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HomeMy WebLinkAboutApril 03, 2012 Agenda AGENDA CITY OF DENTON CITY COUNCIL April 3, 2012 After determining that a quorum is present, the City Council of the City of Denton, Texas will 3:00 p.m. convene in a Work Session on Tuesday, April 3, 2012 at in the Council Work Session Room at City Hall, 215 E. McKinney Street, Denton, Texas at which the following items will be considered: WORK SESSION 1. Citizen Comments on Consent Agenda Items This section of the agenda allows citizens to speak on Consent Agenda Items only. Each speaker will be given a total of three (3) minutes to address any items he/she wishes that are listed on the Consent Agenda. A Request to Speak Card should be completed and returned to the City Secretary before Council considers this item. 2. Requests for clarification of agenda items listed on the agenda for April 3, 2012. 3. Receive a report, hold a discussion and give staff direction regarding the 2012 Tax Abatement Policy for the City of Denton to establish guidelines and criteria governing tax abatement agreements. 4. Receive a report, hold a discussion, and give staff direction regarding an ordinance to repeal the current Chapter 13 Food and Food Service Establishments of the Denton Code of Ordinances with a new Chapter 13 Food and Food Service Establishments ordinance. 5. Receive a report, hold a discussion and give staff direction regarding the placement of accessory structures in side and front yard setbacks. Following the completion of the Work Session, the City Council will convene in a Closed Meeting to consider specific items when these items are listed below under the Closed Meeting section of this agenda. When items for consideration are not listed under the Closed Meeting section of the agenda, the City Council will not conduct a Closed Meeting and will convene at the time listed below for its regular or special called meeting. The City Council reserves the right to adjourn into a Closed Meeting on any item on its Open Meeting agenda consistent with Chapter 551 of the TEXAS GOVERNMENT CODE, as amended, as set forth below. CLOSED MEETING 1.Closed Meeting: A.Consultation with Attorneys – Under Texas Government Code Section 551.071. 1. Consult with City’s attorneys regarding litigation strategy and the status of litigation styled Jones v. City of Denton, Cause No. 2011-50255-367, currently pending in the 367th District Court of Denton County. 2. Consultation, discussion and deliberation with City’s attorneys regarding legal issues relating to Item #5 of the April 3, 2012 Work Session Agenda under both existing and proposed or potential Denton Development Code City of Denton City Council Agenda April 3, 2012 Page 2 regulations where such discussion presents a conflict between the duty of the attorney to the governmental body under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas and the provisions of the Texas Open Meetings Act, Chapter 551 of the Texas Government Code. 3. Consultation with the City’s attorneys regarding legal issues associated with the potential acquisition of certain real property interests located in the Francis Batson Survey, Abstract No. 43, also known as Lot 1, Rayzor Ranch North, an addition to the City of Denton, Texas, according to the plat recorded in Cabinet Y, Page 740, Plat Records, Denton County, Texas, where a public discussion of these legal matters would conflict with the duty of the City’s attorneys to the City of Denton and the Denton City Council under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas, or would jeopardize the City’s legal position in any administrative proceeding or potential litigation. B.Deliberations regarding Real Property – Under Texas Government Code Section 551.072; Consultation with Attorneys – Under Texas Government Code Section 551.071. 1.Receive a briefing from staff, discuss, deliberate and provide staff with direction regarding the established route for the Denton Municipal Electric Northeast Denton Transmission Line Re-Build Project in the City of Denton, Texas specifically running from the King’s Row Substation to the Denton North Interchange pertaining to the value, location, acquisition or condemnation of tracts of real property situated in the D. Culp Survey, Abstract No. 287; the J. Coltart Survey, Abstract No. 288; the H. Williams Survey, Abstract No. 1417; the S. McCracken Survey, Abstract No. 817; the V. Gailor Survey, Abstract No. 452; and the T. Toby Survey, Abstract No. 1288; receive a consultation from the City’s attorneys regarding the same, where a public discussion of these legal matters would conflict with the duty of the City’s attorneys to the City Council under the Texas Rules of Professional Conduct of the State Bar of Texas. 2.Discuss, deliberate and receive information from staff and provide staff with direction pertaining to the potential purchase of certain real property interests located in the M.E.P. & P.R.R. Co. Survey, Abstract No. 927, Denton County, Texas, and located generally in the 300 Block of North Mayhill Road, the 1000 Block South Mayhill Road, and the 1300 Block South Mayhill Road, all within the City of Denton, Texas. Consultation with the City’s attorneys regarding legal issues associated with the potential acquisition of the real property described above where a public discussion of these legal matters would conflict with the duty of the City’s attorneys to the City of Denton and the Denton City Council under the Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas, or would jeopardize the City’s legal position in any administrative proceeding or potential litigation. City of Denton City Council Agenda April 3, 2012 Page 3 ANY FINAL ACTION, DECISION, OR VOTE ON A MATTER DELIBERATED IN A CLOSED MEETING WILL ONLY BE TAKEN IN AN OPEN MEETING THAT IS HELD IN COMPLIANCE WITH TEXAS GOVERNMENT CODE, CHAPTER 551, EXCEPT TO THE EXTENT SUCH FINAL ACTION, DECISION, OR VOTE IS TAKEN IN THE CLOSED MEETING IN ACCORDANCE WITH THE PROVISIONS OF §551.086 OF THE TEXAS GOVERNMENT CODE (THE ‘PUBLIC POWER EXCEPTION’). THE CITY COUNCIL RESERVES THE RIGHT TO ADJOURN INTO A CLOSED MEETING OR EXECUTIVE SESSION AS AUTHORIZED BY TEX. GOV’T. CODE, §551.001, ET SEQ. (THE TEXAS OPEN MEETINGS ACT) ON ANY ITEM ON ITS OPEN MEETING AGENDA OR TO RECONVENE IN A CONTINUATION OF THE CLOSED MEETING ON THE CLOSED MEETING ITEMS NOTED ABOVE, IN ACCORDANCE WITH THE TEXAS OPEN MEETINGS ACT, INCLUDING, WITHOUT LIMITATION §551.071-551.086 OF THE TEXAS OPEN MEETINGS ACT. Regular Meeting of the City of Denton City Council at 6:30 p.m. in the Council Chambers at City Hall, 215 E. McKinney Street, Denton, Texas at which the following items will be considered: REGULAR MEETING 1. PLEDGE OF ALLEGIANCE A. U.S. Flag B. Texas Flag “Honor the Texas Flag – I pledge allegiance to thee, Texas, one state under God, one and indivisible.” 2. PROCLAMATIONS/PRESENTATIONS A.Proclamations/Awards 1.National Community Development Week 2.Friends of the Denton Public Libraries Day 3.Child Abuse Prevention Month and the Year of CASA 3. CONSENT AGENDA Each of these items is recommended by the Staff and approval thereof will be strictly on the basis of the Staff recommendations. Approval of the Consent Agenda authorizes the City Manager or his designee to implement each item in accordance with the Staff recommendations. The City Council has received background information and has had an opportunity to raise questions regarding these items prior to consideration. Listed below are bids, purchase orders, contracts, and other items to be approved under the Consent Agenda (Agenda Items A – H). This listing is provided on the Consent Agenda to allow Council Members to discuss or withdraw an item prior to approval of the Consent Agenda. If no items are pulled, Consent Agenda Items A – H below will be approved with one motion. If items are pulled for separate discussion, they may be considered as the first items following approval of the Consent Agenda. City of Denton City Council Agenda April 3, 2012 Page 4 A.Consider a request for an exception to the Noise Ordinance for the purpose of performing music during the 2012 Relay for Life to be held at the University of North Texas Fouts Field beginning at 3:00 p.m. on Saturday April 21, 2012, until 6:00 a.m. on Sunday, April 22, 2012. The request is for a variance in decibels, from 70 to 75 decibels, for an outdoor concert and for amplified sound on Sunday until 6:00 a.m. Staff recommends approving the request. B.Consider approval of a resolution establishing Naming Policy Guidelines for City Buildings, Facilities, Land, or any portion thereof; repealing Resolution No. R2007-035; and declaring an effective date. C.Consider approval of the minutes of: February 14, 2012 February 21, 2012 February 22, 2012 March 5, 2012 March 6, 2012 D.Consider adoption of an ordinance of the Council of the City of Denton, Texas accepting a proposal and awarding a contract for a Utility Assistance Program for low-income households to Interfaith Ministries in an amount not to exceed $85,000 annually; providing for the expenditure of funds therefor; and providing an effective date. The Public Utilities Board recommends approval (7-0). E.Consider adoption of an ordinance of the City of Denton, Texas authorizing the expenditure of funds for payments by the City of Denton for Electrical Energy Transmission Fees to those cities and utilities providing energy transmission services to the City of Denton; and providing an effective date (File 4933– Adjusted Fiscal Year 1999 Electrical Energy Transmission Fees in the total amount of $645,941). The Public Utilities Board recommends approval (7-0). F.Consider adoption of an ordinance rejecting any and all competitive bids for a contract for Street Milling Services for the City of Denton; and providing an effective date. (Bid 4909–Two Year Contract for Street Milling Services). G.Consider adoption of an ordinance of the City of Denton, Texas, authorizing the City Manager to execute a contract with the Denton Independent School District for the 2012 Summer Food Service Program; authorizing the expenditure of funds to administer the program; and providing an effective date. H.Consider adoption of an ordinance authorizing the City Manager of the City of Denton, Texas (“City”) to execute for and on behalf of the City an Easement Abandonment Agreement (“Agreement”), by and between Creekwood Centre Denton, LLC and the City, contemplating the (I) partial abandonment of that certain easement and right of way, dated on or about July 30, 1927, from Mrs. S. A. Bayless, et al to the Texas Power & Light Company, recorded in Volume 216, Page 231, Real Property Records, Denton County, Texas, being further referenced in an assignment of easements, dated on or about May 21, 1975, from Texas Power & Light Company to the City of Denton, recorded in Volume 756, Page City of Denton City Council Agenda April 3, 2012 Page 5 669, Real Property Records, Denton County, Texas, as more particularly described in the ordinance; and (II) partial abandonment of that certain utility easement, dated on or about May 6, 1955, from J. A. McLeod, and wife Florence McLeod to the City of Denton, Texas recorded in Volume 419, Page 25, Real Property Records, Denton County, Texas, as more particularly described in the ordinance, and affecting lands located in the A. Hill Survey, Abstract No. 623, Denton County, Texas and particularly described as Lot 1, Block A of Denton Station, Phase One, an addition to the City of Denton, Denton County, Texas according to the plat recorded in Cabinet Y, Page 740, Plat Records, Denton County, Texas, and Lot 2, Block A of Denton Station, Phase One, an addition to the City of Denton, Denton County, Texas, according to the plat recorded in Cabinet W, Page 463, Plat Records, Denton County Texas and located approximately within the 1400 block of Centre Place Drive, Denton, Texas upon the terms and conditions provided in the Agreement; authorizing the City Manager to execute an Abandonment and Release of Easements (“The Release”), upon the terms and conditions provided by the Agreement; and declaring an effective date. 4. ITEMS FOR INDIVIDUAL CONSIDERATION A.Consider appointment of board members for Tax Increment Financing Zone Number One (Downtown TIF). B.Consider approval of a resolution creating a special Citizens Bond Advisory Committee for the proposed 2012 street bond election; establishing a charge for the Committee; and declaring an effective date. C.Consider appointments to the Citizen Advisory Committee for the proposed 2012 Bond Election. D.Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of up to $49,325,000 in principal amount of “City of Denton Certificates of Obligation, Series 2012” (including up to $4,900,000 for General Government activities, up to $6,070,000 for Solid Waste Fund activities, and up to $38,355,000 for Electric, Water, and Wastewater Fund activities); authorizing the issuance of the Certificates; delegating the authority to certain City officials to execute certain documents relating to the sale of the Certificates; approving and authorizing instruments and procedures relating to said Certificates; and enacting other provisions relating to the subject. E.Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of up to $42,000,000 in principal amount of "City of Denton General Obligation Refunding and Improvement Bonds, Series 2012"; authorizing the issuance of the Bonds; delegating the authority to certain City officials to execute certain documents relating to the sale of the Bonds; approving and authorizing instruments and procedures relating to said Bonds; and enacting other provisions relating to the subject. City of Denton City Council Agenda April 3, 2012 Page 6 5. CITIZEN REPORTS A. Review of procedures for addressing the City Council. B. Receive citizen reports from the following: 1) Bob Clifton regarding City Elections (2nd Edition). 6. CONCLUDING ITEMS A. Under Section 551.042 of the Texas Open Meetings Act, respond to inquiries from the City Council or the public with specific factual information or recitation of policy, or accept a proposal to place the matter on the agenda for an upcoming meeting AND Under Section 551.0415 of the Texas Open Meetings Act, provide reports about items of community interest regarding which no action will be taken, to include: expressions of thanks, congratulations, or condolence; information regarding holiday schedules; an honorary or salutary recognition of a public official, public employee, or other citizen; a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; or an announcement involving an imminent threat to the public health and safety of people in the municipality that has arisen after the posting of the agenda. B.Possible Continuation of Closed Meeting under Sections 551.071-551.086 of the Texas Open Meetings Act. C.Official Action on Closed Meeting Item(s) under Sections 551.071-551.086 of the Texas Open Meetings Act. CERTIFICATE I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the City of Denton, Texas, on the ________day of ___________________, 2012 at ________o'clock (a.m.) (p.m.) __________________________________________ CITYSECRETARY NOTE: THECITYOFDENTONCITYCOUNCILCHAMBERSISACCESSIBLEIN ACCORDANCEWITHTHEAMERICANSWITHDISABILITIESACT.THECITYWILL PROVIDESIGNLANGUAGEINTERPRETERSFORTHEHEARINGIMPAIREDIF REQUESTEDATLEAST48HOURSINADVANCEOFTHESCHEDULEDMEETING. PLEASECALLTHECITYSECRETARY'SOFFICEAT349-8309ORUSE TELECOMMUNICATIONSDEVICESFORTHEDEAF(TDD)BYCALLING1-800-RELAY- TXSOTHATASIGNLANGUAGEINTERPRETERCANBESCHEDULEDTHROUGHTHE CITYSECRETARY’SOFFICE. AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Economic Development ACM: Jon Fortune SUBJECT Receive a report, hold a discussion and give staff direction regarding the 2012 Tax Abatement Policy for the City of Denton to establish guidelines and criteria governing tax abatement agreements. BACKGROUND The City of Denton first adopted a Tax Abatement Policy in 1989. In accordance with Chapter 312 of the Texas Tax Code, we are required to have a policy in place when tax abatements are awarded. Tax abatement policies are valid for two years and must be readopted or replaced at the end of the term. The last Tax Abatement Policy was adopted on April 20, 2010. The 2012 Tax Abatement Policy was modified to include the addition of the following considerations for granting tax incentives: local contractor preference and community support. In addition, the environmentally sustainable practices category has been expanded, from the 2010 policy revisions, to include the manufacture of green materials or products. References to the Central Business District (CBD) and Census information have also been updated. Additional changes designed to streamline and tailor the policy to fit the current structure of the Economic Development Partnership (EDP) board are also presented. PRIOR ACTION/REVIEW The EDP board reviewed the policy at their March 9, 2012 meeting and recommends approval (5-0). After receiving direction from the City Council, the policy will be amended and presented for adoption at the April 17, 2012 Denton City Council meeting. EXHIBITS 2012 Denton Tax Abatement Policy Exhibit A: Denton Tax Abatement Application Respectfully submitted: ___________________________________ Erica Sullivan, Economic Development Analyst Economic Development Department 201210 Tax Abatement Policy DRAFT DENTON POLICY FOR TAX ABATEMENT I. GENERAL PURPOSE AND OBJECTIVES The City of Denton (City) is committed to the promotion of high quality development in all parts of the city and to an ongoing improvement in the quality of life for its citizens. Insofar as these objectives are generally served by the enhancement and expansion of the local economy, the City will, on a case-by-case basis, give consideration to providing tax abatement as a stimulus for economic development in Denton. It is the policy of the City that said consideration will be provided in accordance with the procedures and criteria outlined in this document. Nothing herein shall imply or suggest that the City is under any obligation to provide tax abatement to any applicant. All applicants shall be considered on a case-by-case basis. Abatements will be considered only as inducements to generate development that otherwise would not occur. Abatements will not be considered if construction of a project already has begun. Tax abatements, as described in this Policy, will be available for new and/or existing facilities and structures and for businesses wanting to locate, expand or modernize, existing or new facilities and structures, including, without limitation, basic industries, corporate office headquarters or distribution centers, except as this Policy may be limited for property described in Section 312.211(a) of the Texas ) II. ECONOMIC DEVELOPMENT PARTNERSHIP BOARD Requests for tax abatement shall be reviewed by the Economic Development Partnership Board on a case-by-case basis unless otherwise directed by City Council, the Board being comprised of two City Council members, two Chamber of Commerce Board members, two representatives from the top twenty taxpayers, and one representative from the University of North Texas, one member with aviation experience, and one member at-large. The Board serves as a recommending body to the City Council regarding whether economic development incentives should be offered in each individual case. Its recommendation shall be based upon an evaluation of information submitted in the tax abatement application and any additional information requested by the Board or presented to the Board. The Tax Abatement Application shall be substantially in the form of Exhibit A of this Policy. All meetings of the Board shall be held in compliance with the Texas Open Meetings Act, Chapter 551 of the Texas Government Code. III. VALUE OF INCENTIVES The criteria outlined in the Application will be used by the Board in determining whether or not it is in the best interests of the City to recommend that tax abatement be offered to a particular project. Specific considerations will include the degree to which the individual project furthers the goals and objectives of the community as described in the Denton Comprehensive Plan, as well as the relative impact on growth, employment, expansion of the tax base, economic development and human health and the 201210 Tax Abatement Policy environment. New, expanding and modernizing businesses may be considered for abatement if the minimum threshold, as described in Table 1 below, is met. Once a determination has been made that a project is eligible for a tax abatement should be offered, the value and term of the abatement may be determined by referencing the following table: TABLE 1: Establishes a framework for considering the length and percentage of abatement according to assessed real property value of improvements and of tangible personal property located on the real property. VALUE OF STRUCTURE AND PERSONAL PROPERTY YEARS OF PERCENTAGE OF IN MILLION DOLLARS ABATEMENT ABATEMENT 100 10 25% 80 9 25% 65 8 25% 50 7 25% 35 6 25% 20 5 25% 15 4 25% 10 3 25% 5 25% 2 To qualify, companies must meet the minimum threshold of the Policy in the first 24 months from the execution of the agreement or as specified in the tax abatement agreement. If upon initial application a project qualifies for tax abatement under the guidelines set forth in this Policy, the City may consider granting an additional 5% abatement for each one of the following factors provided, however, that the total tax abatement does not exceed 50% annually or continue for a period of more than ten years. No applicant may receive credit for more than five of the following factors: The project will occupy a building that has been vacant for at least two years; The project will create high-skilled, high-paying jobs as documented by the applicant; (A breakdown of number of jobs per job classification and entry level wage per classification will be used to determine eligibility); The project will involve a significant relationship with one of the two universities in Denton; At least 25% of the new jobs created by the project will be filled by Denton residents; A minimum of 25% of local contractors and local subcontractors will be utilized during construction of the project; The project will provide knowledge-based jobs (at least 25 percent of jobs require college bachelors degree at entry level); The project will donate significant public art to the community. (To qualify, donation must be approved by Greater Denton Arts Council and City Council); Page 2 of 19 201210 Tax Abatement Policy The project will donate significant materials/equipment to the public schools (to qualify, donation must be approved by DISD and City Council); The project will create improvements to the Denton Downtown Implementation Plan area Central Business District; The project will result in the formation of a business park; The project is an international or national headquarters facility. The project is a medical manufacturing or research facility. The project incorporates significant environmentally sustainable practices to that includes: Leadership in Energy and Environmental Design (LEED) certification, recycling initiatives, the manufacture of sustainable materials or products that support sustainable industries, or the incorporation of clean technology. Renewable Energy will be generated, stored or utilized for the project on an ongoing basis;. The applicant is committed to actively supporting the Denton Community. The total tax abatement may not exceed 50% annually for ten years. All abatements are subject to final . Even though a project may meet the criteria as set forth in this approval of the City Council Policy, an application may be denied at the discretion of the City. Tax abatement shall not apply to any portion of the land value of the project. The thresholds as described in Table 1 are considered guidelines for establishing the Tax Abatement Agreement terms. However, the City may determine that a lower or higher percentage and/or a shorter or longer term of abatement may be more appropriate for an individual project. If the abatement is approved, the City may consider applying all or a portion of the abatement in the first year or during any shorter period within the term of the tax abatement agreement. For example, an approved abatement of 25 percent for four years may be applied as 100 percent abatement for one year. When the City of Denton determines that incentives are required to retain existing businesses, which propose to improve or redevelop property within the City limits, the Denton City Council may consider -by-case basis and reserve the right to waive the minimum threshold and/or exceed fifty percent (50%) in tax abatement. The City of Denton may also take into expansion/redevelopment of existing businesses that create new or additional professional jobs. New or existing businesses that incorporate environmentally sustainable Abatement hereunder will only apply to the increased valuation of the improvements over the appraised value of the property prior to such improvements as same is established by the Denton Central Appraisal District the year in which the tax abatement agreement is executed. The City may also consider other tax incentives authorized by law. Definitions: Local contractors and local sub-contractors refers to vendors that have their principal office or place of business, as reported to the Texas Secretary of State Office, located within Denton City Limits or Extraterritorial Jurisdiction (ETJ). The minimum requirement of 25%, to be eligible under this consideration, will be based on the estimated construction valuation of the project. Professional Knowledge-based jobs are defined as occupations which: require Require specialized and theoretical knowledge, which is usually acquired through a college education training or through work experience and or other training which provides comparable knowledge; Page 3 of 19 201210 Tax Abatement Policy a calling requiring specialized knowledge and often long and intensive academic preparation; rRequires some research, analysis, report writing and presentations;. Require sSpecial licensing, certification, or registration may be required to perform the job task; the work of professional positions is creative, analytical, evaluative, or interpretive, and is characterized by personal responsibility to keep abreast of and exercise judgment and broad perspective in the application of an organized body of knowledge that is constantly studied to make new discoveries and interpretations or to improve the data, materials and methods; may Business park Park A business is defined as a multi-building, multi-tenant, master planned complex of approximately one million square feet or more of under roof, constructed to house manufacturing, distribution, assembly, and office facilities. Leadership in Energy and Environmental Design (LEED) certificationis a voluntary internationally recognized green building certification system, with verificationproviding by a third- party verification that a building or community was designed and built using strategies aimed at improving performance across all the followingthe metrics that matter most: energy savings, water efficiency, CO emissions reduction, 2 improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts. The certification levels consist of the following: Basic, Silver, Gold and Platinum and are weighted on a 100 point system. The LEED system measures: innovation in design; sustainable sites; water efficiency; energy and atmosphere; materials and resources; indoor environmental quality; and locations and linkages. The manufacture of sustainable materials or products may include but is not limited to: biobased, recyclable and reclaimed goods. Denton is located in an air quality nonattainment region designated by the Environmental Protection Agency for air pollution levels that continually exceed national standards. Products and equipment that support sustainable industries or clean technologies that reduce environmental pollution are encouraged and may qualify for consideration under this section. Community support and involvement may include but is not limited to monetary or active investment in local non profits, public institutions or community organizations. Membership and participation in a Denton chamber of commerce is an example that may qualify under this consideration. In order to be eligible for consideration under this factor, the applicant must also agree to be a member of the Denton Chamber of Commerce for the term of the incentive contract. The EDP board will consider criteria proposed by the applicant,The EDP Board will review and make a recommendation on the eligibility of and whether an additional five percent will be added to the overall incentive percentage. When the City determines that abandoned property may require additional incentives to promote economic development that generally satisfies the requirements of this Policy, the City may waive the minimum threshold and/or exceed fifty percent (50%) in tax abatement, or consider other tax incentives Page 4 of 19 201210 Tax Abatement Policy for special projects to redevelop abandoned buildings consistent with existing law. For the purpose of this Policy, an abandoned building is defined as a building that has been identified as being suitable for commercial or industrial development, has been vacant for a minimum of five years or has substantially declined in appraised value. Abatement would only be considered on the increased valuation of the improvements in each year covered by the tax abatement agreement over the value of the property for the year in which the tax abatement agreement is executed. The City may also consider other tax incentives authorized by law. Preliminary Application IV. PROCEDURAL GUIDELINES Any person, organization or corporation desiring that the City consider providing tax abatement to encourage location or expansion of facilities within the limits of the jurisdictions shall be required to Nothing within these guidelines shall imply or comply with the following procedural guidelines. suggest that the City is under any obligation to provide tax abatement to any applicant. A.Applicant shall complete the attached "Application for Tax Abatement." B.A separate application is required for projects seeking LEED Certification. C.Applicant shall prepare a map or other documents providing the following: precise location of the property and all roadways within 500 feet of the site existing uses and conditions of real property proposed improvements and uses any proposed changes in zoning compatibility with the Denton Comprehensive Plan and applicable building codes and City ordinances. A complete legal description shall be provided. D.Applicant shall complete all forms and information detailed in the Application and submit all information to the City Manager (or his/her designee), City of Denton, 215 E. McKinney, Denton, TX 76201. E.All information in the application package detailed above will be reviewed for completeness and accuracy. Additional information may be requested as needed. F.The application will be distributed to the appropriate City departments for internal review and comments. Additional information may be requested as needed. G.Copies of the complete application package and staff comments will be provided to the Board. H.Fiscal agents of the City will review the application for comments and recommendation. Additional information may be requested as needed. Page 5 of 19 201210 Tax Abatement Policy Consideration of the Application I.The Board will consider the application at a regular or called meeting(s). Additional information may be requested as needed. J.The recommendation of the Board will be forwarded, with all relevant materials, to the City Council. K.If the City Council decides to grant a tax abatement, it shall call a public hearing to consider establishment of a tax reinvestment zone in accordance with Section 312.201 of the Tax Code. The reinvestment zone must meet one or more of the criteria of Section 312.202 of the Tax Code. L.The City Council shall hold a public hearing and determine whether the project is "feasible and practical and would be of benefit to the land to be included within the zone and City after the expiration of the tax abatement agreement in accordance with Section 312.201." Special consideration shall be given to policies noted in the Denton Comprehensive Plan when designating a tax reinvestment zone. K. M.L.The City Council may consider adoption of an ordinance designating the area described in the legal description of the proposed project as a commercial/industrial tax abatement zone. N.M.The City Council may consider adoption of an ordinance or resolution approving the terms and conditions of a contract between the City and the applicant governing the provision of the tax abatement and the commitments of the applicant, including all the terms required by Section 312.205 of the Tax Code and such other terms and conditions as the City Council may require. Should the commitments subsequently not be satisfied, the tax abatement shall be null and void (unless the tax abatement agreement provides for a recapture of the property tax revenue lost proportionate to a partial failure to meet the minimum thresholds set forth in the agreement) and all abated taxes shall be paid immediately to the City of Denton and all other taxing jurisdictions participating in the tax abatement agreement. Provisions to this effect shall be incorporated into the agreement. N. The City reserves the authority to enter into tax abatement agreements at differing percentages and/or terms as set forth in the guidelines of this Policy, consistent with the requirements of the Tax Code. Any tax abatement agreement will address various issues, including but not limited to, the following: 1. General description of the project; 2. Amount of the tax abatement and percent of value to be abated each year; 3. Method of calculating the value of the abatement; 4. Duration of the abatement, including commencement date and termination date; 5. Legal description of the property; 6. Kind, number, location and timetable of planned improvements; 7. Specific terms and conditions to be met by applicant; Page 6 of 19 201210 Tax Abatement Policy 8. The proposed use of the facility and nature of construction; 9. Contractual obligations in the event of default, violation of terms or conditions, delinquent taxes, recapture, any decrease in valuation, administration and assignment. Annual Evaluation Upon completion of construction, the City Council shall receive from the City Manager (or his/her designee) an annual evaluation of each abatement to insure compliance with the agreement and to report possible violations of the agreement to the appropriate taxing entities. After new tax base numbers are received in July of each year, the City Manager and his staff will have ninety (90) days to review and prepare a breakdown of those figures. Local Businesses and Historically Underutilized Businesses Businesses receiving a tax abatement are asked to use diligent efforts to purchase all goods and services from Denton businesses whenever such goods and services are comparable in availability, quality and price. The City of Denton also encourages the use, if applicable, of qualified contractors, subcontractors and suppliers who are historically underutilized businesses based on information provided by the General Services Commission pursuant to Chapter 2161 of the Government Code. In the selection of subcontractors, suppliers or other persons or organizations proposed for work on this Agreement, the OWNERS agree to consider this Policy and to use their reasonable and best efforts to select and employ such companies and persons for work on this Agreement. Job Recruiting from Low-Moderate Income Census Tracts Businesses receiving tax abatements are asked to endeavor to make available, or endeavor to cause lessees or assignees to make available, full-time or part-time employment with on-the-job training for Denton citizens. In this effort, the business, lessee or assignee is encouraged to recruit from the low- moderate income Census tracts as further defined byin the U.S. Department of Housing and Urban Qualified Concentration of Low/Mod Income by Census Tracts (QCT) map Block Groups shown in Figure 1below. HUD defines QCTs as census tracts in which one-half or more of the households have incomes below 60 percent of the area median income or the poverty rate is 25 percent of [or] higher. A 20-percent population cap in each metropolitan area or nonmetropolitan part of a state limits the designation of eligible census tracts as QCTs. Page 7 of 19 201210 Tax Abatement Policy FIGURE 1: DENTON, TEXAS 2010-2011 Qualified Concentration of Low/Moderate Income households by Census Tracts Block Groups Page 8 of 19 201210 Tax Abatement Policy EXHIBIT A The City of Denton Tax Abatement Application About the Application... The Tax Abatement Application provides the City with specific information on the project. The information requested in the Application is designed to address the criteria developed within the City of Denton's Tax Abatement Policy. The information serves as the basis for fiscal analysis and overall project evaluation. This evaluation is provided to the Economic Development Partnership (EDP) Board and Council Members and serves as a source document during EDP Board and City Council deliberations. The Application and the Agreement... Specific information from the Application (such as value of new investment and employment commitments) is incorporated into the Abatement Agreement. In fact, the Application is an attachment to the Agreement. Since the Agreement is a binding contract, it is important that each question on the application be answered in full and as realistically as possible. Simply put, the application is part of the process from start to finish so you'll want to make sure you're comfortable with the contents. When Is The Application Final? The answer to this question is very simple: When you tell us, "It's final." It is not uncommon for a property owner(s) to submit numerous Applications as drafts for informational and evaluative purposes only. As conversations continue, the property owner will submit a finalized version of the Application that includes all of the commitments agreed to during the discussions. What about Confidentiality? Section 312.003 of the Texas Tax Code makes confidential information provided to the City as a part of this application that describes the specific processes or business activities to be conducted or the equipment or other property to be located on the property. This information is not subject to public disclosure until the tax abatement agreement is executed. Section 522.131 of the Texas Government Code (Texas Public Information Act) makes confidential information which relates to economic development negotiations between the City and a business prospect that the City seeks to have locate, stay or expand in or near the territory of the City. The information must relate to a trade secret of the business prospect, commercial or financial information which the business prospect can demonstrate based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained or information about a financial or other incentive being offered to the business prospect by the City or by another person. Information about a financial or other incentive being offered to the business prospect is required to be disclosed when an agreement is made with a business prospect. The City is subject to disclosing most records and documents upon request under the Public . Accordingly, please clearly indicate and mark any information you consider proprietary. Information Act This would include anything in your application which you consider a trade secret, commercial or financial information which you can demonstrate by specific factual evidence that would cause substantial competitive harm if disclosed, information which describes the specific processes or business activities to be conducted or the equipment or other property for which the tax abatement is sought, any financial or other incentive you may be seeking from the City or any other information you deem to be confidential under the law. Who is Authorized To Sign the Application? Because the Application itself is non-binding, the person signing need not be the property owner or even an individual duly authorized to sign on behalf of the property owner. However, if an Agreement is reached, the Application will be an attachment to the Agreement and its contents will be binding through the authorized signature required on the Agreement. Page 9 of 19 201210 Tax Abatement Policy EXHIBIT A City of Denton Tax Abatement Application City of Denton Department of Economic Development Denton, Texas 76201 (940) 349-7776 (940) 349-8596 FAX www.cityofdenton.com Linda.Ratliff@cityofdenton.com Page 10 of 19 201210 Tax Abatement Policy APPLICATION FOR TAX ABATEMENT CITY OF DENTON, TEXAS 1. Property Owner Company or Project Name Mailing Address Telephone Fax No. Website Contact Name Title Mailing Address Telephone Fax No. Email Address 2. Provide a chronology of plant openings, closing and relocations over the past 15 years. 3. Provide a record of mergers and financial restructuring during the past 15 years. 4. Will the occupants of the project be owner or lessee? If lessee, are occupancy commitments already existing? 5. Is the project a relocation of existing facility or a new facility to expand operations? If relocation, give current location. 6. If an existing Denton business, will project result in abandonment of existing facility? If so, the value of the existing facility will be subtracted from the value of the new facility to arrive at total project value. Page 11 of 19 201210 Tax Abatement Policy 7. Property Description. - - Attach map of project including all roadways, land use and zoning within 500 feet of site. 8. Current Value. Attach copy of latest property tax statement from the Denton County Central Appraisal District (iInclude both real (land and improvements) and personal property). 9. Increased Value/Estimated Total Cost of Project. Structures $ Site Development $ Personal Property $ Other Improvements $ 10. Indicate percent of tax abatement and number of years requested. Percent Requested Years Requested List any other financial incentives this project will request/receive Estimated Freeport Exemption $ Estimated Electric Utility Industrial Development Rider $ Estimated Water/Wastewater Infrastructure Assistance $ 11. Give a brief description of the activities to be performed at this location, including a description of products to be produced and/or services to be provided. 12. Describe any off-site infrastructure requirements: Water Wastewater Page 12 of 19 201210 Tax Abatement Policy Streets Drainage Other 13. Project Operation Phase. Provide employment information for the number of years tax abatement is requested. At Project Existing Start Date At Term of Employment Information Operation (mo/yr) Abatement (if applicable) _____/_____ A. Total number of permanent, full-time jobs B. Employees transferred from outside Denton C. Net permanent full-time jobs (A. minus B.) E. Total annual payroll for all permanent, full-time jobs (A.) F. Types of jobs created. List the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. G. Indicate the number of shifts the project will operate Page 13 of 19 201210 Tax Abatement Policy H. Estimate annual utility usage for project: Electric kWh Water gpd Wastewater gpd Gas mcf 14. Describe any other direct benefits to the City of Denton as a result of this project (e.g., sales tax revenue or project elements identified in Tax Abatement Policy, Section III). 15. Is property zoned appropriately? Yes No Current zoning. Zoning required for proposed project. Anticipated variances. 16. Is property platted? Yes No Will replatting be necessary Yes No 17. Discuss any environmental impacts created by the project. A. List any permits for which applicant must apply. Applicant will be required to provide City with copies of all applications for environmental permits upon completion of application(s). B. Provide record of compliance to all environmental regulations for the past five years. 18. Provide specific detail of any businesses/residents that will be displaced and assistance that will be available from the requesting company. 19. Provide descri Historic preservation Officer. If any, give detail of how the historically significant area will be preserved. Page 14 of 19 201210 Tax Abatement Policy 20. Justification for Tax Abatement Request: Substantiate and more fully describe the justification for this request. Include the amount of the abatement requested and show how it will contribute to the financial viability of the project. Submit attachments if necessary. 21. List additional abatement factors to be considered for this project as outlined on pages 3 and 4 of the Tax Abatement Policy. Occupies building vacant for at least 2 years Donation of materials to public schools Project creates high-skilled, high-paying jobs Improvements to Downtown Significant relationship with universities Project forms business park 25% of new jobs filled by Denton residents International or national headquarters 25% local contractors to be utilized Medical manufacturing or research facility 25% of jobs are knowledge-based Environmentally sustainable practices used Donation of significant public art Renewable Energy generated/stored/utilized Community support and involvement: Attach description of community involvement 22. Financial Information: Attach a copy of the latest audited financial statement or, in the case of a new project, a business plan. 23. Does the project have an eligible environmentally sustainable or renewable energy component (if so, please identify type and provide a brief description)? 24. Applicants seeking LEED certification must complete the Green Building Application for Tax Abatement (Exhibit B of the policy). This tax abatement application is submitted with the acknowledgement that additional certified financial information may be required. Page 15 of 19 201210 Tax Abatement Policy ___________________________________________________ Authorized Signature Date:_______________________________________________ EXHIBIT B Page 16 of 19 201210 Tax Abatement Policy City of Denton Green Building Tax Abatement Application City of Denton Department of Economic Development Denton, Texas 76201 (940) 349-7776 (940) 349-8596 FAX www.cityofdenton.com Page 17 of 19 201210 Tax Abatement Policy COMPLETE THIS SECTION IF REQUESTING ADDITIONAL INCENTIVE BASED ON LEED CERTIFICATION CONSTRUCTION GREEN BUILDINGAPPLICATION FOR TAX ABATEMENT CITY OF DENTON, TEXAS 1. Property Owner Company or Project Name Mailing Address Telephone Fax No. Website Contact Name Title Mailing Address Telephone Fax No. Email Address 2. Project location address: 3. Provide documentation that the project has been registered with the U.S. Green Building Council. 4. Provide a description of the project (please include the building size, number of occupants and estimated budget). 6. Attach a preliminary Leadership in Energy and Environmental Design (LEED) Scorecard illustrating how project will achieve the LEED certification. Level of Certification: Page 18 of 19 201210 Tax Abatement Policy Number of Points: This Green Building Tax Abatement Application is submitted with the acknowledgement that additional information may be required. ___________________________________________________ Authorized Signature Date:_______________________________________________ Page 19 of 19 AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Planning and Development ACM: Fred Greene SUBJECT Receive a report, hold a discussion, and give staff direction regarding an ordinance to repeal the current Chapter 13 Food and Food Service Establishments of the Denton Code of Ordinances with a new Chapter 13 Food and Food Service Establishments ordinance. BACKGROUND The current version of Chapter 13 of the Denton Code of Ordinances Food and Food Service Establishments was adopted by the City Council on March 23, 2004. This ordinance is based on the Texas Food Establishment Rules (TFER) published by the Texas Department of State Health Services. The TFER is the minimum standard for all food establishments in the state of Texas. A city may adopt rules that are more stringent than the TFER, but not less stringent. Currently in the City of Denton there are approximately 600 food establishments. These establishments include restaurants, daycare center kitchens, hospital cafeterias, school cafeterias, nursing home kitchens, concession stands, etc. The current ordinance also covers temporary food will include amended regulations for all of the above mentioned establishments, but it will also make wholesale changes to a couple of existing categories, namely, Mobile Food Units, Last year the City Council requested a report from the Building Inspections Division on the possibility of allowing Mobile Food Units to obtain Health Permits that would permit a mobile that a mobile food vendor not park for more than 15 minutes in one location. This requirement was intended to regulate construction site lunch vendors and not restaurant type food vendors. To comply with this request a presentation was made to the City Council in a Work Session on September 20, 2011 by the Building Inspections Division. After the presentation, the City Council directed the Building Inspections Division to amend the current food establishment ordinance to allow mobile food units to stay put in one location for more than 15 minutes. The current changes to the mobile food vendor section are included in this proposed ordinance. The other two sections of the current food code that have undergone major changes are the community markets) and temporary food establishments. The City Council is showing support for farmer and community markets. This request also affects the temporary food establishment section of the current codes. Therefore, these two sections have been amended to allow for farmer/community markets and to separate the market vendors from the temporary food establishment vendor restrictions. Agenda Information Sheet April 3, 2012 Page 2 On March 20, 2012 the Health Inspection group made a presentation of the proposed food establishment code to more than 40 food establishment owners and managers. Comments and suggestions were received and as a result of that meeting, changes were made to the proposed food establishment ordinance. The newly proposed ordinance was also posted on the Consumer Health webpage of the City website. On March 22, 2012 the Health Inspection group made a presentation of the newly changed ordinance to the Health and Building Standards Commission (HaBSCo). As a result of that meeting the commissioner voted unanimously to recommend adoption of the proposed food ordinance to the City Council, and the only other recommendation the commissioners made was to enforce the new ordinance for six (6) months and then reassess the ordinance after this initial six (6) month trial period. Staff is in agreement with this recommendation. OPTIONS 1.Accept the proposed Food and Food Service Establishments ordinance as presented; or, 2.Direct the Building Inspection Division to amend the proposed Food and Food Service Establishments ordinance, and provide suggested amendments. PRIOR ACTION/REVIEW A presentation regarding amending the mobile food vendor section of the City Food Ordinance was made by the Building Inspections division to the City Council on September 20, 2011. A public meeting regarding a proposed City Food Ordinance was held on March 20, 2012; and, a presentation of the newly proposed City Food Ordinance was made to the HaBSCo on March 22, 2012. EXHIBITS Current Food and Food Service Establishments Ordinance from 2004 2012 proposed Food and Food Service Establishments Ordinance Prepared by: Kurt S. Hansen Building Official Respectfully submitted: Mark A. Cunningham, AICP, CPM Director of Planning and Development ORDINANCE NO. ________________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS AMENDING CHAPTER 13 FOOD AND FOOD SERVICE ESTABLISHMENTS OF THE CITY OF DENTON CODE OF ORDINANCES BY MAKING CONFORMING CHANGES IN ACCORDANCE WITH TEXAS FOOD ESTABLISHMENT RULES PROMULGATED BY THE TEXAS DEPARTMENT OF HEALTH; PROVIDING A SEVERABLITITY CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $2,000 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON TEXAS HEREBY ORDAINS: SECTION 1: That Chapter 13 FOOD AND FOOD SERVICE ESTABLISHMENTS is hereby amended as follows: ARTICLE I. IN GENERAL - PURPOSE Sec. 13-1 Rules on food service -- Adopted; compliance procedures. The Texas Food Establishment Rules as amended by the Texas Board of Health found in 25 Texas Administrative Code, Chapter 229, Sections 161--171 and 173--175 regarding the regulation of food establishments in this jurisdiction is hereby adopted as the minimum standards for food service operations within the corporate limits of the City of Denton, Texas. Wherever in these rules the words "municipality of Denton" appear, they shall be understood to refer to the City of Denton and the words "regulatory authority" shall refer to the City of Denton. A copy of these rules shall be kept on file in the office of the City Secretary. Any revision, addition, or deletion to the Texas Food Establishment Rules (TFER) by the Department of State Health Services or the United States Food and Drug Administration (FDA) shall be deemed to be an amendment to this article and adopted as of the time it goes into effect or is published. ARTICLE II. DEFINITIONS Sec. 13-2 Definitions. a) Administrator: the Building Official, or their designated employee, of the City of Denton. b) Agricultural product: an agricultural, apicultural, horticultural, silvicultural, or viticultural, or fish or other aquatic species product, either in its natural or processed state, that has been produced, processed, or otherwise had value added for use as human food. c) Catering Establishment: shall mean a food establishment where food is completely or partially prepared for delivery at a separate location where it is meant to be served and consumed. For purposes of this definition of mobile food establishments, a food service establishment is considered to be operating mobile food units, rather than to be operating as a catering establishment; unless at each premises or property to which food is delivered, the food is provided to one person for consum d) Catering operation: a food service establishment which prepares or serves food on premises in control of another. tm; šE e) Certificate of Occupancy: A Certificate of occupancy is a document issued by a local government agency indicating that a building or mobile food vehicle complies with zoning and building laws. f) Change of Ownership: a change of owner or operator of a food establishment business, and does not refer to a change of owner of the property or building in which the business is located. g) Change of Use: that which requires the owner of an establishment to submit plans before any construction is begun on a project that changes the use of the current establishment. h) Commissary: also known as a central preparation facility; base of operations; or premises from which a mobile unit operates. The commissary shall be used as the base of operations for all classes of mobile food vendors. The commissary is an approved site at which food preparation, storage and cleaning or servicing of the vehicle occurs. State law prohibits the use of a private residence as a central preparation facility or warehouse. A commissary must be a permitted food establishment under jurisdiction of a regulatory authority. i) Cooking demonstration: food that is not to be offered, sold or otherwise distributed to the public j) : a designated location used primarily for the distribution and sale directly to consumers of food products by farmers or other producers of agricultural products. An approved area containing individual vendors who offer approved foods such as fruits, eggs, vegetables, pasteurized dairy products and honey. Other allowed foods may be uncooked pasta and baked have vendors that offer other allowed foods, live plants, flowers and other seasonal crafts or items not to exceed 20% of the total number of vendors markets offering merchandise, personal effects, tools, art work or foodservice establishments. k) : any person(s) who operate(s), offers or sells food typically known d on private or honey, eggs and pasteurized dairy products. These vendors and any foodservice operations comply with the Texas Food Establishment Rules as set forth by the Dept. of State Health Services. l) Fixed Commercial Location: a building that can obtain a certificate of occupancy; not mobile in nature. m) Food establishment: (i) an element of the operation such as a transportation vehicle or a central preparation facility that supplies a vending location or satellite feeding location unless the vending or feeding location is permitted by the regulatory authority; and (ii) an operation that is conducted in a mobile, stationary, temporary, or permanent facility or location; where consumption is on or off the premises; and regardless of whether there is a charge for the food. n) Food establishment does not include: (i) an establishment that offers only prepackaged foods that are not potentially hazardous; (ii) a produce stand that only offers whole, uncut fresh fruits and vegetables; (iii) a food processing plant; (iv) a kitchen in a private home if only food that is not potentially hazardous is prepared for sale or service at a function such as a religious or charitable organization's bake sale and not for sale to the general public unless allowed by law (see Senate Bill 81); (v) an area where food that is prepared as specified in subparagraph (l); (vi) of this paragraph is sold or offered for human consumption; (vii) a Bed and Breakfast Limited facility as defined in the Texas Food Establishment Rules; or (viii) a private home that receives catered or home-delivered food. o) Food handler card: a card issued by the city of Denton to all food establishment employees whose work brings them into contact with the handling of food, utensils, or food service equipment. These employees shall fulfill all city requirements before receiving a card. tm; šE p) Grease Interceptor: A plumbing appurtenance that is installed in a sanitary drainage system to intercept oily and greasy wastes from a wastewater discharge. Such device has the ability to intercept free-floating fats and oils. q) Health Officer: the officer or other designated authority charged with the administration and enforcement of this code, or a duly authorized representative. r) Health or regulatory authority: the City of Denton. s) Heavy Food Preparation: shall mean any area in which foods are prepared utilizing a grill, griddle, deep-fat fryer, commercial type ovens, and/or any similar food preparation equipment; or any area subject to flooding type of wet cleaning procedures due to the cutting or processing of meat, poultry, fish or pork. Heavy food preparation includes but is not limited to: cafeterias, fast food restaurants, full service restaurants, pizza preparation, donut preparation, and meat and fish markets, etc. and may include day care centers. For information regarding grease interceptor sizes, refer to the International Plumbing Code as amended by the City Building Inspection Department. t) Juice: when used in the context of food safety, shall mean the aqueous liquid expressed or beverage or an ingredient of a beverage and a puree as an ingredient of a beverage. u) Law: shall mean all applicable federal, state and local statutes, ordinances and regulations v) Light Food Preparation: shall mean any area in which foods are prepared exclusive of the use of fryers, grills or similar equipment. Light food preparation is usually limited to the preparation of hot dogs, sandwiches, salads or other similar foods and fountain-type cold drinks. Light food preparation includes, but is not limited to, sandwich shops, limited menu concession stands, etc. and may include day care centers. For information regarding grease interceptor sizes, refer to the International Plumbing Code as amended by the City Building Inspection Department. w) Minor: shall mean an individual under the age of 18 x) Mobile Food Establishment: has the meaning established in Title 25, Part 1, Section 229.162 under Definitions of the Texas Administrative Code. A food establishment that serves, sells, or distributes any food or beverage from a mobile food preparation vehicle that is not operating at a permanent fixed location, but readily moves about. A mobile food establishment is further defined as a foodservice establishment that is vehicle-mounted or wheeled and is capable of being readily moveable. A mobile food unit shall be fully self-contained. A mobile food establishment is a manufactured vehicle, which meets the requirements of Section 13-28 of this code, from which food is prepared, served or provided for the public with or without charge. Types of mobile food establishments: The mobile food unit classifications are based upon the type of menu served. Class I these mobile food units may provide hot and cold holding display areas from which packaged foods are displayed. Self-service by customers of unpackaged foods is not allowed. Preparation, assembly or cooking of foods is not allowed on the unit.Non-potentially hazardous beverages must be provided from covered urns or dispenser heads only. No dispensed ice is allowed. Class II - These mobile food units may serve a full menu as approved by the Consumer Health Division. y) No food preparation: any area in which foods are provided pre-wrapped, from a source approved by the Department of State Health Services with microwave oven type heating being the maximum handling involved. No food preparation is limited to prepackaged sandwiches or similar foods, candies and containerized beverages. tm; šE z) Non-potentially hazardous beverage: shall mean a non-alcoholic liquid intended for consumption, whether natural or synthetic, that does not require temperature control because it is not capable of supporting the rapid and progressive growth of infectious or toxigenic microorganisms or the growth and toxin production of Clostridium botulinum. The term includes: 1) Tea and coffee, excluding espresso, with powdered creamer or ultra-high, pasteurized half and half in individual servings; 2) Commercially made, high acid beverages with a pH level of 4.6 or below, such as apple juice, lemonade, limeade, and orange juice. 3) Fresh squeezed, high acid beverages prepared according to Department guidelines 4) Commercially filled carbonated beverages; 5) High acid beverages made from a commercial mix; and 6) Mineral water sold in open, single-service cups with ice from an approved source. aa)Non-profit organization: All government entities and political subdivision and public school districts; Organizations chartered under the Texas non-profit corporation act; or Operations exempted by IRS form 501c. bb) Perishable food: shall mean any food of a type or in a condition that may spoil. cc)PHF/TCS Foods: control for safety (see further definition in TFER) dd) Pushcart: A mobile unit that is powered only by human beings. It shall not include a fixed or mobile unit solely intended for use as a mobile bar, accessory drink stand, or part of a service area or buffet line, if it is part of, or an extension of, a fixed food or beverage facility operating under a food service establishment permit and it is located on the permitted premises. Pushcarts shall be limited to pre-packaged, non-potentially hazardous food as approved by the regulatory authority. ee)Remodeling, extensive: any change in the structure of a food preparation area or any change in the establishment which would increase or decrease size requirements for the food preparation or food storage areas as specified in sections 13-27 (b) and (c). The term may also include any construction which requires a building permit from the Building Inspection Division of the City of Denton. It does not include: Expenditures for the replacement of moveable equipment; or ff) Remodeling which does not affect the construction or operation of food storage or food preparation areas or areas used to store or clean utensils and equipment used in food storage or food preparation. gg) Seasonal food service establishment: any food service establishment which operates from a fixed location for a period not to exceed six (6) consecutive months provided that such operation shall occur only once during any twelve (12) consecutive month period. hh) Smoker: any unit, whether mobile or fixed in nature, which uses wood or wood products to provide smoke for the purpose of slow cooking meats intended for human consumption, whether such unit is inside an enclosed building or in an outdoor area. ii) Temporary Event: transitory gatherings such as traveling fairs, carnivals, multicultural celebrations, special interest fundraisers, restaurant food shows, grand openings, customer appreciation days, etc. also called special events. These are single events or celebrations; may also be called a community based event. jj) Temporary food permit: a permit issued after fulfilling all City requirements to a food establishment selling or serving food at a temporary event. The temporary food permit is valid tm; šE until the temporary event concludes or for 14 consecutive days, whichever is less. A temporary food permit is valid for only one event location at a time. kk) Toilet facilities: flush toilets and sinks with hot and cold running water connected to an approved system ll) Warehouse: shall mean any enclosed structure, room, or building where packaged food or food products intended for off-premise consumption are store for, sold to, or offered for sale or distribution to persons other than the ultimate consumer. mm) Wholesome: in sound condition, clean, free from adulteration, and otherwise suitable for use as human food. Food which is packaged shall be deemed wholesome if it meets the foregoing requirements and it is used or sold prior to the expiration date marked on the package. ARTICLE III. REGULATION OF FOOD HANDLERS MANAGEMENT AND PERSONNEL Sec.13-3 Personnel. a) A food employee may drink from a beverage container that has a tight-fitting lid with a straw. b) Employees shall wear disposable gloves when handling ready-to-eat foods, or provide documentation of training regarding correct handling of ready-to-eat foods, as required in Texas Food Establishment Rules 229.164(e)(1)(D)(i)-(iii). Sec.13-4 Food Manager Certification. a) The permit holder of every food establishment shall ensure that at least one person per shift at each location has a valid Food Protection Management training certificate. Certification must be obtained by passing an examination approved by the Texas Department of State Health Services and meeting all requirements of Health and Safety Code, chapter 438, Subchapter G and 25 TAC 229.176 (Texas Administrative Code, relating to Certification of Food Managers) and approved by the regulatory authority. b) The following food service establishments are exempt from the requirements of this section: 1) Establishments selling only uncut produce or commercially packaged; hermetically sealed foods 2) Bars and lounges that do not serve potentially hazardous foods 3) Concession stands that are run by volunteers c) Compliance may be required of establishments having one of the above exemptions if they have repeated or critical food code violations, or if determined by the health officer to be capable of causing food borne illness. d) The owner or operator of a new foodservice establishment shall provide verification to the Consumer Health Division, prior to the opening of the establishment, that the establishment meets the Certified Food Protection Manager requirement of this article. e) If a foodservice establishment cannot meet the requirements of this section because of the termination or permanent transfer of a registered food protection manager, the food establishment shall: Employ another registered food manager within thirty (30) days of the effective date of the termination or transfer of the previous manager. When an existing food service establishment has a change of ownership, the new owner or operator of the establishment shall provide verification to the Consumer Health Division within thirty (30) days of the effective date of the change of ownership that it is in compliance with the certified food protection manager requirements of this article. tm;  šE f) A person commits an offense if the person is the owner or operator of a food establishment and violates a provision of this section. g) A person commits an offense if the person is the food manager of a food establishment and fails Texas Department of State Health Services within the time limits allowed in this article. h) with the City of Denton Consumer Health Division. Sec.13-5 Food handler's card required . a) Every person whose work brings them into contact with the handling of food, utensils, or food service equipment must possess a valid City of Denton food handler card. b) Every person who owns manages, or otherwise controls any food service establishment shall not permit any person to be employed therein who does not possess a valid City of Denton food handler card within ten (10) days from the date of their employment. Sec. 13-6 Food handler test In order to receive a food handler's card, every person must achieve a score of seventy (70) or more on a the test offered by the City of Denton or pass an approved on-line course offered on the City of Denton Consumer Health webpage. After an applicant passes an online food handler course, the applicant shall bring verification to the City in order to receive a City of Denton issued Food Handler card. This requirement must be met upon expiration of a food handler's card and upon application for a new food handler's card. At the discretion of the health officer, if he or she deems it necessary, employees may be required to attend one of the classes offered by the City of Denton Consumer Health Division. Sec. 13-7 Certificates available . The permit holder of the food service establishment shall make food handler cards and food manager certificates displayed where they can be easily seen by the regulatory authority. Sec. 13-8 Duration of food handler card. Any food handler's card issued under the provisions of this article shall remain in full force and effect two years from the date of issuance. Sec. 13-9 Same-nontransferable . Every food handler card issued under the provisions of this chapter shall be nontransferable. Sec. 13-10 Same--Confiscation. The health officer shall have the authority to confiscate a food handler's permit that has expired or is otherwise invalid. ARTICLE IV REGULATION OF FOOD SERVICE ESTABLISHMENTS - FOOD Sec. 13-11 Destruction of unwholesome food authorized . Whenever the city health officer discovers any food or drink displayed for sale or kept for sale, which is unwholesome or unsafe for human consumption, the officer shall order the food or drink to be destroyed or removed, and the owner or the responsible person in charge shall immediately destroy or remove such unwholesome or unsafe food at his or her own expense. Sec. 13-12 Sale or other disposition of unwholesome food prohibited . It shall be unlawful for any person, association of persons, firm, food service establishment, temporary food service establishment or corporation to offer for sale or give away any food or drink for human tm;  šE consumption which has been pronounced by the city health officer to be unfit for such use. No person shall prepare food for sale to the public from their own private residence. Sec 13-13 Donation of foods. A potentially hazardous food may be donated if: a) The food has been kept at 135º degrees Fahrenheit or hotter during hot holding and service; subsequently cooled properly, then refrigerated to meet the time and temperature requirements as described in TFER 229.164. b) Cold foods must be held at 41º degrees Fahrenheit or colder at all times. Ice is not to be used for holding foods cold; mechanical refrigeration units are required. Written documentation of cool- down procedures of the food that is being donated is required. Sec. 13-14 Examination and condemnation of food. Food may be examined or sampled by the health officer as often as necessary for enforcement of any provision of this chapter. The health officer may, upon written notice to the owner or person in charge specifying with particularity the reasons therefore, place a hold order on any food, which he believes is in violation of Section 229.171 2 (N) of the Texas Food Establishment Rules or any other provision of the rules. The health officer shall tag, label, or otherwise identify any food subject to the hold order. No food subject to a hold order shall be used, served, or moved from the establishment. The health officer shall permit storage of the food under conditions specified in the hold order, unless storage is not possible without risk to the public health, in which case immediate destruction shall be ordered and accomplished. Sec. 13-15 Appeal from hold order. The hold order shall state that a request for hearing to appeal the hold order may be filed within five (5) days and that if no hearing is requested, the food shall be destroyed. If requested, a hearing shall be held on the basis of evidence produced at that hearing by the Health and Building Standards Commission as described in section 13-35 of this chapter. The Health and Building Standards Commission may vacate the hold order or direct the owner or person in charge of the food to denature or destroy such food or to bring it into compliance with the provisions of this chapter. ARTICLE V. EQUIPMENT, UTENSILS, AND LINENS: Sec. 13-16 Garbage Containers. Garbage and refuse shall be kept in durable, easily cleanable, insect-proof, and rodent-proof containers that do not leak and do not absorb liquids. Containers used in food preparation and utensil-washing areas shall be kept covered except when actually in use. There shall be sufficient number of containers to hold all the garbage and refuse that accumulates during operation of the food establishment. The regulatory authority may require additional service, dumpsters or larger dumpsters to accommodate the garbage and refuse that accumulates. Suitable facilities, including hot water and detergent or steam shall be provided and used for washing garbage containers. Liquid waste from compacting or cleaning operations shall be disposed of as sewage. Power washing and contracted cleaning services shall be performed according to applicable law. Cardboard or other packaging materials that do not contain food residues or that are waiting regularly scheduled delivery to a recycling or disposal site may be stored outside in a covered receptacle if it is stored so that it does not create a rodent harborage problem. Sec. 13-17 Premises. Food Service establishments and all parts of the property used in connection with operations of the establishment shall be kept free of litter. tm;  šE Only articles necessary for the operation and maintenance of the food service establishment shall be stored on the premises. Sec. 13-18 Equipment. Existing equipment which was installed in a food service establishment prior to the effective date of this chapter, and which does not meet fully all of the design and fabrication requirements of this rule (or those described in Texas Food Establishment Rules) shall be deemed acceptable in that establishment as long as there is no change of ownership, equipment is in good repair and capable of being maintained in a sanitary condition, and the food-contact surfaces are nontoxic. Replacement equipment and new equipment acquired after the effective date of this chapter shall meet the requirements of this chapter and the Texas Food Establishment Rules. ARTICLE VI. WATER, PLUMBING, AND WASTE: Sec. 13-19 Grease Interceptors. Grease Traps/Interceptors shall be required, and located to be easily accessible for cleaning. Grease Interceptors shall be located outside the food preparation area unless otherwise approved by the regulatory authority. ARTICLE VII. PHYSICAL FACILITIES: SECTION 13-20 Dogs permitted in outdoor dining areas A food service establishment may permit a customer to be accompanied by a dog in an outdoor dining area if: a) The food service establishment posts a sign in a conspicuous location stating that dogs are allowed in the outdoor dining area; b) The customer and the dog access the outdoor dining area directly from the exterior of the food service establishment; c) The dog does not enter the interior of the food service establishment; d) The customer retains the dog on a leash at all times and controls the dog; e) The customer does not allow the dog to be on a seat, a table, a countertop, or a similar surface; f) In the outdoor dining area, the food service establishment does not 1) prepare food; or 2) permit open food, except for food that is being served to a customer; and, g) Only cleaners and sanitizers that are not harmful to animals may be used on outdoor surfaces. ARTICLE VIII. POISONOUS OR TOXIC MATERIALS: Refer to the Texas Food Establishment Rules (TFER) of any violations in regards to poisonous or toxic materials. tm;  šE ARTICLE IX. VENDORS, CATERING TRUCKS, MOBILE UNITS MOBILE FOOD ESTABLISHMENTS Sec. 13-21 Requirements for mobile units . a) Application Process 1) In order to obtain a health permit to operate a mobile food establishment within the city limits of Denton, an applicant shall submit all required applications and applicable documents with the City of Denton and pay all required fees. The application shall include an approved Certificate of Occupancy issued by the Building Official and a background check issued by the Police Department. The Certificate of Occupancy verifies that all locations stated in the submitted location itinerary are zoned for restaurants. Other documentation may be required by the health officer. 2) The Consumer Health Division must be given written notice at least two (2) business days before implementation of any changes to the filed itinerary. b) Permit Issuance 1) Upon receiving a proper application for a permit, the Consumer Health Division shall make appropriate inspections of the vehicle; equipment and other reasonable inspections concerned with the mobile food establishment and shall issue a permit and sticker only if: a) The inspection reveals compliance with the applicable requirements of all federal and state statutes and regulations and city ordinances governing the proposed mobile food establishment operation. b) The valid sticker shall be displayed by a mobile food establishment: 1. The hard copy of the permit shall be posted in public view inside the vehicle and 2. The sticker permit shall be posted on the back right corner on the outside of the vehicle it will display the date of expiration of the permit and the unit ID number. 2) The health permit shall be valid for 6 months. Mobile food establishment permits shall not be transferable and shall be considered revoked should the food vending operation be changed from that specified in the permit. c) Operations on Private Property Prior to issuance of a health permit, the operator of a mobile food unit that will be operated on private property for more than one hour in a single day shall submit to the Consumer Health Division proof of ownership of the property or a signed and notarized written statement from the or authorized agent, granting permission for operation of the mobile food unit at the proposed location. If the property owner is a partnership or corporation, the statement shall include the name, address and telephone number of one of the partners or officers. A copy of the statement shall be displayed in the mobile food unit in plain view of the public at all times. The operator of a mobile food unit shall immediately cease operations and remove the mobile food unit from said property upon receipt of a citation for violation of this subsection. d) Operations on Public Property No mobile food vehicle shall operate a business from a public park or publicly owned property or site without written permission from the City. e) Signage tm;  šE 1) Each mobile establishment must be readily identifiable by business name, printed, permanently affixed, and prominently displayed upon at least two sides of the units , in letters and numbers not less than 3 (three ) inches in height 2) name or a distinctive identifying symbol. The lettering shall be at least three (3) inches in height and of a color contrasting with the background color. If a symbol is used, it shall be at least twelve (12) inches in diameter or of an equivalent size. An accurate scale drawing or photograph of the symbol shall be filed with the City of Denton Consumer Health Division. 3) Each mobile food establishment shall be clearly marked with the permit number for purposes of identifying each unit on inspection reports and other communications. f) Mobility A mobile food establishment must demonstrate mobility at any reasonable time if requested by any peace officer, health officer, or designated city employee. g) Vehicle construction 1) The interior of the vehicle shall be manufactured in accordance to Section 13-28 of this code. The vehicle shall be completely enclosed. 2) Mobile food establishments may be required to provide an on board power source, such as a battery or generator, to assure maintenance of PHF/TCS foods at proper temperatures during transit, preparation and service. The vehicle must be equipped with commercial mechanical facilities. All equipment on the vehicle is to be NSF approved, ANSI approved, or of commercial grade. 3) The cab of the vehicle must be physically separated from the food preparation area, and the seats designated for the cook and any passengers must be located outside of the food preparation area. 4) All cooking equipment and hot holding units must be located at the rear of a mobile food preparation vehicle. Covers for deep fryers must be provided and installed over fryer units while vehicle is in motion. 5) The vehicle must be equipped with a built-in hose that may be used to wash the interior of the vehicle when it is at the commissary for servicing. 6) Condiments must be in covered containers with service utensils or from squeeze or pour type bottles with lids. h) Access to Restroom Facilities Prior to the issuance of a health permit, the operator of a mobile food establishment shall submit to the Consumer Health Division and comply with the following: 1) Written proof of availability of restrooms with flushable toilets for the use of the mobile food establishment employees located in a business establishment within 500 feet of each location where the mobile food unit will be in operation for more than one (1) hour in any single day. 2) Proof of availability of adequate facilities shall be in the form of a written and notarized hone number of the property owner or authorized agent, and the type of business and hours of operation, granting permission for the use of the facilities. If the business owner is a partnership or corporation, the statement shall include the name, address and telephone number ofone of the partners or officers. 3) A copy of the notarized statement shall be displayed in the mobile food establishment in plain view of the public at all times. tm; šE i) Overhead Protection Overhead protection shall be provided for mobile food units that are operated outdoors and where food is not covered at all times. The overhead protection shall consist of, but not be limited to, roofing, ceilings, awnings, or umbrellas. The overhead protection must be easily cleanable. Any additional equipment or the arrangement thereof other than that approved when the permit was issued shall be prohibited unless approved in advance by the Consumer Health Division. j) Waste retention If liquid waste results from the operation of a mobile food establishment it shall comply with the following: 1) It shall be stored in permanently installed, vented retention tanks that are at least fifteen percent (15%) larger than the water supply tank, but not less than thirty (30) gallons of capacity and shall be drained and thoroughly flushed during servicing operations. 2) All liquid waste shall be discharged to an approved sanitary sewage disposal system at the commissary. 3) The waste retention tank shall be sloped to an outlet that allows complete drainage of the tank during servicing operations. 4) Liquid waste shall not be discharged from the retention tank when the mobile food establishment is in motion or at an operational location. 5) All connections on the vehicle for servicing mobile food unit waste disposal facilities shall be of a different size or type than those used for supplying potable water to the food unit. 6) The waste connection shall be located below the water connection to preclude contamination of the potable water system. 7) Connection to a sewerage system at an operation location is prohibited. 8) All used fats, oil, or grease shall be discharged to an approved grease interceptor at the commissary. Used fats, oils, or grease shall not be discharged to any unauthorized food establishment grease interceptor. k) Garbage and Refuse A mobile food establishment shall provide a minimum of 20 gallons for garbage and refuse storage of the mobile food establishment that are insect and rodent-proof for customer use. k) Exterior surfaces Exterior surfaces of mobile food units shall be of weather resistant materials and shall comply with all applicable laws. l) Utility connections Utility connections shall be limited to only electrical service and shall be in full compliance with the Electrical Code. All electrical extension cords shall be of industrial grade quality and shall be utilized in a safe manner as not to be a nuisance or a trip hazard. Mobile food establishments shall not be connected to any potable water service, sanitary sewer service, or fuel gas service while in the operation of preparing or vending food. m) Damage Report Any accident involving a mobile food establishment that results in damage to the water system, waste retention tank, food service equipment, or any facility that may result in the contamination of the food being transported or any damage that results in a violation of this section, shall be reported within 24 tm; šE hours of the time the accident occurred. Reports shall be made by the holder of the mobile food establishment health permit. n) Operation capacity limited The operator of a mobile food establishment shall prepare, serve, store, and display food and beverages on or in the mobile food unit itself; and shall not attach, set up, or use any other device or equipment intended to increase the selling, serving, storing, or displaying capacity of the mobile food establishment. It shall be un-lawful for the operator of a mobile food establishment to: 1) Allow items such as, but not limited to brooms, mops, hoses, equipment, containers and boxes or cartons to remain adjacent to or beneath the mobile food establishment; 2) Provide or allow any sign or banner to remain that is not attached and solely supported by the mobile food establishment; 3) Provide or allow any canopy, awning or other covering that is not attached to and solely supported by the mobile food establishment to remain over any part of the mobile food establishment or over any area within 100 (one hundred) feet of the mobile food establishment, except that any awning or covering provided by others and primarily used for other purposes and only incidentally or coincidentally used by the mobile food establishment shall not be considered a violation of this subsection; 4) Provide or allow any dining area, including but not limited to tables, chairs, booths, bar stools, benches, and standup counters, within 100 ( one hundred) feet of the mobile food establishment. Dining areas or seating areas adjacent to fixed location mobile food units operating inside of an enclosed space such as a mall or lobby or park vending units where the seating is provided by someone other than the mobile food establishment operator and only incidentally or coincidentally used by the patrons of the mobile food establishment are acceptable if approved by the health officer. 5) All food vending shall be done from the mobile unit. Food is not to be sold outside of the vehicle, for example, from a table under a free standing canopy. Mobile food establishments are limited by the types and choices of approved food items being prepared and sold. Food preparation may be restricted by Consumer Health. o) Separation and Setbacks Mobile food vehicles shall be separated from existing buildings and other mobile food vehicles by a minimum of 12 feet. Mobile food vehicles shall be subject to all current zoning and setback regulations found in the Denton Development Code (DDC). Mobile food vehicles shall not set up in fire lanes or parking spaces that are required by the Certificate of Occupancy of an existing business. p) Mobile Food Vehicle Types Class 1 These mobile food units may provide hot and cold holding display areas from which packaged foods are displayed. Self-service by customers of unpackaged foods is not allowed. Preparation, assembly or cooking of foods is not allowed on the unit.Non-potentially hazardous beverages must be provided from covered urns or dispenser heads only. No dispensed ice is allowed. Examples of foods that are allowed: 1) Food that was prepared and packaged in individual servings at an approved commissary and transported and stored under conditions meeting the requirements of this article 2) Potentially hazardous beverages such as individual servings of milk, milk products and coffee creams that have been packaged at a pasteurizing plant. All foods sold will need to meet proper labeling requirements. Class 2 These mobile food units may serve a full menu as approved by the Consumer Health Division. tm; šE Note: If the vendor is selling prepackaged food, the vendor shall provide a copy of the commercial if applicable) from the Texas Department of State Health Services. p) Servicing by commissaries Mobile food establishments shall report to the approved commissary location for supplies, cleaning, and servicing operations as follows: 1) The mobile food establishment shall be cleaned and serviced at the commissary at least once every week and shall be stored when not in operation. 2) The mobile food establishment shall acquire needed supplies from the commissary or other approved sources. 3) The mobile food establishment shall provide documentation of each visit to the commissary and shall have that documentation available for inspection. r) Servicing Records It shall be unlawful for an operator of a mobile food establishment to be in operation without a valid servicing record in his possession. The operator of a mobile food establishment shall keep and maintain servicing records on the mobile food establishment for a period of one year from the date of servicing. The servicing records must be immediately available to any peace officer or health officer for inspection. s) Servicing records to be kept by commissaries The commissary from which a mobile food establishment operates shall issue and maintain servicing records for each unit in a manner and form prescribed by the health officer. The permit holder, person in charge, employee, or representative of any commissary shall keep and maintain servicing records at the commissary for a period of two years from the date of servicing or until retrieved by the health officer, whichever comes first. Servicing records maintained at the commissary shall be immediately available to any peace officer or health officer for inspection during normal business hours. t) Falsification of servicing records It shall be unlawful for an owner, permit holder, person in charge, employee, or representative of any commissary to issue a servicing record without first verifying that the mobile food establishment has complied with all servicing requirements. It shall be unlawful for any owner, permit holder, person in charge, employee, or representative of any commissary or mobile food establishment to knowingly present or issue any false, fraudulent, or untruthful servicing record for the purpose of demonstrating compliance with the requirements of this chapter. u) Servicing operations 1) Potable water-servicing equipment shall be stored and handled in a way that protects the water and equipment from contamination. 2) Vehicle cleaning and in-place cleaning of nonfood-contact surfaces of equipment not requiring sanitization shall be done with potable water and shall be done in a manner that will hoses are used in the cleaning process, they shall be food-grade and kept off the floor or pavement, on racks or by other approved suitable means. All cleaning areas shall be paved with a smooth surface of nonabsorbent material such as concrete or machine-laid asphalt, which is sloped to drain toward an approved catch basin or floor drain where the liquid waste can be lawfully disposed. The use of liquid waste transport vehicles (otherwise known as vacuum trucks), licensed by TCEQ, for the removal and disposal of liquid waste resulting from mobile unit food operations is permitted. tm; šE 3) Servicing operations may be performed by the commissary operator or by the mobile food es perform servicing on each mobile food unit and properly complete a servicing record. It is the responsibility of the mobile food establishment operator to confirm that the requirements of this section are fulfilled prior to resuming operations. 4) A current copy of each authorization must be maintained on file with the City of Denton Consumer Health Division and also in plain sight on the vehicle for inspection by the City of Denton or a peace officer upon request. v) Permitting of commissaries as food establishments A commissary servicing any mobile food establishment may be an approved and permitted food establishment at which the mobile food unit is supplied with fresh water, emptied of waste water (and grease) into a proper waste disposal system, and cleaned, including washing, rinsing and sanitizing of those food contact surfaces or items not capable of being immersed in the mobile food -washing sink. The servicing area must be of adequate size and scope as to accommodate its own operation, as well as those of the mobile food establishment. 1) Compliance with all other applicable rules and operational guidelines as may be promulgated by the health officer. 2) When the commissary is within another jurisdiction the permit holder shall provide a copy of the latest inspection of its facility by that regulatory authority. w) Warehouse: 1) If only prepackaged goods are sold, a warehouse may be accepted in lieu of a commissary. 2) Warehouses shall be required to meet only those rules necessary to prevent the contamination of stored foods, single service articles, utensils and equipment. In general, warehouses shall be exempt from the rules relating to finished walls, ceilings, or storage bases, light colored surfaces, restrooms, lavatories and utility facilities, provided foods are protected from contamination from dust, insects, rodents, flooding, drainage, or other contaminants. 3) Handling of unpackaged foods, dishwashing and ice making are prohibited in a warehouse. x) A mobile food preparation facility shall not: 1) Stop or remain at any location to sell or serve food during any time other than the dates and times specified in: a. the current itinerary on file with the Consumer Health Division for the mobile food preparation vehicle; and b. the current authorization agreement on file with the Consumer Health Division for the use of the premises to sell or serve food. 2) Be located within 1500 feet of any public school from Monday through Friday between the hours of 7 AM and 5 PM 3) Be located within 300 feet of a city permitted food establishment; a mobile food establishment may be exempt from this provision only if notarized written permission is given by the food establishment owner, or owners. The written permission shall be kept with the mobile food establishment at all times that the unit is located within three hundred (300) feet of said establishment(s). 4) Serve as a commissary for another mobile food unit or as the base of operation for a caterer 5) Apply for variances of food processing 6) Use leftover foods. All PHF/TCS foods shall be served or discarded at the end of each business day tm; šE 7) Use time as a public health control. All PHF/TCS foods shall be controlled by mechanical means 8) Park on an unimproved surface such as grass or dirt without written approval from the City. 9) Be permitted to be washed-out at the location of an existing food establishment. All washing shall be at an approved commissary or at a commercially operated carwash. Grease or wastewater shall not be dumped or drained at a carwash. 10) Leave a location of operation until the area of operation is free from trash or nuisance caused by the mobile food vehicle business, its employees, or its customers. y) Food Transportation 1) During transportation, food and food utensils shall be kept in covered containers or completely wrapped or packaged so as to be protected from contamination. Foods in original packages do not need to be overwrapped or covered if the original package is sealed. 2) Food shall be maintained at required temperatures at all times during transport. z) Inspection Procedures 1) Critical violations shall result in the immediate closure of a mobile food unit, commissary or warehouse if the City of Denton Consumer Health officer determines that an imminent danger to the public health exists, and that the violation cannot be corrected immediately or an approved alternative procedure has not been implemented. 2) For violations not resulting in closure, the corrections shall be made and approval shall be given by a city health inspector before reopening for business. aa) Closure of a Mobile Food Establishment: When a mobile food unit is closed by the health officer for critical violations, the health officer shall post a closed sign and the inspection report on the unit. When a commissary or warehouse is closed by a health officer for critical violations, the health officer shall post the inspection report inside the facility. No person except the health officer shall remove or alter the inspection report or closed sign. Sec. 13-22 Requirements for snow cone vendors and ice cream vendors a) A snow cone vendor shall be limited to the sale of snow cones and pre-packaged items only and shall have a: 1) Commercially approved source for ice and syrup; 2) Hand wash sink with hot and cold running water under pressure, liquid soap, and paper towels; 3) At least a two (2) compartment sink (with hot and cold running water under pressure) for washing and sanitizing utensils; and, 4) Waste-water holding tank of adequate size for operation or be connected to an existing sanitary sewer. b) A snow cone vendor may also be required to meet any and all provisions required for a food service establishment, which the administrator deems necessary to protect the public health and safety. This type of establishment shall be a fixed location capable of obtaining a certificate of occupancy. c) A water heater system capable of producing water of 100º degrees Fahrenheit interconnected with the potable water supply shall be provided. A minimum of 15 gallons of water must be available. d) Adequate, conveniently located and accessible toilet and lavatory facilities shall be available to the snow cone stand at all times. A notarized letter signed by the owner/operator of the establishment where the facilities are located, must be submitted with the permit application giving written permission for the snow cone personnel to use such facilities and that the facilities tm; šE operation. The path of travel to such facilities shall not exceed a distance of 200 feet. Requirements for the sale of ice cream, other frozen desserts or novelties upon a public street ) (aA person may not sell ice cream, frozen desserts or other novelties from a vehicle before sunrise or after sunset. (b) Ice cream, frozen desserts, and other novelty frozen food items shall be individually wrapped by the manufacturer before being placed in the vehicle from which they are sold and shall be sold in the original wrapping. (c) Such frozen items as described in (b) above may be sold from a pushcart. All vehicles offering ice cream for sale shall have: 1) An automatic flashing device consisting of two lamps at the front of the vehicle, mounted at the same level and as widely spaced laterally as possible and displaying simultaneously flashing amber lights, and two (2) lamps at the rear of the vehicle mounted at the same level and as widely spaced laterally as possible and displaying simultaneously flashing amber lights, to be used at all times while each vehicle is in use for food service or solicitation of sales; capable of maintaining a constant temperature for food storage and contain, in a conspicuous place, a thermometer to allow for verification of temperatures. Sec. 13-23 Catering operations . a) All catering operations based in the City of Denton shall comply with all state rules, laws, and local ordinances. A person shall not engage in a catering operation unless the service is affiliated with a food service establishment operating from a fixed facility that is permitted by the appropriate health authority. b) The base of operations for a catering operation shall be physically separate from a residential home and shall be a permanent, fixed location. c) The health officer may inspect a catering operation at any time. The health officer may request copies of the health permit issued to the caterer from the regulatory authority having jurisdiction where the food is prepared or packaged. ARTICLE X. TEMPORARY FOOD ESTABLISHMENTS: Sec. 13-24 Temporary food service establishments. The term temporary food service establishment shall not include concession stands, which operate at a fixed location in conjunction with scheduled, community-based sporting or recreational events provided that the preparation and serving of potentially hazardous foods shall be restricted to only those pre- cooked, pre-packaged potentially hazardous food products that have been properly prepared in accordance with all Department of State Health Services and local requirements and are properly stored, handled, and served in the unopened, original package from said concession stands. In such instances where open potentially hazardous foods are prepared on site from a concession stand, these shall be evaluated on a case-by-case basis and a determination shall be made as to requirements. a) A temporary food service establishment that does not comply with other requirements of this chapter or other city ordinances applicable to food service establishments is permitted if: 1) The health officer finds that the operation will not result in a health or safety hazard or a nuisance; tm; šE 2) The operation is limited to a single, fixed location, which may include one or more facilities at the location; 3) The operation is either: a. Limited to a time of not more than fourteen (14) consecutive calendar days; b. Operating under a city park and recreation department that has been approved by the city; and c. The food service establishment complies with the other requirements of this section. b) An application and non-refundable fees for a temporary event permit (per food booth) shall be submitted at least two (2) working days prior to the event, or five (5) days prior to the event if ten (10) or more booths are permitted for the same event. The application shall include the time the booth will be set up and ready for inspection. c) If an application is not submitted by the deadline in (b) above, the acceptance of the application will be at the discretion of the health inspector, and an administrative fee will be charged. d) All requirements of the food booth must be in place before a permit will be issued. e) A temporary event permit will be required if there is open food (e.g. offering samples) available. f) Food manufacturers must submit a copy of the state manufacturer license with their application. g) Permits for temporary food service establishments that are not operating in conjunction with a special event or community-based event shall be limited to three (3) permits per year per establishment. Applicants must wait 30 days after an event has ended before applying for a new permit. h) A temporary food service establishment shall not: 1) Prepare, serve, sell or distribute any food not approved in advance by the health officer. This prohibits the storage and preparation of food from a private residence. Any slicing, dicing or cutting of potentially hazardous foods must be done in a commercial kitchen and brought to the event under proper temperature control; this includes raw hamburger meat that must be allowed. 2) Prepare potentially hazardous food; except, that the establishment may prepare potentially hazardous food that is approved in advance by the health officer and does not require substantial preparation prior to consumption (including, but not limited to, a hamburger or frankfurter) or may prepare potentially hazardous food that is obtained by the establishment in individual servings; i) Potentially hazardous food products shall be held in mechanical refrigeration that is maintained at 41º degrees or less. Frozen products may be stored in ice only if approved in advance by the regulatory authority and the duration of the event and items offered for sale is limited, typically less than four (4) hours in duration. Potentially hazardous food products shall be held in mechanical hot or cold holding equipment if the event is more than four (4) hours in duration. All foods are to be kept properly protected during storage, preparation, and service; this will include grill covers or lids to prevent contamination from overhead. j) Bare hand contact with ready-to eat foods is prohibited. Single-use gloves must be worn over cleaned hands. k) - or utensils may be stored in running water dipper wells. l) A temporary food service establishment shall comply with liquid waste disposal ordinances, solid waste disposal ordinances and fire codes. tm; šE m) A temporary food service establishment shall comply with Section 229.170 a-k of Texas Food Rules and any other requirement that the administrator determines is necessary to protect the public health or safety and imposes as a condition to the lawful operation of the establishment. n) Food-handler cards required: Food safety training is required for all temporary food establishment workers. Food service workers may obtain a food-handler card through a class offered through - line course. Depending on the duration of the event and the extent of the food service being offered, minimum of one or maximum of all personnel during the event. o) Animals are prohibited from being within the interior limits of a temporary food establishment. p) A foodservice establishment with a current annual health permit will be required to obtain a temporary event permit if the event is at a location outside their permitted premises. q) Flooring materials to control dust and mud must be approved by the Consumer Health Division. r) SECTION 13-25 a) Management and Personnel Responsibility, assignment. The permit holder shall be the person in charge or shall designate a person in charge and shall ensure that a person in charge is present at the market during hours of operation. Where it is allowed, food vendors that offer, sell, or distribute food that is potentially hazardous or that offer samples of food; shall have a person in charge that can show proof of successful completion of a Texas Department of State Health Services approved Certified Food Managers Course. Food vendors that offer, sell, or distribute only prepackaged foods, non- potentially hazardous foods or beverages or temporary food vendors in conjunction with a special event at such location are exempt from the food manager certification course requirement. Proof of successful completion of a certified food manager course may be required of food vendors having exemptions if judged by the regulatory authority to be capable of causing food-borne illness or may be an increased public health risk. b) Food 1) Preventing contamination: a. Food Display. Except for plants, nuts in the shell and whole, raw fruits and vegetables that are intended for hulling, peeling or washing by the consumer before consumption, food on display shall be protected from contamination by the use of packaging, counter, service line, or salad bar food guards that comply with NSF standards, completely enclosed display cases; or other means approve by the Regulatory Authority. Letters may be required from the fabricator or installer of such food guards stating compliance with NSF standards if visual compliance is not evident through the use of labels or listings posted directly on the food guard by the authority approved to affix such label or listing. b. Except for plants, nuts in the shell and whole, raw fruits and vegetables that are intended for hulling, peeling or washing by the consumer before consumption, food that is not completely packaged must be located under a cover, tent or other covering approved by the Regulatory Authority and remain under the covered protection for the duration of the operating period. 2) Approved Source. Only food from an approved source (as defined in the Texas Food Market under these rules. Foraged foods are not considered to be from an approved source. Food prepared in a private home, a Cottage food production operation or from an unlicensed food manufacturer or wholesaler is considered to be from an unapproved tm; šE defined in this rule. Food from a kitchen regulated by a local regulatory authority and proof of such is presented shall be considered from an approved source. 3) Eggs. The storage, packaging and transfer of eggs shall comply with all regulations of the Texas Department of Agriculture and the Texas Food Establishment Rules (TFER). Egg regulations include storage at a temperature not to exceed 45 degrees Fahrenheit and and address. Eggs in this rule refer to the shell egg of the domesticated chicken, turkey, duck, goose, or guinea. 4) Meat, non-poultry. a. Meat such as game animals, ratites or equine meats (as defined in TFER) may not be sold. b. Whole muscle meat shall be stored frozen and held under refrigeration capable of maintaining the meat in a hard, frozen state. Meat shall be packaged ready to offer or sell. Separating, cutting or otherwise removing meat from an intact package is prohibited. c. Meat shall be produced, stored, labeled in compliance with U.S. Department of Agriculture rules and regulations. Proof of license or exemption shall be provided to the Regulatory Authority at time of application. 5) Poultry. a. Poultry is defined as allowed by TFER, as amended. b. Poultry shall be stored frozen and held under refrigeration capable of maintaining the meat in a hard, frozen state. Poultry shall be packaged in form ready to offer or sell. Separating, cutting or otherwise removing poultry from intact packaging is prohibited. c. Poultry shall be produced, stored and labeled in compliance with U.S. Department of Agriculture rules and regulations. Proof of license or exemption shall be provided to the Regulatory Authority at time of application. 6) Seafood, prohibition 7) Sampling: Allowed only where expressly approved by the Regulatory Authority. Where allowed, sampling shall comply with all of the following: a. Non-PHF/TCS foods shall be offered to the consumer in individual servings or bites and shall not be made available for self service. Portioning foods on site is prohibited. Portions shall be completely enclosed until given to the consumer or shall be unpackaged by the consumer. b. Only single-service articles may be given to the consumer for use. c. PHF/TCS foods shall be maintained at proper temperatures according to TFER (40 degrees or colder; 135 degrees or hotter). Meats shall be frozen and remain frozen until sold to the consumer d. Where PHF/TCS foods are stored on ice, dry ice, or other items intended for use to cool or freeze foods, a thermometer shall be present in the container holding such foods. The thermometer must show evidence of proper temperatures in which to maintain the food item in compliance with TFER. If at any time, food stored in this manner is not at proper temperatures, the Regulatory Authority shall dispose of the food, whether voluntarily or involuntarily, if it cannot be determined if it is safe to sell or offer for sale. tm; šE e. Time as a public health control may not be used as the sole means for holding PHF/TCS foods safely f. Ice shall be readily drained and water or melting ice shall not come into contact with stored food. g. Foods cut or constituted on site such as soups, dips, relish, condiments and sauces shall be maintained at or below 41 degrees Fahrenheit and process must comply with the Equipment and Utensils section of these rules. h. Digital thermometer accurate to +/- 2 degrees Fahrenheit shall be on site for use by the vendor. One thermometer shall be provided for each piece of equipment used to hold proper PHF/TCS temperatures. 8) Animals, prohibition. a. Market. b. Other than service animals that are conspicuously and properly identified, animals accompanying their owner, where allowed, shall be in a carrier or on a leash and under direct physical control of the owner. Animals may not be allowed within 10 feet of a food booth. c) EQUIPMENT AND UTENSILS 1) Functionality of equipment. a. Except for a ods under this ordinance frozen or refrigerated shall comply with TFER and be able to maintain required temperatures for the duration of operations. Municipally equipment capable of maintaining proper food temperatures as required in TFER. Mechanical food equipment shall display certification labeling from an ANSI- accredited certification program or obtain approval from the Regulatory Authority for use. Food equipment that is certified or classified for use by an American National Standard Institute (ANSI) accredited certification program shall be deemed to comply with this rule. A letter may be required from the fabricator or installer of such equipment stating compliance with ANSA- accredited certification program if visual compliance is not evident through the use of labels posted directly on the equipment by the authority approved to affix such a label. b. Tables used within the vending area shall be made of non-porous material and be easily cleanable. c. Utensils used, only when approved for sampling, shall be made of non-wood material and disposable unless compliance for cleaning and sanitizing under Section 229.165 of TFER, or as amended, is provided and approved by the Regulatory Authority for use onsite. 2) Equipment numbers and capacities. a. At least one (1) hand wash sink or facility complying with the Temporary Food Establishment requirements in TFER (Section 229.170) shall be located within the immediate selling area of each food vendor approved to sample foods and available to each vendor where required by the Regulatory Authority. tm; šE b. Manual ware-washing sink requirements. At least one (1) sink with at least three (3) compartments shall be provided for manually washing, rinsing, and sanitizing equipment and utensils for vendors that are approved to sample. c. Alternative manual ware-washing equipment may be used only by vendors when approved by the regulatory authority. Such written approval shall be evident and conspicuous on the permit placard issued to the vendor. d) Water, Plumbing, and Waste 1) Where a hand sink is required, this hand sink shall be a portable hand sink capable of producing hot water, having a portable tanked water source and having a waste tank at least 2/3 size greater than potable source water tank. Hot generation and distribution systems shall be sufficient to meet the peak hot water demands throughout the operation. If approved by the regulatory authority, other means of hand washing may be used. 2) Where manual ware-washing is required using a hard plumbed system, a licensed Plumbing inspector shall inspect the work prior to use. Backflow devices may be required. 3) Trash receptacles shall be available and shall be non-porous. Efforts shall be made to dispose of trash offsite in a timely manner so as not to encourage pests. e) Physical Facilities 1) Floor construction. Floors and floor coverings of all vending areas shall the requirements found in the TFER or be approved by the health officer. 2) Vending area shall be covered and protected to minimize presence of pests. f) Plan Review 1) 2) The plans and specifications shall indicate the following (whether existing or not): a. -howing equipment arrangement and schedule including type and model and grease/waste storage receptacle location, b. c. List of all food items offered or vended, listing separately foods proposed to be sampled. d. description of approved source where food items will be obtained from; and copy of approved food labels. g) Administrative Process 1) All work must be inspected by the regulatory authority for compliance with these rules. After compliance with these rules is deemed to be met, a Food Vendor Permit may be approved. 2) Failure to follow the approved plans and specifications will result in a permit denial, suspension or revocation. 3) A notice, as required by this ordinance, is properly served when it is delivered to the holder of the permit or the person in charge, or when it is sent by registered or certified mail, return receipt requested, to the last known address of the holder of the permit. A copy of the notice shall be on file in the records of the regulatory authority. 4) The hearings provided by the CAAB shall be conducted by them at a time and place designated by CAAB. Based on the recorded evidence of such hearing, the regulatory tm; šE authority shall make final findings, and shall sustain, modify or rescind any notice or order considered in the hearing. A written report of the hearing decision shall be furnished to the holder of the permit by the regulatory authority. 5) Condemnation of adulterated products or on site destruction. Food found to be adulterated shall be condemned and, if no appeal be taken from such determination of condemnation, such articles shall be destroyed for human food purposes under the supervision of an inspector. 6) All appeals from final suspension or revocation of a Food Vendor Permit shall be made in writing to the building official or his designee. The appeal shall be filed in writing within ten (10) days of the occurrence of the suspension or revocation. The Consumer Health director (or his designee) shall attempt to hear the appeal within thirty (30) days after the notice of the appeal. The Consumer Health director shall have the power to reverse a decision of the regulatory authority where he finds that such a reversal will not affect the health and/or welfare of the public. All decisions of the Consumer Health Director or his designee shall be subject to review by the City Council at one of its regularly scheduled meetings. The decision of the Consumer Health Director or his designee will be final unless reversed by the City Council. ARTICLE XI. PERMITTING FOOD SERVICE ESTABLISHMENTS COMPLIANCE AND ENFORCEMENT Sec. 13-26 Power to examine food service establishment records. a) The health officer shall have the authority to examine the records of a food service establishment in order to ensure compliance with all provisions of this ordinance or of state law. b) The health officer shall have the authority to require written documentation of cool down methods used and reheating times in order to verify compliance with food temperature items on the foodservice establishment inspection form. Sec. 13-27 Registration of food service establishments based outside city. A food service establishment or commissary operating from a facility located outside the city that sells, distributes or transports food inside the city may not conduct operations inside the city unless the food service establishment: a) Furnishes the health officer with a certificate from a health authority having jurisdiction over the establishment indicating that the establishment complies with applicable health laws; or b) Furnishes the health officer other information that the administrator determines is necessary to enforce the provisions of this chapter or otherwise protect the public health or safety. Sec. 13-28 Plans and permits. a) The owner shall submit plans and specifications for construction of work areas intended for use in the operation of a food establishment, and the location, size, and type of fixed equipment and interior finishes of such areas to the City of Denton for approval, before work is begun, when a food service establishment is constructed, or: 1) The nature of the operation changes; 2) The establishment is extensively remodeled; 3) When an existing structure is converted for use as a food service establishment; or 4) When the menu is changed to include more or different menu items. tm; šE b) In a food service establishment, the food preparation area shall be of adequate size and shall constitute a minimum of twenty-five (25) percent of the total square footage of the occupied permitted area or the minimum size deemed necessary by the Consumer Health Division. c) In a food service establishment, dry storage areas shall be of adequate size and shall constitute a minimum of fifteen (15) percent of the total square footage of the food preparation area. At the discretion of the Consumer Health Division, additional dry storage may be required. d) A menu must be submitted with all plans. If changes are made to the menu at a later time, the changes must be submitted for approval by the Consumer Health Division. e) All plans submitted shall include information on the following specifications: 1) Aisles and working spaces: Shall be unobstructed and of sufficient width to permit employees to readily perform their duties without contaminating food or food contact surfaces by clothing or personal contact. Minimum width of aisles shall be thirty-six (36) inches. 2) Auxiliary equipment: Water heaters, washing machines, dryers, remote connected refrigerators, compressors, and air conditioners must be located outside of food preparation areas. 3) Equipment and utensils: All equipment is to be NSF (National Safety Foundation) approved or commercial grade. 4) Floors: In food preparation areas, storage areas, utensil washing areas, restrooms, and dressing rooms, floors shall be constructed of smooth, durable, easily cleanable, non- absorbent materials of commercial grade. Flooring must be light colored, without texture or patterns that create difficult places to clean. In addition to the kitchen areas of day care centers, floors in food service areas of classrooms shall meet these requirements. The health officer shall establish approved floor surfaces in food preparation areas based upon the degree of preparation expected. Food establishments involved in heavy food preparation shall incorporate quarry tile, cement-based terrazzo tile or an equivalent floor covering as approved by the health officer. Food establishments involved in light food preparation shall incorporate a commercial grade sheet vinyl or equivalent floor covering as approved by the health officer. Establishments involved in no food preparation shall incorporate sealed concrete, vinyl asbestos tile or an equivalent floor covering as approved by the health officer. An approved sealer (such as rubber cove base) shall be required at the floor/wall interface. If using ceramic tile squares in the food preparation area, the minimum es). 5) Ice machines: Are to be of adequate size and located in areas that meet the wall, floor and ceiling design standards for food preparation areas. Do not locate an ice machine near sources of potential contamination, such as exposed sewer lines, open stairwells, etc. 6) Refrigerators/freezers: Each mechanical refrigeration unit storing potentially hazardous foods must be of commercial type (even in day care center rooms) and each unit must have a numerically scaled indicating thermometer. All such units must hold foods at 41º degrees Fahrenheit or colder. Freezers must hold frozen foods at a temperature of zero (0) º degrees Fahrenheit or colder. Walk-in coolers must be commercially built and have interiors of impervious, non-absorbent materials. Shelves must be resistant to rust. Mechanical refrigeration is required on salad bars, etc. for holding cold foods cold; holding foods in ice will not be acceptable. The processing and packaging of meat and poultry shall be conducted in a refrigerated room: a) Where the temperature is kept at 50º degrees F or less; or b) Which, along with processing equipment, undergoes a mid-shift cleanup after 4 (four) hours of operation. tm; šE 7) Sinks: a) Shall be the number required by law. Stainless steel hand sinks shall be located within every twenty-five (25) linear feet of unobstructed space in food preparation and utensil washing areas so it is convenient for employees to wash hands as often as necessary. Hand-wash sinks shall be freestanding or wall hung. If a sink is too close to other equipment or sinks, a splashguard may be required. Sinks are to be of adequate size to allow for the thorough washing of hands and forearms. Liquid soap and paper towels are required at the hand sink and lotion hand sanitizer is required if gloves are not used. Lavatories, soap dispensers, hand-drying devices and all related fixtures shall be permanently mounted and kept clean and in good repair. A mixing valve shall be required on all hand sink faucets to temper water to a maximum of 110º Fahrenheit. b) A three (3) compartment sink that has basins large enough to allow immersion of the largest utensil and two (2) self draining drain-boards shall be required for manually washing, rinsing and sanitizing equipment and utensils. c) A stainless steel, four (4) compartment sink with two (2) self-draining drain-boards shall be installed in all bar areas. This requirement may be modified if glassware is sanitized in a commercial dishwasher. i. Knee pedals, electronic eye and metered faucets are not allowed in kitchen hand sinks but are allowable in public restrooms. ii. Blower dryers shall not be allowed as a means of drying hands in food preparation or dish wash areas. Common towels are also prohibited. Steam-mixing valves are prohibited. iii. All dishwashing equipment shall be located in one area to prevent any cross contamination from soiled to clean dish storage or food preparation. 8) Storage rooms: Wood shelving is allowed for dry storage use only if finished with varnish or high gloss type paint to make sure it is smooth, non-absorbent, and easy to clean. Rooms are to have finished walls (minimum finish includes: taped and bedded sheetrock painted with high gloss paint) and commercial flooring with rubber cove base at floor/wall juncture. Dry storage rooms may contain refrigerators or freezers not requiring drains to the sewer for condensate removal. 9) Wait areas: If remote from food preparation or service areas, and used only for non- potentially hazardous beverage preparation, wait areas shall comply with the following requirements: a) Flooring shall be VCT or equivalent as approved by the Consumer Health Division b) Counters shall be laminate surface, solid surface, or equivalent c) Shelving below countertops shall be sealed, smooth, and easily cleanable 10) Toilet facilities: Public access shall not be through the kitchen. 11) Walls & ceilings: a) In food preparation, storage, utensil washing areas, and restrooms; walls, ceilings, and other architectural features shall be smooth (not textured), easily cleanable, non- absorbent, light in color, and durable. Fibrous acoustical drop-in ceiling panels are prohibited in these areas. Wall areas behind sinks or places that receive heavy use must be finished with FRP (fiberglass reinforced panels), ceramic tile, epoxy type paint or similar materials to withstand moisture. Bathroom walls shall be finished (as those listed above) behind plumbing fixtures to a height of at least four (4) feet up tm; šE from the floor. Heavy food preparation areas behind stoves, grills, and fryers shall be of stainless steel from floor to ceiling. b) Walk-in cooler walls shall be smooth, easily cleanable, and capable of withstanding effects of low temperature and moisture; install baked-on enamel coated steel panels, F.R.P., or equivalent. c) Surface mounted pipes shall not be installed tightly against the surface of the walls. There shall be a gap of at least two (2) inches between the pipe and the finished surface of the wall. d) All holes cut into walls and ceilings for pipes and conduits shall be sealed, and the clearance between the floor surface and the bottom edge of a door shall be tight fitting. 12) Water heater: Must be of adequate size to provide enough hot water for all hand washing, ware washing, and cleaning. Minimum size: fifty (50) gallons. Commercial tank-less water heaters may be used. 13) At the discretion of the City of Denton, additional sinks such as pot sinks, produce washing sinks, etc. may be required. 14) Kitchens in day care centers shall comply with all rules of this code except that the size of the kitchen may be determined on a case-by-case basis as approved by the City of Denton. 15) When a foodservice establishment is extensively remodeled it must be closed during any demolition especially if water or power service is interrupted. If remodeling pertains to only a portion of the establishment, the food preparation areas shall be protected by a solid wall that prevents any construction debris or other contaminates from entering the kitchen or food service areas. 16) Air curtains or equivalent devices, as approved by the Consumer Health Division, shall be installed on all take-out windows and receiving doors. Self-closing take-out windows may be exempt from air curtain installation. Sec. 13-29 Outdoor Bar Requirements. a) If the food service establishment operates an outdoor bar, the bar area shall meet the same construction guidelines as listed above. This includes a four (4) compartment sink with two (2) self-draining drain-boards and a hand wash sink. All sinks will be required to have hot and cold running water under pressure. b) Outdoor bars shall have smooth and easily cleanable floor, walls, and ceiling surfaces. Solid protection shall be required at three sides of the bar area, and at the ceiling. c) Containers of ice and open beverages shall be protected at all times. Ice bins shall be cleaned and sanitized on a daily basis. d) Lighting shall be adequate with a minimum of twenty (20) foot candles at food preparation surfaces e) Waste disposal containers shall be provided that are durable, cleanable, insect and rodent resistant, and have tight- fitting lids. f) Outdoor premises shall be kept free of litter, dead or trapped birds or insects, rodents or other pests. g) No potentially hazardous foods (PHF) shall be prepared at an outside bar. Preparation shall be limited to beverages and ice. tm;  šE h) Vector control shall be readily available, and if required by the health official, it shall be installed to prevent contamination from insects or birds; and all food equipment (such as blenders) shall be taken in at night for storage. i) If door from interior to exterior of establishment is to be left open, an air curtain will be required to prevent entrance of insects. Sec. 13-30 Permit required . a) It shall be unlawful for any person, association of persons, firm or corporation to operate a food service establishment in the city without having obtained a permit under the terms of this section. b) Any person desiring to operate a food service establishment shall make written application for a permit at the office of the consumer health division. The application shall include the applicant's full name, street and post office address, and whether such applicant is an individual, firm, or corporation, and, if a partnership, the names of the partners, together with their addresses shall be included; the location and type of the proposed establishment; and the signature of the applicant or applicants. If the application is for a temporary or seasonal food service establishment, it shall also include the inclusive dates of the proposed operation. Sec. 13-31 Application fee. a) The applicant shall submit the applicable nonrefundable fee as set forth by city council by ordinance, and the schedule of fees shall be available for public inspection at the offices of the city secretary or the health officer. Notwithstanding any other provision of this chapter the payment of any fees set under this section is not applicable to the City of Denton or any political subdivision or agency of the State of Texas and the United States of America. b) Application fees for seasonal food service establishments shall be the same as those for any other similar full time food service establishment. c) An applicant shall not, under any circumstances, be entitled to a refund of application fees after an application has been filed. d) Fee Exemptions 1) Food vendors operated by a public entity, such as D.I.S.D., university, community college, or the City, may be exempt from paying the Food Vendor fee, if approved by the regulatory authority. 2) A food vendor that is not permanently permitted by the regulatory authority, but that is a recognized charitable or philanthropic organization, or that has attained 501(c) (3) status from the Internal Revenue Service, may be exempt from paying the temporary food establishment fee for a permit for a temporary event, if approved by the regulatory authority. 3) Fee exemptions granted do not exempt any food establishment from the requirement of applying for, obtaining, and displaying a food vendor permit or from complying with the provisions of this section or any other applicable law. Permits are not transferable from one person to another or from one location to another location. A valid permit must be posted in or on every food establishment regulated by this ordinance, in a location conspicuous to the consumer. Sec. 13-32 Permit issuance. a) Upon receipt of an application and payment of the applicable fee, the health officer shall make an inspection of the premises where the business is to be conducted. If the premises comply with the terms of this article and with all current requirements of the zoning ordinance, other ordinances and state law, a permit shall be issued to the applicant upon payment of the permit fee. The applicable fees shall be set by city council by ordinance and the fee schedule shall be available for public inspection at the offices of the city secretary or the health officer. The applicant shall submit the applicable nonrefundable fee as set forth by city council before a permit will be issued. tm;  šE b) Notwithstanding any other provision of this chapter, the payment of any fees set under this section is not applicable to the City of Denton or any political subdivision or agency of the State of Texas and the United States of America. 1) In the event a food permit application is rejected, the administrator shall notify the applicant of the rejection in writing. The notice shall specify the reasons why the permit is denied. The decision of the administrator is final unless the applicant shall file an appeal as provided in Section 13-34. The decision of the administrator shall continue in effect until the final decision of the committee. 2) Permits shall not be transferable. A person who acquires an existing food service establishment shall not operate the establishment without obtaining a new permit within ten (10) days from the date of the change of ownership. 3) Upon change of ownership of a business, the new owner shall be required to meet current food establishment standards as defined in this code and state food rules before a permit may be issued by the Consumer Health Division. 4) If the establishment changes the name of the business only, they have 10 days from the date of the name change to notify the Consumer Health Division in writing. 5) Each food service establishment shall display all valid health permits in public view in the establishment. a) A permit shall be valid for a period of twelve (12) months with the expiration date being the last day of the month the permit was issued; temporary, and seasonal permits shall expire in accordance with their terms, unless suspended or revoked by the health officer. b) Acceptance of a permit issued by the administrator constitutes agreement by the establishment to: 1) Comply with all conditions of the permit and all applicable provisions of this chapter; 2) Allow the lawful inspection of its facility and operations. 3) Inspections of newly constructed establishments prior to opening shall be done: i. when equipment is set in place; ii. at least 2 weeks prior to opening; and iii. At least 2 days prior to opening. If inspections are called for before the establishment is ready for them, the owner may be charged an administrative fee. Sec. 13-33 Expiration and renewal of permits . a) A permit lapses and is void unless the applicable permit fee is received by the City of Denton before the expiration date of the existing permit. b) A permit lapses and is void if the food service establishment operating under the permit constructs a new facility or changes ownership. c) Permit renewal fees that are not received by the expiration date, will be assessed an additional administrative fee. Sec. 13-34 Revocation of permit. tm;  šE The consumer health administrator may, after providing opportunity for a hearing, revoke a permit if the administrator determines that the manager or owner of a food service establishment has: a) Interfered with the health officer in the performance of his duties; or b) Been convicted twice within a twelve-month period for a violation of this chapter; or c) Failed to comply with a hold order or a condemnation order; or d) Failed to comply, within the time specified, with an order to correct or abate an imminent and serious threat to the public health or safety; or e) Intentionally or knowingly impeded a lawful inspection by the health officer; or f) Been closed two (2) or more times within a twelve-month period for conditions that constituted a serious and imminent threat to public health. Prior to revocation, the health officer shall notify the holder of the permit, or the person in charge of the food service establishment, in writing, of the reason for which the permit is being revoked and that the permit shall be revoked at the end of five (5) days following service of such notice unless a written request for a hearing is filed with the city by the holder of the permit within such five-day period. If no request for hearing is filed within the five (5) calendar day period, a final notice of revocation shall be served. Upon receipt of the final notice of revocation, the food service establishment shall immediately cease operation and the permit shall be considered finally revoked. Sec. 13-35 Service of notices. A notice provided for in this article is properly served when it is delivered to the holder of the permit, or the person in charge of the food service establishment, or when it is sent by registered or certified mail, return receipt requested, to the last known address of the holder of the permit. A copy of the notice shall be filed in the records of the city secretary. Sec. 13-36 Appeal from denial or revocation of a permit. If the health officer denies the issuance of a permit or a permit is finally revoked, the officer shall send the applicant or permit holder by certified mail, return receipt requested, written notice of the denial or revocation and of the right to an appeal. The applicant or permit holder may appeal the decision of the health officer to the Health and Building Standards Commission (HaBSCo) by giving written notice to the administrator within ten (10) days of the receipt of the denial or revocation notice. Sec. 13-37 Hearing. A hearing of the appeal shall be conducted by the Health and Building Standards Commission. The hearing shall be held at a time and place designated by the Health and Building Standards Commission. The Health and Building Standards Commission shall hear and consider evidence offered by any interested person. Based upon the recorded evidence of such hearing, the Health and Building Standards Commission shall sustain, modify or rescind any notice, or order, considered in the hearing by a majority vote and provide a written report of the hearing decision to the holder of the permit. The decision of the Health and Building Standards Commission is final as to administrative remedies, and no rehearing may be granted. Once the decision of the Health and Building Standards Commission is final under this section, the applicant or permit holder may appeal the decision to the state district court or court of appropriate jurisdiction. Sec. 13-38 Application after revocation. Whenever a revocation of a permit has become final, the holder of the revoked permit may make written application for a new permit. Sec. 13-39 Authority to inspect. a) The health officer may inspect any and all things offered for sale, given in exchange or given away for use as food or drink for human consumption, and he/she shall have the authority to enter tm;  šE any food service establishment in the city, as authorized by law for the purpose of such inspection. b) The Consumer Health Division will conduct risk-based inspections and where the risk of food- borne illness is low, the Consumer Health Division, at its discretion, may lower the number of required inspections performed to a minimum of one each year. However, if the Consumer Health Division feels that a food service establishment poses a higher risk of food-borne illness, the Consumer Health Division shall conduct inspections as often as necessary to ensure enforcement of these rules. c) The city health officer, after proper identification, shall be permitted to enter any food service establishment at any reasonable time for the purpose of making inspections to determine compliance with these rules. The officer shall be permitted to examine the records of the establishment to obtain information pertaining to food and supplies purchased, received, or used, or to persons employed. d) The following types of establishments are exempt from inspection requirements: 1) Group homes; 2) Establishments selling only commercially packaged, non-potentially hazardous foods; 3) Vending machines; and 4) Facilities operated by nonprofit organizations for their members, families and invited guests. e) Facilities are not exempt when food service is provided in conjunction with a child care facility, retirement center, hospital, school, indigent feeding program or public fundraising events. Sec. 13-40 Report of inspections. Whenever an inspection of a foodservice establishment is done, the health officer shall record the findings on the inspection report form. The inspection report form shall summarize the requirements of these rules and shall set forth a weighted point value for each requirement. Inspection remarks shall be written to reference, by section number, the section violated and shall state the correction to be made. The rating score of the establishment shall be the total of the weighted point values for all violations, subtracted from one hundred (100). The health officer shall furnish a copy of the inspection report form to the person in charge of the establishment at the conclusion of the inspection. The inspection score shall be posted by the health officer near the primary entrance of the establishment or as deemed by the health officer. The completed inspection report form shall be made available for public disclosure to any person who requests it according to law. Removing or falsifying the posted inspection score may be grounds for a citation being issued. The posted inspection score shall be presented as follows: 1. 2. 3. Inspection scores below Sec. 13-41 Re-inspection. a) Any food service establishment inspected by the City of Denton Consumer Health Division which receives a score of seventy-five (75) or below on any inspection shall be re-inspected. b) This re-inspection shall be performed in the same manner, using the same form, as the previous inspection. c) If, upon subsequent re-inspection of the establishment, the health officer finds that sufficient measures were not taken to bring the score above a total of seventy-five (75), he will issue a citation and schedule a date for another re-inspection. The health officer shall continue to perform tm;  šE re-inspections until the establishment has made sufficient progress to warrant a score above seventy-five (75). The issuance of a citation for failure to meet the required score upon re- inspection shall not in any way limit the ability of the inspector to issue any other citation for any violation of this chapter. d) Re-inspection for failure to meet the required score shall be performed within fourteen (14) calendar days immediately following the original inspection, or as soon as possible thereafter, except that where an establishment is closed due to a score below sixty (60), pursuant to section 13-44, the original inspector shall determine the time of the re-inspection. e) Any food service establishment owner or manager that receives a score which he feels is unacceptable, may request a re-inspection. A re-inspection fee shall be required and shall be paid before the re-inspection will be performed. The health inspector shall perform the requested re- inspection within two weeks of the re-inspection fee payment. Only one re-inspection may be requested within any six (6) month period. Sec. 13-42 Fee for re-inspection. a) The fee for re-inspection shall be one-half the annual permit fee of the establishment receiving the re-inspection. b) A re-inspection fee will be charged for each re-inspection necessary to bring the food establishment's score above seventy-five (75). c) Payment of the re-inspection fee shall not void, or in any way affect the responsibility of the owner or permit holder for payment of any fines for any other violations of this chapter. d) The person, partnership, or corporation listed as "owner" on the original application shall be responsible for payment of any and all fees, including re-inspection fees. e) Payment of the re-inspection fee shall be made before a re-inspection will be performed. Sec. 13-43 Violations. a) The Building Official of the City of Denton, or any of his designated employees, shall have the responsibility and power to enforce all provisions of this chapter within the corporate limits of the City of Denton, Texas. b) Whenever the health officer determines that there has been a violation of any provision of this chapter, which in his/her judgment can jeopardize the public health, or for violation of any items, which have been noted as problems on two (2) or more consecutive inspection reports, the health officer may issue a written citation for said person to appear in court. c) It shall be unlawful for any person to knowingly give the health officer a false name when such officer requests the name of said person for purposes of enforcing the provisions of this chapter. Sec. 13.-44 Authority to close. a) The health officer shall close without warning any building or place described in this chapter and prevent its use for the storage, manufacture, or sale of food or drink for human consumption whenever: 1) The health officer, upon inspection of an establishment, finds sufficient violations which cause the rating score of said establishment to be below a total of sixty (60) points; 2) The health officer finds that an establishment is operating with no working refrigeration units; 3) The health officer finds that an establishment is operating without running water or hot water for a period of more than one (1) hour; 4) The health officer finds an establishment is operating without a functioning ware-washing machine or adequate sinks for manual ware-washing; and tm; šE 5) The health officer finds any food service establishment with an unreasonable infestation of rodents or insects. b) It shall be the duty of the health officer to post a notice of closure for such conditions at the entrance of such building or place and to maintain the same until such conditions or practices have been removed or abated. c) No person shall remove or alter in any way a sign, which has been posted by the health officer. SECTION 2. and made a part hereof for all purposes, is hereby adopted and authorized to be imposed for the purposes of application SECTION 3. This ordinance shall repeal every prior ordinance in conflict herewith, but only insofar as the portion of such prior ordinance shall be in conflict; and as to all other sections of the ordinance not in direct conflict herewith, this ordinance shall be and is hereby made cumulative except as to such prior ordinances or portions thereof as are expressly repealed hereby. SECTION 4. Any person violating any provision of this ordinance, shall upon conviction, be fined a sum not exceeding $2,000.00. Each day that a provision of this ordinance is violated shall constitute a separate and distinct offense. SECTION 5. If any provision of this ordinance or application thereof to any person or circumstance is held invalid by any court, such holding shall not affect the validity of the remaining portions of this ordinance, and the City Council of the City of Denton, Texas hereby declares that it would have enacted the remaining portions despite any such validity. SECTION 6. Save and except as amended hereby, all the sections, subsections, and clauses of Chapter 13 Food and Service Establishments of the Code of Ordinances of the City of Denton, Texas shall remain in full force and effect. SECTION 7. This ordinance shall become effective, after its passage and approval on, _____________, 2012, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, a daily newspaper published in the City of Denton, Texas within ten (10) days of the date of its passage. PASSED AND APPROVED this the ______ day of ___________, 2012 _________________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: ________________________________ tm; šE APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: ________________________________ EXHIBIT A: Health Permit Fee Schedule: See new fees hi-lighted in yellow Fee Amount 1. Two year food handler card . . . $25.00 2. Manager Certification $10.00 3. Swimming Pool Operator Certification . . . $50.00 $ 5.00 5. Beer and wine permit- New application processing fee . . . $25.00 6. Wine and beer retailer's permit on premises . . . ½ of TABC charge 7. Wine and beer retailer's off premises . . . ½ of TABC charge 8. Retail dealer's on premise license beer only . . . ½ of TABC charge 9. Retail dealer's on premise late hours license . . . ½ of TABC charge 10. Mixed Beverage permit application fee . . . $25.00 11. Mixed Beverage permit fee ½ of TABC charge 12. Mixed Beverage Late hours ½ of TABC charge 13. Annual swimming pool permit . . . $160.00 14. Re-inspection Fee for p $ 80.00 15. Small Restaurant <= 2 $310.00 16 $485.00 17. Small Grocery Store <= 12 $325.00 18. Medium Grocery Store >= 12,001 $450.00 19. Convenience Store, no Deli $250.00 tm; šE 20. Convenience Store with Deli $300.00 21. Bars $275.00 22. Concession Stands, Seasonal Permits $175.00 23. Mobile Food Unit Class 1 (pre-packaged foods) $175.00 24. Mobile Food Unit Class 2 (foods prepared on vehicle) $310.00 25 $150.00 plus $1.00/each child licensed $275.00 27 $ 150.00 28. Temporary permit . . . $ 20.00 29. *Farmers/Community Market Annual Permit $240.00 30. mmunity Market Monthly Permit $ 40.00 31. **Application fee for all new permits $250.00 32. ***Administrative Fee $ 35.00 Fees are non-refundable. *Sales of whole or uncut produce shall be exempt from permits and fees **Application fee shall not apply to Temporary Food Service Establishments *** Administrative fees may be charged for the following, but not limited to: late payment of any annual health permit fees; late application and payment of fees for temporary events; failure to have a mobile unit inspected when due; change of name of business only; re-inspections of new or remodeled establishments when contractor calls for inspection but is not ready when the inspectors begin the inspection. tm; šE AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Planning & Development ACM: Fred Greene SUBJECT Side and Front Yard Setback Requirement SI12-0003 Receive a report, hold a discussion and give staff direction regarding the placement of accessory structures in side and front yard setbacks. BACKGROUND The Denton City County Day School (the School) is located at 1603 Paisley Street, at the intersection with Campbell Lane. Staff understands that the School is desirous of constructing a canopy over an existing concrete slab that is located at the northeast corner of the property, adjacent to Campbell Lane. side yard, and the proposed canopy is considered an accessory structure. Per Section 35.12.4.B.2 of the Denton Development Code (DDC), accessory structures are prohibited in front or side yards. Therefore, the City cannot issue a permit for the subject accessory structure. DISCUSSION As illustrated in the aerial photograph to the left, the primary structure is located to the far western portion of the property. All of the property that is east (shaded blue) of the primary structure and adjacent to Campbell Lane is considered the side yard. All of the property that is south (shaded green) of the primary structure and adjacent to is Paisley Street considered the front yard. Per Section Accessory 35.12.4.B.2 of the DDC: structures, with the exception of non- residential detached carports, gas station canopies, gas station car wash facilities, and Therefore, in this instance, accessory structures are only permitted in the area shaded yellow, or to the north and northwest of the primary structure. he limitation of the area where accessory structures may be located is more relative to the location of the primary structure than the application or interpretation of Section 35.12.4.B.2 of the DDC. Due to the primary structure being located in the far western portion of the lot, the majority of the buildable lot area is classified as front or side yard; and therefore prohibits the construction and placement of accessory structures in these otherwise buildable areas. It is noteworthy that there are several accessory structures in the side yard of the subject property along Campbell Lane. These structures are either non-conforming or special exceptions, and are therefore permitted. These structures may be enlarged in accordance with Sub-Chapter 11 of the DDC. Subchapter 23 of the DDC defines an accessory structure as: principal structure. Flatwork, in-ground swimming pools and fences or walls used as Given that the existing concrete slab is not a structure, it is therefore not non-conforming. The canopy that is proposed to cover the existing flatwork is therefore considered a new accessory structure; as such, it enjoys none of the privileges afforded to non-conforming structures or special exceptions. Per Section 35.12.4.B.2 of the DDC: - residential detached carports, gas station canopies, gas station car wash facilities, and prohibited security/entry booths, are Given that this is a prohibition against the placement of a structure within a certain location, a variance from the prohibition may not be granted as this would be a legislative and not an administrative act. Allowing accessory structures in a side or front yard would require an amendment of Section 35.12.4.B.2 of the DDC. However, this could have a negative city-wide impact; especially in residential developments, and where residential developments abuts non- residential. Referring to the attached aerial photograph for example, all the residential lots along the east side of Campbell Lane that front the side yard of the school property could have the proposed accessory structure (and those that are existing) in their front yard view shed. This will be true for all similar instances throughout the city, and may create an argument that such an arrangement will render the affected lots less desirable and diminish their value. This raises the question of whether the potential harm to these neighbors (and those is similar circumstances) outweigh the harm of prohibiting accessory structures in front and/or side yards, especially on corner lots. Should the City Council move to enact an amendment of Section 35.12.4.B.2 of the DDC to allow accessory structures in side or front yards, the aforementioned concern may be mitigated to some extent by imposing restrictions that would reduce the potential adverse effects of the accessory structures. For example, accessory structures in side yards could be limited to certain types, have to meet an increased side yard setback (or cannot exceed a certain percentage of the side yard), be subject to certain types of screening, etc. In addition, there could be increased aesthetic/compatibility and/or building code requirements. Staff does not recommend allowing accessory structures in front yards. OPTIONS 1.Maintain the existing provisions of 35.12.4.B.2; or 2.Revise 35.12.4.B.2 to allow accessory structures in side and/or front yards, subject to conditions or limitations. EXHIBIT Exhibit 1 Aerial Photograph/Site Location Map Exhibit 2 Zoning Map Exhibit 3 Applicable section of the DDC Prepared by: Mark A. Cunningham, AICP, CPM Planning and Development Department Director Respectfully submitted: Fred Greene Assistant City Manager 9ãwz,z· SITE LOCATION MAP 9ãwz,z· Zoning Map 9ãwz,z· 35.12.4 Accessory Buildings and Structures. A.Accessory buildings and structures shall comply with all requireprincipal use except where specifically modified by this Subchapter and shall comply with t-I: 1.Mechanical equipment shall be subject to the provisions of this located between the main structure on the site and any street adjacent to a attempt shall be made to place such equipment so that it is not Mechanical equipment may be placed in a side yard abutting a side street if there are lot or building constraints from placing it in the other side yard and the equip landscaping. Any installation of mechanical equipment shall req 2.A swimming pool on a lot with a single family home may be constr any other buildings and structures on the same lot. 3.A swimming pool on a lot with a single family home may be constructed no closer than t the side and rear lot line and the swimming pool shall not encro of Subchapter 12 not inconsistent with this amendment shall reman full force and effect. Figure - I B.General Regulations 1.The combined square footage of the principal structure and acces zoning district maximum lot coverage specified in Subchapter 5. 2.Accessory structures, with the exception of non-residential detached carports, gas station canopies, gas station car wash facilities, and security/entry booths, are 9ãwz,z· 3.Accessory structures shall be set back a minimum of three (3) fe from all property lines associated with its permitted location. 4.No portion of an accessory structure may be located in, or encro 5.All accessory structures that require a building permit shall be associated principal structure or screened from view of abutting p-of-way. roof pitch, exterior construction materials, exterior color, and architectural design and detail. 6.Guest quarters shall be located on the same lot as an existing d-family use and may be attached to the principal building, or be located within a detac 7.No more than one (1) guest quarters per lot shall be allowed. 8.Guest quarters shall not be used as rental units or as a permane 9.Guest quarters shall be served by the same utility meters as the AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Parks and Recreation ACM: Fred Greene ______________________________________________________________________________ SUBJECT Consider a request for an exception to the Noise Ordinance for the purpose of performing music during the 2012 Relay for Life to be held at the University of North Texas Fouts Field beginning at 3:00 p.m. on Saturday April 21, 2012, until 6:00 a.m. on Sunday, April 22, 2012. The request is for a variance in decibels, from 70 to 75 decibels, for an outdoor concert and for amplified sound on Sunday until 6:00 a.m. Staff recommends approving the request. BACKGROUND Relay for Life is sponsored by the American Cancer Society and gives everyone in the community a chance to celebrate the lives of people who have battled cancer, to remember lost loved ones, and to fight back against the disease. At the Relay, teams of people will camp out at Fouts Field and take turns walking or running around the track. Each team is asked to have a representative on the track at all times during the event. Because cancer never sleeps, Relays are overnight events and are up to 24-hours in length. PRIOR ACTION/REVIEW (Council, Boards or Commission) This is the third request from Relay for Life to host an overnight event. City Council approved the requests for the 2010 and 2011 events. RECOMMENDATION Staff recommends approving the noise exception request. EXHIBITS 1.Letter of Request Respectfully submitted: Emerson Vorel, Director Parks and Recreation Department Prepared by: Janie McLeod Community Events Coordinator 2012 Relay For Life Denton TX April 21, 3:00 p.m. - April 22, 6:00 a.m. at Fouts Field, University of North Texas Janie – As discussed, the 2012 Relay for Life in Denton will be an overnight event this year. We will be at Fouts Field on the UNT campus from 3:00pm Saturday, April stnd 21 until 6:00am Sunday, April 22. Please consider this my request for an exception to the City of Denton noise ordinances for the event. While I don’t anticipate any problems, I just want to make sure we’re covered. Nothing is expected to be over 75 decibels. If you have questions or need additional information, please feel free to contact me at 972.459.1419 or 940.367.0990 (cell). Teresa Dillard Logistics Chair, 2012 Denton Relay Denton Relay for Life Home Page rflofdenton.com AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: CMO ACM: Fred Greene ______________________________________________________________________________ SUBJECT Consider approval of a resolution establishing Naming Policy Guidelines for City Buildings, Facilities, Land, or any Portion Thereof; repealing Resolution No. R2007-035; and declaring an effective date. BACKGROUND The City Council discussed the proposed Naming Policy during its Council Work Session on January 10, 2012 and February 21, 2012. The proposed Naming Policy Guidelines provide for naming after an individual, foundation, business, or organization, naming through fundraising or by purchasing naming rights, and renaming of a City building, facility, land, or any portion thereof. RECOMMENDATION Staff recommends the approval of the Naming Policy Guidelines for City Buildings, Facilities, Land, or Any Portion Thereof. As the proposed policy is applicable to all City departments, it is further recommended that the Park and Facilities Naming Policy (No. R2007-035) be repealed and the Naming Policy adopted. PRIOR ACTION/REVIEW (Council, Boards, Commissions) City Council received a report regarding the proposed Naming Policy on January 10, 2012 and on February 21, 2012, and Informal Staff Reports on February 10, 2012 and on March 2, 2012. EXHIBITS Proposed Resolution Proposed Naming Policy Guidelines Proposed Name Application Form Respectfully submitted: ______________________________ Eva Poole Director of Libraries CITY OF DENTON NAMING POLICY GUIDELINES FOR CITY BUILDINGS, FACILITIES, LAND, OR ANYPORTION THEREOF I.GENERAL These policy guidelines are intended to address naming opportunities when a citizen, group, or organization submits a nomination to name a City building, facility, land, or any portion thereof. The City Council may initiate the naming of any building, facility, land, or any portion thereof at its discretion and may apply the following guidelines in Council initiated naming. The Council may choose to waive any part of this guideline by ese policy guidelines do not address the naming of streets, fire or police stations, or naming based on advertising. II.DEFINITIONS City Buildings. City owned facilities which are open to the public and used to conduct City business. Buildings may include, but are not limited to, City Halls, civic/community centers, conference/convention centers, public libraries, and public utility buildings/structures. City Facilities. City owned structures, amenities, or features, which are open to the public and used for City business, or public attractions of any kind, including, but not limited to, athletic fields, bridges, fountains, gymnasiums, library collections and/or departments interior and exterior spaces, meeting rooms, picnic shelters, playground equipment, recreation facilities, swimming pools, tennis courts and basketball courts. City Land. Real estate owned and/or managed by the City, including park property or other open space areas. Funded Project. Any project that the City has fully funded prior to the start of construction. Non-Funded Project. Any project that the City wishes to construct, but for which it lacks designated funding. III. NAMING OF A CITY BUILDING, FACILITY, LAND, OR ANY PORTION THEREOF AFTER AN INDIVIDUAL It is intended that all the criteria in this section be satisfied when considering naming a City facility, building, land, or any portion thereof after an individual. A. Naming After an Individual 1. The individual must be deceased at least five (5) years; and 2. The individual must have been a resident of the City of Denton; and 3. The individual must be of good moral character and must not have been convicted of a felony, or Class A or B misdemeanor; and 4.The individual should have made exceptional contributions to the City of Denton, the State of Texas, or the United States of America; and the i achievements should represent a lasting legacy to the mission of the City building, facility, land, or any portion thereof. B. Naming After an Individual Who Performed Outstanding or Heroic Service Buildings, facilities, land, or any portion thereof may also be named in memory of individuals who died in the line of duty serving the City of Denton, the State of Texas, or the United States of America; or died performing a heroic act, such as saving the life of another person; or a deceased individual who has made a significant and lasting contribution to humanitarian causes on a world or national level. In these instances as appropriate, the City may elect to obtain or attempt to make contact for approval from living family members of the individual recommended for having a City building, facility, land, or any portion thereof named in their honor. C. Naming After a Foundation, Business, or Organization 1. If consideration is given to naming a City building, facility, land, or any portion thereof after a foundation, business, or organization, the foundation, business, or organization considered should have made exceptional local, state, national, or world contributions; and their achievements should represent a lasting legacy to the mission of the City building, facility, land, or any portion thereof. 2. In selected instances, a Citybuilding, facility, land, or any portion thereof may be named after a foundation, business, or organization that makes a unique and extraordinary contribution to the development and or usage of the City building, facility, land, or any portion thereof being named. The merits and value of each such naming shall be evaluated on a case-by-case basis. IV. NAMING A CITY BUILDING, FACILITY, LAND, OR ANY PORTION THEREOF THROUGH FUND RAISING OR BY PURCHASING NAMING RIGHTS 1. Any individual for which a City building, facility, land, or any portion thereof may be named, must be of good moral character and must not have been convicted of a felony, or Class A or B misdemeanor. Any foundation, business, or organization must be compliant with all applicable laws, rules and regulations. 2. ACity building, facility, land, or any portion thereof may be named as part of apublic fundraising campaign, donation, or by purchasing naming rights.The City Council may approve other non-monetary donations for naming rights. 3. Naming rights for a funded project can be accepted at any point during construction. 4. A funding agreement for the naming rights of anon-funded project must be in place prior to start of construction. 5.The required donation to acquire the naming rights of a City building, facility, land, or any portion thereof shall be substantial as determined by the City Council on a case-by-case basis. 6. All funds contributed to naming aCity building, facility, land, or any portion thereof will be nonrefundable. 7. In the event a donor fails to meet the total required commitment, the City Council may reconsider the naming of the City building, facility, land, or any portion thereof. 8. It should not be assumed that a financial contribution guarantees that a City building, facility, land, or any portion thereof will be named after an individual or a business, foundation, or organization. V. PLAQUES, MARKERS AND MEMORIALS A. Plaques, markers, and memorials that are requested to be located on aCity building, facility, land, or any portion thereof, must be reviewed and approved by the City as to design and maintenance requirements. B. Total costs for purchasing plaques, markers, and memorials involved in the naming of a new City building, facility, land, or any portion thereof, as well as up to five (5) years of maintenance costs, shall be paid by the nominating individual or organization, unless City Council waives such funding. This provision has no application in those instances where the costs of plaques, markers, or memorials are included in the design and construction costs of a project. VI. RENAMING OF A CITY BUILDING, FACILITY, LAND, OR ANYPORTION THEREOF A. In order to honor the decisions of previous City Councils and descendants of individuals after whom a City building, facility, land, or any portion thereof are named, renaming shall typically not occur. B. If it is determined that circumstances have changed such that the criteria set forth in III.A.3 or IV.1 is no longer met, the City Council may elect to remove the name from the City building, facility, land, or any portion thereof. Further, a City building, facility, land, or any portion thereof named after a foundation, business, or organization, which dissolves, is convicted of criminal acts, or for other good and valid reasons, may be renamed. VII. PROCEDURES FOR NAMING CITY BUILDINGS, FACILITIES, LAND, OR ANYPORTION THEREOF A. Groups or individuals may submit nominations for naming a City building, facility, land, or any portion thereof, by submitting a nomination to the City Manager on the City of Denton Name Application Form For City Buildings, Facilities, Land, or any portion thereof. B. The City Manager, upon the receipt of the City of Denton Name Application Form For City Buildings, Facilities, Land, or any portion thereof shall refer such naming request to the City Council. C. The City Council may appoint a seven-member ad hoc Naming Committee to review the naming request submitted by a citizen or organization. Such committee shall be nominated by individual Council members. In the event of a City Council initiated naming, the Council may, if it desires, appoint an ad hoc committee as outlined herein to investigate and recommend one or more names for Council consideration. D. At least two additional members of the ad hoc Naming Committee shall be selected from any impacted advisory or governing board. E. The name or names submitted will be considered by the members of the ad hoc Naming Committee. The committee shall be guided by the provisions of this policy and shall provide a recommendation to the City Council for consideration. F. The final decision for naming a City building, facility, land, or any portion thereof shall rest with the City Council. CITY OF DENTON NAME APPLICATION FORM FOR CITY BUILDINGS, FACILITIES, LAND, OR ANY OTHER PORTION THEREOF Please type or print clearly in ink and return to : 1. Date of Submittal: ________________________________________________________ 2. Individual or Organization Submitting Nomination: _______________________________________________________________________ 3. Signature of Nominator or Organization Representative: ______________________________________________________________________ Point of Contact: ______________________________________________________________________ Address: __________________________________________________________ City, State, Zip: _____________________________________________________ Telephone: ________________________________________________________ Email: ____________________________________________________________ 4. Nominee (Check One): Individual Organization 5. Recommended Name of City Building, Facility, Land, or Any Portion Thereof: ______________________________________________________________________ 9. Location of City Building, Facility, Land, or Any Portion Thereof: ______________________________________________________________________ 10. Explanation of why this name should be considered. biographical information and vitae or resume. Use additional sheets, if necessary: ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ CITY OF DENTON CITY COUNCIL MINUTES February 14, 2012 After determining in Special Called Open Session that a quorum was present, the City Council of the City of Denton, Texas convened in a Special Called Closed Session on Tuesday, . February 14, 2012 at 4:05 p.m in the City Council Work Session Room at City Hall. PRESENT: Mayor Mark Burroughs, Mayor Pro Tem Pete Kamp, Council Member Engelbrecht, Council Member Gregory, Council Member King, Council Member Roden, Council Member Watts. ABSENT: None. 1. Receive a report and hold a discussion concerning the City of Denton Brownfield grant. Kenny Banks, Director of Environmental Services and Sustainability, stated that the City received its first Brownfield Cleanup grant on July 23, 2009. Banks introduced Frank Clark with W&M Environmental Group, who the City had contracted with to develop a cleanup plan for the site. Mr. Clark stated that the City had acquired the property for a Transit Park Project in January 2008. The site was a 1.9 acre tract located at the southeast corner of Exposition and Hickory Streets. He briefed the Council regarding the site history. Previous uses of the site included a tool and machinery manufacturer, machine shop, steel fabricator, industrial constructor, automobile and motor repair shops, and a small body shop. Environmental issues were identified which included storage areas for paints, cutting oils, and cleaning solvents; a paint booth; exposed areas behind the main structure. Chemicals of concern included organic compounds (paints, cleaning solvents, and oils), petroleum hydrocarbons, polyaromatic hydrocarbons, and heavy metals. Initial investigations included a Phase I ESA and a limited Phase II assessment that indicated lead and arsenic concentrations in shallow groundwater that were slightly above drinking water protective concentration levels. However, the study indicated that these metals did not appear to originate from site activities, and might have been either naturally occurring or due to disturbances in the site’s groundwater monitoring wells during the sampling process. Clark stated that the grant provided funds to remove 540 square feet of asbestos floor tiles located in one of the three buildings on the site and to hire an environmental consultant to perform all actions needed to obtain a Certificate of Completion for the site through the Texas Commission on Environmental Quality’s Voluntary Cleanup Program for the groundwater concerns. The Brownfield Site Assessment results included – 10 shallow soil borings in source areas; installed one additional well; sampled all three wells; groundwater was clean; soil samples contained elevated metals. Results included no organic or hydrocarbon contamination in soil or groundwater. Metals were found in the soil but had not affected the groundwater. A Municipal Setting Designation was no longer necessary with the updated groundwater data from TCEQ. Staff developed site-specific cleanup targets for soils using TCEQ-approved procedures. Staff submitted the Affected Property Assessment Report (APAR) documenting site conditions to TCEQ. The City received the Certificate of Closure from the TCEQ on November 15, 2011. 2. Receive a report, hold a discussion, and give staff direction regarding the provision of on- site recycling programs for multi-family residential communities, and the solid waste and recycling services offered. City of Denton City Council Agenda February 14, 2012 Page 2 Shirlene Sitton, Recycling Manager, stated that recycling was one of the most accessible and effective means of conserving resources and supporting the economy. Currently, the city-wide recycling rate was at 32%. The multi-family population was 37% of Denton households and 42% of the Denton population. There were 17,500 units and 394 multi-family properties. Denton had about 27,700 single-family homes. She stated that only five multi-family properties had on-site dumpster recycling services. The City had offered on-site recycling for multi-family communities and commercial businesses since 2003. Multi-family properties were considered commercial accounts and waste was collected via dumpster or compactor service. Buildings with four units or less were serviced with trash and recycling carts. The City provided four multi-material Recycling Drop-Off Centers intended for use by any resident or business that did not have on-site recycling, or to supplement when the user had extra recycling materials. Sitton stated that in Denton, on-site recycling for multi-family properties was voluntary, and usually involved switching a current trash dumpster for a recycling dumpster to collect (mixed) recycling (mixed paper, cardboard, boxboard, aluminum, steel, plastic and glass). Denton currently assessed a fee for recycling programs to apartment residents. The monthly $2.30 Multi-Family Household Chemical and Recycling Fee covered on-site Home Chemical Collection for residents and supported residential recycling programs, including the four multi- material recycling drop-off centers, and our public education and outreach programs, such as the Sustainable Schools Program. The fee was charged directly to utilities customers (or property management if “all bills paid”). The fee was not intended for and did not cover costs for on-site recycling of recycling materials. Single-family households paid $5.15 per month for recycling services. This fee included the same programs as above, plus the cost of curbside recycling. Sitton stated that there were barriers to on-site recycling. There was no infrastructure. A large portion of older multi-family communities had a dumpster on the curb or in the right-of-way or in the street; not on the property as the current ordinances specified for any new development. Adding dumpsters could mean setting them in a parking space or on a landscaped area. Sometimes there were enclosures. Existing enclosures would not accommodate a second container. Sometimes there was one trash compactor in an enclosure. Illegal dumping occurred from both residents and non-residents; there was no way to identify the persons contaminating the recycling. Management needed to check the dumpsters regularly and remove contaminants. Another issue involved education. The high turn-over of both residents and management staff made it difficult to keep an informed property population. Sitton stated many multi-family communities had dumpsters located in the right-of-way or on the curb; most were not screened. Denton had no permit or use fee for private use of public right-of- way or easement for these dumpsters. Council had directed staff to reduce dumpsters in rights- of-way, on curbs, and in the street through voluntary measures in 2006. Council might wish staff to explore additional options to encourage property owners to make improvements to move these dumpsters, such as a right-of-way license; or Solid Waste and Recycling to go ahead with whatever container and location was necessary to deliver recycling service to these properties. City of Denton City Council Agenda February 14, 2012 Page 3 Sitton stated that staff was updating the Solid Waste Site Design Criteria Manual and Denton Development Code requiring enclosures that would accommodate both trash and recycling in all new developments to address many of the problems in future developments. Sitton stated that in order to increase the access to recycling for multi-family residents, some cities had adopted multi-family and/or commercial recycling ordinances that directed the property owners to implement recycling programs, but these were few in number. Some cities had tackled this issue by passing a large-scale initiative or plan for waste diversion, such as a Zero Waste type initiative or large diversion goal that provided a more inclusive framework for implementing new recycling programs. Sitton stated that the Council had established a 40% overall diversion rate in its current Strategic Plan. The proposed Sustainability Plan suggested a residential diversion rate of 60%, based on single-family programs, but staff could further develop a framework of recommendations to reach and exceed this goal to include multi-family residential. She stated that a copy of Austin’s 2011 Universal Recycling Ordinance which addressed multi-family and business recycling (part of Zero-Waste Plan) was in the backup. Also in the backup was a copy of San Antonio’s Multi-Family Recycling Ordinance. The following options were discussed. 1) Leave the decision to provide on-site recycling at multi-family communities up to the owners and/or property management and make no further requirements. Staff currently offered this assistance to managers and offered proposals to implement on site recycling. 2) Design an advertising/public information campaign to attract those properties who chose to or who were able to implement on-site recycling in accordance with meeting or exceeding City of Denton diversion goals. 3) Design and implement a new requirement that multi-family management must offer recycling to residents on all properties to meet or exceed the City of Denton’s waste diversion goals. Sitton stated that staff recommended that multi-family properties offer on-site recycling for residents. This plan should be developed carefully with input from stakeholders, and within a framework plan for increasing all diversion programs to reach the City of Denton’s waste diversion goals in the Strategic Plan and the Sustainability Plan. The Council discussed the different options. Mayor Burroughs asked if staff had inventoried all the multi-family sites so they could recognize what the challenges were and what opportunities there were. Council Member King suggested making it as easy as possible. Council Member Watts stated that it should be sensible and flexible. Council Member Engelbrecht encouraged them to look at some sort of incentive program. Sitton stated that it would be a phased-in implementation – the focus would be the age of the property rather than the size of the unit. General Consensus of the Council was that an inventory of the properties would be helpful in addressing the different categories. The Council convened in closed session at 5:10 p.m. City of Denton City Council Agenda February 14, 2012 Page 4 A. Certain Public Power Utilities Competitive Matters – Under Texas Government Code Section 551.086; Deliberations regarding Real Property – Under Texas Government Code Section 551.072; Consultation with Attorneys – Under Texas Government Code Section 551.071. 1) The Council received a presentation from staff, discussed, deliberated and provided staff with direction regarding the establishment of a Combined Heat and Power – Economic Development District (CHP-EDD) in the airport industrial area of Denton, Texas, including the designation, boundaries, and limitations upon activities regarding said proposed District, in the interest of providing electric power; receive a presentation from staff, discuss, deliberate and provide staff with direction regarding the acquisition of property and easements, and the value thereof, related to the CHP-EDD; consulted with and provided direction to the City’s attorneys regarding legal matters related to the CHP-EDD where a public discussion of these legal matters would conflict with the duty of the City’s attorneys to the City Council under the Texas Rules of Professional Conduct of the State Bar of Texas. The Closed meeting adjourned at 5:30 p.m. The Council reconvened in open session. 3. Receive a report and hold a discussion regarding the Combined Heat and Power – Economic Development District (CHP–EDD) in the airport industrial area of Denton, Texas. Mike Grim, Executive Manager of Power Legislation & Regulatory Affairs, stated that Denton had great assets, including land availability, proximity to DFW, central transportation corridor, competitive electric rates, and its universities. With the creation of a CHP–EDD, the City would be able to offer industries the benefits of CHP by providing steam, chilled water, and natural gas giving Denton a vital competitive edge in attracting industrial businesses. Grim stated that the Texas Senate passed Senate Bill 1230 which allowed the City of Denton to designate a CHP-EDD – Combined Heat and Power Economic Development District. This legislation also authorized the City to sell natural gas to industrial customers located in the CHP-EDD. The CHP–EDD was planned to have a 3-mile radius centered northeast of the Denton Airport bordered on the north by University Drive and on the east by Interstate 35. At this time, DME was presenting enabling language in the form of an ordinance creating the Denton CHP–EDD. This ordinance also assigned the task to the Economic Development Partnership Board of creating guidelines for incentives within the CHP–EDD to be presented to Council for approval no later than July 1, 2012. Grim stated that the next steps in the process included bring the ordinance to Council for approval at the February 21 City Council meeting and a signing ceremony on February 22 at the Airport. City of Denton City Council Agenda February 14, 2012 Page 5 With no further business, the meeting was adjourned at 5:47 p.m. ____________________________________ MARK A. BURROUGHS MAYOR CITY OF DENTON, TEXAS ____________________________________ JANE RICHARDSON ASSISTANT CITY SECRETARY CITY OF DENTON, TEXAS AGENDA INFORMATION SHEET AGENDA DATE : April 3, 2012 DEPARTMENT : Finance ACM: Jon Fortune SUBJECT Consider adoption of an ordinance of the Council of the City of Denton, Texas accepting a proposal and awarding a Agreement for 2012-2014 for PLUS ONE Program by and for a Utility Assistance Program for low-income Denton households in an amount not-to-exceed $85,000 per year; providing for the expenditure of funds therefor; and providing an effective date. The Public Utilities Board recommends approval (7-0). BACKGROUND On April 5, 2011, the City Council approved a one year agreement that authorized Interfaith Ministries to continue the administration of Prevent Loss of Utility Service (PLUS ONE) Program. The Program is designed to provide qualifying customers facing a temporary financial crisis with the funds necessary to pay their past due utility bills. Prior to this agreement, the Program was funded strictly through donations from Denton Municipal Utility customers. Over the last five fiscal years, total annual donations to PLUS ONE averaged $15,745. This amount fell far short of addressing the $57,000 and $82,000 in customer demand estimated for 2009 and 2010, and as a result, many qualifying customers were denied assistance due to a lack of adequate funding. While customer donations are still a key component of the Program, a provision was included in the most recent agreement that authorized the allocation of $85,000 in additional funding to Interfaith Ministries. Of this dollar amount, $75,000 is provided to customers qualifying for assistance, and the remaining $10,000 is utilized by Interfaith Ministries to cover the administrative costs associated with fielding customer requests. The allocation of additional funding began promptly following the approval of the new agreement in April 2011. Through January 2012, $56,322 has been administered to a total of 226 families. Only 37 families received assistance over the same time period from the prior year. In addition, the amount of assistance provided to qualifying families has increased from an average of $176 to $239. In the past, the funds administered to a family in need may not have covered the total amount of their past due bill. This is now less likely to happen due to the addition of supplemental funding. Agenda Information Sheet April 3, 2012 Page 2 Based on the results detailed above, staff recommends approval of an extension to the agreement with Interfaith Ministries in an amount not to exceed $85,000 annually. Future annual allocations may fluctuate based on customer need, and as a result, staff will reevaluate the allocation amount each year. Through January 2012, 80% of the funds allocated to Interfaith Ministries through City of Denton and customer donations have been administered. The funds held in reserve should address any increases in demand that might occur in the coming months. As a result, staff does not recommend a change in funding at this time. RECOMMENDATION Staff recommends the adoption of the Ordinance regarding the administration of the PLUS ONE Program. PRIOR ACTION/REVIEW (Council, Boards, Commissions) The PLUS ONE Program was initiated by Denton Municipal Electric and approved by the City Council in 1983. Interfaith Ministries partnered with the City of Denton to administer the Program in 1998. On March 28, 2011, the Public Utility Board recommended a one year agreement with Interfaith Ministries for the administration of the PLUS ONE Program. On April 5, 2011, the City Council adopted Ordinance No. 2011-044 accepting a one year agreement with Interfaith Ministries for the administration of the PLUS ONE Program. On March 26, 2012, the Public Utility Board recommended this item for approval (7-0). FISCAL INFORMATION In addition to customer donations collected by Utilities Customer Service, $75,000 in City of Denton revenues will be allocated to Interfaith Ministries to administer through the PLUS ONE Program. An additional $10,000 will be allocated to cover the operational costs of administering the additional funding. Agenda Information Sheet April 3, 2012 Page 3 EXHIBITS March 26, 2012, PUB Meeting Minutes Ordinance Respectfully submitted: Bryan Langley Chief Financial Officer Prepared by: Ethan Cox Customer Service Manager DRAFT MINUTES 1 PUBLIC UTILITIES BOARD 2 3 March 26, 2012 4 5 After determining that a quorum of the Public Utilities Board of the City of Denton, Texas is 6 present, the Chair of the Public Utilities Board will thereafter convene into an open meeting on 7 Monday, February 27, 2012 at 9:00 a.m. in the Service Center Training Room, City of Denton 8 Service Center, 901-A Texas Street, Denton, Texas. 9 10 Present: Chair Dick Smith, Vice Chair Bill Cheek, Randy Robinson, Phil Gallivan, 11 John Baines, Barbara Russell and Leonard Herring 12 13 Ex Officio Members: George Campbell, City Manager; Howard Martin, ACM Utilities 14 OPEN MEETING 15 16 ITEMS FOR INDIVIDUAL CONSIDERATION 17 18 19 2)Consider a recommendation of an adoption of an ordinance of the Council of the City of 20 Denton, Texas accepting a proposal and awarding a contract for a utility assistance program 21 for low-income households to Interfaith Ministries in an amount not to exceed $85,000; 22 providing for the expenditure of funds therefor; and providing an effective date. 23 Chair Smith stated that there was a lot of discussion on this item last 24 number last year $75,000 25 . Ethan Cox, Customer Service Manager, answered that there are 26 two different numbers that was decided upon last year. There is the $75,000 that will be 27 administered directly to customers in need. There is also $10,000 in administrative cost to Smith asked for more 28 help handle the additional volume. The same amount as last year. explanation of the amounts in the agenda item, if the $56,322 has been administered to 29 date 30 . Cox agreed and explained that amount is through January there is still about three Smith then asked if $85,000 is too much 31 months to go. . Cox stated that at this point it is a 32 little early to say. With 80% being allocated staff has gone through one summer so far, with 33 the conversations with Interfaith it is still in the early stages. Last summer was an extremely 34 hot summer, this year will give a better indication if that amount needs to be adjusted. 35 Typically how Interfaith has handled the allocation to this point, they try to build up a reserve 36 during the months that we are currently in. That will help in the May through October time 37 frames so they will have additional funds to allocate in reserves. This will be revisited each 38 year and determine if the amount needs to be adjusted up or down. Currently in terms of Smith asked 39 allocation staff has allocated about $71,000, $56,000 has been administered. about the differenceSmith asked if it is 40 . Cox responded it is being held in reserves. needed, because the rate payers are subsidizing itIs staff auditing the allocations. 41 . Cox 42 replied that staff gets a monthly report from Interfaith Ministries in terms of the accounts that 43 are being given funding. There are guidelines that details the conditions in which the funds 44 will be allocated. Staff also wants to make sure that Interfaith is not allocating to the same 45 household on more than one occasion in a 12 month period. To this point staff has not seen Russell asked if this 46 any deviation from the service agreement from Interfaith Ministries. amount is in the budget 47 . Cox replied that it is. Draft Minutes of the Public Utilities Board Meeting March 26, 2012 Page 2 of 2 1 Motion to approve item 3 by Board Member Cheek with a second from Board Member 2 Gallivan. Vote 7-0. 3 4 5 Adjournment at 11:11 am AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Phil Williams at 349-8487 ACM: Jon Fortune SUBJECT Consider adoption of an ordinance of the City of Denton, Texas authorizing the expenditure of funds for payments by the City of Denton for Electrical Energy Transmission Fees to those cities and utilities providing energy transmission services to the City of Denton; and providing an effective date (File 4933-Adjusted Fiscal Year 1999 Electrical Energy Transmission Fees in the total amount of $645,941). The Public Utilities Board recommends approval (7-0). FILE INFORMATION The Public Utility Commission of Texas (PUCT) has issued a final order for Docket No. 39066 that settled appeals filed by various entities (including the City of Denton) challenging the opt a transition mechanism that adjusted amounts owed certain utilities by other utilities for wholesale transmission charges within the Electric Reliability Council of Texas (ERCOT) for 1999. As a result, Denton Municipal Electric has been ordered by the PUCT to pay various other electric utilities in the State specific amounts as shown on Exhibit 1. Exhibit 1 shows all amounts to be paid by the City of Denton under the column labeled CODX. The amounts under $50,000 approval authority; therefore they do not require Council approval. Also, as a result of the settlement, Texas Municipal Power Agency (TMPA) will be receiving approximately $5,106,902 from other utilities. Tpercent share of these proceeds comes to approximately $1,087,770.12. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) On March 26, 2012, the Public Utilities Board recommended approval to forward this item to the City Council for consideration. RECOMMENDATION Approve the payment of adjusted fiscal year 1999 electrical transmission fees in the following amounts: American Electric Power (AEP)-$55,173, Austin Energy (AENX)-$56,484, Brazos Electric (BEPC)-$122,669, Lower Colorado River Authority (LCRA)-$193,498, Texas Municipal Power Agency (TMPA)-$166,251, and Texas New Mexico Power (TNMP)-$51,866 for a total expenditure of $645,941. Agenda Information Sheet April 3, 2012 Page 2 PRINCIPAL PLACE OF BUSINESS American Electric Power (AEP) Austin Energy (AENX) Canton, Ohio Austin, Texas Brazos Electric (BEPC) Lower Colorado River Authority (LCRA) Waco, Texas Houston, Texas Texas Municipal Power Agency (TMPA) Texas New Mexico Power Co (TNMP) Bryan, Texas Lewisville, Texas ESTIMATED SCHEDULE OF PROJECT Payment of the fees will be processed upon Council approval. FISCAL INFORMATION Funds to meet this regulatory fee obligation were budgeted in 2011-2012 fiscal year budget account 600100.6072.5650A. Requisitions have been entered in the Purchasing software system for payment to each of the entities. EXHIBITS Exhibit 1: Matrix of Fees Owed Under Docket No. 39066 Exhibit 2: Public Utilities Board Minutes Respectfully submitted: Antonio Puente, Jr., 349-7283 Assistant Director of Finance 1-AIS-File 4933 Exhibit 2 DRAFT MINUTES 1 PUBLIC UTILITIES BOARD 2 3 March 26, 2012 4 5 After determining that a quorum of the Public Utilities Board of the City of Denton, Texas is 6 present, the Chair of the Public Utilities Board will thereafter convene into an open meeting on 7 Monday, February 27, 2012 at 9:00 a.m. in the Service Center Training Room, City of Denton 8 Service Center, 901-A Texas Street, Denton, Texas. 9 10 Present: Chair Dick Smith, Vice Chair Bill Cheek, Randy Robinson, Phil Gallivan, 11 John Baines, Barbara Russell and Leonard Herring 12 13 Ex Officio Members: George Campbell, City Manager; Howard Martin, ACM Utilities 14 OPEN MEETING 15 16 ITEMS FOR INDIVIDUAL CONSIDERATION 17 18 19 1) Consider a recommendation of an adoption of an Ordinance authorizing the payment of 20 funds by the City of Denton for adjusted 1999 electrical energy transmission fees from the 21 City of Denton to American Electric Power (AEP), Austin Energy (AENX), Brazos Electric 22 (BEPC), Lower Colorado River Authority (LCRA), Texas Municipal Power Agency 23 (TMPA), and Texas New Mexico Power (TNMP) in the amounts provided below; and 24 providing an effective date (File 4933-2012 AEP-$55,173 / AENX-$56,484 / BEPC- 25 $122,669 / LCRA-$193,498 / TMPA-$166,251 / TNMP-$51,866 Total Amount of 26 $645,941). 27 Board Member Russell asked for explanation on this item 28 . Phil Williams, General 29 Manager DME, explained further stating the Electrical Reliability Council of Texas 30 (ERCOT) administrates the transmission system. Everyone adds the cost and that cost is 31 divvied out to all the load serving entities. DME has to payout cost for use of the 32 transmission system. In 1999 there was a lawsuit filed and the lawsuit was held up by TMPA 33 Herring asked 34 they have divided up the last four months of 1999 and this is the settlement. if this is an ongoing cost, annual. 35 Williams answered yes, once a year this will be brought 36 forward. 37 Motion to approve item 1 by Board Member Russell with a second from Board Member 38 Robinson. Vote 7-0. 39 40 41 Adjournment at 11:11 am ORDINANCE NO. __________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE EXPENDITURE OF FUNDS FOR PAYMENTS BY THE CITY OF DENTON FOR ELECTRICAL ENERGY TRANSMISSION FEES TO THOSE CITIES AND UTILITIES PROVIDING ENERGY TRANSMISSION SERVICES TO THE CITY OF DENTON; AND PROVIDING AN EFFECTIVE DATE (FILE 4933-ADJUSTED 1999 ELECTRICAL ENERGY TRANSMISSION FEES IN THE TOTAL AMOUNT OF $645,941). WHEREAS, in order to comply with the legislative requirements contained in the Utility Regulatory Act of 1995, for the payment for energy transmission services fees, the City of Denton is required to pay such fees imposed by the Public Utilities Commission of Texas to six listed utilities WHEREAS, the City Manager has reviewed and recommended that the City Council approve and authorize the payment of such fees; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The expenditure of funds in the amount of $645,941 to be paid to the Listed Utilities in this ordinance for all purposes, is hereby authorized. SECTION 2. The City Council of the City of Denton, Texas hereby expressly delegates the authority to take any actions that may be required or permitted to be performed by the City of Denton under File 4933 to the City Manager of the City of Denton, Texas, or his designee. SECTION 3. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the ________ day of ____________________, 2012. _______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY:__________________________________ APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: _________________________________ 4-ORD-FILE 4933 Lower Colorado River Authority $193,498 Texas Municipal Power Agency $166,251 American Electric Power $ 55,173 Austin Energy $ 56,484 Brazos Electric $122,669 Texas New Mexico Power $ 51,866 Total$645,941 AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 Questions concerning this Acquisition may be directed DEPARTMENT: Materials Management to Keith Gabbard at 349-7146 ACM: Jon Fortune SUBJECT Consider adoption of an ordinance rejecting any and all competitive bids for a contract for Street Milling Services for the City of Denton; and providing an effective date. (Bid Number 4909-Two Year Contract for Street Milling Services). BID INFORMATION This bid is for a two year contract for the rental of street maintenance equipment with qualified operators to remove existing asphalt on streets. The process consists of milling to a smooth surface. This method is proven to be the most successful to expedite reconstruction or overlay of street projects. The City of Denton furnishes support services such as supervision and traffic control. Bid responses were received on February 28, 2012. There were only two respondents, as this service is considered a very specialized trade. The bids ranged from $15,880 to $16,800 for the line items where an annual estimated quantity was provided. The quantities that were included in the invitation for bids (IFB) are shown under the columns labeled as (A) on the attached Exhibit 1. During the evaluation process, a more extensive analysis was conducted, as the pricing revealed potential price increases from previous historical measures. A staff review of the actual quantities that were used for each line item over the past two and a half years determined that the quantities provided in the IFB were actually too low. These quantities do not accurately reflect the street milling demand as required by the various upcoming street improvement projects. The actual quantities are indicated under the columns labeled as (B) on the attached Exhibit 1. Additionally, it was determined that the specifications need to be updated to reflect actual requirements for the removal and transfer of the street milling aggregate materials, to ensure that the City retains ownership of the used materials. RECOMMENDATION Staff recommends the rejection of all bids received for milling services and re-bidding these services. The new bid specifications will reflect the average annual quantities used by the Street department in the two years prior in addition to removal of material requirements. The City will immediately re-bid this service after approval of the rejection request. Agenda Information Sheet April 3, 2012 Page 2 PRINCIPAL PLACE OF BUSINESS Dustrol, Inc. TexOp Construction, LP Roanoke, TX Roanoke, TX ESTIMATED SCHEDULE OF PROJECT The specifications for this bid are for a two year contract with the option to renew for two (2) additional one year periods with all terms remaining the same. FISCAL INFORMATION There is no financial impact since no dollar amount will be awarded. EXHIBITS Exhibit 1: Bid Evaluation/Tabulation Respectfully submitted: Antonio Puente, Jr., 349-7283 Assistant Director of Finance 1-AIS-Bid 4909 ORDINANCE NO. ________________ AN ORDINANCE REJECTING ANY AND ALL COMPETITIVE BIDS FOR A CONTRACT FOR STREET MILLING SERVICES FOR THE CITY OF DENTON; AND PROVIDING AN EFFECTIVE DATE. (BID NUMBER 4909-TWO YEAR CONTRACT FOR STREET MILLING SERVICES). WHEREAS, the City has solicited, received and tabulated competitive bids for street milling servicesBid Number 4909) in accordance with the procedures of State laws and City ordinances; and WHEREAS, the City Council has determined that it is in the best interest of the City that the herein described bids should be rejected; NOW THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The following competitive bids for the construction of public works or led according to the bid number assigned herein (Bid Number 4909) are hereby rejected: BID NUMBER CONTRACTOR AMOUNT 4909 Dustrol, Inc. Exhibit A 4909 TexOp Construction, LP Exhibit A SECTION 2. The City Manager is hereby authorized to execute all necessary documents for the rejection of said bids. SECTION 3. The City Council of the City of Denton, Texas hereby expressly delegates the authority to take any actions that may be required or permitted to be performed by the City of Denton under Bid 4909 to the City Manager of the City of Denton, Texas, or his designee. SECTION 4. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the _____ day of _________, 2012 ____________________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: _________________________________ 3-ORD-Bid 4909 EXHIBIT A BID # 4909 DATE: 2/28/12 Two-Year Contract for Street Milling Services ITEM #QTYUOMDESCRIPTIONVENDORVENDOR TexOp Dustrol, Inc. Construction, LP Principle Place of Business: Roanoke, TXRoanoke, TX Milling Machine - Track Type Caterpiller 450 or equal$0.26/Sq.In/Sq.Yd$0.21/Sq.In/Sq.Yd 150,000SY Mobilization charge to include delivery, pick up, loading and unloading as required. One time charge per activation.$300.00$750.00 1A8EA 22HRPick-up Broom - Mobil TE3 or equal$140.00$50.00 Mobilization charge to include delivery, pick up, loading & unloading as required. $100.00$100.00 2A2EA Trucking services per hour per truck for disposal at City of Denton supplied $50.00$45.00 3N/AHR Shipment can be made in ______ days from receipt of order. 2 *Prices shall include a qualified operator or crew with each piece of equipment. **In case of calculation error, unit price will prevail. AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Parks and Recreation ACM: Fred Greene SUBJECT Consider adoption of an ordinance of the City of Denton, Texas, authorizing the City Manager to execute a contract with the Denton Independent School District for the 2012 Summer Food Service Program; authorizing the expenditure of funds to administer the program; and providing an effective date. BACKGROUND This free lunch program is designed to serve children in areas of low-income populations during the summer months, when traditional school lunch programs are not in effect. This program is sponsored and funded by the United States Department of Agriculture, Food and Nutrition Service and is a continuation of the free lunch program that is offered during the school year. The Texas Department of Agriculture has made an effort through outreach to increase the number of cities participating in the program. Cold sack lunches will be prepared by the Denton Independent School District and served at the following locations: 1) MLK Recreation Center, 2) Denia Park, 3) Quakertown Park, 4) Owsley Park, 5) Fairways at University Apartments, 6) Village East Apartments, 7) Fred Moore Park, 8) McMath Middle School, 9) Mack Park, 10) Denton Mobile Park, 11) Civic Center; other DISD summer school sites and additional City sites may be implemented based on need. The total estimated cost for this program is approximately $135,000 which is reimbursed by the Texas Department of Agriculture. The Parks and Recreation Department first offered the Summer Food Service Program in 1992 at Denia Park, Phoenix Park, Fred Moore Park, Civic Center Park, and two summer school locations. At these six locations, a total of 10,776 lunches were served to children 1 through 18 years of age. The 2011 Summer Food Service Program served 39,190 lunches at 18 locations at a cost of $126,877.60. OPTIONS Council may approve the contracts with the Texas Department of Agriculture and Special Nutrition Programs and Denton Independent School District in its entirety, deny the request, or ask staff to make modifications. RECOMMENDATION Staff recommends approval of the proposed ordinance. Agenda Information Sheet April 3, 2012 Page 2 ESTIMATED SCHEDULE OF PROJECT Summer lunches will be served week days from June 4, 2012 through August 17, 2012. No lunches will be served on Wednesday, July 4, 2012, in observance of the Independence Day Holiday. PRIOR ACTION/REVIEW The Denton Independent School District recommended approval to contract the preparation of cold sack lunches for this program when the issue was presented to their board on February 14, 2012. The program is scheduled for implementation on June 4, 2012. FISCAL INFORMATION Texas Department of Agriculture, which administers this grant, will reimburse all costs associated with the program. EXHIBITS 1.Ordinance 2.DISD Agreement Respectfully submitted: Emerson Vorel, Director Parks and Recreation Department Prepared by: Kathy Schaeffer, Athletics/YTS Program Area Manager Parks and Recreation Department AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Utilities ACM: Howard Martin, 349-8232 __________________________________________________________________________________ SUBJECT Consider adoption of an ordinance authorizing the City Manager of the City of Denton, Texas (“City”) to execute for and on behalf of the City an Easement Abandonment Agreement (“Agreement”), by and between Creekwood Centre Denton, LLC and the City, contemplating the (I) partial abandonment of that certain easement and right of way, dated on or about July 30, 1927, from Mrs. S. A. Bayless, et al to Texas Power & Light Company, recorded in Volume 216, Page 231, Real Property Records, Denton County, Texas, being further referenced in an assignment of easements, dated on or about May 21, 1975, from Texas Power & Light Company to the City of Denton, recorded in Volume 756, Page 669, Real Property Records, Denton County, Texas; and (II) partial abandonment of that certain utility easement, dated on or about May 6, 1955, from J. A. McLeod, and wife, Florence McLeod to the City of Denton, Texas, recorded in Volume 419, Page 25, Real Property Records, Denton County, Texas, affecting lands located in the A. Hill Survey, Abstract No. 623, Denton County, Texas and particularly described as Lot 1, Block A of Denton Station, Phase One, an addition to the City of Denton, Denton County, Texas, according to the plat recorded in Cabinet Y, Page 740, Plat Records, Denton County, Texas, and Lot 2, Block A of Denton Station, Phase One, an addition to the City of Denton, Denton County, Texas, according to the plat recorded in Cabinet W, Page 463, Plat Records, Denton County, Texas and located approximately within the 1400 block of Centre Place Drive, Denton, Texas, upon the terms and conditions provided in the Agreement; authorizing the City Manager to execute an Abandonment and Release of Easements (“The Release”), upon the terms and conditions provided by the Agreement; and declaring an effective date. The Public Utilities Board recommends approval (7-0). BACKGROUND The proposed Tonti Student Housing project will consist of 136 units on 11.170 acres of property previously platted as the Denton Station Addition Phase One. The project is located south of Alegre Vista Drive and east of Centre Place Drive. The property is owned by Creekwood Denton Centre LLC (Owner), as evidenced in the Recorder Clerk’s File Number 2012-18392, Real Property Records Denton County, Texas. The Owner has requested the partial abandonment and relocation of two easements within the proposed development project. The first is an electric easement granted in 1927 (Volume 216, Page 231) to Texas Power and Light Company (TP&L) for overhead electric lines. The TP&L easement was further assigned to the City of Denton in 1975 (Volume 756, Page 699). The second is a utility easement granted in 1955 (Volume 419, Page 25). The Owner will enter into an Easement Abandonment Agreement, and has executed an electric easement and utility easement for the relocation of the subject utilities from their existing locations. Staff performs an analysis on the request for easement abandonments as follows: Is the easement tract requested for abandonment considered “excess easement”? Does the easement tract requested for abandonment have a continued public use? 1 Is it in the best interest of the general public to abandon the government’s rights in the subject abandonment tract? Would the granting of this request establish a precedent for easement abandonment for future requests? Staff findings on this analysis are as follows: 1.The requested easement abandonment tracts fit the criteria of “excess easement.” Excess easement is defined as: Property acquired or used by the City for easement subsequently declared excess (not needed for any public project, the continuation of operation and maintenance of public facilities, and/or no foreseeable utility use in the future). 2.The easement abandonment tract areas are not slated for utilization of any future utility facilities. 3.The easement abandonments are in the public interest because the areas for the subject abandonments are no longer needed by the public and/or have not been utilized for the public. 4.These abandonments will not set precedent because the above three standards have been met. OPTIONS 1. Approve the proposed Ordinance. 2. Decline to approve the proposed Ordinance. RECOMMENDATION Staff endorses approval of the Ordinance. ESTIMATED PROJECT SCHEDULE April 2012 PRIOR ACTION/REVIEW Development Review Committee January 2012 March 26, 2012 - The Public Utilities Board recommends approval (7-0). FISCAL INFORMATION Not applicable BID INFORMATION Not applicable Exhibits 1. Ordinance 2. Location Map 3. Site Map 4. PUB Minutes Prepared by: Respectfully submitted, ____________________________________________ ___________________________________________ Doreen E. Blackstone Jimmy D. Coulter Right-of-way Agent Director of Water/Wastewater Real Estate and Capital Support Water Administration 2 LOCATION MAP LOCATION LOTS 1 & 2 BLOCK A DENTON STATION ADDITION DRAFT MINUTES 1 PUBLIC UTILITIES BOARD 2 3March 26, 2012 4 5After determining that a quorum of the Public Utilities Board of the City of Denton, Texas is 6present, the Chair of the Public Utilities Board will thereafter convene into an open meeting on 7Monday, February 27, 2012 at 9:00 a.m. in the Service Center Training Room, City of Denton 8Service Center, 901-A Texas Street, Denton, Texas. 9 10Present: Chair Dick Smith, Vice Chair Bill Cheek, Randy Robinson, Phil Gallivan, 11John Baines, Barbara Russell and Leonard Herring 12 13Ex Officio Members: George Campbell, City Manager; Howard Martin, ACM Utilities 14 OPEN MEETING 15 16 CONSENT AGENDA 17 18 192)Consider a recommendation of an adoption of an ordinance authorizing the City Manager of 20the City of Denton, Texas (“City”) to execute for and on behalf of the City an Easement 21Abandonment Agreement (“Agreement”), by and between Creekwood Centre Denton, LLC 22and the City, contemplating the (I) partial abandonment of that certain easement and right of 23way, dated on or about July 30, 1927, from Mrs. S. A. Bayless, et al to Texas Power & Light 24Company, recorded in Volume 216, Page 231, Real Property Records, Denton County, 25Texas, being further referenced in an assignment of easements, dated on or about May 21, 261975, from Texas Power & Light Company to the City of Denton, recorded in Volume 756, 27Page 669, Real Property Records, Denton County, Texas; and (II) partial abandonment of 28that certain utility easement, dated on or about May 6, 1955, from J. A. McLeod, and wife, 29Florence McLeod to the City of Denton, Texas, recorded in Volume 419, Page 25, Real 30Property Records, Denton County, Texas, affecting lands located in the A. Hill Survey, 31Abstract No. 623, Denton County, Texas and particularly described as Lot 1, Block A of 32Denton Station, Phase One, an addition to the City of Denton, Denton County, Texas, 33according to the plat recorded in Cabinet Y, Page 740, Plat Records, Denton County, Texas, 34and Lot 2, Block A of Denton Station, Phase One, an addition to the City of Denton, Denton 35County, Texas, according to the plat recorded in Cabinet W, Page 463, Plat Records, Denton 36County, Texas and located approximately within the 1400 block of Centre Place Drive, 37Denton, Texas, upon the terms and conditions provided in the Agreement; authorizing the 38City Manager to execute an Abandonment and Release of Easements (“The Release”), upon 39the terms and conditions provided by the Agreement; and declaring an effective date. 40 Motion to approve item 2 by Board Member Russell with a second from Board Member 41 Cheek. Vote 7-0. 42 43 44Adjournment at 11:11 am AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Economic Development ACM: Jon Fortune SUBJECT Consider appointment of board members for Tax Increment Financing Zone Number One (Downtown TIF). BACKGROUND On December 7, 2010, City Council adopted an ordinance creating the Tax Increment Financing Reinvestment Zone Number One (Downtown TIF). One February 1, 2011, City Council appointed the TIF Board members. Board membership is structured as follows: Two Members shall be City Council Members Two members shall be either property owners or residents from within the zone Two members shall be either business owners from within the zone or Chamber of Commerce members One member has no specific category, but must be a qualified voter in the City of Denton As all Board members were appointed at the same time, they drew lots at their first meeting to determine who would have one and two year terms. Three positions are currently eligible for reappointment; Pete Kamp, Bob Moses and Marty Rivers are eligible for reappointment and have expressed an interest in serving another term, if it pleases the City Council. TIF Board Member Category Pete Kamp City Council James King City Council Bob Moses Property Owner Virgil Strange Property Owner Marty Rivers Chamber of Commerce Hank Dickenson Chamber of Commerce Harold Strong Qualified Voter Agenda Information Sheet April 3, 2012 Page 2 Prepared by: _________ Julie Glover, Economic Development Program Administrator Respectfully Submitted, ______________________________ Linda Ratliff, Director Economic Development AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider approval of a resolution creating a special Citizens Bond Advisory Committee for the proposed 2012 street bond election; establishing a charge for the Committee; and declaring an effective date. BACKGROUND As discussed during the development of the FY 2011-12 Budget, the improvement of our street infrastructure is a major initiative for the City. Accordingly, the City significantly increased street maintenance funding from $2.8 to $3.5 million in FY 2011-12. In addition to the street maintenance funding, the City also needs to provide a capital investment of approximately $4 million per year to reconstruct existing streets. As a result, staff is proposing the development of a $20 million street infrastructure bond program to address this need. The program assumes no tax rate increase, and it is expected that voters would be requested to approve the program in the November 2012 election. During prior discussions, the City Council indicated a preference for a twenty-one (21) member Citizen Bond Advisory Committee (up to 3 appointments for each City Council member) to assist with selecting projects for consideration. The City Council made appointments to the Committee on March 6, and additional appointments are expected as a separate agenda item on April 3. The purpose of this agenda item is to 1) create the Citizen Bond Advisory Committee, and 2) establish the charge of the committee. In Exhibit 1, a calendar of events associated with the bond election is included for your review. In Exhibit 2, a resolution is attached which formally creates the Committee and establishes their charge. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) At the January 31, 2012, retreat, staff briefed the City Council on the proposed 2012 Bond Election priorities and schedule. Agenda Information Sheet April 3, 2012 Page 2 On February 6, 2012, the City Council discussed the proposed bond election and indicated a preference for a twenty-one (21) member Citizen Bond Advisory Committee (3 appointments for each City Council member). On February 21, 2012, the City Council discussed the proposed bond election, calendar of events, and Advisory Committee appointment process. On March 6, 2012, the City Council appointed members of the public to the Citizen Advisory Committee for the proposed 2012 Bond Election. EXHIBITS Exhibit 1: Bond Election Calendar of Events Exhibit 2: Resolution Respectfully submitted: Bryan Langley CFO and Director of Strategic Services EXHIBIT 1 2012 Bond Election Schedule January 31, 2012 City Council Retreat Discussion of Committee Structure and Bond Program Characteristics February 21 and March 6, 2012 Council appoints bond committee April 3, 2012 Council approves committee charge April 23, 2012 Kick-Off meeting of Citizens Advisory Committee April June 2012 Committee develops recommendations May 7, 2012 Meeting of Citizens Advisory Committee May 21, 2012 Meeting of Citizens Advisory Committee June 4, 2012 Meeting of Citizens Advisory Committee (if needed) June 6, 2012 Citizens Advisory Committee presents recommendation to the Planning and Zoning Commission June 19, 2012 Citizens Advisory Committee makes recommendation to City Council July 17, 2012 City Council holds additional discussion on bond election August 7, 2012 Council holds public hearing August November Committee educates public on bond program. August 14, 2012 * Council passes an ordinance calling for a bond election on November 6, 2012 (Election must be called no earlier than August 8 and no later than August 20) October 22, 2012 * Early voting begins November 2, 2012 * Early voting ends November 6, 2012 * Street Improvement Bond election held * Denotes legally required dates associated with a bond election. AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider appointments to the Citizen Advisory Committee for the proposed 2012 Bond Election. BACKGROUND As discussed during the development of the FY 2011-12 Budget, the improvement of our street infrastructure is a major initiative for the City. The Strategic Plan, approved by the City Council in April 2011, reinforces this concept in Key Focus Area 2: Public Infrastructure. Specifically, goals 2.1 and 2.5 of the Strategic Plan provide the following objectives related to street infrastructure: Objective 2.1.2 Develop a long-range strategy to transition street funding to achieve the Overall Condition Index (OCI) criteria. Objective 2.5.2 Develop and implement financing plans for identified infrastructure needs. As a result of this approach, the City significantly increased street maintenance funding from $2.8 to $3.5 million in FY 2011-12. Additionally, it is planned that this funding level will increase on an annual basis to $5.8 million by FY 2015-16. While this increase in funding is noteworthy, it is still significantly below the $10 million in annual funding that is needed for street maintenance. Accordingly, further enhancements to maintenance funding will also need to be considered in future budget cycles as well. In addition to the street maintenance funding, the City also needs to provide a capital investment of approximately $4 million per year to reconstruct existing streets. As a result, staff is proposing the development of a $20 million street infrastructure bond program to address this need. The program assumes no tax rate increase, and it is expected that voters would be requested to approve the program in the November 2012 election. During prior discussions, the City Council indicated a preference for a twenty-one (21) member Citizen Bond Advisory Committee (up to 3 appointments for each City Council member) to assist with selecting projects for consideration. To solicit public interest, staff posted a notice on concerning the appointment process. Citizens interested in serving Agenda Information Sheet April 3, 2012 Page 2 on the Bond Advisory C Office. In addition, the notice was distributed on social media channels as well. On March 6, 2012, the City Council made a number of appointments to the Citizen Advisory Committee. The purpose of this item is to request additional City Council appointments to the Citizen Bond Advisory Committee. The March 6 appointments and a listing of interested citizens are attached as Exhibit 1. The City Council, at its discretion, may appoint a Chair for the Committee or the Council may allow the Committee to select the Chair Person. In addition to this item, the charge of the Bond Advisory Committee will be formally presented to the City Council for consideration on April 3 as well. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) At the January 31, 2012, retreat, staff briefed the City Council on the proposed 2012 Bond Election priorities and schedule. On February 6, 2012, the City Council discussed the proposed bond election and indicated a preference for a twenty-one (21) member Citizen Bond Advisory Committee (3 appointments for each City Council member). On February 21, 2012, the City Council discussed the proposed bond election, calendar of events, and Advisory Committee appointment process. On March 6, 2012, the City Council appointed members of public to the Citizen Advisory Committee for the proposed 2012 Bond Election. EXHIBITS th Exhibit 1: March 6 City Council Appointments and List of Citizens Interested in Serving on Committee Respectfully submitted: Bryan Langley CFO and Director of Strategic Services AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of up to $49,325,000 in principal amount of "City of Denton Certificates of Obligation, Series 2012" (including up to $4,900,000 for General Government activities, up to $6,070,000 for Solid Waste Fund activities, and up to $38,355,000 for Electric, Water and Wastewater Fund activities); authorizing the issuance of the Certificates; delegating the authority to certain City officials to execute certain documents relating to the sale of the Certificates; approving and authorizing instruments and procedures relating to said Certificates; and enacting other provisions relating to the subject. BACKGROUND On February 21, 2012, the City Council adopted Ordinance No. 2012-042 and 2012-043 directing the publication of a Notice of Intention to issue Certificates of Obligation (COs) of the City of Denton for General Government, Solid Waste, Water, Wastewater, and Electric System projects. The notices were published on February 24, 2012, and March 2, 2012, in the Denton Record Chronicle, as required by state law. The COs will be issued as a single series of bonds. Staff recommends the sale of $4,845,000 in COs for General Government, which is less than originally intended in the FY 2011-12 Capital Improvements Program (CIP). The decrease is due to lower than anticipated vehicle replacements/additions and partial funding for the Animal Care & Adoption Center, which will only include the design phase. Staff may seek approval of a Reimbursement Ordinance later in the year for the actual construction of the facility. Those COs would be issued in April 2013. Below is a listing of recommended CO funded projects for -12 CIP: 1.Vehicle Replacements/Additions $2,070,092* 2.Vehicle Replacements/Additions $ 109,908 3.Public Safety Mobile Data Computers $ 210,000* 4.Traffic Signals $ 410,000 5.Facilities Maintenance Program $1,600,000 6.Animal Care & Adoption Center (Design) $ 445,000* Total $4,845,000 *Previously authorized through a Reimbursement Ordinance. Agenda Information Sheet April 3, 2012 Page 2 Staff recommends the sale of $6,000,000 in COs for Solid Waste projects. Below is a listing of FY 2011-12 CIP: 1.Auto Side Load Truck $ 262,865* 2.Auto Side Load Truck $ 262,865* 3.Auto Side Load Truck $ 262,865* 4.Auto Side Load Truck $ 262,865* 5.Auto Side Load Truck $ 262,865* 6.Comm-Container-Equipment-Maintenance $ 200,000 7.Commercial Container Equipment/Maintenance $ 150,000 8.Cell 4AB Excavation $ 200,000 9.Front Load Truck $ 267,275* 10.Front Load Truck $ 257,275* 11.Excavator $ 492,000 12.Home Chemical Building Improvements $ 25,000 13.Landfill Permit Expansion $ 277,000 14.Rear Load Truck $ 212,530* 15.Recycling Carts Replacements $ 600,000 16.Recycling Commercial Containers $ 110,000 17.Recycling Facility Upgrades $ 16,000 18.Residential Container Equipment/Assembly $ 130,000 19.Roll-Off Truck $ 182,050* 20.Solid Waste Equipment $ 101,545 21.Leachate Recirculation $ 50,000 22.Landfill Security Fence $ 200,000 23.ELR Scada $ 300,000 24.Solid Waste Tech Research & Development $ 20,000 25.Program Development $ 200,000 26.Landfill Improvements $ 100,000 27.Ground Water Wells $ 25,000 28.Landfill Property $ 520,000 29.LFG Line Construction $ 50,000 Total $6,000,000 *Previously authorized through a Reimbursement Ordinance. Staff recommends the sale of $6,500,000 in COs for Water projects. Below is a listing of recommended CO -12 CIP: 1.2 MG Elevated Storage Robson (Water) $ 3,050,000 2.Oversize Lines (Water) $ 200,000 3.North South Water Line Phase II (Water) $ 750,000 4.Hwy 380 West Phase II (Water) $ 2,500,000 Total $ 6,500,000 Agenda Information Sheet April 3, 2012 Page 3 Staff recommends the sale of $7,850,000 in COs for Wastewater projects. Below is a listing of recommended CO -12 CIP: 1.Volvo Loader (Wastewater) $ 350,000* 2.Oversize WW Lines (Wastewater) $ 200,000 3.Cooper Creek Interceptor III (Wastewater) $ 1,100,000 4.Hwy 380 West (Wastewater) $ 2,000,000 5.Pecan Creek Interceptor II (Wastewater) $ 2,200,000 6.Hwy 380 West Phase II (Wastewater) $ 2,000,000 Total $ 7,850,000 *Previously authorized through a Reimbursement Ordinance. Staff recommends the sale of $23,580,000 in COs for Electric projects. Below is a listing of -12 CIP: 1.Automated Meter Reading (Electric) $ 2,500,000 2.Building Construction (Electric) $ 200,000 3.Communications Equipment (Electric) $ 500,000 4.Distribution Transformers (Electric) $ 500,000 5.Feeder Extension & Improvements (Electric) $ 500,000 6.New Res./Comm. Transmission Lines (Electric) $ 1,750,000 7.Distribution Substation (Electric) $ 5,800,000 8.Transmission Lines (Electric) $ 5,500,000 9.Transmission Substations (Electric) $ 5,300,000 10.Meters (Electric) $ 30,000 11.Miscellaneous NERC Compliance (Electric) $ 500,000 12.Over to Under Conversions (Electric) $ 175,000 13.Power Factor Improvements (Electric) $ 75,000 14.Street Lighting (Electric) $ 200,000 15.Tools & Equipment (Electric) $ 50,000 Total $23,580,000 Approximately $2.7 million in General Government, $2.2 million in Solid Waste and $350,000 in Wastewater projects were previously authorized through Reimbursement Ordinances. The City sells bonds in accordance with the useful life of the asset that is being acquired. For example, vehicles are typically sold with bonds that will be paid within five years. For the FY 2011-12 proposed CO issuance: $210,000 will be 3 year debt; $7,510,000 will be 5 year debt, $2,495,000 will be 10 year debt, and $38,560,000 will be 20 year debt. In addition, the 20 year debt issues will also have a 10 year call feature. The additional $550,000 is for the cost of issuance and to allow flexibility in marketing and pricing the bond sale. Since bond market conditions can change rapidly, and due to the refunding transaction that accompanies this sale, staff is recommending that the City Council approve a negotiated parameter sale for the COs. Agenda Information Sheet April 3, 2012 Page 4 By doing so, City staff will be authorized to execute the sale without additional Council approval provided that the net effective interest rate on the COs is less than 4%. Staff anticipates that the sale and pricing of the bonds will occur on or about April 10, 2012, and the City will use the RBC Capital Markets, Wells Fargo, R.W. Baird & Co., and BOSC, Inc. underwriting firms to assist in the sale the securities. Once the exact terms of the transaction are determined, staff will provide the City Council with additional information in an informal staff report. Concurrently with the sale of COs, the City anticipates the sale of approximately $42 million in General Obligation Refunding and Improvement Bonds (GOs) to fund projects approved by voters in 2005 and refund existing bonds. The refunding is contingent upon market conditions Debt policy requirements. Staff has discussed the CO and GO bond rating of AA and Fitch has rated the City as AA+. These rating reports have been included as exhibits two and three for your review. RECOMMENDATION Staff recommends approval of the ordinance. PRIOR ACTION/REVIEW (Council, Boards or Commissions) On February 14, 2012, the Audit/Finance Committee unanimously recommended approval to forward the upcoming bond issuance to the City Council for consideration. On February 21, 2012, the City Council adopted Ordinance No. 2012-042 and 2012-043 directing the publication of Notice of Intention to Issue Certificates of Obligation of the City of Denton totaling $49,325,000. EXHIBITS 1.Preliminary Official Statement 2. 3.Fitch Bond Rating Report 4.Ordinance Respectfully submitted: Bryan Langley CFO and Director of Strategic Services Prepared By: Antonio Puente, Jr. Assistant Director of Finance PRELIMINARY OFFICIAL STATEMENT Ratings: Fitch: "AA+" Dated April __, 2012 S&P: "AA" (see "Other Information - NEW ISSUE - Book-Entry-Only Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $37,900,000* CITY OF DENTON, TEXAS (Denton County) GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2012 Dated Date: April 1, 2012 Due: February 15, as shown below Interest Accrues from Delivery Date PT . . . Interest on the $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, Series 2012 (the "Bonds") will accrue AYMENT ERMS from the delivery date (the "Delivery Date"), will be payable February 15 and August 15 of each year, commencing August 15, 2012, until maturity or prior redemption, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Obligations - Book-Entry-Only System" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). AI . . . The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") including particularly Texas UTHORITY FOR SSUANCE Government Code, Chapters 1207, 1371 and 1331, as amended, and are direct obligations of the City of Denton, Texas (the "City"), payable from an annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, as provided in the Bond Ordinance (defined herein) authorizing the Bonds (see "The Obligations - Authority for Issuance" and "The Obligations – Security and Source of Payment"). P . . . Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of the City described on Schedule I attached hereto (the URPOSE "Refunded Obligations") for debt service savings and (ii) for various street improvements and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. (1) MATURITY SCHEDULE* CUSIP Prefix: 248866 PrincipalInterestInitialCUSIPPrincipalInterestInitialCUSIP (1)(1) AmountMaturityRateYieldSuffixAmountMaturityRateYieldSuffix $ 20134,440,000205,000$ 2023 700,00020141,110,0002024 3,220,0002015175,0002025 3,335,0002016180,0002026 3,475,0002017185,0002027 3,660,0002018190,0002028 3,790,0002019195,0002029 3,965,0002020205,0002030 4,135,0002021210,0002031 4,315,0002022210,0002032 _______________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the City nor the Financial Advisor shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. R . . . The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2023, in whole or in part in principal EDEMPTION amounts of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. SI . . . The Bonds are being offered by the City concurrently with the "City of Denton Certificates of Obligation, Series 2012" (the "Certificates"), EPARATE SSUES under a common Official Statement, and such Bonds and Certificates are hereinafter sometimes referred to collectively as the "Obligations." The Bonds and Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and other features. L . . . The Bonds are offered for delivery when, as and if issued and received by the Initial Purchaser of the Bonds subject to the approving opinion of the EGALITY Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel for the Underwriters. . . . It is expected that the Bonds will be available for delivery through The Depository Trust Company on May __, 2012. D ELIVERY RBCCM WFS APITALARKETSELLSARGOECURITIES BOSC,I. B NCAIRD A subsidiary of BOK Financial Corporation ______________ * Preliminary, subject to change. THIS PAGE LEFT BLANK INTENTIONALLY 2 PRELIMINARY OFFICIAL STATEMENT Ratings: Fitch: "AA+" Dated April __, 2012 S&P: "AA" (see "Other Information - NEW ISSUE - Book-Entry-Only Ratings" herein) In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. THE CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $46,530,000* CITY OF DENTON, TEXAS (Denton County) CERTIFICATES OF OBLIGATION, SERIES 2012 Dated Date: April 1, 2012 Due: February 15, as shown below Interest Accrues from Delivery Date PT . . . Interest on the $46,530,000* City of Denton Certificates of Obligation, Series 2012 (the "Certificates") will accrue from the delivery date (the "Delivery AYMENT ERMS Date"), will be payable February 15 and August 15 of each year, commencing February 15, 2013, until maturity or prior redemption, and will be calculated on the basis of a 360- day year consisting of twelve 30-day months. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral No physical delivery of the Certificates will be made to the beneficial owners thereof. multiples thereof within a maturity. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "The Obligations - Book-Entry-Only System" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). I A . . . The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") particularly Subchapter C of Chapter UTHORITY FOR SSUANCE 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and Texas Government Code, Chapter 1371, as amended, and constitute direct obligations of the City of Denton, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge of surplus net revenues of the City’s Utility System not in excess of $1,000, as provided in the Certificate Ordinance (defined herein) authorizing the Certificates (see "The Obligations - Authority for Issuance"). P . . . Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping URPOSE additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. (1) MATURITY SCHEDULE* CUSIP Prefix: 248866 PrincipalInterestCUSIPPrincipalInterestCUSIP (1)(1) AmountMaturityRateYieldSuffixAmountMaturityRateYieldSuffix $ 20131,805,0002,495,000$ 2023 3,115,00020141,880,0002024 3,175,00020151,960,0002025 3,170,00020162,035,0002026 3,280,00020172,125,0002027 1,785,00020182,205,0002028 1,845,00020192,300,0002029 1,900,00020202,395,0002030 1,960,00020212,485,0002031 2,025,00020222,590,0002032 _______________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the City nor Financial Advisor shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. R . . . The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2023, in whole or in part in principal amounts EDEMPTION of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. SI . . . The Certificates are being offered by the City concurrently with the "City of Denton General Obligation Refunding and Improvement Bonds, Series 2012" EPARATE SSUES (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligations." The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and other features. L . . . The Certificates are offered for delivery when, as and if issued and received by the Initial Purchaser of the Certificates subject to the approving opinion of the EGALITY Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel for the Underwriters. D . . . It is expected that the Certificates will be available for delivery through The Depository Trust Company on May __, 2012. ELIVERY RBCCM WFS APITALARKETSELLSARGOECURITIES BOSC,I. B NCAIRD A subsidiary of BOK Financial Corporation ______________ * Preliminary, subject to change. THIS PAGE LEFT BLANK INTENTIONALLY 4 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), this document constitutes an Official Statement of the City with respect to the Obligations that has been "deemed final" by the City as of its date except for the omission of no more than the information permitted by the Rule. This Official Statement, which includes the cover page, Schedule and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon. The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as a representation, promise or guarantee of the Financial Advisor. This Official Statement includes descriptions and summaries of certain events, matters and documents. Such descriptions and summaries do not purport to be complete and all such descriptions, summaries and references thereto are qualified in their entirety by reference to this Official Statement in its entirety and to each such document, copies of which may be obtained from the Financial Advisor. Any statements made in this Official Statement or the appendices hereto involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such opinions or estimates will be realized. The Underwriters have reviewed the information in this Official Statement pursuant to their responsibility to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein. See "CONTINUING DISCLOSURE OF INFORMATION" for a description of the City's undertaking to provide certain information on a continuing basis. NONE OF THE CITY, ITS FINANCIAL ADVISOR, OR THE UNDERWRITERS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY ONLY SYSTEM. IN CONNECTION WITH THE OFFERING OF THE OBLIGATIONS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE OBLIGATIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAW OF THE STATES IN WHICH THE OBLIGATIONS HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES, IF ANY, CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. THE OBLIGATIONS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENT. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY ..................................................... 6 INVESTMENTS .......................................................................................... 33 T14-CI ................................................... 34 ABLEURRENT NVESTMENTS CITY OFFICIALS, STAFF AND CONSULTANTS ................................. 8 EO ............................................................................. 8 TAX MATTERS .......................................................................................... 35 LECTED FFICIALS SAS ..................................................... 8 ELECTED DMINISTRATIVE TAFF CONTINUING DISCLOSURE OF INFORMATION ............................ 37 CA ............................................................ 8 ONSULTANTS AND DVISORS OTHER INFORMATION .......................................................................... 38 INTRODUCTION ......................................................................................... 9 R ............................................................................................. 38 ATINGS PLAN OF FINANCING ............................................................................... 9 L ........................................................................................ 38 ITIGATION RQOS ...... 38 EGISTRATION AND UALIFICATION OF BLIGATIONS FOR ALE THE OBLIGATIONS ................................................................................. 11 LIESPF EGALNVESTMENTS AND LIGIBILITY TO ECUREUBLIC UNDS IN T .................................................................................... 38 EXAS TAX INFORMATION ................................................................................ 17 LO ................................................................................ 39 EGALPINIONS 1-V,EGO T ABLEALUATIONXEMPTIONS AND ENERALBLIGATION AFDOI ....... 39 UTHENTICITY OF INANCIAL ATA AND THER NFORMATION D ..................................................................................... 22 EBT FA .......................................................................... 39 INANCIAL DVISOR T2-TAVC ............. 23 ABLEAXABLE SSESSEDALUATIONS BY ATEGORY VAM ERIFICATION OF RITHMETICAL AND ATHEMATICAL T3-VGOD ABLEALUATION AND ENERALBLIGATION EBT C ..................................................................... 40 OMPUTATIONS H ................................................................................ 24 ISTORY U .................................................................................. 40 NDERWRITING T4-TR,LCH ................. 24 ABLEAX ATEEVY AND OLLECTION ISTORY F-LSD ................................ 40 ORWARDOOKING TATEMENTS ISCLAIMER T5-TLT ............................................... 24 ABLEENARGEST AXPAYERS M ................................................................................ 41 ISCELLANEOUS T6-EOTD ............................. 25 ABLESTIMATED VERLAPPING AX EBT SCHEDULE OF REFUNDED OBLIGATIONS ......................... Schedule I DEBT INFORMATION ............................................................................. 23 T7-GODSR .... 23 ABLEENERALBLIGATION EBT ERVICE EQUIREMENTS APPENDICES T8-ISFBP ....... 27 ABLENTEREST AND INKING UNDUDGET ROJECTION GIRC ................................ A ENERALNFORMATION EGARDING THE ITY T9-CS-SD ..................... 27 ABLEOMPUTATION OF ELFUPPORTING EBT EFAFR .......................... B XCERPTS ROM THE NNUALINANCIAL EPORT T10-ABUGO ABLEUTHORIZED UT NISSUED ENERALBLIGATION FBC'O .............................................. C ORMS OF ONDOUNSELSPINIONS B ................................................................................... 27 ONDS T11-OO ..................................................... 28 The cover page hereof, this page, the appendices included herein and any ABLETHER BLIGATIONS addenda, supplement or amendment hereto, are part of the Official FINANCIAL INFORMATION ................................................................. 30 Statement. T12-CNA ............................................... 30 ABLEHANGES IN ET SSETS T12A-GFRE ABLEENERALUNDEVENUES AND XPENDITURE H ............................................................................... 31 ISTORY T13-MSTH ................................... 32 ABLEUNICIPAL ALESAX ISTORY 5 OFFICIALSTATEMENTSUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds and Certificates to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. TC ..................................... The City of Denton (the "City") is a political subdivision and municipal corporation of the HEITY State, located in Denton County, Texas. The City covers approximately 101.15 square miles (see "Introduction - Description of the City"). TB .................................. The $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, HEONDS Series 2012 are to mature on February 15 in the years 2013 through 2032 (see "The Obligations - Description of the Obligations"). C T ..................... The $46,530,000* City of Denton Certificates of Obligation, Series 2012 are to mature on HEERTIFICATES February 15 in the years 2013 through 2032 (see "The Obligations - Description of the Obligations"). PIBonds .............. Interest on the accrues from the Delivery Date (defined herein) and is payable August AYMENT OF NTEREST 15, 2012 and each February 15 and August 15 thereafter until maturity or prior redemption. Certificates Interest on the accrues from the Delivery Date and is payable February 15, 2013 and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Obligations - Description of the Obligations" and "The Obligations - Optional Redemption"). AI .......... The Bonds are issued pursuant to the Constitution and general laws of the State, including UTHORITY FOR SSUANCE particularly Texas Government Code, Chapters 1207, 1371 and 1331, as amended, and an ordinance (the "Authorizing Bond Ordinance") of the City in which the Council delegated to each of the City Manager and the Assistant City Manager authority to complete the sale of the Bonds. The terms of the sale will be included in a "Pricing Certificate," which will complete the sale of the Bonds (the Authorizing Bond Ordinance and the Pricing Certificate for the Bonds are jointly referred to as the "Bond Ordinance") (see "The Obligations - Authority for Issuance"). The Certificates are issued pursuant to the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and Texas Government Code, Chapter 1371, as amended, and an ordinance (the "Authorizing Certificate Ordinance") of the City in which the Council delegated to each of the City Manager and the Assistant City Manager authority to complete the sale of the Certificates. The terms of the sale will be included in a "Pricing Certificate," which will complete the sale of the Certificates (the Authorizing Certificate Ordinance and the Pricing Certificate for the Certificates are jointly referred to as the "Certificate Ordinance") (see "The Obligations - Authority for Issuance"). SB .......... The Bonds constitute direct and voted obligations of the City, payable from a direct annual ad ECURITY FOR THE ONDS valorem tax levied, within the limits prescribed by law, on all taxable property located within the City (see "The Obligations - Security and Source of Payment"). S ECURITY FOR THE C .............................. The Certificates constitute direct obligations of the City, payable from a combination of (i) a ERTIFICATES direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City's Utility System (see "The Obligations - Security and Source of Payment"). R ............................... The City reserves the right, at its option, to redeem Bonds and Certificates, as the case may EDEMPTION be, having stated maturities on and after February 15, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). TE ............................ In the opinion of Bond Counsel, the interest on the Bonds and Certificates will be excludable AXXEMPTION from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. _______________ * Preliminary, subject to change. 6 UP ....................... Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of SE OF ROCEEDS the City described on Schedule I attached hereto (the "Refunded Obligations") for debt service savings, and (ii) for various street improvements, and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. R ...................................... The Obligations and the presently outstanding general obligation debt of the City are rated ATINGS "AA+" by Fitch Ratings ("Fitch") and "AA" by Standard & Poor's Rating Services, a Standard & Poor's Financial Services LLC business ("S&P"). B-E-O S ...... The definitive Obligations will be initially registered and delivered only to Cede & Co., the OOKNTRYNLYYSTEM nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "The Obligations - Book-Entry-Only System"). PR ...................... The City has never defaulted on the payment of its tax-supported indebtedness. AYMENTECORD SFI ELECTEDINANCIAL NFORMATION NetRatio Net FiscalTaxableTax DebtPer CapitaTax Debt to Year TaxableAssessedOutstandingNet FundedTaxable% of EndedEstimatedAssessedValuationat End ofTaxAssessedTotal Tax (3)(5) 9/30PopulationValuation Per CapitaFiscal Year DebtValuationCollections (1) 2008108,980 6,089,499,775$ 55,877 $ 129,439,594$ 1,188 $ 2.13%99.44% (1) 2009111,160 6,291,359,11256,597 122,835,0001,105 1.95%99.40% (2) 2010113,383 6,327,909,02255,810 119,862,6001,057 1.89%98.99% (1) 2011114,517 6,230,117,95854,403 116,165,6501,014 1.86%98.99% (4)(6)(7) (1)(6)(6) 2012115,662 6,412,375,004 115,142,90055,441 1.80%86.18%996 _______________ (1)Source: City Officials. (2)Source: US Census. (3)Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. Source: Denton Central Appraisal District as of July 21, 2011. (4)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (5)Excludes self-supported general obligation debt. (6)Projected. Includes a portion of the Bonds and the Certificates. Excludes the Refunded Obligations. Preliminary, subject to change. (7)Collections for part year only, through January 31, 2012. 7 CITYOFFICIALS,STAFFANDCONSULTANTS EO LECTEDFFICIALS Term City CouncilExpires Mark BurroughsMay, 2012 Mayor Pete KampMay, 2012 Mayor Pro Tem, At Large Place 5 James KingMay, 2012 Councilmember, At Large Place 6 Kevin RodenMay, 2013 Councilmember, District 1 Dalton GregoryMay, 2013 Councilmember, District 2 Jim EngelbrechtMay, 2013 Councilmember, District 3 Chris WattsMay, 2013 Councilmember, District 4 SAS ELECTEDDMINISTRATIVE TAFF NamePosition George C. CampbellCity Manager Howard MartinAssistant City Manager Jon FortuneAssistant City Manager Fred GreeneAssistant City Manager Bryan LangleyChief Financial Officer Jennifer K. WaltersCity Secretary Anita BurgessCity Attorney CA ONSULTANTS AND DVISORS Auditors ......................................................................................................................................................................... Weaver, LLP Dallas, Texas Bond Counsel ............................................................................................................................. McCall, Parkhurst & Horton L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Fort Worth, Texas For additional information regarding the City, please contact: Bryan LangleyDavid Medanich Chief Financial OfficerLaura Alexander City of DentonFirst Southwest Company 215 E. McKinney Streetor777 Main Street, Suite 1200 Denton, Texas 76201Fort Worth, Texas 76102 (940) 349-8224(817) 332-9710 8 OFFICIAL STATEMENT RELATING TO CITY OF DENTON, TEXAS $37,900,000*$46,530,000* GENERAL OBLIGATION REFUNDING ANDCERTIFICATES OF OBLIGATION, SERIES 2012 IMPROVEMENT BONDS, SERIES 2012 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, Series 2012 (the "Bonds") and $46,530,000* City of Denton Certificates of Obligation, Series 2012 (the "Certificates"). The Bonds and the Certificates (collectively the "Obligations") are separate and distinct securities offerings being authorized for issuance under separate ordinances (the "Bond Ordinance" and the "Certificate Ordinance", respectively, each as defined below, and collectively the "Ordinances") to be adopted by the City Council of the City, but are being offered and sold pursuant to a common Official Statement, and while the Bonds and Certificates share certain common attributes, each issue is separate and apart from the other and should be reviewed and analyzed independently, including the kind and type of obligation being issued, its terms of payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and the covenants and agreements made with respect thereto. The City Council adopted an ordinance on April 3, 2012 authorizing the issuance of the Bonds (the "Authorizing Bond Ordinance"). In the Authorizing Bond Ordinance, as permitted by the provisions of Chapters 1207 and 1371, Texas Government Code, as amended, the City Council delegated the authority to each of the City Manager and the Assistant City Manager to establish the terms and details of the Bonds and to effect the sale of the Bonds pursuant to a "Pricing Certificate" (the Authorizing Bond Ordinance and the Pricing Certificate for the Bonds are jointly referred to as the "Bond Ordinance"). The City Council adopted an ordinance on April 3, 2012 authorizing the issuance of the Certificates (the "Authorizing Certificate Ordinance"). In the Authorizing Certificate Ordinance, as permitted by the provisions of Chapters 1371, Texas Government Code, as amended, the City Council delegated the authority to each of the City Manager and the Assistant City Manager to establish the terms and details of the Certificates and to effect the sale of the Certificates pursuant to a "Pricing Certificate" (the Authorizing Certificate Ordinance and the Pricing Certificate for the Certificates are jointly referred to as the "Certificate Ordinance"). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the respective Ordinance, except as otherwise indicated herein. There follows in this Official Statement descriptions of the Obligations and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas, Texas. DC ... The City of Denton, Texas (the "City") is a political subdivision located in Denton County operating ESCRIPTION OF THE ITY as a home-rule city under the laws of the State of Texas and a charter approved by the voters in 1959. The City operates under the Council/Manager form of government where the Mayor and six Councilmembers are elected for staggered two-year terms. The City Council formulates operating policy for the City while the City Manager is the chief administrative officer. The City is approximately 101.15 square miles in area. PLANOFFINANCING P ...Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of the City described on URPOSE Schedule I attached hereto (the "Refunded Obligations") for debt service savings and (ii) for various street improvements and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. _______________ * Preliminary, subject to change. 9 RO ...Proceeds from the sale of the Bonds will be used in part to refund certain outstanding obligations of EFUNDEDBLIGATIONS the City described on Schedule I attached hereto (the "Refunded Obligations"). The principal and interest due on the Refunded Obligations are to be paid on the scheduled interest payment dates and redemption dates of such Refunded Obligations as shown in Schedule I, from funds to be deposited pursuant to an escrow agreement with respect to the Bonds (the "Escrow Agreement") between the City and The Bank of New York Mellon Trust Company, N.A. (the "Escrow Agent"). The Bond Ordinance provides that from the proceeds of the sale of the Bonds received from the Initial Purchaser of the Bonds, together with other funds of the City, if any, the City will deposit with the Escrow Agent an amount which, together with the Federal Securities (defined below) purchased with a portion of the Bond proceeds and the interest to be earned on such Federal Securities, will be sufficient to accomplish the discharge and final payment of the Refunded Obligations on their respective redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. Grant Thornton LLP, certified public accountants, a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Initial Purchaser of the Bonds thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Obligations. Such maturing principal of and interest on the Federal Securities will not be available to pay the Bonds (see "Other Information – Verification of Arithmetical and Mathematical Computations"). By deposit of the Federal Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all the Refunded Obligations in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Grant Thornton LLP, certified public accountants, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed as being outstanding obligations of the City payable from taxes or revenues received by the City, as the case may be, or for the purpose of applying any limitation on the issuance of debt. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason the cash balance on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payment. SUP . . . The proceeds from the sale of the Obligations, together with other City funds, if any, will OURCES AND SES OF ROCEEDS be applied as follows: Sources of FundsThe BondsThe Certificates Par Amount of Bonds-$ -$ Original Issue Premium- - Transfer from Prior Issue Debt Service Funds- - Transfer from Utility System Debt Service Reserve Fund- - Total Sources of Funds-$ -$ Uses of Funds Deposit to Escrow Fund-$ -$ Original Issue Discount- - Deposit to Construction Fund- - Cost of Issuance (1) -- Total Uses of Funds-$ -$ ________________ (1) Including Underwriters' Discount. 10 THEOBLIGATIONS DO . . . The Obligations are dated April 1, 2012 (the "Dated Date"), and mature on February 15 ESCRIPTION OF THE BLIGATIONS in each of the years and in the amounts shown on the cover page and page 3 hereof. Interest will accrue from the date of initial delivery thereof (the "Delivery Date"), will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on August 15 and February 15 of each year, commencing August 15, 2012 for the Bonds and February 15, 2013 for the Certificates, until maturity or prior redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of No physical delivery of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "The Obligations - Book-Entry-Only System" herein. AI . . . The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, UTHORITY FOR SSUANCE particularly Chapters 1207, 1371 and 1331, Texas Government Code, as amended, and the Bond Ordinance. The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and Texas Government Code, Chapter 1371, as amended, and the Certificate Ordinance. SSP . . . ECURITY AND OURCE OF AYMENT The Bonds . . . The Bonds constitute direct and voted obligations of the City and the principal thereof and interest thereon are payable from an annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City, as provided in the Bond Ordinance. The Certificates . . . The Certificates constitute direct obligations of the City, payable from a combination of (i) a direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City's Utility System (consisting of the electric system and the waterworks and sewer system). TRL . . . All taxable property within the City is subject to the assessment, levy and collection by the City of a AXATEIMITATION continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt, including the Obligations, within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all general obligation debt, based on 90% tax collection factor. OR . . . The City reserves the right, at its option, to redeem the Obligations having stated maturities on and PTIONAL EDEMPTION after February 15, 2023 in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2022 or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds or Certificates are to be redeemed, the City may select the maturities of Bonds or Certificates, as the case may be, to be redeemed. If less than all the Bonds or Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds or Certificates, as the case may be, are in Book-Entry-Only form) shall determine by lot the Bonds or Certificates, or portions thereof, within such maturity to be redeemed. If a Bond or Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond or Certificate (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. With respect to any optional redemption of the Bonds or Certificates, as the case may be, unless certain prerequisites to such redemption required by the respective Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds or Certificates, as the case may be, to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption will, at the option of the City, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the City will not redeem such Bonds or Certificates, as the case may be, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that the Bonds or Certificates, as the case may be, have not been redeemed. 11 NR . . . Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of OTICE OF EDEMPTION redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. IF AN OBLIGATION (OR ANY PORTION OF ITS PRINCIPAL SUM) SHALL HAVE BEEN DULY CALLED FOR REDEMPTION AND NOTICE OF SUCH REDEMPTION DULY GIVEN, THEN UPON THE REDEMPTION DATE SUCH OBLIGATION (OR THE PORTION OF ITS PRINCIPAL SUM TO BE REDEEMED) SHALL BECOME DUE AND PAYABLE, AND, IF MONIES FOR THE PAYMENT OF THE REDEMPTION PRICE ARE HELD FOR THE PURPOSE OF SUCH PAYMENT BY THE PAYING AGENT/REGISTRAR AND ALL OTHER CONDITIONS TO REDEMPTION ARE SATISFIED, INTEREST SHALL CEASE TO ACCRUE AND BE PAYABLE FROM AND AFTER THE REDEMPTION DATE ON THE PRINCIPAL AMOUNT REDEEMED. D . . . The Ordinances provide that any Obligation and the interest thereon shall be deemed to be paid, retired, and no EFEASANCE longer outstanding (a "Defeased Obligation") within the meaning of such Ordinance when payment of the principal of such Obligation, plus interest thereon to the due date either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government 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 provide for such payment, and when proper arrangements have been made by the City with the Paying Agent/Registrar for the payment of its services until all Defeased Obligations shall have become due and payable. At such time as an Obligation shall be deemed to be a Defeased Obligation hereunder, as aforesaid, such Obligation and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in the Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/Registrar which is not required for the payment of the Obligations and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City, or deposited as directed in writing to the City. The Ordinances provide that "Government Obligations" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the City Council approves such defeasance, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the City Council approves such defeasance, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (d) any other then authorized securities or obligations under applicable Texas state law that may be used to defease obligations such as the Obligations. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Obligations. Because the Ordinances do not contractually limit such investments, registered owners will be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that any particular rating for U.S. Treasury securities used as Government Obligations or the rating for any other Government Obligations will be maintained at any particular rating category. Upon such deposit as described above, such Defeased Obligations shall no longer be regarded to be outstanding obligations payable from ad valorem taxes levied by the City or from the other revenues pledged to their payment in the Ordinances, but will be payable only from the funds and Government Obligations deposited in escrow and will not be considered debt of the City for any purpose. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; and (ii) gives notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and financial arrangements; (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. 12 B-E-OSThis section describes how ownership of the Obligations is to be transferred and how the . . . OOKNTRYNLYYSTEM principal of, premium, if any, and interest on the Obligations are to be paid to and accredited by DTC while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Obligations in the aggregate principal amount thereof and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor’s rating of "AA+". The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owners entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC’s records reflect only the identity of the Direct Participant to whose account such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 13 Redemption notices shall be sent to DTC. If less than all of the Obligations within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Obligations will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar on payable dates in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City and the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Obligation certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Initial Purchaser. Effect of Termination of Book-Entry-Only System In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, printed Obligations will be issued to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "The Obligations - Transfer, Exchange and Registration" below. PA/R . . . The initial Paying Agent/Registrar for the Bonds and the Certificates is The Bank of New York AYING GENTEGISTRAR Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds and Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds and Certificates. Upon any change in the Paying Agent/Registrar for the Bonds and Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds and Certificates, as applicable, by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of the Bonds and Certificates is payable to the registered holder appearing on the registration books of the Paying Agent/Registrar (the "Registered Owner") at the designated corporate trust office of the Paying Agent/Registrar upon surrender of the Bonds and Certificates for payment. Interest on the Bonds and Certificates is payable to the Register Owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (identified below) and such interest shall be paid by the Paying Agent/Registrar by check mailed, first class postage prepaid, to the Register Owner or by such other arrangement, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the Registered Owner. If the date for the payment of the principal of or interest on the Bonds and Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the city where the designated corporate office of the Paying Agent/Registrar is located is authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. 14 T,ER . . . In the event the Book-Entry-Only System should be discontinued, printed RANSFERXCHANGE AND EGISTRATION Obligations will be delivered to the Registered Owners and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed Obligations to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the Registered Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new Registered Owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the Registered Owner or assignee of the Registered Owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the Registered Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "The Obligations—Book-Entry-Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the Registered Owner of the uncalled balance of an Obligation. RDIP . . . The record date ("Record Date") for the interest payable on the Bonds and ECORDATE FOR NTERESTAYMENT Certificates on any interest payment date means the close of business on the last business day of the month next preceding such interest payment date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Registered Owner of a Bond and Certificate appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. A . . . In each Ordinance, the City has reserved the right to amend the Ordinance without the consent of any holder MENDMENTS of the respective Obligation for the purpose of amending or supplementing the Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the City, do not materially adversely affect the interests of the holders. Each Ordinance further provides that the holders of the Bonds or Certificates, as applicable, aggregating in principal amount a majority of the outstanding Bonds or Certificates, as the case may be, shall have the right from time to time to approve any amendment not described above to the applicable Ordinance if it is deemed necessary or desirable by the City; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Bonds or Certificates so affected, no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Bonds or Certificates; (ii) reducing the rate of interest borne by any of the outstanding Bonds or Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Bonds or Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Bonds or Certificates, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Bonds or Certificates necessary for consent to such amendment. Reference is made to the Ordinances for further provisions relating to the amendment thereof. R . . . Each Ordinance establishes specific events of default with respect to the respective series of Obligations. If the EMEDIES City defaults in the payment of the principal of or interest on the Bonds or Certificates when due or the City defaults in the observance or performance of any of the covenants, conditions, or obligations of the City, the failure to perform which materially, adversely affects the rights of the owners thereof, including but not limited to, their prospect or ability to be repaid in accordance with the respective Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, each Ordinance provides that any registered owner of a respective Obligation is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought if there is no other available remedy at law to compel performance of the respective Obligations or Ordinance and the City's obligations are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the appointment of a trustee to 15 represent the interest of the owners of the respective Obligations upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. The Texas Supreme Court has ruled in Tooke v. City of Mexia 197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is unclear whether the Texas legislature has effectively waived the City’s sovereign immunity from a suit for money damages, owners of Obligations may not be able to bring such a suit against the City for breach of the Obligations or Ordinance covenants in the absence of City action. Chapter 1371, Texas Government Code ("Chapter 1371"), which pertains to the issuance of public securities by issuers such as the City, permits the City to waive sovereign immunity in the proceedings authorizing its debt, but in connection with the issuance of the Obligations, the City has not waived sovereign immunity. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City's property. Further, the Registered Owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds or the Certificates. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligationholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Obligations are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Initially, the only Registered Owner of the Bonds and Certificates will be The Depository Trust Company. See "The Obligations - Book-Entry-Only System" herein for a description of the duties of DTC with regard to ownership of the Bonds and Certificates. TRTPLBI HEEMAINDER OF HIS AGEEFTLANKNTENTIONALLY 16 TAXINFORMATION AVTL . . . The appraisal of property within the City is the responsibility of the Denton Central Appraisal District DALOREMAXAW (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under V.T.C.A., Title I, Tax Code, as amended (the "Property Tax Code") to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount that would not exceed the lesser of (1) the market value of the property for the most recent tax year that the market value was determined by the appraisal office or (2) the sum of (a) 10% of the property’s appraised value in the preceding tax year, plus (b) the property’s appraised value in the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of sixteen members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to less than $3,000 of the market value. The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (ii) the surviving spouse was at least 55 years of age at the time of the death of the individual’s spouse and (iii) the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse. In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. Under Article VIII and State law, the governing body of a county, municipality or junior college district may provide for a freeze on total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older above the amount of tax imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, the total amount of taxes imposed on such homestead cannot be increased except for improvements (other than maintenance, repairs or improvements required to comply with governmental requirements) and such freeze is transferable to a different residence homestead. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual’s spouse. Once established such freeze cannot be repealed or rescinded. 17 State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children; provided, however, that beginning in the 2009 tax year, a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100 percent disability compensation due to a service-connected disability and a rating of 100 percent disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran’s residence homestead. In addition, effective January 1, 2012, and subject to certain conditions, surviving spouses of a deceased veteran who had received a disability rating of 100% will be entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse until such surviving spouse remarries. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property provided official action to tax the same was taken before April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides for the exemption from taxation of "goods-in-transit." "Goods-in- transit" is defined by Section 11.253 of the Property Tax Code, which is effective for tax years 2008 and thereafter, as personal property acquired or imported into Texas and transported to another location in the State or outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. Section 11.253 permits local governmental entities, on a local option basis, to take official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax "goods-in-transit" during the following tax year. A taxpayer may only receive either the freeport exemption or the "goods-in-transit" exemption for items of personal property. The City or Denton County may create one or more tax increment financing districts ("TIF") within the City or Denton County, as applicable, and freeze the taxable values of property in the TIF at the value at the time of its creation. Other overlapping taxing units levying taxes in the TIF may agree to contribute all or part of future ad valorem taxes levied and collected against the value of property in the TIF in excess of the "frozen values" to pay or finance the costs of certain public improvements in the TIF. Taxes levied by the City against the values of real property in the TIF in excess of the "frozen" value are not available for general city use but are restricted to paying or financing "project costs" within the TIF. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City is also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City. In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes, however no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City. ETRRTR . . . Under the current Property Tax Code a governing body of a taxing unit is FFECTIVE AXATE AND OLLBACKAXATE required to adopt its annual tax rate per $100 taxable value for the unit before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the lower of the effective tax rate or the rollback tax rate until it has held two public hearings on the proposed increase following notice to the taxpayers and otherwise complied with the Property Tax Code. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. 18 "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PATP . . . Property within the City is generally assessed as of January 1 of each year. ROPERTYSSESSMENT AND AXAYMENT Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PI . . . Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: ENALTIES AND NTEREST Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest accrues at a rate of one percent (1%) for each month or portion of a month the tax remains unpaid. A delinquent tax continues to incur the penalty interest as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest is to compensate the taxing unit for revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CATC . . . The City grants an exemption to market value of the residence homestead of persons 65 ITY PPLICATION OF AXODE years of age or older of $40,000 and has indicated a desire to increase the Over-65 exemption by an additional $5,000 each year in 2013-2014 until the exemption amount reaches $50,000. Disabled taxpayers also receive a $10,000 exemption. The City grants an additional one-half of one percent, or a minimum of $5,000 exemption of the market value of residence homesteads. See Table 1 for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property. Denton County began collecting taxes for the City during the fiscal year 2006-07. The City does not allow split payments, and discounts are not allowed. 19 The City does not tax freeport property. The City collects the additional one-half cent sales tax for reduction of ad valorem taxes. The City does tax "goods-in-transit". The City has not adopted the tax freeze for citizens who are disabled or are 65 years of age or older. The City has adopted a tax abatement policy. The City participates in one tax increment reinvestment zone, which was created in 2010. TIF . . . The City created Tax Increment Reinvestment Zone Number One (known as the Downtown AXNCREMENTINANCING TIF) in 2010. The 2011 taxable assessed valuation increase for the Downtown TIF was $2,300,954 and resulted in approximately $15,871 in ad valorem revenue, which is reported in the City’s Downtown Tax Increment Financing Fund for the FY 2011-12 Adopted Budget. TAP . . . The City has adopted a tax abatement policy. In 1990, the City council adopted a resolution AXBATEMENTOLICY setting guidelines and criteria for granting abatements in reinvestment zones created within the City. These guidelines specifically note that incentives are limited to companies which create new wealth and do not adversely affect existing businesses operating within the City. The City Council approved the following tax abatement agreements: In 2004, a 35% tax abatement for a term of five years was granted to Fastenal Company for their 200,000 square foot, $5 million distribution center. The project was delayed but completed in 2008 at an estimated valuation of $15 million. The agreement will terminate in 2013. In 2007, a 100% tax abatement for a term of up to seven years was granted to Aldi Foods for their 500,000 square foot $52 million distribution center. The abatement amount is based on the cost incurred by Aldi to construct a road to their site. The project was completed in 2009 and the agreement will terminate in 2016. In 2010, a 65% tax abatement agreement for a term of five years was granted to Target Corporation for its 400,000 square foot frozen and refrigerated food distribution center. Target broke ground on the project in 2011 and plans a late 2012 or early 2013 opening. In 2011, a 40% tax abatement agreement for a term of five years was granted to Peerless Manufacturing for its 80,000 square foot, $16 million, manufacturing facility. Peerless plans to break ground in late 2012 or 2013. Peerless is an existing Denton business who will consolidate other manufacturing operations to Denton. The agreement will terminate five years from the opening of the facility. C380A . . . The City has also entered into Chapter 380 agreements. Each agreement is based on the HAPTERGREEMENTS project’s contribution in either sales or property tax revenue. The City Council approved the following Chapter 380 agreements: In 2001, an agreement was approved for the 450,000 square foot, $50 million Denton Crossing retail center. The grantee receives one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. The project was completed and the Chapter 380 Grant was initiated in 2005. The agreement will terminate in 2019. In 2003, an agreement was approved for Sally Beauty Company for their new international headquarters valued at over $29 million. The company receives a grant equal to 40% of the property tax paid on the new facility and equipment for a period of ten years. The agreement will terminate in 2014. In 2004, an agreement was approved for Teasley Partners for an urban style mixed-use development. The grantee may receive one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. The project has not been completed. Although a new hotel and some residential units have been completed, no qualifying retail has been constructed. In 2004, an agreement was approved for Windjammer Ltd for Unicorn Lake, an urban style mixed-use development. The grantee will receive one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. Although the project is still under development, the grantee has satisfied the thresholds established in the agreement. The grant payments were initiated in December 2009. The agreement will terminate in 2023. 20 In 2007, an agreement was approved for Allegiance Hillview for the Rayzor Ranch mixed-use development. The 400 acre project will have over one million square feet of retail and will be built in two phases. The agreement provides a varying rate of sales tax reimbursement based on public improvement costs, which include the widening of a state highway that bisects the project. The grantee will receive a maximum of $20 million over a 15 year term for phase one and a maximum of $42 million over a term of 20 years for phase two. Approximately 405,000 square feet of retail in phase one has been completed, with Sam's and Wal-Mart opening in Fall 2010. Future retail include a Kohl’s Department Store. The developers plan to begin construction on the Town Center in the fourth quarter of 2012. In 2008, an agreement was approved for the expansion of a jewelry manufacturing plant operated by Josten’s, a manufacturer of high school and college class rings. The grant is based on 75% of the new property tax revenue generated by the expansion for a term of seven years. The project was completed and the agreement will terminate in 2015. In 2010, an agreement was approved for Grand Mesa, contractor for Schlumberger, equal to 50% of new property tax revenue generated for their 150,000 square foot regional maintenance facility. The term of the agreement is seven years and will terminate in 2017. In 2011, an agreement was approved for a major renovation of the Golden Triangle Mall. A threshold of a minimum $45 million must be invested into the property for the new owners to receive a 50% share of the sales tax resulting from the renovations. The agreement allows Golden Triangle Mall until October 1, 2014 to reach their investment threshold. The term of the agreement will terminate in 20 years. AP . . . In 2010 the City conducted annexation proceedings for fifteen (15) areas within its extraterritorial NNEXATION LANS jurisdiction (ETJ) totaling approximately 7,494 acres. Approximately 3,377 acres of this total acreage were immediately annexed on May 4, 2010. The remaining 4,117 acres were given 5-year Development Agreements in accordance with Section 43.035 of the Texas Local Government Code (Tx.LGC). This section of the Tx.LGC allows property appraised for ad valorem tax purposes as land for agricultural, wildlife management, or timber land to retain their ETJ status for up to 45 years through a development agreement commonly referred to as a non-annexation agreement (NNA). At the time of annexation proceedings in 2010, Chapter 212.172(d) of the Texas Local Government Code (LGC) limited the renewal or extension of each successive NAA "The total period to fifteen (15) years; not to exceed a total of 45 years. However, the Tx.LGC has been revised to simply state: duration of the contract and any successive renewals or extensions may not exceed 45 years," thus, there is no longer a 15-year cap or a limited number of terms. Since the first NAAs offered by the City were limited to 5 years each, the total duration of future contracts and any successive renewals or extensions may not exceed forty (40) years per NAA. It is estimated that a total of 187 residents were added to the City’s population from the immediate annexation of the aforementioned 3,377 acres that were immediately annexed in 2010. In addition to the 15 areas mentioned above, three (3) other areas, totaling approximately 1,595 acres were placed in 3-year annexation plans that were adopted by the City Council on April 6, 2010. The City Council will consider the annexation of these 3 areas in May 2013. It is estimated that a total of 1,949 residents will be added to the City’s population if the 3 areas are annexed in their entirety. However, it is unlikely that the full population projections will be realized in 2013 since several property owners were offered NAAs and retain their ETJ status. In accordance with Section 43.056 of the Tx.LGC, the City has adopted service plans that provide for full municipal services (defined to mean services provided by the City within its full-purpose boundaries, including water and wastewater service otherwise provided to similar areas in the City but excluding gas and electrical service) to the areas that were annexed in 2010, and those areas that are included in a 3-year annexation plan. The City may provide the services utilizing any of the methods by which it extends services to other areas of the City. The cost to provide services to the areas, as well as any revenues generated from the areas, will occur immediately with regard to some services and in phases over a three to five year period in regard to other services but only as areas are finally annexed. While the City has projected a total net aggregate cost of annexing all 9,089 acres (costs of services to the annexed areas minus additional ad valorem taxes, sales taxes and other revenues generated from the annexed areas), the financial impact to the City is not material since some of these properties may be annexed over a 40 year period due to the possibility of extended NAAs. If the areas were annexed within 5 years, the cost would be approximately $2,014,000. If the areas were annexed within 10 years, the cost would be approximately $2,625,000. The estimates above make a number of assumptions regarding expenditures and revenues over the next few years. The overriding assumption for the analysis is that the fundamental development of the described areas will not change. In other words, the annexation cost estimate does not assume that any major development will take place in the described areas. This assumption is being made for the cost estimate since additional developments are merely a matter of speculation at this time. The use of this assumption, however, should not be interpreted to mean that the described areas are not expected to develop over time. 21 T1-V,EGOD ABLEALUATIONXEMPTIONS AND ENERALBLIGATIONEBT 2011/12 Market Valuation Established by Denton Central Appraisal District7,252,499,619$ Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions85,860,689$ Over 65 Exemptions197,929,836 Disabled Persons Exemptions2,530,660 Disabled Veterans Exemptions19,240,766 Agricultural Land Use Productivity301,187,756 Historical/Other Exemptions3,644,701 Freeport Exemptions139,845,135 Abatement Exemptions51,431,877 Prorated Exempt Property363,074 Pollution Exemptions30,271,872 Homestead Cap Adjustment7,818,249840,124,615 2011/12 Taxable Assessed Valuation (as of 7-21-11)6,412,375,004$ 2011/12 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone(2,300,954) 2011/12 Taxable Assessed Valuation available for General Obligations and Debt of City (as of 7-21-11)6,410,074,050$ (1) City Funded Debt Payable from Ad Valorem Taxes (2) General Obligation Bonds (as of 2-1-12)118,070,000$ (2) Certificates of Obligation (as of 2-1-12)126,335,000 Tax and Utility System Revenue Bonds (as of 2-1-12)56,740,000 (3) The Certificates46,530,000 (3) The Bonds37,900,000 Funded Debt Payable from Ad Valorem Taxes$385,575,000 (4) Less Self-Supporting General Obligation Debt (5) Solid Waste System General Obligation Debt53,471,150$ Drainage System General Obligation Debt2,295,000 (5) Utility System General Obligation Debt204,830,000260,596,150 Net Tax Supported Debt Payable from Ad Valorem Taxes124,978,850$ Interest and Sinking Fund as of 1-31-12 (unaudited)$22,683,105 Ratio Total Funded Debt to Taxable Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02% Ratio Net Funded Debt to Taxable Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.95% 2012 Estimated Population - 115,662 Per Capita Taxable Assessed Valuation - $55,421 Per Capita Total Funded Debt - $3,334 Per Capita Net Funded Debt - $1,081 _ _______________ (1)The above statement of indebtedness does not include $179,065,000 Utility System Revenue Bonds as these bonds are payable solely from the net revenues of the Utility System (the "System"), as defined in the ordinances authorizing such bonds. (2)Excludes the Refunded Obligations. Preliminary, subject to change. (3)Preliminary, subject to change. (4)As a matter of policy, the City provides payment of debt service on its general obligation debt issued to fund improvements to its Utility System, Solid Waste System and Drainage System from surplus revenues of these Systems (see "Table 7 – General Obligation Debt Service Requirements" and "Table 9 – Computation of Self-Supporting Debt"). This policy is subject to change in the future. The City’s Utility System is comprised of the City’s entire existing electric, light and power system and the existing waterworks and sewer system. The City’s Utility System General Obligation Debt has been issued to finance improvements to finance or refinance Utility System improvements and contractual obligations and is being paid, or is expected to be paid, from Utility System revenues. The City has $156,855,000 Utility System Revenue Bonds outstanding payable from a pledge of Utilty System revenues (excludes the relevant Refunded Obligations). The City’s Solid Waste System General Obligation Debt has been issued to finance or refinance Solid Waste System improvements and is being paid, or is expected to be paid, from Solid Waste System revenues. The City has no outstanding Solid Waste System Revenue Bonds. The City’s Drainage System General Obligation Debt has been issued to finance or refinance Drainage System improvements and is being paid, or is expected to be paid, from Drainage System revenues. The City has no outstanding Drainage System Revenue Bonds. (5)Includes a portion of the Bonds and Certificates. Preliminary, subject to change. 22 T2-TAVC ABLEAXABLESSESSEDALUATIONS BY ATEGORY (1) Taxable Appraised Value for Fiscal Year Ended September 30, 201220112010 % of% of% of CategoryAmountTotalAmountTotalAmountTotal Real, Residential, Single Family3,610,010,439$ 49.78%3,545,009,743$ 50.46%3,475,374,687$ 48.95% Real, Residential, Multi-Family689,687,370 9.51%661,530,441 9.42%688,298,068 9.70% Real, Vacant Lots/Tracts140,758,151 1.94%149,930,858 2.13%162,282,464 2.29% Real, Acreage (Land Only)366,276,930 5.05%352,636,983 5.02%356,896,058 5.03% Real, Farm and Ranch Improvements37,791,667 0.52%32,148,788 0.46%33,242,494 0.47% Real, Commercial and Industrial1,449,703,794 19.99%1,381,432,997 19.66%1,392,817,179 19.62% Real, Oil, Gas, and Other Mineral Reserves86,195,936 1.19%116,459,175 1.66%68,616,710 0.97% Real and Tangible Personal, Utilities87,973,672 1.21%66,756,673 0.95%79,577,104 1.12% Tangible Personal, Commercial and Industrial714,263,695 9.85%651,961,490 9.28%749,892,931 10.56% Tangible Personal, Other14,868,334 0.21%16,634,472 0.24%17,779,752 0.25% Real and Special Property, Inventory54,969,631 0.76%51,489,918 0.73%74,454,431 1.05% Total Appraised Value Before Exemptions7,252,499,619$ 100.00%7,025,991,538$ 100.00%7,099,231,878$ 100.00% Less: Total Exemptions/Reductions(840,124,615) (795,873,580) (771,322,856) (2)(2)(2) Supplements- - - (3) Taxable Assessed Value6,412,375,004$$ 6,327,909,0226,230,117,958$ Taxable Appraised Value for (1) Fiscal Year Ended September 30, 20092008 % of% of CategoryAmountTotalAmountTotal Real, Residential, Single Family3,397,880,407$ 48.63%3,192,783,727$ 48.35% Real, Residential, Multi-Family638,906,357 9.14%552,635,146 8.37% Real, Vacant Lots/Tracts160,766,209 2.30%135,800,628 2.06% Real, Acreage (Land Only)330,913,400 4.74%330,570,774 5.01% Real, Farm and Ranch Improvements32,526,580 0.47%51,987,396 0.79% Real, Commercial and Industrial1,416,914,699 20.28%1,326,705,553 20.09% Real, Oil, Gas, and Other Mineral Reserves51,531,540 0.74%46,500,010 0.70% Real and Tangible Personal, Utilities84,395,222 1.21%68,372,262 1.04% Tangible Personal, Commercial and Industrial778,403,096 11.14%785,231,437 11.89% Tangible Personal, Other20,656,852 0.30%19,919,543 0.30% Real Property, Inventory74,539,998 1.07%92,889,789 1.41% Total Appraised Value Before Exemptions6,987,434,360$ 100.00%6,603,396,265$ 100.00% Less: Total Exemptions/Reductions(696,075,248) (671,868,100) (2) Supplements- 157,971,610 Taxable Assessed Value6,291,359,112$ 6,089,499,775$ _______________ (1) Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. For the Fiscal Year ended 2012, the values were reported on July 21, 2011 based on information as of January 1, 2011. (2) Due to a change in Appraisal District reporting, supplements are included in category amounts. (3) Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. 23 T3-VGODH ABLEALUATION AND ENERALBLIGATIONEBTISTORY NetRatio NetNet FiscalTaxableTax DebtTax DebtFunded Year TaxableAssessedOutstandingto TaxableDebt EndedEstimatedAssessedValuationat End ofAssessedPer (3)(5) 9/30PopulationValuation Per CapitaFiscal Year ValuationCapita (1) 2008 108,980 6,089,499,775$ 55,877 $ 129,439,594$ 2.13%1,188 $ (1) 2009 111,160 6,291,359,11256,597 122,835,0001.95%1,105 (2) 2010 113,383 6,327,909,02255,810 119,862,6001.89%1,057 (1) 2011 114,517 6,230,117,95854,403 116,165,6501.86%1,014 (1) (4)(6) (6)(6) 2012 115,662 6,412,375,004 115,142,90055,441 1.80%996 _______________ (1)Source: City Officials. (2)Source: US Census. (3)Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. Source:Denton Central Appraisal District as of July 21, 2011. (4)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (5)Excludes the Refunded Obligations and self-supported general obligation debt. (6)Projected, includes a portion of the Bonds and a portion of the Certificates. Preliminary, subject to change. T4-TR,LCH ABLEAXATEEVY AND OLLECTIONISTORY Fiscal Year Distribution EndedTaxGeneralInterest and % Current% Total (1) 9/30 Rate FundSinking FundTax Levy CollectionsCollections 20080.66652$ 0.44765$ $ 0.2188740,816,256$ 98.77%99.44% 20090.666520.447650.21887 43,086,12398.32%99.40% 20100.666520.447650.21887 42,898,41498.88%98.99% 20110.689750.470880.21887 43,890,12198.99%98.99% (2)(2) 20120.689750.470880.21887 44,213,48686.18%86.18% _______________ (1)Tax levy for the 2012 year is based on the Certified Value. Prior years represent adjusted values that include supplements. (2)Collections for part year only, through January 31, 2012. 5-TLT T ABLEENARGESTAXPAYERS 2011/12% of Total TaxableTaxable AssessedAssessed Name of TaxpayerNature of PropertyValuationValuation Columbia Medical Center of DentonHospital/Professional Building$78,054,2601.22% Paccar Inc.Diesel Truck Manufacturing60,418,4740.94% Inland Western Denton Crossing Ltd PSReal Estate Development45,388,8940.71% Cypress Denton Station LTDResidential Multifamily 38,803,3890.61% Verizon SouthwestTelephone Utility33,292,7900.52% GEL Timberlinks LLCDResidential Multifamily24,197,1650.38% Denton Education Housing Corp.Residential Multifamily23,423,2800.37% SCI Gateway at Denton Fund 25 LLCCommercial Lots/Real, Industrial 20,403,8020.32% CNL Retirement CRS1Medical Facilities20,283,6000.32% Range Texas Production LLCGas Utility18,114,5420.28% $ 5.65%362,380,196 Source: Denton Central Appraisal District. 24 GODL . . . No general obligation debt limitation is imposed on the City under current State ENERALBLIGATIONEBTIMITATION law or the City's Home Rule Charter (see "The Obligations – Tax Rate Limitation" for a description of the limitations on ad valorem tax rates.). T6-EOTD ABLESTIMATEDVERLAPPING AXEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. 2011/12City'sAuthorized Taxable2011/12TotalEstimatedOverlappingBut Unissued AssessedTaxFunded%Funded DebtDebt As Of Taxing JurisdictionValueRateDebtApplicableAs of 2-1-122-1-12 (1)(2)(3) City of Denton6,412,375,004$$0.68975$124,978,850100.00%124,978,850$ 0$ Denton Independent School District8,827,685,5291.53000 592,214,14263.25%374,575,445116,749,713 Denton County53,491,990,7140.27736 477,705,00011.97%57,181,289330,713,873 Argyle Independent School District997,763,6651.46005 54,200,3767.90%4,281,830- Aubrey Independent School District574,567,5561.54000 52,924,3450.03%15,877- Krum Independent School District705,064,3911.54000 47,066,5072.69%1,266,089- Pilot Point Independent School District469,304,2781.37000 19,484,9640.07%13,639- Ponder Independent School District853,195,8081.34461 29,200,0002.15%627,800- Sanger Independent School District651,014,5951.37207 27,311,0401.07%292,228- Total Direct and Overlapping Funded Debt563,233,047$ Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation………………………………………8.78% Per Capita Overlapping Funded Debt…………………………………………………………………………………$ 4,967.53 __________________ (1)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (2)Includes a portion of the Bonds and a portion of the Certificates, less the Refunded Obligations and self-supporting debt. Preliminary, subject to change. (3)Reflects remaining authorization after the issuance of the Bonds. 25 DEBTINFORMATION 26 T8-ISFBP ABLENTEREST AND INKING UNDUDGETROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39,075,952$ Interest and Sinking Fund Balance as of 9/30/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,2$79,080 Interest and Sinking Fund Tax Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,166,809 From Revenue Supported Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..24,249,362 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 41,745,251 .$2,669,299 Estimated Balance, 9/30/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T9-CS-SD ABLEOMPUTATION OF ELFUPPORTING EBT Net Revenue from Solid Waste System, Fiscal Year Ended 9-30-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$5,174,307 Less: Solid Waste System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,174,307$ Solid Waste System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,817,328 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,979$ Net Revenue from Drainage System, Fiscal Year Ended 9-30-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,131,178$ Less: Drainage System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,131,178$ Drainage System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,225 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589,953$ Net Revenue from Utility System (Electric System and Waterworks and Sewer System), Fiscal Year Ended 9-30-11 . . 51,081,657$ Less: Utility System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,916,896 Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34,164,761$ Utility System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,179,134 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,985,627$ T10-ABUGOB ABLEUTHORIZED UTNISSUEDENERALBLIGATIONONDS AmountAmount DateAmountHeretoforeBeingUnissued PurposeAuthorizedAuthorizedIssuedIssuedBalance Transportation2/5/200527,700,000$ 24,900,100$ 2,799,900$ -$ Parks2/5/200510,700,000 9,505,900 1,194,100 - 38,400,000$ 34,406,000$ 3,994,000$ -$ AIAGOD . . . As shown in Table 10 above, after the issuance of the NTICIPATED SSUANCE OF DDITIONAL ENERALBLIGATIONEBT Bonds, the City will no longer have voted but unissued debt remaining to be issued. During calendar year 2012, City staff anticipates that a citizens committee will be formed to study whether the City should seek additional voter authorization to fund additional infrastructure needs of approximately $20 million over the next five years. While the City cannot be certain at present that an election will be called, or if it is, that all or part of the measures submitted to the public will be approved, it is possible that the City could do so, and that additional tax-supported debt could be issued within the next 12 months. The City may also issue tax-supported debt other than bonds to fund public improvements, such as the Certificates, without submitting a measure to the voters, but subject to voter petition rights for a referendum. 27 T11-OO ABLETHERBLIGATIONS The City has entered into capital lease agreements. The following is a schedule of future minimum lease payments under these capital leases and the present value of the net minimum lease payments as of September 30, 2011: YearAnnual EndingLease 30-SepPayment 20121,343,688$ 2013996,146 2014877,555 201558,497 201658,497 201758,497 Total Minimum Lease Payment3,392,880$ Less: Amount Representing Interest233,844 Present Value of Minimum Future Lease Payments3,159,036$ PF . . . The City provides pension benefits for all of its full-time employees (except firefighters) through the Texas ENSIONUND Municipal Retirement System ("TMRS"), a State-wide administered pension plan. Employees may retire at ages 60 and above with five or more years of service or with twenty years of service regardless of age, and a member is vested after five years. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. In 2011, the Texas Legislature approved Senate Bill 350 (SB 350) which restructured the TMRS funds. This legislation permitted the TMRS actuary to prepare the December 31, 2010 actuarial valuation as if the fund restructuring had occurred as of December 31, 2010. In addition, the actuarial assumptions were updated for the new fund structure and adopted by the TMRS Board at their May 2011 meeting. For a more complete description of the impact of the legislation and new actuarial assumptions, please refer to the December 31, 2010 TMRS Comprehensive Annual Financial Report (CAFR). The funded status as of December 31, 2010 under the two separate actuarial valuations is presented below: ActuarialCity ActuarialActuarialAccruedUnfunded"Full" FiscalValuationValuationLiabilityAALFundedARC YearDateof Assets(AAL)(UAAL)RatioRate (1) 201112/31/2010148,131,734$ 231,155,736$ 83,024,002$ 64.1%20.54% (2) 201112/31/2010208,101,143 279,659,548 71,558,405 74.4%18.58% _______________ (1) Actuarial valuation performed under the original fund structure. (2) Actuarial valuation performed under the new fund structure approved in SB 350. The "phase in" period was expected to last eight years from fiscal year 2009 through fiscal year 2016, but due in part to the new fund structure approved by SB 350, management intends on paying the full ARC beginning in fiscal year 2012-2013. For more detailed information concerning the TMRS plan as well as the City’s historical unfunded actuarial accrued liability for calendar years 2009-2011, see Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" - Note V.A., page 52 and Exhibit XII, page 63. F’RRF . . . The City provides pension benefits for firefighters through the Denton Firemen's IREMENSELIEF AND ETIREMENT UND Relief and Retirement Fund (the "Firemen’s Fund"). Firefighters may retire at ages 50 with twenty or more years of service, and a member is vested after ten years of credited service. As of December 31, 2009, there were (i) 63 retirees and beneficiaries receiving benefits and terminated employees entitled to benefits but not yet receiving them, (ii) 92 current employees who were vested and (iii) 71 employees who were not vested. The City made contributions equal to 14% of member salaries for FY 2008- 09 and 15.41% for FY 2009-10. For 2011, the City increased its contribution rate to 17.17%. As of December 31, 2009 (the most recent biennial actuarial valuation), the plan's unfunded actuarial accrued liability was $19,617,547 and the funded ratio was 70.2%. For more detailed information concerning the Firemen's Fund as well as the City’s historical unfunded actuarial accrued liability for calendar years 2005-2009, see Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" – Note V.A., page 52 and Exhibit XII, page 63. 28 OPEB . . . GASB released the Statement of General Accounting Standards No. 45 ("GASB 45"), THEROSTMPLOYMENTENEFITS Accounting by Employers for Other Post-Employment Benefits ("OPEB"), in June 2004. The City implemented GASB 45 for the fiscal year beginning October 1, 2007. GASB 45 sets forth standards for the measurement, recognition, and display of post- employment benefits, other than pensions, such as health and life insurance for current and future retirees. Those subject to this pronouncement are required to: (i) measure the cost of benefits, and recognize other post-employment benefits expense, on the accrual basis of accounting over the working lifetime of the employees; (ii) provide information about the actuarial liabilities for promised benefits associated with past services and whether, or to what extent, the future costs of those benefits have been funded; and provide information useful in assessing potential demands on the employer’s future cash flows. The employer’s contributions to OPEB costs that are less than an actuarially determined annual required contribution will result in a net OPEB cost, which under GASB 45 will be required to be recorded as a liability in the employer’s financial statements. Actuarial valuations have been completed by an outside consulting firm regarding the City's OPEB liability. The reports provide the City with the City’s OPEB requirements assuming the City's plan offerings, designs, and cost share approach remain constant. September 30, 2011October 1, 2009July 1, 2007 Annual Required Contribution1,314,901 $ 1,314,901 $ 879,280 $ Contribution Made623,130 $ 370,759 $ 69,696 $ Net OPEB Obligation Obligation - End of Year3,167,492 $ 2,520,343 $ 1,606,533 $ Unfunded Actuarial Accrued Liability10,944,544 $ 10,944,544 $ 7,926,202 $ The City’s GASB 45 liability was discussed at length with the Audit/Finance Committee and the City Council. At the conclusion of these discussions, the City Council concurred with the staff recommendation to fund the City’s OPEB costs on a pay-as-you-go basis. The pay-as-you-go approach has been recommended since 1) this provides the lowest cost approach, 2) the ARC is relatively small in comparison to the City’s overall budget, and 3) the pay-as-you-go cost is not forecasted to exceed the ARC in the foreseeable future. See Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" – Note V.B., pages 58 and 59. TRTPLBI HEEMAINDER OF HIS AGEEFTLANKNTENTIONALLY 29 FINANCIALINFORMATION T12-CNA ABLEHANGES IN ETSSETS Fiscal Year Ended September 30, Revenues:20112010200920082007 Program Revenue: Charges for Services15,673,556$ 14,781,002$ 14,924,773$ 13,917,248$ 13,876,695$ Operating Grants and Contributions4,270,697 3,407,085 2,281,136 3,306,325 2,991,224 Capital Grants and Contributions7,497,908 15,206,424 3,641,296 7,308,398 5,399,220 General Revenue: Property Tax44,144,844 43,144,645 43,187,433 41,499,791 34,756,356 Sales Tax22,871,282 20,484,954 20,466,772 21,440,839 20,653,932 Other Taxes/Fees21,219,346 19,131,162 17,270,857 17,909,903 16,784,901 Miscellaneous2,830,297 6,375,678 5,741,097 7,501,310 6,831,875 Total Revenue118,507,930$ 122,530,950$ 107,513,364$ 112,883,814$ 101,294,203$ Expenditures: General Government28,198,604$ 29,569,535$ 27,482,131$ 26,408,949$ 22,145,804$ Public Safety49,154,371 47,998,906 45,368,783 43,426,526 42,161,674 Public Works16,089,302 15,767,926 15,816,065 15,448,473 14,008,867 Parks and Recreation12,421,893 12,854,336 12,755,037 12,927,020 11,564,247 Interest on Long-Term Debt5,046,724 5,121,329 5,733,268 5,372,868 4,658,128 Total Expenses110,910,894$ 111,312,032$ 107,155,284$ 103,583,836$ 94,538,720$ Increase in Net Assets before Transfers7,597,036$ 11,218,918$ 358,080$ 9,299,978$ 6,755,483$ Transfers(10,430,082) 482,801 846,119 323,038 (13,475,571) Increase (Decrease) in Net Assets(2,833,046)$ 11,701,719$ 1,204,199$ 9,623,016$ (6,720,088)$ Prior Period Adjustment(10,674,744) - - - - Net Assets at Beginning of Year154,011,484 142,309,765 141,105,566 131,482,550 138,202,638 (1) Net Assets at End of Year $ 154,011,484140,503,694$ 142,309,765$ 141,105,566$ 131,482,550$ _______________ (1) Unrestricted net assets, the part of the net assets that may be used to meet the City’s ongoing obligations, were $34,590,673 as of September 30, 2011 (see Appendix B, "Excerpts from the Comprehensive Financial Report"). 30 T12A-GFREH ABLEENERALUNDEVENUES AND XPENDITURE ISTORY Fiscal Year Ended September 30, Revenues:20112010200920082007 Taxes53,492,664$ 50,049,759$ 49,769,861$ 49,772,244$ 45,842,915$ Licenses and Permits1,460,548 1,198,552 1,265,733 1,080,580 1,097,323 Franchise Fee19,324,244 17,457,994 15,669,981 16,197,042 15,197,943 Fines and Forfeitures4,216,247 4,378,064 4,691,420 4,969,102 4,468,692 Fees for Service5,656,550 5,989,349 5,888,390 5,657,673 4,439,570 Interest Revenue172,719 237,559 744,122 1,084,097 1,441,299 Intergovernmental825,549 770,164 718,453 779,158 380,887 Miscellaneous193,022 317,460 229,599 369,052 529,753 Total Revenues85,341,543$ 80,398,901$ 78,977,559$ 79,908,948$ 73,398,382$ Expenditures: General Government19,495,940$ 22,037,729$ 21,318,437$ 18,925,270$ 16,142,835$ Public Safety44,921,713 43,156,478 41,999,464 39,619,707 36,776,654 Public Works7,483,926 6,516,276 6,738,327 6,553,570 5,561,166 Parks and Recreation9,422,432 9,837,073 10,016,114 10,230,800 7,312,078 Capital Outlay575,128 691,880 809,004 854,273 2,409,001 Debt Service: Principal Retirement140,422 185,154 223,106 202,003 41,301 Total Expenditures82,039,561$ 82,424,590$ 81,104,452$ 76,385,623$ 68,243,035$ Excess (Deficiency) of Revenues Over Expenditures3,301,982$ (2,025,689)$ (2,126,893)$ 3,523,325$ 5,155,347$ Other Financing Sources (Uses): Capital Leases-$ -$ 44,865$ 69,897$ 1,108,131$ Transfers In20,304 1,018,218 112,022 - 5,278,998 Sale of Capital Assets90,699 160,495 - 193,375 - Transfers (Out)(515,761) (421,200) (612,532) (968,914) (4,038,781) Total Other Financing Sources (Uses)(404,758)$ 757,513$ (455,645)$ (705,642)$ 2,348,348$ Net Changes in Fund Balances2,897,224$ (1,268,176)$ (2,582,538)$ 2,817,683$ 7,503,695$ Fund Balances at Beginning of Year21,526,779 22,794,955 25,377,493 22,559,810 15,056,115 Fund Balances at End of Year24,424,003$ 21,526,779$ 22,794,955$ 25,377,493$ 22,559,810$ 31 T13-MSTH ABLEUNICIPAL ALESAXISTORY The City has adopted the Municipal Sales and Use Tax Act, V.T.C.A., Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. In January 1994, the voters of the City approved the imposition of an additional one-half of one percent (½ of 1%) for property tax reduction. In September 2003, the voters of the City approved the imposition of an additional one-half of one percent (½ of 1%) for the Denton County Transportation Authority. The implementation of this tax began January 2004, and is allocated directly to the Denton County Transportation Authority. Fiscal Year% ofEquivalent of Ended TotalAd ValoremAd ValoremPer (1) 9/30CollectedTax LevyTax RateCapita 200821,984,936$ 53.86%0.3610 $ 202 $ 200920,950,78648.63% 0.3330 188 201021,015,17348.99% 0.3321 185 201122,871,28252.11% 0.3671 200 (2) 20128,430,62519.07% 0.1315 73 _______________ (1)Source: City of Denton Annual Program of Services. Collections for 2008-2010 have been restated to exclude payments for economic development incentives which were previously netted from sales tax collections. (2)Collections through January 31, 2012. The sales tax breakdown for the City is as follows: Property Tax Relief 0.50¢ Denton County Transportation Authority 0.50¢ City Sales & Use Tax 1.00¢ State Sales & Use Tax 6.25¢ Total 8.25¢ FP INANCIAL OLICIES Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Officers Association of the United States and Canada. The GFOA has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Denton for each of the fiscal years ended September 30, 1983 through September 30, 2010. The City's current report will be submitted to GFOA to determine its eligibility for another Certificate. The City has also received the GFOA's award for Distinguished Budget Presentation each year since 1988. The measurement focuses for the Enterprise Funds, Internal Service Funds and Nonexpendable Trust Funds are income determination and cost of service, respectively. Accordingly, the accrual basis, whereby revenues and expenses are identified in the accounting period in which they are earned and incurred and net income, is utilized for these funds. The modified accrual basis, whereby revenues are recognized when they become both measurable and available for use during the year and expenditures are recognized when the related fund liability is incurred, is used for all other funds. Budgetary Procedures . . . As prescribed by City Charter the City Manager, and within the time period required by law, submits to the City Council a proposed budget for the fiscal year beginning the following October 1. The budget includes proposed expenditures and revenues required to fund the expenditures. Following Council considerations, amendments and refinements, a public hearing is ordered and conducted for the purpose of obtaining taxpayer comments. The budget is finally approved and adopted by passage of an ordinance by the City Council prior to the beginning of the fiscal year. The budget is adopted on a basis consistent with generally accepted accounting principles. The City strives to maintain an unreserved general fund balance of 20% of budgeted expenditures. 32 INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council. Both Texas law and the City’s investment policies are subject to change. LI . . . Under Texas law, the City is authorized to invest in (1) obligations, including letter of credit, of the EGALNVESTMENTS United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended (the "PFIA")) that are issued by or through an institution that either has its main office or a branch office in Texas, and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits, or are invested by the City through a depository institution that has its main office or a branch office in the State of Texas and otherwise meet the requirements of the PFIA, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured a combination of cash and obligations described in clause (1) which are pledged to the City, held in the City’s name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State, (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (12) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. If specifically authorized in the authorizing document, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, ordinance, or resolution. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Political subdivisions such as the City are authorized to implement securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) of the first paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm not less than "A" or its equivalent, or (c) cash invested in obligations that are described in clauses (1) through (6) and (10) through (12) of the first paragraph under this subcaption, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in the name of the governmental body and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. IP . . . Under Texas law, the City is required to invest its funds under written investment policies that primarily NVESTMENTOLICIES emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool 33 funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds’ investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. AP . . . Under Texas law the City is additionally required to: (1) annually review its adopted policies and DDITIONAL ROVISIONS strategies; (2) adopt a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers’ with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (4) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the entity’s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. (1) T14-CI ABLEURRENTNVESTMENTS As of January 31, 2012, the City’s available funds were invested as follows: Market ValueBookMarket DescriptionPercentValueValue U.S. Federal Agency Coupons43.51%196,977,296$ 197,333,253$ U.S. Federal Agency Callables10.24%46,451,98546,462,745 U.S. Federal Agency Step Up1.54%7,000,0006,996,458 Municipal Bonds - Coupon0.22%1,009,7391,016,750 Commercial Paper4.41%19,954,28919,989,400 (2) Certificates of Deposit 30.67%139,099,000139,099,000 Demand Deposits9.41%42,671,18342,671,183 100.00%453,163,492$ 453,568,789$ _______________ (1)There are no City funds invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index or commodity. (2)CDs are either fully insured by FDIC insurance or collateralized by federal agency securities at a minimum of 102% of principal plus accrued interest or secured by Federal Home Loan Bank letters of credit. 34 TAXMATTERS O PINIONS The Bonds . . . On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel to the City, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"), (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel to the City will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. The Certificates . . . On the date of initial delivery of the Certificates, Bond Counsel to the City will render its opinion that, in accordance with Existing Law, (1) interest on the Certificates for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Certificates will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Code. Except as stated above, Bond Counsel to the City will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Certificates. See Appendix C – Forms of Bond Counsel’s Opinions. In rendering each of the foregoing opinions, Bond Counsel to the City will rely upon (a) certain information and representations of the City, including information and representations contained in the City's federal tax certificate with respect to each Obligation issue, (b) covenants of the City contained in the Obligation documents relating to certain matters, including arbitrage and the use of the proceeds of the Obligationsand the Refunded Obligations and the property financed or refinanced therewith, and (c) with respect to the Bonds, the verification report prepared by Grant Thornton LLP. Failure by the City to observe the aforementioned representations or covenants could cause the interest on the Obligations to become taxable retroactively to the date of issuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Obligations in order for interest on the Obligations to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Obligations to be included in gross income retroactively to the date of issuance of the Obligations. The opinion of Bond Counsel to the City is conditioned on compliance by the City with such requirements, and Bond Counsel to the City has not been retained to monitor compliance with these requirements subsequent to the issuance of the Obligations. Bond Counsel’s opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel’s opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Obligations. A ruling was not sought from the Internal Revenue Service by the City with respect to the Obligations or the projects being financed or refinanced therewith. Bond Counsel’s opinion represents its legal judgment based upon its review of Existing Law and the representations of the City that it deems relevant to render such opinion and is not a guarantee of a result. No assurances can be given as to whether or not the Internal Revenue Service will commence an audit of the Obligations, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an audit is commenced, under current procedures the Internal Revenue Service is likely to treat the City as the taxpayer and the holders of the Obligations may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. FITATOID EDERALNCOMEAXCCOUNTING REATMENT OF RIGINAL SSUEISCOUNT The initial public offering price to be paid for one or more maturities of the Obligations may be less than the principal amount thereof or one or more periods for the payment of interest on the Obligations may not be equal to the accrual period or be in excess of one year (the "Original Issue Discount Bonds"). In such event, the difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the Obligations less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods which do not exceed one year. Under existing law, any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. 35 Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner’s basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. CFITC OLLATERALEDERALNCOMEAXONSEQUENCES The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Obligations. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, owners of interests in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE OBLGATIONS. Interest on the Obligations will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Interest on the Obligations may be subject to the "branch profits tax" imposed by section 884 of the Code on the effectively- connected earnings and profits of a foreign corporation doing business in the United States. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Obligations, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Obligations, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. S,LFT TATEOCAL AND OREIGNAXES Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Obligations under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. FPL UTURE AND ROPOSEDEGISLATION Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Obligations under Federal or state law and could affect the market price or marketability of the Obligations. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Obligations should consult their own tax advisors regarding the foregoing matters. 36 CONTINUINGDISCLOSUREOFINFORMATION In each of the Ordinances the City has made the following agreement for the benefit of the holders and beneficial owners of the respective series of Obligations. The City is required to observe each agreement while it remains obligated to advance funds to pay such Obligations. Under each agreement, the City will be obligated to provide certain updated financial information and operating data annually, and the timely notice of specified events to the Municipal Securities Rulemaking Board ("MSRB"). This information will be available free of charge from the MSRB via the Electronic Municipal Market Access ("EMMA") system at www.emma.msrb.org. AR . . . The City will provide certain updated financial information and operating data to the MSRB annually. NNUALEPORTS The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 5 and 7 through 14 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2012. The City will provide the updated information to the MSRB. The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB’s Internet Web site or filed with the United States Securities and Exchange Commission (the "SEC"), as permitted by SEC Rule 15c2-12 (the "Rule"). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information of the type described in the preceding paragraph by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from time to time pursuant to State law or regulation. The City’s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. NCE . . . The City will also provide timely notices of certain events to the MSRB. The City will OTICE OF ERTAINVENTS provide notice of any of the following events with respect to the Obligations to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations; (7) modifications to rights of holders of the Obligations, if material; (8) Obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the City, which shall occur as described below; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. In addition, the City will provide timely notice of any failure by the City to provide annual financial information in accordance with their agreement described above under "Annual Reports". For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. LA . . . The City has agreed to update information and to provide notices of specified events only IMITATIONS AND MENDMENTS as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Obligations may seek a writ of mandamus to compel the City to comply with its agreement. 37 The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a 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 Obligations in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. CPU . . . During the last five years, the City has complied in all material respects with all OMPLIANCE WITH RIOR NDERTAKINGS continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. OTHERINFORMATION R ATINGS The Obligations and the presently outstanding tax supported debt of the City are rated "AA+" by Fitch and "AA" by S&P. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Obligations. L ITIGATION It is the opinion of the City Attorney and City Staff that there is no pending, or to their knowledge threatened, litigation or other proceeding against the City that could have a material adverse financial impact upon the City or its operations. RQOS EGISTRATION AND UALIFICATION OF BLIGATIONS FOR ALE The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds or Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds or Certificates under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LIESPFT EGALNVESTMENTS AND LIGIBILITY TO ECUREUBLICUNDS IN EXAS The Obligations . Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudence standard, the Obligations are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Certificates . Section 271.051, Texas Local Government Code, provides that the Certificates are legal and authorized investments for banks, savings banks, trust companies, savings and loan associations, insurance companies, fiduciaries, trustees and guardians, and for the sinking funds of municipalities, school districts, and other political subdivisions or public agencies of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the State, municipalities, school districts, and other political subdivisions of the State, and are legal security for those deposits to the extent of their market value. General Considerations . For political subdivisions in Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Obligations may have to be assigned a rating of at least "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. The City has made no investigation of other laws, rules, regulations, or 38 investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LO EGALPINIONS The City will furnish to the Underwriters complete transcripts of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinions of the Attorney General of Texas approving the Initial Bond and Initial Certificate and to the effect that the Obligations are valid and legally binding obligations of the City, and based upon an examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to like effect and to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the captions and subcaptions "Plan of Financing – Refunded Obligations", "The Obligations" (exclusive of subcaptions "Book-Entry-Only System" and "Obligationholders Remedies" and the last sentence under "Tax Rate Limitation"), "Tax Matters" and "Continuing Disclousre of Information" (except for the information under the subcaption "Compliance with Prior Undertakings") and the subcaptions "Legal Opinions" (except for the last two sentences of the first paragraph thereof), "Registration and Qualification of Obligations for Sale" and "Legal Investments and Eligibility to Secure Public Funds in Texas" under the caption "Other Information" in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinances. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinions will accompany the Obligations deposited with DTC or will be printed on the Obligations in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel to the Underwriters. The legal fee to be paid Counsel to the Underwriters is contingent on the sale and delivery of the Obligations. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise from the transaction. AFDOI UTHENTICITY OF INANCIAL ATA AND THERNFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements, and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents, and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FA INANCIAL DVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and does not assume any responsibility for the information, covenants, and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending, or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 39 VAMC ERIFICATION OF RITHMETICAL AND ATHEMATICAL OMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by First Southwest Company on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Obligations and the restricted Federal Securities will be verified by Grant Thornton LLP, certified public accountants. Such computations will be based solely on assumptions and information supplied by First Southwest Company on behalf of the City. Grant Thornton LLP will restrict its procedures to verifying the arithmetical accuracy of certain computations and will not make any study or evaluation of the assumptions and information on which the computations will be based and, accordingly, will not express an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. The report will be relied upon by Bond Counsel in rendering its opinion with respect to the tax-exemption of interest on the Obligations and with respect to the defeasance of the Refunded Obligations. U NDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $_________________. The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $_________________. The Underwriters will be obligated to purchase all of the Certificates if any Certificates are purchased. The Certificates to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Certificates into investment trusts) at prices lower than the public offering prices of such Certificates and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have reviewed the information in this Official Statement pursuant to their respective responsibilities to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association ("WFBNA"). WFBNA, the senior underwriter of the Bonds, has entered into an agreement (the "Distribution Agreement") with Wells Fargo Advisors, LLC ("WFA") for the retail distribution of certain municipal securities offerings, including the Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting compensation with respect to the Bonds with WFA. WFBNA and WFA are both subsidiaries of Wells Fargo & Company. One of the Underwriters is BOSC, Inc., which is not a bank, and the Obligations are not deposits of any bank and are not insured by the Federal Deposit Insurance Corporation. F-LSD ORWARDOOKINGTATEMENTSISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. 40 M ISCELLANEOUS The financial data and other information contained herein have been obtained from the City's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. The Ordinances authorizing the issuance of the Obligations will approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Underwriters. MARK BURROUGHS Mayor City of Denton, Texas ATTEST: JENNIFER K. WALTERS City Secretary City of Denton, Texas 41 Schedule I SCHEDULE OF REFUNDED OBLIGATIONS* Certificates of Obligation, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 3/15/20032/15/20144.000%190,000$ 190,000$ 2/15/20154.100%195,000195,000 2/15/20164.200%200,000200,000 2/15/20174.300%215,000215,000 2/15/20184.400%225,000225,000 2/15/20194.500%200,000200,000 2/15/20204.600%210,000210,000 2/15/20214.700%220,000220,000 2/15/20224.750%230,000230,000 2/15/20234.750%240,000240,000 $ 2,125,0002,125,000$ The 2014 - 2023 maturities will be redeemed prior to original maturity on February 15, 2013, at par. General Obligation Refunding and Improvement Bonds, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 3/15/20032/15/20144.000%315,000$ 315,000$ 2/15/20154.100%205,000205,000 2/15/20164.200%215,000215,000 2/15/20174.300%220,000220,000 2/15/20184.400%235,000235,000 2/15/20194.500%245,000245,000 2/15/20204.600%255,000255,000 2/15/20214.700%270,000270,000 2/15/20224.750%280,000280,000 2/15/20234.750%295,000295,000 $ 2,535,0002,535,000$ The 2014 - 2023 maturities will be redeemed prior to original maturity on February 15, 2013, at par. * Preliminary, subject to change. Certificates of Obligation, Series 2004 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 5/1/20042/15/20154.750%670,000$ 670,000$ 2/15/20164.625%705,000705,000 2/15/20174.750%735,000735,000 2/15/20184.750%775,000775,000 2/15/20194.750%810,000810,000 2/15/20204.750%850,000850,000 2/15/20214.800%890,000890,000 2/15/20224.875%935,000935,000 (1)(1) 2/15/20235.000%985,000985,000 (1)(1) 2/15/20245.000%1,035,0001,035,000 $ 8,390,0008,390,000$ The 2015 - 2024 maturities will be redeemed prior to original maturity on February 15, 2014, at par. (1) Represents a mandatory sinking fund redemption of a term certificate with a final maturity date of February 15, 2024. Utility System Revenue Refunding and Improvement Bonds, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 4/1/200312/1/20144.000%2,000,000$ 2,000,000$ 12/1/20154.000%2,100,0002,100,000 12/1/20164.000%2,215,0002,215,000 12/1/20174.100%2,330,0002,330,000 12/1/20184.250%2,445,0002,445,000 12/1/20194.375%2,575,0002,575,000 12/1/20204.500%2,700,0002,700,000 12/1/20214.500%2,845,0002,845,000 12/1/20224.500%3,000,0003,000,000 $ 22,210,00022,210,000$ The 2014 - 2022 maturities will be redeemed prior to original maturity on June 1, 2013, at par. APPENDIX A GENERAL INFORMATION REGARDING THE CITY L . . . The City of Denton is located in the northern portion of the Dallas/Fort Worth Consolidated Statistical Area OCATION (CSMA). The City is a part of the Dallas/Fort Worth Metroplex, and is situated at the apex of a triangle based by Dallas (38 miles to the southeast) and Fort Worth (36 miles to the southwest). The City has excellent access to and from all parts of the area. EF . . . The fiscal year 2010-2011 was very eventful for Denton. Listed below are just a few of projects: CONOMIC UTURE ME&IN AJORMPLOYER NDUSTRIALEWS Target Corporation began construction of their new, automated 400,000 square foot distribution center. The Denton facility will serve as a prototype for future Target frozen and refrigerated food distribution centers. The $100 million project will open in 2012/2013 with 115 employees. Schlumberger , an oilfield service company, selected Denton as its site for a regional equipment maintenance facility. The $18 million purchase and renovation project was complted and opened in Spring 2012. The company employs approximately 100. Peerless Manufacturing, an existing Denton business, announced their plans to expand in Denton and consolidate other Texas operations. Plans include a new 80,000 square foot manufacturing facility, and the site provides the capability to expand to 250,000 square feet in the future. Peerless will begin construction in 2012 or 2013. The expansion will add another 20 employees to their 72 employee base. Labinal, Inc. , currently located in Corinth, Texas, is moving and expanding their operation in Denton. Labinal will invest nearly $5.8 million in an existing building and will move another $5 million in equipment to Denton. The company will employ approximately 700 at the Denton facility. DDMA EVELOPMENT AT ENTONUNICIPALIRPORT The arrival of the Denton Municipal Airport’s new air traffic control tower in May of 2004 precipitated a reclassification of air space from Class G to Class D during daily operation hours of 8 a.m. and 8 p.m. and increased our corporate jet traffic. Denton Municipal Airport recently opened a $1.2 million terminal and completed realignment of a 7,000 foot taxiway providing a secondary emergency landing surface. The airport control tower operates with radar display capability inaugurated in October 2010 along with extended hours of operation from 6:00 AM until 10:00 PM seven (7) days each week. The airport services corporate jet traffic by providing uncongested, Class D airspace and is a major domestic and international flight training location. Private business growth at Denton Airport produced over $5 million in new investment in hangars and office space in 2009. Private industry employment is over 400 workers on- site at the airport. A $1.2 million taxiway extension project completed early in 2011 has opened over 22 net acres for new aviation development with direct taxiway access. An $8 million infrastructure improvement project, 95% funded through a grant from the Texas Department of Transportation Aviation Division (TxDOT Aviation), was completed in the fourth quarter of 2011 to add 1,000 feet of runway for a total 7,000 foot runway at Denton Airport. In addition to operating as one of the most active fixed-wing, general aviation airports in the United States, the airport is host to two major helicopter flight training businesses and services military helicopters through one of two airport fixed base operators. A Foreign Trade Zone application has been completed to include the Airport, surrounding businesses and the University of North Texas Discovery Park research facility in order to stimulate additional airport business development. The City Council recently adopted a 2010 Airport Business Plan to enhance development of the Airport as a financially self-sufficient aviation enterprise with specific marketing and economic development incentives for aviation industry. RN ETAILEWS Unicorn Lake Construction of the mixed-use development known as continues. Construction of the Villas of Tuscan Hills, a 106 lot residential community that overlooks the lake, is currently underway with luxury homes selling from $400,000- $700,000. Dogwood Estates, an independent living community, the Brick House Gym, Cinemark, Pour House Grill, Washington Federal Savings and Loan, and Towne Center Bank represent some of the businesses that have located in the development. Recently, Cafe China, Los Toreros, Beth Marie’s Ice Cream, Curves and other retail occupied a new 20,000 square feet retail center. In addition, the development is home to the Hilton Homewood Suites, Foundation Management Systems, and several new medical offices. In 2011, Unicorn Lake welcomed Chuy’s Mexican Restaurant. This popular restaurant increased traffic within the development, resulting in nearly a 100% increase in sales tax generation. Rayzor Ranch Market Place Thehas completed over 400,000 square feet of retail/commercial space. Wal-Mart and Sam’s opened in Fall 2010 along with several restaurants and other commercial and retail The center continues to grow. Kohl’s Department Store is currently planning to open in 2013. The Rayzor Ranch Town Center will begin construction the fourth quarter of 2012. Another 800,000 square feet of commercial and retail space is planned at build-out. Over469,000 square feet of miscellaneous commercial and retail permits were issued, of which twelve were restaurants. A - 1 HD EALTHCARE IN ENTON The medical sector continues to grow in Denton with an additional 86,000 square feet of doctors' offices and senior care facilities. OD THEREVELOPMENTS Three new banks opened in Denton in 2010-11. Downtown Denton, which has become a major focus for redevelopment for the City of Denton added 88,106 square feet of new living units – apartments and townhomes – and 5,500 square feet of new retail/restaurants in 2010-11. IB NDUSTRY AND USINESS Major Employers Approximate Number of EmployerDescriptionEmployees University of North Texas Higher Education 7,762 Denton Independent School District Education 3,113 Denton State Assisted Living Center Healthcare for Disabled 1,700 Texas Woman's University Education 1,610 Denton County Government 1,523 Peterbilt Motors-Headquarters & Plant Diesel Trucks 1,500 City of Denton Government 1,436 Denton Regional Medical Center Hospital/Healthcare 800 Presbyterian Hospital of Denton Hospital/Healthcare 750 Jostens Class Ring Manufacturer 600 Sally Beauty International Headquarters Beauty Supply Distributor 600 Thermadyne/Victor Equipment/Tweco Welding Equipment 512 Flowers Baking Company Bakery 355 Anderson Merchandisers Distributor 332 Retardation Fulfillment Packaging 302 Tetra PakAseptic Packaging 300 (1) FEMA (Regional HQ & Call Center) Federal Government 300 James Wood Auto ParkCar/Truck Sales/Service 287 United Copper IndustriesCopper Wire 264 Mayday Manufacturing/Hi-Tech MetalsAviation Components Manufacturing 250 Acme BrickBrick Manufacturing 190 Keller WilliamsReal Estate 170 Business Air/Jetworks Air CenterFBO & Aircraft Sales, Paint & Interiors 170 Denton Rehabilitation & Nursing CenterElder Care/Rehabilitation 160 Wells FargoFinancial Institution 160 The VintageNursing Facility 150 Miller of DentonDistributor 145 Senior Care & Rehabilitation CenterElder Care/Rehabilitation 145 Morrison MillingFlour Grain Mill 131 Mayhill HospitalHospital/Healthcare 130 U.S. Aviation GroupFlight Training/Aircraft Sales 125 Denton Good Samaritan VillageRetirement Center/Elder Care 125 Denton Good Samaritan Lake Forest VillageRetirement Center/Elder Care 125 North Texas Hospital Hospital/Healthcare 120 Bill Utter Ford Vehicle Sales/Service 107 Hulcher Services Railroad Emergency Response 100 University Behavioral Health of Denton Hospital/Healthcare 100 _______________ (1)Up to 1,100 during a disaster relief event. Source: City of Denton and Denton Chamber of Commerce Economic Development Offices. A - 2 Denton is proud to be home to nearly 37 companies and institutions that employ 100 or more people, several of them representing corporate, regional and international headquarters. Well over 100 companies that produce, manufacture, and distribute goods all over the world call Denton home. More than 4,500 companies choose to do business in Denton. With small, medium, and large businesses operating in a variety of industries, diversity is strength in Denton. Statistics show most of these workers are skilled and receive their training right here in Denton. EPG . . . Historical population totals from U.S. Census depict Denton’s consistent population CONOMIC AND OPULATION AINS increases commensurate with Denton’s steady economic growth. 1940 Census – 11,192 1950 Census – 21,345 1960 Census – 26,844 1970 Census – 39,874 1980 Census – 49,079 1990 Census – 66,270 2000 Census – 80,537 2010 Census – 113,383 (1) estimated 2012 Population is 115,662 _______________ (1)City of Denton Population Estimate. The City’s ascension toward a top economic position in Texas is attributable to the steady influence of governmental activity that include the annual expansion of the two state-supported universities, and due to several desirable environmental factors. Denton is located in a rich agricultural, oil and gas production region; is part of the Dallas/Fort Worth Metroplex; has proximity to three of Texas’ largest reservoirs (Lake Texoma is only 40 miles from Denton); a mild climate; and the influential aspects of social, cultural and educational advantages have prompted professional workers to select Denton as their residence. ER . . . The following data were taken from the U.S. Census Bureau’s 2011 American Community Survey. CONOMIC ANKING % of Population Whose Age is: 0-19 28% 20-34 33% 35-54 23% 55-64 8% 65 and over 8% Number of Households 36,926 City of Denton Median Household Income 47,297 City of Denton Household Income $250,000 + 1,001 $100,000-$199,999 5,335 $50,000-$99,999 10,995 $35,000-$49,000 5,463 $25,000-34,999 4,020 Less than or equal to $24,999 10,112 City of Denton Population by Occupation Agriculture, forestry, fishing and hunting, and mining 0.9% Construction 5.9% Manufacturing 8.2% Wholesale Trade 2.5% Retail trade 13.2% Transportation, warehousing, and utilities 4.7% Information 2.2% Finance and insurance, real estate rental and leasing 5.5% Professional, scientific, and management, and administrative and waste management services 8.4% Educational Services, and health care and social assistance 28.7% Arts, entertainment, and recreation, and accommodation, and food services 11.1% Other services, except public administration 4.6% Public Administration 4.0% Source: U. S. Census Bureau, 2005-2009 American Community Survey, 5 year estimate. A - 3 E/LF . . . According to the Texas Workforce Commission, the December 2011 available workforce in MPLOYMENTABORORCE Denton is 65,604. EUniversity of North Texas . . . Denton is home to the , founded in 1890, and Texas Woman’s University, founded in DUCATION 1901. North Central Texas College, established in 1924, built an extension campus just outside Denton’s extraterritorial jurisdiction (ETJ) in adjacent cities, Corinth and Flower Mound. The two universities and community college have a combined enrollment of more than 53,000students and total employment of approximately 9,500 total employees. With an enrollment of over 35.700, the University of North Texas exceeds the combined enrollment of Southern Methodist University in Dallas, Texas Christian University in Fort Worth and Rice University in Houston. Texas Woman’s University has an approximate enrollment of 12,026 in Denton with an additional 2,696 students attending in Dallas and Houston. University of North Texas The (UNT) campus comprises a land area of more than 875 acres that includes Discovery Park, th UNT’s 285-acre research park.. The University is the nation’s 26 largest public university and offers 97 bachelor’s, 828 master’s and 35 doctoral degree programs; many nationally recognized. UNT maintains a low 20:1 student-faculty ratio more prevalent among private rather than public institutions. Named one of America’s 100 Best College Buys for 16 consecutive The Princeton Review. years, UNT is additionally listed as a "Best in the West" college by Texas Woman’s University (TWU), a major state-supported teaching and research institution, it’s the nation’s largest public university attended primarily by women, who comprise 90% of attending students. Through its seven schools and colleges, TWU offers 548programs leading to a Bachelor’s degree, 52 Master’s degree fields, and Doctoral degrees in 23 specialization areas. TWU experienced a 10 percent growth in enrollment from 2009 to 20011 and was ranked among the nation’s top 10 U.S. News and World Report universities with the most diverse student populations by in 2011. TWU’s graduate programs in U.S. News and World Reports Best occupational therapy and physical therapy have ranked among the nation’s 25 best by Graduate SchoolsForbes for 4 consecutive years. magazine ranked TWU among the top 25% of U.S. colleges for undergraduates in 2011 and the university continues to be among the nation’s leading providers of nurses and healthcare professionals. North Central Texas College (NCTC), established in 1924, offers Associate Degrees in a number of fields and core college requirements for students transferring to UNT and TWU to complete their Bachelor’s degrees. The student population of NCTC’s campuses in the adjacent cities of Corinth and Flower Mound is almost 7,000. The administration anticipates the student population to increase to 12,000 in the next few years. NCTC serves the citizens of Denton with quality education by offering a broad scope of educational choices and offers the local business community educational options as well. The competitive need to keep employees current with modern technology and methodology is easier due to NCTC’s customized training which teaches curriculum developed closely with business management to ensure individual company needs are met. In 2007 the college collaborated with regional gas drilling production companies experiencing a critical shortage in trained professionals to develop and launch NCTC’s newest Associates Degree program in Gas Energy Production Management. Denton Independent School District (DISD) encompasses almost 180 square miles and continues to be one of north Texas’ fastest-growing school districts. Over 23,930 students enrolled for the 2010-2011 school year in the district’s 35 schools that include 21 elementary schools (grades K-5), six middle schools (6-8), three high schools (9-12), one advanced technology complex (11-12), two early childhood centers, and two alternative schools. The 2010-2011 school year marked the completion of additional science labs and prep rooms, and safety and security technology enhancements in all district schools funded previously in a November 2007 bond election. The district’s second early childhood education center opened in August 2010 th and discussions began for the construction of a 7 middle school that would incorporate new "Green" technologies. The district’s "student centered" approach supports strong individualized instruction and smaller school size. DISD offers classes at each school for students who experience learning disabilities or handicaps. Counselors, speech and language specialists, psychologists and reading and diagnostic consultants are available for all grade levels. DISD offers a number of advanced placement credit classes and dual high school/college credit classes and its students routinely place among top recipients in state and national academic, fine arts, career technology, and athletic competitive events. The district’s LaGrone Advanced Technology Complex offers state-of the-art facilities and training in nine advanced disciplines and serves as a model for the region and surrounding states. Denton State Supported Living Center (formerly Denton State School) is one of the country’s most modern and progressive educational institutions for mentally-disabled Texas residents. This state-supported facility is located on a 200-acre site paid for by Denton citizens. Present facilities include residences that accommodate 530 residents, more than 20 buildings for physically handicapped individuals, and a 32 bed acute hospital with supporting facilities such as X-ray, laboratory, dental, and pharmaceutical. Additional buildings include a modern administration building, an academic building, laundry facility, chapel, maintenance shop and a warehouse. The school has a staff of 1,700 with an annual budget of over $73M. A - 4 Denton Universities Expand . . . Texas Woman’s University (TWU) has grown dramatically. Student enrollment at the University’s home campus in Denton increased 50% from 2001-2011 to just over 12,026students. One third of TWU students (33%) are graduate students. Similar growth at the University’s Dallas and Houston satellite nursing campuses necessitated recent construction projects. A $40M TWU Institute of Health Sciences-Houston facility opened in August 2006 and a $56M TWU T. Boone Pickens Institute of Health Sciences-Dallas facility opened in February 2011. TWU leads as a provider of critically needed health care professionals, boasting the state’s largest undergraduate and graduate nursing programs. TWU is proud of its diversity; minority students comprise 50% of students. TWU is one of only 16 U.S. universities, and the only Texas university selected to participate in the American Democracy Project Civic Agency initiative focused on encouraging students to be civic leaders in their communities. University of North Texas (UNT) . . . Among the nation’s top 50 schools for Hispanic and African American students, UNT has the largest residential campus in the North Texas Region and is the largest provider of online credit courses among Texas public universities. UNT’s Discovery Park, a 285-acre, 553,000 square foot facility is home to UNT’s Engineering School and Center for Advanced Research and Technology (CART), one of the nation’s premier materials science and engineering research facilities. CART provides researchers with a unique grouping of microscopes for nanotechnology research within several of the university’s 15 research cluster areas, and for other critical advancement fields UNT’s College of Engineering offers undergraduate and graduate programs in electrical engineering, materials science, computer science, and mechanical and energy engineering. A new $33.2M Life Sciences Building featuring open research laboratories that promote collaborative and interdisciplinary research completed in 2010. The university’s $60 million Gold LEED Certified Business Leadership Complex, focused on global economic and business disciplines, and $78M, Platinum LEED Certified, 30,000 seat stadium both completed in 2011. A . . . Northwestern Denton County is one of the more diversified agricultural areas in Texas. With soil types GRICULTURE ranging from rich black to sandy loam, and good, soft artesian water, it is ideal for diversified farming and livestock. Principal crops are corn, wheat, oats, hay, grain sorghums and peanuts. Beef cattle, sheep, chickens and turkeys contribute a substantial and steady income annually to the farmers and ranchers of the County. A very significant concentration of valuable world champion horse farms east of the City’s corporate boundaries provide a prosperous economic resource for the area. Products significant to the economy are horses, beef, eggs, wheat, grain sorghums, hay, and nursery crops. T . . . Denton is located at the convergence of Interstate 35 East and Interstate 35 West on the north end of the RANSPORTATION Dallas/Fort Worth Metroplex, approximately 35 miles from the central business districts of both Dallas and Forth Worth. This location along the NAFTA super highway provides great access to points north and south, which has led to a number of distribution warehouse facilities choosing to locate in Denton. Additionally, Denton is located only 20 miles north of Dallas- Fort Worth International Airport (DFW), and both Dallas’ Love Field Airport and Fort Worth’s Meacham International Airport are in close proximity to Denton. Alliance Airport, located less than 15 miles southwest of Denton on Interstate 35 West provides access to a unique industrial airport and multimodal industrial park. Together, Alliance’s access to highway, rail and air transportation offers an excellent opportunity for future industrial growth. Denton County Transportation Authority (DCTA) recently completed the construction of a regional passenger rail line, which connects Carrollton and Denton. The DCTA A-train will meet growing transportation demands in eastern Denton County. The project also provides a logical extension of the Dallas Area Rapid Transit (DART) Northwest Corridor Green Line. In the Summer of 2010, the Denton City Council approved the Denton Downtown Implementation Plan, which included zoning and development standards that, along with the implementation of commuter rail service in June 2011 has encouraged transit oriented development in the vicinity of the new rail station enhancing the vibrant music, cultural and retail landscape of Denton’s downtown. The Kansas City Southern Railroad and the Union Pacific Railroad provide daily service to Denton. Full switching is available, providing direct access to all major markets across the nation. Greyhound/Trailways serves Denton through Dallas and Oklahoma City. Motor freight in Denton is included in the Dallas/Fort Worth commercial trade zone and is served by major freight carriers. B . . Center Bank and Northstar Bank opened new branch facilities in Unicorn Lake mixed use development. There are ANKING 26 banks in Denton: Access First Capital; Bank of America; JPMorgan Chase; BBUA Compass Bank; Wells Fargo Bank; First Convenience; First State Bank; Provident Bank; Point Bank; First National Bank; Marqbank; Meridian Bank; State Bank and Trust; Inwood National Bank; Synergy; Denton’s only locally-owned bank, Northstar Bank; Washington Federal Savings; Towne Center Bank; DATCU Credit Union; Affiliated Bank; First United Bank & Trust; Legends Bank; Members' Choice Federal Credit Union; Pegasus Credit Union; State Farm Bank; and First United Bank with Denton’s first "Banco" branch specializing in serving Denton’s Hispanic community. A - 5 GI ROWTHNDICES CityState (1) Building Values (millions) FiscalWaterSewerElectricUnemploymentUnemployment (2) (2) RatesRates YearCommercialResidentialTotalCustomersCustomersCustomers 200764 $ 219 $ 283$ 29,78328,02043,6073.84%4.35% 2008131 157 288 29,67928,01944,3754.03%4.84% 2009132 131 263 30,28828,67445,1535.96%7.88% 201082 82 164 30,88929,10545,3576.30%8.00% 2011204 62 266 31,22229,52048,0245.70%7.20% _____________ (1)New Construction Only, Includes Multi-Family as Commercial and Duplexes as Residential (2)Source: Texas Workforce Commission. M . . . Denton has become a regional medical destination serving north Texas and southern Oklahoma. In 2010-2011, ten EDICAL new healthcare offices and facilities broke ground or opened adding an estimated $14 million in valuation to the tax rolls and over 120,000 square feet of medical resources to citizens in the area. Denton Regional Medical Center is a 208-bed community hospital that serves the growing population of Denton, Wise, Cooke, and Montague Counties. The hospital offers a full- spectrum of healthcare including advanced open-heart surgery and neurosurgery programs. Denton Regional became the first hospital in Denton County to earn the prestigious Level II Chest Pain Center accreditation by the international non-profit Society of Chest Pain Centers and is pursuing the Level III Trauma Center designation. Since 2005, the hospital has opened a new $7 million, 13,500 square-foot day surgery center and a new hospital floor housing a 29-bed, $19M progressive care unit. Denton Regional’s Center for Cancer and Blood Disorders, a comprehensive cancer diagnostic and treatment center integrating education, nutrition, and rehabilitation services opened in 2008. Texas Health Presbyterian Hospital of Denton (formerly Denton Community Hospital) celebrated the grand opening of its 272,538 square-foot, 255-bed facility and an 80,000 square-foot medical office building in 2005. The hospital expanded its Women’s Center services in 2006 with the opening of a Level III Neonatal Intensive Care Unit serving Denton and its surrounding communities. North Texas Hospital opened a 60,000 square foot specialty hospital featuring eight surgical suites and 16 inpatient beds in 2005. In 2007, North Texas Hospital became one of only four hospitals in the Dallas-Fort Worth region to offer patients improved surgical outcomes by utilizing the $1M, state-of-the-art DaVinci robotic surgical suite. Other new hospitals gaining Denton its reputation as a regional medical destination include Mayhill Hospital, a 40,000 square-foot facility featuring physical rehabilitation and a behavioral health services hospital that opened in 2005 and Integrity Transitional Hospital, a 38,500 square foot, $16 million dollar long-term acute care hospital that opened in 2007. Denton’s rapid medical growth continued in 2008, adding more than 123,000 square feet of new medical offices and treatment facilities; most notably the new 44,000 square foot, $20 million Select Medical Rehabilitation Hospital, modeled after the renowned Kessler institute for Rehabilitation. R . . . Lake Ray Roberts, located approximately 8 miles northeast of the City’s corporate boundary on the Elm Fork ECREATION of the Trinity River, is a major water conservation and flood control facility of more than 799,600 acre-feet of storage that allows for an abundance of parks and other water and outdoor related recreational facilities. The nine mile Greenbelt Hike/Bike/Equestrian Trail, located between Lake Ray Roberts and Lake Lewisville, is a cooperative project made possible by the Army Corps of Engineers and the Cities of Denton and Dallas. Nearby Lake Lewisville, one of North Texas’ largest lakes is one of Texas’ most popular recreation areas. Lake Lewisville has a shoreline of 183 miles located entirely in Denton County. Lake Lewisville attracts over 3,000,000 visitors to its shores annually. The upper reaches of the lake are only about 3 miles east of the Denton City Limits, while the dam is 15 miles from downtown Denton. Grapevine Lake, another large body of water created by the U.S. Army Corps of Engineers, is located in Denton and Tarrant Counties. The dam is 23 miles from Denton. Parks and recreational areas abound on the shores of Lake Ray Roberts, Lake Lewisville, and Grapevine Lake. Boating fishing, hunting, swimming and all water sports are the favorite recreational pastimes, which, because of this area’s favorable climate, are in use the year round. The City of Denton Parks and Recreation Department and the Denton Independent School District have created a partnership to produce a signature water recreation attraction. The $12.16 million Waterworks Park opened in 2003 and features four water slides, a children's play pool, a 600 ft. long continuous flow tubing river, outdoor amphitheater, pavilions, a sand volleyball court and two indoor pools. The Hula Loop slide was recently added to the Water Park and an Ultra Violet light sanitizing system has been added to all of the outdoor pools. Other recently completed CIP projects include the renovation and expansion of the Senior Center, the addition of new pedestrian trails at Denia Park and Unicorn Lake, the construction of Briercliff Park, Specialist Earnest W. Dallas, Jr. Veterans Memorial Park and Wheeler Ridge Park, and improvements to the courtyard at City Hall and to the playground at Quakertown Park. Construction has just begun to rebuild Owsley Park. Property was recently purchased to expand both Carl Young, Sr. Park and E. J. Milam Park. The Parks and Recreation Department is in the process of purchasing 26 acres on the north side of North Lakes Park that will be used to construct four new adult soccer/rugby fields. The Parks and Recreation Department is also looking to the future with the purchase of a 196 acre park site that will eventually become the home of athletic fields, walking trails, and a large multi-generational recreation and fitness center. A - 6 APPENDIX B EXCERPTS FROM THE CITY OF DENTON, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2011 The information contained in this Appendix consists of excerpts from the City of Denton, Texas Comprehensive Annual Financial Report for the Year Ended September 30, 2011, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. APPENDIX C FORMS OF BOND COUNSEL'S OPINIONS Public Finance Tax Supported / U.S.A. Denton, Texas General Obligation Bonds New Issue Report Ratings New Issue Details New Issues Sale Information: $37,900,000 General Obligation Refunding and Improvement Bonds, Series General Obligation Refunding and Improvement Bonds, Series 2012 AA+ 2012, and $46,530,000 Certificates of Obligation, Series 2012, via negotiated sale the week of Certificates of Obligation, March 19. Series 2012 AA+ Outstanding Debt Security: Annual property tax levy, limited to $2.50 per $100 of taxable assessed valuation General Obligations AA+ (TAV). The certificates of obligation (COs) are additionally payable from surplus revenues of Certificates of Participation AA+ Denton’s utility system. Rating Outlook Purpose: GOs to refund a portion of the district’s outstanding debt obligations and for various Stable street improvements and park land acquisitions and improvements; COs to finance acquisitions of vehicles and equipment, and municipal, street, and utility renovations and improvements. Final Maturity: Feb. 15, 2032. Key Rating Drivers Stable Local Economy: The city is strategically located in the Dallas-Fort Worth (DFW) metroplex, which continues to outpace the nation in total employment, population, and income growth. Significant education and healthcare sectors have provided a stabilizing influence to the local economy. Steady growth of the employment base is reflected in low unemployment, which has helped keep the city’s median household income in line with state averages. Diverse Tax Base: TAV appreciated modestly over the last several years, on the heels of stronger growth that was consistent with prerecession regional trends. The city’s strong transportation network along the North American Free Trade Agreement corridor has attracted investment that includes warehousing facilities and helped establish the foundation for anticipated long-term growth. The top 10 taxpayers represent medical, manufacturing, real Related Research estate, energy, and utility interests with little concentration risk. Fitch Rates The City of Denton, (TX) Series 2012 GO Refunding and Sound Fiscal Profile: Financial results typically exceed budget expectations, contributing to Improvement Bonds & COs ‘AA+’; Outlook robust general fund balances in excess of policy targets. The tenured management team Stable, March 19, 2012 complies with established and annually updated and collaborates with the city council on long- term planning to prioritize resources. The city has prudently dedicated future growth in franchise fees to fund a portion of infrastructure needs within the newly established street improvement fund. Manageable Debt: The city’s debt burden is manageable, with modest additional governmental debt issuances on the horizon. Overall debt is above average, reflecting sizable overlapping school district issuances; however, this is somewhat tempered by strong community support, growing wealth levels, and rapid debt amortization. Analysts Rebecca Meyer +1 512 215-3733 rebecca.meyer@fitchratings.com Jose Acosta +1 512 215-3726 jose.acosta@fitchratings.com www.fitchratings.com March 19, 2012 Public Finance Rating History Credit Profile Outlook/ Rating Action Watch Date Strategically Located Metro City AA+ Affirmed Stable 3/19/12 Denton and its 115,662 residents lie within the DFW metroplex, the economic and cultural hub of northern Texas with a population exceeding six million. Denton’s location at the convergence of I-35 East and West, 35 miles from downtown Dallas and Fort Worth, and access to air and rail transportation, has attracted a variety of industries and businesses to the city. Tax base expansion until the past several years had been steady, reflecting a regular influx of residential, retail, commercial, and industrial development. Education and health services top the city’s largest employers, offering stability throughout economic recessionary cycles. Denton’s unemployment rate of 5.7% as of December 2011 compares favorably to that of the state and nation. Completion of a transit rail line connecting Denton to the Dallas Area Rapid Transit system in June 2011 improves access to other parts of the metroplex and is expected to spur additional development around the downtown transit station. General Fund Financial Summary ($000, Audited Years Ended Sept. 30) 2008 200920102011 General Fund Revenue 79,909 78,978 80,399 85,343 General Fund Expenditures 76,386 81,104 82,424 82,039 General Fund Surplus 3,523 (2,126)(2,025)3,304 Transfers In 0 112 1,018 20 Other Sources 264 45 160 91 Transfers Out 969 613 421 516 Net Transfers and Other (705) (456)757 (405) Net Surplus/(Deficit) 2,818 (2,582)(1,268)2,899 Total Fund Balance 25,378 22,795 21,527 24,424 As % of Expenditures, Transfers Out, and Other Uses 32.8 27.9 26.0 29.6 Unrestricted Fund Balance 25,254 22,795 21,527 24,424 As % of Expenditures, Transfers Out, and Other Uses 32.6 27.9 26.0 29.6 Note: Numbers may not add due to rounding. Sound Fiscal Management A fiscal 2011 operating surplus of $2.9 million (net of transfers) bolstered general fund unrestricted reserves to $24.4 million, representing a strong 29.6% of spending; unrestricted reserves consist of committed, assigned, and unassigned reserves. The city consistently outperforms the budget and has maintained healthy reserves exceeding the policy target equal to 20.0% of spending. A healthy (12.0%) increase in sales tax receipts and $1.0 million of attrition-based cost savings contributed to the city’s favorable fiscal 2011 performance. The city’s revenues in fiscal 2011 were comprised largely of ad valorem taxes (36%), sales taxes (27%), and franchise fees from utilities operating in the city (23%). Management has prudently designated a portion of fiscal 2012 franchise fee revenue, as well as future franchise Related Criteria fee revenue growth, to the newly established street improvement fund in an effort to increase U.S. Local Government Tax-Supported street maintenance funding over time. Rating Criteria, Aug. 15, 2011 Tax-Supported Rating Criteria, Management anticipates favorable fiscal year 2012 financial performance, anticipating a Aug. 15, 2011 modest $1 million use of reserves attributable to establishment of the street improvement fund. Denton, Texas 2 March 19, 2012 Public Finance A balanced fiscal 2013 budget is expected, based on conservative revenue growth assumptions and continued cost management. Given recent results, Fitch Ratings believes these projections are reasonable. Manageable Debt The city’s direct debt burden on the Debt Statistics budget is manageable at 15% of fiscal ($000) 2011 spending, and the pace of principal amortization is rapid at 72% This Issue General Obligations 37,900 within 10 years. High overall debt This Issue Certificates of Participation 46,530 levels reflect significant issuances by Outstanding Direct Debt Net of Refunding 301,145 seven school districts located or Self-Supporting (260,596) Total Net Direct Debt 124,979 partially located within the city; overall Overlapping Debt 438,233 debt per capita is $4,869 per capita, or Total Overall Debt 563,212 7.8% of market value. City officials report modest additional governmental Debt Ratios capital improvement projects planned a Direct Debt Per Capita 1,081 b for the medium term. As % of MV 1.7 a Overall Debt Per Capita 4,869 The city participates in the Texas b As % of MV 7.8 Municipal Retirement System (TMRS), ab Population: 115,662 (2012). Market value (MV): $7,252,499,619 (2012). Note: Numbers may not add due to rounding. with an adequate fiscal 2011 funded ratio of 74.4% based on an investment assumption of 7.0%, and provides other post-employment benefits (OPEB) to its employees. The city’s fixed costs including debt service, pension, and OPEB obligations comprise a manageable 19% of total general fund expenditures. Denton, Texas 3 March 19, 2012 Public Finance The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. LL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE A LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE A T WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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Denton, Texas 4 March 19, 2012 AGENDA INFORMATION SHEET AGENDA DATE: April 3, 2012 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of up to $42,000,000 in principal amount of "City of Denton General Obligation Refunding and Improvement Bonds, Series 2012"; authorizing the issuance of the Bonds; delegating the authority to certain City officials to execute certain documents relating to the sale of the Bonds; approving and authorizing instruments and procedures relating to said Bonds; and enacting other provisions relating to the subject. BACKGROUND This bond sale was previously discussed with the Audit/Finance Committee on February 14, 2012, and the City Council on February 21, 2012. At the time of these discussions, staff anticipated refunding existing debt as part of this issuance, if market conditions were favorable. market conditions are favorable, and as such, staff requests approval to proceed with the refunding. This bond sale includes the issuance of bonds to fund projects approved by the voters in the 2005 Bond Election and to refund existing debt. The General Obligation (GO) funded items represent the projects approved by the voters in the 2005 Bond Election. Staff is recommending the issuance of all remaining GOs included in the FY 2011-12 Adopted Capital Improvement Program (CIP) totaling $3,994,000. Below is a listing of recommended GO funded projects for FY 2011-12: 1.Major Street Improvements $2,799,900 2.Clear Creek Natural Heritage Center $ 499,400 3.Way Finding & Entrance Markers $ 694,700 Total $3,994,000 Staff recommends refunding $35,260,000 in principal amount of existing debt. This refunding is an advance refunding, which is defined as the process of selling a new issue of bonds to obtain funds needed to retire existing securities that are callable more than 90 days of the issuance of the new bonds. The existing debt issues are callable on June 1, 2013, February 15, 2013, and February 15, 2014. As such, the refunding will also include approximately $2.4 million in accrued interest. Debt Policy requires that the present value savings of an advance refunding is at least 3% of the par amount being refunded. projects a net present value savings at $2,790,396 or 7.9% of the par amount of refunded bonds. Agenda Information Sheet April 3, 2012 Page 2 Below is a summary of the existing debt that staff proposes to refund with GOs: PROPOSED REFUNDING 2003 Certificates of Obligation $ 2,125,000 2003 General Obl Ref & Imp $ 2,535,000 2004 Certificates of Obligation $ 8,390,000 2003 Utility Sys Rev Ref & Imp $22,210,000 Total $35,260,000 The refunding will not extend the maturity date of the existing debt, and approximately $2.6 million in excess debt service reserves will applied to the refunding. In addition, issuance costs are projected to be approximately $201,085. Since bond market conditions can change rapidly, and due to complexities associated with the refunding transaction, staff is recommending that the City Council approve a negotiated parameter sale for the GOs. By doing so, City staff will be authorized to execute the sale without additional Council approval provided that the net effective interest rate on the GOs is less than 4%. Staff anticipates that the sale and pricing of the bonds will occur on or about April 10, 2012, and the City will use the RBC Capital Markets, Wells Fargo, R.W. Baird & Co., and BOSC, Inc. underwriting firms to assist in the sale the securities. Once the exact terms of the transaction are determined, staff will provide the City Council with additional information in an informal staff report. Concurrently with the sale of the bonds, the City anticipates the sale of approximately $49,325,000 of Certificates of Obligation (CO). Staff has discussed the CO and GO issuances in detail with the bond rating agencies. AA and Fitch has rated the City as AA+. These rating reports have been included as exhibits two and three for your review. RECOMMENDATION Staff recommends approval of the ordinance. PRIOR ACTION/REVIEW (Council, Boards or Commissions) On February 14, 2012, the Audit/Finance Committee unanimously recommended approval to forward the upcoming bond issuance to the City Council for consideration. Agenda Information Sheet April 3, 2012 Page 3 EXHIBITS 1.Preliminary Official Statement 2. 3.Fitch Bond Rating Report 4.Ordinance Respectfully submitted: Bryan Langley CFO and Director of Strategic Services Prepared By: Antonio Puente, Jr. Assistant Director of Finance PRELIMINARY OFFICIAL STATEMENT Ratings: Fitch: "AA+" Dated April __, 2012 S&P: "AA" (see "Other Information - NEW ISSUE - Book-Entry-Only Ratings" herein) In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $37,900,000* CITY OF DENTON, TEXAS (Denton County) GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2012 Dated Date: April 1, 2012 Due: February 15, as shown below Interest Accrues from Delivery Date PT . . . Interest on the $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, Series 2012 (the "Bonds") will accrue AYMENT ERMS from the delivery date (the "Delivery Date"), will be payable February 15 and August 15 of each year, commencing August 15, 2012, until maturity or prior redemption, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Obligations - Book-Entry-Only System" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). AI . . . The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") including particularly Texas UTHORITY FOR SSUANCE Government Code, Chapters 1207, 1371 and 1331, as amended, and are direct obligations of the City of Denton, Texas (the "City"), payable from an annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, as provided in the Bond Ordinance (defined herein) authorizing the Bonds (see "The Obligations - Authority for Issuance" and "The Obligations – Security and Source of Payment"). P . . . Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of the City described on Schedule I attached hereto (the URPOSE "Refunded Obligations") for debt service savings and (ii) for various street improvements and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. (1) MATURITY SCHEDULE* CUSIP Prefix: 248866 PrincipalInterestInitialCUSIPPrincipalInterestInitialCUSIP (1)(1) AmountMaturityRateYieldSuffixAmountMaturityRateYieldSuffix $ 20134,440,000205,000$ 2023 700,00020141,110,0002024 3,220,0002015175,0002025 3,335,0002016180,0002026 3,475,0002017185,0002027 3,660,0002018190,0002028 3,790,0002019195,0002029 3,965,0002020205,0002030 4,135,0002021210,0002031 4,315,0002022210,0002032 _______________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the City nor the Financial Advisor shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. R . . . The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2023, in whole or in part in principal EDEMPTION amounts of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. SI . . . The Bonds are being offered by the City concurrently with the "City of Denton Certificates of Obligation, Series 2012" (the "Certificates"), EPARATE SSUES under a common Official Statement, and such Bonds and Certificates are hereinafter sometimes referred to collectively as the "Obligations." The Bonds and Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and other features. L . . . The Bonds are offered for delivery when, as and if issued and received by the Initial Purchaser of the Bonds subject to the approving opinion of the EGALITY Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel for the Underwriters. . . . It is expected that the Bonds will be available for delivery through The Depository Trust Company on May __, 2012. D ELIVERY RBCCM WFS APITALARKETSELLSARGOECURITIES BOSC,I. B NCAIRD A subsidiary of BOK Financial Corporation ______________ * Preliminary, subject to change. THIS PAGE LEFT BLANK INTENTIONALLY 2 PRELIMINARY OFFICIAL STATEMENT Ratings: Fitch: "AA+" Dated April __, 2012 S&P: "AA" (see "Other Information - NEW ISSUE - Book-Entry-Only Ratings" herein) In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. THE CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $46,530,000* CITY OF DENTON, TEXAS (Denton County) CERTIFICATES OF OBLIGATION, SERIES 2012 Dated Date: April 1, 2012 Due: February 15, as shown below Interest Accrues from Delivery Date PT . . . Interest on the $46,530,000* City of Denton Certificates of Obligation, Series 2012 (the "Certificates") will accrue from the delivery date (the "Delivery AYMENT ERMS Date"), will be payable February 15 and August 15 of each year, commencing February 15, 2013, until maturity or prior redemption, and will be calculated on the basis of a 360- day year consisting of twelve 30-day months. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral No physical delivery of the Certificates will be made to the beneficial owners thereof. multiples thereof within a maturity. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "The Obligations - Book-Entry-Only System" herein. The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "The Obligations - Paying Agent/Registrar"). I A . . . The Certificates are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") particularly Subchapter C of Chapter UTHORITY FOR SSUANCE 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and Texas Government Code, Chapter 1371, as amended, and constitute direct obligations of the City of Denton, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge of surplus net revenues of the City’s Utility System not in excess of $1,000, as provided in the Certificate Ordinance (defined herein) authorizing the Certificates (see "The Obligations - Authority for Issuance"). P . . . Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping URPOSE additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. (1) MATURITY SCHEDULE* CUSIP Prefix: 248866 PrincipalInterestCUSIPPrincipalInterestCUSIP (1)(1) AmountMaturityRateYieldSuffixAmountMaturityRateYieldSuffix $ 20131,805,0002,495,000$ 2023 3,115,00020141,880,0002024 3,175,00020151,960,0002025 3,170,00020162,035,0002026 3,280,00020172,125,0002027 1,785,00020182,205,0002028 1,845,00020192,300,0002029 1,900,00020202,395,0002030 1,960,00020212,485,0002031 2,025,00020222,590,0002032 _______________ (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the City nor Financial Advisor shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. R . . . The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2023, in whole or in part in principal amounts EDEMPTION of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. SI . . . The Certificates are being offered by the City concurrently with the "City of Denton General Obligation Refunding and Improvement Bonds, Series 2012" EPARATE SSUES (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligations." The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and other features. L . . . The Certificates are offered for delivery when, as and if issued and received by the Initial Purchaser of the Certificates subject to the approving opinion of the EGALITY Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Forms of Bond Counsel's Opinions"). Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel for the Underwriters. D . . . It is expected that the Certificates will be available for delivery through The Depository Trust Company on May __, 2012. ELIVERY RBCCM WFS APITALARKETSELLSARGOECURITIES BOSC,I. B NCAIRD A subsidiary of BOK Financial Corporation ______________ * Preliminary, subject to change. THIS PAGE LEFT BLANK INTENTIONALLY 4 For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"), this document constitutes an Official Statement of the City with respect to the Obligations that has been "deemed final" by the City as of its date except for the omission of no more than the information permitted by the Rule. This Official Statement, which includes the cover page, Schedule and the Appendices hereto, does not constitute an offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale. No dealer, broker, salesperson or other person has been authorized to give information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon. The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as a representation, promise or guarantee of the Financial Advisor. This Official Statement includes descriptions and summaries of certain events, matters and documents. Such descriptions and summaries do not purport to be complete and all such descriptions, summaries and references thereto are qualified in their entirety by reference to this Official Statement in its entirety and to each such document, copies of which may be obtained from the Financial Advisor. Any statements made in this Official Statement or the appendices hereto involving matters of opinion or estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of such opinions or estimates will be realized. The Underwriters have reviewed the information in this Official Statement pursuant to their responsibility to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein. See "CONTINUING DISCLOSURE OF INFORMATION" for a description of the City's undertaking to provide certain information on a continuing basis. NONE OF THE CITY, ITS FINANCIAL ADVISOR, OR THE UNDERWRITERS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY ONLY SYSTEM. IN CONNECTION WITH THE OFFERING OF THE OBLIGATIONS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE OBLIGATIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACT. THE REGISTRATION OR QUALIFICATION OF THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAW OF THE STATES IN WHICH THE OBLIGATIONS HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES, IF ANY, CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. THE OBLIGATIONS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENT. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY ..................................................... 6 INVESTMENTS .......................................................................................... 33 T14-CI ................................................... 34 ABLEURRENT NVESTMENTS CITY OFFICIALS, STAFF AND CONSULTANTS ................................. 8 EO ............................................................................. 8 TAX MATTERS .......................................................................................... 35 LECTED FFICIALS SAS ..................................................... 8 ELECTED DMINISTRATIVE TAFF CONTINUING DISCLOSURE OF INFORMATION ............................ 37 CA ............................................................ 8 ONSULTANTS AND DVISORS OTHER INFORMATION .......................................................................... 38 INTRODUCTION ......................................................................................... 9 R ............................................................................................. 38 ATINGS PLAN OF FINANCING ............................................................................... 9 L ........................................................................................ 38 ITIGATION RQOS ...... 38 EGISTRATION AND UALIFICATION OF BLIGATIONS FOR ALE THE OBLIGATIONS ................................................................................. 11 LIESPF EGALNVESTMENTS AND LIGIBILITY TO ECUREUBLIC UNDS IN T .................................................................................... 38 EXAS TAX INFORMATION ................................................................................ 17 LO ................................................................................ 39 EGALPINIONS 1-V,EGO T ABLEALUATIONXEMPTIONS AND ENERALBLIGATION AFDOI ....... 39 UTHENTICITY OF INANCIAL ATA AND THER NFORMATION D ..................................................................................... 22 EBT FA .......................................................................... 39 INANCIAL DVISOR T2-TAVC ............. 23 ABLEAXABLE SSESSEDALUATIONS BY ATEGORY VAM ERIFICATION OF RITHMETICAL AND ATHEMATICAL T3-VGOD ABLEALUATION AND ENERALBLIGATION EBT C ..................................................................... 40 OMPUTATIONS H ................................................................................ 24 ISTORY U .................................................................................. 40 NDERWRITING T4-TR,LCH ................. 24 ABLEAX ATEEVY AND OLLECTION ISTORY F-LSD ................................ 40 ORWARDOOKING TATEMENTS ISCLAIMER T5-TLT ............................................... 24 ABLEENARGEST AXPAYERS M ................................................................................ 41 ISCELLANEOUS T6-EOTD ............................. 25 ABLESTIMATED VERLAPPING AX EBT SCHEDULE OF REFUNDED OBLIGATIONS ......................... Schedule I DEBT INFORMATION ............................................................................. 23 T7-GODSR .... 23 ABLEENERALBLIGATION EBT ERVICE EQUIREMENTS APPENDICES T8-ISFBP ....... 27 ABLENTEREST AND INKING UNDUDGET ROJECTION GIRC ................................ A ENERALNFORMATION EGARDING THE ITY T9-CS-SD ..................... 27 ABLEOMPUTATION OF ELFUPPORTING EBT EFAFR .......................... B XCERPTS ROM THE NNUALINANCIAL EPORT T10-ABUGO ABLEUTHORIZED UT NISSUED ENERALBLIGATION FBC'O .............................................. C ORMS OF ONDOUNSELSPINIONS B ................................................................................... 27 ONDS T11-OO ..................................................... 28 The cover page hereof, this page, the appendices included herein and any ABLETHER BLIGATIONS addenda, supplement or amendment hereto, are part of the Official FINANCIAL INFORMATION ................................................................. 30 Statement. T12-CNA ............................................... 30 ABLEHANGES IN ET SSETS T12A-GFRE ABLEENERALUNDEVENUES AND XPENDITURE H ............................................................................... 31 ISTORY T13-MSTH ................................... 32 ABLEUNICIPAL ALESAX ISTORY 5 OFFICIALSTATEMENTSUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds and Certificates to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. TC ..................................... The City of Denton (the "City") is a political subdivision and municipal corporation of the HEITY State, located in Denton County, Texas. The City covers approximately 101.15 square miles (see "Introduction - Description of the City"). TB .................................. The $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, HEONDS Series 2012 are to mature on February 15 in the years 2013 through 2032 (see "The Obligations - Description of the Obligations"). C T ..................... The $46,530,000* City of Denton Certificates of Obligation, Series 2012 are to mature on HEERTIFICATES February 15 in the years 2013 through 2032 (see "The Obligations - Description of the Obligations"). PIBonds .............. Interest on the accrues from the Delivery Date (defined herein) and is payable August AYMENT OF NTEREST 15, 2012 and each February 15 and August 15 thereafter until maturity or prior redemption. Certificates Interest on the accrues from the Delivery Date and is payable February 15, 2013 and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Obligations - Description of the Obligations" and "The Obligations - Optional Redemption"). AI .......... The Bonds are issued pursuant to the Constitution and general laws of the State, including UTHORITY FOR SSUANCE particularly Texas Government Code, Chapters 1207, 1371 and 1331, as amended, and an ordinance (the "Authorizing Bond Ordinance") of the City in which the Council delegated to each of the City Manager and the Assistant City Manager authority to complete the sale of the Bonds. The terms of the sale will be included in a "Pricing Certificate," which will complete the sale of the Bonds (the Authorizing Bond Ordinance and the Pricing Certificate for the Bonds are jointly referred to as the "Bond Ordinance") (see "The Obligations - Authority for Issuance"). The Certificates are issued pursuant to the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and Texas Government Code, Chapter 1371, as amended, and an ordinance (the "Authorizing Certificate Ordinance") of the City in which the Council delegated to each of the City Manager and the Assistant City Manager authority to complete the sale of the Certificates. The terms of the sale will be included in a "Pricing Certificate," which will complete the sale of the Certificates (the Authorizing Certificate Ordinance and the Pricing Certificate for the Certificates are jointly referred to as the "Certificate Ordinance") (see "The Obligations - Authority for Issuance"). SB .......... The Bonds constitute direct and voted obligations of the City, payable from a direct annual ad ECURITY FOR THE ONDS valorem tax levied, within the limits prescribed by law, on all taxable property located within the City (see "The Obligations - Security and Source of Payment"). S ECURITY FOR THE C .............................. The Certificates constitute direct obligations of the City, payable from a combination of (i) a ERTIFICATES direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City's Utility System (see "The Obligations - Security and Source of Payment"). R ............................... The City reserves the right, at its option, to redeem Bonds and Certificates, as the case may EDEMPTION be, having stated maturities on and after February 15, 2023, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2022, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Obligations - Optional Redemption"). TE ............................ In the opinion of Bond Counsel, the interest on the Bonds and Certificates will be excludable AXXEMPTION from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. _______________ * Preliminary, subject to change. 6 UP ....................... Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of SE OF ROCEEDS the City described on Schedule I attached hereto (the "Refunded Obligations") for debt service savings, and (ii) for various street improvements, and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. R ...................................... The Obligations and the presently outstanding general obligation debt of the City are rated ATINGS "AA+" by Fitch Ratings ("Fitch") and "AA" by Standard & Poor's Rating Services, a Standard & Poor's Financial Services LLC business ("S&P"). B-E-O S ...... The definitive Obligations will be initially registered and delivered only to Cede & Co., the OOKNTRYNLYYSTEM nominee of DTC pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "The Obligations - Book-Entry-Only System"). PR ...................... The City has never defaulted on the payment of its tax-supported indebtedness. AYMENTECORD SFI ELECTEDINANCIAL NFORMATION NetRatio Net FiscalTaxableTax DebtPer CapitaTax Debt to Year TaxableAssessedOutstandingNet FundedTaxable% of EndedEstimatedAssessedValuationat End ofTaxAssessedTotal Tax (3)(5) 9/30PopulationValuation Per CapitaFiscal Year DebtValuationCollections (1) 2008108,980 6,089,499,775$ 55,877 $ 129,439,594$ 1,188 $ 2.13%99.44% (1) 2009111,160 6,291,359,11256,597 122,835,0001,105 1.95%99.40% (2) 2010113,383 6,327,909,02255,810 119,862,6001,057 1.89%98.99% (1) 2011114,517 6,230,117,95854,403 116,165,6501,014 1.86%98.99% (4)(6)(7) (1)(6)(6) 2012115,662 6,412,375,004 115,142,90055,441 1.80%86.18%996 _______________ (1)Source: City Officials. (2)Source: US Census. (3)Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. Source: Denton Central Appraisal District as of July 21, 2011. (4)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (5)Excludes self-supported general obligation debt. (6)Projected. Includes a portion of the Bonds and the Certificates. Excludes the Refunded Obligations. Preliminary, subject to change. (7)Collections for part year only, through January 31, 2012. 7 CITYOFFICIALS,STAFFANDCONSULTANTS EO LECTEDFFICIALS Term City CouncilExpires Mark BurroughsMay, 2012 Mayor Pete KampMay, 2012 Mayor Pro Tem, At Large Place 5 James KingMay, 2012 Councilmember, At Large Place 6 Kevin RodenMay, 2013 Councilmember, District 1 Dalton GregoryMay, 2013 Councilmember, District 2 Jim EngelbrechtMay, 2013 Councilmember, District 3 Chris WattsMay, 2013 Councilmember, District 4 SAS ELECTEDDMINISTRATIVE TAFF NamePosition George C. CampbellCity Manager Howard MartinAssistant City Manager Jon FortuneAssistant City Manager Fred GreeneAssistant City Manager Bryan LangleyChief Financial Officer Jennifer K. WaltersCity Secretary Anita BurgessCity Attorney CA ONSULTANTS AND DVISORS Auditors ......................................................................................................................................................................... Weaver, LLP Dallas, Texas Bond Counsel ............................................................................................................................. McCall, Parkhurst & Horton L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Fort Worth, Texas For additional information regarding the City, please contact: Bryan LangleyDavid Medanich Chief Financial OfficerLaura Alexander City of DentonFirst Southwest Company 215 E. McKinney Streetor777 Main Street, Suite 1200 Denton, Texas 76201Fort Worth, Texas 76102 (940) 349-8224(817) 332-9710 8 OFFICIAL STATEMENT RELATING TO CITY OF DENTON, TEXAS $37,900,000*$46,530,000* GENERAL OBLIGATION REFUNDING ANDCERTIFICATES OF OBLIGATION, SERIES 2012 IMPROVEMENT BONDS, SERIES 2012 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $37,900,000* City of Denton General Obligation Refunding and Improvement Bonds, Series 2012 (the "Bonds") and $46,530,000* City of Denton Certificates of Obligation, Series 2012 (the "Certificates"). The Bonds and the Certificates (collectively the "Obligations") are separate and distinct securities offerings being authorized for issuance under separate ordinances (the "Bond Ordinance" and the "Certificate Ordinance", respectively, each as defined below, and collectively the "Ordinances") to be adopted by the City Council of the City, but are being offered and sold pursuant to a common Official Statement, and while the Bonds and Certificates share certain common attributes, each issue is separate and apart from the other and should be reviewed and analyzed independently, including the kind and type of obligation being issued, its terms of payment, the security for its payment, the rights of the holders, the federal, state or local tax consequences of the purchase, ownership or disposition of the Obligations and the covenants and agreements made with respect thereto. The City Council adopted an ordinance on April 3, 2012 authorizing the issuance of the Bonds (the "Authorizing Bond Ordinance"). In the Authorizing Bond Ordinance, as permitted by the provisions of Chapters 1207 and 1371, Texas Government Code, as amended, the City Council delegated the authority to each of the City Manager and the Assistant City Manager to establish the terms and details of the Bonds and to effect the sale of the Bonds pursuant to a "Pricing Certificate" (the Authorizing Bond Ordinance and the Pricing Certificate for the Bonds are jointly referred to as the "Bond Ordinance"). The City Council adopted an ordinance on April 3, 2012 authorizing the issuance of the Certificates (the "Authorizing Certificate Ordinance"). In the Authorizing Certificate Ordinance, as permitted by the provisions of Chapters 1371, Texas Government Code, as amended, the City Council delegated the authority to each of the City Manager and the Assistant City Manager to establish the terms and details of the Certificates and to effect the sale of the Certificates pursuant to a "Pricing Certificate" (the Authorizing Certificate Ordinance and the Pricing Certificate for the Certificates are jointly referred to as the "Certificate Ordinance"). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the respective Ordinance, except as otherwise indicated herein. There follows in this Official Statement descriptions of the Obligations and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas, Texas. DC ... The City of Denton, Texas (the "City") is a political subdivision located in Denton County operating ESCRIPTION OF THE ITY as a home-rule city under the laws of the State of Texas and a charter approved by the voters in 1959. The City operates under the Council/Manager form of government where the Mayor and six Councilmembers are elected for staggered two-year terms. The City Council formulates operating policy for the City while the City Manager is the chief administrative officer. The City is approximately 101.15 square miles in area. PLANOFFINANCING P ...Proceeds of the Bonds are expected to be used (i) to refund certain outstanding obligations of the City described on URPOSE Schedule I attached hereto (the "Refunded Obligations") for debt service savings and (ii) for various street improvements and park land acquisitions and improvements, and (iii) to pay the costs associated with the issuance of the Bonds. Proceeds from the sale of the Certificates will be used for (a) acquisition of vehicles and equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's solid waste disposal system; (b) renovations to, and equipping of, existing municipal buildings, including the acquisition and installation of replacement heating, venting and air conditioning equipment, flooring and roofing; (c) acquisition of vehicles and equipment for the fire, police, streets and traffic control, facilities management, and parks and recreation departments; (d) constructing and improving streets, including installation of traffic signals; (e) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's waterworks and sewer system; (f) acquisition of equipment for, and acquiring, constructing, installing and equipping additions, extensions, renovations and improvements to, the City's electric light and power system; and also for the purpose of paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection the design of an animal shelter and with said projects and said Certificates of Obligation. _______________ * Preliminary, subject to change. 9 RO ...Proceeds from the sale of the Bonds will be used in part to refund certain outstanding obligations of EFUNDEDBLIGATIONS the City described on Schedule I attached hereto (the "Refunded Obligations"). The principal and interest due on the Refunded Obligations are to be paid on the scheduled interest payment dates and redemption dates of such Refunded Obligations as shown in Schedule I, from funds to be deposited pursuant to an escrow agreement with respect to the Bonds (the "Escrow Agreement") between the City and The Bank of New York Mellon Trust Company, N.A. (the "Escrow Agent"). The Bond Ordinance provides that from the proceeds of the sale of the Bonds received from the Initial Purchaser of the Bonds, together with other funds of the City, if any, the City will deposit with the Escrow Agent an amount which, together with the Federal Securities (defined below) purchased with a portion of the Bond proceeds and the interest to be earned on such Federal Securities, will be sufficient to accomplish the discharge and final payment of the Refunded Obligations on their respective redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. Grant Thornton LLP, certified public accountants, a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Initial Purchaser of the Bonds thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Obligations. Such maturing principal of and interest on the Federal Securities will not be available to pay the Bonds (see "Other Information – Verification of Arithmetical and Mathematical Computations"). By deposit of the Federal Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all the Refunded Obligations in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Grant Thornton LLP, certified public accountants, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed as being outstanding obligations of the City payable from taxes or revenues received by the City, as the case may be, or for the purpose of applying any limitation on the issuance of debt. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason the cash balance on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payment. SUP . . . The proceeds from the sale of the Obligations, together with other City funds, if any, will OURCES AND SES OF ROCEEDS be applied as follows: Sources of FundsThe BondsThe Certificates Par Amount of Bonds-$ -$ Original Issue Premium- - Transfer from Prior Issue Debt Service Funds- - Transfer from Utility System Debt Service Reserve Fund- - Total Sources of Funds-$ -$ Uses of Funds Deposit to Escrow Fund-$ -$ Original Issue Discount- - Deposit to Construction Fund- - Cost of Issuance (1) -- Total Uses of Funds-$ -$ ________________ (1) Including Underwriters' Discount. 10 THEOBLIGATIONS DO . . . The Obligations are dated April 1, 2012 (the "Dated Date"), and mature on February 15 ESCRIPTION OF THE BLIGATIONS in each of the years and in the amounts shown on the cover page and page 3 hereof. Interest will accrue from the date of initial delivery thereof (the "Delivery Date"), will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on August 15 and February 15 of each year, commencing August 15, 2012 for the Bonds and February 15, 2013 for the Certificates, until maturity or prior redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of No physical delivery of The Depository Trust Company ("DTC") pursuant to the Book-Entry-Only System described herein. the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations. See "The Obligations - Book-Entry-Only System" herein. AI . . . The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, UTHORITY FOR SSUANCE particularly Chapters 1207, 1371 and 1331, Texas Government Code, as amended, and the Bond Ordinance. The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, and Texas Government Code, Chapter 1371, as amended, and the Certificate Ordinance. SSP . . . ECURITY AND OURCE OF AYMENT The Bonds . . . The Bonds constitute direct and voted obligations of the City and the principal thereof and interest thereon are payable from an annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City, as provided in the Bond Ordinance. The Certificates . . . The Certificates constitute direct obligations of the City, payable from a combination of (i) a direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City's Utility System (consisting of the electric system and the waterworks and sewer system). TRL . . . All taxable property within the City is subject to the assessment, levy and collection by the City of a AXATEIMITATION continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt, including the Obligations, within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all general obligation debt, based on 90% tax collection factor. OR . . . The City reserves the right, at its option, to redeem the Obligations having stated maturities on and PTIONAL EDEMPTION after February 15, 2023 in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2022 or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds or Certificates are to be redeemed, the City may select the maturities of Bonds or Certificates, as the case may be, to be redeemed. If less than all the Bonds or Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds or Certificates, as the case may be, are in Book-Entry-Only form) shall determine by lot the Bonds or Certificates, or portions thereof, within such maturity to be redeemed. If a Bond or Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond or Certificate (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. With respect to any optional redemption of the Bonds or Certificates, as the case may be, unless certain prerequisites to such redemption required by the respective Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds or Certificates, as the case may be, to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption will, at the option of the City, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the City will not redeem such Bonds or Certificates, as the case may be, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that the Bonds or Certificates, as the case may be, have not been redeemed. 11 NR . . . Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of OTICE OF EDEMPTION redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. IF AN OBLIGATION (OR ANY PORTION OF ITS PRINCIPAL SUM) SHALL HAVE BEEN DULY CALLED FOR REDEMPTION AND NOTICE OF SUCH REDEMPTION DULY GIVEN, THEN UPON THE REDEMPTION DATE SUCH OBLIGATION (OR THE PORTION OF ITS PRINCIPAL SUM TO BE REDEEMED) SHALL BECOME DUE AND PAYABLE, AND, IF MONIES FOR THE PAYMENT OF THE REDEMPTION PRICE ARE HELD FOR THE PURPOSE OF SUCH PAYMENT BY THE PAYING AGENT/REGISTRAR AND ALL OTHER CONDITIONS TO REDEMPTION ARE SATISFIED, INTEREST SHALL CEASE TO ACCRUE AND BE PAYABLE FROM AND AFTER THE REDEMPTION DATE ON THE PRINCIPAL AMOUNT REDEEMED. D . . . The Ordinances provide that any Obligation and the interest thereon shall be deemed to be paid, retired, and no EFEASANCE longer outstanding (a "Defeased Obligation") within the meaning of such Ordinance when payment of the principal of such Obligation, plus interest thereon to the due date either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Government 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 provide for such payment, and when proper arrangements have been made by the City with the Paying Agent/Registrar for the payment of its services until all Defeased Obligations shall have become due and payable. At such time as an Obligation shall be deemed to be a Defeased Obligation hereunder, as aforesaid, such Obligation and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in the Ordinance, and such principal and interest shall be payable solely from such money or Government Obligations. Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from such Government Obligations received by the Paying Agent/Registrar which is not required for the payment of the Obligations and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City, or deposited as directed in writing to the City. The Ordinances provide that "Government Obligations" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the City Council approves such defeasance, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the City Council approves such defeasance, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (d) any other then authorized securities or obligations under applicable Texas state law that may be used to defease obligations such as the Obligations. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Obligations. Because the Ordinances do not contractually limit such investments, registered owners will be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that any particular rating for U.S. Treasury securities used as Government Obligations or the rating for any other Government Obligations will be maintained at any particular rating category. Upon such deposit as described above, such Defeased Obligations shall no longer be regarded to be outstanding obligations payable from ad valorem taxes levied by the City or from the other revenues pledged to their payment in the Ordinances, but will be payable only from the funds and Government Obligations deposited in escrow and will not be considered debt of the City for any purpose. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; and (ii) gives notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and financial arrangements; (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. 12 B-E-OSThis section describes how ownership of the Obligations is to be transferred and how the . . . OOKNTRYNLYYSTEM principal of, premium, if any, and interest on the Obligations are to be paid to and accredited by DTC while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Obligations in the aggregate principal amount thereof and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor’s rating of "AA+". The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owners entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC’s records reflect only the identity of the Direct Participant to whose account such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. 13 Redemption notices shall be sent to DTC. If less than all of the Obligations within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments on the Obligations will be made to DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar on payable dates in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as in the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment to DTC is the responsibility of the City, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City and the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Obligation certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Initial Purchaser. Effect of Termination of Book-Entry-Only System In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, printed Obligations will be issued to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "The Obligations - Transfer, Exchange and Registration" below. PA/R . . . The initial Paying Agent/Registrar for the Bonds and the Certificates is The Bank of New York AYING GENTEGISTRAR Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds and Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds and Certificates. Upon any change in the Paying Agent/Registrar for the Bonds and Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds and Certificates, as applicable, by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Principal of the Bonds and Certificates is payable to the registered holder appearing on the registration books of the Paying Agent/Registrar (the "Registered Owner") at the designated corporate trust office of the Paying Agent/Registrar upon surrender of the Bonds and Certificates for payment. Interest on the Bonds and Certificates is payable to the Register Owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (identified below) and such interest shall be paid by the Paying Agent/Registrar by check mailed, first class postage prepaid, to the Register Owner or by such other arrangement, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the Registered Owner. If the date for the payment of the principal of or interest on the Bonds and Certificates shall be a Saturday, Sunday, a legal holiday, or a day when banking institutions in the city where the designated corporate office of the Paying Agent/Registrar is located is authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. 14 T,ER . . . In the event the Book-Entry-Only System should be discontinued, printed RANSFERXCHANGE AND EGISTRATION Obligations will be delivered to the Registered Owners and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed Obligations to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the Registered Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new Registered Owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the Registered Owner or assignee of the Registered Owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the Registered Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "The Obligations—Book-Entry-Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the Registered Owner of the uncalled balance of an Obligation. RDIP . . . The record date ("Record Date") for the interest payable on the Bonds and ECORDATE FOR NTERESTAYMENT Certificates on any interest payment date means the close of business on the last business day of the month next preceding such interest payment date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Registered Owner of a Bond and Certificate appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. A . . . In each Ordinance, the City has reserved the right to amend the Ordinance without the consent of any holder MENDMENTS of the respective Obligation for the purpose of amending or supplementing the Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the City, do not materially adversely affect the interests of the holders. Each Ordinance further provides that the holders of the Bonds or Certificates, as applicable, aggregating in principal amount a majority of the outstanding Bonds or Certificates, as the case may be, shall have the right from time to time to approve any amendment not described above to the applicable Ordinance if it is deemed necessary or desirable by the City; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Bonds or Certificates so affected, no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Bonds or Certificates; (ii) reducing the rate of interest borne by any of the outstanding Bonds or Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Bonds or Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Bonds or Certificates, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Bonds or Certificates necessary for consent to such amendment. Reference is made to the Ordinances for further provisions relating to the amendment thereof. R . . . Each Ordinance establishes specific events of default with respect to the respective series of Obligations. If the EMEDIES City defaults in the payment of the principal of or interest on the Bonds or Certificates when due or the City defaults in the observance or performance of any of the covenants, conditions, or obligations of the City, the failure to perform which materially, adversely affects the rights of the owners thereof, including but not limited to, their prospect or ability to be repaid in accordance with the respective Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any owner to the City, each Ordinance provides that any registered owner of a respective Obligation is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make such payment or observe and perform such covenants, obligations, or conditions. The issuance of a writ of mandamus may be sought if there is no other available remedy at law to compel performance of the respective Obligations or Ordinance and the City's obligations are not uncertain or disputed. The remedy of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the appointment of a trustee to 15 represent the interest of the owners of the respective Obligations upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the Registered Owners. The Texas Supreme Court has ruled in Tooke v. City of Mexia 197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is unclear whether the Texas legislature has effectively waived the City’s sovereign immunity from a suit for money damages, owners of Obligations may not be able to bring such a suit against the City for breach of the Obligations or Ordinance covenants in the absence of City action. Chapter 1371, Texas Government Code ("Chapter 1371"), which pertains to the issuance of public securities by issuers such as the City, permits the City to waive sovereign immunity in the proceedings authorizing its debt, but in connection with the issuance of the Obligations, the City has not waived sovereign immunity. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City's property. Further, the Registered Owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Bonds or the Certificates. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligationholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Obligations are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Initially, the only Registered Owner of the Bonds and Certificates will be The Depository Trust Company. See "The Obligations - Book-Entry-Only System" herein for a description of the duties of DTC with regard to ownership of the Bonds and Certificates. TRTPLBI HEEMAINDER OF HIS AGEEFTLANKNTENTIONALLY 16 TAXINFORMATION AVTL . . . The appraisal of property within the City is the responsibility of the Denton Central Appraisal District DALOREMAXAW (the "Appraisal District"). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under V.T.C.A., Title I, Tax Code, as amended (the "Property Tax Code") to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount that would not exceed the lesser of (1) the market value of the property for the most recent tax year that the market value was determined by the appraisal office or (2) the sum of (a) 10% of the property’s appraised value in the preceding tax year, plus (b) the property’s appraised value in the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of sixteen members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to less than $3,000 of the market value. The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (ii) the surviving spouse was at least 55 years of age at the time of the death of the individual’s spouse and (iii) the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse. In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. Under Article VIII and State law, the governing body of a county, municipality or junior college district may provide for a freeze on total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older above the amount of tax imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, the total amount of taxes imposed on such homestead cannot be increased except for improvements (other than maintenance, repairs or improvements required to comply with governmental requirements) and such freeze is transferable to a different residence homestead. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual’s spouse. Once established such freeze cannot be repealed or rescinded. 17 State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children; provided, however, that beginning in the 2009 tax year, a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100 percent disability compensation due to a service-connected disability and a rating of 100 percent disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran’s residence homestead. In addition, effective January 1, 2012, and subject to certain conditions, surviving spouses of a deceased veteran who had received a disability rating of 100% will be entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse until such surviving spouse remarries. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open-space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property provided official action to tax the same was taken before April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides for the exemption from taxation of "goods-in-transit." "Goods-in- transit" is defined by Section 11.253 of the Property Tax Code, which is effective for tax years 2008 and thereafter, as personal property acquired or imported into Texas and transported to another location in the State or outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. Section 11.253 permits local governmental entities, on a local option basis, to take official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax "goods-in-transit" during the following tax year. A taxpayer may only receive either the freeport exemption or the "goods-in-transit" exemption for items of personal property. The City or Denton County may create one or more tax increment financing districts ("TIF") within the City or Denton County, as applicable, and freeze the taxable values of property in the TIF at the value at the time of its creation. Other overlapping taxing units levying taxes in the TIF may agree to contribute all or part of future ad valorem taxes levied and collected against the value of property in the TIF in excess of the "frozen values" to pay or finance the costs of certain public improvements in the TIF. Taxes levied by the City against the values of real property in the TIF in excess of the "frozen" value are not available for general city use but are restricted to paying or financing "project costs" within the TIF. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City is also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City. In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes, however no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City. ETRRTR . . . Under the current Property Tax Code a governing body of a taxing unit is FFECTIVE AXATE AND OLLBACKAXATE required to adopt its annual tax rate per $100 taxable value for the unit before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the lower of the effective tax rate or the rollback tax rate until it has held two public hearings on the proposed increase following notice to the taxpayers and otherwise complied with the Property Tax Code. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. 18 "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PATP . . . Property within the City is generally assessed as of January 1 of each year. ROPERTYSSESSMENT AND AXAYMENT Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PI . . . Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: ENALTIES AND NTEREST Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest accrues at a rate of one percent (1%) for each month or portion of a month the tax remains unpaid. A delinquent tax continues to incur the penalty interest as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest is to compensate the taxing unit for revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CATC . . . The City grants an exemption to market value of the residence homestead of persons 65 ITY PPLICATION OF AXODE years of age or older of $40,000 and has indicated a desire to increase the Over-65 exemption by an additional $5,000 each year in 2013-2014 until the exemption amount reaches $50,000. Disabled taxpayers also receive a $10,000 exemption. The City grants an additional one-half of one percent, or a minimum of $5,000 exemption of the market value of residence homesteads. See Table 1 for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property. Denton County began collecting taxes for the City during the fiscal year 2006-07. The City does not allow split payments, and discounts are not allowed. 19 The City does not tax freeport property. The City collects the additional one-half cent sales tax for reduction of ad valorem taxes. The City does tax "goods-in-transit". The City has not adopted the tax freeze for citizens who are disabled or are 65 years of age or older. The City has adopted a tax abatement policy. The City participates in one tax increment reinvestment zone, which was created in 2010. TIF . . . The City created Tax Increment Reinvestment Zone Number One (known as the Downtown AXNCREMENTINANCING TIF) in 2010. The 2011 taxable assessed valuation increase for the Downtown TIF was $2,300,954 and resulted in approximately $15,871 in ad valorem revenue, which is reported in the City’s Downtown Tax Increment Financing Fund for the FY 2011-12 Adopted Budget. TAP . . . The City has adopted a tax abatement policy. In 1990, the City council adopted a resolution AXBATEMENTOLICY setting guidelines and criteria for granting abatements in reinvestment zones created within the City. These guidelines specifically note that incentives are limited to companies which create new wealth and do not adversely affect existing businesses operating within the City. The City Council approved the following tax abatement agreements: In 2004, a 35% tax abatement for a term of five years was granted to Fastenal Company for their 200,000 square foot, $5 million distribution center. The project was delayed but completed in 2008 at an estimated valuation of $15 million. The agreement will terminate in 2013. In 2007, a 100% tax abatement for a term of up to seven years was granted to Aldi Foods for their 500,000 square foot $52 million distribution center. The abatement amount is based on the cost incurred by Aldi to construct a road to their site. The project was completed in 2009 and the agreement will terminate in 2016. In 2010, a 65% tax abatement agreement for a term of five years was granted to Target Corporation for its 400,000 square foot frozen and refrigerated food distribution center. Target broke ground on the project in 2011 and plans a late 2012 or early 2013 opening. In 2011, a 40% tax abatement agreement for a term of five years was granted to Peerless Manufacturing for its 80,000 square foot, $16 million, manufacturing facility. Peerless plans to break ground in late 2012 or 2013. Peerless is an existing Denton business who will consolidate other manufacturing operations to Denton. The agreement will terminate five years from the opening of the facility. C380A . . . The City has also entered into Chapter 380 agreements. Each agreement is based on the HAPTERGREEMENTS project’s contribution in either sales or property tax revenue. The City Council approved the following Chapter 380 agreements: In 2001, an agreement was approved for the 450,000 square foot, $50 million Denton Crossing retail center. The grantee receives one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. The project was completed and the Chapter 380 Grant was initiated in 2005. The agreement will terminate in 2019. In 2003, an agreement was approved for Sally Beauty Company for their new international headquarters valued at over $29 million. The company receives a grant equal to 40% of the property tax paid on the new facility and equipment for a period of ten years. The agreement will terminate in 2014. In 2004, an agreement was approved for Teasley Partners for an urban style mixed-use development. The grantee may receive one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. The project has not been completed. Although a new hotel and some residential units have been completed, no qualifying retail has been constructed. In 2004, an agreement was approved for Windjammer Ltd for Unicorn Lake, an urban style mixed-use development. The grantee will receive one-third of the sales tax generated by the project for a maximum of fifteen years as reimbursement for public improvement costs related to the project. Although the project is still under development, the grantee has satisfied the thresholds established in the agreement. The grant payments were initiated in December 2009. The agreement will terminate in 2023. 20 In 2007, an agreement was approved for Allegiance Hillview for the Rayzor Ranch mixed-use development. The 400 acre project will have over one million square feet of retail and will be built in two phases. The agreement provides a varying rate of sales tax reimbursement based on public improvement costs, which include the widening of a state highway that bisects the project. The grantee will receive a maximum of $20 million over a 15 year term for phase one and a maximum of $42 million over a term of 20 years for phase two. Approximately 405,000 square feet of retail in phase one has been completed, with Sam's and Wal-Mart opening in Fall 2010. Future retail include a Kohl’s Department Store. The developers plan to begin construction on the Town Center in the fourth quarter of 2012. In 2008, an agreement was approved for the expansion of a jewelry manufacturing plant operated by Josten’s, a manufacturer of high school and college class rings. The grant is based on 75% of the new property tax revenue generated by the expansion for a term of seven years. The project was completed and the agreement will terminate in 2015. In 2010, an agreement was approved for Grand Mesa, contractor for Schlumberger, equal to 50% of new property tax revenue generated for their 150,000 square foot regional maintenance facility. The term of the agreement is seven years and will terminate in 2017. In 2011, an agreement was approved for a major renovation of the Golden Triangle Mall. A threshold of a minimum $45 million must be invested into the property for the new owners to receive a 50% share of the sales tax resulting from the renovations. The agreement allows Golden Triangle Mall until October 1, 2014 to reach their investment threshold. The term of the agreement will terminate in 20 years. AP . . . In 2010 the City conducted annexation proceedings for fifteen (15) areas within its extraterritorial NNEXATION LANS jurisdiction (ETJ) totaling approximately 7,494 acres. Approximately 3,377 acres of this total acreage were immediately annexed on May 4, 2010. The remaining 4,117 acres were given 5-year Development Agreements in accordance with Section 43.035 of the Texas Local Government Code (Tx.LGC). This section of the Tx.LGC allows property appraised for ad valorem tax purposes as land for agricultural, wildlife management, or timber land to retain their ETJ status for up to 45 years through a development agreement commonly referred to as a non-annexation agreement (NNA). At the time of annexation proceedings in 2010, Chapter 212.172(d) of the Texas Local Government Code (LGC) limited the renewal or extension of each successive NAA "The total period to fifteen (15) years; not to exceed a total of 45 years. However, the Tx.LGC has been revised to simply state: duration of the contract and any successive renewals or extensions may not exceed 45 years," thus, there is no longer a 15-year cap or a limited number of terms. Since the first NAAs offered by the City were limited to 5 years each, the total duration of future contracts and any successive renewals or extensions may not exceed forty (40) years per NAA. It is estimated that a total of 187 residents were added to the City’s population from the immediate annexation of the aforementioned 3,377 acres that were immediately annexed in 2010. In addition to the 15 areas mentioned above, three (3) other areas, totaling approximately 1,595 acres were placed in 3-year annexation plans that were adopted by the City Council on April 6, 2010. The City Council will consider the annexation of these 3 areas in May 2013. It is estimated that a total of 1,949 residents will be added to the City’s population if the 3 areas are annexed in their entirety. However, it is unlikely that the full population projections will be realized in 2013 since several property owners were offered NAAs and retain their ETJ status. In accordance with Section 43.056 of the Tx.LGC, the City has adopted service plans that provide for full municipal services (defined to mean services provided by the City within its full-purpose boundaries, including water and wastewater service otherwise provided to similar areas in the City but excluding gas and electrical service) to the areas that were annexed in 2010, and those areas that are included in a 3-year annexation plan. The City may provide the services utilizing any of the methods by which it extends services to other areas of the City. The cost to provide services to the areas, as well as any revenues generated from the areas, will occur immediately with regard to some services and in phases over a three to five year period in regard to other services but only as areas are finally annexed. While the City has projected a total net aggregate cost of annexing all 9,089 acres (costs of services to the annexed areas minus additional ad valorem taxes, sales taxes and other revenues generated from the annexed areas), the financial impact to the City is not material since some of these properties may be annexed over a 40 year period due to the possibility of extended NAAs. If the areas were annexed within 5 years, the cost would be approximately $2,014,000. If the areas were annexed within 10 years, the cost would be approximately $2,625,000. The estimates above make a number of assumptions regarding expenditures and revenues over the next few years. The overriding assumption for the analysis is that the fundamental development of the described areas will not change. In other words, the annexation cost estimate does not assume that any major development will take place in the described areas. This assumption is being made for the cost estimate since additional developments are merely a matter of speculation at this time. The use of this assumption, however, should not be interpreted to mean that the described areas are not expected to develop over time. 21 T1-V,EGOD ABLEALUATIONXEMPTIONS AND ENERALBLIGATIONEBT 2011/12 Market Valuation Established by Denton Central Appraisal District7,252,499,619$ Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions85,860,689$ Over 65 Exemptions197,929,836 Disabled Persons Exemptions2,530,660 Disabled Veterans Exemptions19,240,766 Agricultural Land Use Productivity301,187,756 Historical/Other Exemptions3,644,701 Freeport Exemptions139,845,135 Abatement Exemptions51,431,877 Prorated Exempt Property363,074 Pollution Exemptions30,271,872 Homestead Cap Adjustment7,818,249840,124,615 2011/12 Taxable Assessed Valuation (as of 7-21-11)6,412,375,004$ 2011/12 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone(2,300,954) 2011/12 Taxable Assessed Valuation available for General Obligations and Debt of City (as of 7-21-11)6,410,074,050$ (1) City Funded Debt Payable from Ad Valorem Taxes (2) General Obligation Bonds (as of 2-1-12)118,070,000$ (2) Certificates of Obligation (as of 2-1-12)126,335,000 Tax and Utility System Revenue Bonds (as of 2-1-12)56,740,000 (3) The Certificates46,530,000 (3) The Bonds37,900,000 Funded Debt Payable from Ad Valorem Taxes$385,575,000 (4) Less Self-Supporting General Obligation Debt (5) Solid Waste System General Obligation Debt53,471,150$ Drainage System General Obligation Debt2,295,000 (5) Utility System General Obligation Debt204,830,000260,596,150 Net Tax Supported Debt Payable from Ad Valorem Taxes124,978,850$ Interest and Sinking Fund as of 1-31-12 (unaudited)$22,683,105 Ratio Total Funded Debt to Taxable Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02% Ratio Net Funded Debt to Taxable Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.95% 2012 Estimated Population - 115,662 Per Capita Taxable Assessed Valuation - $55,421 Per Capita Total Funded Debt - $3,334 Per Capita Net Funded Debt - $1,081 _ _______________ (1)The above statement of indebtedness does not include $179,065,000 Utility System Revenue Bonds as these bonds are payable solely from the net revenues of the Utility System (the "System"), as defined in the ordinances authorizing such bonds. (2)Excludes the Refunded Obligations. Preliminary, subject to change. (3)Preliminary, subject to change. (4)As a matter of policy, the City provides payment of debt service on its general obligation debt issued to fund improvements to its Utility System, Solid Waste System and Drainage System from surplus revenues of these Systems (see "Table 7 – General Obligation Debt Service Requirements" and "Table 9 – Computation of Self-Supporting Debt"). This policy is subject to change in the future. The City’s Utility System is comprised of the City’s entire existing electric, light and power system and the existing waterworks and sewer system. The City’s Utility System General Obligation Debt has been issued to finance improvements to finance or refinance Utility System improvements and contractual obligations and is being paid, or is expected to be paid, from Utility System revenues. The City has $156,855,000 Utility System Revenue Bonds outstanding payable from a pledge of Utilty System revenues (excludes the relevant Refunded Obligations). The City’s Solid Waste System General Obligation Debt has been issued to finance or refinance Solid Waste System improvements and is being paid, or is expected to be paid, from Solid Waste System revenues. The City has no outstanding Solid Waste System Revenue Bonds. The City’s Drainage System General Obligation Debt has been issued to finance or refinance Drainage System improvements and is being paid, or is expected to be paid, from Drainage System revenues. The City has no outstanding Drainage System Revenue Bonds. (5)Includes a portion of the Bonds and Certificates. Preliminary, subject to change. 22 T2-TAVC ABLEAXABLESSESSEDALUATIONS BY ATEGORY (1) Taxable Appraised Value for Fiscal Year Ended September 30, 201220112010 % of% of% of CategoryAmountTotalAmountTotalAmountTotal Real, Residential, Single Family3,610,010,439$ 49.78%3,545,009,743$ 50.46%3,475,374,687$ 48.95% Real, Residential, Multi-Family689,687,370 9.51%661,530,441 9.42%688,298,068 9.70% Real, Vacant Lots/Tracts140,758,151 1.94%149,930,858 2.13%162,282,464 2.29% Real, Acreage (Land Only)366,276,930 5.05%352,636,983 5.02%356,896,058 5.03% Real, Farm and Ranch Improvements37,791,667 0.52%32,148,788 0.46%33,242,494 0.47% Real, Commercial and Industrial1,449,703,794 19.99%1,381,432,997 19.66%1,392,817,179 19.62% Real, Oil, Gas, and Other Mineral Reserves86,195,936 1.19%116,459,175 1.66%68,616,710 0.97% Real and Tangible Personal, Utilities87,973,672 1.21%66,756,673 0.95%79,577,104 1.12% Tangible Personal, Commercial and Industrial714,263,695 9.85%651,961,490 9.28%749,892,931 10.56% Tangible Personal, Other14,868,334 0.21%16,634,472 0.24%17,779,752 0.25% Real and Special Property, Inventory54,969,631 0.76%51,489,918 0.73%74,454,431 1.05% Total Appraised Value Before Exemptions7,252,499,619$ 100.00%7,025,991,538$ 100.00%7,099,231,878$ 100.00% Less: Total Exemptions/Reductions(840,124,615) (795,873,580) (771,322,856) (2)(2)(2) Supplements- - - (3) Taxable Assessed Value6,412,375,004$$ 6,327,909,0226,230,117,958$ Taxable Appraised Value for (1) Fiscal Year Ended September 30, 20092008 % of% of CategoryAmountTotalAmountTotal Real, Residential, Single Family3,397,880,407$ 48.63%3,192,783,727$ 48.35% Real, Residential, Multi-Family638,906,357 9.14%552,635,146 8.37% Real, Vacant Lots/Tracts160,766,209 2.30%135,800,628 2.06% Real, Acreage (Land Only)330,913,400 4.74%330,570,774 5.01% Real, Farm and Ranch Improvements32,526,580 0.47%51,987,396 0.79% Real, Commercial and Industrial1,416,914,699 20.28%1,326,705,553 20.09% Real, Oil, Gas, and Other Mineral Reserves51,531,540 0.74%46,500,010 0.70% Real and Tangible Personal, Utilities84,395,222 1.21%68,372,262 1.04% Tangible Personal, Commercial and Industrial778,403,096 11.14%785,231,437 11.89% Tangible Personal, Other20,656,852 0.30%19,919,543 0.30% Real Property, Inventory74,539,998 1.07%92,889,789 1.41% Total Appraised Value Before Exemptions6,987,434,360$ 100.00%6,603,396,265$ 100.00% Less: Total Exemptions/Reductions(696,075,248) (671,868,100) (2) Supplements- 157,971,610 Taxable Assessed Value6,291,359,112$ 6,089,499,775$ _______________ (1) Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. For the Fiscal Year ended 2012, the values were reported on July 21, 2011 based on information as of January 1, 2011. (2) Due to a change in Appraisal District reporting, supplements are included in category amounts. (3) Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. 23 T3-VGODH ABLEALUATION AND ENERALBLIGATIONEBTISTORY NetRatio NetNet FiscalTaxableTax DebtTax DebtFunded Year TaxableAssessedOutstandingto TaxableDebt EndedEstimatedAssessedValuationat End ofAssessedPer (3)(5) 9/30PopulationValuation Per CapitaFiscal Year ValuationCapita (1) 2008 108,980 6,089,499,775$ 55,877 $ 129,439,594$ 2.13%1,188 $ (1) 2009 111,160 6,291,359,11256,597 122,835,0001.95%1,105 (2) 2010 113,383 6,327,909,02255,810 119,862,6001.89%1,057 (1) 2011 114,517 6,230,117,95854,403 116,165,6501.86%1,014 (1) (4)(6) (6)(6) 2012 115,662 6,412,375,004 115,142,90055,441 1.80%996 _______________ (1)Source: City Officials. (2)Source: US Census. (3)Valuations shown are certified taxable assessed values reported by the Denton Central Appraisal District to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. Source:Denton Central Appraisal District as of July 21, 2011. (4)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (5)Excludes the Refunded Obligations and self-supported general obligation debt. (6)Projected, includes a portion of the Bonds and a portion of the Certificates. Preliminary, subject to change. T4-TR,LCH ABLEAXATEEVY AND OLLECTIONISTORY Fiscal Year Distribution EndedTaxGeneralInterest and % Current% Total (1) 9/30 Rate FundSinking FundTax Levy CollectionsCollections 20080.66652$ 0.44765$ $ 0.2188740,816,256$ 98.77%99.44% 20090.666520.447650.21887 43,086,12398.32%99.40% 20100.666520.447650.21887 42,898,41498.88%98.99% 20110.689750.470880.21887 43,890,12198.99%98.99% (2)(2) 20120.689750.470880.21887 44,213,48686.18%86.18% _______________ (1)Tax levy for the 2012 year is based on the Certified Value. Prior years represent adjusted values that include supplements. (2)Collections for part year only, through January 31, 2012. 5-TLT T ABLEENARGESTAXPAYERS 2011/12% of Total TaxableTaxable AssessedAssessed Name of TaxpayerNature of PropertyValuationValuation Columbia Medical Center of DentonHospital/Professional Building$78,054,2601.22% Paccar Inc.Diesel Truck Manufacturing60,418,4740.94% Inland Western Denton Crossing Ltd PSReal Estate Development45,388,8940.71% Cypress Denton Station LTDResidential Multifamily 38,803,3890.61% Verizon SouthwestTelephone Utility33,292,7900.52% GEL Timberlinks LLCDResidential Multifamily24,197,1650.38% Denton Education Housing Corp.Residential Multifamily23,423,2800.37% SCI Gateway at Denton Fund 25 LLCCommercial Lots/Real, Industrial 20,403,8020.32% CNL Retirement CRS1Medical Facilities20,283,6000.32% Range Texas Production LLCGas Utility18,114,5420.28% $ 5.65%362,380,196 Source: Denton Central Appraisal District. 24 GODL . . . No general obligation debt limitation is imposed on the City under current State ENERALBLIGATIONEBTIMITATION law or the City's Home Rule Charter (see "The Obligations – Tax Rate Limitation" for a description of the limitations on ad valorem tax rates.). T6-EOTD ABLESTIMATEDVERLAPPING AXEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. 2011/12City'sAuthorized Taxable2011/12TotalEstimatedOverlappingBut Unissued AssessedTaxFunded%Funded DebtDebt As Of Taxing JurisdictionValueRateDebtApplicableAs of 2-1-122-1-12 (1)(2)(3) City of Denton6,412,375,004$$0.68975$124,978,850100.00%124,978,850$ 0$ Denton Independent School District8,827,685,5291.53000 592,214,14263.25%374,575,445116,749,713 Denton County53,491,990,7140.27736 477,705,00011.97%57,181,289330,713,873 Argyle Independent School District997,763,6651.46005 54,200,3767.90%4,281,830- Aubrey Independent School District574,567,5561.54000 52,924,3450.03%15,877- Krum Independent School District705,064,3911.54000 47,066,5072.69%1,266,089- Pilot Point Independent School District469,304,2781.37000 19,484,9640.07%13,639- Ponder Independent School District853,195,8081.34461 29,200,0002.15%627,800- Sanger Independent School District651,014,5951.37207 27,311,0401.07%292,228- Total Direct and Overlapping Funded Debt563,233,047$ Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation………………………………………8.78% Per Capita Overlapping Funded Debt…………………………………………………………………………………$ 4,967.53 __________________ (1)Includes tax incremental value of approximately $2,300,954 that is not available for the City's general obligations and debt of City. (2)Includes a portion of the Bonds and a portion of the Certificates, less the Refunded Obligations and self-supporting debt. Preliminary, subject to change. (3)Reflects remaining authorization after the issuance of the Bonds. 25 DEBTINFORMATION 26 T8-ISFBP ABLENTEREST AND INKING UNDUDGETROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39,075,952$ Interest and Sinking Fund Balance as of 9/30/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,2$79,080 Interest and Sinking Fund Tax Levy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,166,809 From Revenue Supported Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..24,249,362 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 41,745,251 .$2,669,299 Estimated Balance, 9/30/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T9-CS-SD ABLEOMPUTATION OF ELFUPPORTING EBT Net Revenue from Solid Waste System, Fiscal Year Ended 9-30-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$5,174,307 Less: Solid Waste System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,174,307$ Solid Waste System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,817,328 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,979$ Net Revenue from Drainage System, Fiscal Year Ended 9-30-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,131,178$ Less: Drainage System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,131,178$ Drainage System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,225 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589,953$ Net Revenue from Utility System (Electric System and Waterworks and Sewer System), Fiscal Year Ended 9-30-11 . . 51,081,657$ Less: Utility System Revenue Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,916,896 Balance Available for Other Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34,164,761$ Utility System General Obligation Bond Requirements, 2012 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,179,134 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,985,627$ T10-ABUGOB ABLEUTHORIZED UTNISSUEDENERALBLIGATIONONDS AmountAmount DateAmountHeretoforeBeingUnissued PurposeAuthorizedAuthorizedIssuedIssuedBalance Transportation2/5/200527,700,000$ 24,900,100$ 2,799,900$ -$ Parks2/5/200510,700,000 9,505,900 1,194,100 - 38,400,000$ 34,406,000$ 3,994,000$ -$ AIAGOD . . . As shown in Table 10 above, after the issuance of the NTICIPATED SSUANCE OF DDITIONAL ENERALBLIGATIONEBT Bonds, the City will no longer have voted but unissued debt remaining to be issued. During calendar year 2012, City staff anticipates that a citizens committee will be formed to study whether the City should seek additional voter authorization to fund additional infrastructure needs of approximately $20 million over the next five years. While the City cannot be certain at present that an election will be called, or if it is, that all or part of the measures submitted to the public will be approved, it is possible that the City could do so, and that additional tax-supported debt could be issued within the next 12 months. The City may also issue tax-supported debt other than bonds to fund public improvements, such as the Certificates, without submitting a measure to the voters, but subject to voter petition rights for a referendum. 27 T11-OO ABLETHERBLIGATIONS The City has entered into capital lease agreements. The following is a schedule of future minimum lease payments under these capital leases and the present value of the net minimum lease payments as of September 30, 2011: YearAnnual EndingLease 30-SepPayment 20121,343,688$ 2013996,146 2014877,555 201558,497 201658,497 201758,497 Total Minimum Lease Payment3,392,880$ Less: Amount Representing Interest233,844 Present Value of Minimum Future Lease Payments3,159,036$ PF . . . The City provides pension benefits for all of its full-time employees (except firefighters) through the Texas ENSIONUND Municipal Retirement System ("TMRS"), a State-wide administered pension plan. Employees may retire at ages 60 and above with five or more years of service or with twenty years of service regardless of age, and a member is vested after five years. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. In 2011, the Texas Legislature approved Senate Bill 350 (SB 350) which restructured the TMRS funds. This legislation permitted the TMRS actuary to prepare the December 31, 2010 actuarial valuation as if the fund restructuring had occurred as of December 31, 2010. In addition, the actuarial assumptions were updated for the new fund structure and adopted by the TMRS Board at their May 2011 meeting. For a more complete description of the impact of the legislation and new actuarial assumptions, please refer to the December 31, 2010 TMRS Comprehensive Annual Financial Report (CAFR). The funded status as of December 31, 2010 under the two separate actuarial valuations is presented below: ActuarialCity ActuarialActuarialAccruedUnfunded"Full" FiscalValuationValuationLiabilityAALFundedARC YearDateof Assets(AAL)(UAAL)RatioRate (1) 201112/31/2010148,131,734$ 231,155,736$ 83,024,002$ 64.1%20.54% (2) 201112/31/2010208,101,143 279,659,548 71,558,405 74.4%18.58% _______________ (1) Actuarial valuation performed under the original fund structure. (2) Actuarial valuation performed under the new fund structure approved in SB 350. The "phase in" period was expected to last eight years from fiscal year 2009 through fiscal year 2016, but due in part to the new fund structure approved by SB 350, management intends on paying the full ARC beginning in fiscal year 2012-2013. For more detailed information concerning the TMRS plan as well as the City’s historical unfunded actuarial accrued liability for calendar years 2009-2011, see Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" - Note V.A., page 52 and Exhibit XII, page 63. F’RRF . . . The City provides pension benefits for firefighters through the Denton Firemen's IREMENSELIEF AND ETIREMENT UND Relief and Retirement Fund (the "Firemen’s Fund"). Firefighters may retire at ages 50 with twenty or more years of service, and a member is vested after ten years of credited service. As of December 31, 2009, there were (i) 63 retirees and beneficiaries receiving benefits and terminated employees entitled to benefits but not yet receiving them, (ii) 92 current employees who were vested and (iii) 71 employees who were not vested. The City made contributions equal to 14% of member salaries for FY 2008- 09 and 15.41% for FY 2009-10. For 2011, the City increased its contribution rate to 17.17%. As of December 31, 2009 (the most recent biennial actuarial valuation), the plan's unfunded actuarial accrued liability was $19,617,547 and the funded ratio was 70.2%. For more detailed information concerning the Firemen's Fund as well as the City’s historical unfunded actuarial accrued liability for calendar years 2005-2009, see Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" – Note V.A., page 52 and Exhibit XII, page 63. 28 OPEB . . . GASB released the Statement of General Accounting Standards No. 45 ("GASB 45"), THEROSTMPLOYMENTENEFITS Accounting by Employers for Other Post-Employment Benefits ("OPEB"), in June 2004. The City implemented GASB 45 for the fiscal year beginning October 1, 2007. GASB 45 sets forth standards for the measurement, recognition, and display of post- employment benefits, other than pensions, such as health and life insurance for current and future retirees. Those subject to this pronouncement are required to: (i) measure the cost of benefits, and recognize other post-employment benefits expense, on the accrual basis of accounting over the working lifetime of the employees; (ii) provide information about the actuarial liabilities for promised benefits associated with past services and whether, or to what extent, the future costs of those benefits have been funded; and provide information useful in assessing potential demands on the employer’s future cash flows. The employer’s contributions to OPEB costs that are less than an actuarially determined annual required contribution will result in a net OPEB cost, which under GASB 45 will be required to be recorded as a liability in the employer’s financial statements. Actuarial valuations have been completed by an outside consulting firm regarding the City's OPEB liability. The reports provide the City with the City’s OPEB requirements assuming the City's plan offerings, designs, and cost share approach remain constant. September 30, 2011October 1, 2009July 1, 2007 Annual Required Contribution1,314,901 $ 1,314,901 $ 879,280 $ Contribution Made623,130 $ 370,759 $ 69,696 $ Net OPEB Obligation Obligation - End of Year3,167,492 $ 2,520,343 $ 1,606,533 $ Unfunded Actuarial Accrued Liability10,944,544 $ 10,944,544 $ 7,926,202 $ The City’s GASB 45 liability was discussed at length with the Audit/Finance Committee and the City Council. At the conclusion of these discussions, the City Council concurred with the staff recommendation to fund the City’s OPEB costs on a pay-as-you-go basis. The pay-as-you-go approach has been recommended since 1) this provides the lowest cost approach, 2) the ARC is relatively small in comparison to the City’s overall budget, and 3) the pay-as-you-go cost is not forecasted to exceed the ARC in the foreseeable future. See Appendix B, "Excerpts from the City’s Comprehensive Annual Financial Report" – Note V.B., pages 58 and 59. TRTPLBI HEEMAINDER OF HIS AGEEFTLANKNTENTIONALLY 29 FINANCIALINFORMATION T12-CNA ABLEHANGES IN ETSSETS Fiscal Year Ended September 30, Revenues:20112010200920082007 Program Revenue: Charges for Services15,673,556$ 14,781,002$ 14,924,773$ 13,917,248$ 13,876,695$ Operating Grants and Contributions4,270,697 3,407,085 2,281,136 3,306,325 2,991,224 Capital Grants and Contributions7,497,908 15,206,424 3,641,296 7,308,398 5,399,220 General Revenue: Property Tax44,144,844 43,144,645 43,187,433 41,499,791 34,756,356 Sales Tax22,871,282 20,484,954 20,466,772 21,440,839 20,653,932 Other Taxes/Fees21,219,346 19,131,162 17,270,857 17,909,903 16,784,901 Miscellaneous2,830,297 6,375,678 5,741,097 7,501,310 6,831,875 Total Revenue118,507,930$ 122,530,950$ 107,513,364$ 112,883,814$ 101,294,203$ Expenditures: General Government28,198,604$ 29,569,535$ 27,482,131$ 26,408,949$ 22,145,804$ Public Safety49,154,371 47,998,906 45,368,783 43,426,526 42,161,674 Public Works16,089,302 15,767,926 15,816,065 15,448,473 14,008,867 Parks and Recreation12,421,893 12,854,336 12,755,037 12,927,020 11,564,247 Interest on Long-Term Debt5,046,724 5,121,329 5,733,268 5,372,868 4,658,128 Total Expenses110,910,894$ 111,312,032$ 107,155,284$ 103,583,836$ 94,538,720$ Increase in Net Assets before Transfers7,597,036$ 11,218,918$ 358,080$ 9,299,978$ 6,755,483$ Transfers(10,430,082) 482,801 846,119 323,038 (13,475,571) Increase (Decrease) in Net Assets(2,833,046)$ 11,701,719$ 1,204,199$ 9,623,016$ (6,720,088)$ Prior Period Adjustment(10,674,744) - - - - Net Assets at Beginning of Year154,011,484 142,309,765 141,105,566 131,482,550 138,202,638 (1) Net Assets at End of Year $ 154,011,484140,503,694$ 142,309,765$ 141,105,566$ 131,482,550$ _______________ (1) Unrestricted net assets, the part of the net assets that may be used to meet the City’s ongoing obligations, were $34,590,673 as of September 30, 2011 (see Appendix B, "Excerpts from the Comprehensive Financial Report"). 30 T12A-GFREH ABLEENERALUNDEVENUES AND XPENDITURE ISTORY Fiscal Year Ended September 30, Revenues:20112010200920082007 Taxes53,492,664$ 50,049,759$ 49,769,861$ 49,772,244$ 45,842,915$ Licenses and Permits1,460,548 1,198,552 1,265,733 1,080,580 1,097,323 Franchise Fee19,324,244 17,457,994 15,669,981 16,197,042 15,197,943 Fines and Forfeitures4,216,247 4,378,064 4,691,420 4,969,102 4,468,692 Fees for Service5,656,550 5,989,349 5,888,390 5,657,673 4,439,570 Interest Revenue172,719 237,559 744,122 1,084,097 1,441,299 Intergovernmental825,549 770,164 718,453 779,158 380,887 Miscellaneous193,022 317,460 229,599 369,052 529,753 Total Revenues85,341,543$ 80,398,901$ 78,977,559$ 79,908,948$ 73,398,382$ Expenditures: General Government19,495,940$ 22,037,729$ 21,318,437$ 18,925,270$ 16,142,835$ Public Safety44,921,713 43,156,478 41,999,464 39,619,707 36,776,654 Public Works7,483,926 6,516,276 6,738,327 6,553,570 5,561,166 Parks and Recreation9,422,432 9,837,073 10,016,114 10,230,800 7,312,078 Capital Outlay575,128 691,880 809,004 854,273 2,409,001 Debt Service: Principal Retirement140,422 185,154 223,106 202,003 41,301 Total Expenditures82,039,561$ 82,424,590$ 81,104,452$ 76,385,623$ 68,243,035$ Excess (Deficiency) of Revenues Over Expenditures3,301,982$ (2,025,689)$ (2,126,893)$ 3,523,325$ 5,155,347$ Other Financing Sources (Uses): Capital Leases-$ -$ 44,865$ 69,897$ 1,108,131$ Transfers In20,304 1,018,218 112,022 - 5,278,998 Sale of Capital Assets90,699 160,495 - 193,375 - Transfers (Out)(515,761) (421,200) (612,532) (968,914) (4,038,781) Total Other Financing Sources (Uses)(404,758)$ 757,513$ (455,645)$ (705,642)$ 2,348,348$ Net Changes in Fund Balances2,897,224$ (1,268,176)$ (2,582,538)$ 2,817,683$ 7,503,695$ Fund Balances at Beginning of Year21,526,779 22,794,955 25,377,493 22,559,810 15,056,115 Fund Balances at End of Year24,424,003$ 21,526,779$ 22,794,955$ 25,377,493$ 22,559,810$ 31 T13-MSTH ABLEUNICIPAL ALESAXISTORY The City has adopted the Municipal Sales and Use Tax Act, V.T.C.A., Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. In January 1994, the voters of the City approved the imposition of an additional one-half of one percent (½ of 1%) for property tax reduction. In September 2003, the voters of the City approved the imposition of an additional one-half of one percent (½ of 1%) for the Denton County Transportation Authority. The implementation of this tax began January 2004, and is allocated directly to the Denton County Transportation Authority. Fiscal Year% ofEquivalent of Ended TotalAd ValoremAd ValoremPer (1) 9/30CollectedTax LevyTax RateCapita 200821,984,936$ 53.86%0.3610 $ 202 $ 200920,950,78648.63% 0.3330 188 201021,015,17348.99% 0.3321 185 201122,871,28252.11% 0.3671 200 (2) 20128,430,62519.07% 0.1315 73 _______________ (1)Source: City of Denton Annual Program of Services. Collections for 2008-2010 have been restated to exclude payments for economic development incentives which were previously netted from sales tax collections. (2)Collections through January 31, 2012. The sales tax breakdown for the City is as follows: Property Tax Relief 0.50¢ Denton County Transportation Authority 0.50¢ City Sales & Use Tax 1.00¢ State Sales & Use Tax 6.25¢ Total 8.25¢ FP INANCIAL OLICIES Basis of Accounting . . . The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Officers Association of the United States and Canada. The GFOA has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Denton for each of the fiscal years ended September 30, 1983 through September 30, 2010. The City's current report will be submitted to GFOA to determine its eligibility for another Certificate. The City has also received the GFOA's award for Distinguished Budget Presentation each year since 1988. The measurement focuses for the Enterprise Funds, Internal Service Funds and Nonexpendable Trust Funds are income determination and cost of service, respectively. Accordingly, the accrual basis, whereby revenues and expenses are identified in the accounting period in which they are earned and incurred and net income, is utilized for these funds. The modified accrual basis, whereby revenues are recognized when they become both measurable and available for use during the year and expenditures are recognized when the related fund liability is incurred, is used for all other funds. Budgetary Procedures . . . As prescribed by City Charter the City Manager, and within the time period required by law, submits to the City Council a proposed budget for the fiscal year beginning the following October 1. The budget includes proposed expenditures and revenues required to fund the expenditures. Following Council considerations, amendments and refinements, a public hearing is ordered and conducted for the purpose of obtaining taxpayer comments. The budget is finally approved and adopted by passage of an ordinance by the City Council prior to the beginning of the fiscal year. The budget is adopted on a basis consistent with generally accepted accounting principles. The City strives to maintain an unreserved general fund balance of 20% of budgeted expenditures. 32 INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council. Both Texas law and the City’s investment policies are subject to change. LI . . . Under Texas law, the City is authorized to invest in (1) obligations, including letter of credit, of the EGALNVESTMENTS United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended (the "PFIA")) that are issued by or through an institution that either has its main office or a branch office in Texas, and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits, or are invested by the City through a depository institution that has its main office or a branch office in the State of Texas and otherwise meet the requirements of the PFIA, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured a combination of cash and obligations described in clause (1) which are pledged to the City, held in the City’s name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State, (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (12) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. If specifically authorized in the authorizing document, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, ordinance, or resolution. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Political subdivisions such as the City are authorized to implement securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) of the first paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm not less than "A" or its equivalent, or (c) cash invested in obligations that are described in clauses (1) through (6) and (10) through (12) of the first paragraph under this subcaption, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in the name of the governmental body and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. IP . . . Under Texas law, the City is required to invest its funds under written investment policies that primarily NVESTMENTOLICIES emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool 33 funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds’ investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. AP . . . Under Texas law the City is additionally required to: (1) annually review its adopted policies and DDITIONAL ROVISIONS strategies; (2) adopt a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers’ with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (4) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the entity’s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. (1) T14-CI ABLEURRENTNVESTMENTS As of January 31, 2012, the City’s available funds were invested as follows: Market ValueBookMarket DescriptionPercentValueValue U.S. Federal Agency Coupons43.51%196,977,296$ 197,333,253$ U.S. Federal Agency Callables10.24%46,451,98546,462,745 U.S. Federal Agency Step Up1.54%7,000,0006,996,458 Municipal Bonds - Coupon0.22%1,009,7391,016,750 Commercial Paper4.41%19,954,28919,989,400 (2) Certificates of Deposit 30.67%139,099,000139,099,000 Demand Deposits9.41%42,671,18342,671,183 100.00%453,163,492$ 453,568,789$ _______________ (1)There are no City funds invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index or commodity. (2)CDs are either fully insured by FDIC insurance or collateralized by federal agency securities at a minimum of 102% of principal plus accrued interest or secured by Federal Home Loan Bank letters of credit. 34 TAXMATTERS O PINIONS The Bonds . . . On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel to the City, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"), (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel to the City will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. The Certificates . . . On the date of initial delivery of the Certificates, Bond Counsel to the City will render its opinion that, in accordance with Existing Law, (1) interest on the Certificates for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Certificates will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Code. Except as stated above, Bond Counsel to the City will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Certificates. See Appendix C – Forms of Bond Counsel’s Opinions. In rendering each of the foregoing opinions, Bond Counsel to the City will rely upon (a) certain information and representations of the City, including information and representations contained in the City's federal tax certificate with respect to each Obligation issue, (b) covenants of the City contained in the Obligation documents relating to certain matters, including arbitrage and the use of the proceeds of the Obligationsand the Refunded Obligations and the property financed or refinanced therewith, and (c) with respect to the Bonds, the verification report prepared by Grant Thornton LLP. Failure by the City to observe the aforementioned representations or covenants could cause the interest on the Obligations to become taxable retroactively to the date of issuance. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Obligations in order for interest on the Obligations to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Obligations to be included in gross income retroactively to the date of issuance of the Obligations. The opinion of Bond Counsel to the City is conditioned on compliance by the City with such requirements, and Bond Counsel to the City has not been retained to monitor compliance with these requirements subsequent to the issuance of the Obligations. Bond Counsel’s opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel’s opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Obligations. A ruling was not sought from the Internal Revenue Service by the City with respect to the Obligations or the projects being financed or refinanced therewith. Bond Counsel’s opinion represents its legal judgment based upon its review of Existing Law and the representations of the City that it deems relevant to render such opinion and is not a guarantee of a result. No assurances can be given as to whether or not the Internal Revenue Service will commence an audit of the Obligations, or as to whether the Internal Revenue Service would agree with the opinion of Bond Counsel. If an audit is commenced, under current procedures the Internal Revenue Service is likely to treat the City as the taxpayer and the holders of the Obligations may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. FITATOID EDERALNCOMEAXCCOUNTING REATMENT OF RIGINAL SSUEISCOUNT The initial public offering price to be paid for one or more maturities of the Obligations may be less than the principal amount thereof or one or more periods for the payment of interest on the Obligations may not be equal to the accrual period or be in excess of one year (the "Original Issue Discount Bonds"). In such event, the difference between (i) the "stated redemption price at maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made on the Obligations less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods which do not exceed one year. Under existing law, any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income (as defined in section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth below. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial owner) is includable in gross income. 35 Under existing law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial owner’s basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Original Issue Discount Bond. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. CFITC OLLATERALEDERALNCOMEAXONSEQUENCES The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Obligations. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, owners of interests in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed an earned income credit, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE OBLGATIONS. Interest on the Obligations will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Interest on the Obligations may be subject to the "branch profits tax" imposed by section 884 of the Code on the effectively- connected earnings and profits of a foreign corporation doing business in the United States. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Obligations, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Obligations, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. S,LFT TATEOCAL AND OREIGNAXES Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Obligations under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. FPL UTURE AND ROPOSEDEGISLATION Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Obligations under Federal or state law and could affect the market price or marketability of the Obligations. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Obligations should consult their own tax advisors regarding the foregoing matters. 36 CONTINUINGDISCLOSUREOFINFORMATION In each of the Ordinances the City has made the following agreement for the benefit of the holders and beneficial owners of the respective series of Obligations. The City is required to observe each agreement while it remains obligated to advance funds to pay such Obligations. Under each agreement, the City will be obligated to provide certain updated financial information and operating data annually, and the timely notice of specified events to the Municipal Securities Rulemaking Board ("MSRB"). This information will be available free of charge from the MSRB via the Electronic Municipal Market Access ("EMMA") system at www.emma.msrb.org. AR . . . The City will provide certain updated financial information and operating data to the MSRB annually. NNUALEPORTS The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 5 and 7 through 14 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2012. The City will provide the updated information to the MSRB. The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB’s Internet Web site or filed with the United States Securities and Exchange Commission (the "SEC"), as permitted by SEC Rule 15c2-12 (the "Rule"). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information of the type described in the preceding paragraph by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from time to time pursuant to State law or regulation. The City’s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. NCE . . . The City will also provide timely notices of certain events to the MSRB. The City will OTICE OF ERTAINVENTS provide notice of any of the following events with respect to the Obligations to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations; (7) modifications to rights of holders of the Obligations, if material; (8) Obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the City, which shall occur as described below; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. In addition, the City will provide timely notice of any failure by the City to provide annual financial information in accordance with their agreement described above under "Annual Reports". For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. LA . . . The City has agreed to update information and to provide notices of specified events only IMITATIONS AND MENDMENTS as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Obligations may seek a writ of mandamus to compel the City to comply with its agreement. 37 The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a 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 Obligations in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. CPU . . . During the last five years, the City has complied in all material respects with all OMPLIANCE WITH RIOR NDERTAKINGS continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. OTHERINFORMATION R ATINGS The Obligations and the presently outstanding tax supported debt of the City are rated "AA+" by Fitch and "AA" by S&P. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Obligations. L ITIGATION It is the opinion of the City Attorney and City Staff that there is no pending, or to their knowledge threatened, litigation or other proceeding against the City that could have a material adverse financial impact upon the City or its operations. RQOS EGISTRATION AND UALIFICATION OF BLIGATIONS FOR ALE The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds or Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds or Certificates under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LIESPFT EGALNVESTMENTS AND LIGIBILITY TO ECUREUBLICUNDS IN EXAS The Obligations . Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments, investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. In addition, various provisions of the Texas Finance Code provide that, subject to a prudence standard, the Obligations are legal investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings and loan associations. The Certificates . Section 271.051, Texas Local Government Code, provides that the Certificates are legal and authorized investments for banks, savings banks, trust companies, savings and loan associations, insurance companies, fiduciaries, trustees and guardians, and for the sinking funds of municipalities, school districts, and other political subdivisions or public agencies of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the State, municipalities, school districts, and other political subdivisions of the State, and are legal security for those deposits to the extent of their market value. General Considerations . For political subdivisions in Texas that have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Obligations may have to be assigned a rating of at least "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. The City has made no investigation of other laws, rules, regulations, or 38 investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. LO EGALPINIONS The City will furnish to the Underwriters complete transcripts of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinions of the Attorney General of Texas approving the Initial Bond and Initial Certificate and to the effect that the Obligations are valid and legally binding obligations of the City, and based upon an examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to like effect and to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information under the captions and subcaptions "Plan of Financing – Refunded Obligations", "The Obligations" (exclusive of subcaptions "Book-Entry-Only System" and "Obligationholders Remedies" and the last sentence under "Tax Rate Limitation"), "Tax Matters" and "Continuing Disclousre of Information" (except for the information under the subcaption "Compliance with Prior Undertakings") and the subcaptions "Legal Opinions" (except for the last two sentences of the first paragraph thereof), "Registration and Qualification of Obligations for Sale" and "Legal Investments and Eligibility to Secure Public Funds in Texas" under the caption "Other Information" in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the legal issues contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinances. The legal fee to be paid to Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinions will accompany the Obligations deposited with DTC or will be printed on the Obligations in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriters by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel to the Underwriters. The legal fee to be paid Counsel to the Underwriters is contingent on the sale and delivery of the Obligations. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise from the transaction. AFDOI UTHENTICITY OF INANCIAL ATA AND THERNFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements, and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents, and ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FA INANCIAL DVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and does not assume any responsibility for the information, covenants, and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending, or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. 39 VAMC ERIFICATION OF RITHMETICAL AND ATHEMATICAL OMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by First Southwest Company on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Obligations and the restricted Federal Securities will be verified by Grant Thornton LLP, certified public accountants. Such computations will be based solely on assumptions and information supplied by First Southwest Company on behalf of the City. Grant Thornton LLP will restrict its procedures to verifying the arithmetical accuracy of certain computations and will not make any study or evaluation of the assumptions and information on which the computations will be based and, accordingly, will not express an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. The report will be relied upon by Bond Counsel in rendering its opinion with respect to the tax-exemption of interest on the Obligations and with respect to the defeasance of the Refunded Obligations. U NDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $_________________. The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $_________________. The Underwriters will be obligated to purchase all of the Certificates if any Certificates are purchased. The Certificates to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Certificates into investment trusts) at prices lower than the public offering prices of such Certificates and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have reviewed the information in this Official Statement pursuant to their respective responsibilities to investors under the federal securities laws, but the Underwriters do not guarantee the accuracy or completeness of such information. Wells Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association ("WFBNA"). WFBNA, the senior underwriter of the Bonds, has entered into an agreement (the "Distribution Agreement") with Wells Fargo Advisors, LLC ("WFA") for the retail distribution of certain municipal securities offerings, including the Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting compensation with respect to the Bonds with WFA. WFBNA and WFA are both subsidiaries of Wells Fargo & Company. One of the Underwriters is BOSC, Inc., which is not a bank, and the Obligations are not deposits of any bank and are not insured by the Federal Deposit Insurance Corporation. F-LSD ORWARDOOKINGTATEMENTSISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. 40 M ISCELLANEOUS The financial data and other information contained herein have been obtained from the City's records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. The Ordinances authorizing the issuance of the Obligations will approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Underwriters. MARK BURROUGHS Mayor City of Denton, Texas ATTEST: JENNIFER K. WALTERS City Secretary City of Denton, Texas 41 Schedule I SCHEDULE OF REFUNDED OBLIGATIONS* Certificates of Obligation, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 3/15/20032/15/20144.000%190,000$ 190,000$ 2/15/20154.100%195,000195,000 2/15/20164.200%200,000200,000 2/15/20174.300%215,000215,000 2/15/20184.400%225,000225,000 2/15/20194.500%200,000200,000 2/15/20204.600%210,000210,000 2/15/20214.700%220,000220,000 2/15/20224.750%230,000230,000 2/15/20234.750%240,000240,000 $ 2,125,0002,125,000$ The 2014 - 2023 maturities will be redeemed prior to original maturity on February 15, 2013, at par. General Obligation Refunding and Improvement Bonds, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 3/15/20032/15/20144.000%315,000$ 315,000$ 2/15/20154.100%205,000205,000 2/15/20164.200%215,000215,000 2/15/20174.300%220,000220,000 2/15/20184.400%235,000235,000 2/15/20194.500%245,000245,000 2/15/20204.600%255,000255,000 2/15/20214.700%270,000270,000 2/15/20224.750%280,000280,000 2/15/20234.750%295,000295,000 $ 2,535,0002,535,000$ The 2014 - 2023 maturities will be redeemed prior to original maturity on February 15, 2013, at par. * Preliminary, subject to change. Certificates of Obligation, Series 2004 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 5/1/20042/15/20154.750%670,000$ 670,000$ 2/15/20164.625%705,000705,000 2/15/20174.750%735,000735,000 2/15/20184.750%775,000775,000 2/15/20194.750%810,000810,000 2/15/20204.750%850,000850,000 2/15/20214.800%890,000890,000 2/15/20224.875%935,000935,000 (1)(1) 2/15/20235.000%985,000985,000 (1)(1) 2/15/20245.000%1,035,0001,035,000 $ 8,390,0008,390,000$ The 2015 - 2024 maturities will be redeemed prior to original maturity on February 15, 2014, at par. (1) Represents a mandatory sinking fund redemption of a term certificate with a final maturity date of February 15, 2024. Utility System Revenue Refunding and Improvement Bonds, Series 2003 PrincipalPrincipal OriginalMaturityInterestAmountAmount Dated DateDateRateOutstandingRefunded 4/1/200312/1/20144.000%2,000,000$ 2,000,000$ 12/1/20154.000%2,100,0002,100,000 12/1/20164.000%2,215,0002,215,000 12/1/20174.100%2,330,0002,330,000 12/1/20184.250%2,445,0002,445,000 12/1/20194.375%2,575,0002,575,000 12/1/20204.500%2,700,0002,700,000 12/1/20214.500%2,845,0002,845,000 12/1/20224.500%3,000,0003,000,000 $ 22,210,00022,210,000$ The 2014 - 2022 maturities will be redeemed prior to original maturity on June 1, 2013, at par. APPENDIX A GENERAL INFORMATION REGARDING THE CITY L . . . The City of Denton is located in the northern portion of the Dallas/Fort Worth Consolidated Statistical Area OCATION (CSMA). The City is a part of the Dallas/Fort Worth Metroplex, and is situated at the apex of a triangle based by Dallas (38 miles to the southeast) and Fort Worth (36 miles to the southwest). The City has excellent access to and from all parts of the area. EF . . . The fiscal year 2010-2011 was very eventful for Denton. Listed below are just a few of projects: CONOMIC UTURE ME&IN AJORMPLOYER NDUSTRIALEWS Target Corporation began construction of their new, automated 400,000 square foot distribution center. The Denton facility will serve as a prototype for future Target frozen and refrigerated food distribution centers. The $100 million project will open in 2012/2013 with 115 employees. Schlumberger , an oilfield service company, selected Denton as its site for a regional equipment maintenance facility. The $18 million purchase and renovation project was complted and opened in Spring 2012. The company employs approximately 100. Peerless Manufacturing, an existing Denton business, announced their plans to expand in Denton and consolidate other Texas operations. Plans include a new 80,000 square foot manufacturing facility, and the site provides the capability to expand to 250,000 square feet in the future. Peerless will begin construction in 2012 or 2013. The expansion will add another 20 employees to their 72 employee base. Labinal, Inc. , currently located in Corinth, Texas, is moving and expanding their operation in Denton. Labinal will invest nearly $5.8 million in an existing building and will move another $5 million in equipment to Denton. The company will employ approximately 700 at the Denton facility. DDMA EVELOPMENT AT ENTONUNICIPALIRPORT The arrival of the Denton Municipal Airport’s new air traffic control tower in May of 2004 precipitated a reclassification of air space from Class G to Class D during daily operation hours of 8 a.m. and 8 p.m. and increased our corporate jet traffic. Denton Municipal Airport recently opened a $1.2 million terminal and completed realignment of a 7,000 foot taxiway providing a secondary emergency landing surface. The airport control tower operates with radar display capability inaugurated in October 2010 along with extended hours of operation from 6:00 AM until 10:00 PM seven (7) days each week. The airport services corporate jet traffic by providing uncongested, Class D airspace and is a major domestic and international flight training location. Private business growth at Denton Airport produced over $5 million in new investment in hangars and office space in 2009. Private industry employment is over 400 workers on- site at the airport. A $1.2 million taxiway extension project completed early in 2011 has opened over 22 net acres for new aviation development with direct taxiway access. An $8 million infrastructure improvement project, 95% funded through a grant from the Texas Department of Transportation Aviation Division (TxDOT Aviation), was completed in the fourth quarter of 2011 to add 1,000 feet of runway for a total 7,000 foot runway at Denton Airport. In addition to operating as one of the most active fixed-wing, general aviation airports in the United States, the airport is host to two major helicopter flight training businesses and services military helicopters through one of two airport fixed base operators. A Foreign Trade Zone application has been completed to include the Airport, surrounding businesses and the University of North Texas Discovery Park research facility in order to stimulate additional airport business development. The City Council recently adopted a 2010 Airport Business Plan to enhance development of the Airport as a financially self-sufficient aviation enterprise with specific marketing and economic development incentives for aviation industry. RN ETAILEWS Unicorn Lake Construction of the mixed-use development known as continues. Construction of the Villas of Tuscan Hills, a 106 lot residential community that overlooks the lake, is currently underway with luxury homes selling from $400,000- $700,000. Dogwood Estates, an independent living community, the Brick House Gym, Cinemark, Pour House Grill, Washington Federal Savings and Loan, and Towne Center Bank represent some of the businesses that have located in the development. Recently, Cafe China, Los Toreros, Beth Marie’s Ice Cream, Curves and other retail occupied a new 20,000 square feet retail center. In addition, the development is home to the Hilton Homewood Suites, Foundation Management Systems, and several new medical offices. In 2011, Unicorn Lake welcomed Chuy’s Mexican Restaurant. This popular restaurant increased traffic within the development, resulting in nearly a 100% increase in sales tax generation. Rayzor Ranch Market Place Thehas completed over 400,000 square feet of retail/commercial space. Wal-Mart and Sam’s opened in Fall 2010 along with several restaurants and other commercial and retail The center continues to grow. Kohl’s Department Store is currently planning to open in 2013. The Rayzor Ranch Town Center will begin construction the fourth quarter of 2012. Another 800,000 square feet of commercial and retail space is planned at build-out. Over469,000 square feet of miscellaneous commercial and retail permits were issued, of which twelve were restaurants. A - 1 HD EALTHCARE IN ENTON The medical sector continues to grow in Denton with an additional 86,000 square feet of doctors' offices and senior care facilities. OD THEREVELOPMENTS Three new banks opened in Denton in 2010-11. Downtown Denton, which has become a major focus for redevelopment for the City of Denton added 88,106 square feet of new living units – apartments and townhomes – and 5,500 square feet of new retail/restaurants in 2010-11. IB NDUSTRY AND USINESS Major Employers Approximate Number of EmployerDescriptionEmployees University of North Texas Higher Education 7,762 Denton Independent School District Education 3,113 Denton State Assisted Living Center Healthcare for Disabled 1,700 Texas Woman's University Education 1,610 Denton County Government 1,523 Peterbilt Motors-Headquarters & Plant Diesel Trucks 1,500 City of Denton Government 1,436 Denton Regional Medical Center Hospital/Healthcare 800 Presbyterian Hospital of Denton Hospital/Healthcare 750 Jostens Class Ring Manufacturer 600 Sally Beauty International Headquarters Beauty Supply Distributor 600 Thermadyne/Victor Equipment/Tweco Welding Equipment 512 Flowers Baking Company Bakery 355 Anderson Merchandisers Distributor 332 Retardation Fulfillment Packaging 302 Tetra PakAseptic Packaging 300 (1) FEMA (Regional HQ & Call Center) Federal Government 300 James Wood Auto ParkCar/Truck Sales/Service 287 United Copper IndustriesCopper Wire 264 Mayday Manufacturing/Hi-Tech MetalsAviation Components Manufacturing 250 Acme BrickBrick Manufacturing 190 Keller WilliamsReal Estate 170 Business Air/Jetworks Air CenterFBO & Aircraft Sales, Paint & Interiors 170 Denton Rehabilitation & Nursing CenterElder Care/Rehabilitation 160 Wells FargoFinancial Institution 160 The VintageNursing Facility 150 Miller of DentonDistributor 145 Senior Care & Rehabilitation CenterElder Care/Rehabilitation 145 Morrison MillingFlour Grain Mill 131 Mayhill HospitalHospital/Healthcare 130 U.S. Aviation GroupFlight Training/Aircraft Sales 125 Denton Good Samaritan VillageRetirement Center/Elder Care 125 Denton Good Samaritan Lake Forest VillageRetirement Center/Elder Care 125 North Texas Hospital Hospital/Healthcare 120 Bill Utter Ford Vehicle Sales/Service 107 Hulcher Services Railroad Emergency Response 100 University Behavioral Health of Denton Hospital/Healthcare 100 _______________ (1)Up to 1,100 during a disaster relief event. Source: City of Denton and Denton Chamber of Commerce Economic Development Offices. A - 2 Denton is proud to be home to nearly 37 companies and institutions that employ 100 or more people, several of them representing corporate, regional and international headquarters. Well over 100 companies that produce, manufacture, and distribute goods all over the world call Denton home. More than 4,500 companies choose to do business in Denton. With small, medium, and large businesses operating in a variety of industries, diversity is strength in Denton. Statistics show most of these workers are skilled and receive their training right here in Denton. EPG . . . Historical population totals from U.S. Census depict Denton’s consistent population CONOMIC AND OPULATION AINS increases commensurate with Denton’s steady economic growth. 1940 Census – 11,192 1950 Census – 21,345 1960 Census – 26,844 1970 Census – 39,874 1980 Census – 49,079 1990 Census – 66,270 2000 Census – 80,537 2010 Census – 113,383 (1) estimated 2012 Population is 115,662 _______________ (1)City of Denton Population Estimate. The City’s ascension toward a top economic position in Texas is attributable to the steady influence of governmental activity that include the annual expansion of the two state-supported universities, and due to several desirable environmental factors. Denton is located in a rich agricultural, oil and gas production region; is part of the Dallas/Fort Worth Metroplex; has proximity to three of Texas’ largest reservoirs (Lake Texoma is only 40 miles from Denton); a mild climate; and the influential aspects of social, cultural and educational advantages have prompted professional workers to select Denton as their residence. ER . . . The following data were taken from the U.S. Census Bureau’s 2011 American Community Survey. CONOMIC ANKING % of Population Whose Age is: 0-19 28% 20-34 33% 35-54 23% 55-64 8% 65 and over 8% Number of Households 36,926 City of Denton Median Household Income 47,297 City of Denton Household Income $250,000 + 1,001 $100,000-$199,999 5,335 $50,000-$99,999 10,995 $35,000-$49,000 5,463 $25,000-34,999 4,020 Less than or equal to $24,999 10,112 City of Denton Population by Occupation Agriculture, forestry, fishing and hunting, and mining 0.9% Construction 5.9% Manufacturing 8.2% Wholesale Trade 2.5% Retail trade 13.2% Transportation, warehousing, and utilities 4.7% Information 2.2% Finance and insurance, real estate rental and leasing 5.5% Professional, scientific, and management, and administrative and waste management services 8.4% Educational Services, and health care and social assistance 28.7% Arts, entertainment, and recreation, and accommodation, and food services 11.1% Other services, except public administration 4.6% Public Administration 4.0% Source: U. S. Census Bureau, 2005-2009 American Community Survey, 5 year estimate. A - 3 E/LF . . . According to the Texas Workforce Commission, the December 2011 available workforce in MPLOYMENTABORORCE Denton is 65,604. EUniversity of North Texas . . . Denton is home to the , founded in 1890, and Texas Woman’s University, founded in DUCATION 1901. North Central Texas College, established in 1924, built an extension campus just outside Denton’s extraterritorial jurisdiction (ETJ) in adjacent cities, Corinth and Flower Mound. The two universities and community college have a combined enrollment of more than 53,000students and total employment of approximately 9,500 total employees. With an enrollment of over 35.700, the University of North Texas exceeds the combined enrollment of Southern Methodist University in Dallas, Texas Christian University in Fort Worth and Rice University in Houston. Texas Woman’s University has an approximate enrollment of 12,026 in Denton with an additional 2,696 students attending in Dallas and Houston. University of North Texas The (UNT) campus comprises a land area of more than 875 acres that includes Discovery Park, th UNT’s 285-acre research park.. The University is the nation’s 26 largest public university and offers 97 bachelor’s, 828 master’s and 35 doctoral degree programs; many nationally recognized. UNT maintains a low 20:1 student-faculty ratio more prevalent among private rather than public institutions. Named one of America’s 100 Best College Buys for 16 consecutive The Princeton Review. years, UNT is additionally listed as a "Best in the West" college by Texas Woman’s University (TWU), a major state-supported teaching and research institution, it’s the nation’s largest public university attended primarily by women, who comprise 90% of attending students. Through its seven schools and colleges, TWU offers 548programs leading to a Bachelor’s degree, 52 Master’s degree fields, and Doctoral degrees in 23 specialization areas. TWU experienced a 10 percent growth in enrollment from 2009 to 20011 and was ranked among the nation’s top 10 U.S. News and World Report universities with the most diverse student populations by in 2011. TWU’s graduate programs in U.S. News and World Reports Best occupational therapy and physical therapy have ranked among the nation’s 25 best by Graduate SchoolsForbes for 4 consecutive years. magazine ranked TWU among the top 25% of U.S. colleges for undergraduates in 2011 and the university continues to be among the nation’s leading providers of nurses and healthcare professionals. North Central Texas College (NCTC), established in 1924, offers Associate Degrees in a number of fields and core college requirements for students transferring to UNT and TWU to complete their Bachelor’s degrees. The student population of NCTC’s campuses in the adjacent cities of Corinth and Flower Mound is almost 7,000. The administration anticipates the student population to increase to 12,000 in the next few years. NCTC serves the citizens of Denton with quality education by offering a broad scope of educational choices and offers the local business community educational options as well. The competitive need to keep employees current with modern technology and methodology is easier due to NCTC’s customized training which teaches curriculum developed closely with business management to ensure individual company needs are met. In 2007 the college collaborated with regional gas drilling production companies experiencing a critical shortage in trained professionals to develop and launch NCTC’s newest Associates Degree program in Gas Energy Production Management. Denton Independent School District (DISD) encompasses almost 180 square miles and continues to be one of north Texas’ fastest-growing school districts. Over 23,930 students enrolled for the 2010-2011 school year in the district’s 35 schools that include 21 elementary schools (grades K-5), six middle schools (6-8), three high schools (9-12), one advanced technology complex (11-12), two early childhood centers, and two alternative schools. The 2010-2011 school year marked the completion of additional science labs and prep rooms, and safety and security technology enhancements in all district schools funded previously in a November 2007 bond election. The district’s second early childhood education center opened in August 2010 th and discussions began for the construction of a 7 middle school that would incorporate new "Green" technologies. The district’s "student centered" approach supports strong individualized instruction and smaller school size. DISD offers classes at each school for students who experience learning disabilities or handicaps. Counselors, speech and language specialists, psychologists and reading and diagnostic consultants are available for all grade levels. DISD offers a number of advanced placement credit classes and dual high school/college credit classes and its students routinely place among top recipients in state and national academic, fine arts, career technology, and athletic competitive events. The district’s LaGrone Advanced Technology Complex offers state-of the-art facilities and training in nine advanced disciplines and serves as a model for the region and surrounding states. Denton State Supported Living Center (formerly Denton State School) is one of the country’s most modern and progressive educational institutions for mentally-disabled Texas residents. This state-supported facility is located on a 200-acre site paid for by Denton citizens. Present facilities include residences that accommodate 530 residents, more than 20 buildings for physically handicapped individuals, and a 32 bed acute hospital with supporting facilities such as X-ray, laboratory, dental, and pharmaceutical. Additional buildings include a modern administration building, an academic building, laundry facility, chapel, maintenance shop and a warehouse. The school has a staff of 1,700 with an annual budget of over $73M. A - 4 Denton Universities Expand . . . Texas Woman’s University (TWU) has grown dramatically. Student enrollment at the University’s home campus in Denton increased 50% from 2001-2011 to just over 12,026students. One third of TWU students (33%) are graduate students. Similar growth at the University’s Dallas and Houston satellite nursing campuses necessitated recent construction projects. A $40M TWU Institute of Health Sciences-Houston facility opened in August 2006 and a $56M TWU T. Boone Pickens Institute of Health Sciences-Dallas facility opened in February 2011. TWU leads as a provider of critically needed health care professionals, boasting the state’s largest undergraduate and graduate nursing programs. TWU is proud of its diversity; minority students comprise 50% of students. TWU is one of only 16 U.S. universities, and the only Texas university selected to participate in the American Democracy Project Civic Agency initiative focused on encouraging students to be civic leaders in their communities. University of North Texas (UNT) . . . Among the nation’s top 50 schools for Hispanic and African American students, UNT has the largest residential campus in the North Texas Region and is the largest provider of online credit courses among Texas public universities. UNT’s Discovery Park, a 285-acre, 553,000 square foot facility is home to UNT’s Engineering School and Center for Advanced Research and Technology (CART), one of the nation’s premier materials science and engineering research facilities. CART provides researchers with a unique grouping of microscopes for nanotechnology research within several of the university’s 15 research cluster areas, and for other critical advancement fields UNT’s College of Engineering offers undergraduate and graduate programs in electrical engineering, materials science, computer science, and mechanical and energy engineering. A new $33.2M Life Sciences Building featuring open research laboratories that promote collaborative and interdisciplinary research completed in 2010. The university’s $60 million Gold LEED Certified Business Leadership Complex, focused on global economic and business disciplines, and $78M, Platinum LEED Certified, 30,000 seat stadium both completed in 2011. A . . . Northwestern Denton County is one of the more diversified agricultural areas in Texas. With soil types GRICULTURE ranging from rich black to sandy loam, and good, soft artesian water, it is ideal for diversified farming and livestock. Principal crops are corn, wheat, oats, hay, grain sorghums and peanuts. Beef cattle, sheep, chickens and turkeys contribute a substantial and steady income annually to the farmers and ranchers of the County. A very significant concentration of valuable world champion horse farms east of the City’s corporate boundaries provide a prosperous economic resource for the area. Products significant to the economy are horses, beef, eggs, wheat, grain sorghums, hay, and nursery crops. T . . . Denton is located at the convergence of Interstate 35 East and Interstate 35 West on the north end of the RANSPORTATION Dallas/Fort Worth Metroplex, approximately 35 miles from the central business districts of both Dallas and Forth Worth. This location along the NAFTA super highway provides great access to points north and south, which has led to a number of distribution warehouse facilities choosing to locate in Denton. Additionally, Denton is located only 20 miles north of Dallas- Fort Worth International Airport (DFW), and both Dallas’ Love Field Airport and Fort Worth’s Meacham International Airport are in close proximity to Denton. Alliance Airport, located less than 15 miles southwest of Denton on Interstate 35 West provides access to a unique industrial airport and multimodal industrial park. Together, Alliance’s access to highway, rail and air transportation offers an excellent opportunity for future industrial growth. Denton County Transportation Authority (DCTA) recently completed the construction of a regional passenger rail line, which connects Carrollton and Denton. The DCTA A-train will meet growing transportation demands in eastern Denton County. The project also provides a logical extension of the Dallas Area Rapid Transit (DART) Northwest Corridor Green Line. In the Summer of 2010, the Denton City Council approved the Denton Downtown Implementation Plan, which included zoning and development standards that, along with the implementation of commuter rail service in June 2011 has encouraged transit oriented development in the vicinity of the new rail station enhancing the vibrant music, cultural and retail landscape of Denton’s downtown. The Kansas City Southern Railroad and the Union Pacific Railroad provide daily service to Denton. Full switching is available, providing direct access to all major markets across the nation. Greyhound/Trailways serves Denton through Dallas and Oklahoma City. Motor freight in Denton is included in the Dallas/Fort Worth commercial trade zone and is served by major freight carriers. B . . Center Bank and Northstar Bank opened new branch facilities in Unicorn Lake mixed use development. There are ANKING 26 banks in Denton: Access First Capital; Bank of America; JPMorgan Chase; BBUA Compass Bank; Wells Fargo Bank; First Convenience; First State Bank; Provident Bank; Point Bank; First National Bank; Marqbank; Meridian Bank; State Bank and Trust; Inwood National Bank; Synergy; Denton’s only locally-owned bank, Northstar Bank; Washington Federal Savings; Towne Center Bank; DATCU Credit Union; Affiliated Bank; First United Bank & Trust; Legends Bank; Members' Choice Federal Credit Union; Pegasus Credit Union; State Farm Bank; and First United Bank with Denton’s first "Banco" branch specializing in serving Denton’s Hispanic community. A - 5 GI ROWTHNDICES CityState (1) Building Values (millions) FiscalWaterSewerElectricUnemploymentUnemployment (2) (2) RatesRates YearCommercialResidentialTotalCustomersCustomersCustomers 200764 $ 219 $ 283$ 29,78328,02043,6073.84%4.35% 2008131 157 288 29,67928,01944,3754.03%4.84% 2009132 131 263 30,28828,67445,1535.96%7.88% 201082 82 164 30,88929,10545,3576.30%8.00% 2011204 62 266 31,22229,52048,0245.70%7.20% _____________ (1)New Construction Only, Includes Multi-Family as Commercial and Duplexes as Residential (2)Source: Texas Workforce Commission. M . . . Denton has become a regional medical destination serving north Texas and southern Oklahoma. In 2010-2011, ten EDICAL new healthcare offices and facilities broke ground or opened adding an estimated $14 million in valuation to the tax rolls and over 120,000 square feet of medical resources to citizens in the area. Denton Regional Medical Center is a 208-bed community hospital that serves the growing population of Denton, Wise, Cooke, and Montague Counties. The hospital offers a full- spectrum of healthcare including advanced open-heart surgery and neurosurgery programs. Denton Regional became the first hospital in Denton County to earn the prestigious Level II Chest Pain Center accreditation by the international non-profit Society of Chest Pain Centers and is pursuing the Level III Trauma Center designation. Since 2005, the hospital has opened a new $7 million, 13,500 square-foot day surgery center and a new hospital floor housing a 29-bed, $19M progressive care unit. Denton Regional’s Center for Cancer and Blood Disorders, a comprehensive cancer diagnostic and treatment center integrating education, nutrition, and rehabilitation services opened in 2008. Texas Health Presbyterian Hospital of Denton (formerly Denton Community Hospital) celebrated the grand opening of its 272,538 square-foot, 255-bed facility and an 80,000 square-foot medical office building in 2005. The hospital expanded its Women’s Center services in 2006 with the opening of a Level III Neonatal Intensive Care Unit serving Denton and its surrounding communities. North Texas Hospital opened a 60,000 square foot specialty hospital featuring eight surgical suites and 16 inpatient beds in 2005. In 2007, North Texas Hospital became one of only four hospitals in the Dallas-Fort Worth region to offer patients improved surgical outcomes by utilizing the $1M, state-of-the-art DaVinci robotic surgical suite. Other new hospitals gaining Denton its reputation as a regional medical destination include Mayhill Hospital, a 40,000 square-foot facility featuring physical rehabilitation and a behavioral health services hospital that opened in 2005 and Integrity Transitional Hospital, a 38,500 square foot, $16 million dollar long-term acute care hospital that opened in 2007. Denton’s rapid medical growth continued in 2008, adding more than 123,000 square feet of new medical offices and treatment facilities; most notably the new 44,000 square foot, $20 million Select Medical Rehabilitation Hospital, modeled after the renowned Kessler institute for Rehabilitation. R . . . Lake Ray Roberts, located approximately 8 miles northeast of the City’s corporate boundary on the Elm Fork ECREATION of the Trinity River, is a major water conservation and flood control facility of more than 799,600 acre-feet of storage that allows for an abundance of parks and other water and outdoor related recreational facilities. The nine mile Greenbelt Hike/Bike/Equestrian Trail, located between Lake Ray Roberts and Lake Lewisville, is a cooperative project made possible by the Army Corps of Engineers and the Cities of Denton and Dallas. Nearby Lake Lewisville, one of North Texas’ largest lakes is one of Texas’ most popular recreation areas. Lake Lewisville has a shoreline of 183 miles located entirely in Denton County. Lake Lewisville attracts over 3,000,000 visitors to its shores annually. The upper reaches of the lake are only about 3 miles east of the Denton City Limits, while the dam is 15 miles from downtown Denton. Grapevine Lake, another large body of water created by the U.S. Army Corps of Engineers, is located in Denton and Tarrant Counties. The dam is 23 miles from Denton. Parks and recreational areas abound on the shores of Lake Ray Roberts, Lake Lewisville, and Grapevine Lake. Boating fishing, hunting, swimming and all water sports are the favorite recreational pastimes, which, because of this area’s favorable climate, are in use the year round. The City of Denton Parks and Recreation Department and the Denton Independent School District have created a partnership to produce a signature water recreation attraction. The $12.16 million Waterworks Park opened in 2003 and features four water slides, a children's play pool, a 600 ft. long continuous flow tubing river, outdoor amphitheater, pavilions, a sand volleyball court and two indoor pools. The Hula Loop slide was recently added to the Water Park and an Ultra Violet light sanitizing system has been added to all of the outdoor pools. Other recently completed CIP projects include the renovation and expansion of the Senior Center, the addition of new pedestrian trails at Denia Park and Unicorn Lake, the construction of Briercliff Park, Specialist Earnest W. Dallas, Jr. Veterans Memorial Park and Wheeler Ridge Park, and improvements to the courtyard at City Hall and to the playground at Quakertown Park. Construction has just begun to rebuild Owsley Park. Property was recently purchased to expand both Carl Young, Sr. Park and E. J. Milam Park. The Parks and Recreation Department is in the process of purchasing 26 acres on the north side of North Lakes Park that will be used to construct four new adult soccer/rugby fields. The Parks and Recreation Department is also looking to the future with the purchase of a 196 acre park site that will eventually become the home of athletic fields, walking trails, and a large multi-generational recreation and fitness center. A - 6 APPENDIX B EXCERPTS FROM THE CITY OF DENTON, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2011 The information contained in this Appendix consists of excerpts from the City of Denton, Texas Comprehensive Annual Financial Report for the Year Ended September 30, 2011, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. APPENDIX C FORMS OF BOND COUNSEL'S OPINIONS Public Finance Tax Supported / U.S.A. Denton, Texas General Obligation Bonds New Issue Report Ratings New Issue Details New Issues Sale Information: $37,900,000 General Obligation Refunding and Improvement Bonds, Series General Obligation Refunding and Improvement Bonds, Series 2012 AA+ 2012, and $46,530,000 Certificates of Obligation, Series 2012, via negotiated sale the week of Certificates of Obligation, March 19. Series 2012 AA+ Outstanding Debt Security: Annual property tax levy, limited to $2.50 per $100 of taxable assessed valuation General Obligations AA+ (TAV). The certificates of obligation (COs) are additionally payable from surplus revenues of Certificates of Participation AA+ Denton’s utility system. Rating Outlook Purpose: GOs to refund a portion of the district’s outstanding debt obligations and for various Stable street improvements and park land acquisitions and improvements; COs to finance acquisitions of vehicles and equipment, and municipal, street, and utility renovations and improvements. Final Maturity: Feb. 15, 2032. Key Rating Drivers Stable Local Economy: The city is strategically located in the Dallas-Fort Worth (DFW) metroplex, which continues to outpace the nation in total employment, population, and income growth. Significant education and healthcare sectors have provided a stabilizing influence to the local economy. Steady growth of the employment base is reflected in low unemployment, which has helped keep the city’s median household income in line with state averages. Diverse Tax Base: TAV appreciated modestly over the last several years, on the heels of stronger growth that was consistent with prerecession regional trends. The city’s strong transportation network along the North American Free Trade Agreement corridor has attracted investment that includes warehousing facilities and helped establish the foundation for anticipated long-term growth. The top 10 taxpayers represent medical, manufacturing, real Related Research estate, energy, and utility interests with little concentration risk. Fitch Rates The City of Denton, (TX) Series 2012 GO Refunding and Sound Fiscal Profile: Financial results typically exceed budget expectations, contributing to Improvement Bonds & COs ‘AA+’; Outlook robust general fund balances in excess of policy targets. The tenured management team Stable, March 19, 2012 complies with established and annually updated and collaborates with the city council on long- term planning to prioritize resources. The city has prudently dedicated future growth in franchise fees to fund a portion of infrastructure needs within the newly established street improvement fund. Manageable Debt: The city’s debt burden is manageable, with modest additional governmental debt issuances on the horizon. Overall debt is above average, reflecting sizable overlapping school district issuances; however, this is somewhat tempered by strong community support, growing wealth levels, and rapid debt amortization. Analysts Rebecca Meyer +1 512 215-3733 rebecca.meyer@fitchratings.com Jose Acosta +1 512 215-3726 jose.acosta@fitchratings.com www.fitchratings.com March 19, 2012 Public Finance Rating History Credit Profile Outlook/ Rating Action Watch Date Strategically Located Metro City AA+ Affirmed Stable 3/19/12 Denton and its 115,662 residents lie within the DFW metroplex, the economic and cultural hub of northern Texas with a population exceeding six million. Denton’s location at the convergence of I-35 East and West, 35 miles from downtown Dallas and Fort Worth, and access to air and rail transportation, has attracted a variety of industries and businesses to the city. Tax base expansion until the past several years had been steady, reflecting a regular influx of residential, retail, commercial, and industrial development. Education and health services top the city’s largest employers, offering stability throughout economic recessionary cycles. Denton’s unemployment rate of 5.7% as of December 2011 compares favorably to that of the state and nation. Completion of a transit rail line connecting Denton to the Dallas Area Rapid Transit system in June 2011 improves access to other parts of the metroplex and is expected to spur additional development around the downtown transit station. General Fund Financial Summary ($000, Audited Years Ended Sept. 30) 2008 200920102011 General Fund Revenue 79,909 78,978 80,399 85,343 General Fund Expenditures 76,386 81,104 82,424 82,039 General Fund Surplus 3,523 (2,126)(2,025)3,304 Transfers In 0 112 1,018 20 Other Sources 264 45 160 91 Transfers Out 969 613 421 516 Net Transfers and Other (705) (456)757 (405) Net Surplus/(Deficit) 2,818 (2,582)(1,268)2,899 Total Fund Balance 25,378 22,795 21,527 24,424 As % of Expenditures, Transfers Out, and Other Uses 32.8 27.9 26.0 29.6 Unrestricted Fund Balance 25,254 22,795 21,527 24,424 As % of Expenditures, Transfers Out, and Other Uses 32.6 27.9 26.0 29.6 Note: Numbers may not add due to rounding. Sound Fiscal Management A fiscal 2011 operating surplus of $2.9 million (net of transfers) bolstered general fund unrestricted reserves to $24.4 million, representing a strong 29.6% of spending; unrestricted reserves consist of committed, assigned, and unassigned reserves. The city consistently outperforms the budget and has maintained healthy reserves exceeding the policy target equal to 20.0% of spending. A healthy (12.0%) increase in sales tax receipts and $1.0 million of attrition-based cost savings contributed to the city’s favorable fiscal 2011 performance. The city’s revenues in fiscal 2011 were comprised largely of ad valorem taxes (36%), sales taxes (27%), and franchise fees from utilities operating in the city (23%). Management has prudently designated a portion of fiscal 2012 franchise fee revenue, as well as future franchise Related Criteria fee revenue growth, to the newly established street improvement fund in an effort to increase U.S. Local Government Tax-Supported street maintenance funding over time. Rating Criteria, Aug. 15, 2011 Tax-Supported Rating Criteria, Management anticipates favorable fiscal year 2012 financial performance, anticipating a Aug. 15, 2011 modest $1 million use of reserves attributable to establishment of the street improvement fund. Denton, Texas 2 March 19, 2012 Public Finance A balanced fiscal 2013 budget is expected, based on conservative revenue growth assumptions and continued cost management. Given recent results, Fitch Ratings believes these projections are reasonable. Manageable Debt The city’s direct debt burden on the Debt Statistics budget is manageable at 15% of fiscal ($000) 2011 spending, and the pace of principal amortization is rapid at 72% This Issue General Obligations 37,900 within 10 years. High overall debt This Issue Certificates of Participation 46,530 levels reflect significant issuances by Outstanding Direct Debt Net of Refunding 301,145 seven school districts located or Self-Supporting (260,596) Total Net Direct Debt 124,979 partially located within the city; overall Overlapping Debt 438,233 debt per capita is $4,869 per capita, or Total Overall Debt 563,212 7.8% of market value. City officials report modest additional governmental Debt Ratios capital improvement projects planned a Direct Debt Per Capita 1,081 b for the medium term. As % of MV 1.7 a Overall Debt Per Capita 4,869 The city participates in the Texas b As % of MV 7.8 Municipal Retirement System (TMRS), ab Population: 115,662 (2012). Market value (MV): $7,252,499,619 (2012). Note: Numbers may not add due to rounding. with an adequate fiscal 2011 funded ratio of 74.4% based on an investment assumption of 7.0%, and provides other post-employment benefits (OPEB) to its employees. The city’s fixed costs including debt service, pension, and OPEB obligations comprise a manageable 19% of total general fund expenditures. Denton, Texas 3 March 19, 2012 Public Finance The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. LL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE A LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE A T WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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Denton, Texas 4 March 19, 2012 . _ � NOTICE 1S FURTHER GIVEN that all Bonds should be submitted to one of the following address: First Class/Registered/ Certified Mail The Bank of New York Mellon Trust Company, N.A. Global Corporate Trust P.O. Sox 396 East Syracuse, New York 13057 Dated: 20 Express Deliverv The Bank of New York Mellon Trust Company, N.A. Global Corporate Trust 111 Sanders Creek Parkway East Syracuse, New York 13057 Hand Deliverv The Bank of New York Mellon Trust Company, N.A. Global Corporate Trust Corporate Trust Window 101 Barclay Street I S�� Floor East New York, New York 10286 By: The Bank of New York Mellon Trust Company, National Association A-2