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AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ý·¬§ Ó¿²¿¹»® Ñºº·½» CM: Ù»±®¹» Ý¿³°¾»´´ô Ý·¬§ Ó¿²¿¹»® SUBJECT Ø±´¼ ¿ ¼·½«·±² ®»¹¿®¼·²¹ ¬¸» Ý¸¿®¬»® °®±ª··±² ±² Ý±«²½·´ ¬»®³ ´·³·¬ ¿²¼ ¹·ª» ¬¿ºº ¼·®»½¬·±²ò BACKGROUND Ó¿§±® Þ«®®±«¹¸ ®»¯«»¬»¼ ¬¸¿¬ ¬¸· ·¬»³ ¾» °´¿½»¼ ±² ¬¸» ß«¹«¬ ïçô îððè Ý·¬§ Ý±«²½·´ ¿¹»²¼¿ò ß ½±°§ ±º ß®¬·½´» ×× Ì¸» Ý±«²½·´ ¿²¼ ß®¬·½´» ××× Ò±³·²¿¬·±² ¿²¼ Û´»½¬·±² ±º ¬¸» Ý¸¿®¬»® · ·²½´«¼»¼ º±® §±«® ·²º±®³¿¬·±²ò Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ö»²²·º»® É¿´¬»® Ý·¬§ Í»½®»¬¿®§ AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune ______________________________________________________________________________ SUBJECT Receive a report, hold a discussion, and give staff direction regarding the 2008-09 Budget, Capital Improvement Program, and Five-Year Financial Forecast. BACKGROUND The FY 2008-bmitted to the City Council on July 31st, and a Workshop to present the preliminary details of the Budget was conducted on August 7, 2008. This agenda item is being scheduled in order to allow Council Members to ask any follow-up questions regarding the Proposed Budget. Below is the schedule we will follow to adopt the Budget and Tax Rate: August 19 Vote to Consider a Proposal for a Tax Increase prior to publishing Notice of Hearing st September 9 Public Hearing on Budget and Tax Rate (1 Hearing) September 16 Second Public Hearing on Tax Rate September 23 City Council Adopts Budgets and Tax Rate If you have any questions or need additional information, please let me know. Respectfully submitted: Bryan Langley Director of Finance AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune ______________________________________________________________________________ SUBJECT Consider adoption of an ordinance amending the existing gas franchise between the City of one percent increase from four percent to five percent ; providing for acceptance by Atmos Energy Corporation; and finding and determining that the meeting at which this ordinance is passed is open to the public as required by law; and providing for an effective date. BACKGROUND Atmos Energy (formerly, TXU Gas) is engaged in the business of furnishing and supplying gas to the general public in the city, including the transportation, delivery, sale, and distribution of gas in, out of, and through the city alleys, grounds and rights-of-ways the City receives compensation under a duly authorized franchise agreement and associated amendment (Ordinances No. 2001-484 and 2002-202). The City currently receives a franchise fee calculated as four percent (4%) of gross revenues. On June 18, 2002, the City and TXU Gas entered into a settlement (Ordinance No. 2002-202) of litigation styled City of Denton v. Texas Utilities Company, Et Al., Cause No. 009383, which amended the then existing franchise agreement. As a result of this settlement, TXU Gas agreed to settle and resolve payments by applying a monthly surcharge to . The surcharge is reflected as a fractional amount above the four percent (4%) franchise fee. On March 4, 2008, the City and Atmos Energy entered into a settlement agreement (Resolution No. R2008-012) stemming from our participation in a coalition of cities known as the Atmos mechanism for the City to amend or renew its franchise agreement with a franchise fee of five percent (5%) of gross revenues. Agenda Information Sheet August 19, 2008 Page 2 The following cities have already opted in to the higher franchise fee: Austin Clifton Fredericksburg Hico Olney Round Rock Balch College Georgetown Hillsboro Plano San Angelo Springs Station Bartlett Commerce Goldthwaite Hutto Plugerville Sanger Belton Copperas Groesbeck Leander Ranger Whitney Cove Blooming Corsicana Hamilton Longview Riesel Grove Bryan Electra Henrietta Mart Rice Cedar Park Fort Worth Hickory Creek Mesquite Rogers st In order to be effective on October 1, the City of Denton is required to approve the franchise amendment ordinance in August. Following the passage of this ordinance, CoServ Gas will be Fee from four percent (4%) to five percent (5%) effective, October 1, 2008. The increase to the gas franchise fee has been recommended as part of the fiscal year 2008-09 budget. RECOMMENDATION Staff recommends five percent (5%) of gross revenues. PRIOR ACTION/REVIEW (Council, Boards, Commissions) This item was discussed with the Audit/Finance Committee on July 15, 2008, and with the City Council on August 7, 2008. FISCAL IMPACT Based on the four most recent quarterly payments, a one percent (1%) increase in the franchise fee will generate an estimated $260,000 annually. A one percent (1%) increase will also increase an average residential Respectfully submitted, Bryan Langley Director of Finance AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Parks and Recreation ACM: Fred Greene SUBJECT Consider approval of a resolution allowing the Black Chamber of Commerce to be the sole participant allowed to sell alcoholic beverages at the Blues Festival on September 20, 2008, upon certain conditions; authorizing the City Manager or his designee to execute an agreement in conformity with this resolution; and providing for an effective date. The Parks, Recreation and Beautification Board recommend approving the request with a vote of 7-0. BACKGROUND The Blues Festival has been held at the North Texas Fairgrounds for the past several years but in 2007 it moved back to Quakertown Park. The event coordinators are requesting to be allowed to sell alcoholic beverages in the city park. Quakertown Park is the only city park where the sale of alcohol is permitted, RECOMMENDATION Staff recommends approval of the ordinance and agreement as submitted, which is consistent with agreements with other co-sponsored events, such as the Denton Arts & Jazz Festival. PRIOR ACTION/REVIEW (Council, Boards, Commissions) At the August 4, 2008 meeting, the Parks, Recreation and Beautification Board recommended approving the request with a vote of 7-0. FISCAL INFORMATION None. EXHIBITS 1. Proposed Resolution 2. Letter of Request 3. Quakertown Agreement 4. Parks, Recreation and Beautification Board Minutes of August 4, 2008 Respectfully submitted: Emerson Vorel Director of Parks and Recreation Prepared by: Janie McLeod Community Events Coordinator 1 DRAFT 2 Parks, Recreation and Beautification Board 3 Minutes 4 5 August 4, 2008 6 Civic Center Conference Room 7 8 Members present : Carol Brantley, Allyson Coe, Dale Conway, Reggie Heard, Jo Kuhn, Ross Richardson, 9 and Jennifer Wages 10 Members absent: None 11 Staff present: Emerson Vorel, Amanda Green, Mary Aukerman, Janie McLeod and Paul Williamson, Real 12 Estate. 13 14 Chairperson Jo Kuhn called the meeting to order at 6:00 p.m. 15 16 AWARDS AND RECOGNITIONS: 17 Tomara Rock, Recreation Coordinator at MLK, was introduced to the board as the recipient of the Jack 18 Ashworth Jr. and Sr. Endowed Scholarship award from TRAPS. She showed the actual award to the 19 Board members who congratulated her on her accomplishment. 20 21 APPROVAL OF MINUTES OF June 2, 2008 MEETING: Chairperson Kuhn asked for any amendments 22 to the minutes; there being none, the minutes were approved as written. 23 24 ACTION ITEMS: 25 Consider a Request from the Denton Black Chamber of Commerce to Sell Alcoholic Beverages at a) th 26 the 10 Annual Blues Festival Janie McLeod presented a request from the Denton Black Chamber 27 of Commerce to sell alcoholic beverages at their annual Blues Festival. She stated that they are again 28 using to use Quakertown Park as their venue instead of the Fair Grounds, as they have better 29 participation. 30 31 MOTION: Jo asked that a motion be made to approve the request from the Denton Black Chamber th 32 of Commerce to sell alcoholic beverages at the 10 Annual Blues Festival; Allyson made the motion, 33 Reggie seconded the motion and the motion passed with a vote of 7-0. 34 35 b) Paul Williamson explained that, since 36 this was presented at the last meeting, a portion of the line had been moved to the west and off of park 37 property and will now have much less impact on the athletic fields but should grant a road easement 38 to the park property from US77. Emerson explained that we are still waiting for approval from Texas 39 Parks and Wildlife and the National Park Service and the granting of this easement will be contingent 40 upon receiving those approvals. Paul pointed out that this is just phase one of a proposed pipeline to 41 provide potable water from Lake Ray Roberts to the new communities being developed in the 42 southwest part of Denton and is important for the City of Denton as a whole. 43 44 MOTION: Jo asked that a motion to consider approval of 45 North Lakes Park contingent on the project meeting all the requirements of the Texas Parks and 46 Wildlife Chapter 26 code; Jennifer made the motion and Allyson seconded the motion, which was 47 passed with a vote of 7-0. 48 49 DISCUSSION ITEMS: 50 None a). 51 June 2008 1 2 Citywide Parkland Acquisition PROJECT STATUS REPORT Emerson reported that the 196 acre 3 tract of land is set to close sometime in September. Emerson stated that he was very excited to acquire this 4 parcel of land for the city as he sees it housing athletic fields as well as a mega-recreation center in the 5 future. 6 7 Senior Center Renovation and Expansion Project There was a small fire in the kiln closet at the center 8 on Monday, but the damage was confined to that area, which includes water damage from the sprinklers, 9 but they worked to keep the fire contained. There a drainage issue with this project as it lays in a flood 10 plain. It will take extra time to resolve the issues because of the need for FEMA to amend the map flood 11 line. The consultants are already preparing a Letter of Map Amendment to submit to FEMA. 12 13 items not in the packet: 14 Water Works Park The Park had a record breaking attendance of 3,000 on one day. Jo asked if we 15 were having record attendance this year with the unusually hot weather, but Emerson explained that 16 when the weather gets too hot, people do not want to be out in it for any reason, even attending the 17 pools, but he did say that early reports show good attendance this year. 18 19 , although 10 20 cases have been reported in Denton County. Emerson pointed out that the Natatorium has the UV 21 system that kills the parasite immediately and that they hyper-chlorinated the pools at the Water Park 22 on Friday night and at Civic Center pool on Saturday night. The problem with this process is that the 23 next incident could happen with the first child in the pool and the parasite could be reintroduced at that 24 time. The parasite does not thrive in the chlorinated water but is reintroduced with each contaminating 25 incident. We will continue to keep up practices that minimize the possibility of an incident in the City 26 of Denton pools. 27 28 KEEP DENTON BEAUTIFUL 29 No discussion. 30 31 PUBLIC ART COMMITTEE MEETING MINUTES 32 Emerson pointed out that, since the Public Art Committee is a sub-committee of the Parks, Recreation and 33 Beautification Board, their meeting minutes will be included in future Park Board meeting packets. 34 35 ITEMS FOR UPCOMING MEETINGS: 36 Emerson pointed out that Carole may not be able to continue on the Board. Carole said that she will have 37 confirmation this week as to whether or not she will remain on the Board. 38 39 djourn; Ross made the motion to With no further business on the agenda, Jo asked for a motion to a 40 adjourn, Carole seconded the motion and the meeting was adjourned at 6:26 p.m. June 2008 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune ______________________________________________________________________________ SUBJECT Consider adoption of an ordinance authorizing the Mayor or his designee to enter into an Interlocal Agreement with Denton County for the County to provide property tax billing and collection services for the City of Denton and to repeal subsection 10-2(B) of the City Code and all ordinances to the extent of conflict therewith (the split-payment option for payment of taxes); providing a savings clause and providing an effective date. (The Audit/Finance Committee recommends approval 3-0) BACKGROUND Prior to tax year 2007, the City of Denton was responsible for maintenance of more than 37,000 tax accounts. This maintenance included updating ownership records, changing levy amounts, mailing of current and delinquent statements, answering tax questions, as well as, collecting and posting payments. While the City was responsible for handling our tax accounts, Denton County performed similar job functions for the Denton County and the Denton Independent School District. Given the similarities in tax functions, the Council considered and approved an Interlocal Agreement with Denton County to be responsible for tax billing and collections for the tax year 2007 and forward on March 6, 2007. The rationale for this change was for the convenience of having one entity billing and collecting payments, and also the ability for the City to capture cost savings by allocating this function to the County. The City of Denton retained the processing of tax supplemental payments for years 2006 and prior. These functions are currently being handled by the Budget Department of the City of Denton. After carefully considering this issue, staff believes processing tax supplemental payments on a monthly basis is causing Budget Department resources to be focused away from core budgeting functions. It is our observation that the current tax operations arrangement also creates confusion, frustration and additional time for the taxpayer to wait before receiving a tax supplemental payment in its entirety from all three taxing entities. Further, because Denton County is processing tax supplements for all tax years on their own behalf and on behalf of Denton ISD, no value is added for the taxpayer to receive supplemental payments from different sources at different time frames. In summary, it is management resources spent on processing tax supplementals for a subsection of tax years is not advantageous for the City or the taxpayer. Agenda Information Sheet August 19, 2008 Page 2 Since approval of this Interlocal Agreement in March 2007, the City has been fortunate to have experienced a very positive working relationship with the County regarding tax functions. Due to the favorable business relationship we have established with the County, City staff approached the County Tax Office about the possibility of the County assuming the tax supplemental payments for years 2006 and prior. Denton County has indicated they would be interested in assuming the additional responsibilities. Logistically, the County will not be adversely affected by the transition, as they are already handling the same tax supplemental payments the City is processing for tax years 2006 and prior. In addition, the County has agreed to notify the City of all refunds made on our behalf. When the City collected taxes, citizens had the choice to pay the taxes in full or exercise a split- payment option. The County does not offer a split payment option, and therefore, the City will need to repeal language regarding this type of payment provision in our existing ordinance. RECOMMENDATION Staff recommends amending the Interlocal Agreement with Denton County to include the processing of tax supplemental payments for years 2006 and prior. If the City Council agrees with the recommendation, Denton County will also have to formally approve the contract amendment. In addition, Denton County has advised staff that the fees in our March 2007 agreement will need to be increased by $0.06 per statement, from $0.67 to $0.73. This fee increase is independent of the proposed service charges related to the processing of supplemental payments for years 2006 and prior. The increased fee is due to the normal inflationary costs of conducting Staff recommends approval of these fee increases. PRIOR ACTION/REVIEW 1. Audit/Finance Committee Meeting, July 15, 2008. The Committee recommended the City Council amend the Interlocal Agreement to cover tax billing in year 2008 and supplemental payments in all tax years. 2. City Council Meeting, March 6, 2007. The City Council approved an Interlocal Agreement with Denton County, establishing tax billing and collection management on behalf of the City of Denton for tax years 2007 and forward. 3. Audit/Finance Committee Meeting, February 19, 2007. The Committee recommended the City Council review the tax billing and collection procedures. Agenda Information Sheet August 19, 2008 Page 3 FISCAL INFORMATION Under the current Interlocal Agreement, the City pays the County for receipting, bookkeeping, issuing and mailing of the tax statements. Summary fees are listed below: $0.67 per initial statement processing in October and delinquent statement processing before April 1 and July 1. $0.05 processing fee per statement should the City request an additional notice of statements to be provided in March. $0.41 per each statement, delinquent notice, etc, mailed. New fees for 2008-09: $0.73 per initial statement processing in October and delinquent statement processing before April 1 and July 1. $0.25 surcharge for processing statements for the municipality that reside outside Denton County. No fee increases to the additional statement processing in March or the mailing charge. For the 2007 tax year, the County processed 39,469 statements at a cost of $26,444. For the same number of statements, the new rate would increase the cost by $2,368 to $28,812. While there is no ongoing fee related to the service amendment, the City will be responsible for paying the cost of converting our the one-time cost for this conversion will not exceed $30,000. As a result of this change, the City will also be able to cancel our $9,200 annual maintenance agreement for our tax software system. Therefore, the City will incur $20,800 in one-time costs in FY 2008-09, followed by an annual savings of $9,200 each year thereafter. EXHIBITS 1. Interlocal Agreement 2. Ordinance Respectfully Submitted By: Bryan Langley Director of Finance s:\our documents\ordinances\08\denton county property tax interlocal agreement.doc ORDINANCE NO. ___________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE MAYOR OR HIS DESIGNEE TO ENTER INTO AN INTERLOCAL AGREEMENT WITH DENTON COUNTY FOR THE COUNTY TO PROVIDE PROPERTY TAX BILLING AND COLLECTION SERVICES FOR THE CITY OF DENTON AND TO REPEAL SUBSECTION 10-2(B) OF THE CITY CODE AND ALL ORDINANCES TO THE EXTENT OF CONFLICT THEREWITH (THE SPLIT-PAYMENT OPTION FOR PAYMENT OF TAXES); PROVIDING A SAVINGS CLAUSE AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City enter into an Interlocal Cooperation Agreement for the County through its duly elected tax assessor-collector to act as tax assessor and collector for the City property tax collection (Interlocal Agreement); and WHEREAS, the County is well equipped to perform this service; and WHEREAS, Section 10-2(b) of the Code of Ordinances of the City (City Code) currently allows the payment of one-half of the principal amount of all property taxes for the current year to be paid before December 1 of the year for which such taxes are due and the balance to be paid at any time before July 1 of the following year without penalty (the split-payment option for payment of property taxes); and WHEREAS, the County does not allow the split-payment option for payment of property taxes; and WHEREAS, the City Council finds that the Interlocal Agreement is in the public interest and that the split-payment option for the payment of property taxes should be repealed to the extent of any conflict with the Interlocal Agreement; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this Ordinance are incorporated herein by reference. SECTION 2. The Mayor, or his designee, is hereby authorized to execute the Interlocal Agreement of behalf of the City with the County. The City Manager, or his designee, is hereby authorized to carry out the rights and duties of the City under the Interlocal Agreement including the expenditure of funds provided for therein. SECTION 3. Subsection b of Section 10-of the City Code and all other ordinances allowing the split-payment option for the payment of property taxes, are hereby repealed to the extent of any conflict with the Interlocal Agreement or s:\our documents\ordinances\08\denton county property tax interlocal agreement.doc SECTION 4. Save and except as amended hereby, all the provisions, sections, paragraphs, sentences, clauses, and phrases of Section 10-2 of the City Code shall remain in full force and effect. SECTION 5. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the _________ day of ___________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY ________________ BY: _________________ Page 2 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Curt Arndt 349-7342 ACM: Jon Fortune SUBJECT Consider adoption of an Ordinance accepting competitive bids and awarding a contract for the purchase of traffic signal hardware for the City of Denton Traffic Division; providing for the expenditure of funds therefor; and providing an effective date (Bid 4098-Annual Contract for Traffic Signal Hardware awarded to the lowest responsible bidder meeting specification for related groups of items, as shown on Exhibit A, in the annual estimated amount of $700,000). BID INFORMATION This bid is for an annual contract for the purchase of traffic signals and related items. These materials will be utilized in the construction of new signals and in the maintenance of the existing traffic control system throughout the city of Denton. RECOMMENDATION Award to the lowest responsible bidder for related groups of items in the annual estimated amount of $700,000. Award line items 1-6, and 7-39, 40-48, 49-73, 74-76, 77-88, 91-92 and 94-96 as group items allowing the department to mix items, saving on freight charges and creating an ease of ordering. Item # Vendor Items 1-48, 89, 90, 93 Consolidated Traffic Controls, Inc. Exhibit A Items 49-73, 77-88 CES Network Services, Inc. Exhibit A Items 74-76, 91-92, 94-96 Paradigm Traffic Systems Exhibit A The lower cost items 1-4 offered by Raptor Controls do not meet specification for dimension size. Lower cost items 7-13, 16, and 35-37, offered by General Traffic Equipment Corp. will not interchange with existing Pelco hardware as required in the bid specifications. Lower cost item 84 offered by Roadrunner Traffic and Consolidated Traffic Controls, Inc., does not meet specification regarding the required Polyphaser brand. PRINCIPAL PLACE OF BUSINESS Consolidated Traffic Controls, Inc. CES Network Services, Inc. Paradigm Traffic Systems Arlington, TX Dallas, TX Fort Worth, TX Agenda Information Sheet August 19, 2008 Page 2 ESTIMATED SCHEDULE OF PROJECT This is an annual contract with the option to renew for additional one-year periods with all prices, terms and conditions remaining the same. Delivery of materials is estimated to be 60 days or less. FISCAL INFORMATION These supplies and materials will be funded from accounts 352001.6520, 352001.6508, and various job accounts as projects are scheduled. EXHIBITS Exhibit 1: Bid Tabulation Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-Bid 4098 ORDINANCE NO. ___________ AN ORDINANCE ACCEPTING COMPETITIVE BIDS AND AWARDING A CONTRACT FOR THE PURCHASE OF TRAFFIC SIGNAL HARDWARE FOR THE CITY OF DENTON TRAFFIC DIVISION; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (BID 4098-ANNUAL CONTRACT FOR TRAFFIC SIGNAL HARDWARE AWARDED TO THE LOWEST RESPONSIBLE BIDDER MEETING SPECIFICATION FOR RELATED GROUPS OF ITEMS, AS SHOWN ON EXHIBIT A, IN THE ANNUAL ESTIMATED AMOUNT OF $700,000). WHEREAS, the City has solicited, received and tabulated competitive bids for the purchase of necessary materials, equipment, supplies or services in accordance with the procedures of State law and City ordinances; and WHEREAS, the City Manager or a designated employee has reviewed and recommended that the herein described bids are the lowest responsible bids for the materials, equipment, supplies or services as shown in the "Bid Proposals" submitted therefor; and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the purchase of the materials, equipment, supplies or services approved and accepted herein; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The numbered items in the following numbered bids for materials, equipment, supplies, or services, shown in the "Bid Proposals" on file in the office of the City Purchasing Agent, are hereby accepted and approved as being the lowest responsible bids for such items: BID ITEM NUMBER NO VENDOR AMOUNT 4088 1-48, 89, 90, 93 Consolidated Traffic Controls, Inc. Exhibit A 4088 49-73, 77-88 CES Network Services, Inc. Exhibit A 4088 74-76, 91-92, 94-96 Paradigm Traffic Systems Exhibit A SECTION 2. By the acceptance and approval of the above numbered items of the submitted bids, the City accepts the offer of the persons submitting the bids for such items and agrees to pur- chase the materials, equipment, supplies or services in accordance with the terms, specifications, standards, quantities and for the specified sums contained in the Bid Invitations, Bid Proposals, and related documents. SECTION 3. Should the City and the winning bidder(s) wish to enter into a formal written agreement as a result of the acceptance, approval, and awarding of the bids, the City Manager or his designated representative is hereby authorized to execute a written contract in accordance with the terms, conditions, specifications, standards, quantities and specified sums contained in the Bid Proposal and related documents and to extend that contract as determined to be advantageous to the City of Denton. SECTION 4. By the acceptance and approval of the above enumerated bids, the City Council hereby authorizes the expenditure of funds therefor in the amount and in accordance with the approved bids. SECTION 5. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this day of , 2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: JOHN M. 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DEPARTMENT: Materials Management to Kevin Gunn at 349-8595 ACM: Jon Fortune SUBJECT Consider adoption of an Ordinance approving the expenditure of funds for the purchase of server software and hardware for server replacements from Dell as approved by the State of Texas Building and Procurement Commission Department of Information Resources (DIR) under #DIR-SDD-192; providing for the expenditure of funds therefor; and providing an effective date (File 4113-Purchase of Software and Hardware Replacements awarded to Dell in the amount of $108,389.86). FILE INFORMATION The Department of Technology Services (Technology Services) is responsible for the server hardware and software that all City departments use to conduct their daily business. Twenty-five (25) servers are past the warranty period and no longer supported by the original vendor. This hardware should be replaced to continue to provide a high level of service and reliability. Technology Services has adopted technology known as server virtualization which enables mult First, virtualization replaces many physical servers with one server reducing hardware requirements and associated electric power, physical space, and cooling expense. Second, virtualization improves return on investment as hardware resources are more fully utilized. Lastly, virtualization provides high reliability by improving disaster recovery time, providing redundancy, allowing greater maintenance windows, and providing a means for development/test environments without costly duplication of hardware resources. With the approval of this agenda item, Technology Services will replace twenty-five (25) servers with eight (8) servers using virtualization technology. RECOMMENDATION Award to Dell in the amount of $108,389.86 for server hardware and software for server replacements. PRINCIPAL PLACE OF BUSINESS Dell Round Rock, Texas Agenda Information Sheet August 19, 2008 Page 2 ESTIMATED SCHEDULE OF PROJECT Server replacements will start immediately with an estimated completion date of June 2009. FISCAL INFORMATION Funding for this item is budgeted in the Technology Services Bond Account 840019744.1355.30100. Requisition 88655 has been entered in the Purchasing software system. Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent Attachment 1: Quotes from Dell 1-AIS-File 4113 Û¨¸·¾·¬ ï ORDINANCE NO. _______________ AN ORDINANCE APPROVING THE EXPENDITURE OF FUNDS FOR THE PURCHASE OF SERVER SOFTWARE AND HARDWARE FOR SERVER REPLACEMENTS FROM DELL AS APPROVED BY THE STATE OF TEXAS BUILDING AND PROCUREMENT COMMISSION DEPARTMENT OF INFORMATION RESOURCES (DIR) UNDER #DIR-SDD-192; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (FILE 4113-PURCHASE OF SOFTWARE AND HARDWARE REPLACEMENTS AWARDED TO DELL IN THE AMOUNT OF $108,389.86). WHEREAS, pursuant to Resolution 92-019, the State Purchasing Building and Procurement Commission has solicited, received and tabulated competitive bids for the purchase of necessary materials, equipment, supplies or services in accordance with the procedures of state law on behalf of the City of Denton; and WHEREAS, the City Manager or a designated employee has reviewed and recommended that the herein described materials, equipment, supplies or services can be purchased by the City through the Building and Procurement Commission programs at less cost than the City would expend if bidding these items individually; and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the purchase of the materials, equipment, supplies or services approved and accepted herein; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The numbered items in the following numbered purchase order for materials, equipment, supplies, or services, shown in the "Purchase Orders" listed hereon, and on file in the office of the Purchasing Agent, are hereby approved: FILE NUMER VENDOR AMOUNT 4113 Dell $108,389.86 SECTION 2. By the acceptance and approval of the above numbered items set forth in the attached purchase orders, the City accepts the offer of the persons submitting the bids to the Building and Procurement Commission for such items and agrees to purchase the materials, equipment, supplies or services in accordance with the terms, conditions, specifications, standards, quantities and for the specified sums contained in the bid documents and related documents filed with the Building and Procurement Commission, and the purchase orders issued by the City. SECTION 3. Should the City and persons submitting approved and accepted items set forth in the attached purchase orders wish to enter into a formal written agreement as a result of the City's ratification of bids awarded by the Building and Procurement Commission, the City Manager or his designated representative is hereby authorized to execute the written contract which shall be attached hereto; provided that the written contract is in accordance with the terms, conditions, specifications and standards contained in the Proposal submitted to the Building and Procurement Commission, quantities and specified sums contained in the City's purchase orders, and related documents herein approved and accepted. SECTION 4. By the acceptance and approval of the above enumerated bids, the City Council hereby authorizes the expenditure of funds therefor in the amount and in accordance with the approved bids. SECTION 5. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the _______ day of _______________________, 2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ 3-ORD-File 4113 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Frank Payne 349-8946 ACM: Jon Fortune SUBJECT Consider adoption of an ordinance approving Amendment No. 2 to the Professional Services Agreement by and between the City of Denton, Texas and Arthur Surveying Co., Inc. to provide professional surveying services in support of the City of Denton Engineering Department; authorizing the expenditure of funds therefor in the amount of an additional $75,000 (for a total award of $400,000); and providing an effective date. FILE INFORMATION The City of Denton Engineering Department currently contracts with Arthur Surveying Co., Inc. for the delivery of routine surveying services on a work order basis. Surveying services include providing construction staking, field design surveys, topographic surveys, boundary surveys and analysis, preparation of easement or right-of-way exhibits, GPS monument placement, and other professional surveying services as required. estimates that an additional $75,000 will be needed to cover these services through September 30, 2008. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) Council approved a contract with Arthur Surveying Co., Inc. in the amount of $250,000 on December 12, 2006. The City Manager approved Amendment No. 1 to the Agreement in the amount of $75,000 on January 3, 2007. RECOMMENDATION Approve Amendment No.2 to the contract between Arthur Surveying Co., Inc. and the City of Denton in the amount of $75,000 for a total contract award of $400,000. PRINCIPAL PLACE OF BUSINESS Arthur Surveying Co., Inc. Lewisville, TX Agenda Information Sheet August 19, 2008 Page 2 ESTIMATED SCHEDULE OF PROJECT estimated to cover services through the end of the 2007-08 fiscal year. FISCAL INFORMATION Funding for this service is provided from individual project accounts as services are requested. All surveying for the Engineering Department will be funded from account 630400.7875. EXHIBITS Exhibit 1: Letter from Arthur Surveying Exhibit 2: Memo from City Engineer Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-File 3219 Û¨¸·¾·¬ ï Û¨¸·¾·¬ î ORDINANCE NO. ______________ AN ORDINANCE APPROVING AMENDMENT NO. 2 TO THE PROFESSIONAL SERVICES AGREEMENT BY AND BETWEEN THE CITY OF DENTON, TEXAS AND ARTHUR SURVEYING CO., INC. TO PROVIDE PROFESSIONAL SURVEYING SERVICES IN SUPPORT OF THE CITY OF DENTON ENGINEERING DEPARTMENT; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR IN THE AMOUNT OF AN ADDITIONAL $75,000 (FOR A TOTAL AWARD OF $400,000); AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on December 12, 2006 by Ordinance No. 2006-337, the City awarded a professional service agreement to Arthur Surveying Co., Inc., in the amount of $250,000 for indefinite quantity surveying services; WHEREAS, on January 3, 2007, the City Manager awarded Amendment No. 1 to Arthur Surveying Co., Inc., in the amount of $75,000 for indefinite quantity surveying services; WHEREAS, the Staff having recommended, and the City Manager having recommended to the Council that a change order be authorized to amend such contract agreement with respect to the scope of work and an increase in the payment amount, and said change order fees under the proposed contract are fair and reasonable and are consistent with and not higher than the recommended practices and fees published by the professional association and such fees do not exceed the maximum provided by law; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. Amendment Two, increasing the amount of the professional services agreement between the City and Arthur Surveying Co., Inc., which is on file in the office of the Purchasing Agent, in the amount of Seventy Five Thousand and 00/100 ($75,000.00) Dollars, is hereby approved and the expenditure of funds therefor is hereby authorized in accordance with said change order. The total purchase order amount increases to $400,000.00. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: _________________________________ APPROVED AS TO LEGAL FORM: JOHM M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ 4-ORD-File 3219 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Vance Kemler 349-8044 ACM: Jon Fortune SUBJECT Consider adoption of an ordinance approving Amendment No. 1 to the Professional Services Agreement by and between the City of Denton, Texas and Chiang, Patel & Yerby, Inc. to provide professional design, development, and construction related services for the City of Denton Solid Waste Department; authorizing the expenditure of funds therefor in the amount of an additional $20,000 (for a total award of $110,000); and providing an effective date. (The Public Utilities Board approved this item by a vote of (6-0). FILE INFORMATION Chang, Patel, and Yerby, Inc. (CP&Y) and the City of Denton entered into a Professional Services Agreement (PSA) on January 29, 2008. The PSA, for $90,000, is for CP&Y to assist and provide the Solid Waste Department with 1) investigation, alternatives evaluation, and development of various solid waste projects, 2) preparation and support of permit applications, modifications, and amendments 3) review and preparation of documents, and 4) construction project quality assurance and quality control. During the scope of providing the above listed professional services, CP&Y utilized field hours that had not been anticipated. Therefore, an additional $20,000 in funding is required in order for CP&Y to complete the engineering services as listed within the change order request for professional services, outlined in Exhibit 1. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) The Public Utilities Board approved this item at its August 11, 2008 meeting. The City Manager approved the original Professional Services Agreement in the amount of $90,000 on January 29, 2008. The Public Utilities Board approved the original Agreement on January 14, 2008. RECOMMENDATION Approve Amendment No. 1 to the Professional Services Agreement with Chiang, Patel and Yerby, Inc. in the amount of $20,000 for a total award of $110,000. Agenda Information Sheet August 19, 2008 Page 2 PRINCIPAL PLACE OF BUSINESS Chiang, Patel and Yerby, Inc. Dallas, TX ESTIMATED SCHEDULE OF PROJECT The scope of services and fee estimate provided by Chiang, Patel and Yerby, Inc. will be for the time period through January 1, 2009. FISCAL INFORMATION Amendment No. 1 will be funded from account# 660021590.1365.30100. EXHIBITS Exhibit 1: Chiang, Patel and Yerby, Inc. Change Order Request Letter Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-File 3961 Û¨¸·¾·¬ ï EXHIBIT 1 ORDINANCE NO. ________________ AN ORDINANCE APPROVING AMENDMENT NO. 1 TO THE PROFESSIONAL SERVICES AGREEMENT BY AND BETWEEN THE CITY OF DENTON, TEXAS AND CHIANG, PATEL & YERBY, INC. TO PROVIDE PROFESSIONAL DESIGN, DEVELOPMENT, AND CONSTRUCTION RELATED SERVICES FOR THE CITY OF DENTON SOLID WASTE DEPARTMENT; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR IN THE AMOUNT OF AN ADDITIONAL $20,000 (FOR A TOTAL AWARD OF $110,000); AND PROVIDING AN EFFECTIVE DATE. WHEREAS, on January 29, 2008, the City Manager awarded a Professional Services Agreement to Chiang, Patel & Yerby, in the amount of $90,000 for the professional development, design and construction related services for the City of Denton Solid Waste Department; WHEREAS, the Staff having recommended, and the City Manager having recommended to the Council that a change order be authorized to amend such contract agreement with respect to the scope of work and an increase in the payment amount, and said change order fees under the proposed contract are fair and reasonable and are consistent with and not higher than the recommended and such fees do not exceed the maximum provided by law; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The Amendment No. 1, increasing the amount of the Professional Services Agreement between the City and Chiang, Patel and Yerby, Inc., which is on file in the office of the Purchasing Agent, in the amount of Twenty Thousand and 00/100 ($20,000.00) Dollars, is hereby approved and the expenditure of funds therefor is hereby authorized in accordance with said change order. The total purchase order amount increases to $110,000.00. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY:_________________________________ APPROVED AS TO LEGAL FORM: JOHM M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ 3-ORD-File 3961 1 DRAFT MINUTES 2 PUBLIC UTILITIES BOARD 3 August 11, 2008 4 5 6 After determining that a quorum of the Public Utilities Board of the City of Denton, Texas was 7 present, the Chair of the Public Utilities Board thereafter convened into an Open Meeting on 8 Monday, August 11, 2008 at 9:00 a.m. in the Service Center Training Room, City of Denton 9 Service Center, 901-A Texas Street, Denton, Texas. 10 Present 11 : Chair Charldean Newell, Dick Smith, Bill Cheek, Phil Gallivan, Randy Robinson, 12 Bill Grubbs and John Baines (arrived at 9:40 a.m.) 13 14 Ex Officio Members: 15 George C. Campbell, City Manager 16 Howard Martin, ACM Utilities 17 OPEN MEETING: 18 19 20 3) Consider approval of Change Order No. 1, in the amount of $20,000, to the professional 21 services agreement (PSA) between Chiang, Patel, and Yerby, Inc. (CP&Y) and the City of 22 Denton for CP&Y to provide professional development, design, and construction related 23 services to the City of Denton during fiscal year 2008 for the new total not to exceed amount 24 of $110,000. 25 26 Howard Martin, ACM, called on Vance Kemler, General Manager of Solid Waste, to present this 27 item. Kemler stated that in January 2008 CP&Y had been retained to provide engineering 28 services for the City and that the original agreement was in the amount of $90,000. That 29 agreement was approved through the City Manager process. An additional $20,000 was being 30 requested s exceeded the 31 original estimate. 32 33 Board Member Phil Gallivan asked if this request was for the layout and design of the landfill 34 entry way discussed during the last PUB meeting. Kemler replied that it was not. 35 Board Member Randy Robinson moved to approve Item 3 with a second from Board 36 Member Bill Grubbs. The motion was approved by a 6-0 vote. Board Member John 37 Baines stated that due to arriving at the conclusion of the discussion he would abstain from 38 voting. 39 40 41 The meeting was adjourned by consensus at 9:53 a.m. AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Keith Gabbard 349-7144 ACM: Jon Fortune SUBJECT Consider adoptionof an Ordinance authorizing the City Manager to execute Change Order Number One to the contract between the City of Denton and Jagoe-Public Company; providing for the expenditure of funds therefor; and providing an effective date (Bid 3994-West Oak Street Reconstruction Change Order Number One in the amount of $175,002.56 for a total bid award of $904,868.31). CHANGE ORDER INFORMATION This Change Order is to compensate Jagoe-Public Company for additional footage of curb/gutter, sidewalk, ADA ramps, asphalt and cement treated sub-grade. Also included in the Change Order are deductions for replacement of access ramps, concrete pads, signage, hydrated lime, and manhole adjustments. All adjustments in quantity shown on the Change Order document reflect bid line item prices. The total dollar amount of the Change Order is less than 25% of the bid award. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) Council awarded this bid to Jagoe-Public Company in the amount of $729,865.75 on April 15, 2008 (Ordinance# 2008-084). RECOMMENDATION Approve Change Order Number One in the amount of $175,002.56 for a total bid award amount of $904,868.31. PRINCIPAL PLACE OF BUSINESS Jagoe-Public Company Denton, TX ESTIMATED SCHEDULE OF PROJECT This Change Order will not affect the estimated completion date which is the last week of August 2008. Agenda Information Sheet August 19, 2008 Page 2 FISCAL INFORMATION Change Order Number One will be funded from account 350236446.1360.40100. EXHIBITS Exhibit 1- Change Order One Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-Bid 3944 Change Order One Û¨¸·¾·¬ ï ORDINANCE NO. ________________ AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE CHANGE ORDER NUMBER ONE TO THE CONTRACT BETWEEN THE CITY OF DENTON AND JAGOE- PUBLIC COMPANY; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (BID 3994-WEST OAK STREET RECONSTRUCTION CHANGE ORDER NUMBER ONE IN THE AMOUNT OF $175,002.56 FOR A TOTAL BID AWARD OF $904,868.31). WHEREAS, on April 15, 2008 by Ordinance No. 2008-084, the City awarded a public works contract to Jagoe-Public Company in the amount of $729,865.75 for the West Oak Street Reconstruction; WHEREAS, the Staff having recommended, and the City Manager having recommended to the Council that a change order be authorized to amend such contract agreement with respect to the scope of work and an increase in the payment amount, and said change order fees under the proposed contract are fair and reasonable and are consistent with and not higher than the recommended practices and fees published by the p and such fees do not exceed the maximum provided by law; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The Change Order No. One, increasing the amount of the contract between the City and Jagoe-Public Company which is on file in the office of the Purchasing Agent, in the amount of One Hundred Seventy Five Thousand and Two and 56/100 ($175,002.56) Dollars, is hereby approved and the expenditure of funds therefor is hereby authorized in accordance with said change order. The total purchase order amount increases to $904,868.31. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: _________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Frank Payne 349-8946 ACM: Jon Fortune SUBJECT Consider adoption of an Ordinance accepting competitive bids and awarding a public works contract for Old North Road Drainage Improvements; providing for the expenditure of funds therefor; and providing an effective date (Bid 4083-awarded to the lowest responsible bidder meeting specification, J.T. Dersner, Inc. in the amount of $437,158.50). (The Public Utilities Board approved this item by a vote of (6-0). BID INFORMATION This bid is for the installation of a storm drain system from south of Foxcroft Road to Cooper Creek. Old North Road is an important collector street for this area which experienced major flooding during the heavy rains that occurred in spring 2007. The project consists of installing 154 linear feet (lf) (Reinforced Concrete Pipe), 20 boxes, and a headwall as well as other miscellaneous bid items required to install a storm drain system. The design of this installation is anticipated to handle rain runoff equal to the April 2007 rainfall. PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS) The Public Utilities Board approved this item at its August 11, 2008 meeting. RECOMMENDATION Award to J.T. Dersner, Inc. in the amount of $437,158.50. PRINCIPAL PLACE OF BUSINESS J.T. Dersner, Inc. Grand Prairie, TX Agenda Information Sheet August 19, 2008 Page 2 STAFF COST ESTIMATE opinion of probable construction cost for this project was $341,519.45. The The estimate was derived utilizing pricing received from recently bid projects, and it is thought that inflation of unit prices in general led to the difference between the opinion of probable construction cost and the low bid. ESTIMATED SCHEDULE OF PROJECT This project is scheduled to be completed within 50 working days from notice to proceed. FISCAL INFORMATION This project will be funded from the following accounts: 650036559.1360.40100 $153,659.81 650036560.1360.40100 $ 77,556.04 650035462.1360.40100 $205,942.65 $437,158.50 Requisition 88756 has been entered in to the Purchasing software system. EXHIBITS Exhibit 1: Bid Tabulation Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-Bid 3971 Þ×Ü ý ìðèí Exhibit 1 ÜßÌÛæ ðéñïéñðè ÑÔÜ ÒÑÎÌØ ÎÑßÜ ÜÎß×ÒßÙÛ ×ÓÐÎÑÊÛÓÛÒÌÍ ïÎùøêúëôíéôîïçøïùîëçøïùîëçøïùîëçøïùîëçøïùîë Ð·°»©±®µ É¸·¬»©¿¬»® Ö¿¹±»óÐ«¾´·½ ÍÓÞ Û²¬»®°®·»ÖÌ Ü»®²»® ×²½ Ý±²¬®«½¬·±² ÔÔÝÝ±²¬®«½¬·±² ×²½òÝ±³°¿²§ Ú¿®³»® Þ®¿²½¸ô Ð®·²½·°´» Ð´¿½» ±º Þ«·²»æ É¿½±ô ÌÈÜ»²¬±²ô ÌÈÜ»²¬±²ô ÌÈÙ®¿²¼ Ð®¿·®·»ô ÌÈ ÌÈ ïÞ¿» Þ·¼ üëíðôéðëòðð üéêðôéððòðð üìçïôïëïòðð üìçêôîíðòðð üìíéôïëèòëð Þ×Ü ÞÑÒÜ§»§»§»§»§» ßÜÜÛÒÜËÓ ï§»§»§»§»§» ORDINANCE NO. _________ AN ORDINANCE ACCEPTING COMPETITIVE BIDS AND AWARDING A PUBLIC WORKS CONTRACT FOR OLD NORTH ROAD DRAINAGE IMPROVEMENTS; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (BID 4083-AWARDED TO THE LOWEST RESPONSIBLE BIDDER MEETING SPECIFICATION, J.T. DERSNER, INC. IN THE AMOUNT OF $437,158.50). WHEREAS, the City has solicited, received and tabulated competitive bids for the construction of public works or improvements in accordance with the procedures of State law and City ordinances; and WHEREAS, the City Manager or a designated employee has received and recommended that the herein described bids are the lowest responsible bids for the construction of the public works or improvements described in the bid invitation, bid proposals and plans and specifications therein; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The following competitive bids for the construction of public works or improvements, as described in the "Bid Invitations", "Bid Proposals" or plans and specifications on file in the Office of the City's Purchasing Agent filed according to the bid number assigned hereto, are hereby accepted and approved as being the lowest responsible bids: BID NUMBER CONTRACTOR AMOUNT 4083 J.T. Dersner, Inc. $437,158.50 SECTION 2. The acceptance and approval of the above competitive bids shall not constitute a contract between the City and the person submitting the bid for construction of such public works or improvements herein accepted and approved, until such person shall comply with all requirements specified in the Notice to Bidders including the timely execution of a written contract and furnishing of performance and payment bonds, and insurance certificate after notification of the award of the bid. SECTION 3. The City Manager is hereby authorized to execute all necessary written contracts for the performance of the construction of the public works or improvements in accordance with the bids accepted and approved herein, provided that such contracts are made in accordance with the Notice to Bidders and Bid Proposals, and documents relating thereto specifying the terms, conditions, plans and specifications, standards, quantities and specified sums contained therein. SECTION 4. Upon acceptance and approval of the above competitive bids and the execution of contracts for the public works and improvements as authorized herein, the City Council hereby authorizes the expenditure of funds in the manner and in the amount as specified in such approved bids and authorized contracts executed pursuant thereto. SECTION 5. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of ,2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ 3-ORD-Bid 4083 1 DRAFT MINUTES 2 PUBLIC UTILITIES BOARD 3 August 11, 2008 4 5 6 After determining that a quorum of the Public Utilities Board of the City of Denton, Texas was 7 present, the Chair of the Public Utilities Board thereafter convened into an Open Meeting on 8 Monday, August 11, 2008 at 9:00 a.m. in the Service Center Training Room, City of Denton 9 Service Center, 901-A Texas Street, Denton, Texas. 10 Present 11 : Chair Charldean Newell, Dick Smith, Bill Cheek, Phil Gallivan, Randy Robinson, 12 Bill Grubbs and John Baines (arrived at 9:40 a.m.) 13 14 Ex Officio Members: 15 George C. Campbell, City Manager 16 Howard Martin, ACM Utilities 17 OPEN MEETING: 18 19 CONSENT AGENDA: 20 21 22 has had an opportunity to raise questions regarding these items prior to consideration. 23 24 1) Consider approval of Bid No. 4083 to J.T. Dersner Inc. for the construction of a new storm 25 water system on Old North Road, in an amount not to exceed $437,158.50. 26 Board Member Phil Gallivan moved to approved Item 1 with a second from Board 27 Member Dick Smith. The motion was approved by a 6-0 vote. 28 29 30 The meeting was adjourned by consensus at 9:53 a.m. AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008Questions concerning this acquisition may be directed DEPARTMENT: Materials Management to Keith Gabbard 349-7144 ACM: Jon Fortune SUBJECT Consider adoption of an Ordinance accepting competitive bids and awarding a public works contract for the reconstruction of Mingo Road; providing for the expenditure of funds therefor; and providing an effective date (Bid 4093-awarded to the lowest responsible bidder meeting specification, Jagoe-Public Company in the amount of $887,825.80). BID INFORMATION This bid is for the reconstruction of Mingo Road from Bell Avenue northeast to the intersection of Nottingham Street. The project will include approximately 18,000 square-yards of asphalt milling, 15,800 square-yards of 8-inch cement stabilization, 15,250 square-yards of asphalt paving, pavement marking, and associated activities. RECOMMENDATION Award Bid 4093 to Jagoe-Public Company in the amount of $887,825.80. PRINCIPAL PLACE OF BUSINESS Jagoe-Public Company Denton, TX ESTIMATED SCHEDULE OF PROJECT This project is estimated to be completed within 60 days of notice to proceed or approximately mid October 2008. FISCAL INFORMATION This project will be funded from account 350247446.1360.40100. Requisition 88702 has been entered in the Purchasing software system. EXHIBITS Exhibit 1: Bid Tabulation Agenda Information Sheet August 19, 2008 Page 2 Respectfully submitted: Tom Shaw, C.P.M., 349-7100 Purchasing Agent 1-AIS-Bid 4093 Þ×Ü ý ìðçí Exhibit 1 ÜßÌÛæ ðéñîîñðè Ó×ÒÙÑ ÎÑßÜ ÎÛÝÑÒÍÌÎËÝÌ×ÑÒ ïÎùøêúëôíéôîïçøïùîëçøïùîëçøïùîëçøïùîëçøïùîë ÍËÒÓÑËÒÌ ÖßÙÑÛóÐËÞÔ×Ý ßÜÊßÒÝÛÜ ÖÎÖ ÐßÊ×ÒÙÖÔÞ ÝÑÎÐÝÑÓÐßÒÇÐßÊ×ÒÙ ÚÑÎÌ ÉÑÎÌØô Ð®·²½·°´» Ð´¿½» ±º Þ«·²»æ ÜßÔÔßÍô ÌÈÎÑßÒÑÕÛô ÌÈÜ»²¬±²ô ÌÈÜßÔÔßÍô ÌÈ ÌÈ ïÞ¿» Þ·¼ üïôðìîôíèêòïì üïôïðìôïèêòîì üïôðîçôééëòëð üèèéôèîëòèðüïôîèìôëððòðð Þ×Ü ÞÑÒÜ§»§»§»§»§» ORDINANCE NO. _________ AN ORDINANCE ACCEPTING COMPETITIVE BIDS AND AWARDING A PUBLIC WORKS CONTRACT FOR THE RECONSTRUCTION OF MINGO ROAD; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (BID 4093-AWARDED TO THE LOWEST RESPONSIBLE BIDDER MEETING SPECIFICATION, JAGOE-PUBLIC COMPANY IN THE AMOUNT OF $887,825.80). WHEREAS, the City has solicited, received and tabulated competitive bids for the construction of public works or improvements in accordance with the procedures of State law and City ordinances; and WHEREAS, the City Manager or a designated employee has received and recommended that the herein described bids are the lowest responsible bids for the construction of the public works or improvements described in the bid invitation, bid proposals and plans and specifications therein; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The following competitive bids for the construction of public works or improvements, as described in the "Bid Invitations", "Bid Proposals" or plans and specifications on file in the Office of the City's Purchasing Agent filed according to the bid number assigned hereto, are hereby accepted and approved as being the lowest responsible bids: BID NUMBER CONTRACTOR AMOUNT 4093 Jagoe-Public Company $887,825.80 SECTION 2. The acceptance and approval of the above competitive bids shall not constitute a contract between the City and the person submitting the bid for construction of such public works or improvements herein accepted and approved, until such person shall comply with all requirements specified in the Notice to Bidders including the timely execution of a written contract and furnishing of performance and payment bonds, and insurance certificate after notification of the award of the bid. SECTION 3. The City Manager is hereby authorized to execute all necessary written contracts for the performance of the construction of the public works or improvements in accordance with the bids accepted and approved herein, provided that such contracts are made in accordance with the Notice to Bidders and Bid Proposals, and documents relating thereto specifying the terms, conditions, plans and specifications, standards, quantities and specified sums contained therein. SECTION 4. Upon acceptance and approval of the above competitive bids and the execution of contracts for the public works and improvements as authorized herein, the City Council hereby authorizes the expenditure of funds in the manner and in the amount as specified in such approved bids and authorized contracts executed pursuant thereto. SECTION 5. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of ,2008. ______________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ 3-ORD-4093 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Parks and Recreation ACM: Fred Greene ________________________________________________________________________ SUBJECT Consider a request for an exception to the Noise Ordinance for the purpose of playing music and operating a public address system during the Stand Up and Vote Festival. The festival is sponsored by AV & The Trunk Pop Entertainment Family. The event will be located in the Fred Moore Park on Saturday, September 13, 2008, with music beginning at 7:00 p.m. and concluding at 11:30 p.m. This request is for an exception to the noise ordinance with respect to hours of operation of an amplified loudspeaker system after 10:00 p.m. BACKGROUND Chris Avant, with AV & The Trunk Pop Entertainment Family, is hosting this first time event to encourage voter registration among the younger population. The event will have representation from various political parties and the opportunity to register voters of all ages. There will be a variety of live music and performances, vendors selling political items, and food booths. PRIOR ACTION/REVIEW None FISCAL INFORMATION None EXHIBITS 1. Letter of Request from Chris Avant Respectfully submitted: Emerson Vorel, Director Parks and Recreation Department Prepared by: Janie McLeod Community Events Coordinator AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬·» ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî __________________________________________________________________________________ SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ¿«¬¸±®·¦·²¹ ¬¸» ¿°°®±ª¿´ ±º ¿² Ù¿ ´·²» Û¿»³»²¬ ¾»¬©»»² ¬¸» Ý·¬§ ±º Ü»²¬±²ô ¿ ¹®¿²¬±® ¿²¼ Û²¬»®°®·» Ì»¨¿ Ð·°»´·²» ÔÔÝô ¿ Ì»¨¿ ´·³·¬»¼ ´·¿¾·´·¬§ ½±®°±®¿¬·±²ô ¿ ¹®¿²¬»»ô ®»¹¿®¼·²¹ ¿ ðòðì ¿½®» ¬®¿½¬ ±º ´¿²¼ ´±½¿¬»¼ ±² Ô±¬ ïô Þ´±½µ ï ±º ¬¸» Î±¾±² Î¿²½¸ É¿¬»® Î»½´¿³¿¬·±² Ð´¿²¬ô ®»½±®¼»¼ ·² Ý¿¾·²»¬ Î Ð¿¹» íêëô Ð´¿¬ Î»½±®¼ô Ü»²¬±² Ý±«²¬§ô Ì»¨¿ ¿²¼ ¾»·²¹ ·² ¬¸» Ì ú ÐòÎòÎ Í«®ª»§ô ß¾¬®¿½¬ Ò±ò ïíðïô Ý·¬§ ±º Ü»²¬±²ô Ü»²¬±² Ý±«²¬§ô Ì»¨¿å °®±ª·¼·²¹ ¿² »ºº»½¬·ª» ¼¿¬»ò Ì¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ®»½±³³»²¼ ¿°°®±ª¿´ øêóð÷ò BACKGROUND Ì¸» Ý·¬§ ±º Ü»²¬±² ½«®®»²¬´§ ±©² ¿ îòçïë ¿½®» ¬®¿½¬ ±º ´¿²¼ µ²±©² ¿ Ô±¬ ïô Þ´±½µ ï ±º ¬¸» Î±¾±² Î¿²½¸ É¿¬»® Î»½´¿³¿¬·±² Ð´¿²¬ ß¼¼·¬·±²ô ¾»·²¹ ®»½±®¼»¼ ¾§ Ý±«²¬§ Ý´»®µ Ú·´» ²«³¾»® îððéóîççêéô Î»¿´ Ð®±°»®¬§ Î»½±®¼ô Ü»²¬±² Ý±«²¬§ô Ì»¨¿ò Û²¬»®°®·» Ì»¨¿ Ð·°»´·²» ÔÔÝòô · ®»¯«»¬·²¹ ¿ Ù¿ Ô·²» Û¿»³»²¬ ±² ¬¸» Ý·¬§ ±º Ü»²¬±² °®±°»®¬§ ± ¬¸¿¬ ¬¸»§ ³¿§ ½±²¬®«½¬ ¿ íêó·²½¸ ²¿¬«®¿´ ¹¿ °·°»´·²»ò Ì¸» íêó·²½¸ ¹¿ °·°»´·²» · ¾»·²¹ ½±²¬®«½¬»¼ º®±³ Ó±®¹¿² Ó·´´ ·² Û®¿¬¸ Ý±«²¬§ ¬± ¿ °±·²¬ ¬¸¿¬ · ²±®¬¸»¿¬ ±º Í¸»®³¿² ·² Ù®¿§±² Ý±«²¬§ô ¿²¼ · ¿°°®±¨·³¿¬»´§ ïèð ³·´» ·² ´»²¹¬¸ò Û²¬»®°®·» Ì»¨¿ Ð·°»´·²» ÔÔÝòô ¸¿ »¨°®»»¼ ¬¸¿¬ ¿´´ »¿»³»²¬ º±® ¬¸» ²¿¬«®¿´ ¹¿ °·°»´·²» °®±¶»½¬ ¸¿ ¾»»² ¿½¯«·®»¼ ·² Ü»²¬±² Ý±«²¬§ »¨½»°¬ º±® ¬¸» ½«®®»²¬ ®»¯«»¬»¼ »¿»³»²¬ò Ì¸» ®»¯«»¬»¼ »¿»³»²¬ ¿®»¿ · ¿°°®±¨·³¿¬»´§ ëðóº±±¬ ·² ©·¼¬¸ ¿²¼ · ´±½¿¬»¼ ±² ¬¸» ©»¬ ´·²» ±º ¬¸» Ý·¬§ ±º Ü»²¬±² °®±°»®¬§ ¬¸¿¬ · ¿¼¶¿½»²¬ ¬± Ú´±®»²½» Î±¿¼ò Ì¸» ³»¬¸±¼ ±º ½±²¬®«½¬·²¹ ¬¸» ¹¿ ´·²» ±² Ý·¬§ °®±°»®¬§ · ¾§ «¬·´·¦·²¹ ¾±®·²¹ ¬»½¸²·¯«»ò ß ½±³°»²¿¬·±² º±® ¬¸» »¿»³»²¬ô Û²¬»®°®·» Ì»¨¿ Ð·°»´·²» ÔÔÝòô ¸¿ ¿¹®»»¼ ¬± °¿§ ¬¸» Ý·¬§ ±º Ü»²¬±² ¬¸» º¿·® ³¿®µ»¬ ª¿´«» ±º üîôëððòðð º±® ¬¸» ®»¯«»¬»¼ Ù¿ Ô·²» Û¿»³»²¬ò RECOMMENDATION Í¬¿ºº »²¼±®» ¿°°®±ª¿´ ±º ¹®¿²¬·²¹ ¬¸» Û¿»³»²¬ ®»¯«»¬ò ESTIMATED PROJECT SCHEDULE ß«¹«¬ îððè PRIOR ACTION/REVIEW Ü»ª»´±°³»²¬ Î»ª·»© Ý±³³·¬¬»» Î»½±³³»²¼ ß°°®±ª¿´ Ð«¾´·½ Ë¬·´·¬§ Þ±¿®¼ Ö«´§ îèô îððè FISCAL INFORMATION Ò±¬ ¿°°´·½¿¾´» ï EXHIBITS 1. Ô±½¿¬·±² Ó¿° 2.Ü»¬¿·´ Ó¿° 3.Û¿»³»²¬ 4.Ñ®¼·²¿²½» 5.ÐËÞ Ó»»¬·²¹ Ó·²«¬» Î»°»½¬º«´´§ «¾³·¬¬»¼ô Ö·³³§ Üò Ý±«´¬»® Ü·®»½¬±® ±º É¿¬»®ñÉ¿¬»©¿¬»® É¿¬»® ß¼³·²·¬®¿¬·±² Ð®»°¿®»¼ ¾§æ ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁ Ó¿®µ ßò Ô¿·®¼ Î·¹¸¬ó±ºó©¿§ ß¹»²¬ Î»¿´ Û¬¿¬» ¿²¼ Ý¿°·¬¿´ Í«°°±®¬ î EXHIBIT 1 åóîøéíê ø÷îèíî øíåîèíåî ùíêø÷ðð éãùûïíê÷ åóððíååííø é÷ûúíêî ùê÷÷ñøûð÷ éóè÷ ûððê÷ø îíèèíéùûð÷ êíúéíîêûîùô ðíùûèóíîïûì SITE MAP EDIT 2 NORTH EXHIBIT 3 EXHIBIT 4 ORDINANCE NO. 2008-________ AN ORDINANCE AUTHORIZING A GAS LINE EASEMENT BETWEEN THE CITY OF DENTON, AS GRANTOR AND ENTERPRISE TEXAS PIPELINE, LLC, A TEXAS LIMITED LIABILITY CORPORATION, AS GRANTEE, REGARDING A 0.04 ACRE TRACT OF LAND LOCATED ON LOT 1, BLOCK 1 OF THE ROBSON RANCH WATER RECLAMATION PLANT ADDITION, RECORDED IN CABINET R PAGE 365, PLAT RECORDS, DENTON COUNTY, TEXAS AND BEING IN THE T & P.R.R SURVEY, ABSTRACT NO. 1301, IN THE CITY OF DENTON, DENTON COUNTY, TEXAS; PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The Gas Line Easement by and between the City of Denton, and Enterprise Texas Pipeline, LLC, a Texas Limited Liability companyrantee in substantially the form of the easement attached hereto and made part of the ordinance for all Easement SECTION 2. The City Manager or his designee is hereby authorized to execute the Easement on behalf of the City. SECTION 3. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the ________ day of ________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY By: _______________________________ APPROVED AS TO LEGAL FORM: JOHN C. KNIGHT, INTERIM CITY ATTORNEY By: _______________________________ EXHIBIT 5 ï î ÜÎßÚÌ Ó×ÒËÌÛÍ í ÐËÞÔ×Ý ËÌ×Ô×Ì×ÛÍ ÞÑßÎÜ ì Ö«´§ îèô îððè ë ê ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ é °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ¬¸»®»¿º¬»® ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² è Ó±²¼¿§ô Ö«´§ îèô îððè ¿¬ çæðð ¿ò³ò ·² ¬¸» Í»®ª·½» Ý»²¬»® Ì®¿·²·²¹ Î±±³ô Ý·¬§ ±º Ü»²¬±² ç Í»®ª·½» Ý»²¬»®ô çðïóß Ì»¨¿ Í¬®»»¬ô Ü»²¬±²ô Ì»¨¿ò ïð Present: ïï Ý¸¿·® Ý¸¿®´¼»¿² Ò»©»´´ô Ü·½µ Í³·¬¸ô Þ·´´ Ý¸»»µô Ð¸·´ Ù¿´´·ª¿²ô Î¿²¼§ Î±¾·²±² ïî ¿²¼ Þ·´´ Ù®«¾¾ ïí ïì Û¨ Ñºº·½·± Ó»³¾»®æ ïë Ù»±®¹» Ýò Ý¿³°¾»´´ô Ý·¬§ Ó¿²¿¹»® ïê Ø±©¿®¼ Ó¿®¬·²ô ßÝÓ Ë¬·´·¬·» ïé Absent ïè æ Ö±¸² Þ¿·²»ô »¨½«»¼ ïç OPEN MEETING: îð îï CONSENT AGENDA: îî îí Ì¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ¸¿ ®»½»·ª»¼ ¾¿½µ¹®±«²¼ ·²º±®³¿¬·±²ô ¬¿ºº ®»½±³³»²¼¿¬·±²ô ¿²¼ îì ¸¿ ¸¿¼ ¿² ±°°±®¬«²·¬§ ¬± ®¿·» ¯«»¬·±² ®»¹¿®¼·²¹ ¬¸»» ·¬»³ °®·±® ¬± ½±²·¼»®¿¬·±²ò îë îê ï÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º ¿ Ù¿ Ô·²» Û¿»³»²¬ ¾»¬©»»² ¬¸» Ý·¬§ ±º Ü»²¬±²ô ¿ îé ¹®¿²¬±®ô ¿²¼ Û²¬»®°®·» Ì»¨¿ Ð·°»´·²» ÔÔÝô ¿ Ì»¨¿ ´·³·¬»¼ ´·¿¾·´·¬§ ½±®°±®¿¬·±²ô ¿ ¹®¿²¬»»ô îè ®»¹¿®¼·²¹ ¿ ðòðì ¿½®» ¬®¿½¬ ±º ´¿²¼ ´±½¿¬»¼ ±² Ô±¬ ïô Þ´±½µ ï ±º ¬¸» Î±¾±² Î¿²½¸ É¿¬»® îç Î»½´¿³¿¬·±² Ð´¿²¬ ß¼¼·¬·±²ô ®»½±®¼»¼ ·² Ý¿¾·²»¬ Îô Ð¿¹» íêëô Ð´¿¬ Î»½±®¼ô Ü»²¬±² Ý±«²¬§ô íð Ì»¨¿ ¿²¼ ¾»·²¹ ·² ¬¸» Ì ú ÐòÎòÎ Í«®ª»§ô ß¾¬®¿½¬ Ò±ò ïíðïô Ý·¬§ ±º Ü»²¬±²ô Ü»²¬±² íï Ý±«²¬§ô Ì»¨¿å ¿²¼ °®±ª·¼·²¹ ¿² »ºº»½¬·ª» ¼¿¬»ò íî íí î÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º Þ·¼ ýìðéï ¿²¼ ¿©¿®¼·²¹ ¬¸» °«®½¸¿» º±® ¹¿´ª¿²·¦»¼ íì ¬»»´ ¬®¿²³··±² °±´» ¬± Ê¿´³±²¬óÒ»©³¿®µô Ó¿²º·»´¼ô Ì»¨¿ ·² ¬¸» »¨°»²¼·¬«®» ¿³±«²¬ íë ±º üíôïíéôèëçò íê íé í÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º Þ·¼ ýìðéè ¿²¼ ¿©¿®¼·²¹ ¬¸» °«®½¸¿» º±® º¿¾®·½¿¬·²¹ íè ¿²¼ ¼»´·ª»®·²¹ ¹¿´ª¿²·¦»¼ ¬»»´ ¬®«½¬«®» ¿²¼ ¿²½¸±® ¾±´¬ ®»¯«·®»¼ ¬± ½±²¬®«½¬ ÎÜ É»´´ ¬¸ íç ×²¬»®½¸¿²¹» ¬± Ð¿®µ Ó»¬¿´ Ú¿¾®·½¿¬±®ô ×²½òô ëéðî Éò é Í¬®»»¬ô É¿µ» Ê·´´¿¹»ô Ì»¨¿ éëëðï ìð ·² ¬¸» ¿³±«²¬ ±º üîêéôëîí ¿²¼ ¬± Ü·ó¬®¿² Í¬»»´ Ú¿¾®·½¿¬·±²ô ÔÔÝô ìéîë Ø·¹¸©¿§ îè Û¿¬ô ìï Ð·²»ª·´´»ô Ô±«··¿²¿ éïíêð ·² ¬¸» ¿³±«²¬ ±º üêéôîêð º±® ¿ ¬±¬¿´ »¨°»²¼·¬«®» ±º üííìôéèíò ìî ìí ì÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿¼±°¬·±² ±º ¿² Ñ®¼·²¿²½» ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ °®±ª·¼·²¹ ìì º±®ô ¿«¬¸±®·¦·²¹ô ¿²¼ ¿°°®±ª·²¹ ¬¸» »¨°»²¼·¬«®» ±º º«²¼ º±® ¬¸» °«®½¸¿» ±º Þ·±¨·¼» º±® ¬¸» ìë Ý·¬§ ±º Ü»²¬±² É¿¬»©¿¬»® Ü»°¿®¬³»²¬ô ©¸·½¸ · ¿ª¿·´¿¾´» º®±³ ±²´§ ±²» ±«®½» ·² ìê ¿½½±®¼¿²½» ©·¬¸ ¬¸» °»®¬·²»²¬ °®±ª··±² ±º Ý¸¿°¬»® îëî ±º ¬¸» Ì»¨¿ Ô±½¿´ Ù±ª»®²³»²¬ ìé Ý±¼» »¨»³°¬·²¹ «½¸ °«®½¸¿» º®±³ ¬¸» ®»¯«·®»³»²¬ ±º ½±³°»¬·¬·ª» ¾·¼¼·²¹å ¿²¼ °®±ª·¼·²¹ ìè ¿² »ºº»½¬·ª» ¼¿¬» øÚ·´» ìïðîó¬± Í·»³»² É¿¬»® Ì»½¸²±´±¹·» Ý±®°ò ·² ¬¸» ¿³±«²¬ ±º ìç üîòðìñ¹¿´´±² º±® ¿² ¿²²«¿´ »¬·³¿¬»¼ ¿³±«²¬ ±º üéëôððð÷ò Ü®¿º¬ Ó·²«¬» ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ³»»¬·²¹ Ö«´§ îèô îððè Ð¿¹» î ±º î Board Member Phil Gallivan moved to approve Items 1 through 4 with a second from ï Board Member Bill Cheek. The motion was approved by a 6-0 vote. î í AGENDA INFORMATION SHEET AGENDA DATE æ ß«¹«¬ ïïô îððè DEPARTMENT æ Ë¬·´·¬§ ß¼³·²·¬®¿¬·±² ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ Ý±«²½·´ ±º Ü»²¬±²ô Ì»¨¿ ¿«¬¸±®·¦·²¹ ¬¸» Ý·¬§ Ó¿²¿¹»® ¬± »¨»½«¬» ¿ É¿¬»©¿¬»® Ó¿·² Ð®±óÎ¿¬¿ Î»·³¾«®»³»²¬ ¿¹®»»³»²¬ ¾»¬©»»² ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ¿²¼ ÜÞÍ× Ô¿²¼±©²» ×ô ÔòÐò º±® ®»·³¾«®»³»²¬ ±º ¬¸» ½±¬ ±º ¾«·´¼·²¹ ¿ ©¿¬»©¿¬»® ³¿·²ô ¬¸®±«¹¸ °®±ó®¿¬¿ ½¸¿®¹» °¿·¼ ¬± ¬¸» Ý·¬§å ¿«¬¸±®·¦·²¹ ¬¸» ¬®¿²º»® ±º º«²¼ °«®«¿²¬ ¬± ¬¸» ¿¹®»»³»²¬å ¿²¼ °®±ª·¼·²¹ ¿² »ºº»½¬·ª» ¼¿¬»ò Ì¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ®»½±³³»²¼ ¿°°®±ª¿´ øëóð÷ò BACKGROUND ÜÞÍ× Ô¿²¼±©²» ×ô Ôò Ðò øÜ»ª»´±°»®÷ · ¼»ª»´±°·²¹ ¬¸» Í°»²½»® Í¯«¿®» °®±¶»½¬ ±² Ô±±° îèè ¿¼¶¿½»²¬ ¬± ¬¸» Ì®¿½¬±® Í«°°´§ ¬±®» øÛ¨¸·¾·¬ ïóÓ¿°÷ò Ì± °®±ª·¼» ©¿¬»©¿¬»® »®ª·½» ¬± ¬¸» °®±°±»¼ ¼»ª»´±°³»²¬ô ±ººó·¬» »¨¬»²·±² ±º ¬¸» »©»® ´·²» · ®»¯«·®»¼ò Ì¸» °®±°±»¼ »©»® ´·²» »¨¬»²·±² º®±³ Í°»²½»® Í¯«¿®» ©·´´ ®«² °¿®¿´´»´ ¬± ¬¸» Ô±±° îèè ¹»²»®¿´´§ ©·¬¸·² ¿² »¨·¬·²¹ °±©»® ´·²» »¿»³»²¬ô ¿²¼ ½±²²»½¬ ¬± ¬¸» Ð»½¿² Ý®»»µ ×²¬»®½»°¬±® »©»® ¶«¬ ²±®¬¸ ±º ¬¸» Ð»½¿² Ý®»»µ ø»» Û¨¸·¾·¬ ï÷ò Ì¸» »©»® ´·²» ±ººó·¬» »¨¬»²·±² °®±¶»½¬ ·²½´«¼» ïôééì º»»¬ ±º èó·²½¸ô ïôëðð º»»¬ ±º ïðó·²½¸ô çîê º»»¬ ±º ïîó·²½¸ô ¿ ¼«¿´ °·°» ·°¸±² §¬»³ ¬± ½®± ¬¸» ½®»»µô ¿²¼ ïí ³¿²¸±´»ò Ì¸» ¾·¼ °®·½» ±º ¬¸» ±ººó·¬» »©»® §¬»³ · üîïïôëêð øÛ¨¸·¾·¬ î÷ò Ì¸» Ý·¬§ ±º Ü»²¬±² Ý±²¬®¿½¬ ¿²¼ Þ±²¼ ¸¿®» º±® ¬¸» ±ººó·¬» »©»® °®±¶»½¬ · üìôîêêò Ì¸» ¬±¬¿´ ½±²¬®«½¬·±² ½±¬ ±º ¬¸» ±ººó·¬» »©»® °®±¶»½¬ · ¬¸»®»º±®» üîïëôèîêò Ì¸» ¬±¬¿´ ´»²¹¬¸ ±º ¬¸» ±ººó·¬» »©»® §¬»³ · ìôìéè º»»¬ ·²½´«¼·²¹ ¬¸» ·°¸±² §¬»³ò Ì¸» ½±¬ °»® º±±¬ · ¬¸« ½±³°«¬»¼ ¿¬ üìèòîð °»® º±±¬ º±® ¬¸» ±ººó·¬» »©»® ´·²»ò Ì¸· °»® º±±¬ ½±¬ ©·´´ ¾» «»¼ ¿ ¬¸» ¾¿· º±® ½±´´»½¬·²¹ °®±ó®¿¬¿ »©»® ½¸¿®¹» º®±³ °®±°»®¬·» º®±²¬·²¹ ¬¸» »©»® ´·²» ¿ ¬¸»§ ¼»ª»´±° ¿²¼ ½±²²»½¬ ¬± ¬¸» »©»® §¬»³ò Ì¸» °®±°±»¼ ±ººó·¬» »©»® ´·²» »¨¬»²·±² °®±¶»½¬ ©·´´ °®±ª·¼» ¿½½» ¬± ©¿¬»©¿¬»® »®ª·½» ¬± ¬¸» º¿¬ ¼»ª»´±°·²¹ Ô±±° îèè ½±®®·¼±®ò Ì¸» »©»® ´·²» ¸¿ ¾»»² ·¦»¼ ¬± °®±ª·¼» ½¿°¿½·¬§ º±® ¬¸» º«´´ °±¬»²¬·¿´ ¼»ª»´±°³»²¬ ±º ¬¸» »©»®¸»¼ ¼®¿·²·²¹ ·²¬± ¬¸» °®±°±»¼ »©»® ´·²»ò Ì¸» »©»® ´·²» °®±¶»½¬ · º«´´§ º«²¼»¼ ¾§ ¬¸» Ü»ª»´±°»®ô ¿²¼ ¼±» ²±¬ ®»¯«·®» ¿²§ »¨°»²¼·¬«®» ±º É¿¬»©¿¬»® Ü»°¿®¬³»²¬ º«²¼ò RECOMMENDATION Í¬¿ºº ®»½±³³»²¼ ¿°°®±ª¿´ ±º ¬¸» Í»©»® Ó¿·² Ð®±óÎ¿¬¿ Î»·³¾«®»³»²¬ ß¹®»»³»²¬ ©·¬¸ ÜÞÍ× Ô¿²¼±©²» ×ô Ôò Ðò PRIOR ACTION/REVIEW (Council, Boards, Commissions) ÐËÞæ ß°°®±ª»¼ ¬¸» °®±ó®¿¬¿ ¿¹®»»³»²¬ ±² Ò±ª»³¾»® ïîô îððé FISCAL INFORMATION Ì¸»®» · ²± »¨°»²¼·¬«®» ±º ©¿¬»©¿¬»® º«²¼ ¬± »²¬»® ·²¬± ¬¸» Í»©»® Ó¿·² Ð®±óÎ¿¬¿ Î»·³¾«®»³»²¬ ß¹®»»³»²¬ ©·¬¸ ÜÞÍ× Ô¿²¼±©²» ×ô Ôò Ðò EXHIBITS ïòÓ¿° îòÞ·¼ Ð®·½» íòÑ®¼·²¿²½» ìòß¹®»»³»²¬ ëòÐËÞ Ó»»¬·²¹ Ó·²«¬» Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ö·³ Ý±«´¬»® Ü·®»½¬±® ±º É¿¬»®ñÉ¿¬»©¿¬»® Ë¬·´·¬·» Ð®»°¿®»¼ ¾§æ Ðò Íò ß®±®¿ô ÐòÛò ß·¬¿²¬ Ü·®»½¬±® ±º É¿¬»©¿¬»® Ë¬·´·¬·» EXHIBIT 1 -.,` r-,J~ .. ~~~== :v ~~ ~; ; . ,, t ~`. ~-.% ='' :°~ ~ _~~ 12'.--'_ ~= 12" 12" 12" Spencer Square Proposed Offsite Sewer Line ~~ - ..::_~ :; - -. ~, ;; .~~ ;; i ~;;r s~ ~::~ _ ~,. w- "~a ^~; r '! ..; ~~ . ~. J` ~ T r' ,.-~ f _ B SPEN .~ z` '~ -.y-! j ^ ~ ~~ ~~~ 1 inch equals 500 feet r ~ ' . i i 1 ~ t - t j 1 1 ti t ~ 1 1 l~ t 1 ER ~ ~ J ~ I 2 .a.~. b 1, i 10'• I (': I. l i I I; ~~ ,o" I~ I~ I a'• I ~ I g' $• F s• 1~ r ~' ~ ~jj/ i 1 _~ /~ /~ // /f ,~ "i•. '~..' lSpencer Square i b~fi i~ EXIT 1 ~_ '~' :1" '~I r ~~~`' y ~ ~, li LLANO UTILITY SERVICES, INC. 3501 FM 2181 * Suite 245 * CORINTH, TX 7620 5 940270-8700 * Fax 940270-870 ()()1 SALES AND PROPOSAL CONTRAC T 1 of 3 Client:Page: Project:SPENCER SQUARE Date:6/28/2007 DENTON, TEXASBy:GCW DESCRIPTIONUNITPRICETOTAL WATER 8" DR-142349LF21.50$ $50,503.50 6' DR-1495LF18.75$ $1,781.25 2" COPPER760LF26.00$ $19,760.00 8" GATE VALVE4EA1,000.00$ $4,000.00 6" GATE VALVE5EA800.00$ $4,000.00 FIRE HYDRANT5EA1,875.00$ $9,375.00 2" WATER SERVICE19EA1,000.00$ $19,000.00 20X8 TAPPING SLEEVE AND VALVE2EA9,950.00$ $19,900.00 FITTINGS3TN3,300.00$ $9,900.00 TESTING1LS1,300.00$ $1,300.00 TRENCH SAFETY1LS600.00$ $600.00 SUB-TOTAL$140,119.7 5 OFFSITE SANITARY SEWE R 12" SDR-35926LF29.00$ $26,854.00 10" SDR-351500LF25.60$ $38,400.00 8" SDR-351774LF23.00$ $40,802.00 4' DIA MANHOLE13EA2,085.00$ $27,105.00 CONCRETE ENCASEMENT80LF35.00$ $2,800.00 CONNECT TO EXISTING MANHOLE1EA875.00$ $875.00 TESTING1LS4,000.00$ $4,000.00 TRENCH SAFETY4338LF0.25$ $1,084.50 SUB-TOTAL$141,920.5 0 SIPHON 10" SDR-36 BY OPEN CUT140LF225.00$ $31,500.00 8" SDR-35 BY OPEN CUT140LF175.00$ $24,500.00 4X4 JUNCTION BOX2EA3,670.00$ $7,340.00 CONCRETE ENCASEMENT140LF45.00$ $6,300.00 SUB-TOTAL$69,640.0 0 ON SITE SANITAR Y 8" SDR-35989LF23.00$ $22,747.00 4" SDR-35265LF19.40$ $5,141.00 4' DIA MANHOLE5EA2,085.00$ $10,425.00 CONCRETE ENCASE20LF35.00$ $700.00 SUB-TOTAL$39,013.0 0 EXHIBIT 2 LLANO UTILITY SERVICES, INC. 3501 FM 2181 * Suite 245 * CORINTH, TX 7620 5 940270-8700 * Fax 940270-870 ()()1 SALES AND PROPOSAL CONTRAC T 2 of 3 Client:Page: Project:SPENCER SQUARE Date:6/28/2007 DENTON, TEXASBy:GCW DESCRIPTIONUNITPRICETOTAL ONSITE STORM 36" RCP CL III722LF87.75$ $63,355.50 30" RCP CL III730LF67.25$ $49,092.50 24" RCP CL III227LF50.50$ $11,463.50 21" RCP CL III192LF43.75$ $8,400.00 18" RCP CL III131LF36.75$ $4,814.25 PRECAST BOX BEND MANHOLE3EA1,500.00$ $4,500.00 4X4 STORM MANHOLE5EA2,925.00$ $14,625.00 4X4 WYE INLET6EA2,020.00$ $12,120.00 10' CURB INLET3EA2,800.00$ $8,400.00 5' CURB INLET1EA2,200.00$ $2,200.00 36" SET 4:13EA2,025.00$ $6,075.00 SUB-TOTAL$185,045.7 5 LOOP 288 STORM RELOCATE 10' CURB INLET5EA4,330.00$ $21,650.00 36" RCP CL III60LF87.75$ $5,265.00 SUB-TOTAL$26,915.0 0 WATER$140,119.7 5 OFFSITE SANITARY SEWE$141,920.5 R0 ON SITE SANITAR$69,640.0 Y0 SIPHON$31,500.0 0 ONSITE STORM$185,045.7 5 LOOP 288 STORM$26,915.0 0 TOTAL$595,141.0 0 LLANO UTILITY SERVICES, INC. 3501 FM 2181 * Suite 245 * CORINTH, TX 7620 5 940270-8700 * Fax 940270-870 ()()1 SALES AND PROPOSAL CONTRAC T 3 of 3 Client:Page: Project:SPENCER SQUARE Date:6/28/2007 DENTON, TEXASBy:GCW DESCRIPTIONUNITPRICETOTAL CITY OF DENTON CONTRACT AND BON1LS12,000.00$ 12,000.00$ TOTAL607,141.0$ 0 NOTE:BID TO PLANS DATED 2005. SEWER TO EXTEND TO 5' OF BUILDING. WATER TO EXTEND TO 5' OF BUILDING PRICE DOES NOT INCLUDE CONNECTION TO PLUMBERS SERVICES. SOIL TESTING TO BE PAID BY OTHERS. STAKING AND LAYOUT TO BE PAID BY OTHERS. NATIVE MATERIAL TO BE USED FOR 95% COMPACTION ON BACKFILL. GUIDE WIRE OR POWER POLE CONFLICTS TO BE PAID BY OTHERS. EXCESS SPOILS TO BE LEFT ON SITE. TREE HAUL OFF TO BE LEFT ON SITE. METERS, FEES, & BONDS TO BE PAID BY OTHERS. CREEK CROSSING AND DEWATERING NOT INCLUDE D NOT RESPONSIBLE FOR CONFLICTS WITH EXISTING UTILITIES THANK YOU FOR THE OPPORTUNITY TO BID THIS PROJECT. PLEASE CALL WITH ANY QUESTIONS. Gary C. Wells 214-280-9277 Email: gwells@llanoutility.com EXHIBIT 3 ÑÎÜ×ÒßÒÝÛ ÒÑò îððèóÁÁÁÁÁÁÁÁÁÁÁ ßÒ ÑÎÜ×ÒßÒÝÛ ÑÚ ÌØÛ Ý×ÌÇ ÝÑËÒÝ×Ô ÑÚ ÜÛÒÌÑÒô ÌÛÈßÍ ßËÌØÑÎ×Æ×ÒÙ ÌØÛ Ý×ÌÇ ÓßÒßÙÛÎ ÌÑ ÛÈÛÝËÌÛ ß ÉßÍÌÛÉßÌÛÎ Óß×Ò ÐÎÑóÎßÌß ÎÛ×ÓÞËÎÍÛÓÛÒÌ ßÙÎÛÛÓÛÒÌ ÞÛÌÉÛÛÒ ÌØÛ Ý×ÌÇ ÑÚ ÜÛÒÌÑÒô ÌÛÈßÍ ßÒÜ ÜÞÍ× ÔßÒÍÜÑÉÒÛ ×ô ÔòÐò ÚÑÎ ÎÛ×ÓÞËÎÍÛÓÛÒÌ ÑÚ ÌØÛ ÝÑÍÌÍ ÑÚ ÞË×ÔÜ×ÒÙ ß ÉßÍÌÛÉßÌÛÎ Óß×Òô ÌØÎÑËÙØ ÐÎÑóÎßÌß ÝØßÎÙÛÍ Ðß×Ü ÌÑ ÌØÛ Ý×ÌÇå ßËÌØÑÎ×Æ×ÒÙ ÌØÛ ÌÎßÒÍÚÛÎ ÑÚ ÚËÒÜÍ ÐËÎÍËßÒÌ ÌÑ ÌØÛ ßÙÎÛÛÓÛÒÌå ßÒÜ ÐÎÑÊ×Ü×ÒÙ ßÒ ÛÚÚÛÝÌ×ÊÛ ÜßÌÛò ÉØÛÎÛßÍô ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ®»¯«·®» ¬¸¿¬ ¬¸» ¼»ª»´±°³»²¬ ±©²»¼ ¾§ ÜÞÍ× Ô¿²¼±©²» ×ô ÔòÐò øÑ©²»®÷ô ½±³³±²´§ ®»º»®®»¼ ¬± ¿ ¬¸¿¬ ®»¿´ °®±°»®¬§ ½±³³±²´§ µ²±©² ¿ Í°»²½»® Í¯«¿®»ô Ü»²¬±² Ý±«²¬§ô Ì»¨¿ ø¿ ³±®» °¿®¬·½«´¿®´§ ¼»°·½¬»¼ ·² Û¨¸·¾·¬ ×ô ¿¬¬¿½¸»¼ ¸»®»¬± ¿²¼ ·²½±®°±®¿¬»¼ ¸»®»·² ¾§ ®»º»®»²½»÷ ´±½¿¬»¼ ·² ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ±® ·¬ »¨¬®¿¬»®®·¬±®·¿´ ¶«®·¼·½¬·±²å ¿²¼ ¿·¼ Ñ©²»® · ®»¯«·®»¼ ¬± °®±ª·¼» «½¸ ®»¿´ °®±°»®¬§ ©·¬¸ ¿¼»¯«¿¬» ©¿¬»©¿¬»® »®ª·½» ¾§ ¼»·¹²·²¹ô ½±²¬®«½¬·²¹ô ¿²¼ ·²¬¿´´·²¹ ¿ ©¿¬»©¿¬»® 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·² ¿½½±®¼¿²½» ©·¬¸ ¬¸» Ü»²¬±² Ü»ª»´±°³»²¬ Ý±¼»ô Í«¾½¸¿°¬»® íëòïêòîðò ÍÛÝÌ×ÑÒ îò Ì¸¿¬ ¬¸» Ý·¬§ Ó¿²¿¹»® · ¸»®»¾§ ¿«¬¸±®·¦»¼ ¬± ³¿µ» «½¸ »¨°»²¼·¬«®» ¿²¼ ¬®¿²º»® ±º º«²¼ «²¼»® «½¸ ½±²¼·¬·±² ¿ ¿®» »¬ º±®¬¸ ·² ¬¸» ¿¬¬¿½¸»¼ ß¹®»»³»²¬ò ÍÛÝÌ×ÑÒ íò Ì¸¿¬ ¬¸· ±®¼·²¿²½» ¸¿´´ ¾»½±³» »ºº»½¬·ª» ·³³»¼·¿¬»´§ «°±² ·¬ °¿¿¹» ¿²¼ ¿°°®±ª¿´ò ÐßÍÍÛÜ ßÒÜ ßÐÐÎÑÊÛÜ ¬¸· ¬¸» ÁÁÁÁÁÁÁ ¼¿§ ±º ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁô îððèò ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁ ÓßÎÕ ßò ÞËÎÎÑËÙØÍô ÓßÇÑÎ ï ßÌÌÛÍÌæ ÖÛÒÒ×ÚÛÎ ÉßÔÌÛÎÍô Ý×ÌÇ ÍÛÝÎÛÌßÎÇ Þ§æ ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁ ßÐÐÎÑÊÛÜ ßÍ ÌÑ ÔÛÙßÔ ÚÑÎÓæ ÖÑØÒ Óò ÕÒ×ÙØÌô ×ÒÌÛÎ×Ó Ý×ÌÇ ßÌÌÑÎÒÛÇ Þ§æ ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁ î EXHIBIT 4 EXHIBIT 5 ï î ÜÎßÚÌ Ó×ÒËÌÛÍ í ÐËÞÔ×Ý ËÌ×Ô×Ì×ÛÍ ÞÑßÎÜ ì Ò±ª»³¾»® ïîô îððé ë ê ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ é °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² Ó±²¼¿§ô è Ò±ª»³¾»® ïîô îððé ¿¬ çæðí ¿ò³ò ·² ¬¸» Í»®ª·½» Ý»²¬»® Ì®¿·²·²¹ Î±±³ô Ý·¬§ ±º Ü»²¬±² Í»®ª·½» ç Ý»²¬»®ô çðïóß Ì»¨¿ Í¬®»»¬ô Ü»²¬±²ò ïð Present ïï æ Ý¸¿·® Ý¸¿®´¼»¿² Ò»©»´´ô Þ·´´ Ý¸»»µô Ð¸·´ Ù¿´´·ª¿²ô Î¿²¼§ Î±¾·²±²ô Þ·´´ Ù®«¾¾ ¿²¼ ïî Ö±¸² Þ¿·²» ø¿®®·ª»¼ ¿¬ çæîé ¿ò³ò÷ ïí Absent ïì æ Ü·½µ Í³·¬¸ô »¨½«»¼ ïë ïê Û¨ Ñºº·½·± Ó»³¾»®æ ïé Ù»±®¹» Ýò Ý¿³°¾»´´ô Ý·¬§ Ó¿²¿¹»® ïè Ø±©¿®¼ Ó¿®¬·²ô ßÝÓ Ë¬·´·¬·» ïç Chair Charldean Newell announced that a quorum was present and convened into a closed îð meeting at 9:03 a.m. to consider the following under the provisions of §551.086 of the Texas îï Government Code. îî îí CONSENT AGENDA: îì îë Ì¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ¸¿ ®»½»·ª»¼ ¾¿½µ¹®±«²¼ ·²º±®³¿¬·±²ô ¬¿ºº ®»½±³³»²¼¿¬·±²ô ¿²¼ îê ¸¿ ¸¿¼ ¿² ±°°±®¬«²·¬§ ¬± ®¿·» ¯«»¬·±² ®»¹¿®¼·²¹ ¬¸»» ·¬»³ °®·±® ¬± ½±²·¼»®¿¬·±²ò îé îè ï÷Ý±²·¼»® ®»½±³³»²¼¿¬·±² ±º ¿² ±®¼·²¿²½» ¿«¬¸±®·¦·²¹ ¬¸» °¿®¬·¿´ ¿¾¿²¼±²³»²¬ ±º ¿ ðòïìðí îç ¿½®» ©¿¬»® »¿»³»²¬ ¬®¿½¬ ®»½±®¼»¼ ·² Î»½±®¼»® Ò«³¾»® çêóÎððííéîêô ±º ¬¸» Î»¿´ Ð®±°»®¬§ íð Î»½±®¼ ±º Ü»²¬±² Ý±«²¬§ô Ì»¨¿ô ·¬«¿¬»¼ ·² ¬¸» Ûò Ð«´½¸¿´µ· Í«®ª»§ô ß¾¬®¿½¬ Ò±ò ççêò íï íî î÷Ý±²·¼»® ¬¸» ¿°°®±ª¿´ ±º Þ·¼ Ò±ò íêçîô «¾³·¬¬»¼ ¾§ Í¸¿© Û²ª·®±²³»²¬¿´ ¿²¼ íí ×²º®¿¬®«½¬«®»ô ×²½òô Þ¿¬±² Î±«¹»ô Ô±«··¿²¿ô º±® ¬¸» ½±²¬®«½¬·±² ±º ´¿²¼º·´´ ¹¿ »¨¬®¿½¬·±² íì ©»´´ ¿²¼ ¬¸» ¹¿ ½±´´»½¬·±² §¬»³ô ¿²¼ ¬¸» ·²¬¿´´¿¬·±² ±º ¿ ¹¿ º´¿®» ¿¬ ¬¸» Ý·¬§ ±º Ü»²¬±² íë Ô¿²¼º·´´ô ·² ¬¸» ¿³±«²¬ ±º üïôîêëôëïìò íê íé í÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º ¿ Ð®±º»·±²¿´ Í»®ª·½» ß¹®»»³»²¬ ©·¬¸ Ó·²»® ú Ó·²»® íè Ý±²«´¬·²¹ Û²¹·²»»®ô ×²½ò º±® ³·¹®¿¬·±² ±º ÜÓÛ Ù»±¹®¿°¸·½¿´ ×²º±®³¿¬·±² Í§¬»³ øÙ×Í÷ íç ß®½ÚÓ ¼¿¬¿¾¿» ¬± ß®½Ù×Íô ß®½ÍÜÛ ¿²¼ ß®½ÚÓ ª»®·±² çòîô Ñ®¿½´» ïð¹ ¿²¼ ·³°´»³»²¬ ìð ß®½ÚÓ Ê·»©»® º±® ß®½Ù×Í Û²¹·²» ©·¬¸ ¬¸» Î»¼´·²»® Û¨¬»²·±² º±® ¼¿¬¿ §²½¸®±²·¦¿¬·±² ±º ìï ³±¾·´» º·»´¼ ´¿°¬±° «²·¬ ·² ¿² ¿³±«²¬ ²±¬ ¬± »¨½»»¼ üéèôéëëò ìî ìí ê÷Ý±²·¼»® ¿°°®±ª¿´ ±º ¬¸» ¬¿ºº ®»½±³³»²¼¿¬·±² ¬± °«®½¸¿» ¬©± ³±¼«´¿® ½¿´» ¸±«» ìì ½±²¬®±´ ¾«·´¼·²¹ô º±® «» ·² ¬¸» Ý·¬§ ±º Ü»²¬±² ´¿²¼º·´´ô º®±³ Ì·³ Þ»¿¬§ Þ«·´¼»®ô ±º Ü»²¬±²ô ìë Ì»¨¿ô º±® ¬¸» ¬±¬¿´ °®·½» ±º üíçôçéêò ìê ìé é÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º ¬¸» Ì»¨¿ Ý±³³··±² ±² Û²ª·®±²³»²¬¿´ Ï«¿´·¬§ ìè ¿²²«¿´ Ý±²±´·¼¿¬»¼ É¿¬»® Ï«¿´·¬§ º»» º±® ¬¸» ±°»®¿¬·±² ±º ¬¸» Ð»½¿² Ý®»»µ É¿¬»® ìç Î»½´¿³¿¬·±² Ð´¿²¬ ·² ¬¸» ¿³±«²¬ ±º üéëôðððò ëð Ü®¿º¬ Ó·²«¬» ±º ¬¸» Ð«¾´·½ Ë¬·´·¬·» Þ±¿®¼ ³»»¬·²¹ Ò±ª»³¾»® ïîô îððé î ±º î ï è÷Ý±²·¼»® ®»½±³³»²¼·²¹ ¿°°®±ª¿´ ±º ¬¸» Í»©»® Ó¿·² Ð®±óÎ¿¬¿ Î»·³¾«®»³»²¬ ß¹®»»³»²¬ î ©·¬¸ ÜÞÍ× Ô¿²¼±©²» ×ô Ôò Ðò º±® ¬¸» ½±²¬®«½¬·±² ±º ¬¸» ±ººó·¬» ¿²·¬¿®§ »©»® ´·²» ¾§ ¬¸» í ¼»ª»´±°»® ¬± »®ª» ¬¸» Í°»²½»® Í¯«¿®» ¼»ª»´±°³»²¬ò ì Board Member Randy Robinson moved to approve Items 1, 2, 3, 6, 7, and 8 with a second ë from Board Member Gallivan. The motion was approved by a 5-0 vote. ê é AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî __________________________________________________________________________________ SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ °®±¸·¾·¬·²¹ °¿®µ·²¹ ±² ¬¸» ²±®¬¸ ¿²¼ ±«¬¸ Í·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ º®±³ ·¬ ·²¬»®»½¬·±² ©·¬¸ Ð»³¾®±±µ» Ð´¿½»ñÚ¿·®º¿¨ Ì®¿·´ ¬± ·¬ ; ·²¬»®»½¬·±² ©·¬¸ Ì»¿´»§ Ô¿²»ñÚÓ îïèï°®±ª·¼·²¹ ¿ ®»°»¿´»® ½´¿«»å °®±ª·¼·²¹ ¿ ¿ª·²¹ ½´¿«»å °®±ª·¼·²¹ º±® ¿ °»²¿´¬§ ²±¬ ¬± »¨½»»¼ üëðð º±® ª·±´¿¬·±² ±º ¬¸· ±®¼·²¿²½»å ¿²¼ °®±ª·¼·²¹ º±® ¿² »ºº»½¬·ª» ¼¿¬»ò Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼ ¿°°®±ª¿´ øèóð÷ò BACKGROUND Ì¸» Ý·¬§ ±º Ü»²¬±² ¸¿ ®»½»·ª»¼ ¿ ®»¯«»¬ º®±³ Ö»» Ö±¸²±²ô ®»·¼»²¬ ¿¬ îððï Ð»³¾®±±µ» Ð´¿½»ô ¿²¼ Ù»®¿´¼ Þ®»²¸±´¬¦ô Ð¸Üô ®»·¼»²¬ ±º îïðð Ú¿·®º¿¨ Ì®¿·´ô º±® ¿ Ò± Ð¿®µ·²¹ ®»¬®·½¬·±² ±² ¾±¬¸ ¬¸» ²±®¬¸ ¿²¼ ±«¬¸ ·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ º®±³ Ð»³¾®±±µ» Ð´¿½»ñÚ¿·®º¿¨ Ì®¿·´ ¬± Ì»¿´»§ Ô¿²»ñÚÓîïèïò Ì¸» ®»¿±² º±® ¬¸· ®»¯«»¬ · ¬± ¸»´° ¬¸» ¿½½»·¾·´·¬§ ¬± ¾±¬¸ ®»·¼»²¬·¿´ ¼®·ª» ¬± ¬¸»» ¬©± °®±°»®¬·» ¿²¼ ¬± ®»¼«½» ¬¸» °±¬»²¬·¿´ ±º ¿² ¿½½·¼»²¬ ½¿«»¼ ¾§ ¿ ª»¸·½´» ¬«®²·²¹ ±ºº ±º Ì»¿´»§ Ô¿²»ñÚÓîïèï ±²¬± Í¿ª¿²²¿¸ Ì®¿·´ ¿²¼ ¸·¬¬·²¹ ¿ °¿®µ»¼ ª»¸·½´»ò Ò± °¿®µ·²¹ ®»¯«»¬ ¿®» ¬§°·½¿´´§ ·¹²»¼ º±® ©¸±´» ¾´±½µô °®±ª·¼·²¹ º±® ´» ½±²º«·±² ¿ ¿ ®»«´¬ ±º ¬¸» °±·¾´» ´± ±º ·¹² ±ª»® ¬·³» ©¸»² ³¿´´»® »½¬·±² ¿®» ®»¬®·½¬»¼ ¿²¼ ¬¸« »¿·²¹ »²º±®½»³»²¬ò Ó®ò Ö±¸²±² ¿²¼ Ü®ò Þ®»²¸±´¬¦ ®»·¼»²½» ±½½«°§ ¬¸» ©¸±´» ¾´±½µ ·² ¯«»¬·±²ô ©·¬¸ Ó®ò Ö±¸²±² ±² ¬¸» ²±®¬¸ ·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ ¿²¼ Ü®ò Þ®»²¸±´¬¦ ±² ¬¸» ±«¬¸ ·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ò OPTIONS ïòß°°®±ª» ¬¸» ±®¼·²¿²½»ò îòß°°®±ª» ¬¸» ±®¼·²¿²½» ©·¬¸ ½±²¼·¬·±²ò íòÜ»²§ ¿°°®±ª¿´ ±º ¬¸» ±®¼·²¿²½»ò RECOMMENDATION Í¬¿ºº ®»½±³³»²¼ ¿°°®±ª¿´ ±º ¿² ±®¼·²¿²½» º±® ¿ ²± °¿®µ·²¹ ¿²§ ¬·³» ®»¬®·½¬·±² ±² ¾±¬¸ ¬¸» ²±®¬¸ ¿²¼ ±«¬¸ ·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ º®±³ Ð»³¾®±±µ» Ð´¿½»ñÚ¿·®º¿¨ Ì®¿·´ ¬± Ì»¿´»§ Ô¿²»ñÚÓîïèïò PRIOR ACTION/REVIEW Ñ² Ó¿®½¸ íô îððèô ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼»¼ øèóð÷ ¬¸¿¬ ¬¸» Ý·¬§ Ý±«²½·´ ¿°°®±ª» ¿² ±®¼·²¿²½» º±® ¿ ²± °¿®µ·²¹ ¿²§ ¬·³» ®»¬®·½¬·±² ±² ¾±¬¸ ¬¸» ²±®¬¸ ¿²¼ ±«¬¸ ·¼» ±º Í¿ª¿²²¿¸ Ì®¿·´ º®±³ Ð»³¾®±±µ» Ð´¿½»ñÚ¿·®º¿¨ Ì®¿·´ ¬± Ì»¿´»§ Ô¿²»ñÚÓîïèï FISCAL INFORMATION Ú±«® ·¹² ¿²¼ ¿ °±¬ º±® »¿½¸ ©·´´ ¾» ®»¯«·®»¼ò EXHIBITS ïòÚ»¾®«¿®§ îëô îððè ³»³±®¿²¼«³ º®±³ Ö»» Ö±¸²±² ¿²¼ Ù»®¿´¼ Þ®»¸¸±´¬¦ò îòÔ±½¿¬·±² ³¿°ò íòÌ®¿ºº·½ Í¿º»¬§ Ý±³³··±² ³·²«¬» º®±³ Ó¿®½¸ íô îððèò ìòÑ®¼·²¿²½» Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ú®¿²µ Ùò Ð¿§²»ô ÐòÛò Ý·¬§ Û²¹·²»»® EXHIBIT 1 ~I'~f: ~' i ~~ ,+j_ rye, y~~F~ ~-~ra (~. a s -q C_t~.I~~~"'; r~ ~~:~~ r['e~ ~;~e~ ~~~~ ~c~ ~~~ ~~ ~,.~ ~~ ~lr~a?y Tr3:i:] ti~.~. T~~::a;: i ~~ ~ :~li~ ~4~"i itii r~~ ~~ ~i~f=!tal:t ~~'j ~:t:t'~ 1'~ arr~ ~~}` ~~~a ~°~ E~~~~i ~ c~~;`?~1~ ~_ ~~ r~: ri,h~ ~1 ~ ~ .~ .4~~ C I F -~1 .s~.b~.ia ~4:~~~,~t .~ ~:Ls~+ ~ ~~~. '~~~E~~~ 4.1T7 ~?C1.~' aa~i°~:~~ ~t~ ~:~~ri~31J1~~1 ~~3.1.1' ~~~~" r-~~.:1~ ~~,~:.~~.n'~° f~~:~~~ ~ra~~~.~~ ~1~~~~ ~= .~~ ~~~:~ :L~~~,:~ ~ . -~'1~ ~~ u~ ~t L~ a~~~.L~° t ~~ ~~~.~: ~ ~~R. ~ I~.~,~ ~=1' ~L4~.r~~a ~ ~~ `i~efl.i ~ ~ i ~~r C~i:rr~.k~~t;, '~~:`ra r~ ~1~~{'~~~~~ c~ r'r~~",t ~~~r <! r~a:~~~ T~~61 a~~~, ii"~ ~ ~'~r~ ~~:~ ~ ~~°~..n ~~ru I;~~c::4`~~~ ~.i:~~_ ~~t~, ~~h:: ~6~~rt ~[~~~.~ ~~~-~ ~i~jr ~~ ~t~J~~ ;s~~~ k~~u~~ ~, ~i.: Ex, ~.~ ~~~s~~; ~:~ ~~o ~llyz ~- ° :C~.~E-i~L: 'ii7~ ~~~ ~ ;~~ ~~ ~ ~ j~ ~:~~il~.~>°~;:L~ ~~~~ ~~~~-r.:I~:~~r:].~ ~~>_ ~.3~''~-~~ L ~~:~~1~~; t~~ ~a ~~Ru ~~: ~.r ~-~v. ~ a ~~:~~ bra ~ry~d ~:~~ ~a;~~~. ~~~~~~ ~~r~ ~t~ ~~~~~ w i~:€t=:_~ ~.~~' ~,I~~a.1~~~~.~., ~~~ ~ ~:I ~ ~ ~~~i.ria _~ul-t~,~~ l r 1.~ i ~~ ~~i:~=~~ ~i:!.G'~ t i ~~, ~?.?~'{~ 1.i} ~'~'_~~a ~+~?T 'I.~~'!~ '~g1 L~~Ti~1; ~? ~+r-..1-CL~~.~'1~ f~.l~ ~~~~~~ ~:I'~~] ~.~~~,~~;_~.:~~:~~~f~~ ~~~~t ~~ ~ t~s ~~~- t~~:~ ;~°~?tr__ ~r ~~~ ~r ;ic~dk~'~~f~1~, =~.~ ~~1-i.~~~ aj, ~3~ 1: ,_~ ~; T~~~' °T~~.sI LAP ~a~, ~~r3~f:~ ~~:~~~~ fle~~._ ~~ tub ~i ~, I!~~ c_-ar ~~ ~r ~ ~:t,:, ~t:~~ ~~~r~r~~~ ~~ Te~~i:~ ~~c~~~ iii i ~ 'h~.~ "i' ;~~~~ :r~~~ ~~~~~~~~ (-~ 1:~~;4.~~:'~~1±~' ~a~~ 'tc~3.~~ .'t.~~ t~ii> s; :~~. ~~1<~rr~ ~-~' ~:~~ ~ie~a~:~~i~:iEtt ~r4:.i.~i~;f--~au_~ ~• ~~ ~~:,n~~~~i~~ ~a~~~~ ~~~ ~:~+~.~~~E~~~_ ~-~~~.t~ ~~~+I~~ ~~r~~1:~~1; ~~~~~ I sa?~~~~ ~>.~ t~ ~~±J ~ t.~ z~~~. iii ~~;~t~1. ~s~~, t~~` ~;~ ttc ~ ~.~~;~L :~s~:'>i:i:~F n ~:i~1, ~'+~ ~:in~1 t ~~°~::at-~ ~~1~~ 13~1~+1b::'i C t~;~ ~!?~ ~ ~ ~~~,i ~~}' ~I +~-~sG~'~'"4:~.r2_1!457~!?~r ~4";sual65~ ~'1~~'t~'Lc ~y ~~`~ ~ ~I=:~_ L ~~' ~- .r°.~' ~iC}:~,~L~ C~! ~ ~~~~1~ `4~,` I ~ I 'L'~F~!;!•'LLL L~S~~ C~51.~; ~9`~ ~3;~11'1_i_'+~~ 1~ ;~. k~~1~,I] ~'~T I~~' ~t~,a ~~$1~;i~ ~'~:~.1 L'~ t~ i~'',%F ~ F,~1~ ~#~5C ~a~ : ~~ ~9 CI- ` ~;I1~ 4`~~€~.~11` ~ ~ ~`1fi~ ?:l1`C ~'J ~1t:11`~. ~ ' ~ , ~, "`k ''S :C'~r.~~~A~ ~ ~~: ~€~ ~~~7 s.~ d~~ L1 tt~~~. ~E~~~ b~~.;!t:"k i, i` r~,~~~:~'s~~~, "i_r~ ~~ ~,h~t~e i l ~~ ~~ L~ ~r~~rb ~l'~ ~'It`ti~,~r!?~7~ ~,~E.i.i~~t~r. ~'h,~:~iti ~'tait: ~~~ ~,'.,,~~~ ~:r~~7~i~~ c ~:~~c~ ~.~ ~h.i:~; ;~~y~;r~r_ k i ~ ° ~ ~;~`' 1~ , ,~ ~~ ~. sit .~:i~~ '~ ~c~~c~t-~~ L~ ~ s z ~T ~ ` ~.: ~ .~; ~ ~ _ ~ -. .. ~~ _ _ -- _ . x ` f~ c c~ ~ " ~ ~. j = - i, i ~ S.}, .w. +~ ~ 1i 'S~~ ~ ~r- ~7 a ~~' , ~ r 1 ' 1 JJ i ; ~'_ ;>` _ r- 1 Y ~ 4 ~~ ~, f- ~~ ` . _ ~ 3 .i era :J ~ .x 1` r > - `` ~ ,, '^ t ~ ! Proposed no parking ~ r.. ~`s* ~ .?z i i' .. =~ ;; ~ r xr'~ "' ~' ~ _ s ~ i z-- ? ~ , ~ ~ __ ~ ~ j t ~ 111 _ °„' { ~ i . I ~~ ~ ~ .t Y -~. _ i ~ t ~z- ~ ' ~~ a t y _ , ~ _ E ~ f s 1 .~ z,. n ~ ~' ~, a .. ~' m ~ ~ ~ - ~ -~5 ~ ,, ~ , _ ,~,, _ ~g -~~~== "7 L =s `l. i.- ` ~' G i ~ ~ , , .LR .r `fir t~' ~ <<.~ ~i ' ~ t E "~~ ~ ~ ~ i LOCATION MAP -, I - _ ~,~ '~ V~~ ~; ~~ ~A e~ ~1rr ~~ 7 ~7 r4 z. ~ i _~ r r ~. -,. j~=~ ti s ~ ~ i 4 ~-..~ `' `~~, _ ~ ~ 1~ ;- f ~;i~ . 13 `;_~ LI.I ~' ~'~ -~_E EXHIBIT 2 ,., '~~. =? . ÛÈØ×Þ×Ì í DRAFT MINUTES ÌÎßÚÚ×Ý ÍßÚÛÌÇ ÝÑÓÓ×ÍÍ×ÑÒ Ó¿®½¸ íô îððè ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² Ó±²¼¿§ô Ó¿®½¸ íô îððè ¿¬ ëæíð °ò³ò ·² ¬¸» Ý±«²½·´ Ý¸¿³¾»®ô Ý·¬§ ±º Ü»²¬±² Ý·¬§ Ø¿´´ô îïë Ûò Ó½Õ·²²»§ Í¬®»»¬ô Ü»²¬±²ô Ì»¨¿ò Present æÝ¸¿·® Ù®»¹ Í¿©µ±ô Ý¸¿®´» Ù«¿®²¿½½·¿ô Ô»´¿ Ø±©»´´ô Ð¿¬ Ý¸»»µô Ö±¸² Ý®»©ô Ó¿®·±² Í½±¬¬ô Ó·½¸¿»´ Ù®»»² ¿²¼ Ö¿±² Ü¿ª· Absent æ Ô·²¼¿ Þ®±©²ô »¨½«»¼ Also Present æ Þ«¼ Ê±µ±«²ô Ì®¿ºº·½ Û²¹·²»»® ß²² Ú±®§¬¸»ô Þ±¿®¼ ¿²¼ Ý±³³·¬¬»» Ý±±®¼·²¿¬±® Ì¿§´±® Î·½»ô Ð¸§·½¿´ Í»½«®·¬§ Ó¿²¿¹»® ±º ÚÛÓß Ö»»§ Ö±¸²±²ô ½·¬·¦»² OPEN MEETING: í÷Î»½»·ª» ¿ ®»°±®¬ ¿²¼ ¸±´¼ ¿ ¼·½«·±² ®»¹¿®¼·²¹ ¿ ®»½±³³»²¼¿¬·±² ¬± Ý·¬§ Ý±«²½·´ ±º ¿ Ò± Ð¿®µ·²¹ ®»¬®·½¬·±² ¿¬ ¬¸» ®»¯«»¬ ±º ¬¸» ¸±³»±©²»® ±² ¾±¬¸ ·¼» ±º Í¿ª¿²²¿ Ì®¿·´ º®±³ Ð»³¾®±±µ» Ð´¿½»ñÚ¿·®º¿¨ Ì®¿·´ ¬± Ì»¿´»§ Ô¿²»ñÚÓîïèïò Ê±µ±«² ·²¬®±¼«½»¼ Ö»»§ Ö±¸²±²ô ±²» ±º ¬¸» ½·¬·¦»² ®»¯«»¬·²¹ ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±²ò Ó®ò Ö±¸²±² ¬¿¬»¼ ¬¸»®» ©»®» ±²´§ ¬©± ¸±«» ±² Í¿ª¿²²¿ Ì®¿·´ô ¸· ¿²¼ Ü®ò Ù»®¿´¼ Þ®»²¸±´¬¦ ¬¸¿¬ ¿®» ¿ºº»½¬»¼ ¾§ ¬¸» ²«³¾»® ±º ª»¸·½´» °¿®µ·²¹ ±² ¾±¬¸ ·¼»ò Ð»±°´» °¿®µ ±² ¬¸· ¬®»»¬ ¬± ¿½½» ¿ °±²¼ ·² ¬¸» °¿®µ ¿½®± Ì»¿´»§ Ô¿²» º±® º·¸·²¹ ¿²¼ ¬¸»®» ¿®» ¬·³» ©¸»² ª»¸·½´» ¿®» °¿®µ»¼ ± ½´±» ¬± ¸· ¼®·ª»©¿§ ¸» ½¿²²±¬ ¹¿·² ¿½½» ¬± ¸· ¼®·ª»©¿§ ¿²¼ ³«¬ °¿®µ ¸· ª»¸·½´» ·² Ü®ò Þ®»²¸±´¬¦ ¼®·ª»©¿§ ¿ ¸» ®«² ¿ ¸»¿¬·²¹ ¿²¼ ¿·® ½±²¼·¬·±²·²¹ ¾«·²» ¿²¼ º®»¯«»²¬´§ ¸¿ ¿ ¬®¿·´»® ¿¬¬¿½¸»¼ ¬± ¸· ¬®«½µò Ó®ò Ö±¸²±² ¬¿¬»¼ ¸» ¾»´·»ª» ¬¸· · ¿ ¿º»¬§ ½±²½»®² º±® ¿´´ °¿®¬·» ·²ª±´ª»¼ ¾»½¿«» ¬¸»§ °¿®µ ± ½´±» ¬± Ì»¿´»§ Ô¿²» ¬¸¿¬ ª»¸·½´» ¬«®²·²¹ º®±³ Ì»¿´»§ ¸¿ª» ¼·ºº·½«´¬§ ³¿²»«ª»®·²¹ ¬¸®±«¹¸ ¬¸» ²¿®®±©²» ±º Í¿ª¿²²¿¸ Ì®¿·´ ¾»½¿«» ±º ¬¸» ª»¸·½´» ¬¸¿¬ ¿®» °¿®µ·²¹ ±² ¾±¬¸ ·¼» ±º ¬¸· ®±¿¼©¿§ò Ý±³³··±²»® Ô»´·¿ Ø±©»´´ ¬¿¬»¼ ¸» ¼®±ª» ¬± ¬¸¿¬ ¿®»¿ ¿²¼ ½±«´¼ ½±²º·®³ ¬¸¿¬ ·«» ¬¿¬»¼ ¾§ Ó®ò Ö±¸²±² ¼± »¨·¬å ¬¸¿¬ ·¬ · ¿ ª»®§ ¬·¹¸¬ ¿®»¿ ¿²¼ ¿ ®·¹¸¬ ¸¿²¼ ¬«®² ·²¬± ¬¸» ¼®·ª»©¿§ ©±«´¼ ¾» ª»®§ ¼·ºº·½«´¬ò Ý¸¿·® Í¿©µ± ¿¹®»»¼ ¬¿¬·²¹ ¸» ®»¹«´¿®´§ ¼®·ª» ¬¸¿¬ ¿®»¿ ¿²¼ ¸¿ ±¾»®ª»¼ ¬¸» °¿®µ»¼ ª»¸·½´» ¾´±½µ»¼ ©¸·½¸ ¼±» ½®»¿¬» ¿ ¸¿¦¿®¼ò Commissioner John Crew moved to approve Item 3 with a second from Commissioner Howell. The motion was approved by an 8-0 vote. Ì¸» ³»»¬·²¹ ©¿ ¿¼¶±«®²»¼ ¾§ ½±²»²« ¿¬ éæíð °ò³ò s:\our documents\ordinances\08\no parkingsavannah trail.doc EXHIBIT 4 ORDINANCE NO. ___________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS PROHIBITING PARKING ON THE NORTH AND SOUTH SIDES OF SAVANNAH TRAIL FROM ITS INTERSECTION WITH PEMBROOKE PLACE/FAIRFAX TRAIL TO ITS INTERSECTION WITH TEASLEY ; LANE/FM2181PROVIDING A REPEALER CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $500 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. When signs or markings are in place giving notice thereof, no person shall park a vehicle on the north or south side of Savannah Trail from its intersection with Pembrooke Place/Fairfax Trail to its intersection with Teasley Lane/FM 2181. SECTION 2. The provisions of Section I prohibiting the parking of vehicles shall apply on the designated portion of the above named street or streets except when it is necessary to stop a vehicle to avoid conflict with other traffic or in compliance with the direction of a police officer or official traffic control device. SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase, or word in this ordinance, or application thereof to any person or circumstances is held invalid by any court of competent jurisdiction, 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 it would have enacted such remaining portions despite any invalidity. SECTION 4. Save and except as amended hereby, all the provisions, sections, subsections, paragraphs, sentences, clauses, and phrases of the Code of Ordinances shall remain in full force and effect. SECTION 5. Any person found liable of violating this Ordinance by a court of competent jurisdiction shall be fined a sum not to exceed five hundred dollars ($500). Each day that a provision of this ordinance is violated shall constitute a separate offense. The disposition of parking citations issued pursuant to this Ordinance shall be governed by Division 3 titled . SECTION 6. This Ordinance providing for a penalty shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, the official newspaper of the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the ______ day of __________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR s:\our documents\ordinances\08\no parkingsavannah trail.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ Page 2 AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî __________________________________________________________________________________ SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ °®±¸·¾·¬·²¹ °¿®µ·²¹ ±² ¬¸» »¿¬ ¿²¼ ; ©»¬ ·¼» ±º Õ·³¾»®´§ Ü®·ª» º®±³ ·¬ ·²¬»®»½¬·±² ©·¬¸ Õ¿®·²¿ Í¬®»»¬ ¬± ·¬ ±«¬¸»®´§ ¬»®³·²« °®±ª·¼·²¹ ¿ ®»°»¿´»® ½´¿«»å °®±ª·¼·²¹ ¿ ¿ª·²¹ ½´¿«»å °®±ª·¼·²¹ º±® ¿ °»²¿´¬§ ²±¬ ¬± »¨½»»¼ üëðð º±® ª·±´¿¬·±² ±º ¬¸· ±®¼·²¿²½»å ¿²¼ °®±ª·¼·²¹ º±® ¿² »ºº»½¬·ª» ¼¿¬»ò Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼ ¿°°®±ª¿´ øéóð÷ò BACKGROUND Ì¸» Ý·¬§ ±º Ü»²¬±² ¸¿ ®»½»·ª»¼ ¿ ®»¯«»¬ º®±³ Ì¿§´±® Üò Î·½»ô Ð¸§·½¿´ Í»½«®·¬§ Ó¿²¿¹»® ±º ¬¸» Ú»¼»®¿´ Û³»®¹»²½§ Ó¿²¿¹»³»²¬ ß¹»²½§ øÚÛÓß÷ô º±® ¿ Ò± Ð¿®µ·²¹ ®»¬®·½¬·±² ±² ¾±¬¸ ¬¸» »¿¬ ¿²¼ ©»¬ ·¼» ±º Õ·³¾»®´§ Ü®·ª» º®±³ ·¬ ·²¬»®»½¬·±² ©·¬¸ Õ¿®·²¿ Í¬®»»¬ ¬± ·¬ ±«¬¸»®´§ ¬»®³·²«ò Ì¸» ®»¿±² º±® ¬¸· ®»¯«»¬ · ¬± ¸»´° °®±ª·¼» ¿ ¼»·®»¼ ³·²·³«³ ïððóº±±¬ ©·¼» »½«®·¬§ °»®·³»¬»® ¿®±«²¼ Ú»¼»®¿´ ¾«·´¼·²¹ Ò± °¿®µ·²¹ ®»¯«»¬ ¿®» ¬§°·½¿´´§ ·¹²»¼ º±® ©¸±´» ¾´±½µô °®±ª·¼·²¹ º±® ´» ½±²º«·±² ¿ ¿ ®»«´¬ ±º ¬¸» °±·¾´» ´± ±º ·¹² ±ª»® ¬·³» ©¸»² ³¿´´»® »½¬·±² ¿®» ®»¬®·½¬»¼ ¿²¼ ¬¸« »¿·²¹ »²º±®½»³»²¬ò Ì¸» ÚÛÓß ¾«·´¼·²¹ ±½½«°·» ¬¸» ©¸±´» ¾´±½µ ±² ¬¸» »¿¬ ·¼» ±º Õ·³¾»®´§ Ü®·ª»ô ¿²¼ ¬¸» °®±°»®¬§ ±² ¬¸» ©»¬ ·¼» ±º ¬¸» ¬®»»¬ · «²¼»ª»´±°»¼ò Ø±©»ª»®ô Ü»²¬±² Ý±«²¬§ · ½±³·²¹ º±®©¿®¼ ©·¬¸ ¬¸» Ü»²¬±² Ý±«²¬§ ß¼³·²·¬®¿¬·ª» Ý±³°´»¨ ±² °®±°»®¬§ ¬± ¬¸» ²±®¬¸ ¿²¼ ©»¬ ±º ÚÛÓß ¿²¼ · ½±²·¼»®·²¹ ®»¯«»¬·²¹ ¿ ½±²¬·²«±« ´»º¬ ¬«®² ´¿²» ±² ¬¸» ¬®»»¬ ·² ¬¸· ¿®»¿ô ©¸·½¸ ©±«´¼ ¿´± ®»¯«·®» ¬¸» ·²¬¿´´¿¬·±² ±º Ò± Ð¿®µ·²¹ ¿´±²¹ ¬¸» ¬®»»¬ò OPTIONS ïòß°°®±ª» ¬¸» ±®¼·²¿²½»ò îòß°°®±ª» ¬¸» ±®¼·²¿²½» ©·¬¸ ½±²¼·¬·±²ò íòÜ»²§ ¿°°®±ª¿´ ±º ¬¸» ±®¼·²¿²½»ò RECOMMENDATION Í¬¿ºº ®»½±³³»²¼ ¿°°®±ª¿´ ±º ¿ ²± °¿®µ·²¹ ¿²§ ¬·³» ®»¬®·½¬·±² ±®¼·²¿²½» ±² ¾±¬¸ ¬¸» »¿¬ ¿²¼ ©»¬ ·¼» ±º Õ·³¾»®´§ Ü®·ª» º®±³ Õ¿®·²¿ Í¬®»»¬ ¬± ·¬ ±«¬¸»®´§ ¬»®³·²«ò PRIOR ACTION/REVIEW Ñ² Ó¿®½¸ íô îððèô ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼»¼ øéóð÷ ¬¸» Ý·¬§ Ý±«²½·´ ¿°°®±ª» ¿² ±®¼·²¿²½» º±® ²± °¿®µ·²¹ ±² ¾±¬¸ ¬¸» »¿¬ ¿²¼ ©»¬ ·¼» ±º Õ·³¾»®´§ Ü®·ª» º®±³ Õ¿®·²¿ Í¬®»»¬ ¬± ·¬ ±«¬¸»®´§ ¬»®³·²« FISCAL INFORMATION Ú±«® ·¹² ¿²¼ ¿ °±¬ º±® »¿½¸ ©·´´ ¾» ®»¯«·®»¼ò EXHIBITS ïòÔ»¬¬»® º®±³ Ì¿§´±® Üò Î·½»ô Ð¸§·½¿´ Í»½«®·¬§ Ó¿²¿¹»® ±º ÚÛÓßò îòÔ±½¿¬·±² ³¿°ò íòÌ®¿ºº·½ Í¿º»¬§ Ý±³³··±² ³·²«¬» º®±³ Ó¿®½¸ íô îððèò ìòÑ®¼·²¿²½» Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ú®¿²µ Ùò Ð¿§²»ô ÐòÛò Ý·¬§ Û²¹·²»»® ÛÈØ×Þ×Ì ï U.S. Department of Homeland Security ÌÈ Ò¿¬·±²¿´ Ð®±½»·²¹ Í»®ª·½» Ý»²¬»® íçðð Õ¿®·²¿ Ü®ò Ü»²¬±²ô Ì»¨¿ éêîðè FEMA Ú»¾®«¿®§ îïô îððè ÓÛÓÑÎßÒÜËÓ ÚÑÎæ Ý·¬§ ±º Ü»²¬±² Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ÚÎÑÓæ Ì¿§´±® Üò Î·½» Ð¸§·½¿´ Í»½«®·¬§ Ó¿²¿¹»® ÚÛÓßô Ì»¨¿ Ò¿¬·±²¿´ Ð®±½»·²¹ Í»®ª·½» Ý»²¬»® ÍËÞÖÛÝÌæ Î»¯«»¬ Ò± Ð¿®µ·²¹ ·¹² ¬± ¾» °±¬»¼ ±² Õ·³¾»®´§ Í¬®»»¬ Ì¸» °«®°±» ±º ¬¸· ³»³±®¿²¼«³ · ¬± ®»¯«»¬ Ò± Ð¿®µ·²¹ Ì±©óß©¿§ Æ±²» ·¹² ¬± ¾» °±¬»¼ ±² ¾±¬¸ ·¼» ±º Õ·³¾»®´§ Í¬®»»¬ò Õ·³¾»®´§ Í¬®»»¬ ®«² ¿¼¶¿½»²¬ ¬± ¬¸» Ì»¨¿ Ò¿¬·±²¿´ Ð®±½»·²¹ Í»®ª·½» Ý»²¬»® ´±½¿¬»¼ ¿¬ íçðð Õ¿®·²¿ Ü®ò Þ±¬¸ô Õ¿®·²¿ Ü®·ª» ¿²¼ Õ·³¾»®´§ Í¬®»»¬ ·²¬»®»½¬ ¿´±²¹ ¬¸» ±«¬¸©»¬ ·¼» ±º ¬¸» º¿½·´·¬§ ø°¸±¬± »²½´±»¼÷ò Õ·³¾»®´§ Í¬®»»¬ ½´±»¬ ½«®¾ · íç º»»¬ º®±³ ¬¸» ±«¬¸©»¬ ·¼» ±º ¬¸» º¿½·´·¬§ ©¸·½¸ ¸±«» ²«³»®±« ±ºº·½» °¿½»ò Ì¸· · ¿ ¸»·¹¸¬»² ½±²½»®² ©·¬¸ ÚÛÓß ÌÈÒÐÍÝ ©¸·½¸ »³°´±§ ¿°°®±¨·³¿¬»´§ êðð ¬± èðð »³°´±§»» ¿¬ ¿²§ ¹·ª»² ¬·³»ò Ð»® ¬¸» Department of Justice Standards for Protection of Federal Facilities ¼¿¬»¼ ß°®·´ ìô îððí ¿²¼ Department of Homeland Security/Federal Emergency Management Agency Homeland Security Implementation Plan for “Elevated” Condition Level Yellow Procedures ¼¿¬»¼ Í»°¬»³¾»® îíô îððìå Ú»¼»®¿´ ¾«·´¼·²¹ ³«¬ ¾» µ»°¬ ½´»¿® ±º «²½¸»½µ»¼ ½¿® ¿²¼ ±¾¶»½¬ ¿¬ ´»¿¬ ïðð º»»¬ò × ©¿²¬ ¬± ¬¸¿²µ §±« º±® °®±ª·¼·²¹ ÚÛÓß ¬¸» ±°°±®¬«²·¬§ ¬± ¾» ´·¬»¼ ¿ ¿² ¿¹»²¼¿ ·¬»³ ¼«®·²¹ ¬¸» ²»¨¬ Ý·¬§ Ý±«²½·´ ³»»¬·²¹ ±² Ó¿®½¸ íô îððèò ß¬ ¬¸· ³»»¬·²¹ô × ©·´´ ¹´¿¼´§ °®»»²¬ ¬¸» ®»º»®»²½» ´·¬»¼ ¿¾±ª» ¬± ¬¸» ½±³³··±² º±® ª·»©·²¹ò ÚÛÓß Ì»¨¿ Ò¿¬·±²¿´ Ð®±½»·²¹ Í»®ª·½» Ý»²¬»® ¿°°®»½·¿¬» ¿´´ ±º ¬¸» «°°±®¬ ¬¸» Ý·¬§ ±º Ü»²¬±² · °®±ª·¼·²¹ ·² ¬¸· ³¿¬¬»®ò ×º §±« ¸±«´¼ ¸¿ª» ¿²§ ¯«»¬·±² °®·±® ¬± ¬¸» Ý·¬§ Ý±«²½·´ ³»»¬·²¹ô × ½¿² ¾» ®»¿½¸»¼ ¿¬ øçìð÷ èçïóèéêëò FEMA, 3900 Karina Dr. (looking at Kimberly St. north and south) Kimberly St. (39 Ft from the west wing) Intersection of Karina Dr. and Kimberly St. LOCATION MAP EXHIBIT 2 - ~..,~ -~-:~. y .. - .:-~~ z - .:.,. ;~,.~ _~ ' ,_ ~~~ ",~~`-;ice-~-n~~' {1 s .._.. ~ 1~ ` ;. .,,.i .,j ~_ Fy #. __~-bS,~__a.,~y"-~~r¢~,-,~ r., `ir'a~y ~~^.4-+,r ~, ~r. ~~~ .'3`. d'~q ~r".~is.. t-~ r -asr. .. 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The motion was approved by a 7-0 vote with Commissioner Lelia Howell voluntarily removing herself temporarily during the vote by indicating that she is currently employed by FEMA and there may be a conflict of interest. Ì¸» ³»»¬·²¹ ©¿ ¿¼¶±«®²»¼ ¾§ ½±²»²« ¿¬ éæíð °ò³ò s:\our documents\ordinances\08\no parkingkimberlydrive.doc EXHIBIT 4 ORDINANCE NO. ___________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS PROHIBITING PARKING ON THE EAST AND WEST SIDES OF KIMBERLY DRIVE FROM ITS INTERSECTION WITH ; KARINA STREET TO ITS SOUTHERLY TERMINUSPROVIDING A REPEALER CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $500 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. When signs or markings are in place giving notice thereof, no person shall park a vehicle on the east or west side of Kimberly Drive from its intersection with Karina Street to its southerly terminus. SECTION 2. The provisions of Section I prohibiting the parking of vehicles shall apply on the designated portion of the above named street or streets except when it is necessary to stop a vehicle to avoid conflict with other traffic or in compliance with the direction of a police officer or official traffic control device. SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase, or word in this ordinance, or application thereof to any person or circumstances is held invalid by any court of competent jurisdiction, 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 it would have enacted such remaining portions despite any invalidity. SECTION 4. Save and except as amended hereby, all the provisions, sections, subsections, paragraphs, sentences, clauses, and phrases of the Code of Ordinances shall remain in full force and effect. SECTION 5. Any person found liable of violating this Ordinance by a court of competent jurisdiction shall be fined a sum not to exceed five hundred dollars ($500). Each day that a provision of this ordinance is violated shall constitute a separate offense. The disposition of parking citations issued pursuant to this Ordinance shall be governed by Division 3 titled s. SECTION 6. This Ordinance providing for a penalty shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, the official newspaper of the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the ______ day of __________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR s:\our documents\ordinances\08\no parkingkimberlydrive.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ Page 2 AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî __________________________________________________________________________________ SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ °®±¸·¾·¬·²¹ °¿®µ·²¹ ±² ½¸±±´ ¼¿§ º®±³ éæíð ¿ò³ò ¬± íæíð °ò³ò ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ ·¬ ·²¬»®»½¬·±² ©·¬¸ É±±¼¸¿ª»² ; Ô¿²» ¬± ·¬ ·²¬»®»½¬·±² ©·¬¸ Þ®±±µº·»´¼ Ô¿²»°®±ª·¼·²¹ ¿ ®»°»¿´»® ½´¿«»å °®±ª·¼·²¹ ¿ ¿ª·²¹ ½´¿«»å °®±ª·¼·²¹ º±® ¿ °»²¿´¬§ ²±¬ ¬± »¨½»»¼ üëðð º±® ª·±´¿¬·±² ±º ¬¸· ±®¼·²¿²½»å ¿²¼ °®±ª·¼·²¹ º±® ¿² »ºº»½¬·ª» ¼¿¬»ò Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼ ¿°°®±ª¿´ øçóð÷ò BACKGROUND Ì¸» Ý·¬§ ±º Ü»²¬±² ¸¿ ®»½»·ª»¼ ¿ ®»¯«»¬ º®±³ Î¿§ Ô¿¹´»¼»® Í®òô ®»·¼»²¬ ¿¬ îéïì É±±¼¸¿ª»² Í¬®»»¬ ¿²¼ Ö·³³·» Ò¿«½¸»®ô ®»·¼»²¬ ¿¬ îéïë Þ®±±µº·»´¼ Ô¿²» ¬± ®»¬®·½¬ °¿®µ·²¹ ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ É±±¼¸¿ª»² Í¬®»»¬ ¬± Þ®±±µº·»´¼ Ô¿²» º®±³ éæíð ¿³ ¬± íæíð °³ ±² ½¸±±´ ¼¿§ò Ì¸»·® °®±°»®¬·» ø¬¸» ±²´§ ¬©±÷ ·¼» ¬± ¿²¼ ¬¸»·® ¼®·ª»©¿§ »®ª·½» ±ºº Û³»®±² Ô¿²»ò Ê»¸·½´» °¿®µ ·² ¬¸· ¿®»¿ ¬± »®ª·½» É·´±² Û´»³»²¬¿®§ô ®»«´¬·²¹ ·² ¬¸» ¼®·ª»©¿§ ·² ¯«»¬·±² ¾»·²¹ ¾´±½µ»¼ ±² ±½½¿·±² ¿²¼ ·² ·¹¸¬ ¼·¬¿²½» ¾»·²¹ ·³°»¼»¼ò Ò± °¿®µ·²¹ ®»¯«»¬ ¿®» ¬§°·½¿´´§ ·¹²»¼ º±® ©¸±´» ¾´±½µô °®±ª·¼·²¹ º±® ´» ½±²º«·±² ¿ ¿ ®»«´¬ ±º ¬¸» °±·¾´» ´± ±º ·¹² ±ª»® ¬·³» ©¸»² ³¿´´»® »½¬·±² ¿®» ®»¬®·½¬»¼ ¿²¼ ¬¸« »¿·²¹ »²º±®½»³»²¬ò Ó®ò Ô¿¹´»¼»® ¿²¼ Ó®ò Ò¿«½¸»® °®±°»®¬·» ±½½«°§ ¬¸» ©¸±´» ¾´±½µò OPTIONS ïòß°°®±ª» ¬¸» ±®¼·²¿²½»ò îòß°°®±ª» ¬¸» ±®¼·²¿²½» ©·¬¸ ½±²¼·¬·±²ò íòÜ»²§ ¿°°®±ª¿´ ±º ¬¸» ±®¼·²¿²½»ò RECOMMENDATION Í¬¿ºº ®»½±³³»²¼ ¿°°®±ª¿´ ±º ¿² ±®¼·²¿²½» º±® ¿ ²± °¿®µ·²¹ ®»¬®·½¬·±² º®±³ éæíð ¿³ ¬± íæíð °³ ±² ½¸±±´ ¼¿§ ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ É±±¼¸¿ª»² Í¬®»»¬ ¬± Þ®±±µº·»´¼ Ô¿²»ò PRIOR ACTION/REVIEW Ñ² ß°®·´ éô îððè ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼»¼ øçóð÷ ¬¸¿¬ ¬¸» Ý·¬§ Ý±«²½·´ ¿°°®±ª» ¿² ±®¼·²¿²½» º±® ¿ ²± °¿®µ·²¹ ®»¬®·½¬·±² º®±³ éæíð ¿³ ¬± íæíð °³ ±² ½¸±±´ ¼¿§ ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ É±±¼¸¿ª»² Í¬®»»¬ ¬± Þ®±±µº·»´¼ Ô¿²»ò FISCAL INFORMATION Ì©± ·¹² ¿²¼ ¿ °±¬ º±® »¿½¸ ©·´´ ¾» ®»¯«·®»¼ò EXHIBITS ïòÐ»¬·¬·±² ¿²¼ ¾¿½µ«° º®±³ Î¿§ Ô¿¹´»¼»® Í®ò ¿²¼ Ö·³³·» Ò¿«½¸»®ò îòÔ±½¿¬·±² ³¿°ò íòÌ®¿ºº·½ Í¿º»¬§ Ý±³³··±² ³·²«¬» º®±³ ß°®·´ éô îððèò ìòÑ®¼·²¿²½» Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ú®¿²µ Ùò Ð¿§²»ô ÐòÛò Ý·¬§ Û²¹·²»»® PETITION REQUEST EXHIBIT 1 PETITION REQUEST iNI-ORMATIORI t=ORM fl~f:~?ETIylC~iJ1.5B~tt'Jii'::kfr'U~-il~`'}tN(~Rl~~'i(~;F~:EE7UES1 fi-tt,CIT`:'GE_Efjtli~'~i~C. {"INS T AlL'hEi?G'vGJi.1t?CitF't' `PARKIUGI~ i itP1l.~t•,L::'~' JF=FIi1v E~ i,^iGT1?f,ItS:t i`iC:;LU°.:.'iN ~= 7t-i't r+~LLUi'bYF!G :~::tJi i I~P+3i'Sj I'sttt:<.:>:~ nt3it~3 tf ~o). i.' Servaen the hgurs gi 7:30 am to 3:30 pm z. Frionday th(ouon Friday only =~_ S1 ~'+ ~, •+ ::t ~~ ~;?. ti' .= a 1400 5fat?c of Emersan Lana WGOdhavan Street f~rooxfioir; Lana .~ ~! a,; 61 'j! r, ~,,t ~ ~t} +H1y I~ S~It~G REt:UF~TEC 54GAU~ .` Porinr, 0~ thv :.+vCiu'1 5i:i~ Of i:fn8r4.Un, t,.~nu :rr~,=.fa3 ;:nr•.,-~.essrry tta~~rd:: in the s:,txth4 2t~rie. ~i tip tiYS; t''a?JCL'r !nv'C,+(:'ers iI?e stus'r:nt tiim~-p~ ~,i,°•-Ut-J IpUp. Fa~:sn~: =rct Pr(vi?faiy Crvnad v=i:cleG h~v~ n 4f If11C.lI1 t3ilry :tlrnirs~ F,.^~~l bui,R~[f C;si ~tT:c:f+.~.^,di Ff~1Ttl ifiw t iCli Cis tR~ f:)llp I}E;s,:c~ilS? Cls itt? nBRG'.\` ~7r'T.Cc YJtt~n'JF?fiIC~E'S s"'..fc p2f:~L'{j Odl JC~lli Lftt~ !'tfl I-U'-1 i;~ ~ulSin ~iir+-~ CI, Enterst~n. i n° =,c,c.-or}c; h.~Zfi>d i? int~rah•:t5 i; :8 cr-ss+s.ntk. ai E.mn(~or, ii rS~u ~iUGt;ilyl`t. 'vntllCfv3 Ci3f"<.+?tt ~fi ilsL'- SaUi`1 SK.'8 Qi Emersan ++?~uiril%i y (ins GF ~jgt:i t+~ th>r atrih Siff=_ of-the cra5sv;a:k •~:hiC;~ y,r(y lEIi15 n~i~tUr'iSfS ff4i11 bf.~i!1Q l-:t7114i$R it llQl:•t i4 @I«t£': ti,e crn~.s+;:f!~K f,~~+j (1!!*4•E:('ifinL+ ;3ii~: Pr~(~1+1+~ i?n lfl? 5+:il't ~rs3t C. Ers,ef.~,n, Gehuean ~rtin=;f;el~? rind tti'~jocti-:;s.'en, iii+F tf,:rTic :l•av: ~rc•unti ;he drr_tip ~.: ; pici~-up tac« r!'r3fr f)+J!•~ vnfj IliCfil`i:aEj 1_nB an': ~„( i;.iYa3fv n~,5~ as SiU~w`'1ia ~?(.~p(t?8 .r~ini~ t?i Cr~•SSlit~ it'ac 3ifB@i rit IiIE~ G(L3tic ~?l:nv tl;r? C~titi,t~n 3J~'v!; (C4~'CI~'n•, sU~ ic~i+zrt -lgn;,~u2s, u Gl.illi~ nif;8:lr1~3 1*;.II t?c: heRd. ~er~encino ors Itl3 [C.:Tr81C9iitS rE;Cerv~r .8i I*ns ((trgi::lg ~~ '?;eii ~s ICiFe ~ ar•;r,'.~-: DhC't1r ~_~~ f;s, _,p4itir,,ts:,=.t r~~lrir~rier.15 m.?y ae f~l~ced z(i ttie _~r`::R:i?~:9, ~nc~~ to e~capiart~•r? ~~ t!?a Glt;'. 'f'lito'i ~fi i(tr. mGUirLtr,+'niS ..;~~. (rrt, ;`,iS r~;,ilvSt +.r;ilf ive s~;h=:!Ut=?d 1ar ih'~. G'It:' ra~(i~.l'•3+1LS:~ir~cr~Lts:l fbr' apFsrzr,,~l. ~hoU'~ VGU h~ :'e dry Gi=,Stiana cs c;~n .em< atyoul 'tii~ r~~ci.t~i Lr ti?lZ YtlJi~~~a rs a 4v~rnlC', s+i+~~~s~ r_=ort4aCi the City'c; EnArnekrir~~ ~.>iiyarfm~nt a: 3^9-E:s3la C~ a n ° w ~ ~ c~ ~~ Z ~ ~. a Q tC ~°• ~ __, p ~ ~. ~ ~~r ll! ^ m ~~:{fin r /1 ~+ sr 'ti V ,J n_` (X ~ c z~F"' c. A~~g~; ~ z~~~a~. ~?~•= f--`-"w ~°~~~m ~, ~; ;~ ~ a ~ ~- ~ S ," ~~ ~ .~'~ ~ ~, ~r ~.~~ -~.~ --~ [_ !!. 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Z €=~ ? -~~ .~ .~ x ~~ -~ ~~; ~'~ a~ l .LI81HX3 isanoax I~oliliaa LOCATION MAP EXHIBIT 2 1 ., + ~ P ~ - ,~ ~- ,, , ; ~ ;~ s -~:~ pa ~ ,~: ~- i ~ .. _ _ - t ~ i s ~. ~ ~~,'~ ~ ,.r ~ titr .~ i. ;1 j i~ 1 -,gyp ~• A-' ~ ~ s ~rw`.~N~vr _ _ ._ Y y r~ C ~ fii ~ ~'~7•~ ~ 3 ~ ~ . t ~~_. r^ °_~ r ., ~ ~: € ~~ , ~ ~ , „_ ~ _ i ~~ fy!~i~~jj~ l `-, f` i'~l' ra" tr 1_ _r~ a 'E ,~ ~ = r"y 'Y •~', ' f~~1lf}y~ r* r ~'r;.H ~ ~ ° l;l y~k., 3 ~ l ,y~n„~,, ~~: ~ a^r~ '^°'.~. r L ~ ... ~.~`~s-_- - _ ~,~ ~J t .. ~~1;~ se y,~ y ~ -- ' ~4.F ~, i !'_.: r x :... i4'is xft~ _ ~ - _ K z _ ~ 7~ - s-~ye F„-u" _ i V e ~~-y y ~' - "7i ~~S «~ ~ C ray _ .e1,. • " {{f L~__y'.rt - - , "~ i t ~E ` -" K ~. - ~ `Yy ~ I `~~~' WYC1.i_Llll~• ~ ) ~.. ~j' ~~~1r ii`+~jwjp_~`~~r• ~~~~~_~~ ~ -~~+~~~ 1~1: 4'j"Di ~. A~4#ti 1~.y ,! `Ji 4~ ~~ ,~.. ~~. ~~, rj~.. gf. ~. `[r.~ ~ ~ , ~ 3. ~~ ~ 'Y .Y~, ~~ '~4C ~ "T~ iii!!!- r.. ~ ) 4r M'i^r ~ ~ 1q T~L t~( ,#' } ~l yyS ~~. ~~ Y t r' ~'~ .!~q'_ft c 5L~ i~._ ~,~ .~3.1 tit .+ yr, . ~- ~ ` ~`' e4r ~ ~ rl,~-_ -~ fie, r F~~; ~,~.a: trar~~;~ .~r~~_ j•y ~~`~~ Proposed no parkin "*~'~~.=. "t~-b"~ ~'r~'. '~ ° i~r l~ .b ~' ~• s1R 1 ~~.+ b ~'~ ~.Z.M` ,c C1. +"Ff4~?u(~(~1y~. t -. '~..~~~T_ ~ a r ~s~ ~ ~~ 4~L 1 ~~i h~"d ~ i~<e_nf..r., ~` .t`~'i~`'+~'~aia~' .1~~_ J~ i~5`j . _. ~~. . - - r air "" Y. d y n4,i' m ~~~_ ~y,~I ,"2~t i±.' '`ia: .. ' ash"r.P r ,~~' ei~ r t? 7 7 ~- "~ t ~ ~' ~t ` E j •,~( ~ _ ~} D i2 { ~'1~S ~ tTFt~ ~ y_~ ~.iq~~,. T.~t.r 1 ~~ ~ ~~ ~ `~ ~~ ~, _ ~~ ~~ 'Kl ,.~,e~~a ~ ~ }~r. tt(~ t ~1 X1(1 i7~I ~Pz ~~~~:~ w w, '}.~.. ~~ *+. ~,~ Ji f .r~~~y 3 ~ Y~'~. w-.. ti"'a: ,~ [~. ` i. i i ~[ f ~ykyl~~vt_t~ ;1 ~''~ ~" ~-t t ra.I.• , s.y :~ t t r,+~ ~ r ~^ -e t 5 • Li. !t a }: r ~ ~ ~„'+# *~' -~ ~i~~ W _ ~ i ~. ~'y~~p 5 SiRj' t 'I '1'7~ ~ CC:<._ ra t. ?~ _f k ,, ÛÈØ×Þ×Ì í DRAFT MINUTES ÌÎßÚÚ×Ý ÍßÚÛÌÇ ÝÑÓÓ×ÍÍ×ÑÒ ß°®·´ éô îððè ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² Ó±²¼¿§ô ß°®·´ éô îððè ¿¬ ëæíð °ò³ò ·² ¬¸» Ý±«²½·´ Ý¸¿³¾»®ô Ý·¬§ ±º Ü»²¬±² Ý·¬§ Ø¿´´ô îïë Ûò Ó½Õ·²²»§ Í¬®»»¬ô Ü»²¬±²ô Ì»¨¿ò Present: Ý¸¿·® Ù®»¹ Í¿©µ±ô Ý¸¿®´» Ù«¿®²¿½½·¿ô Ó¿®·±² Í½±¬¬ô Ð¿¬ Ý¸»»µô Ô·²¼¿ Þ®±©²ô Ô»´·¿ Ø±©»´´ô Ó·½¸¿»´ Ù®»»²ô Ö¿±² Ü¿ª· ø¿®®·ª»¼ ¿¬ ëæíé °ò³ò÷ ¿²¼ Ö±¸² Ý®»© ø¿®®·ª»¼ ¿¬ ëæìè °ò³ò÷ Also Present æ Þ«¼ Ê±µ±«²ô Ì®¿ºº·½ Û²¹·²»»® Ö·³ Ý±«´¬»®ô Ü·®»½¬±® É¿¬»® Ë¬·´·¬·» Ñºº·½»® Õ»·¬¸ Ó¿®¬·² ß²² Ú±®§¬¸»ô Ý±±®¼·²¿¬±® Þ±¿®¼ ¿²¼ Ý±³³·¬¬»» Î¿§ Ô¿¹´»¼»®ô ß´·½» Ù±®»ô ½·¬·¦»² Þ®»²¬ Û®µ·²ô Ñ©²»®ô Ý¿³°« Þ±±µ¬±®» OPEN MEETING: î÷Î»½»·ª» ¿ ®»°±®¬ô ¸±´¼ ¿ ¼·½«·±² ¿²¼ ½±²·¼»® ¿ ®»½±³³»²¼¿¬·±² ¬± ¬¸» Ý·¬§ Ý±«²½·´ ±º Ò± Ð¿®µ·²¹ô éæíð ßÓ ¬± íæíð ÐÓ ½¸±±´ ¼¿§ô ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ É±±¼¸¿ª»² Í¬®»»¬ ¬± Þ®±±µº·»´¼ Ô¿²»ò Þ«¼ Ê±µ±«²ô Ì®¿ºº·½ Û²¹·²»»®ô °®»»²¬»¼ ¬¿¬·²¹ ¬¸¿¬ ·¬ · ²±¬ «²½±³³±² ¿¬ ½¸±±´ º±® °¿®»²¬ ¬± °¿®µ ¿²¼ ¬± °¿®¬·¿´´§ ¾´±½µ ¼®·ª»©¿§ ¿²¼ ½®±©¿´µò Î¿§ Ô¿¹´»¼»® Í®òô ®»·¼»²¬ ¿¬ îéïì É±±¼¸¿ª»² Í¬®»»¬ô ¿²¼ Ö·³³·» Ò¿«½¸»®ô ®»·¼»²¬ ±º îéïë Þ®±±µº·»´¼ô ¸¿ª» ®»¯«»¬»¼ ®»¬®·½¬»¼ °¿®µ·²¹ ±² ¬¸» ±«¬¸ ·¼» ±º Û³»®±² Ô¿²» º®±³ É±±¼¸¿ª»² Í¬®»»¬ ¬± Þ®±±µº·»´¼ Ô¿²» ¾»¬©»»² ¬¸» ¸±«® ±º éæíð ¿ò³ò ¬± íæíð °ò³ò ½¸±±´ ¼¿§ò Þ±¬¸ ±º ¬¸» °®±°»®¬·»ô ¬¸» ±²´§ ¬©±ô ¼®·ª»©¿§ ¿®» ±² Û³»®±² Ô¿²» ¿²¼ ª»¸·½´» ©·´´ °¿®µ ·² ¬¸· ¿®»¿ ©¿·¬·²¹ ¬± °·½µ «° ¬«¼»²¬ò Ý±³³··±²»® Ó·½¸¿»´ Ù®»»² ¬¿¬»¼ ¸» ¸¿¼ ¿ °®±¾´»³ ©·¬¸ ¬¸» ´»²¹¬¸ ±º ¬¸» °®±°±»¼ ¬·³»ò Ý±³³··±²»® Ó¿®·±² Í½±¬¬ ¿µ»¼ ·º ¬¸» »´»³»²¬¿®§ ½¸±±´ ¸¿¼ ¾»»² ½±²¬¿½¬»¼ ¿¾±«¬ ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±²ò Ê±µ±«² ®»°´·»¼ ¬¸»§ ¸¿¼ ²±¬ò Î¿§ Ô¿¹´»¼»®ô Í®òô °±µ» ·² º¿ª±® ±º ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±²ò Ñºº·½»® Õ»·¬¸ Ó¿®¬·² °±µ» ·² º¿ª±® ±º ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±² ¬¿¬·²¹ ¬¸¿¬ ª»¸·½´» ©·´´ ¿´± °¿®µ ·² ¬¸» ½®±©¿´µ ©¸·½¸ ½®»¿¬» ¿º»¬§ ·«» º±® ½¸·´¼®»² ¿¬¬»³°¬·²¹ ¬± ½®± ¬¸» ¬®»»¬ò Commissioner Lelia Howell moved to approve the recommendation for no parking from 7:30 a.m. to 3:30 p.m. school days with a second from Commission Pat Cheek. The motion was approved by a 9-0 vote. Ì¸» ³»»¬·²¹ ©¿ ¿¼¶±«®²»¼ ¾§ ½±²»²« ¿¬ èæðê °ò³ò s:\our documents\ordinances\08\no parkingemersonlane.doc EXHIBIT 4 ORDINANCE NO. ___________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS PROHIBITING PARKING ON SCHOOL DAYS FROM 7:30 A.M. TO 3:30 P.M. ON THE SOUTH SIDE OF EMERSON LANE FROM ITS INTERSECTION WITH WOODHAVEN LANE TO ITS INTERSECTION ; WITH BROOKFIELD LANEPROVIDING A REPEALER CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $500 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. When signs or markings are in place giving notice thereof, no person shall park a vehicle on school days from 7:30 a.m. to 3:30 p.m. on the south side of Emerson Street from its intersection with Woodhaven Lane to its intersection with Brookfield Lane. SECTION 2. The provisions of Section I prohibiting the parking of vehicles shall apply on the designated portion of the above named street or streets except when it is necessary to stop a vehicle to avoid conflict with other traffic or in compliance with the direction of a police officer or official traffic control device. SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase, or word in this ordinance, or application thereof to any person or circumstances is held invalid by any court of competent jurisdiction, 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 it would have enacted such remaining portions despite any invalidity. SECTION 4. Save and except as amended hereby, all the provisions, sections, subsections, paragraphs, sentences, clauses, and phrases of the Code of Ordinances shall remain in full force and effect. SECTION 5. Any person found liable of violating this Ordinance by a court of competent jurisdiction shall be fined a sum not to exceed five hundred dollars ($500). Each day that a provision of this ordinance is violated shall constitute a separate offense. The disposition of parking citations issued pursuant to this Ordinance shall be governed by Division 3 titled . SECTION 6. This Ordinance providing for a penalty shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, the official newspaper of the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the ______ day of __________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR s:\our documents\ordinances\08\no parkingemersonlane.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ Page 2 AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî __________________________________________________________________________________ SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ °®±¸·¾·¬·²¹ °¿®µ·²¹ ±² ½¸±±´ ¼¿§ º®±³ éæíð ¿ò³ò ¬± íæíð °ò³ò ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ º®±³ ·¬ ·²¬»®»½¬·±² ©·¬¸ Ó»®½»¼» Î±¿¼ ; ¬± ·¬ ·²¬»®»½¬·±² ©·¬¸ Ó½Ý±®³·½µ Í¬®»»¬°®±ª·¼·²¹ ¿ ®»°»¿´»® ½´¿«»å °®±ª·¼·²¹ ¿ ¿ª·²¹ ½´¿«»å °®±ª·¼·²¹ º±® ¿ °»²¿´¬§ ²±¬ ¬± »¨½»»¼ üëðð º±® ª·±´¿¬·±² ±º ¬¸· ±®¼·²¿²½»å ¿²¼ °®±ª·¼·²¹ º±® ¿² »ºº»½¬·ª» ¼¿¬»ò Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ®»½±³³»²¼ ¿°°®±ª¿´ øìóí÷ò BACKGROUND Ì¸» Ý·¬§ ±º Ü»²¬±² ¸¿ ®»½»·ª»¼ ¿ ®»¯«»¬ º®±³ ®»·¼»²¬ ·² ¬¸» ¿®»¿ ¬¸®±«¹¸ Óò ß´·½» Ù±®» ¬± ®»¬®·½¬ °¿®µ·²¹ ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ º®±³ Ó»®½»¼» Î±¿¼ ¬± Ó½Ý±®³·½µ Í¬®»»¬ º®±³ éæíð ¿³ ¬± íæíð °³ ±² ½¸±±´ ¼¿§ò Ì¸· ·¬»³ ©¿ ±®·¹·²¿´´§ ½±²·¼»®»¼ ¾§ ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ¿¬ ¬¸»·® ß°®·´ éô îððè ³»»¬·²¹ò Ì¸» °®±°»®¬·» ±º ¬¸» ®»·¼»²¬ ·²ª±´ª»¼ ·¼» ¬± Ð¿®ª·² Í¬®»»¬ô ©·¬¸ ¬¸» ¼®·ª»©¿§ º±® îìîð Ó»®½»¼» øÓ®ò ¿²¼ Ó®ò Ç±«²¹ ®»·¼»²½»÷ ¿½½»·²¹ ±²¬± Ð¿®ª·² Í¬®»»¬ò Ê»¸·½´» °¿®µ ·² ¬¸· ¿®»¿ ¬± »®ª·½» Þ±®³¿² Û´»³»²¬¿®§ò Ì¸» º±«® ®»·¼»²½» ¬¸¿¬ ¿®» ¼·®»½¬´§ ¿ºº»½¬»¼ ¿®»æ ïòîìîï Ó½Ý±®³·½µ ø¼·¼ ²±¬ °¿®¬·½·°¿¬» ·² ®»¯«»¬÷ îòîìîð É»¬©±±¼ ø°¿®¬·½·°¿¬»¼ ·² ®»¯«»¬÷ íòîìîï É»¬©±±¼ ø°¿®¬·½·°¿¬»¼ ·² ®»¯«»¬÷ ìòîìîð Ó»®½»¼» ø°¿®¬·½·°¿¬»¼ ·² ®»¯«»¬÷ Ì¸» °»¬·¬·±² ¿¬¬¿½¸»¼ ¿ Û¨¸·¾·¬ ï ½±²¬¿·² ·¹²¿¬«®» º±® ¬¸»» º±«® °®±°»®¬·» ¿ ·²¼·½¿¬»¼ò Ì§°·½¿´´§ ¬¸» Ý·¬§ ®»¯«·®» ¿ ³·²·³«³ ±º éëû ±º ¬¸» ¿ºº»½¬»¼ °®±°»®¬§ ±©²»® ¬± ¾» ·² ¿¹®»»³»²¬ ©·¬¸ ¬¸» ®»¯«»¬ ¿²¼ ¬¸· °»¬·¬·±² ³»»¬ ¬¸· ®»¯«·®»³»²¬ò Ì¸» °»¬·¬·±² ¸¿ ³«´¬·°´» ·¹²¿¬«®» º±® ±³» ±º ¬¸»» °®±°»®¬·» ¿ ©»´´ ¿ ±¬¸»® °®±°»®¬§ ±©²»® ·² ¬¸» ¿®»¿ò Ì¸» ¿º»¬§ ½±²½»®² »¨°®»»¼ ¾§ ¬¸» ®»·¼»²¬ ·²½´«¼»æ Ð¿®µ·²¹ ±² Ð¿®ª·² ½¿«» ·²¿¼»¯«¿¬» ·¹¸¬ ¼·¬¿²½» ±² ¬¸» ½®±ó¬®»»¬ ¬± »²¬»® Ð¿®ª·² Í¬®»»¬ô ¿²¼ ½¸·´¼®»² ¿®» ¾»·²¹ ¼®±°°»¼ ±ºº ±® 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¬± ¬¸» º®±²¬ ¼±±® ±º ¬¸» ½¸±±´ô ©¸·½¸ ¸¿°°»² ¬± ¾» ¬¸» ±²´§ ¼±±® ¬¸¿¬ · ²±¬ ´±½µ»¼ ©¸»² ³¿²§ ±º ¬¸» ª±´«²¬»»® ¸±© «°ò Ì¸» ¿º»¬§ ½±²½»®² ¼·½«»¼ ¿¬ ¬¸» ß°®·´ îððè ³»»¬·²¹ ©»®» ®»·¬»®¿¬»¼ ¿¬ ¬¸· ³»»¬·²¹æ Ð¿®»²¬ ¼®±°°·²¹ ±ºº ±® °·½µ·²¹ «° ½¸·´¼®»² º®±³ ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ ±½½¿·±²¿´´§ ½¿«» ½¸·´¼®»² ¬± ½®± ¬¸» ¬®»»¬ º®±³ ¾»¬©»»² °¿®µ»¼ ª»¸·½´» ¿²¼ ±«¬·¼» ¬¸» ½®±©¿´µ ©¸»®» ¬¸»§ ¿®» ²±¬ °®±¬»½¬»¼ ¿²¼ ¿®» ³±®» ¼·ºº·½«´¬ ¬± »»å Ê»¸·½´» °¿®µ·²¹ ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ ½¿«» ·¹¸¬ ¼·¬¿²½» °®±¾´»³ º±® ª»¸·½´» ¿¬ »¿½¸ ±º ¬¸» ½®±ó¬®»»¬ ©¸»² ¬®§·²¹ ¬± »²¬»® Ð¿®ª·² Í¬®»»¬ô °®±¼«½·²¹ ½±²¼·¬·±² º¿ª±®¿¾´» º±® ¿ °±¬»²¬·¿´ ¿½½·¼»²¬å ¿²¼ Ê»¸·½´» °¿®µ»¼ ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ ±³»¬·³» ¼»²§ ¿½½» ¬± ¬¸» Ç±«²¹ ®»·¼»²½»ò ×¬ ©¿ ¼·½«»¼ ¿¬ ¬¸» Ö«´§ îððè ³»»¬·²¹ ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ¬¸¿¬ °¿®µ·²¹ ±² Ð¿®ª·² Í¬®»»¬ ¾§ ª±´«²¬»»® · ¿ ³¿¬¬»® ±º ½±²ª»²·»²½»ò Í¬¿ºº ¾»´·»ª» ¬¸¿¬ ³¿²§ ±º ¬¸» ·«» ®¿·»¼ ¾§ ¬¸» ª±´«²¬»»® ¿¬ ¬¸» ³»»¬·²¹ ¿®» ¿ ®»«´¬ ±º ¬¸» ½¸±±´ ²±¬ °®±ª·¼·²¹ ¿°°®±°®·¿¬» 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Í¬®»»¬ò FISCAL INFORMATION Ú±«® ·¹² øî º±® »¿½¸ ¾´±½µ º¿½»÷ ¿²¼ ¿ °±¬ º±® »¿½¸ ©·´´ ¾» ®»¯«·®»¼ò EXHIBITS ïòÐ»¬·¬·±² ¿²¼ ¾¿½µ«° º®±³ ®»·¼»²¬ò îòÔ±½¿¬·±² ³¿°ò íòÌ®¿ºº·½ Í¿º»¬§ Ý±³³··±² ³·²«¬» º®±³ ß°®·´ éô îððèò ìòÌ®¿ºº·½ Í¿º»¬§ Ý±³³··±² ³·²«¬» º®±³ Ö«´§ éô îððèò ëòÑ®¼·²¿²½» Î»°»½¬º«´´§ «¾³·¬¬»¼æ Ú®¿²µ Ùò Ð¿§²»ô ÐòÛò Ý·¬§ Û²¹·²»»® PETITION REQUEST FC:~~'tt:[15 fit, ~tii~y, E~:;ct Ft :~S ~'Q3i3 kit t~E t~+~;i}~, 34C fL(•.i~ .`r'te'?'t:i':1) 4{:1~+5'{;i'$°?litt'MG Eli ~?C}'.' sl„tii f {fin [}i€t ~,lSa~E;it":` z;is`t'l'<<Y }°:LfS,'t)i aiS'~C[, IE7 }y'tPtit [)} ~°5itfj~s r~4)ETili#it rIi'T11tif11uPr ~~'t'sli.il ~ 351Ctj Cs=~ ~'Clura:9tf'.S:Sii]C7ti i'; :`! t711~~l ~(C'~t~t';fit 3i i~:e t~Jsl'.i'a~z't:Ettt [t}~}3.!C:'7n ~!Cit;} i;'~jt'~1+~~ty{}tt 177i'e'C ~`G}iI4~C:S (.''?t(ftii:t~ t'rCS Ci1L' Sti7LZ~t Sits:,' UZ G]<"st'~'tti It}+#~:~. 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C'~: ~'ili~'Iit ~Cttili \IErr~'t':~5 t~ 'S}~.`iJfff:EC}: !i.?'~:jL ~)I,J~7 :'~{~ CFS~ ti'l~tlf( Ci11-6_:llc iE2 Y'£`~tei~il. ~~.tl1l'}t~~ ?i:.'~•:t:C} iil C~[!S E?i:':! 1171 I~IS: u]iiCjf6 ~si;[.° 51f F~a~~'tn tlttt~,;; [~14 ~n~.'f~s.111{+r5 tii ~l~r:Sit'.J[?~.~ ilt~ ~'ci4'if4 ~ ~Iltl[E i:L+tttri~ ~'siScnt~ >7sLCti[flL, [t9 ijlti?Ei ti}i'~`t ilta}•: {t;+:~[s.t4`:tli=i i}[!ftli~ _-S:itU`tJ~ ~[!t?,!I'k I_'iEfi :itd s:tt` Ri,:t LfZC ~:t5 ~t::?'"s::EU_! ;!i 1:; 5)it ii1Z:.:i}.It~l ~f4~'i ~:as }'i3a'\•"€71 EIt iCc:1Zt ~} '~t0 S~`ii~3E t-t:-tt tt7~; 71ik ~$E11~aI3t! tt11 Lh~ &1S?I`i}t 41i}4' Il~ }'zlf'c'691 4i 111 i;~•,',~T F}lam 1}~}tt ~t,!Lh ~€5f t~:;il C711Ci4•`~t.ilt?tl ~'}l~ -`'4{} r'~3:C~8Ttf_'," i•LIit7}[~ i+C J[SE7E1L c~?1~Ct1 Itox.lf !tl1i~ it.z Cll:vs'c' 15 tnt E+~tilti}:'.ttt i°}t~7t}: }'Cav 1i~i ti'sEt.~ ,^~~i:;t:t~t4e --_ _ _~s 4.~v 4 .~. EXHIBIT 1 1~3tra: t.t~CC ?'? ~ ~~r'{`esC?ti~tacrCi ~l I:?~ntrct,, T'~: '~:~~t'i ~ ` ~ +. ' iii ~'L_~~._~ :~_t_ i--T ~ t~ ~~'.Z~.iF_'r~1.~V~Q~~ i ~i_`r-_i '•~'•~h_.~vit.{;~r,,.,,~'J 9 !_ +~~ 1 PETITION REQUEST EXHIBIT 1 y ` 1 t iti .~i~ 1 ~ i ~ -vt) ~ - ~ ~ ' ~ ~ ~ r - '' ~ •_ ~~ x, ....3 ~ ! t'~~ ~ ~ `!-. - '~ is 4 - -. . ~ ~-;' ~~s+~ ~ r ~ - 1 I ii'~~ r ~ _ ~ ~ e.~ _ -~.___ f /:' z - c... ._ ;fit- .~ ~ _ tC tf. 1, . ~ , , 1 t ti' . ir. ;~_l~'i+~. . ~ ~ ~ 151. __ t I e ~ ~s~.., Y~r i'o _. ;'`'`, ~ .`~ e." ',II.;A`~';r~~ 'id ~ ~ -~i i._ y.e• I-4 y ,~ '~ ~Y~ ' ' ~~~^L'"`,7.}}~ ' r `-d =.y~ ~ Le'v _ ~-_`;. ~~~ ~ r 1z+e=. C''~ ~} (~~ r Ct~w F~~ . = >i .' !Y ~ r.` ~ C~ fd ~ `~ i e , c ~+ `f ~ ' may' ~ ='~' ~ ~, ~f-y'r%4=~-' j4` (~ ~ ~, P~ 1 L ~ ~~ ~ ~r I~r~~~t' ~ v ~'`t A~-x{v"~~'°'i Y / j ~f : ~..~. ~~±'=~~• M'_ - r,'~ `ff ~ "~+~ ~ i i ~' ~ ~- ~ f ryry (A~, _ ~ 1 ~. , ~~ qtr ~~ " ~ ~ '''~' -•~~' ~,,`IL: i ~'~ yl _ ~; ~ ~r f ' ~ , 's d (: 1 t 4 d! ,f . -. - 1 - ~ ~~ ~ ~~ ~ ~ ? i g~ •' r ~ . . J mot f e 1 --~ `- P ~ fi- ` 1~1 ~ I ~' ` -`~ PETITION REQUEST r- ' S ~ .4+-~ i ~~,}_~~L.f ~l~?~ ar • ^~ a i t-: ~yL ter! i.: yr '~!~ +.. ~ ' JL~_. ~..1=..~:_'_h_. -' _ ~ I} ~5 ~ l rj ,- a ~, ~+ ~ i f~ .q _ a_ ~ EXHIBIT 1 1 .4a, ! a} ~ ~ 4= L ''' .~ I,~ I _ ~ ~ q _ ~ ~~ f-~f' i ' ~ _- r • 1 •.. ,}_~A~ _ ~ Vie.-~`~i:,,-a._~. _~.~y _ 3- ~~ ~ ;?..-'~t _~er? '-~' ~i ~}s ,r ~ ~"() ~... i~ S ~ ~o'~+'~r~~r_,..._ ~~Y ~ t~[ %~r'.~ .y+-~.!~ J:l.~ : ~-j' .1=J~-~- '+~ ~ _ ~ r',.l-~-s 'r~`17 ~f ~ ,~[_ y ~1 r _ r ~ ,~ _~. ,_ ~~:.-~1~t~~y- i3 t'``-~- ~::~~ ~.s ~.:°tiLi~'•.r~~ - tt._t~,~_~„:r[-L ~ ~"~ ,~'~i"..~%~-~.`~-•~` ~ •~C ~'~_ ., { r-y _ ; ~ ~\ + 1 rt ~ta_~? L.l ti a t~ y,! l:- • ~fk ~_.~.ft % Sit L' ~~(~41 , f-- ~ E ~.:.1 f(( LOCATION MAP EXHIBIT 2 9 ... ~ Y ~SF. ~- V 4F , .. ! 3-.. y r y ~' ..y e,4.~_ ._ _ .s_~ 'i.. s~'. ~ .~-.C'!v ~s ~ ~i ~ 1..t: n +l~ ~ ~ k ..,_; ~'^` ~ -F. ,~ ~ ~ ;~„ 2421 MCCORMICK ~ ! 2420 WESTWOOD ~i, ~' '~ ~ 2421 WESTWOOD .; 2420 MERCEDES ~ `- i ~' - j; "- , ~ ~i~ ~I ~ Proposed no parking ~: ! ~.. ~ X ~' ~ '~ ~ ~ . -. a ~; - ~, .. .; - ~ _ c . f _~ . ~ 1 - I v - y, ~ 3 ~, 1 f ~ yq ~ "~ ^ K ~ LY...... .~ ,. ~ _ - ... ~, w ~ f ~ n ~ ; . ~ _ „~ _ . iF~' ~ ~ ~ ~ ~. ~ ~ '~~~#~-,r'~"}4~ (.+?~'~~ ~T ?,.• '}~!- P: ~ f~ - ~.: ~ yet:. .! r a '~ I J.,~ C1:, i . '29 7 I P ~Y ^! _ ~ ~~_ ~;I i _ ~ ! ' s :. s'S ~'..t~~ X41 'fi. " - _ R ~_ ~_ :4.. t _ rr~ -' -~ r.. i ,~ ~' _ :r,~ ~ t P u ~~ . , . ~ ., ~_ E ` 'L y 1 t .°tT.~i.. S_ T`n'Y3.~`9~111!"~, .~, :. f -'i ~~~~-. 'Wi't ~i9.=s. ~ ÛÈØ×Þ×Ì í DRAFT MINUTES ÌÎßÚÚ×Ý ÍßÚÛÌÇ ÝÑÓÓ×ÍÍ×ÑÒ ß°®·´ éô îððè ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² Ó±²¼¿§ô ß°®·´ éô îððè ¿¬ ëæíð °ò³ò ·² ¬¸» Ý±«²½·´ Ý¸¿³¾»®ô Ý·¬§ ±º Ü»²¬±² Ý·¬§ Ø¿´´ô îïë Ûò Ó½Õ·²²»§ Í¬®»»¬ô Ü»²¬±²ô Ì»¨¿ò Present: Ý¸¿·® Ù®»¹ Í¿©µ±ô Ý¸¿®´» Ù«¿®²¿½½·¿ô Ó¿®·±² Í½±¬¬ô Ð¿¬ Ý¸»»µô Ô·²¼¿ Þ®±©²ô Ô»´·¿ Ø±©»´´ô Ó·½¸¿»´ Ù®»»²ô Ö¿±² Ü¿ª· ø¿®®·ª»¼ ¿¬ ëæíé °ò³ò÷ ¿²¼ Ö±¸² Ý®»© ø¿®®·ª»¼ ¿¬ ëæìè °ò³ò÷ Also Present æ Þ«¼ Ê±µ±«²ô Ì®¿ºº·½ Û²¹·²»»® Ö·³ Ý±«´¬»®ô Ü·®»½¬±® É¿¬»® Ë¬·´·¬·» Ñºº·½»® Õ»·¬¸ Ó¿®¬·² ß²² Ú±®§¬¸»ô Ý±±®¼·²¿¬±® Þ±¿®¼ ¿²¼ Ý±³³·¬¬»» Î¿§ Ô¿¹´»¼»®ô ß´·½» Ù±®»ô ½·¬·¦»² Þ®»²¬ Û®µ·²ô Ñ©²»®ô Ý¿³°« Þ±±µ¬±®» í÷Î»½»·ª» ¿ ®»°±®¬ô ¸±´¼ ¿ ¼·½«·±² ¿²¼ ½±²·¼»® ¿ ®»½±³³»²¼¿¬·±² ¬± ¬¸» Ý·¬§ Ý±«²½·´ ±º Ò± Ð¿®µ·²¹ô éæíð ßÓ ¬± íæíð ÐÓ ½¸±±´ ¼¿§ô ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ º®±³ Ó»®½»¼» Î±¿¼ ¬± Ó½Ý±®³·½µ Í¬®»»¬ò Ê±µ±«² °®»»²¬»¼ ¬¸· ·¬»³ ¬¿¬·²¹ ¬¸¿¬ ®»·¼»²¬ ·² ¬¸· ¿®»¿ ¸¿ª» ®»¯«»¬»¼ ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±² ¿²¼ °®»»²¬»¼ ¿ °»¬·¬·±² ©·¬¸ ·¹²¿¬«®» ³»»¬·²¹ ¬¸» ³·²·³«³ ®»¯«·®»³»²¬ ¬¸¿¬ éëû ±º ¬¸» ¿ºº»½¬»¼ °®±°»®¬§ ±©²»® ¬± ¾» ·² ¿¹®»»³»²¬ò ß´·½» Ù±®»ô ®»·¼»²¬ô °±µ» ·² º¿ª±® ±º ¬¸» ²± °¿®µ·²¹ ¼»·¹²¿¬·±²ò Óò Ù±®» ¸¿ ´·ª»¼ ·² ¬¸¿¬ ¿®»¿ º±® íê §»¿® ¿²¼ ¸¿ ¸¿¼ ²± °®±¾´»³ «²¬·´ ¸» ¬¿®¬»¼ ®·¼·²¹ ¿ ¾·½§½´»ò Ê»¸·½´» ¿®» °¿®µ»¼ ¿´±²¹ ¬¸» ¬®»»¬ ¿²¼ ¾´±½µ ¬¸» ª·»© ½¿«·²¹ °»¼»¬®·¿² ¬± ³±ª» ¬± ¬¸» ³·¼¼´» ±º ¬¸» ¬®»»¬ò Ù±®» ¬¿¬»¼ ¬¸¿¬ ¸» ¸¿ ¼®·ª»² ¬¸®±«¹¸ ¬¸» ½¸±±´ °¿®µ·²¹ ´±¬ ¿²¼ ½±«²¬»¼ ¿¬ ´»¿¬ îë »³°¬§ °¿®µ·²¹ °¿½»ò Ê±´«²¬»»® ¿®» °¿®µ·²¹ ±² ¬¸» ¬®»»¬ ¿ ¿ ³¿¬¬»® ±º ½±²ª»²·»²½»ò Ê±µ±«² ¬¿¬»¼ ¬¸¿¬ ¬¿ºº ¸¿¼ ±¾»®ª»¼ ¬¸» ·¬» ¿²¼ º±«²¼ ¬¸¿¬ »¿½¸ ¬·³» ¿³°´» °¿®µ·²¹ °¿½» ¬¸¿¬ ¿®» ²±¬ ¾»·²¹ «»¼ò Vice Chair Guarnaccia moved to approve the no parking designation between the hours of 7:30 a.m. to 3:30 p.m. school days with a second from Commissioner Green. The motion was approved by a 9-0 vote. Ì¸» ³»»¬·²¹ ©¿ ¿¼¶±«®²»¼ ¾§ ½±²»²« ¿¬ èæðê °ò³ò ÛÈØ×Þ×Ì ì ÜÎßÚÌ Ó×ÒËÌÛÍ ÌÎßÚÚ×Ý ÍßÚÛÌÇ ÝÑÓÓ×ÍÍ×ÑÒ Ö«´§ éô îððè ßº¬»® ¼»¬»®³·²·²¹ ¬¸¿¬ ¿ ¯«±®«³ ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ©¿ °®»»²¬ô ¬¸» Ý¸¿·® ±º ¬¸» Ì®¿ºº·½ Í¿º»¬§ Ý±³³··±² ½±²ª»²»¼ ·²¬± ¿² Ñ°»² Ó»»¬·²¹ ±² Ó±²¼¿§ô Ö«´§ éô îððè ¿¬ ëæíð °ò³ò ·² ¬¸» Ý±«²½·´ Ý¸¿³¾»®ô Ý·¬§ ±º Ü»²¬±² Ý·¬§ Ø¿´´ô îïë Ûò Ó½Õ·²²»§ Í¬®»»¬ô Ü»²¬±²ô Ì»¨¿ò Present: Ê·½»óÝ¸¿·® Ý¸¿®´» Ù«¿®²¿½½·¿ô Ô»´·¿ Ø±©»´´ô Ð¿¬ Ý¸»»µô Ö±¸² Ý®»©ô Ó¿®·±² Í½±¬¬ô Ó·½¸¿»´ Ù®»»² ¿²¼ Ö¿±² Ü¿ª· Absent æ Ù®»¹ Í¿©µ± ¿²¼ Ô·²¼¿ Þ®±©²ô ¾±¬¸ »¨½«»¼ Also Present æ Ì®¿ºº·½ Û²¹·²»»® Þ«¼ Ê±µ±«² Õ·³ Ó¿²µ·²ô ß¼³·²·¬®¿¬·ª» ß·¬¿²¬ OPEN MEETING: î÷Î»½»·ª» ¿ ®»°±®¬ô ¸±´¼ ¿ ¼·½«·±² ¿²¼ ®»½±²·¼»® ¿ ®»½±³³»²¼¿¬·±² ¬± ¬¸» Ý·¬§ Ý±«²½·´ ±º Ò± Ð¿®µ·²¹ô éæíð ¿ò³ò ¬± íæíð °ò³òô ½¸±±´ ¼¿§ ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² Í¬®»»¬ º®±³ Ó»®½»¼» Î±¿¼ ¬± Ó½Ý±®³·½µ Í¬®»»¬ò Ê±µ±«² ·²¬®±¼«½»¼ ¬¸· ·¬»³ ¾§ ·²¼·½¿¬·²¹ ¬¸¿¬ ·¬ ¸¿¼ ¾»»² ½±²·¼»®»¼ ¾§ ¬¸» Ý±³³··±² °®»ª·±«´§ ¿²¼ ¬¸¿¬ ¬¸» Ý±³³··±² ¸¿¼ ®»½±³³»²¼ ¿°°®±ª¿´ ±º ¬¸» ®»¬®·½¬·±² çóðò Ø±©»ª»®ô ·²½» ¬¸»² ¿ ½·¬·¦»²ô ©¸± · ¿ ª±´«²¬»»® ¿¬ Þ±®³¿² Û´»³»²¬¿®§ô ¸¿ ¿µ»¼ ¬¸¿¬ ¬¸· ·¬»³ ¾» ®»½±²·¼»®»¼ ¾§ ¬¸» Ý±³³··±² ± ¿ ¬± ¬¿µ» ¬¸»·® ½±²½»®² ·²¬± ¿½½±«²¬ò Ê·½» Ý¸¿·® Ý¸¿®´» Ù«¿®²¿½½·¿ ¿µ»¼ º±® ½·¬·¦»² ½±³³»²¬ ·² ±°°±·¬·±² ¬± ¬¸» ²± °¿®µ·²¹ ¦±²»ò Ê¿²²¿ ×²¹®¿³ °±µ» ·² ±°°±·¬·±² ±º ¿ ²± °¿®µ·²¹ ¦±²» ¬¿¬·²¹ ¬¸¿¬ ¿¬ ´»¿¬ º·ª» ª±´«²¬»»® ¸¿ª» ³±¾·´·¬§ ·«» ¿²¼ ²»»¼»¼ °¿®µ·²¹ ·² ½´±» °®±¨·³·¬§ ±º ¬¸» ½¸±±´ò ×²¹®¿³ º«®¬¸»® ¬¿¬»¼ ¬¸¿¬ ¬¸»®» ©¿ ´·¬¬´» ·¼» ¬®»»¬ °¿®µ·²¹ ¿ª¿·´¿¾´» ¿²¼ ¬¸¿¬ ¬¸» ½¸±±´ ©¿ ¹±·²¹ «²¼»® ®»²±ª¿¬·±²ñ »¨°¿²·±² ¿²¼ ¬¸¿¬ «²¬·´ ¬¸» ½±²¬®«½¬·±² ©¿ ½±³°´»¬»¼ô ¬¸» °±®¬¿¾´» ¾«·´¼·²¹ ·² ¬¸» ¾¿½µ ©±«´¼ ¾» °´¿½»¼ ±² ¬¸» °¿®µ·²¹ ´±¬ô ®»¼«½·²¹ ¬¸» ²«³¾»® ±º ¿ª¿·´¿¾´» °¿®µ·²¹ °¿½»ò Ý±³³··±²»® Ó·½¸¿»´ Ù®»»² ¿µ»¼ ×²¹®¿³ ·º ¬¸»®» ©»®» ¿²§ ®»»®ª»¼ °¿®µ·²¹ °¿½» º±® ¬¸» ª±´«²¬»»®ò ×²¹®¿³ ®»°´·»¼ ¬¸»®» ©»®» ²±¬ò ×² ¿¼¼·¬·±²ô ¸» ·²¼·½¿¬»¼ ¬¸¿¬ ¿´´ ¾«¬ ¬¸» º®±²¬ ¼±±® ©»®» ´±½µ»¼ ¿²¼ ± ·¬ ©¿ ¿ ´±²¹»® ¼·¬¿²½» ¬± ©¿´µ º®±³ ¬¸» °¿®µ·²¹ ¬¿´´ ±² ¬¸» ·¼» 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Ê±µ±«² ½±²½«®®»¼ ©·¬¸ Ó®ò Ó±®®· ·² ¬¸¿¬ ¾»½¿«» ¬¸» °¿®µ·²¹ ±² ¬¸» ²±®¬¸ ·¼» ±º Ð¿®ª·² ©¿ ²±¬ »¨½´«·ª» ¬± ª±´«²¬»»®ô ¬¸¿¬ °¿®»²¬ ½¿² °¿®µ ¿²¼ ´»¬ ¬¸»·® ½¸·´¼®»² ±«¬ ±º ¬¸» ª»¸·½´» ¿²¼ ¬¸»² ¬¸» ½¸·´¼®»² ©±«´¼ ½®± ¬¸» ¬®»»¬ ¾»¬©»»² °¿®µ»¼ ª»¸·½´»ò ×² ¿¼¼·¬·±²ô ¬¸» °¿®µ»¼ ±® ¬¿²¼·²¹ ª»¸·½´» ½¿² ½¿«» ·¹¸¬ ¼·¬¿²½» ®»¬®·½¬·±² ¿¬ ¬¸» ·²¬»®»½¬·±²ò Ê±µ±«² ·²¼·½¿¬»¼ ¬¸¿¬ ¬¸» ¬±°°·²¹ ·¹¸¬ ¼·¬¿²½» º±® íðÓÐØô ©¸»² ¬¸» ½¸±±´ ¦±²» · ²±¬ ·² »ºº»½¬ô · îðð º»»¬ ¿²¼ ¬¸¿¬ ¬¸» ¬±°°·²¹ ·¹¸¬ ¼·¬¿²½» º±® îðÓÐØô ©¸»² ¬¸» ½¸±±´ ¦±²» · ·² »ºº»½¬ô · ïïë º»»¬ò Ûª»² «·²¹ ¬¸» ´» ®»¬®·½¬·ª» îðÓÐØô ¬¸» ïïë º»»¬ ®»¯«·®»¼ ·² ¾±¬¸ ¼·®»½¬·±² ¿¬ ¿² ·²¬»®»½¬·±² ©±«´¼ »ºº»½¬·ª»´§ ®»¯«·®» ¬¸» ©¸±´» ¾´±½µ ¬± ¾» ®»¬®·½¬»¼ô ¿ »¿½¸ ¾´±½µ ©¿ ±²´§ ¿ ´·¬¬´» ±ª»® îðð º»»¬ ·² ´»²¹¬¸ò ß «½¸ô ¬¸» °±¬»²¬·¿´ º±® ¿² ¿½½·¼»²¬ô ¿ ¿ ®»«´¬ ±º »·¬¸»® ±® ¾±¬¸ ·¬«¿¬·±² ©¿ ³«½¸ ³±®» ´·µ»´§ ¬¸¿² ·º ¬¸» ®»¬®·½¬·±² ¾»·²¹ ®»¯«»¬»¼ ©»®» ·³°±»¼ò Commissioner Lelia Howell moved to approve a no parking zone with a second from Commission Marion Scott. The motion was approved by a 4-3 vote with Commissioners Charles Guarnaccia, Jason Davis, Marion Scott and Lelia Howell voting in favor and Commissioners Pat Cheek, Michael Green and John Crew voting in opposition. Ì¸» ³»»¬·²¹ ©¿ ¿¼¶±«®²»¼ ¾§ ½±²»²« ¿¬ èæîè °ò³ò s:\our documents\ordinances\08\no parkingparvinstreet.doc EXHIBIT 5 ORDINANCE NO. ___________ AN ORDINANCE OF THE CITY OF DENTON, TEXAS PROHIBITING PARKING ON SCHOOL DAYS FROM 7:30 A.M. TO 3:30 P.M. ON THE NORTH SIDE OF PARVIN STREET FROM ITS INTERSECTION WITH MERCEDES ROAD TO ITS INTERSECTION ; WITH MCCORMICK STREETPROVIDING A REPEALER CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $500 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. When signs or markings are in place giving notice thereof, no person shall park a vehicle on school days from 7:30 a.m. to 3:30 p.m. on the north side of Parvin Street from its intersection with Mercedes Street to its intersection with McCormick Street. SECTION 2. The provisions of Section I prohibiting the parking of vehicles shall apply on the designated portion of the above named street or streets except when it is necessary to stop a vehicle to avoid conflict with other traffic or in compliance with the direction of a police officer or official traffic control device. SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase, or word in this ordinance, or application thereof to any person or circumstances is held invalid by any court of competent jurisdiction, 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 it would have enacted such remaining portions despite any invalidity. SECTION 4. Save and except as amended hereby, all the provisions, sections, subsections, paragraphs, sentences, clauses, and phrases of the Code of Ordinances shall remain in full force and effect. SECTION 5. Any person found liable of violating this Ordinance by a court of competent jurisdiction shall be fined a sum not to exceed five hundred dollars ($500). Each day that a provision of this ordinance is violated shall constitute a separate offense. The disposition of parking citations issued pursuant to this Ordinance shall be governed by Division 3 titled . SECTION 6. This Ordinance providing for a penalty shall become effective fourteen (14) days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record-Chronicle, the official newspaper of the City of Denton, Texas, within ten (10) days of the date of its passage. PASSED AND APPROVED this the ______ day of __________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR s:\our documents\ordinances\08\no parkingparvinstreet.doc ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY BY: _________________________________ Page 2 AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider approval of a resolution voting for a member to the Board of Managers of the Denco Area 9-1-1 District; and declaring an effective date. BACKGROUND The Denco Area 9-1-1 District, created in 1987, is governed by a board of managers. The board is appointed by the county, participating cities and the Denton County Fire Chief's Association. Board members serve staggered two-year terms and are eligible for reappointment. The Emergency Telephone Number Act states: "the board shall manage, control and administer the district. The board may adopt rules for the operation of the district." On May 19, 2008, Denco Area 9-1-1 sent a memo requesting nominations to serve on the Board of Managers, which was provided to Council in the May 23, 2008 Reading File. On July 16, 2008, the Denco Area 9-1-1 District sent a list of the nominations they received from participating cities. There were two nominees: Harlan Jefferson, and Drew Corn (Attached). Last year the City nominated Mayor Olive Stephens to serve another term on the Board, and has nominated her since 1987. This year the term of Harlan Jefferson, Town of Flower Mound, expires on September 30, 2008. Mr. Jefferson has expressed his desire to serve another term if appointed. The City has nominated Mr. Jefferson to serve on the Board since 1998. The current Board of Managers is comprised of the following individuals: Board MemberAppointed By Term Expires Jack Miller, Chair Denton County Commissioners Court 9/30/2008 Mayor Olive Stephens, Vice Chair Denton County Participating City 9/30/2009 Harlan Jefferson, Secretary Denton County Participating City 9/30/2008 Bill Lawrence Denton County Commissioners Court 9/30/2008 Chief Lonnie Tatum Denton County Fire Chiefs Association 9/30/2009 Keith Stephens Largest Telephone Service Provider Rep. Non-voting Agenda Information Sheet August 19, 2008 Page 2 ESTIMATED SCHEDULE OF PROJECT Denco requests each city to vote for one of the nominees and advise them of its selection prior to September 15, 2008. The nominee with the most votes will be the municipalities' representative to the Denco Area 9-1-1 District Board of Managers for the two-year term beginning October 1, 2008. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On June 3, 2008 the City Council approved a resolution to nominate Harlan Jefferson as a member to the Board of Managers of the Denco Area 9-1-1 District for a two-year term to commence on October 1, 2008. RECOMMENDATION Staff recommends voting for Harlan Jefferson to serve on the Board of Managers for Denco 9-1- FISCAL INFORMATION This resolution has no fiscal impact. EXHIBITS Letter from Denco Resolution Respectfully submitted: Jon Fortune Assistant City Manager S:\Our Documents\Resolutions\02\911 vote for member.doc RESOLUTION NO. _________________ A RESOLUTION VOTING FOR A MEMBER TO THE BOARD OF MANAGERS OF THE DENCO AREA 9-1-1 DISTRICT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the term of office of Harlan Jefferson, a member of the Board of Managers of the Denco 9-1-1 District, will expire on September 30, 2008; and WHEREAS, Section 772.306 of the Health and Safety Code (V.A.C.S.) provides that two voting members of the Board of Managers of an Emergency Communication District shall be appointed jointly by participating municipalities located in whole or in part in the District; and WHEREAS, the City of Denton, Texas wishes to vote for a member to said Board; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. The City of Denton, Texas hereby votes for Harlan Jefferson as a member to the Board of Managers of the Emergency Communication District of Denton County for a two year term to commence October 1, 2008. SECTION 2. This Resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the _________ day of ___________________, 2008. __________________________________ MARK A. BURROUGHS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: __________________________________ APPROVED AS TO LEGAL FORM: JOHN M. KNIGHT, INTERIM CITY ATTORNEY ________________ BY: _________________ AGENDA INFORMATION SHEET AGENDA DATE: ß«¹«¬ ïçô îððè DEPARTMENT: Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ ACM: Ø±©¿®¼ Ó¿®¬·²ô íìçóèîíî SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ±º ¬¸» Ý·¬§ Ý±«²½·´ ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ¿«¬¸±®·¦·²¹ ¬¸» Ý·¬§ Ó¿²¿¹»® ¬± »¨»½«¬» ¿ °®±º»·±²¿´ »®ª·½» ¿¹®»»³»²¬ º±® ¿®½¸·¬»½¬«®¿´ ±® »²¹·²»»®·²¹ »®ª·½» ¾§ ¿²¼ ¾»¬©»»² ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿ ¿²¼ Ì»¿¹«» Ò¿´´ ¿²¼ Ð»®µ·²ô ×²½ò º±® °®±º»·±²¿´ ¿®½¸·¬»½¬«®¿´ ¿²¼ »²¹·²»»®·²¹ »®ª·½» º±® ¬¸» ½±²¬®«½¬·±² ³¿²¿¹»³»²¬ ±º ¬¸» ËòÍò Ø·¹¸©¿§ íèð Ð®±¶»½¬ô Ð¸¿» ×å °®±ª·¼·²¹ º±® ¬¸» »¨°»²¼·¬«®» ±º º«²¼ ¬¸»®»º±®å ¿²¼ °®±ª·¼·²¹ ¿² »ºº»½¬·ª» ¼¿¬» øüìëêôêïè °®±º»·±²¿´ »²¹·²»»®·²¹ »®ª·½»÷ò BACKGROUND INFORMATION Ì¸» Ý·¬§ ±º Ü»²¬±² Ë¬·´·¬§ ¿²¼ Ý×Ð Û²¹·²»»®·²¹ Ü»°¿®¬³»²¬ ¼»·®» ¬± ½±²¬®¿½¬ ©·¬¸ ¿ ¯«¿´·º·»¼ »²¹·²»»®·²¹ º·®³ º±® ¬¸» ¼»´·ª»®§ ±º ½±²¬®«½¬·±² ³¿²¿¹»³»²¬ô ·²°»½¬·±² ¿²¼ ³¿¬»®·¿´ ¬»¬·²¹ »®ª·½» ¿±½·¿¬»¼ ©·¬¸ ¬¸» ©·¼»²·²¹ ±º ËòÍò Ø©§ò íèð ¾§ ß´´»¹·¿²½» Ø·´´ª·»©ô ÔòÐò º±® 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Garcia Office Building Development Agreement regarding Road Construction Consider adoption of an ordinance regarding a development agreement related to the deferment of perimeter road improvements. The approximately 2.6-acre property is located at the southwest corner of West Collins Street and Locust Street. The subject site is located within a Downtown Commercial General (DC-G) zoning district. BACKGROUND Applicant: Spring Brook Planning Group Grapevine, TX On October 24, 2007, Isbell Engineering, on behalf of Ms. Tomasa Garcia presented a hardship variance to the Planning and Zoning Commission. The hardship variance was requested to Subchapter 35.20.2.L. of the Denton Development Code regarding the requirement for perimeter road improvements; the Planning and Zoning Commission denied this variance request. The applicant appealed this decision to City Council, and staff was directed to consider the request as an exaction variance rather than a hardship variance. In a companion case, the applicant received approval of a hardship variance to Subchapter 35.20.3. of the Denton Development Code regarding the requirement for sidewalk construction. The applicant received a variance permitting the construction of 5-foot sidewalks instead of the required 8-foot sidewalks along the property frontage. An exaction assessment was completed for the subject property, and it was determined that the required improvements were roughly proportional to the proposed development. A development agreement was requested for the subject property in order to permit the applicant to defer the perimeter road improvements until such a time as the property is subdivided or the square footage of the proposed development of a 6,905 square foot building is expanded by 1,000 square feet, or 25%, whichever is greater. PRIOR ACTION/REVIEW April 2, 2007: A building permit application was submitted for an office building on the subject property. April 20, 2007: Staff review comments were returned to the applicant, including comments from the Planning Department that the property would require a preliminary and final plat before a building permit could be issued. September 24, 2007: Subdivision Variance applications were filed by the applicant requesting variances regarding sidewalk construction (V07-0017) and perimeter road improvements (V07-0016). October 24, 2007: The Planning and Zoning Commission considered the variances and recommended approval of the variance regarding sidewalk construction (4-1) and denial of the variance regarding perimeter road improvements (3-2). November 13, 2007: file an appeal to the Planning and Zoning Commission denial, and an official letter of appeal was submitted on November 16, 2007. December 11, 2007: The applicant appealed the decision of the Planning and Zoning Commission to the City Council. EXHIBITS 1. Agenda Information Sheet 2. Location Map 3. Proposed Site Plan 4. Site Photographs 5. Proportionality Assessment 6. Ordinance 7. Development Agreement Prepared by: Jane Gurney Associate Planner Respectfully submitted: Mark Cunningham, AICP Director, Planning and Development 2 EXHIBIT 1 PLANNING & DEVELOPMENT STAFF ANALYSIS August 19, 2008 DATE TO BE CONSIDERED: LOCATION: The property is located at the southwest corner of West Collins Street and Locust Street. APPLICANT: Spring Brook Planning Group 2405 Mustang Drive Grapevine, TX 76051 OWNER: Tomasa Garcia 316 Dallas Drive Denton, TX 76205 REQUEST: Consider adoption of an ordinance related to a development agreement pertaining to perimeter road improvements. COMPREHENSIVE Downtown University Core PLAN DESIGNATION: SITE AND The approximately 2.6-acre tract of land is located at the southwest SURROUNDINGS: corner of West Collins Street and Locust Street, east of Fort Worth Drive. The property is within a Downtown Commercial General (DC-G) zoning district. North: Residential properties, Commercial properties and Eagle Drive; DC- G zoning district. South: Commercial properties and undeveloped land; DC-G zoning district. East: Locust Street, Railroad right-of-way, undeveloped property; DC-G zoning district. West: Forth Worth Drive, The Exchange at North Texas Apartments; DC-G and DC-N zoning districts. 3 BACKGROUND: The applicant is proposing the construction of a 6,905 square foot office building on the 2.6-acre subject property. A building permit application was submitted in April, 2007, and as part of the review of this application, the applicant was informed that the property was not platted, and a preliminary and final plat would be required before a building permit could be issued. The applicant submitted two variance applications in September, 2007. One variance request proposed the construction of a 5-foot sidewalk along the property frontage in lieu of the required 8-foot sidewalk (V07-0017); this variance was granted by the Planning and Zoning Commission on October 24, 2007. The second variance application was requesting relief from the requirement to construct perimeter roadways to Commercial Collector standards (V07-0016); this variance was denied by the Planning and Zoning Commission on October 24, 2007. The applicant appealed the decision of the Planning and Zoning Commission to City Council on December 11, 2007, and staff was directed to process the request as an exaction variance rather than a hardship variance. An exaction assessment was completed, and it was determined that the required perimeter street improvements were roughly proportional (95.82%) to the prop subject property in order to permit the applicant to phase the perimeter road improvements to correspond to future development of the property; specifically, at such a time as the property is subdivided or the square footage of the proposed development of 6,905 square feet is expanded by 1,000 square feet, or 25%, whichever is greater. ANALYSIS: The applicant is attempting to construct a 6,905 square foot office building on the 2.6-acre subject property, and to maintain a second existing building on the site. The applicant was informed that per the Denton Development Code, they would be required to plat the subject property or demonstrate it is a lot of record before a building permit could be issued. They were also informed that as part of the platting process, public improvements including perimeter paving and sidewalk construction would be required. The applicant expressed that this was a cost that they did not anticipate, and that they would not be able to carry this cost and still construct the proposed office building. Staff suggested platting the property into two lots, and final platting only the lot which the office building was to occupy; doing so would have relieved the applicant from constructing the roads along the entire property, which is approximately 862 feet of frontage, and permitted them to only be responsible for the road along the platted lot, approximately 300 feet, based on the submitted site plans. The applicant has indicated they do not wish to plat the property into two separate lots to avoid 4 restricting future expansion of the proposed office building. DEPARTMENT AND Staff has completed a proportionality assessment of the proposed AGENCY REVIEW: development, and determined that the required perimeter street improvements are roughly proportional (95.82%) to the proposed development. 5 E~~IT 2 LOCATION MAP Z - ; W _ti, ~. ,. r : i•~ l , ~ ~ .~ ~ --~, ~ ~~ ~~ ~ ~~~' ~ ' "~'~ s ~ ~ -•~: c~ ~ ' ~ ti ~, l~t qq ~ ...~ t 4 1 ~r Ji 1 ~~ ~ ~~~• ~" ~ ~ r 1 ~:~;~~-~:;:; .~~ ~ ~:~ , } ~Subject~Propertj~ ~ £;J~~~' . ( •~t i ~'4, t• C ~ j'Fjt..+rwsF ~ ~ ~ ~ ~ i t~ 1 <J ''Y ~' i t tr,~ ~ ~ f ti ff ~~ ~- F~ -M1 ~~/]S~J~~ry- r~r~. `-' ~l ~ e~ {.t.y~-~~ t-'---; -- -_.~ Fit .. ,~ c f~ f - ~p^/CC , -x ,t ~ F ' ' t ~ ~ ~ ~ -~` u.`y-.~~ r ~~ {~ S r l., } '~~ ~, ~ l `lL~ -~(~'^ •F ~ i ~ ~ 3 ti ~ 1 y;" ~ y f • it /t o'. ~>( ' r - . tit ~7r _ -~ rr-fx-,~ r.;~t" ~ "i' w"'~-~ 11 f. V 1.., 44 4 ~ it ,' ~~ ~ 5 ~~ y ~.~-. ~S"` Tit ~ • S' ''-~5~ 4 . ~1 .. ~ ra 1" }. _ , , 6 EXHIBIT 3 PROPOSED SITE PLAN 7 EI~~IT 4 SITE PHOTOGRAPHS - - ~, ~ ~ r ~.- ~: ~ _ - ~ :~.. } _ ~ ~/.., r Y t ~ ...~ View of Collins Street along the property line, looking west from the intersection of Collins and Locust Street. View of Locust Street, looking south along the property line. View of Collins Street, looking east along the property frontage ÛÈØ×Þ×Ì ë Rough Proportionality Worksheet for Roadway Infrastructure Improvements City of Denton, Texas Development Name: Tomasa Garcia Office Building Applicant: Alejandro & Tomasa Garcia Legal Description : Tract 167 of the A. Hill Survey, Abstract 623 (Lot, Block) Case / Plat Number: Date: V07-0016January 15, 2008 Worksheet Last Updated: 08/09/2007 Trip Generation Method: DEMAND - Traffic Generated by Proposed Development: Linear Rates Reression Euations gq X Land Use: (when land uses and intensities are known at time of preliminary plat) PM Peak Internal 5 Demand: Trip Length: 12 Hour Trip Capture Development Unit: Land Use Type :Intensity : (vehicle-miles) (miles) 34 Rate:Rate : 131.41 1,000 SF GFA7.85511.150%1.50 General Office Building Zoning Class: (when only zoning class is known at time of preliminary plat) PM Peak Internal Estimated 5 Net Demand: Trip Length: Hour Trip Capture Zoning Class:Development Unit: 2 Acres: (vehicle-miles) Intensity : (miles) 34 Rate:Rate : TOTAL DEMAND PLACED ON THOROUGHFARE SYSTEM:131.41 12 3 Notes: Per the ITE Trip Generation Manual;Intensity is the amount of a development unit proposed for the development; Trip Rate is the trip generation rate and a reduction for pass-by's per the ITE Trip Generation Handbook. When regression equations are used, the rate is derived from the equation at the given intensity. For uses without a 4 regression equation, the linear rate is used and the cell is shaded gray. Internal Capture should only be used when supported by a traffic study OR when vehicular traffic does 5 not utilize the City's roadway network; Trip Length shall not exceed the average trip lengths from the NCTCOG Origin-Destination Travel Survey In cases w/ ROW dedication only, % of capacity provided SUPPLY - Roads to be Built or Funded by the Applicant: by ROW = ROW Capacity Roadway Number of Capacity / Supply Added: Dedication Roadway Name:Classification: @ LOS D:Length: Lanes: (vehicle-miles) Only? (vphpl)(Feet) 94.34 Collins 420593NO2 Collector 42.80 Locust 420269NO2 Collector TOTAL CAPACITY (SUPPLY) ADDED TO SYSTEM:137.14 A comparison of the capacity provided by a development against the traffic impacts SUPPLY / DEMAND COMPARISON: of the proposed development. (Vehicle-Miles)Comparison TOTAL DEMAND PLACED ON THOROUGHFARE SYSTEM:131.41 SUPPLY > DEMAND TOTAL CAPACITY (SUPPLY) ADDED TO SYSTEM:137.1495.82% Based upon the results of this rough proportionality analysis, the capacity (supply) provided by the proposed development exceeds the anticipated demand it places on the system. Given these assumptions, only 95.82% of the capacity supplied can be attributed to the proposed development. Therefore, the roadway improvements are NOT roughly proportional to the demands placed on the system (i.e. the applicant is adding more capacity than needed to support their development). Note: Minimum Standards for access to and from a development may supersede the results of this analysis. ÛÈØ×Þ×Ì ê ÛÈØ×Þ×Ì é AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Parks and Recreation ACM: Fred Greene SUBJECT th Consider a request for an exception to the Noise Ordinance for the purpose of the 10 Annual Denton Blues Festival, sponsored by the Denton Black Chamber of Commerce. The event will be held in Quakertown Park on Saturday, September 20, 2008, from 11:00 a.m. to 11:30 p.m. The exception is specifically requested to increase hours of operation for amplified sound from 10:00 p.m. until 11:30 p.m. The amplified sound will not go above the allowable 70 decibels for an outdoor concert. BACKGROUND The Denton Black Chamber of Commerce has requested an exception to the Noise Ordinance hours to increase the time from 10:00 p.m. to 11:30 p.m. The event expects to have 2,500 people in attendance to hear conventional Blues music performed by national and local Blues artists. Proceeds from this event will be used to help fund their annual scholarship and Young Minority Entrepreneur Program. Amplified sound will be used for both music and public announcements. PRIOR ACTION/REVIEW (Council, Boards or Commissions) FISCAL INFORMATION None EXHIBITS 1. Request Letter from the Denton Black Chamber of Commerce Respectfully Submitted: Emerson Vorel Director of Parks and Recreation Prepared By: Janie McLeod Community Events Coordinator AGENDA INFORMATION SHEET ßÙÛÒÜß ÜßÌÛæ ß«¹«¬ ïçô îððè ÜÛÐßÎÌÓÛÒÌæ Ø«³¿² Î»±«®½» ÝÓñÜÝÓñßÝÓæ Ù»±®¹» Ýò Ý¿³°¾»´´ô Ý·¬§ Ó¿²¿¹»® SUBJECT Ý±²·¼»® ¿¼±°¬·±² ±º ¿² ±®¼·²¿²½» ¿°°±·²¬·²¹ ¿ Ý·¬§ ß¬¬±®²»§å ¿°°®±ª·²¹ ¿² »³°´±§³»²¬ ¿¹®»»³»²¬å ¿«¬¸±®·¦·²¹ ¬¸» Ó¿§±® ¬± »¨»½«¬» ¿² ¿¹®»»³»²¬ »³°´±§·²¹ ¿ Ý·¬§ ß¬¬±®²»§ ±º ¬¸» Ý·¬§ ±º Ü»²¬±²ô Ì»¨¿å »¬¬·²¹ ¬¸» ½±³°»²¿¬·±² ¿²¼ ¬»®³ ±º ¬¸¿¬ »³°´±§³»²¬å ¿«¬¸±®·¦·²¹ »¨°»²¼·¬«®» ¿²¼ ¿½¬·±²å ¿²¼ °®±ª·¼·²¹ ¿² »ºº»½¬·ª» ¼¿¬»ò OPTIONS ß°°®±ª» ¬¸» ±®¼·²¿²½» ¿²¼ ¿¹®»»³»²¬ ¿ °®±°±»¼ô ²±¬ ¿°°®±ª» ¬¸» ±®¼·²¿²½» ¿²¼ ¿¹®»»³»²¬ô ±® ³¿µ» ³±¼·º·½¿¬·±²ò EXHIBITS Ñ®¼·²¿²½» Î»°»½¬º«´´§ «¾³·¬¬»¼æ ÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁÁ Ý¿®´¿ Öò Î±³·²»óØ¿¹¹³¿®µ Ü·®»½¬±® ±º Ø«³¿² Î»±«®½» AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune SUBJECT Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and General Obligation Bonds ($7,300,000), Series 2008authorizing the issuance of the bondsfor projects relating to streets and transportation, parks and beautification, and buildings and improvements; approving and authorizing instruments and procedures relating to said bonds; and enacting other provisions relating to the subject. BACKGROUND This ordinance authorizes the issuance, sale and delivery ) in the amount of $7,300,000 to fund the following capital improvement projects that were approved by voters on February 5, 2005: $2,385,000 Residential Streets 225,000 Miscellaneous Roadways 220,500 Sidewalk Installations 925,000 Downtown Walnut, Pecan, Austin 1,305,000 Senior Center Expansion 1,200,000 Soccer Fields 174,000 Denia Park Circulation Trail/Connection 45,000 Mack Park Restrooms/Concessions 25,500 North Lakes Restrooms/Concessions 345,000 Evers Park Baseball Field Improvements 180,000 IOOF Cemetery/Oakwood Fence 21,000 Goldfield Tennis Center 250,000 Tree Bank & Open Space $7,301,000 Total Capital Improvement Program Projects The City will issue the Bonds at a premium to cover issuance costs and all capital project needs. The Bonds will be sold for a twenty year term with a ten year call provision. have assigned favorable bond ratings for this issuance. recently upgraded the on general obligation debt from AA- to AA. their prior rating of Aa3. The ratings are summarized below: General Obligation Bonds ($7,300,000), Series 2008 AA Aa3 Agenda Information Sheet August 19, 2008 Page 2 The Bonds will be sold through a competitive bid process following the guidelines established by the financial advisor, First Southwest Company, will accept bids for the issuance on August 19, 2008. Staff will then present the bids at the City Council meeting on the evening of August 19, 2008, with the final delivery of funds expected September 23, 2008. Interest rates, pricing, insurance provisions, if any, and all other information from the successful bidder will be included in the finalized Official Statement following City award of the bid. The agenda information packet includes various documents as it relates to the issuance of the Bonds. Included is the ordinance authorizing the issuance of the bonds, the rating agency reports, the Preliminary Official Statement (POS), paying agent/registrar agreement, and the Capital Improvement Program (CIP). The attached rating agency reports, POS, and CIP are the same documents used for the Certificates of Obligation. PRIOR ACTION/REVIEW (Council, Boards, Commission) These projects were approved by voters in a successful bond election held on February 5, 2005. City Council also approved the CIP for fiscal years ending 2008-2012 and changes or additions, as it relates to timing and use of the Bonds, have been reviewed and approved by the Citizen Oversight Committee, various City Council Committees (Mobility, Audit/Finance, etc.). In addition, the City Council discussed this information at the August 7, 2008 Budget work session. FISCAL INFORMATION An estimated debt service schedule is presented on page 21, Table 7 in the attached POS. The estimated average annual debt service payment on the new issuance, including principal and interest, will total approximately $568,000. This payment is anticipated and included Plan. EXHIBITS 1. Ordinance 2. Rating Agency Reports (will be provided at the meeting) A B 3. Preliminary Official Statement 4. Paying Agent/Registrar Agreement 5. Proposed Capital Improvement Program for FY 2007-08 and FY 2008-09 6. 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L rr.. s-- .r re J ~ •~ ,~ .r r ~~ `- CJ r ~.~ -~y ~} ~~ s~- :l. Ar•_ r"° rr :" ,~; s.. ,,,,,p ".•.7 'r~a '~ ~:. _, w~ [~' ..~,. ~ r~F ,~ :i 'l; ,q~ ^. r, - ;~.. - ~~ r^. r '~ r .~ "l. • ~.. ~~ .. ., ~, :. N 3 - ~ .J ~y y ~"- ~~ .~~ '' '-~ ~:: F, r. •w L . ~ ~~ !l;: W ~ ~ -. W ,.~ W~ r~ f; ~~ :; ~, .,: ,,, ~~~ :~ ; ,~~ °~; ,~ ~~_ ~; "J P,~ ~ ~.J ry ~j ;, ~ *r7 '. J =+ ~; ~,, +fa •T ~ '1 l ,.~ ~. ~ .w ~;~~ ',~ ' 7 "J .1 Lw ~ ~J ~.~ ~~~ ~~~ u ;, .~ ~.. :~ ~= ,~ . Y r. ~~ °J -, ;: L :~~~ ^+ r1 V ~ ... ,.~ ~,,~_ ~ ~, ~~ rt ~ ~. ,.~ a r r- ,J ,,;~~ rs ~~ ~j ~ J 'L'yy •v I" ~ V f+r .~ ^a ~~ ._, ,; W , ~~ ,~ , o :~ ~~ ~, ~ ,;~ ~, ~ 4 J--~ ~ r _.f ~ -.~ ~, ;; ~. ~Y~ f --s .,~ r. A 1.~ ' /~ r ~1 .~ ~IB~~UIB 1'V1C I`]t1.;1,1;0~11~.~1,1t1' (Il°l~l~'1~~1._ S~I',~'11~~:~11•:.~ l° Ratin s .~ 6 A ~i~ation pt Fir~l ~~#lh~~~t ~A~~TO~Y $ Moody's: "Applied For" (See "Continuing Disclosure of information" herein) Dated August 7, 200$ S&P: "Applied For" See ("tither Information - NEW ISSLiE -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 NUT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBL1GATlONS"FOR FINANCIAL INSTITi]TIONS "1 ~', , ~ I,3~V,VV~ CITY QF DENTQN, TEXAS (Denton County) GENERAL OBLIGATION BLINDS, SERIES 2008 Dated Date: August I5, 2008 Due: February 15, as shown below PAYMENT TERMS ... lnterest on the $7,30D,DDD City of Denton, Texas General Obligation Bonds, Series 2008 (the "Bonds"} will accrue from August 15, 2008, (the "Dated Date"} and will be payable February 15 and August 15 of each year commencing February 15, 2009, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The deftnitive 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. 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 AgentlRegistrar 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 Bonds and Certiftcates -Book-Entry- Only System" herein. The initial Paying AgentlRegistrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "The Bonds and Certiftcates - Paying AgentlRegistrar"}. AUTHORITY FoR IS5UANCE ...The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the "State"} including particularly Vernon's Texas Codes Annotated ("V.T.C,A,"}, Government Code, Chapter 1331, as amended, and an election held in the City of Denton, Texas on February 5, 2005, and are direct obligations of the City of Denton, Texas (the "City"}, payable from a direct annual ad valorem tax levied on al! taxable property within the City, within the limits prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance"} (see "The Bonds and Certiftcates -Authority for Issuance"}, FURPO5E ...Proceeds from the sale of the Bonds will be used for (a} for various street improvements, senior center improvements and park land acquisitions and improvements, and (b} to pay the costs of issuing the Bonds. MATURITY SCHEDULE Principal Interest CUSIP Principal Amount Maturity Rate Yield Suffix 1~1 Amount $$ 2~ 2aa9 ~ 3 235,Oaa gala 38a,aaa 245,Oaa 2a l 1 395,aaa 255,aaa 2a12 415,aaa 27a,0aa 2x13 435,aaa 2$5,aaa 2x14 455,aaa 295,aaa 2a15 4$a,aaa 31a,aaa 2a16 5a5,aaa 325,aaa 2a17 53a,aaa 345,aaa 2a1$ 555,aaa CLiSIF Prefix: 248865 (~t Interest CUSIP Mai Rate Yield Sufftx~'} 2a19 2a2a 2a21 2a22 2a23 2a24 2a25 2a2G 2a27 2a28 (Accrued Interest from August 15, 2008 to be added) (1} CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, a division of the McGraw-Hill Companies, lnc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers are provided for convenience of reference only. The City, the Financial Advisor and the Initial Purchaser of the Bonds take no responsibility for the accuracy of such numbers. REDEMP'CION ...The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2019, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. (see "The Bonds and Certiftcates -Optional Redemption"). SEPARATE ISSUES ...The Bonds are being offered by the City concurrently with one other issue, the "City of Denton, Texas, Certiftcates of Obligation, Series 2008", in the principal amount of $10,b85,000 (the "Certiftcates"}, under a common Official Statement, and such Certiftcates and the Bonds are hereinafter sometimes referred to collectively as the "Obligations". The Bonds and the 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, and other features. LEGALITY .. ,The Bonds are offered for delivery when, as and if issued and received by the Initial Purchaser of the Bonds and subject to the approving opinion of the Attorney General of Texas and the opinion of McCal I, Parkhurst & Horton, L.L.P,, Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company on September 23, 200$. SEALED BIDS DUE TUESDAY, AUGUST 19, 2008, AT 11:30 AM, CDT THIS PAGE LEFT BLANK INTENTIONALLY ~1$~~ ri]'~Ce~ l'l~l'1,1~11N'~~lt~~ ()I~l~lt'1~11, S1 X11 l?111`;N'I' Rahn s: A P~~`ssa~p~ ~f F"sr~t So~+a~~~t COr-s~~rr'l g r Moody's: "Applied For" (See "Continuing Disclosure of Information" herein} Dated August 7, 2008 S&P: "Applied For" J ~f See {"tither Information - r,~ NEWISSUE - Sook-Entry-Unly Ratings" herein) .~.~ 'r" r '~ "~` In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, y ' `+- '~ ~ 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 c orporati on s. °~ .:: r THE CERTIFICATES WILL NUT BE DESIGNATED AS "OUALIFIEDTAX-EXEMPT OBL1GATiONS" FOR FINANCIAL INSTITUTIONS ;~ r. u .~ :i ~T ~k ~, p; CITY OF DENTUN, TEXAS :. ,w ~. ~,~ {Denton County) J -~~ CERTIFICATES OF UELIGATIUN, SERIES 2008 ;; .a ~~ rr, Dated Date: August 15, 20D8 Due: February 15, as shown below ~.., .:~ ., PAYMENT TERMS ...interest on the $10,685,000 City of Denton, Texas Certificates of Obligation, Series 2008 {the "Certificates") will accrue from August 15, y ,v 2008, (the "Dated Date") and will be payable February 15 and August l5 of each year commencing February l5, 2009, 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 ("OTC") pursuant to the Book-Entry-only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of `;, $5,000 ar integral multiples thereof, No physical delivery of the Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest ~~' '` an the Certificates will be payable by the Paying AgentlRegistrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of c„ ~•- DTC far subsequent payment to the beneficial owners of the Certificates. See "The Bands and Certificates -Book-Entry-only System" herein, The initial Paying ., ,~ ,~ AgentlRegistrar is The Bank of New Yark Mellon Trust Company, N.A., Dallas, Texas (see "The Bands and Certificates - Paying AgentlRegistrar"). -- ~ ';; ~~ .,; ~~ ¢.: ~r. ~ '~ A[1THURITY FOR I55t1A~YCi; . , .The Certificates are issued pursuant to the Canstitutian and general laws of the State of Texas, (the "State") particularly Subchapter C J ... '~~ ~ of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), 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 bylaw, 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 $10,000, as provided in the ordinance authorizing the Certificates (the Certificate Ordinance) (see The Bonds and Certificates -Authority for Issuance ). ~, ~- :f: ,~ c. W., `P P~RP05E . , .Proceeds from the sale of the Certificates will be used for (a) acquisition of land far, and design, construction and equipping of, a public safety radio s '`.J r.r f ^>~ antenna; (b) renovations and improvements to, and equipping of, existing municipal facilities, including Ciry Hall East and City libraries; (c) improvements to the ~: " - y Ci 's solid waste dis osal s stem and ac utsrtion of related a ui ment• d ac uisition of land for, and desi n, construction and a ui in af, animal shelter; e ~.~ . ~ acquisition of vehicles and equipment for the City's moror pool; and (f} acquisition of land for and improvements to municipal parks; and also for the purpose of c ~~ paying all or a portion of the City's contractual obligations for professional services, including engineers, architects, attorneys, map makers, auditors, and financial J ~ % advisors, in connection with the preparation of the City's master plan for downtown improvements, and with said Certificates of Obligation. s., :~ ,; '-" ~_ ~ MATURITY SCHEDULE CUSIP Prefix; 1488fi5{t~ ~~•A Y *' J ti. r : .~ ~' Principal Interest CUSIP Principal Interest CUSIP r ;~ rb rte" ~ ~ ~ Amount Maturity Rate Yield Suffixal Amount Maturity Rate Yield Sut~xt~l ;~ J 4 ~, ~ $ 980,000 2009 $ 190,000 2019 ~~ ~~ `' ,~ ;~ 1,030,000 2010 200,000 2020 rf' -~ c :~ ~ 1075 000 2011 210 000 2021 ~ . ,ti ~ f f 7 «+ ,, .., :~ 1,125,000 2012 220,000 2022 r ~ r `.'~ 1,180,000 2013 230,000 2023 ,- 705,Oaa 2x14 245 a0a 2024 y ~. ,~ J 735,Oa0 2015 255,000 2025 ~~' ~ y 465,Oaa 2016 270,000 2026 r o 485,Oaa 2017 285,OOa 2027 `~ - ~ 505,Oaa 2a18 295 OOa 2028 V "~ ~ ~ ~ y~. ,J; ~ r ~ .,~~ {Accrued Interest from August 15, ZDOB to be added) ,y .__. .~ v ~,, (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, a division y ~ r' of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP ~ ~ ~ numbers are provided for convenience of reference only. The City, the Financial Advisor and the Initial Purchaser of the Certificates take no responsibility for the :~`~ accuracy of such numbers. 1 } n .-• ~ •+ ~ -•-- REDEMPTION ...The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2019, in whale or in part in principal amounts of $5,000 or any integral multiple thereof, on February l5, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date of '~ ~; ~ redemption. (see "The Bonds and Certificates -Optional Redemption"). ~~ -~ ~ ~ SEPARATE ISStlES , , .The Certificates are being offered by the City concurrently with one other issue, the "City of Denton, Texas, General Obligation Bonds, Series :,~ :~ 2008", in the principal amount of $7,300,000 {the "Bonds"), under a common Official Statement, and such Bonds and the Certificates are hereinafter sometimes y referred to collectively as the "Obligations". The Certificates and the Bands 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, and other J features. ~~ ~~_;~ :r.~~ n LEGALITY ...The Certificates are offered far delivery when, as and if issued and received by the Initial Purchaser of the Certificates and subject to the approving ,~~ ~ opinion of the Attorney General of Texas and the opinion of McCall, Parkhurst & Horton, L.L.P., Bond Counsel, Dallas, Texas {see Appendix C, "Form of Band '~ . f ~ Counsel's Opinions"), ~, " ~ ~ ~~ J ~ DELIVERY ... It is expected that the Certificates will be available for delivery through The Depository Trust Company on September 23, 2008. ~ :J .-~ SEALED BIDS DUE TUESDAY, AUGUST 19, Zoos, AT 11:40 AM, CDT ~J r~" :-~ .~, :J --. • ~. ~,. :` r, C: . 4~ .v THIS PAGE LEFT BLANK INTENTIONALLY For purposes of compliance ~vith Rule 15c2-12 of the Securities and Exchange Commission, as amended and in effect on the date hereof, this document constitutes an Off cial Statement of the City with respect to the Obligations that has been "deemed~nal" by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-11. No dealer, broker, salesman or other person has been authorized by the City to give any information, or to make any representations other than those contained in this O~cial Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell Obligations in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Oj~cial Statement nor any sale made hereunder shall, under arty circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See "Continuing Disclosure of Information" for a description of the City's undertaking to provide certain information on a continuing basis. THE OBLIGATIONS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE OBLIGATIONS INACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE CITY NOR ITS FINANCIAL ADVISOR MAKE 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 THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 21 e 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 THE 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 STATEMENTS See "OTHER INFORMATION -- FORWARD-LOOKING STATEMENTS DISCLAIMER" HEREIN. TABLE OF CONTENTS PRELI:'~T[NARY ()Ii'l~,I['lAL 5'I"Ar1~~;1~EN"1' Sl1~ItitARY' b C'1`I"Y ()~[ IC~IAIaS, S7'AFN ADD CONSLIa"I.a'!`~"5..........8 ELECTED OFFIC[ALS ....................................................... 8 SELECTED ADMINISTRATIVE STAFF ............................... 8 CONSULTANTS AND ADVISORS ...................................... 8 INTR[)I)[~CTI(:)N .................................................................. ~ TITE BONDS AND CERTIFICATES .................................. 9 T AX IN ~ OR~~ A~I'ION ........................................................ l TABLE 1 -VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT ............................................. 17 TABLE 2 -TAXABLE ASSESSED VALUATIONS BY CATEGORY ......................................................... 1$ TABLE 3 -VALUATION AND GENERAL QBLIGATION DEBT HISTORY ................................................... 19 TABLE 4 -TAX RATE, LEVY AND COLLECTION HISTORY ............................................................. 19 TABLE 5 -TEN LARGEST TAXPAYERS ........................ 19 TABLE b -ESTIMATED OVERLAPPING DEBT ............... 20 DEBT INFORh1ATIoN ...................................................... ~ 1 TABLE 7 -GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS .................................................. 2 I TABLE $ -INTEREST AND SINKING FUND BUDGET PROJECTION ....................................................... 22 TABLE 9 -COMPUTATION OFSELF-SUPPORTING DEBT22 TABLE 1~ -AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS .......................................... 22 TABLE 11 - QTHER QBLIGATIONS ...............................22 FI:tiAN[;TAL [till'ORNl.Ar1~TON .................................. TABLE 12 -CHANGES IN NET ASSETS .........................24 TABLE 12A -GENERAL FUND REVENUES AND EXPENDITURE HISTORY .....................................25 TABLE 13 -MUNICIPAL SALES TAX HISTORY ............2b TABLE 14 -CURRENT INVESTMENTS ............................2$ "1'Ah 1'1,~TTERfi ............................. OTHk;R INFOR~1ATIUN ................................................... 31 RATII+IGS .......................................................................31 LITIGATION ...................................................................31 REGISTRATION AND QUALIFICATION OF BONDS AND CERTIFICATES FOR SALE ....................................31 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ....................................31 LEGAL OPINIONS ..........................................................31 CONTINUING DISCLOSURE OF INFORMATION ...............32 FINANCIAL ADVISOR ....................................................33 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION .....................................................33 INITIAL PURCHASER .....................................................33 FORWARD-LOOKING STATEMENTS DISCLAIMER .........34 CERTIFICATION OF THE OFFICIAL STATEMENT ............34 APPENDICES C~F..NERAL Iv~UR.[vIATIUN RI»G~'1RDING THE CIT~'...........A F\CER.PTS I' RU'~9 THE A'~~1C~AL ~['tiA~iCI:1L R.EI'ORT... B F{)R'~4 OF £i{:)~D C~UllNSF.[,'S UPI1tI{~)h'S ........................ C The cover page hereof, this page, the appendices included herein and any addenda, supplement or amendment hereto, are part of the Preliminary Official Statement. 5 PRELIMINARY UFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Preliminary Official Statement, The offering of the Bonds and Certificates to potential investors is made only by means of this entire Preliminary Official Statement. No person is authorized to detach this summary from this Preliminary Official Statement or to otherwise use it without the entire Preliminary Official Statement. THE CITY ..................................... The City of Denton is a political subdivision and municipal corporation of the State, located in Denton County, Texas. The City covers approximately 79.8 square miles (see "Introduction - Description of City"). THE BONDS .................................. The Bonds are issued as $7,304,000 General Qbligation Bonds, Series 200$. The Bonds are issued as serial bonds maturing February 15, 2049 through February 15, 202$ (see "The Bonds and Certificates - Description of the Bonds and Certificates"}. THE CERTIFICATES ..................... The Certificates are issued as $10,b85,000 Certificates Of Obligation, Series 2008. The Certificates are issued as serial certificates maturing February 15, 2049 through February 15, 202$ (see "The Bonds and Certificates - Description of the Bonds and Certificates"). PAYMENT OF INTERE5T .............. Interest on the Bonds and Certificates accrues from August 15, 2048, and is payable February 15, 2009, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Bonds and Certificates -Description of the Bonds and Certificates," and "The Bonds and Certificates -Optional Redemption"). AUTHORITY FOR ISSUANCE.......... The Bonds are issued pursuant to the Constitution and general laws of the State, including particularly Chapter 1331, Texas Government Code, as amended, an election held in the City on February 5, 2005, and the Bond Grdinance passed by the City Council of the City (see "The Bonds and Certificates -Authority for Issuance"}. The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971}, as amended, and the Certificate Ordinance passed by the City Council of the City (see "The Bonds and Certificates -Authority for Issuance"). SECURITY FOR THE BONDS ,.....,.,, The Bonds constitute direct and voted obligations of the City, payable from a direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property located within the City (see "The Bonds and Certificates -Security and Source of Payment"}. SECURITY FOR 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 $10,400} of surplus net revenues of the City's Utility System (see "The Bonds and Certificates -Security and Source of Payment"). REDEMPTION ............................... The City reserves the right, at its option, to redeem Bonds and Certificates, as the case may be, having stated maturities on and after February 15, 2019, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2418, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates -Optional Redemption"), TAx ExEMPTION ............................ In the opinion of Bond Counsel, the interest on the Bonds and Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. USE OF PROCEEDS ....................... Proceeds from the sale of the Bonds will be used for (a) for various street improvements, senior center improvements and park land acquisitions and improvements, and (b} to pay the costs of issuing the Bonds. Proceeds from the sale of the Certificates will be used for (a} acquisition of land for, and design, construction and equipping of, a public safety radio antenna; (b} renovations and improvements to, and equipping of, existing municipal facilities, including City Hall East and City libraries; (c) improvements to the City's solid waste disposal system and acquisition of related equipment; (d) acquisition of land for, and design, construction and equipping of, animal shelter; (e) acquisition of vehicles and equipment for the City's motor pool; and (f) acquisition of land far and improvements to municipal parks; and also far 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 with the preparation of the City's master plan for downtown improvements, and with said Certificates of obligation. 1ZATINGS ...................................... The presently outstanding general obligation debt of the City is rated "Aa3" by Moody's Investors Service, Inc. ("Moody's") and "AA-" by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance companies. Applications for contract ratings on the Bonds and Certificates have been made to Moody's and S&P (see "Other Information -Ratings"). BooK-ENTRY-ONLY SYSTEM,,,.., The definitive Bonds and Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book-Entry-only System described herein. Beneficial ownership of the Bonds and Certificates may be acquired in denominations of $5,000 or integral multiples thereof, No physical delivery of the Bonds and Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds and Certificates will be payable by the Paying AgentlRegistrar 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 and Certificates (see "The Bonds and Certificates -Book-Entry-only System"}, PAYMENT RECORD ...................... The City has never defaulted. SELECTED FINANCIAL INFURMAT[QN Funded Ratio Funded Fiscal Per Capita Tax Per Capita Tax Debt to Year Estimated Taxable Taxable Debt Funded Taxable % of Ended City Assessed Assessed at End Tax Assessed Total Tax 9130 Population Valuation ~~~ Valuation of Year Debt Valuation Collections 20x4 98,288 $ 4,042,202,$71 $ 41,126 $110,005,000 $1,119 2.72% 100.34% 2005 103,220 4,374,943,831 42,385 113,800,000 1,102 2,60% 99.47% 2006 10$,3$1 4,789,376,811 44,190 121,000,000 1,116 2.53% 100.22% 2007 113,800 5,441,228,909 47,814 138,995,000 1,221 2.55% 100.54% 2008 119,490 6,089,499,775 (2) 50,962 153,730,000 t3) 1,287 f3) 2.52%t3} 100.84%~4~ (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. (2} Source: Denton Central Appraisal District as of July 21, 2007. (3) Projected, includes the Bonds and Certificates, (4} Collections for part year only, through July 1, 2008. For additional information regarding the City, please contact: Bryan Langley Director of Finance City of Denton 215 E. McKinney Street Denton, Texas 7b201 (940) 349-8224 Laura Alexander David K. Medanich First Southwest Company or 777 Main Street, Suite 12x0 Fart Worth, Texas 76102 (817) 332.9710 7 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Term Cit Council Ex fires Mark Burroughs May, 2010 Mayor Pete Kamp May, 2010 Mayor Pro Tem, At Large Place 5 Joe Mulroy May, 2014 Councilmember, At Large Place 6 Charlye Heggins May, 2009 Councilmember, District 1 Rudy Moreno May, 2009 Councilmember, District 2 Jack Thomson May, 2x09 Councilmember, District 3 Chris Watts May, 2009 Councilmember, District 4 SELECTED ADMINISTRATIVE STAFF Name George C. Campbell Howard Martin Jon Fortune Fred Greene Byars Langley Jennifer K. Walters John Knight Position City Manager Assistant City Manager Assistant City Manager Assistant City Manager Director of Finance City Secretary lnterim City Attorney CONSULTANTS AND ADVISORS Auditors* ......................................................................................................................................................................... KPMG LLP Dallas, Texas Bond Counsel ............................................................................................................................. McCall, Parkhurst & Horton L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Fort Worth, Texas * Weaver & Tidwell were hired on July 15, 2008 as new auditors for the City. 8 PRELIMINARY OFFICIAL STATEMENT RELATING TO $7,300,Oaa $10,655,000 CITY OF DENTON, TEXAS CITY OF DENTON, TEXAS GENERAL OBLIGATION BONDS, SERIES 20x8 CERTIFICATES OF OBLIGATION, SERIES 2008 INTRODUCTION This Preliminary Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $7,300,000 City of Denton, Texas, General Obligation Bonds, Series 2008 the "Bonds"} and $10,b85,000 City of Denton, Texas, Certificates of Gbligation, Series 2008 the "Certificates"}. Capitalized terms used in this Preliminary Official Statement have the same meanings assigned to such terms in the Bond Ordinance and Certificate Grdinance each to be adopted on the date of sale of the Bonds and Certificates which will authorize the issuance of the Bonds and Certificates, respectively, except as otherwise indicated herein. The Bonds and the Certificates are being offered by the City concurrently under a common Official Statement, and the Bonds and Certificates are hereinafter sometimes referred to collectively as the "obligations". The Bonds and the Certificates are separate and distinct securities offerings being issued and sold independently except for the common Gfficial 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, and other features. There follows in this Preliminary Gfficial Statement descriptions of the Bonds and Certificates 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, Fart Worth, Texas. DESCRIPTION OF THE CITY ...The City of Denton, Texas is a political subdivision located in Denton County operating 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 CouncillManager 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 79.8 square miles in area. THE BONDS AND CERTIFICATES DESCRIPTION OF THE BONDS AND CERTIFICATES ...The Bands and Certificates are dated August 15, 2008, and mature, ar are subject to redemption prior to maturity, on February 15 in each of the years and in the amounts shown on the cover page and page 3 hereof. Interest 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, commencing February 1 S, 2009. The definitive Bonds and Certificates 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 The Depository Trust Company, New York, New York ("DTC") pursuant to the Book-Entry-Gnly System described herein. No physical delivery of the Bonds and Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds and Certificates will be payable by the Paying AgentlRegistrar 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 and Certificates. See "The Bonds and Certificates -Book-Entry-Gnly System" herein. AUTHORITY FoR ISSUANCE ...The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1331, Texas Government Code, as amended; an election held and passed by a majority of the participating voters on February 5, 2005; and the Grdinance authorizing the Bonds the "Bond Ordinance"}, See "Table 10 -Authorized But Unissued General Obligation Bonds." 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 Gbligation Act of 1971}, as amended, and the Ordinance authorizing the Certificates (the "Certificate Ordinance", together with the Bond Grdinance, the "Grdinances"}. SECURITY AND SOURCE OF PAYMENT .. . The Bonds ...All taxable property within the City is subject to a direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all Bonds which tax must be levied within the limits prescribed by law. The Cert f Cates ... All taxable property within the City is subject to a direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all obligations payable in whole or in part from ad valorem taxes, which tax must be levied within limits prescribed by law. Additionally, the Certificates are payable from and secured by a limited pledge of surplus net revenues of the City's Utility System, not in excess of $10,000, as provided in the Certificate Grdinance authorizing the Certificates. TAX RATE LIMITATIQN . , .All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $104 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. QPTIQNAL REDEMPTIQN ...The City reserves the right, at its option, to redeem Bonds and Certificates, as the case may be, having stated maturities on and after February 15, 2019, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 201$, 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 and Certificates to be redeemed. If less than all the Bonds or Certificates of any maturity are to be redeemed, the Paying AgentlRegistrar for DTC while the Bonds and Certificates 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 for 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 AgentlRegistrar on the redemption date, NQTICE QF REDEMPTIQN , ..Not less than 30 days prior to a redemption date for the Bonds or Certificates, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds or Certificates to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying AgentlRegistrar 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 a Bond or Certificate for 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 Bond or Certificates for the portion of its principal sum to be redeemed} shall become due and payable, and, if moneys for the payment of the redemption price and the interest accrued on the principal amount to be redeemed to the date of redemption are held for the purpose of such payment by the Paying AgentlRegistrar, interest shall cease to accrue and be payable from and after the redemption date on the principal amount redeemed. DEFEASANCE ...The Ordinances provide that any Obligation and the interest thereon shall be deemed to be paid, retired, and no 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 AgentlRegistrar 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 AgentlRegistrar for the payment of its services until a1J Defeased Obligations shall have became 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 AgentlRegistrar 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 AgentlRegistrar 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, fib) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and ~c}noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. 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 pledge to their payment in the Ordinances, but will be payable only from the funds and defeasance securities 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 far redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations far 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; (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; viii) directs that notice of 10 the reservation be included in any redemption notices that it authorize; and (iv} at the time of the redemption, satisfies the conditions of the preceding paragraph with respect to such Obligations as though it was being defeased at the time of the exercise of the option to redeem the Obligations, after taking the redemption into account in determining the sufficiency of the provisions made for the payment of the Obligations. B44K-ENTRY-QNLY SYSTEM ...This section describes how ownership of the Obligations is to be transferred and haw the 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 Of~cia! 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 Benef cia! Owners, or that they will do so on a timely basis, or (3~ DTC will serve and act in the manner described in this Of~cia! Statement. The current rules applicable to DTC are on f le with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTCParticipants are on~le with DTC. DTC will act as securities depositary far the Obligations. The Obligations will be issued as fully-registered securities registered in the name of Cede Bc Co. (OTC's partnership nominee} ar such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for the Obligations in the aggregate principal amount thereof and will be deposited with OTC. OTC, the world's largest depository, is alimited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New Yark 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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that OTC's participants ("Direct Participants"} deposit with OTC. 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 Bc Clearing Corporation ("DTCC"}. DTCC, in turn, is awned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC}, as well as by the New York Stack Exchange, Inc., the American Stack Exchange LLC, and the National Association of Securities Dealers, Inc. 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 ar indirectly ("Indirect Participants"}. DTC has Standard & Paar's highest rating; AAA. 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.ar~. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on OTC's retards. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner"} is in turn to be recorded an the Direct and Indirect Participants' records. Beneficial Owners will not receive written confsrmation 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 OTC'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; OTC'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 lndirect 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 11 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, Beneficia! Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Obligations unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County 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}. Redemption proceeds and principal and interest payments on the Obligations wial 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 AgentlRegistrar 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 or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest 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 AgentlRegistrar. 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 Dther Sections of this Dff cial 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 Baak-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. PAYING AGENTIREGISTRAR ...The initial Paying AgentlRegistrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinances, the City retains the right to replace the Paying AgentlRegistrar. The City covenants to maintain and provide a Paying AgentlRegistrar at all times until the Bonds and Certificates are duly paid and any successor Paying AgentlRegistrar 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 AgentlRegistrar for the Bonds and Certificates. Upon any change in the Paying AgentlRegistrar 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 by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying AgentlRegistrar. Principal of the Bonds and Certificates is payable to the registered holder appearing on the registration books of the Paying AgentlRegistrar (the "Registered Owner") at the designated corporate trust office of the Paying AgentlRegistrar 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 AgentlRegistrar at the close of business on the Record Date (identified below} and such interest shall be paid by the Paying AgentlRegistrar by check mailed, first class postage prepaid, to the Register Owner or by such other arrangement, acceptable to the Paying AgentlRegistrar, 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 AgentlRegistrar 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. 12 TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book-Entry-Only System should be discontinued, printed Obligations will be delivered to the registered owners and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying AgentlRegistrar only upon presentation and surrender of such printed Obligations to the Paying AgentlRegistrar and such transferor 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 AgentlRegistrar. New Obligations will be delivered by the Paying AgentlRegistrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying AgentlRegistrar, 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 AgentlRegistrar. 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 AgentlRegistrar shall be required to transfer or exchange any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate or Bond. RECORD DATE FOR INTEREST PAYMENT ...The record date ~"Record Date") for the interest payable on the Bonds and 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 anon-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 AgentlRegistrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ~"Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Bond and Certificate appearing on the registration books of the Paying AgentlRegistrar at the close of business on the last business day next preceding the date of mailing of such notice. QBLIGATIONHOLDERS' REMEDIES ...The Ordinances do not specify events of default with respect to the Bonds or the Certificates. If the City defaults in the payment of principal, interest, or redemption price on the Bonds or Certificates when due, or the City defaults in the observation or performance of any other covenants, conditions, or obligations set forth in an Ordinance, the registered owners of the Bonds or Certificates, as applicable, may seek a writ of mandamus to compel the City or City officials to carry out the legally imposed duties with respect to the applicable Obligations if there is no other available remedy at law to compel performance of the Obligations or the Ordinances and the City's obligations are not uncertain or disputed. The issuance of a writ 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 represent the interest of the holders of the Bonds or the Certificates 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. On June 30, 200b, the Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 Tex. 200b} 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, Obligationholders may not be able to bring such a suit against the City for breach of the Bonds or Certificates or respective 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 bonds, but in connection with the issuance of the Bonds and the Certificates, the City has not waived sovereign immunity and is not using the legal authority provided by Chapter 1371. 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 properly within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ~"Chapter 9"}. 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. 13 TAX INFQI7MATI4N AD VALQREM TAX LAW ...The appraisal of property within the City is the responsibility of the Denton Central Appraisal District (the "Appraisal District"}. Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under V.T.C.A., Title I, Tax Cade, as amended (the "Property Tax Cade"} to appraise all property within the Appraisal District on the basis of l00% 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 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 not to exceed the lesser of { 1 }the market value of the property, or (2}the sum of (a} 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b} the appraised value of the properly for the last year in which the property was appraised plus (c} the market value of all new improvements to the property, The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at Least 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 Cade, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII"} and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1} an exemption of not less than $3,000 of the market value of the residence homestead of persons b5 years of age or older and the disabled from all ad vabrem taxes thereafter levied by the political subdivision; {2} an exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged far the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. As of January 1, 2004, 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 levied an the residence homestead of a disabled person or persons b5 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 b5 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 and such freeze is transferable to a different residence homestead and to the surviving spouse living in such homestead who is disabled or is at least 55 years of age. Once established such freeze cannot be repealed or rescinded. 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 an 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 $12,00x. 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 oropen-space land elevated to timber production, may elect to have such property appraised for property taxation an the basis of its productive capacity. The same land may not be qualified under both Section 1-el 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 nanbusiness property are exempt from ael valorem taxation. Article VIII, Section 1-j, provides far "feeport property" to be exempted from ad valorem taxation. Freeport property is defined as goads detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstaneling such exemption, counties, school districts, junior college districts anel 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; elecisians to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides far the exemption from taxation of "gavels-in-transit." "Gooels-in- transit" is defined by a provision of the Tax Code, which is effective for tax years Z00$ anel thereafter, as personal property acquired or imported into Texas and transported to another location in the State or outsiele of the State within 175 days of the date the property was acquired ar 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 manufactureel housing inventory. The Tax Cade provision 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 "gaols-in-transit" during the fallowing tax year. A taxpayer may only receive either the freeport exemption ar the "goods-in-transit" exemption far items of personal property. 14 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 14 years. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE . , .Under the current Property Tax Code a governing body of a taxing unit is required to adopt its annual tax rate per $100 taxable value for the unit before the later of September 30 or the 64th 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 $104 taxable value far 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 adapted 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 ral.lback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted}. "Adjusted" means last 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.OS plus a rate that will produce this year's debt service from this year's values (unadjusted} divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT ...Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 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 became 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 fast due an February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest Total February 6% 1 % 7% March 7 2 9 April 8 3 11 May 9 4 13 June 14 5 1S July 12 6 1 S After July, penalty remains at I2%, and interest increases at the rate of 1% each month. 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 na additional penalties ar interest assessed. In general, property subject to the City's lien may be sold, in whale ar 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. 15 CITY APPLICATION OF TAX CODE ...The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $25,000 and those who are disabled of $10,D00. 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 far the payment of debt. The City does not tax nonbusiness personal property. The County began collecting taxes for the City during the fiscal year 200G-07. The City does not allow split payments, and discounts are not allowed. The City does not tax freeport property. The City collects the additional one-half cent sales tax far 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 b5 years of age or older, which became a local option and subject to local referendum on January 1, 2004. The City has adopted a tax abatement policy. TAX ABATEMENT POLICY ...The City has established a tax abatement program to encourage economic development. In 1990 the City Council adopted a resolution 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. 0n July 31, 2001, the council voted to abate taxes on 100% of new valuation generated from the expansion of the Peterbilt Motors regional headquarters building in Denton far ten years. The company was required to spend a minimum of $5,000,000 on the renovation and consolidate approximately 35 jabs to the facility. 0n May 13, 2003, the council voted to rebate 40% of ad valorem taxes paid for a new facility and new equipment to Sally Beauty Company far ten years, beginning in 2004, under a Chapter 380 Economic Development Program Agreement. The new property value is estimated at $24,000,000. Gn September 2, 2003, the council voted to abate taxes on 35% of $30,000,000 for expansion and renovations to an existing facility to Flowers Foods Bakeries Group far 5 years beginning in 2005. Flower Foods employs approximately 152 employees. The tax abatement agreement provides for the thresholds to be phased-in aver three years. The agreement requires a total threshold of $30,000,000 aver the 3-year period. The company will receive a prorated abatement amount based on the percentage increase in valuation. Gn March 2, 2004, the council voted to abate taxes on 35% of approximately $b,000,000 far a new facility and equipment to Fastenal Company far five years, beginning in 2007. Fastenal is completing a new 240,000 square foot regional headquartersldistribution center near the Denton Municipal Airport in the summer of 2008. The $10 Million project will employ approximately 200 people. They are also working with the University of North Texas' Logistics Department, to employ students. The tax abatement agreement requires a minimum threshold of $5,000,000 in valuation over the five-year period. Gn March 1, 2005, the council voted to grant an amount equal to 50% of the ad valorem taxes paid far new facilities within the Granite Paint Business Park for ten years. Granite Properties is constructing Demon's first speculative building industrial park. When complete, the park will have over 900,000 square feet under roof. Granite Paint Phase I has constructed two speculative buildings far a combined 297,500 square feet of space and plans to begin Phase II in 2008109. tither officelwarehouse buildings include 7,540 square feet for Spilde-Harrison; two buildings for CR Smith Investments totaling 28,G78 square foot; 9,997 square feet of office and warehouse space for Bobcat; 3,200 square feet for a new steel building for Pioneer Equipment Rental; 8,100 square feet far a new training center at Peterbilt Motors Company. tin August 21, 2007, the council voted to abate taxes on 100% of ad valorem taxes of approximately $50,000,000 for a new 500,000 square foot distribution center including inventory and equipment to Aldi Incorporated far seven years. The company is required to complete construction of Westcourt Road at an estimated cost of $2,500,000. The 500,000 square foot distribution facility will service 25 stores located in North Texas including two to three stores planned in the City of Denton. Gn February 19, 2008, the council voted to grant an amount equal to 75% of the ad valorem taxes paid far the expansion of Jostens lncorporated facility and equipment far seven years. Jostens will expand their facility by 13,000 square feet. The project will also create 130 new jobs with an annual wage increase of approximately $4.5 Million. 1G TABLE 1 - VALUATiQN, EXEMPTIQNS AND GENERAL OBLiGAT1QN DEBT 2007108 Market Valuation Established by Denton Central Appraisal District $6,603,396,265 Less ExemptionslReductions at 100°/a Market Value: Residence Homestead Exemptions $ 78,576,727 Over 65 Exemptions 101,984,189 Disabled Persons Exemptions 2,824,490 Disabled Veterans Exemptions 4,029,825 Agricultural Land Use Productivity 240,213,602 HistoricallOther Exemptions 4,632,385 Freeport Exemptions 171,800,729 Abatement Exemptions 12,644,040 House Bill 3bb 39,59b Prorated Exempt Property 498,407 Pollution Exemptions 23,972,03b Community Housing Development Exemptions 21,110,342 Homestead Cap Adjustment 9,541,732 b71,8b8,100 2007108 Taxable Assessed Valuation (as of 7-21-07} $ 5,931,528,1 b5 Plus Supplements 157,971,b10 2007108 Taxable Assessed Valuation, inclusive of Supplements (as of 7-21-07} $ b,089,499,775 2008109 Certified Taxable Assessed Valuation $ b,291,359, l 12 City Funded Debt Payable from Ad Valorem Taxes (as of 7-1-08} ~~~ General Obligation Bonds $ 78,380,000 Tax and Certificates of Obligation 57,3b5,000 The Certificates 10,b85,000 The Bonds 7,300,000 Funded Debt Payable from Ad Valorem Taxes $ 153,730,000 Less Self-Supporting General Obligation Debt (~l Solid Waste System Genera[ Obligation Debt $ 19,114,b83 (3l Drainage System General Obligation Debt 7,Ob5,000 2b,179,b83 Net Tax Supported Debt Payable from Ad Valorem Taxes $ 127,550,317 Interest and Sinking Fund as of 7-1-08 (unaudited} $ 3,744,9bb Ratio Total Funded Debt to Taxable Assessed Valuation ........................ ................... 2.52% Ratio Net Funded Debt to Taxable Assessed Valuation .................. . ...... .................... 2.09% 2008 Estimated Population - 119,490 Per Capita Taxable Assessed Valuation - $50,9b2 Per Capita Total Funded Debt - $1,287 Per Capita Net Funded Debt - $1,Ob7 (1} The above statement of indebtedness does not include $2bb,910,O00 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 the bonds. (2} General Obligation debt in the amounts shown for which repayment is provided from revenues of the respective revenue systems. The amount of self supporting debt is based on the percentages of revenue support as shown in Table 10. It is the City's current policy to provide these payments from respective system revenues; this policy is subject to change in the future. (3} Includes a portion of the Certificates. 17 TABLE 2 -TAXABLE ASSESSED VALUATIONS BY CATEGORY Taxable App raised Value fyr Fiscal Year Ended September 30, 2008 2007 2006 %Of %of %vf Category Amount Total Amount Total Amount Tota] Real, Residential, Single Family $3,192,783,727 48.35% $2,927,902,799 50.15% $2,630,845,438 50.72% Real, Residential, Multi-Family 552,635,146 8.37% 454,710,640 7.79% 44b,271,900 8.b0% Real, Vacant LotslTracts 135,800,b28 2.Ob% 131,508,053 2.25% 98,411,369 1.90% Real, Acreage (Land Only) 330,570,774 5.01% 277,588,810 4.75% 222,710,266 4.29% Real, Farm and Ranch Improvements 51,987,396 0.79% 29,732,528 0.51% 23,387,957 0.45% Real, Commercial and Industrial 1,326,705,553 20.09% 1,085,722,435 18.60% 1,000,517,019 19.29% Real, Oil, Gas, and Other Mineral Reserves 46,500,010 0.70% 57,823,640 0.99% 2b,722,880 0.52% Rea] and Tangible Personal, Utilities 68,372,262 1.04% b2,085,822 l.Ob% b1,453,b59 1.18% Tangible Personal, Commercial and Industrial 785,231,437 11.89% 737,2b0,202 12.b3% 577,041,159 11.12% Tangible Personal, Other 19,919,543 0.30% 23,b54,377 0.41% 2b,019,704 0.50% Real and Special Property, inventory 92,889,789 1.41% 50,2b3,27b 0.8b% 73,514,372 1.42% Total Appraised Value Before Exemptions $b,b03,39b,2b5 100.00% $ 5,838,252,582 100.00% $5,186,895,723 100.00% Less: Total ExemptionslReductions (671,868,100} (593,625,675} (493,123,258) NoncatagonzablePraperty - 674,208 - Supplements 157,971,610 195,927,794 95,604,346 Taxable Assessed Value $ b,089,499,775 $ 5,441,228,909 $ 4,789,376,811 Taxable Appraised Value for Fiscal Year Ended September 30, 2005 2004 of % of Category Amount Total Amount Total Real, Residential, Single Family $2,445,993,713 51.86% $2,243,246,b71 51.54% Real, Residential, Multi-Family 415,779,403 8.82% 397,b90,b55 9.14% Real, Vacant LotslTracts 89,988,573 1.91% 100,332,693 2.31% Real, Acreage (Land Only} 218,495,173 4.63% 221,844,8b9 5.10% Real, Farm and Ranch improvements 18,670,34b 0,40% 17,401,518 0.40% Real, Commercial and industrial 859,873,094 18.23% 747,983,391 17.19% Real, Oil, Gas, and Other Mineral Reserves 22,b81,700 0.48% - 0.00% Real and Tangible Personal, Utilities 71,23b,279 1.51% b8,858,b70 1.58% Tangible Personal, Commercial and industrial 474,b12,410 10.06% 45b,589,726 10.49% Tangible Personal, Other 27,083,3b7 0.57% 28,504,241 O.bS% Real Property, Inventory 71,809,892 1.52% 69,711,912 1.60% Total Appraised Value Before Exemptions $ 4,716,223,950 100.00% $ 4,352,1 b4,346 100.00% Less: Total ExemptianslReductions (445,814,852) (442,887,140) Supplements 104,534,733 132,925,665 Taxable Assessed Value $4,374,943,831 $4,042,202,871 (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 2008 the values are as of July 21, 2007. 18 TABLE 3 -VALUATION AND GENERAL OBLIGATION DEBT HISTORY Ratio Fiscal Taxable Tax Debt Tax Debt Funded Year Taxable Assessed outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 913a Population ~~~ Valuation ~~~ Per Capita of Year Valuation Capita 2004 98,288 $4,a42,2a2,871 $41,126 $11O,a05,000 2,72% $1,119 2005 103,220 4,374,943,831 42,385 113,80a,00a 2.60% 1,102 20x6 108,381 4,789,376,$11 44,190 121,a0a,000 2,53% 1,116 20x7 113,8x0 5,441,228,909 47,814 138,995,00a 2,55% 1,221 2008 119,490 6,089,499,775 (3? 50,962 153,73x,000 (4) 2.52% (4l 1,287 (4) (1} Source: City officials. (2} 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. (3} Source: Denton Central Appraisal District as of July 21, 2aa7, (4} Projected, includes the Bonds and Certificates. TABLE 4 -TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year Distribution Ended Tax General Interest and % Current % Total 9130 Rate Fund Sinking Fund Tax Levy ~~} Collections Collections 2004 $ 0.54815 $ x.34928 $ 0.19887 $ 22,542,421 98.47°/Q 100.34°/Q 20x5 x.59815 x.39928 x.19887 26,457,399 98.33% 99.47% 20x6 x.60815 x.42928 0.17887 29,545,033 98.71°/Q laa.22°/Q 2007 0.62652 0.44765 0.17887 34,273,862 99.36°/Q 100.54°/Q 2x08 0.66652 0.44765 x.21887 40,587,734 98,70°/Q t~} 100.80% ~~~ (1} Tax levy for the current year is the Certified Value. Prior years represent adjusted values. (2} Collections for part year only, through July 1, 2008. TABLE ~ -TEN LARGEST TAXPAYERS ~~~ Name of Taxpayer TTHR Limited Partnership Columbia Medical Center of Denton Inland Western Denton Crossing Ltd PS United Copper Industries Allegiance Hillview, LP Paccar Inc. Anderson Merchandisers Verizon Southwest FMP Denton Robson Denton Dev LP Source: Denton Central Appraisal District. Nature of Property HospitaVProfessional Building HospitaVProfessional Building Real Estate Development Copper Wire Manufacturer Real Estate Development Diesel Truck Manufacturing Distribution Center Telephone Utility Retail Development Real Estate Development 2007108 % of Total Taxable Taxable A55e55ed AS5e55ed Valuation Valuation $loa,78a,a67 1.65°i° 80,454,725 1.32% 56,310,992 x.92% 40,387,52a 0.66% 36,391,2x5 a.6a°i° 35,a52,3ao x.58°i° 34,492,145 0.57% 34,386,920 0.56% 25,495,405 0,42% 24,562,198 0.40% $ 468,313,477 7.69% GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "The Bands and Certificates -Tax Rate Limitation"}. 19 TABLE b -ESTIMATED OVERLAPPING DEBT 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 bands ~"Tax Debt"} was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except far the amounts relating to the City, the City has not independently verified the accuracy ar completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. 2007108 City's Authorized Taxable 2007108 Total Estimated Overlapping But Unissued Assessed Tax Funded % Funded Debt Debt As Of Taxing Jurisdiction Value Rate Debt A 1^ ~p icable As of 7-1-08 7-1-08 City of Denton $ 6,089,499,775 $ 0.66652 $127,550,317 ~~~ 100.00% $127,550,317 $10,335,000 cZ~ Denton lndependent School District 8,738,355,170 1.43400 654,154,238 66.47% 434,816,322 116,745,000 Denton County 47,635,357,859 0.23589 295,214,740 12.90% 38,082,701 80,195,625 Argyle lndependent School District 890,188,486 1.41005 57,578,407 7.30% 4,203,224 - Aubrey Independent School District 471,063,460 1.39810 45,495,358 0.01% 4,550 9,000,000 Krum Independent School District 723,635,651 1.36550 48,835,303 1.78% 869,268 - Pilot Point Independent School District 436,647,144 1.30000 19,674,011 0.12% 23,609 - PonderIndependent School District 804,574,321 1.43400 33,400,000 2.36% 788,240 - Sangerlndependent School District 593,994,416 1.34000 30,927,685 0.11% 34,020 - Total Direct and Overlapping Funded Debt $ 606,372,252 Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation ..................................................... 9.96% Per Capita Overlapping Funded Debt ....................................................................................... ... ........... $ 5,074,67 ~1) Includes the Bands and Certificates, less self supporting debt, ~2) Reflects remaining authorization after the issuance of the Bands. 20 DEBT INFORMATION z w w a a w Grp U F Q z Q F Q 0 a z w r a H ~ a ~ °v~, ~ m ~ o o '~ ~ o r ~ ~ o .~ vi ri ~o o; o ~ p~ c*~ ~ oa o~ o a ., ~ N N ~0 ~D o0 ov ~ ~ O N ~ r ~ ~n O N -~ r ~ O ~n N V ~ N o0 vi o ~D r~ ~n N N O c+1 Oti r ~D *~ o0 00 ~ o ~ ~ ~n ~, o r m r r ati r~ o o ati ~n o 00 0~ o, o~ N a m in M ~ O N of ~D N ri [~ N M vi ~ oo ~ Oi [~ o r o N ri vi ~ a~i N ~ O N ~ ~ r N ~ O~ c+1 ~n ~C O~ ~D N ~ r O ~n Oti N O ~ , ~ ~ M O ~D ~ ~ ~n ~ N ~n r ~C ~ ~ ~ N ~D ~D O M r N ~'' 'J O ~ ~i Vi ~ ri N --~ ~ ~ O Oti oo [~ C~ ~D vi ~ cri c+1 N O Q ~+ b9 b4 r O O V1 vi vl O ~n O O vi O r-+ c'+'1 00 00 00 00 ~D O o0 0 ~ ~(] ~ -~ 00 f*1 DO ~ DO ~ ~ M ~D ~ V'1 ~D M f'+1 ('~'1 r+ ~ M ~ ~, ~' o r r o 00 o r ~n r N~ r o r+~ ~ N~ oa oo ~n o r, ~ n~ C/) ~ ~ ~, D O O~ ('~1 D DO O~ D O V'i O r-+ N ~D ~ r DO ('~1 N Vi n Qti 4 C ~ OG M N ('~1 c'*1 N N c+1 M N c+1 c+1 M c'+1 r1 M c+1 ~ ~ ~ ~ ~D ~ A Q N ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ C a ~ .~ 5R b4 ~ N V'i O ~ ~D ~ ('~1 00 M O~ ~ DO o0 ~ r ~ O O~ Q1 ~ r+ 00 4 a ~ ~ N O O~ ~D r ~t O r o0 O c'+'1 N r ~D O~ ~ N ~ O 01 00 ~ ~ . ~ cC ~ ~ ~ ~ ~ ~ r 'n O~ N ~n r ~ N r ~ 00 0~ N ~D r ~ V) ~ 3 ~ N ~ 00 O~ N r o0 ~D oo ~ ~ G~ O ~ oo ~ N ~ ~ N ~ ~ ~ ~0 N N O~ Oti oo ~n ~n o0 00 0o r r ~ oo ~ ~ oti M oo r r vi a. -d A ~ r ~ N N rn ~ ~ oo r r r r r ~ ~ ~ c+~ ~ .--~ ~ a~ G N N N N N~~~ ~ ~ b4 bR ~ ~ r ~ M rn ~ oo r ch ~ M v, M -~ ~ ~ oo c*~ v~ ~ ~ o 0 0 0~ ~ ~ r r ~ oo -y N o oC ~ ov r ~ ~ o N oo ~0 ~ ... o, o, r do 0 oti -~ N r ~ --~ o ~ ~ ~ ~ ~ o ~ ~ M -~ 'd ~ ~o vi o ni o 0o ni ~ -~ o~ vo ~ o a, ri ~ cv ~o r" o t~ .~ ~ C ~ ~G M ~D ~0 r Oti ~0 ~ c'h O~ ~ ~0 r oo O N oo •--+ r oo -~ r O ~ ~ r-+ ~ *--~ ~ M Qti v1 M ~G DO O O~ ^~ r r N ~G ~G ov O ~ o0 ~ ~ r ao 0o r tiG ~ rt t+~ N -~ -~ O~ O~ oo r ~ ~n ~ M rt -~ vi O fA b4 n U w .~ w s F-" ~ M V1 *--~ •--+ DO Cti Q~ Q1 ~0 ~ 04 V1 00 V~ 00 ~ -~ l'rl *~ ~0 ~ ~ ~0 N M DO M ~0 ~D ~0 O ~ 00 N o0 r o0 O c*1 ~C o0 O 01 ~ N U1 U1 N ~ r vi O Vt O~ ~ N ~ N ~n M ~ Q1 C~ O ~n ~ ~ ~D ~0 ~ O~ ~ O N Qti ~ 0~ O O O O~ 00 ~G ~ O r O ~ 00 c~1 00 M r M O r~ N 0 0 O~ 00 ~ ~n ~~ N N C ~ ~ r1 M N N N ^~ ^~ r, ^~ ^~ ~ '"' M bA bR r o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ..• o o ~i ~i o ~i vi vi vi ~i O o 0 0 0 ~i ~i o vi Sri vi ~ 00 M r N o0 O c+1 ~G ov O O~ o -~ N c~ ~ ~n r oo O~ 00 ~ G~ O O *~ *~ r r~~ ~n *~ N N N N N N N N N ~G ~ ~ ri ~--i .-i p 59 69 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O ~p ~ ~ ~ N O o0 ~ ~p ~ 00 00 ~ ~ 00 ~ O ~D N ~G ~ O O~ ~ ~ oG ~n ~ O o0 r o0 O ~ O ~ N a0 N M ~ ~n w. 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"" ~ O~ 00 ~G c+1 r m ~C ~ o0 00 0o N ~n ~ N O~ o -~ M M o0 0 O OD ~G ~G ~ 00 0o crt ~ ~ O ~n -~ r tG O ~ ~G N ~ 00 •-+ vi ~n '~. ~ O O D Oi o0 00 00 00 00 r r ~G tG ~n ~ ~ M N N ~D a ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ o 00 0~ o ~ N crr ~ ~n ~ r o0 0~ o -~ N c+~ ~ ~n ~ r o0 ~ y -d M 0 0 •--~ ^~ ~ -~ ~ -y -y -~ -~ -y N N N N N N N N N ~,,, W °` o v o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N N N N N N C O .~ . ~ C ~ O ~ •}, cn c~ C ~+ .. ~ ~ ~ O o ~ ~ O ~ ~ O C ~~ 4 ~'' c° n r 0 ~ ~ ~ r o et y 4• ~ O ~, ~ ~ ~ ~" ~ ~ c~ ~ ~, ~ ~ ; ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ C ~' '0 o ~ a v0, -~ ~ 4: U v ~ U ~ ~ p A ~ ~ ~ ~ ~ ,~ ~ ~ td vi ~ U '~ O ~ _~ ~ V ~~s D C +r 47 O C ~ ~ o U ~ ~' ~ w ~ ~ ~ ~ ~ ~, '~ ~' ~ ~ C „~ ~' ~, ,~ ~• O U C ~ ~ ~: ._,..,r'..~ 0 r.+ ~ ~ C i i (~ ~ ~ ~ ~ b vi ~ ~, .~ .~ o v a~ ~ ~ ~ ~ ~ +r +~ O q ~, ~, .~ 0 0 ~ ,~ ~ w a -ti ..:, ~ ro ~~~•o 0 ~ ~ ~ 44~ r~ •~ r~ n ~ N M ~ 21 TABLE $ -INTEREST AND SINKING FUND BUDGET PROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/34/2448 ..... . .... . ....... . . . . .. . .. . . . . ... . ........ . ..... $ 17,166,941 Interest and Sinking Fund Balance as of 9130147 ....................... . ................................... $ 886,141 Interest and Sinking Fund Tax Levy ................................................. . .. . . . ................... 13,328,088 Budgeted Transfers ..................... . ...... . .. . . ........................ . ................................... 4,003,675 18,217,904 Estimated Balance, 9130108 ........................................ . ...... . ........................................................ 1,051,043 TABLE ~ -COMPUTATION OFSELF-SUPPORTING DEBT Net Revenue from Solid Waste System, Fiscal Year Ended 9-30-07 ............ . .......................... $ 4,888,674 Less: Solid Waste System Revenue Bond Requirements, 2408 Fiscal Year ...... . ...................... . ... - Balance Available for Other Purposes ............. . ................ . .. . ...................... . ... . . $4,888,674 Solid Waste System General Obligation Bond Requirements, 2008 Fiscal Year ........................... . . 2,562,822 Balance ........ . ............................................................. . .............. $ 2,325,852 Net Revenue from Drainage System, Fiscal Year Ended 9-30-07 .. . ........................... . ... . ...... $ 2,412,374 Less: Drainage System Revenue Bond Requirements, 2008 Fiscal Year ................................... - Balance Available for Other Purposes .............................................................. $ 2,412,374 Drainage System General Obligation Bond Requirements, 2048 Fiscal Year . . .............................. 284,457 Balance ..................................................................................... $1,732,317 TABLE 1 a -AUTHORIZED BUT UNISSUED GENERAL QBLIGATION BONDS ~~~ Date Amount Purpose .. Authorized Authorized Transportation 2/5/2005 $ 27,700,000 Parks 2/5/2045 10,700,000 Buildings 2/5/2045 4,044,000 $ 42,400,000 Amount Amount Heretofore Being Unissued Issued Issued Balance $16,199,600 $3,750,444 $ 7,750,440 5,870,400 2,245,440 2,584,644 2,695,000 1,345,444 - $ 24,765,400 $ 7,300,444 $10,335,404 (1} The City has $2,157,000 unissued general obligation bonds authorized by its December 13, 1986 bond election and $2,310,040 unissued genera! obligation bonds authorized by its February 24, 1996 bond election, Due to the age of this voted authorization the City does not anticipate the issuance of these bands. TABLE 11 - QTHER QBLIGATIONS 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, 2447: Year Annual Ending Lease 30-Sep Payment 2008 $1,983,495 2409 1,877,654 2410 1,724,957 2011-2017 1, l b0,836 Total Minimum Lease Payment $ 6,746,942 Less: Amount Representing Interest 46I,494 Present Value of Minimum Future Lease Payments $ 6,2$5,448 22 PENSION Fuwo ...The City provides pension benefits for all of its full-time employees (except firefighters) through the Texas Municipal Retirement System ("TMRS"}, a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued far pension expense. The City provides pension benefits for firefighters through the Denton Firemen's Relief and Retirement fund. The funding policy for the fund requires the City to make contributions equal to 12% for FY 2007-08 and ] 4% far FY 200$-09. (For more detailed infarmation concerning the retirement plans, see Appendix B, "Excerpts from the City's Annual Financial Report, Nate V.A., page 52".) IMPLEMENTATION OF NEW ACCQUNTING STANDARDS ...Certain financial data included in this Official Statement for the year ended September 30, 2007 (principally, data used in Table 9) are derived from unaudited financial statements of the City. For the year ended September 30, 20x2, the City implemented the provisions of the Governmental Accounting Standard Board ("GASB"} Statement No. 34, Basic Financial Statements -and Management's Discussion and Analysis - ~or State and Local Governments, GASB Statement No. 37, Basic Financial Statements -and Management `s Discussion and Analysis - j~or State and Loca! Governments: Omnibus, and GASB Statement No. 3$, Certain Financial Note Disclosures which results in a change in content and format of the City's financial statements (collectively, the "New GASB Statements"). The audited financial statements of the City for the year ended September 30, 2007, prepared in accordance with the New GASB Statements, are in included in Appendix B hereto. The purpose of the New GASB Statements is to create new information and restructure much of the information that governments have presented in the past to provide a more comprehensive demonstration of their annual financial performance on a system-wide basis. Among the significant changes effected by the new accounting standards are new presentations for proprietary or business-type operations of the City, such as those reported for the City's electric, water and waste water operations (the "Proprietary Funds"}. As required by the new GASB statements, the City's annual report consists of three basic financial statements for the Proprietary Funds: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. Those statements are included in the financial statements of the City for the year ended September 30, 2007 in Appendix B. GASB released the Statement of General Accounting Standards No. 45 ("GASB 45"}, Accounting by Employers far Other Post- Employment Benefits ("OPEB"), in June 2004. The City will be required to implement 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 cast 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 casts 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. In 200$, the City engaged an actuarial firm to prepare an estimate of the City's GASB 45 liability as of October 1, 2007, The 200$ report provides the City with the City's OPEB requirements assuming the City plan offerings, designs, and cost share approach remain constant. The 20x8 report estimates the City's accrued liability at $14.2 million for all funds which represents the present value of all future benefits to be provided by the City to current and future eligible (and electing) retirees, less future normal costs and any pre-funded amounts held in trust. Using this same information, the City's annual required contribution will be approximately $$79,000 for fiscal year 2008. The City has previously set aside approximately $1.5 million for this purpose in a City controlled internal service fund, and the City is budgeting additional contributions to this reserve in the future. The GASB 45 liability and reserved assets will be fully disclosed in the FY 2007-08 Comprehensive Annual Financial Report (CAFR}. A discussion of the New GASB Statements is set forth in the Management Discussion and Analysis and in various notes to the City's financial statements in Appendix B. 23 FINANCIAL INFORMATION TABLE 1Z - CHANGES IN NET ASSETS (~) Revenues: Program Revenue: Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenue: Property Tax Sales Tax Other TaxeslFees Miscellaneous Total Revenue Expenditures: General Government Public Safety Public Works Parks and Recreation lnterest on Lang-Term Debt Total Expenses Increase in Net Assets before Transfers Transfers Increase (Decrease) in Net Assets Prior Period Adjustment Net Assets at Beginning of Year Net Assets at End of Year Fiscal Year Ended September 30, 2007 2006 2005 2004 2003 $ 13,876,695 $ 13,965,099 $ 11,998,876 $ 10,224,627 $ 10,175,929 2,991,224 3,712,817 2,995,978 3,264,777 3,221,264 5,399,220 5,536,786 7,426,194 14,046,071 14,023,056 34,756,356 30,000,847 26,678,783 23,149,916 20,964,738 20,653,932 20,343,413 18,998,057 17,871,380 16,047,297 16,784,901 17,914,704 16,628,912 15,689,937 15,099,363 6,831,875 5,859,560 4,218,245 4,213,163 5,354,783 $101,294,203 $ 97,333,226 $ 88,945,045 $ 88,459,871 $ 84,886,430 $ 22,145,804 $ 22,165,661 $ 26,b75,799 $ 26,411,608 $ 22,933,107 42,lb1,b74 36,b2b,635 33,b42,445 30,508,765 28,837,158 14,008,867 12,485,281 11,986,881 11,053,131 10,274,822 11,564,247 10,497,241 9,912,996 9,418,580 8,419,508 4,658,128 4,333,428 4,175,466 4,494,851 4,186,051 $ 94,538,720 $ 8b,108,246 $ 8b,393,587 $ 81,88b,935 $ 74,b50,b4b $ 6,755,483 $ 11,224,980 $ 2,551,458 $ b,572,93b $ 10,235,784 (13,475,571} 895,106 864,493 1,410,947 1,000,305 $ (6,720,088} $ 12,120,086 $ 3,415,951 $ 7,983,883 $ 11,236,089 - - - 191,800 - ~l) Beginning with fiscal year ended September 3~, 2~~2, the City implemented Government Accounting Standards Board Statement Na. 34 ("GASB 34"}. In accordance with GASB 34, the City's financial statements far the fiscal year ended September 3~, 2~~7, which are attached hereto as Appendix B, include a management discussion and analysis of the operating results of such fiscal year. Reference is made to Appendix B for such information. 24 TABLE 12A -GENERAL FUND REVENI~ES AND EXPENDITURE HISTQRY Fiscal Year Ended September 30, Revenues: 2007 2006 2005 2004 2003 Taxes $ 45,842,915 $ 41,906,626 $ 37,179,874 $ 32,863,098 $ 29,455,465 Licenses and Permits 1,097,323 1,383,169 1,235,337 1,700,044 1,151,169 Franchise Fee 15,197,943 16,499,994 14,250,484 13,215,882 12,571,489 Fines and Forfeitures 4,468,692 4,639,922 3,959,476 3,338,979 3,422,952 Fees far Service 4,439,570 3,661,522 5,520,074 6,178,245 6,020,190 Interest Revenue 1,441,299 761,159 621,164 441,755 856,204 intergovernmental 380,887 541,968 629,259 664,896 692,581 Miscellaneous 529,753 447,200 382,494 1,581,327 418,817 Total Revenues $ 73,398,382 $ 69,841,560 $ 63,778,162 $ 59,984,226 $ 54,589,3b7 Expenditures: General Government $16,142,835 $16,304,027 $18,214,630 $19,524,403 $16,166,690 Public Safety 36,776,654 35,073,613 32,252,497 29,347,031 28,081,091 Public Works S,Sb1,166 4,950,734 5,228,666 4,465,283 4,342,542 Parks and Recreation 7,312,078 6,817,078 6,810,881 6,060,086 5,873,122 Capital Outlay 2,409,001 281,258 341,958 160,077 147,196 Debt Service: Principal Retirement 41,301 - - - - Total Expenditures $ 68,243,035 $ 63,426,710 $ 62,848,632 $ 59,556,880 $ 54,610,641 Excess (Deficiency) ofRevenues Over Expenditures $ 5,155,347 $ b,414,850 $ 929,530 $ 427,346 $ (21,274) Other Financing Sources ~Uses~: Capital Leases $ 1,108,131 $ - $ - $ - $ - Transfers In 5,278,998 579,878 748,065 1, l 10,160 529,721 Transfers (Out) 4,038,781 1,867,799 1,3b5,b89 500,219 (393,074 Total Other Financing Sources (Uses) $ 2,348,348 $ (1,287,921) $ (617,624) $ 609,941 $ 136,647 Net Changes in Fund Balances $ 7,503,695 $ 5,126,929 $ 311,906 $ 1,037,287 $ 115,373 Fund Balances at Beginning of Year l 5,056,115 9,929,186 9,617,280 8,579,993 8,464,620 Fund Balances at End of Year $ 22,559,810 $15,056,115 $ 9,929,186 $ 9,617,280 $ 8,579,993 25 TABLE 13 -MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, V.T.C.A., Tax Cade, 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 or the Certificates. 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 (1/~ of 1%) for property tax reduction. In September 20i~3, the voters of the City approved the imposition of an additional one-half of one percent (112 of 1%) for the Denton County Transportation Authority. The implementation of this tax began January 21~1~4, and is allocated directly to the Denton County Transportation Authority. Fiscal Year 1 112°/0 % of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9134 Collected ~1~ Tax Le Tax Rate Capita 2144 $17,b84,899 78.45% $1.4375 $ 18Q 245 18,998,457 71.81 % x.4342 184 2i)4b 21),343,413 b8.8b% 1).4248 188 247 2~,b53,934 b~.2b% ~.379b 181 21)48 13,642,887 fz) 33.b1% 1).2244 114 (1} Source: City of Denton Annual Program of Services. (2} Collections through May 31, 2~~8. Total sales tax levied by all jurisdictions in the City is as follows: Property Tax Relief ~.5~¢ Denton County Transportation Authority ~.5~¢ City Sales & Use Tax 1.~~¢ State Sales & Use Tax b.25¢ Total 8.25¢ FINANCUIL POLICIES Basis of Accounting ...The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance officers Association of the United States and Canada. The GF~A has awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Denton for each of the fiscal years ended September 34, 1983 through September 30, 244b. The City's current report has been submitted to GF~A to determine its eligibility for another Certificate. The City has also received the GF~A'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 an a basis consistent with generally accepted accounting principles. 2b 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. LEGAL INVESTMENTS ...Under Texas law, the City is authorized to invest in (1}obligations, including letter of credit, of the United States or its agencies and instrumentalities, (2} direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or 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; (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 lsrael; (7} certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended} that are issued by or through an institution that either has its main office or a branch in Texas, and are guaranteed or insured by the Federal Deposit lnsurance Corporation or the National Credit Union Share lnsurance 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, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (I), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (4) 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 40 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 orAAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1} obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no 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. Governmental bodies in the State are authorized to implement securities lending programs if (i} the securities loaned under the program are 100% collateralized, aloan 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. INVESTMENT PQLICIES ...Under Texas law, the City is required to invest its funds underwritten investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (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. 27 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 awn affairs, not for speculation, but far 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 off cers 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} adapted investment strategy statements and (b} state law. No person may invest City funds without express written authority from the City Council, ADDITIQNAL PRQVISIDNS ...Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2} require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a} receive and review the City's investment policy, (b} acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c} deliver a written statement attesting to these requirements; (4} perform an annual audit of the management controls on investments and adherence to the City's investment policy; (5} provide specific investment training for the Treasurer, Chief Financial off cer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7} restrict the investment in non money mutual funds of any portion of bond proceeds, reserves and funds held for debt service and 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; and (8) require local government investrnent pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 14 -CURRENT INVESTMENTS As of June 30, 2008, the City's investable funds were invested in the following categories: Market Value Book Description Percent Value U.S. Federal Agency Coupons 56.47% $177,043,103 U.S. Federal Agency Ca11ab1es 16.69% 52,211,335 U.S. Treasury Securities 7.08% 22,119,919 Money MarketlPool 15.67% 49,150,000 Commercial Paper 4.09% 12,856,174 100.00% $313,380,532 Market Value $177,130,665 52,367,281 22,209,436 49,150,000 12,825,400 $ 313,682,782 28 TAX MATTERS OPINION ... 4n the date of initial delivery of the Bonds and Certificates, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, will render its opinions that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"}, (l} interest on the Bonds and Certificates for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2} the Bonds and 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 Internal Revenue Cade of 19$6 (the "Code"}. Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds and Certificates. See Appendix C -- Form of Bond Counsel's Opinions. In rendering its opinion, Bond Counsel will rely upon (a} certain information and representations of the City, including information and representations contained in the City's federal tax certificate, and fib} covenants of the City contained in the Bond and Certificate documents relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and Certifcates and the property financed or refinanced therewith. Failure of the City to comply with these representations or covenants could cause the interest on the Bonds and Certificates to become includable in grass income retroactively to the date of issuance of the Bonds and Certificates. The Cade and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds and the Certificates in order for interest on the Bonds and the Certificates 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 Bonds and the Certificates to be included in gross income retroactively to the date of issuance of the Bonds and the Certificates. The opinions of Bond Counsel are conditioned on compliance by the City with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds and the Certificates. 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. 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 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 Bonds and the Certificates. A ruling was not sought from the Internal Revenue Service by the City with respect to the Bonds or the Certificates or the property financed or refinanced with proceeds of the Bonds or the Certificates. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Bonds or the Certificates. The opinion of Bond Counsel is not binding on the Internal Revenue Service. If an Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the City as the taxpayer and the holders of the Bonds and the Certificates may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. FEDERAL INCOME TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT ...The initial public offering price to be paid for one or more maturities of the Bonds and Certificates (the "original Issue Discount Bonds" or "original Issue Discount Certificates"} may be less than the principal amount thereof or one or more periods for the payment of interest on the Bonds or Certificates may not be equal to the accrual period or be in excess of one year. In such event, the difference between (i} the "stated redemption price at maturity" of each Original Issue Discount Bond or original Issue Discount Certificate, and (ii} the initial offering price to the public of such Original Issue Discount Bond or Original Issue Discount Certificate would constitute original issue discount. The "stated redemption price at maturity" means the sum of all payments to be made o the Bonds and Certificates less the amount of a l 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 or Original Issue Discount Certificate in the initial public offering is entitled to exclude from gross income (as defined in Section bl of the Code} an amount of income with respect to such Qriginal Issue Discount Bond or Original Issue Discount Certificate equal to that portion of the amount of such original issue discount allocable to the accrual period. Far 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 or Original Issue Discount Certificate prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond or Original Issue Discount Certificate 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 or Original Issue Discount Certificate was held by such initial owner} is includable in gross income. 29 Under existing law, the original issue discount on each Original Issue Discount Bond or Original Issue Discount Certificate is accrued daily to the stated maturity thereof din 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 Certificates 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 Band or Original Issue Discount Certificate 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 fib) the amounts payable as current interest during such accrual period on such Bonds and Certificate. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Bonds or Original Issue Discount Certificates 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 Bands or Original Issue Discount Certificates should consult their awn 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 or Original Issue Discount Certificates 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 or Original Issue Discount Certificates. CQLLATERAL FEDERAL INCOME TAX CONSEQi]ENCES ...The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds and Certificates. 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, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed earned income credit, certain S corporations with accumulated Subchapter C earnings and profits and excess passive investment income including foreign corporations subject to the branch profits tax 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 BONDS AND CERTIFICATES. Interest on the Bonds and Certificates 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. Section 55 of the Code imposes a tax equal to 20 percent for corporations, or 26 percent for non corporate taxpayers ~2$ percent for taxable excess exceeding X175,000}, of the taxpayer's "alternative minimum taxable income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Under section 6012 of the Cade, holders of tax-exempt obligations, such as the Bonds and Certificates, 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 far ordinary income tax treatment of gain recognized upon the disposition of atax-exempt obligation, such as the Bonds and Certificates, 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 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. STATE, LOCAL AND FOREIGN TAXES ...Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds and Certificates under applicable state or local laws. Foreign investors should also consult their awn tax advisors regarding the tax consequences unique to investors who are not United States persons. 30 OTHER INFORMATION RATINGS The presently outstanding tax supported debt of the City is rated "Aa3" by Moody's and "AA-" by S&P. Applications for contract ratings on the Bonds and the Certificates have been made to Moody's and 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 organization 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 Bonds and Certificates. LITIGATION It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATIQN AND QUALIFICATIQN QF BQNDS AND CERTIFICATES FAR SALE The sale of the Bonds and Certificates 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 Bonds and Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds and Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds and Certificates under the securities laws of any jurisdiction in which the Bonds and Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds and Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TQ SECURE PUBLIC FUNDS IN TEXAS Section 12U l .U41 of the Public Security Procedures Act (Chapter 1201, Texas Government Code} provides that the Bonds and Certificates are negotiable instruments governed by Chapter S, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds and Certificates by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 225b, Texas Government Code, requires that the Bonds and Certificates be assigned a rating of at least "A" or its equivalent as to investment quality by a national rating agency. See "Other Information -Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds and Certificates are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Bonds and Certificates are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security far those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Bonds and Certificates are legal investments for various institutions in those states. LEGAL OPINIQNS The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Bonds and Certificates, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and Initial Certificate and to the effect that the Bonds and Certificates are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to like effect and to the effect that the interest on the Bonds and Certificates will be excludable from gross income for federal income tax purposes under Section lU3~a} of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds and Certificates or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Bonds and Certificates will also be furnished. In its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P. has reviewed the information describing the Bonds and Certificates in the Official Statement to verify that such description conforms to the provisions of the Bond Ordinance and Certificate Ordinance. In connection with the issuance of the Bonds and Certificates, McCall, Parkhurst & Horton L.L.P. represents only the City. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds and Certificates is contingent on the sale and delivery of the Bonds and Certificates. The legal opinion will accompany the Bonds and Certificates deposited with DTC or will be printed on the Bonds and Certificates in the event of the discontinuance of the Book-Entry-Only System. 31 The various legal opinions to be delivered concurrently with the delivery of the Bonds and Certificates 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 ar 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 out of the transaction. CONTINUING DISCLOSURE OF INFORMATION In each of the Qrdinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bands and the Certificates. The City is required to observe the agreement for sa long as it remains abligated to advance funds to pay the Bonds and the Certificates. Under the agreement, the City will be abligated to provide certain updated financial infarmation and operating data annually, and timely notice of specified material events, to certain information vendors. This infarmation will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ...The City will provide certain updated financial information and operating data to certain information vendors annually. The infarmation 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 infarmation within six months after the end of each fiscal year ending in or after 200$. The City will provide the updated infarmation to each nationally recognized municipal securities information repository ~"NRMSIR") approved by the staff of the United States Securities and Exchange Commission ~"SEC") and to any state infarmation depository ~"SID") that is designated and approved by the State of Texas and by the SEC staff. The City may provide updated infarmation in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated infarmation 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 by the required time, and audited financial statements when and if such audited financial statements became available, Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B ar such other accounting principles as the City may be required to employ from time to time pursuant to state law ar regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is b00 West $th Street, P. 0. Box 2177, Austin, Texas 7$76$- 2177, and its telephone number is 512147b-b947. The Municipal Advisory Council has also received SEC approval to operate, and has begun to operate, a "central past office" repository for infarmation filings made by municipal issuers, such as the City, which repository then transmits the filed information to the NRMSIRs and the appropriate SID. This central past office can be accessed and utilized at www.DisclosureUSA.com ~"DisclosureUSA"). The City may utilize DisclosureUSA for the filing of infarmation relating to the Bonds and the Certificates. MATERIAL EVENT NOTICES ...The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds and the Certificates, as applicable, if such event is material to a decision to purchase or sell Bonds or Certificates: (I) principal and interest payment delinquencies; ~2) non- payment related defaults; ~3) unscheduled draws on debt service reserves reflecting financial difficulties; ~4) unscheduled draws on credit enhancements reflecting financial difficulties; ~5) substitution of credit ar liquidity providers, or their failure to perform; fib) adverse tax opinions or events affecting the tax-exempt status of the Bonds or Certificates; ~7) modifications to rights of holders of the Bonds or Certificates; ~$) Bonds ar Certificate calls; ~9) defeasances; X10) release, substitution, ar sale of property securing repayment of the Bonds or Certificates; and X11) rating changes. Neither the Bonds ar Certificates or the Qrdinances make provisions for debt services reserves, ar liquidity enhancement. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to each NRMSIR. AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID ...The City has agreed to provide the foregoing infarmation only to NRMSIRs and the SID. The infarmation will be available to holders of Bonds and the Certificates only if the holders comply with the procedures and pay the charges established by such information vendors ar obtain the information through securities brokers who do so. LIMITATIONS AND AMENDMENTS ...The City has agreed to update information and to provide natives of material events only as described above, The City has not agreed to provide other information that may be relevant ar 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 32 usefulness to a decision to invest in or sell Bands or Certificates at any future date. The City disclaims any contractual or tart liability far 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 Bands or Certificates may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, ar type of operations of the City, if (i} the agreement, as amended, would have permitted an underwriter to purchase ar sell Bonds or Certificates 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 iii}either (a}the holders of a majority in aggregate principal amount of the outstanding Bonds or Certificates consent to the amendment or fib} any person unaffiliated with the City such as nationally recognized band counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bands ar Certificates. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing ar selling Bonds or Certificates in the primary offering of the Bands or Certificates. 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 far the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ...During the last five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds and Certificates. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds and Certificates is contingent upon the issuance and delivery of the Bonds and Certificates. First Southwest Company may submit a bid far the Bands and Certificates, either independently ar as a member of a syndicate organized to submit a bid far the Bands and Certificates. First Southwest Company, in its capacity as Financial Advisor, has relied an the opinion of Band 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 Bonds and Certificates, or the possible impact of any present, pending ar future actions taken by any legislative ar judicial bodies. In the normal course of business, the Financial Advisor may also from time to time sell investment securities to the City far the investment of bond proceeds or other funds of the City upon the request of the City. The Financial Advisor to the City has provided the fallowing 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. AUTHENTICITY OF FINANCIAL DATA AND QTHER INFQRMATIQN 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 ar estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Preliminary 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 al.l respects. INITIAL PURCHASER After requesting competitive bids for the Bonds, the City accepted the bid of the "Initial Purchaser of the Bonds"} to purchase the Bonds at the interest rates spawn on the cover page of the Of~`icial Statement at a price of par plus a cash premium of $ .The Initial Purchaser of the Bonds can give no assurance that any trading market will be developed for the Bonds after their sale by the City to the Initial Purchaser of the Bonds. The City has no control over the price at which the Bonds are subsequently sold and the initial yield at which the Bonds will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser of the Bands. After requesting competitive bids for the Certificates, the City accepted the bid of (the "Initial Purchaser of the Certificates") to purchase the Certificates at the interest rates shown an page 3 of the Official Statement at a price of par plus a cash premium of $ .The Initial Purchaser of the Certificates can give no assurance that any trading market will be developed far the Certificates after their sale by the City to the Initial Purchaser of the Certificates, The City has na control aver the price at which the Certificates are subsequently sold and the initial yield at which the Certificates will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser of the Certificates. 33 FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Gfficial 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 betaken 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. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Bonds and Certificates, the City will furnish a certificate, executed by proper officers, acting in their official capacity, to the effect that to the best of their knowledge and belief: (a} the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds and Certificates and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b} insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c} insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and ~d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The Ordinances authorizing the issuance of the Bonds and Certificates will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds and Certificates by the Initial Purchasers. MARK BURR~UGHS Mayor City of Denton, Texas ATTEST: JENNIFER K. WALTERS City Secretary 34 APPENDIX A GENERAL INFORMATION REGARDING THE CITY LocATIoN ...The City of Denton is located in the northern portion of the Da11aslFort Worth Consolidated Statistical Area (CSMA}. The City is a part of the DallaslFort Worth Metroplex, and is situated at the apex of a triangle based by Dallas X38 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. ECONOMIC FI]TI]RE ...The fiscal year 2007-200$ brought exciting news in economic development. Listed below are just a few of the highlights. MAJOR EMPI,DYL'R c~c INDf/S7R1A1. NEWS • Granite Point Phase I has constructed two speculative buildings for a combined 297,500 square feet of space. Other officelwarehouse buildings include 7,540 square feet for Spilde-Harrison; two buildings for CR Smith Investments totaling 28,678 square foot; 9,997 square feet of office and warehouse space for Bobcat; 3,200 square feet for a new steel building for Pioneer Equipment Rental; and 8,100 square feet for a new training center at Peterbilt Motors Company. D1s VELOPMIN7'AT DIsNTDN MUNICIPAL AIRPORT 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 tv Class D during daily operation hours of 5 a.m, and 10 p.m. and increased our corporate jet traffic. Denton Municipal Airport opened a new $1.2 million terminal and completed realignment of a taxiway providing a secondary emergency runway. The airport's control tower supports corporate jet traffic by providing Class D airspace from 8 a.m. to 10 p.m. daily. In 2005, three of four major airport business operators plan a total of $3.1M in office, hanger, and maintenance facility construction totaling 50,000 square feet. A construction grant for $1.5 M funded 90% by TxDOT and 10% by the City of Denton will open up an additional 18-20 acres for airport master plan development. TXDOT will additionally fund an $8.4 million runway expansion from 6,000 to 7,000 feet in 2010, enhancing existing business fleet operating capacity. Once approved, a pending Foreign Trade Zone application that includes the airport, surrounding businesses and the University of North Texas Discovery Park research facility will leverage additional future airport business investment. RETAIL NEWS • Denton Towne Crossing, a 43 -acre retail development located in the southeastern corner of Brinker Road and Loop 28$, completed 340,000 square feet of retail space. The center includes a bank and several restaurant and retail pads with Home Depot and Super Target as anchors for the development. Construction of the mixed-use development known as Unicorn Lake continues. The master-planned center incorporates the urban style development of residential over retail along the lake. 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, Pourhouse Grill, Washington Federal Savings and Loan have located in the center. Additional restaurants, a bank, and medical offices are also planned to open by year end. The Hilton Homewood Suites recently purchased a site in this development and should begin construction within 12 months. HEALTHCARE INDENTDN In 2005 both of Denton's hospitals completed or began expansion plans that confirm Denton's status as a regional center for quality medical services. The hospitals spent approximately $150 million on these facility expansions. Medical facilities continue to expand and locate in Denton. • Denton Regional Medical Center expanded adding 27,431 square feet of medical office space. Located adjacent to North Texas Hospital, the Mayhill Hospital (40,400 square feet), Caring for Women (13,402 square feet}, and the Texas Back Institute (14,076 square feet} have a combined valuation of $8,506,563. • Integrity Transitional Hospital, a 38,000 square foot, $16 million long term acute-care specialty hospital opened in 2007. Two healthcare facilities have joined the Rayzor Ranch development: construction began on Select Medical, a $20 million rehabilitation hospital specializing in spinal injuries and brain trauma and StoneGate Senior Health Continuing Care announced plans to construct a I28 resident continuing care retirement facility providing skilled nursing, Alzheimer's care and assisted living apartments. A-1 OTNL"R DEYI:L~PMF,N7S Raynor Ranch development recently received zoning approval for an overlay district creating a 414-acre mixed use development. The $854 million project will provide approximately 2.1 million square feet of retail and will include a 15-acre park with an amphitheater and large water feature, hotels, single family, apartments and town homes. The southern portion of the property is adjacent to Presbyterian Hospital and will be home to the new Select Medical facility. Senior assisted living is also planned for this area. Sam's Club and VVa1Mart plan to begin construction of 375,444 square feet of space on the north side of the development in 2448 with a late fall 2449 opening. The remainder of the development is slated to open in 2414111. ~ Other major commercial investments include several banks that built new facilities in Denton in 244612447: Narthstar Bank, Wells Fargo (two new branches) and Washington Federal Savings at an average value of over $544,444. In addition, Caartyard by Marriott and Comfort Inn hotels are scheduled to open in 2448, • Malecalar Insight purchased a vacant 84,444 square foot building, formerly occupied by NeoRx. Molecular Insight is a pharmaceutical manufacturing company who will renovate the facility to begin manufacturing in Denton in 2449. ~ Fastenal Company will complete their 244,444 square foot building on Airport Road in the summer of 2448, Fastenal assembles and distributes industrial fasteners. The $14 million project will employ approximately 244 and will serve as the company's regional headquarters. ~ Aldi Incorporated has announced plans to construct a $44 million, 544,444 square foot distribution facility for 25 stores located in North Texas including two to three stares planned in the City of Denton. REMAINING PORTION OF THIS PAGE LEFT BLANK INTENTIONALLY A-2 INDUSTRY AND BUSINESS Major Employers Approximate Number of Employer Description Employees University of North Texas Educational Facility 7,351 Denton Independent School District School System 2,b00 Peterbilt Motors-Headquarters & Plant Diesel Trucks 2,000 Denton State School MHMR Facility 1,50 Denton County County Government 1,~~ 1 City of Denton City Government 1,300 Texas Woman's University Educational Facility 1, l Sg FEMA Regional Headquarters) Federal Government Call Center 1,100 Denton Regional Medical Center Hospital S00 Presbyterian Hospital of Denton Hospital 750 Victor Equipment Welding Equipment 57~ Sally Beauty World HQ Beauty Supply Company 500 Anderson Merchandisers Consumer Products Distributor 500 Jostens Class Ring Manufacturer Class Ring Manufacturer 280 Progressive Industries MHMR Facility 27b United Copper Copper Wire 2b~ James Wood Auto Park Car (Truck Sales & Service 252 Tetra Pak Aseptic Packaging 250 Precision Pattern Inc. Jet Interior Manufacturing 237 Acme Brick Brick Manufacturer 225 Nucon Steel Steel Manufacturing 180 CBS Mechanical Mechanical Contractor 175 Denton Rehabilitation & Nursing Center RetirementlRehabilitation 1b0 Morrison Milling Flour Grain Mill 1b0 Wells Fargo Bank 1b0 Mayday Manufacturing Aerospace Machined Parts 1b0 Flowers Baking Company Bakery 152 Russell Newman Ltd. World HQ SleepwearlLoungewear 150 General Telemarketing International Call Center 150 The Vintage RetirementlRehabilitation 150 Senior Care Health & Rehabilitation Center Nursing Facility 1~5 DATCU Financial Institution 13b Denton Good Samaritan Village Retirement Center l20 Lake Forest Good Samaritan Village Retirement Center 120 Mayhill Hospital Psychiatric & Rehabilitation l l5 Bill Utter Ford Car (Truck Sales & Service l 07 Denton Publishing Company Newspaper Publishing 100 Integrated Alliance, LP Call Center l00 Hulcher Services Railroad Emergency Response 100 Source: City of Denton and Denton Chamber of Commerce Economic Development Offices Denton is proud to be home to nearly ~0 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 3,000 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. A-3 ECONOMIC AND POPULATION GAINS ...Historical population totals from U.S. Census depict Denton's consistent population increases commensurate with Denton's steady economic growth. 1940 Census -11,192 1950 Census - 21,345 19b0 Census - 2b,$44 1970 Census - 39,$74 19$0 Census - 49,079 1990 Census - bb,270 2000 Census - $0,537 estimated 200$ Population is 119,490 (i) ~l} City of Denton Planning Department. 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 DallaslFort 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. ECONOMIC RANKING ...The following data was taken from Claritas 2007 Survey. Of Population Whose Age is: 0-17 21% 1$-34 39% 35-54 25% 55-b4 $% 65 and over 7% Number of Households 2007 44,432 City of Denton Average Household. Income $ 57,$33 City of Denton Household Income $250,000 + 2% $100,000 - $249,999 20% $ 50,000 - $ 99,999 27% $ 35,000 - $ 49,999 15% $ 25,000 - $ 34,999 15% Less than or equal to 24,999 15% City of Denton Population by Occupation; Sales & Office 29% Professional B~ Related Occupations 24% Service 17% Management, Business & Finance 12% Production B~ Transportation 10% Construction 15% Farming, Fishing, & Forestry Less than 1 A-4 EMPLOYMENTILABOR FORCE . , .According to the U.S. Department of Labor's Bureau of Labor Statistics, the 2447 annual available workforce in Denton is 5$,229. Additionally Denton is fortunate to draw workers from the Dallas and Fort Worth MSA's representing 5.1 million people, as well as north to southern Oklahoma. EDUCATION .. ,Denton is home to the University of North Texas, founded in 1$90, Texas Woman's University, founded in 1901. North Central Texas College, established in 1924, built an extension campus just outside Denton's extraterritorial jurisdiction (ETJ) in adjacent city, Corinth. The two universities and community college have a combined enrollment of more than 47,967 students and approximately 9,x99 full and part time staff members. With an enrollment of over 33,134, the University of North Texas exceeds the combined enrollment of Southern Methodist University in Dallas, Texas Christian University in Fort Worth and Rice University in Houston. Texas Woman's University has an approximate enrollment of 9,999 in Denton with an additiona12,16$ students attending in Dallas and Houston. The University of North Texas AUNT} campus comprises a land area of more than 425 acres valued in excess of $167 million. The University encompasses nine colleges and schools of study and offers Bachelor's degrees in 96 fields, Master's degrees in 111 areas and Doctoral programs in 50 disciplines. UNT maintains a low 20:1 student-faculty ratio more prevalent among private rather than public institutions. UNT is listed in both America's 100 Best College Buys and America's 140 Most Wired Colleges. Texas Woman's University TWU}, a major state-supported teaching and research institution, it's the nation's largest public university attended primarily by women, who comprise 91% of attending students. Eighty percent of Physical Therapy faculty members at TWU hold a Doctoral Degree or other appropriate degrees in their fields. Through its seven schools and colleges, TWU offers 5$ programs leading to a Bachelor's degree, 66 Master's degree fields, and Doctoral degrees in 23 specialization areas. According to the Texas Higher Education Coordinating Board, TWU experienced the fourth highest enrollment growth rate among universities in Texas with a 36 percent increase from 2642-2447. In 2041, TWU's Doctoral health studies program tied with Harvard University for second place nationally in a study of recommended practices by the National Association of Graduate-Professional studies. According to the Center for Measuring University Performance, TWU is ranked in the top 124 public universities nationwide in the number of doctoral degrees awarded. 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 campus in the adjacent city of Corinth is just under 5,004 with the potential for three times that number with construction of additional facilities planned in the near-term. 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 modem 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 2447 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 Schooi District (DISD) encompasses almost 1$0 square miles and continues to be one of north Texas' fastest-growing school districts. Over 24,444 students enrolled for the 2047-204$ school year in the district's 33 schools that include 24 elementary schools (grades K-5), six middle schools ~6-$}, three high schools (9-12), one advanced technology complex (11-12} one early childhood center, and two alternative schools. Voters approved a November 2Qa7 bond package for $2$2M to fund two new elementary schools, one new middle school, design plans fora 4~' comprehensive high school and additional science labs and prep rooms in all district schools. 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 schoollcollege 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 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 653 students, more than 24 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 modem administration building, an academic building, laundry facility, chapel, maintenance shop and a warehouse. The school has a staff of 1,544 with an annual budget of over $44M. Denton Universities Expand ...Texas Woman's University TWU} has grown dramatically. Student enrollment at the university's home campus in Denton increased 47% from 2442-2407 to just under 10,040 students. Similar growth at the university's Dallas and Houston satellite nursing campuses necessitated recent university construction projects. A $40M TWU Institute of Health Sciences-Houston facility opened in August 2046 and a $56M TWU lnstitute of Health Sciences-Dallas facility will break ground in 2449. TWU leads as a provider of critically needed health care professionals, boasting the nation's fifth largest College of Nursing, largest nursing doctoral program. TWU is proud of its diversity; minority students comprise A-5 40°/a of students, and 55°/a of the most recent semester's graduates were first generation college graduates. Almost half of TWU students (42%) are graduate students. University of North Texas (UNT) -Named one of America's 140 Best College Buys for 12 consecutive years, and among the nation's top 54 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, 553,004 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 has been the recipient of almost $lb million in defense funding the past four years and provides researchers with a unique grouping of microscopes for nanotechnology research and for other critical advancement fields. Bachelor and Master degree programs in Mechanical and Energy Engineering were added in 2447 to UNT's existing College of Engineering programs in electrical engineering, materials science, computer science, and engineering technology. Over 228,444 of newly constructed square feet were completed and include Honor's Hall residence for UNT's Honors College students and Chestnut Hall, housing UNT's expanded student health center and career center. Work will begin in 2408 on two new buildings; the Life Sciences Building will feature open research laboratories that promote collaborative and interdisciplinary research and the $b4 million Business Leadership Complex, focused on global economic and business disciplines. ACR[Ci]LTi]RE ...Northwestern Denton County is one of the more diversified agricultural areas in Texas. With soil types 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. Avery significant concentration of valuable world champion horse farms east of the City's corporate boundaries provide a prosperous economic resource for the City and area. Products significant to the economy are horses, beef, eggs, wheat, grain sorghums, hay, and nursery crops. TRANSPORTATION ...Denton is located only 24 miles northeast of the Dallas-Fort Worth International Airport which began operations in January 1974. In addition, Dallas' Love Field Airport and Fort Worth's Meacham International Airport are in close proximity to Denton. Alliance Airport, located about 24 miles southwest of Denton, is the only purely industrial airport in the world. Accompanying the Alliance Airport are five business parks. Together, Alliance's access to highway, rail and air transportation offers an excellent opportunity for future industrial growth. 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. GreyhoundlTrailways serves Denton through Dallas and Oklahoma City. Motor freight in Denton is included in the DIFW commercial trade zone and is served by major freight carriers. BANI~NG ...There are 18 banks in Denton: Access First Capital, Bank of America, N.A., Chase, Compass Bank, Wells Fargo Bank, N.A., Farmers and Merchants State Bank, First Convenience, First State Bank, Northwest Bank Texas, N.A., Provident Bank, Guaranty Federal Bank, Point Bank, Inwood National Bank, Synergy, Washington Mutual, Denton's only locally-owned bank, Northstar Bank, Washington Federal Savings, Wachovia, and First United Bank with Denton's first "Banco" branch specializing in serving Denton's Hispanic community. GROWTH INDICES Fiscal Building Values (millions) ~~~ Year Commercial Residential Total 2003 $ 42 $ 277 $ 319 2004 50 2005 81 200b bl 2007 49 2bb 31b 2b1 342 242 303 217 2bb Water Customers 24,978 2b,41 b 27,584 28,805 29,783 Sewer Electric Customers Customers 23,329 37,057 24,453 39,507 25,b95 41,84b 2b,951 42,18b 28,020 43,b07 City State Unemployment Unemployment Rates (Z) Rates ~~~ NIA b.71 NIA b.03% 3.83% 5.39% 3.97% 4.94% 3.84% 4.35% (1) New Construction Only. (2} Source: Texas Workforce Commission. A-b MEDICAL ...Denton has become a regional medical destination serving north Texas and southern Oklahoma. Denton Regional Medical Center is a 184-bed community hospital that serves the growing population of Denton, Wise, Caake, and Montague Counties. The hospital offers afull-spectrum of healthcare including advanced open-heart surgery and neurosurgery programs. Denton Regional is the only facility in Denton County to earn the prestigious Level II Chest Pain Center accreditation by the international non-profit Society of Chest Pain Centers. Since 2aa5, the hospital has opened a new $7 million, 13,5aa square-foot day surgery center and a new hospital floor housing a 29-bed, $19M progressive care unit. Denton Regional's Center far Cancer and Blood Disorders, a comprehensive cancer diagnostic and treatment center integrating education, nutrition, and rehabilitation services will complete in 2008. Presbyterian Hospital of Denton (formerly Denton Community Hospital) celebrated the grand opening of its 272,538 square- faat, 161-bed facility and an 84,400 square-foot medical office building in 2005. The hospital expanded its Women's Center services in 24a~ with the opening of a Level III Neonatal Intensive Care Unit serving Denton and its surrounding communities. A new 52,aaa square-foot, $14 million physical rehabilitation hospital brake across from Presbyterian Hospital ground in 2007 and will be modeled after the renowned Kessler Institute far Rehabilitation. North Texas Hospital opened a ~4,4aa square foot specialty hospital featuring eight surgical suites and 16 inpatient beds in 2aa5. In 2x47, 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 Denton hospitals gaining Denton its reputation as a regional medical destination include Mayhill Hospital, a 4a,ooa square-foot featuring physical rehabilitation and behavioral health services hospital opened in 2aa5 and Integrity Transitional Hospital, a 38,500 square foot, $16 million dollar long-term acute care hospital opened in 2aa7. RECREATION ....Lake Ray Roberts, located approximately $ miles northeast of the City's corporate boundary on the Elm Fork of the Trinity River, is a major water conservation and flood control facility of mare than 749,~a4 acre-feet of storage that allows for an abundance of parks and other water and outdoor related recreational facilities. The nine mile Greenbelt HikeBikelEquestrian Trail, located between Lake Ray Roberts and Lake Lewisville, is a cooperative project made passible 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' mast popular recreation areas. Lake Lewisville has a shoreline of 183 miles located entirely in Denton County. Lake Lewisville attracts over 3,a4a,a4a visitors to its shores annually. The upper reaches of the lake are only about 3 miles east of the Denton City Limits, while the darn 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 an the shares of Lake Ray Roberts, Lake Lewisville, and Grapevine Lakes. 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 $12.1 million Waterworks Park opened in 2aa3 and features four water slides, a children's play pool, a Boa ft. long continuous flow tubing river, outdoor amphitheater, pavilions, a sand volleyball court and two indoor pools, A-7 APPENDIX B EXCERPTS FRAM THE CITY 4F DENTDN, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2007 The information contained in this Appendix consists of excerpts from the City of Denton, Texas Annual Financial Report for the Year Ended September 30, 2007, 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. 1 ~ ~~ KPMG LLP Suite 31 Qa l17 North Harwood Street Dallas, TX 752a~-6585 Independent Auditors' Report The Honorable Mayor and Members of City Council City of Denton, Texas: We have audited the accompanying financial statements of tl~e governmental activities, business type activities, each major fund and the aggregate remaining fund information of the City of Denton, Texas the City} as of and for the year ended September 30, 2007, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. Gur responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Azditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of September 30, 2007, and the respective changes in financial position, and, where applicable, cash flows thereof and the budgetary comparison for the General Fund for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated February 1$, 200$ on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. KPMG t_LP, a U.S. limited liability partnership, is the U.5. member firm of KPMG Intemalional, 8 Swiss CODperatlve. The management's discussion and analysis, the schedule of TMRS funding progress and contributions and the schedule of Denton's Firemen's Relief and Retirement Plan funding progress and contributions on pages 3 through 10, 57 and 58, respectively, are not a required part of the basic f nancial statements but are supplementary information required by U.S, generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Qur audit was conducted for tlae purpose of forming opinions on the f nancial statements that collectively comprise the City's basic financial state~~nents. Tl~e introductory section, combining and individual fund financial statements and schedules, capital assets used in the operation of governmental fiends schedules, regulatory section and statistical section are presented for purposes of additional analysis and are not a required part of the. basic financial statements. The combining and individ~.~al fund financial statements and schedules have been subjected to the auditing procedures applied in tl~e audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section, capital assets used in the operation of governmental funds schedules, regulatory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and accordingly, we express no opinion on them. rtrN'~GS LCP February l8, 2008 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, Zo07 The City of Denton's Management's Discussion and Analysis is designed to ~a} assist the reader in focusing on significant financial issues, fib} provide an overview of the City's financial activity, (c} identify changes in the City's financial position (its ability to address the next and subsequent years' challenges}, (d} identify any material deviations from the financial plan the approved budget), and fie} identify individual fund issues or concerns. Since the Management's Discussion and Analysis (MD&A} is designed to focus on the current year's activities, resulting changes and currently known facts, please read it in conjunction with the Transmittal Letter (beginning on page i} and the City's financial statements beginning on page 11}. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of the fiscal year ended September 30, 200 7, by $512,351,177 net assets). Of this amount, $138,575,851 (unrestricted net assets} maybe used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets increased by $39,255,728. This increase can be attributed to the net revenue of the governmental activities, business-type activities and the contribution of capital assets by developers. • As of September 30, 2007, the City's governmental funds reported combined fund balances of $81,313,672, an increase of $27,442,558 in comparison with the prior fiscal year, due to increased revenue from taxes and the proceeds from the issuance of long-term debt. Approximately 39% of the $81,313,672, $31,455,921, is available for spending at the government's discretion (unreserved fund balance). • At the end of the fiscal year, the unreserved and undesignated fund balance for the General Fund was $18,199,161, or 23,68% of budgeted general fund expenditures. • The City's total noncurrent liabilities increased by $21,812,324 during the fiscal year. The primary reason for the increase was the issuance of $16.7 million of revenue bonds, $15.9 million of general obligation bonds, and $11.5 million of certificates of obligation bonds along with the normal pay down of general obligation bonds and certificates of obligation bonds of $9.4 million, and the normal pay down of revenue bonds of $13.3 million. OVERVIEW OF THE FIlVANCIAL STATEMENTS The Management's Discussion and Analysis is intended to serve as an introduction to the City of Denton's basic financial statements. The City's basic financial statements comprise three components: ~l) government- wide financial statements, ~2} fund financial statements and ~3} notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar toprivate-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods ~e.g., uncollected taxes and earned but nvt used vacation leave). Both the statement of net assets and the statement of activities are prepared using the accrual basis of accounting as opposed to the modif ed accrual basis. In its Statement of Net Assets and the Statement of Activities, the City is divided between two kinds of activities: • Governmental activities. Most of the City's basic services are reported here, including police, fire, libraries, development, public services and operations, public works, building inspection, technology 3 CITY 4F DENTQN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued SEPTEMBER 30, 2007 services and general administration. Property taxes, sales taxes and franchise taxes finance most of these activities. • Business-type activities. The City charges a fee to customers to cover the cost of services it provides. The City's utility systems electric, water and wastewater} and solid waste activities are reported here. The government-wide financial statements can be found on pages 11-13 of the report. Fund Financial Statements. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Fund financial statements provide detailed information about the most significant funds, not the City as a whole. Some funds are required to be established by state law or bond covenants. However, the City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants and other monies. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. • Governmental funds. The majority of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method identified as the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. By comparing information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements, readers may better understand the long-term impact of the government's near-term financing decisions. The relationship or differences between governmental activities reported in the Statement of Net Assets and the Statement of Activities} and governmental funds is detailed in a reconciliation following the fund financial statements. The City of Denton maintains ten governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the general fund, debt service fund and capital projects fund, all of which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation, Individual fund data for six of these non-major governmental funds along with an aggregate of all other is provided in the form of combining statements elsewhere in this report. • Proprietary funds. The City charges customers for certain services it provides, whether to outside customers or to other units within the City. These services are generally reported in proprietary funds. Proprietary funds are reported in the same manner that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City's enterprise funds ~a component of proprietary funds} are similar to the business-type activities that are reported in the government-wide statements but provide more detail and additional information, such as cash flows. The internal service funds the other component of proprietary funds are utilized to report activities that provide supplies and services for the City's other programs and activities, such as the City's municipal warehouse, the City's self insurance fund and equipment maintenance function. Because these services benefit both governmental and business-type functions, they have been included in both the governmental and business-type activities in the government-wide financial statements. The City of Denton maintains four enterprise funds. The City uses enterprise funds to account for its electric, water and wastewater systems and solid waste operations. The funds provide the same type of information as the government-wide financial statements, only in more detail and include some of the internal service fund-type activity. The City considers all enterprise funds to be major funds. 4 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS continued) SEPTEMBER 30, 2007 ~ Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Agency funds are a component of fiduciary funds. Agency funds differ from other fiduciary funds in that they do not typically involve a formal trust agreement. Agency funds are used to account for situations where the City's role is purely custodial, such as receipt, temporary investment and remittance of fiduciary resources to individuals, private organizations, or other governments. The City maintains three fiduciary funds. The City uses agency funds to account for the collection and payment of the City's payroll and associated liabilities, employee-purchased insurance and other similar relationships. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29 - 56 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As of September 30, 2007, the City's combined net assets were $512,351,177, of which $131,482,550 can be attributed to governmental activities and $380,868,627 attributed to business-type activities. This analysis focuses on the net assets Table 1) and changes in net assets Table 2) of the City's governmental and business- type activities. The largest portion of the City's net assets X66.7°/a) reflects its investment in capital assets ~e.g., land, building, machinery and equipment, less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table 1 Net Assets {in tliausffi~ds} Governirei~tal Business-twe Activities Activities Total Current and other assets Capital assets Total assets Long-term liabilities outstanding Other liabilities Total liabilities 2007 2006 ~ 94,658 $ 81,555 179,923 180,465 274,581 262,(12.0 124,126 107, 706 18,973 16,111 143,099 123,817 99,858 107,410 886 440 30,738 30,353 2Q07 2006 $ 269,434 ~ 246, 829 449,529 422,062 718,963 668, 891 288,703 283,310 49,391 50,688 338,094 333,998 242,016 213, 075 31,015 30,975 107,838 90,843 2007 2006 $ 364,092 $ 328,384 629,452 602,527 993,544 930,911 412,829 391,016 68,364 66,799 481,193 457,815 341,874 320,.485 31,901 31,415 138,576 121,196 N et a ss ets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets $ 131,482 $138,203 $ 380,869 $ 334,893 $ 512,351 $ 473,096 5 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS continued} SEPTEMBER 30, 2007 Governmental activities decreased the City's net assets by $6,720,088 and business-type activities increased the City's net assets by $45,975,816. The key elements of these increases are contained in Table 2. Table 2 Changes in Net Assets din thousands Governmental Business-type Activities Activities Total Revenue: Program Revenue: Charges far services Operating grants and contributions Capital grants and contributions General Revenue: Property tax Sales tax Franchise tax Hotel occupancy tax Beverage tax Bingo tax investment Income Miscellaneous Total revenue Expenses: General government Public safety Public works Parks and recreation Interest on long-term debt Electric Water Wastewater Solid waste Total expenses Increase in net assets before transfers Transfers Increase in net assets Net assets at beginning of year - Net assets at end of year $13,877 $13,965 2,991 3,713 5,399 5,537 34,756 30,001 20,654 20,343 15,198 16,500 1,269 1,133 295 258 24 24 3,633 1,967 3,199 3,892 101295 97,333 22,146 22,166 42,162 36,627 14,009 12,485 11,564 10,497 4,658 4,333 94 539 86,108 6,756 11,225 ~ 13,476 895 X6,720} 12,120 138,202 126,082 $131,482 $13 8,202 $195,405 $221,151 8,441 10,023 12,109 5,971 548 1955 216 503 239100 123,927 145,368 25,840 26,708 18,785 19,028 15 451 13,45 5 184 003 204,559 32,500 34,541 13,476 (895} 45,976 33,646 334,893 301,247 $380,869 $334,893 $209,282 $235,116 2,991 3,713 13,840 15,560 34,756 30,001 20,654 20,343 15,198 16,500 1,269 1,133 295 258 24 24 15,742 7,938 3,747 5,847 317,798 336,433 22,146 22,166 42,162 36,627 14,009 12,485 11,564 10,497 4,658 4,333 123,927 145,368 25,840 26,708 18,785 19,028 15,451 13,45 5 278,542 290,667 39,256 45,766 39,256 45,766 473 095 427 329 $512,351 $473,095 Governmental activities. The mast significant governmental activities expense was in providing public safety, which incurred expenses of $42,161,674. These expenses were funded by revenues collected from a variety of sources, with the largest being from property taxes, which are $34,756,356 for the fiscal year ended September 30, 2007. The most significant portion of public safety is the cost of personnel, which totaled $31,415,487. Qther significant governmental activities expense for the City includes general government, which incurred $22,145,804 in expenses, of which $12,371,944 represented personnel charges. During the fiscal year Motor Pool, an internal service fund, was dissolved resulting in a transfer of net assets to business- type activities of $14,332,928, which included the net value on capital assets as well as any unspent cash allocated to vehicle and equipment purchases. Governmental activities' portion of the Motor Pool dissolution was $9,900,198, but since internal service funds are classified as governmental activities, there is na effect presented above. 6 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued} SEPTEMBER 30, 2007 Increased expenses for governmental activities include $3.4 million additional depreciation relating to vehicles and equipment transferred to the general government from Motor Pool; $1.1 million depreciation adjustment on public safety equipment; increased capital purchases of $1.1 million; and $1.5 million associated with the commencement of operations at fire station #7. The $4.0 million increased revenues in governmental activities are mainly due to a 13.6% increase to the property tax base in fiscal year 2007 over fiscal year 2006. Business-type activities. Business-type activities increased the City's net assets by $45,975,816, accounting for the total growth in the entity-wide net assets. A key element of this increase is capital contributions, emerging as a ma j or revenue source for the Water and Wastewater funds during the current fiscal year, producing $8,440,634 in revenue. Contributions of assets arise from new property development within the City. Charges for services decreased $25,745,292 due to Energy Cost Adjustment (ECA} rate decreases by 50.1 % as a result of lower energy costs and decreased sales volumes as a result of rain totals ten inches above normal. The expense decrease between fiscal years 2006 and 2007 reflects decreased costs of production as it relates to the above normal rainfall. As noted in governmental activities, Motor Pool was dissolved resulting in a transfer of net assets tobusiness-type activities of $14,3 32,928. FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of resources available to spend. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported a combined ending fund balance of $81.3 million, an increase of $27.4 million in comparison with the prior year. Approximately $27.1 million constitutes unreserved, undesignated fund balance, which is available for spending at the government's discretion. In addition to unreserved, undesignated fund balance, the governmental funds reported unreserved, designated fund balance of $4.3 million. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1} to purchase or construct capital assets ($49.0 million}, or 2} to pay debt service ($0.9 million}. The general fund is the chief operating fund of the City. At September 30, 2007, the unreserved and undesignated fund balance of the general fund was $18.2 million, or 23.68% of budgeted general fund expenditures. The unreserved and undesignated fund balance of the general fund increased by $4.9 million during the current fiscal year due to expenditures being less than anticipated by $2.9 million and higher than anticipated revenues from return on investment of $0.9 million and fees for services of $0.5 million. The entire balance of the capital projects fund is reserved for capital construction and acquisition. At the end of the fiscal year, the capital projects fund has a fund balance of $49.0 million, an increase of $16.1 million. In 2007, the City received $24.8 million of proceeds from the issuance of debt while expending $14.5 million on construction and acquisition. In addition to 2007 debt proceeds, the capital projects fund received $1.8 million in interest income, $1.3 million of revenue related to gas wells, and transfers in from the general fund, motor pool, and CDBG grant of $1.1 million, $ l . l million and $0.4 million respectively. The debt service fund has a total fund balance of $0.9 million all of which is reserved for the payment of debt service. The overall increase in the debt service fund balance was $0.4 million. Proprietary funds. The city's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. 7 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS continued) SEPTEMBER 34, 2447 Unrestricted net assets in Electric, Water, and Wastewater at September 30, 2007 are $72.1 million, $19.0 million, and $10.0 million respectively, Solid Waste has unrestricted net assets of $4.1 million. The results reflect an increase of unrestricted net assets in each fund, specifically $9.7 million in Electric, $1.4 million in Water, $4.4 million in Wastewater, and $1.4 million in Solid Waste. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Denton's business-type activities, GENERAL FUND BUDGETARY HIGHLIGHTS During fiscal year 200b-2007 there were no formal amendments to the City of Denton general fund budget. For fiscal year 200b-07, General Fund actual expenditures including transfers} on a budgetary basis were $7b.1 million compared to the budget of $7b.9 million, The $0.8 million variance was primarily due to reduced personnel costs for the general government and an offsetting transfer to the recreation fund to cover the aquatic center deficit balance. Actual revenue (including transfers and proceeds from capital leases} on a budgetary basis was $83,b million compared to the original budget of $77.3 million, Of the $b.3 million variance, approximately $5.2 million was the transfer from the Motor Pool fund due to dissolution and $l.l million was due to the unbudgeted proceeds on capital leases. Over the years, the Denton City Council has followed a policy of maintaining a general fund balance in order to plan for unforeseen emergencies and place the City in a more favorable position. In 1997-1998, the policy level was increased from 10% to 12.5% of general fund expenditures. In 1999-2000, the percentage was increased to 13% , in 2004-2005 to 13.5%, and in 2005-200b to 14.0%. The 200b-07 budget increased the policy level to 14.5%. The City of Denton's unreserved and undesignated fund balance at September 30, 2007 is $18.2 million, or 23.b8% of budgeted expenditures. Below is a listing of the ending unreserved balances for the past three years, as well as fiscal year 200b-07 projected and actual, For those years where the actual ending balance has exceeded the policy level, the following year's budget has included utilization of that amount for one-time expenditures. By using the fund balance for one-time expenditures only, the financial impact on future budgets is eliminated. Actual Actual Adopted Projected Actual 9130105 913010b 9130107 9130107 9130107 Unreserved balances $9,718,3 b8 $13,2b4,027 $11,150,708 $14,432,949 $18,199,1 b 1 % of total budgeted expenditures 13.98% 18.84% 14.50% 18.77% 23,b8% Policy level 13.50% 14.00% 14.50% 14.50% 14.50% The largest revenue source of the General Fund's budget was the ad valorem tax. Demon's ad valorem tax rate is comprised of two components. The first is the operations and maintenance component that is used to calculate revenue for the City's General Fund operations. The second component is the debt portion that is used to calculate revenue to pay the City's general debt service obligations. The Denton Central Appraisal District's certified appraisal roll shows an increase of 13.b1% over the prior year certified value and 11.94% over the final 2005 value including supplements}, This increase consisted of $255.2 million of new value added far 200b and a $39b.b million increase in value for property on the tax rolls in 2005. The 200b-07 ad valorem tax rate was increased by $0.01837 to $.b2b52 per $100 of valuation, which was used to provide enhanced services for police, streets, code enforcement and library services. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. At the end of fiscal year 2007, the City had $b29,452,713 invested in a broad range of capital assets, including police and fire equipment, buildings, park facilities, roads, bridges and water and sewer lines see Table 3 on the following page}. This amount represents a net increase including additions and deductions} of $2b,925,881 or 4,5% over the prior fiscal year. S CITY QF DENTaN, TEXAS MANAGEMENT'S DISCUSSIQN AND ANALYSIS (continued} SEPTEMBER 30, 2007 Table 3 Capital Assets at Year-end Net of Accumulated Depreciation, in Thousands Governmental Business-type Activities Activities Totals 2007 2006 2047 2446 2007 2006 Land $ 7,840 $ 7,830 $ 10,415 $ 9,7$0 $ 17,855 $ 17,610 Landfill improvements - - 253 549 253 549 Buildings and improvements 41,766 39,484 4,802 4,171 46,568 43,255 Plant, machinery and equipment 20,881 28,666 116,625 98,879 137,506 127,545 Water rights - - 57,099 57,795 57,499 57,795 Infrastructure 95,568 95,255 226,441 213,637 322,009 348,892 Construction in progress 13,869 9,630 34,294 37,251 48,163 46,881 Total capital assets $179,924 $180,465 $449,529 $422,462 $629,453 $642,527 This year's major additions included: De9c ' ion Amount Fire Station #? $ 4,024,221 Preserve at ~caa Creek -development infrastructume 3,1$5,?2Q pillages of Carmel Phase lA -development infrasbn~ccture 1,554,951 Ba Hard Street upgmade 1,512,99 wheeler Ridge Phase 4 - development infrastructure 1,361,338 Library Boobs 1,045,150 Total $ 12,b4~4,3?0 Additional information on the City's capital assets can be found in note IV. D, on pages 44 - 42 of this report. Debt. At year-end, the City had $423.9 million in bonds and notes outstanding as compared to $401.4 million at the end of the prior fiscal year, an increase of 5.6%, as shown in Table 4. Table 4 Outstanding Debt at Year-end din thousands} Governmental Business-type Activities Activities Totals 2007 2006 2007 2446 2007 2006 General obligation bonds $ 74,654 $58,743 $ 3,100 $ 3,5$2 $ 73,750 $ 62,325 Certificates of obligation 51,355 46,700 13,$94 11,975 65,245 SS,675 Revenue bonds - - 281,754 277,305 281,750 277,305 Notes - - 3,141 3,141 3,141 3,141 Total $122,005 $145,443 $301,881 $296,443 $423,886 $401,446 These amounts do not include net unamortized premiumsl~discounts} of $7,686,484 or net deferred gainl~loss} on refunding of x$9,627,882}. 9 CITY QF DENT4N, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS continued} SEPTEMBER 30, 2007 During the current fiscal year, the City issued debt in February 2007 and July 2007. The new debt resulted primarily from the issuance of $41,795,000 in utility refunding revenue bonds, $15,925,OOO in general obligation bonds, $11,445,ooQ in certificates of obligation, and $16,744,000 in utility revenue bonds. Moody's lnvestor's Service, Inc. has given the City's General Gbligation Bonds and the Certificates of Obligation a rating of "Aa3." Standard and Poor's Corporation has given both the City's General Gbligation Bonds and Certificates of Gbligation an "AA-" rating. The City's Utility Revenue Bonds carry "Al" and "A+" ratings by Moody's and Standard and Poor's respectively. The City is permitted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.SO per $loo of assessed valuation for general governmental services including the payment of principal and interest on general obligation long-term debt. The current ratio of tax-supported debt to certified assessed value of all taxable property is 2.SO%. Other long-term liabilities. The City maintains a self insurance program for general liability, auto liability, public officials' liability, errors and omission liability, police professional liability, and workers' compensation. Private insurance companies cover claims for property loss over $50,000 per occurrence and for workers' compensation and liability over $500,000 per occurrence. The City has a reserve for claims and judgments of $3.3 million outstanding at year-end compared with $2.9 million at the end of the prior fiscal year. Gther obligations include accrued vacation pay and sick leave. More detailed information about the City's long-term liabilities is presented in Note IV. G., on pages 45 - 50 of this report. EC4NQMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES All indicators are pointing to continued growth of the Denton community, and the 2QO7-o8 Budget includes the resources to provide City services to meet demands. The 2007-08 budget includes a $0.041$100 valuation increase in the ad valorem tax rate to accommodate the debt associated with the 2005 bond program and additional drainage improvements. Sales tax revenue is projected to increase 2.0%, and the general fund balance reserve has been increased to 15.0% of budgeted expenditures. The 2007-08 budget includes no base rate increases for electric customers. The water budget includes a 3% rate revenue increase for retail customers. No base rates changes are proposed for wastewater retail or wholesale customers. Solid Waste adopted budget includes a rate increase of $0.50 per month to the single- familyresidential recycling rate. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Denton Finance Department, Z15 E. McKinney, Denton, Texas 76201. 10 CITY OF DENTON, TEXAS Exhibit I STATEMENT OF NET ASSETS SEPTEMBER 30, 2007 Primary Government Governmental Business-type Activities Activities Total ASSETS: Current assets: Cash, cash equivalents and investments, at fair value S 35,219,984 $ 112,994,437 $ 148,214,421 Receivables, net of allowances: Taxes 4,424,110 - 4,424,110 Accounts - 10,495,699 10,495,699 Unbilled utility service - 8,620,054 8,620,054 Interest 587,590 1,174,890 1,762,480 Other 2,829,239 1,970 2,831,209 Internal balances X7,954,141) 7,954,141 - Duefrom fiduciary funds 80,309 35,156 115,465 Due from other governments 1,075,398 - 1,075,398 Inventory 6,523,928 - 6,523,928 Prepaid items 140 18,310 18,450 Deferred debt issuance casts 96,629 272,082 368,711 Total current assets 42,883,186 141,566,739 184,449,925 Noncurrent assets: Restricted assets: Cash, cash equivalents and investments, at fair value 51,033,505 123,889,435 174,922,940 Escrow deposits 5,257 716,273 721,530 Accrued interest 222 1,270,993 1,271,215 Other receivables - 26,337 26,337 Deferred debt issuance casts 735,595 1,963,896 2,699,491 Capital assets not being depreciated: Land 7,839,654 10,015,175 17,854,829 Construction in progress 13,868,587 34,294,162 48,162,749 Capital assets, net of accumulated depreciation: Buildings 41,766,340 4,801,695 46,568,035 Plant, machinery and equipment 20,880,854 116,624,565 137,505,419 Infrastructure 95,567,903 226,441,491 322,009,394 Landfill improvements - 253,199 253,199 Waterrights - 57,099,088 57,099,088 Total noncurrent assets 231,697,917 577,396,309 809,094,226 Total assets 274,581,103 718,963,048 993,544,151 LIABILITIES: Current liabilities: Accounts payable 4,674,006 19,472,465 24,146,471 Retaina~e payable 140,246 - 140,246 Deposits - 3,505,469 3,505,469 Accrued interest 808,934 - 808,934 Due to other gavernroents 18 - 18 Noncurrent liabilit;es due within one year 12,696,621 20,224,590 32,921,211 Other liabilities 627,775 - 627,775 Unearned revenue 8,750 81,325 90,075 Payable Pram restricted assets: Accounts payable 16,090 1,202,204 1,218,294 Retainage payable - 343,987 343,987 Accrued interest - 4,561,500 4,561,500 Total current liabilities 18,972,440 49,391,540 68,363,980 Noncurrent liabilities: Noncurrent liabilities due in mare than one year 124,126,113 288,702,8$1 412,828 994 Total noncurrent liabilities 124,126,113 288,702,881 412 828,994 Tatalliabilities 143,098,553 338,094,421 481,192,974 NET ASSETS: Invested in capital assets, net of related debt 99,858,383 242,015,614 341,873,997 Restricted: Restricted far debt service 88b,141 29,097,159 29,983,300 Restricted for capital acquisition - 1,918,029 1,918,029 Unrestricted 30,738,026 107,837,825 138,575,851 Total net assets ~ 131.4$2,550 $ 380.868.627 S 512.351.177 The Hates to the basic financial statements are an integral part of this statement. 11 CITY OF DENTON, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2007 Program Revenues Operating Capital Charges for Grants and Grants and FunctionslPrograms Expenses Services Contributions Contributions Primary government: Governmental activities: General government S 22,145,804 ~ 3,694,$69 ~ 2,291,182 S - Public safety 42,161,674 6,160,611 606,381 - Publicworks 14,00$,867 800,378 62,143 5,399,220 Parks and recreation 11,564,247 3,220,$37 31,518 - Interestexpense 4,658,12$ - - - Total governmental activities 94,538,720 13,876,695 2,991,224 5,399,220 Business-type activities: Electric system 123,926,967 128,973,477 - - Water system 25,839,614 27,830,767 - 2,246,754 Wastewater system 18,785,353 22,634,454 - 6,193,880 Solid waste 15,451,025 15,967,051 - - Total business-type activities 184,aa2,959 195,405,749 - 8,440,634 Total primary government S 278,541,679 S 209,282,444 _,~_ 2,9,9,1,,2„4_ _$ ,_ 13839,854 General revenues: Taxes: Property tax Sales tax Franchise fees Hotel occupancy tax Beverage tax Bingo tax Investment income Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets at beginning of year Net assets at end of year The notes to the basic financial statements are an integral part of this statement. i2 Exhibit II Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-type A ..~t.~ai.... A ..~:.,,~C..,, T,.~..1 (35,394,682} - (7,747,126) - (8,311,892) - (4,658,128) - 72,271,581 - - 5,04b,510 - 4,237,907 - 14,042,981 c~~ rn~ - 19,843,424 '12,271,581} 19,843,424 34,75b,356 20,653,932 15,197,943 1,268,627 294,b23 23,708 3,632,744 3,199,131 13,475,571 b5,551,493 (6,720,088) 138,202,638 $ 131,482,550 12,108,632 548,189 13,475,571 26,132,392 45,975,816 334,892,811 $ 380,868,627 ~ (16,159,753) (35,394,682) (7,747,126) (8,311,892} (4,b58,128~ (72,271,58 5,04b,510 4,237,907 10,042,981 516,026 19,843,424 (52,428,157} 34,756,356 20,653,932 15,197,943 1,2b8,b27 294,623 23,708 15,741,376 3,747,320 y 1,VOJ,~OJ 39,255,728 473,095,449 $ 512,351,177 13 CITY 4F DENTON, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 34, 2447 Exhibit III Other Total General Capital Governmental Governmental Fund Debt Service Projects Funds Funds ASSETS: Cash, cash equivalents and investments, at fair value S 19,584,495 S 847,844 $ 49,348,152 $ 8,725,992 $ 78,466,043 Escrow Deposits 5,257 - - - 5,257 Receivables, net of allowances for uncollectibles: Taxes 4,155,269 268,841 - - 4,424,114 Accrued interest 162,149 - 313,712 52,881 528,742 Other 2,251,491 - 219,714 152,534 2,623,739 Interfund receivables 471,252 - - 64,611 531,863 Due from other governments - - - 1,475,398 1,475,398 Total assets ~ 26.629.513 ~ 1.116.645 ~ 49.841.578 5 10.467.416 ~ 87.655.151. LIABILITIES AND FUND BALANCES LIABILITIES: Accounts payable 2,423,114 - 665,772 475,169 3,564,055 Retaina~e payable - - 133,544 6,742 144,246 Interfund parables - - - 64,611 64,611 Due to other governments 18 - - - 18 Other liabilities 627,775 - - - 627,775 Deferred revenues 1,018,796 230 504 74,692 628,783 1,948,775 TotalliabiGties 4,069,703 230,504 .~ 869,968 1,171,345 6,341,480 FUND BALANCES: Reserved for: Debt service - $$6,141 - - 886,141 Capital projects - - 48,971,610 - 48,971,610 Unreserved, designated for, reported in: Vehicle replacement 4,360,649 - - - 4,364,649 Unreserved, undesignated reported in: General fund 18,199,161 - - - 18,199,161 Special revenue funds - - - 8,896,111 8,896,111 Total fund balances 22,559,810 886,141 48,971,610 8,896,111 81,313,672 Total liabili'es and fund balances _5; 2.629.513 S 1.116.645 S 49.841.78__ ~ O.Q67.416 ~„ 87,655.1, 5~„ The notes to the basic financial statements are an integral part of this statement. ~4 CITY OF DENTQN, TEXAS Exhibit 1V RECUNCILIATIQN QF THE BALANCE SHEET QF GUVERNMENTAL FUNDS TQ THE STATEMENT QF NET ASSETS AS OF SEPTEMBER 30, 2007 Total fund balances -governmental funds (Exhibit III) $ 81,313,672 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. 179,923,338 Certain receivables will be collected next year but are not available soon enough to pay for the current period's expenditures and therefore are reported as deferred revenues in the funds. 1,940,026 An internal charge to business-type activities is not recorded at the fund level. (2,571,266) Several internal service funds are used by the City's management. The assets and liabilities of the internal service funds are included with governmental activities. Total assets of internal service funds $ 23,189,963 Less: Capital assets reported above X8,587,636) Less: Total liabilities of internal service funds X16,645,955) Liabilities reported below 6,424,614 4,380,986 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: General obligation bonds payable $ (70,650,317) Certificates of obligation payable (51,355,1Q0) Less: Deferred charge for issuance costs 249,288 Arbitrage payable X3,335) Accrued interest on the bonds (808,934) Capital leases payable X2,393,684) Compensated absences 8,542,124 (133,504,206 Total net assets of governmental activities Exhibit I) $ 131,4$2,550 The notes to the basic financial statements are an integral part of this exhibit. 15 CITY OF DENTUN, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Exhibit V Uther Total REVENUES: Taxes Licenses and permits Franchise fees Fines and forfeitures Fees for services Investment revenue Intergovernmental Miscellaneous Total revenues EXPENDITURES: Current: General government Public safety Public works Parks and recreation Capital outlay Debt service: Principal retirement Bond issuance costs Interest and other charges Total expenditures Excess (deficiency) of revenues over (under) expenditures UTHER FINANCING SUURCES ([ISES): General Capital Governmental Governmental Fund Debt Service Projects Funds Funds $ 45,842,915 $ 9,791,684 $ - $ 1,268,627 $ 56,903,226 1,097,323 - - - 1,097,323 15,197,943 - - - 15,197,943 4,468,692 - - 596,357 5,065,049 4,439,570 - - 3,184,695 7,624,265 1,441,299 82,748 1,810,561 298,136 3,632,744 380,887 - 1,639 3,469,987 3,852,513 529,753 - 1,999,374 477,624 3,006 X51 73 398,382 9,874,432 3,811,574 9,295,426 96,379,814 16,142,835 - 274,026 3,741,878 20,158,739 36,776,654 - 74,804 862,513 37,713,971 5,561,166 - 978 62,143 5,624,287 7,312,078 - 2,690 2,919,593 10,234,361 2,409,001 - 14,480,371 348,550 17,237,922 41,301 6,808,439 - - 6,849,740 - - 314,286 - 314,286 - 4,389,307 - - 4,389,307 68,243,035 11,197,746 15,147,155 7,934,677 102,522,613 5,155,347 1323 314 (11,335,581) 1,360,749 (6,142,799) Issuance of Iong-term debt - - 24,780,000 - 24,780,000 Premium on debt issuance - - 528,630 - 528,630 Capital leases 1,108,131 - - - 1,108,131 Transfers in 5,278,99$ 1,769,797 2,588,960 2,685,377 12,323,132 Transfers out (4,038,781_ - (431,039 (684,716) (5,154,536) Total other financing sources (uses) 2,348,348 1,769,797 27,466,551 2 000,661 33,585,357 Net change in fund balances 7,503,695 446,483 16,130,970 3,361,410 27,442,558 Fund balances at beginning of year 15,056,115 439,658 32,840,640 5,534,701 53,871,114 Fund balances at end of year $ 22,559,810 $ 886,141 $ 48,971,610 S 8,896,111 $ 81.313.672 The notes to the basic financial statements are an integral part of this statement. 16 CITY QF DENTQN, TEXAS Exhibit VI RECUNCILIATIQN QF STATEMENT 4F REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES QF GUVERNMENTAL FUNDS TQ THE STATEMENT OF ACTIVITIES FQR THE YEAR ENDED SEPTEMBER 30, 2407 Net change in fund balances -total governmental funds (Exhibit V} $ 27,442,558 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation and retirement of assets ($14,911,525=$1b,252,128 - $1,350,b03 internal service portion} exceeded capital outlays ($17,237,922} in the current period. 2,326,397 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Such amounts are recorded in the funds when considered available. (210,810} The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins and donations} is to increase net assets. 5,155,928 Band proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of band principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which proceeds exceeded payments. (19,438,391} Fund-level financials report costs related to bonds as expenditures; however, these are deferred and amortized on the government-wide financials. (317,OG5} Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (1,318,845} Governmental funds include transfers in for the dissolution of the internal service fund Motor Pool. As internal service fund assets are classified on the government-wide statements as governmental, the statement of activies would not include these amounts as a change in net assets. (b,523,bb1} Amounts recorded in the statement of activities include transfers out far the dissolution of the internal service fund Motor Pool to business-type activities. Governmental funds do not report this amount. (14,332,928} Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. A portion of the net revenue (expense} of certain internal service funds is reported with governmental activities. The amount reported with business-type activities is $143,040. 96,729 Change in net assets of governmental activities (Exhibit II} $ (b,720,088} The notes to the basic financial statements are an integral part of this statement. 17 18 CITY OF DENTON, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET TO ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2007 Exhibit VII Variance with Adjustments - Actual on a Final Budget - BudgetedAmounts Actual Budgetary Budgetary Positive Ori final Final Amounts Basis Basis (Negative) REVENUES: Taxes $ 45,588,821 $ 45,588,821 $ 45,842,915 $ - $ 45,842,915 ~ 254,094 Licenses and permits 1,492,680 1,492,680 1,097,323 - 1,097,323 (395,357) Franchise fees 15,791,387 15,791,387 15,197,943 - 15,197,943 (593,444) Fines and forfeitures 4,343,843 4,343,843 4,468,692 - 4,468,692 124,849 Fees for services 3,907,596 3,907,596 4,439,570 - 4,439,570 531,974 Investment revenue 550,000 550,000 1,441,299 - 1,441,299 891,299 Intergovernmental 363,162 363,162 380,887 - 380,887 17,725 Miscellaneous 154,599 285,081 529,753 - 529,753 244,672 Total revenues 72,192,088 72,322,570 73,398,382 - 73,398,382 1,075,812 EXPENDITURES: Current: General government 23,332,793 20,059,041 16,142,835 3,771,385 19,914,220 144,821 Public safety 37,654,912 36,782,059 36,776,654 - 36,776,654 5,405 Public works 6,526,281 5,768,446 5,561,166 - 5,561,166 207,280 Parks and recreation 7,484,603 7,438,752 7,312,078 - 7,312,078 126,674 Capital outlay 1,116,860 2,563,256 2,409,001 - 2,409,001 154,255 Debt service: Principal retirement 41,301 41,301 41,301 - 41,301 - Total expenditures 76,156,750 72,652,855 68,243,035 3,771,385 72,014,420 638,435 Excess (deficiency) of revenues over expenditures (3,964,662) (330,2$5) 5,155,347 (3,771,385) 1,383,962 1,714,247 OTHER FINANCING SOURCES tUSES): Capital leases - - 1,108,131 - 1,108,131 1,108,131 Transfer in 5,106,792 4,976,310 5,278,998 3,771,385 9,050,383 4,074,073 Transfers out (742,446) (4,246,341) (4,038,781) - (4,038,781) 207,560 Total other financing sources (uses) 4,364,346 729,969 2,348,348 3,771,385 6,119,733 5,389,764 Excess (deficiency) of revenues and other sources over (under) expenditures and other uses 399,684 399,684 7,503,695 - 7,503,695 7,104,011 Fund balances at beginning of year 15,056,115 15,056,115 15,056,115 - 15,056,115 - Fund balance at end of year $ 15,455,799 $15,455,799 $ 22,559,810 $ - $ 22,559,810 5 7,104,011 Adjustments -Budgetary Basis are expenditures allocated to and reimbursed by other funds. These expenditures are recorded in the other funds' financials. The notes to the basic financial statements are an integral part of this statement. 19 CITY 4F DENT4N, TEXAS STATEMENT 4F NET ASSETS PROPRIETARY FUNDS AS 4F SEPTEMBER 30, 2007 ASSETS: Current assets: Cash, cash equivalents and investments, at fair value Receivables, net of allowances: Accounts Unbilled utility service Accrued interest Other Interfund receivables Merchandise inventory Prepaid items Deferred debt issuance costs Total current assets Noncurrent assets: Restricted assets: Cash, cash equivalents and investments, at fair value Escrow deposit Accrued interest Other receivables Interfund receivables Deferred debt issuance costs Capital assets, net of accumulated depreciation Total noncurrent assets Total assets LIABILITIES: Current liabilities: Accounts payable Claims payable Compensated absences payable Leases payable Deposits Accrued interest Interfund payables Unearned revenue Payable from restricted assets: Accounts payable Retainage payable Accrued interest Revenue and certificate and general obligation bonds Total current liabilities paid from restricted assets Total current liabilities Business-type Activities -Enterprise Funds Electric Water Wastewater Solid stem System System Waste $ 78,509,502 $ 19,b15,484 $ 7,752,223 $ 7,117,228 b,876,b2b 1,594,954 1,140,402 883,717 5,878,927 l,1b8,208 901,b75 671,244 783,341 2l 1,883 116,983 b2,b83 - 1,970 - - 486,759 91,843 189,644 13,706 14,375 - 3,935 - 83,56b l l 1,082 55,789 21,b45 92,b33,09b 22,795,424 10,1b0,b51 8,770,223 3b,5b4,844 54,034,427 2b,224,9bb 7,Ob5,198 126,311 97,b9b 57,b92 434,574 492,610 439,858 20b,b13 131,912 - 26,337 - - 4,321,244 209,542 105,293 - 575,891 9b4,Ob1 318,b05 105,339 100,383,585 185,1b9,551 142,353,969 21,b22,270 ,.,-„-142w85 _ 240,941,472 169,2b7,138 29,359,293 235,097,581 263,736,89b 179,427,789 38,129,51b 18,b11,735 251,384 303,597 305,749 4b7,7bb 494,b47 241,549 240,500 - - 135,919 1,043,b41 3,239,502 224,819 - 41,148 81,325 - - - 52,084 319,933 - 228,649 1,356,773 2,148,593 410,449 419,738 97,125 18,213 951,113 105,021 5,496,141 5,92b,483 4,125,b89 2,052,245 6,904,998 8 b23,b58 5,584,37b 2,595,217 29,305,32b 9,594,508 b,2b5,451 4,226,255 20 Exhibit VIII Governmental Activities - Total Internal Enterprise Service Tundc Ti'nnrlc $ 112,994,437 $ 6,909,897 10,495,699 - 8,620,054 - l,l 74,890 58,848 1,970 205,500 781,952 4,6$6 - 6,523,928 1$,310 140 272,082 5,119 134,359,394 13,708,118 123,889,435 877,549 716,273 - 1,270,993 222 26,337 - 4,636,079 - 1,963,896 16,438 449,529,375 8,587,636 582,032,388 9 481,845 716,391,782 23,189,963 19,472,465 1,109,951 - 437,544 1,444,462 226,488 1,179,574 442,279 3,545,469 - - 25,640 - 5,778,504 81,325 - 1,202,2D4 16,090 343,9$7 - 4,561,500 - 17,6D0,558 469,732 23,708,249 485,822 49,391,540 8,506,184 (continued} 21 CITY OF DENTON, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS AS OF SEPTEMBER 30, 2007 Business-type Activities -Enterprise Funds Electric Water Wastewater Solid System System System Waste Noncurrent liabilities: Leases payable $ - S - $ 190,09$ $ 2,522,096 Payable from restricted assets: Arbitrage payable 24,692 5,525 17,037 - General obligation bonds payable - - - 2,670,243 Certificates of obligation - - - 12,323,127 Revenue bonds payable, net of premiumldiscount 82,753,134 133,623,217 56,606,213 - Deferredamount on refunding X2,645,$94) X5,226,934) X1,370,727) (96,130) Notes payable - 3,141,222 - - Compensatedabsences payable 50,915 35,444 30,00$ 75,133 Claims payable - - - - Landfill closurelpostclosurecosts - - - 3,974,462 Total noncurrent liabilities $0,1$2,$47 131,57$,474 55,472,629 21,4b$,931 Total. liabilities 109,4$$,173 141,172,9$2 61,738,0$0 25,b95,1$6 NET ASSETS: Invested in capital assets, net of related debt 42,769,$13 90,349,270 100,597,301 8,299,230 Restricted for debt service 10,737,9$7 12,375,006 5,9$4,166 - Restricted for capital acquisition - 820,101 1,097,92$ - Unrestricted 72,101,60$ 19,019,537 10,010,314 4,135,100 Total net assets $125,609,408 $122,563,914 $117,6$9,709 $12 434,330 Adjustment to reflect inclus ion of internal service fund activities related to enterprise funds. Net assets of business-type activities Exhibit I) The notes to the basic financial statements are an integral part of this statement. 22 Exhibit Vlll Governmental Activities - Total Internal Enterprise Service Funds Funds $ 2,712,194 ~ $$4,574 47,254 - 2,670,243 53,312 12,323,127 4,292,209 272,952,564 - (9,339,655} - 3,141,222 - 191,500 30,380 - 2,879,296 3,974,462 - 288,702,881 8,139,771 338,494,421 16,645,955 242,015,614 3,344,636 29,097,159 - 1,918,029 - 105,266,559 3,199,372 ~ 378,297,361 $ 6,544,Q08 2,571,266 $ 38Q,868,627 (concluded) Z3 CITY OF DENTON, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities -Enterprise Funds Electric Water Wastewater Solid System System System Waste OPERATING REVENUES: Utility services $ 124,727,137 $ 20,624,118 $ 20,103,918 $ 15,809,048 Charges far goads and services - - - - Other fees 4,246,340 3,057,387 1,088,519 158,003 Miscellaneous - - 32,294 - Totaloperating revenues 128,973,477 23,681,505 21,224,731 15,967,451 OPERATING EXPENSES: Operating expenses before depreciation 116,650,348 15,167,255 11,073,000 11,796,867 Depreciation 4,255,715 5,033,989 5,087,019 2,910,127 Total operating expenses 120,906,063 24,201,244 16,160,019 14,706,994 Operating income 8,067,414 3,480,261 5,064,712 1,260,057 NON-OPERATING REVENUES EXPENSES): Investment revenue 5,934,612 3,623,792 1,831,738 718,490 Interest expense and fiscal charges (3,049,271) (5,665,918) (2,641,555) (774,935) Impact fee revenue - 4,149,262 1,409,723 - Gain floss) on disposal of capital assets (45,703) (120,160) (9,220) 319,857 Other non-operating revenues expenses) - 136,107 28,634 238,674 Total non-operating revenues (expenses) 2,839,638 2,123,083 619,320 502,086 Income before contributions and transfers 10,907,052 5,603,344 5,684,032 1,762,143 CONTRIBUTIONS AND TRANSFERS: Capital contributions - 2,246,754 6,193,880 - Transfers in 5,154,417 3,102,983 3,901,029 2,486,595 Transfers out (74,829) (109,863) X923,197) (61,564) Total contributions and transfers 5,079,588 5,239,874 9,171,712 2,425,031 Change in net assets 15,986,640 10,843,218 14,855,744 4,187,174 Total net assets at beginning of year 109,622,768 111,720,696 102,833,965 8,247,156 Total net assets at end of year $ 125,649,408 $ 122,563,914 $ 117,689,709 $ 12,434,330 Change in fund net assets of proprietary funds Adjustment to reflect inclusion of internal service fund activities related to enterprise funds. Change in net assets ofbusiness-type activi ties (Exhibit II) The notes to the basic financial statements are an integral part of this statement. 24 Exhibit IX Governmental Activities - Total Internal Enterprise Service $ 151,264,221 $ - - 15,767,700 5,550,249 - 31,194 195,618 189,546,764 19,063,318 154,657,470 17,575,050 17,156,550 1,350,603 171,974,320 19,225,653 11,108,631 361,451 (12,131,679} (211,745} 5,555,955 - 144,774 - 403,415 - 6,054,117 149,703 13,956,571 (11,651} 5,440,634 - 14,645,014 111,411 (1,169,453} (24,233,116} 11,916,205 (24,020,704} 45,871,776 (14,033,356} $ 378,197,361 $ 6,544,005 45,572,776 103,040 $ 45,975,516 Z5 CITY OF DENTON, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 3a, 2x47 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 131,199,927 Cash paid to employees far services (5,959,780) Cash paid to suppliers (115,521,194) Net cash provided by operating activities 9,718,953 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers out (74,829) Transfers in 5154,417 Net cash used by noncapital financing activities: __ 5,479 588 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal payments on capital debt (5,321,239) Interest and fiscal charges (2,978,544) Principal payments under capital lease obligation - Proceeds framissuance ofcapital debt 7,451,915 Proceeds from impact fees - Proceeds from sale of capital assets - Acquisitionand construction of capital assets 13 442 379 Net cash used by capital financing activities 14 69a 247 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale and maturities of investment securities 295,13x,5a9 Purchase of investment securities (3x4,359,367) Interest received on investments 5 473,772 ., Net cash provided (used) by investing activities 244,914 Net increase (decrease) in cash and cash equivalents 353,2x8 Business- a Activities -Enter rise Funds Electric Water Wastewater System System System $ 23,968,1x4 $ 21,316,526 (9,155,89b) (4,638,448) 6 b 1 x S52 (b,435,8ab) 8 241 b5b 1 x,642,272 (149,862) (923,197) 3,142,983 3 9x1 x29 2,993,121 ,.2977,832 (5,146,586) (3,53x,246) (5,897,696) (2,68x,390) - (13a,34a) 9,692,632 - 4,149,262 1,4x9,723 (6,312,592 {7,x64,986} 3,514,98x} X11,996,239} Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Investments, at fair value (Note IV.A.) Cash, cash equivalents and investments, at fair value RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income Adjustments: Depreciation expense Decrease (Increase) in receivables Decrease (Increase) in interfund receivables Increase in inventories Decrease (Increase) in prepaid items Increase (Decrease) in accounts payable Increase (Decrease) in compensated absences payable Increase in closurelpostclosureIiability Increase (Decrease) in interfund payables Total adjustments Net cash provided by operating activities 39,859,562 (46,255,aa4) 3.473.212 2,922,22b} 4,757,571 1x,353,381 1,35a,31b 14,7x6,589 b,147,887 144,367,757 b7,542,024 S 115.x74_ S 73.649.911 25,754,151 (22,562,4x4) 1.731.2x7 4,923,358 6,547,223 1,618,434 8,165,653 25,811,536 S 33.977.189 $ 8,467,414 $ 3,48x,261 $ 5x64 712 4,255,715 5,x33,989 5,487,419 3,224,274 19,541 58,645 (997,824) 267,x59 33,194 (13,422) 2,17a 5,5x9 (4,84x,863) (22b,342) 485,433 51,323 3b,242 (14,212) b( 7,bb4} ~4112~ ~77,984~ 1.651.539 4,721,395 5,577,5b4 $ 9,718,953 $ 8,2x1,656 $__ 14,642,,272 NONCASH CAPITAL, INVESTING AND FINANCING ACTIVITIES: Noncash activity during the year consisted of contributed capital assets for the Water and Wastewater funds in the amounts of $2,246,754 and $6,193,880, respectively; the change in the fair value of investments of $l,bb8,baa, $664,497, $377,645 and $122,447 for the Electric, Water, Wastewater and Solid Waste funds, respectively; the addition of capital leases in Solid Waste and the Internal Service funds of $1,313,791 and $1,547,995, respectively; and the change in fair value of investments of $226,8b2 for the Internal Service funds. The notes to the basic financial statements are an integral part of this statement. 26 Exhibit X Governmental Activities Total Internal Solid Enterprise Service --- -- - - $ 15,575,560 $ 192,460,117 $ 19,336,778 (6,923,301) (26,677,425) (3,745,944) _ (5,334,308). (133,541,864) 13,521,242} 3,317,951 31,880,832 2,069,632 (61,564) (1,169,452) (24,233,126) 2 486 595 14,645,424 212,422 2,425,031 13,475,572 24,020,704) (1,167,9Q5} (15,165,976) (4,780,786} (757,730) (12,314,360) (243,919} (851,429} (981,769) (I,$46,117} 2,631,889 19,376,436 15,705,581 - 5,558,985 - 319,857 319,857 (4,3714 (31,191,453) (713,1Q7) (4,196,814) 34,398,280} 8,161,652 6,958,623 367,702,845 14,448,280 (8,300,000) (377,476,367) (944,440} 627,200 11,305,391 402,112 _ (714,177)_ 1531869 13,550,392 831,991 12,489,993 (239,028) 1,365,106 14,687,233 2,843,911 2,197,097 27,177,226 2,604,883 11,985,329 209,706,646 5,182,563 $ 14.182,426 $ 236.883,872 $ 7.787.446 $ 1260 057 S 17,872,444 $ [162,355) 2,910,127 17,286,850 1,354,603 (549,091 } 2,753,329 (91,973) 157,601 (539,974) 365,424 - - (2,490,582} _ (5,743} 30,606 272,269 (4,269,543} 772,427 2,527 75,88Q 43,156 285,054 285,054 . {1,020,593) (1,577,545) 2 252 326 2,057 894 14,008,388 2,231987 3,317,951 $ 31,880,832 $ 2,069,632 27 CITY OF DENTQN, TEXAS STATEMENT QF ASSETS AND LIABILITIES AGENCY FUNDS AS 4F SEPTEMBER 3Q, 2U07 Total Agency Funds ASSETS: Cash, cash equivalents and investments, at fair value $ 1,530,883 lnterfund receivables 49 Other receivables 195,487 Total assets $ 1,726,419 LIABILITIES: Accounts payable ~ 1,610,903 Interfund payables 115,516 Total liabilities ~ 1,726,419 The notes to the basic financial statements are an integral part of this statement. Exhibit XI 28 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2007 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Denton is a municipal corporation governed by an elected mayor and six-member council, The City receives funding from state and federal government sources and must comply with the requirements of these funding source entities. However, the City is not included in any other governmental "reporting entity," as defined in pronouncements by the Governmental Accounting Standards Board GASB} Statement No. 14, "The Financial Reporting Entity," since council members are elected by the public and have decision-making authority, the authority to levy taxes, the power to designate management, the ability to significantly influence operations, and primary accountability for fiscal matters. The financial statements of the City have been prepared to conform to accounting principles generally accepted ~GAAP} in the United States of America as applicable to state and local governments. GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies. A. Reporting entity An elected mayor and asix-member council govern the City. As required by accounting principles generally accepted in the United States of America, these financial statements present the City the primary government} and its component units, which are entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City's operations, and so data from these units are combined with data of the primary government, A discretely presented component unit, on the other hand, is reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the City, The City had no discretely presented or blended component units at September 30, 2007. B. Government-wide and fund financial statements The basic financial statements include both government•wide (based on the City as a whole} and fund financial statements. The reporting focus is either the City as a whole government-wide financial statements} or major individual funds within the fund financial statements}. The government-wide financial statements ~i.e., the statement of net assets and the statement of activities} report information on all non-fiduciary activities of the primary government. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, axe reported separately from business-type activities, which rely to a significant extent on fees and charges for support, The government-wide statement of activities demonstrates the degree to which the direct expenses of a functional category public safety, public works, etc.} or segment axe offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include ~ 1 }charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment; ~2} grants and contributions that are restricted to meeting operational requirements of a particular function or segment; and ~3} grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The net cost (by function or business-type activity} is normally covered by general revenue {property taxes, sales taxes, franchise fees, interest income, etc.}, Separate fund financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major governmental funds and major enterprise funds are reported as separate columns in the fund financial statements. GASB Statement No. 34 sets forth minimum criteria percentage of assets, liabilities, revenues or expenditureslexpenses of either fund category and for the governmental and enterprise funds combined} for the determination of major funds. Non-major funds are combined in a column in the fund financial statements. 29 CITY ~F DENTIN, TEXAS NOTES TD BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, ZD07 Internal service funds, which traditionally provide services primarily to other funds of the government, are presented in summary form as part of the proprietary fund financial statements. The financial statements of internal service funds are allocated abased on the percentage of goods or services provided} between the governmental and business-type activities when presented at the government-wide level. The City's fiduciary funds are presented in the fund financial statements. Since by definition these assets are being held for the benefit of a third party bother local governments, individuals, etc.} and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The focus of the fund financial statements is on the mayor individual funds of the governmental and business-type categories, as well as the fiduciary funds Eby category}. Each presentation provides valuable information that can be analyzed and compared to enhance the usefulness of the information. C. Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund-level financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 6D days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property tax, franchise fees, sales tax and other taxes associated with the current fiscal period are all susceptible to accrual and so have been recognized as revenues of the current fiscal period. All of the other revenue items are considered to be measurable and available only when cash is received. The City reports the following mayor governmental funds: The general fund is the City's primary operating fund. All general tax revenues and other receipts that are not allocated bylaw or contractual agreement to some other fund are accounted for in this fund. From the fund are paid general operating costs, fixed charges and capital improvement costs that are not paid through other funds. The debt service fund accounts for the payment of principal and interest on general long-term liabilities, paid primarily by taxes levied by the City, and for payment of principal and interest on capital leases in the governmental funds. The capital projects fund accounts for financial resources used far the acquisition or construction of major capital facilities being financed from bond proceeds, capital contributions, or transfers from other funds, other than those recorded in the enterprise funds and internal service funds. Qther governmental funds is a summarization of all of the non-major governmental funds. 30 CITY OF DENTQN, TEXAS NOTES TQ BASK FINANCIAL STATEMENTS (continued} SEPTEMBER 34, 2447 The City reports the following major proprietary funds: The City utility system is made up of three separate funds as follows. The electric fund accounts for electrical utility services to the residents and commercial establishments of the City, Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The water fund accounts for water utility services to the residents and commercial establishments of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The wastewater fund accounts for sewer and storm water services to the residents and commercial establishments of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The City provides additional services through the following fund: The solid waste fund accounts for the provision of solid waste services to the residents of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The City additionally reports the following funds: Internal service funds are used to account for the financing of materials and services provided by one department of the City to other departments of the City on acost-reimbursement basis. Agency funds are used to account for the payment of payroll, employee insurance, and other similar liabilities. The City holds the assets in an agency capacity for individuals, private organizations or other governments. The City follows private-sector standards of accounting and financial reporting has issued by the Financial Accounting Standards Board} issued prior to December 1, 1989 in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for business-type activities and enterprise funds, subject to this same limitation. Proprietary funds distinguish operating revenues and expenses from non-operating items. operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's electric, water, wastewater and solid waste funds are charges to customers for services. Operating expenses for the enterprise funds and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. For deferred charges, the City recognizes, as an asset or a liability, the difference between the electric fund's energy cost adjustment ~ECA} revenue collected and related costs, in compliance with Financial Accounting Standards Board Statement No. 71. When both restricted and unrestricted resources are available for use, It is the Clty's policy to use restricted resources first, then unrestricted resources as they are needed. 31 CITY QF DENTUN, TEXAS N4TE5 TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 D. Assets, liabilities and net assets or equity 1. Cash cash equivalents and investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments are carried at fair value or cost, if maturities are one year or less. Fair value is determined as the price at which two willing parties would complete an exchange. Interest earned on investments is recorded in the funds in which the investments are recorded. 2. Receivables Qutstanding balances between funds are reported as "interfund receivableslpayables." Any residual balances between governmental activities and business-type activities are reported in the government-wide statements as "internal balances." Trade and property tax receivables are shown net of an allowance for uncollectibles. The City accrues amounts for utility services provided in September, but not billed at September 30, 2007. 3. Inventories Inventories of supplies are maintained at the City warehouse for use by alI City funds and are accounted for by the consumption method. Cost is determined using a moving average method. No inventories exist in the governmental fund types. 4. Restricted Assets Certain proceeds of the City's governmental and proprietary fund revenue bonds, general obligation bonds, and certificates of obligation, as well as certain resources set aside far their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Assets collected from impact fees are limited by state statute in use and also shown as restricted on the balance sheet of the Water and Wastewater funds. 5. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets ~e.g., roads, bridges, sidewalks and similar items} are reported in applicable governmental or business-type activities columns in the government-wide financial statements and in the proprietary fund financial statements. The City defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the time received. Major outlays for capital assets and improvements are capitalized as projects are constructed. Net interest incurred during the construction phase of capital assets of business-type activities and enterprise funds is included as part of the capitalized value of the assets constructed. For 2007, net interest capitalization of $754,863 was recorded for electric fund projects, $217,724 was recorded for water fund projects and $158,21 S was recorded for wastewater fund projects. 3Z CITY OF DENTIN, TEXAS NOTES T~ BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 34, 2447 Capital assets are depreciated using the straight-line method over the following useful lives: Assets Years Buildings 40 Infrastructure 20 - 40 General improvements 10 Machinery and equipment 10 - 20 Furniture and office equipment 10 Computer equipmentlsoftware 3 -10 Plant and equipment 5 Underground pipe 40 Water storage rights SO -100 Water recreation rights 50 Communication equipment 5 Vehicles 3 -10 Renewals and betterments of property and equipment are capitalized, whereas normal repair and maintenance are charged to expense as incurred. b. Compensated Absences The City allows employees to accumulate unused vacation up to 320 hours 1480 for Civil Service Fire employees.} Upon termination, any accumulated vacation time will be paid to an employee. Generally, sick leave is not paid upon termination except for fire fighters and police officers. Firefighters and police officers accumulate unused sick leave up to a maximum of 10$0 hours and 720 hours, respectively. All other employees are paid only upon illness while in the employ of the City. Accumulated vacation and sick leave is accrued when incurred in the government-wide, proprietary and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. The General Fund has been used in prior years to liquidate governmental funds' related liability, 7. Arbitra e Arbitrage involves the investment of the proceeds from the sale oftax-exempt securities in a taxable money market instrument that yields a higher rate, resulting in interest revenue in excess of interest costs. Federal tax code requires that these excess earnings be rebated to the federal government. The Capital Projects Fund has been used in prior years to liquidate governmental funds' related liability. $. Lon -term obli ations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term obligations are reported as liabilities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Gains and losses on refunding are amortized over the life of the refunded debt or the life of the new issue, whichever is shorter. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances axe reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 33 CITY OF DENTQN, TEXAS NOTES TQ BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 9. Fund equity_ In the fund financial statements, governmental funds report reservations of fund balance for accounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balances represent management plans that are subject to change. II. RECUNCILIATIQN QF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government-wide statement of activities Another element of that reconciliation states, "Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which proceeds exceeded payments." The details of this $19,038,391} difference are as follows. Debt issued or incurred: Issuance of general obligation debt $~ 15,925,000} Issuance of certificates of obligation ~8,855,a0o} Issuance of capital lease debt ~ 1,108,131 } Principal repayments: Principal retirement 6,849,740 Net adjustment to decrease net changes in fund balances -total governmental funds to arrive at changes in net assets of governmental activities 1 1 Another element of that reconciliation states, "The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins and donations} is to increase net assets." The details of this $5,155,928 difference are as follows: Loss on disposal of capital assets $ X241,653} Donations of capital assets increase net assets in the statement of 5,397,581 activities but do not appear in the governmental funds because they are not financial resources Net adjustment to increase net changes in fund balances -total Z governmental funds Another element of that reconciliation states, "Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of the $1,318,845}difference are as follows: Compensated absences $1,175,378} Arbitrage liability 22,633 Accrued interest 166100 Net adjustments to decrease net changes in fund balances -- total governmental funds to arrive at changes in net assets of governmental activities 4 34 CITY QF DENT4N, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2007 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information The City Council follows these procedures, as prescribed by City Charter, in establishing the budgets reflected in the financial statements: 1. Within the time period required by law, the City Manager submits to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted prior to the adoption of the budget in order to obtain taxpayer comments. 3. The annual budget adopted by the City Council covers the general fund, special revenue funds Recreation Fund, Police Confiscation Fund, and Tourist and Convention Fund only}, the debt service fund, the enterprise funds, and internal service funds. The budget is legally enacted by the City Council through passage of an ordinance prior to the beginning of the fiscal year. The basic financial statements reflect the legal level of control, (i.e. the level at which expenditures cannot legally exceed the appropriated amount} which is established by function activity within an individual fund as approved by City Council. 4. The City Charter provides that the City Manager has the authority to transfer any unencumbered appropriation balances from one appropriation to another within a single function (office, department, or agency}. City Council approval is not required at this level. The Charter also provides that at any time during the year, at the request of the City Manager, City Council may by resolution transfer any part of the unencumbered appropriation balances or the entire balance thereof between functions, as well as make any increases in fund appropriations. Budgets are adopted on a basis for the governmental funds and the budgeted special revenue funds that is generally consistent with generally accepted accounting principles. Budgets for enterprise funds are prepared on the full accrual basis, except certain noncash transactions such as depreciation expense and amortization on debt issuance costs where it is not budgeted, and debt service payments where it is budgeted. At the beginning of the subsequent year, management reviews all open encumbrances from the prior year and, as provided in the budget ordinance, appropriations for the encumbrances maybe carried forward. In the current fiscal year, no appropriations were carried forward. Also, during the budgetary process, amounts are included in all fund budgets to recognize administrative transfers between funds for goods or services. These amounts are not included in the reporting of actual activity for the funds, For funds reporting required budget-to-actual comparisons, these administrative transfers are included as adjustments -budgetary basis. B. Deficit fund equity The Criminal Justice special revenue fund had a deficit fund balance of $~?7,270) at September 30, 2007. This deficit was a result of the reimbursement timing. Elimination of the deficit fund balance is anticipated in 2008. IY. DETAILED NQTES ON ALL FUNDS A. Deposits and investments In order to facilitate effective cash management practices, the operating cash of all funds is pooled into common accounts for the purpose of increasing income through combined investment activities. At year-end, the City had $47,9$2,883 in cash and cash equivalents, including $31,174,3b7 invested in money market funds that the City considers cash equivalent. 4f the $47,982,883, agency funds reported $1,530,853. In addition, the City had $12,993 in petty cash at year-end. Statutes authorize the City to invest in obligations of the U.S. Treasury; U.S, agencies, fully collateralized repurchase agreements, public fund investment pools, SEC-registered, no-load, money market mutual funds, investment-grade, rated municipal securities of any state and fully collateralized certificates of deposit. The investments reported at September 30, 2007, were similar to those held during the fiscal year. 35 CITY OF DENTUN, TEXAS NUTES TU BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2007 The City reports all investments in the financial statements at fair value. At September 30, 2007, the City's investments carried a fair value of $276,672,36$. As of September 30, 2007, City investments were as follows; Weighted Average Investment Type Fair Value Maturity (Years) U.S. Treasury Securities $ 2$,735,966 1.12 U.S. Agency Securities-Coupon 149,132,257 0.77 U.S. Agency Securities-Callable 74,09$,997 0.92 U.S. Agency Securities-Discount 9,705,000 4.66 U.S. Agency Securities-Step-Up 14,997,115 0.59 Total fair value of investments $ 276,672,365 Portfolio weighted average maturity 0.76 Interest rate risk. In accordance with its investment policy, the City manages its exposure to declines in fair values due to interest rate fluctuations by limiting the weighted average maturity of its investment portfolio to Iess than eighteen months. With review and approval of the City's investment committee, the weighted average maturity of its investment portfolio may be extended beyond eighteen months. Credit risk. The City's investment policy limits investments to obligations of the United States of America and its agencies, investment quality obligations of the States with a rating not less than AA, fully insured Certificates of Deposit, and commercial paper that has a maturity of 270 days or less and arating of A-1 or P-1. The City's investments in the bonds of U.S. agencies were rated AAA by Standard & Poor's and Fitch Ratings and Aaa by Moody's Investors Service. Custodian credit risk. This is the risk that in the event of a bank or counterparty failure, the City's deposits may not be returned. The policy states that all bank deposits and bank investments of City funds shall be secured by pledged collateral with a market value equal to no less than 102 percent of the principal plus accrued interest less an amount insured by FDIC, if a deposit. As of September 30, 2007, the bank balance for deposits was $3,354,570 which was insured by FDIC for $100,000 and covered by collateral with a fair value of $6,542,791 held by an independent third party custodian pledged for the City, but not in the City's name. 36 CXTY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 Cash, cash equivalents and investments, at fair value are reported together on the financial statements. Investments, at fair value, by fund were as follows: ether General Capital Governmental Fund Projects Funds Electric Unrestricted investments $ 18,794,547 $ 38,710,127 $ 4,176,598 $ 66,888,143 Change in fair value 2,483 75,145 24,259 (242,757) Restricted investments - - - 37,bb3,721 Change in fair value - - - 58,b50 Total $ X8,797,030 $ 38,785,272 $ 4,200,857 $ 104,3b7,757 Internal Total Service City Water Wastewater Solid Waste Funds Investments Unrestricted investments $ 18,20b,148 $ 5,922,576 $ 5,499,985 $ 4,805,203 $ 163,003,327 Change in fair value 94,471 86,451 3,257 (19,7bS} 23,544 Restricted investments 49,365,535 19,878,600 6,406,b28 400,000 113,714,484 Change in fair value (124,130} (76,091) 75,459 (2,875) (b8,987} Total $ b7,542,024 $ 25,811,536 $ 11,985,329 $ 5,182,Sb3 $ 27b,672,368 B. Property tax revenue Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on October 1 and are due and payable at that time; therefore, the legally enforceable claim arises on October 1. A receivable is recorded at that time. All unpaid taxes levied October 1 become delinquent February 1 of the following year. Property taxes at the fund level are recorded as receivables and revenue at the time the tax levy is billed. Current-year revenues recognized are those ad valorem taxes collected within the current period or soon enough thereafter to pay current liabilities, which is sixty days after year-end. All other outstanding receivables are adjusted from revenue and recognized as deferred for future collections. Current tax collections for the year ended September 30, 2007, were 98.7% of the tax levy. An allowance is provided for delinquent taxes not expected to be collected in the future. At September 30, 2007, the City had a tax rate of $0.62652 per $100 valuation. Based upon the maximum ad valorem tax of $2.50 per $100 valuation imposed by Texas Constitutional law, the City had a tax rate margin of $1.87348. Additional revenues up to $101,940,335 could be raised per year based on the current year's assessed value of $5,441,228,909 before the limit is reached. 37 CITY OF DENTQN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 C. Receivables Receivables at September 30, 2007, for the City's individual major funds and other funds anon-major funds, internal service funds and fiduciary funds}, including the applicable allowances for uncollectible accounts, are shown below. Capital General Debt Service Pro~e~ Electric Water Receivables: Taxes $4,460,129 $ 375,110 $ - $ - $ - Accounts - - - 18,$00,140 3,027,975 Accrued interest 162,149 - 313,712 1,275,951 651,741 Unbilled utility service - - - 5,$78,927 1,168,20& Other 9136134 - 219,714 - 2&,307 Gross receivables 13,758,412 375, 110 533,426 25,955,018 4,876,231 Less: Allowance for uncollectibles 7,189,503 106,269 - 11,923,514 1,433,021 Net total receivables 6 568 909 268 841 533 426 14 031504 3 443 210 Qther Internal Waste- Solid Governmental Service water Waste Funds Funds Total Receivables: Taxes $ - $ - $ - $ - $ 4,835,239 Accounts 2,801,888 2,146,014 - - 26,776,017 Accrued interest 323,596 194,595 52,881 59,070 3,033,695 Unbilled utility service 901,675 671,244 - - 8,620,054 Other - - 152,534 205,500 9,742,189 Gross receivables 4,027,159 3,Q11,853 205,415 264,570 53,007,194 Less: Allowance for uncollectibles 16614$6 1262 297 - - 23 576 09Q Net total receivables 2 365 673 1749 556 205 415 $ 264,570 29 4311Q4 38 CITY OF DENTQN, TEXAS NUTES TQ BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, 2007 D. Capita! assets Capital assets balances and transactions for the year ended September 30, 2007 are summarized below and on the following page. Governmental activities: Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Infrastructure Machinery and equipment and other improvements Total capital assets being depreciated Less accumulated depreciation for: Buildings lnfrastructure Machinery and equipment and other improvements Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Balance at Balance at October 1, 2006 Increases Decreases September 30, 2007 $ 7,829,494 $ 10,160 $ - $ 7,839,654 9,630,063 15,070,446 10 831922 13,868,587 17,459,557 15 080 606 10 831922 21708 241 50,869,538 3,986,348 (46,499} 54,809,387 166,183,829 8,715,548 - 174,899,377 63,056,733 7 872160 20107 084 50,821,809 280,11 D,100 20,574,456 20153 583 280,530,573 11,785,097 1,291,973 X34,023} 13,043,047 70,928,830 8,402,644 - 79,331,474 34,391,026 _6,567,51 l 11017 582 29,940,955 l 17,104,953 16,262, l 28 11051605 122,315,476 163,005,147 4,311,928 9101978 158,215,097 l 44 4 4 1 1 2 Capital assets for governmental activities include capital assets held in the internal service funds. Governmental activities Accumulated Depreciation included an adjustment of $1,122,534 to reflect appropriate depreciation based on asset lives. On October 1, 2DD6, the City eliminated the Motor Pool Fund, an internal service fund. The elimination of the Motor Pool Fund resulted in $15,129,071 of original cost and $8,274,983 of accumulated depreciation being transferred to governmental fixed assets and other internal service funds. Continued} 39 CITY ~F DENTIN, TEXAS NUTES T4 BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 Business-type activities; Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Landfill improvements Water rights Infrastructure Plant, machinery, equipment and other improvements Total capital assets being depreciated Less accumulated depreciation for: Buildings Landfill improvements Water rights Infrashucture Plant, machinery, equipment and other improvements Total accumulated depreciation Total capital assets, being depreciated, net Balance at Balance at October 1, 2006 Increases Decreases September 30, 2007 $ 9,779,660 $ 235,515 $ - $ 10,015,175 37,250,781 23,049,614 26 006 233 34,294,162 47 030 441 23 285129 26 006 233 44,309,337 6,619,392 840,654 X93,600) 7,366,446 9,885,664 15,02 - 9,900,666 69,883,098 - - 69,883,098 277,031,029 20,700,091 X8,003,853) 289,727,267 l ?8,651,701 36,218,210 3 271394 211,598,51 ? 542,070,884 57,773,957 11368 847 588,4?5,994 2,448,276 189,915 ~?3,440) 2,564,751 9,336,374 311,093 - 9,647,467 12,087,680 696,330 - 12,784,010 63,394,239 7,781,697 X7,890,160) 63,285,7?6 79,7?2,628 17,?11,345 2 510 021 94,973,952 167 039,197 26,690,380 10 473 621 183,255,956 375,031,687 31,083,577 895 226 405,220,038 Business-type activities capital assets, net 4 212 4 14 44 2 Business-type activities Accumulated Depreciation included an adjustment of $168,661 to reflect appropriate depreciation based on asset lives. The prior period included $91,200 of Land that has been reclassified as Infrastructure and $294,790 of Infrastructure that has been reclassified as Land. The elimination of the Motor Pool fund resulted in $18,255,023 of original cost and $9,403,530 of accumulated depreciation being transferred to business-type activities. Depreciation expense was charged to governmental activities functionslprograms as follows: Governmental activities: General government $ 2,020,606 Public Safety 3,226,582 Public Works 8,377,166 Parks & Recreation 1,287,1? 1 Capital assets held by the internal service funds are Charged to the various functions based upon usage 1,350,603 Total depreciation expense-governmental activities 12 Business-type activities: Electric $ 4,255,715 Water 5,033,989 Wastewater 5,087,019 Solid Waste 2,910,127 Total depreciation expense-business-type activities 1 ? 286 0 40 CITY OF DENTQN, TEXAS NOTES T4 BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 Construction commitments The City has several major construction projects planned or in progress as of September 30, 2007. These projects are evidenced by contractual commitments with contractors and include: Remaining Proa ect Spent-to-Date Commitment Landfill Cell 3A $837,895 $2,536,42$ R D Wells Interchange -Electric System Infrastructure 682,168 2,417,795 R D Wells Substation D -Electric System Infrastructure 953,6$8 1,$64,962 Fort Worth Substation -Electric System Infrastructure 356,838 1,239,120 Solid Waste Scale House 719,607 1,016,4$5 Russell Newman Blvd 874,461 915,531 Bonnie Brae Distribution Substation 67,442 $99,09$ E. Interfund receivables, payables and transfers A summary of Interfund receivables and payables din thousands} at September 30, 2007, is as follows; Interfund Receivables: Governmental 1 l T 1 Business-Type Majvr Funds Interfund Payables: Agency Funds Non-Major Governmental Funds Internal Service Funds Total Non-Major Internal Governmental Solid Service General Fund Funds Electric Water Wastewater Waste Funds Total $ 75 $ - $ b $ l3 $ 7 $ 9 $ 5 $ 115 - bl - - - - - bl 39b - 4,802 288 288 5 - 5,779 $ 471 $ b I $ 4,$08 $ 301 $ 295 $ 14 $ 5 $ 5,955 41 CITY OF DENTUN, TEXAS NOTES T4 BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, Zoos The more significant interfund receivables and payables include the fallowing: Interfund receivables Interfund payables Amount Electric fund Internal service funds-materials management $4,SD2,009 General fund Internal service funds-materials management 395,629 Water fund Internal service funds-materials management 287,702 Wastewater fund Internal service funds-materials management 257,702 The outstanding balances between the Electric, General, Water and Wastewater Funds and the Materials Management Fund are a result of the cash position in the Materials Management Fund due to inventory purchases. Transfers between funds din thousands) during the year were as follows: Transfers Out: Governmental Major Funds Transfers In: Governmental Major Funds: Business-Type Major Funds Capital Non-Major Internal General Projects Governmental Solid Service Fund Fund Funds Electric Water Wastewater Waste Funds Total General Fund $ - $ - $ 82 $ - $ - $ - $ - $5,197 ~ 5,279 Debt Service Fund S$7 255 - - - 62$ - - 1,770 Capital Projects Fund 1,095 - 374 - - b - l,ll4 2,589 Non-Major Governmental Funds 2,033 17b 10 75 110 220 61 - 2,b85 Electric - - - - - - - 5,154 5,154 Water 24 - 73 - - 69 - 2,937 3,103 Wastewater - - 14G - - - - 3,755 3,901 Solid Waste - - - - - - - 2,487 2,4$7 Internal Service Funds - - - - - - - 212 212 Government-widel Governmental Activities - - - - - - - 3,377 3,377 Total $ 4,039 $ 431 $ b85 $ 75 $ 110 $ 923 $ 6l $24,233 $ 30,557 42 CITY 4F DENTON, TEAS NOTES T4 BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 The more significant transfers include the following: Transfers from fund Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool General Fund Internal service funds-Motor Pool Transfers to fund Amount General Fund $5,19b,998 Electric 5,154,417 Wastewater 3,755,083 Government-wide activities 3,37b,537 Water 2,93b,S33 Solid Waste 2,48b,595 Aquatics 1,$75,4bb Capital Projects 1,114,241 Transfers from the General Fund to Aquatics were to cover the deficit in fund equity. Transfers from the Motor Pool fund were due to the elimination of the fund and the transfers of the equity balances on actober 1, 200b, F. Leases Leases payable represent the remaining principal amounts payable under lease purchase agreements for the acquisition of equipment through the General, Solid Waste, Tech Services, and Wastewater funds, These leases are recorded as capital leases. Remaining requirements, including interest, under these leases are as follows: Year Pa meets 2005 $1,983,495 2009 1,877,b54 2010 1,724,957 2011-2017 1,1b0,83b Total minimum lease payments b,74b,942 Less: amount representing interest ,~ 4b 1,494 Present value of minimum future lease payments b 2 44 The following schedule provides an analysis of the City's investments in equipment under capital lease arrangements as of September 30, 2007: Equipment $8,035,7b9 Less: Accumulated Depreciation 1 S95 772 Total b 139 997 43 CITY QF DENTQN, TEXAS NQTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 G. Long-term debt Long-term liabilities transactions for the year ended September 30, 2007, are summarized as follows below and on the following page: Balance at Balance at October 1, September 30, Due Within 2006 Increases Decreases 2007 One Year Governmental Activities: General obligation bonds $ 58,742,900 $ 15,925,000 $ 4,017,553 $ 70,650,317 $ 4,340,723 Certificates of obligation 46,700,000 8,855,000 4,199,900 51,355,100 4,047,550 Obligations under capital leases 3,559,742 2,656,127 3,822, l 85 2,393,684 635,615 Arbitrage payable 25,968 - 22,633 3,335 - Compensatedabsences payable 7,323,590 5,542,124 7,323,590 8,542,124 3,242,116 Claims payable 2,995,213 1,198,862 877,279 3,316,796 437,500 Unarnortized premiuml~discounts} 418,591 525,630 97,646 849,575 94,267 Unarnortized deferred gainl~loss} X393,205} X94} (105,102} (288,197} X101,150} Total governmental long-term liabilities $119,372,799 $37,705,649 $20,255,714 $136,822,734 $12,696,621 Business-type Activities: Revenue bonds $277,305,000 $58,535,000 $54,090,000 $281,750,000 $14,840,000 General obligation bonds 3,582,100 - 482,417 3,099,683 449,277 Certificates of obligation 11,975,000 3,535,050 1,620,150 13,889,900 1,592,450 Obligations under capital leases - 4,873,533 981,769 3,591,764 1,179,570 Arbitrage payable 5,105 42,773 624 4?,254 - Compensated absences payable 1,560,082 1,635,962 1,560,082 1,635,962 1,444,462 Note payable 3,141,222 - - 3,141,222 - Landfill closurelpost-closure costs 3,689,408 285,054 - 3,974,462 - Unamortized premiuml(discounts} 7,419,303 200,519 782,913 6,836,909 718,831 Unamortized deferred gainl~loss} 8,277,227 2,281,076 1,218,618 9,339,685 - Total business-type activities 300,399,993 66,826,815 58,299,33? 305,927,471 20,224,590 Total long-term liabilities $419,772,792 $104,532,464 $78,555,051 $445,750,205 $32,921,211 [The elimination of the Motor Pool Fund resulted in t he transfer of $945,050 in certificates of obligation and $3,559,742 of Capital Lease obligations from Govern mental Activities to Business-type Activities.] 44 CITY OF DENTUN, TEXAS NUTES TQ BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 General bonded debt -General bonded debt at September 30, 2007, is comprised of the following: Gross Amount original outstanding at Interest Rate Final Amount September 30, Bonded Debt ~%) Issue Date Maturit of Issue 2007 General obligation 5.0 to 7.0 1997 20 l 7 $ 4,700,000 $ 23 5,000 General obligation 5,25 to 5.25 1998 2018 9,660,000 5,295,000 General obligation 4.1 to 5.0 1999 2019 8,215,000 4,920,000 General obligation refunding 3.2 to 5.0 1999A 2016 5,53$,780 3,708,300 General obligation 5.25 to 6.125 2000 2020 3,750,000 755,000 General obligation 4.5 to 5.5 2001 2021 14,245,000 9,985,000 General obligation 5.0 to 5.25 2002 2022 12,075,000 10,320,000 General obligation refunding 3.0 to 4,75 2003 2023 7,222,999 4,217,017 General obligation refunding 2.5 to 5.0 2004 2020 7,370,000 6,965,000 General obligation 3.0 to 5.0 2005 2025 5,000,000 4,730,000 General obligation 4.25 to 4.875 2006 2026 3,695,000 3,595,000 General obligation 4.0 to 4.5 2007 2026 l 5,925,000 15,925,000 Total general obligation bonds 97,396,779 70,650,317 Certificates of obligation 4.0 to 5.0 1998 Certificates of obligation 4.1 to 5.0 1999 Certificates of obligation 5.25 to 6.125 2000 Certificates of obligation 4.25 to 5.25 2001 Certificates of obligation 4.7 to 5.25 2002 Certificates of obligation 3.0 to 4.75 2003 Certificates of obligation 2.0 to 5.0 2004 Certificates of obligation 3.0 to 4.375 2005 Certificates of obligation 4.0 to 4.75 2006 Certifcates of obligation 4.7 to 5.0 2007 Total certificates of obligation Total general bonded debt 2018 5,625,000 850,000 2019 5,926,273 3,540,000 2020 3,125,000 620,000 2021 8,275,000 4,030,000 2022 8,045,000 5,995,000 2023 5,650,000 4,325,000 2024 l 2, 805,000 11,625,000 2025 5,575,000 4,765,000 2026 7,214,950 6,750,100 2027 8,855,000 8,855,000 71,096,223 51,355,100 $168,493,002 $122,005,417 [These amounts do not include net unamortized premiumsl~discounts) of $849,575 nor net deferred gainl~loss} on refunding of x$288,197).] Proceeds of general bonded debt are restricted to the uses for which they were approved in the bond elections. The City Charter expressly prohibits the use of bond proceeds to fund operating expenses. The general obligations are collateralized by the full faith and credit of the City and, primarily, payable from property taxes. In prior years, the City defeased general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds, Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City's financial statements. On September 30, 2007, $3,060,000 of general obligation bonds considered defeased are still outstanding. 45 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 In July 2007, the City issued $11,445,000 x$2,590,000 of which is included as part of business-type activities} in certificates of obligation and $15,925,000 of general obligation bonds. The debt was issued to pay the cost of various Capital Project improvements x$24,700,000) and proprietary fund capital improvements x$2,590,000}. The bonds and obligations are payable over the next 20 years. Revenue bonds -Revenue bond debt at September 30, 2007, is comprised of the following issues: Principal Net Net Original Outstanding at Unamortized Outstanding at Interest Rate Issue Final Amount September 30, Premium) September 30, Revenue Bonds %} Date Maturit of Issue 2007 Discount} 2007 Utility system refunding 3.55 to 6.75 1993 2008 $ 6,045,000 $ 385,000 $ X281) $ 3$4,719 Utility system 4.3 to 6.3 1998 2018 7,175,000 1,440,000 - 1,440,000 Utility system refunding 4.65 to 6.65 1998 2030 36,795,000 3,210,000 X26,216) 3,1$3,784 Utility system refunding 4.0 to 5.0 1998 2015 7,640,000 5,760,000 - 5,760,000 Utility system 4.974 to 6.0 2000 2020 54,880,000 15,690,000 15,111 15,705,111 Utility system 4,0 to 5.4 2001 2021 59,545,000 23,825,000 186,089 24,01 l ,089 Utility system 4.25 to 5.0 2002 2022 56,710,000 47,180,000 254,546 4?,434,546 Utility system 5.0 to 6.5 2002 2022 13,985,000 3,405,000 X8,286) 3,396,? 14 Utility system 3.625 to refunding 5.625 2003 2022 50,180,000 36,555,000 l , l 18,461 37,673,461 Utility system refunding 2.0 to 5.25 2004 2024 24,850,000 23,865,000 1,048,084 24,913,084 Utility system refunding 3.0 to 5.0 2005 2023 53,845,000 53,690,000 4,053,840 57,743,840 Utility system refunding 4.5 to 5.0 2006 2026 8,515,000 8,210,000 - 8,210,000 Utility system 4.0 to 4.25 2007 2026 16,740,000 16,740,000 4,196 16,744,196 Utility system refunding 4.0 to 4.25 2007 2029 41,795,000 41,?95,000 135,333 41,930,333 Total revenue Bonds $438,700,000 $281,750,000 $6,780,877 $288,530,877 [These amounts do not include net unamortized gainl~loss} on refunding of x$9,243,555}.] 46 CITY OF DENT4N, TEXAS NOTES TD BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 ether enterprise obligations -General obligation bonds and certificates of obligation issued for solid waste fund at September 30, 2007, is comprised of the following: Gross Amount lnterest Qriginal Qutstanding at Rate lssue Final Amount September 30, ether Qbli ations (°lo) Date Maturit of Issue 2007 General. obligation refunding 3.2 to 5.0 1999 2016 $ 1,481,220 $ 991,700 General obligation refunding 3.0 to 4.75 2003 2023 857,001 472,983 General obligation refunding 2.5 to 5.0 2004 2015 2,040,000 1,b35,000 Total general obligation bonds 4,378,221 _ 3,099,683 Certificates of obligation 4.25 to 5.25 2001 2021 3,845,000 945,000 Certificates of obligation 4.7 to 5.25 2002 2022 4,545,000 2,600,000 Certificates of obligation 3.0 to 4.75 2003 2023 1,755,000 695,000 Certificates of obligation 2.0 to 5.0 2004 2024 1,195,000 905,000 Certificates of obligation 3.0 to 4.375 2005 2025 1,570,000 1,240,000 Certificates of obligation 4.0 to 4.75 2006 2026 5,450,050 4,914,900 Certificates of obligation 4.7 to 5.0 2007 2027 2,590,000 2,590,000 Total certificates of obligation 20,950,050 l 3,889,900 Total other enterprise obligations $25,328,271 $16,989,583 [These amounts do not include net unamortized premiumsl(discounts) of $56,032 nor net defe rred gainl(loss) on refunding of ($96,130).] The revenue bonds are collateralized by the revenue of the Denton utility system funds (System} and the various special funds established by the bond ordinance. The ordinance provides that the revenue of the System is to be used first to pay operating and maintenance expenses of the System and second to establish and maintain the revenue bond funds. Any remaining revenues may then be used for any lawful purpose. The ordinance also contains provisions, which among other items restrict the issuance of additional revenue bonds unless the special funds noted above contain the required amounts and certain financial ratios axe met. Management believes the City is in compliance with all significant requirements. Assets in these accounts consist of cash and U.S. government securities, Below is a summary of the various net asset balances in the funds required by the bond ordinance to be restricted for debt service. Interest and sinking fund $11,377,144 Reserve fund 17,720,015 Total restricted net assets restricted for debt service $29,097,159 In prior years, the City defeased revenue bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds axe not included in the City's financial statements. 0n September 30, 2007, $72,861,000 of revenue bonds considered defeased are still outstanding. 47 CITY OF DENT4N, TEXAS NQTES TO BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, 2007 In February 2007, the City issued $41,795,000 of revenue refunding bonds. The reacquisition price exceeded the net carrying amount of the old debt by $2,281,076. This amount is being amortized over the remaining life of the refunded debt, which is shorter than the life of the new debt issued. This advanced refunding was undertaken to reduce total debt service payments over the next 20 years by $3,996,164 and resulted in a net present value savings of $2,238,899. In July 2007, the City issued $16,740,000 in revenue bond debt. The debt was issued to pay for the cost of various utility system improvements and upgrades. The bonds are payable over the next 20 years. Note payable In 1980, the City and the City of Dallas contracted with the Corps of Engineers for the construction and development of Ray Roberts Reservoir in Denton County. In contracts with the Corp of Engineers, the City will pay for twenty-six X26%} percent of the estimated water storage rights of the reservoir. Water obtained from the reservoir will be pro rata on the basis of each city's proportional share of total construction cost. The closing of the dam was completed in 1987 with water being available from the reservoir in 1989. Schedule of long-term debt maturities Aggregate maturities of the long-term debt principal and interest} for the years subsequent to September 30, 2007, are shown below and on the following page: Governmental Activities: Certificates of General Obligation Obli a~ tion Capital Leases Total Fiscal Year Pn'ncil al Interest Pnncipal Interest Pn~, 'ncipal Interest Prt'ncipal Interest 2448 $ 4,340,723 $ 3,347,718 $ 4,047,550 $ 2,294,136 $ 635,615 $ 40,512 $ 9,023,888 $ 5,642,366 2009 4,263,569 3,456,747 4,216,400 2,084,539 643,329 32,798 9,123,298 5,174,084 2010 4,215,885 2,871,391 4,258,200 1,901,932 604,497 24,775 9,078,582 4,798,098 2011 4,457,634 2,676,730 4,427,954 1,717,795 120,684 19,44D 8,606,264 4,413,965 2012 4,719,305 2,468,204 3,275,000 1,552,545 125,203 14,92D 8,119,548 4,035,669 2013-2017 23,118,205 9,487,695 13,625,444 5,856,758 264,356 31,468 37,047,561 14,975,921 2018-2022 17,620,000 3,968,935 12,195,444 2,778,999 - - 29,815,444 6,747,934 2023-2027 7,915,000 941,622 5,710,444 454,199 - - 13,625,444 1,355,821 Total $70,650,317 $28,339,042 $51,355,1 DO $18,644,943 $2,393,6$4 $163,913 $124,399,141 $47,143,858 48 CITY OF DENTUN, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 Business-Type Activities: Fiscal Year 2008 2009 2010 2011 2012 2013-2017 2018-2022 2023-2027 2028-2032 Total General Obli ag tion Pri_ •ncipal Interest $ 449,277 $115,145 471,431 100,124 474,115 83,630 332,370 68,146 345,695 54,068 1,026,795 77,468 Certificates of Obli ation Pr_ •ncipal Interest $ 1,592,450 $ 611,451 1,453,600 537,231 1,431,800 474,224 1,322,050 411,641 1,160,000 354,148 2,825,000 1,276,376 2,790,000 649,036 1,315,000 126,829 Revenue Pn'nc~al Interest $14,840,000 $ 13,088,928 l 4, 865,000 12,431, 5 5 5 15,430,000 11,650,536 l 4,320,000 10,887,021 l 4,955,000 10,168,263 83,590,000 39,295,695 88, l 30,000 17,956,806 28,190,000 4,213,528 7,430,000 482,800 Fiscal Year 2008 2009 2010 2011 2012 2013-2017 2018-2022 2023-2027 2028-2032 Total $3,099,683 $498,581 $13,889,900 $4,440,936 $281,750,000 $120,175,132 Notes Payable Capital Leases Total Principal Interest Principal Interest Principal Interest $3,141,222 $ - $1,179,570 $127,797 $21,202,519 $13,943,321 - - 1,113,259 88,268 17,903,290 13,157,178 - - 1,044,855 50,831 18,380,770 12,259,221 - - 272,048 20,335 16,246,468 11,387,143 - - 282,032 10,350 16,742,727 10,586,829 - - - - 87,441,795 40,649,539 - - - - 90,920,000 18,605,842 - - - - 29,505,000 4,340,357 - - - - 7,430,000 482,800 $3,]4],222 $ - $3,891,764 $297,581 $305,772,569 $125,412,230 [These amounts do not include net unamortized premiuml~discount} of $7,686,484 nor net unamortized gainl~loss} on refunding of x$9,627,882}.] Bonds authorized and unissued General obligation bonds authorized but unissued as of September 30, 2007, amounted to $22,102,000. When issued, the proceeds will be allocated to the applicable capital projects. H. Landfill closure and post-closure cost State and federal laws and regulations require the City to place a final cover on its Mayhill Road landfill site upon closure and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and post-closure care costs will be paid only upon anticipated closure, the City reports a portion of these costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. Based on a model created by a 2005 engineering study, total landfill closure and post- closure cost increased from $14,582,641 to $14,947,207 and increased this year's reported landfill closure and post-closure expense by $285,054. The X3,974,462 reported as landfill closure and post-closure care liability represents the cumulative amount incurred to date based on the use of 26.6% of the estimated capacity of the entire landfill at September 30, 2007. Based on this estimate, the remaining potential estimated liability for closure and post-closure care of the entire landfill is X10,972,745. The City will recognize the remaining estimated cost of closure and post-closure care as the remaining capacity is filled. These amounts are based on what it would cost to perform closure and post- closure care in 2007. Actual cost may fluctuate due to inflation, changes in technology, or changes in 49 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2007 regulations. The landfill has a remaining life of 27 years, and the City expects to close the landfill in fiscal year 2034. The solid waste fund has provided for a designation of cash and investments of $3,974,462 at September 30, 2007, and anticipates increasing the reserve in future periods as the closure and post-closure activities are carried out. V. OTHER INFORMATION A. Pension plans Texas Municipal Retirement Plan Plan description The City provides pension benefits for all of its full-time employees except fire fighters} through a non- traditional, joint contributory, hybrid-defined benefit plan in the state-wide Texas Municipal Retirement System TMRS), one of 821 administered by TMRS, an agent multiple-employer public employee retirement system. Benefits Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City-financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent X200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit refereed to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of their salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 6o and above with five regardless of age. A member is vested aver five years. of the City, within the options available in the sta constraints also in the statutes. or more years of service or with 20 years of service The plan provisions are adopted by the governing body e statutes governing TMRS and within the actuarial Contributions The contribution rate for the employees is 7%, and the City matching ratio is currently 2 to 1, both as adapted by the governing body of the City. Under the state law governing TMRS, the actuary annually determines the city contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, bath of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time a retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 25-year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Three-Year Trend Information for TMRS Funding Year ending 12/31/06 12/31/05 12/31/04 Annual required contribution ARC} $9,311,315 $9,347,195 $8,707,103 Actual contributions $9,311,315 $9,347,195 $8,707,103 Percent contributed 100% 100% 100% 50 CITY 4F DENT4N, TEXAS NOTES T4 BASIC FINANCIAL STATEMENTS (continued SEPTEMBER 30, 2007 Actuarial cost method Amortization method Remaining amortization period Asset valuation method Investment rate of return Projected salary increases Includes inflation at Cost-of living adjustments Actuarial Assumptions 12/31/06 Unit credit Level percent of payroll 25 years--open period Amortized cost 7% None 3.5% None At its December 8, 2007 meeting, the TMRS Board of Trustees adopted actuarial assumptions to be used in the actuarial valuation for the year ended December 3 1, 2007. A summary of actuarial assumptions and definitions can be found in the December 31, 2007 TMRS Comprehensive Annual Financial Report. Since its inception, TMRS has used the traditional Unit Credit actuarial funding method. This method accounts for liability accrued as of the valuation date but does not project the potential future liability of provisions adopted by a city. Two-thirds of the cities participating in TMRS have adopted the Updated Service Credit and Annuity Increases provisions on an annually repeating basis. These provisions are considered to be "committed" benefits for likely to be guaranteed; as such, the TMRS Board has adopted the Projected Unit Credit ~PUC}actuarial funding method, which facilitates advance funding for future updated service credits and annuity increases that are adopted on an annually repeating basis. For the December 31, 2007 valuation, the TMRS Board determined the PUC method will be used. In addition, the Board also adopted a change in. the amortization period from a 25-year "open" to a 25-year "closed" period. TMRS Board of Trustee rules provide, whenever a change in actuarial assumptions or methods results in a contribution rate increase in an amount greater than 0.5%, the amortization period may be increased up to 30 years, unless a city requests the period remain at 25 years. For cities with repeating features, these changes will likely result initially in higher required contributions and lower funded ratios. To assist in this transition to higher rates, the Board also approved an eight-year phase-in period, which will allow cities the opportunity to increase their contributions gradually approximately 12.5% each year} to their full rate for their required contribution rate}. Using demographic date from the December 3 1, 2006 valuation, TMRS' actuary has made calculations with the new actuarial assumptions. For cities with annually repeating benefits, those calculations resulted in estimated higher contribution rates, increased unfunded actuarial liabilities, and lower funded ratios. The City adopted the Updated Service Credit provision in 1992, on a repeating basis. Additionally, the City adopted annuity increases for its retirees, on a repeating basis in 1992 equal to 70% of the change in consumer price index. The City of Denton is one of 821 municipalities having the benefit plan administered by TMRS. Each of the 821 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2006, valuations are contained in the 2006 TMRS Comprehensive Annual Financial Report, a copy of which maybe obtained by writing to P.Q. Box 149153, Austin, Texas 78714-9153. In December 2007 the TMRS Board of Trustees adopted a change in actuarial cost methods. The effect of the change will result in an increase in city contribution rates for most Texas cities. Currently this impact is unknown but will be distributed by TMRS based on an actuarial valuation as of December 3 1, 2007. 51 CITY QF DENT4N, TEAS NUTES TQ BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 Denton Firemen's Relief and Retirement Plan Plan description The Board of Trustees of the Denton Firemen's Relief and Retirement Fund is the administrator of a single- employerdefined benefit pension plan. The Denton Firemen's Relief and Retirement Fund cover firefighters in the Denton Fire Department. The table below summarizes the membership of the fund as of December 31, 2005, the most recent biennial actuarial valuation. 12/31/45 1. Retirees and beneficiaries currently receiving benefits and terminated employees entitled to 53 benefits but not yet receiving them 2. Current employees a. Vested 73 b. Nonvested 92 3. Total 218 The Denton Firemen's Relief and Retirement Fund provides service retirement, death, disability and withdrawal benefits. These benefits vest after 10 years of credited service. Firefighters may retire at age 5D with 20 years of service. As of the December 31, 2005 actuarial valuation date, the Plan effective May 1, 2005 and amended June 14, 2007 provided a monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse form of annuity, equal to 2.44% of Highest 3b-Month Average Salary for each year of service. There is no provision for automatic postretirement benefit increases. The fund has the authority to provide, and has periodically in the past provided for, ad hoc postretirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighter's Retirement Act TLFFRA). TLFFRA provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made The contribution provisions of this plan are authorized by TLFFRA. The TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the city. While the contribution requirements are not actuarially determined, state law requires that an eligible actuary must approve each plan of benefits adopted by the fund. The actuary certifies that the contribution commitment by the firefighters and the city provides an adequate financing arrangement. Using the entry age actuarial cost method, the plans' normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan's unfunded actuarial accrued. liability, and the number of years needed to amortize the plan's unfunded actuarial accrued liability is determined using an open, level percentage of payroll method. The costs of administering the plan are financed from the fund. The funding policy of the Denton Firemen's Relief and Retirement Fund requires contributions equal to 12% of pay by the firefighters. The City of Denton contributed 1 D% of payroll during January through September 2DDb, will contribute 11% of payroll Qctober 2006 through September 2407, and is planning to contribute 12% of payroll Qctober 2007 through September 2008 and then to begin contributing the same percentage of payroll that the city contributes to the Texas Municipal Retirement System for other employees. The December 31, 2005 actuarial valuation assumes that the city contribution rate will average 12.75% beginning Dctober 2048. SZ CITY ~F DENTIN, TEXAS NOTES T~ BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 Three-Year Trend Information for Denton Firemen's Relief and Retirement Funding Year ending 1213110b 12/31/05 12/31/04 Annual required contribution ARC} $2,071,542 $1,970,b32 $1,8b8,444 Actual contributions $2,071,542 $1,970,b32 $1,8b8,444 Percent contributed 100% 100% 100% Actuarial Assumptions 12/31/05 Actuarial cost method Entry age Amortization method Level percent of payroll, open Amortization period for ARC 23 years Asset valuation method 5-year adjusted market value Investment rate of return 7.75 Proj ected salary increases 4.50% plus promotion and longevity Includes inflation at 4.0% Cost-of living adjustments None Payroll increases 4.50% ARC as percent of payroll Budgeted rates Financial statements are available and can be obtained by contacting the Denton Fire Department at the City of Denton at 332 E. Hickory, Denton, Texas 7b201. B. Deferred compensation plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all permanent City employees, permits them to defer, until future years, up to 25% of annual gross earnings not to exceed $15,500. Employees who are age 50 or older may contribute an amount not to exceed $20,500. Employees who are within three years of retirement eligibility may elect to participate in a catch-up provision allowed by Section 457, which has an annual maximum contribution amount of $31,000. The withdrawal of deferred compensation funds is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are, until paid or made available to the employee or other beneficiary, solely the property and rights of the employees. Accordingly, the assets and associated liability of the plan are not included in the City's financial statements. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan. C. Self-insurance plan The City has established a self insurance plan for workers' compensation benefits and general liability. Employee health insurance is afully-insured plan, however, the City will move to self-insurance starting January 2008. Accrued claims payable include provisions for claims reported and claims incurred but not reported. The provision for reported claims is determined by estimating the amount which will ultimately be 53 CITY OF DENTUN, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 paid each claimant. The provision for claims incurred but not yet reported is estimated based on actuarial studies. The City's costs associated with the self insurance plan are reported as interfund transactions. Accordingly, they are treated as operating revenues of the Internal Service Risk Retention Fund and operating expenditures expenses} of the other funds. Workers' compensation and generai liabiiity insurance It is the policy of the City of Denton not to purchase commercial insurance for workers' compensation claims or general liability. Commercial liability insurance coverage is purchased for public officials, airport operations, emergency medical services, take-home vehicles, and employee theft and dishonesty. Additionally, excess insurance is purchased for general liability and workers' compensation exposure. The City reports liabilities when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Because actual claims liabilities depend on such complex factors as inflation, changes in legal doctrines, and damage awards, the process used in computing claims liability does not necessarily result in an exact amount. Claims liabilities are re-evaluated periodically to take into consideration settlement of claims, new claims and other factors. As of September 30, 2007, the estimated value of these liabilities was $3,316,796. Changes in balances of claims liabilities during fiscal years 2007 and 2006 were as follows: Claims Liability Claims and Claims Liability Beginning of Change in Claims End of Fiscal Year Estimates Payments Fiscal Year Workers' Compensation 2007 $2,418,698 $ 958,944 $738,947 $2,638,696 2006 1,450,000 1,437,485 468,787 2,418,698 General Liability 2007 $ 576,515 $ 239,918 $138,332 $ 678,100 2006 353,000 302,868 79,353 576,515 Gn September 30, 2007, the City of Denton held net assets of $1,733,246 in the Risk Retention Fund for payment of claims, There were no significant reductions in insurance coverage from coverage in the prior year, and the amount of settlements did not exceed insurance coverage in the current year or in any of the past three fiscal years. D. Commitments and contingencies Agreement with TMPA In 1976, the City, along with the cities of Bryan, Greenville, and Garland, Texas the Cities} entered into a Power Sales Contract with the Texas Municipal Power Agency (TMPA}. TMPA was created through concurrent ordinances of the Cities and is governed by a Board of Directors consisting of eight members, two appointed by the governing body of each city, Under the terms of the agreement, TMPA agreed to construct or acquire electric generating plants to supply energy and power to the Cities for a period of not less than 35 years. The Cities in turn agreed to purchase all future power and energy requirements in excess of the amounts generated by their systems from TMPA at prices intended to cover operating costs and retirement of debt. In the event that revenues are insufficient to cover all costs and retire the outstanding debt, each of the Cities has guaranteed a portion of the unpaid debt based, generally, upon its pro rata share of the energy delivered to consumers in the prior operating year. 54 CITY OF DENTUN, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS (continued SEPTEMBER 30, 2007 As of September 30, 2007, total TMPA long-term debt outstanding was approximately $1,026,502,000, and the City's percentage was approximately 21.3°/a. In the opinion of management, the possibility of a material payment in the near future under this guarantee is remote in that TMPA is generating operating profits and assets exceed liabilities. TMPA operates a 462-megawatt, coal-fired generating plant. In 1996, TMPA switched to an external source of coal to reduce costs. Should TMPA be dissolved, each city would be entitled to an undivided interest in the property. Selected financial statement information of TMPA is as follows: September 30 Unaudited} 2007 2006 ~OOOs} ~OOOs} Qperating revenues $ 248,977 $ 244,480 operating expenses 112,916 103,876 Qperating income 136,061 140,604 ether non-operating sources 9,361 8,413 Current assets 48,166 55,778 Total assets 1,203,288 1,245,503 Long-term debt 1,026,502 1,072,169 Total liabilities 1,165,858 1,209,944 Total equity 37,430 35,559 Agreement with the City of Dallas During 1985, the City entered into an agreement with the City of Dallas that provides for the purchase of a minimum of 500,000 gallonslday of untreated water from the City of Dallas from Lake Lewisville. This contract will be effective for 30 years. The cost of water purchased under this agreement during fiscal year 2007 was $52,974, E. Litigation Various claims and lawsuits are pending against the City. In accordance with GA.AP, those judgments considered "probable" are accrued, while those claims and judgments considered "reasonably possible" are disclosed but not accrued. In the opinion of City management and legal counsel, the maximum amount of all significant claims considered reasonably possible, excluding condemnation proceedings, is approximately $500,000 as of September 30, 2007. Potential losses after insurance coverage on all probable claims and lawsuits will not have a material effect on the City's financial position as of September 30, 2007. ***~ 55 ~6 Fiscal Year 2005 200 2oa7 Fiscal Vp~r Luu~ 200G 2007 CITY OF DENTON, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF TMRS FUNDING PROGRESS AND CONTRIBUTIONS LAST THREE FISCAL YEARS (Unaudited} Actuarial Valuation n~ta 1 L! J 11 LUU~F 12/31/2005 12i31i2aob Covered _ Payroll $ 4b,415,828 4b,394,3a3 47,271,473 Actuarial Value of S ecntc ~ ~~,LU~+,Lia 98,051,747 105,951,245 UAAL as Percent of Covered Payroll 70.3 77.2 83.3 Actuarial Accrued Liability (AAL} Unit Credit Matl.nrl ~ 1L I,~L I,~UJ 133,853,457 145,3a9,b33 Annual Required t`nntrihntinnc a a,lul,iva 9,347,195 9,311,315 Unfunded Actuarial Accrued Liability (UAAL} $ (32,G23,59a} (35,801,710} (39,358,388} Actual ~'nntrihntinnc Exhibit XII Funded Percent 74.5 73.3 72.9 Percent ~'nntrihutar~ ~ a,lul,iu~ ivu.u 9,347,195 la0.a 9,311,315 100.a 57 CITY OF DENT4N, TEXAS REQUIRED SUPPLEMENTARY INFQRMATIUN SCHEDULE OF DENT4N FIREMEN'S RELIEF AND RETIREMENT PLAN FUNDING PRUGRESS AND CUNTRIBUTIUNS LAST THREE VALUATION YEARS Unaudited) Exhibit XIII Actuarial Unfunded Accrued Actuarial Actuarial Actuarial Liability ~AAL) Accrued Fiscal Valuation Value of Unit Credit Liability Funded Year Date Assets Method ~UAAL) Percent 2002 12/31/2001 $ 26,061,756 $ 29,786,004 $ (3,724,24$) 87.5% 2004 12/31/2003 30,538,352 37,557,733 X7,019,381) 81.3 2006 12/31/2005 34,677,009 45,341,724 (10,664,715) 76.5 UAAL as Percent of Annual Fiscal Covered Covered Required Actual Percent Year Payroll Pa roll Contributions Contributions Contributed 2002 ~ 7,947,098 46.9% $ 1,504,822 $ 1,504,822 100.0% 2004 8,459,472 83.0 1,846,396 1,846,396 100.0 2006 10,445,026 102.1 1,970,632 1,970,632 100.0 58 APPENDIX C FARM ~F BAND COUNSEL'S ~PINI~NS Proposed Form of Opinion of Bond counsel An opinion in substantially the following form will be delivered by McCall, Parkhurst & Horton L.L.P., Bond Counsel, upon the delivery of the Bonds, assuming no material changes in facts or law. CITY CF DENT4N GENERAL CBLIGATI4N BOND SERIES 2008 DATED AUGUST 15, 2008 IN THE PRINCIPAL AMQUNT QF $7,300,000 AS BAND COUNSEL for the City of Denton, in Denton County, Texas (the "Issuer"}, we have examined into the legality and validity of the bond issue initially evidenced by the bond described above (the "Initial Bond"}, which Initial Bond originally has been issued and delivered as a single fully registered bond, without interest coupons, with the principal amount thereof payable, asset forth in the Initial Bond, and with the unpaid balance of each installment of principal, respectively, bearing interest from the date of the Initial Bond to the scheduled due date ("maturity"}, or to the date of prepayment or redemption, of each installment of principal, at the rates per annum for each maturity set forth in the Initial Bond with interest, calculated on the basis of a 3b0-day year composed of twelve 30-day months, payable on February 15, 2009, and semiannually on each August 15 and February 15 thereafter, and with the then outstanding principal of the Initial Bond being subject to prepayment or redemption, as a whole or in part, prior to scheduled maturity, in accordance with the terms and conditions stated on the face of the Initial Bond. The Initial Bond may, at the request of the registered owner, be transferred and converted into, andlor exchanged for, fully registered bonds, without interest coupons, in the denomination of $5,000 or any integral multiple of $5,000, and such bonds again may be transferred andlor exchanged, all subject to the conditions stated and in the manner provided in the Ordinance authorizing the issuance of the Initial Bond (the "Bond ordinance"}, with any such bonds which are registered, authenticated, and delivered in accor- dancewith the Bond ordinance being hereinafter called "Definitive Bonds". WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and have examined and relied upon a transcript of certified proceedings of the Issuer and other pertinent instruments furnished by the Issuer relating to the authorization of the Initial Bond and Definitive Bonds and the issuance and delivery of the Initial Bond, including the executed Initial Bond and a printed specimen of the form for Definitive Bonds initially made available by the Issuer for completion and exchange for the Initial Bond; and we have examined and relied upon the Issuer's Federal Tax Certificate, of even date herewith. BASED QN SAID EXAMINATION, IT IS OUR QPINIQN that the Initial Bond and Definitive Bonds have been duly authorized, and the Initial Bond has been duly issued and delivered, all in accordance with law, and that, except as may be limited by laws applicable to the Issuer relating to bankruptcy, reorganization, and other similar matters affecting creditors' rights or by general principles of equity which permit the exercise of judicial discretion, the Initial Bond constitutes and the Definitive Bonds will constitute valid and legally binding obligations of the Issuer; and that ad valorem taxes sufficient to provide for the payment of the interest on and principal of the Initial Bond and Definitive Bonds have been levied and pledged for such purpose, within the limit prescribed by law. IN QUR ~PINIQN, except as discussed below, the interest on the Initial Bond and the Definitive Bonds (collectively, the "Bonds"} is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "specified private activity bonds" and that, accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57(a}(5} of the Internal Revenue Code of 198b (the "Code"}. In expressing the aforementioned opinions, we have relied on certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or if the Issuer fails to comply with such covenants, interest on the Bonds may become includable in grass income retroactively to the date of issuance of the Bonds. EXCEPT AS STATED ABOVE, we express no opinion as to any federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Initial Bond and the Definitive Bonds. WE CALL YQUR ATTENTIQN TQ THE FACT that the interest ontax-exempt obligations, such as the Bonds, is included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code. QUR OPINIQNS ARE BASED QN EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof, We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or became effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service the "Service"~; rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINIQN as to any insurance policies issued with respect to the payments due far the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future. QUR SALE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer far the sole purpose of rendering our opinions with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Bonds, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Bonds. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Bands has been limited as described therein. Respectfully, Z Proposed Form of Opinion of Bond Counsel An opinion in substantially the following form will be delivered by McCall, Parkhurst & Horton L.L.P., Bond Counsel, upon the delivery of the Certificates, assuming no material changes in facts or law. CITY OF DENTON CERTIFICATE OF OBLIGATION, SERIES 2008 DATED AUGUST 15, 2008 IN THE PRINCIPAL AMOUNT OF $10,685,000 AS BOND COUNSEL for the City of Denton, in Denton County, Texas the "Issuer"}, we have examined into the legality and validity of the issue of Certificates of Obligation initially evidenced by the certificate described above the "Initial Certificate"},which Initial Certificate originally has been issued and delivered as a single fully registered certificate, without interest coupons, with the principal amount thereof payable as set forth in the Initial Certificate, and with the unpaid balance of each installment of principal, respectively, bearing interest, calculated on the basis of a 360-day year composed of twelve 30-day months, from the date of the Initial Certificate to the scheduled due date ~"maturity"} of each installment of principal, at the rates per annum for each maturity, set forth in the Initial Certificate with interest payable on February 15, 200, and semiannually on each August 15 and February 15 thereafter, and with the then outstanding principal of the Initial Certificate being subject to prepayment or redemption, as a whole or in part, prior to scheduled maturity, in accordance with the terms and conditions stated on the face of the Initial Certificate. The Initial Certificate may, at the request of the registered owner, be transferred and converted into, andlor exchanged for, fully registered certificates, without interest coupons, in the denomination of $5,000 or any integral multiple of $5,000, and such certificates again may be transferred andlor exchanged, all subject to the conditions stated and in the manner provided in the Ordinance authorizing the issuance of the Initial Certificate (the "Certificate Ordinance"},with any such certificates which are registered, authenticated, and delivered in accordance with the Certificate Ordinance being hereinafter called "Definitive Certificates". WE HAVE EXAMINED the applicable and pertinent provisions of the Constitution and laws of the State of Texas, and have examined and relied upon a transcript of certified proceedings of the Issuer and other pertinent instruments furnished by the Issuer relating to the authorization of the Initial Certificate and Definitive Certificates and the issuance and delivery of the Initial Certificate, including the executed Initial Certificate and a specimen of the form for Definitive Certificates initially made available by the Issuer for completion and exchange for the Initial Certificate; and we have examined and relied upon the Issuer's Federal Tax Certificate, of even date herewith. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Initial Certificate and Definitive Certificates have been duly authorized and the Initial Certificate has been duly issued and delivered, all in accordance with law, and that, except as may be limited by laws relating to bankruptcy, reorganization, and other similar matters affecting creditors' rights or by general principles of equity which permit the exercise of judicial discretion, the covenants and agreements in the Certificate Ordinance constitute valid and binding obligations of the Issuer, and the Initial Certificate constitutes and Definitive Certificates collectively, the "Certificates"} will constitute valid and legally binding obligations of the Issuer, which, together with the interest thereon, and together with other parity obligations of the Issuer, are payable from and secured by ~i} annual ad valorem taxes, within the limit prescribed by law, levied on all taxable property within the Issuer, and iii}certain surplus revenues knot to exceed $10,000 in aggregate amount} derived by the Issuer from the ownership and operation of the City's Utility System consisting of the City's combined waterworks system, sanitary sewer system, and electric light and power system}, all as provided in the Certificate Ordinance. THE ISSUER has reserved the right to issue, in accordance with law, and in accordance with the Certificate Ordinance, other and additional obligations, and to enter into contracts, payable from ad valorem taxes andlor revenues of the City's Utility System, on a parity with, or with respect to said revenues, superior in lien to, this Certificate. THE ISSUER also has reserved the right, subject to the restrictions stated in the Certificate Ordinance, to amend the Certificate Ordinance with the approval of the holders orowners offifty-one percent in principal amount of all outstanding Certificates which are payable from and secured by certain surplus revenues. IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Certificates is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Certificates are not "'specified private activity bonds" and that, accordingly, interest on the Certificates will not be included as an individual or corporate alternative minimum tax preference item under section 57~a}(5) of the Internal Revenue Code of 1986 the "Code"). In expressing the aforementioned opinions, we have relied on certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants regarding the use and investment of the proceeds of the Certificates and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or if the Issuer fails to comply with such covenants, interest on the Certificates may become includable in gross income retroactively to the date of issuance of the Certificates. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Certificates. WE CALL YOUR ATTENTION TO THE FACT that the interest ontax-exempt obligations, such as the Certificates, is included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service the "Service"}; rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representationssnd covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Certificates. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Certificates as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due for the principal of and interest on the Certificates, nor as to any such insurance policies issued in the future. 2 OUR SOLE ENGAGEMENT in connection with the issuance of the Certificates is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and.validity of the Certificates under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Certificates for federal income tax purposes, and for no other reason or purpose, The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Certificates, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Certificates. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. Respectfully, 3 Exhibit 4 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of August 19, 2008 (this "Agreement"), by and between the City of Denton, Texas (the "Issuer"), and The Bank of New York Mellon Trust Company, National Association, a national banking association (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its General Obligation Bonds, Series 2008 (the "Securities") in the aggregate principal amount of $7,300,000 such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Securities are scheduled to be delivered to the initial purchaser thereof on or about September 23, 2008; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Ordinance" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Ordinance." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated on the signature page hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Ordinance" means a written request or ordinance signed in the name of the Issuer by the Mayor of the Issuer delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Ordinance" means the ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the City Secretary or any other officer of the Issuer and delivered to the Bank. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Ordinance). "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Responsible Officer" when used with respect to the Bank means the Chairman orVice-Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above 2 designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity" means the date specified in the Ordinance the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," Issuer," and Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying_Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Ordinance. Section 3.03. Reporting Requirements. To the extent required by the Code or the Treasury Regulations, the Bank shall report to the Holders and the Internal Revenue Service the amount of interest paid or the amount treated as interest accrued on the Bond which is required to be reported by the Holders on their returns of federal income tax. ARTICLE FOUR REGISTRAR Section 4.01. Security Register -Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register"), and, if the Bank Office is located outside the State of Texas, a copy of such books and records shall be kept in the State of Texas, for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transferor exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Bonds. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Re is~ter. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. 4 The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank toprovide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Cancelled Bonds. All bonds surrendered to the Bank, at the designated Payment/Transfer Office, for payment, redemption, transfer, or replacement, shall be promptly cancelled by the Bank. The Bank will provide to the Issuer, at reasonable intervals determined by the bank, a bond evidencing the destruction of canceled bonds. Section 4.06. Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. Incase any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on bonds or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent ofthe Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counselor any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (~ The Bank may exercise any ofthe powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements ofthe Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a segregated account to be held by the Bank solely for the benefit of the owners of the Securities to be used solely for the payment of the Securities, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized with securities or obligations that are eligible under the laws of the State of Texas and to the extent permitted by the laws ofthe United States of America to secure and be pledged as collateral for such accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such account shall be made by check drawn on such account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. 6 Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction within the State of Texas to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1,1987, which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereto. Section 6.02. Assi n.~. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. hereof. Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Bank may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Bank shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Bank shall be the successor of the Bank hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto, provided that the successor or resulting corporation is a bank, trust company, financial institution or other agency competent and legally qualified to act as Paying Agent/Registrar under this Agreement and the Order. The Bank shall provide immediate notice to the Issuer of any such pending merger, conversion, consolidation or of any such pending transfer to a successor corporation. Section 6.07. Severabili . In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.08. Benefits of A reg ement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.09. Entire A reg ement. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Ordinance, the Ordinance shall govern. Section 6.10. Counterparts. This Agreement maybe executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.11. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until 8 (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof), together with other pertinent books and records relating to the Securi- ties, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.12. Governing. Texas. This Agreement shall be construed in accordance with and governed by the laws of the State of 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION By _ Title 2001 Bryan Street,10th Floor Dallas, Texas 75201 CITY OF DENTON, TEXAS By Mayor 215 E. McKinney Denton, Texas 76201 SCHEDULE A Paying Agent/Registrar Fee Schedule [To be supplied by the Bank] N ~_ L W a ,~ V 0 a ~~ zz w w w Z W 0~ ~ ~ Ca0 C (, J J ~~ aW aW U ~ O w _y W ~ ~ ~ N ~ ~ ~ V I ~ I ~ I ~~ I I ~~ I ~ I I ~ I I I I I ~ } K N 0 0 ~ r ~} 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0~ 0 0 0 0 0~ 0 0 0 0 0 0 0 0 0 0 0 0 Q W~ ~~ O~~ O~~~~ O r 0 0 0 0 0 0~ 0 0 ~~ y o~NNNOOI~~N~o~N~~O~00~Or0 OO O c`')NNO~MNr c'')r N~O~n~OC'')O~c'~ ~~ U N rr N rNl~ y Q? 0 U 000000000000000000000 000000000000000000000 p ~ oou~ooooo~nooooo0000000 Q~~ Z ~i~io~i~io~~i~i~ioroooooouioo O U Z o~NNNOOI~~N~o~N~u)O~OO~OrO c`') N N o• c`') N r c'') r N ~o ~ ~ O c`') O ~ c~ ~~ ~ N rr N rNl~ ~ ~ W Z 0 0 0 0 0 0 0 Q O 0 0 0 0 0 0 0 ~ ' ' ' ' ' ' ' ' ' ' ' O O O O O ' O O U Q ~ O~ 0 0 ~ O (' ~0~~0(`') ~('') ~ ~ N r N W m U O ~ p W N p I ~ I I I I I I I I I I I I I I I I I I I ~ W 0~ 2 y H ~ ~ Z Q ~ z ~ ~ p 0000000000000 W O O O O O O O O O O O O O N W 0 0~ 0 0 0 0 0~ 0 0 0 0 ~ ~ ~ ~ O ~ ~ O ~ ~ ~ ~ O r O O y O~NNNOOI~~N~O~N~ = c/1 c`7 N N o~ c`7 N r l`') r N ~ Z N Q ,,^^ o V y I ~ I I I I I I I I I I I I I I I I O I I Z p ~i ~ z .~ H O o X m ~ ('~ O O O N N 0 0 0 N N O O O O 0 O O O 0 O 0 ~i 0 L } ° ~ N 0 ~ ~ ~ ~ O ~ N N ~.o~~ ~ ~ 3 ~ o~"o~ ~ } Q a~oLo o ~ U U Q ~ ° ~~, o ~ ~ ~ o ~~ ~ ~ ~' U ~ ~ (~ U ~ 0 L U ~ 0 ~ ° ~ 0 ~ .~ ~ \ ~ N ~ N 0 ~ ~ w ~ ~ C } ~ ~ ~ ~ iL ~ ~ Q Q ~ i ~ ~ cn W ~ o a~ o ~~ L } ° ° ~ ° ° ° o SOU ~~- o ~ ~ ~ ~, ~o ° 0 ~ ~ ~ ~ ~ \ N ~ ~ ~ 0 N U N W ~~~ W U N~~ i 'N Q~~ J J U U N ~ ~ ~ L 0 Q ~ } ~ ~3 ~ ~U~~ ~ ~ ~~_~}~ ~ ~~a}~ Z N ~ ~ ~ ~ ~ ~ ~ ~ m N ~ dS N 0 ~ N ~ w ~ ~ ~ ~ ~ ~ 3 N ~ 0 ~ ~ ~ ~ ~ ~ 0 w ~ `~ ~ 0 ~ U ~ _0 S O U L~ w J w U N O v~ O m- N~ 0 0 L ~ - ~ ~ t J to N ~ > ~ U ~ ~ L ~ ~ O ~/~t ~ ~ ~ .~ ~/~, '~ ~ H ~ a~~-~oa~o° o~ i~~°~WL°o0 a ~~'v~~v~c.~~~Zw~C~~wUc.~Q>~w~~ Q _QQ_QQ a ~ ~ ~ ~ ~ N N p W W W W W- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ U ~ ~ ~ }~'~ 7~'~ }~'~ J~'~ -_ 7L'~ L 7L'~ L 7L'~ L 7L'~ L ~_ ~_ ~_ ~_ ~ •~ 7L~ /O~ V V V V~ V~ V~ V~ V~~~~~~ L V V p ~~~~ m w w w w w w w w m m m m> ~ w w ~ 000000000000000000000 W ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N N N N N N ~ ~ N ~ ~ ~ O ~ I I I I I I I N~ ~('~ ~D N (~ I I I I I I O I L } ('') ~ r ~ ('') ~ O ~ } x r ~ 0 ~0 = ~} 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0~ 0 0 0 0 0~ 0 0 0 0 0 0 0 0 0 Q W ~ OOOOOr~00~0~~0~00000000 H~ y O~O~('~~OI~~~DOO~N000~0~00 OO O cONOrNNO~ N~~NNf~u~~c'~~Nrc'~ ~~ U cvri r r rr ~ r O O ~ I I I I I I I I I I I I I I Q I I I I I I y Q ? O ~ U r 00000000000000 000000 00000000000000 000000 p ~ ooooou~ooooou~oo 1000000 a~~ Z ooooor~ioo~o~i~o~o 000000 O=U Z O~O~c~~01~Q.~DOO~NO 0~0~00 cONOrNNO~ N~~NNf~ u)c'~~Nrc~ ~ ~ W Z 0 0 0 0 0 0 Q O I I I I I I I I I I I I I I I O O O O O O 0 0 0 0 0 0 U a 0 0 0 0 0 0 O ~ O ~ O O (' ~('')~Nr('') W m U ~ ~ p W N p I I I I I I I I I I I I I I I I I I I I I ~ W 0~ 2 y H ~ ~ Z a~ z ~ ~ p 00000000000000 W 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N W 0 0 0 0 0~ 0 0 0 0 0~ 0 0 ~ ~ OOOOOr~00~0~~0~0 O y O~O~('')~OI~Q.~000~NO = y CONOrNNO~ Nu~u~NNf~ ~ Z N c~i a ~,/ y I I I I I I I I I I I I I I I I I I I I I Z p ~ z ~' 0 X m W ~4 O O O N N ~4 O O O O O 0 0 0 N 54 O O O O O I 0 O O O I 7~ V/ A~ L ° L n` ~ } } 0 ~ ~ 0 ~ a~oo~~ Q ~ ~ ~ U ~~ N ~ ~ ~ ~ a o D ~ ~ .0 :U ~ ~ ~ o ~~~~~/1U ~ Q} o 0 0 0 } } 3 ~ ~ ~ = N ~ ~ 0 C c.~ ~ ~ o ~~~ ~ a o a 3 ~ ~ ~ ~ .~~ O ~ ~ N ~ _~ ~ ~ c 4 ~ U ~ ~ ~ N N ~~ ~ ~~ ~_ ~ N 2 0~ O N N C In w 0~ U ~ 0 Q N N N p~ I~ N~~ ~ N O W E Q }/` ~_ Z ~ p ~ ~ N ~ C ~ ~ N ~ N ~ ~ Q ~ ~ N ~ ~0 o ~3~~ ~- o U~ ~ °- ow3 ~ o UN~ a C0 ~ `~ ~ ~ ~~~~ ~ ~}~ ~Q Q~~ ~~ ~~ ~ ~ ~~~~~~ ~~U~ZUw~Q~i>ii~ ~0 Q Q Q ~ ~ ~ ~ ~ W U ~ ~ ~ ~ p U\\\ \ cn vrr~ cn vrr~ cn vrr~ cn ~ ~ ~ ~ ~ ~ ~ cn vr~ C ~ ~ ~ p ~~~~~~~wwwwwww~~~>mmm oc 000000000000000000000 Q \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ W CO 0p CO 0p CO 0p CO 00 00 00 00 00 00 00 00 00 00 00 00 00 00 ~ O O O O O O O O O O O O O O O O O O O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N N N N N N N N N N N N N U 0 Q W 0 0 0 0) .Q 0 Q I 0 .N 0 L w N U .~ }_ U Exhibit6 NOTICE OF SALE AND BIDDING INSTRUCTIONS ON S7,3aa,aaa CITY OF DENTON, TEXAS Denton County} GENERAL OBLIGATION BONDS, SERIES 2aa8 Sealed Bids Due Tuesday, August 19, 2aa8, at 11:3a AM, CDT THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. THE SALE BONDS OFFERED FOR SALE AT COMPETITIVE BIDDING . , .The City of Denton, Texas the "City"} is offering for Sale its $7,300,000 General Obligation Bonds, Series 200$ (the "Bonds"). Bidders may submit bids for the Bonds by any of the following methods: ~l} Deliver bids directly to the City as described below in "Bids Delivered to the City;" ~2} Submit bids electronically as described below in "Electronic Bidding Procedures;" or ~3} Submit bids by telephone or facsimile as described below in "Bids by Telephone or Facsimile." BIDS DELIVERED TO CITY .. ,Sealed bids, plainly marked "Bid for Bonds," should be addressed to "Mayor and City Council, City of Denton, Texas," and should be delivered to the City's Financial Advisor at 777 Main Street, Suite 1200, Fort Worth, Texas 76102, prior to 11:30 AM, CDT, on the date of the sale. ELECTRONIC BIDDING PROCEDURE ...Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of PARITY. Subscription to i-Deal's BIDCOMP Competitive Bidding System is required in order to submit an electronic bid. The City will neither confirm any subscription nor be responsible for the failure of any prospective bidder to subscribe. Bidders submitting an electronic bid shall not be required to submit Official Bid Forms prior to award. An electronic bid made through the facilities of PARITY shall be deemed an irrevocable offer to purchase the Bonds on the terms provided in this Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the City. The City shall not be responsible for any malfunction or mistake made by, or as a result of the use of the facilities of, PARITY, the use of such facilities being the sole risk of the prospective bidder, If any provisions of the Notice of Sale shall conflict with information provided by PARITY as the approved provider of electronic bidding services, this Notice of Sale shall control. Further information about PARITY, including any fee charged, may be obtained from Parity Customer Support, 4a West 23rd Street, 5th Floor, New York, New York 1aa10, X212) 404-8102. For purposes of the bidding process, regardless of the bidding method, the time as maintained by i-Deal shall constitute the official time. For information purposes only, bidders are requested to state in their electronic bids the true interest cost to the City, as described under "Basis for Award" below. All electronic bids shall be deemed to incorporate the provisions of this Notice of Sale and the Official Bid Form. The winning bidder shall submit a signed bid form if not previously submitted. BIDS BY TELEPHONE OR FACSIMILE ...Bidders must submit, prior to August 19, 200$, SIGNED Official Bid Forms to Laura Alexander, First Southwest Company, 777 Main Street, Suite 1200, Fort Worth, Texas 76102, and submit their bid by telephone or facsimile (fax} on the date of the sale. Telephone bids will be accepted at ($17} 332-9710, between 10:30 AM, CDT and 11:30 AM, CDT on the date of the sale. Fax bids will be received between 10:30 AM, CDT and 11:30 AM, CDT, on the date of the sale at ($17} 336-5572, attention: Rhonda Van Iderstine. First Southwest Company will not be responsible for submitting any bids received after the above deadlines. The City and First Southwest Company are not responsible if such telephone or facsimile numbers are busy which prevents a bid or bids from being submitted on a timely basis. First Southwest Company assumes no responsibility or liability with respect to any irregularities associated with the submission of bids if any options are exercised. PLACE AND TIME OF BID OPENING, , .The bids for the Bonds will be publicly opened and read at the offices of the Financial Advisor, at 11;3a AM, CDT, Tuesday, August 19, 2aa8. AWARD OF THE BONDS ...The City Council will take action to award the Bonds (or reject all bids} at a meeting scheduled to convene at b:3a PM, CDT, on the date of the bid opening, and adopt an ordinance authorizing the Bonds and approving the Official Statement (the "Bond Ordinance"}. THE BONDS DESCRIPTION ...The Bonds will be dated August 15, 2aa8 (the "Dated Date"}. Interest will accrue from the Dated Date and will be due on February 15, 2aag, and each August 15 and February 15 thereafter until the earlier of maturity or prior redemption. The Bonds will be issued only in fully registered form in any integral multiple of $5,aa4 for any one maturity. The Bonds will mature on February 15 in each year as follows: MATURITY SCHEDULE Principal Principal Principal Year Amount Year Amount Year Amount 2449 $ 225,41)1) 241 b $ 314,444 2422 $ 415,444 2414 235,444 2417 325,444 2423 435,444 2411 245,444 2418 345,444 2424 455,444 2412 255,444 2419 3Ga,4aa 2425 484,444 2413 274,444 2424 384,444 242G 545,444 2414 285,aa4 2421 3g5,4aa 2427 534,444 2415 2g5,aa4 2428 555,444 OPTIONAL REDEMPTION ...The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2419, in whole or in part in principal amounts of $5,444 or any integral multiple thereof, on February 15, 2418, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. SERIAL BONDS ANDIOR TERM BONDS ...Bidders may provide that all of the Bonds be issued as serial Bonds or may provide that any two or more consecutive annual principal amounts be combined into one or more term Bonds. MANDATORY SINKING FUND ... If the successful bidder elects to alter the Maturity Schedule reflected above and convert principal amounts of the Serial Bonds into "Term Bonds", such "Term Bonds" shall be subject to mandatory redemption on the first February 15 next following the last maturity for Serial Bonds, and annually thereafter on each February 15 until the stated maturity for the Term Bonds at the redemption prices of par plus accrued interest to the date of redemption, The principal amounts of the Term Bonds to be redeemed on each mandatory redemption date shall be the principal amounts that would have been due and payable in the Maturity Schedule shown above had no conversion to Term Bonds occurred. At least thirty (3a} days prior to each mandatory redemption date, the Paying AgendRegistrar shall select by lot the Term Bonds to be redeemed and cause a notice of redemption to be given in the manner provided in the Preliminary Official Statement. The principal amount of the Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the City, by the principal amount of the Term Bonds of the same maturity which (i} shall have been acquired by the City at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date or purchase thereof, and delivered to the Paying AgendRegistrar for cancellation or (ii} shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. A final official statement will incorporate the mandatory redemption provisions for the Bonds in the event the successful bidder elects to convert serial maturities into one or more Term Bonds. BOOx ENTRY-ONLY SYSTEM ...The City intends to utilize the Book-Entry-only System of The Depository Trust Company {"DTC"}. See "The Bonds -Book-Entry-only System" in the Preliminary Official Statement. PAYING AGENT/REGISTRAR , ..The initial Paying AgendRegistrar shall be The Bank of New York Mellon Trust Company, National Association (see "The Bonds -Paying AgendRegistrar" in the Preliminary Official Statement}. SOURCE OF PAYMENT ...The Bonds are direct and voted general obligations of the City payable out of the receipts from an annual ad valorem tax levied, within the limits prescribed by law, on all taxable property located within the City, as provided in the Bond Ordinance. Further details regarding the Bonds are set forth in the Preliminary Official Statement. ii CONDITIONS OF THE SALE TYPE OF BIDS AND INTEREST RATES ...The Bonds will be sold in one block on an "All or None" basis, and at a price of 1 aa.9a% of their par value plus accrued interest from the dated date of the Bonds the "Dated Date") to the date of delivery of the Bonds. Bidders are invited to name the rates} of interest to be borne by the Bonds, provided that each rate bid must be in a multiple of 118 of 1% or lllaa of 1% and the net effective interest rate must not exceed 15%. The highest rate bid may not exceed the Iowest rate bid by more than 2% in rate. Using the interest rate established for the February 15, 2a19 maturity as the base year, interest rates for successive maturities shall be structured in ascending order such that for each succeeding maturity, rates shall be equal to or greater than the interest rate for the maturity of the preceding year. No limitation is impaled upon bidders as to the number of rates or changes which may be used. All Bonds of one maturity must bear one and the same rate. No bids involving supplemental interest rates will be considered. Each bidder shall state in the bid the total interest cost in dollars and the effective interest rate determined thereby (calculated in the manner prescribed by Chapter 12a4, Texas Government Code), which shall be considered informative only and not as a part of the bid. BASIS FOR AWARD ...The sale of the Bonds will be awarded to the bidder making a bid that conforms to the specifications herein and which produces the lowest True Interest Cost rate to the City. The True Interest Cost rate is that rate which, when used to compute the total present value as of the Dated Date of all debt service payments on the Bands an the basis of semi-annual compounding, produces an amount equal to the sum of the par value of the Bonds plus any premium bid abut not interest accrued from the Dated Date to the date of their delivery). In the event of a bidder's ercor in interest cost rate calculations, the interest rates, and premium, if any, set forth in the Official Bid Form will be considered as the official bid. GOOD FAITH DEPOSIT ... A Good Faith Deposit, payable to the "City of Denton, Texas", in the amount of $14b,aaa.aa, is required. Such Good Faith Deposit shall be a bank cashier's check ar certified check, which is to be retained uncashed by the City pending the Initial Purchaser's compliance with the terms of the bid and the Notice of Sale and Bidding Instructions. The Good Faith Deposit may accompany the Official Bid Farm ar it may be submitted separately. If submitted separately, it shall be made available to the City prior to the opening of the bids, and shat I be accompanied by instructions from the bank on which drawn which authorize its use as a Good Faith Deposit by the Initial Purchaser who shall be named in such instructions. The Good Faith Deposit of the Initial Purchaser will be returned tv the Initial Purchaser upon payment far the Bands, No interest will be allowed an the Gaod Faith Deposit. In the event the Initial Purchaser should fail or refuse to take up and pay for the Bonds in accordance with the bid, then said check shall be cashed and accepted by the City as full and complete liquidated damages. The checks accompanying bids other than the winning bid will be returned immediately after the bids are opened, and an award of the Bands has been made. DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS CUSIP NUMBERS ... It is anticipated that CUSIP identification numbers will appear on the Bonds, but neither the failure to print or type such number on any Bond nor any error with respect thereto shall constitute cause for a failure ar refusal by the Initial Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this Notice of Sale and Bidding Instructions and the terms of the Official Bid Farm. All expenses in relation to the printing ar typing of CUSIP numbers an the Bands shall be paid by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid for by the Initial Purchaser. DELIVERY OF BONDS ...Initial Delivery will be accomplished by the issuance of one Initial Band (also called the "Bond" or "Bonds"), either in typed ar printed form, in the aggregate principal amount of $7,3aa,aaa, payable in stated installments to the Initial Purchaser or its designee, signed by the Mayor and City Secretary, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts. Upon delivery of the Initial Band, it shall be immediately cancelled and one definitive Bond for each maturity will be registered and delivered only to Cede & Co., and deposited with DTC in connection with OTC's Book-Entry-Only System. Delivery will be at the corporate trust office of the Paying AgentlRegistrar in Dallas, Texas. Payment for the Bonds must be made in immediately available funds for unconditional credit to the City, or as otherwise directed by the City. The Initial Purchaser will be given six business days' notice of the time fixed for delivery of the Bonds. It is anticipated that delivery of the Bonds can be made on or about September 23, 2aa8, and it is understood and agreed that the Initial Purchaser will accept delivery and make payment far the Bonds by la:aa AM, CDT, on September 23, 2aa8, ar thereafter on the date the Bond is tendered far delivery, up to and including October 7, 2aa8. If for any reason the City is unable to make delivery on ar before October 7, 2aa8, the City shall immediately contact the Initial Purchaser and offer to allow the Initial Purchaser to extend its offer for an additional thirty days. If the Initial Purchaser does not elect to extend its offer within six days thereafter, then its Good Faith Deposit will be returned, and both the City and the Initial Purchaser shall be relieved of any further obligation. In no event shall the City be liable for any damages by reason of its failure to deliver the Bonds, provided such failure is due to circumstances beyond the City's reasonable control. CONDITIONS TO DELIVERY . , .The obligation of the Initial Purchaser to take up and pay for the Bonds is subject to the Initial Purchaser's receipt of ~a) the legal opinion of McCall, Parkhurst & Horton, L.L.P., Dallas, Texas, Bond Counsel for the City ("Bond Counsel"), fib) the na-litigation certificate, and ~c} the certification as to the Preliminary Official Statement, all as further described in the Preliminary Official Statement. In order to provide the City with information required to enable it to comply with certain conditions of the Internal Revenue Code of 198b relating to the exemption of interest on the Bonds from the gross income of their owners, the Initial Purchaser will be iii required to complete, execute, and deliver to the City (on or before the 6th business day prior to the delivery of the Bonds) a certification as to their "issue price" substantially in the form and to the effect attached hereto or accompanying this Notice of Sale and Bidding Instructions. In the event the successful bidder will not reoffer the Bonds for sale, such certificate may be modified in a manner approved by the City. In no event will the City fail to deliver the Bonds as a result of the Initial Purchaser's inability to sell a substantial amount of the Bonds at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver such a certificate by the date of delivery of the Bonds, if its bid is accepted by the City. It will be the responsibility of the Initial Purchaser to institute such syndicate reporting requirements to make such investigation, or otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certification should be directed to Bond Counsel. LEGAL OPINIONS ...The Bonds are offered when, as and if issued, subject to the approval of the Attorney General of the State of Texas. Delivery of and payment for the Bonds is subject to the receipt by the Initial Purchaser of opinions of Bond Counsel, to the effect that the Bonds are valid and binding obligations of the City and that the interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Matters" in the Preliminary Official Statement, including alternative minimum tax consequences for corporations. CERTIFICATION OF PRELIMINARY QFFICIAL STATEMENT ... At the time of payment for and Initial Delivery of the Bonds, the City will execute and deliver to the Initial Purchaser a certificate in the form set forth in the Preliminary Official Statement. CHANGE IN TAX EXEMPT STATUS ....At any time before the Bonds are tendered for delivery, the Initial Purchaser may withdraw its bid if the interest received by private holders on obligations of the same type and character shall be declared to be includable in gross income under present federal income tax laws, either by ruling of the Internal Revenue Service or by a decision of any Federal court, or shall be declared taxable or be required to be taken into account in computing any federal income taxes, by the terms of any federal income tax law enacted subsequent to the date of this Notice of Sale and Bidding Instructions. GENERAL FINANCIAL ADVISOR ...First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company may submit a bid far the Bonds, either independently or as a member of a syndicate organized to submit a bid for the Bonds. 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 Bonds, ar the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. In the normal course of business, the Financial Advisor may from time to time sell investment securities to the City for the investment of bond proceeds or other funds of the City upon the request of the City. BLUE SxY LAWS ... By submission of its bid, the Initial Purchaser represents that the sale of the Bonds in states other than Texas will be made only pursuant to exemptions from registration or, where necessary, the Initial Purchaser will register the Bonds in accordance with the securities law of the states in which the Bonds are offered or sold. The City agrees to cooperate with the Initial Purchaser, at the Initial Purchaser's written request and expense, in registering the Bonds or obtaining an exemption from registration in any state where such action is necessary, provided, however, that the City shall not be obligated to qualify as a foreign corporation or to execute a general or special consent to service of process in any such jurisdiction, NOT AN QFFER TO SELL ...This Notice of Sale and Bidding Instructions does not alone constitute an offer to sell the Bonds, but is merely notice of the sale of the Bonds. The offer to sell the Bonds is being made by means of the Notice of Sale and Bidding Instructions, the Official Bid Form and the Preliminary Official Statement. Prospective purchasers are urged to carefully examine the Preliminary Official Statement to determine the investment quality of the Bonds. ISSUANCE OF ADDITIONAL DEBT ... Other than the City's $10,685,000 Certificates of Obligation, Series 2008 being offered for sale concurrently with, but separately from, the Bonds, the City does not anticipate the issuance of additional general obligation debt within the next 12 months. RATINGS ...The presently outstanding tax supported debt of the City is rated "Aa3" by Moody's Investors Service, Inc. ~"Moody's"} and "AA-" by Standard & Poor's Ratings Services, ADivision ofMcGraw-Hill Companies, Inc. ~"S&P"}, The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance companies. Applications for contract ratings on this issue have been made to Moody's and S&P. The results of their determinations will be provided as soon as possible. MUNICIPAL BOND INSURANCE ... In the event the Bonds are qualified for municipal bond insurance, and the Purchaser desires to purchase such insurance, the cost therefor will be paid by the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. It will be the responsibility of the Purchaser to disclose the existence of insurance, its terms and the effect thereof with respect to the reoffering of the Certificates. Any rating downgrade by Moody's, S&P, or Fitch Ratings, respectively, of the bond insurance provider after the Bid Opening shall not relieve the Purchaser of its obligation under the heading "DELIVERY 4F THE BDNDS AND ACCOMPANYING D4Ci1MENTS". iv THE PRELIMINARY OFFICIAL STATEMENT AND COMPLIANCE WITH SEC RULE 15C2-12 ... The City has prepared the accompanying Preliminary official Statement and, for the limited purpose of complying with SEC Rule 15c2-12, deems such Preliminary Official Statement to be final as of its date within the meaning of such Rule for the purpose of review prior to bidding. To the best knowledge and belief of the City, the Preliminary official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Bands. Representations made and to be made by the City concerning the absence of material misstatements and omissions in the Preliminary official Statement are addressed elsewhere in this Notice of Sale and Bidding Instructions and in the Preliminary Official Statement. The City will furnish to the Initial Purchaser, acting through a designated senior representative, in accordance with instructions received from the Initial Purchaser, within seven (7) business days from the sale date an aggregate of 154 copies of the official Statement reflecting interest rates and other terms relating to the initial reoffering of the Bonds. The cost of any Gfficial Statement in excess of the number specified shall be prepared and distributed at the cost of the Initial Purchaser. T11e Initial Purchaser shall be responsible far providing in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Except as Hated above, the City assumes no responsibility or obligation for the distribution or delivery of any copies of the official Statement in connection with the offering or reoffering of the subject securities. CONTINUING DISCLOSURE AGREEMENT ...The City will agree in the Bond ordinance to provide certain periodic information and notices of material events in accordance with Securities and Exchange Commission Rule 15c2-12, as described in the Preliminary official Statement under "Continuing Disclosure of Information". The Initial Purchaser's obligation to accept and pay for the Bonds is conditioned upon delivery to the Initial Purchaser or agent of a certified copy of the Bond ordinance containing the agreement described under such heading. COMPLIANCE WITH PRIOR UNDERTAKINGS , ..The City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2.12, ADDITIONAL COPIES OF NOTICE, BID FORM AND STATEMENT ... A limited number of additional copies of this Notice of Sale and Bidding Instructions, the official Bid Form and the Preliminary Official Statement, as available over and above the normal mailing, may be obtained at the offices of First Southwest Company, Investment Bankers, 325 North St. Paul, Suite $44, Dallas, Texas 75241, Financial Advisor to the City. ~n the date of the sale, the City will, in the Bond ordinance authorizing the issuance of the Bonds, confirm its approval of the form and content of the Preliminary Official Statement, and any addenda, supplement or amendment thereto, and authorize its use in the reoffering of the Bonds by the Initial Purchaser. MARK BURR~UGHS Mayor City of Denton, Texas ATTEST: JENNIFER WALTERS City Secretary August 7, 2448 BLIND YEARS Bonds Accumulated Bonds Maturin Amount Bond Years Bond Years Maturin 2009 225,000 112.500 112.500 2009 2010 235,000 352.500 45.000 2010 2011 245,DDD b12.500 1,077.5DD 2011 2012 255,DDD 892.500 1,97D.DDD 2012 2013 27D,DDD 1,215.000 3,185.DDD 2013 2014 285,DOD 1,5$7.500 4,752.500 2014 2015 295,D00 1,917,500 b,~7D.DDD 2015 201 310,000 2,325.000 8,995.DDD 201b 2017 325,000 2,7b2.500 11,757.50D 2017 2018 345,000 3,277.500 15,035.OOD 2018 2019 3bD,ODD 3,78D.DDD 18,815.000 2019 2020 38D,ODD 4,37D.ODD 23,185.000 202D 2021 395,000 4,937.500 28,122.500 2021 2022 415,000 5,bD2.5DD 33,725.000 2022 2023 435,000 b,307.500 4D,032.5DD 2023 2024 455,000 7,D52.500 47,D85.DDD 2024 2025 480,000 7,92D.DDD 55,DD5.DDD 2025 202 505,000 8,837.500 b3,$42.5DD 2026 2027 53D,OOD 9,805.000 73,b47.5DD 2D27 2028 555,OOD 10,822.500 84,47D.DDD 202$ Ave rage Maturity .................... ......... l l .571 Years UFFICIAL BID FURM Honorable Mayor and City Council City of Denton, Texas August 19, 2~~8 Honorable Mayor and Members of the City Council: Reference is made to your Preliminary Official Statement and Notice of Sale and Bidding Instructions, dated August 'l, 2~~8 of $7,3~U,UUU CITY OF DENTON, TEXAS GENERAL OBLIGATION BONDS, SERIES 2U48, bath of which constitute a part hereof. For your legally issued Bonds, as described in said Notice of Sale and Bidding lnstructions and Preliminary Official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, plus a cash premium of $ for Bonds maturing and bearing interest as follows: Principal interest Principal Interest Principal Interest Maturity Amount Rate Maturi Amount Rate Ma, turity Amount Rate 2/15/2009 $ 225,000 % 2/15/2016 $ 310,000 % 2/15/2022 $ 415,aaa 21151201a 235,000 % 2/15/2017 325,Oaa % 2/15/2023 435,aa0 21151?all 245,a0a % 2/15/2018 345,OOa % 211512x24 455,aa0 2115l2a l2 255,a0a % 2/15/2019 36x,000 % 2/15/2025 480,aa0 2/15/2013 27a,a0a % 211512a2a 38a,aaa % 2/15/2026 5a5,a00 2/15/2014 285,a0a % 211512x21 395,aaa % 211512x27 530,aaa 21] 512015 295,a0a 2/15/2028 555,aa0 Of the principal maturities set forth in the table above, term bonds have been created as indicated in the following table (which may include multiple term bands, one term band or no term bond if none is indicated}. For those years which have been combined into a term bond, the principal amount shown in the table above shall be the mandatory sinking fund redemption amounts in such years except that the amount shown in the year of the term bond maturity date shall mature in such year. The term bonds created are as follows: Year of Maturity Date First Mandatary Principal Interest February 15 Redem lion Amount Rate $ °ro m ni Our calculation which is not a part of this bid) of the true interest cost from the above is: TRUE INTEREST COST We are having the Bonds of the following maturities insured by at a premium of $ ,said remiu~m to be aid b the Initial Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City, The Initial Bonds shall be registered in the name of ,which will, upon payment for the Bonds, be canceled by the Paying AgentlRegistrar. The Bonds will then be registered in the name of Cede & Co. (DTC's partnership nominee), under the Book-Entry-Only System. A bank cashier's check or certified check of the Bank, , in the amount of $146,44U.4a, which represents our Good Faith Deposit (is attached hereto} or Chas been made available to you prior to the opening of this bid}, and is submitted in accordance with the terms as set forth in the Preliminary Official Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Bonds utilizing the Book-Entry-only System through DTC and make payment for the Initial Bond in immediately available funds in the Corporate Trust Division, The Bank of New York Mellon Trust Company, National Association, not later than 1a:44 AM, CDT, on September ~3, X448, or thereafter on the date the Bonds are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions. It will be the obligation of the purchaser of the Bonds to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Bonds, a certificate relating to the "issue price" of the Bonds in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the City. We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Respectfully submitted, Syndicate Members: Name of Underwriter or Manager Authorized Representative Phone Number Signature ACCEPTANCE CLAUSE The above and foregoing bid is hereby in all things accepted by the City of Denton, Texas, subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 19th day of August, ~aa8. ATTEST: Mayor City of Denton, Texas City Secretary CERTIFICATE OF UNDERWRITER The undersigned hereby certifies as follows with respect to the bid and purchase of the City of Denton, Texas General Obligation Bonds, Series 20x8 (the "Bonds"}: 1. The undersigned is the duly authorized representative of the purchaser (the "Purchaser"} of the Bonds from the City of Denton, Texas (the "Issuer"}. 2. All of the Bonds have been offered to members of the public in a bona fide initial offering, For purposes of this Certificate, the term "public" does not include any bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers (including the Purchaser or members of the selling group or persons that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of the selling group}. 3. Each maturity of the Bonds was offered to the public at a price which, on the date of such offering, was reasonably expected by the Purchaser to be equal to the fair market value of such maturity. 4. Other than the obligations set forth in paragraph 5 hereof (the "Retained Maturity" or "Retained Maturities"}, the first pricelyield at which a substantial amount (i.e., at least ten (lx} percent} of the principal amount of each maturity of the Bands was sold to the public is set forth below. Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maturing Maturi %IYield Ma~ taring. Maturi (%IYield} $ 225,Oao 20x9 $ 360,x00 2x19 235,aao 201a 38a,a00 2a2a 245,aao 2011 395,x00 2x21 25s,aaa 2x12 415,aoo 2x22 27x,aax 2x13 435,aoo 2x23 2ss,aax 2x14 455,aao 2x24 295,aax gals 4sa,aao 2x25 31x,axx 2alb sa5,aao 2a2b 32s,axo 2x17 s3a,aao 2x27 34s,axo 2x18 555,aao 2x28 5. In the case of the Retained Maturities, the Purchaser reasonably expected on the offering date to sell a substantial amount (i.e., at least ten (la}percent} of each Retained Maturity at the initial offering pricelyield as set forth below: Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maturin Maturi (%JYield Maw, Maturi %JYield} $ 225,x0a 2x09 $ 3bx,axa 2x19 235,xao gala 38x,xoa 2x20 245,aax 2011 395,xxx 2x21 255,000 2012 41 s,xOx 2x22 27o,aaa 2x13 435,xax 2x23 285,ax0 2014 455,xxx 2x24 295,xxx 2015 480,aax 2025 31x,xxx 2016 Sa5,a0x 2026 325,xOx 2017 530,a0x 2027 345,xxa 2018 sss,a0x 2028 b. Please choose the appropriate statement: ~ }The Purchaser will not purchase bond insurance for the Bonds. ~ }The Purchaser will purchase bond insurance from the "Insurer") for a feelpremium of $ (the "Fee"). The Fee is a reasonable amount payable solely for the transfer of credit risk for the payment of debt service on the Bonds and does not include any amount payable for a cost other than such guarantee, e.g., a credit rating or legal fees. The Purchaser represents that the present value of the Fee for each obligation constituting the Bonds to which such Fee is properly allocated and which are insured thereby is less than the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The Fee has been paid to a person who is not exempt from federal income taxation and who is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds determined with regard to the payment of the guarantee fee) has been used as the discount rate. No portion of the Fee is refundable upon redemption of any of the Bonds in an amount which would exceed the portion of such Fee that has not been earned, 7. The Purchaser understands that the statements made herein will be relied upon, by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 198b, and by Bond Counsel in rendering their opinion that the interest on the Bonds is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of , 2~Q$. Name of Purchaser or Manager of Purchasing Syndicate) By: Title: AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM: Jon Fortune ~TIR.TF,CT Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of the "city of Denton Certificates of Obligation ($10,685,000), Series 2008"; authorizing the issuance of the Certificates of Obligation for projects relating to buildings and equipment, vehicles, parks, economic development and solid waste equipment and construction; approving and authorizing instruments and procedures relating to said Certificates of Obligation; and enacting other provisions relating to the subject. BACKGROUND This ordinance authorizes the issuance, sale and delivery of Certificates of Obligation (the "Certificates") in the amount of $10,685,000 (including issuance costs). The City will sell bonds for a twenty year term with a ten year call provision, unless otherwise noted, for the following capital improvement proj ects: $ 300,000 Downtown Master Plan 510,000 Park Property Acquisition (Southwest Park) 1,000,000 Animal Shelter/Land 2,650,000 Public Safety Radio Antenna (10 Years) 500,000 City Hall East Renovation 550,000 South Branch Library Expansion 2,300,000 Vehicle Replacement (5 years) 2,800,000 Solid Waste ($1.8MM/7 yrs and $ l .OMM/20 yrs) $10,610,000 Total Capital Improvement Plan Projects Each of these items meets the stated purposes included in the City's Debt Service Management Policy [Section 403.07 X(C)] for which Certificates may be issued. The Policy specifically states that they maybe issued to: • finance permanent improvements and land acquisition, the need for which arose between bond elections • finance costs associated with capital project overruns • acquire equipment/vehicles Agenda Information Sheet August 19, 2008 Page 2 After a comprehensive analysis of the City's financial outlook and stability, Standard and Poor's and Moody's Investor Services have assigned favorable bond ratings for this issuance. Standard and Poor's recently upgraded the City's rating on general obligation debt from AA- to AA . Moody's has affirmed their prior rating of Aa3. The ratings are summarized below: Certificates of Obli atg ion ($10,685,000), Series 2008 • Standard and Poor's AA • Moody's Aa3 The Certificates will be sold through a competitive bid process following the guidelines established in the City's Debt Service Management Policy [Section 403.07 XII (A)]. The City's financial advisor, First Southwest Company, will accept bids for the issuance on August 19, 2008. Staff will then present the bids at the City Council meeting on the evening of August 19, 2008, with the final delivery of funds expected September 23, 2008. Interest rates, pricing, insurance provisions, if any, and all other information from the successful bidder will be included in the finalized Official Statement following City Council's award of the bid. The agenda information packet includes various documents as it relates to the issuance of the Certificates. Included is the ordinance authorizing the issuance of the Certificates, the rating agency reports, the Preliminary Official Statement (POS), paying agent/registrar agreement, as well as the Capital Improvement Program (CIP) . All the aforementioned documents, except for the ordinance and the paying agent/registrar agreement, are found with the agenda information for the General Obligation Bonds to minimize redundancy and paperwork. PRIOR ACTION/REVIEW (Council, Boards, Commission) The City Council approved the CIP for fiscal years ending 2008-2012 and changes or additions, as it relates to timing and use of the Certificates, have been reviewed by the Audit/Finance Committee. In addition, the City Council reviewed the revised CIP Plan for FY 2007-08 and FY 2008-09 during a budget work session on August 7, 2008. The City Council approved an ordinance on July 15, 2008 directing the publication of Notice of Intention to issue the Certificates. FISCAL INFORMATION An estimated debt service schedule is presented on page 21, Table 7 in the POS which is included with the General Obligation Bond agenda information. The estimated average annual debt service payment on the new issuance, including principal and interest, will total approximately $705,000. This payment is anticipated and included in the City's Long Range Financial Plan. Agenda Information Sheet August 19, 2008 Page 3 F,XTTTRTTC 1. Ordinance 2. Rating Agency Reports -included with General Obligation Bond Sale Agenda Item 3. Preliminary Official Statement -included with General Obligation Bond Sale Agenda Item 4. Paying Agent/Registrar Agreement 5. Proposed Capital Improvement Program -included with General Obligation Bond Sale Agenda Item 6. Notice of Sale and Bidding Instructions Respectfully submitted: Bryan Langley Director of Finance Exhibit 1 ORDINANCE N'O. ~~08- AN ORDINANCE CONSIDERING ALL MATTES INCIDENT AND RELATED TO THE ISSUANCE, SALE AND DELIVERY OF THE "CITY OF DENTDN CERTIFICATES OF OBLIGATION ~ 10,6S5,~llD}, SERIES X048"; AUTHORI~INCr THE ISSUANCE OF THE CERTIFII~TES OF OBLIGATION; APFROV~TNG AND ATJTHORI~ING INSTRU~IrIENTS AND PROCEDURES RELATING TO SAID CERTIFICATES OF OBLIGATION; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT. THE STATE OF TEAS COUNTY OF DENTDN CITY OF DENTDN WHEREAS, the Certificate of Obligation Act of 1971, Subchapter C of Chapter X71 of the Texas Local Government Code, as mended the "Act"} permits the City to issue and X11 far cash the Certificates of Obligation hereinafter authorized; and . . WHEREAS, the City has duly caused native of its intention to issue the Certificates of Obligation hereinafter authorized to be published at the times and in the manner required by the Act and no petition has been filed protesting the issuance thereof, NOS, THEREFORE THE COUNCIL OF 'THE CITY OF DENTDN HERESY ORDAINS: Section 1. AMOUNT AND PURROSE OF THE CERTIFICATES. The certif irate ar certificates ofthe City of Denton, Texas the "Issuer"}are hereby authorized to be issued and delivered in the aggregate principal amount of 1 D,S~,~Oa, for the purpose of paying all ar a portion of the City's contractual obligations incurred pursuant to contracts far the purchase ofcertain real and personal property, to~wit: ~a} acquisition of land far, and design, construction and equipping af, a public safety radio .antenna; fib} renovations and improvements ta, and equipping of, existing municipal facilities, including City Hall East and City libraries; ~c} improvements to the City's solid waste disposal system and acquisition of related equipment; ~d} acquisition of land for, and design, construction and equipping of, animal shelter; fie} acquisition of vehicles and equipment for the pity's motor pawl; and ~f} acquisition of land for and hprovements to municipal parks; and also far the purpose ofpaying all or a portion ofthe City's contractual obligations far professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, m connec~on with the preparation afthe City's master plan for downtown improvements, and with said Certificates of Obligation, Section 2. DESIGNATION OF THE CERTIFICATES, Each certificate issued pursuant to this Ordinarce shall be designated: "CITY OF DENTDN CERTIFICATE OF OBLIGATION, SEINES 2a0S", and initially there shall be issued, Bald, and delivered hereunder a single fully registered certificate, without interest coupons, payable in installments ofprincipal the "Initial Certificate"~, butthe Initial Certificate may be assigned and transferred andlor converted into and exchanged far a like aggregate principal amount of fully registered certificates, without interest coupons, having serial maturi~es, and in the denomination ar denominations of $~,~00 or tinny integral multiple of~5,000, all in the manner hereinafter provided, The term "Certcates" as used in this Ordinance shall mean and include collectively the Ini~al Certificate and all substitute certificates exchanged therefor, as well as all other substitute certificates and replacement certificates issued pursuant hereto, and the term "Oertificates" shall mean any of the Certificates. Section 3. INITIAL DATE, DENOIVIINATION, NU1I~BER, 11~ATURITIES, INITIAL REGISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL CERTIFICATE, ~a} The Initial Certificate is hereby authorised to be issued, sold, and delivered hereunder as a single fully registered Cerfii~icate,without interest coupons, dated August I ~, ~aaS, in the denomination and aggregate principal amount aft l0,dS,~0~, numbered R- ~, payable in annual installments afprincipal to the initial registered ownerthereof, to-wit: or to the registered assignee or assignees of said Certificate or any portion or portions thereof din each ease, the "registered owner"}, with the annual installments of principal of the Initial Certificate to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL CERTIFICATE set forth in this Ordinance, fib} The Initial Certi~.cate ~i} may or shall be prepaid or redeemed prior to the respective scheduled due dates of installments of principal thereof, iii} nay be assigned and transferred, viii}maybe converted and exchanged far other Certificates, Div} sha11 have the characteristics, and ~~} shall be signed and sealed, and the principal of and interest on the Initial Certificate shall be payable, all as provided, and in the manner rewired or indicated, in the FORM OF INITIAL CERTIFICATE set forth in this Ordinance. . Section 4. INTEREST. The unpaid principal balance ofthe Initial Certi~.cate shall bear interest from the date afthe Initial Certificate to the respective scheduled due dates ofthe in,stailments of principal ~fthe Initial Certificate, and said interest shall be payable, all in the manner provided and at the rates and an the dates stated in the FORM OF INITIAL CERTIFICATE set Earth in this Ordinance. Section 5. FORM OF INITIAL CERTIFICATE. The form afthe Initial Certificate, including the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be endorsed on the Initial Certificate, sha11 be substantially as follows: FORM OF INITIAL CERTIFICATE NO, R-1 10,6S,OOa UNITED STATES OF AMERICA STATE OF TEAS COUNTY OF DENTON CITY OF DENTON CERTIFICATE OF OBLIGATION . SERIES DOS THE CITY OF DENTIN, in Denton County, Texas the "Issuer"}, being a political subdivision of the State of Texas, hereby promises to pay to ar to the registered assignee ar assignees of this Certificate or any portion or par~ians hereof din each case, the "registered owner"~ the aggregate principal a.aunt of ~~o,6ss,ooa (TEN NIILLION SIX HUNDRED EIGHTY FIVE THOUSAND DOLLARS) in annual installments ofprincipal due and payable an February 1 ~ each afthe yeaxs, and in the respective principal amounts, as set forth in the fallowing schedule, and to pay interest, Pram the date afthis Certificate hereinafter stated, on the balance of each such installment of principal, respectively, from time to titn.e remaining unpaid, at the rates per annum as follows: 2 PRINIFAL INTEREST PRINCIPAL INTEREST Y~„AR AIVI~UNT R~1~ °1o YEAR AUNT 4TH °Io 2~0~ 2019 20 ~ 0 2020 2011 2021 2012 2a22 20I 2023 2014 2024 2015 2025 2ai~ 202 2~ ~ ~ 202 2D1S 202 Interest shall first be due and payable an February 15, 2009, and semiannually an each August 15 and February 1 thereafter while this ~erti~cate or any portion hereof is outstanding and unpaid. Said interest shall be calculated on the basis of a 3~0-day year compared of twelve 30-day r~anths. THE ~NTALLENTS OF PRINCIPAL OF AND THE INTEREST ON this ~ertif cafe are payable in lawful money afthe United States ofAmerica, without exchange ar collection charges. The installments ofprincipal and the interest on this Certificate are payable to the registered owner hereafthraugh the services of THE BANK OF NE'YOR 1VIELLON TRUST COIIrIPAN~, NATIONAL A.SSOIATYON, DALLAS, TEAS, which is the "Paying AgentJRegistrar"' far this certificate. Payment atoll principal afand interest onthis certificate shall be made by the Paying AgentJRegis~ar to the registered owner hereofon eachprinci- pal andlorinterest payment date by check dated a ofsuch datE, draws by the Paying AgentfReg~trar on, and payable solely from, funds afthe Issuer required by the ordinance autharizingthe issuance afthis certificate the "certificate Ordinance"~ to be on deposit with the Paying AgentlRegistrar far such purpose as hereinafter provided; and such check shall be sent by the Paying AgentlRegistrar by United States mail, first-class postage prepaid, on each such principal andlor interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared at the close of business on the last day of the month next preceding each such date the "Record Da#e"} on the Registration Baak kept by the Paying AentlRegistrar, as hereinafter described, The Issuer covenants with the registered owner ofthis Certificate that on ar before each principal andlor interest payment date far this Ce~ificate it will make available to the Paying AgentlRegistrar, from the "I~terest and Sinking Fund" created by the certificate Ordinance, the amounts required to provide far the payment, in hnmediateiy available funds, of all principal of and interest an this Certificate, when due. IN THE EVENT of a nonpayment of interest on a scheduled payment date, and far thirty {3 D~ days #hereafter, a new record date far such interest payment ~a "Special Record Date"~ will be established by the Paying AgentlRegistrar, i and when funds for the payment afsuch interest have been received from the Issuer. Notice ofthe Special Record Date and of the scheduled payment date ofthe past due interest {'}Special Payment Date",which shall be f if~een { 15~ days after the peciai Record Date} shall be sent at least five ~5} business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of certificate appearing on the registration baa~s ofthe Paying Agentl~egistrar at the close of business on the ~ 5th business day next preceding the date of mailing of such notice. ~' THE DATE far the payment afthe principal afar interest ott this certificate shall be a Saturday, Sunday, a legal holiday, or a day on whrch banking institutions in the pity where the Paying Agentlegistrar is located are authorized by law ar executive order to close, then the date for such payment shah be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day an which banking institutions are authorized to close; and payment an such date shall have the same farce and effect as ifmade an the original date payment was due. THIS ERTIFI~ATE has been authorized in accordance with the ~onstitutian and laws of the State of Texas in the principal amount of $10,85,00 far the purpose of paying all ar a portion of the pity's contractual obligations incurred pursuant to contrac#s for the purchase afcertain real and personal property, to-wit; ~a~ acquisition of land for, and design, constriction and equipping of, a public safety radio antenna; }renovations and improvements ta, and equipping af, existing municipal facilities, including pity Hail East aril pity libraries; ~c~ improvements to the pity's solid waste disposal system and acquisition of related equipment; ~d~ acquisition of land far, and design, construction and equipping af, animal shelter; fie} acquisition of vehicles and equipment for the pity's n~atar pool; and ~~ ac~uisitian of land far and improvements to municipal parlCS; and also forthe purpose afpaying all or a portion afthe pity's contractual obligations for professional services, including engineers, architects, attorneys, reap makers, auditors, and financial advisors, in connection with the preparation ofthe pity's master plan far downtown unpravements, and with said Certificates of Obligation. DN FEBRUARY 15, X01 ~, or an any date whatsoever thereafter, the unpaid installments afprincipaf afthis Certificate afCbligatian tray be prepaid or redeemed prior to their scheduled due dates, at the ~ptian of the Issuer, with funds derived from any available source, as whole, ar in part, at the prepayment or redemption price afthe par or principal amount thereof, plus accrued interest to the date fixed far prepayment or redemption. If less than all of the Certificates are to be redeemed, the Yssuer may select the maturities of the Cer~cates to be redeemed. if less than all ofthe ~ertifcates of any maturity are to be redeemed, the Paying Agentll~egistrar shall deterrni~e by lot the ~erti~tcates, or portions thereof, within such maturity to be redeemed, THE E~TIFICATE of this Series scheduled to mature an FEBR[~ARY I5, ~~ and FEBRUARY 15, 20~ are subject to mandatary redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with money from the Mandatory Redemption Account afthe Interest and Sinking Fund, with the particular certificates or portion thereafto be redeemed to be selected by the Paying AgentlReistrar, by lot ar othex customary method ~pravided that a portion afa Certificate may be redeemed only in an integral multiple af~5,0~0}, at a redemption price equal to the par ar principal amount thereafand accrued interest to the date afredernption, on the dates, and in the principal amounts, respectively, as Shaw in the following schedule: Feb 15 ~0 Maturi Mandatary Principal Redem tiara Dates Amounts February 15, 20 February 15, 2D maturity} Feb 15 20 1Viaturi 4 Mandatory Principal Rad~mptio~,_, ates A~ount February l ~, 2~_ February 15, ~0_ {maturity} The principal amount of the er~f icate~ required to be redeemed on the Mandatory Redemption Date pursuant to the foregoing shall be reduced, at the option of the Issuer by the principal amount of any Certificates out of the maturity scheduled far February 15, 20_ and February 15, ~0 which, at least 45 days prior to the aforesaid appropriate redemption date ~1}shall have been acquired by the Issuer at a price not exceeding the principal amount of such Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying AentlRegistrar far cancellation, or {2} as shall have been redeemed pursuant to the optional redemption pra~isians hereof and not previously credited to the mandatory sinking fund redemption. During any period xn which ownership of the certificates is determined by a book entry at a securities depository farthe Certificates, iffewer than all ofthe Certificates afthe same maturity and bearing such interest rate are to be redeemed, the Certificates, ar portions thereof, to be redeemed shall be selected in accordance with the arrangements between #ne issuer and the securities depasitar~. AT LEAST 30 days prior to the date fixed far any such prepayment ar redemption a written notice of such prepayment or redemption shall be mailed by the Paying AgentlRegistrar to the registered owner hereof, By the date fixed far any such prepayment or redemption due provision shall be made by the Issuer with the Paying AgentlRegistrar far the payment of the required prepayment ar rede~nptian price far this Certificate ar the portion hereofwhich is to be so prepaid ar redeemed, plus accrued interest thereon to the date fixed far prepayment ar redemption. If such written notice of prepayment ar redemption is given, and ifdue provision far such py~.ent is made, ail as provided above, this Certificate, or the portion thereofwhich is to be so prepaid or redeemed, thereby automatically shall be heated as prepaid nr redeemed prior to its scheduled due date, and shall not bear interest aver the date fixed for its prepayment or redemption, and shall not be regarded as being outstanding except for the right of the registered owner to receive the prepayment ar redemption price plus accrued interest to the date fixed far prepayment or redemption from the Paying Agent~Registrar out ofthe funds provided far such payment The Paying AgentlRegistrar shall record in the Registration Books all such prepayments ar redemptions ofprincipal afthis Cerficate ar any portion hereofi TI~IIS CERTIFICATE, to the extent of the unpaid principal balance hereof, ar any unpaid portion hereof in any integral multiple of S,O~Q, may be assigned by the initial registered owner hereof and shall be transferred only in the Registration Books of the issuer kept by the Paying AgentlRegistrar acting in the capacity afregistrar far the Certificates, uponthe terms and conditions set forth in the Certificate Ordinance, Among other requirements for such transfer, this Certificate roust be presented and surrendered to the Paying AentlRegistrarfnr cancellation, together with proper instruments afassignment, in form anal with guaxantee of signatures satisfactory to the Paying Agent~Regis~ar, evidencing assignment by the initial registered owner of this ertif irate, cr any pooh or part~ons hereof in any integral muitrpie of 5,~~0, to the assignee or assignees in whose name or names this Certificate ar any such portion arportions hereofis arare to betrans- ferredand registered, Any instrument or instruments afassignment satisfactory to the Paying Agent~Registrar may be uedta evidence the assignment ofthis Certificate ar any such portion ar portions hereofby the initial registered owner hereof. A new certificate ar certificates payable to such assignee or assignees {which then will be the new registered owner ar owners of such new Certificate or Certificates} ar to the initial registered owner as to any portion ofthis Certificate which is not being assigned and transferredby the initial registered owner, shall be delivered by the Paying AgentlRegistrar in conversion afand exchange for this Cert~icate ar any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof for the conversion and exchange of this Certificate ar any pardon hereof. The registered owner of this Certifcate shall be deemed and treated by the Issuer and the Paying AgentlRegistrar as the absolute owner hereaffor all purposes, including payment and discharge ofliability upon this Certificate to the extent ofsuch payment, and the Issuer and the Paying Agen#IRegistrar shall not be affected by any notice to the contrary. A PROVIDED above and in the Certificate Ordinance, this Certificate, to the extent of the unpaid principal balance hereof, may be converted rota and exchanged for a like aggregate principal amount of fully registered certificates, without interest coupons, payable to the assignee or assignees duly designated in writing by the initial registered owner hereaf, ar to the initial registered owner as to any portion of this Certificate which is not being assigned and transferred by the initial registered owner, in any denaminatian or denominations to any integral multiple of 5,Da0 ~sub~ect to the requirement hereinafter stated that each substitute certificate issued in exchange for any portion ofthis Certificate shall have a single stated principal maturity date}, upan surrender of this Certificate to the Paying AentlRegistrar for cancellation, alI in accordance with the farm and procedures set forth ~ the Certificate Ordinance If this Certificate ar any portion hereaf is assigned anal transferred or converted each certif irate issued in exchange for any pa~ion hereaf shad have a single stated principal n~at~urity date corresponding to the due date of the installment of principal ofthis Certificate ar portion hereof for which the substitute certificate is being exchanged, and shall bear interest at the rate applicable to and borne by such installment afprincipal ar pardon thereof, Na such certifcate shall be payable in installments, but shall have only one stated principal maturity date. AS PROVIDED IN THE CER.TII~'ICATE ORDINANCE, THIS CERTI~`ICATE IN ITS PRESENT FORM MAY BE AIC~NED AND TRANSFERRED OR CONCERTED ONCE ONLY, and to one or more assignees, but the certificates issued and delivered in exchange for this Certificate or any padon hereofmay be assigned and transferred, and converted, subsequently, as provided in the Certificate Ordinance. The Issuer shall pay the Paying AgentlRegist~ar's standard ar customary fees and charges far transferring, canvertixig, and exchanging this Certificate ar any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes ar governmental charges required to be paid with respect thereto. The Paying Agent~Registrar shall not be required to nuke any such assignment, canversian, ar exchange during the period commencing with the close of business an any Record Date and ending with the opening of business an the next fallowing principal ar interest payment date, IN THE EVENT any Paying AgentlRegistrar far this Certificate is changed by the issuer, resigns, ar otherwise ceases to act as such, the Issuer has covenanted inthe Certificate Ordinance that it promptly will appoint a competent and legapy qualified substitute therefor, and promptly will cause written notice theof to be mailed to the registered owner ofthis Certificate. IT IS HEREBY cerd.fied, recited, and covenanted that this Certificate has been duly and validly authorized, issued, and delivered; that all acts, conditions, .and things required ar. proper to be perfarrned, exist, and be lane precedent to or in the authorization, issuance, and delivery of this Certificate have been performed, existed, grid been done in accordance with law; that this Certficate is a general obligation of the Issuer, issued on the full faith and credit thereof; and that annual ad valorem taxes sufficient to provide for the payment ofthe Interest an and principal ofthis Certificate, as such interest carves due and such principal matures, have been levied and ordered to be levied against all taxable property in the Issuer, and have been pledged irrevocably for such payment, within the lirnit prescribed by law; and that, together with other parity obligations, this Certificate additionally is payable from and secured by certain surplus revenues gnat to exceed $1 a,4aa in aggregate amount} derived by the Issuer franc the ownership and operation of the City's Utility System ~cansisting of the City's combined waterworks system, sanitary sewer system, and electric light and power system}, all as provided in the Certificate Ordinance. THE ISSUER has reserved the right to issue, in accordance with law, and in accordance with the Cerdficate Ordinance, other and additional obllgatians, and to enter into contracts, payable from ad valorem taxes andlarrevenues afthe City's Utility System, on parity with, or with respect to said revenues, superior in lien to, this Certifiica#e, ~~ BBCOM~NO the registered owner afthis Certificate, the registered owner thereby acknowledges all afthe tenrns and provisions ofthe Certificate Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between the registered owner hereof and the Issuer. IN wITN~SS wIREOF, the Issuer has caused this Certificate to be signed. with the manual ar facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual ar facsimile signature nfthe City Secretary of the Issuer, has caused the official seal afthe Issuer to be duly impressed, ar placed in facsimile, on this Certificate, and has caused this Cerd~cate to be dated August 15, ~O~S. ATI`EST; By: Jennifer waiters City Secretary, City of Benton, Texas CITY OP DENTON, T~~AS By~ lurk A. Burroughs Mayor, City of Denton, Texas {CITY SEAL] (INSERT BOND INSURANCE LEGEND, IF ANY) FORM OF R.ErISTRATION CERTIFICATE OF TIC C~, OLLER ~ PUBLIC ACCO[T,,~TS: COMPTROLLER'S REGISTRATION C~RTIFICATB: REGISTER NO. I hereby certify that this Certificate has been examined, certified as to validity, and approved by the Attorney General of the State of Texas, and that this Certificate has been registered by the Comptroller of Public Accounts afthe State of Texas witness my signature and seal this (COMPTROLLER'S SEAL} Comptroller of Public Accounts ofthe State of Texas Section d~ ADDITIONAL CHARACTERISTICS Op` TIC CERTIFICATES. Re10 T~~ ~a} The Issuer shall keep ar cause to be kept at the principal corporate trust office of TIC BAND OF NEw YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, DALLAS, TEXAS the "Paying AgentlRegistrar"} books or records of the registration and transfer of the Certificates the "Registration Books"}, and the Issuer hereby appoints the Paying AgentlRegistrar as its registrar and transfer agent to keep such books ar records and make such transfers and registrations under such reasonable regutafions as the Issuer and Paying AgentlRegistrarmoy prescribe; and the Paying Agent~Registrar shall make such transfers and registrations as herein provided, The Paying AgentlRegistrar shall obtain and record ~ the Registration Books the address of the registered owner of each Certificate to which payments with respect to the Certificates shall be mailed, as herein provided; but it shall be a duty afeach registered owner to notify the Paying ~gentlRegistrar in writing of the address to which pay~.ents shall be nailed, and such interest payments shall not be mailed unless such notice has been given, The Issuer shall have the right to inspect the Registration Soaks wring regular business hours afthe Paying AgentlReistrar, but otherwise the Paying Agentlltegistrar shall keep the Registration B auks can~idential and,unless otherwise required by law, shall not permit their inspection by any other entity. Registration of each Certificate may be transferred in the Registration Books only upon presentation and surrender of such Certificate to the Paying Agent~Registrar far t~rransfer of reg~stratlan and cancellation, together with proper written instruments of assignment, in farm and with guarantee of signatures satisfactory to the Paying AgentlRegistrar, {i} evidenc- ~ngthe ass~gtnnent ofthe Certificate, yr any portionthereafin any integral multiple of$~,~~4, to the assignee ar assignees thereof, and {ii} the right ofsuch assignee or assignees to have the Certificate ar any such portion thereof registered in the name afsuch assignee or assignees. upon the assignment and transfer of any Certificate or any portion thereat a new substitute Certif cafe ar Certificates shall be issued to conversion and exchange therefor in the manner herein provided, The Initial Certificate, to the extent of the unpaid principal balance thereof, may be assigned and transferred by the initial registered owner thereof once only, and to one or mare assignees designated in writing by the initial registered owner thereof. All Certificates issued and delivered conversion of and exchange fax the Initial Certificate shall be in any denomination ar denam.inatians of any integral multiple of 5,Oa0 {sub jest to the requirement hereinafter stated that each substitute Certificate shall have a single stated principal maturity date, shall be in the farm prescribed in the FDRNI ~F StTBSTITUTE CERTIFICATE set forth in this ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as hereina~er provided, If the Initial Certificate or any po~ian thereof is assigned and transferred or converted the Initial Certificate must be surrendered to the Paying AgentlRegistrar for cancellation, and each Certificate issued in exchange far any portion of the Initial Certificate shall have a single stated principal maturity date, and shall not be payable in installin.ents; and each such Certificate shall have a principal maturity date corresponding to the due date of the installment of principal ar portion thereof far which the substitute Certificate is being exchanged; and each such Certificate shall bear interest atthe single rate applicable to and borne by such installment ofprincipal or portion thereof far which it is being exchanged Ifonly a portion ofthe Initial Certificate is assigned and transferred,there shall be delivered to and registered in the name of the initial registered owner substitute Certificates in exchange for the unassigned balance afthe Initial Certificate in the same manner as if the initial registered owner were the assignee thereof, If any Certificate or portion thereof other than the Initial Certificate is assigned and transferred or converted each Certificate issued in exchange therefor shall have the same principal maturity date and bear interest at the sauce rate as the Cert~f cote far which it is exchanged. A farm of assigent shall be printed ar endorsed an each Certificate, excepting the Initial Certificate, which shall be executed by the registered owner ar its duly authorized attorney or representative to evidence an assignment thereof, ~Jpan surrender of any Certificates or any po~ian ar portions thereof for transfer of registration, an authorized representative of the Paying AgentlRegistrar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Certificate ar Certificates, having the characteristics herein described payable to such assignee ar assignees {which then will be the registered owner or owners of such new Certificate ar Certificates}, or to the previous registered owner in case only a portion of a Certificate is being assigned and transferred, all in conversion afand exchange far said assigned Certificate or Certificates or any portion or portions thereof, in the same form. and manner, and with the same effect, as provided in Section b{d},below, far the conversion and exchange afCerti~icates by any registered owner of a Cecate. The Issuer shall pay the Paying AgentlRegistrar's standard ar customary fees and charges far making such transfer and delivery ofa substitute Certificate ar Certificates, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying AgentlRegistrar shall not be required to make ~ansfers afregistration afany Certificate ar any portion thereof during the period commencing with the close of business on any Record Date and ending with the opening of business on the next fallowing principal ar interest payment date. {~} Dwnershi of Certificates. The entity in whose name any Certificate shall be registered in the Registration Banks at any time shall be deemed and treated as the absolute owner thereoffar all purposes of this Ordinance, whether or not such Certificate shall be overdue, and the Issuer and the Payin AentlRegistrar shall not be affected by any notice to the contrary; and payment af, or an account af, the principal of, premimn, if any, and interest on any such Certificate shall be made only to such registered owner. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Cei"tlficate to the extent afthe Sunl or sums so paid. {c} Pa ent of Certificates and Interest The Issuer hereby fi.arther appoints the Paying AgentlRegistrar inset asthe paying agent far paying the principal of and interest an the Certificates, and to act as its agent to convert and exchange ar replace Certificates, ail as provided in this Ordinance. The Paying AgentlRegistrarshsll keep proper records of all payments made by the Issuer and the Paying AgentlRegistrar with respect to the Certificates, and of all conversions and exchanges of Certificates, and all replacements of Certificates, as provided ~ this Ordinance. However, in the event ofa nonpayment of interest on a scheduled payment date, and for thirty {3Q} days thereafter, a new record date far such interest payment {a "Special Record Date'} will be established by the Paying AgentlRegis~ar, if and when funds for the payment of such interesthave beenreceived from the Issuer, Notice afthe Special Record Date and afthe scheduled payment date of the past due interest {"Special Payment Date", which shall be fifteen { 15} days after the Special Record Dated shall be sent at least five {~~ business days prior to the Special Record Date by ~Tnited States mail, fit class postage prepaid, to the address of each Haider of a Certificate appearing an the registration books ofthe Paying Agent~Registrar at the close of business on the 15th business day next preceding the date of mailing of such notice. {d} Conversion and b~xch a ar R lacement~ Authentication, each Certificate issued and delivered pursuant to this Ordinance, to the extent of the unpaid principal balance ar principal amount thereof, may, upon surrender ofsuch Certificate at the principal corporate trust office afthe Paying AgentlRegistrar, together with a written request therefor duly executed by the registered owner ar the assignee ar assignees thereof, ar its ar their duly authari~ed attorneys or representatives, with guarantee of signatures satisfactory to the Paying AgentlRegistrar, may, at the option ofthe registered owner or such assignee ar assignees, as appropriate, be converted into and exchanged for fully registered certif icates, without interest coupons, in the form prescribed in the ~'~R DF SLT$STITUT~ C~RTIp'ICA.TE set forth in this ordinance, in the denomination of ~S,DQQ, ar any integral multiple of $S,aaa {subject to the requirement hereinafter stated that each substitute CertYf~cate shah have a single stated maturity date}, as requested in writing by such registered owner ar such assignee or assignees, m an aggregate principal amount equal to the unpaid principal balance or principal amount afany Certificate ar Certifcates so surrendered, and payable to the appropriate registered owner, assignee, or assignees, as the case may be. If the Initial Certificate is assigned and transferred or converted each substitute Certificate issued in exchange for arty portion ofthe Initial Certificate shall have a single stated principal maturity date, and shah not be payable in installments; and each such Certificate shall have a principal ~aaturity date corresponding to the due date ofthe installment ofprincipal or portion thereof far which the substitute Certificate is being exchanged; and each such Ce~ificate shall bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged, If any Certificate or portion thereof {other than the Initial Certificated is assigned and transferred ar converted, each Certificate issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Ce~cate far which it is being exchanged. Bach substitute Certificate sha11 bear a letter andlar number to distinguish it from each other Certificate. The Paging Agent~Registrar shall convert and exchange or replace Certificates a provided herein, and each fully registered certificate delivered in conversion of and exchange for ar replacement of any Certificate or portion thereof as permitted or required by any provision of this Ordinance shah constitute one of the Certificates for ail purposes of this Ordinance, and may again be converted and exchanged ar replaced. It is specifically provided that any Certificate authenticated in conversion afand exchange far or replacement ofanather Certificate on ar prior to the first scheduled Record Date far the Initial Certificate shall bear interest from the date of the Initial Certificate, but each substitute Certificate sa authenticated after such first scheduled Record Date sha11 bear Interest from the interest payment date next preceding the date on v~h~ch ~uCh substitute ~ertrf~cate was so authenticated, unless such certificate is authenticated aver any Record Date but on or before the next fallowing interest payment date, in which case it shall bear interest from such next following interest anent date; provided, however that if at the time of deliv P y ~ cry ~f any substltute Certlficate the ~i~terest on the Certificate for which it is being exchanged is due but has not been paid, then such Certificate shall bear interest from the date to which such interest has been paid in full. TIDE ~NITIA~, CERTIFICATE issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Pa ~ Yg Agent~Registrar, but on each substitute Certificate issued in conversion ofand exchange for ar replacement of ~.ny Certificate or Certificates issued under this Grdinance there shall be printed a certifcate, in the form substantially as follows: „PAYING AGIINTIRECITPA.R' AUTHENTICATION CERT~'ICAT1~ It is hereby certified that this Certificate has been issued under the provisions of the Certificate Ordinance described on the face of this Certificate; and that this Certificate has been. Issued in conversion of and exchange far or replacement of a certificate, certificates, or a poian of a certificate ar certificates of an issue which originally was approved by the Attorney General of the Mate of Texas and re 'stered b the y Comptroller of Public Accounts of the State of Texas. THE BANK OF NEB YORK E~,LGN TRUST COIViPANY,I~ATIONAL ASSOCIATION, DALLAS, TEAS, Paying Agen~Registrar Dated By ~'Authari.~ed Representative" An authori~edrepresentative ofthe Paying AgentlRegitrar shall, before the delivery of any such Certificate, date and manually sign the shave certificate, and na such Certificate shall be deemed to be issued or outstanding unless such Certificate is sa executed. The Paying AgentlRegistrarprompIly shall cancel all Certift.cates surrendered for canversion and exchange or replacement, Na additional ordinances, orders, or resolutions need be passed or adapted by the governing body afthe Issuer ar any other body ar person so as to accainplish the foregoing canversion and exchange ar replacement ofany Ce~ificate or portion thereof, and the Paying AgentlRegistrar shall provide for the printing, execution, and delivery of the substitute Certifi`icates in the manner prescribed herein, Pursuant to Chapter 1201, Texas Government Code, the duty of canversion and exchange or replacement of Certificates as aforesaid is hereby imposed upon the Paying AgentlRegistrar, and, upon the execution of the above Paying AgentlRegistra~rs Authentication Certificate, the converted and exchanged or replaced Certiftcate shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Initial Certificate which originally was issued pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. The Issuer shall pay the Paying AgentlRegistrar~s standard or customary fees and charges far transferring, converting, and exchanging any Certificate or any portion thereof, but the one requesting any such transfer, conversion, and exchange shall pay any taxes ar governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Pa ' AgentlRegistrar shall not be required to inal~e any such conversion and exchange ar replacement of Cei~xificates ar any portion thereofduring the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date. 10 fie} In General. All Certificates issued i~ con~reysion and exchange or replacement afany other Certificate or portion thereof, ~~} shall be issued in fully registered form, without interest coupons, with the principal of and interest an such Certificates to be payable only to the registered owners thereof, ~ii~ may ar shall be redeemed prior to their scheduled maturities, ~iii~ may be transferred and assigned, Div} may be converted and exchanged far other Cer~ficates, ~~~ shall have the characteristics, Zvi} shall be signed and sealed, and ~vii~ the principal of and interest on the Certificates shall be payable, all as provided, and in the manner rewired or indicated, the FORI4~ OF SUBSTITUTE CERTYFICATE set forth in this Ordinance. ~f} Pa meet of Fees and Char es, The Issuer hereby covenants with the registered owners of the Certificates that it will ~i~ pay the staxtdard ar customary fees and charges ofthe Paying Agent~Registray far its services with respect to the payment ofthe principal ofand interest an the Certificates, when due, and iii} pay the fees and charges of the Paying AgentlRegistrar far services with respect to the transfer of registration afCertificates, and with respect to the conversion and exchange afCerticates solely to the extent above prodded in this Ordinance. ~g~ Substitute Pa ' A entlRe 'stray. The Issuer covenants with the registered owners of the Certificates that at all times while the Certificates are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services ofPaying Agen#1Registrar fay the Certificates under this Ordinance, and that the Paying A.gentlRegistray will be one entity. The Issuer reserves the right ta, and may, at its option, change the Paying Ager~tJReistrar upon not less than 1~0 days written natlce to the Paying Agent~Registrax, to be effective not later than ~0 days prior to the next principal ar interest payment date aver Such notice. In the event that the entity at any tune acting as Paying AgentlReg1strar far ft successor by merger, acquisition, ar other methods should resign or otherwise cease to act as such, the Issuer covenants that it will promptly appoint a competent and legally qualified bank, trust company, financial institution, ar other agency to act as Paying AgentlRegistrar under this Ordinance. Upon any change in the Paying AgentlRegistrar, the previous Paying AentlRegistrar shall promptly transfer and deliver the Regis~atian Books far a copy thereol},along with all other pertinent books and records relating to the Certificates, to the new Paying Agent~Registrar designated and appointed by the Issuer, Upon. any change in the Paying AgentlRegistrar, the Issuer promptly will cause a written natlce thereafto be sent by the new Paying AentlRegistr~r to each registered owner afthe Cercates, by CJnited States mail, first-class postage prepaid, which notice also shall give the address of the new Paying AgentlRegistray. By accepting the position and performing as such, each Paging AgentfRegistrar shall be deemed to have agreed to the provisions of this Oydirtance, and a certif ed copy of this Ordinance shall be delivered to each Paying AgentlRegistrar. Section 7. FORII~ OF SUBSTITUTE CERTIFICATES. The farm of all Certilcates issued in conversion anal exchange or replacement of any other Certificate ar pawn thereat including the farm of Paying Agent~Registrar's Certificate to be printed on each afsuch Certificates, and the Forth afAssignment to he printed on each ofthe Certificates, shall be, respectively, substantially as follows, with such appropriate variations, omissions, ar insertions as are permitted or required by this Ordinance. FORM OF SUBSTITUTE CERTIFICATE ~Boak-Entry Only Legend, if apprvpriate~ NO, UNITED STATES OF AIVIERICA PRINCIPAL AMOUNT STATE OF TEAS COUNTY OF I~ENTON CITY OF I~ENTON CERTIFICATE OF OBLIGATION SERIES DOB Il 11 1TJ11 ~Ll~T lil ~,TE ~T 1 ~ JJ~TE i.fl iT.[.11J ~; 1TL ~{,~ LJ J.I N~. u7~ ON TIDE MATURITY DATE specified above the CITY ~~ DENTON, in Denton County, Texas the "Issuer"}, being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee hereof neither being hereinafier called the "registered owner"~ the principal amount of and to pay interest thereon, calculated on the basis of a 3b~-day year composed of twelve 30-day months, from. August i ~, ~OQS, to the maturity date specified above, at the interest rate per annum specified above; with interest being first due and payable on February 15, ~0~~, and semiannuafly on each August ~ 5 and February I thereafter, except that ifthe date ofauthentication ofthis Certificate is later than the first Record Date {hereina~er defined}, such principal amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date {hereinafter defined} but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. THE PRINCIPA,~ OF INTEREST ON this Certificate are payable in lawful money of the United States afAmerica, without exchange or collection charges. The principal ofthis Certificate shall be paid to the registered owner hereof upon presentation and surrender of this ertif irate at maturity, at the principal corporate trust office of TIME BANI{ OF NEB YORE MEf,LON TRUST COMPANY, NATIONAL ASSOCIATION, DAI,I~AS, TEAS, which is the "paying AgentlRegistrar" farthis Certificate The payment of interest on this certificate shalt be made by the Paying AgentlRegistrar to the registered owner hereof on each interest payment date by check dated a of such interest payment date, drawn by the Paying AgentlRegistrar on, and payable solely frorn~ funds ofthe Issuer required by the ordinance authori~in g the issuance ofthe Certificates the "Certificate Ordinance"~ to be an deposit with the Paying AgentlRegistrar for such purpose as hereinafter provided; and such check shall be sent by the Paying AgentlRegistrar b y United Mates mail, first-class postage prepaid, an each such interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared at the close of business on the last day of the month next preceding each such date the r'Record Date"'} on the Registration Eooks kept by the Paying AentlRegistrar, as hereinafierdescribed. However, the payment of such interest may be made by any other method acceptable to the Paying AgentlRegistrar and requested by, and at the risk and expense of, the registered owner hereof. The Issuer covenants with the registered owner ofthis Certificate that an or before each principal payment date, interest payment dale, and accrued interest payment date for this Certificate it will rnal~e available to the Paying AgentlRegistrar, from the "Interest and Sinl~ing Fund" created b the y Certificate Ordinance, the aanounts required to provide for the payment, in immediately available funds, of alI principal of and interest on the Certificates, when due. IN THE EVENT of a nonpayment of interest on a scheduled payment date, and for thirty {30~ days thereafter, a new record date far such Interest payment {a "Special Record Date"} will be established by the Paying AgentlRegistrar, if and when funds for the payment of such interest have been received from the Issuer. Nance ofthe Special Record Date and ofthe scheduled payment date of the past due interest {Special Payment Date", which shall be fifkeen ~ 15} days afar the Special Record Date} shall be sent at least five ~5 • ~ ~ business days prior to the Special Record Date by United States mail, first class postage aid, to the 1~ address afeach Folder afa Certificate appearing on the registration books of the Paying AgentlRe is~rar at the close of business on the 15th business day next preceding the data of mailing of such notice. IF THE DATE far the payment of the principal of or Interest on this Certificate sha11 be a Saturday, Sunday, a 1ea1 holiday, or a day on. which banking institutions in the City where the Paying AgentlRegis~ar is located are authorized by law or executive order to close, then the date fvr such payment sha11 be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day on which banking institutions are authorized to close; and payment on such date sha11 have the same farce and of fect as if made an the original date payment was due. T~IIS CERTI~`ICATE is one of an issue of Certificates initially dated August 15, X008, authorized in accordance with the Cvnstitutian and caws of the Mate of Texas in the principal amount of $10,85,000, far the purpose ofpaying all or a portion ofthe City's contractual obligations incurred pursuant to contracts for the purchase of certain real and personal property, to~wit: ~a} acquisition of land for, and design, car~truction and equipping of, a public safety radix antenna.; fib} renavatians and irnpravements to, and equipping of, existing municipal facilities, including City pIall East and City libraries; ~c} improvements to the City's solid waste disposal system and acquisition of related equipment; ~d} acquisition of land far, and design, canstructian and equipping af, animal shelter; fie} acquisition of~ehicles and equipment forthe City's rnator pao1; anal ~~ acquisition afland for and improvements to municipal parks; and also far the purpose of paying all ar a portion of the City's contractual obligations far professional services, including engineers, architects, attorneys, map makers, auditors, and financial advisors, in connection with the preparation afthe City's master plan far downtown irnpravements, and with said Certificates of Obligation, ON FEERi~ARY 1, X01 S, or an any date whatsoever thereafter, the Certificates afthis Series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, at the redemption price of the par ar principal amount thereof plus accrued interest to the date fixed far redemption. If less than all of the Certificates are to be redeemed, the issuer may select the maturities of the Certificates to be redeemed, If less than all of the Certificates of any maturity are to be redeemed, the Paying AgentlRRegistrar shall determine by lot the Certificates, or pardons thereof, within such maturity to be redeemed, TI~:E CERTIFICATE of this Series scheduled to mature on ~'EBRARY 15, ZQ_ and FEBRUARY t 5, 20~ are subj ect to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with m~aney from the 1Vlandatory Redemp~on Account of the Interest and finking Fund, with the particular Cerd.ficates or portion thereof to be redeemed to be selected by the Paying AgentlRegistrar, by lot or other c~stamary ~rethad ~pravided that a portion of a Certificate may be redeemed only in an integral multiple of5,000}, at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, on the dates, and in the principal amounts, respectively, as ~shaw in the following schedule. February i 5, ~0 Nlaturi Mandatory Principal Redem tion Dates Amounts February i 5, 20 February 15, 20_ (maturity} February 15, ~0 Maturity .~ ~~~~ ~~ Mandatory Principal Redein lion Dates Arn.ount February 15, ~0 February 15, ~0~ maturity} The principal amount of the Certificates required to be redeemed an the Mandatory Redem Lion Dates pursuant to the fore oin shall be reduce at the p ~ ~ d, aption of the Issuer by the principal amount of any Certificates aut afthe maturity scheduled for February 15, ~0~ and February 1~, ZO which, at least ~ days prior to the aforesaid appropriate redemption date { 1 } shall have been acquired by the Issuer at a rice net exceeding the rrnci al arnaunt afsuch certificates p p F plus accrued interest to the date of purchase thereof, and delivered to the Paying Aent~R.egistrar for cancellation, or ~~} as shall have been redeemed ursuant to P the optional redemptian praviians hereof and not previously credited to the mandatary sinkin fund redemption. During any period in which ownership of the Certificates is determined by a bank en at a securities depository far the Certificates, iffewer than all afthe Certificates ofthe same maturity and bearin such interest rate are to be redeemed the Certificates or • g portions thereaf, to be redeemed shall be selected in accordance with the arrangements between the Issuer and the securities depositary, AT LEAST ~ days prior #o the date #Y.xed far any redemptian of Certif cater or portions thereafprior to maturity a written notice ofsuch redemption shall be sent by the Paying Agentl~egistrar by United Mates mail, first-class postage prepaid, to the registered owner of each Certificate to be redeemed at its address as It appeared an the 4th day prior to such redemptian date; provided, however, that the failure to send, mail, ar receive such native, or any defect therein or in the sending or mailing thereof, sha11 net affect the validity ar effectiveness of the praceedmgs for the redemption of any Certificate. By the date fixed for any such redemption due provision shall be made with the Paying Agentll~egistrar far the payment of the required redemption pricy for the Certificates ar portions thereaf which are to be sa redeemed, plus accrued interest thereon to the date fixed for redemptian, If such written notice nfredemp~an is given and if due rovision p far such payment is made, ail as provided above, the Certificates ar portions thereaf which are to be sa redeemed thereby autamaticalty shall be treated as redeemed prior to their scheduled maturities, and the shall Y net beax interest after the date fixed for redemptian, and they shall not be regarded as being outstan ' exvept far the right of the registered owner to receive the redemptian price plus accrued interest from the Paying Agentl~egistrar out ofthe funds provided far such payment. Ifa portion afany Certifcate shall be redeemed a substitute Certificate ar Cert~frcates having the carne maturity date, bearing interest at the carne rate, in any denomination or denominations in any integral multiple of $~,a0a, at the written request of the registered owner, and an aggregate principal amount equal. to the unredeemed portion thereof, will be issued to the registered owner open the surrender thereaf for cancellation, at the expense of the Issuer, all as provided in the Certificate prdinanc. T~ CERTIFICATE DR ANY PDRTIDI~ ~~ PORTIDN~ I~REDF IN ANY INTEGRAL ML1L'TIPLE DF $S,Oa~ may be assigned and shall be transferred ardy in the Registration Baaks ofthe Issuer kep# by the Paying AgentlRegitrar acting in the capacity of registrar for the Certificates, upon the terms and conditions set forth in the Certificate Ordinance. Among other requirements ~'ar such assignment and transfer, this Certificate must be presented and surrendered to the Paying A.gentlRegistrar, together with ra er instruments of assi en in farm and wi p p th guarantee of signatures satisfactory to the Paying Agentl~egistrar, evidencing assignment of this Certif cote or any pardon ar portions hereof in an bite . ~ Y ~ multiple of $,aaa to the assignee or assignees in whose Heine or Haines this Certificate or an such anion Y p ar pardons hereof is or are to be transferred and registered. The farm afAssignnien# printed or endorsed on this Certificate shall be executed by the registered owner ar its duly authari~ed attorney ar representative, to evidence the assignment hereof, Anew Certificate or Certificates payable to such assignee or asst ees which then will be the new re istered owner r . g o owners of such new Certificate or Certrficates~, ar to the previous registered owner m the case af#he assignment and transfer afanly a pardon afthis Certificate,may 14 be delivered ~~ the Paying AgentlRegistrar in conversion of and exchange for this certificate all in the form and manner as provided in the next paragraph ~ereaf fox the canversion and excl~.an a afother ~erti~i~ates. Tl~e Issuer shall a the Pa in A ent~R ~ p ~ ~ g eg~strar s standard ar customary fees and charges for ma.k~.ng such transfer, but the one requesting such ~ansfer shall pay any taxes ar ather governmental char es re aired to be paid with res ect thereto. The Pa in A en g q p y g g t~Registrar shalt not be required to make transfers of registraatian ofthis certificate ar any portion hereofduring the period commencing with the close afbusiness an any Record Date and ending with the opening of business an the next following principal ar interest payment date. The registered owner of this Oertificate shall be deemed and treated by the Issuer and the Paying AgentlRegistrar as the absolute owner hereof for all purposes, including payment and dischar a of liability upon #his certificate to the extent of such a ent g P Ym , and the Issuer and the Paying Agent~IRegistrar shall not be alTected by any notice to the contrary. ALL ERTIEIOATES OF THIS ERIE are issuable solely as fully registered. certificates, without interest coupons, in the denn~.ination of any integral multiple of $5,00. As provided in the certificate Ordinance, this erti~cate, may, at the request of the registered owner or the assignee or a,ssi ees hereof be converted into and exchanged far a like aggregate principal amount affully registered certificates,without interest coupons, payable to the appropriate registered owner, assignee, or assignees, as the cane n~a be Y having the carne maturity date, and bearing interest at the same rate, in any denarninatian or denominations in any integral multiple of $5,000 as requested in writing by the appropriate registered owner, assi ee or assignees, as the case may be, upon surrender of this certificate to the Paying AgentlReistrar far cancellation, all in accordance with the form and procedures set forth. in the Certif irate Ordinance. The Issuer shall pay the Paying AgentlRegistrar's standard ar customary fees and charges for trat~fe ' , canvertin ~ g an exchanging any certificate ar any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid withrespect thereto as a condition precedent to the exercise of such privilege of conversion and exchange, The Paying AgentlRegistrar shall not be required to make any such conversion anal exchange during the period canunencing with the claw of business on any Record Date and ending with the aperung of business an the next fallowin rinci a1 ax gp p interest payment elate. IN THE EVENT any Paying AgentlReistrar far the certificates is changed by the Issuer, resi , ar otherwise ceases to act as such the rssuer has covenanted in ~ the certificate Ordinance that ~t pro~aptly well appoint a competent and legally quali#ied substitute therefor, and will pran~ptly cause written notice thereof to be mailed to the registered owners ofthe certificates. IT IS HERI~BY certified, recited, and covenanted that this Oertificate has been duly and validl authorized, issued, anal delivered' that ail acts conditions ~ y aril things required or proper to be performed, exist, and be done precedent to or in the authari~ation, issuance, and delivery afthis ~ertifcate have been performed, existed, and been done in accordance with law; that this Oerd~.cate is a general abli anon ofthe Issuer, issued an the full faith and credit there g of, and that annual ad valorem taxes sufficient to provide for the payment ofthe interest on and principal afthis erti~cate, as such interest comes due and such rinci al .matures, have been levied and ordered to be levied a ain p l? g stall taxable property in the Issuer, and have been pledged irrevocably for such payment, within the limit prescribed by law; and that, together with other ari abli ations this Oertificate and P g ~ the other erditcates of this series, additionally are payable from and secured by certain surplus revenues {not to exceed $10,000 in aggregate amount} derived by the Issuer from the ownership and operation of the pity's iJtility system consisting of the ~i ~s combined waterworks system, sanitary sewer system, and electric tight and power systein~, all as provided in the certificate Ordinance. THE IITE~ has reserved the right to issue, in accardaace with law, and ~. accordance with the Oerti~cate Ordinance, other and additional obligations, and to enter into contracts, payable from ad valarern taxes andlor revenues ofthe pity's Uti~.ity system, on a parity with, or with respect to said revenues, su riar 15 in lien to, this erticate. BY' B~~OMINO the xegitered owner afthis certificate,the registered owner thereb acknowled es ail ofthe terms and provisions ofthe certificate Ordi ~ g Hance, agrees to be bound b,~ such terms and provisions acl~nowledges that the certificate Ordinance is duly recorded and available far ins ectian in the offici minutes and records of the av p g erring body of the Yssuer, and agrees that the terra and provisions of this ertificate and the er~.~cate Ordinance constitute a contract between each re istered owner hereof and the g Issuer, IN wITN~~ ~REOF, the Yssuer has caused this ~ertif~cate to be signed with the manual or facsimile signature`of the Nlayor ofthe Issuer arrd countersigned and attested with the rnarrual or facsimile signature of the arty secretary of the Issuer, and has caused the o~cial seal of the Issuer to be dul impressed, or placed in facsimile, on this erti~.cate, ~ ATTEST: ~y - ~~/F ~ rennifer Walters pity secretary, pity of Denton, Texas CITY OF DENTON, TEA ~~ f YYY ~'~ ~. ~l~r!'aLTghS Mayor, pity ofDentan, Texas (CITY SEAL) FORM OF PAYING ~4CENTIREOITRAR'S A~JTHENTI~ATION ~ERTIFIATE PAYING AC~~NTIRE~ITRAR' AUTH~NTIOATION ~ERTIFIAT~ It is hereby certified that this ertifrcate has been issued under the provisions of the Certificate Ordinance descr~.bed on the face ofthis Certificate; and that this Certificate has been issued conversion of and ea~change for ar replacement of a certif ~icate,certificates, or a portion of a certificate or cer~tifrcates of an issue which originally was approved by the Attorney General ofthe Mate of Texas and re istered b the comptroller ofFublic Accounts ofthe Mate of Te g Y xas, TI-~ ANI~ OF NEw Y'ORI~ IIrIELf,ON TR~TT C~MP,ANY, NATIONAf, ASSOCIATION, I3AI.,I1A, TEAS, Paying Agent~Registrar Dated By Authorized Representative (INSERT BOND INSURANCE LEGEND, IF ANY) FOIE OF ASSIIVNT; ASICrNENT IG FAR VALUE LEND, the undersigned registered owner afthis certificate, ar du1 authorized representative ar attarne ~ y tlrereaf, hereby assigns this certificate to I ~ ~Assig~ee's Social Security or Taxpayer Identification Number ~l~rint or typewrite Assignee's name and address, including zip cadet and hereby irrevocably constitutes and appoints attorney to transfer the registration of this er~i~cate on the Paying AgentlReglstrar's Regis rattan Baaks with foil power of substitution ~, the premises, Dated: Signature guaranteed: N~TIF, Signature{s} must be guaranteed by an eligible guarantor instution participating in a securities ~ansfer associattOn recognized signature guarantee program. Registered owner N~TIE; This signature must correspond with the name ofthe Registered owner appearing an the face of this certificate in every particular without alteration or enlargement ar any change whatsoever. Section 8. TAB LEVY. A special. Interest and Sinking Fund {the 'Interest and Sinking Fund"~ is hereby created solely far the benefit afthe Ceificates, and the Interest and Sinking Fund shall be established and maintained by the Issuer at an official depository bank afthe Issuer. The Interest and St Fund shall be kept separate and apaxt from all ether funds and accounts afthe Issuer, and shall be used ant for a in the interest an and rind aI afthe ~erticates. A.II ad y P Y g p p valorem takes levied and collected far and an account of the ~e~ificates, together with any premium and accrued interest received upon sale of the ~erti~cates shall be•deposlted, as collected, to the credit ofthe Interest and inkY.ng Fund. During each ear while an of the ~ert`icates or interest thereon are atstst y Y anding and unpaid, the governing body of the Issuer sha11 compute and ascertain a rate and at~aunt of ad valareua tax which will be sufficient to raise and produce the money required to pay the Interest on the certificates as such interest becomes due, and to provide and maintain a sinking fund adequate to pay the principal of its certificates a~ such princi a.1 matures ar is p scheduled far redemption but never less than ~% of the original principal arnaunt of the certificates as ~. sinking fund each year}, Said tax sha11 be based ~an the latest approval tax rolls of the Issuer, with full allowance being made far tax delinquencies and the cost of tax collection. Said rate and amount of ad valorerrr tax is hereby levied, and is hereby ordered to be Levied, against all taxable grape in the Issuer for each ear while an of y y the Certificates ar interest thereon axe outstanding and unpaid; and said tax shall be assessed and collected each such year and deposited to the credit ofthe afaresa~d Interest and Sinkin Fund. Said ad valorem taxes sufficient to ravide far the . p payment ofthe interest an and principal afthe er~,ficates, 17 as such interest comes due and suchprincipal matures or is scheduled for rede~n Lion, are hereb led ed for such payment, within the limit rescribed p ~ ~ p by law. Section 9. SUII~US RE~EN~UES. The Certificates additionally shall be payable from and secured by surplus revenues in accordance with Section 1~~2 afthe Texas Government Code as amended to the extent hereinafter permitted, derived by the Issuer from the ownership and o eration of the Issuer's Utili System ~car~istir~ of its combined wat p erworks system, sanitary sewer system, and electric light and power system} remaining a#~er ~a} payment of all amounts constituting operation and maintenance ex eases of said Utility System, and a n~ent of all debt servic ~ {b~ p y e, reserve, and other re~uiren~ents and amounts re aired to be paid under all ordinances heretofore or hereafter authoriz' ~ Ong ~~}all bands and iii}all other obligations not on a parity with the Certificates, which arc payable frnn~ and secured by any Utility System revenues and c payment of all amounts payable from any Utility System revenues pursuant to contracts heretofore ar hereafter entered into by e Issuer in accordance with law the ~'urplus Revenues"}. If, far an reason the Issuer fails to deposit ad valorem taxes levied ursuant y p to Section 8 hereof to the credit of the Interest and Sinking Fund in an amount suf#icient to pay, when due, the principal of and interest on the Certiftcates then Surplus Revenues, to the extent hereinafter permitted, shall be deposited to the credit of the Interest and Sinking Fund and used to pay such principal andlor interest. A maximum a ate of ~ I0 ~Oa of lus Revenues n~a be used to a ~ ~ y p y prncipal andlar interest an the Certificates and any obligations an a P therewith. The ert~f ieates and any ~bllgatians on a parity therev~ith are not, and shall not be deemed to be payable from or secured by any Surplus Revenues in excess of an aggregate of $ l a,aaa. Until and unless an aggregate of $ l ~,aaa of Surplus Revenues actually is used to pay any such principal andlar interest additional abligatians, payable from and secured by all or any remaining unused part of said a ate of $ la,oaa ofSurplus Revenues ma be issued. b the rs ~' g . ~ F ~ y . ~ suer on a parity with the Certificates and any other then outstanding parity obl~gat~ons, with the Certificates and all such additional parity obligations to be a able from and secured equall and ratabl b all or an rema' ' p Y Y Y y y Ong unused part of said aggregate The Issuer reserves, and shall have, the right to issue bands, and other obligations not an a parity with the Certificates and to enter into contracts, in accordance with applicable laws, to be payable from and secured b an Utili S stem revenues other than the a y y Y gregate of $1~,O~a of Surplus Revenues as described above. The Certificates are an a parity with thane issues ofCity ofl]entan Certificates afObligatian,Series 1998 series 1999, Series ~Oaa, Series ~00I, Series X002, Series ~Oa3, Series ~QU4, Series X045 and Series ~aO the "Outstandin Cer~,fica ~r ~ ~ g ten }, as permitted m the Ordinances authorizing same; and it is hereby found and. determined that Wane ofthe above de~.ned Surplus Revenues have ever been used to a an rinci al andlar interest on the Outstandin ertif icates. p y Y p p Section la, D~FEASA~E OF CERTIFICATE, ~a} Any Certificate and the interestthereon shall be deemed to be paid, retired, and na longer outstanding ~a'"Oefeaaed Certificate"} within the meanie afthis Ordinance, except to the extent ravided in subsection d of g p ~ ~ this S~ctiDn, when payinent ofthe principal of such Certificate, plus interest thereon to the due date either ~i}shall have been made or caused to be made in accordance with the terms thereof, ar iii} shah have been prodded for on or before such due date b irrevocably depositing with or makin available to the Fa in A en y ~ y g g t~Regis~rar for such payment ~i} lawful money of the United States of America suicient tv make such payment or ~2} Government Obli ations which mature as to pt~inci~ al and interest in such amoun g p i and at such tunes as will insure the availability, without reinvestment, ofsufficient money to provide for such payment, and when ro er arraxi ements have been made b the Issuer with the Pa ' p p g y ying AgentlRegistrar far the payment of its services until alI I~efeased Certificates shall have becvine due and payable, At such time as a Certificate shall be deemed to be a l~efeased Certificate hereunder, as aforesaid, such Certificate and the interest thereon shall na lan er be secured b g y, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pie ed a rovided in this Or ' p dinance, and such principal and rnterest shall be payable solely from such more or overnmment Obligations. y l8 (b) Any moneys so deposited with the paying Agent/Regisirar may at the written direction of the Issuer 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 AgentlRegistrar which is not required for the payment ofhe Certificates and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. (c) The term "Government Obligations" as used in this Section shall mean (i) direct, noncalIable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America., (ii) 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 of the purchase thereofare rated as to investment quality by a nationally recognized investment rating firm not Less than AAA or its equivalent, and (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the District adopts or approves the proceedings authorizing the financial arrangements are rated as to investment quality by a nationally recognized investment rating film not less than AAA or its equivalent. (d) Until all Defeased Certificates shall have become due and payable, the Paying Agent/Registrarsball perform the services ofPaying Agent/Registrar for such Defeased Certificates the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. Section 11. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES. (a) Replacement Certificates. In the event any outstanding Certificate is damaged, mutilated, lost, stolen, or destroyed, the Paying Agent/Registrar shall cause to be printed, executed, and delivered, a new certificate of the same principal amount, maturity, and interest rate, as the damaged, mutilated., lost, stolen, or destroyed Certificate, in replacement for such Certificate in the manner hereinafter provided. (b) li tion for Re 1 went Certifi Application for replacement of damaged, mutilated, lost, stolen, or destroyed Certificates shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft, or destruction of a Certifica#e, the registered owner applying for a replacement certificate shall furnish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft, or destruction of a Certificate, the registered owner s~ fiunish to the Issuer and the Paying Agent/Registrarevidence totheir satisfaction of the loss, theft, or destruction of such Certificate, as the case may be. In every case of damage or mutilation of a Certificate, the registered owner shall surrender to the Paying Agent/Registrarfcr cancellation the Certificate so damaged or mutilated. (c) 1`to Default Occurred Notwithstanding the foregoing provisions of this Section, in the event of arty such Certificate shall have matured, and no default has occurred which is then cominuing in the payment of the principal of; or interest on the Certificate, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Certificate) instead of issuing a replaceme~ Certificate, provided security or indemnity is furnished as above provided in this Section. (d) ~arxe for s ' ~ Rplacement Certificates. Prior to the issuance of any replacement certificate, the Paying Agent/Registrar shall charge the registered owner of such Certificate with all legal, printing, and other expenses in connection therewith. Every replacement certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Certificate shall be found 19 at any time, ar be enforceable by anyone, and shall ~e entitled to all the benefts of this ordinance a ua11 and proportionately with an and all other Certificates dul i ~ Y Y y slued under this ~rd~nance. fie} Authori for Issuin Re lacement Certificates. In accordance with Chapter 1~~ 1, Texas Co~vernment Code, this Section of this ordinance shall constitute authority for the issuance of an such replacement certificate without necessi of farther ac ' y ty iron by the governing body of the Issuer or any other body or person, and the duty afthe replacement of such certificates is hereby authorized and iln osed u on the Payin A entlRe Istrar and the Pa in A en p p ~ Y g tlReg~strar shall authenticate and deliver such Certificates in the form and manner and with the effect, as provided in Seaton ~~d~ of this ordinance for Certificates issued in conversion and exchange for other Certificates. Section l~, CUTCI~~, AP~R~VAL, ANA RECITRATICN ~F ~ERT~FICATES; BRTIFICATE C~UNSEL~S DFINI~N, CUSIP NUMBERS, PREAMBIJE ANI) I~SC~RA~CE. The a or y of the Issuer is hereby authorized to have control of the Initial Certificate issued hereunder and all necess • • ~ •• ~ retards and praceed~ngs per~utung to the Initial Certificate pending its delivery and 1#s ~nvest~gat~an, exarni- natton, and approval by the Attorney Creneral ofthe State of Texas, and its registraatton by the Cam troller of Public Accounts of the State of Texas. U an r ' ' ~ p p egistratlon of the Inutial Certificate said Comptroller of Public Accounts far a deputy designated in writing to act far said o~nptroller~ shall manually si the Comptroller's Re istratian Certificate on the Initial Certificate, and the seal of said Comptroller shall be impressed, ar placed in facsimile, on the Initial Certificate. The approving Legal opinion ofthe Issuer's Bond Counsel anal the assigned CUSIP nuna.bers may, at the option ofthe Issuer, be printed on the Initial erttl~cate or on any Certificates issued and delivered in conversion of and exchange ar replacement of any Certificate, but neither shall have any legal ef~'ect, and shalt be solely far the convenience and. Information of the registered owners of the Certificates. The preamble to this ordinance is hereby adopted and made a art p hereof for all purposes. Ifinsurance is obtained on any of the Certificates, the Initial Certificate and all other Certificates shad bear an appropriate legend concerning insurance as provided by the insurer. Section l~. C~~EI~ANTS RECARI]IN~r TAB-ENIPTICN OF INTEREST ~N THE CERTIFICATES, ~a~ Covenants. The Issuer covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment ofthe Certificates as obligations described in section 1~3 ofthe Internal Revenue Code of 198G, as amended the 'Code"},the interest oir which is not includable in the "gross incaine" ofthe holder for purposes offederal income taxation. In furtherance thereof, the Issuer covenants a~ follows: ~1~ to take any action to assure that no more than 10 percent of the proceeds of the Certificates or the projects financed therewith Mess amounts deposited to a reserve fund, ifany}are used far any "private business use," as defined in section 141 }fib} of the Code are if more than l D percent of the proceeds or the projects financed therewith are so used, such amounts, whether ar not received by the Issuer, with respect to such private business use, a not, underthe terms afthis order ar any underlying arrangement, directly or indirectly, secure ar provide far the payment afmore than 10 percent of the debt service an the certificates, in tan.ventian of sectxan 141 ~}~2~ of the Code; ~~~ to take any action t0 assure that 1ri the event that the "pr~va~te busile55 use" described in subsection ~1} hereofexceeds percent ofthe proceeds ofthe Certificates ar the pro jests financed therewith bless a~iounts deposited into a reserve fund, if any then the amount in excess of 5 percent 1~ used for ~ 'private business uSe'+ Which is "related" and not "disproportionate," w'lthin ~e me of section 141 3 of the Code to ~ {b}~ ~ the governmental used ~3} to take any action to assure that na mount which is greater than the lesser of $~,OO~,D~~, ar percent of the proceeds of the Certificates bless anaaunts deposited into a reserve 2a fund, if any} is directly or indirectly used to finance loans to persar>s, other than state ar local governmental units, in contravention of section l4 f ~c} of the Code; ~4~ to refrain from taking any action which would otherwise result in the Certificates berg treated a~s "private activity bonds" within the meaning of section 141~~ of the Cade• ~ , ~~} to refrain from taking any action that would result in the Certificates being "federall guaranteed" within the meanie of section 14~ b of the ~ g ~ } Cade; {~} to refrain from using any portion of the proceeds of the Certificates, directl ar indirectly, to acquire ar to re lace funds which wer ~ i p e used, directly ar indirectly, to acquire investment property has defined in section l 48~b}~2} afthe Code} which produces a materials hi her yield over the term of the Certificates other than i y g nvestn~ent property acquired with -_ ~A) proceeds of the Certificates invested for a reaso~aable temporary period of ~ years ar leis ar, in the ease of a refunding bond, for a period of 90 days or less until such proceeds are needed for the purpose for which the bonds are issued, 3} anaaunts invested in a bona fide debt service fund, within the meaning afsectian 1.148- l ~b~ of the Treasury Regulations, and ~~} amounts deposited in any reasonably required reserve ar replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Cer~f scares; ~7} to otherwise restrict the use afthe proceeds of the Certificates ar amounts treated as proceeds afthe Certificates, as may be necessary, sa that the Certificates da not otherwise contravene the requirements of section 148 of the Code relating to arbitrage} and, tQ the extent applicable, section 149~d~ ofthe Code relating to advance refundings}; and ~8} to pay to the I~rdted States of America at least once during each five-year period ~eg~g on the date of delivery of the Certificates} an amount that is at least equal to ~~ ercent of the "Excess Earnings," within the meaning of section 148~i} afthe Code and to pay to the CJnited Mates afAmerica, not later than 0 days after the Certificates have been paid in fu11,10~ percent of the amount then required to be paid as a result afExcess Earnings under secfian 145#} afthe Code. fib} Pry The Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in a Treasury Regulations and, in the case afrefunding bands, transferred proceeds if an and ~ Y~ proceeds of the refunded bands expended prior to the date of issuance of the Certificates. It is the understanding of the issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the j.T.S. I]epar~ment afthe Treasury ursuant thereto. In the event that re arsons or ruli s ~ ng are hereafter promulgated which modify ar expand provisions of the Code, as applicable to the Certificates, the Issuer will oat be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recagni~ed bond counsel will not adversely affect the exemption from federal income taxati.an of interest an the Certificates under section 1~3 afthe Cade In the event that regulatia ar rulings are hereafter promulgated which im se additional requirements which area liable to the Ce ' ~ pp rt~.cates, the Issuer agrees to comply with the additional requirements to the extent necessary, in a opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of Interest on the Certlf lcates under section I03 of the Code, In furtherance of such intention, the Issuer hereby authari~es and directs the 1Vlayor to execute an dacunients certificates ar re its re aired b the Cade an y q y d to inaiCe such elections, on behalf of the Issuer, which nay be permitted by the Cade as are consistent with the purpose for a issuance of the Certificates. ~1 Section 14. ALL~CATIDN DF, AND LINIITATIC~N DN, EENDITURES FDR TIC PI~D,CT, The Issr~er covenants to account farthe expenditure ofsale proceeds and investment earpin s to be used for the purposes described ip Section I ofthis ~rdipance th f~ . ~ e Prod ect ~ on it books and records Sri accordance with the requiremepts afthe Internal Revenue Cade. The Issuer recognizes that in order far the roceeds to be considered used far the reimbursement of costs the roc P p cods must be allocated to expenditures within 1 S months afthe later afthe date that ~ 1 }the expenditure is made, or ~2} the Pro j ect is com leted• but in no event later than three ears after the date on which th ' ' • p• . ~ e anginal expenditure ~s paid. The foregaipg notwithstandipg, the Issuer recagpi~es that ip ardor for proceeds to be expended under the Internal Revenue Cade the sale proceeds or ipvestment earnings must be expended na more than ~~ days after the earlier of l the fi#~h ~~ appiversary ofthe delivery ofthe Certificates, or ~}the date the Certificates axe retired. The Issuer a eel to obtain the advice of nationa~ll ~reca `zed bond counsel i • y f such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely a#~ect the tax~exempt status of the Certificates. Fox purposes hereof, the Issuer shall not be obligated to caipply with this covenant if it obtains an o inion that such failure to cane 1 will not adversel affect the ex p p y y cludability for federal income tax purposes from grass income of the interest. Section 1 S. DISPDSITiON DF PROJECT. The Issuer covenants that the property capstitutin the Project will not be sold or otherwise dis osed in a g p transaction resultipg in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opiniap ofntionally-recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates. Far aces hereof, the Issuer shall not be obli ted to com 1 w' ' ~ ~ i + p ga p y ith s covenant ~f it obtains legal opinion that such failure to comply will not adversely affect the excludability far federal income tax p aces from oss income of the interest. Section 1G. INTEREST EARNINGS DN CERTIFICATE PRQCEEDS. Interest earnings derived from the investment ofpraceeds from the sale ofthe Initial Certificate shall be used along with other roceeds for the p aces far which the Certificates are issue • p d, provided that after completion ofsuch purposes, ifapy of such interest earnings remain an hand, such interest earnings shall be deposited in the Interest and Sin~ip Fund. it is further rovided, however that an interest e ~ g p y ariupgs ap certificate proceeds which are required to be rebated to the United States ofAmerica pursuant to Section I3 hereof in order to prevent the Certificates from being 'arbitrage bonds" within. the meaning of the Cade shall be sa rebated and not considered as interest earnings for the purposes ofthis section. Section 17. SALE DF INITIAL CERTIFICATE. The Initial Certificate is hereby said and shall be delivered to ,_,~, far cash far the par value thereof and accrued interest thereon to date ofdelivery plus a premium aft {accrued interest to b de sited into the Interest and . Sinking Fund. It is hereby officially found, determined, and declared that the Initial Certificate has been sold at public sale to the bidder offering the lowest interest cast, after receiving sealed bids pursuant to a Notice of Sale and Bidding Instructions apd Preliminary Official Statement dated July 7, 2~0~, prepared and distributed in cannect~ap wig the sale of the Initial Certificate. Said Notice of Sale and Bidding Instructions and Prelim,ipary Ocial Statement, and any addenda, suppiemerit, or amendment thereto have been and are hereby approved by the governing body of the Issuer, and their use in the offer and sale of the Certificate is hereby approved. It is further of ficially found, deter.ined, and declared that the statements and representations captained in laid Notice ofSale and Bidding Instructions and Prelirn%nary Dcial Statement are tree and correct in ail material respects, to the best knowledge and belief of the governing body of the issuer. Section 1S. ~FFICiAL STATEN~ENT. An official Statement dated as ofthe date ofthrs meeting has been prepared in connection with the sale ofthe Initial Certificate and the Certificates in the farm and substance s~bn~itted at this meeting. Said official Statement and an su l y pp ernent ~~ ar addenda thereto have been and are hereby approved, and their use in the offer and sale of the Certificates is hereby approved, ft i~ further off roiiiy found, determined, and declared that the statements and representations contained xn said Official Statement are true and correct in ail rriaterial respects, to the best knowledge and belief of the fssuer, The distribution and use of the Preliminary Official Statement dated August ~, 2~~5, prior to the date hereof is herob ratified y and approved. Section 1 ~, DTC R~CIST~ATION, The Certificates initially shah be issued and delivered in such manner that no physical distribution ofthe Cerdf~cates will be made to the public, and The De asito Trust Campan "DTC" ,New York New York ' ' ` p y ~ ~ , uartially will act as depository fox the Certificates. DTC has represented that it is ~, limited purpose trust company incorporated under the laws afthe State ofNew York, a member of the ~'ederai Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered under Section I7A of the federal Securities exchange Act of 1934, as amended, and the Issuer accepts, but in no way verifies, such representations. The Initial Certificate authorized by this Ordinance shall be delivered to and registered in the name of the Purchaser, However, it is a condition afdelivery and sale that the Purchaser, immediately aver such deliv shall cause the Paying AgentlRegistrar, as provided far in this Ordinance, to cancel said itial Certificate and deliver in exchange therefor a substitute Certificate for each inaturity of such Initial Certificate, with each such substitute Certificate to be registered in the name afCEDE CO.,the nominee nfDTC, and it shall be the duty afthe Paying AgentlRegistrar to take such action. It is expected that DTC will bold the Certificates on behalf of the Purchaser andlar the DTC Participants, as defined and described in the Official Statement referred to and approved in Section 1 S hereof the 'DTC Participants"}. o long each Certificate is registered i n the name of CEDE CO,, the Pa~.ng AgentlRegistrar shall treat and deal with DTC in all respects the same as if it were the actual and beneficial owner thereof It is expected that DTC wilt n~aantain a bock entry system which will identify beneficial ownership of the Certificates by DTC Partici ants in into amounts of $~ ~0~ with transfe p ~ rs of ownership bung effected on the xecords of DTC and the DTC Participants pursuant to rules and xegulations established by them, andthatthe sr~bstitute Certificates initiall deposited with DTC shall be immobilized and not be y further exchanged for substitute Certificates except a hereinafter provided, The issuer is not responsible ar liable far any functions ofDTC, will not be res ansible P far paying any fees or charges with respect to its services, wilt not be responsible or liable for maintannen , supervisin , or reviewin the records of DTC ar ' • • g g g the DTC Participants, ar protecting any interests or rights of the beneficial owners of the Certificates. It shalt be the duty of the Purchaser and the DTC Participants to mare all arrangements with DTC to establish this bank-entry system, the beneficial ownershi of the Certificates, and the method of ain the fees p p y g and charges of DTC. The Yssuer does not represent, nor does rt in any way covenant that the initial bock-entry system. established with DTC will be maintained in the future. The Issuer reserves the nght and option at any t~lYle in the future, in its sole discretion, to terminate the DTC CEDE ~ CO.} bank~entry only registration requirement described above, and to ermit the Certificates to be re istered in the name of ~ p • g any owner. if the Yssuer exercises its right and opt~an to terminate such requirement, it shall give written notice of such termination to the Paying AgontlRegistrar and to DTC, and thereafter the Paying AgentlRegistrar sha11, upon presentation and proper request, register any Certificate in any name as provided for m this Ordinance. Notwithstanding the initial establishment of the foregoing baok~entry system with DTC, if far any reason oily of the originally delivered substitute e~if~cates is dui filed with the Pa 'n A entlR.e 'strar with ro er re u y ~ g g p p q est for transfer and substitution, as provided far in this Ordinance, substitute Certificates will be duly delivered as provided in this Ordinance, and there will be no assurance or representation that any book-entry system wall be maintained for such Certificates. Section ~~. CONTTNUINC DISCLOSU ~a} A~ntiual Repor„. ~i} The Issuer shall provide annually to each NRMSIR acid any SID, within six months after the end of each fiscal year ending in or after ~0~, financial information and operating data with respect to the issuer afthe general type included in the final Official Statement authorized by Section 1~ afthis Ordinance, being the infor~natian described in 23 Exhibit A hereto, which Exhibit i attached to and incarporated in this ordinance a if written ward for ward herein. Any financial statements sa to be provided shall be ~ I ~ prepared in accordance with the accountin principles described in Exhibit A hereta ar such ather cco unting principles as the Issuer may be required to employ from time to tune pursuant to state law ar regulation, and ~} audited, ifthe Issuer commissions an audit of such statements and the audit is cvrnpieted within the period during which they must be rovided. If the audit of such financial statements is not co p rnplete within such period, then the Issuer shall provide unaudited fn.Yancial statements by the required time and will provide audited financial statements far the applicable fiscal year to each NRSIR and any fD, when and ifthe audit report on such statements become avai.Iable. iii} If the Issuer changes its fiscal gear, it will notify each NRIVISIR and any SII] of the than e hand of the date of the new fiscal ear end riar to th g y } p e next date by which the Issuer otherwise wauld be required to provide financial infarmatiar~ and operating data pursuant to this Section, The ~.nancial information and operating data to be provided pursuant to this Section may be set Earth, in full in one or more documents or nay be Included by specific reference to any document including an official statement or other offering document, ifit is available from the MSRB} drat theretofore has been provided to each NRSIR and any SII~ ar filed with the SEC. fib} 1Vlaterial went Notices. The Issuer shall notify any SII~ and each NRI~[SrR, in a timel y manner, of any ofthe following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: I. Principal and interest payment delinquencies; ~~ Nan-payment related defaults; 3~ Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws an credit enhancements reflecting financial difficulties; ~. substitution of credit or liquidity providers, ar their failure to perform; ~. Adverse tax opinions ar events affecting the tax-exempt status of the Certificates; 7. ~riodif icatians to rights of holders of the Certificates; 8. Certificate calls; 9. I~efeasances; 1 a. Release,substitution# ar sale afproperty securing repayment afthe Certificates;and. 11. Rating changes. The Issuer shall notify any SIl] and each NRSIR, in a timely manner, of any failure by the issuer to ~ ravide P financial infarmat~an or aperati.ng data in accordance with subsection ~a~ afthis Section by the time re ufred q by such subsection. ~c} Limitations Disclaimers and A~nendrnents, ~i} The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer re~aains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the Issuer in ~4 any event writ give the notice required by Subsection {b} hereof of any Certrfcate calls and defcasance that cause the Issuer to no longer be such an "obligated person', iii} The provisions ofthis Section are far the cote benefit ofthe registered owners and benefcial owners afthe Certificates, and nothing in this Section, express ar Impiled, shall give any benefit ar an le ai ar equitable right, reined , or claim hereunder tQ an other y g ~ ~ person, The Issuer undertakes to provide only the financial infarmation, aperating data, f inancfai stte~nerlts, and r~atlces which ft has ex ressl a eed to provide pursuant to this Section and does not her p , ~ ~ eby undertake to pxavlde any other Infarmatian that maybe relevant or material to a complete presentation of the Issuer's financial results, condition, or ros ects ar hereby undertake to u date an information ro ' p • p P y p vided In, accordance wf th~S Section ar otherwise, except as expressly provided here, The Issuer does not make any representation or warranty conce such inforfnativn ar its usefulness to a decision to rove ~ t m or sell Certificates at any future date. {iii} UNDER ~~ CIRCUMSTANCES SHALL THE ISSUER, ITS OFFICERS, AGENTS AND EMPLOYEES, BE LIABLE TO 'T`HE REGISTERED OWNER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR FORT, FOR DAl1~,AE RESULTING IN MOLE OR IN PART FROM ANY BREACH B'Y THE ISSUER, '~"TI~R NE~rLIGENT OR wITHOUT FAULT ON ITS PART, OF ANY COTENANT SPECIFIED TN THIS SECTION, EUT EVERY RIOI~'T AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACI~ SHALL BE LIMITED TO AN' ACTYON FOR MANDAMUS OR SPECIFIC PERFORMANCE, {rv} Na default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of ar default under the Ordinance far purposes of any other provision afthis Ordinance. Nothing in this Section is intended ar shall act to disclaim, waive, or otherwise limit the duties ofthe Issuer under federal and state securities laws. {v~ The provisions ofthis Section maybe amended by the Issuer from time to time to ado t to changed circumstances that arise from a than a in le al . P g requirements, a change In law, or a change >n the identity, nature, stat~is, or type ofaperatians afthe Issuer, but only if{1}the provisions ofthis Section, as so a.nlended, would have permitted an underwriter to purchase or sell Certificates in the pri~aary offering afthe Certificates in compliance with the Rule, taking into account any amendments or interpretations afthe Rule since such offering as well as such changed circumstances and {~} either (a} the registered owners of a majority in aggregate principal amount {vr any greater amount required by any other provision of this Ordinance that authorizes sash an amendment} of the outstanding Certificates consent to such amendment ar {b~ a person that is unaffiliated with the Issuer (such as nationally recognised band counsels determined that such amendment will not materially hnpair the interest of the registered owners and beneficial, owners ofthe Certificates. Ifthe Issuer so amends the provisions ofthis Section, it shall include with an amended financial inforn~atron or o eratin data next rovi Y ~ p ded m accordance with subsection {a} of this Section an explanation, in narrative fonrn, of the reason far the amef~dinent and of the impact of any change rn the e of fnancia~l inform ' atian or operating data sa prodded. The Issuer may also amend ar repeal the provisions ofthis continuing disclosure agreement lithe SEC amends ar repeals the applicable provision afthe Rule or a court of final jurisdretian enters judgment that such provisions ofthe Buie are invalid, but only ifand to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Cercates in the prrlnary offering of the Certifcates. {d~ Defnrtians. As used in this Section, the follawrng terms havethe meanings ascribed to such terms below: #'1VISRB~' means the Municipal Securi~es Rulemaking Board. ~5 '"NR1I~SIR" means each persan whom the SEC or its staff has determined to be a nationall recagni~ed municipal securities information re asito within the me ' y p ry an~ng of the Rule fram time to time. "Rule" means ~ Rule 1 Sc~;1, as amended from time to time, "~"means the United States Securities and Ea~change Commission. "SII]" means and person designated by the State of Texas or an authorized de artment officer ar agency thereof as, and determined b the SBC or i P y is staff to be, a state information depository within the meatung of the Rule from time to tie. Sectian 2 I. PR~T`ECTIQN ~F PLEDCrE• Chapter 1~~8, Gavernment Code, a lies to the issuance afthe Cer~i~icates and the Ied a ofthe taxes and Pp p surplus revenues granted by the Issuer under Sections S and 9 of this Qrdinance, and is therefore valid, effective, and perfected. If Texas law is amended at an tune while the Certificates are autstandin and un aid such ~ ~ p that the pledge of the taxes and surplus revenues granted by the Issuer under sections S and 9 of this ordinance is to b sub j ect to the ~1in re uirernents of Chapter ~, Texas Business Commerce Co ~ ~ de, then in order to preserve to the registered owners of the Ce~ificates the perfection of the security interest in saki pledge, the Issuer agrees to take such measures as it deterznines are reasonable anal necessary under Texas Iaw to comply with the a liable ravisions of Chapter 9, Texas Business ~ Canlmerce pP p Cade and enable a filing to perfect the secuxity interest in sal.d pledge to occur. Section 22. I~`URTHBR PR~CEDURB• The 1Vlayor of the Issuer, the City Secretary ofthe Issuer and all other officers, employees, and agents of the Issuer, and each. of them, shall be and the are h.ereb expressly authorised, em owered and directed from dm ~ ~ p ~ e to tune at~d at any tune to do and perfor~a all such acts and things and to execute, acknowledge, and deliver in the name and under the ca ante seal and an behalfofthe Issuer all such instruments w he#her ar not herein mentraned, as may be necessary or desirable in order to carry out the terms and provisions of this Ce~ificate ordinance, the Certificates the sale of the Certificates, the Notice of Sale and Bidding Instructions and the Official Statement' and the Assistant Ci ty MaaagerlFiscal and ll~unicipal Services ofthe City shall cause the expenses of issuance afthe Certificates to be paid from the proceeds of sale of the Initial Certilicate or firom, other lawfull available funds of the Issuer, In case an officex whose si tur y Y gna a sha11 appear an any Certificate shall cease to be such ocer before the delivery of such Certil'~cate, such signature shall nevertheless be valid and sucient for all purposes the same as if such officer had remained in ofd ce until such delivery, Section 23, ~P~N NIB~TIN~S, The City Council has found and determined that the meetin t which this ordinance is considered is a n to the ublic and th ~ g• .. pe p at nonce thereofwas given m accordance with the prov~s~ans afthe Texas Cpen Meetings, Law, Tex. Gov't. Cade, Chapter 551, as amended. Section ~4. EPPBCTIVE DATB, This ordinance shall become effective ummediatel u nits passage and approval, y Po ~d FUSSED ANA ~A.PFR.~~E~] this the i 9th day of 1~ug~.st, BOOS. ariC ~.. Eu~r'oag~s, Mayor ATTEST; .Tennifer afters, City Secretary A~PRDVED AS TD LEGAL F`~RIVf John. I~ht, ~~teri~ City ~4tt~rney ~~: ~IT 1`! ~ERI~'TI~ ~~ A11'UA~ FINAN~~AL ~MATI~N The follon information is referred to in ectlon ~~ of this ordinance: A~nnu~I Fi~~nci t~Iemeni~ ~n~ ~peraiang I~at~ The financial information and aperating data with respect to the Issuer to be prodded ann~all accordance v~lth inch section are as ~ ecified and inclu Y p ~ ded m the Appendix or under the tables of the ~'icial taternent referred ta} below: Tables numbered I through aad 7 through 1~, inclusive, under the captions ''Tai Information", "]]ebt Infor'tnation" and "Financial Information" ~n the Official statement. Appendix ~ in the ~f ficla.l Statement. Acoonn~in~ PrI.a~Iplca The accounting principles referred to in such Section axe the accounting principles described in the Hates to the financial statements referred to in the paraaph abase. Exhibit 4 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of August 19, 2008 (this "Agreement"), by and between the City of Denton, Texas (the "Issuer"), and The Bank of New York Mellon Trust Company, National Association, a national banking association (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its Certificates of Obligation, Series 2008 (the "Securities") in the aggregate principal amount of $10,685,000 such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Securities are scheduled to be delivered to the initial purchaser thereof on or about September 23, 2008; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Ordinance" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Ordinance." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated on the signature page hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Ordinance" means a written request or ordinance signed in the name of the Issuer by the Mayor of the Issuer delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Ordinance" means the ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the City Secretary or any other officer of the Issuer and delivered to the Bank. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Ordinance). "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Responsible Officer" when used with respect to the Bank means the Chairman orVice-Chairman of the Board of Directors, the Chairman or Vice-Chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above 2 designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity" means the date specified in the Ordinance the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," Issuer," and Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying_Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Ordinance. Section 3.03. Reporting Requirements. To the extent required by the Code or the Treasury Regulations, the Bank shall report to the Holders and the Internal Revenue Service the amount of interest paid or the amount treated as interest accrued on the Bonds which is required to be reported by the Holders on their returns of federal income tax. ARTICLE FOUR REGISTRAR Section 4.01. Security Register -Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register"), and, if the Bank Office is located outside the State of Texas, a copy of such books and records shall be kept in the State of Texas, for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Re is~ter. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank toprovide an up-to-date listing or to convert the information into written form. 4 The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Cancelled Certificates. All certificates surrendered to the Bank, at the designated Payment/Transfer Office, for payment, redemption, transfer, or replacement, shall be promptly cancelled by the Bank. The Bank will provide to the Issuer, at reasonable intervals determined by the bank, a certificate evidencing the destruction of canceled certificates. Section 4.06. Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. Incase any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4, o 1, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (~ The Bank may exercise any ofthe powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the state- ments ofthe Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a segregated account to be held by the Bank solely for the benefit of the owners of the Securities to be used solely for the payment of the Securities, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized with securities or obligations that are eligible under the laws ofthe State of Texas and to the extent permitted by the laws ofthe United States of America to secure and be pledged as collateral for such accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such account shall be made by check drawn on such account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity ofthe Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for 6 payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1,1987, which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS hereto. Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties Section 6.02. Assi n.~. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. Section 6.04. Effect of Headings. hereof. The Article and Section headings herein are for convenience only and shall not affect the construction Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Bank may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Bank shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Bank shall be the successor of the Bank hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto, provided that the successor or resulting corporation is a bank, trust company, financial institution or other agency competent and legally qualified to act as Paying Agent/Registrar under this Agreement and the Order. The Bank shall provide immediate notice to the Issuer of any such pending merger, conversion, consolidation or of any such pending transfer to a successor corporation. Section 6.07. Severabili . In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.08. Benefits of A reg ement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.09. Entire A reg ement. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Ordinance, the Ordinance shall govern. Section 6.10. Counterparts. This Agreement maybe executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.11. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termina tion of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. 8 Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereo fl, together with other pertinent books and records relating to the Securi- ties, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.12. Governing. Texas. This Agreement shall be construed in accordance with and governed by the laws of the State of 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION By _ Title 2001 Bryan Street,10th Floor Dallas, Texas 75201 CITY OF DENTON, TEXAS By Mayor 215 E. McKinney Street Denton, Texas 76201 SCHEDULE A Paying Agent/Registrar Fee Schedule Exhibit 6 NOTICE OF SALE AND BIDDING INSTRUCTIONS UN $ l O,bSS,aaa CITY QF DENTUN, TEXAS (Denton County} CERTIFICATES OF OBLIGATION, SERIES 200$ Sealed Bids Due Tuesday, August 19, 200$, at 11:00 AM, CDT THE CERTIFICATES WILL NOT BE DESIGNATED AS "OUALIFIEDTRX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. THE SALE CERTIFICATES OFFERED FOR SALE AT COMPETITIVE BIDDING... The City of Denton, Texas (the "City") is offering far sale its $10,b85,000 Certificates of Obligation, Series 20x8 (the "Certificates"). Bidders may submit bids for the Certificates by any of the fallowing methods: (1} Deliver bids directly to the City as described below in "Bids Delivered to the City;" (2} Submit bids electronically as described below in "Electronic Bidding Procedures;" or (3} Submit bids by telephone ar facsimile as described below in "Bids by Telephone or Facsimile," BIDS DELIVERED TO CITY ...Sealed bids, plainly marked "Bid for Certificates," should be addressed to "Mayor and City Council, City of Denton, Texas," and should be delivered to the City's Financial Advisor at 777 Main Street, Suite 1200, Fart Worth, Texas 76102, prior to I I :00 AM, CDT, on the date of the sale. ELECTRONIC BIDDING PROCEDURE . , .Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of PARITY. Subscription to i-Deal's BIDCOMP Competitive Bidding System is required in order to submit an electronic bid. The City will neither confirm any subscription nor be responsible for the failure of any prospective bidder to subscribe, Bidders submitting an electronic bid shawl not be required to submit Official Bid Farms prior to award. An electronic bid made through the facilities of PARITY shall be deemed an irrevocable offer to purchase the Certificates on the terms provided in this Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the City. The City shall not be responsible for any malfunction or mistake made by, or as a result of the use of the facilities af, PARITY, the use of such facilities being the sole risk of the prospective bidder. If any provisions of the Notice of Sale shall conflict with information provided by PARITY as the approved provider of electronic bidding services, this Native of Sale shall control. Further information about PARITY, including any fee charged, may be obtained from Parity Customer Support, 40 West 23rd Street, Sth Floor, New York, New Yvrk laala, (212} 404-$102. Far purposes of the bidding process, regardless of the bidding method, the time as maintained by i-Deal shall constitute the official time. Far information purposes only, bidders are requested to state in their electronic bids the true interest cast to the City, as described under "Basis for Award" below. All electronic bids shall be deemed to incorporate the provisions of this Notice of Sale and the Official Bid Form. The winning bidder shall submit a signed bid form if not previously submitted. BIDS BY TELEPHONE OR FACSIMILE ...Bidders must Submit, prior to August 19, 2008, SIGNED Official Bid Forms to Laura Alexander, First Southwest Company, 777 Main Street, Suite 1200, Fort Worth, Texas 76102, and submit their bid by telephone ar facsimile (fax) an the date of the sale. Telephone bids will be accepted at (817) 332-9710, between 10:00 AM, CDT and l 1:00 AM, CDT an the date of the sale. Fax bids will be received between 10:00 AM, CDT and I I:00 AM, CDT, an the date of the sale at (817) 336-5572, attention: Rhonda Van Idersfine. First Saut est Company will not be responsible far submitting any bids received after the above deadlines. The City and First Southwest Company are not responsible if such telephone or facsimile numbers are busy which prevents a bid ar bids from being submitted on a timely basis. First Southwest Company assumes no responsibility or liability with respect to any irregularities associated with the submission of bids if any options are exercised. PLACE AND TIME ~F BID OPENING. , ,The bids for the Certificates will be publicly opened and read at the offices of the Financial Advisor, at 11;00 AM, CDT, Tuesday, August 19, 2008, AWARD ~F THE CERTIFICATES . , .The City Council will take action to award the Certificates (or reject all bids) at a meeting scheduled to convene at d;30 PM, CDT, on the date of the bid opening, and adopt an ordinance authorizing the Certificates and approving the Official Statement the "Certificate Ordinance"}. THE CERTIFICATES DESCRIPTION ...The Certificates will be dated August 15, 2008 (the "Dated Date"). Interest will accrue from the Dated Date and will be due on February 15, 2009, and each August 15 and February 15 thereafter until the earlier of maturity or prior redemption. The Certificates will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity. The Certificates will mature on February 15 in each year as follows; MATURITY SCHEDULE Principal Principal Principal Year Amount Year Amount Year Amount 2009 $ 980,000 2016 $ 465,000 2022 $ 220,000 2010 1,030,000 2017 485,000 2023 230,000 2011 1,075,000 2018 505,000 2024 245,000 2012 1,125,000 2019 190,000 2025 255,000 2013 1,180,000 2020 200,000 2024 270,000 2014 705,000 2021 210,000 2027 285,000 2015 735,000 2028 295,000 OPTIQNAL REDEMPTIQN ...The City reserves the right, at its option, to redeem Certificates having stated maturities on and after February 15, 2019, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. SERIAL CERTIFICATES ANDIQR TERM CERTIFICATES ...Bidders may provide that all of the Certificates be issued as serial Certificates or may provide that any two or more consecutive annual principal amounts be combined into one or more term Certificates. MANDATARY SINKING FUND . , . if the successful bidder elects to alter the Maturity Schedule reflected above and convert principal amounts of the Serial Certificates into "Term Certificates", such "Term Certificates" shall be subject to mandatory redemption on the first February 15 next following the last maturity for Serial Certificates, and annually thereafter on each February 15 until the stated maturity for the Term Certificates at the redemption prices of par plus accrued interest to the date of redemption. The principal amounts of the Term Certificates to be redeemed on each mandatary redemption date shall be the principal amounts that would have been due and payable in the Maturity Schedule shown above had no conversion to Term Certificates occurred. At least thirty X30) days prior to each mandatary redemption date, the Paying AgentlRegistrar shall select by lot the Term Certificates to be redeemed and cause a notice of redemption to be given in the manner provided in the Preliminary official Statement. The principal amount of the Term Certificates required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the City, by the principal amount of the Term Certificates of the same maturity which (i) shall have been acquired by the City at a price not exceeding the principal amount of such Term Certificates plus accrued interest to the date or purchase thereof, and delivered to the Paying Agentlltegistrar far cancellation or (ii} shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. A final official statement will incorporate the mandatory redemption provisions for the Certificates in the event the successful bidder elects to convert serial maturities into one or mare Term Certificates. B44K-ENTRY-ONLY SYSTEM ...The City intends to utilize the Baak-Entry-only System of The Depository Trust Company ("OTC"). See "The Bonds and Certificates -Book-Entry-only System" in the Preliminary Official Statement. PAYING AGENTIREGISTRAR ...The initial Paying AgentlRegistrar shall be The Bank of New Yark Mellon Trust Company, National Association see "The Bonds and Certificates - Paying AgentlRegistrar" in the Preliminary official Statement}. SOURCE OF PAYMENT ...The Certificates constitute direct obligations of the City, payable from a combination of ~i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and iii} a limited pledge (not to exceed $10,000} of surplus net revenues of the City's Utility System, as provided in the Certificate Ordinance. Further details regarding the Certificates are set forth in the Preliminary Official Statement. ii CONDITIONS OF THE SALE TYFE OF BIDS AND INTEREST RATES ...The Certificates will be sold in one block on an "All or None" basis, and at a price of not less than par and not more than 1 a0.5% of their par value plus accrued interest from the dated date of the Certificates the "Dated Date"} to the date of delivery of the Certificates. Bidders are invited to name the rates) of interest to be borne by the Certificates, provided that each rate bid must be in a multiple of lib of 1% or 11100 of 1% and the net effective interest rate must not exceed 15%, The highest rate bid may not exceed the lowest rate bid by more than 2% in rate. Using the interest rate established for the February 15, 2019 maturity as the base year, interest rates for successive maturities shall be structured in ascending order such that for each succeeding maturity, rates shall be equal to ar greater than the interest rate far the maturity of the preceding year. Na limitation is imposed upon bidders as to the number of rates or changes which may be used. All Certificates of one maturity must bear one and the same rate. No bids involving supplemental interest rates will be considered. Each bidder shall state in the bid the total interest cost in dollars and the effective interest rate determined thereby calculated in the manner prescribed by Chapter 1204, Texas Government Code), which shall be considered informative only and not as a part of the bid. BASIS FOR AWARD ...The sale of the Certificates will be awarded to the bidder making a bid that conforms to the specifications herein and which produces the lowest True Interest Cost rate to the City. The True Interest Cast rate is that rate which, when used to compute the total present value as of the Dated Date of all debt service payments on the Certificates on the basis ofsemi-annual compounding, produces an amount equal to the sum of the par value of the Certificates plus any premium bid (but not interest accrued from the Dated Date to the date of their delivery). In the event of a bidder's error in interest cost rate calculations, the interest rates, and premium, if any, set forth in the Official Bid Form will be considered as the official bid, GOOD FAITH DEP(}SIT ... A Good Faith Deposit, payable to the "City of Denton, Texas", in the amount of $213,700.00, is required. Such Good Faith Deposit shall be a bank cashier's check or certified check, which is to be retained encashed by the City pending the Initial Purchaser's compliance with the terms of the bid and the Notice of Sale and Bidding Instructions. The Good Faith Deposit may accompany the Official Bid Farm or it may be submitted separately. If submitted separately, it shall be made available to the City prior to the opening of the bids, and shall be accompanied by instructions from the bank on which drawn which authorize its use as a Good Faith Deposit by the Initial Purchaser who shall be named in such instructions. The Good Faith Deposit of the Initial Purchaser will be returned to the Initial Purchaser upon payment for the Certificates. No interest will be allowed on the Good Faith Deposit. In the event the Initial Purchaser should fail or refuse to take up and pay for the Certificates in accordance with the bid, then said check shall be cashed and accepted by the City as full and complete liquidated damages. The checks accompanying bids other than the winning bid will be returned immediately after the bids are opened, and an award of the Certificates has been made. DELIVERY OF THE CERTIFICATES AND ACCOMPANYING DOCUMENTS CtISIP NUMBERS ... It is anticipated that CUSP identification numbers will appear on the Certificates, but neither the failure to print or type such number an any Certificate nor any error with respect thereto shall constitute cause for a failure or refusal by the Initial Purchaser to accept delivery of and pay for the Certificates in accordance with the terms of this Notice of Sale and Bidding Instructions and the terms of the Official Bid Form. All expenses in relation to the printing or typing of CUSIP numbers on the Certificates shall be paid by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid for by the Initial Purchaser. DELIVERY OF CERTIFICATES ...Initial Delivery will be accomplished by the issuance of one Initial Certificate also called the "Certificate" or "Certificates"}, either in typed or printed form, in the aggregate principal amount of $la,b85,0aa, payable in stated installments to the Initial Purchaser or its designee, signed by the Mayor and City Secretary, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts. Upon delivery of the Initial Certificate, it shall be immediately cancelled and one definitive Certificate far each maturity will be registered and delivered only to Cede & Co., and deposited with DTC in connection with DTC's Book-Entry-Only System. Delivery will be at the corporate trust office of the Paying AgentlRegistrar in Dallas, Texas. Payment for the Certificates must be made in immediately available funds for unconditional credit to the City, or as otherwise directed by the City. The Initial Purchaser will be given six business days' notice of the time fixed far delivery of the Certificates. It is anticipated that delivery of the Certificates can be made on or about September 23, 2aa8, and it is understood and agreed that the Initial Purchaser will accept delivery and make payment for the Certificates by 10:x0 AM, CDT, on September 23, 2aag, ar thereafter on the date the Certificate is tendered for delivery, up to and including October 7, 20as. If for any reason the City is unable to make delivery on or before October 7, 2008, the City shall immediately contact the Initial Purchaser and offer to allow the Initial Purchaser to extend its offer for an additional thirty days. If the Initial Purchaser does not elect to extend its offer within six days thereafter, then its Good Faith Deposit will be returned, and both the City and the [nitial Purchaser shall be relieved of any further obligation. In no event shall the City be liable for any damages by reason of its failure to deliver the Certificates, provided such failure is due to circumstances beyond the City's reasonable control. CONDITIONS TO DELIVERY ...The obligation of the Initial Purchaser to take up and pay for the Certificates is subject to the Initial Purchaser's receipt of (a) the legal opinion of McCall, Parkhurst & Horton, L.L.P., Dallas, Texas, Band Counsel for the City ~"Band Counsel"}, fib} the no-litigation certificate, and (c} the certification as to the Preliminary Official Statement, all as further described in the Preliminary Official Statement. iii In order to provide the City with information required to enable it to comply with certain conditions of the Internal Revenue Code of I986 relating to the exemption of interest an the Certificates from the grass income of their owners, the Initial Purchaser will be required to complete, execute, and deliver to the City (on ar before the 6th business day prior to the delivery of the Certif sates} a certification as to their "issue price" substantially in the form and to the effect attached hereto ar accompanying this Native of Sale and Bidding Instructions. In the event the successful bidder will not reoffer the Certificates for sale, such certificate may be modified in a manner approved by the City. In no event will the City fail to deliver the Certificates as a result of the Initial Purchaser's inability to sell a substantial amount of the Certificates at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver such a certificate by the date of delivery of the Certificates, if its bid is accepted by the City. It will be the responsibility of the Initial Purchaser to institute such syndicate reporting requirements to make such investigation, ar otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certification should be directed to Certificate Counsel, LEGAL QPINIONS , ..The Certificates are offered when, as and if issued, subject to the approval of the Attorney General of the State of Texas. Delivery of and payment for the Certificates is subject to the receipt by the Initial Purchaser of opinions of Bond Counsel, to the effect that the Certificates are valid and binding obligations of the City and that the interest an the Certificates will be excludable fram gross income far federal income tax purposes under existing law, subject to the matters described under "Tax Matters" in the Preliminary Official Statement, including alternative minimum tax consequences far corporations. CERTIF[CATION OF PRELIMINARY QFFICIAL STATEMENT ... At the time of payment far and Initial Delivery of the Certificates, the City will execute and deliver to the Initial Purchaser a certificate in the form set Earth in the Preliminary Official Statement. CHANCE IN TAX EXEMPT STATUS ....At any time before the Certificates are tendered for delivery, the Initial Purchaser may withdraw its bid if the interest received by private holders an obligations of the same type and character shall be declared to be includable in gross income under present federal income tax laws, either by ruling of the Internal Revenue Service ar by a decision of any Federal court, ar shall be declared taxable ar be required to be taken into account in computing any federal income taxes, by the terms of any federal income tax law enacted subsequent to the date of this Native of Sale and Bidding Instructions. GENERAL FINANCIAL ADVISOR ...First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Certificates. The Financial Advisor's fee for services rendered with respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. First Southwest Company may submit a bid far the Certificates, either independently ar as a member of a syndicate organized to submit a bid for the Certificates, First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Band Counsel and has not verified and does not assume any responsibility far the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Certificates, or the passible impact of any present, pending ar future actions taken by any legislative ar judicial bodies. In the normal course of business, the Financial Advisor may from time to time sell investment securities to the City for the investment of bond proceeds or other funds of the City upon the request of the City. BLUE SKY LAWS ... By submission of its bid, the Initial Purchaser represents that the sale of the Certificates in states other than Texas will be made only pursuant to exemptions fram registration or, where necessary, the Initial Purchaser will register the Certificates in accordance with the securities law of the states in which the Certificates are offered ar sold. The City agrees to cooperate with the Initial Purchaser, at the Initial Purchaser's written request and expense, in registering the Certificates or obtaining an exemption from registration in any state where such action is necessary, provided, however, that the City shall not be obligated to qualify as a foreign corporation ar to execute a general or special consent to service of process in any such jurisdiction. NOT AN QFFER TO SELL , ..This Notice of Sale and Bidding Instructions does not alone constitute an offer to sell the Certificates, but is merely notice of the sale of the Certificates. The offer to sell the Certificates is being made by means of the Native of Sale and Bidding Instructions, the Official Bid Farm and the Preliminary Official Statement. Prospective purchasers are urged to carefully examine the Preliminary Official Statement to determine the investment quality of the Certificates. ISSUANCE of ADDITIONAL DEBT ...Other than the City's $7,3QQ,QQQ General ObIigatian Bands, Series 2QQ8 being offered far sale concurrently with, but separately from, the Certificates, the City does not anticipate the issuance of additional general obligation debt within the next I2 months. RATINGS ...The presently outstanding tax supported debt of the City is rated "Aa3" by Maady's Investors Service, Inc. ("Maady's"} and "AA-" by Standard & Poor's Ratings Services, ADivision ofMcGraw-Hill Companies, Inc, ("S&P"}. The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance companies. Applications for contract ratings an this issue have been made to Moody's and S&P. The results of their determinations will be provided as soon as possible. MUNICIPAL BOND INSURANCE ... In the event the Certificates are qualified for municipal bond insurance, and the Purchaser desires to purchase such insurance, the cost therefor will be paid by the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. It will be the responsibility of the Purchaser to disclose the existence of insurance, its terms and the effect thereof with respect to the reoffering of the Certificates. Any rating downgrade by Moady's, iv S&P, or Fitch Ratings, respectively, of the bond insurance provider after the Bid Opening shall not relieve the Purchaser of its obligation under the heading "DELIVERY OF THE CERTIFICATES AND ACCOMPANYING DOCUMENTS". THE PRELIMINARY OFFICIAL STATEMENT AND COMPLIANCE W[TH SEC RULE 15C2-12 ... The City has prepared the accompanying Preliminary Gfticial Statement and, for the limited purpose of complying with SEC Rule 15c2-12, deems such Preliminary Official Statement to be final as of its date within the meaning of such Rule for the purpose of review prior to bidding. Tv the best knowledge and belief of the City, the Preliminary Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Certificates. Representations made and to be made by the City concerning the absence of material misstatements and omissions in the Preliminary Official Statement are addressed elsewhere in this Notice of Sale and Bidding Instructions and in the Preliminary Official Statement. The City will furnish to the Initial Purchaser, acting through a designated senior representative, in accordance with instructions received from the Initial Purchaser, within seven (7~ business days from the sale date an aggregate of 150 copies of the 4flicial Statement reflecting interest rates and other terms relating to the initial reoffering of the Certificates. The cost of any Official Statement in excess of the number specified shall be prepared and distributed at the cost of the Initial Purchaser, The Initial Purchaser shall be responsible for providing in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Except as noted above, the City assumes no responsibility or obligation for the distribution or delivery of any copies of the Official Statement in connection with the offering or reoffering of the subject securities. CONTINUING DISCLOSURE AGREEMENT ...The City will agree in the Certificate Ordinance to provide certain periodic information and notices of material events in accordance with Securities and Exchange Commission Rule 15c2-12, as described in the Preliminary Official Statement under "Continuing Disclosure of Information", The Initial Purchaser's obligation to accept and pay for the Certificates is conditioned upon delivery to the Initial Purchaser yr agent of a certified copy of the Certificate Ordinance containing the agreement described under such heading. COMPLIANCE WITH PRIOR UNDERTAKINGS ...The City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. ADDITIONAL COPES OF NOTICE, B1D FORM AND STATEMENT .. , A limited number of additional copies of this Notice of Sale and Bidding Instructions, the Official Bid Form and the Preliminary Official Statement, as available over and above the normal mailing, may be obtained at the offices of First Southwest Company, Investment Bankers, 325 North St. Paul, Suite 800, Dallas, Texas 75201, Financial Advisor to the City. 4n the date of the sale, the City will, in the Certificate Ordinance authorizing the issuance of the Certificates, confirm its approval of the form and content of the Preliminary Official Statement, and any addenda, supplement or amendment thereto, and authorize its use in the reoffering of the Certificates by the Initial Purchaser. MARK BURR~UGHS Mayor City of Denton, Texas ATTEST: ]ENNIFER WALTERS City Secretary August 7, 2008 BOND YEARS Certificates Accumulated Certificates Maturing Amount Band Years Band Years Maturty 2aa9 9$4,444 494.444 494.444 2aa9 gala 1,43a,aoa 1,545.444 2,435.444 gala tall 1,475,404 2,b87.5aa 4,722.544 tall 2412 1,125,444 3,937.544 $,bba.aaa 2x12 2x13 1,184,444 5,314.444 13,974.444 2x13 2x14 745,444 3,877.544 17,847.544 2x14 2x15 735,444 4,777.544 22,b25.aa4 2x15 2alb 4b5,4aa 3,487.544 2b,112.544 2alb 2x17 4$5,444 4,122.544 34,235.444 2x17 2al$ 545,444 4,797.544 35,432.544 2al$ 2x19 19a,aQa 1,995.444 37,427.544 2x19 2424 2aa,aoa 2,3oa.aaa 39,327.500 2424 2421 214,404 2,b25.a4a 41,952,544 2421 2422 224,444 2,974.444 44,922,544 2422 2023 234,444 3,335.444 4$,257.544 2423 2024 245,444 3,797.544 52,455.440 2424 2425 255,444 4,247.544 5b,2b2.500 2425 242b 274,444 4,725.444 ba,9$7.5a4 202b 2427 2$5,444 5,272.544 bb,2b4.a44 2427 2428 295,444 5,752.544 72,412.544 2428 Average Maturity ............................ . b.74a3 Years OFFICIAL BID FURM Honorable Mayor and City Council August 19, 2008 City of Denton, Texas Honorable Mayor and Members of the City Council: Reference is made to your Preliminary Official Statement and Notice of Sale and Bidding Instructions, dated August 7, 2008 of $10,685,000 CITY 4F DENTGN, TEXAS CERTIFICATES 4F OBLIGATION, SERIES 2008, both of which constitute a part hereof. For your legally issued Certificates, as described in said Notice of Sale and Bidding Instructions and Preliminary Official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, plus a cash premium of $ (not to exceed 0.5% of the total par amount} for Certificates maturing and bearing interest as follows: Principal Interest Principal Interest Principal Interest Maturi Amount Rate Maturi Amount Rate Maturi Amount Rate 2/15/2009 $ 980,000 % 2/15/201 b $ 4b5,a00 % 2/15/2022 $ 220,000 2/15/2010 1,030,000 % 211512x17 485,000 % 2/15/2023 230,Oaa 2/15/2011 1,075,000 % 211512x18 505,aaa % 211512x24 245,OOa 21I 512012 1,125,000 % 211512a 19 19a,aaa % 211512x25 255,000 2/15/2013 1,180,000 % 211512x20 2aa,aaa % 21I512a26 270,000 2/15/2014 705,000 % 2/15/2021 21 a,aaa % 211512x27 285,000 2/15/2015 735,000 % 2/15/2028 295,000 4f the principal maturities set forth in the table above, term bonds have been created as indicated in the following table (which may include multiple term bonds, one term bond or no term bond if none is indicated}. For those years which have been combined into a term bond, the principal amount shown in the table above shall be the mandatory sinking fund redemption amounts in such years except that the amount shown in the year of the term bond maturity date shall mature in such year. The term bonds created are as follows: Year of Maturity Date First Mandatory Principal Interest February 1 S Redemption Amount Rate fur calculation (which is not a part of this bid} of the true interest cost from the above is: TRUE INTEREST COST °/ We are having the Certificates of the following maturities insured by at a premium of $ said premium to be paid by the Initial Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. The Initial Certificates shall be registered in the name of ,which will, upon payment for the Certificates, be canceled by the Paying AgentlRegistrar. The Certificates will then be registered in the name of Cede & Co. (DTC's partnership nominee}, under the Book-Entry-only System. A bank cashier's check or certified check of the Bank, , in the amount of $213,700.00, which represents our Good Faith Deposit his attached hereto) or Chas been made available to you prior to the opening of this bid}, and is submitted in accordance with the terms as set forth in the Preliminary Offrcial Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Certificates utilizing the Baok-Entry-Only System through DTC and make payment for the Initial Certificate in immediately available funds in the Corporate Trust Division, The Bank of New York Mellon Trust Company, National Association, not later than I0:00 AM, CDT, on September 23, 2008, or thereafter on the date the Certificates are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions, It will be the obligation of the purchaser of the Certificates to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Certificates, a certificate relating to the "issue price" of the Certificates in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the City, We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Respectfully submitted, Syndicate Members: Name of Underwriter or Manager Authorized Representative :Phone Number Signature ACCEPTANCE CLAUSE The above and foregoing bid is hereby in all things accepted by the City of Denton, Texas, subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 19th day of August, 2008. ATTEST: Mayor City of Denton, Texas City Secretary CERTIFICATE 4F UNDERWRITER The undersigned hereby certifies as follows with respect to the bid and purchase of the City of Denton, Texas Certificates of Obligation, Series 2448 (the "Certificates"): 1. The undersigned is the duly authorized representative of the purchaser (the "Purchaser"} of the Certificates from the City of Denton, Texas (the "Issuer"). 2. All of the Certificates have been offered to members of the public in a bona fide initial offering. For purposes of this Certificate, the term "public" does not include any bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers (including the Purchaser or members of the selling group or persons that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of the selling group}. 3. Each maturity of the Certificates was offered to the public at a price which, on the date of such offering, was reasonably expected by the Purchaser to be equal to the fair market value of such maturity. 4. Other than the obligations set forth in paragraph 5 hereof (the "Retained Maturity" or "Retained Maturities"}, the first pricelyield at which a substantial amount (i.e., at least ten (14} percent} of the principal amount of each maturity of the Certificates was sold to the public is set forth below. Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maturin Maturi %IYield} Maturing Maturi %IYield ~ 9s0,000 2009 $194,444 2419 1,030,000 2010 200,000 2020 1,075,000 2011 210,000 2021 1,125,440 2012 224,440 2422 1,180,440 2013 234,440 2423 705,444 241 25,444 242 735,DD4 2415 255,444 2425 465,DD4 2416 274,444 242b 485,444 2417 285,444 2427 545,444 2418 285,444 2428 5. In the case of the Retained Maturities, the Purchaser reasonably expected on the offering date to sell a substantial amount (i.e., at least ten (l4} percent) of each Retained Maturity at the initial offering pricelyield asset forth below; Principal Offering Principal Offering Amount Year of Price Amount Year of Price Ma~in~. Maturi %IYield Maturing Maturi %IYield $ 884,444 2448 $194,444 2419 1,434,444 2414 200,440 2424 1,475,444 2411 214,44D 2421 1,125,444 2412 224,444 2422 1,184,444 2413 234,444 2423 745,444 241 245,DD0 2024 735,444 2415 255,DD0 2425 X65,444 2416 27D,DD4 2o2b X85,444 2417 285,444 2427 545,444 2418 285,D44 2428 6. Please choose the appropriate statement: ( )The Purchaser will not purchase bond insurance for the Certificates. (}The Purchaser will purchase bond insurance from (the "insurer"} for a feelpremium of $ (the "Fee"}. The Fee is a reasonable amount payable solely for the transfer of credit risk for the payment of debt service on the Certificates and does not include any amount payable for a cost other than such guarantee, e.g., a credit rating or legal fees. The Purchaser represents that the present value of the Fee for each obligation constituting the Certificates to which such Fee is properly allocated and which are insured thereby is less than the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Certificates. The Fee has been paid to a person who is not exempt from federal income taxation and who is not a user or related to the user of any proceeds of the Certificates. In determining present value for this purpose, the yield of the Certificates (determined with regard to the payment of the guarantee fee) has been used as the discount rate. No portion of the Fee is refundable upon redemption of any of the Certificates in an amount which would exceed the portion of such Fee that has not been earned. 7. The Purchaser understands that the statements made herein will be relied upon, by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, and by Bond Counsel in rendering their opinion that the interest on the Certificates is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of , 2008. (Name of Purchaser or Manager of Purchasing Syndicate) By: Title; AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance A M• nF n C Jo ortu e SUBJECT Consider adoption of an ordinance considering all matters incident and related to the issuance, sale and delivery of the "City of Denton Utility System Revenue Bonds ($15,290,000), Series 2008"; authorizing the issuance of the bonds for Electric and Water System infrastructure; approving and authorizing instruments and procedures relating to said bonds; and enacting other provisions relating to the subject. BACKGROUND This ordinance authorizes the issuance, sale and delivery of Utility System Revenue Bonds (the "Bonds") in the amount of $15,290,000 to fund $11,000,000 in capital improvements for Electric and $4,000,000 in Water System infrastructure. The issuance amount also includes the necessary deposit into the debt service reserve fund and cost of issuance. The Bonds will be used for electric and water transmission and distribution projects, as well as water storage. After a comprehensive analysis of the Utility System's financial outlook and stability, Standard and Poor's and Moody's Investor Services have assigned favorable bond ratings for this issuance. The ratings are summarized below: Utilit~ystem Revenue Bonds ($15,290,000), Series 2008 ~ Standard and Poor's A+ • Moody's Al The Bonds will be sold through a competitive bid process following the guidelines established in the City's Debt Service Management Policy [Section 403.07 XII (A)]. The City's financial advisor, First Southwest Company, will accept bids for the issuance on August 19, 2008. Staff will then present the bids at the City Council meeting on the evening of August 19, 2008, with the final delivery of funds expected September 23, 2008. Interest rates, pricing, insurance provisions, if any, and all other information from the successful bidder will be included in the finalized Official Statement, as well as other bond documents following City Council's award of the bid. The agenda information packet includes various documents as it relates to the issuance of the Bonds. Included is the ordinance authorizing the issuance of the bonds, the rating agency reports, the Preliminary Official Statement (POS), Notice of Sale and Bidding Instructions and the paying agent/registrar agreement. Agenda Information Sheet August 19, 2008 Page 2 PRIOR ACTION/REVIEW (Council, Boards, Commission) The City Council and the Public Utilities Board approved the projects funded by the Bonds in the Capital Improvement Program for fiscal years ending 2008-2012. FISCAL INFORMATION An estimated debt service schedule is included on page 40, Table 7 in the attached POS. The estimated average annual debt service payment on the new issuance, including principal and interest, will total approximately $1,192,000. This payment is anticipated and included in the Utility System's long-range financial pro forma. F,XTTTRTTC 1. Ordinance 2. Rating Agency Reports A. Moody's (will be provided at the meeting) B. Standard & Poor's 3. Preliminary Official Statements 4. Notice of Sale and Bidding Instructions 5. Paying Agent/Registrar Agreement Respectfully submitted: Bryan Langley Director of Finance Exhibit 1 ~RD~vANCE N~, 2005- AN oRD~vANCE CONSIDERING ALL l1~ATTERS INCIDENT A.ND RELATED TD THE ISSUANCE, SALE AND DELIVERY DF THE t'CITY ~F DENTON UTILITY BYTE REVENUE BoND~ ~ i ~,290,~0~}, SERIES 2005"; AUTHORIZrNG THE ISSUANCE OF THE BANDS; APPRDVIN AND AUTHGRI~ING ~NTRUIVIENTS AND PRgCEDURE RELATING TD SAID BONDS; AND ENACTYNG OTHER FRDVIIDNS RELATING TD THE SUBJECT THE STATE DF TEXAS COUNTY DF DENTDN CITY~DF DENTDN WHEREAS, the City ofDentan, Texas, heretofore has duly issued the following revenue bonds: City of Denton Utility System Revenue Refunding Bands, Taxable Series 1~9-B, dated June 1, ~~~~; City ofDentan Utility System Revenue Bonds, Series 1995, dated March 1,1995; City of Dentan Utility System Revenue Refunding Bands, Series 199SA, dated duly I x,1995; City ai' Dentan Utility System Re-~enue Refunding Bands, Series 19988, dated August 1,1995; City ofDentan Utility System Revenue Bands, Series 2000A, da#ed April 1~, ~aaa; City ofDentan Utility System Revenue Bands, Taxable Series 2000B, dated Apri115, 2000; City ofDentan Utility System Revenue Refunding and In~provernent Bands, Series 2 1, dated April 15, 2001; - City of Dentan Utility System Revenue Bends, Series 2402A, dated April 1, 2002; City of Dentan Utility System Revenue .Bands, Taxable Series 20028, dated April 1, 2002; City of Denton Utility System Revenue Refunding and Improvement Bonds, Series 2~~, dated Apri11, 2003; City ofDentan Utility System Revenue Refunding Bonds, Series 2004, dated September 1, 2004; City of Dentan Utility System Revenue Ref~ulding Bands, Series 2005, dated 1Vlay 1 ~, 200; City of I]enton Utility System Revenue Bands, Series 200b, dated July 15, 200; City ofDentan Utility System Revenue Ref~uiding Bands, Series 2007, dated February 15, 2007; City of Denton Utility System Revenue Bonds, Series 2007, dated July 15, 2007; and WHEREAS, the Series 2008 Bonds hereiila~er authorized and described are to be issued, said and delivered pursuant to Chapters 1a2, Texas Cavernment Code, the City's Home Rile Charier, and other applicable laws, N~, THEREFORE THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: Section ~. AMOUNTAND PURPOSE OF THE BONDS. The bond orbonds ofthe City ofDenton, Tens the "Issuer"'}are hereby authorized to be issued and delivered in the aggregate principal amount of 1 ,~9~,4~~, for the purpose of ~a} fund capital improvements for the electric system transmission and distribution facilities; fib} miscellaneous water system improvements; ~c~ ~na1~e deposit to the System debt service reserve fund; and ~d}pay the costs of issuance ofthe Bands. Section 2. DESCRIPTION OF THE BONDS. ~}Each bond issued pursuant to this ordinance shall be designated: "'CITY OF DENTON UTILITY SYSTEIVI REVENUE BOND, SERIES ~~08."with respect to the Series X045 Bonds, initially there sha11 be issued, sold, and delivered hereunder a single fu11y registered band, without interest coupons, payable in installments ofprincipal the ""Initial Series X048 Bond"~, but the Initial Series 208 Bond nay be assigned and transferred andlor converted into and exchanged for a like aggregate principal amount affull~r registered bands, without interest coupon, having serial maturities, and in the denomination ar denominations of $S,DO~ or any integral multiple of X5,000, all in the manner hereinafter prodded. The terms ""Series ~4oS Bonds" as used In this Ordinance shall mean and include collectively the Initial Series 205 Band and all substitute bonds exchanged therefor, as we11 as all other substitute bonds and replacement bands issued pursuant hereto, and the term "Series X008 Bond" shall mean any of the Series X408 Bonds. fib} The term "Initial Bond"' as used in this Ordinance shall mean and include collectively the Initial Series X048 Band, the term "Bondsf" as used in this Ordinance shall mean and include collectively the Initial Band and all substitute bonds exchanged therefor, as well as all other substitute bands and replacement bonds issued pursuant hereto, and the term "Band" shall mean and of the Bonds. Section ~, INITIAL DATE, DENOMINATION, NUMBER, MATURITIES, INITIAL RECrISTERED OWNER, AND CHARACTERISTICS OF THE INITIAL BOND. ~a} The Initial series 2005 Bond is hereby authorized to be issued, sold, and delivered hereunder as a single fully registered Bond, without interest coupons, dated August 15, ZOOS, in the denomination and aggregate principal amount of $15,90,000 numbered R- I, payable In annual installments of principal to the Ir~tial registered owner thereof, to-wit: or to the registered assignee or assignees of said Bond or any portion or portions thereof din each case, the "registered owner""~, with the annual installments afprincipal ofthe Initial Series 2QOS Bond to be payable on the dates, respectively, and in the principal amounts, respectively, stated in the FORM OF INITIAL BOND set forth in this Ordinance. fib} The Initial Series X448 Bond ~i} may and shall be prepaid ar redeemed prior to the respective scheduled due dates of installments of principal thereof, iii} may be assigned and transferred, viii} may be converted and exchanged far other Bonds, ~iv~ shall have the characteristics, and ~v) shall be signed and sealed, and the principal ofand Interest on the Initial Series BOOS Bond shall be payable, all as provided, and in the manner required ar indicated, in the FORM OF INITIAL SERIES 20D8 BOND set forth in this Ordinance. ecrian 4. INTEREST. The unpaid principal, balance of the Initial Series SOUS Bond shall bear interest from the date of each Initial Series 2005 Bond to the respective scheduled due dates, or to the respective dates ofprepayment or redemption, of the installments afprincipal ofthe Initia~i series 2008 Bond, and said interest shall be payable, all in the manner prav~ded and at the rates and an the dates stated in the FORM OF INITIAL ERIE 2005 BOND set far~h in this Ordinance, ~ectian 5. CORM OF INITIAL SERIES 2005 BOND. The faun of the Initial Series 2008 Band, including the farm afReistratian certificate afthe an~ptroller ofPublic Accounts ofthe State afTexas to be endorsed an the Initial series 2005 Band, sha11 be substantially as follows: FORM OF I~IITIAI~ SERIES 2005 BOND NO, R-1 ~'NITED STATES OF AMERICA STATE OF TEXAS BOUNTY OF DENTON rT~ OF DENTON UTILITY SYSTEM REVENUE BOND SERIES 2005 15,290,00 THE CITY' OF DENTON, in Denton Count, Texas the "Issuer"}, being a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee or assignees of this Bond or any portion ar portions hereof din each case, the "registered owner"~ the aggregate principal a~naunt of $15,290,000 (FIFTEEN MILLION TWO HUNDRED NINETY THOUSAND DOLLARS) in annual installments ofprlncipal due and payable on December 1 in each afthe years, and in the respective principal amounts, as set forth in the fallowing schedule, and to pay interest, from the date of this Band hereina~er stated, on the balance of each such italln~ent of principal, respectively, from time to time rema~ng unpaid, at ~e rates a~ follows PRINCIPAL INTEREST YBAIt PRINCIPAL n~TEREST YEAR AMO~]~NT RATE °/a AMOUNT RATE °Ia ~~~~ ~~~~ 2009 2019 2010 202 201 ~ ~~~ 1 ~~~~ 2022 2013 2Q2~ 2014 2024 3 ~~1~ ~o~s ~o ~ ~ ~o~~ ~~~~ ~o~~ Interest shall first be due and payable on December 1, ~4~$, and semiannually on each June l and December 1 thereaer while this Band or any portion hereof is outstanding and unpaid. Said interest shall be calculated an the basis afa 3~D-day year composed aftwelve 3~-day months, THE INSTALLMENTS DF PRINCIPAL ~~' AND THE INTEREST ~N this Bond are payable in lawful money afthe United Mates ofAmerica, without exchange or collection charges. The intallments of principal and the interest on this Band are payable to the registered owner hereafthrough the seises of the Dallas, Texas corporate trot office of TIC BAND DF NEw ~~RI~ 11~ELLDN TRUST ~~MPANY, NATIONAL AS DCIATI~N, which is the "Paying AgentlReistrar" for this Bond. Payment afall principal of and interest on this Bond shall be made by the Paying AgentlRegistrar to the registered owner hereof an each principal andlar interest payment date by check, dated as of such date, drawn by the Paying Agent~Registrar an, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Band the "Bond Ordinance"~ to be an deposit with the Paying AgntlRegistrar for such purpose as hereina~er provided; and such cheek shall be sent by the Paying Agent~Regrstrar by United Mates mail, first-class postage prepaid, on each such principal andlor interest payment date, to the registered owner hereof, at the address of the registered owner, as it appeared on the 15th day ofthe month next preceding each such date ~the'~Record Date"} on the Registration Baaks kept by the Paying AentlRegistrar, as hereinafter described. The Issuer covenants with the registered owner of this Fond that on ax before each principal and~ar interest payment date for this Band it will make available to the Paying AgentJRegistrar, from the "Interest and Sinking Fund" maintained pursuant to the Bond Ordinance, the amounts required to provide far the payment, in immediately available funds, of all principal of and interest an this Bond, when due. IN T EVENT of a nonpayment of interest on a scheduled payment date, and far thirty ~3 ~}days thereaer, a new record date far such interest pyment,~a "Special Record Date"~ will be established by the Paying AgentJRRegis#rar, if and when funds far the payment of such interest have been received from. the Issuer. Notice afthe Special Record Date and ofthe scheduled payment date ofthe past due interest ~'~Special Payment Date", which sha11 be fifteen X15}days after the Special Record Date} shah be sent at least ftve ~5} business days prior tv the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Bond appearing an the registration books of the Paying AgentlRegistrar at the close of business an the 15th business day next preceding the date of mailing of such notice. IF THE DATE for the payment of the principal of or interest an this Band shall be a Saturday, Sunday, a legal holiday, ar a day on which banking institutions in the pity where the Paying AgentJRegistrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or day an which banking institution are authorized to close; and payment on such date shall have the same farce and effect as if made an the original date payment was due TPIIS BAND has been authari~ed in accordance with the constitution and laws afthe State of'Texas in the principal amount of $I5,~94,~0~ for the purpose of ~a} fund capital improvements for the elec~ic system transn~issian and distribution facilities; fib} miscellaneous water system improveinents;~c} make a deposit to the System debt service reserve fund; and {d} pay the costs of issuance of the Bonds. DN DECEMBER 1, 201 S, ar an any date whatsoever thereat~er, the unpaid installments afprincipal afthis Bond may he prepaid ar redeemed prior to their scheduled due dates, at the option ofthe Issuer, with funds derived from any available source, as whale, or in part, and, if in part, the particular portion of this Band to be prepaid ar redeemed shall be selected and designated by the Issuer ~pravided that a portion afthis Bond may be redeemed only in an integral multiple af5,0~~~, at the prepayment or redemption price ofthe par ar principal amount thereof, plus accrued interest to the date fixed far prepayment or redemption. T BDI~D afthis series scheduled to mature on DECEMBER 1, 20_ and DE~EMBER.1, ~D_ are subject to mandatory redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in park prior to their scheduled rnatuxities, with money Exam the Interest and finking Pund, with the particular Bonds ar portion thereof to be redeemed to be selected by the Paying AgentlRegistrar, by lot ar other customary method ~pravided that a portion of a Band may be redeemed only . an integral multiple of ~,~~0}, at a redemption price equal to the par or principal amount thereof and accrued interest to the date of redemption, an the dates, and in the principal arnaunts, respectively, as show in the fallowing schedule: December 1,.2.0. 1Viaturity Mandatory Principal Redematlon Dates Ylaunts December 1, 20 December 1, 2~` ~matur~ty~ DeCelrlber 1, ~0 Maturity NlandatOry Principal ~e~lem~]tlan Dates Am December ~, ~~_ December ~, ~~_ ~n~aturlty} The principal amount of the Bonds required to be redeeaa~ed an the Mandatory Redemption Dates pursuant to the foregoing shall be reduced., at the option of the tssuer by the principal amount afany Bands out ofthe maturity scheduled far December I, ~0 and December 1, Z4~ which, at least 45 days prior to the aforesaid appropriate redemption date ~ 1 }shall have been acquired by the Issuer at a price not exceeding the principal amount of such Bonds plus accrued interest to the date of purchase thereof, and delivered to the Paying AgentlRegistrar far cancellation, or ~2} ha11 have been redeemed pursuant to the optional redemption provisions hereof and not previously credited to the mandatary sinking fund redemption. During any period in which ownership afthe Bands is determined by a bank entry at a securities depository for the Bands, if fewer than all afthe Bonds ofthe carne maturity and bearing such interest ra#e are to be xedeemed, the Bonds, ar portions thereof, to be redeemed shall be selected in accordance with the arrangements between the Issuer and the securities depositary. AT LEAST 30 days prior to the date fixed for any such prepayment or redemption a written notice of such prepayment or redemption shall be mailed by the Paying Agent~Registrar to the registered owner hereof. By the date .xed for any such prepayment or redemption due provision shall be made by the Issuer with the Paying AgentlRegistrar fir the payment of the required prepayment or redenaptian price far this Band or the portion hereof which is to be sa prepaid or redeemed, plus accrued interest thereon to the date fixed for prepayment ar redemption. If such written notice of prepayment ar redemption is given, and if due provision for such payment is made, alI as provided above, this Bond, or the portion thereofwhich is to be sa prepaid or redeemed, thereby automatically shall he treated as prepaid ar redeemed prior to its scheduled due date, and shall oat hear interest after the date fixed for its prepayment ar redemption, and shall not he regarded a.s being outstanding except far the right of the registered owner to receive the prepayment or redemption pxice plus accrued interest to the date f xed fox prepayment ar redemption from the Paying AentlRegistrar out ofthefunds provided for such payment. The Paying Agent~Registrarar shall record in the R.egistratian Books all such prepayments ar redemptions of principal of this Bond ar any portion hereof. THIS BOLD, to the extent ofthe unpaid or unredeemed pr~ncip,balance hereof, ar ariy unpaid and unredeemed portion hereofin any integral multiple of5,0~0, may be assigned by the initial registered owner hereof and sha11 be transferred only in the Registration Soaks of the issuer kept by the Paying AgentlRegistrarocting in the capacity of registrar for the Bonds, upon the terms and conditions set forth in the Bond Ordinance, Among other requirements for such transfer, this Bond must be presented and surrendered to the Paying AgentlRegistrar for cancellation, together with proper instruments of a~ssignrnent, in form and with guarantee of signatures satisfactory to the Paying Aentegistrar, evidencing assignment by the initial registered owner of this Bond, or any portion or portions hereof in any integral multiple of S,ODO, to the assignee or assignees in whose name ar names tins Band ar any such portion ar portions hereof is ar are to be transferred and registered. Any instrument or instruments of assignment satisfactory tv the Paying Agent~Registrar may be used to evidence the assignment ofthis Bond ar ax~y such portion ar portions hereof by the initial registered owner hereof. Anew bond ar bonds payable to such assignee or assignees which then will be the new registered owner ar owners of such new Bond or Bands} or to the initial registered owner as to any portion of this Bond which is not being assigned and traferred by the initial registered owner, shall be delivered by the Paying AgentlRegistrar in conversion afand exchange for this Bond or any portion or portions hereof, but solely in the form and manner as provided in the next paragraph hereof fur the conversion and exchange ofthis Bond ar any portion hereaf~ The registered owner ofthis Band shall be deemed and treated by the Issuer and the Paying AgentlRegistrar a the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying Aent~Registrar shall not be affected by any no#ice to the contrary. ~ PROBED above and in the Band Ordinance, this Band, to the extent of the unpaid or unredeemed principal balance hereo f may be converted into and exchanged for a like aggregate principal amount of fully registered bands, without interest coupons, payable to the assignee ox assignees duly designated in writing by the initial registered owner hereof, or to the initial registered owner as to any portion ofthis Bond which is rat being assigned and transferred by the initial registered owner, in any denomination or denominations in any integral multiple of $S,~~D sub ject to the requirement hereina~ftar stated that each substitute band issued in exchange for any portion ofthis Band shall have a single stated principal maturity date}, upon surrender ofthis Boyd to the Paying AgentlRegistrax for cancellation, all in accordance with the `arm and procedures set forth in the Bond Ordinance. If this Band or any portion hereof is assigned and transferred ar converted each bond issued in exchange for any portion hereof shall have a single stated principal maturity date corresponding to the due date of the installment of principal of this Bond or portion hereof for which the substitute band is being exchanged, and shall boar interest at the rate applicable to and borne by such installment of principal or portion thereof. such bonds, respectively, shall be subject to redemption prior to maturity an the same dates and for the same prices as the corresponding installment of principal afthis Bond ar portion hereof for which they are being exchanged. Na such fond shall be payable in installments, but sha11 have only one stated principal maturity date, AS PROVIDED Ili THE BOND ORDINANOE, THIS BOND IN lT PRESENT FORM AMY BE ASSiGI~ED ANi] TRANSFERR.EI~ OR ~ONETED O1~E ON~.~Y, and to one or more assignees, but the bonds issued and delivered in exchange for this Bond ar any portion hereofn~ay be assigned and ~ansferred,and converted, subsequently, as provided to the Bond Ordinance The Issuer shall pay the Paying Agent~Registrar's standard ar customary fees and charges for transferring, converting, and exchanging this Bond or any portion thereof, but the cue requesting such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto, The Paying gentegistrar shall not be required to make any such assignment, conversion, ar exchange ~i}during the period conencing with the cluse ofbusiness on any Record Date and ending with the opening of business on the next fallowing principal or interest payment date, or, {ii}with respect to .y Bond ar pardon thereof called far prepayment or redemption prior tQ maturity, within 45 days prior to its prepayment ar redemption date, 1 TIC EVENT any Paying AgentlRegistrar for this Bond is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and promptly will cause written notice thereof to be mailed to the registered owner afthis Band. iT I HEREBY certified, recited, and covenanted that this Band has been duly and validly authorized, issued, Bald, and delivered; that all acts, conditions, and things required or proper to be performed, exist, and be dare precedent to or in the authari~ation, issuance, and delivery of this Bond have been performed, existed, and been done in accordance with law; that this Bond is a special obligation afthe Issuer, secured by and payable, together with other bonds, from a first lien on and pledge afthe'rPledged Revenues", which include, but are not limited ta, the "let revenues ofthe ystern" a.s such terms are defined inthe Band Ordinance, wz~ the ystern cans~sttng ofthe Clty's entire combined waterworks, sewer, and electric light and power system. THE ILTER has reserved the right, subject to the restriction stated ~. the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien on and pledge of the "Pledged Revenues" on a panty wlth this Bond. THE ISI]ER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Bond Ordinance with the approval of the holders ar owners of fifly-one percent in principal amount of all outstanding bands which are secured by and payable from a first lien on and pledge of the Pledged Revenues, TIC REGISTERED OwN~I~ hereof shall nevex have the right to demand payment afthis Band or the interest hereon out of any funds raised or to be raised by taxation ar from any source whatsoever other than specified in the Bond Ordinance BY BEOM the registered owner ofthis Band, the registered owner thereby acknowledges all of the terms and provision of the Band Ordinance, agrees to be bound by such terms and previsions, acknowledges that the Band Ordinance is duly recorded and available far inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and previsions of this Band and the Band Ordinance cartitute a contract between the registered owner hereof and the Issuer. 7 IN ITNE ~REOF, the Issuerhas cawed this Bond to be signed withthe manual or facsimile signature of the Mayor of the Issuer and countersigned and attested with the manual signature or facsimile afthe City Secretary ofthe Issuer, has caused the ofeial seal afthe Issuer to be duly impressed an this Band, and has caused this Bond to be dated August 15, 20U8. ATTEST: By: Jennifer falters pity Secretary, City of Denton, Texas {CITY SEAL} CITY OF DENTON, TEA By:. __.. Mark A,Burroughs -- Mayar, City of Denton, Texas (BAND INSURANCE LEGEND, IF ANY) FORM OF REGISTRATION CERTIFICATE OF TIC COMPTROLLER OF PUBLIC ACCOC]NTS; COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Bond has been examined, certified as to validity, and approved by the Attorney General of the Mate of Texas, and that this Band has been registered by the Comptroller of Public Accounts of the Mate of Texas. witness my signature and seal this (COMPTROLLER'S SEAL) Comptroller of Public Accounts of the Mate of Texas Secction b. ADDITIONAL CHARACTERISTICS OFTHE BONDS. Re 'stration and Transfer. ~a~ The Issuer shall keep or cause to be kept at the Dallas, Texas, corporate trust office of TIDE BANK OF NE'L YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION the "Paying AgentlRegistrar"} books ar records of the registration and transfer of the Bonds the "Registration Books"~, and the Issuer hereby appoints the Paying AgentlRegistrar as its registrar and transfer agent to keep such books or records and make such transfers and registrations under such reasonable regulations as the Issuer and Paying Agent~Registrar may prescribe; and the Paying AgentlRegistrar shall make such transfers and registrations as herein provided, The Paying AentlRegis~rar shall obtain and record in the Registration Soaks the address ofthe registered owner of each Bond to which payments with respect to the B ands sha11 be mailed, as herein provided? but it shall be the duty of each registered owner to notify the Paying AgentlRegistrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right tv inspect the Registration. Books during regular business hours ofthe Paying AgentlRegistrar, but otherwise the Paying AgentJRegistrar shall keep the Registration Books conf identiar and, u~,less otherwise required b~ law, half not permit their inspection by any other entity Registration ofeach Bond may be transferred in the Registration Books aniy upon presentation and surrender afsucla Band to the Paying .AgentlRegistrar for transfer ofregistration ar~d cancellation, together with proper written insments of assignment, in form and with guarantee of signatures satisfactory to the Paying AgentJRegistrar, evidencing ~i} the assignment of the Bond, ar any portion thereof ~, any integral ~nr~Itiple of ,D00, to the assignee ar assignees thereof, and ~ii~ the right of such assignee ar assignees to have the Bond Dr any such portion thereofreglstered m the name of such assignee or assignees. Upon the assignment and transfer afany Bond ar any portion thereof,anew substitute Bond ar Bonds shall be Issued in canversion and exchange therefor in the manner herein provided. The Initial Band, to the extent of the unpaid or unredeemed principal balance thereof, nay be assigned and transferred by the initial registered owner thereof once only, and to one or more assignees designated in writing by the initial registered owner thereof. All Bonds Issued and delivered in conversion of and exchange for the Initial Band shall be in any denomination yr denominations afany integral multiple of X5,000 subject to the requirement hereinafter stated that each substitute Band shall have a single stated principal maturity date}, shalt be in the form prescribed ire the PORIVI OF I~BTITUTE ERIE 2008 BOND set forth in this Ordinance, and shall have the characteristics, and may be assigned, transferred, and converted as hereinafter provided. Ifthe Initial Bond or any portion thereof is assigned and transferred or converted the Initial Bond must be surrendered to the Paying AgentlRegistrarfoi cancellation, and each Bond issued in exchange for any portion ofthe Initial Band shall have a single stated principal maturity date, and shall not be payable in installments; and each such Bond shall have a principal maturity date corresponding to the_ due date ofthe installment ofprincipal or portion thereof for which the substitute Bond is being exchanged; each such Bond shad bear interest at the single rate applicable to and borne by such installment of principal or portion thereof for which it is being exchanged If only a portion ofthe Initial Bond is assigned and transferred, there shall be delivered to and registered in the name of the initial registered owner substitute Bonds in exchange far the unassigned balance ofthe Initial Bond in the same manner as ifthe initial registered owner were the assignee thereof. Ifany Bond or portion thereof other than the Initial Band is assigned and transferred or converted each Bond issued exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Band for which it is exchanged. A form of assignment shall be printed or endorsed on each Bond, excepting the Initial Bond, which shall be executed by the registered owner ar its duly authorised attorney or representative to evidence an assignment thereof, I,~pon surrender of any Bands or any portion or portions thereof far transfer of registration, an authorised representative of the Paying Agent.lRegis~ar shall make such transfer in the Registration Books, and shall deliver a new fully registered substitute Bond or Bonds, having the characteristics herein described, payable to such assignee or assignees which then will be the registered owner or owners of such new Bond or Bonds}, or to the previous registered owner in case only a portion of a Band is being assigned and transferred, all in conversion ofand exchange for said assigned Bond or Bonds nr any portion or portions thereof, in the same form and manner, and with the same effect, as provided in ~ectian ~{d~, below, for the canversion and exchange of Bonds by any registered owner of a Band. The Issuer shall pay the Paying AentlRegistrar's standard or customary fees and charges for making such transfer and delivery of a substitute Bond or Bands, but the one requesting such transfer shall pay any taxes ar other governmental charges required to be paid with respect thereto. The Paying AgentlRegistrar shall not be required to make transfers of registration of any Bond or any portion thereof ~i} during the period commencing with the close of business on any ~ecard Date and ending w%th the opening of business on the next following principal or interest payment date, ar, iii} with respect to any Bond or any portion thereof called far redemption prior to maturity, within 4~ days prior to its redemption date. fib} Ownershi of Bonds. The entity in whose name any Bond shall be registered in the Registration Books at any time shall be deemed and treated as the absal~te owner thereof for all purposes of this Ordinance, whether or oat such Bond shall be overdue, and the issuer and the Paying Agentegistrar shall oat be affected by any notice to the contrary; and payment of, or an account af, the principal of, premium, if any, and interest on any such Bond shall be made only to such registered owner. Ail such 9 payments shall be valid ~ effectual to satisfy and discharge the liability upon such Band to the extent of the sum or sums so paid, ~c~ Pa anent of Bonds and Interest. ~'he Issuer hereby further appoints the Paying AgentlRegistrar to act as the paying agent far paying the principal of and interest on the Bands, and to act as its went to convert and exchange or replace Bonds, all as provided in this Ordinance. The Paying Agentl~egistrar shall keep proper retards ofall payments made by the Issuer and the Paying AgentlRegistrar with respect to the Bonds, and of all conversions and exchanges of Bands, and all replacements of Bands, as provided in this Ordinance. However, in the event of a nonpayment of interest an a scheduled payment date, and fur thirty X30} days therea~er, a new retard date far sr~ch interest payment ~a "Special Retard Date"} will be established by the Paying AgentlRegistrar, if and when funds for the payment of such interest have been received from the Issuer, Notice ofthe Special Record Date and ofthe scheduled payment date afthe past due interest ~"Special Payment Dater', which shall be fifteen ~15~ days after the Special Record Date} shall be sent at least five ~5}business days prior to the Special Record Date by Dnited States mail, first class postage prepaid, to the address ofeach Holder of a Band appearing an the registration books ofthe Paying AgentlRegistrar atthe Blase afbusiness an the ISth business day next preceding the date ofmailing ofsuch nonce. {d} onver~~~n and Exchan e~or,R~eplace~nent: Aut~ent~„ca, tton. Each Bond issued and delivered pursuant to this Ordinance, to the extent afthe unpaid ar unredeemed principal balance or principal amount thereof, mays upon surrender of such Bond at the principal corporate trust office of the Paying AgentlRegi~trar, together with a written request therefor duly executed by the registered owner ar the assignee or assigmec thereof, or i#s or their duly authorised attorneys or representatives, with guas~antee of signatures satisfactory to the Paying ~,gentlRegistrar, may, at the option of the registered owner or such assignee or assignees, as appropriate, be converted into and exchanged far fully registered bands, without interest coupons, in the form prescribed in the FOR1Vi Op` SUBSTITUTE SERIES ~~a8 BOND set forth in this Ordinance, in the denami~atian of S,aaa, ar any integral multiple of $~,Oaa ~sub~ ect to the requirement hereinaer stated that each substitute Bond shall have a single stated maturity date}, as requested in writing by such registered owner or such assignee ar assignees, in an aggregate principal amount equal to the unpaid ar unredeemed principal balance or principal amount of any Band or Bonds so surrendered, and payable to the appropriate registered owner, assignee, ar assignees, as the case may be~ Ifthe Initial Bond is assigned and transferred ar converted each substitute Bond issued in exchange far any portion of the Initial Bond shall have a single stated principal maturity date, and shall not be payable in instal~a.ents; each such Bond shall have a principal maturity date corresponding to the due date ofthe installment ofprincipal ar portion thereof far which the substitute Bond is being exchanged; and each such Band shall bear interest at the single rate applicable to and borne by such ir~talhnent of principal or po~ian thereof for which it is being exchanged. If a portion of any Bond father than the Initial Band} shall be redeemed prior to its scheduled. maturity provided herein, a substitute Band ar Bonds having the same maturity date, bearing interest at the same rate, in the denaminatian or denominations of any integral multiple of 5,aaa at the request of the -registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon surrender thereof far cancellation. Yfany Band ar portion thereof~ather than the Initial Bandy is assigned and ~ansfenred ar converted, each Band issued in exchange therefor shall have the same principal maturity date and bear interest at the same rate as the Bond far which it is being exchanged. Each substitute Band shah bear letter andlor number to distinguish it from each other Band. The Paying AgentlRegistrarsball convert and exchange ar replace Bands as provided herein, and each fi~Ily registered bond delivered in conversion afand exchange fir ar replacement of any Band or portion thereafas permitted ar requixed by any provision of this Ordinance shaf 1 constitute one of the Bands fax ail purposes of this Ordinance, and may again be converted and exchanged or replaced. It is specifically provided that any Band authenticated in conversion of and exchange for ar replacement of another Bond on or prior to the first scheduled Retard Date far the Initial Band shall bear interest frarn the date of the Initial Bond, but each 10 substitute Band sa authenticated aver such first scheduled Record Date shall hear interest from the interest payment date next preceding the date an which such substitute Band was so authenticated, unless such Band is authenticated after any Record Date but on or before the next following interest payment date, in which case it shall bear interest from such next following interest payment date; provided, however, that if at the tune of delivery of any substitute Bond the interest an the Band fax which it zs being exchanged is due but has not been paid, then such Bond sha11 bear interest from the date to which such interest has been paid in foil. The Initial Bond issued and deli~rered pursuant to this Ordinance is not requixed to be, and shall not be, authenticated by the Paying AgentlRegis~ar, but Qn each substitute Bond issued in conversion of and exchange for or replacement of any Bond ar Bonds issued under this Ordinance there shall be printed a certificate, in the form substaritiahy as follows: "PAY~.NG AGENTIREGITRAR~S AIJTINTI~ATION ~ERTIFIATE It is hereby certified that this Band has been issued under the provisions of the Bond Ordinance described in this Bond; and that this Bond has been issued in conversion of and exchange for ar replacement of a bond, bonds, ar a pardon of a bond or bonds of an issue which originally was appraved by the Attorney General of the Mate of Texas and registered by the omptraller of Public Accounts of the Mate of Texas. TIC BANK OF NEB CORK NiBLLGN TRUST COMPANY, NATIONAL AOCIATION, Paying Agent~Registrar Dated By -- Authorized Representative„ An authorized representative afthe PaY~ A.gentlReistrar shall, before the delivery of any such Bond, date and manually sign the above erti~icate, and na such Band shall be deemed to be issued ar outstanding unless such Oertificate is sa executed. The Paying AgentlRegistrar promptly sha11 cancel ail Bonds surrendered for conversion and exchange ar replacements No additional ordinances, orders, or resolutions need be passed or adapted by the governing body afthe Issuer or any other body ar person sa as to accomplish the foregoing conversion and exchange ar replacement afany Bond ar portion thereat and the Paying AgentlRegistrar shall provide far the printing, execution, and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to chapter 1 ~0 1, Texas Government fade, the duty of conversion and exchange ar replacement of Bands as aforesaid is hereby imposed upon the Paying Agent~Registrar, and, upon the execution afthe above Paging AgentlRegistrar's Authentication er~f irate, the converted and exchanged ar replaced Band snail be valid, incontestable, and enforceable i;n the same manner and with the carne effect as the Initial Bond which originally was issued pursuant to this Ordinance, appraved by the Attorney General, and registered by the Comptroller of Public Accounts. The Issuer shall pay the Paling AgentlRegistrar's standard ar customary fees and charges for transferring, converting, and exchanging any Bond or any portion thereof, but the one requesting any such transfer, conversion, and exchange shall pay any taxes or governmental charges required to be paid with respect thereto as a condition precedent to the exercise of such privilege of conversion and exchange. The Paying AgentJRegistrar sha11 not be required to make any such conversion and exchange ar replacement ofBonds ar any portion thereof~i} during the period camencirig with the close ofbusiness on any Retard Date and ending with the opening ofbusiness on the next following principal or interest payment date, or, iii}with respect to any Band ar portion thereof called for redemption prior to maturity, within ~5 days prior to its redemption date. fie} In General. All Bonds issued in conversion and excha~age or replacerent afany other Band I1 or portion thereof, ~i} sha11 be issued in fully registered farm, without interest coupons, with the principal of and interest on such Bands to be payable only to the registered owners thereof, iii} may and shah be redeemed priorto their scheduled maturities, {iii} may be transferred and assigned, Div} may be converted and exchanged far other Bonds, {~} shall have the characteristics, {vi} sha11 be signed and sealed, and vii} the principal of and interest on the Bonds shall be payable, a1i as provided, and in the manner required ar indicated, in the FORM OF SUBSTITUTE SERIES BOOS BOND set forth in this Ordinance. ~~ Pa went of Fees and es, The Issuer hereby covenants with the registered owners of the Bonds that it will {i} pay the standard ar customary fees and charges ofthe Paying Agent~Registrar for its services with respect to the payment afthe principal of and interest an the Bands, when due, and {iii pay the fees and charges ofthe Paying Agent.lRegistrar far services with respect to the transfer ofregis~ration of Bonds, and v~ith respect to the conversion and exchange afBonds solely to the extent above provided in this Ordinance. {g} Subs,,,tut`yinAgentJRe is.~rar. The Issuer covenants with the registered owners ofthe Bonds that at all times while the Bands are outstanding the Issuer will provide a can~petent and legally qualif ed bank, trust company, financial institution, ar other agency to a.ct as and perform the se~ices of Paying Agen~Registrar for the Bonds under this Ordinance, and that the Paying Agent~Registrar ~vi11 be one entity The Issuer reserves the right to, and may, at its option, change the Paying AgentJRegistrar upon not less than 12~ days written notice to the Paying AgentlReistrar, tv be effective not later than ~~ days prior to the next principal ar interest payment date aver such notice. In tho event that the entity at any tune acting as Paying Agentegistrar {or its successor by merger, acquisition, or other method} should resign ar ather~ise cease to act as such, the Issuer covenants that it will promptly appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent~Registrar under this Ordinance. Upon any change in the Paying Agent~Registrar, the previous Paying Agent~Registrar shall pra~nptly transfer and deliver the Registration Basks {or a copy thereof, along with all other pertinent banks and records relatingto the Bands, to the new Paying AentlRegistrar designated and appointed by the Issuer. Upon any change in the Paying AgentlRegistrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent~Registrar to each registered owner of the Bands, by United States mail, first-class postage prepaid, which notice also shall give the address afthe new Paying AgentlRegistrar. By accepting the position and perforrning as such, each Paying Agent~Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy ofthis Ordinance shall be delivered to each Paging AgentlRegistrar. Section 7. FORM OF SUBSTITUTE SERIES ~0~8 BOND. The form of all Series ~a08 Bands issued in conversion and exchange orreplacetnent of any other Series X008 Band orportionthereaf,including the form ofPaying AgentlRegistrar's Certificate to be printed on each of such Series 248 Bonds, and the Farm of Assignment to be printed on each of the Series ~a08 Bands, shall be, respectively, substantially as follows, wig such appropriate variations, omissions, ar insertions as are permitted or required by this Ordinance. FORM OF SUBSTITUTE SERIES ~0~8 BOND NO. ~ UNITED STATES OF AMERICA PRINCIPAL AIVIOUNT STATE OF TEXAS COUNTY OF I~ENTON CITY OF I)ENTON UTILITY YSTE REVENUE BOND SERIES BOOS 12 IN~'ERET MATURITY ORIGINAL DATA RATE DATE OF ISSUE USIP NO. August 15, 200 ~~ TIDE MATURITY' DATE specified above the CITY OF DENTON, in Denton County, Texas {the 'Issuer"}? berg a political subdivision of the State of Texas, hereby promises to pay to or to the registered assignee hereof {either being hereinafter called the "registered owner"~ the principal amount of and to pay interest thereon from August I5, X008, to the rnatu~ity date specified above, or the date of redemption prior to maturity, at the interest rate per annum specified above; with interest being first due and payable on December 1, ~oOS, and semiannually on each June I and December 1 thereafter, except that ifthe date of authentication of this Fond is later than the first Record Date ~hereinalter defined}, such principal amount shall bear interest from the interest payment date next preceding the date of authenticatian~ unless such date ofauthentication is after any Record Date ~hereinaf~er defined} but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date. Said interest shall be calculated on the basis of a GQ-day year composed of twelve 30-day months. TIDE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States ofAmerica, without exchange or collection charges. The principal ofthis Bend shall be paid to the registered owner hereof upon presentation and surrender of this Band at maturity or upon the date fixed for its redemption prior to maturity, at the Dallas, Texas corporate trust afce of TIDE BANK DF NEw YORK MELLON~ TRUST COMPANY, NATIONAL ASSOCIATION, which is the "Paying AgentJReistrar" for this Band. The payment of interest on this Band shall be made by the Paying Agent~Registrar to the registered owner hereofon each interest payment date by check, dated as afsuch interest a anent date,drawn PY by the Paying Agent~Registrar an, and payable solely from, ftu7ds of the issuer required by the ordinance authorizing the issuance of the Bands the 'Band Ordinance"} to be an deposit with the Paying AgentlRegistrar far such purpose as hereinafter provided; and such check shall be sent by the Paying Agez~tlRegistxar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at the address ofthe registered owner, as it appeared at the close ofbusiness on the 15th day ofthe month next preceding each such date {the 'Record Date"} on the Registration Books kept by the Paying AgentlRegistrar, as hereina~er described, ~Iawever, the payment of such interest may be made by any other method acceptable to the Paying AgentlRegistrar and requested by, and at the risk and expense of, the registered owner hereof. Any accrued interest due upon the redemption ofthis Bond prior to maturity as prodded herein shall be paid to the registered owner at the principal corporate trust office of the Paying AgentlReistrar upanpresentation and surrender of this Band for redemption and payment at the principal corporate Iri~st office afthe Paying Aent~Registrar. The Issuer covenants with the registered owner ofthis Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Band it will make available to the Paying AgentlRegistrar, from the "Interest and Sinking Fund„ created by the Bond ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due TN TIDE EVENT of a nonpayment of interest an a scheduled payment date, and for thirty {30}days therea~er, a new record date for such interest payment {a "Special Record Date"} will be established by the l3 Paying AgentlRegitrar, if and when funds far the payment of such interest have been received from the Issuer, Notice afthe Special Record Date and ofthe scheduled payment date ofthe past due interest ~"'Special Payment Date", which shall be fifteen ~1~~ days after the Special Record Date} shall be sent at least five ~S} business days prior to the Special Record Date by iJnited States mail, first class postage prepaid, to the address of each Haider of a Band appearing on the registration books of the Paying Agent~Registrar at the close of business on the 15th business day next preceding the date of mailing of such native. IF '1`Y~E DATA far the payment of the principal of ar interest on this Bond shall be a Saturday, Sunday, a legal holiday, or a day an which banning institutions in the City where the Paying AgentlReistrar is located are authorized by law ar executive order to close, then the date far such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, ar day an which banning institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the orighial date payment was due, THIS BAND is one of a series of Bonds initially dated August 15, 2008, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of 15,20,a00 for the purpose of ~a} fund capital i~npravements for the electric trarismissivn and distribution facilities; fib} miscellaneous water system irnpravements; ~c} make a deposit to the System debt service reserve fund; and ~d~ pay the casts off' issuance of the Bonds. ~N DECEMBER 1, 2018, or an any date whatsoever thereafter, the Bonds of this Series may be redeemed prior to their scheduled maturities, at the option ofthe Issuer, with funds derived from any available and lawful source, as a whale, or in part, and, if in part, the paxticular Bonds, ar portions thereof, to be redeemed shall be selected and designated by tine Issuer ~pravided that a pardon ofa Bond may be redeemed only in an integral multiple of X5,000}, at a redemption price afthe par ar principal arnaunt thereof, plus accrued interest to the date fixed far redemption. BANDS ofthis Series scheduled to mature an DECEMBER I, 20_ and DECEMBER 1, 20 are subject to mandatary redemption prior to their scheduled maturities, and shall be redeemed by the Issuer, in part, prior to their scheduled maturities, with rnaney from the Interest and Shaking Fund, with the particular Bonds or pardon thereof to be redeemed to be selected by the Paying AgentlRegistrar, by lot ar other customary method provided that a portion of a Band may be redeemed only in an integral multiple of X5,000}, at a redemption pace equal to the par or principal amount thereof and accrued interest to the date of redemption, an the dates, and an the principal ainoun#~, respectively, as show in the following schedule: December 1 20 Maturi Mandatory Prrracipal Redena Lion Dates Amounts .~ December 1, 2a_ December 1, 20_ {maturity December 1.20 1Vlaturi~ Mandatary Principal Redein flan I]ates Amounts December 1, 20 December 1, 2~ ~inaturity~ 14 The principal amount of the Bonds required to be redeemed on the Mandatary I~edenrptian Dates pursuant to the foregoing shall be reduced, at the option ofthe Issuer by the principal amount afany Bands cut afthe maturity scheduled for Decem~her ~, ~~_ and I]ecember 1, ~0 which, at least 45 days prior to the aforesaid appropr~.ate redemption date ~l}shall have been acquired by the Issuer at a price not exceeding the principal amount of such Bands plus accrued interest to the date of purchase thereof, and delivered to the Paying AgentlRegistrar far cancellation, or ~~~ as shah have been redeemed pursuant to the vptianal redemption provisions hereof and not previously credited to the mandatary sinking fund redemption. During any period in which ownership of the Bands is determined by a book entry at a securities depository far the Bands, if fewer than all of the Bands ofthe same maturity and bearing such interest rate are to be redeemed, the Bonds, ar porp.ans thereof, to be redeemed shall selected in accordance with the arrangements between the Issuer and the securities depositary. AT LEAST 30 days prior to the date fixed for any redemption ofBonds or portions thereofprior to maturity a written notice of such redemption shall be sent by the Paging AgentlRegistrar by United States mail, first-class postage prepaid, at least 30 days prior to the date fired for any such redemption, to the registered owner of each Band to be redeemed at its address as it appeared an the 45th day prior to such redemption date and to mayor securities depositories, national bond rating agencies and band infarmatian services; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or eiTec~veness of the proceedings far the redemption ofany Bond. By the date fixed for any such redemption due provision shall be made with the Paying Agent~Registraar forthe payment ofthe required redern.ptianprice for the Bands or portions thereof that are to be so redeemed. Ifsuch written notice of redemption is sent and ifdue provision for such payment is made, all as provided above, the Bands or pardons thereafthat are to be sa redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest aver the date fixed for redemption, and they shall not be regarded as being outstanding except for the right ofthe registered owner to receive the redemption price from the Paying AgentlRegistrar out of the funds provided far such payment. ~f a portion of any Band shall be redeemed, a substitute Bond ar Bonds having the same maturity date, bearing interest at the same rate, in any denon~inatian ar denominations in any integral multiple of 5,a0~, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof will be issued to the registered owner upon the surrender thereoffar cancellation, at the expense of the Issuer, all as prodded in the Bond Ordinance, THIS BOND OR ANY' PORTION ~~ PORTIONS IREOF IN ANY YNTE~RAY,IN.ULTIP~,E OF ~S,Oaa may be assigned and shall be transferred only in the Registration Backs of the Issuer kept by the Paying A~gentJRegistrar acting in the capacity of registrar for the Bands, upon the terms and conditions set forth in the Bond Ordnance. Arnang other requirements far such assignment and transfer, this Band must be presented and surrendered to the Paying AgentlRegistrar, together withproper instruments afasignn~ent, inform and with guarantee of signatures satisfactory to the Paying AgentlRegistrar, evidencing assignment of this Band or any portion or portions hereofin any integral multiple af5,0~0 to the assignee or assignees in whose name ar names this Bond or any such portion or portions hereof is or are to be transferred and registered. The form of Assignment printed or endorsed an this Band shall be executed by the registered owner ar its duly authorised attorney ar representative, to evidence the assignment hereof, A new Bond or Bands payable to such assignee ar assignees which then will be the new registered owner or owners of such new Bond or Bands}, ar to the previous registered owner the case of the assignment and transfer of anl~ a pardon ofthis Band, nay be delivered by the Paying AgentlRegistrar inconversion ofandexchange for this Bond, all in the farm and manner as provided in the next paragraph hereof far the conversion and exchange of other Bonds. The Issuer shall pay the Paying AgentlRegistrar's standard or customary fees and charges for making such transfer, but the one requesting such transfer shall pay any taxes or other governmental charges required to be paid with respect thereto. The Paying AgentlRegistrar shall not be l5 required to make transfers ofregistratian of this Bond or ar~y portion hereaf~i} during the period comn~enc' with the close ofbusiness on any Record Date and ending with the opening ofbusines on the next following principal ar Interest payment date, or, iii} with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. The registered owner afthis Bond sha11 be deemed and treated by the Issuer and the Paying AgentlReistrar as the absolute owner hereof for all purposes, including payment and discharge of liability upon this Bond to the extent of such payment, and the Issuer and the Paying AgentJRe1strar shall not be affected by any native to the contrary. ALL BONDS OF T~.I SERIES are issuable solely as fully registered bonds, without interest coupons, i~ the denomination of any integral multiple of S,OOD. As provided in the Bond Ordinance, this Bond, ar any unredeemed portion hereof, may, at the request of the registered owner or the assignee ar assignees hereof, be converted into and exchanged far a like aggregate principal amount of fully registered bonds, wlthaut interest coupons, payable to the appropriate registered owner, assignee, ar assignees, as the case nay be, having the same maturity date, and bearing interest at the carne rate, in any denomination Qr denorninatians in any integral multiple of5,~~4 as requested in writing by the appropriate reglstered owner, assignee, ar assignees, as the case nay be, upon surrender of this Bond to the Paying AgentlRegistrar for cancellation, all in accordance with the farm and procedures set forth in the Bond Ordinance. The Issuer shall pay the Paying Agent~Registrar's standard or customary fees and charges for transferring, converting, and exchanging any Bond ar any portion thereof, but the one requesting such transfer, conversion, and exchange shall pay any taxes ar governmental charges required to be paid with respect thereto a a condition precedent to the exercise of such privilege of conversion and exchange. The Paying AentlRegistrar shall not be required to make any such conversion and exchange ~i} during the period can~mencing with the close of business on any Record Date and ending with. the opening of business on the next fallowing princlpal ar interest payment date, or, iii} with respect to any Band ar portion thereof called far redemption prior to maturity, within 4 days prior to its redemption date, IN THE EVENT any Paying AgentlRegistrar for the Bonds is changed by the Issuer, resigns, ar otherwise ceases to act as such, the Issuer has covenanted in the Band Ordinance that it promptly will appoint a competent and legalty qualified substitute therefor, and will promptly cause written nofice thereof to be mailed to the registered owners of the Bonds. IT r~ HEREBY certified, recited, and covenanted that this Band has been duly and validly authorised, issued, sold, and delivered; that all acts, conditions, and things required ar proper to be performed, exist, and be done precedent to ar in the authorization, Issuance, and delivery of thls Band have been performed, existed, and been done in accordance with law; that this Bond is a special obligation ofthe Issuer, secured by and payable, together with other bonds, from a fiat lien on and pledge afthe "Pledged Revenuest', which include, but are not lirn~ited ta, the "Net Revenues ofthe system", as such terms are defined in the Bond Ordinance, withthe system consisting ofthe City's entire combined waterworks, sewer, and electric light and power system, THE ISSUER has reserved the right, subs ect to the restrlctions stated in the Bond Ordinance, to issue Additional Bonds payable from and secured by a first lien an and pledge of the "Pledged Revenues" an a parity with this Band and series of which it Is a part. THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Ordinance, to amend the Band Ordinance with the approval of the holders or owners of fife-one percent in princlpal amount of all outstanding bands which are secured by and payable from a first lien on and pledge of the Fledged Revenues. l~ TIC REGISTERED OWNER hereof shall never have the right to demand payrr~ent of this Bond ar the interest hereon out of any funds raised ar to be raised by taxation ar frorn any source whatsoever other than specified in the Bond Ordinance. BY BECOMING the registered owner afthis Band, the registered owner thereby acknowledges all of the terms and previsions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection ~n the official minutes and records of the governing body of the Issuer, and agrees that the terms and pro~isrons of this Band and the Bond ordinance constitute a contract between each registered owner hereof and the Issuer. IN w~TNES wHER.B~F, the Issuer has caused this Band to be signed with the manual ar facsin~iie signature of the Mayor of the Issuer and countersigned and attested with the manual, or facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, ar placed in facsimile, on this Band. ATTFIT; . By~ rent~,fer Walters pity Secretary, City ofDentan, Texas CITY OF DEI~TON, TB~AS ~y: MaxlC A. Burroughs Mayor, City of Denton, Te~cas {CITY SEAL) FORM OF PAYING ACrENT~REGISTRAR'S AC~T'HENTiCATION CERTIFICATE PA,YIN AGEI~TIREGISTRAR' AUTHENTICATIGN CERTIFICATE It is hereby certified that this Band has been issued under the provisions of the Band Ordirrar~ce described in this Band; and that this Bond has been issued in conversion of and exchange far ar replacement of a band, bands or a pardon of a band or bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Ca~nptroller of Public Accounts of the S.te of Texas, THE BANK OF NEw YORK 1VIELI,OIV TRUST COMPANY, NATIONAL ASSOCIATION, Paying Agent}Registrar Dated By Authorised Representative (BOND INSURANCE LEGEND, IF ANY} FORM OF ASSIGI~NT; ASSIGNMENT FOIE ~"ALUE RECEDED, the undersigned registered owner of this Bond, ar duly authar~ed representative or at#orney thereof, hereby assigns this Bond to 17 {Assignee's Social {print or typewrite Assignee's name and security or Taxpayer address, including zip code} Identification dumber} and hereby ix~revaca~bly constitutes and appoints attorney to transfer the registration ofthis Bond an the Paying AgentlRegistrar's Registration BaoiCS with flail power of substitution in the premises. Dated: Signature guaranteed: NOTICE: Signature{s} must be guaranteed by an eligible guarantor institution pa~icipating in a securities transfer association recognized signature guarantee program. Registered Owner NOTICE; This signature must correspond with the namme of the Registered Owner appearing on the face afthis Bond in every particular without alteration ar enlargement or any change whatsoever, Section 8. DEPTNITION~S. As used in this Ordinance the follow%ng terms shall have the meanings set forth below, unless the text hereof speci~.cally indicates otherwise; {a} The terms "City' and "Issuer' shall mean the City ofDentoa, in Dentan County, Texas, {b} The term "pity Council" or'~Council" shall mean the governing body of the City. {c} The term "Bonds}'shall mean collectively the Initial Band as defined and described in Section ~ of this Ordinance and all substitute bands exchanged therefor, and all other substitute bands and replacement bands, issued pursuant to and as provided in this Ordinance, {d} The term. "Parity Bonds shall mean collectively {x~ the autstand~ng City afDentvn [Jtility System Revenue Refunding Bonds, Taxable Series 1993-8, authorized by ordinance passed on June 8, ~ 993 {the "Series 1993-8 Bands"~, {ii}the outstanding City ofDentan Utility System Revenue Bonds, Series 1998, authorized by an ordinance passed an 1Viarch X4,1998 {the "Series 1998 Bonds"}, {iii}the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1998A, authorized by an ordinance passed on July Z 1, I998 the "Series 199SA Bonds"}, {iv} the outstanding City of Dentan Utility System Revenue Refunding Bonds, Series 19988, authorized by an ordinance passed on August 4,1998 {the "Series 19988 Bands'}, {v}the outstanding City ofDenton Utility System Revenue Bands, Series Z~~~A, authorized by an ordinance passed an April ~S, X404 {the "Series 24~OA Bonds"}, {vii the outstanding City ofDenton Utility system Revenue Bonds, Taxable Series ~~~OB, authorized by an ordinance passed an April ~5, ~~~0 (the t'Taxable Series ~D~B Bands"}, {vii}the outstanding City of Denton Utility System Revenue Refunding and Improvement Bands, Series ~0~ 1, authorized by an ordinance passed an Apri117, 2~D 1 the t'eries COQ 1 Bands"}, {viii the outstanding City afDenton [Jtility system Revenue Bonds, Series ~~~2A, authorized by an ordinance passed on,April 9, 2~0~ {the "Series ~~D2A Bands"}, {~~ the outstanding City afDentan Utility System Revenue Bonds, Taxable Series X428, authorized by an ordinance passed on Apri19, ~~02 {the 18 "Taxable Series ~~~~~ Bands"} fix} the outstanding City afDenton Utility ysterr~ Revenue Refundin and Improvement Bonds, Series 2003 authorized ~ an y ard~nance passed on April 1, 240 the ''Series 2003 Bonds"}, ~xi} the outstanding City of Denton Utility system Revenue Refunding Bands, Series 204, authorized by an ardir~ance passed an September 7, 2404 the "Series 2004 Bonds"}, ~xii} the outstandin Ci afDenton Utility S~rsten~ Revenue Refunding Bonds, Series 200, authorized by an ordinance passed on 1VIa 24, 205 the Series 2005 Bonds x111 the outtan y +' ++~, ~ ...~ ding City of Denton Utility System Revenue Bonds, Series 204, authored by an ordinance passed an July 1 S, 200 the "Series 200 Bonds"}, ~xiv} the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 2447, authorized by an ordinance passed on January 23, 2007 the"'Series 2007 Refunding Bonds"},~xv~ the outstanding City of Denton Utility System Revenue Bonds, Series 20D7, authorized by an ordinance passed on July 17, 2007 the"Series 2007 Bonds'+}„ and ~xiv~ the Bonds. fie} "The term "Additionat Bonds" shall mean the additional parity revenue bonds which the City reserves the right to issue in the future, in accordance with Section 2G of this Ordinance. ~ The terra, "System." shall mean ~1}the City's entire existing waterworks and sewersystem and the City's entire existing electric light and power system, together with alt future extensions, improvements, enlargements, and additions thereto, and all replacements thereof, ar~d ~~} any other related facilities, all or any part of the revenues or inca~ne from which do, in the future, at the option of the City, and in accordance wii law, became +"Pledged Revenues" as hereinafter defined; provided that, notwithstanding the faregoin , g and to the extent now or herea~er authorized ar permitted by law, the term System shall not mean any water, sewer, electric, or other facilities of any kind which are declared act to be a part of the System, and which are acquired or constructed by the City with the proceeds from the issuance of "Speciat Facilities Bands", which are hereby defined as being special revenue obligations of .e City which are not payable from or secured by any Pledged Revenues, but which are secured by and payable from Iiens an and pledges of any other revenues, sources, or payments, including, but not limited to, special contract revenues or payments received from any ether legal entity in connection with such facilities; and such revenues, sources, or payments shall not be considered as ar constitute Crass Revenues of the System, unless and to the extent otherwise provided in the ordinance ar ordinances autl~arizing the issuance ofsuch "Special Facilities Bends"'. ~ The terms "Cross Revenues of the SysternF' and "'Cross Revenues" shall mean all revenues and income ofevery nature derived ar received by the City from the operation and ownership afthe System, ~nclud~ng the interest income from the investment or deposit ofm.aney in any Fund created by this Ordinance. ~h} The terms "Net Revenues afthe System+', and "Net Revenues+' shall mean all grass Revenues after deducting therefrom an amount equal to the current expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render e#~cient service, provided, however, that only such repairs and exter~ians, as in the~udg~nent ofthe City Council, reasonably and. fairly exercised by the adoption afapprapriate resolutions, axe necessary to keep the System in operation and render adequate service to said City and the inhabitants thereof, or such as might be necessary to meet some physical accident or condition which would otherwise hnpai.r the Bands or Additional Bands, shalt be deducted in determining "Net Revenues+'. Payments required to be made by the City far water supply ar water facilities, sewer services or sewer facilities, fuel supply, and far the purchase of electric power, which payments under Iaw constitute operation and maintenance expenses ofany part afthe System, shaft constitute andbe regarded as expenses ofaperatian and maintenance afthe System under this Ordinance, Depreciation and amortization shall not constitute ar be regarded as expenses of operation and maintenance ofthe system. ~i} The term "Pledged Revenues" shall mean l9 (1} the Net Revenues, plus ~2} the net revenues ofthe Drainage System, which shall be calculated Qn the same basis as the Net Revenues of the System, plus ~3} any additional revenues, incorne, or other resources relating to the System which are expected to be available to the City on a regular periodic basis, including, without limitation, any grants, donations, or income received ar to he received from the United Mates government, or any other public or private source, whether pursuant to an agreement or otherwise, which in the future may, at the option of the City, be pledged to the payment of the Parry Bands or Additional Bonds. ' 1~ rr 1! II ~ ~ f . , The term gear or ~ seal year shall mean the fiscal ear used ~ the ~ 1n connect~an wrth the operation of the System. ~C} The tem. 'Government Obligations" shall mean ~i} direct, noncallable obligations of the United States ofAnierica, including obligations that are unconditionally guaranteed by the United States of An~eric~, ~~~} nonGallable 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 doe date of the purchase thereof are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and viii} noncallable obligations ofa state or an agency or a county, municipality, ar other political subdivision of a state that have been refunded and that, on the date the governing body ofthe District adopts or approves the proceedings authorizing the financial axrarigements are rated as to investment quality by a nationally recognized investment rating ~ir~n not less than AAA or its equivalent. ~l} "Drainage system„ means the City's entire existing drainage system and all facilities related thereto. gym} "Rate Stabilization Fund" means the City~s separate bate Stabilization Fund established for the purpose of stabilizing rates for ratepayers. Section 9. PLEDGE. ~a} The Fonds are "Additional Bonds" as permitted. by Sections 24 and ~5 of the ordinance passed on N~arch 1 x,1983, authorizuag the City ofDenton Revenue Refunding Bonds, series 1983 the "Series 1983 Bonds"}; and it is hereby determined, declared, and resolved that all of the Parity Bonds including the Bonds} are secured and payable equally and ratably on a parity, and that Sections ~ through 2S, ofthis Ordinance are supplemental to and cutnulatfve of Sections 7 through ~7 afthe aforesaid ordinance passed on ll~arch 10,1983, with Sections S through Z9 ofthis Ordinance being applicable to ail ofthe Parity Bands. ~} The Parity Bonds and any Additional Bonds, and the ~riterest thereon, including say interest coupons appertaining thereto, are and shall be secured by and payable from a f first lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged to the establishment and maintenance of the Funds created by this Ordinance, and any Funds created by any ordinance authorizing the issuance ofany Addrtianal Fonds. The Parity Bands and any Additional Bonds are not and will not be secured by ar payable from a mortgage ar deed oftrut on any real, personal, or mixed properties constituting the System, Section ~ D~ S~~TEIVI FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and aGCOU~ted far separate and apart from all other funds ofthe City, a special fund to be entitled the "City ofDenton Utility System Fund" the "System Fund."}, All gross Revenues shall be credited to the System Fund immediately upon receipt, unless otherwise provided ~0 in this ordinance, All current expenses of operation arzd maintenance of the System shall be paid from such dross Revenues credited to the System Fund as a first charge against same, Before making any deposits hereina~er required to be rn.ade from the System Fund, the City shall retain in the system Fund at all tunes an amount at least equal to one-sixth of the amount budgeted far the then current f scal year far the current operation and maintenance expenses ai`the System, Section r l . INTEREST A.ND SINKING FUND, Far the sole purpose ofpaying the principal ofand interest on all Parity Bonds and Additional Bonds, there heretofore has been and is hereby created and there sha11 be established and maintained an the books of the City, and accounted for separate anal apart from all other funds of the City, a separate fund to be entitled the t~Ci, of Denton Utility System Revenue Bonds Interest and S1nking Fund" the "Interest and Sinking Fund"}. Section 1 ~. RESER'~E FUND. There heretofore has been, and is hereby, created, and there shall be established and maintained at wachovia Bank National Association, and herea~er, at the option of the City established and maintained at any tune at any national bank having a capital and surplus in excess of ~25,ODa,aa~, a separate fund to be entitled the ~tCity ofDentan [Ttility System Bands and Additional Bonds Reserve Fund" the "Reserve Fund"}, The Deserve Fund shall be used to pay the principal ofand interest on any Parity Bonds or Additional Bonds when anal to the extent the amounts in the Interest and Sinking Fund mailable for such payment are insufficient for such purpose, and may be used for the purpose of finally ret~ng the last of any Parity Bands or Additional Bonds, Section 13. ExTENSI~N AND IMPR~~ENIENT FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted far separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility system Extension and Improvement Fund" the "Extension and Impravement Fund"}. The Extension and Impravement Fund shall be used for the purpose of paying the costs of improvements, enlargements, extensions, additions, replacements, or other capital expenditures related to the System, or for paying the costs of unexpected or extraordinary repairs ar replacements of the System far which System funds are not available, or for paying unexpected or extraordinary expenses of operation and maintenance of the System far which System funds are not otherwise available, or for any other lawful purpose, Section ~~, EERCrENCY FUND, There is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from alb other funds of the City, a separate fund to be entitled the "City of l~entan Utility System Emergency Fund" the "Emergency Fund"}, The Emergency Fund shad be used far the purpose afpaying unexpected or extraordinary expenses o#`repair, replacement, operation, and maintenance of the System for which neither System funds nor the moneys in the Extension and Improvement Fund are available, There was deposited in the Emergency Fund simultaneously with the delivery of the Series i 983 Bands to the initial purchasers thereof from lawfully available funds of the City the amount of 2a,a0a. All investment interest income from the Emergency Fund shall be transferred to the System Fund as received. Section i 5. DEPOSITS ~F PLEf~C~ED REVENUES. Fledged Revenues shall be credited to or deposited in the Interest and Sinking Fund, the Reserve Fund, the Extension and Improvement Fund, and otherfunds when and as required by this Ordinance and any ordinance authorizing the issuance ofAdditional Bands. Section 1 . INVESTMENTS. Ta the extent permitted by law, money in any Fund established pursuant to this Ordinance or any ordinance authorizing the issuance ofAdditional Bonds, may, at the option of the City, be placed in time deposits or ceiticates ofdeposit secured by obligations ofthe type herein,after described, or be invested in o~ernment obligations has defined in Section 8 herea#~ or obligations ~l guaranteed ar insured by the United States ofAnlerica, which, in the opinion afthe Attorney General ofthe United~States,'are backed by its hall faith and credit or represent its general abligatians, ar invested in abliatlans of ~nstrumental~t~es of the United States of Arrierica, including, but not limited ta, evidences of indebtedness issued, insured, or guaranteed by such goverrnnental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal dame LoanBar~ks, Croverntnent National artgage Association, United States Postal Service, Fanners Hame Administration, Federal Home Loan Mortgage Assaciatian, Small Business Adtninistratian, Federal Housing Association, or Participation Certificates in the Federal Assets Financing Trust; prodded that all such deposits and investments shall be made in such manner as will, in the opinion afthe City, permit the money required to be expended from any Fund to be available at the proper time or tunes as expected to be needed. Such investments except United States Treasury Obligations--State and Local Gavernm,ent Series investments held in bock entry farm, which shall at all times be valued at cast} shall be valued in terns of current market value as ofthe last day of each f scat year. Unless otherwise set forth herein, ai.I interest and income derived from such deposits and investments irurr~ediately sha11 be credited to, and any lasses debited to, the Fund Eton which the depositor investment was made, and surpluses in arty Fund shall or may be disposed ofas hexeinaf~er provided. Such investments shall be sold promptly when necessary to prevent any default in cannectian with the Parity Bands or Additional Bands consistent with the ordinances, respectively, authorizing their issuance. Section 17. FUNDS SECURED, That aney in all Funds created by this Ordinance, to the extent oat invested, shall be secured in the manner prescribed by law, Section ~ 8, PRIORITY" OF DEPOSITS AND PAY~NTS FRONT S~STEII~ FUND, That the City shall make the deposits and payments from Pledged Revenues in the System Fund when and as required by this Ordinance and any ordinance authorizing any Additional Bonds, and such deposits shall be made in the following manner and with the fallowing irrevocable priorities, respectively: First, to the interest and Sinking Fund, when and the amounts rewired by this Ordinance and any ordinance authorizing the Parity Bonds ar any Additional Bonds; then Second, to the Reserve Fund, when and in the amounts required by this Ordinance and any ordinance authorizing the Parity Bonds or any Addition Bonds; then 'Third, to the Extension and Improvement Fund, when and as required by Section ~ 1 of this Ordinance. Sectian 19. INTEIT AND S~1NC FUND RE~UIREBNTS. The City shall cause to be deposited to the credit of the Interest and Sinking Fund the accrued interest received from. the sale of the Initial Bond, and an ar before the 25th day of each month, the City shall cause to be deposited to the credit of the Ynterest and Sinking Fund, in approximately equal monthly payments, amounts sufFicient, together with any other funds on hand therein, to pay ail afthe interest or principal and interest carving due, including the principal amount of any Parity Bands required to be redeemed prior to maturity pursuant to any mandatory redemption requirements, an the Parity Bands and any Additional Bonds on the next succeeding interest payment date, Any moneys sa deposited inthe hterest and Sinking Fund with respect to a mandatory redemption require~ne~t, together with other lawfully available funds of the City, nay be used by the City, to purchase, in advance of a mandatary redemption date and at a price not exceeding the principal amount thereof plus accrued interest thereon to the date of purchase, Parity Bonds which would be subject to being chosen far mandatory redemption an such mandatary redemption date. The Paying Agent shall cancel any Parity Bands so purchased. 22 Section 2~. RBSERVE FUND RE~UiREII~ENTS. There is now an hand in the Reserve Fund an axnonnt afmoney and Oavernment Obligations which is in excess of,OOO,0~0 and which is at least a ual to the avers a annual rind l and interest re uire ~ g P p q eats ofthe outstanding Taxable Series 199-8 Bonds, the Series 199 Bonds, the Series 1 9SA Bonds, the Series 19988 Bonds, the Series 2~OOA Bonds, the Series 20~~8 Bonds, the Series 200I Bands, the Series 20~2A Bonds, the Taxable Series 204E Bends, the Series ~0~3 Bonds, the Series 204 Bonds, the Series 2D~5 Bonds, the Series 20~d Bonds, the Series 207 Refunding Bonds and the Series 2~D7 Bands the current "Required Reserve AnYaunt"~. Following the issuance and delivery of the Initial Bonds the Required Reserve Amount shall became and be an amount of money and investrn.ents equal to the average annual principal and interest requirements ofall the outstanding Parity Bonds and Additional Bands; provided further, however, that the Required Reserve Amount shall never be less than $3,004~p~0 ifthe maximum annual principal and interest requirements on all outstandin Parity Bonds and Additional Bonds exceeds 3 a0D 0 g $ , , 0~. Immediately after the issuance and delivery of the tnitial Bond there shall be deposited to the credit of the Reserve Fund, from the proceeds of the sale of the Initial Bond, money suf~'icient to cause the Reserve Fund to contain an aggregate amount of money and investments equal. to the Required Reserve Amount for ail then outstanding Parity Bands. Aber the delivery of any future Additional Bands the City sha11 cause the Reserve Fund to be increased, if and to the extent necessary, so that such Fund will contain an amount of money and invest~n.ents equal to the Required Reserve Amount ,Any increase in the Required Reserve Amount maybe funded from Pledged Revenues, or from proceeds from the sale of any Additional Bonds, or any other available source or combination of sources. All or any part afthe Required Reserve Amount not funded initially and in~rnediately after the delivery of any installment or issue of Additional Bonds shall be funded, within not more than eve years from the date ofsuch delivery, by deposits afPledged Revenues in approximately equal monthly installments on or before the 25th day of each month. Principal amounts ol" the Parity Bonds and any Additional Bonds which must be redeemed pursuant to any applicable mandatory redemption requirements shall be deemed to be n~atur` amounts of principal forthe purpose ofcalculating principal and interest requirements on such bonds. when and so tong as the amount in the Reserve Fund is not less than the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund; but when and if the Reserve Fund at any time contains less than the Required. Reserve Amount, then the City shall tra~a.sfer from Pledged Revenues in the System Fund, anal deposit to the credit of the Reserve Fund, monthly on or before the 25th day of each month, a sum equal to l1~Oth of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The City spec~ically covenants that when and sa long as the Reserve Fund contains the Required Reserve Amount, the City shall cause all an~aunts in excess of the Required Reserve Amount to be deposited to the credit of the tnterest and Smoking Fund. Section 21, EXTENSION AND INIPRO~EENT FUND REUIREIVIENTS. wring each year, subject and subordinate to making the required deposits to the credit afthe Interest and S' ~' Fund and the Reserve Fund, the City shall be required to deposit to the credit of the Extension and Improvement Fund, from Pledged Revenues in the System Fund, an amount equal to 8°Io afthe "Adjusted Cross Revenues ofthe System.", which term is hereby defined to mean the following: the Gross Revenues of the System far such year aftcer deducting from such grass Revenues an amount equal to the current exper~es ofoperation and maintenance ofthe System for such year which are directly attributable to ~i}all fuel costs related to the production of electric energy by the City andlor iii}the purchase of electric energy by the City. Additional excess Pledged. Revenues may, at the option of the City Council, be deposited to the credit afthe Extension and Irnprovernent Fund as permitted by Section 2~~b} hereof, but no such additional deposit is required. All investment interest income from the Extension and Improvement Fund shall be retained in and remain a part of such Fund. 23 Section ~2, RATE STABILISATION FUND. ~a} In each fiscal year, the City hereby agrees to transfer the Transfer Amount has def ~ned belay} from the Rate tabilizatian Fund into the ~~rst~~n Pond for the purpose of paying the current expenses of operation and maintenance of the System and pledges such Transfer Amount to the payment of the Bands, all Parity Bonds and any Additional Bonds } The Transfer Amount shall be an amount ofmoneys and investments contained in the Rate stabilization Fund equal to the amount for each fiscal year of the City that will, when added to the otherwise expected Pledged Revenues for that ~.scal year, produce an amount ofPledged Revenues during such fiscal year at least equal to the greater of 1.25 times the average annual principal and interest requirements of all then outstanding Bonds, Parity Bonds and Additional Bonds or 1.25 times the succeeding fiscal year's principal and interest requirements of all then outstanding Bonds, Parity Bonds and Additional Bands, ~c} The Transfer Amount will be calculated and reflected in the annual budget far each fiscal year and will, on the first day of such fiscal year, be transferred from the Rate Stabilization Fund into the System Fund, Section 23, DEFICIENCIES; E~CE5 PLEDGED REVENUES, ~a} Ifon any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund ar the Reserve Fund, such deficiency shall be made up as soar as possible from the next available Pledged Revenues, fib} Subject to making the required deposits to the credit of the various Funds when and as required by this Ordinance nr any ordinance authorizing the issuance of Additional Bonds, any surplus Pledged Revenues may be used by the City for any lawful purpose. Section 24, PAYMENT OF PARITY BONDS AND ADDITIONAL BONDS. On or before each principal or interest payment date, while any ofthe Parity Bonds or Addi~onal Bonds are outstanding and unpaid the City shall make available to the Paying Agents therefor, out ofthe Interest and Sinking Fund, or if necessary, out of the Reserve Fund, money sufficient to pay, on each of such dates, the principal of and interest on the Parity Bands and Additional Bonds as the same matures and carves due, ar to redeem the Parity Bands or Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the City. At the direction of the City the Paying Agents shall either deliver paid Parity Bonds and Additional Bonds, and any interest coupons appertaining thereto, tv the Cif or destroy all paid Panty Bonds and Additional Bonds, and any coupons appertairdng thereto, and furnish the City with an appropriate certificate of cancellation ar destruction. Section 25, FINAL DEPOSITS. ~a} Any Parity Band or Additional Bond shall be deemed to be paid, retired, and no longer outstanding within the meaning ofthis Ordinance when payment of the principal o~ redemptionpremiurn, ifany, on such Parity Band orAdditional Band, plus interest thereunto the due date thereof ~w~hether such due date be by reason nfm~aturity, upon redemption, or otherwise} either ~i}shall have been made or caused to be made in accordance with the terms thereof {including the giving of any required notice of redemption ar provision for the proper giving of such notice having been made}, ar iii}shall have been provided by irrevocably depositing with or making available to a Paying Agent therefor, intrust and irrevocably set aside exclusively far such payment, ~1} maney 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 reinvestn~.er~t, of sut"fi.cient maney to make such payment, and all necessary and proper fees, compensation, and expenses of such Paying Agent pertaining to the Parity Bands and Additional Bands with respect to which such deposit is nude shall have been paid or the payment thereof provided for to the satisfaction of such paying agent. At such tune as a Band or Additional Bond shall be deemed to be paid hereunder, as aforesaid, it shall rra longer be secured by ar entitled to the benefits ofthis 24 Ordinance ar a lien on and pledge afthe Pledged Revenues, and shall be entitled tv payment solel from such money or Government Obligations. fib} Any moneys sa deposited with a paying agent may at the direction of the City also be invested in Oravernrtnent Obligations, maturing rn the amounts and times as hereinbefare sot Earth, and all income from all avernrnent obligations ~ the hands of the paying agent pursuant to this Section which is oat required far the payment afthe Parity Bands and Additional Bands, the redernptian premium, ifany, and interest thereon, with respect to which such ~naney has been so deposited, shall be turned aver to the Ci or deposited a directed by the City. Section fib, AI~DiTIONAL B~1V~S. ~a} The City shall have the right and power at any time and from time to time, and in one or more series ar issues, to authorize, issue, and deliver additional ari A tY revenue bands .erein called "'Additional Bands"}, in accordance with law, in any amounts, far any lawful purpose, including the refunding of any Parity Bonds or Additional Bands, or other obligations. Such Additional Bonds, ifand when authorized, issued, and delivered in accordance with this ordinance, shall be payable from and secured by an irrevocable first lien on and pledge of the Pledged Revenues, equally and ratably an a parity in all respects with the Parity Bands and any other outstanding Additional Bands. ~ The principal ofall Additional Bands must be scheduled to be paid ar mature on ~]ece~nber I of the years in which. such principal is scheduled to be paid armature. Section ~7. FURTIR RE~UIRI~Ni,~NTS FOR ADDITIONAL BO1~S. Additiana.l Bonds shall be issued only in accordance with this Ordinance, and no installment, series, or issue of Additional Bonds shall be issued ar delivered unless; ~a} The 1Vlayor ofthe City and the City secretary sign a written cer~.ficate to the eft`ect that the City is oat in default as to any covenant, condition, or obligation in connection with all then outstanding Parity Bands and Additional Bands, and the ordinances authorizing same, and that the interest and Sinl~ing Fund and the Reserve Fund each contains the amount then required to be therein. fib} An independent certified public accountant, ar independent firm of certified public accountants, acting by and through a certified public accountant, signs a written certificate to the effect that, in his or its opinion, during either the next preceding fiscal year, or ar~y twelve consecutive calendar month period out of the 18~mor~th period immediately preceding the month in which the ordinance authari~~ng the issuance ofthe then proposed Additional Bonds is passed, the Pledged Revenues were at Ieast ~i} I.ZS tunes an amount equal to the average annual principal and interest requirements, and ~ii~ i.1D tunes an amount equal to the principal and interest requirements during the fiscal year during which such requirements are scheduled to be the greatest, afall Parity Bonds and Additional Bonds which are scheduled to be outstanding after the delivery of the then proposed Additional Bands. It is specifically provided, however, that in calculating the amount of Pledged Revenues for the purposes of this subsection }, if there has been any increase m the rates or charges for services of the System which is then ~ effect, but which was oat in effect during a1I ar any part of the entire period for which the Pledged Revenues are being calculated .ereinafter referred to as the "entire period"} then the certified public accountant, ar in lieu of the certified public accountant a firm of consulting engineers, shall determine and certify the amount of Pledged Revenues as being the total of ~i}the actual Pledged Revenues far the entire period, plus iii} a sum equal to the aggregate arnaunt by which the actual billings to customers of the System. during the entire period would have been increased if such increased rates ar charges had been in effect during the entire period. ~c~ Provision shall be made in the ordinance authorizing their issuance far increasing the Reserve Fund to the Required Reserve Amount as required by Sedan ~0 hereof. ~S ~d} All calculations of average annual principal aa~d intere st requirernents of any bonds made in connection with the issuance of any then proposed Additional Bands sha11 be made as of the date of such Additional Bands; and also in making calculations for such purpose, and for any other purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to maturity pursuant to an applicable mandata redem flan re uirements shall be d y ~' p q eemed to be maturing amounts of principal of such bonds, Section ~8. CrBNERAL COTENANTS. The City further covenants and agrees that in accordance with and to the extent required ar permitted by law: ~a} Performance. ~t will faithfully perform at all tunas any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of Add~t~anal Bands, and in each and every Parity Band and Additional Band; that it will pram tl a ar cause P Yp Y to be paid the principal of and interest on every Parity Band and Additional Band, on the dates and in the places and manner prescribed in such ordinances and Parity Bonds or Additional Bands; and that it will, at the times and in the rnar~ner prescribed, deposit ar cause to be deposited the a~naunts required to be deposited into the interest and Sinking Fund and the Reserve Fund; and any hoiden ofthe Parity Bonds ar Additional Bonds may require the City, its af#icials, and employees, to carry out, respect, or enforce the covenants and obligations afthis Ordinance, ar any ordinance authorizing the issuance ofAdditional Bands, by all legal and equitable means, including specifically, but without limitation, the use and filing ofmandarnus proceedings, in any court of competent ~urisdictian, against the City, its officials, and employees, {b} Ci 's Le al Authors .The City is a duly created ar~d existing Name rule city of the State of Texas, and is duly authorized under the laws of the State of Texas to create and issue the Parity Bands and Additional Bonds; that all action an its part for the creation and issuance of the said obligations has been or will be duly aril effectively taken, and that said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. {c} T,~, The City has or will obtain lawful title to the lands, buildings, structures, and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, far the benefit ofthe holders and owners ofthe Parity Bonds and Additional Bands, against the claims and demands ofall persons wham.oever, that it is lawfully qualified tv pledge the Pledged Revenues to the payment of the Parity Bands and Additional Bonds in the manner prescribed herein, and has lawfully exercised such rights. {d} L~. The City will from time to time and before the same became Jelin cent a end disc a all taxes assessments and a • q P y ~ g vernmental charges, if any, which shall be lawfully unposed upon it, or the System, that it will pay all lawful claims for rents, royalties, lobar, materials, and supplies which if unpaid might by Iaw became a lien Qr charge thereon, the lien of which would be prior to ar interfere with the liens hereof, sa that the priority of the liens gra.~nted hereunder shall be fully preserved in the manner graded herein, and that it will not create ar suffer to be created any mechanic's, laborer's, materialman's, ar a~.er lien ar charge which. rnight or could be prior to the liens hereof, or da ar suffer any matter ar thing whereby the liens hereof might ar could be impaired; provided, however, that na such tax, assessment, ar charge, and that na such claims which rnight be used as the basis of a mechanic's, laborer's, materialman's, ar other lien ar charge, shall be required to be paid sa long as the validity afthe carne shall be contested in goad faith by the City. {e} O eratian of S stems No Free Service. while the Parity Bands ar any Additional Bands are outstanding and unpaid the City shall continuously and efficiently operate the System, and shall maintain the System in goad condition, repair, and working order, all at reasonable cost. Na free service afthe System ~~ shall be allowed, and should the City ar any of its agencies, instrumentalities, lessors, or concessionaires make use of the services and facilities of the ysten~, payment monthly of the standard retail price of the services provided shall be nude by the City ar any of its agencies, inst~.mentalities, lessors, ar conces~ana~res out of funds from sources ether than the revenues of the System, unless made franc s Ius Pledged Revenues as errnitted b Section 23 hereof. p y ~ ~f} Further Encumbrance, while the Parity Bands ar any Add~tianal Bonds are outstanding and unpaid, the City sha~I rat additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Additional Bands, unless said encu.lmbrance is made junior and subordinate in ail respects to the liens, pledges, covenants, and agreements of this Ordinance and an Y ordurance authoriz~ng the issuance of Additional Bonds; but the right of the City to Issue revenue bonds payable from a subordinate lien on surplus Pledged Revenues is specifically recognized and retained, as permitted under Section 3~b}hereof. fig} Sale Lease ar l]i oral of Pro e . Na part afthe System shall be Bald, leased, mortgaged, dem~altshed, removed ar otherwise disposed af, except as follows; ~ 1 } Ta the extnt permitted by law, the City may sell, cease, mortgage, demolish, remove ar otherwise dispose of at any time and from time to time any property ar facilities constituting part ofthe System only if~A}the City Council shalt detenntne, as evidenced by a resolution to that effect, such property ar facilities are nit useful in the operation of the System, or ~B}the proceeds of such sale are $25,000 or less, or the City Council shall determine, as evidenced by a resolution to that efl"ect, the fair market value ofthe property ar facilities exchanged is $250,00 or less, or ~C} ifsuch proceeds ar fair market value exceed $250,000 the City Council shall determine, as evidenced by a resolution to that effect, that the sale ar exchange of such property or facilities will gat impair the ability ofthe City to comply during the current or any future fiscal year with the covenant ofthe City set forth in Section 28~i} of this Ordinance. The proceeds of any such sale ar exchange not used to acquire other property necessary ar desirable far the sale or efficient operation ofthe System shall forthwith, at the option of the City, ~i~ to be used to redeem or purchase Parity Bonds ar Additional Bonds, iii} otherwise be used to provide for the payment afParity Bonds or Additional Bonds or ~~ii} be used for any other lawful purpose. ~~} To the extent permitted by law, the City may lease ar make contracts ar grant licenses far the operation old ar make arrangements for the use af, or grant easements or other rights with respect ta, any part afthe Syte~., provided that any such lease, contract, license, axrangernent, easement or right ~A}dies nit impede the operation of the system by the City and ~B} does nit ~. any mariner impair or adversely affect the rights ar security of the owners of the Parity Bonds ar Additional Bonds under this Ordinance; and provided, farther, that if the depreciated cost of the property to be covered by any such lease, contract, Iicere, arrangement, easement ar other right is in excess af$00,40a, the City Council shall determine, as evidenced by a resolution to that effect, that the action of the City with respect thereto dies not result in a breach ofthe conditions under this clause ~2}, Any payments received by the City under ar in cannectian with any such lease, contract, license, arrangement, easement or right in respect ofthe system or any part thereof shall constitute Cxrass Revenues, ~h} Insurance, ~l} The City shall cause to be insured such parts afthe System as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents, ar casualties against which and to the extent insurance is usually carried by corporations operating lrke properties, including, to the extent reasonably obtainable, fire and extended coverage i~rsurance, insurance against d.amae by floods, and use and occupancy insurance. Public liability 27 and property damage insurance also shall be carried unless the City Attorney gives a written o inion to the effect that the Ci is rat liable for claims ~vhi p ch would be protected by such insurance. AlI insurance premiums sha11 be paid as an expense ofaperatian ofthe system, At ar~y time while any contractor en a ed in construction work shall be fu11 res onsible Cher y p efor, the City shall not be required to carry insurance on the work being constructed ifthe contractor is required to carry appropriate inurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times, 11 on the P happening of any Ions ar da~.age covered by insurance from one ar more of said causes, the City sha11 make due proof of loss anal shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the City. The proceeds of insurance covering such property, together with any other funds necessary and available far such purpose, shall be used forthwith by the City for re airin the P g property damaged orxeplacing the property destroyed; provided, however, that ifsaid insurance proceeds and other funds are insufficient far such purpose, then said insurance proceeds pertaining to the system shall be deposited in a special and separate trust fund, at an offtcial depository of the City, to be designated the Insurance Account. The Insurance Account shall be held until such time as other funds became available which, together with the Insurance Account, will be sufftcient to make the repairs or replacements ariinall Y required, ~~} The annual audit hereinafter required may contain a section commenting on whether ar not the City has complied with the requirements of this section with respect to the maintenance of insurance, and shall state whether or not all insurance pre~niu~ns upon the insurance policies to which reference is made have been paid i Annual Bud et and Rate Oovenant. The City shall prepare, prior to the beginning of each f seal year, an annual budget, in accordance with law, reflecting an esthnate of cash receipts and disbursements for the ensuing fiscal year in sui~icient detail to indicate the probable Grass Revenues and Pledged Revenues for such ftscal year. The pity shall i"ix, establish, maintain, and collect, such rates, char es, g and fees far the use and availability ofthe system at all times as are necessary ~ I } to produce Gross Revenues sufficient, together with any other Pledged Revenues, to pay all current operation and maintenance expenses of the system, and ~~} to produce an amount of Pledged Revenues dung each ftscal year at least equal to the greater of 1.2 times the average annual principal and interest requirements ofall then outstanding Pori Bands and Additional Bonds or 1.2~ tim,es the succeeding fiscal year's principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds. ~~ R~. The pity shall keep proper boars of record and account in which full, true, proper, and correct entries will be made afall dealings, activities, and transactions relating to the system,the Pledged Revenues, and the Funds created pursuant to this Ordinance, and all boars, documents, and vouchers relating thereto sha11 at all reasonable times be made available far inspection upon request of ariy Bondholder, provided, that all books, documents, anal vouchers relating to the City's electric system sha11 be made available for inspection only to the extent required by law, including, without limitation, the provisions of section X2,133 of the Texas Goverrvnent Code. To the extent consistent with the provisions of this Ordinance, the City shall keep its books and records in a manner conforming to standard accounting practices as usually would be followed by private corporations owning and operating a sim~ar system, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. ~~ A~. After e close of each fiscal year while any of the Parity Bonds or any Additional Bonds are outstanding, an audit will be made of the books and accounts relating to the system and the Pledged Revenues by an independent certified public accountant or an independent Firm of certified public accountants, As loan as prac~cable aver the close afeach such year, and when said audit has been completed and made available to the Oity, a copy ofsuch audit for the preceding year shall be mailed to the 1Vlunicipal 28 Advisory Council of Texas, to each paying agent for any bonds payable frarn. Pled ed Revenues and to an B ondhalders who shall so re nest in ` ' ~ y q writing. The annual audit reports shall be open to the inspection ofthe Bondholders and their agents and representatives at all reasonable ~nnes. ~l~ Governmental A envies. It will comply with all of the terms and conditions of an and all franchises, permits, and authorizations a livable to or y pp necessary with respect to the system, and which have been obtained from any gaverntnental agency;and the City has ar will obtain and keep in full force and effect all franchises, permits, authorization, and athex requirements applicable to or necessary with res ect to the P acquisition, construction, equipment, operation, and maintenance of the system. ` gym} ~ Na Com etition. ~t will not operate, ar grant any franchise or, to the extent it legally ina , y permit the acquisition, construction, or operation af, any facilities which would be in competition with. the system, and to the extent that it legally may, the City will prohibit any such competing facilities. fin} No A`bit~~ae. The City covenants to and with the purchasers of the Parity Bands and any Additional Bands that no use will be made of the proceeds of any of such bands at any time throughout the term afany of such bands which, if such use had been reasonably expected an the date of delivery of any of such bands to and payment therefor by the purchasers, would have caused any of such bonds to be arbi~a e bonds within the meanie of section 1~8 afthe late g g real Revenue Cade ofl98d, as amended the "Cade"}, or any regulations ar rulings pertaining thereto; and by this covenant the City is obligated to camply with the requirements ofthe aforesaid Cade and all applicable and pertinent ~epartznent of the Treasury regulations relating to arbitrage bonds. The City further covenants that the proceeds afall such bonds wi11 not otherwise be used directly or indirectly sa as to cause all ar any part of such bands to be or become arbitrage bands within the meaning of the aforesaid Cade, ar any regulations pertaining thereto. Section 29. AME~DME~IT OF GRDINA~CI~. ~a} The holders or owners of Rarity Bands and Additional Bonds aggregating in principal amount 51°Io afthe aggregate principal amount ofthen outstandin Parr Bonds anal Additional Bands shall have the ri g ght from trine to time to approve any amendment to this ordinance which inay be deemed necessary ar desirable by the City, provided, however, that nathin herein g contained shall permit or be construed to permit the amendment afthe terms and conditions in this ordinance ar m the Panty Bands or Additional Bonds so as to: ~l} Make any change ~ the maturity of the outstanding Parity Bonds or Additional Bonds; ~2} Reduce the rate ofinterest borne by any afthe outstanding Panty Bands ar Additional Bonds; ~~~ Reduce the amount of the principal payable on the outstanding Parity Bands ar Additional Bonds; ~4} Modify the terms of payment of principal of ar interest on the outstanding Parity Bonds or Additional Bands, or impose any .conditions with respect to such payment; ~5} ,Affect #~e rights of the holders or owners of less than all ofthe Panty Bonds and Addisanal Bands then outstanding; ~~} Change the mini,mun~ percentage of the principal atnaunt of Parity Bands and Additional Bands necessary far consent to such amendment. } ~f at any time the City shall desire to amend the Grdinance under this section, the City shall cause notice of the proposed amendment to be published in a financial publication of general circulation in ~~ The City of New York, New Yark, once during each calendar weep for at least two successive calendar weeks. Such notice shall brie#~y set Earth the nature afthe proposed amendment and shall state that a ca thereofis on ale at the rinci al office of the Pa in A ents f pt' ~ ~ y g ar inspection by ail holders or owners of Parity Bonds and Additional Bands. Such publication xs not required, however, ifnotice in wri ' is iven to each balder ar owner of P ' ' ~ arity Bonds and Additional Bonds. ~c} whenever at any time not less than thirxy days, and within one year from the date of the first publication afraid na~.ce or other service ofwritten notice the City shall receive an instrument or instruments executed by the holders ar owners of~at least 51°I~ in aggregate principal amount of all Parity Bands and Additional Bands then outstanding, which instrument ar instruments shall refer to the proposed. amendment described in said native and which specifically consent to aril approve such ainendrnent in substantiall the form of the co thereafon plc withthe Pa, in A en y pt' y g ts, the City Council may pass the amendatory ordinance in substantially the same farm, ~d} Upon the passage afany arnendatQry ordinance pursuant to the provisions afthis Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties, and obligations under this Ordinance of the City, and all the holders or owners of then outstanding Panty Bands and Additional Bonds and all future Parity Bands aid Additional Bonds shall therea~er be determined, exercised, and enforced hereunder, sub j ect in all respects to such ainer~dmer~ts. fie} Any consent given by the holder or owner of a Parr Band or Additional Bond. pursuant to the provisions ofthis Section shall be irrevocable for a period afane year from the date ofthe first publication of the native provided for in this section, and shall be conclusive and binding upon all future holders yr owners afthe sane Panty Bond or Additional Bond during such period. Such consent may be revoked at any time after ane year from the date of the first publication of such notice by the holder ar owner who gave such consent, or by a successor in title, by #iling notice thereof with the paying agents and the City, but such revacatiari shall not be effective if the holders ar owners of Sl°Io in aggregate principal a~naunt of the then outstanding Parity Bonds and Additional Bands as in this Section defined have, prior to the attempted revocation, consented to, and approved the arnendrnent. ~ Far the purpose of this Section, the fact afthe haldig afParity Bands ar Additional Bonds which are in beaxer, coupon form, by any bondholder and the amount and. numbers of such bearer Pori Bands or Add~t~onal Bands an ~ d the date oftheir hatd~n same, may be proved by the aft~davit ofthe person ciain~in to be such holder ar owner, or by a certificate executed by any trust company, bank, banker, ar any other depositary wherever situated showing that at the date therein mentioned such person had an de alit with such trust com an bank banker ar other de asi . ' - P p Y~ P tart', the Pare Bands and Additional Bands described in such certificate. The City may conclusively assu~ue that such ownership continues until written notice to the contrary is served upon the City. The ownership ofall registered Parity Bands and Additional Bonds shall be determined from the registration books kept by the registrar therefor. Section a~ DAMALI~, MUTILATED, LOST, STOLEN, OR DBSTOYED BONDS, {a} lie la~einent Bands. in the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying Agentll~egistrar sha11 cause to be printed, executed, and delivered, a new bond ofthe same principal a~.ount~ maturity, and interest rate, as the damaged, mutilated, lost, stolen, ar destroyed Band in replacement for such Band in the manner hereina~er provided, } A lication far Re lacement Bands, Application far replace~aent of damaged, mutilated, lost, stolen, or destroyed Bands shall be made by the registered owner thereofto the Paying AgentlRe istrar, ~n eve case ofloss the ar destruction of g rY 3 ~, a Band, the registered owner applying for a replacement band shall furnish to the issuer and to the Paying AgentlRegistrar such security or indemnity as may be re aired ~a ~~ them to save each of them harmless from any loss ar damage with respect thereta. Also, in eve case of loss, theft, or destruction of a Band the re istered owner ~ . . ~ g shall furnish to the Issuer and to the Paying AgentJReg~strar evldence to they satisfaction ofthe lass, they, ar destruuction afsuch Band, as the case ma be, In every case of dam ear mutilation of a Ban the re i ~ . ~ d, g stered a~vner shall surrender to the Paying AgentJRegistrarfar canceliationthe Bond so damaged ar mutilated. ~c~ Na l~efault~ccurred. Natwithstandingthe foregoing pravisioris ofthis Section, intheevent any such Bond shall have matured, and na default has occurred which is then continuing in the a meat of the princi al of, redem flan remiun~ if an ar int p y P P P ~, crest on the Band, the Yssuer may authorize the payment ofthe same without surrender thereof except in the case of a damaged or mutilated Band} instead of issuin a replacement Band, provided securi ar indernni is furnished ~ tY as above pravlded in this Section, . ~d~ ~har~e far~RePXa~,n~ Bads. Prior to the issuance afany replacement hand,the Paying AgentlRegistrar shall charge the registered owner of such Band with alI legal, printin ,and other g expenses in connection therewith, Bvery replacement band issued pursuant to the provisions ofthis Section by virxue ofthe fact that any Band is last, stolen, ar destroyed shall constitute a contractual abii tiara afthe Issuer whether or not a lost, stolen, ar destroyed Band shall be found at any time, ar be enforceable b anyone, and shall be entitled to all the benefits of this ~rdin Y once equally and proportionately with any and all other Bonds duly issued under this ordinance. fie} Authori far Iss ' ~e lacen~ent Bands; In accordance with chapter I~a~, Texas Gaven~ment bode, this Section of this ordinance shall constitute authority far the issuance of an such replacement band without necessi of further y ty action by the governing body ofthe Issuer ar any other body or person, and the duty of the replacerrient of such bands is hereby authorized and imposed upon the Paying Agentl~egistrar, and the Paying A.gentlReistrar shall authenticate and deliver such Bands in the form and manner aril with the effect, as pravlded in Section ~~d} afthis ordinance far Bonds issued in conversion and exchange for other Bonds. Section 31, ~VENANTS RBGAI~DINC~ TAX-EMPTI~N. The Issuer covenants to refrain from any action which. would adversely affect, and to take such action to ensure, the treatment of the Bands as obligations described ~ section 1 a3 ofthe bode, the interest on which is not includable in the " ass income" l' afthe holder far purposes of federal income taxation, In furtherance thereaf, the Issuer covenants as follows; . a to take any action to assure that no mare than 10 percent of the proceeds of the Bands bless amounts deposited to a reserve fund, if any}are used for any "private business use", as defined in section 14 ~ }~~} of the bode or, if mare than ~ 0 percent ofthe proceeds are so used,that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this ~rdiriance ar any underlying arrangement, directly ar indirectly} secure or provide far the payment of mare than ~ U percent of the debt service an the Bonds, in contravention of section 141 ~~~} of the bode; } to take any action to assure that in the event that the "private business use" described in subsec~on ~a.} hereofe~ceeds 5 percent of the proceeds afthe Bonds Riess amounts deposited rota a reserve fund, if any} then the amount in excess of 5 percent is used far a "private business use" which is "related' and not "disproportionate", within the meaning of section I41~~~ ofthe bode, to the gOV~rn~,enta~ uses ~c} to take ar~y action to assure that no amount which is greater than the lesser of S,a0a,a0a, or ~ percent of the proceeds of the Bands bless amounts deposited into a reserve fund, 31 if any} is directly or indirectly used to finance loans to persons, other than state ar local governmental units, in contravention of section 141 ~c} of the Cade; ~d} to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bands" within the meaning of section 14 I {~} of the Code; fie} to regain from taking any action that would result in the Bonds being "federally guaranteed' within the meaning of section 149~b} of the Cade; ~ to refraua from using any portion afthe proceeds afthe Bonds, directly ar indirectly, to acquire or to replace funds winch were used, directly or indirectly, to acquire investment property has defined in section 148~b}~~} afthe Cade} which produces a materially higher yield over the term of the Bands, other than inves~nent property acquired with -~ ~1} proceeds afthe Bonds invested far areasanable temporary period of 30 days ar less in the case of an advance refunding bond and 90 days of less in the case of current refunding bond, ~2} amounts invested in a bona fide debt service fund, within the meaning of section 1. I48- l fib} of the Treasury Regulations, and ~3} amounts deposited in any reasonably required reserve ar replacement fund to the extent such amounts do not exceed 10 percent of the stated principal amount far, in the case of a discount, the issue price} of the Bonds; } to otherwise res~ict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bands da not otherwise contravene the requirements afsectian 14S afthe Code relating to arbitrage}, ~ectian I49~g} ofthe Code relating to hedge bonds}, and, to the extent applicable, section 149~d} of the Code relating to advance refundings}; and ~h~ to pay to the United Mates of America at least once during each five-year period ~begirlning on the date of delivery ofthe Bonds} an amount that is at least equal to 90 percent of the 'Excess Earnings", within the meaning afsectian l4$~f~ afthe Cade and to pay to the United Mates afAmerica, not later that ~0 days afrer the Bonds have been paid in full, I00 percent afthe amount then required to be paid as a result of Excess Earnings under section 148~f} of the Cade. far purposes of the foregoing ~a} and }, the Issuer understands that the term ~'praceeds" includes 'rdispasition proceeds" as defined in the Treasury Regulations and, in the case afrefunding bands,transferred proceeds cif any} and proceeds of the refunded bonds expended prior to the date of issuance of the Bands, It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Cade and any regulations ar rulings prarnulgated by the U.S. Department ofthe Treasury pursuant thereto. In the event that regulations ar rulings are hereafter promulgated which modify, or expand provisions afthe Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to ~camply, inthe opinion ofnationally-recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest an the Bands under section 103 of the Code, In the event that regulations or rulings are hereafter promulgated which impale additional requirements which are applicable to the Bonds, the Issuer agrees to comply withthe additional requirements to the extent necessary and reasonably passible, in the opinion of nationally-recognised bond counsel, to preserve the exemption from federal income taxation ofinterest an the Bonds under section 1 ~3 afthe Code. 32 In fu~thcrance afsuch intention, the Issuer hereby authorizes and directs the Mayor to execute an documents Y certificates or reports required by the fade and to make such elections, an behalf of the Issuer, which n~a be permitted b the fade as are consistent with the ~ ~ purpose for the issuance of the ~ ands. The Issuer covenants to comply with the co~renants contained in this section after defeasance afthe Bands. In order to facilitate compliance with the above covenant .}, a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United Mates of America, and such fund shall not be subject to the claim of any other person, including without IirnttatiQn, the owners of the Bonds. The Rebate Fund is established for the additional purpose of cor~pllance with Section 1~8 ofthe bode. Section ~~, AI~110ATION OF, AND IIIMITATION ON, EPENDITURE FOR TIDE PROTEST. The pity covenants to account far the expenditure of sale proceeds and investment earnings to be used far the purposes described in ectivn I of this Ordinance the "Project"'} on its books and records in accordance with the requirements of the fade, The pity recognizes that in order for the proceeds to be considered used far the reimbursement of costs, the proceeds must be allocated to expenditures within I ~ months ofthe later afthe date that ~I}the expenditure is made, or ~~}the Project is completed; but in no event later than three yeaxs after the date an which the orlgrnal expenditure is paid. The foregoing notwithstanding, the pity recognises that in order far proceeds to be expended under the bode, the sale proceeds ar investment earnings must be expended no more than ~0 days aver the earlier of ~ 1 }the fifth anniversary of the delivery of the Bonds, or ~~}the date the Bonds are retired. The City agrees to obtain the advise of nationally-recognized bond counsel if such expenditure fails to carnply with the foregoing to assure that such expenditure will not adversely affectthetax-exempt status ofthe Bonds. Far purposes hereof, the City shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal incarne tax purposes from grass income of the interest. Section 33. DISPOSITION OF PRO~ET. The Issuer covenants that the property consti#uting the projects financed will not be sold ar otherwise disposed in a transaction resulting ~, the receipt by the Issuer of cash or other compensation, unless the Issuer obta~.ns an opinion ofnationally-recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status ofthe Bonds. For purposes of the foregoing, the portion of the property comprising personal. property and disposed of in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. Far purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability far federal income tax purposes from grass income of the interest. Section 34, INTEREST EARNINxS ON BOND PROEEI)S. Interest earnings derived firon~ the investment of proceeds from the sale of the Initial Bonds, other than proceeds deposited in the Interest and inking Fund and the Reserve Fund, shall be used along with other available proceeds for improving the System; provided that aver completion afthe improvements ifany ofsuch interest earnings rena.ain on hand, such Interest earnings shall be deposited in the Interest and Sinking Fund, It is further provided, however, that any interest earnings on bond proceeds which are required to be rebated to the United States afArnerica pursuant to the covenants Regarding Tax-Exemption herein sa as to prevent the Bonds from being arbitrage bonds shah be sa rebated and not considered as interest earnings for the purposes of this Ordinance. Section 3. ~USTOI)Y,APPROVAL, AND REGISTRATION OF BONDS; BOND OOUNSl1~,'S OPINION, USIP NUMBERS, PREAMBLII, AND INSURANCE. The Mayor of the Issuer is hereby authorized to have control afthe Initial Bonds issued hereunder and all necessary records and proceedings pertaining to the Initial Bond pending their delivery and the investigation, examination, and approval by the Attorney General of the Mate of Texas, and the registration by the comptroller of Public Accounts of the Mate of Texas. Upon registration of the Initial Band said arnptroller of Public Accounts for a deputy 3 designated in writing to act for said Comptroller} shall manually sign the Cam trailer's Re istratian Certificate on the Initial Bon and ~ d, the seal of said Comptroller shall be impressed, or placed in facsimile, an the Initial Bards. The approving legal opinion of the issuer's Bond Counsel and the assi ed CUSIP numbers ma , at the o tiara afthe Issuer be rioted ' ' p on the Irut~al Band ar an any Bands issued and delivered ~ f m conversion afand exchange or replacement ofany Band, but neither shad have ~ legal effect, and shall be solely far the convenience and inforrnatian of the registered owners of the Bands. The preamble to this Ordinance is hereby adapted and made a parr hereof far all purposes. If insurance is obtained an an oI" the Bands, the Initial Band and ail other Bands shall bear an a r y pp opriate legend concerning Insurance as provided by the insurer. Section 3~. SALE DF INITiA~ BDND. The rnitial Bond is hereby said and shall be delivered to far cash far the par value thereafarid accrued interest thereon to date afdelivery plus a premium of _ _ accrued interest to be deposited iota the Interest and S inking Fund}, It is hereby officially found, determined, and declared that the Initial Band has been Bald at public sale to the bidder offering the lowest interest cost, after receiving sealed bids pursuant to a Notice of Sale and Biddin Instrucctions and Preli.in Official Statement dated g y August ~ 2DOS, prepared and distributed in connection with the sale afthe Initial Bond. Said Native of Sale and Bidding Instructions and Preliminary Official Statement, and any addenda, supplement, ar amendment thereto have been and are hereby approved by the governing body of the Issuer, and their use in the offer and sale of the Bond is hereby approved. It is further officially found, determined, and declared that the statenrient and representations contained in said Notice of Sale and Bidding Instructions and Preliminary Ocial Statement are true and correct in ail material respects, to the best knowledge and belief of the governing body of the Issuer. ~ectian 7. OFFICIAII STATEMENT. Ara Official Statement dated as afthe date of this meeting has been. prepared in connection with the sale ofthe Initial Bands and the Bands, in the form and substance submitted. at this meeting, Said Ocial Statement and any supplement ar addenda thereto have been and are hereby approved, and their use in the offer and sale ofthe Bends is hereby approved. It is f~,rkher afficiall y found, determined, and declared that the statements and representations contained in said Official Statement are true and correct in all material respects, to the best knowledge and belief of the Issuer. The distribution and use of the Preliminary Official Statement dated August ~, ~a08, prior to the date hereof is hereby ratified and approved, Sec~.on ~8. DTC REGtTRAT~ON. The Bonds init~at~y shalt be issued and delivered in such manner that no physical distribution of the Bonds will be made to the public, and The Depositary Trust Company ~'"DTC"}, New York, New York, initially will act as depository far the Bonds, DTC has represented that it is a limited purpose trust company incorporated under the laws ofthe State afNew Yark, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York [Jniform Commercial Cade, and '"clearing agency" registered under Section I7A, afthe federal Securities Exchange Act of 1 ~4, as amended, and the Issuer accepts, but in no way verifies, such representations, The Initial Barad authorized by this Ordinance shall be delivered to and registered in the name ofthe Purchaser. However, it is a condi~on afdelivery and sale that the Purchaser, immediately aver such delivery, shall cause the Paying Agenteistrar, as provided far in this Ordinance, to cancel said Initial Bond and deliver in exchange therefor a substitute Band for each maturity of such Initial Bond, with each such substitute Band to be registered in the Warne of CEDE ~,, the nominee of DTC, anal it shall be the duty of the Pa ' AgentlRegistrar totake such action. It is expected that DTC wilt bald the Birds on behalf afthe Purchaser andlor the DTC Participants, as defined and described in the 0~cial Statement referred to and approved in section 3~ hereof~the'"DTC Parricipants'~}. So long as each Bond is registered in the name of CEDE CO., the Paying Agent~Regist~rar shall treat and deal with DTC in all respects the same as if it were the actual and beneficial owner thereof. It is expected that DTC will maintain a book entry system which will identi ~ ~ . . . . beneficral awnershtp of the Bands by DTC Participants m integral amounts of $~,Oaa, with transfers of 34 ownership being effected on the records ofDT and the DTI Participants pursuant to rules and regulations established by them, and that the substitute Bonds initially deposited with DTC shall be in~mobili~ed and not be further exchanged for substitute Bonds except as hereinafter provided. The issuer is not res onsible or l? liable for any functions of DTO, will not be responsible far paying any fees or charges with res ect to Its . ~ ,. ~~ p services, will not be responsible or fable far ma~nta~tung, superv~s~ng, or rev~ewuag the records ofDTC ar the DTI Participants, or protecting any interests or rights ofthe beneficial owners ofthe Bands, It shall be the duty of the Purchaser and the DTC Participants to make all arrangements with DTI to establish this book-entry system, the beneficial ownership ofthe Bonds, and the method ofpaying the fees and c es of D ~ T~. The Issuer does not represent, nor does ~t ~n any way covenant that the initial book-entry systerr~ established with DTI w~~l be maintained in the future. The Issuer reserves the right and option at any time in the futuxe, in its sole discretion, to terminate the DTI CEDE ~.} book-entry only re istratiun requirement described above, and to permit the Bands to be registered in the name Qfany owner. Ifthe Issuer exercises its right and option to tern~~nate such requirement, ~t shall glVe written notice of such term~natian to the Paying AgentlRegistrar and to DTI, and thereafter the Paying AgentlRegistrar shall, upon presentation and proper request, register any Bond in any name as provided for in this Ordinance. Notwithstandingthe initial establishment of the foregoing bank-entry system with DTI, rf for any reason any of the originally delivered substitute Bonds is duly filed with the Paying ~gentl~egistrar with proper request far transfer and substitution, as provided for m this Ordinance} substitute Bands will be duly delivered as provided in this Ordinance, and there will be na assurance or representation that any book-entry system will be maintained for such Bonds. section 39. COMPLfANOE wITI~ ~I,E ISc~-12, ~a} A,~an`eu~„o mss, ~i} The Issuer shall provide annually to each NRMSIR and any SID, within six rnanths after the end of each fiscal ear endin y g or after 20D8, financial information and operating data with respect to the Issuer of the general type included in the final Official Statement authorized by Section 3~ ofthis Ordinance, being the information described in Exhibit A hereto, -which Exhibit is attached to and incorporated ~ this Ordinance as if written ward far word herein. A,.ny financial statements so to be provided shall be ~ 1 ~ prepared in accordance with the accounting principles described in Exh~ hereto, or such other accounting principles as the Issuer may be required to employ from tune to time pursuant to state law or regulation, axed ~2} audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided. If the audit ofsuch financial. statements is not complete within such period, then the Issuer shall provide unaudited financial statements by the required tune and will provide audited financial statements far the applicable fiscal year to each N~MSiR and any SID, when and ~f the audit report on such statements became available. iii} If the Issuer changes its fiscal year, it will notify each I~RMSIR and any SID of the change hand of the date of the new fiscal year end} prior to the next date by which the Issuer otherwise would be required to provide financial infvrn~atian and operating data pursuant to this section, The financial information and operating data to be provided pursuant to this section may be set forth in full in one or more documents or may be included by specific reference to any dacurr~ent including an official statement or other offering document, lilt is available from the MSRB~ thattheretafare has been provided to eachNRMTR and any SID ar ftled with the SEQ. fib} 1Vlaterial Event Notices. The Issuer shall notify any ZD and each NI~SIR, in a ~mely manner, ofany ofthe following events with respect to the Bands, ifsuch event is material within the meaning of the federal securities laws: l . Pr~nclpal and interest payment del~nquenc~es; ~, Non-payment related defaults; 35 3. Unscheduled draws an debt service reserves rellecting financial difficulties; 4. Unscheduled draws an credit er~hancen~ents reflecting financial difliculties; 5. Substitution of credit ar liquidity providers, or theix failure to perform; ~. Adverse tax opinions ar events affecting the tax~exempt sta#us of the Bonds; 7. Modifications to rights of holders of the Bonds; S. Band calls; 9. Defeasances; I ~, Release, substitution, ar sale of property securing repayment of the Bands; and 11. Rating changes. The Issuer shall notify any SID and each NRMSIR, in a timely manner, afany failure by the Issuer to provide financial information or operating data in accordance with subsection ~a} ofthis Section by the tithe required by such subsection, ~c} Limitations Disclaimers and Anlendmer~ts. ~i} The Issuer shall be obligated to observe and perform the cavenar~ts specified m this section far sa long as, but anty far sa long as, the Issuer remains an "obligated persons' with respect to the Bands within the n~ean~ng of the Rule, except that the Issuer in any event will give the notice required by Subsection fib} hereof ofany Band calls and defeasance that cause the Issuer to no longer be such an "obligated person". iii} The provisions of this Section are far the sole ber~ef~t of the registered owners and beneficial owners afthe Bands, and nothing in this Section, express ar implied, shall give any beneft ar any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to ravide oni the P y financial infor~natian, operating data fmanciai statements, and nad.ces which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other infor~natian that maybe relevant or material to a coruplete presentation of the Issuer's fn~ancial results, condition, ar prospects ar hereby undeake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Issuer does not make any representation or warranty concerning such information or its usefulness to decision to invest in ar sell Bands t ar~y future date. viii} UNDER NO CIRUMSTANES SHALL THE ISSUER, ITS OFFICERS, AGENTS AND EMPLOYEES, BE LIABLE TO THE RErIS'I~RED OWNER OR BENEFIOIAL OWNER OF ANY FOND OR ANY OTHER PERSON, IN ONTRAT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE ISSUER, wI~THER NEC~LI~xENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EERY RIGHT AND REIVIEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH ~ SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. Div} Na default by the Issuer in observing or perforruing its abiigations under this Section shall ca~nprise a breach of ar default under the Ordinance far purposes of ar~y other provision of this Ordinance. 3~ Nothing in this Section ~~ intended or shall act to disclaim, wane, or otherwise limit the duties afth under federal and state securities laws a Issuer ~v~ The provisions of this Section may be amended by the Issuer firarn tune to time to ado t to changed circumstances that arise from char a in le al re uirements ~ ~ idea ' ~ ~ , a change ~n law, or a change m the t~ty, nature, status, or type ofoperatians ofthe Issuer, but only if~I}the provisions afthxs Sectio so amended, would have permitted an underwriter to urchase r ~ p o yeti Bands in the primar~r offering afthe Bonds 1n compliance with the Rule, taking into account any an~endn~ents ox interpretations of the Rule since such offering as well as such changed circumstances and ~~~ either ~a~ the re istered owners of ~, m'ori ' a e ate rinci al amount J ~ ~ p p far any greater arnaunt required by any other provision of this ordinance that authorises such an amendment} of the outstanding ~ Dods consent to such amendment or a erson that is unaffiliated with th ~~ P e Issuer such as nationally recognized bond counsel} determined that such amendment will not materially impair the interest of the registered owners and henellciai owners of the Bonds. If the Issuer so amends the provisions ofthis Section, it shall include with any amended financial information ar operating data next provided in accordance with subsection ~a} of this Section an ex lanatio in narrative farm, of the reason far the amendment and p n' of the impact of any change in the t,~pe of financial ixifor~ation ar operating data sa provided. The Issuer may also amend or repeal the provisions of this cantinutn disclosure agreement if the SEA amends or r cols the a licabl ' ~ g ep pp a prova,sian of the Rule or a court of final ~urisdictinn enters judgment that such provisions ofthe Rule are invalid, but aril if and to the extent that the provisions of this sentence would not y prevent an underwriter from lawfully purchasing ar selling Bands in the primary of feting of the Bonds. ~d} Definitions. As used in this Section, the following terms have the me s ascribed to such terms below: "1ViRB" means the Municipal Securities Ruleinaking Board "NRMSIR" means each person wham the SEO or its staff has determined to be a natianall recognised municipal securities information re osita within the rn y p caning of the Rule from. tin~,e to time. 'Rule" means SEC Rule I Sc2-1~, as amended from tune to time. "Er' means the United States Securities and Exchange Cainmissian. "SIDt' means any person designated by the State of Texas ar an authorized de artmen aflicer or agent thereof as and determine p t' ' y d by the EO or its staff to be, a state information depository within the meaning of the Rule from time to time. - section 40. PROTEOTIQI~ DF pLED~E. chapter I~~S, Government node, applies to the issuance of the Bands and the pledge of the revenues granted by the Issuer under Section 9 of this ordinance and is therefore valid, effec~ve, and perfected. IfTexas law is amended at any time while the Bands are autstandin and unpaid such drat the pled a ofthe revenues anted b th ~ g g y e Issuer under Section 9 afthis ordinance is to be subject to the filing requu~ements of ohapter 9, Texas Business & Cam~.erce node then in order to preserve to the registered owners afthe Bands the perfection ofthe security interest in said led e, the Issuer agrees take such measures as it determines are r p g easonable and necessary under Texas law to comply with the applicable provisions of ohapter 9, Texas Business Commerce node and enable a film to erfect the security interest in said led a to occur. g p p g section 4I. FURTHER PREDURES. The Mayan ofthe Issuer, the City Secre ofthe Issuer and all other officers em 1a Y p gees, and agents of the issuer, and each of them, shall be and they are hereby 37 expressly authorized, empowered, and directed from tine to time and at any time to do and perfar ail such aots and things and to execute, acl~nowlede, anal deliver in the name and under the corporate seal and an behalfofth Issuer all such instruxnent~ whether or not herein mentioned, as may be necess or desirable in order to cagy out the terms and provisions ofthis Bond ordinance, the Bonds, the sale ofthe Bonds, and the official Statement; and the Assistant pity Managerl~inance of the City shall cause the expenses of issuance of the Bonds to be paid from the proceeds of sale of the Initial Bonds ar from other lawfull available funds ofthe Issuer. Incase any officer whose signature shall appear on any Band shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the sane as if such nicer had remained in office until such delivery, Section 4~, ~PE~ MEBTI~G. The pity council has found and determined that the meeting at wl~ch this ordinance is considered is open to the public and that notice thereafwas given in accordance with the provisions ofthe Texas open Meetings, Law, Tex. ~ov't~ bode, chapter 551, as amended. section 4~, 1PEALE~. All indentures, ordinances or resolutions, or parts thereof, that are in conflict or inconsistent with any provision ofthis ordinance are hereby repealed to the extent of such conflict and the provisions of this ordinance shall be and remain controlling as to the matters contained herein. section 44. El~'FBTI~E I~AT'~. This ordinance shall become effective immediately upon its passage and approval. Remainder of page intentionally left blanl~~ 3S PASSED AND APPROVED this the 19th day of August, 2007. Mark A. Burroughs, Mayor ATTEST: Jennifer Waiters, City Secretary APPROVED AS TO LEGAL FORM: John Knight, Interim City Attorney sy: ~~ ~~-74 R I r .L !~~ ~~ A1UA~ FINANIA~ ~~~~~ The folio~ng information is referred to in S~ctian ~~ ofthis ordinance; Annum I~inancia~ ~atement~ and ~peratiag Uata The financial infar7natian and operating data with respect to the issuer to be provided annual~,~ in accordance nth such section are as specified hand included in the Appendix or under the tables of the official taternent referred tai below; Tables numbered 1 through i0, inclusive, under the captions "The Electric ~~stem", "The dater yste~n" , ,f~he astewate~ System", "~~bt Inforn~atlvn" and +'F1nanClat Information" ~n the ~f~lclal Statement. Appendix ~ in the ~f~lCial ~tat~n~ent. Aocount~ng Princ~p~~ The accounting principles referred to in such Section are the accounting principles described in the notes to the fnanciai statements referred to in the p~graph above, Denton, Texas Primary Credit Analysts Peter V Murphy New York US$15,42 mil util sys rev bnds ser 2008 dtd 08/15/2008 due 12/01/2027 (1) 212-438-2065 Long lermRating A+/Stable New peter_murphy~ standardandpoors.com Denton util sys Secondary CreditAnalysts long Term Rating A+/Stable Affirmed Paul Jasin Dallas (1) 214-871-1424 Rationale pawl jasin~ standardandpoors.com Standard & Poor's Ratings Services has assigned its `A+' rating to Denton, Texas' series 2008 utility system revenue bonds. The outlook is stable. In addition, Standard & Poor's affirmed its `A+' standard long-term and underlying ratings (SPUR) on the city's utility system debt. The `A+' rating reflects the following credit risks associated with the city's combined electric water and sewer system: ^ The electric system's reliance on the Texas Municipal Power Agency's (TMPA) Gibbons Creek coal facility for more than half of its energy requirements, resulting in above-average electric system capacity costs through 2018, although the all-in cost is competitive during periods of high natural gas prices; ^ Capital pressures associated with Demon's expanding population base, resulting in continued expansion of the city's electric, water, and sewer systems; and ^ Pressure to maintain competitive rates, particularly in the electric system, which has resulted in low debt service coverage levels. The ratings also reflect: RatingsDirect ^ A growing and diverse service area economy with good access to employment throughout Publication Date the strong and diverse Dallas-Fort Worth metropolitan area; and Aug. 8, 2008 ^ Strong liquidity, including the rate stabilization reserves, of more than six months' operating expenditures. Denton, Texas Securing the bonds is a first-lien pledge of net revenues of Demon's electric water and sewer funds. The electric system is dominant, typically accounting for three-quarters of total revenues. Demon's combined utilities business profile of `5' is average, reflecting retail rate competitiveness and proactive management. However, officials expect TMPA wholesale power costs to rise according to current debt service schedules. The system also faces challenges from the above- average fixed charges and dependence on TMPA for the bulk of its power needs, although the strong operating performance and competitiveness of the plant diminish this concern somewhat. Denton benefits from its location in the diverse Dallas-Forth Worth Metroplex. The city's electric system, which provides about 75% of the combined utility revenues, has shown stable retail energy sales growth, a 3.4% annual increase by megawatt-hour from 2003 to 2007, and a 5% annual growth in dollar volume in the same period, as natural gas prices have pushed unit power costs up in recent years. Through June 2011, the electric system's power supply agreement with Constellation Energy Commodities Group Inc. requires Constellation to supply the city, at a cost that varies and is linked to market movements, with all its power requirements above what the city receives from its TMPA base load resource. In addition, Constellation will provide certain ancillary services that permit the city to receive energy from the Electric Reliability Council of Texas power grid. Historically, financial operations have been sound, although as debt issuance has increased to support recent capital projects, particularly in the water department, debt service coverage has declined. For the past three fiscal years, Denton has used its rate stabilization reserves to offset above-market costs associated with its debt-laden TMPA power resource, although in fiscals 2005 and 2006 this amount was limited. The rate stabilization reserve was established to cope with the high debt imbedded in Demon's base load resource and TMPA's Gibbons Creek coal plant. It has not been depleted as fast as earlier projections indicated, due to numerous factors. TMPA's Gibbons Creek debt matures by 2018, and the reserve makes Demon's electric rates competitive in the interim. The city expects modest recurring annual draws on the fund in the 2008 years but maintain strong reserves for the foreseeable future. Adjusted fixed-charge coverage, which factors in rate stabilization fund withdrawals, off- balance-sheet debt, and sizeable transfers to the city's general fund, was an adequate 1.4x in the past two years. Audited results for fiscal 2007, which ended Sept. 30, 2007, indicate solid cash balances, including $70.9 million of rate stabilization funds, equal to about six months' expenditures. Demon's 2008-2012 capital plan is sizable yet manageable, and includes an additional $127 million of new debt during the next five years to fund projects spread evenly between the three utility systems. The city expects further capital needs for water treatment within the next seven years. Outlook The stable outlook reflects Demon's sizable rate stabilization reserves and sufficient rate-setting flexibility, which will allow its electric utility to remain competitive for several years as a deregulated energy market evolves in Texas. The outlook also reflects the assumption that Denton will continue to fully pass along variable fuel charges to its customers on a timely basis and increase base rates as necessary. In addition, the outlook reflects the assumption that the rate stabilization fund will not be depleted at a faster rate than expected, enabling the city to continue to offset high capacity charges associated with its base-load Gibbons Creek coal plant. Standard & Poor's ANALYSIS 2 Denton, Texas Denton uti I sys Unenhanced Rating A+(SPU R)/Stable Affirmed Many issues are enhanced by bond insurance. www. standardandpoors. com Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. 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Credit ratings issued by Ratings Services are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sel I any securities or make any other investment decisions. Accordingly, any user of credit ratings issued by Ratings Services should not rely on any such ratings or other opinion issued by Ratings Services in making any investment decision. Ratings are based on information received by Ratings Services. Other divisions of Standard & Poor's may have information that is not available to Ratings Services. Standard & Poor's has established policies and procedures to maintain the confidentiality of non-public information received during the ratings process. Ratings Services receives compensation for its ratings. Such compensation is normally paid either by the issuers of such securities or by the underwriters participating in the distribution thereof. The fees generally vary from US$2,000 to over US$1,500,000. While Standard & Poor's reserves the right to disseminate the rating, it receives no payment for doing so, except for subscriptions to its publications. Permissions: To reprint, translate, or quote Standard & Poor's publications, contact: Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280; or by e-mail to: research_requestC~standardandpoors.com. Exhibit 3 ~. ~. G ~, 1~ r• ~~ _y FJ :l ;.. ..... a -;r; T.~ :; f~• J - ~~. Y7 rh „i 4.,a ~. ~r, -- ;' L.. ~~ ^.3 ~~ ~, ,, .: y.. n L. ~~ ~ .~ ~a Fr ~' W :.~ "~~ ~F F. i-< .r iy ~ ..s ww '~~~~ ,~•J ,~ ~~/ ~, , .~ w~. ~, :~ '~ ~') J ., s; n? n J u .~ ,~-,. ~~ ~,_ Y„ .,,., ~_ ,,~ +- "J ~~ r 'ra ~ ~j w -~y ~, ,~ r+ ~ ~' ~ o F,, Y y v ~ ~, _ ^r~~i J ~ +~ ~~ ~~ a ~r ,.~ «.~ ~' ,., ~ '4 F ; 1..i V H c j ~ ~dJ .~ J 4 r _~ ~. . ~~,~_ !4} r ~' ~ .. L~. J ~ ,~ ~r ~' = ~ ~.: /, :J ~ L .~ ~ ~_ J ~~ '.J L.. ~. •' U r i^ { •~ y J d ~ ~R~ - 4- .` ~~ L.. ~ ~ wr/ H ~ ~... ~ ,~ ~ r. AJ r ~~ ~,~,~ ~~ f ~~ :. r.W ~ ,~ ~~~ ~J .~ .~ ~ J ~ 'J ;r, :~ ~.:~ :~ ~ ;- J ~i. ~ ~~~ ~:~; y~ ~r.: - ~~ ;~ ~ :~, ~~ ...~ ;~ ,,,,~ ~ ApiYisip~gtFirst~u~hw~~t~penp~n}~ 111 1 1'~Il'~~~Ill t.:)11<1t:'1~~1.. S'l',•~"11~'.'1II~~,~'1~ Ratings: Moody's: "Applied For" (see "Continuing Disclosure of Information" herein) Dated August 7, 2aaa S&P: "Applied For" See {"other Information - NEW ISSUE -Book-Entry-Unly 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 NUT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS ~15,29a,aoo CITY OF DENTON, TEXAS (Denton County) UTILITY SYSTEM REVENUE BLINDS, SERIES 2008 Dated Date: August 15, 2008 Due: December 1, as shown below PAYMENT TERMS ...Interest on the $15,290,000 City of Denton, Texas Utility System Revenue Bonds, Series 2008 (the "Bonds") will accrue from August 15, 2008, (the "Dated Date") and will be payable December 1 and Lune 1 of each year commencing December ], 2008, and will be calculated on the basis of a 3b0-day year consisting of twelve 3a-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. 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 Bonds -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 Bonds - Paying AgentlRegistrar"}. AurIIORIrY FoR ISSUANCE ...The Bonds are issued pursuant to the general laws of the State of Texas, particularly Vernon's Texas Codes Annotated ("V.T.C.A") Government Code, Chapter ] 502, as amended, and an ordinance (the "Series 2008 Ordinance"} passed by the City Council, and are special obligations of the City of Denton (the "City"), payable, both as to principal and interest, solely from and secured by a Erst lien on and pledge of certain Pledged Revenues, including the Net Revenues of the City's combined water, sewer and electric light and power system (the "System"}. Special reference is made to "The Electric System" herein for a description of certain legal and regulatory changes that have affected, and are expected to further affect, the environment in which the City's electric utility system operates. The City has not covenanted or obligated itself to pay the Bonds from monies raised or to be raised from taxation (see "The Bonds -Authority for Issuance" and "The Bonds -Security and Source of Payment"). PURPQSE ...Proceeds from the sale of the Bonds will be used to (a) fund capital improvements for the System; {b) fund a deposit to the System debt service reserve fund; and (c) pay the costs of issuance of the Bonds. MATURITY SCHEDULE Principal Interest CUSIP Principal Amount Maturity Rate Yield SufEx~l} Amount Maturi $ 63o,aao 2008 $ 73 s,ooo 20 18 sas,ooo 2009 ~~o,oo0 2019 525,oao 2010 s 1 s,ooo 2020 540,OOO 2411 855,000 2021 560,000 2412 900,000 2022 58x,000 2013 945,000 2023 b05,000 2414 1,000,000 2024 ~3s,ao0 201s 1,oso,ooo 2025 ~~0,ao0 2016 1,105,000 202 ~00,ao0 201 1,15,000 202 (Accrued Interest from August 15, 2008 to be added) CUSIP PreGx~'~: 249015 Interest CUSIP Rate Yield Suffix {~~ ~~ (1 } CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Paa~s CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. CUSIP numbers are provided far convenience of reference only. The City, Financial Advisor and the Initial Purchaser take no responsibility for the accuracy of such numbers. REQEMPTION ...The City reserves the right, at its option, to redeem Bands having stated maturities on and after December 1, 2019, in whole or in part in principal amounts of $5,000 ar any integral multiple thereof, an December 1, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bands -Optional Redemption"). LEGALITY ...The Bonds are offered far delivery when, as and if issued and received by the Initial Purchaser and subject to the approving opinion of the Attorney General of Texas and the opinion of McCall, Parkhurst & Horton, L.L.P., Band Counsel, Dallas, Texas {see Appendix C, "Form of Bond Counsel's Opinion"). DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company an September 23, 2008. SEALED BIDS DUE TUESDAY, AUGUST 19, 2008 , AT 10:30 AM, CDT For purposes of compliance with Rule 15cZ-IZ of the Securities and Exchange Commission, as amended and in effect on the date hereof, this document constitutes an Official Statement of the City with respect to the Bonds that has been "deemed final" by the City as of its date except for the omission of no more than the information permitted by Rule 15cZ-I2. No dealer, broker, salesman or other person has been authorised by the City to give arty information, or to make any representations other than those contained in this O~cial Statement, and, if given or made, such other information or representations must not be relied upon as having been authorised by the City. This Off vial Statement does not constitute an offer to sell Bonds in arty jurisdiction to any person ro whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor. Arty information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Oj~cial Statement nor any sale made hereunder shall, under arty circumstances, create airy implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See "Continuing Disclosure of Information" for a description of the City's undertaking to provide certain information on a continuing basis. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS INACCORDANCE WITHAPPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONIN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. NEITHER THE CITY NOR ITS FINANCIAL ADVISOR MAKE 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. THIS OFFICIAL STATEMENT CONTAINS "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION ZI e OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INVOLVE KNO WN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS TO BE DIFFERENT FROM THE FUTURE RESULTS, PERFORMANCE AND ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED THAT THE ACT UAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. SEE "OTHER INFORMATION-- FORWARD-LOOKING STATEMENTS DISCLAIMER" HEREIN. TABLE OF CONTENTS PRF~LI1~IIltiAR'k' OFFICIAL S'I"A'TE~IE~'1~ S[?19:1~IARY 3 SELE('7`EU PROVISIO'~S OF TIME BOND ORDIN,~~NCE .............................................................45 C'Irl"Y' OFFICIAES, S"I",OFF AI~U CONSGL'1'Ati1"5..........4 ELECTED OFFICIALS ..................................................... ..4 SELECTED ADMINISTRATIVE STAFF ............................. .. 4 CONSULTANTS AND ADVISORS .................................... .. 4 IlVTRO1) [i ~~rl,1l~~ ................................................................ .. 1 TH. E BONDS ........................................................................ .. 5 ~'I.AN:~GE~~~ENT OT THE SYSTEM ................................ l? TH. E ELECTRIC SYSTF,hI ................................................ 13 TABLE 1-HISTORICAL OPERATING AND FINANCIAL DATA .................................................................. 15 TABLE 2-CURRENT ELECTRIC RATE SCHEDULES........ 1 b TIIE ~~'ATER SYSTEM ...................................................... 3 b TABLE 3 -WATER USAGE ............................................ 37 TABLE 4 -TOP TEN WATER CUSTOMERS ..................... 37 TABLE 5 -WATER RATES ............................................ 37 'I'IIE ~r~l7,I`~-r ~II"~R tiYSrr~~~~ .............................. TABLE b -WASTEWATER RATES .................................. 3 $ wATE.R A~1D 1~'AS~rEwA~1~ER RATE ~-~A~v~cE~>>E~rT3~ I~~I~rr ~i\~~VI\~IA~`I[,/i1 ...................................................... ~1/ TABLE 7 -DEBT SERVICE REQUIREMENTS ................... 40 FINANCIAL INFORI~'IATION ..........................................41 TABLE $ -COMPARABLE CALCULATION OF NET REVENUES AVAILABLE FOR DEBT SERVICE ......41 TABLE 9 -COVERAGE AND FUND BALANCES .............. 42 TABLE 10 -CURRENT INVESTMENTS ............................44 TAX ~1ATTERS ...................................................................5b OTHER INTFORAIATION ................................................... 57 RATINGS ....................................................................... 57 LITIGATION ................................................................... 5 $ REGISTRATION AND QUALIFICATION OF BONDS FOR SALE ................................................................... 5$ LEGAL INVESTMENTS AND ELIGIB[LITY TO SECURE PUBLIC FUNDS IN TEXAS .................................... 5$ LEGAL OPINIONS .......................................................... 5$ CONTINUING DISCLOSURE OF INFORMATION ............... 5~ FINANCIAL ADVISOR .................................................... b0 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION ..................................................... b0 INITIAL PuRCHASER ..................................................... b0 FORWARD-LOOKING STATEMENTS DISCLAIMER ......... b0 CERTIFICATION OF THE OFFICIAL STATEMENT ............ bl APPENDICES GFNERAI.. l~1FURNI~~~'I(}N RF(le'1RDI?~G THE CITY.......... A DT:S(~R[PTIU'~ OF SIr'~'ATE BILL 7 AEI) '~E~II1 ~I'raxAS MUNICIPAL P01~~ERAGENC~' ................................ B EXCERPTS FR01~I THE ANNUAIa FIIv:~NCIAI.. R.EPURT.,, C f~UR1~i OF ~3UNI) (.',(.)UN'fiFi.'S DNIN[!)[~ .......................... ~~) The cover page hereof, this page, the appendices included herein and any addenda, supplement ar amendment hereto, are part of the Preliminary Official Statement. PRELIMINARY OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Preliminary Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Preliminary Official Statement. Na person is authorized to detach this summary from this Preliminary Official Statement or to otherwise use it without the entire Preliminary Official Statement. THE CITY .......................................... The City of Denton is a political subdivision and municipal corporation of the State, located in Denton County, Texas. The City covers approximately 79.$ square miles see "lntroduction - Description of City"}. TxE BONDS .................................... The Bonds are issued as $15,290,OU0 Utility System Revenue Bands, Series 2UU$. The Bonds are issued as serial bonds maturing December 1, 2UU$ through December 1, 2027 see "The Bonds - Description of the Bonds"}. PAYMENT OF INTEREST ................ Interest on the Bands accrues from August 15, 204$, and is payable December 1, 200$, and each June 1 and December 1 thereafter until maturity or prior redemption see "The Bonds -Description of the Bonds," and "The Bands -Optional Redemption"}. AUTHORITY FOR ISSUANCE........... The Bands are issued pursuant to the general laws of the State, including particularly V.T.C.A. Government Code, Chapter 1502, as amended, and an Ordinance passed by the City Council of the City see "The Bands -Authority far Issuance"}. SECURITY FOR THE BANDS ............. The Bonds constitute special obligations of the City payable, both as to principal and interest, solely from and secured by a first lien an and pledge of certain Pledged Revenues including the Net Revenues of the City's combined water, sewer and electric light and power system (the "System"}. Special reference is made to "The Electric System" herein for a description of certain legal and regulatory changes that have affected, and are expected to further affect, the environment in which the City's electric utility system operates. The City has not covenanted or obligated itself to pay the Bands from monies raised or to be raised from taxation (see "The Bonds -Authority for Issuance" and "The Bands -Security and Source of Payment'). REDEMPTION ................................. The City reserves the right, at its option, to redeem Bands having stated maturities on and after December 1, 2019, in whale ar in part in principal amounts of $5,000 or any integral multiple thereof, on December 1, 2U1$, ar any date thereafter, at the par value thereof plus accrued interest to the date of redemption. TAX EXEMPTION ............................ In the opinion of Bond Counsel, the interest on the Bands will be excludable from gross income far federal income tax purposes under existing law, subject to the matters described under the caption "Tax Matters" herein, including the alternative minimum tax on corporations. USE of BOND PROCEEDS ................ Proceeds from the sale of the Sands will be used to (a} fund capital improvements for the System; (b} fund a deposit to the System debt service reserve fund; and ~c} pay the costs of issuance of the Bonds. RATINGS ........................................ The presently outstanding System revenue debt of the City is rated "A1" by Moody's Investors Service, Inc. ~"Moody's"} and "A+" by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"}. Applications for contract ratings an the Bands have been made to Maody's and S&P (see "Other Information -Ratings"}. Boot-ENTRY-ONLY SYSTEM ....... The definitive Bonds will be initially registered and delivered only to Cede & Ca., the nominee of DTC pursuant to the Boak-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,OU0 ar integral multiples thereof. No physical delivery of the Bands will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying AgentlRegistrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC far subsequent payment to the beneficial owners of the Sands see "The Sands -Book-Entry-Only System"}. PAYMENT RECORD .......................... The City has never defaulted with respect to the payment of bonds secured by revenues of the System. For additional information regarding the City, please contact: Bryan Langley Laura Alexander Director of Finance David K. Medanich City of Denton First Southwest Company 215 E. McKinney Street or 777 Main Street, Suite 1200 Denton, Texas 76201 Fort Worth, Texas 76102 (940} 349-8224 (817) 332.9710 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Term City Council Expires Mark Burroughs May, 2010 Mayor Pete Kamp May, 2410 Mayor Pro Tem, At Large Place 5 Joe Mulroy May, 2010 Councilmember, At Large Place 6 Charlye Heggins May, 2009 Councilmember, District 1 Rudy Moreno May, 2009 Councilmember, District 2 Jack Thomson May, 2009 Councilmember, District 3 Chris Watts May, 20x9 Councilmember, District 4 SELECTED ADMINISTRATIVE STAFF Name George C. Campbell Howard Martin Jan Fortune Fred Greene Byars Langley Jennifer K. Waiters John Knight Position City Manager Assistant City Manager Assistant City Manager Assistant City Manager Director of Finance City Secretary Interim City Attorney CONSi1LTANTS AND ADVISORS Auditors* ......................................................................................................................................................................... KPMG LLP Dallas, Texas Bond Counsel ............................................................................................................................. McCall, Parkhurst & Horton L.L.P. Dallas, Texas Financial Advisor ...................................................................................................................................... First Southwest Company Fort Worth, Texas * Weaver & Tidwell were hired on July 15, 2008 as new auditors for the City. 4 PRELIMINARY OFFICIAL STATEMENT RELATING TO $15,2ga,aaa CITY OF DENTON, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 2aa8 INTRODUCTION This Preliminary Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $15,290,000 City of Denton, Texas Utility System Revenue Bands, Series 204$ the "Bonds"}. Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance to be adapted on the date of sale of the Bonds (the "Ordinance"} which will authorize the issuance of the Bonds, except as otherwise indicated herein see "Selected Provisions of the Bond Ordinance"). There follows in this Preliminary Official Statement descriptions of the Bonds and certain information regarding the City and its finances, including, particularly, the City's combined water, sewer and electric light system the "System"}. 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. DESCRIPTIQN aF THE CITY ...The City of Denton, Texas is a political subdivision located in Denton County operating 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 CouncillManager form of government in which 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 79.$ square miles in area. THE BONDS DESCRIPTIQN OF THE BONDS ...The Bonds are dated August 15, 200$, and mature on December 1 in each of the years and in the amounts, and accrue interest at the per annum rates, shown on the cover page hereof. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and such interest will be payable on December 1 and June 1, commencing December 1, 240$. The definitive Bonds 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 The Depository Trust Company ~"DTC"} pursuant to the Book-Entry-Only System described herein. 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 AgentlRegistrar 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 Bonds -Book-Entry-Only System" herein. AvTHORITY FOR ISSUANCE AND PURPOSE ...The Bonds are issued pursuant to the general laws of the State of Texas, particularly V.T.C.A. Govemment Code, Chapter 1502, as amended, and the Ordinance. Proceeds of the bonds will (a} fund approximately $4 million of water system improvements and approximately $11 million of electric system improvements; (b} fund a deposit to the System debt service reserve Fund; and (c}pay the costs of issuance of the Bonds. SECURITY AND SOURCE OF PAYMENT ...The Bonds are special obligations of the City payable, both as to principal and interest, solely from and, together with certain outstanding revenue bonds of the City (collectively with the Bonds, the "Parity Bonds"} and any additional parity bonds ("Additional Bonds"} that may be issued in the future, secured by a first lien on and pledge of the Pledged Revenues, including the Net Revenues of the System. In the Ordinance, the "System" is defined as the City's entire existing waterworks and sewer system and the City's entire existing electric light and power system, together with all future extensions, improvements, enlargements, and additions thereto, and all replacements thereof, and any other related facilities, but excluding any water, sewer, electric, or other facilities of any kind that are declared not to be a part of the System, and which are acquired or constructed by the City with the proceeds from the issuance of "Special Facilities Bonds." The Ordinance defines "Gross Revenues" to include all revenues and income received by the City from the operation and ownership of the System, including the interest income from the investment or deposit of money in any fund created by the Ordinance. The Ordinance defines "Net Revenues" as all Gross Revenues after deducting the current expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service. Maintenance and operating expenses of the System include contractual payments which under Texas laws and their provisions are established as operating expenses. The City has several contracts for the purchase of water and energy that are maintenance expenses of the System. See "The Electric System - "Introduction" and "The Water System --Water Supply", The Ordinance defines "Pledged Revenues" as (a} the Net Revenues of the System, plus (b) the net revenues of the City's drainage system, plus (c} any additional revenues, income or other resources relating to the System which are expected to be available on a regular periodic basis which in the future may, at the option of the City, be pledged to the payment of the Parity Bonds and any Additional Bonds issued hereafter see "Selected Provisions of the Band Ordinance" herein}. The City currently has outstanding Parity Bonds as follows: Outstanding Dated Principal Date Amount ~1~ Issue Description 3/15/1998 $ 1,080,004 Utility System Revenue Bonds, Series 1998 71151199$ 2,744,444 Utility System Revenue Refunding Bonds, Series 199$-A 8/1/1998 4,374,444 Utility System Revenue Refunding Bonds, Series 199$-B 4/15/2444 12,544,404 Utility System Revenue Bonds, Series 2444-A 4/15/2444 840,444 Utility System Revenue Bonds, Taxable Series 2444-B 4/15/2441 20,445,444 Utility System Revenue Refunding and lmprovement Bonds, Series 2441 4/1/2442 45,444,444 Utility System Revenue Bonds, Series 2042-A 4/1/2442 2,920,440 Utility System Revenue Bonds, Taxable Series 2442-B 4/1/2443 33,95 5,444 Utility System Revenue Refunding and Improvement Bonds, Series 2003 9/1/2444 23,790,444 Utility System Revenue Refunding Bonds, Series 2444 5/15/2445 53,585,044 Utility System Revenue Refunding Bonds, Series 2445 71151244E 7,940,044 Utility System Revenue Bonds, Series 244 2/15/2447 41,90,004 Utility System Revenue Refunding Bonds, Series 2447 7/15/2447 1 x,13 5,044 Utility System Revenue Bonds, Series 2447 Total $ 2GG,914,444 (1 } As of July 1, 2008. The Bonds are not a charge upon any other income or revenues of the City and shall never constitute an indebtedness ar pledge of the general credit ar taxing powers of the City. The Ordinance does not create a lien or mortgage on the System, except the Pledged Revenues, and any judgment against the City may not be enforced by levy and execution against any property owned by the City. Special reference is made to "The Electric System" herein for a description of certain legal and regulatory changes that have affected, and are expected to further affect, the environment in which the City's electric utility system operates. PLEDGED REVENUES ...The payment of the Parity Bonds and any Additional Bonds and the interest thereon constitutes a first lien upon the Pledged Revenues. THE RESERVE FUND ...The Ordinance confirms the establishment of the "Reserve Fund" by the City and requires the City to maintain therein an amount of money and investments equal to the average annual principal and interest requirements of all the outstanding Parity Bonds and Additional Bonds (the "Required Reserve Amount"}; provided, however, that the Required Reserve Amount shall never be less than $3,444,444 if the maximum annual principal and interest requirements on all outstanding Parity Bonds and Additional Bonds exceeds $3,044,404. Immediately after the issuance and delivery of the Bonds there shall be deposited to the credit of the Reserve Fund, if and to the extent necessary, from the proceeds of the sale of the Bonds, an amount of money sufficient to cause the Reserve Fund to contain an aggregate amount of money and investments equal to the Required Reserve Amount for all then outstanding Parity Bonds. After the delivery of any future Additional Bonds the City shall cause the Reserve Fund to be increased, if and to the extent necessary, so that the Reserve Fund will contain an amount of money and investments equal to the Required Reserve Amount. Any increase in the Required Reserve Amount may be funded from Pledged Revenues, or from proceeds from the sale of any Additional Bonds, or any other available source or combination of sources. All or any part of the Required Reserve Amount not funded initially and immediately after the delivery of Additional Bonds shall be funded, within not more than five years from the date of such delivery, by deposits of Pledged Revenues in approximately equal monthly installments on or before the 25th day of each month. If at any time after the funding of the Required Reserve Amount there is a depletion therein or the Reserve Fund otherwise holds less than the Required Reserve Amount, the Ordinance requires that the City commence making transfers of Pledged Revenues from the System Fund to the Reserve Fund monthly in an amount equal to llb4th of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The Reserve Fund shall be used to pay the principal of and interest on any Parity Bonds or Additional Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Parity Bonds or Additional Bonds. See "Selected Provisions of the Bond Ordinance" herein. FLow of FUNDS ...The Ordinance confirms the creation of the "System Fund," the "Interest and Sinking Fund," the "Reserve Fund" and the "Extension and Improvement Fund," among others, and provides that all Gross Revenues be credited to the System Fund immediately upon receipt. The current expenses of operation and maintenance of the System are required to be paid from the Gross Revenues as a first charge from amounts in the System Fund. Before making the deposits to the other funds described below, the City is required by the Ordinance to retain in the System Fund an amount at least equal to one-sixth of the amount budgeted for the then current fiscal year for the current operation and maintenance expenses of the System. Thereafter, the City is required to transfer Pledged Revenues in the System Fund to the funds described below and in the following order of priority; First, tv the Interest and Sinking Fund, vn or before the 25th day of each month in approximately equal monthly payments, amounts sufficient, together with any ether funds on hand therein, to pay all of the interest or principal and interest coming due, including with respect to any mandatory redemption requirements, on the Parity Bonds and any Additional Bonds vn the next interest payment date; Second, tv the Reserve Fund, to fund the Required Reserve Requirement, as described above; and Third, to the Extension and Improvement Fund, an amount equal to 8% of the "Adjusted Gross Revenues of the System", which means the Gross Revenues of the System for each year after deducting from the Gross Revenues an amount equal tv the current expenses of operation and maintenance of the System for such year that are directly attributable to (i) all fuel costs related to the production of electric energy by the City andlor (ii} the purchase of electric energy by the City. The Extension and Improvement Fund shall be used far the purpose of paying the costs of improvements, enlargements, extensions, additions, replacements, or other capital expenditures related to the System, or for paying the costs of unexpected or extraordinary repairs or replacements of the System for which System funds are not available, or for paying unexpected or extraordinary expenses of operation and maintenance of the System for which System funds are not otherwise available, or for any ether lawful purpose. Subject to making the required deposits tv the credit of the various Funds when and as required by the Ordinance or any ordinance authorizing the issuance of Additional Bonds, any surplus Pledged Revenues may be used by the City for any lawful purpose. See "Selected Provisions of the Bond Ordinance" herein. RATES , ..The Ordinance requires the City to establish, maintain and collect, such rates, charges and fees for the use and availability of the System that are at all times in amounts necessary (1} to produce Gross Revenues sufficient, together with any other "Pledged Revenues" (which consist of the Net Revenues and any additional revenues, income, or other resources which are expected to be available to the City vn a regular periodic basis that in the future, at the option of the City, may be pledged tv the payment of the Parity Bands and any Additional Bonds}, to pay all current operation and maintenance expenses of the System, and (2) to produce an amount of Pledged Revenues during each fiscal year at least equal tv the greater of 1.25 times the average annual principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds or 1.25 times the succeeding fiscal year's principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds. The City has established certain accounts (the "rate stabilization funds"} within each of its water, sewer and electric light enterprise funds to serve as operating reserves that may be drawn upon from time to time in lieu of increasing utility rates. In accordance with the terms of the Ordinance, the City Council may pledge all or part of the amounts in one or more of the rate stabilization funds to secure the Parity Bands, in which event, such pledged amounts will become "Pledged Revenues" that may be taken into account by the City for purposes of satisfying the foregoing rate covenant. See "Selected Provisions of the Bond Ordinance" herein. OPTIONAL REDEMPTION ...The City reserves the right, at its option, to redeem Bonds having stated maturities on and after December 1, 2U19, in whale or in part in principal amounts of $S,ODU yr any integral multiple thereof, an December 1, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bands of any maturity are to be redeemed, the Paying AgentlRegistrar (or DTC while the Bonds are in Book-Entry-Only farm} shall determine by fat the Bands, or portions thereof, within such maturity to be redeemed. If a Bond (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 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 redemptive date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying AgentlRegistrar on the redemption date. NOTICE OF REDEMPTION , , .Not less than 30 days prior to a redemption date for the Bands, the City shall Cause a notice of redemption to be sent by United States mail, first class, postage prepaid, tv the registered owners of the Bonds to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying AgentlRegistrar 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 BEF,N DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. ADDITIONAL BONDS ... Subject to satisfying certain conditions for the issuance of parity bonds, the City has reserved the right in the Ordinance to issue Additional Bonds from time to time. Any such Additional Bands will be secured on a parity with the pledge of the Pledged Revenues that secures the outstanding Parity Bonds including the Bonds. Among the conditions required by the Ordinance far the issuance of Additional Bonds, is the delivery to the City of a written certification from an independent certified public accountant to the effect that, in his or its opinion, during either the next preceding fiscal year, or any twelve consecutive calendar month period out of the 18-month period immediately preceding the month in which the ordinance authorizing the issuance of the then proposed Additional Bonds is passed, the Pledged Revenues were at least (i} 1.25 times an amaunt equal to the average annual principal and interest requirements, and (ii} 1.1 a times an amaunt equal to the principal and interest requirements during the fiscal year during which such requirements are scheduled to be the greatest, of all Parity Bands and Additional Bands which are scheduled to be outstanding after the delivery of the then proposed Additional Bonds. In calculating the amaunt of Pledged Revenues for this purpose, if there has been any increase in the rates ar charges far services of the System which is then in effect, but which was not in effect during all or any part of the entire period far which the Pledged Revenues are being calculated (hereinafter referred to as the "entire period") then the certified public accountant, ar in lieu of the certified public accountant a firm of consulting engineers, may determine and certify the amaunt of Pledged Revenues as being the total of (i) the actual Pledged Revenues far the entire period, plus (ii) a sum equal to the amount by which the actual billings to customers of the System during the entire period would have been increased if such increased rates ar charges had been in effect during the entire period. Reference is made to "Selected Provisions of the Band Qrdinance" far further requirements with respect to the issuance of Additional Bands. AMENDMENT QF THE ORDINANCE ...The ordinance provides that the holders ar owners of Parity Bonds and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding Parity Bands and Additional Bands shall have the right from time to time to approve any amendment to the Qrdinance which may be deemed necessary ar desirable by the City, provided, however, that without the consent of all holders ar owners of Parity Bonds and Additional Bonds, no amendment may be made that would: (1) make any change in the maturity of the outstanding Parity Bonds or Additional Bonds; (2} reduce the rate of interest borne by any of the outstanding Parity Bonds or Additional Bands; (3} reduce the amaunt of the principal payable on the outstanding Parity Bands or Additional Bands; (4) modify the terms of payment of principal of ar interest on the outstanding Parity Bands or Additional Bonds, ar impose any conditions with respect to such payment; (5} affect the rights of the holders ar owners of less than all of the Parity Bonds and Additional Bands then outstanding; (b} change the minimum percentage of the principal amount of Parity Bonds and Additional Bands necessary far consent to such amendment. Far a description of the notice requirements and other provisions pertaining to the amendment of the Qrdinance, see "Selected Provisions of the Bond Qrdinance." DEFEASANCE QF BQNDS ...The Qrdinance provides far the defeasance of the Bonds when payment of the principal of and premium, if any, on Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, ar otherwise}, is provided by irrevocably depositing with a paying agent, intrust (1}money sufficient to make such payment or (2} Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent far the respective series of Bands. The Qrdinance provides that "Defeasance Securities" means (1 }direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency ar instrumentality and that are rated as to investment quality by a nationally recognized investment rating fine not less than AAA or its equivalent, and (3) noncallable obligations of a state or an agency ar a county, municipality, ar other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, The City has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit far such defeasance and to withdraw far the benefit of the City moneys in excess of the amount required far such defeasance. Upon such deposit as described above, such defeased Bonds shall no longer be regarded to be outstanding obligations payable from Pledged Revenues, but will be payable only from the funds and defeasance securities deposited in escrow and will not be considered debt of the City far purposes of applying any limitation on the City's ability to issue revenue obligations ar for any other purpose. After firm banking and financial arrangements far the discharge and final payment ar redemption of the Bonds have been made as described above, all rights of the City to initiate proceedings to call the Bands for redemption or take any other action amending the terms of the Bands are extinguished; provided, however, that the right to call the Bands far 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 Bonds far redemption; (ii) gives native of the reservation of that right to the owners of the Bonds 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 authorize; and (iv) at the time of the redemption, satisfies the conditions of the preceding paragraph with respect to such Bands as though it was being defeased at the time of the exercise of the option to redeem the Bands, after taking the redemption into account in determining the sufftciency of the provisions made for the payment of the Bonds. BDOK ENTRY ONLY SYSTEM ... Thrs section describes haw ownership of the Bonds is to be transferred and how the principle of, premium, if any, and interest on the Bonds are to be paid to and accredited by DTC while the Bands are registered in its nominee name. The mformatian in this section concerning DTC and the Baak-Entry-Daly System has been provided by DTC for use in disclosure documents such as this Official Statement. Tie City believes the source of such information to be reliable, but takes no respansrbrlity for the accuracy ar completeness thereof The City cannot and does not give any assurance that (~~ DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participants, (2~ DTC Participants ar others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds, ar redemption or other notices, to the Benefrcia[ Owners, or that they will da sa an a timely basis, ar (3~ DTC will serve and act rn the manner described in this Offrcial Statement. The current rules a~a~alicable to DTC are on frle with the Securities and Exchange Commission, and the current ~arocedures of DTC to be followed in dealing with DTC Partici~aants are on j~le with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co, (DTC's partnership nominee). One fully registered certificate will be issued for each maturity of the Bonds in the aggregate principal amount of each such maturity and will be deposited with DTC. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds 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 the Bonds in the aggregate principal amount thereof and will be deposited with DTC. DTC, the world's largest depository, is alimited-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 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over laa 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC}, as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such 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 Standard & Poor's highest rating: AAA. 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.or;~. Purchases of Bands under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("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 Bonds 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds 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 Bonds 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 Bonds; DTC's records reflect only the identity of the Direct Participant to whose account such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County 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 Bonds are credited on the record date identified in a listing attached to the Omnibus Proxy). Redemption proceeds and principal and interest payments on the Bonds 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 AgentlRegistrar 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 or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds and principal and interest 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 Bonds at any time by giving reasonable notice to the City and the Paying AgentlRegistrar. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system ofbook-entry transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered. Use of Certain Terms in Other Sections of this Offacial Statement. In reading this Official Statement it should be understood that while the Bonds 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 Bands, 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 order 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 Underwriters. Use of Certain Terms in 4tlaer Sections of dais Official Statement. In reading this Official Statement it should be understood that while the Bonds 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 Bonds, 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 ordinance will be given only to OTC. Information concerning DTC and the Book-Entry-only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City or the Financial Advisor, Effect of Termination of Bvak-Entry-Unly System. In the event the Book-Entry-only System with respect to the Bonds is discontinued by OTC, or the use of the Book-Entry-Only System with respect to the Bonds is discontinued by the City, printed securities certificates will be issued to the respective holders of the Bonds, as the case may be, and the respective Bonds will be subject to transfer, exchange, and registration provisions as set forth in the ordinance, summarized under "The Bonds -Transfer, Exchange, and Registration" below. PAYING AGENTIREGISTRAR ...The initial Paying AgentlRegistrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinance, the City retains the right to replace the Paying AgentlRegistrar. The City covenants to maintain and provide a Paying AgentlRegistrar at all times until the Bonds are duly paid and any successor Paying AgentlRegistrar 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 AgentlRegistrar for the Bonds. Upon any change in the Paying AgentlRegistrar for the Bands, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying AgentlRegistrar. Interest on the Bonds shall be paid to the registered owners appearing on the registration books of the Paying AgentlRegistrar at the close of business on the Record Date (defined below), and such interest shall be paid (I) by check sent United States Mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying AgentlRegistrar or (ii) by such other method, acceptable to the Paying AgentlRegistrarrequested by, and at the risk and expense of, the registered owner. Principal of the Bonds will be paid to the registered owner at their stated maturity or earlier redemption upon presentation to designated paymentltransferoffke of the Paying AgentlRegistrar. If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the designated paymentltransfer office of the Paying AgentlRegistrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book-Entry-Only System should be discontinued, printed certificates will be deliver to the registered owners and thereafter the Bonds may be transferred and exchanged on the registration books of the Paying AgentlRegistrar only upon presentation and surrender of such printed certificates to the Paying AgentlRegistrar 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. Bonds may be assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to the Paying AgentlRegistrar. New Bonds will be delivered by the Paying AgentlRegistrar, in lieu of the Bonds l~ being transferred or exchanged, at the designated office of the Paying AgentlRegistrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Bonds issued in an exchange or transfer of Bonds 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 Bonds 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 AgentlRegistrar. New Bonds registered and delivered in an exchange or transfer shall be in any integral multiple of $S,OOD for any one maturity and for a like aggregate designated amount as the Bonds surrendered for exchange or transfer. See "The Bonds -Book-Entry-Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability ofthe Bonds. Neither the City nor the Paying AgentlRegistrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Band. RECORD DATE FOR INTEREST PAYMENT ...The record date ("Record Date") far the interest payable an the Bonds on any interest payment date means the 15a` day of the preceding month. In the event of anon-payment of interest an a scheduled payment date, and for 3D days thereafter, a new record date far such interest payment (a "Special Record Date"} will be established by the Paying AgentlRegistrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date} shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of a Bond appearing an the registration books of the Paying AgentlRegistrar at the close of business on the last business day next preceding the date of mailing of such notice. BONDHOLDERS REMEDIES ...The Ordinance does not specify events of default with respect to the Bonds. If the City defaults in the payment of principal, interest, or redemption price on the Bonds when due, or the City defaults in the observation or performance of any other covenants, conditions, or obligations set Earth in the Ordinance, the registered owners may seek a writ of mandamus to compel the City or City officials to carry out the legally imposed duties with respect to the Bonds if there is no other available remedy at law to compel performance of the Bonds or the Ordinance and the City's obligations are not uncertain ar disputed. The issuance of a writ of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be arbitrarily refused. There is na acceleration of maturity of the Bonds in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year, The Ordinance does not provide far the appointment of a trustee to represent the interest of the owners of the Bonds, upon any failure of the City to perform in accordance with the terms of the Ordinance, ar upon any other condition and accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative af, and be financed by, the registered owners. On ]une 30, 20Db, the Texas Supreme Court ruled in Tooke v. City of Muria, 147 S.W. 3~d 325 (Tex, 20Ub}, that a waiver of sovereign immunity in a contractual dispute must be provided far 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 the Bonds may not be able to bring such a suit against the City far breach of the Bands, or the Ordinance covenants in the absence of City action. Chapter 13? 1, Texas Government Cade ("Chapter 13? 1 "}, 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 bonds, but in connection with the issuance of the Bands and the Certificates, the City has not waived sovereign immunity and is not using the legal authority provided by Chapter 1371, 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. 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, such provision is subject to judicial construction. 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 owners of the Bonds which has sought protection under Chapter 4. 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 far broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Bonds 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. 11 MANAGEMENT OF THE SYSTEM The System includes the City's entire existing electric, light and power system and the existing waterworks and sewer system, together with all future extensions, improvements, enlargements and additions thereto. 2'he Public Utilities Board ... By City Charter, there has been created a Public Utilities Board (the "Board"} composed of seven members, appointed by the City Council with the City Manager and the Assistant City Manager of Utilities serving as ex-officio, non-voting members of the Board. The Board serves the Department of Utilities as a consulting and advisory board. The duties of the Board are summarized as follows. 1. Review of the Annual Utility Operating Budget and 5-year Capital lmprovements Plan, and the transmission thereofto the City Council. 2. Review of recommended: a. expansion of, additions to, betterment of, or extensions to the System; b. incurring of debt; c. issuance of bonds and d. establishment of rates and charges. All actions of the Board are subject to final approval of the City Council. Management of the System ...The System is managed by the Assistant City Manager of Utilities, who is responsible to the City Manager. The System is organized into three major services, Electric, Water and Wastewater, and consists of approximately 368 employees. In addition, within Utility Administration, there are various administrative staff, customer service, energy management, and financial administration responsibilities. The Electric Utility is composed oftwelve main divisions: 1. Electric Power Supply Administration, 2. Electric Wholesale Power, 3. Electric Operations, 4, Electric Dispatch, 5. Electric Distribution, 6. Electric Substations, 7. Electric General Operations Administration, 8. Electric Engineering, 9. Electric Metering, 10, Electric Administration, 11. Electric Community Relations, and 12. Safety and Training. The WaterlWastewater Utilities are composed of six main functional areas, which are divided into twelve divisions, each of which is headed by a division manager. The six fu~actionai areas include: 1. Water Production, 2. WaterlWastewater Field Services, 3. Wastewater Treatment Plant, 4. Mu~aicipal LaboratorylEnvironmental Services, 5. Drainage, and 6. Engineering Services. The System utilizes the services of the City's Finance Department for accounting, purchasing and warehousing. The System also utilizes various administrative departments of the City for its personnel, and data processing needs. UTILITY RATES ... It is the City's policy to review electric, water and wastewater rates on an annual basis to assure adequacy and equity. lndependent consultants are generally used every 5th year, with City staff completing the work in house during the interim. Rate recommendations are submitted by the staff to the Board for review and approval, which then forwards a recommendation to the City Council for final approval. To date, the City Council has approved all rate recommendations ofthe Board. 12 THE ELECTRIC SYSTEM INTRODUCTION ...The City has awned and operated its electric light and power system (the "Electric System"} since 1905. In order to secure access to a long-term baselaad electric generating facility, the Cities of Bryan, Denton, Garland and Greenville, Texas created the Texas Municipal Power Agency ("TMPA") in 1975. TMPA is a faint power agency without taxing power, and a separate municipal corporation and political subdivision of the State that operates in accordance with Chapter 163, Texas Utilities Code, as amended. (See "The Electric System -The TMPA Power Sale Agreement" below and "Appendix B - Description of Senate BiII 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency.") TMPA owns the Gibbons Creek Steam Electric Station ("Gibbons Creek"}, acoal-fired generating plant located in Grimes County, Texas, which has a net generating capacity of 462 megawatts ("MW"), The City's contractual right to TMPA's generation represents approximately 9$ MW, or approximately 30°/v of the City's projected 2008 peak system-wide demand. The City's rights and obligations relative to TMPA are set forth in an agreement (the "TMPA Agreement"), dated as of September 1, 1976, between TMPA and the cities of Bryan, Denton, Garland and Greenville (collectively, the "Member Cities"}. In June 2001, the City sold its uneconomical generating units, having a capacity of 178 MW, and entered into afive-year power purchase agreement (the "2001 Power Purchase Agreement"} with PG&E Energy Trading -Power, L.P. ("PG&E") the agreement was subsequently assigned by PG&E to Constellation Power Source, Inc. Effective November 1, 2004, Constellation Power Source, Inc. became known as Constellation Energy Commodities Group, Inc. ("Constellation Commodities Group"). The 2001 Power Purchase Agreement expired on June 29, 2006. Dn May 16, 2006, the City Council approved a new S year agreement with Constellation Commodities Group (the "200b Power Purchase Agreement"), the term of which begins on June 30, 2006 and expires on June 30, 2011 unless terminated prior to that date as permitted under certain exceptional circumstances set forth in the 2006 Power Purchase Agreement. See "The Electric System -Electric System Challenges and Responses -Power Purchase Agreements." The Electric System, like all other municipal electric systems in the State, is presently functioning as a traditional electric utility, supplying all aspects of electric service to its customers. Senate Bill 7 adopted by the Texas Legislature (the "Legislature") in 1999 ("Senate Bill 7" or "SB 7") provides for open competition in the provision of retail electric service in the State, which competition commenced on January 1, 2002 in the part of the State that is within the service area of the Electric Reliability Council of Texas ("ERGOT"}. The City is located in the ERC4T service area. See "The Electric System -Texas Deregulation Structure, Status and Issues - ERC~T." Under SB 7, municipally-owned utilities ("M4Us"), like the Electric System, are not required to participate in the competitive retail market, although they may "apt in" to retail electric competition. To date, na M4U in ERC4T has opted in to competition, and under the statutory scheme of SB 7 any decision by a M4U to apt in is irrevocable. Ta date, the City Council has decided not to open the City to retail electric competition based on various technical and financial analyses. The mast recent comprehensive assessment of the City's options with respect to retail electric competition was made in January 2004. The assessment described issues that would need to be addressed by the City Council in the event that it or a future Council should be disposed toward opting into retail competition; certain of the issues would affect all options available to the City, while other issues would apply only in selected scenarios. The report identified a number of risks and uncertainties associated with opting in to retail electric deregulation, but concluded that the largest single issue is the City's ability to pay its TMPA obligations. The City's TMPA contract requires each Member City to approve certain changes affecting the consortium, and the City is contractually obligated to pay its portion of TMPA fixed casts through at least 2018, which provides the prospect of potentially large "stranded costs" for the City (see "The Electric System -The TMPA Power Sale Agreement"}. Other issues identified in the report include a recommendation far reduction of fund transfers to the General Fund of the City, which has been implemented by the City. The transfers are allowed by the City Charter to be made by the Electric System (see "The Electric System - Contributions to the City of Denton"}, ether factors noted in the report include additional costs that would be borne by the City in connection with technology upgrades needed to accommodate multiple retail energy providers if the Electric System were to opt to remain as the sole transmission and distribution utility in the City, as is permitted by SB 7. Today, the issues surrounding the opt in decision remain the same as those identified in the 2004 report. While SB 7 generally deregulates the retail sale of energy in the State, SB 7 maintains the existing regulated structure with respect to electric transmission and distribution services in the State. As discussed below under "The Electric System -The New Nodal Design Rule," on Apri15, 2006, the Public Utility of Commission of Texas (the "PUG") ordered the adoption of a new, nodal wholesale market design within ERC~T based on the theory of lacational marginal pricing of energy, Although, the operation of the nodal system was ordered by the PUC to begin on January 1, 2009, ar as soon thereafter as technically possible, through implementation of a set of ERGOT-proposed protocols (the "Nadal Design Rule"). Electric System Management is of the view that, due to a number of challenges, including that ERC4T will require a large number of additional skilled staff to create and implement the necessary complex software system required by the Texas nodal system, there is some risk that this date will not be met. It is Electric System Management's view that the most probable nodal system implementation date will be Fall of 2009. The Nodal Design Rule will dramatically alter the wholesale market design in ERC~T. However, for the reasons discussed below, Electric System Management is of the view that the Electric System is positioned to continue to participate in the distribution of energy within the City's service area, which in recent years has experienced strong growth trends, particularly with respect to energy sales to the City's primarily residential customer base. See "Appendix B -Description of Senate Bi117 and the Texas Municipal Power Agency -Texas Municipal Power Agency -Senate Bill 7, TMPA and the Member Cities" and "Appendix B - Description of Senate Bill 7 and the Texas Municipal Power Agency -Senate Bill 7." 13 FACTQRS AFFECTING THE ELECTRIC UTILITY INDUSTRY ...The electric utility industry in the State in general has been, and in the future may be, affected by a number of factors that could impact the financial condition and competitiveness ofthe Electric System. Such factors include: • prevailing governmental palicies and regulatory actions, including those of the Federal Energy Regulatory Commission ("FERC"}, the North American Electric Reliability Council ("NERC"), the Environmental Protection Agency, the Texas Commission on Environmental Quality ("TCEQ"}, the PUC and ERGOT, with respect to: - wholesale market design, including allocation of transmission congestion costs; - transmission cost rate structure; - purchased power and recovery of investments; - acquisitions and disposal of assets and facilities; - operation and construction of facilities; - present or prospective wholesale and retail competition; - changes in and compliance with environmental and safety laws and policies; and - developments in Federal law with respect to the ability of the City and TMPA to finance and operate facilities and make energy sales in a manner that permits them to finance facilities with, and honor existing covenants with respect to, tax-exempt debt; • continued implementation of the legislation passed during the ]999, 2001, 2003 and 2005 sessions of the Texas Legislature to restructure the electric utility industry in Texas or any amendments that may be enacted to that legislation in future Texas legislative sessions; • power costs and availability, including the continued development, and financial stability of owners of, merchant power plants in the State; • weather conditions and other natural phenomena, and acts of sabotage, wars or terrorist activities; • unanticipated population growth or decline, and changes in market demand and demographic patterns; • changes in business strategy, development plans or vendor relationships; • competition for retail and wholesale customers; • access to adequate and reliable transmission facilities to meet changing demands; • pricing and transportation of coal, natural gas and other commodities that may affect the cost of energy sold to the City by TMPA and others; • unanticipated changes in interest rates, commodity prices or rates of inflation; • unanticipated changes in operating expenses and capital expenditures; • commercial bank market and capital market conditions; • competition for new energy development and other business opportunities; • legal and administrative proceedings and settlements; • inability of the various counterparties to meet their obligations with respect to the Electric System's power purchase arrangements; • significant changes in the Electric System's relationship with its employees, including the availability of qualified personnel; • significant changes in critical accounting policies material to the Electric System; and • actions of rating agencies. The City cannot fully predict what effects such factors will have on the operations and financial condition of the Electric System, but the effects could be significant. The discussion of such factors herein does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the electric utility industry is, and will be, available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the Bonds should obtain and review such information. 14 TABU 1- HISTORICAL QPERATING AND FINANCIAL DATA The table below sets forth certain operating and financial data with respect to the Electric System for each of the five most recently completed fiscal years. Average Number of Monthly Year Ended September 3Q, Customers by Service ClasslEcatlon 2QQ7 2QQ6 2QQ5 2QQ4 2QQ3 Residential 38,418 37,148 36,699 34,635 32,478 Commercial and industrial 4,604 4,49Q 4,574 4,269 4,12Q Other 585 548 573 603 459 Tota] 43,607 42,186 41,846 39,507 37,Q57 Annual Megawatt Hours Sales by SeNlce C~a551fICatlOn Residential 466,135 478,791 443,4Q0 411,893 414,411 Commercial and Industrial 767,369 77Q,Q98 735,225 685,47Q 654,257 Other 34,633 39,284 39,873 38,787 38,910 Subtotal 1,268,137 1,288,173 1,218,498 1,136,150 1,107,578 Sales for Resale - - - - - Tatal Sales 1,268,137 1,288,173 1,218,498 1,136,15Q 1,107,578 Lass and Unaccounted 58,179 54,442 62,286 54,885 57,5b 1 Total MW to System 1,326,316 1,342,615 1,280,784 1,191,Q35 1,165,139 Lass and Unaccounted 4.39% 4.Q5% 4.86% 4.61% 4.94% Annual Revenue by Service Classification ($ in Thousands) ~'~ Residential $ 47,383 $ 54,005 $ 48,193 $ 41,174 $ 40,607 Commercial and industrial 62,570 73,612 64,929 55,773 49,523 Other 4,626 5,670 5,307 4,741 4,422 Total $ 114,579 ~ 133,287 $ 118,429 $ 101,688 $ 94,552 Analysis of Electric Billing Residential Customers Avg. Monthly Bill per Customer $ 123.33 ~ 145.38 ~ 131.32 $ 118.88 $ 125.03 Avg. Monthly kWh per Customer 1,213 1,289 1,208 1,189 1,276 Avg. Monthly Cents per kWh 10.17 11.28 10.87 10.00 9.80 Commercial and Industrial Customers Avg. Monthly Bill per Customer $ 1,359.03 $ 1,639.46 $ 1,419.52 ~ 1,306.45 $ 1,202.02 Avg. Monthly kWh per Customer 16,667 17,151 16,074 16,057 15,880 Avg. Monthly Cents per kWh 8.15 9.56 8.83 8. l4 7.57 Capacity and Energy Mix (rounded to nearest MW}Capacity Owned Capacity (MW} - - - - - Firm Purchase (MW} - TMPA 98 98 98 98 98 Firm Purchase (MW} -Other 254 248 242 236 23Q Total 352 346 340 334 328 Annual Peak Demand 307 319 299 277 286 Energy Owned Capacity (MWH} - - - - - Firm Purchase (MWH} - TMPA 729,502 759,493 731,647 672,531 722,401 Firm Purchase (MWH} -Other 596,422 583,123 549,137 518,504 442,738 Total 1,325,924 1,342,616 1,280,784 1,191,035 1,165,139 (1} Changes in revenue from period to period is attributable in large part to change in the cost of fuel during the respective period, and the resulting changes made by the City in the energy cost adjustment ("ECA") factor of the System's electric rate schedules. The ECA is adjusted to recover the cost associated with purchased power. The ECA is a pass through of fuel cost to Electric System Customers. The average ECAs for fiscal years 2003, 2004, 2045, 2006, and 2007 were $0.03481KWh, $0.03931KWh, $0.04651KWh, $0.06881KWh, and $0.03431KWh, respectively. 15 TABLE ~- CllRRENT ELECTRIC RATE SCHEDULES Approximately 97% of the Electric System customers are billed under the rate schedules summarized below. Special rate schedules are available for customers with unique load curves such as city street lighting, etc. Residential Service Rate (Effective October 1, 2047} Applicable to any customer for all electric service used for residential purposes in an individual private dwelling or an individually metered apartment, supplied at one point of delivery and measured through one meter. This rate is not applicable to resale service in any event, nor to temporary, standby, or supplementary service. Facili Char e Single-Phase $ $.251 bill Three-Phase $16.54 I bill Ener Char a -Winter Rates First 640 kWH 5.70¢ I kWH Additional kWH 3.79¢ I kWH Ener~y Charge -Summer Rates All kWH 5.74¢ I kWH Energy Cost Adjustment See Schedule ECA below. General Service Large (Effective October 1, 2007 The General Service Large Rate (GSL} is applicable to any commercial ar industrial customer having a minimum actual demand of 2SD KVA or 225 kW far all electric service supplied at one point of delivery and measured through one meter. Customers with an average actual demand equal to or greater than 200 kVA or l$0 kW during the previous twelve month period may be allowed service under this rate, subject to the minimum billing provision. Customers other than commercial and industrial may be allowed service under this rate, subject to the minimum billing provision. Customers who elect to discontinue service under this rate are ineligible for service under this rate far l2 months. This rate is not applicable to resale service in any event, or to temporary, standby, or supplementary service. Facili , Char a $65.55 I bill Demand Charge $ 9.33 I kVA (Minimum of 250 kVA billed) Energy Charge per billing t~eriad First 200,000 kWh 2.14¢ I kWh Additional kWh 1,21 ¢ I kWh Energw Cost Adjustment See Schedule ECA below. Minimum Billing For each billing period, the Customer shall be obligated to pay the following charges as a minimum, whether or not any energy was actually used: (1} The Facility Charge plus: (2} The Demand Charge l6 General Service Medium (Effective Gctober 1, 2007} The General Service Medium ("GSM"} rate is applicable to any commercial or industrial customer having a maximum demand of at least ~~ kW in any one of the twelve (12) previous months but less than 225 kW in each of the previous twelve (12) months for all electric service supplied atone point of delivery and measured through one meter. This rate is not applicable to resale service in any event, or to temporary, standby, or supplementary service. Facility Charge Single-Phase Three-Phase Demand Charge Energy Charge der billing period First 6,000 kWh Additional kWh Energ Cy ost Adjustment $15.801 bill $ 21.101 bill $ 4.001 kW (All kW} 4.43¢ 1 kWh 3.66¢ 1 kWh See Schedule ECA below. Minimum Billing For each billing period, the Customer shall be obligated to pay the following charges as a minimum, whether or not any energy was actually used: (1) The Facility Charge plus: (~) The Demand Charge General Service Small (Effective Gctober 1, 2007} The General Service Small (GSS} rate is applicable to any commercial or industrial customer having a maximum demand of less than 20 kW in each of the previous twelve (12) months for all electric service supplied at one point of delivery and measured through one meter, If demand in any month exceeds 20kW, billing will be made under the Rate Schedule GSM and Customer must remain on the GSM rate for a minimum of twelve (12} billing periods. This rate is not applicable to resale service in any event, or to temporary, standby, or supplementary service. Facili Char e Single Phase $15.801 bill Three Phase $21.101 bill Energy Charge per billin;~ period First 2,500 kWh 7.02¢ 1 kWh Additional kWh 3.67¢ 1 kWh Energy Cost Adjustment See Schedule ECA below. Minimum Billing For each billing period, the Customer shall be obligated to pay the following charges as a minimum, whether or not any energy was actually used: Single-Phase Facility Charge Three-Phase Facility Charge Ener y Cg ost Adjustment (Effective October 1, 2007} The Energy Cost Adjustment rate is set by the Public Utilities Board. The ECA rate shall be reviewed on a monthly basis and adjusted as defined below to recover the variable cost of energy delivered to customers, Variable energy cost includes the variable cost of Texas Municipal Power Agency (TMPA} energy (excluding the portion of TMPA's energy charge associated with fixed costs}, the variable cost of purchased energy (excluding demand payments or fees for services}, and fuel costs. 17 Energy Cast Adjustment Balancin Account Calculation The ECA Balancing Account shall be calculated using the following formula: ECA Balancing Account = (Actual plus Projected ECA revenue} - Projected Energy Cost) Where: Projected Energy Cost = Actual plus Projected cumulative cost of fuel} + (Actual plus Projected cumulative variable cost of TMPA energy} + Actual plus Projected cumulative variable purchased energy cost). The General Manager, Denton Municipal Electric ar hisll~er designee shall calculate the ECA Balancing Account balance monthly. In the event that the ECA Balancing Account balance calculated during the last month of each fiscal quarter (December, March, June, and September} is greater than or less than zero dollars ~$0} by $500,000 or more during the next quarter, the General Manager, Denton Municipal Electric or hislher designee must recommend to the Public Utilities Board an ECA rate adjustment sufficient to recoverlreturn any underlover collection, and maintain the Electric System in a financially sound position. The Public Utilities Board shall consider that recommendation and may adjust the ECA rate for the quarter immediately following as necessary to maintain the Electric System in a financially sound position. Energy Cost Adiustrnent Calculation ECA = [Projected Energy Cost) + (ECA Balancing Account}]I(Projected kWh sales} Energ Cy ost Adjustment Char,_ge The Energy Cost Adjustment Charge shall be based on actual kWh consumption during the billing period. Energy Cost Adjustment Charge = kWh x ECA rate Extraordinary C ircumstance ECA Rate Adi ustment In the event that the ECA Balancing Account balance calculated for any month is greater than or less than zero dollars ($0} by $2,500,000 or more during the next month, the General Manager, Denton Municipal Electric or hislher designee shall recommend to the Public Utilities Board an ECA rate adjustment sufficient to recaverlreturn any underlaver collection, and maintain the Electric System in a financially sound position. The Public Utilities Board shall consider that recommendation and may adjust the ECA rate for the month immediately following with the goal of maintaining the Electric System in a financially sound position. For FY 2007-08, the quarterly ECA rates have been set at $0.061281KWH far the first, second, third and fourth quarters. MANAGEMENT OF THE ELECTRIC SYSTEM ...The Board serves the City's Department of Utilities as a consulting and advisory board. All actions of the Board are subject to final approval of the City Council. The General Manager, Denton Municipal Electric manages the Electric System with responsibility for wholesale power supply, distribution, engineering, substations, marketing, metering, planning and safety operations. The staff of the Electric System includes approximately l20 full-time and part-time professional and administrative staff. THE ELECTRIC SYSTEM BUSINESS PLAN ...Although there are many evolving issues concerning retail electric competition in the State and potential changes from the upcoming nodal market implementation, the Electric System has identified and implemented a business strategy, which is described below, designed to permit the City to accommodate its long-term contractual commitment to purchase energy from TMPA, while positioning the Electric System far flexibility. In accordance with its strategy, the City has taken a number of steps in connection with the changing market, including, in particular, the transactions described under "The Electric System -Electric System Challenges and Responses -Power Purchase Agreements." Due to changes effected by SB 7, as well as the implementation of a nodal market environment, the City's strategies must continue to evolve with new market developments, including the impact an the City's electric customers of increased fuel costs, and regulatory and legal developments that effect the operations of the Electric System and ERGOT market. To the extent permitted by City resources, the City monitors Federal and State legislative and regulatory actions far the purpose of observing and influencing, to the extent possible, developments that could affect the operations of the Electric System and the options of the City relative to the Electric System. Further, the City is actively engaged as a stakeholder in connection with ERGOT market design, reliability, and operations meetings as well as PUC stakeholder meetings, The current Electric System business plan generally provides that the electric facilities owned by the City will be transmission and distribution facilities, which provide a return on investment established by the City Council, whether or not the City Council elects to open the City to full retail electric service competition. This Electric System business plan was implemented in 18 anticipation of the restructuring of the Texas energy market that occurred in 2002 in accordance with Sg ~ and receives periodic review and revision when necessary. This plan was implemented to provide the City with a relatively safe cash flow from the Electric System transmission and distribution business, which is not subject to competition, even under a retail deregulation scenario, while reducing risk to the City of holding unneeded generation capacity in the event the City Council should elect to open the Electric System's service territory to retail power competition. In addition, it is the City's policy to bond-finance transmission and distribution facilities, which permits the City to amortize the cost of such facilities over a period that approximates the useful life of the facilities. The City anticipates that it will continue to band-finance such facilities using relatively low-cost tax-exempt debt, and the Bonds are being issued to fund $11 million of system improvements for the Electric System. See "The Electric System -Capital Improvement Plan and Additional Debt." Principal policy initiatives that have been pursued in light of the enactment of Sg 7 include the City's sale of its obsolete generating assets in 2001 and replacement of those assets with capacity and energy through power supply and management contracts. In entering into the 2001 Power Purchase Agreement and the 2006 Power Purchase Agreement collectively with the 2001 Power Purchase Agreement, the "Power Purchase Agreements"}, the City has augmented the energy it is obligated to purchase from TMPA with energy purchased under the agreements, which represents approximately 45% to 50% of the City's energy purchases. The 2006 Power Purchase Agreement, together with the energy to be purchased under the TMPA Agreement means that the City has established energy supply agreements for all of its requirements through June of 201 1, which will extend beyond the inauguration of the ERCOT Nodal Design Rule. The City anticipates that any increased cost for energy delivered from TMPA as a result of the Nodal Design Rule will be limited, at least in the short-term, due to ~I) the fact that Gibbons Creek is presently located in the same "load zone" as the Electric System, and under the Nodal Design Rule charges to loads will be based on the average zone cost and ~2} the Nodal Protocols adopted by the PUC provide far "preassigned congestion revenue rights" for delivery of Gibbons Creek energy to the City in the event the present zone configuration is changed in a way that places Gibbons Creek in a different zone from the Electric System, which could result in additional congestion costs being borne by the City. Additionally, the 2006 Power Purchase Agreement provides the City greater certainty with respect to energy price and services for its non-TMPA energy purchases due to the fact that the contract terms extend beyond the implementation date of the nodal market. The ERCOT wholesale market, from which all retail energy providers ~"REPs"} serving retail customers in ERCOT purchase their power, has evolved into a market that is priced largely on the marginal generation cost in ERCOT, which is natural gas fueled combined cycle generation, regardless of the generation source the energy is delivered from. The Electric System's ability to provide 50% to 55% of its customer's energy requirements at actual cost of service from a coal fired plant, with the remaining power supply coming from the same wholesale market that serves deregulated REPS, has helped to offset the fixed cost associated with TMPA debt payments, This resource mix, combined with selective use of a rate stabilization fund, which was established in 199b (the "Rate Stabilization Fund") to address the TMPA debt and competitive issues, have to date allowed the Electric System to maintain rates that are competitive with the rates available in the deregulated areas of ERCOT, even after base rate increases were implemented by the Electric System in January and October of 2005 (see "The Electric System -Electric System Challenges and Responses -Rate Study; Transmission Cost Filing and the Rate Stabilization Fund"). Based on these considerations, Electric System Management does not expect that potential competitors would be able to substantially undercut the City's electric service rate to residential or commercial customers, although large load, industrial customers could be aggressively recruited by potential competitors. Presently, the City's customer base is only ll% industriallcommercial in composition, based upon the number of customer accounts, although for the year ended September 30, 2007, approximately 61% of the City's energy sales were generated by commercial and industrial customers. It is passible that competitors could use factors other than price in efforts to obtain such customers, which generally use significantly more energy than do residential customers. ELECTRIC SYSTEM CHALLENGES AND RESPONSES ...The Electric System is committed to maintaining its electric rates at levels that are competitive with other retail electric providers, In the view of Electric System Management, among the most significant challenges facing the Electric System are those arising from the City's long-term power purchase agreement with TMPA, under which the City is obligated to purchase or pay for 21,3% of TMPA's fixed costs, including debt service, as well as TMPA's variable costs relating to the energy that the City takes from TMPA. Depending upon the relative cost of natural gas and coal, and owing to the relatively high debt service requirements of TMPA, the total TMPA energy cost from time to time may be above market (i.e., a "stranded cost"}. Over the past four years, however, natural gas prices have generally had a sustained upward trend, with increasingly extreme price volatility during the past three years, particularly as a result of the disruption in supply caused by Hurricanes Katrina and Rita. As a result, TMPA's coal-generated energy costs have been attractive relative to gas-generated energy in the ERCOT market, particularly during times when demand for energy in ERCOT is high, See "Appendix g -Description of Senate gill 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency - Outstanding Debt.") In the event that the City should open its service area to retail competition, the Electric System could and likely would seek to recover any stranded costs represented by the TMPA power purchase agreement through the use of the nonbypassable competitive transition charge that Sg 7 allows municipal electric utilities to place on their distribution rates. Other significant challenges confronting the Electric System for the future include issues arising from the continued development of the wholesale and retail energy markets within ERCOT, transmission constraints that may affect the cost of energy delivered to the City, environmental compliance and political considerations that could affect the City's "opt in" decision. 19 Electric System Management is of the view that the greatest potential impact on the Electric System would be a decision by the City Council to participate in the competitive retail electric market. The potential effects of a decision to compete include the potential loss of customers to other REPS resulting in a reduced electric load, while the City's obligations under the TMPA Agreement would require the continuation of the City's take-or-pay obligations to TMPA. On the other hand, if the City's retail rates and its ability to deliver dependable service are competitive with those of other REPs, the City may be successful in retaining existing customers should the City determine to open the City's service area to retail competition, Any decision of the City Council to participate in full retail competition would also permit the Electric System to offer electric service to customers that are not presently within the certified service area of the City. A decision of the City Council not to compete may have other unintended consequences, such as declines in economic development activity within the City due to the "protected" rate structure of the Electric System, if the rate structure is higher in cast than rates in areas that are open to competition. Under the Nodal Design Rule, the cost of energy will include charges assessed with respect to transmission constraints that affect power delivery within a particular load zone area. Therefore, the Nodal Design Rule is likely to result in lower energy delivery costs to utilities in load zones that have fewer transmission constraints than those located in more constrained areas. At present, the City is located in a load zone that is more highly constrained than some other zones in ERCOT. Measures gelatin to ~'MPA. TMPA has reduced its operation and maintenance expenses in recent years through certain measures, including those described herein under "Appendix B -Description of Senate Bill 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency." Electric System Management believes that the variable costs of TMPA energy are likely to be competitive for the foreseeable future. However, the City's share of TMPA's fixed costs, particularly its debt service requirements, could result in the total cost of the City's purchased power from TMPA exceeding the cost of power that is marketed within ERCOT from time to time. (See "The Electric System -Litigation and Potential Litigation Concerning Cost of Energy Delivered by TMPA under the TMPA Agreement" for a discussion of the potential impact that the Nodal Design Rule could have on the cost of delivering energy to the respective Member Cities of TMPA, depending upon a variety of factors, including whether the TMPA generating assets and each of the Member Cities continue to be included in a common load zone.} The price of natural gas, which fuels a significant part of the energy presently generated and marketed within ERCOT, will in large part determine the relative cost of TMPA energy to other marketed energy in both the wholesale and retail markets that the City views as benchmarks. As shown below under "Appendix B -Description of Senate Bill 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency -Outstanding Debt," the debt service an TMPA's Revenue Bonds, as currently structured, increases from approximately $112 million in the fiscal year ending September 30, 2007 to approximately $137 million in the year ending September 30, 2010, which represents an approximately 22.3% increase from 2007 levels. However, TMPA debt service will decrease in 2009 to approximately $97 million, as a result of a debt restructuring undertaken by TMPA in July 2008. As described under "The Electric System -The TMPA Power Sale Agreement," a series of amendments to the TMPA Agreement made during 1997 provide flexibility to the Electric System, while at the same time establishing a firm percentage obligation for the Electric System with respect to its TMPA payment obligations. Prior to the amendment of the TMPA Agreement, the City's proportion of TMPA costs fluctuated from year to year (although it typically was between 2I% and 23% of TMPA costs}, Except as described below under "The TMPA Power Sale Agreement -The Debt Service Guarantee Percentage," under the 1997 amendments to the TMPA Agreement, the City has a fixed obligation to pay for 21.3% of TMPA's annual system costs, including the payment of TMPA's debt service requirements and operating and maintenance expenses and, in connection with such obligation, the City is entitled to receive the same percentage of TMPA's available output of energy. (See "The Electric System -Litigation and Potential Litigation Concerning Cost of Energy Delivered by TMPA under the TMPA Agreement.") The 1997 amendments to the TMPA Agreement also repealed provisions of the TMPA Agreement that had prohibited the Member Cities from purchasing energy from others or from constructing new generating facilities of their own. Prior to the 1997 amendments, the Member Cities were, in effect, acting as a consortium for all power production and off-system energy sales. As described below under "The Electric System -Electric System Challenges and Responses -The Power Purchase Agreements," the Electric System has taken advantage of this flexibility to act independently from the other Member Cities in connection with the sale in 2001 of obsolete generation units and by negotiating the Power Purchase Agreements. As described below under "The Electric System -The TMPA Power Sale Agreement -Rebate of Excess Revenues to the Member Cities," the 1997 amendments also require that TMPA annually rebate to each Member City its proportionate share of TMPA revenues that are in excess of the amount needed by TMPA to pay its operating costs and to meet its debt service requirements. The City has deposited these rebates into a rate stabilization fund (the "Stabilization Fund"). See the discussion of the Stabilization Fund below, It should be noted, however, that the resolutions under which TMPA has issued its outstanding first lien revenue bands (the "TMPA Prior Lien Resolution"} and certain other resolutions under which TMPA has issued subordinate lien debt (such resolutions, together with the TMPA Prior Lien Resolution are collectively, the "TMPA Resolution"} contain covenants for the protection of its bondholders and the maintenance of the tax-exempt status of its debt, which could affect the means available to both TMPA and the Electric System in responding to developing market conditions. the 200b Power Purchase Agreement. , .. On May 16, 2006, the City Council approved the 2004 Power Purchase Agreement with Constellation Commodities Group. Under the 2x06 Power Purchase Agreement, Constellation Commodities Group is obligated to supply all the capacity and energy requirements of the City above those supplied from the City's existing purchased power agreement with TMPA (see "The Electric System -The TMPA Power Sale Agreement"}. All energy resources of the City during the term of the 2DQb Power Purchase Agreement, including power supplied to the City under its TMPA power purchase agreement, will be delivered to the City in accordance with the terms of the 2006 Power Purchase Agreement at points of 2a delivery located within the City, In addition to supplying the City's energy in excess of the City's TMPA allocation, the 2DOG Power Purchase Agreement requires Constellation Commodities Group to perform certain ancillary services for the City that are necessary to permit the City to receive energy from the ERGOT power grid. Such services include scheduling and dispatch of energy, Given the nature of ERGOT as a closed grid with few interconnections with other power grids, energy supplied to the City by Constellation Commodities Group that are in excess of amounts supplied from the City's TMPA power supply agreement must be generated from other resources within ERGOT. The City is obligated to give Constellation Commodities Group notice each day of the City's energy requirements for the next day, which requirements are required to be supplied to the City from a combination of energy taken from TMPA and other energy supplied by Constellation Commodities Group. The cost to the City of energy provided to the City under the 200G Power Purchase Agreement in excess of that delivered to the City from its TMPA resource is not fixed, but will vary from time to time depending upon a number of factors, including the cast of fuel and energy transmission, The City has the right under the agreement to hedge its natural gas fuel requirements for energy supplied by Constellation Commodities Group. The obligations of Constellation Commodities Group under the 200G Power Purchase Agreement have been secured andlor guaranteed within certain limits by Constellation Energy Group, lnc. and under certain extraordinary conditions described in the 200b Power Purchase Agreement, the City is obligated to provide additional collateral to secure its payment obligations. As is the case with the TMPA Agreement, the City's payment obligations under the 200G Power Purchase Agreement will constitute an operating and maintenance expense of the System. Constellation Commodities Group is a Delaware corporation and awholly-owned subsidiary of Constellation Energy Group, [nc., the shares of which trade on the New York Stock Exchange. Constellation Commodities Group is the wholesale energy operation of Constellation Energy, a Fortune 200, integrated energy company. According to the most recent from IDK, filed with the Securities and Exchange Commission on February 2b, 20D8, Constellation Commodities Group is the largest supplier of wholesale power in North America, with a business focus on energy sales to wholesale customers such as electric co-operatives, power marketers, municipalities and utilities. Rate Study and the Rate Stabilization Fund. [n 199b, the City established the Rate Stabilization Fund by transferring approximately $45.1 million from the unreserved fund balances of the Electric System. In general, the Rate Stabilization Fund was created to serve as a reserve that could be drawn upon, at Ieast in part, in lieu of increasing electric rates in the full amount required to provide funding to pay the cost of purchased power from TMPA as the amount of TMPA debt service hand thus the City's contract payments} increases. At September 30, 2007, the City had approximately $53.9 million on deposit in the Rate Stabilization Fund, which included approximately $3.7 million contributed to the Rate Stabilization Fund in Fiscal Year 2007 from Electric System operations. Approximately $4.b million of the Rate Stabilization Fund is expected to be used in 2008 to cover TMPA projected debt service expenses. The use of the Rate Stabilization Fund is part of the City's business plan to maintain competitive electric rates after the advent of SB 7. Effective January 1, 2005, the City increased the base rates charged to its residential and general service customer classes. A base rate increase was implemented effective October 1, 2005 for the Government, Temporary Service, Weekend, Athletic Fields, and Lighting customer classes, The City's rates, including the 2005 rate increases, remain competitive with TXU Energy, the incumbent utility that serves a portion of the dual certified area of the City, and ail other retail energy providers presently marketing in the Dallas-Fort Worth area. TXU Energy was obligated to offer the price-to-beat rate ~"PTB rate"} to requesting residential and small business customers in the historical service territory of TXU Electric Delivery Company, its incumbent utility, through January 1, 2007, As of January 1, 2D05, TXU Energy was permitted under the terms of SB 7 to offer electricity to the residential customers in its historical service territory at a price other than the PTB rate. In accordance with SB7, the PTB rate was eliminated on January 1, 2007. Although in the short-term, the elimination of the PTB rate appears to have had a negligible effect on energy prices in the Dallas-Fort Worth area, the City is unable to predict how this change will affect energy prices in the area over time. However, since the City's energy rates were significantly lower than the PTB rate offered by TXU Energy in the Dallas-Fort Worth at the end of 20DG, the City anticipates that the Electric System rates will remain competitive, at least in the short-term. in February 2007, TXU Corp., of which TXU Energy and TXU Electric Delivery Company were affiliates, announced that two leading private equity firms and a leading global investment bank had executed a definitive merger agreement under which an investor group led by the private equity firms would acquire TXU Corp. The acquisition closed in October 2007 and TXU Corp. is now known as Energy Future Holdings Corp. Among other aspects of the acquisition of TXU Corp and its subsidiaries, was the termination of efforts to obtain air permits from TCEQ for 8 ofl 1 new coal-fired generating plants that TXU announced in April 200G according to TXU, the 11 units, if constructed, would have provided 9,000 MW of new electric generation in ERCOT~. The TXU acquisition announcement also described a plan to reduce energy costs to TXU customers that average at least 1,500 KWh per month in energy use by 15%, which cuts, according to TXU Energy, were completed in October 2007 and will be in force through December 2D08. Mona ement Audit. Under The City charter, each City utility is required to undergo a management review, conducted by an outside consultant, every ten years. For purposes of the Electric System review, the City has contracted with Navigant Consultants [nc. ~"NCI"} to perform such a review. NCI is the final stages of that review and the results are expected to be delivered to the City by the end of August, 2D08. Until the City has reviewed the NCI recommendations, the City cannot fully predict what effects, if any, the management review will have on the operations, including energy resource supply and procurement, rate making, or financial reporting of the Electric System, although the City could implement changes in a variety of those areas based upon the review. 21 Marketing. In light of the increased levels of electric market advertising, particularly by the investor owned utilities, that resulted from the onset of retail electric competition, the Electric System has instituted a campaign to raise the awareness of its customers of the services it offers, and to reinforce in the minds of its customers that the City provides the same level of service and service options as are available in the open market (to this end, for example, in 200 the City initiated a green energy rate option for its residential customers and added commercial and industrial customer green rates effective Qctober 1, 200G. A marketing program aimed to develop, implement, and maintain programs that effectively solicit new customers, cultivate and reinforce customer loyalty, and improve and expand available services to customers is in place. The marketing program targets key large commercial and industrial customers and promotes various energy efficiency, energy audit, and other programs across all rate classes. THE TMPA PUWER SALE AGREEMENT ...The City's rights and obligations with respect to TMPA are set forth in the TMPA Agreement. Under the TMPA Agreement, the City is obligated to take ar pay far its percentage share of the energy generated by TMPA, and TMPA is abligated to devote its best efforts to the generation and delivery of energy from the generating facilities of TMPA, but the failure of TMPA to provide energy under the TMPA Agreement will not relieve any Member City of its obligations under the TMPA Agreement, as such obligations are uncanditianal and absolute. The City's payment obligations under the TMPA Agreement are equal to the greater of the "Take or Pay Percentage" (as defined below} and the "Debt Service Guarantee Percentage" (as defined below}. For additional information regarding TMPA, see "Appendix B - Description of Senate Bill 7 and the Texas Municipal Power Agency -Texas Municipal Pawet Agency." The Take or ~~ ~ercentaQe. Under the TMPA Agreement, each of the Member Cities is unconditionally abligated to pay to TMPA, without offset or counterclaim and without regard to whether energy is delivered by TMPA to the Member Cities, their percentage of TMPA's annual system costs, including the payment of TMPA's debt service requirements and operating and maintenance expenses, as set faith below: City of Bryan, Texas 21.70% City of Denton, Texas 21.30% City of Garland, Texas X7.00% City of Greenville, Texas 10.00% A City may choose to take or not take energy from the TMPA generating assets, as it sees fit (as noted above, while the City's TMPA resources have represented approximately one-third of the City's firm power capacity in recent years, the City has averaged taking approximately 55% to 60% of its energy from TMPA over the last three fiscal years}. While the City is obligated to pay its fixed percentage of the annual system costs, it becomes abligated to pay the variable costs of generating energy only to the extent that it actually takes energy from TMPA. The Debt Service Guarantee ~ercenta~e. In any instance where TMPA's bond, reserve fund and contingency funds, created by the TMPA Prior Lien Resolution, are not funded to the amount then required to be on deposit therein, without giving consideration to transfers made from funds other than TMPA's revenue fund or from proceeds of its bands (provided that transfers may be made from TMPA's reserve fund to its debt service fund for not more than two (2} consecutive calendar months}, the Member Cities are obligated to make their percentage share of a payment to TMPA in the amount that is necessary to establish ar reestablish the amount then required, under the terms of the TMPA Prior Lien Resolution, to be on deposit in such funds. The percentage share of the payment to be made by each Member City under the TMPA Agreement is determined by calculating the percentage relationship that each Member City's Net Energy for Load (as def ned in the TMPA Agreement} far the contract year immediately preceding the contract year in which the calculation is being made to the total aggregate Net Energy for Load of all Member Cities for such contract year, and the sum of the adjusted percentages shall equal 100%. Allocation ofEnerQV by TMPA. Each Member City shall be entitled to schedule and receive, each month for its own account, the proportion of the available energy from TMPA's generation facilities equal to the Take or Pay Percentage, as such percentage may be Pram time to time adjusted in accordance with the provisions of the TMPA Agreement. TMP~I A Bement Term. The contract term of the TMPA Agreement is for a period of thirty-five years Pram September 1, 197b or until all bonds and certain other indebtedness of TMPA is paid, whichever occurs later. At present, the final maturity of TMPA's indebtedness is September 1, 201$, although it is passible that TMPA could restructure its debt to shorten ar extend the schedule of its debt retirement. Construction of New„ ~r~ects. The TMPA Agreement provides that TMPA must give notice of intent to each Member City containing a general description of any new proposed project, the projected sources and uses of funds in connection therewith, and a statement of TMPA's opinion that such proposed project is necessary far TMPA to meet its commitments under the TMPA Agreement and is economically feasible. Each Member City is required thereafter to notify TMPA, within ~0 days, of its approval ar disapproval of the project. If each Member City approves the project, TMPA may thereafter issue bonds to finance the project without further approval of the Member Cities. Any Member City disapproving a proposed project is required to elect one of two options set forth in the TMPA Agreement. The TMPA Agreement includes provisions that differ from those described above far the sharing of energy and costs in the event that a new project is proposed and one or mare Member Cities do not determine to participate in the project. There are no current plans for TMPA to initiate a new generation project. TMPA 22 is constructing new transmission projects in accordance with transmission system expansion plans developed through the ERC4T regional transmission planning process. A.~errcy Rates. The TMPA Agreement provides that the rates and charges for power, energy and services charged to each Member City by TMPA shall be (1} nondiscriminatory, (2} fair and reasonable and based on the cost of providing the power, energy and services with respect to which the rates or charges are based and (3} an amount suff cient to (i) pay TMPA's annual system costs, (ii}make the deposits to the funds required by the TMPA Resolution, (iii} fund the annual capital budget of TMPA, and (iv} with respect to other funds or other accounts established by the board of directors of TMPA (the "Board of Directors"} and not required by the provisions of the TMPA Resolution, fund such funds or accounts in an amount not greater than 3.5% of TMPA's annual system budget, or such greater amount as may be approved by the affirmative vote of at least six members of the Board of Directors with at least one member of the Board of Directors appointed by each Member City voting in favor of any such increase. Rebate of Excess Revenues to the Member Cities. Except for funds held for purposes of self insurance, any funds held by TMPA on the last day of each fiscal year (commencing September 34, 1998} over and above the amounts required in connection with subsections (i}, (ii}, (iii} and (iv} of clause (3} of the preceding paragraph shall be returned to the Member Cities within 120 days of such date in the same percentage as the percentage each City contributed to such amounts. Funds held pursuant to clause subsection (iv} of clause (3) of the preceding paragraph, if approved by the affirmative vote of at least six members of the Board of Directors with at least one member of the Board of Directors appointed by each Member City voting in the affirmative, may be used to reduce the debt of TMPA. TMPA Agreement Payments Constitute Operating expenses of the City. The TMPA Agreement provides that all payments by a Member City under the TMPA Agreement, including any payments required to be made to TMPA's bond, reserve and contingency funds, shall constitute an operating expense of its electric system payable solely from the revenues and receipts of such electric system. Rate Covenant under the TMPA Agreement. Under the TMPA Agreement, each Member City has covenanted to establish, maintain and collect rates and charges for the electric service of its electric system which shall produce revenues at least sufficient, together with other revenue available to such electric system and available electric system reserves, to enable it to pay to TMPA, when due, all amounts payable by such city under the TMPA Agreement. Sale or Assignment o{'Electric S sty ems. Under the TMPA Agreement and the TMPA Resolution, no sale or other disposition by a Member City of its electric utility distribution system as a whole or substantially as a whole may become effective without the consent of all the Member Cities and TMPA during the term of the TMPA Agreement. A Member City may assign its rights under the TMPA Agreement but such assignment shall not relieve such Member City of its financial obligations under the TMPA Agreement during the time any TMPA Revenue Bonds are outstanding. CAPITAL IMPROVEMENT PLAr~ AND ADDITIONAL DEBT ...Capital projects involve the acquisition or construction of major facilities and equipment. Each year, the City Council adopts a capital budget for the Electric System that differs from the operating budget because it is a "multi-year" process. "Multi-year" means that the project's budget is active until the project is finished. Due to the multi-year nature of capital projects, budgeted expenditures in these plans consist of carryover projects from previous years and new projects being initiated in the current year. Due to its nature as a planning tool, a capital budget, while identifying and prioritizing capital expenditures, is subject to revision as circumstances change, including changes in the economy and in the need for various governmental services and the placement of such services within the City. Consequently, the inclusion of an expenditure in a capital budget is not a firm commitment to a project, particularly as the planning horizon extends into the future. The Electric System's current capital improvement plan (the "Electric CIP"} identifies projects far five-year period ending September 30, 2413, The Electric CIP identifies approximately $124 million in transmission and distribution projects, of which approximately 99% are projected to be bond-financed, including the use of funds from prior bond issues. The current Electric CIP indicates the total level of bond funded expenditures (including the use of both bond funds available from previous bond issues and bond funds from new issues} far Electric System improvements in the following amounts: Total Fiscal Bond Funded Year Expenditures 2408-49 $3b.9 million 2449-14 24.8 million 2414-11 19.5 million 2411-12 19.b million 2412-13 23.0 million 23 ELECTRIC SYSTEM'S SERVICE AREA AND SERVICE AREA COMPOSITION ... In 1976, the Public Utility Commission of Texas (the "PUC"} issued the City a Certificate of Convenience and Necessity ~"CCN"} to serve electricity to an area encompassing the City's then boundaries, plus its extraterritorial jurisdiction area ~"ETJ"). SB 7 provided that the City may file with the PUC to single certificate areas within its municipal boundaries as they existed on February 1, 1999. With the exception of two existing subdivisions being served by TXU Energy and CaServ Electric ~"CoServ"}, the City was granted single certif cation of these areas in April of 2002, The territory now single-certified for electric service for the City is approximately 60 square miles in area. Dual and occasional triple certification presently exist in the ETJ. Approximately 49% of the City's electric service area is multiple-certified, representing an area of approximately 53 square miles. While the City's electric service customers in the multiple-certified service area will not be open to new competitors unless the City Council "opts in" to retail competition, the Electric System competes for new customers that move into the multi-certified service area against the other utilities that have been certified in the past to provide service in that area. Far the year ended September 30, 2007, the Electric System provided electric service to a monthly average of 43,607 customers located in the certified service territory of the Electric System. As a result of the economic catalysts of the Dallas-Fart Worth International Airport, Fort Worth's Alliance Airport and the major business districts in the northern parts of the Dallas-Fort Worth metropolitan area ~"DFW"}, Denton and the DFW area have in recent years experienced significant electric load and population growth. According to ERC4T, the load in Denton County has experienced significant and sustained growth over the past decade and ERC4T projects that the County will have load growth averaging ~.~% aver the five-year period beginning in 200$ for the entire ERC4T area, ERC4T projects future demand using a 1.$% growth per year for each of the next five years). In May 200$, ERC4T reported that over 93% of the 2008 summer load for Denton County is projected to be imported from generation sources outside of the County. Denton County is in the nine-county DFW ozone nonattainment area, which will restrict the construction of traditional generation capacity in the County. ERC4T forecasts show that by the summer of 2013, approximately 95% of energy to meet the Denton County load will be imported from outside of the County (ERGOT currently projects no new generating units being constructed in the County during the five year period covered by ERC~T's current load forecasts}. Denton County's energy import statistics are similar to those far the other three counties in the former four-county ozone non-compliance area the area was expanded to nine counties in April 2004}, in which construction of new generation has been, and is expected to continue to be, restricted due to environmental compliance issues. See "The Electric System - Environmental Regulation -State Implementation Plan for DFW ozone Non-Attainment Status."} The need to import energy into the DFW area contributes to the transmission constraint status of the north Texas area. (See "The Electric System -Texas Deregulation Structure, Status and Issues.") For the year ended September 30, 2007, the customer base that was served by the Electric System measured by number of accounts is approximately 8$% residential and approximately 11 % commercial and industrial in composition, although commercial and industrial accounts provided approximately 61% of the energy sold. For the year ended September 30, 2007, the top ten customers of the Electric System provided 24% of the tarriffed rate revenues of the Electric System and purchased 28% of the energy sold by the Electric System, Two State institutions of higher education, the University of North Texas ("UNT"} and Texas Woman's University ~"TWU" and collectively with UNT, the "Universities"}, were included in the top ten customers of the Electric System for each of the five most recently completed fiscal years. For the year ended September 30, 2007, the Universities provided 8% of the tarriffed rate revenues of the Electric System and purchased l l% of the energy sold by the Electric System. A provision of SB 7 provided that utilities that provide electric service to State facilities, consisting of faur- year state universities, upper level institutions, Texas State Technical Colleges, or college educational institutions, must do so in accordance with rate tariffs that are equal to the utilities' established base rate for the customer class applicable tv such State educational institutions, less an additional 20% discount (the "State University and Colleges Discount Tariff'}. As a result of the State University and Colleges Discount Tariff, the Universities' cost of energy has been less than the costs incurred by the Electric System for providing such energy, although the City is lawfully permitted to recover the amount of the State University and Colleges Discount Tariff from its other rate paying customers, and it has done so. The City has interpreted SB 7 to provide for the expiration of the State University and Colleges Discount Tariff on August 31, 2007. In light of the assumed expiration of that tariff, the City engaged in discussions with both Universities prior to August 31, 2007 in an attempt to reach agreement regarding the billing for energy, and as a result, TWU agreed to pay the invoiced cost of energy to the City after September 1, 2007, but issued a protest letter to preserve its rights to a potential refund. The City was unable to reach any agreement with UNT, and on February $, 200$, the City filed suit in the 15$th Judicial District Court in Denton County against UNT seeking a declaratory judgment with respect to the question of whether the State University and Colleges Discount Tariff has in fact expired by its own terms. For all City energy invoices after August 31, 2007, UNT has made payment to the City based upon an estimate of its energy casts without regard to the expiration of the tariff The City is optimistic of prevailing in the case, although it is possible that notwithstanding the outcome of the litigation, the State Legislature could re-enact the State University and Colleges Discount Tariff or some similar legislation in its 20091egislative session or in a subsequent legislative session. The Electric System has competed successfully far customers with TXU Energy and CaServ in multiple-certified areas since 1976. According to records of the Electric System, approximately 140% of the new residential subdivisions and large industrial accounts in the multiple-certified service area have become customers of the City during the last three fiscal years. LOAD REQUIREMENTS ...The City's capacity requirements are calculated based upon the City's peak summer demand. For the year ending September 30, 2007, the City's peak capacity requirement was 306 MW, which occurred in August. The City has forecasted a maximum load of 3I4 MW for 2a0$. 24 INTERCGNNECTIQNS, .The City is interconnected with two TMPA i38 kilovolt ~"kV"} lines and one Brazos Electric Cooperative 138 kV transmission system. The TMPA transmission system serves the City via a 138 kV loop around the City. TMPA furnishes energy to the loop via a 345 kV transmission system and two 138 kV ties also interconnected with the TXU Energy transmission system. wer the last five years, the City has funded approximately $50 million of electric system improvements, a significant portion has been for transmission and distribution facility improvements. The distribution improvements are consistent with the City's strategy of maintaining a commitment to its distribution system in order to provide a City-established rate of return for the City in the event that the City should elect to open to retail competition. The transmission improvements are part of the ERC4T planned transmission system upgrades. The Electric System receives TC4S payments from the ERC4T "postage stamp" transmission system structure that covers the cast of investment in and maintenance of its transmission system. LITIGATIQN AND POTENTIAL LITIGATIQN CONCERNING CAST QF ENERGY DELIVERED BY TMPA UNDER THE TMPA AGREEMENT ... In 1997, the PUC adopted open access transmission regulations that required each transmission customer to nominate load for development of the approved cost of transmission service matrix on an annual basis. After adoption of these regulations a dispute arose between TMPA and the cities of Denton, Garland, and Greenville the "Northern Cities"}, on the one hand, and the City of Bryan ("Bryan"}, on the other, concerning which entity, TMPA or Bryan, could nominate the load for transmission service to Bryan. The dispute also involved whether TMPA could include in its wholesale rates for power and energy to the four Member Cities the costs of the ERC~T charges associated with open access transmission service from Gibbons Creek to the Member Cities. After both TMPA and Bryan attempted to nominate the load for Bryan, and Bryan filed a complaint at the PUC concerning the dispute, the PUC, in July 1999, ruled that under its regulations and transmission pricing orders, Bryan was entitled to nominate the load for transmission service to Bryan (the "PUC Decision"}. The PUC Decision also held that while TMPA could nominate the load for the Nvrthem Cities as their agent, TMPA could not include the ERC4T charges associated with transmission service to the Northern Cities in its rates to Bryan. TMPA appealed the PUC Decision arguing, among other things, that the PUC did not have jurisdiction to change TMPA's delivery obligations under the TMPA Agreement, to adjudicate a contract dispute, to require TMPA to provide unbundled transmission service, or to regulate TMPA's wholesale rates for power and energy. The PUC Decision was appealed and has become the subject of a series of rulings by Texas district and appellate courts. In May 2004, the Texas Court of Appeals affirmed a lower court's holding that the PUC has jurisdiction to determine the reasonableness of TMPA's transmission rate to Bryan. The Court of Appeals decision was appealed to the Texas Supreme Court. 4n December 14, 2007, the Texas Supreme Court issued its decision reversing the Court of Appeals. The Supreme Court held, among other things, that: the PUC does not have jurisdiction to regulate, modify, or abrogate the Power Sales Contract; the PUC does not have jurisdiction to unbundle or interfere with the Power Sales Contract or TMPA's wholesale rates; and the PUC does not have jurisdiction aver the contract dispute. Bryan and the PUC each filed a motion for rehearing in the Supreme Court on January 3I, 2007, which motions were denied on June 20, 2008. This litigation is styled TMPA v. P UC. After the dispute arose, Bryan withheld the disputed amounts from its payments to TMPA. To recover such amounts, TMPA, in 1998, filed suit in Grimes County District Court. In that Court, Bryan is advancing various arguments that the Power Sales Contract is unbundled, including various theories of estoppel. The Grimes County case has been dormant from its inception for purposes of judicial economy and resolving the threshold question of the PUC's jurisdiction. It is possible that some action may need to be taken in the future, but the case has been abated until one of the parties requests that the case go forward. Under the Nodal Design Rule, transmission congestion is addressed by including in the cost of wholesale power a component known as "transmission congestion rent," the result being that the cost of wholesale power delivered to loads located in zones with greater transmission congestion will be higher than the cost of wholesale power in zones having less transmission congestion. The Nodal Design Rule thus uses location sensitive, or nodal, cost methodology to address transmission congestion see "The Electric System -The New Nodal Design Rule"}. Under the Nodal Design Rule, the cost of Gibbons Creek power to any one TMPA member could be different than the cost of Gibbons Creek power to other TMPA member cities, depending upon the load zone or zones to which the TMPA member cities and Gibbons Creek are assigned. At present, each TMPA Member City and Gibbons Creek are in the northern load zone of ERC4T, thus under the Nodal Design Rule all Member Cities would be assessed the same cost for power from Gibbons Creek. However, under the Nodal protocols adopted by the PUC, after three years, zone designations could be changed, which could cause the cost of Gibbons Creek power to no longer be identical for all TMPA cities. The PUC has completed its administrative rulemaking relating to the Nodal Design Rule, but has indicated that a new administrative project to examine issues relating to creating and changing load zones in the nodal market should be initiated, but such rulemaking has not yet been launched. Under the ERC4T protocols adapted by the PUC on April S, 200b, the nodal zone configurations will not change from the current four zone configuration for the first three years after the start date of the nodal wholesale system, thus during such period all TMPA Member Cities and Gibbons Creek will remain in the North Texas zone. The new PUC rulemaking is to determine what method will be used to calculate, review, and approve any future changes to the zones. It is possible that, at some point after the first three years of nodal operation, smaller, more localized zones could be created that would result in substantially different prices for energy delivered to one or more of the Member Cities, and that such price could be substantially higher than the percentage of TMPA's annual system costs. Gibbons Creek is located approximately 19 miles east of Bryan and 225 miles southeast of the City. There are significant transmission constraints for energy coming into the DFW area, where the Northern Cities are located, from the south where Gibbons Creek is located, particularly as compared 25 to transmission capacity between Gibbons Creek and the City of Bryan, However, the Nodal Design Rules provide all TMPA cities with "preassigned congestion revenue rights" that may offset the additional transmission congestion casts associated with a TMPA city being placed in a different load zone from Gibbons Creek. (See "The Electric System -Texas Deregulation Structure, Status and Issues -Transmission Constraints."} During the administrative hearing held by the PUC in connection with the adoption of the order implementing the Nodal Design Rule, each of the Northern Cities filed legal briefs and provided expert testimony to the effect that such result would, among other impacts, impair their rights under the TMPA Agreement and violate various provisions of the Texas Utilities Cade. Each of the Northern Cities asserted that the TMPA Agreement provides that each Member City shall be responsible far its percentage share of TMPA's annual system costs, including debt service, operation and maintenance costs, which include energy delivery casts. The Northern Cities and TMPA also asserted that provisions of the legislation under which TMPA was created, as well as provisions of SB 7 that relate to M~Us, prohibit the PUC from interfering with such agreements. The City of Bryan intervened in the administrative hearing in support of the adoption of the Nadal Design Rule, In its April 5, 200b order promulgating the Nodal Design Rule, the PUC stated that the modifications supported by TMPA were not presented in a manner that met the standard established by the PUC in its preliminary order relating to the hearing. That standard provided, among other things, that the Nodal Design Rule would be presumed to be valid, and that the burden of proof would be placed upon a party challenging the Nadal Design Rule to show that the Rule should be modified. TMPA and the TMPA Northern Cities filed motions far rehearing challenging the validity of the April 5, 2006 order an a number of grounds, which matian was denied by the PUC an May 16, 200b. 0n June 15, 2006, TMPA and the City of Garland filed suits in State District Court in Travis County to appeal the denial of the matian for rehearing, To date no action has occurred in these cases. The final decision of the Texas Supreme Court in TMPA v. PUC could provide important precedent either for or against the arguments of TMPA and the City of Garland, as both matters involve questions of the PUC's regulatory powers vis-a-vis the rights and obligations of TMPA and the Member Cities under the TMPA Agreement. CONTRIBUTI[7NS TO THE CITY OF DENTON , ..The Electric System enterprise fund annually transfers an amount to the General Fund of the City to reimburse for the Electric System's share of administrative overhead of the City, as determined by an independent consultant engaged for that purpose. The Electric System also makes an annual transfer to the General Fund in lieu of a franchise payment equal to 4% of the Electric System's revenues. In addition, the City Charter provides that the City shall be entitled to receive an annual return on its net investment from excess revenues, if any, of the Electric System not more than 6% of the net investment as a "return an investment." The City Council has adapted an ordinance providing that transfers from the Water System, Wastewater System and Electric System Rate Stabilization Funds (which represent excess revenues from prior years} may be transferred to the General Fund to the extent needed to maintain compliance with the City's bond covenants (see "The Bonds -Rates"). In satisfaction of this Charter requirement, the Electric System annually makes an additional transfer to the General Fund of the City in an amount calculated at 3.5% of revenues. Far calculation of bath the Franchise Fee payment and the "return an investment" payment calculations the portion of the ECA revenues that is included in the calculation of revenues subject to transfer is capped at 4.0 cents per kWh far FY 2007; 3.5 cents per kWh far FY 2008; 3.25 cents per kWh for FY 2009; and 3.0 cents per kWh going forward from and after FY 2010. The amount transferred to the General Fund far administrative overhead is an operating expense of the Electric System, while amounts transferred in lieu of a franchise tax and as a return an investment are made after the Electric System has provided far the payment of operating expenses and debt service requirements, TEXAS DEREGULATION STRUCTURE, STATUS AND ISSUES ... The fallowing discussion, as well as the discussion set forth under "The Electric System -The New Nodal Design Rule is presented for the purpose of providing information concerning the current Texas legal and market structure, which is unique in many respects from deregulated markets in other parts of the United States, in part due to the isolation of the market in ERCOT (in which the City is located), which is essentially a transmission grid and associated generation facilities comprising an "island," there being few interconnects to other transmission grids. While the City has not "opted in" to full retail competition, it does participate in the wholesale energy market through its use of power purchase agreements, specifically, the 2006 Power Purchase Agreement, to meet its energy needs above the energy supplied by its TMPA entitlement and its use of the ERC~T transmission system to deliver power from its share of the Gibbons Creek generating unit, owned and operated by TMPA, to its customers. The wholesale energy market in ERC4T was established by legislation enacted in the 1995 Texas Legislature, and has been significantly modified and developed through enactment of SB 7 and the commencement of retail electric choice in the Texas an January 1, 2002. The discussion below describes same of the effects an the market and the challenges presented to the market as a whole, as well as, in same instances, local regions within ERC4T that are facing particular effects of deregulation. The continuing development of wholesale and retail competition in the ERCpT market will affect the planning, actions, options, cost structure and other essential factors of the Electric System, The information in the sections referenced above is derived from various PUC and ERC4T source materials, and in particular, portions of this section are excerpted from biennial PUC Reports to the Texas Legislature. The 2007 PUC Report to the Texas Legislature is available in full an the PUC website at h :Ilwww. uc,state.tx.uslelectriclre ortslsca elindex.cfm and previous biennial reports to the Texas Legislature are available in full on the PUC website at httpalwww.puc.state.tx.uslelectriclrepartslscopelarchive.cfm. The City is does not take responsibility far the content of the PUC Legislative Reports or other information presented an the PUC website. 26 In general, the restructuring of the electric utility industry in accordance with SB 7 continues to evolve, and the City is observing and evaluating the changes in the developing energy market in the State. The elimination of the PTB rate on January 1, 2007 and the planned implementation of the Nodal Design Rule on January 1, 2009 are key dates in the evolution of the restructured market. ERC~T , .. ERC~T is one of eight Regional Reliability Councils in the North American Electric Reliability Council. The ERGOT bulk electric system is located entirely within the State of Texas and serves more than 20 million customers, representing approximately $5% of Texas' electrical. load. The ERC~T service region covers mare than 75°/a, or 2UU,000 square miles of the State and contains a total of approximately 3$,000 miles of transmission lines, including approximately $,000 miles at 345 kV, and more than 500 generation units. The ERC~T grid serves $5% of the State's electric load. ERC~T also manages financial settlement for the competitive wholesale bulk-power market and administers customer switching for 5.9 million Texans in competitive choice areas. According to ERGOT, the all time peak demand in ERGOT occurred on August 17, 2006 when 62,339 MWs of power was used. ERC~T is connected electrically to other reliability councils through two direct current lines, providing only limited importlexport capability. ether electric reliability councils, such as the Southwest Power Pool, serve areas in the Texas panhandle, east Texas and west Texas. Under Texas law, ERC~T is required to perform four primary functions: ensuring non-discriminatory access to the transmission and distribution systems for all electricity buyers and sellers; ensuring the reliability and adequacy of the regional electric network; ensuring that information related to customer retail choice is provided in a timely manner; and ensuring that electricity production and delivery are accurately accounted for among all regional generators and wholesale buyers and sellers. The PUC has primary jurisdiction over ERGOT. ERC~T regulations require that each market participant, including MOUs, either be, or engage, a qualified scheduling entity ("QSE"} to submit schedules and ancillary services bids and settle payments with ERGOT. From July of 2006 through June of 2011, Constellation Commodities Group will provide QSE services to the Electric System under the 2006 Power Purchase Agreement. Individual electric utilities own sections or components of the ERC~T transmission grid and are responsible for operating and maintaining their awn transmission lines and equipment. The ISM coordinates the operation of the transmission grid to ensure its reliability, and ERC~T coordinates with the various transmission-owning electric utilities to make sure the transmission system will meet the needs of the electric market. With the adoption of SB 7, investor awned utilities have functionally "unbundled" their respective electric generation business, electric transmission and distribution business and retail electric business from one another. See "Appendix B - Description of Senate Bi117 and the Texas Municipal Power Agency -Senate Bill 7." Overview of the Senate Bi!! 7 Market Structure ...Senate Bill 7 dramatically altered the production and sale of electricity to retail customers in the State. Prior to SB 7, all retail customers were served by integrated investor awned electric utilities, electric cooperatives ~"Electric Co-ops"}, or M4Us. The PUC certificated the service areas of utilities, Electric Co-ops, and M~Us, where, for the most part, these entities were granted the exclusive right and obligation to service customers in an area. Integrated utilities, M~Us, and Electric Co-ops built generation plants and constructed transmission and distribution facilities and performed retail functions such as billing and customer service to meet their obligations to serve. The PUC set electric rates, far those utilities over which it had rate-making authority, that gave those utilities the opportunity to earn a reasonable return on prudent investments and to recover reasonably incurred expenses, but that were also just and reasonable to retail customers. As described below under "The Electric System -The New Nodal Design Rule," the Nodal Design Rule will again dramatically alter the wholesale market dynamics in ERC~T. The wholesale electric market was opened to competition as a result of the amendments to the Texas Public Utility Regulatory Act ~"PURA"} adopted by the Legislature in 1995. As a part of these amendments, independent power producers ~"IPPs"} were permitted to construct generation facilities and were granted access to the transmission lines of utilities, Electric Co-ops, and M~Us in order for IPPs and power marketers to move power to wholesale customers. As noted above, SB 7, adopted by the Legislature in 1999, established a framework to allow retail electric customers to select a provider of electricity other than the traditional utility beginning in January 1, 2002, unless the PUC delayed competition for a utility's service area. The governing boards of Electric Co-ops and M~Us were granted the authority to decide if and when to open their service areas to customer choice. See "Appendix B -Description of Senate Bi117 and the Texas Municipal Power Agency -Senate Bi117." Although transmission and distribution facilities remain regulated by the PUG, the prices far the production and sale of electricity to both wholesale and retail customers are now predominantly dictated by market forces instead of regulatory rate- setting procedures. Customers with peak demand of one MW or less were provided access to the regulated PTB rate until January 1, 2007 (beginning January 1, 2005, affiliated REPS were permitted to offer rates lower than the price to beat}, and the PUC is required to designate "providers of last resort" ("P~LRs"} to ensure that all customers have access to electricity in the competitive market. The POLR for the City would be determined when and if the City opts in to retail competition, SB 7 established a framework for retail competition that is different from that adapted in other states. Formerly integrated investor-awned utilities were required to separate their business functions into three distinct companies: a power generation company ~"PGC"}, a transmission and distribution utility ~"TDU"}, and an REP. PGCs operate as wholesale providers of 27 generation services, in the same manner as independent generators. REPS operate as retail providers of electricity and energy services, and are the entities that have the primary contact with retail customers in the new market. TDUs remain regulated by the PUC, and are required to provide non-discriminatory access to the transmission and distribution grid at rates and terms of access prescribed by the PUC. In Texas, ERC4T performs functions in the retail market that are performed by the TDUs in other states that have introduced retail competition. Key elements in the design of the ERC4T retail market are the creation of a single, large retail market throughout the region and the use of a neutral third party to perform tasks related to the scheduling of power and settlement functions, ERC4T also serves as the registration agent far all retail transactions. All customer switch requests, move-in and move-out requests, and monthly electricity usage data flow through ERC4T. REPS generally provide electricity to customers by purchasing wholesale electricity from generators located within the ERC4T region. REPs use a QSE to schedule power through ERC4T to meet their customers' daily energy needs. All schedules and transactions within ERC4T "flow," which means that schedules are not contingent upon a determination that there is adequate transmission capacity available to move power from the generation resource to the load, If all of the schedules submitted for a particular day or hour cannot be accommodated because of transmission constraints, ERC4T uses amarket-based congestion management system to clear the congestion and maintain reliability. The costs associated with clearing the congestion are assigned to market participants under methods outlined in the protocols adopted by ERC4T (the "ERGOT Protocols" or the "Protocols") and approved by the PUC. Texas has not frozen prices at levels below market prices, as in some other parts of the country. In contrast to the fixed-price regimes established in other states, SB 7 created a framework whereby the remaining regulated rates charged by the affiliated REPs were reduced from 1999 levels, but can be adjusted to reflect changes in the market prices of natural gas and purchased energy, which have resulted in increases in rates by the incumbent providers, who have passed through, with PUC approval, at least portions of the increased fuel charges that have affected gas-generated facilities since January 1, 2002. Inmost areas of the State that are open to competition, these PTB rates charged by affiliated REPs provided a 6% reduction from January 1999 rates, adjusted for changes in fuel costs, from the opening of the market until January 1, 2007, These rates generally have remained above market rates, permitting other competitive REPS to enter the market and profitably serve retail customers. Generation Capacity Adequacy. According to the ERC4T Report on Existing and Potential Electric System Constraints and Needs, December 2007 (the "ERGOT Transmission Report"}, from 1997 to 2007 the peak demand on the ERC4T system has increased approximately 2.2% per year. The current forecast for 200$ to 2013 indicates ERC4T's peak demand is expected to increase 1.8% annually. Currently there are about 9,600 MW of generation within ERC4T that is over 40 years in age. Generation maturity is important to ERC4T planners in determining available capacity, long-range reliability, and whether there will be enough new capacity to compensate for load growth requirements. Age is one indication of the efficiency and maintenance cost of a generating unit, which are major factors in the decommissioning of units. Most of the capacity greater than 50 years old is around DFW. Other areas with high concentrations of older plants are Central Texas and along the Rio Grande border. Since 1999 the ERC4T system has added 80 plants, added new units to existing plants, and upgraded existing units. The total is over 29,000 MW of new generation. Three of these new plants are capable of serving ERC4T and the Southwest Power Pool or the SERC Reliability Corporation. Much of the new generation is around Houston and in the Rio Grande Valley. Several large wind projects have been built in West Texas. These new plants, especially the wind generation, have resulted in significant changes which have placed new challenges on the adequacy and the reliability of the existing transmission grid. According to the November 2007 update to the PUC's "New Electric Generating Plants in Texas Since 1995" report, companies in the electric business have made significant investments in Texas (State-wide, including non-ERGOT areas) in recent years. Ninety-three new generation plants were installed in Texas between January 1995 and November 2007, leading to reserve margins in excess of 14.6% in ERC4T for 2007. About 37,063 MW of new capacity has been added in Texas since 1995, with another 4,433 MW under construction and some 25,756 MW of new capacity has been announced but has not yet begun construction fall statistics in this paragraph include fossil -fueled and renewable generation}. In May 2008, ERC4T had added 29,000 MW of new generation development since 1999, and it had signed new generation interconnection agreements which signifies new construction that will tie into the grid} comprising 3,900 MW of new generation. In December 2007, ERC4T reported it had received requests for 70 interconnection studies totaling 27,896 MW. However, this figure represents plants that have been publicly announced, as well as plants that are in preliminary planning stages. There is uncertainty associated with the proposed plants for a variety of reasons, including that many are in competition with other proposed plants and they require large financial commitments and the receipt of environmental permits; a significant portion of this potential capacity will likely not be constructed. 28 The chart below provides information on ERGOT projected summer reserve margin far the years 200$ through 2013. ERGOT experiences peak demand during the summer; projected winter reserve margins are substantially higher than the projected summer margins. Capacity, Demand and Reserves in the ERGOT Rion 244$ 2449 2414 2411 2412 2413 Summer Peak Forecast (MW) 63,725 65,428 66,422 67,745 6$,833 74,235 Total Resources (MW) 72,543 75,749 77,$94 77,91$ 7$,$43 78,$43 Reserve Margin (12.5% minimum required) 13.$% 16.5% 17.3% 15.4% 14.5% 12.3% Improvement since Dec 2447 Up 4.7% Up 4.4% Up 3.3% Up 3.8% Up 4.0% Up 4.1% Source: ERGOT Report on the Capacity, Demand, and Reserves in the ERGOT Region, May, 2408. ERGOT has performed technical studies and reviewed the appropriate level of reserve margins. As a result of such studies, ERGOT has established a 12.5% reserve margin goal far the ERGOT market. The PUC has opened a rulemaking project to determine whether the adequacy of reserve margins should be left to market forces, or whether other means should be created to help ensure a minimum reserve margin. Transmission Constraints ...One of the fundamental market design elements in the current ERGOT Protocols is the use of a zonal congestion management system to resolve transmission congestion. Congestion can occur in any electrical system when the lowest-cost mix of generating plants to serve customer needs cannot be used because transmission lines would be overloaded under that pattern of generation and load. If transmission facilities limit the operation of the optimal set of generation plants, the transmission grid is said to be "congested." Congestion is relieved through rearranging or "re-dispatching" generation such that the flow of electricity on the grid is altered, and the constraining line is no longer in danger of being overloaded. Generating units that are ordered by ERGOT to lower or increase their output to relieve congestion receive payments to do so from other market participants. In the ERGOT zonal system, the transmission elements that are most likely to limit the free flow of electricity are identified as "commercially significant constraints" ~"CSCs"), and the transmission grid is divided into congestion zones such that each of the generators and loads within a zone has a similar effect on the CSCs between the zones. Determination of zones within ERGOT is an annual event and for 2448 ERGOT has identified four congestion zones (Houston, North, South and West). In a zonal system, most congestion occurs between zones ~"zonal congestion" or "inter-zonal congestion"), but it can also occur within a zone ("intrazonal congestion"}. ERGOT reports zonal congestion costs have decreased from over $144 million in 2441 to less than $$4 million in 2445 and less than $54 million for January through October 2447. This decrease can be attributed to the implementation of direct assignment of zonal costs to market participants scheduling energy over the constraints and on-going improvements to the transmission system. Since 2445 ERGOT TDUs have completed projects costing approximately $2.2 billion. The projects that are being considered over the next five years to meet the growing electricity needs are estimated to cost $3 billion, ERGOT has implemented a zonal balancing energy market for the resolution of transmission congestion between the four 2448 identified zones. A CSC is generally a high voltage (138 kV to 345 kV) power line which acts as an interface between two zones and physically limits due to its design capacity} the economic flow of energy between the zones to a commercially significant degree. When an ERGOT system operator determines a CSC is congested, the system operator reduces the line loading by issuing instructions to increase the generation in the zone importing the power and to decrease generation in the zone exporting the power. The instructions are based upon the generators' bids available in the balancing market. The resulting overall higher costs are defined as zonal congestion costs and are directly assigned on a pro-rata basis to those market participants scheduling energy over the CSC. Intro-zonal Con eg scion ...Infra-zonal, or local, congestion occurs when the lack of sufficient transmission infrastructure in a given area within a single congestion zone) results in a limitation, or bottleneck, of the flow of energy into or within that area. For 2444-2445 ERCDT identified nine general areas with local constraints, including an eight county area within the North Texas zone, designated as the DFW infra-zonal area, which includes the City. lntra-zonal congestion is usually remedied by running higher-cost, Less-efficient generation in the local area to reduce transmission flows and to improve the voltage profiles in the area. To resolve infra-zonal congestion, three different ERGOT market services for the use ofgeneration-unit-specific deployments are used. These are Out-of--Merit Energy ("OOME"), Out-of Merit Capacity ("ODMC"} and Reliability Must-Run ("RMR"). The cost of providing these services is collectively defined as infra-zonal (local) congestion costs and is uplifted to all load-serving entities within the ERGOT region. Infra-zonal congestion costs are highly dependent on local generation availability, the limits of the current transmission infrastructure (including the impact of scheduled and non-scheduled outages), the local area load demand, and projected load 29 growth, ERGOT is working diligently with market participants to develop both short-range and. long-range plans to minimize infra-zonal congestion costs. Intrazonal congestion costs have also decreased from over X400 million in 2003 to about $183 million in 2006 and less than ~ 125 million from January through November 2007, Most of this decrease can be attributed to improvements in the transmission system and operational improvements. Transmission Constraints in the Dallas-Fort Worth Area ...The DFW area is the large, dense load center comprised of many of the cities in north Texas, The large load in this area continues to grow by a significant amount each year, In addition, several generating units in the area have recently been mothballed. The increasing load in DFW, as well as mothballing of these older gas units, has led to increased requirements on the transmission system in the area. These increased requirements include the need for additional transmission capacity into DFW and into certain subsections within DFW, as well as additional autatransformer capacity to allow power to be transferred from the 345 kV bulk transmission system dawn to the load that is served off the 138 kV system. The DFW area, in which the City is located, is one of ERCOT's two largest load centers, with a total load in 2008 of about 19,000 MW for the four counties in the central Da11aslFort Worth area (Dallas, Tarrant, Collin, Denton}, but a combined capacity of only about 6,000 MW. Since 1999 about 2,600 MW of generation has been built and another 3,300 MW of generation is planned near DFW, but all these plants are outside the transmission-constrained metro area. Sites for new generation development are limited and are likely to encounter public opposition. In some cases, the sitting of the new generation has been strongly influenced by air quality issues affecting the DFW area, as described below. Construction of generation in the four-county DFW area is further compounded by the fact that the area is part of anine-county area that has been designated by the Environmental Protection Agency ~"EPA"} and TCEQ as anon-attainment area for ground- level ozone, which is produced in part from nitrogen oxide (often referred to as "NOx"} emissions from fossil -fuel burning. For a discussion of current State Implementation Plan ~"SIP") mandates of specific actions to reduce emissions of NOx from various sources within the area, see "The Electric System -Environmental Regulation -State Implementation Plan far DFW Ozone Non- Attainment Status," To conform to the SIP, DFW power plants will be required either to retrofit existing generation units with new NOx reduction devices or to reduce or cease operation. Because the existing DFW transmission system was designed assuming continued operation of this in-area generation capacity, the DFW area could experience significant problems of peak period supply adequacy and voltage stability if significant amounts of the in-area generation becomes unavailable and no new in- areaplants are built. Can estron Under Nadal Market Desi , .. On April 5, 2006 the PUC issued an order accepting the ERGOT proposed draft protocols for implementing a nodal market design in Texas by January 1, 2009. In contrast to the zonal market design discussed above, there is no infra-zonal congestion, with the result that all congestion is treated in a manner similar to current zonal for inter-zonal} congestion with the exception of how the cost of congestion is determined and to which party that cost is assigned. Under the nodal market design, all paints of receipt or delivery into the ERGOT transmission system are assigned a value of energy at that unique paint. The difference between the prices between any two points is considered the imputed cost of transmission between those two points, including any congestion costs. ERGOT will act as a centralized dispatching agent, charging all loads, or users for electricity based on calculated nodal prices and paying all providers, or generators, of energy based on the appropriate nodal price for the point where their energy is injected into the transmission system. Zones will still be used in the nodal market design, but only for financial settlement purposes, Under the approved Texas version of the nodal market design, all loads, or users of energy within a designated zone will pay the same average price based on the weighted average price of all load nodes in that zone. The zones initially established in the draft nodal protocols approved by the PUC are basically the four existing zones plus three zones for three non- opt-inenfities ("NOIEs"), specifically, the municipal utilities of San Antonio, Austin, and the Lower Colorado River Authority. Up to seventeen additional non-opt-in utilities may also request their own zone designations prior to the implementation of the protocols, if they desire, For the City, the move to a nodal market design would mean that the Electric System would get paid by ERGOT the calculated nodal price at Gibbons Creek for the City's portion of generation output at Gibbons Creek by ERGOT, and would pay ERGOT the zonal average price for the zone in which it is located, for all usage by the City. Unlike the zonal market, where there was a distinct advantage to having both Gibbons Creek and the Electric System in the same congestion zone to avail incurring zonal (or inter-zonal) congestion costs, the load zones created in the nodal market will not impact the price that ERGOT will pay for Gibbons Creek production, The City has taken a proactive step to ensure its ratepayers are protected from the initial impacts of potential price differences between Electric System load and the Gibbons Creek nodal price that will be created in the nodal market design. Under the terms of the 2006 Power Purchase Agreement, Constellation will bear the risk for fluctuations in price between the City's contract price and the nodal price at Gibbons Creek when the nodal market design is implemented. The 2006 Power Purchase Agreement will not expire until June 30, 2011, which will give the City customers more than one year of protection from any adverse impacts of the nodal market design. In the City's view, it is particularly important during the early implementation period to avoid impacts of market dislocations and inefficiencies that invariably occur during the start up phase of a new market structure. 30 THE NEW NODAL DESIGN RULE , . , Introduction , , . In August 2003, the PUC adopted an order setting forth the parameters of the Nodal Design Rule, In adapting its order, the PUC required that the rule be developed with consideration of micraeconomic principles, and implemented through a stakeholder process developed under the auspices of ERGOT, which established the Texas Nadal Team ("TNT") for the purpose of developing new protocols an which the wholesale market design in ERGOT would be based. In November 2004, ERGOT filed acast-benefit study with the PUC and a set,af draft protocols describing a proposed nodal market design similar to the market design adapted by FERC in its Standard Market Design. Pure theoretical nodal market design is based upon the costs incurred far delivery of energy to a specific location on the electric grid, and assessing that cast to the specific location as apposed to spreading the cast to all participants on the grid, as in the current "zonal" wholesale market design of ERGOT. This nodal approach is used in the service areas of several national ISOs, particularly, those in the northeast region of the United States. The Texas design is a variation of that theoretical approach in which load casts are settled by zones and all other participant costs are settled by specific location (Wade}. On September 25, 2005, the Texas nodal protocols were filed with the PUC, and a series of administrative hearings were held by the PUC in late 2005 during which expert testimony and legal briefs were presented by ever 40 stakeholders, including consumer groups, associations representing large energy users, independent power producers, investor owned utilities, MOUs, Electric Ca-ops, ERGOT, the Office of Public Counsel of the PUC, and energy aggregation groups. Com orison a the Existin Zana[ Market to a Nodar Market ...The existing ERGOT zonal market operates in a manner that allows parties to meet their contractual requirements and deliver power based upon thane contracts. It also allows entities to self supply their energy requirements from their owned resources without any market impacts other than the potential of reliability related transmission congestion costs. An MOU, such as the City, is able to schedule all of its energy, reliability and other ancillary energy services from its own resources, and if sa scheduled thane resources will be dispatched to provide those services. Under the current scheme, ERGOT may only move such resources off of their dispatch paints to address system reliability concerns. The current ERGOT zonal market design also includes a balancing energy market operated by ERGOT to saver any deviations in scheduled transactions and actual requirements. This market clears energy transactions on a unifarrn price within each geographical load zone. The transmission system is divided into four zones based upon the electrical configuration of the transmission system. Each of the four zones includes all of the load and generation resources geographically bounded by the designated electrical system network. If a generating resource is moved from its scheduled dispatch point to another dispatch paint, either up ar dawn, that resource receives compensation based upon the direction of movement and a unifarrn clearing price across that single load zone. The balancing energy market approximates 5% of the total energy delivered within the ERGOT system, with the remaining 95% representing energy Bald bilaterally among contracting buyers and sellers of energy. One of the key features of a market based an bilateral contracts is that there is an ability to gain price assurance for the cost of meeting the energy requirements an a chart-term and long-term basis. In contrast to the existing zonal wholesale market design, the nodal market design uses the locational marginal price ("LMP") solutions model, which requires all generating units to offer energy to the market at some price, and all energy transactions are settled through an ERGOT-developed LMP algorithm. Under a nodal LMP market, ERGOT will calculate a price far every monitored location within the transmission grid. These prices reflect the impact of each and every generator ar virtual injection and the relationship of each and every megawatt of energy withdrawn from the system relative to the land carrying capability of the transmission system. This is done on a system-wide basis far each and every settlement period. Under a nodal LMP model mare money is purposefully collected from "Land Serving Entities" (MOUs, Electric Ca-aps or REPs that sell energy to retail customers) than is necessary to compensate the supply side (generators or wholesale power marketers). This is done through the introduction of a new pricing element called "congestion rent" into the market. The revenue from this "congestion rent" is disbursed to holders of Congestion Revenue Rights ("CRRs") associated with each specific transmission element in ERGOT. CRRs can be obtained by any entity, that meets specified credit standards, wishing to bid in an ERGOT managed CRR auction. CRRs obtained through the ERGOT auction process can be traded between entities in secondary markets. CRRs may be obtained by Laad Serving Entities as a hedge against "congestion rents" they may be assessed ar by entities wishing to trade in this commodity market purely far the opportunity it offers to provide a return on their investment. In adapting the Nadal Design Rule an April 5, 2006, only one change was made to the protocols that were filed with the PUC by ERC4T in September 2005. That change was suggested by an Electric Co-op and included definitional changes related to ancillary energy services to allow far self scheduling of generation load in the scheduling with ERGOT to permit separate determination of congestion charges ar payments and energy imbalance service charges ar payments to permit self scheduling entities to designate a source and sink far their transactions, In addition, the PUC recommended that additional study be given to three issues raised during the administrative proceeding, specifically, (1} ca-optimization of energy reserves in the real-time market (measures designed to optimize the resources that produce energy as contrasted with those relied on to provide operating reserves, i.e., co-optimization of energy and reserves), (2) lead participation in the nodal market (the ability of supply side participants to participate in the market with energy and capacity services and to encourage the demand side of the market to respond better to wholesale "price signals"} and (3) creating and changing land zones in the nodal market, including any load zones that may be created by NOIEs (the PUC has expressed its intent to establish a separate rulemaking project to address how load zones will be determined and changed, which will impact how broad ar narrow a Laad zone is for purposes of spreading congestion costs among the participants in that area, although to date that rulemaking project has not been initiated). 31 Concerns Expressed by the Ci with Respect to the Development o{ the ]Nodal Design Rule ...During the course of the stakeholder process during which the nodal protocols were developed and during the administrative hearings, the City has expressed concerns that the Nodal Design Rule may reallocate the costs of alleviating transmission constraints in a manner that could increase the total cost of energy in transmission constrained areas of ERC4T, which include the City, It has also expressed an overall concern that, based on the experience in electric markets, which operate under a nodal design, application of a nodal design in ERC4T will increase the volatility of energy prices and cause a system wide increase in energy costs paid by consumers. The City challenged the authority of the PUC to implement the Nodal Design Rule on several grounds and proposed modifications to the proposed protocols that were designed to ensure that the City will continue to have energy price certainty under the terms of the TMPA Agreement for energy purchased by the City from TMPA. The City's challenges and proposed modifications, as well as those of other participants, were rejected by the PUC in its order of Apri15, 200b. (See AThe Electric System B Litigation and Potential Litigation Concerning Cost of Energy Delivered by TMPA under the TMPA Agreement.@} FEDI;RAI. REGULAT~UN QF ELECTRIC TRANSMISSIQN SERVICES .. . The Enerey Policy Act of 1992. The Federal Energy Policy Act of 1992 (the "Energy Act"), greatly expanded the authority of FERC to order utilities, including utilities within ERC~T, tv provide transmission service for other utilities, qualifying facilities, and independent power producers. FERC also has authority to determine the prices that may be charged for transmission, but has generally deferred to the PUC electric transmission open access rules for access and pricing within ERC4T, Retail Wheeling. The authority to order retail wheeling, which allows a retail customer to be located in one utility's service area and to obtain power from another utility or non-utility source, is specifically excluded from the enhanced authority granted tv FERC under the Energy Act. However, while the States may have authority to determine whether retail wheeling will be permitted, FERC has determined that it has jurisdiction over the rates, terms and conditions of retail wheeling. FERC Final Rules and Pro osed Rulemakin~s in. Federal Regulation of Electric Utilities. To establish foundations necessary tv develop a competitive wholesale electricity market and effectuate the transmission access provisions of the Energy Policy Act, on April 24, 199b, FERC issued two final rules ~"FERC Final Rules") on non-discriminatory open access transmission services by public utilities and stranded cost recovery. The first of the FERC Final Rules, Order No. 888, requires all public utilities that own, control or operate facilities used for transmitting electric energy in interstate commerce to ~i) file open-access, non-discriminatory transmission tariffs containing, at a minimum, the non-price terms and conditions set forth in the order and (ii) functionally unbundle wholesale power services by (I) applying unified transmission tariffs system to all customers, (2} providing separate rate systems for wholesale generation, transmission and ancillary services and (3) relying on the same electronic information dissemination network that its transmission customers rely on in selling and purchasing energy. The second of the FERC Final Rules, order No, $$9, requires all public utilities to establish or participate in an open Access Same-Time Information System (BASIS} that meets certain specifications, and comply with standards of conduct designed to prevent employees of a public utility (or any employees of its affiliates) engaged in wholesale power marketing functions from obtaining preferential access to pertinent transmission system information. FERC stated that its overall objective is to ensure that all participants in wholesale electricity markets have non-discriminatory open access to transmission service, including network transmission service and ancillary services. FERC also indicated that it intends to apply the principles set forth in the FERC Rules to the maximum extent to municipal and other non-FERC regulated utilities, both in deciding cases brought under the Federal Power Act and by requiring such utilities to agree to provide open access transmission service as a condition to securing transmission service from jurisdictional investor-owned utilities under open access tariffs. Although the FERC Rules do not directly regulate municipally-owned and other non-FERC-regulated utilities such as the Electric System, the FERC Rules have a significant impact on such utilities' operations. The FERC Rules have significantly changed the competitive climate in which the non-FERC regulated utilities operate, giving their customers much greater access to alternative sources of electric transmission services. The rules require them to provide open access transmission service conforming to the requirements for investor owned utilities whenever they are properly requested to do so under the Energy Policy Act or as a condition of taking transmission service from an investor owned utility, In certain circumstances, the non-FERC-regulated utilities are required to pay compensation to their present suppliers of wholesale power and energy for stranded costs that may arise when the non-FERC-regulated utilities exercise their option to switch to an alternative supplier of electricity, wer the past several years, various efforts have been made to provide same interstate connections with the ERC4T transmission grid. These efforts have resulted in protracted judicial and administrative proceedings involving ERC4T members. FERC has issued orders, which, among other things, permit the ERC~T members to avoid Federal regulation of rates as the result of the ordered interconnections with another interstate connected utility. Ener~t Policy Act of 2005. In 2005, the United States Congress passed the Energy Policy Act of 2005 ~"005 Policy Act"} which amended the Federal Power Act to significantly change the electric regulatory climate in North America. The 2005 Policy Act requires all electric utilities, including M4Us, in the United States to comply with reliability standards promulgated and enforced by NERC, under the supervision of FERC. Such mandatory and enforceable reliability standards include the ability to assess civil penalties for violations of such standards. At this time, the City believes the Electric System is in material compliance with current NERC reliability standards. However, if the Electric System is found not to be in compliance with the 32 applicable standards, significant monetary damages could be assessed by Texas Regional Entity, a division of ERCOT delegated by NERC as the regional enforcement entity within ERCOT. PROPOSED FEDERAL LEGISLATION , , .Many bills have been introduced in the United States House of Representatives and the United States Senate to deregulate the electric utility industry on the Federal or state level, Many of the bills provide for open competition in the furnishing of electricity to all retail customers (i.e., retail wheeling}. In addition, various bills have been introduced that would impact the issuance oftax-exempt bonds for electric transmission and generation facilities. No prediction can be made as to whether these bills or any future proposed Federal bills will become law or, if they became law, what their final form or effect would be. ENVIRONMENTAL REGULATION .. . General. Electric utilities are subject to numerous environmental regulations administered at the Federal and State level. Over time such regulations have become more stringent as water and air quality goals have tightened, and as pollution control technologies have advanced. Considering the growing concern that the emissions of carbon dioxide ("COZ"} and other greenhouse gases are contributing to global warming, it is expected that this trend will continue into the future and that mare climate change legislation will be enacted. The uncertainty associated with future regulations, coupled with the piecemeal and uncoordinated manner in which they are implemented, presents the electric utility industry with a formidable challenge, Consequently, the City cannot predict whether Gibbons Creek will remain subject to the regulations currently in effect, will always be in compliance with present or future regulations, or will always be able to obtain all required environmental licenses and permits. Furthermore, more stringent environmental requirements may require significant upgrades in environmental controls, reduced operating levels, increased operating costs, or, where the necessary upgrades are not economical, the shutdown of affected generating units. Air Emissions New Source Review. The applicable rules of the agencies charged with implementing the Federal Clean Air Act ~"FCAA"} and the Texas Clean Air Act ~"TCAA"} regulate air emissions from power plants through a number of different programs. For example, both the FCAA and the TCAA contain new source review ("NSR"} requirements that require pre- construction permits authorizing the discharge of air emissions from new or modified facilities. Over the last several years, the EPA has conducted a major enforcement initiative targeting alder coal-fired electric generation plants and has asserted that a number of coal-fired electric generation plants have undertaken major modifications in the past without concurrently upgrading pollution controls, as required. One of the goals of this enforcement initiative is to force the older coal plants to go through the air permitting process and then install significant upgrades to their air emission controls consistent with current permitting criteria. There has been considerable controversy over what kinds of activities or changes represent a facility modification requiring a permit amendment and what kinds of activities or changes are considered routine maintenance not necessitating an amendment. Through several rulemaking actions, the EPA has attempted to provide both clarity and some degree of reform to the implementation of the NSR provisions. However, the rules have been challenged and will likely be tied up in litigation for some time to come and considerable uncertainty remains, Up to this point, Gibbons Creek has not been subject to investigation as part of this enforcement initiative. As explained below, Gibbons Creek has completed facility changes that generally reduce air emissions of sulfur dioxide ("SO2"} and NOx. FCAA. In 1990, legislation was signed into law that significantly amended the FCAA (the "1990 Amendments"}. Among other requirements, the 1990 Amendments addressed acid rain deposition through the reduction of SOZ and NOx emissions from electric utility power plants, particularly those fueled by coal. In an innovative approach to pollution control, SOZ emissions were limited by means of a market-based emission cap and trade program, which was implemented in two phases. Gibbons Creek was subject to Phase II of this program, which went into effect in the year 2000. Under the program and through the switch from lignite to Power River Basin coal as fuel, the unit has sufficient SOZ allowances to sustain current operating requirements. See "Appendix B - Description of Senate Bill 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency -Clean Air Act Compliance." The 1990 Amendments also required coal units to reduce NOx emissions. As with the SOZ program, the NOx program consisted of a two-phase strategy, with the first set units achieving compliance in 1996 and the second in 2000. Gibbons Creek was covered under Phase II. Gibbons Creek became subject to the NOx emission requirements and has achieved compliance with these rules. Clean Air Interstate Rule and Clean Air Mercury Rule. The Clean Air Interstate Rule ("CAIR"}, issued by EPA in 2005, with the objective of further reducing SOZ and NOx emissions from power plants. On July 11, 200$, the Court of Appeals far the District of Columbia ruled that the EPA lacked authority to implement CAIR and, citing flaws in CAIR, threw out LAIR in its entirety. CAIR had applied to states in the eastern half of the United States including Texas} and was to have been implemented through a cap and trade program modeled after the 1990 Amendments. The aim of the program was reduction in emissions of SOZ and NOx by 70% in two phases, beginning in 2009 and culminating in 20 ] 5. Gibbons Creek had submitted its CAIR permit amendment application and had received a final draft permit from TCEQ in connection with that application. It was believed that the NOx emission control systems at Gibbons Creek could be fine tuned to sufficiently reduce emission rates and still maintain current operation levels, although additional credits could have been needed. It is uncertain whether new legislation or 33 regulatory action will be filed or implemented that would have similar goals and compliance costs for Gibbons Creek as under LAIR. ' The Clean Air Mercury Rule ~"CAMR"), also issued by EPA in 2005, requires reductions of mercury emissions from coal-fired generation plants through a nationwide cap and trade approach. The mercury reductions are proposed to be phased in between 2010 and 2018. Potential emission reduction projects that will achieve the expected mercury emission limits at Gibbons Creek are currently being evaluated. The installation of additional pollution control equipment to address these new emission reduction requirements (assuming any such equipment should prove necessary) may require significant capital expenditures and may also significantly increase operating and maintenance costs. At this time, the City cannot predict the final cost to it arising from these developing changes to the environmental air emissions rules applicable to its operations. Ambient Air uali Standards. The EPA has established national air quality standards for six regulated pollutants: ozone, lead, particulate matter, carbon monoxide, 502, and NOx. When a pollutant concentration in an area exceeds a standard, the area is classified as "nvnattainment" for that pollutant, A nonattainment designation then triggers a process by which the affected state must develop and implement a plan to improve air quality and "attain" compliance with the appropriate standard. This so called State lmplementativn Plan ("SIP")entails enforceable control measures and time frames. Of these six pollutants, urban areas have had the greatest difficulty achieving the ozone standard, the primary component of smog. This challenge was compounded in duly of 1997, when EPA adopted a revised and mare stringent ozone standard and was made even mare difficult when, on March 12, 2008, EPA strengthened the national ambient air quality standards for ozone. In issuing the new standards (the "New Air Quality Standards"), the EPA stated that the revisions reflect new scientific evidence about ozone and its effects vn public health and welfare. The New Air Quality Standards revise both the primary ozone standard, designed to protect public health, and the secondary standard, designed to protect welfare, such as vegetation and crops. While Gibbons Creek is not currently in a nonattainment area as determined by the previous standard, it is possible that under the New Air Quality Standards the Gibbons Creek location may be deemed to be in anon-attainment area and additional controls implemented that would affect it. In addition, legislation has been introduced during the current session and prior sessions of the U.S. Congress that would regulate emissions of so-called "greenhouse gases," including CO2, which has not been previously regulated as a pollutant in the U.S. The legislation introduced in Congress in 2008 provided far a phased in reduction of such gases and would require power plants, factories and ail companies, among others, to operate within specified allowances of emissions of such gases beginning in 2012, when the current emission levels would be reduced by half. The legislation included additional emissions reductions thereafter and provided for the establishment of a market for the trade of such emission allowances. To date, no such legislation has been enacted by the U.S. Congress, and the City cannot predict whether any similar bill will be enacted by Congress, or whether State legislation could be enacted that would regulate carbon dioxide emissions. Moreover, the City cannot predict the financial impact that any such legislation, if finally enacted and signed into law, would have vn the City yr the electric market in general. State Actions and Im lementation Plan or DFW Ozone ion-Attainment Status. In an effort to improve the air quality in both existing and impending nvnattainment areas, the State has implemented two regional programs targeted at reducing statewide NOx emissions from power plants. NOx emissions are targeted in that these compounds react with volatile organic compounds in the presence of sunlight to form ground level ozone. The first program, which was part of SB 7, required that "grandfathered" power plants, i.e., facilities that were constructed prier to the 1971 Texas Clean Air Act, obtain a Texas Air Permit and reduce NOx emissions by approximately 50%. See "Appendix B - Description of Senate Bill 7 and the Texas Municipal Power Agency - Texas Municipal Power Agency -Clean Air Act Compliance." The second program was implemented on April 19, 2000, when TCEQ adopted a regional NOx reduction rule affecting permitted power plants in the attainment counties in the eastern half of the State. The regional rule, as with the grandfathered provisions of SB 7, calls for an approximate 50% reduction of NOx from permitted power plants. Gibbons Creek is affected by this rule and has achieved compliance with the regional rule. See "Appendix B -Description of Senate Bi117 and the Texas Municipal Power Agency -Texas Municipal Power Agency -Clean Air Act Compliance." Through these regional NOx reductions, power plant sources are facing much more severe NOx control requirements. It is possible new requirements and programs may be implemented in the future that will further impact the Gibbons Creek operations. The DallaslFort Worth ozone nonattainment area initially, Collin, Dallas, Denton, and Tarrant Counties ~"Original DFW Area")) was originally designated "moderate" under the 1990 Amendments, and thus was required to attain the 1-hour ozone standard by November 15, 199b (a 1-hour standard is an EPA measure that specifies that certain pollutants not be at or above a particular level on more than three days aver three years). As required by the FCAA, the State submitted a SIP in 1994 which projected attainment of the ozone air quality standard by 199b. This plan was based on a volatile organic compounds reduction strategy. The Original DFW Area did not attain the ozone standard in 199b. EPA is authorized to redesignate an area to the next higher classification ("bump up") if it fails to attain by the required date. Consequently, in March 1998, and in accordance with FCAA, EPA reclassified the Original DFW Area from moderate to 34 serious, based on monitored exceedances of the azane standard between 1994 and 1996. The reclassification required the State to submit a revised SIP demonstrating attainment of the ozone standard by November 15, 1999. Because the Original DFW Area continued to exceed the ozone standard in 1999, EPA required submittal of a revised SIP by May 1, 2aaa, demonstrating attainment. On April 19, 2x00, the Texas Natural Resources Conservation Commission (predecessor to TCEQ} adapted a new SIP, which included a plan far the Original DFW Area. In February 2x01, EPA accepted the SIP, including the plan for the Original DFW Area. In accepting the SIP, EPA did not reclassify the Original DFW Area from serious to severe, and deferred the compliance date for the Original DFW Area to November 15, 2007 from November 15,1999. On April 15, 20x4, Ellis, Johnson, Kaufman, Parker and Rockwall Counties were added to the nanattainment area ~"Current DFW area"}. The Current DFW Area is now classified as a "moderate" azane nonattainment area under the $-hour ozone standard. The requirements of the 1-hour standard remained in effect far the Original DFW Area until EPA revoked that standard on June 15, 2005. At that time the Current DFW Area became subject to the $-hour requirements. In April 2aa4, EPA also addressed other aspects of $-hour attainment in Phase I of its Implementation Rule, promulgated April 30, 2004. The Implementation Rule outlines a number of options for areas with outstanding obligations far an approved 1-hour ozone attainment demonstration, which applies to the Original DFW Area. Should EPA ultimately determine in accordance with its review time line that the State fails to demonstrate attainment, EPA may bump up the area to the severe classification. (The FCAA provides various punitive measures far areas that are classified as "severe." Two of these measures involve the loss of Federal highway funding and the implementation of a more stringent environmental permitting program far commercial and industrial entities, possibly retarding economic growth in such areas.} On November 29, 2aa5, EPA finalized Phase II of its $-hour Ozone Implementation Rule, which detailed reasonable further progress ~"RFP"} requirements for $-hour atone nonattainment areas, such as the Current DFW Area. On November 21, 2aa6, TCEQ filed revisions to the Current DFW Area SIP (the "Revised DFW SIP"}. After public comments were received through February 12, 2007, TCEQ adopted the Revised DFW SIP on May 23, 2007. On July 1, 2a0$ the EPA regional administrator with oversight responsibilities far Texas and four other states announced that EPA will accept the Revised DFW SIP without modification. The Revised DFW SIP notes that the Current DFW Area consists of two sets of counties: the original four one-hour nonattainment counties ~Callin, Dallas, Denton, and Tarrant) and the five new nonattainment counties Ellis, Johnson, Kaufman, Parker, and Rockwall). Because of this circumstance, TCEQ has two options far fulfilling its $-hour ozone RFP requirements far the Current DFW Area: (1) to treat all nine counties as a single area with a single RFP reduction target of 15 percent reduction in volatile organic compound ("VOC"} emissions from the entire nine-county area between 2002 and 2aa$ ar ~2}treat the two sets of counties as separate areas with separate RFP targets. TCEQ chase option 2 to fulfill the $-hour azane RFP requirements far the Current DFW Area, using the mandate of VOC reductions far the five-county area and NOx reductions far the four-county area. Using NOx reductions for the four-county area is consistent with the DFW $-hour ozone attainment demonstration SIP that shows reductions in NOx emissions are mare effective than reductions in VOC emissions far reducing ozone levels in the DFWvine-county area. The Revised DFW SIP is intended to bring North Texas' ozone dawn to the previous federal limit by fall 2009 ~althaugh the Revised DFW SIP will not meet the New Air Quality Standards}, with the expectation that the State will submit a new plan designed to maintain legal levels in June 2x10. Major elements of the Revised DFW SIP include: a 40% cut in smog-causing emissions from cement plants in Ellis County, located south of the City; new standards far power plants in the nine counties in the nonattainment area; emissions cuts from pipeline compressor engines in East Texas; voluntary measures such as an enhanced state incentive program far replacing old, highly polluting diesel engines; planned local traffic improvements; continuing vehicle emissions checks; and planned new federal vehicle standards in 2009. The Revised DFW SIP does not address new coal-burning power plants or require additional cuts from existing power plants outside the nonattainment area, such as Gibbons Creek. The Revised DFW SIP notes that significant decreases in 1-hour ozone design values, and NOx and VOC emissions in the DFW area have occurred since 1990, however, the increased stringency of the $-hour ozone standard requires further reductions to bring the area into attainment of the .0$ ppm $-hour standard by modeling $4 ppb or less by 2009 (the Revised DFW SIP notes that two monitoring locations, in the City and in nearby Frisco, are modeled to be above the target of $5 ppb, each projected at 87.7 ppb}, Rapid population growth and economic development in the Current DFW Area present numerous and complex challenges to reducing NOx and VOC emissions. On-road and non-road mobile sources are the largest contributors to NOx emissions in the DFW area. The 1-hour ozone design value has decreased about 1a.7 percent aver the past 15 years, while the &hour azane design value has decreased 9.5 percent during the same period. In 2aa5, the peak 1-hour azane design value was reduced to 125 ppb, while the peak $-hour ozone design value dropped to 95 ppb. NOx and VOC emissions trends demonstrate decreasing emissions in the DFW area. 35 THE WATER SYSTEM The water system provides retail water service to all customers located within the City limits, as well as wholesale treated and raw water service to the Upper Trinity Regional Water District ~"UTRWD"} for its use and for resale to two of its customer cities. The water distribution system consists of 2 water treatment plants, 520 miles of water mains, l4 million gallons of ground storage, and 4,36 million gallons of elevated storage, The City continues to operate the water system in compliance with all State and Federal water quality requirements. Water Supply ...The present municipal supplies are obtained from surface sources, The City has conservation storage rights in Lewisville Reservoir, which was constructed by the U.S. Corps of Engineers. This Reservoir has a maximum conservation storage area of 436,000 acre feet of water. The City holds the rights to 21,000 acre feet of storage, with the balance being held by the City of Dallas ~"Dallas"}. Based on the safe yield of 90.20 MGD, the City receives 4,34 million gallons per day ~"MGD"} in water rights from Lewisville Reservoir. The City also has 247,$96 acre feet of annual withdrawal rights from the Ray Roberts Reservoir X799,600 acre feet} located on the Elm Fork of the Trinity River nine miles upstream from the Lewisville Reservoir, The City and Dallas have determined and agreed by contract that the safe yield of Ray Roberts Reservoir is 76 MGD, and that the City's share is 26°/a or 19.786 MGD, and Dallas' share is 74% or 56.24 MGD. The City projects that the combined 24.62 MGD of currently available surface water volume from Lewisville Reservoir the City has rights to 4.$6 MGD in Lewisville Reservoir, including wastewater effluent returns) and Ray Roberts Lake the City's rights in Ray Roberts total 19.76 MGD} will be sufficient to serve the City's needs for approximately seven years. The City's retail and wholesale treated water volume during 2007 averaged approximately 15.54 MGD. The City has a raw water supply contract with Dallas, dated August 7, 1985, that has a 30 year term, provided that the City can, upon five years' notice to Dallas, reduce or cease taking water under the contract. The contract obligates the City to purchase at least 544,444 gallons per day from Dallas. This is a minimum contract volume that the City maintains in order to keep open a long term option to purchase additional raw water from Dallas in the future that may be provided from existing or new water resources developed by Dallas. The water contract with Dallas is similar to the contracts for retail andlor wholesale water that Dallas supplies to 23 other North Texas municipalities. As regional water provider, Dallas is actively exploring prospects for obtaining additional water resources to serve its customer cities. The City's wholesale water purchase price from Dallas is currently 0.4360 cents per 1,444 gallons. State legislation has been enacted in recent years to organize similarly-situated water use areas into water planning groups. The City is working with Dallas and the other water users of the State's seventeen-county Region C Water Planning Group, which are conducting along-range water supply study to determine the water requirements and supply alternatives for the region through 2454. Given its raw water contract with Dallas, the City is of the view that it has the flexibility to work with Dallas at least through the remaining term of the agreement, but that it could also become a participant or a customer of other regional water suppliers that are investigating additional water supplies for the Region C Water Planning Group. The City has adopted a drought contingency plan, designed to help reduce water system demands in the event of a reduced water supply due to extended drought conditions or a temporary loss of critical facilities. Since the City shares two water supply reservoirs with Dallas, the drought contingency plan of the City shares common "trigger points" with the Dallas with respect to water that may be taken from the shared water supply reservoirs, although the City may implement its drought contingency plan for water treatment andlor distribution system limitations even if Dallas has not implemented its drought contingency plan. Water Treatment Plants , ..The City's water treatment plants are capable of treating and pumping 48.75 MGD. The maximum volume pumped to date was 32.7$ MGD in 2446. In June 2443, the operations began at the City's second water treatment plant, which has a capacity of 24 MGD. Upper Trinity Regional Water District ... 0n June 16,1989, the City, in cooperation with 32 other Denton County cities, towns and water supply entities, effected the creation of the UTRWD in accordance with enabling State Legislation. The UTRWD's purpose is to provide future raw water supplies, wholesale water and wastewater services to entities primarily in, but not limited to, Denton County, UTRWD is controlled by a Board of Directors representing the cities in the region, The UTRWD is also authorized to plan, acquire or develop future raw water supplies or reservoirs for its participating members. The City began selling raw water to UTRWD in 1994 from the surplus capacity of the Lewisville Reservoir, During the 2404 Fiscal Year, a raw water pipeline from a new reservoir in east Texas was completed, which allows UTRWD to pass raw water through Lewisville Reservoir to a treatment plant in which it has an ownership interest. Although the UTRWD has completed the waterline into the Lewisville Reservoir, the line does not supply 144% of their water needs. Therefore, the City is continuing to sell wholesale raw water to the UTRWD. The pricing of the water sold to UTRWD by the City is at a wholesale, untreated rate. Because the raw water sales fluctuate the revenue is not a component of the water rate models. The City's contract with UTRWD provides for treated water sales to the UTRWD for resale to the City of Sanger, a municipality with a population of approximately 5,954 ~"Sanger"}. Sanger's water purchases are currently based on a demand charge for .5 MGD, plus a volume charge based upon actual water taken. In 2447, treated water sales by the City for resale to the City of Sanger averaged 128,712 36 gallons per day. In 2004, the City contracted with UTRWD to deliver City treated water to UTRWD for resale to the City of Krum, a municipality of about 3,250 people ~"Krum"}. The City began selling water to Krum through the UTRWD in April 2005, and it is expected that the water sales to Krum will continue for a term of eight years Ito 2013}. Like the Sanger water cantract, the Krum water contract also includes demand and use components. For 2007, Krum has designated to take .2 MGD of water under its contract with the City, In 2007, treated water sales to Krum averaged 85,647 gallons per day. The City's contract ~vith UTRWD will expire in July 2012, unless it is extended by mutual agreement. TABU 3 -WATER USAGE ~GALLDNS} Average Maximum Year Da Sales} Day 2003 14,334,020 29,340,000 2004 13,571,727 25,030,000 2005 15,156,884 30,090,040 2006 19,444,940 32,783,000 2007 15,537,326 29,487,000 TABLE 4 - TOP TEN WATER CUSTOMERS 2007 Annual Consumption Name of Customer Gallons Revenue University of North Texas 273,912,150 $ 799,256 Denton Independent School District 116,500,570 360,729 Texas Woman's University 99,115,630 296,194 Upper Trinity Regional Water District 83,926,000 407,794 City of Denton 72,326,700 226,601 Value Family Properties 64,892,490 186,247 Peterbilt 54,184,200 156,530 Denton County 39,954,770 117,289 Denton State School 32,590,500 93,535 The Ridge at North Texas 32,293,100 94,430 869,696,110 $ 2,738,645 TABLE ~ -WATER RATESEFFECTIVE QCTUBER ~, 2007} Residential Inside City Limits outside Ci Limits Facility Charge 314"meter $ 9.95 per month $11.45 per month 1"meter 12.95 per month 14.90 per month 1 112" meter 16.60 per month 19.10 per month 2" meter 18.90 per month 21.75 per month Volume Char e Inside Ci Limits 0-15,000 gallons 15,001-30,000 gallons 30,001-50,000 gallons Over 54,444 gallons Summer a -October $2.68 per 1,000 gallons 3.70 per 1,000 gallons 4.74 per 1,444 gallons 5.14 per 1,444 gallons Winter November-April} $2.68 per 1,040 gallons 2.68 per 1,004 gallons 2.68 per 1,004 gallons 2.68 per 1,004 gallons Outside City Limits 0-15,440 gallons 15,001-30,000 gallons 30,001-50,000 gallons Over 50,000 gallons $3.48 per 1,004 gallons 4.26 per 1,004 gallons 5.41 per 1,000 gallons 5.87 per 1,440 gallons $3.48 per 1,400 gallons 3.08 per 1,004 gallons 3.48 per 1,400 gallons 3.08 per 1,400 gallons 37 Commercial and Industrial (Inside City Limits) Facility Charge 314" meter $18.40 per month 1"meter 21,30 per month 1 112" meter 25,30 per month 2" meter 32.60 per month Volume Charge 2.96 per 1,000 gallons RESIDENTIAL IRRIGATION RATE Summer Winter ~Ma -October ovember-A ril 0-15,000 gallons $3.70 per 1,000 gallons $2.68 per 1,000 gallons 15,001-30,000 gallons 4.70 per 1,000 gallons 2.68 per 1,000 gallons Over 30,000 gallons 5.10 per 1,000 gallons 2.68 per 1,000 gallons COMMERCIAL IRRIGATION RATE Summer Winter Ma -October ovember-A ril} All Volumes $3.56 per 1,044 gallons $2.96 per 1,000 gallons THE WASTEWATER SYSTEM The wastewater system provides retail wastewater collection and treatment service to City citizens, as well as the City's four wholesale wastewater customers. The collection system consists of approximately 459 miles of gravity wastewater lines, 21 miles of force mains, and 27 lift stations. wastewater Reclamation Plant ... In 1994 the City campleted an expansion of its wastewater reclamation plant, which has an operating permit for treatment of up to 15 MGD. A 6 MGD expansion was completed at the reclamation plant in December 2003, bringing total permitted treatment capacity to 21 MGD, which the City projects will meet its needs through 2013. The City's treated wastewater effluent volume averaged 11.26 MGD in 2007. The wastewater system is subject to, and is presently operated and maintained in compliance with, applicable State and Federal laws, regulations and effluent discharge permits. The City's discharge permit for the wastewater reclamation plant imposes stringent limitations on the removal of ammonia, dechlorination, and sludge conditioning and treatment. Wholesale Customers . , .The City has contracts to treat wholesale wastewater for the Cities of Corinth, Krum, Argyle and the Lake City Municipal Utility Authority. In 2407, the wholesale treatment volume averaged approximately 1.04 MGD. Compact and Ef~uent Programs ...Use of wastewater byproducts and recycled yard waste to make compost material has provided an additional means of sludge disposal for the City, and has produced a new revenue source through sale of the compost product. The City has seven acres ofroller-compacted concrete surface at its wastewater reclamation plant that is used for the City's compost program. All sludge from the reclamation plant is composted by the City. The City has also implemented a reuse system for treated effluent. The City is expanding its reuse water program for sale to major irrigation users in the City. The effluent waterline project was completed in March 2004. In 2007, the City received $149,342 in revenues from the sale of effluent to the local electric generating plant and to irrigation customers. TABLE G -WASTEWATER RATES EFFECTIVE UCTOBER 1 ~ 2Q07} Residential Facility Charge $7.45 per month Volume Charge 2.85 per 1,000 gallons Based on 98% of average water consumption billed during December through February; volumes are capped at 18,000 gallonslbill} Co m merc iallIndustrial Facility Charge $19.47 per month Volume Charge 3.70 per 1,000 gallons Based ors $5% of monthly water consumption} Industrial surcharge based on concentration of biochemical oxygen demand and total suspended solids of effluent} Residential Customer Uutside City Limits Facility Charge $8.60 per month Minimum Billing $29.55 per month Volume Charge $3.29 per 1,000 gallons Rate Regulation ...Within its boundaries, the City has exclusive jurisdiction over the water and wastewater system rates. Rate Management ... For a discussion of the City's wastewater system rate structure, see "Water and Wastewater -Rate Management." 38 WATER AND WASTEWATER RATE MANAGEMENT Since the late 1990's, the City has financed substantial amounts of new water and wastewater infrastructure improvements to meet increased demands for service. No new infrastructure was financed in the years 2004, 2005 and 2006. The City funded $9 million for water facilities in 2001 and is funding $4 million for water facilities from this issue of Bonds, but will not fund any wastewater system improvements with debt during fiscal year 2008. Prior to the 2003 fiscal year the City had not increased water or wastewater rates since fiscal year 1996. The City increased wastewater rates by 4%, 9% and 6% in 2004, 2005 and 2006, respectively, No rate increases are currently planned for the wastewater system, since these recent rates have put the wastewater system in position to meet capacity costs and debt requirements at least for the short term. Water rates were increased by 2% in fiscal year 2007 and 3% in fiscal year 2008. The ability of the City to maintain relatively low water rate increases is attributable to several factors, including a comparatively stable cast for raw water. In addition, the City has benefited from a decline in interest rates that has permitted it to borrow and refinance System debt at favorable rates. Another significant factor in the City's management of water and wastewater rates include the implementation of water and wastewater impact fees that occurred in 1998. The water and wastewater impact fees were updated and increased in 2003 and in 2008. The 2008 update of the water impact fees established two water service area zones for assessing impact fees. The water impact fee for Zone 1 is $3,400, and Zone 2 is $4,000. Wastewater maintained the two service area zones previously established in 2003. The current impact fee for wastewater service area Zone 1 is $1,700 and Zone 21s $1,760. These fees are assessed to offset the additional infrastructure costs associated with service to new development areas, Impact fees allow the City to meet new development requirements without the need to recover costs from existing customers through higher utility or tax rates. As spawn under "DEBT INFORMATION -Anticipated Issuance of Revenue Bonds," the City is projecting that it will issue mare debt over the next five years for water system projects. As a result, and to maintain relatively level water cost for its customers while meeting increases in costs of labor and supplies, the City is projecting a 3% water rate increase for each year beginning in 2008 through 2014. The City's current water and wastewater rates are comparable, though slightly higher, than rates charged in nearby municipalities of similar size, though the City's rates are somewhat lower than other water suppliers operating in the immediate area adjoining the City. The City has identified significant water and wastewater infrastructure that it anticipates will be funded through a mix of currently-generated funds, the use of financial reserves and System debt over the next five years (see "Debt Information - Anticipated Issuance of Revenue Bonds"). The increasing capital expenditures and growth in debt service associated with the capital expenditures, particularly far the wastewater system, are significant contributors to the increased wastewater rates, discussed above. In addition, the wastewater increases reflect a financial goal for both the water and wastewater systems to (i) generate net revenues each year in amounts equal to the System's debt service coverage ratio of 1.25 times debt service, after payment of operating expenses of each system, with each component of the System meeting the rate covenant on a stand-alone basis, and iii} with each system building toward the accumulation of reserves equal to 60 days of working capital and an unreserved fund balance of 15% of budgeted expenses. In fiscal year 2001, the City reached these goals. Reserve funds, including rate stabilization accounts, that were established to address future capital and contingency requirements and to provide financial flexibility are being used to minimize rate increases. Through the use of such reserves, the City can meet budget demands during cycles of wet weather, such as occurred in the summer of 2007, that reduce the cash flow of the water system. The use of rate stabilization funds also permits the City to temporarily absorb increases in variable operating costs. In accordance with the terms of the Ordinance, the City Council may pledge all or part of the amounts in one or more of the rate stabilization funds to secure the Parity Bands, in which event, such pledged amounts become "Pledged Revenues" that may be taken into account by the City far purposes of satisfying the debt service coverage covenant described in the preceding paragraph. For the year ended September 30, 2007 the City added $2,000,000 to the water rate stabilization fund, and $4 million to the wastewater rate stabilization fund. For flscal year 2008, the City does not anticipate using any rate stabilization reserves from water or wastewater. The City's fiscal year 2008 budget includes a beginning balance of approximately $12 million in the water rate stabilization fund and $4.0 million in the wastewater rate stabilization fund. The City Charter provides that the City shall be entitled to receive annually on the net investment from excess revenues of its utility enterprise funds, if any, of not more than 6 percent of the net investment of such funds in each year. In satisfaction of this "rate of return" transfer provision, the City annually makes transfers from the water and wastewater system except for amounts attributable to drainage operations, as described below) to the City's General Fund that equal to 3.5% of the rate revenue of each fund. In addition, there is an annual transfer of 4% of rate revenue as a payment in lieu of franchise taxes and an indirect allocation for recovery of administrative overhead, which for fiscal year 2007 is equal to 3% of rate revenue. Since February 2002, when the City implemented its drainage fee, drainage projects have been funded by such fee, which is administered through the wastewater system budget. During the 2003 Texas legislative session, legislation was approved that exempted State agencies, including State institutions of higher education, from paying drainage fees. As a result of this change in the law, prior year projections of drainage revenues were reduced by $252,000 each year. To address the loss of such funds, commencing with fiscal year 2006, the City has determined that no #ransfers will be made to the General Fund from drainage revenues that are comparable to the rate of return or payment in lieu of franchise taxes made to the General Fund from the water system and other rate revenues of the wastewater system. The City will also cease making a transfer to the wastewater system equivalent to the drainage fee. The net result is expected to be an approximately $200,000 benefit for drainage operations. 39 DEBT INFQRMATIQN TABLE 7 -DEBT SERVICE REQUIREMENTS Fiscal Year Total % of Ended outstanding Revenue Bonds ~~~ The Bonds (1) outstanding Principal 9130 Princi al Interest Total Principal Interest Total Debt Retired 2x08 $ 14,84a,xx0 $ 13,088,928 $ 27,928,928 $ - $ - $ - $ 27,928,928 2x09 14,865,000 12,431,555 27,29b,555 63x,xaa 5b1,717 1,191,717 28,488,272 2010 15,430,000 11,b50,53b 27,080,53b 505,xaa b89,804 1,194,804 28,275,339 2x 11 14,32a,xxx 10,887,021 25,2x7,x21 525,xaa b71,521 1,19b,521 2b,4x3,542 2x12 14,955,xxa 1x,1b8,2b3 25,123,2b3 540,xaa b52,b18 1,192,b18 26,315,881 25.79% 2x13 15,b35,xxa 9,438,021 25,x73,x21 SbO,xaa b33,a93 1,193,093 2b,2bb,114 2014 1b,385,xxa 8,b78,334 25,063,334 580,000 b09,958 1,189,958 2b,253,291 2x15 1b,875,xxa 7,88b,852 24,761,852 605,xaa 582,999 1,187,999 25,949,851 2x 1 b 1b,920,xxa 7,x71,409 23,991,409 b35,xaa 554,789 1,189,789 25,181,198 2x 17 17,775,x0a b,221,a77 23,99b,x77 b7x,0a0 525,100 1,195,1 Ox 25,191,178 54.9b% 2x 18 18,470,x0a 5,347,175 23,817,175 70x,0a0 492,183 1,192,183 25,x09,358 2019 19,xb0,xaa 4,4b2,241 23,522,241 735,xaa 455,949 1,19x,949 24,713,19x 202a 2a,x35,xaa 3,540,394 23,575,394 77x,xaa 417,948 1,1$7,948 24,763,342 2021 1b,840,x0a 2,bb9,33b 19,Sa9,33b 815,0x0 377,926 1,192,92b 20,702,2b3 2022 13,725,xaa 1,937,b59 15,bb2,b59 855,xa0 335,759 1,19x,759 1b,853,418 85.93% 2x23 8,535,xa0 1,4xb,a91 9,941,x91 90x,0a0 291,445 1,191,445 11,132,53b 2x24 5,905,xaa 1,x70,978 b,975,978 945,xa0 244,859 1,189,859 8,1b5,837 2x25 b,195,000 788,838 b,983,838 l,a0x,0a0 195,748 1,195,748 8,179,585 2a2b 4,025,0x0 555,9x3 4,580,9x3 1,05x,0a0 143,985 1,193,985 5,774,888 2x27 3,53x,0a0 391,719 3,921,719 1,105,0x0 88,881 1,193,881 5,115,599 97.11% 2x28 2,37x,000 2b5,413 2,b35,413 l,l b5,0a0 30,144 1,195,144 3,830,557 2029 2,475,000 162,456 2,637,456 - - - 2,b37,45b 2x30 2,585,000 54,931 2,b39,931 - - - 2,639,931 1x0.00% $ 281,75x,xaa $ 120,175,130 $ 4x1,925,13a $ 15,29x,000 $ $,556,423 $ 23,84b,423 $ 425,771,553 ~l} "outstanding Revenue Bonds" does not include leaselpurchase obligations. (2} Average life of the issue - 11.244 years. Interest on the Bonds has been calculated at the rate of 4.95% for purposes of illustration. VOTED BUT UNISSUED REVENUE BONDS .. ,The City has no voted but unissued revenue bonds. ANTICIPATED ISSUANCE OF REVENUE BONDS ...The City has developed a five year capital improvement plan for the System (the "CIP"). The CIP includes improvements that will be funded with revenues of the System as well as through the issuance of Additional Bonds. The CIP is a planning tool and the City is not obligated to fund the CIP. The funding of the CIP will be dependent in part on continued demand for services, economic conditions in the City and the financial ability of the System to support the funding of the CIP, among other factors. The current five year CIP includes total capital expenditures for the System of approximately $341 million, of which, approximately $289 million are planned to be funded from proceeds of System debt (a portion of such expenditures will be made from prior issues of System debt). The planned issuances of revenue debt is shown in the following table. Projected Revenue Bond Sales (000's~ t'1 2008-09 2009-10 2010-11 2011-12 2012-13 Electric Utilities $ 8,000 $ 8,000 $ 8,000 $ 8,x00 $ 4,000 Water Utilities 24,500 15,000 7,500 3,x00 2,0x0 WastewaterlDrainage Utilities 3,OOa b,a00 7,5x0 8,x00 8,x00 $ 35,5x0 $ 29,aaa $ 23,aaa $ 19,aaa $ 14,aaa ~1) The Electric System will revise its bond issuance plans in September 20x8 for the five year period shown in the table. 4a FINANCIAL INFQRMATIQN TALE $ -COMPARABLE CALCE1LATi0N OF NET REVENUES AVAILABLE FOR DEBT SERVICE The table below provides comparable calculations of Net Revenues available for debt service for the periods shown. Such calculations include all operating revenues plus interest income, less operating expenses. For purposes of the calculation, depreciation, amortization, franchise fees, and payments in lieu of taxes are excluded from operating expenses, Fiscal Year Ended September 30, __.._ri1 _..... r» _...._ rn _..... rn ____ n~ Gross Revenues Electric Service Water Service Wastewater Service Other Fees ~~~ Interest lncome t3~ Impact Fees ~~t Total Revenues Expenses Electric System Fuel and Purchased Power Other Operating and Administrative Expenses Water System Fuel and Purchased Power Water Purchased Other Operating and Administrative Expenses Wastewater System Fuel and Purchased Power Other Operating and Administrative Expenses Total Expenses Net Revenue Available for Debt Service and Other Lawful Purposes Contribution to Net Revenues Available Electric System Water System Wastewater System Electric Customers Water Customers Wastewater Customers yl 1lrT,7 f.r, l.+r 20,b24,118 yl 1ZL.,1 VT,~.JV 25,708,728 W 14 l,LVl,JTJ 20,899,b24 ~7 1VJ,41 l,TV1 18,222,344 W 1V1,VV4,V VZ 19,348,543 20,103,918 21,045,73b ] 8,2b 1,9b2 l b,47b,72b 15,b77,355 8,424,540 11,231,8bb 4,081,191 4,S1b,158 5,1b8,922 8,b79,400 b,340,498 5,141,512 4,141,819 6,919,311 $ 188,118,098 $ 212,8b7,407 $ 179,798,2b2 $ 159,42b,179 $ 154,12b,215 $ 95,390,443 $ 113,375,234 $ 103,375,311 $ 91,b22,708 $ 85,71b,083 ~D 1VO,LIJ,J'7J .p 1L0,'T10,LVU y 11 l,1VU,lJ! y lU`T,UUI,JIL y 70,V0l,LVV $ l,Ob0,570 $ 1,533,389 $ 1,190,957 $ 970,035 $ 932,388 52,974 73,2b9 bb,779 71,454 118,979 12,489,b93 12,b00,b82 9,528,b08 8,715,391 8,4b3,887 $ 13,b03,237 $ 14,207,340 $ 10,78b,344 $ 9,75b,880 $ 9,515,254 $ 733,8b4 $ 1,004,980 $ 880,197 $ 744,984 $ b41,772 ~ 7,lOO,JlV .p 11,VlJ,1J! .p 11,VI1,`FOY ,p 1V,VIV,J`F1 •D 7,J'~F1,7VJ $ 131,bOb,95b $ 153,b98,b83 $ 139,b2b,5b5 $ 125,288,733 $ 117,750,417 $ Sb,511,142 $ 59,1b8,724 $ 40,171,b97 $ 34,137,44b $ 3b,375,798 44,28% 40.50% 35.20% 27.10% 28,bb% 30.41% 3b.30% 39.50% 45.30% 4b.b5% 25.31% 23.20% 25.30% 27.b0% 24.49% 43,607 42,18b 41,84b 39,507 37,057 29,783 28,805 27,584 2b,270 24,913 28,020 2b,951 25,b95 24,435 23,329 ~1} Data is derived from financial statements of the City that are audited. ~2} Includes a reimbursement for the electric transmission as well as water and wastewater tapping fee revenues. ~3} Excludes changes in non-cash Fair Market Value in years 2603 through 2007. ~4} In years 2004 through 2007, impact fees are recognized as collected. Prior to 2004, impact fee revenues were deferred until spent at which time it is recognized as earned revenue. 41 TABLE g -COVERAGE AND FUND BALANCES Average Annual Principal and Interest Requirements, 2048-2030 .................... . ................. $ 18,511,847 ~'~ Coverage of Average Requirements by 9-30-07 Net Available . . ........... . . . . . . . . . .. . .......... . ..... 3.05 times ~~} Maximum Principal and lnterest Requirements, 2009 ........................................ . ....... $ 28,4$$,272 ~i} Coverage of Maximum Requirements by 9-30-07 Net Available . . .. . .......... . .. . .................... 1.9$ times ~~} Utility System Revenue Bands Outstanding as of 7-1-07 ............................. . . . . . ........ . .. $ 2bb,910,000 The Bonds ................................................................................ 15,290,000 Total Outstanding Revenue Bonds ................... . ............. . ... . ......................... $ 282,200,000 Interest and Sinking Fund, as of 7-1-08 ................................... . . . . , , ................. $ 4,44$,143 Aggregate of A11 Rate Stablization Funds, as of 7-1-08 .... . ............................... . ......... $ 70,174,471 Reserve Fund, as of 7-1-08 ...................................... . ............................. $ 17,90$,705 Emergency Fund, as of 7-1-0$ .................................................................. $ 2b5,329 Extension and Replacement Fund, as of 7-1-08 ......... . .......................................... $ 7,370,391 (1 } Includes the Bonds. (2} Unaudited. IMPLEMENTATIQN QF NEW ACCOUNTING STANDARDS ...Certain financial data included in this Official Statement for the years ended September 30, 2003, 2004, 2005, 200b, and 2007 (principally, data used in Tables 8 and 9) are derived from unaudited financial statements of the City. For the year ended September 30, 2002, the City implemented the provisions of the Governmental Accounting Standard Board ("GASB"} Statement No. 34, Basic Financial Statements -and Management's Discussion and Analysis -for State and Local Governments, GASB Statement No. 37, Basic Financial Statements -and Management's Discussion and Analysis -for State and Local Governments: Omnibus, and GASB Statement No. 38, Certain Financial Note Disclosures which results in a change in content and format of the City's financial statements (collectively, the "New GASB Statements"}. The audited financial statements of the City for the year ended September 30, 2007, prepared in accordance with the New GASB Statements, are in included in Appendix C hereto. The purpose of the New GASB Statements is to create new information and restructure much of the information that governments have presented in the past to provide a more comprehensive demonstration of their annual financial performance on a system-wide basis. Among the significant changes effected by the new accounting standards are new presentations for proprietary or business-type operations of the City, such as those reported for the City's electric, water and waste water operations (the "Proprietary Funds"). As required by the new GASB statements, the City's annual report consists of three basic financial statements for the Proprietary Funds: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. Those statements are included in the financial statements of the City for the year ended September 30, 2007 in Appendix C. In addition to the changes discussed in the preceding paragraph, certain items comprising the Pledged Revenues are no longer reported in the City's financial statements in the same detail as in prior years. For various reasons, including budgeting for each business-type activity as a cost center, and for purposes of its disclosure obligations, the City maintains additional detail, some of which is included in tables used herein. While the information for 2003, 2004, 2005, 200b and 2007is consistent with the Proprietary Fund information contained in its audited financial statements, the 2003, 2004, 2005, 2006 and 2007 columns have been marked as unaudited to reflect the inclusion of additional detail maintained in the financial records of the City, but which are no longer reported in the audited financial statements. GASB released the Statement of General Accounting Standards No. 45 ("GASB 45"}, Accounting by Employers for Other Post- Employment Benefits ("OPEB"), in June 2004. The City will be required to implement 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. In 200$, the City engaged an actuarial firm to prepare an estimate of the City's GASB 45 liability as of October 1, 2007. The 200$ report provides the City with the City's OPEB requirements assuming the City plan offerings, designs, and cost share approach remain constant. The 2008 report estimates the City's accrued liability at $1 b.2 million for all funds which represents the present value of all future benefits to be provided by the City to current and future eligible (and electing} retirees, less future normal costs and any pre-funded amounts held in trust. Using this same information, the City's annual required contribution will be approximately $$79,000 for fiscal year 200$. The City has previously set aside approximately $1.5 million for this purpose in 42 a City controlled internal service fund, and the City is budgeting additional contributions to this reserve in the future. The GASB 45 liability and reserved assets will be fully disclosed in the FY 2007.0$ Comprehensive Annual Financial Report ~CAFR}. A discussion of the New GASB Statements is set forth in the Management Discussion and Analysis and in various notes to the City's financial statements in Appendix C. FINANCIAL POLICIES Basis of Accounting ...The accounting policies of the City conform to generally accepted accounting principles of the Governmental Accounting Standards Board and program standards adopted by the Government Finance Gf~"icers Association of the United States and Canada ~GFGA}. The GFGA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual financial report for the fiscal year ended September 30, 2007. This Certificate is the highest form of recognition for excellence in state and local government financial reporting. A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate since 19$4. In addition to the Certificate, the City received GFGA's Award for Distinguished Budget Presentation for its fiscal year 2007 annual budget document. 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, at least 64 days prior to the beginning of each fiscal year, 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. INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council. Both state law and the City's investment policies are subject to change. INVESTMENT AUTHORITY AND INVESTMENT PRACTICES UE THE CITY ...Available City funds are invested as authorized by Texas law and in accordance with investment policies approved by the City Council. Both state law and the City's investment policies are subject to change. Under Texas law, the City is authorized to invest in (1} obligations of the United States or its agencies and instrumentalities, including letters of credit; (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 obligation, 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; (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; (b} bonds issued, assumed or guaranteed by the State of Israel; (7} certificates of deposit that are issued by a state or national bank domiciled in the State of Texas, a savings bank domiciled in the State of Texas, or a state or federal credit union domiciled in the State of 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, ~$} fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause ~l}, and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, ~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, X14} commercial paper with a stated maturity of 274 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 fib} 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, X11} 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 X12} 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. In addition, if specifically authorized in the authorized document, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, 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 AAAm 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 1944 X15 U.S.C. Section $4b-] 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 43 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 apposite to the changes in a market index. Governmental bodies in the State 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 lawn 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 ar national bank that is continuously rated by a nationally recognized investment rating firm not less than "A" ar 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 governing body ar a third party designated by the such governmental body; (iii) a loan made under the program is placed through either a primary government securities dealer ar a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year ar less. Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed far pooled fund groups. All City funds must be invested consistent with a formally adapted "Investment Strategy Statement" that specifically addresses each fund's 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 afthe portfolio, and (6}yield. Under Texas law, the City's 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 far investment considering the probable safety of capital and probable income to be derived." At least quarterly the City's investment officers must submit an investment report to the City Council detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, and 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 ar fund ar pooled fund group for which each individual investment was acquired, and (7}the compliance of the investment portfolio as it relates ta: (a} adopted investment strategies and (b) Texas law. No person may invest City funds without express written authority from the City Council. Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2} require any investment officers with personal business relationships or family relationships with f rms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and the City, (3) require the registered principal of firms seeking to sell securities to the City to: (a} receive and review the City's investment policy, (b} acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4} in conjunction with its annual financial audit, perform a compliance audit of the management controls on investments and adherence to the City's investment policy, (5}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, (6) restrict the investment in non-money mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, (7) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements and (8}provide specific investment training for the Treasurer, the chief financial officer (if not the Treasurer) and the investment officer. TABLE IO -CURRENT INVESTMENTS As of June 34, 2408, the following percentages of the City's investable funds were invested in the following categories of investments: Market Value Baak Market Descri tiara Percent Value Value U.S. Federal Agency Caupans 56.47% $ 177,443,143 $ 177, I30,665 U.S. Federal Agency Callables 16.69% 52,211,335 52,367,281 U.S. Treasury Securities 7.48% 22,119,919 22,249,436 Money MarketlPool 15.67% 49,154,444 49,154,444 Commercial Paper 4,49% 12,856,174 12,825,444 140.44% $ 313,384,532 $ 313,682,782 As of such date, the market value of such investments (as determined by the City by reference to published quotations, dealer bids, and comparable information} was aver 144% of their book value. No funds of the City are invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index, ar commodity. 44 SELECTED PROVISIONS OF THE BOND ORDINANCE On the date of the sale of the Bonds, the City Council will adapt the Ordinance authorizing the Bonds, which will be in substantially the same farm as the ordinances authorizing the outstanding Parity Bands. Selected provisions of the Ordinance are set forth below, The complete Ordinance is available from the City, the City's Financial Advisor and, during the offering period for the Bonds, from the Initial Purchaser, upon request. Section 8. DEFINITIONS. As used in this Ordinance the following terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise: ~a} The terms "City" and "Issuer" shall mean the City of Denton, in Denton County, Texas. fib} The term "City Council" or "Council" shall mean the governing body of the City. ~c} The term "Bands" shall mean collectively the Initial Bond as defined and described in Section 2 of this Ordinance and all substitute bands exchanged therefor, and all other substitute bonds and replacement bonds, issued pursuant to and as provided in this Ordinance. ~d} The term "Parity Bonds" shall mean collectively (i} the outstanding City of Denton Utility System Revenue Refunding Bands, Taxable Series 1993.8, authorized by ordinance passed on June 8,1993 (the "Series 1993-8 Bonds"}, (ii}the outstanding City of Denton Utility System Revenue Bonds, Series 199b, authorized by an ordinance passed on May 7, 199b the "Series 199b Bonds"}, viii} the outstanding City of Denton Utility System Revenue Refunding Bands, Series 199b-A, authorized by an ordinance passed an May 7, 199b the "Series 199b-A Bonds"), (iv} the outstanding City of Denton Utility System Revenue Bonds, Series 1998, authorized by an ordinance passed on March 24,1998 (the "Series 1998 Bonds"), (v} the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 1998A, authorized by an ordinance passed on July 2I, 1998 (the "Series 1998A Bands"}, ~vi) the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 19988, authorized by an ordinance passed on August 4, 1998 (the "Series 1998B Bonds"}, vii} the outstanding City of Denton Utility System Revenue Bonds, Series 2000A, authorized by an ordinance passed an April 25, 2000 (the "Series 2000A Bonds"}, (viii} the outstanding City of Denton Utility System Revenue Bonds, Taxable Series 2000B, authorized by an ordinance passed on April 25, 2000 the "Taxable Series 20008 Bonds"}, (ix} the outstanding City of Denton Utility System Revenue Refunding and Improvement Bonds, Series 2001, authorized by an ordinance passed on April 17, 2001 (the "Series 2001 Bonds"), (x) the outstanding City of Denton Utility System Revenue Bonds, Series 2402A, authorized by an ordinance passed on April 9, 2002 (the "Series 2002A Bonds"), (xi} the outstanding City of Denton Utility System Revenue Bonds, Taxable Series 20028, authorized by an ordinance passed on April 9, 2002 (the "Taxable Series 2002B Bonds"} (xii} the outstanding City of Denton Utility System Revenue Refunding and Improvement Bonds, Series 2003, authorized by an ordinance passed an April 1, 2003 (the "Series 2403 Bonds"}, ~xiii} the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 2004, authorized by an ordinance passed on September 7, 2004 (the "Series 2004 Bonds"}, (xiv} the outstanding City of Denton Utility System Revenue Refunding Bonds, Series 2005, authorized by an ordinance passed on May 24, 2005 (the "Series 2005 Bonds"}, ~xv) the outstanding City of Denton Utility System Revenue Bonds, Series 200G, authorized by an ordinance passed on July 18, 200b (the "Series 200b Bonds"), ~xvi} the outstanding City of Denton Utility System Revenue Refunding Bonds, Senes 2447, authorized by an ordinance passed on January 23, 2007 (the "Series 2007 Refunding Bonds"}, (xvii) the outstanding City of Denton Utility System Revenue Bands, Series 2007, authorized by an ordinance passed on July 17, 2007 (the "Series 2007 Bonds"}, and ~xviii) the Bonds. (e} The term "Additional Bonds" shall mean the additional parity revenue bonds which the City reserves the right to issue in the future, in accordance with Section 2b of this Ordinance. (fy The term "System" shall mean ~l} the City's entire existing waterworks and sewer system and the City's entire existing electric light and power system, together with all future extensions, improvements, enlargements, and additions thereto, and all replacements thereof, and (2} any other related facilities, all or any part of the revenues or income from which da, in the future, at the option of the City, and in accordance with law, became "Pledged Revenues" as hereinafter defined; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term System shall not mean any water, sewer, electric, or other facilities of any kind which are declared not to be a part of the System, and which are acquired or constructed by the City with the proceeds from the issuance of "Special Facilities Bonds", which are hereby defined as being special revenue obligations of the City which are not payable from or secured by any Pledged Revenues, but which are secured by and payable from liens an and pledges of any other revenues, sources, ar payments, including, but not limited to, special contract revenues or payments received from any other legal entity in connection with such facilities; and such revenues, sources, or payments shall not be considered as or constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or ordinances authorizing the issuance of such "Special Facilities Bonds". fig) The terms "Gross Revenues of the System" and "Gross Revenues" shall mean all revenues and income of every nature derived or received by the City from the operation and ownership of the System, including the interest income from the investment or deposit of money in any Fund created by this Ordinance. 45 (h} The terms "Net Revenues of the System", and "Net Revenues" shall mean all Grass Revenues after deducting therefrom an amount equal to the current expenses of operation and maintenance of the System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service, provided, however, that only such repairs and extensions, as in the judgment of the City Council, reasonably and fairly exercised by the adoption of appropriate resolutions, are necessary to keep the System in operation and render adequate service to said City and the inhabitants thereof, or such as might be necessary to meet same physical accident or condition which would otherwise impair the Bonds or Additional Bonds, shall be deducted in determining "Net Revenues". Payments required to be made by the City for water supply or water facilities, sewer services or sewer facilities, fuel supply, and for the purchase of electric power, which payments under law constitute operation and maintenance expenses of any part of the System, shall constitute and be regarded as expenses of operation and maintenance of the System under this ordinance. Depreciation and amortization shall not constitute or be regarded as expenses of operation and maintenance of the System. ~i} The term "Pledged Revenues" shall mean (1} the Net Revenues, plus (2} the net revenues of the Drainage System, which shall be calculated on the same basis as the Net Revenues of the System, plus (3} any additional revenues, income, or other resources relating to the System which are expected to be available to the City on a regular periodic basis, including, without limitation, any grants, donations, or income received or to be received from the United States Government, or any other public or private source, whether pursuant to an agreement or otherwise, which in the future may, at the option of the City, be pledged to the payment of the Parity Bonds or Additional Bonds. (j} The term "year" or "fiscal year" shall mean the fiscal year used by the City in connection with the operation of the System. (k} The term "Government obligations" shall mean (i}direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America., (ii} 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 of the purchase thereof are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (iii} noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the District adopts or approves the proceedings authorizing the financial arrangements are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. ~l} "Drainage System" means the City's entire existing drainage system and all facilities related thereto, gym} "Rate Stabilization Fund" means the City's separate Rate Stabilization Fund established for the purpose of stabilizing rates for ratepayers. Section 9. PLEDGE. ~a) The Bonds are "Additional Bonds" as permitted by Sections 24 and 25 of the ordinance passed on March 10, 1983, authorizing the City of Denton Revenue Refunding Bands, Series 1983 the "Series 1983 Bands"}; and it is hereby determined, declared, and resolved that all of the Parity Bonds (including the Bonds} are secured and payable equally and ratably on a parity, and that Sections 8 through 28, of this ordinance are supplemental to and cumulative of Sections 7 through 27 of the aforesaid ordinance passed on March 10,1983, with Sections 8 through 29 of this ordinance being applicable to all of the Parity Bonds. fib} The Parity Bonds and any Additional Bonds, and the interest thereon, including any interest coupons appertaining thereto, are and shall be secured by and payable from a first lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged to the establishment and maintenance of the Funds created by this Qrdinance, and any Funds created by any ordinance authorizing the issuance of any Additional Bonds. The Parity Bonds and any Additional Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. Section I0. SYSTEM FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a special fund to be entitled the "City of Denton Utility System Fund" the "System Fund"}. All Gross Revenues shall be credited to the System Fund immediately upon receipt, unless otherwise provided in this Ordinance. All current expenses of operation and maintenance of the System shall be paid from such Gross Revenues credited to the System Fund as a first charge against same. Before making any deposits hereinafter required to be made from the System Fund, the City shall retain in the System Fund at all times an amount at least equal to one-sixth of the amount budgeted far the then current fiscal year for the current operation and maintenance expenses of the System. 46 Section 11. INTEREST AND SINKING FUND. For the sole purpose of paying the principal of and interest on all Parity Bonds and Additional Bonds, there heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Revenue Bonds Interest and Sinking Fund" (the "Interest and Sinking Fund"}. Section 12. RESERVE FUND. There heretofore has been, and is hereby, created, and there shall be established and maintained at JPMorgan Chase Bank, National Association, and hereafter, at the option of the City, established and maintained at any time at any national bank having a capital and surplus in excess of $25,400,000, a separate fund to be entitled the "City of Denton Utility System Bonds and Additional Bonds Reserve Fund" (the "Reserve Fund"}. The Reserve Fund shall be used to pay the principal of and interest on any Parity Bonds or Additional Bonds when and to the extent the amounts in the Interest and Sinking Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of any Parity Bonds or Additional Bonds, Section 13. EXTENSION AND 1MPRGVEMENT FUND. There heretofore has been and is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Extension and Improvement Fund" (the "Extension and Improvement Fund"}, The Extension and Improvement Fund shall be used for the purpose of paying the costs of improvements, enlargements, extensions, additions, replacements, or other capital expenditures related to the System, or for paying the costs of unexpected or extraordinary repairs or replacements of the System for which System funds are not available, or for paying unexpected or extraordinary expenses of operation and maintenance of the System for which System funds are not otherwise available, or for any other lawful purpose. Section 14. EMERGENCY FUND. There is hereby created and there shall be established and maintained on the books of the City, and accounted for separate and apart from all other funds of the City, a separate fund to be entitled the "City of Denton Utility System Emergency Fund" the "Emergency Fund"}. The Emergency Fund shall be used for the purpose of paying unexpected or extraordinary expenses of repair, replacement, operation, and maintenance of the System for which neither System funds nor the moneys in the Extension and Improvement Fund are available. There was deposited in the Emergency Fund simultaneously with the delivery of the Series 19$3 Bonds to the initial purchasers thereof from lawfully available funds of the City the amount of $250,000. All investment interest income from the Emergency Fund shall be transferred to the System Fund as received. Section 15. DEPGSITS GF PLEDGED REVENUES. Pledged Revenues shall be credited to or deposited in the Interest and Sinking Fund, the Reserve Fund, the Extension and Improvement Fund, and other funds when and as required by this Grdinance and any ordinance authorizing the issuance of Additional Bonds. Section 16. INVESTMENTS. To the extent permitted by law, money in any Fund established pursuant to this ordinance or any ordinance authorizing the issuance of Additional Bonds, may, at the option of the City, be placed in time deposits or certificates of deposit secured by obligations of the type hereinafter described, or be invested in Government Gbligations has defined in Section $ hereof} or obligations guaranteed or insured by the United States of America, which, in the opinion of the Attorney General of the United States, are backed by its full faith and credit or represent its general obligations, or invested in obligations of instrumentalities of the United States of America, including, but not limited to, evidences of indebtedness issued, insured, or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, United States Postal Service, Farmers Home Administration, Federal Home Loan Mortgage Association, Small Business Administration, Federal Housing Association, or Participation Certificates in the Federal Assets Financing Trust; provided that all such deposits and investments shall be made in such manner as will, in the opinion of the City, permit the money required to be expended from any Fund to be available at the proper time or times as expected to be needed. Such investments except United States Treasury Obligations--State and Local Government Series investments held in book entry form, which shall at all times be valued at cost} shall be valued in terms of current market value as of the last day of each fiscal year. Unless otherwise set forth herein, all interest and income derived from such deposits and investments immediately shall be credited to, and any losses debited to, the Fund from which the deposit or investment was made, and surpluses in any Fund shall or may be disposed of as hereinafter provided. Such investments shall be sold promptly when necessary to prevent any default in connection with the Parity Bonds or Additional Bonds consistent with the ordinances, respectively, authorizing their issuance. Section 17. FUNDS SECURED. That money in all Funds created by this Ordinance, to the extent not invested, shall be secured in the manner prescribed by law. Section 18. PRIORITY OF DEPOSITS AND PAYMENTS FROM SYSTEM FUND. That the City shall make the deposits and payments from Pledged Revenues in the System Fund when and as required by this Ordinance and any ordinance authorizing any Additional Bonds, and such deposits shall be made in the following manner and with the following irrevocable priorities, respectively: First, to the Interest and Sinking Fund, when and in the amounts required by this Ordinance and any ordinance authorizing the Parity Bonds or any Additional Bonds; then 47 Second, to the Reserve Fund, when and in the amounts required by this Ordinance and any ordinance authorizing the Parity Bonds or any Additional Bonds; then Third, to the Extension and Improvement Fund, when and as required by Section 21 of this Ordinance. Section 19. INTEREST AND SINKING FUND REQUIREMENTS. The City shall cause to be deposited to the credit of the Interest and Sinking Fund the accrued interest received from the sale of the Initial Bond, and on or before the 25th day of each month, the City shall cause to be deposited to the credit of the Interest and Sinking Fund, in approximately equal monthly payments, amounts sufficient, together with any other funds on hand therein, to pay all of the interest or principal and interest coming due, including the principal amount of any Parity Bonds required to be redeemed prior to maturity pursuant to any mandatory redemption requirements, on the Parity Bonds and any Additional Bonds on the next succeeding interest payment date. Any moneys so deposited in the Interest and Sinking Fund with respect to a mandatory redemption requirement, together with other lawfully available funds of the City, may be used by the City, to purchase, in advance of a mandatory redemption date and at a price not exceeding the principal amount thereof plus accrued interest thereon to the date of purchase, Parity Bonds which would be subject to being chosen for mandatory redemption on such mandatory redemption date. The Paying Agent shall cancel any Parity Bonds so purchased. Section 20. RESERVE FUND REQUIREMENTS. There is now on hand in the Reserve Fund an amount of money and Government Obligations which is in excess of $3,000,000 and which is at least equal to the average annual principal and interest requirements of the outstanding Taxable Series 1993-B Bonds, the Series 199G Bonds, the Series 199b-A Bonds, the Series 1998 Bonds, the Series 1998A Bonds, the Series 1998B Bonds, the Series 2000A Bonds, the Series 2004E Bonds, the Series 2041 Bonds, the Series 2002A Bonds, the Taxable Series 2002B Bonds, the Series 2003 Bonds, the Series 2004 Bonds, the Series 2005 Bonds, the Series 200G Bonds, the Series 2007 Refunding Bonds and the Series 2007 Bonds (the current "Required Reserve Amount"}. Following the issuance and delivery of the Initial Bonds, the Required Reserve Amount shall become and be an amount of money and investments equal to the average annual principal and interest requirements of all the outstanding Parity Bonds and Additional Bonds; provided further, however, that the Required Reserve Amount shall never be less than $3,000,000 if the maximum annual principal and interest requirements on all outstanding Parity Bonds and Additional Bonds exceeds $3,000,000. Immediately after the issuance and delivery of the Initial Bond there shall be deposited to the credit of the Reserve Fund, from the proceeds of the sale of the Initial Bond, money sufficient to cause the Reserve Fund to contain an aggregate amount of money and investments equal to the Required Reserve Amount for all then outstanding Parity Bonds. After the delivery of any future Additional Bonds the City shall cause the Reserve Fund to be increased, if and to the extent necessary, so that such Fund will contain an amount of money and investments equal to the Required Reserve Amount. Any increase in the Required Reserve Amount may be funded from Pledged Revenues, or from proceeds from the sale of any Additional Bands, or any other available source or combination of sources. All or any part of the Required Reserve Amount not funded initially and immediately after the delivery of any installment or issue of Additional Bonds shall be funded, within not more than five years from the date of such delivery, by deposits of Pledged Revenues in approximately equal monthly installments on or before the 25th day of each month. Principal amounts of the Parity Bonds and any Additional Bonds which must be redeemed pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal for the purpose of calculating principal and interest requirements on such bonds. When and so long as the amount in the Reserve Fund is not less than the Required Reserve Amount no deposits shall be made to the credit of the Reserve Fund; but when and if the Reserve Fund at any time contains less than the Required Reserve Amount, then the City shall transfer from Pledged Revenues in the System Fund, and deposit to the credit of the Reserve Fund, monthly on or before the 25th day of each month, a sum equal to llGOth of the Required Reserve Amount, until the Reserve Fund is restored to the Required Reserve Amount. The City specifically covenants that when and so long as the Reserve Fund contains the Required Reserve Amount, the City shall cause all amounts in excess of the Required Reserve Amount to be deposited to the credit of the Interest and Sinking Fund. Section 21. EXTENSION AND IMPROVEMENT FUND REQUIREMENTS. During each year, subject and subordinate to making the required deposits to the credit of the Interest and Sinking Fund and the Reserve Fund, the City shall be required to deposit to the credit of the Extension and Improvement Fund, from Pledged Revenues in the System Fund, an amount equal to $% of the "Adjusted Gross Revenues of the System", which term is hereby defined to mean the following: the Gross Revenues of the System for such year after deducting from such Gross Revenues an amount equal to the current expenses of operation and maintenance of the System for such year which are directly attributable to (i}all fuel casts related to the production of electric energy by the City andlor iii}the purchase of electric energy by the City. Additional excess Pledged Revenues may, at the option of the City Council, be deposited to the credit of the Extension and Improvement Fund as permitted by Section 23(b} hereof, but no such additional deposit is required. All investment interest income from the Extension and Improvement Fund shall be retained in and remain a part of such Fund. Section 22, RATE STABILIZATION FUND. ~a} In each fiscal year, the City hereby agrees to transfer the Transfer Amount (as defined below} from the Rate Stabilization Fund into the System Fund for the purpose of paying the current expenses of operation and maintenance of the System and pledges such Transfer Amount to the payment of the Bonds, all Parity Bonds and any Additional Bonds. 48 (b) The Transfer Amount shall be an amount of moneys and investments contained in the Rate Stabilization Fund equal to the amount for each fiscal year of the City that will, when added to the otherwise expected Pledged Revenues for that fiscal year, produce an amount of Pledged Revenues during such fiscal year at least equal to the greater of 1.25 times the average annual principal and interest requirements of all then outstanding Bonds, Parity Bonds and Additional Bonds or 1,25 times the succeeding fiscal year's principal and interest requirements of all then outstanding Bonds, Parity Bands and Additional Bonds. (c) The Transfer Amount will be calculated and reflected in the annual budget for each fiscal year and will, on the first day of such fiscal year, be transferred from the Rate Stabilization Fund into the System Fund. Section 23. DEFICIENCIES; EXCESS PLEDGED REVENUES. (a) If on any occasion there shall not be sufficient Pledged Revenues to make the required deposits into the Interest and Sinking Fund or the Reserve Fund, such deficiency shall be made up as soon as possible from the next available Pledged Revenues. (b) Subject to making the required deposits to the credit of the various Funds when and as required by this Ordinance or any ordinance authorizing the issuance of Additional Bonds, any surplus Pledged Revenues may be used by the City for any lawful purpose. Section 24. PAYMENT OF PARITY BONDS AND ADD1T14NAL BONDS, On or before each principal or interest payment date, while any of the Parity Bonds or Additional Bonds are outstanding and unpaid the City shall make available to the Paying Agents therefor, out of the lnterest and Sinking Fund, or if necessary, out of the Reserve Fund, money sufficient to pay, on each of such dates, the principal of and interest on the Parity Bonds and Additional Bonds as the same matures and comes due, or to redeem the Parity Bands or Additional Bonds prior to maturity, either upon mandatory redemption or at the option of the City. At the direction of the City the Paying Agents shall either deliver paid Parity Bonds and Additional Bonds, and any interest coupons appertaining thereto, to the City or destroy all paid Parity Bonds and Additional Bonds, and any coupons appertaining thereto, and furnish the City with an appropriate certificate of cancellation or destruction. Section 25. FINAL DEPOSITS. (a) Any Parity Bond or Additional Bond shall be deemed to be paid, retired, and no longer outstanding within the meaning of this Ordinance when payment of the principal of, redemption premium, if any, on such Parity Band or Additional Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof (including the giving of any required notice of redemption or provision for the proper giving of such notice having been made), or (ii) shall have been provided by irrevocably depositing with or making available to a Paying Agent therefor, in trust and irrevocably set aside exclusively for such payment, (1) money sufficient to make such payment or (2) 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 make such payment, and all necessary and proper fees, compensation, and expenses of such Paying Agent pertaining to the Parity Bonds and Additional Bonds with respect to which such deposit is made shall have been paid or the payment thereof provided for to the satisfaction of such paying agent. At such time as a Bond or Additional Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefits of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to payment solely from such money or Government Obligations. (b) Any moneys so deposited with a paying agent may at the direction of the City also be invested in Government Obligations, maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this Section which is not required for the payment of the Parity Bonds and Additional Bonds, the redemption premium, if any, and interest thereon, with respect to which such money has been so deposited, shall be turned over to the City or deposited as directed by the City. Section 2b. ADDITIONAL BONDS. (a} The City shall have the right and power at any time and from time to time, and in one or more series or issues, to authorize, issue, and deliver additional parity revenue bonds (herein called "Additional Bonds"), in accordance with law, in any amounts, for any lawful purpose, including the refunding of any Parity Bonds or Additional Bonds, or other obligations. Such Additional Bonds, if and when authorized, issued, and delivered in accordance with this Ordinance, shall be payable from and secured by an irrevocable first lien on and pledge of the Pledged Revenues, equally and ratably on a parity in all respects with the Parity Bonds and any other outstanding Additional goads. (b) The principal of all Additional Bonds must be scheduled to be paid or mature on December 1 of the years in which such principal is scheduled to be paid or mature. Section 27. FURTHER REQUIREMENTS FOR ADDITIONAL BONDS. Additional Bonds shall be issued only in accordance with this Ordinance, and no installment, Series, or issue of Additional Bonds shall be issued or delivered unless: (a) The Mayor of the City and the City Secretary sign a written certificate to the effect that the City is not in default as to any covenant, condition, or obligation in connection with all then outstanding Parity Bonds and Additional Bonds, and the ordinances authorizing same, and that the Interest and Sinking Fund and the Reserve Fund each contains the amount then required to be therein. 49 (b) An independent certified public accountant, or independent firm of certified public accountants, acting by and through a certified public accountant, signs a written certificate to the effect that, in his or its opinion, during either the next preceding fiscal year, or any twelve consecutive calendar month period out of the 1$-month period immediately preceding the month in which the ordinance authorizing the issuance of the then proposed Additional Bands is passed, the Pledged Revenues were at least (1)1.25 times an amount equal to the average annual principal and interest requirements, and (ii) l .l0 times an amount equal to the principal and interest requirements during the fiscal year during which such requirements are scheduled to be the greatest, of all Parity Bonds and Additional Bonds which are scheduled to be outstanding after the delivery of the then proposed Additional Bonds. It is specifically provided, however, that in calculating the amount of Pledged Revenues for the purposes of this subsection (b), if there has been any increase in the rates or charges for services of the System which is then in effect, but which was not in effect during all or any part of the entire period for which the Pledged Revenues are being calculated (hereinafter referred to as the "entire period") then the certified public accountant, or in lieu of the certified public accountant a firm of consulting engineers, shall determine and certify the amount of Pledged Revenues as being the total of (i) the actual Pledged Revenues for the entire period. plus (ii) a sum equal to the aggregate amount by which the actual billings to customers of the System during the entire period would have been increased if such increased rates or charges had been in effect during the entire period. (c) Provision shall be made in the ordinance authorizing their issuance for increasing the Reserve Fund to the Required Reserve Amount as required by Section 20 hereof. (d) All calculations of average annual principal and interest requirements of any bonds made in connection with the issuance of any then proposed Additional Bonds shall be made as of the date of such Additional Bands; and also in making calculations for such purpose, and for any other purpose under this Ordinance, principal amounts of any bonds which must be redeemed prior to maturity pursuant to any applicable mandatory redemption requirements shall be deemed to be maturing amounts of principal of such bands. Section 2$. GENERAL COVENANTS. The City further covenants and agrees that in accordance with and to the extent required or permitted by law; (a) Performance. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of Additional Bonds, and in each and every Parity Bond and Additional Bond; that it will promptly pay or cause to be paid the principal of and interest on every Parity Bond and Additional Band, on the dates and in the places and manner prescribed in such ordinances and Parity Bonds or Additional Bonds; and that it will, at the times and in the manner prescribed, depositor cause to be deposited the amounts required to be deposited into the Interest and Sinking Fund and the Reserve Fund; and any holder of the Parity Bonds or Additional Bonds may require the City, its officials, and employees, to carry out, respect, ar enforce the covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of Additional Bonds, by all legal and equitable means, including specifically, but without limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its officials, and employees. (b) City's Legal Authority. The City is a duly created and existing home rule city of the State of Texas, and is duly authorized under the laws of the State of Texas to create and issue the Parity Bonds and Additional Bonds; that all action on its part for the creation and issuance of the said obligations has been or will be duly and effectively taken, and that said obligations in the hands of the holders and owners thereof are and will be valid and enforceable special obligations of the City in accordance with their terms. (c} Title. The City has or will obtain lawful title to the lands, buildings, structures, and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands, buildings, structures, and facilities, and every part thereof, for the benefit of the holders and owners of the Parity Bonds and Additional Bonds, against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of the Parity Bonds and Additional Bonds in the manner prescribed herein, and has lawfully exercised such rights. (d) Liens. The City will from time to time and before the same become delinquent pay and discharge all taxes, assessments, and governmental charges, if any, which shall be lawfully imposed upon it, or the System, that it will pay all lawful claims for rents, royalties, labor, materials, and supplies which if unpaid might by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided herein, and that it will not create or suffer to be created any mechanic's, laborer's, materialman's, or other lien or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof might or could be impaired; provided, however, that no such tax, assessment, or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's, materialman's, or other lien or charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by the City. (e) Operation of System; No Free Service. While the Parity Bonds or any Additional Bonds are outstanding and unpaid the City shall continuously and efficiently operate the System, and shall maintain the System in good condition, repair, and working 50 order, all at reasonable cast. No free service of the System shall be allowed, and should the City or any of its agencies, instrumentalities, lessors, or concessionaires make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the City or any of its agencies, instrumentalities, lessors, or concessionaires out of funds from sources other than the revenues of the System, unless made from surplus Pledged Revenues as permitted by Section 23~b} hereof. (f~ Further Encumbrance. While the Parity Bonds or any Additional Bonds are outstanding and unpaid, the City shall not additionally encumber the Pledged Revenues in any manner, except as permitted in this ordinance in connection with Additional Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants, and agreements of this Ordinance and any ordinance authorizing the issuance of Additional Bonds; but the right of the City to issue revenue bonds payable from a subordinate lien on surplus Pledged Revenues is specifically recognized and retained, as permitted under Section 23~b} hereof. fig} Sale, Lease or Disposal of Property, No part of the System shall be sold, leased, mortgaged, demolished, removed or otherwise disposed of, except as follows: ~l} To the extent permitted by law, the City may sell, lease, mortgage, demolish, remove or otherwise dispose of at any time and from time to time any property or facilities constituting part of the System only if (A} the City Council shall determine, as evidenced by a resolution to that effect, such property or facilities are not useful in the operation of the System, or (B) the proceeds of such sale are $250,00 or less, or the City Council shall determine, as evidenced by a resolution to that effect, the fair market value of the property or facilities exchanged is $250,000 or less, or (C} if such proceeds or fair market value exceed $250,000 the City Council shall determine, as evidenced by a resolution to that effect, that the sale or exchange of such property or facilities will not impair the ability of the City to comply during the current or any future fiscal year with the covenant of the City set forth in Section 28ti} of this Ordinance. The proceeds of any such sale or exchange not used to acquire other property necessary or desirable for the sale or efficient operation of the System shall forthwith, at the option of the City, ~i} to be used to redeem or purchase Parity Bonds or Additional Bonds, iii) otherwise be used to provide far the payment of Parity Bonds or Additional Bonds or viii} be used for any other lawful purpose. (2} To the extent permitted by law, the City may lease or make contracts or grant licenses for the operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any part of the System, provided that any such lease, contract, license, arrangement, easement or right (A} does not impede the operation of the System by the City and ~B} does not in any manner impair or adversely affect the rights or security of the owners of the Parity Bonds or Additional Bonds under this ordinance; and provided, further, that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement, easement or other right is in excess of $500,000, the City Council shall determine, as evidenced by a resolution to that effect, that the action of the City with respect thereto does not result in a breach of the conditions under this clause (2}. Any payments received by the City under or in connection with any such lease, contract, license, arrangement, easement or right in respect of the System or any part thereof shall constitute Gross Revenues, (h} Insurance. ~l} The City shall cause to be insured such parts of the System as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents, or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance. Public liability and property damage insurance also shall be carried unless the City Attorney gives a written opinion to the effect that the City is not liable for claims which would be protected by such insurance. All insurance premiums shall be paid as an expense of operation of the System. At any time while any contractor engaged in construction work shall be fully responsible therefor, the City shall not be required to carry insurance on the work being constructed if the contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the City shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the City. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the City for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient far such purpose, then said insurance proceeds pertaining to the System shall be deposited in a special and separate hvst fund, at an official depository of the City, to be designated the Insurance Account. The Insurance Account shall be held until such time as other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacements originally required. ~2) The annual audit hereinafter required may contain a section commenting on whether or not the City has complied with the requirements of this Section with respect to the maintenance of insurance, and shall state whether or not all insurance premiums upon the insurance policies to which reference is made have been paid. 51 (i} Annual Budget and Rate Covenant. The City shall prepare, prior to the beginning of each fiscal year, an annual budget, in accordance with law, reflecting an estimate of cash receipts and disbursements for the ensuing fiscal year in sufficient detail to indicate the probable Gross Revenues and Pledged Revenues for such fiscal year, The City shall fix, establish, maintain, and collect, such rates, charges, and fees for the use and availability of the System at all times as are necessary (1} to produce Gross Revenues sufficient, together with any other Pledged Revenues, to pay all current operation and maintenance expenses of the System, and (2} to produce an amount of Pledged Revenues during each fiscal year at least equal to the greater of 1.25 times the average annual principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds or 1.25 times the succeeding fiscal year's principal and interest requirements of all then outstanding Parity Bonds and Additional Bonds. (~} Records. The City shall keep proper books of record and account in which full, true, proper, and correct entries will be made of all dealings, activities, and transactions relating to the System, the Pledged Revenues, and the Funds created pursuant to this Ordinance, and all books, documents, and vouchers relating thereto shall at all reasonable times be made available for inspection upon request of any Bondholder, provided, that all books, documents, and vouchers relating to the City's electric system shall be made available for inspection only to the extent required by law, including, without limitation, the provisions of Section 552,133 of the Texas Government Code. To the extent consistent with the provisions of this Ordinance, the City shall keep its books and records in a manner conforming to standard accounting practices as usually would be followed by private corporations owning and operating a similar System, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. ~k) Audits. After the close of each fiscal year while any of the Parity Bonds or any Additional Bonds are outstanding, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by an independent certified public accountant or an independent firm of certified public accountants. As soon as practicable after the close of each such year, and when said audit has been completed and made available to the City, a copy of such audit for the preceding year shall be mailed to the Municipal Advisory Council of Texas, to each paying agent for any bonds payable from Pledged Revenues, and to any Bondholders who shall so request in writing. The annual audit reports shall be open to the inspection of the Bondholders and their agents and representatives at all reasonable times. ~l) Governmental Agencies. It will comply with all of the terms and conditions of any and all franchises, permits, and authorizations applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and the City has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction; equipment, operation, and maintenance of the System. (m} No Competition, It will not operate, or grant any franchise or, to the extent it legally may, permit the acquisition, construction, or operation of, any facilities which would be in competition with the System, and to the extent that it legally may, the City will prohibit any such competing facilities. (n} No Arbitrage. The City covenants to and with the purchasers of the Parity Bonds and any Additional Bonds that no use will be made of the proceeds of any of such bonds at any time throughout the term of any of such bonds which, if such use had been reasonably expected on the date of delivery of any of such bands to and payment therefor by the purchasers, would have caused any of such bands to be arbitrage bands within the meaning of Section 14$ of the Internal Revenue Code of 19$6, as amended (the "Code"}, or any regulations or rulings pertaining thereto; and by this covenant the City is obligated to comply with the requirements of the aforesaid Code and all applicable and pertinent Department of the Treasury regulations relating to arbitrage bonds. The City further covenants that the proceeds of all such bonds will not otherwise be used directly or indirectly so as to cause all or any part of such bonds to be or become arbitrage bonds within the meaning of the aforesaid Code, or any regulations pertaining thereto. Section 29. AMENDMENT OF ORDINANCE. (a} The holders or owners of Parity Bonds and Additional Bonds aggregating in principal amount 51% of the aggregate principal amount of then outstanding Parity Bonds and Additional Bonds shall have the right from time to time to approve any amendment to this Ordinance which may be deemed necessary or desirable by the City, provided, however, that nothing herein contained shall permit or be construed to permit the amendment of the terms and conditions in this Ordinance or in the Parity Bonds or Additional Bonds so as to: (1) Make any change in the maturity of the outstanding Parity Bonds or Additional Bonds; (2) Reduce the rate of interest borne by any of the outstanding Parity Bonds or Additional Bonds; (3) Reduce the amount of the principal payable an the outstanding Parity Bonds or Additional Bonds; (4) Modify the terms of payment of principal of or interest on the outstanding Parity Bonds or Additional Bonds, or impose any conditions with respect to such payment; 52 (S} Affect the rights of the holders or owners of less than all of the Parity Bonds and Additional Bonds then outstanding; (6} Change the minimum percentage of the principal amount of Parity Bonds and Additional Bonds necessary for consent to such amendment. (b) If at any time the City shall desire to amend the Ordinance under this Section, the City shall cause notice of the proposed amendment to be published in a financial publication of general circulation in The City of New York, New York, once during each calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the principal office of the Paying Agents for inspection by all holders or owners of Parity Bonds and Additional Bonds. Such publication is not required, however, if notice in writing is given to each holder or owner of Parity Bonds and Additional Bonds. (c} Whenever at any time not less than thirty days, and within one year, from the date of the first publication of said notice or other service of written notice the City shall receive an instrument or instruments executed by the holders or owners of at least Sl% in aggregate principal amount of all Parity Bonds and Additional Bands then outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and which specifically consent to and approve such amendment in substantially the farm of the copy thereof on file with the Paying Agents, the City Council may pass the amendatory ordinance in substantially the same form. (d) Upon the passage of any amendatory ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the respective rights, duties, and obligations under this Ordinance of the City, and all the holders or owners of then outstanding Parity Bonds and Additional Bonds and all future Parity Bonds and Additional Bonds shall thereafter be determined, exercised, and enforced hereunder, subject in all respects to such amendments. (e) Any consent given by the holder or owner of a Parity Bond or Additional Band pursuant to the provisions of this Section shall be irrevocable for a period of one year from the date of the first publication of the notice provided for in this Section, and shall be conclusive and binding upon all future holders or owners of the same Parity Bond yr Additional Bond during such period. Such consent may be revoked at any time after one year from the date of the first publication of such notice by the holder or owner who gave such consent, or by a successor in title, by filing notice thereof with the paying agents and the City, but such revocation shall not be effective if the holders or owners of Sl% in aggregate principal amount of the then outstanding Parity Bonds and Additional Bonds as in this Section defined have, prior to the attempted revocation, consented to, and approved the amendment. (f} For the purpose of this Section, the fact of the holding of Parity Bonds ar Additional Bonds which are in bearer, coupon form, by any bondholder and the amount and numbers of such bearer Parity Bonds or Additional Bonds and the date of their holding same, may be proved by the affidavit of the person claiming to be such holder or owner, or by a certificate executed by any trust company, bank, banker, yr any other depository wherever situated showing that at the date therein mentioned such person had on deposit with such trust company, bank, banker, or other depository, the Parity Bonds and Additional Bonds described in such certificate. The City may conclusively assume that such ownership continues until written notice to the contrary is served upon the City. The ownership of all registered Parity Bonds and Additional Bonds shall be determined from the registration books kept by the registrar therefor. Section 30. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding Bond is damaged, mutilated, lost, stolen, or destroyed, the Paying AgentlRegistrar shall cause to be printed, executed, and delivered, a new bond of the same principal amount, maturity, and interest rate, as the damaged, mutilated, lost, stolen, or destroyed Bvnd, in replacement for such Bond in the manner hereinafter provided. (b} Application for Replacement Bands. Application for replacement of damaged, mutilated, lost, stolen, or destroyed Bonds shall be made by the registered owner thereof to the Paying AgentlRegistrar. In every case of loss, theft, or destruction of a Bond, the registered owner applying for a replacement bond shall furnish to the Issuer and tv the Paying AgentlRegistrar such security or indemnity as may be required by them to save each of them harmless from any loss yr damage with respect thereto. Also, in every case of loss, theft, or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying AgentlRegistrareoidence to their satisfaction of the loss, theft, or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar far cancellation the Bond so damaged or mutilated. (c} No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred which is then continuing in the payment of the principal of, redemption premium, if any, or interest on the Bond, the Issuer may authorize the payment of the same {without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. 53 (d} Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement bond, the Paying AgentlRegistrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen, or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen, or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this ordinance. (e} Authority for Issuing Replacement Bonds. In accordance with Chapter 121, Texas Government Code, this Section of this Ordinance shall constitute authority for the issuance of any such replacement bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such bonds is hereby authorized and imposed upon the Paying AgentlRegistrar, and the Paying AgentlRegistrar shall authenticate and deliver such Bonds in the form and manner and with the effect, as provided in Section b(d} of this ordinance for Bonds issued in conversion and exchange for other Bonds. Section 31, CaVENANTS REGARDING TAX-EXEMPTION. The Issuer covenants to refrain from any action which would adversely affect, and to take such action to ensure, the treatment of the Bonds as obligations described in section 1~3 of the Code, the interest on which is not includable in the "gross income" of the holder for purposes of federal income taxation, In furtherance thereof, the Issuer covenants as follows: (a} to take any action to assure that no more than 1D percent of the proceeds of the Bonds (less amounts deposited to a reserve fund, if any} are used for any "private business use", as defined in section 141(b}(b} of the Code ar, if more than l~ percent of the proceeds are so used, that amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 1Q percent of the debt service on the Bonds, in contravention of section 141(b}(2} of the Code; (b} to take any action to assure that in the event that the "private business use" described in subsection (a} hereof exceeds 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any} then the amount in excess of 5 percent is used fora "private business use" which is "related" and not "disproportionate", within the meaning of section 141(b}(3} of the Code, to the governmental use; (c} to take any action to assure that no amount which is greater than the lesser of $S,QOO,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any} is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c} of the Code; (d} to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(b} of the Code; (e} to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b} of the Code; (f} to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b}(2} of the Code} which produces a materially higher yield over the term of the Bonds, other than investment property acquired with -- (1} proceeds of the Bonds invested for a reasonable temporary period of 30 days or Iess in the case of an advance refunding bond and 90 days of less in the case of a current refunding bond, (2} amounts invested in a bona fide debt service fund, within the meaning of section 1.14$-1(b) of the Treasury Regulations, and (3) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 14 percent of the stated principal amount (or, in the case of a discount, the issue price} of the Bonds; (g) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage}, Section 149(g) of the Code (relating to hedge bonds), and, to the extent applicable, section 149(4) of the Code (relating to advance refundings); and (h) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings", within the 54 meaning of section 148(fj of the Code and to pay to the United States of America, not later that dQ days after the Bonds have been paid in full, 1QQ percent of the amount then required to be paid as a result of Excess Earnings under section 148(1} of the Code. For purposes of the foregoing (a} and fib), the Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any} and proceeds of the refunded bonds expended prior to the date of issuance of the Bonds. It is the understanding of the Issuer that the covenants contained herein are intended to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto, In the event that regulations or rulings are hereafter promulgated which modify, or expand provisions of the Cade, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally-recagnized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 1 Q3 of the Cade. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary and reasonably possible, in the opinion of nationally- recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 1Q3 of the Cade. In furtherance of such intention, the Issuer hereby authorizes and directs the Mayor to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, which may be permitted by the Code as are consistent with the purpose far the issuance of the Bonds. The Issuer covenants to comply with the covenants contained in this section after defeasance of the Bonds. In order to facilitate compliance with the above covenant (h), a "Rebate Fund" is hereby established by the Issuer for the sale benefit of the United States of America, and such fund shall not be subject to the claim of any other person, including without limitation, the owners of the Bonds. The Rebate Fund is established for the additional purpose of compliance with Section 148 of the Code. Section 32. ALL4CATI~N 0F, AND LIMITATION 4N, EXPENDITURES FOR THE PROJECT. The City covenants to account for the expenditure of sale proceeds and investment earnings to be used for the purposes described in Section 1 of this Ordinance (the "Project"} on its books and records in accordance with the requirements of the Code. The City recognizes that in order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within l8 months of the later of the date that (I}the expenditure is made, or ~2} the Project is completed; but in no event later than three years after the date on which the original expenditure is paid. The foregoing notwithstanding, the City recognizes that in order far proceeds to be expended under the Cade, the sale proceeds or investment earnings must be expended no more than dQ days after the earlier of ~1) the fifth anniversary of the delivery of the Bands, or (~}the date the Bonds are retired. The City agrees to obtain the advise ofnationally-recognized bond counsel if such expenditure fails to comply with the foregoing to assure that such expenditure will not adversely affect the tax-exempt status of the Bonds. For purposes hereof, the City shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 33. DISP4SITI~N 4F PROJECT, The Issuer covenants that the property constituting the projects financed will not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally-recognized band counsel that such sale or other disposition will not adversely affect the tax- exempt status of the Bonds. For purposes of the foregoing, the portion of the property comprising personal property and disposed of in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. Section 34. INTEREST EARNINGS QN BAND PROCEEDS. Interest earnings derived from the investment of proceeds from the sale of the Initial Bonds, other than proceeds deposited in the Interest and Sinking Fund and the Reserve Fund, shall be used along with other available proceeds for improving the System; provided that after completion of the improvements if any of such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on bond proceeds which are required to be rebated to the United States of America pursuant to the Covenants Regarding Tax-Exemption herein so as to prevent the Bands from being arbitrage bands shall be so rebated and not considered as interest earnings for the purposes of this Ordinance. 55 TAX MATTERS OPINION ... On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L,P., Dallas, Texas, Bond Counsel, 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 will be excludable from the "gross income" of the holders thereof and (2} the Bonds will not be treated as "private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(S) of the Internal Revenue Code of lgSb (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See Appendix D - Form of Bond Counsel's Opinion. In rendering its opinion, Bond Counsel will rely upon (a} certain information and representations of the City, including information and representations contained in the City's federal tax certificate, (b) covenants of the City contained in the Bond documents relating to certain matters, including arbitrage and the use of the proceeds of the Bonds and the property financed or refinanced therewith. Failure of the City to comply with these representations or covenants could cause the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds 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 Bonds to be included in gross income retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel is conditioned on compliance by the Issuer with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds. 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. 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 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 Bonds. A ruling was not sought from the Internal Revenue Service by the Issuer with respect to the Bonds or the property financed or refinanced with proceeds of the Bonds. No assurances can be given as to whether the Internal Revenue Service will commence an audit of the Bonds. Bond Counsel's opinion is not binding on the Internal Revenue Service. If an Internal Revenue Service audit is commenced, under current procedures the Internal Revenue Service is likely to treat the Issuer as the taxpayer and the Bondholders may have no right to participate in such procedure. No additional interest will be paid upon any determination of taxability. FEDERAL INCOME TAX ACCOUNTING TREATMENT OF QRIGINAL ISSUE DISCOUNT .The initial public offering price to be paid for one or more maturities of the Bonds may be less than the principal amount thereof or one or more periods for the payment of interest on the bonds 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 bonds 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 such initial owner is entitled to exclude from gross income (as defined in section bl 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 the 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. 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 purpases 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 Band. Sb 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 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. COLLATERAL FEDERAL INCUME TAX CONSEQUENCES ...The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds. 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, individual recipients of Social Security or Railroad Retirement benefits, individuals allowed earned income credit, certain S corporations with accumulated earnings and profits and excess passive investment income, foreign corporations subject to the branch profits tax 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 OFTAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 5S of the Code. Section 55 of the Cade imposes a tax equal to ZO percent for corporations, or ~6 percent for non corporate taxpayers ~~8 percent for taxable excess exceeding $175,000}, of the taxpayer's "alternative minimum taxable income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 176 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of atax-exempt obligation, such as the Bonds, 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 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. STATE, LQCAL AND FQREIGN TAXES ...Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds 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. UTHER INFURMATIUN RATINGS The presently outstanding System revenue debt of the City is rated "A1" by Moody's and "A+" by S&P, Applications for contract ratings on this issue have been made to Moody's and 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 wi1J 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 Bonds. The Texas Public Utilities Regulatory Act ~"PURA"} provides that municipalities, such as the City, that operate electric utilities may exempt information or records that relate to the electric utility from the requirements of the State's open records act, if the information or records are reasonably related to a competitive matter, and without regard to whether the municipally owned utility has adopted customer choice or serves in a multiple certificated service area. PURR defines such protected information to include commercial information that the municipality believes would, if disclosed, give advantage to competitors or prospective competitors. In applying for ratings on the Bonds, the City has provided certain information that it deems to be protected from 57 public disclosure under PURR to the Rating Agencies. Such information has been provided under the terms of confidentiality agreements. LITIGATION It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of the Bonds 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 Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bands under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGI$ILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 12Q 1.41 of the Public Security Procedures Act (Chapter 12q 1, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter S, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Bonds be assigned a rating of at least "A" or its equivalent as to investment quality by a national rating agency. See "ETHER INF4RMATI4N -Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Bands are legal investments for various institutions in those states. LEGAL OPINIONS The City will furnish to the Initial Purchaser a complete transcript of proceedings had incident to the authorization and issuance of the Bonds, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Bond and to the effect that the Bonds are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel, to like effect and to the effect that the interest on the Bonds will be excludable from gross income for federal income tax purposes under Section 1 ~3~a} of the Code, subject to the matters described under "Tax Matters" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that na litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Bonds will also be furnished. In its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P, has reviewed the information describing the Bonds in the Gfficial Statement to verify that such description conforms to the provisions of the ordinance. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent an the sale and delivery of the Bonds. McCall, Parkhurst & Horton L.L.P. has also served as disclosure counsel to the City for the limited purpose of reviewing the information under the captions "The Electric System," "The Water System" and "The Wastewater System." In connection with the issuance of the Bonds, McCall, Parkhurst & Horton L.L.P. represents only the City. The legal opinion will accompany the Bonds deposited with DTC or will be printed on the Bonds in the event of the discontinuance of the Book-Entry-only System. The various legal opinions to be delivered concurrently with the delivery of the Bonds 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, ar of the future performance of the parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. 58 CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement far the benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS . , ,The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 10 and in Appendix C. The City will update and provide this information within six months after the end of each fiscal year ending in and after 2008. The City will provide the updated information to each nationally recognized municipal securities information repository ~"NRMSIR") and to any state information depository ~"S1D") that is designated by the State of Texas and approved by the State of Texas and approved by the staff of the United States Securities and Exchange Commission (the "SEC"). The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information by the required time and audited financial statements when and if such audited financial statements became available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix C or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. 0. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 5121476-6947. The Municipal Advisory Council has also received SEC approval to operate, and has begun to operate, a "central post office" repository for information filings made by municipal issuers, such as the City, which repository then transmits the filed information to the NRMSIRs and the appropriate SID. This central past office can be accessed and utilized at www.DisclosureUSA.org ~"DisclosureUSA"), The City may utilize DisclosureUSA for the filing of information relating to the Bonds. MATERIAL EVENT NOTICES... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds, if such event is material to a decision to purchase or sell Bands: ~1) principal and interest payment delinquencies; ~2) non-payment related defaults; ~3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bands; (7) modifications to rights of holders of the Bands; ~8) Bond calls; (9) defeasances; X10) release, substitution, or sale of property securing repayment of the Bonds; and X11) rating changes. Neither the Bonds nor the Ordinance make any provision for liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to each NRMSIR. AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID ...The City has agreed to provide the foregoing information only to NRMSIRs and the SID, The information will be available to holders of Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. LIMITATIONS AND AMENDMENTS... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if ~i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in S9 compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii} either (a} the holders of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or (b} any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 1 Sc2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ...During the last five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 1Sc2-12. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company may submit a bid for the Bonds, either independently or as a member of a syndicate organized to submit a bid for the Bonds. 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 Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. In the normal course of business, the Financial Advisor may also from time to time sell investment securities to the City for the investment of bond proceeds or other funds of the City upon the request of the City. 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. AUTHENTICITY OF FINANCIAL DATA AND QTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Preliminary 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. INITIAL PURCHASER After requesting competitive bids for the Bonds, the City accepted the bid of the "Initial Purchaser"} to purchase the Bonds at the interest rates shown on the cover page of the Official Statement at a price of par plus a cash premium of $ ,The Initial Purchaser can give no assurance that any trading market will be developed for the Bonds after their sale by the City to the Initial Purchaser. The City has no control over the price at which the Bonds are subsequently sold and the initial yield at which the Bonds will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, 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. GO 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 betaken 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. CERTIFICATION OF THE UFFICIAL STATEMENT At the time of payment for and delivery of the Bonds, the City will furnish a certificate, executed by proper officers, acting in their official capacity, to the effect that to the best of their knowledge and belief (a} the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Bonds and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b} insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact rewired to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The Ordinance authorizing the issuance of the Bonds will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the Purchaser. MARK BURROUGHS Mayor City of Denton, Texas ATTEST: JENNIFER K. WALTERS City Secretary bI APPENDIX A GENERAL INFORMATION REGARDING THE CITY LOCATION . , ,The City of Denton is located in the northern portion of the DallaslFort Worth Consolidated Statistical Area (CSMA}. The City is a part of the DallaslFort 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. ECOKOMIC FUTURE ...The fiscal year 2007-2008 brought exciting news in economic development. Listed below are just a few of the highlights. M,4JOR EMPLOYER ~ IND ~STR1,4 L ~F, WS • Granite Paint Phase I has constructed two speculative buildings far a combined 297,500 square feet of space. Other officelwarehouse buildings include 7,540 square feet far Spilde-Harrison; two buildings far CR Smith Investments totaling 28,678 square foot; 9,997 square feet of office and warehouse space far Bobcat; 3,200 square feet for a new steel building far Pioneer Equipment Rental; and 8,100 square feet far a new training center at Peterbilt Matars Company. DEVEL OPMENT A T D]~ NTON MUNICIP,4 L 1~ IR~'OR7' 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 10 p.m. and increased our corporate jet traffic. Denton Municipal Airport opened a new $1.2 million terminal and completed realignment of a taxiway providing a secondary emergency runway. The airport's control tower supports corporate jet traffic by providing Class D airspace from 8 a.m. to 10 p.m. daily. In 2008, three of four major airport business operators plan a total of $3.1M in office, hanger, and maintenance facility construction totaling 80,000 square feet. A construction grant for $1.5 M funded 90% by TxDOT and 10% by the City of Denton will open up an additiona118-20 acres for airport master plan development. TXDOT will additionally fund an $8.4 million runway expansion from 6,404 to 7,444 feet in 2410, enhancing existing business fleet operating capacity. Once approved, a pending Foreign Trade Zone application that includes the airport, surrounding businesses and the University of North Texas Discovery Park research facility will leverage additional future airport business investment. RETAIL SEWS • Denton Towne Grassing, a 43 -- acre retail development located in the southeastern corner of Brinker Raad and Laap 288, completed 344,000 square feet of retail space. The center includes a bank and several restaurant and retail pads with Home Depot and Super Target as anchors for the development. Construction of the mixed-use development known as Unicorn Lake continues. The master-planned center incorporates the urban style development of residential over retail along the lake. Canstructian 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, Poorhouse Grill, Washington Federal Savings and Loan have located in the center. Additional restaurants, a bank, and medical offices are also planned to open by year end. The Hilton Homewood Suites recently purchased a site in this development and should begin construction within 12 months. HEALTHC,4 RE IN DENTON In 2005 both of Denton's hospitals completed ar began expansion plans that confirm Denton's status as a regional center for quality medical services. The hospitals spent approximately $150 million an these facility expansions. Medical facilities continue to expand and locate in Denton. • Denton Regional Medical Center expanded adding 27,431 square feet of medical office space. Located adjacent to North Texas Hospital, the Mayhill Hospital X40,000 square feet), Caring far Women (13,402 square feet), and the Texas Back Institute (10,076 square feet) have a combined valuation of $8,506,863. Integrity Transitional Hospital, a 38,000 square foot, $16 million long term acute-care specialty hospital opened in 2007. Two healthcare facilities have joined the Rayzor Ranch development: construction began on Select Medical, a $20 million rehabilitation hospital specializing in spinal injuries and brain trauma and StoneGate Senior Health Continuing Care announced plans to construct a 128 resident continuing care retirement facility providing skilled nursing, Alzheimer's care and assisted living apartments, A-1 0?'HF.R DE~ELOPMEN?'S Rayzor Ranch development recently received zoning approval far an overlay district creating a 410-acre mixed use development. The $850 million project will provide approximately 2.1 million square feet of retail and will include a 15-acre park with an amphitheater and large water feature, hotels, single family, apartments and town homes. The southern portion of the property is adjacent to Presbyterian Hospital and will be home to the new Select Medical facility. Senior assisted living is also planned far this area. Sam's Club and WalMart plan to begin construction of 375,000 square feet of space on the north side of the development in 2008 with a late fall 2009 opening. The remainder of the development is slated to open in 2010111. • Qther major commercial investments include several banks that built new facilities in Denton in 200b12007: Narthstar Bank, Wells Fargo two new branches) and Washington Federal Savings at an average value of over $500,000. In addition, Courtyard by Marriott and Comfort Inn hotels are scheduled to open in 2008, • Molecular Insight purchased a vacant 80,000 square foot building, formerly occupied by NeaRx. Molecular Insight is a pharmaceutical manufacturing company who will renovate the facility to begin manufacturing in Denton in 2009. • Fastenal Company will complete their 240,000 square foot building an Airport Road in the summer of 2008. Fastenal assembles and distributes industrial fasteners, The $10 million project will employ approximately 200 and will serve as the company's regional headquarters. • Aldi Incorporated has announced plans to construct a $40 million, 500,000 square foot distribution facility far 25 stores located in North Texas including two to three stores planned in the City of Denton. REMAINING PORTION OF THIS PAGE LEFT BLANK INTENTIONALLY A-2 INDUSTRY AND BUSINESS Major Employers Approximate Number of Employer Description Employees University of North Texas Educational Facility 7,351 Denton Independent School District School System 2,600 Peterbilt Motors-Headquarters & Plant Diesel Trucks 2,000 Denton State School MHMR Facility 1,450 Denton County County Government 1,441 City of Denton City Government 1,300 Texas Woman's University Educational Facility 1,1 S9 FEMA (Regional Headquarters) Federal Government Call Center 1,100 Denton Regional Medical Center Hospital 800 Presbyterian Hospital of Denton Hospital 750 Victor Equipment Welding Equipment 574 Sally Beauty World HQ Beauty Supply Company 500 Anderson Merchandisers Consumer Products Distributor 500 Jostens Class Ring Manufacturer Class Ring Manufacturer 280 Progressive Industries MHMR Facility 276 United Copper Copper Wire 264 James Wood Auto Park Car (Truck Sales & Service 252 Tetra Pak Aseptic Packaging 250 Precision Pattern Inc. Jet Interior Manufacturing 237 Acme Brick Brick Manufacturer 22S Nucon Steel Steel Manufacturing 180 CBS Mechanical Mechanical Contractor 17S Denton Rehabilitation & Nursing Center RetirementlRehabilitation 160 Morrison Milling Flour Grain Mill 160 Wells Fargo Bank 160 Mayday Manufacturing Aerospace Machined Parts 160 Flowers Baking Company Bakery 152 Russell Newman Ltd. World HQ SleepwearlLoungewear 150 General Telemarketing International Call Center 1 SO The Vintage RetirementlRehabilitation 150 Senior Care Health & Rehabilitation Center Nursing Facility 14S DATCU Financial Institution 136 Denton Good Samaritan Village Retirement Center 120 Lake Forest Good Samaritan Village Retirement Center 120 Mayhill Hospital Psychiatric & Rehabilitation 11S Bill Utter Ford Car (Truck Sales & Service 107 Denton Publishing Company Newspaper Publishing 100 Integrated Alliance, LP Call Center 100 Hulcher Services Railroad Emergency Response 100 Source: City of Denton and Denton Chamber of Commerce Economic Development Offices Denton is proud to be home to nearly 40 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 3,000 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. A-3 ECONOMIC AND POPULATION GAINS ...Historical population totals frarn U.S. Census depict Demon's consistent population increases commensurate with Demon's steady economic growth. l 940 Census --11,192 1954 Census - 21,345 1960 Census -- 26,844 1974 Census - 39,874 1984 Census - 49,x79 1994 Census - 66,270 2444 Census - 80,537 estimated 2008 Population is 119,490 ~~~ ~1} City of Denton Planning Department. 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 DallaslFvrt Worth Metraplex; 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. ECONOMIC RANKING ...The following data was taken from Claritas 2x07 Survey. Of Population Whose Age is. 0.17 21% 18.34 39% 35.54 25% S 5-64 8% 65 and over 7% Number of Households 2007 44,432 City of Denton Average Household Income $ 57,833 City of Denton Household. Income $250,000 + 2% $100,000 - $249,999 20% $ 50,000 - $ 99,999 27% $ 3 5,000 - $ 49, 999 15 $ 25,000 - $ 34,999 15% Less than or equal to 24,999 15% City of Denton Population by Occupation; Sales & Office 29% Professional & Related Occupations 24% Service 17% Management, Business & Finance 12% Production & Transportation 10% Construction 15% Farming, Fishing, &. Forestry Less than 1% A-4 EMPLOYMENTILASOR FORCE ...According to the U.S. Department of Labor's Bureau of Labor Statistics, the 2007 annual available workforce in Denton is 58,229. Additionally Denton is fortunate to draw workers from the Dallas and Fart Worth MSA's representing 5.1 million people, as well as north to southern Oklahoma. EDUCATION ...Denton is home to the University of North Texas, founded in 1890, Texas Woman's University, founded in 1901. North Central Texas College, established in 1924, built an extension campus just outside Denton's extraterritorial jurisdiction (ETJ) in adjacent city, Corinth. The two universities and community college have a combined enrollment of more than 47,967 students and approximately 9,099 full and part time staff members. With an enrollment of over 33,134, 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 9,999 in Denton with an additional 2,168 students attending in Dallas and Houston. The University of North Texas (UNT) campus comprises a land area of more than 425 acres valued in excess of $167 million. The University encompasses nine colleges and schools of study and offers Bachelor's degrees in 96 fields, Master's degrees in I11 areas and Doctoral programs in 50 disciplines. UNT maintains a low 20:1 student-faculty ratio more prevalent among private rather than public institutions. UNT is listed in bath America's 100 Best College Buys and America's 100 Most Wired Colleges. 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 91% of attending students. Eighty percent of Physical Therapy faculty members at TWU hold a Doctoral Degree or other appropriate degrees in their fields. Through its seven schools and colleges, TWU offers 58 programs leading to a Bachelor's degree, 66 Master's degree fields, and Doctoral degrees in 23 specialization areas. According to the Texas Higher Education Coordinating Board, TWU experienced the fourth highest enrollment growth rate among universities in Texas with a 36 percent increase from 2002-2007. In 2001, TWU's Doctoral health studies program tied with Harvard University for second place nationally in a study of recommended practices by the National Association of Graduate-Professional studies, According to the Center for Measuring University Performance, TWU is ranked in the top 120 public universities nationwide in the number of doctoral degrees awarded. 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 campus in the adjacent city of Corinth is just under 5,000 with the potential far three times that number with construction of additional facilities planned in the near-term. 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. liver 20,000 students enrolled for the 2007-2008 school year in the district's 33 schools that include 20 elementary schools (grades K-5}, six middle schools (6-$}, three high schools (9-12}, one advanced technology complex (11-12) one early childhood center, and two alternative schools. Voters approved a November 2007 bond package for $2$2M to fund two new elementary schools, one new middle school, design plans fora 4~' comprehensive high school and additional science labs and prep rooms in all district schools. 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 schoollcollege 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 School is one of the country's most modem and progressive educational institutions for mentally-disabled Texas Residents. This state supported facility is located on a 2UU-acre site paid for by Denton citizens. Present facilities include residences that accommodate 653 students, more than 20 buildings far 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 1,500 with an annual budget of over $44M. Denton Universities Expand ...Texas Woman's University (TWU} has grown dramatically. Student enrollment at the university's home campus in Denton increased 47°/a from 20U2-2007 to just under 10,000 students. Similar growth at the university's Dallas and Houston satellite nursing campuses necessitated recent university construction projects. A $40M TWU Institute of Health Sciences-Houston facility opened in August 200b and a $56M TWU Institute of Health Sciences-Dallas facility will break ground in 2009. TWU leads as a provider of critically needed health care professionals, boasting the nation's fifth largest College of Nursing, largest nursing doctoral program. TWU is proud of its diversity; minority students comprise A-5 40% of students, and 55% of the most recent semester's graduates were first generation college graduates. Almost half of TWU students (42%} are graduate students. University of North Texas AUNT} -Named one of America's 100 Best College Buys for 12 consecutive years, and among the nation's top 50 schools for Hispanic and African American students, i1NT 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 has been the recipient of almost $lb million in defense funding the past four years and provides researchers with a unique grouping of microscopes for nanotechnology research and for other critical advancement fields. Bachelor and Master degree programs in Mechanical and Energy Engineering were added in 2007 to UNT's existing College of Engineering programs in electrical engineering, materials science, computer science, and engineering technology. Over 228,000 of newly constructed square feet were completed and include Honor's Hall residence for UNT's Honors College students and Chestnut Hall, housing UNT's expanded student health center and career center. Work will begin in 200$ on two new buildings; the Life Sciences Building will feature open research laboratories that promote collaborative and interdisciplinary research and the $b0 million Business Leadership Complex, focused on global economic and business disciplines. AGItICULTUItE ...Northwestern Denton County is one of the more diversified agricultural areas in Texas. With soil types 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. Avery significant concentration of valuable world champion horse farms east of the City's corporate boundaries provide a prosperous economic resource for the City and area. Products significant to the economy are horses, beef, eggs, wheat, grain sorghums, hay, and nursery crops. TRANSpoRTATION ...Denton is located only 20 miles northeast of the Dallas-Fort Worth International Airport which began operations in January 1974. In addition, Dallas' Love Field Airport and Fort Worth's Meacham International Airport are in close proximity to Denton. Alliance Airport, located about 20 miles southwest of Denton, is the only purely industrial airport in the world. Accompanying the Alliance Airport are five business parks. Together, Alliance's access to highway, rail and air transportation offers an excellent opportunity for future industrial growth. 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. GreyhoundlTrailways serves Denton through Dallas and Oklahoma City. Motor freight in Denton is included in the DIFW commercial trade zone and is served by major freight carriers. BANKING ...There are 18 banks in Denton: Access First Capital, Bank of America, N.A., Chase, Compass Bank, Wells Fargo Bank, N.A., Farmers and Merchants State Bank, First Convenience, First State Bank, Northwest Bank Texas, N.A., Provident Bank, Guaranty Federal Bank, Point Bank, Inwood National Bank, Synergy, Washington Mutual, Demon's only locally-owned bank, Northstar Bank, Washington Federal Savings, Wachovia, and First United Bank with Demon's first "Banco" branch specializing in serving Demon's Hispanic community. GItQWTH INDICES City State Fiscal Building Values ~millions~ ~~~ Water Sewer Electric Unemployment Unemployment Year Commercial Residential Total Customers Customers Customers Rates (z) Rates ~z} 2003 $ 42 $ 277 $ 3 i9 24,978 23,329 37,057 NIA b.71% 2004 50 2bb 31b 2b,41b 24,453 39,507 NIA b.03% 2005 $1 2b1 342 27,5$4 25,b95 41,$4b 3.$3% 5.39% 2006 b1 242 303 2$,805 2b,9S 1 42,186 3.97% 4,94% 2007 49 217 2b6 29,7$3 2$,020 43,b07 3.84% 4.35% (l} New Construction Only. (2} Source: Texas Workforce Commission. A-b MEDICAL ...Denton has became a regional medical destination serving north Texas and southern Qklahoma. Denton Regional Medical Center is a 184-bed community hospital that serves the growing population of Denton, Wise, Cooke, and Montague Counties. The hospital offers afull-spectrum of healthcare including advanced open-heart surgery and neurosurgery programs. Denton Regional is the only facility in Denton County to earn the prestigious Level 11 Chest Pain Center accreditation by the international non-profit Society of Chest Pain Centers. Since 2DD5, 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 far Cancer and Blood. Disorders, a comprehensive cancer diagnostic and treatment center integrating education, nutrition, and rehabilitation services will complete in 2DD8. Presbyterian Hospital of Denton formerly Denton Community Hospitals celebrated the grand opening of its 272,538 square- foot, ldl-bed facility and an 80,000 square-foot medical office building in 2005. The hospital expanded its Women's Center services in 200b with the opening of a Level Ill Neonatal Intensive Care Unit serving Denton and its surrounding communities. A new 52,000 square-foot, $14 million physical rehabilitation hospital broke across from Presbyterian Hospital ground in 2007 and will be modeled after the renowned Kessler Institute for Rehabilitation. North Texas Hospital opened a bD,DDD square foot specialty hospital featuring eight surgical suites and l b inpatient beds in 2DD5. 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 Denton hospitals gaining Denton its reputation as a regional medical destination include Mayhill Hospital, a 40,000 square-foot featuring physical rehabilitation and behavioral health services hospital opened in 2005 and Integrity Transitional Hospital, a 38,500 square foot, $16 million dollar long-term acute care hospital opened in 2007, RECREATION .. , .Lake Ray Roberts, located approximately 8 miles northeast of the City's corporate boundary on the Elm Fork of the Trinity River, is a major water conservation and flood control facility of more than 799,bDD acre-feet of storage that allows for an abundance of parks and other water and outdoor related recreational facilities. The nine mile Greenbelt HikelBikelEquestrian 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 Lakes. 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 $12.1b million Waterworks Park opened in 2DD3 and features four water slides, a children's play pool, a b00 ft. long continuous flow tubing river, outdoor amphitheater, pavilions, a sand volleyball court and two indoor pools. A-7 APPENDIX B DESCRIPTION OF SENATE BILL 7 AND THE TEXAS MUNICIPAL POWER AGENCY TEXAS MUNICIPAL PQWER AGENCY... TMPA is governed by a Board of Directors made up of two representatives from each Member City and is empowered to plan, finance, acquire, construct, own, operate and maintain facilities to be used in the business of generation, transmission and sale of electric energy to the Member Cities. The TMPA Agreement requires TMPA to prepare annual budgets, projecting its Annual System Costs for the succeeding year, including debt service requirements on its bonds, and to submit the same to the Member Cities. Based on these and other budgetary facts and estimates, TMPA sets the rates and charges to be paid by the Cities for the ensuing year, T'~LfPA's Generation Unit. TMPA's power supply source consists of the Gibbons Creek Steam Electric Station located in Grimes County, Texas, and includes a single net 462 megawatt ("MW"} Wyoming Powder River Basin coal fueled steam electric plant, reservoir, railroad spur, associated transmission facilities, an adjacent surface mine no longer in use and related properties and equipment ("Gibbons Creek"}. Gibbons Creek began commercial operation on October 1, 1983. For the fiscal year ended September 30, 2007, Gibbons Creek's capacity and availability were $S.1$% and $$.O1%, respectively, each of which represents a marginal decrease in these areas of productivity over 2006. In recent years, the productivity of Gibbons Creek has been increased, in part due to gains achieved from better boiler management placed in operations with the modifications made to Gibbons Creek for the purpose of limiting nitrogen oxide ("NOx"} emissions. See "Description of Senate Bill 7 and the Texas Municipal Power Agency -Texas Municipal Power Agency -Clean Air Act Compliance." Gibbons Creek also participated in ERCOT's balancing uploads protocol, in which capacity payments are paid by ERCOT to owners of generation based on the market clearing price for capacity in non-spinning reserves. Modi ications to Plant and 0 erations, Gibbons Creek was designed to burn lignite mined at a mine located on approximately 1$,aaa acres adjacent to the facility ("Gibbons Creek Mine"} and owned by TMPA. In 1996, TMPA commenced various modifications to Gibbons Creek, including the conversion of the plant to burn western coal mined in the Wyoming Powder River Basin, The modifications included the installation of an advanced design steam path turbine and the installation of additional superheat sections. These modifications have increased the generation capacity and the operating efficiency of the plant. The modifications made to Gibbons Creek relating to the fuel conversion were completed in the summer of 1997. Mining operations were halted by TMPA at the Gibbons Creek Mine in February 1996. In 1997, TMPA terminated several leveraged leases for certain mining equipment by acquiring the equipment and then selling it in order to reduce operating expenses at the Gibbons Creek Mine. The modifications to the plant and the change in fuel were made with the expectation that they would provide fuel cost savings in comparison with the operation of the Gibbons Creek Mine for fuel, to reduce the planned outage cycle at Gibbons Creek and to allow TMPA to achieve compliance with the federal Clean Air Act ("FCAA"} without the need for additional sulfur dioxide ("502"}allowances based on current regulations. In 2aaa and 2aaS, TMPA commissioned separate plant life assessment studies of Gibbons Creek to help assess the impact of the fuel switch on the expected life of Gibbons Creek, Based on capital projects completed at the plant and improved maintenance practices, the 2aa5 assessment projected that the life expectancy of Gibbons Creek as a base load unit would be 2a35. Over the period from fiscal year 1992-93 to 199$-99, TMPA reduced operating and maintenance costs of its plant, including through the reduction of employees and personnel costs. During such time, the number of regular employees was reduced by approximately 67%. In July 2aaa, TMPA entered into an agreement with Kennecott Coal Sales Company effective January 1, 2aa4. The agreement for a supply of coal from the PRB is a six-year agreement which, unless terminated earlier, expires on December 31, 20a9. Pricing under the agreement was fixed for the first three years (i.e. calendar years 2aa4-2aa6} subject to adjustment as provided in the agreement. Pricing for the last three years was subject to the parties reaching mutual agreement during a negotiating period in 20a6. On July 14, 2aab, following the negotiation period, the parties executed an agreement establishing pricing for calendar years 2aa7-2aa9. The primary source of coal under the agreement is the Cordero Rojo Complex. However, the agreement provides that, under certain circumstances, coal may be supplied from other mines, including the Jacobs Ranch Mine and the Antelope Mine. On October 2, 1995, TMPA entered into a coal transportation agreement with the Burlington Northern Railroad Company, now the Burlington Northern Santa Fe ("BNSF"}, under which BNSF was obligated to provide rail transportation far the coal purchased by TMPA from the PRB. The agreement expired on March 31, 20a1. TMPA pursued negotiations with BNSF through the summer of 2aaa, but was unable to secure a satisfactory new or extended contract arrangement to take effect upon expiration of the 1995 agreement. Therefore, in July 2aaa, TMPA formally requested BNSF to establish rates and terms for common carrier coal transportation service to Gibbons Creek, in both shipper and carrier- supplied railcars, effective at the conclusion of the 1995 contract. In August 2a0a, BNSF gave a partial response by quoting a common carrier rate in cars supplied by BNSF. TMPA considered this rate to be unacceptable, and in October 20a0 petitioned the Federal Surface Transportation Board ("STB"} to compel BNSF to set reasonable rates for the Gibbons Creek service in both carrier-supplied and shipper-supplied railcars. On March Z1, 2aa3, the STB issued a decision holding that BNSF's common carrier rate to TMPA was in excess of the maximum reasonable rate allowed by law. The decision established a maximum reasonable rate and requires BNSF to make a reparations payment to account for the difference between the rate charged and the maximum reasonable rate allowed by law. On April 14, 2aa3, TMPA and BNSF each frled a petition for reconsideration ofthe STB's decision. In September 20a3, TMPA and BNSF reached an agreement relating to the obligation of BNSF to pay TMPA for amounts charged in excess of maximum allowed common carrier rates. Based on this agreement, TMPA recorded a refund amount by reducing 2aaa fuel cost and recognizing interest earned on the refund amount as of the September agreement date. Payment of the refund, in the amount of $3.5 million, occurred on December 12, 20a3. On September 24, 2aa4, the STB issued a ruling on the petitions for reconsideration. The ruling, though confirming that the rate B-1 that had been originally appealed by TMPA exceeded the maximum reasonable rate allowed by law, increased the maximum reasonable rate by approximately $2.7 million, thus reducing the amount that BNSF had previously refunded to TMPA, As of September 30, 2004, TMPA accrued a liability to BNSF, resulting from this increase in the prescribed rate, of $2.7 million. On December 3, 2004, TMPA discharged this liability by refunding to BNSF $2.8 million, TMPA did not engage in any further appeal of the rate prescribed by the STB. Coal transportation services to TMPA by BNSF are currently governed by the final STB Order and the BNSF tariff as approved in that proceeding. Subsequent to the March 2003 decision of the STB, TMPA began conducting certain engineering, environmental, routing, and related studies to determine the feasibility of constructing a railroad spur between Gibbons Creek and a Union Pacific Railroad rail line. In May 2005, the Board of Directors of TMPA adapted a resolution of public necessity to acquire the right of way necessary for the construction of a rail spur between Gibbons Creek and Union Pacific Railroad's main line track near Navasota, Texas. While the majority of the acreage needed far the spur has been acquired through voluntary purchase, it was necessary far TMPA to file nine proceedings in eminent domain, Subsequent to those filings, TMPA has acquired through settlement two of the properties for which the eminent domain proceedings were filed. The seven remaining cases are pending in state court. TMPA's Transmission Facilities. TMPA-owned transmission system consists of 345-kV and 138-kV switchyard facilities and transmission line facilities in the vicinity of the Gibbons Creek Station, as well as additional 345-kV and 138-kV lines and substation facilities in Brazos, Collin, Dallas, Denton, Grimes, Hunt, Montague, Robertson, Rockwall, and Wise counties of Texas. These facilities provide 345-kV ties to Oncor Electric Delivery and CenterPoint Energy at several points throughout the ERCOT system. These facilities provide ties to the Member Cities, TXU Energy, CenterPoint Energy, Cap Rock Energy Corporation and Brazos Electric Power Cooperative, Inc. at a number of points in the ERCOT system. TABLE B~ -OUTSTANDING DEBT Fiscal Year % o f Ending Outstanding Debt ~~} Principal 9130 Principal Interest Total Retired 2008 $ 73,801,448 $ 43,167,311 $ 116,968,759 2009 43,987,825 52,141,530 96,129,355 2010 82,781,394 54,274,007 137,055,401 2011 85,949,662 50,216,066 136,165,728 2012 89,045,218 47,425,070 136,470,288 40.32% 2013 47,909,852 89,262,623 137,172,475 2014 38,962,390 98,214,597 137,176,988 2015 31,514,054 106,212,396 137,726,450 2016 29,662,133 108,064,318 137,726,450 2017 64,755,020 109,811,430 174,566,450 63.17% 201$ 263,069,000 15,203,450 278,272,450 2019 4,810,000 4,600,000 9,410,000 2020 5,090,000 4,323,425 9,413,425 2021 5,380,000 4,030,750 9,410,750 2022 5,690,000 3,721,400 9,411,400 93.66% 2023 6,020,000 3,394,225 9,414,225 2024 6,365,000 3,048,075 9,413,075 2025 6,730,000 2,682,088 9,412,088 2026 7,115,000 2,295,113 9,410,113 2027 7,525,000 1,886,000 9,411,000 97.29% 2028 7,960,000 1,453,313 9,413,313 2029 8,415,000 995,613 9,410,613 2030 8,900,000 511,750 9,411,750 100.00% ~ 931,437,996 $ 806,934,547 $ 1,738,372,543 ~l} Includes outstanding Prior Lien Obligations and Subordinate Lien Bonds. Interest on the $255,000,000 Tax-Exempt Commercial Paper Notes and $$,069,000 Taxable Commercial Paper Notes have been illustrated at the interest rates of 4,0% and 5.0%, respectively for purposes of illustration. The Junior Subordinate Lien Bonds are secured by a junior subordinate pledge of the Net Revenues and the proceeds of any obligations issued to retire them. The Junior Subordinate Lien Bonds have been illustrated to mature through September 1, 2030. Interest has been assumed to bear interest at 2.52% until refunded at maturity on June 15, 2009 with bonds bearing interest at 5.75% thereafter. The Agency has not taken any official action with respect to the refunding of the Junior Subordinate Lien Bonds at maturity on June 15, 2009 and the Agency could elect to refund the bonds in a manner that is substantively different than is demonstrated herein, including utilizing a different final maturity date, B-2 In accordance with the TMPA Agreement, the City is responsible for a proportion of the costs of TMPA, including debt service, as described above. 4n March 10, 2005, the Board of Directors of TMPA adopted resolutions ~i) re-issuing, as Series 2005A, the taxable commercial paper notes, in an amount not to exceed $20 million, and (ii) re-issuing, as Series 2045, the tax-exempt commercial paper notes, in an amount not to exceed $255 million, representing an increase of $60 million in the amount oftax- exempt commercial paper notes authorized to be issued. In June 200$, TMPA issued $80 million of short-term fixed rate indebtedness to refinance a portion of its commercial paper notes and to finance additional transmission projects. That debt matures on June 15, 2449 and is payable from a junior subordinate lien on the TMPA's net revenues and from proceeds of refunding obligations issued to refinance that debt. The TMPA Resolution provides that TMPA shall fund certain funds and accounts, including a bond reserve fund, and shall annually maintain rates to produce net revenues equal to at least 1.25 times the debt service on the Revenue Bonds. At September 34, 2447, TMPA's debt service reserve fund was valued at approximately $104.65 million, Amounts collected by TMPA from the Member Cities over and above its requirements for the expenses of operations and maintenance, the payment of debt service and maintaining the funds and accounts relating thereto are rebated back to each Member City as described below under "The Electric System -The Power Sales Contract." SB '~~ TMPA AND THE MEMBER CITIES ...Several provisions in SB 7 pertain to TMPA and its Member Cities. Gne of these provisions the "Debt Retirement Provision") provides that TMPA shall "set as an objective the extinguishment of the agency's debt by September 1, 2404," and further provides that, in the event the objective is not met, TMPA must "provide detailed reasons to the electric utility restructuring legislative oversight committee by November 1, 2000, why the agency was not able to meet this objective," The Debt Retirement Provision goes on to state that each municipal power agency "shall extinguish the agency's indebtedness by sale of the electric facility to one or more purchasers, by way of a sale through the issuance of taxable or tax-exempt debt to the member cities, or by any other method." The Debt Retirement Provision does not provide for any penalty or remedial action to be taken against a municipal power agency for the failure to meet the objective of extinguishing its debt by September 1, 2000. In July 1999, the Board of Directors of TMPA established a Debt Retirement Committee to study and to recommend options for achieving the objective of extinguishing TMPA's debt. Based on the work of the Committee, in October 2040, TMPA submitted to the Joint Committee on Gversight of Electric Utility Restructuring ~i.e. the electric utility restructuring legislative oversight committee referred to in SB 7) the report required by the Debt Retirement Provision. The report, in addition to explaining the reasons why TMPA was not able to extinguish all of its debt by September 1, 2000, identified the options explored by the Committee and available to TMPA to reduce TMPA's debt service requirements in the future. The options that are available to TMPA may be affected, and possibly limited, by certain provisions of the TMPA Agreement that pertain to asset sales and provisions of the TMPA Resolution that require it to comply with federal requirements that govern the use of facilities that have been financed with proceeds oftax-exempt bonds, among other factors. In addition, SB 7 provides that TMPA may, at its option, use the rate of return method for calculating its transmission cost of service. If the rate of return method is used, the return component for the transmission cost of service ~"TCGS") revenue requirement shall be sufficient to meet the transmission function's pro rata share of levelized debt service and debt service coverage ratio and other annual debt obligations; provided that the total levelized debt service may not exceed the total debt service under TMPA's current payment schedule. Any additional revenue generated by this methodology must be applied to reduce TMPA's outstanding indebtedness. This provision of SB 7 allows TMPA to take into account in determining the transmission revenue requirement a portion of the transmission system's share of TMPA debt service as if such debt service was level instead of increasing over time, which accelerates the recovery of that portion of debt service vis-a-vis actual debt requirements. Pursuant to this provision of SB 7, TMPA applied for, and, on February 16, 2041, received from the PUC an order revising and levelizing TMPA's TC~S. 4n August 1, 2401, the PUC approved a plan for the use of the additional revenues resulting from the levelized TC~S for the reduction of TMPA's debt. The major components for the plan are determination of the transmission portion of TMPA's debt service; calculation of TC~S revenues based on levelized and actual debt service, and identification of the indebtedness instruments that would maximize reduction of debt service, In addition, TMPA has established a debt retirement reserve for purpose of accounting for the additional revenues. As additional revenues are used to retire outstanding indebtedness identified in the PUC approved plan, the debt retirement reserve will be relieved. In accordance with the TMPA plan, which was approved by the PUC, the leveling of TMPA's TC~S produced additional revenues of approximately $18.3 million dollars during the years 2441 through 2406, which have been invested under escrow agreements and used to pay down approximately $28.3 million in TMPA debt due for payment in the years 2047 through 2417. SB 7 also provides that the PUC, if requested by a Member City of TMPA, shall examine all areas within the Member City's service area that are also certificated to one or more other retail electric utilities and, after notice and hearing, the PUC may amend the retail electric utilities' CCNs so that only one retail electric utility is certificated to provide distribution services in the area, provided that an application is filed with the PUC prior to September 1, 2000 and is limited to single certification of the area within the Member City's boundaries as of February 1,1999 and that the right of an electric utility or an electric cooperative to serve its existing customers, including any property owned or leased by any customer, is preserved. See "The Electric System - Electric System's Service Area and Service Area Composition" for a discussion of actions that have been taken by the City under this provision of SB 7. Clean Air Act Com liance. Gibbons Creek is subject to S~2 emission requirements under the FCAA, but based on the S42 emission reductions achieved in connection with the change to Wyoming Powder River Basin coal, TMPA has sufficient S42 allowances for projected operating rates of Gibbons Creek. B-3 The 199a amendments to the FCAA also implement more stringent rules designed to achieve compliance with the national ambient air quality standard for ozone. See "The Electric System -Environmental Regulation -FCAA". The Texas Commission on Environmental Quality ~"TCEQ"} concluded that emissions from electric utilities located in central and east Texas are contributing to ozone formation in three ozone non-attainment areas located in Texas: the Dallas-Fart Worth, Houston- Galveston, and Beaumont-Port Arthur areas. As a result on April 19, 2~U~, the TCEQ issued final rules that will require the reduction of Nix emissions at large electric utilities located in 31 east and central Texas counties, including Grimes County, where Gibbons Creek is located. For coal-fired electric utilities including Gibbons Creek, the combustion unit must achieve an average annual nitrogen oxide emission rate of U.165 pounds of nitrogen oxide per million BTU of heat generated. Compliance with this standard was mandatory by May 1, 2U~5. To achieve the required level of emissions, Gibbons Creek has undergone significant modification using a phased approach to achieving compliance. The initial two phases involved modifications to the fuel and air supply systems to control the combustion process and to limit the formation of nitrogen oxides in the bailer. These phases were completed following the spring 2~~2 outage. Completion of the final tuning of the system occurred in early 2U~3. No additional post-combustion controls were necessary. The final cost of meeting the standards for the N4x emissions was approximately $12 million. New cooling water intake structure regulations were introduced in July 2~a4 for existing power generating facilities with intake structures that withdraw 5~ million gallons per day or more. See "The Electric System -Environmental Regulation -Wastewater Discharge and Federal Clean Water Act ". The effects of these regulations on Gibbons Creek are currently being investigated by TMPA. Global warming, or climate change, has become a major political issue over the last few years. It now looks like some form of legislation for the control of "greenhouse gases", such as carbon dioxide, will be passed in the future. The impacts of such legislation to fossil-fuel power plants could be significant. See "The Electric System -Environmental Regulation -Ambient Air Quality Standards". TMPA is monitoring these developments and reviewing compliance options. Gibbons Creek Opacity Notice of Violation. EPA issued a notice of violation ("N~V"} on June 3a, 2a06 for alleged exceedences of Gibbons Creek's opacity air permit limits during 16 six minute periods (for a total of 96 minutes} over the period October 26, 2~~2 to October 5, 2aU3. EPA also alleged violations based on TMPA's alleged failure to report certain down time of its opacity monitoring system during the 2aU3 time frame. EPA has not yet provided a final assessment of its penalty demand, but it has indicated that it expects the final demand to be approximately $133,10U. Final resolution of this matter is still subject to negotiations between EPA and TMPA, and there is not yet a final assessment of any penalties arising from these alleged violations. It is expected that this situation will be resolved with a combination of monetary penalties and supplemental environmental projects. At this time, the final cost to TMPA andlor the Member Cities arising from the resolution of this matter cannot be predicted. Gibbons Creek Mine and Related Remediation 4bli~ations. Up until 1996, TMPA mined the coal utilized at Gibbons Creek at the 15,~~0 acre lignite Gibbons Creek Mine located adjacent to the power plant. TMPA shut down this mining operation following conversion to low-sulfur Power River Basin coal. TMPA is obligated to perform certain remediation and land reclamation activities at the closed mining sites, and has certain bonding requirements to provide financial assurance for completion of these remediation activities. In recent years, TMPA has completed most of the active remediation work and has been able to significantly reduce its bonding requirements. Post-reclamation monitoring and the final completion of the site remediation will, however, continue for several more years, and TMPA will retain the financial obligation to complete this work. It is projected that by 2U15, most of the area will have been released from all reclamation obligations. As of April 24, 2aU8, TMPA's bonding requirement for the mine reclamation was approximately $45.67 million, of which approximately $9.4 million is self bonded. Gibbons Creek Water Rights. TMPA has made a water appropriation application to TCEQ to secure long-term water rights necessary for various sedimentation ponds and similar water bodies located in the Gibbons Creek Mine. TMPA's water appropriation application has been contested by the Brazos River Authority ~"BRA"} based on alleged capacity limitations in the Brazos River Basin. TCEQ recently issued TMPA a draft water appropriations permit that was generally consistent with TMPA's application, but this draft application is still potentially subject to a contested case proceeding initiated by BRA. TMPA is currently in negotiations with BRA and TCEQ in an attempt to resolve any remaining disputes. At this time, the final outcome of this matter, or the financial impact to TMPA andlor the Member Cities, cannot be predicted, if Gibbons Creek is unable to secure the necessary water rights for its mine ponds, Solid Waste Dis oral. Gibbons Creek produces industrial solid wastes and maintains on-site landfills for waste disposal. These facilities are generally responsible for the liabilities associated with proper waste disposal and any related site contamination based upon improper management of these wastes. In that regard, the presence of hazardous substances at Gibbons Creek could expose the City andlor TMPA to potential liabilities associated with the cleanup of contaminated soil and groundwater under federal or state "Superfund" statutes. Currently, most of the ash produced at Gibbons Creek is sold to third parties to be beneficially reused, but historically ash and scrubber sludge ono longer generated since the switch to Power River Basin coal} were disposed of in the on-site landfills. TMPA retains management and environmental compliance responsibilities for these waste disposal facilities. B-4 APPENDIX C EXCERPTS FROM THE CITY OF DENTON, TEXAS ANNUAL FINANCIAL REPORT Far the Year Ended September 30, 2007 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, 2007, 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. ^ ~ KPMG LLP Suite 310a 717 North Harwood Street Dallas, TX 752D1-6585 Independent Auditors' Report The Honorable Mayor and Members of City Council City of Denton, Texas: We have audited the accompanying financial stateir~ents of the governmental activities, business type activities, each major fund and the aggregate remaining fund information of the City of Denton, Texas the City} as of and for the year ended September 30, 2007, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City's management. fur responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in tl~e United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of September 30, 2007, and the respective changes in financial position, and, where applicable, cash flows thereof and the budgetary comparison for the General Fund for the year then ended inconformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated February 18, 2008 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit, KPiNG LLP, a u.S. limned Nabilily parinerst~ip, is the U.S. member firm of KPMG lntemational, a Swiss cooperative. The management's discussion and analysis, the schedule of TMRS funding progress and contributions and the schedule of Denton's Firemen's Relief and Retirement Plan funding progress and contributions on pages 3 through 10, 57 and 5$, respectively, are not a required part of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. ~Ve have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supple~~nentary information. However, we did not audit the information and express no opinion on it. fur audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund financial statements and schedules, capital assets used in the operation of governmental funds schedules, regulatory section and statistical section are presented for purposes of additional analysis and are not a required part of the. basic financial statements. The combining and individual fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in al! material respects in relation to the basic financial statements taken as a whole. Tl~e introductory section, capital assets used in the operation of governmental funds schedules, regulatory section and statistical section lave not been subjected to the auditing procedures applied in the audit of the basic f nancial statements and accordingly, we express no opinion on them. I~PN~~ LLB February l $, 200$ CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 34, 2447 The City of Denton's Management's Discussion and Analysis is designed to (a} assist the reader in focusing on significant financial issues, (b} provide an overview of the City's financial activity, (c} identify changes in the City's financial position (its ability to address the next and subsequent years' challenges}, (d} identify any material deviations from the financial plan (the approved budget}, and (e} identify individual fund issues or concerns. Since the Management's Discussion and Analysis (MD&A} is designed to focus on the current year's activities, resulting changes and currently known facts, please read it in conjunction with the Transmittal Letter (beginning on page i} and the City's financial statements (beginning on page 11}. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of the fiscal year ended September 30, 2007, by $512,351,177 (net assets}. Qf this amount, $138,575,851 (unrestricted net assets} may be used to meet the government's ongoing obligations to citizens and creditors. • The City's total net assets increased by $39,255,728. This increase can be attributed to the net revenue of the governmental activities, business-type activities and the contribution of capital assets by developers. * As of September 30, 2007, the City's governmental funds reported combined fund balances of $81,313,672, an increase of $27,442,558 in comparison with the prior fiscal year, due to increased revenue from taxes and the proceeds from the issuance of long-term debt. Approximately 39% of the $81,313,672, $31,455,921, is available for spending at the government's discretion (unreserved fund balance}. * At the end of the fiscal year, the unreserved and undesignated fund balance for the General Fund was $18,199,161, or 23.68% of budgeted general fund expenditures. * The City's total noncurrent liabilities increased by $21,812,324 during the fiscal year. The primary reason for the increase was the issuance of $16.7 million of revenue bonds, $15.9 million of general obligation bonds, and $11.5 million of certificates of obligation bonds along with the normal pay down of general obligation bonds and certificates of obligation bonds of $9.4 million, and the normal pay dawn of revenue bonds of $13.3 million. OVERVIEW OF THE FINANCIAL STATEMENTS The Management's Discussion and Analysis is intended to serve as an introduction to the City of Denton's basic financial statements, The City's basic financial statements comprise three components: (1} government- wide financial statements, (2} fund financial statements and (3} notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar toprivate-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Qver time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing haw the City's net assets changed during the most recent fiscal year. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but not used vacation leave}. Both the statement of net assets and the statement of activities are prepared using the accrual basis of accounting as opposed to the modified accrual basis. In its Statement of Net Assets and the Statement of Activities, the City is divided between two kinds of activities: • Governmental activities. Most of the City's basic services are reported here, including police, fire, libraries, development, public services and operations, public works, building inspection, technology 3 CITY 4F DENT4N, TEXAS MANAGEMENT' S DISCUSSION AND ANALYSES continued} SEPTEMBER 30, 2007 services and general administration. Property taxes, sales taxes and franchise taxes finance most of these activities. • Business-type activities. The City charges a fee to customers to cover the cost of services it provides. The City's utility systems electric, water and wastewater} and solid waste activities are reported here. The government-wide financial statements can be found on pages 11-13 of the report. Fund Financial Statements. A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Fund financial statements provide detailed information about the most significant funds, not the City as a whole. Some funds are required to be established by state law or bond covenants. However, the City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants and other monies. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. The majority of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method identified as the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps the reader determine whether there are mare or fewer financial resources that can be spent in the near future to finance the City's programs. By comparing information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements, readers may better understand the long-term impact of the government's near-term financing decisions. The relationship or differences between governmental activities reported in the Statement of Net Assets and the Statement of Activities} and governmental funds is detailed in a reconciliation following the fund financial statements. The City of Denton maintains ten governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the general fund, debt service fund and capital projects fund, all of which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation. Individual fund data for six of these non-major governmental funds along with an aggregate of all other is provided in the form of combining statements elsewhere in this report. Proprietary funds. The City charges customers for certain services it provides, whether to outside customers or to other units within the City. These services are generally reported in proprietary funds. Proprietary funds are reported in the same manner that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City's enterprise funds ~a component of proprietary funds} are similar to the business-type activities that are reported in the government-wide statements but provide more detail and additional information, such as cash flows. The internal service funds the other component of proprietary funds} are utilized to report activities that provide supplies and services for the City's other programs and activities, such as the City's municipal warehouse, the City's self insurance fund and equipment maintenance function. Because these services benefit bath govemmental and business-type functions, they have been included in both the governmental and business-type activities in the government-wide financial statements. The City of Denton maintains four enterprise funds. The City uses enterprise funds to account for its electric, water and wastewater systems and solid waste operations. The funds provide the same type of information as the government-wide financial statements, only in more detail and include some of the internal service fund-type activity. The City considers all enterprise funds to be major funds. 4 CITY OF DENTON, TEXAS MANAGEMENT'S DISCUSSIQN AND ANALYSIS continued} SEPTEMBER 30, 2007 • Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Agency funds are a component of fiduciary funds. Agency funds differ from other fiduciary funds in that they do not typically involve a formal trust agreement, Agency funds are used to account for situations where the City's role is purely custodial, such as receipt, temporary investment and remittance of fiduciary resources to individuals, private organizations, or other governments. The City maintains three fiduciary funds. The City uses agency funds to account for the collection and payment of the City's payroll and associated liabilities, employee-purchased insurance and other similar relationships. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29 - 56 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As of September 30, 2007, the City's combined net assets were $512,351,177, of which $131,482,550 can be attributed to governmental activities and $380,868,627 attributed to business-type activities. This analysis focuses~on the net assets Table 1}and changes in net assets Table 2} of the City's governmental and business- type activities. The largest portion of the City's net assets (66.7%} reflects its investment in capital assets ~e.g., land, building, machinery and equipment}, less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table 1 Net Assets ~l]Z thQi1Sa11aS~ Gavern~re~ztal Business-tvae Activities Aaivities Total C urrent and other a ss ets Capital assets Total assets Long-term liabilities outstanding ~ ther liabilities Total liabilities 2007 2006 $ 94,658 $ 81,555 179,923 180,465 274,581 262,020 124,126 107,706 18,973 16,111 143,099 123,817 99,858 107,410 886 440 30,738 30,353 2007 2006 $ 269,434 $ 246,829 449,529 422,062 718,963 668,891 288,703 283,310 49,391 50,688 338,094 333,998 242,016 213,075 31,015 30,975 107,838 90,843 2007 20~ $ 364,092 $ 328,384 G29,452 602,527 993,544 930,911 412,829 391,016 68,364 6G, 799 481,193 457,815 341,874 320,485 31,901 31,415 138,576 121,196 Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets $ 131,482 $138,203 $ 380,869 $ 334,893 $ 512 351 $ 473,096 5 CITY 4F DENT4N, TEXAS MANAGEMENT'S DISCU55I4N AND ANALY5I5 continued) SEPTEMBER 30, 2007 Governmental activities decreased the City's net assets by $6,720,055 and business-type activities increased the City's net assets by $45,975,516. The key elements of these increases are contained in Table 2. Table 2 Changes in Net Assets din thousands) Governmental Business-type Activities Activities Total Revenue: Program Revenue: Charges for services Operating grants and contributions Capital grants and contributions General Revenue: Property tax Sales tax Franchise tax Hotel occupancy tax Beverage tax B Ingo tax Investment Income Miscellaneous Total revenue Expenses: General government Public safety Public works Parks and recreation Interest on long-term debt Electric Water Wastewater Solid waste Total expenses Increase in net assets before transfers Transfers Increase in net assets Net assets atbeginning ofyear - Net assets at end of year $13,577 $13,965 2,991 3,713 5,399 5,537 34,756 30,001 20,654 20,343 15,195 16,500 1,269 1,133 295 255 24 24 3,63 3 1,967 3,199 3,592 101,295 97,333 22,146 22,166 42,162 36,627 14,009 12,45 5 11,564 10,497 4,655 4,333 94,539 56, l OS 6,756 11,225 {13,476) 595 (6,720} 12,12a 135,202 126,052 $131,452 $135,202 $195,405 $221,151 5,441 10,023 12,109 5,971 545 1,955 216,503 239,100 123,927 145,365 25,540 26,705 15,755 19,025 15,451 13,455 154,003 204,559 32,500 34,541 13,476 ~595~ 45,976 33,646 334,593 301,247 $350,569 $334,593 $209,252 $235,116 2,991 3,713 13,540 15,560 34,756 30,001 20,654 20,343 15,195 16,500 1,269 1,133 295 255 24 24 15,742 7,935 3,747 5,547 317,795 336,433 22,146 22,166 42,162 36,627 14,009 12,455 11,564 10,497 4,655 4,333 123,927 145,365 25,540 26,705 15,755 19,025 15,451 13,455 275,542 290,667 39,256 45,766 39,256 45,766 473,095 427,329 $512,351 $473,095 Governmental activities. The most significant governmental activities expense was in providing public safety, which incurred expenses of $42,161,674. These expenses were funded by revenues collected from a variety of sources, with the largest being from property taxes, which are $34,756,356 for the fiscal year ended September 30, 2007. The most significant portion of public safety is the cost of personnel, which totaled $31,415,457. Qther significant governmental activities expense for the City includes general governrr~ent, which incurred $22,145,504 in expenses, of which $12,371,944 represented personnel charges. During the fiscal year Motor Pool, an internal service fund, was dissolved resulting in a transfer of net assets to business- type activities of $14,332,925, which included the net value on capital assets as well as any unspent cash allocated to vehicle and equipment purchases. Governmental activities' portion of the Motor Pool dissolution was $9,900,195, but since internal service funds are classified as governmental activities, there is no effect presented above. 6 CITY QF DENTQN, TEXAS MANAGEMENT'S DISCUSSIGN AND ANALYSIS (continued} SEPTEMBER 30, Zoos Increased expenses for governmental activities include $3.4 million additional depreciation relating to vehicles and equipment transferred to the general government from Motor Pool; $1.1 million depreciation adjustment on public safety equipment; increased capital purchases of $1.1 million; and $1.5 million associated with the commencement of operations at fire station #7. The $4.0 million increased revenues in governmental activities are mainly due to a 13.6% increase to the property tax base in fiscal year 2007 over fiscal year 2006. Business-type activities. Business-type activities increased the City's net assets by $45,975,516, accounting for the total growth in the entity-wide net assets. A key element of this increase is capital contributions, emerging as a major revenue source for the Water and Wastewater funds during the current fiscal year, producing $$,440,634 in revenue, Contributions of assets arise from new property development within the City. Charges for services decreased $25,745,292 due to Energy Cost Adjustment (ECA} rate decreases by 50.1 % as a result of lower energy costs and decreased sales volumes as a result of rain totals ten inches above normal. The expense decrease between fiscal years 2006 and 2007 reflects decreased costs of production as it relates to the above normal rainfall. As noted in governmental activities, Motor Pool was dissolved resulting in a transfer of net assets tobusiness-type activities of $14,332,925. FINANCIAL ANALYSIS OF THE GUVERNMENT'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of resources available to spend. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported a combined ending fund balance of $81.3 million, an increase of $27.4 million in comparison with the prior year. Approximately $27.1 million constitutes unreserved, undesignated fund balance, which is available for spending at the government's discretion. In addition to unreserved, undesignated fund balance, the governmental funds reported unreserved, designated fund balance of $4.3 million. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1 } to purchase or construct capital assets ($49.0 million}, or 2} to pay debt service ($0.9 million}. The general fund is the chief operating fund of the City. At September 30, 2007, the unreserved and undesignated fund balance of the general fund was $18.2 million, or 23.68% of budgeted general fund expenditures. The unreserved and undesignated fund balance of the general fund increased by $4.9 million during the current fiscal year due to expenditures being less than anticipated by $2.9 million and higher than anticipated revenues from return on investment of $0.9 million and fees for services of $0.5 million. The entire balance of the capital projects fund is reserved for capital construction and acquisition. At the end of the fiscal year, the capital projects fund has a fund balance of $49.0 million, an increase of $16.1 million. In 2007, the City received $24.8 million of proceeds from the issuance of debt while expending $14.5 million on construction and acquisition. In addition to 2007 debt proceeds, the capital projects fund received $1.8 million in interest income, $1.3 million of revenue related to gas wells, and transfers in from the general fund, motor pool, and CDBG grant of $1.1 million, $1.1 million and $0.4 million respectively. The debt service fund has a total fund balance of $0.9 million all of which is reserved for the payment of debt service. The overall increase in the debt service fund balance was $0.4 million. Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail, 7 CITY 4F DENT4N, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS (continued) SEPTEMBER 3D, 2UU7 Unrestricted net assets in Electric, Water, and Wastewater at September 30, 2007 are $72.1 million, $19.0 million, and $10.0 million respectively. Solid Waste has unrestricted net assets of $4.1 million. The results reflect an increase of unrestricted net assets in each fund, specifically $9.7 million in Electric, $1.4 million in Water, $4.4 million in Wastewater, and $1.4 million in Solid Waste. Qther factors concerning the finances of these funds have already been addressed in the discussion of the City of Demon's business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS During fiscal year 2006-2007 there were no formal amendments to the City of Denton general fund budget. For fiscal year 2006-07, General Fund actual expenditures including transfers} on a budgetary basis were $76.1 million compared to the budget of $76.9 million. The $0.8 million variance was primarily due to reduced personnel costs for the general government and an offsetting transfer to the recreation fund to cover the aquatic center deficit balance. Actual revenue including transfers and proceeds from capital leases} on a budgetary basis was $83.6 million compared to the original budget of $77.3 million. 0f the $6.3 million variance, approximately $5.2 million was the transfer from the Motor Pool fund due to dissolution and $1.1 million was due to the unbudgeted proceeds on capital leases. Qver the years, the Denton City Council has followed a policy of maintaining a general fund balance in order to plan for unforeseen emergencies and place the City in a more favorable position. In 1997-1998, the policy level was increased from 10% to 12.5% of general fund expenditures. In 1999-2000, the percentage was increased to 13% , in 2004-2005 to 13.5%, and in 2005-2006 to 14.0%. The 2006-07 budget increased the policy level to 14.5%. The City of Denton's unreserved and undesignated fund balance at September 30, 2007 is $18.2 million, or 23.68% of budgeted expenditures. Below is a listing of the ending unreserved balances for the past three years, as well as fiscal year 2006-07 projected and actual, For those years where the actual ending balance has exceeded the policy level, the following year's budget has included utilization of that amount for one-time expenditures. By using the fund balance for one-time expenditures only, the financial impact on future budgets is eliminated. Actual Actual Adopted Projected Actual 9130105 9130106 9130107 9130107 9130107 Unreserved balances $9,718,368 $13,264,027 $11,150,708 $14,432,949 $1$,199,1 b 1 % of total budgeted expenditures 13.98% 18.84% 14.50% 18.77% 23.68% Policy level 13.50% 14.00% 14.50% 14.50% 14.50% The largest revenue source of the General Fund's budget was the ad valorem tax. Demon's ad valorem tax rate is comprised of two components. The first is the operations and maintenance component that is used to calculate revenue for the City's General Fund operations. The second component is the debt portion that is used to calculate revenue to pay the City's general debt service obligations. The Denton Central Appraisal District's certified appraisal roll shows an increase of 13.61 % over the prior year certified value and 11.94% over the final 2005 value including supplements}. This increase consisted of $255.2 million of new value added for 2006 and a $396.6 million increase in value for property on the tax rolls in 2005. The 2006-07 ad valorem tax rate was increased by $0.01837 to $.62652 per $100 of valuation, which was used to provide enhanced services for police, streets, code enforcement and library services. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. At the end of fiscal year 2007, the City had $629,452,713 invested in a broad range of capital assets, including police and fire equipment, buildings, park facilities, roads, bridges and water and sewer lines see Table 3 on the following page}. This amount represents a net increase (including additions and deductions} of $26,925,881 or 4.5% over the prior fiscal year. S CITY OF DENTIN, TEXAS MANAGEMENT'S DISCUSSIGN AND ANALYSIS continued} SEPTEMBER 3~, ZQQ7 Table 3 Capital Assets at Year-end Net of Accumulated Depreciation. in Thousands Governmental Business-type Activities Activities Totals 2007 2006 2007 2006 2007 2006 Land $ 7,840 $ 7,830 $ 10,015 $ 9,780 $ 17,855 $ 17,610 Landfill improvements - - 253 549 253 549 Buildings and improvements 41,766 39,084 4,802 4,171 46,568 43,255 Plant, machinery and equipment 20,881 28,666 116,625 98,879 137,506 127,545 water rights - - 57,099 57,795 57,099 57,795 Infrastructure 95,568 95,255 226,441 213,637 322,009 308,892 Construction in progress 13,869 9,630 34,294 37,251 48,163 46,881 Total capital assets $179,924 $180,465 ,~ $449,529 $422,062 $629,453 $602,527 This year's major additions included: Deacriptiun Amount Fire Station #7 $ 4,024,221 Preserve at Plecaa Creek -development infrastructure 3,185,720 Pillages of Carmel Phase lA - developmeat infrastructure 1,554,951 Bernard Street upgrade 1, 512,994 wheeler Ridge Phase 4 - develgameat infrastructure 1,361,338 Lrbrary Boob 1,005,150 Total $ 12,b44,370 Additional information on the City's capital assets can be found in note IV. D, on pages 40 - 42 of this report. Debt. At year-end, the City had $423.9 million in bonds and notes outstanding as compaxed to $4~~1.4 million at the end of the prior fiscal year, an increase of 5.6%, as shown in Table 4. Table 4 Outstanding Debt at Year-end din thousands) Governmental Business-type Activities Activities Totals 2007 2006 2007 2006 Zoo? 2006 General obligation bands $ 70,650 $58,743 $ 3,100 $ 3,582 $ 73,750 $ 62,325 Certificates of obligation 51,355 46,700 13,890 11,975 65,245 58,675 Revenue bands - - 2$1,750 277,305 281,750 277,305 Notes - - 3,141 3,141 3,141 3,141 Total $122,005 $105,443 $301,881 $296,OO3 $423,886 $401,446 These amounts do not include net unamortized premiumsl~discounts} of $7,686,484 or net deferred gainl~loss} on refunding of x$9,627,882}. 9 CITY QF DENTQN, TEXAS MANAGEMENT'S DISCUSSIQN AND ANALYSIS (continued) SEPTEMBER 30, 2007 During the current fiscal year, the City issued debt in February 2007 and July 2007. The new debt resulted primarily from the issuance of $41,795,000 in utility refunding revenue bonds, $15,925,000 in general obligation bonds, $11,445,000 In CertlfiCates of Obllgatl0n, and $16,740,OOO In ut111ty revenue bonds. Moody's Investor's Service, Inc. has given the City's General Obligation Bonds and the Certificates of Obligation a rating of "Aa3." Standard and Poor's Corporation has given both the City's General Obligation Bonds and Certificates of Obligation an "AA-" rating. The City's Utility Revenue Bonds carry "A 1" and "A+" ratings by Moody's and Standard and Poor's respectively. The City is permitted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation long-term debt. The current ratio oftax-supported debt to certified assessed value of all taxable property is 2.50%. Qther lung-term liabilities, The City maintains a self insurance program for general liability, auto liability, public officials' liability, errors and omission liability, police professional liability, and workers' compensation. Private insurance companies cover claims for property loss over $50,000 per occurrence and far workers' compensation and. liability over $500,000 per occurrence. The City has a reserve for claims and judgments of $3.3 million outstanding at year-end compared with $2.9 million at the end of the prior fiscal year. Other obligations include accrued vacation pay and sick leave. More detailed information about the City's long-term liabilities is presented in Note IV. G., on pages 45 - 50 of this report. ECUN~MIC FACTQRS AND NEXT YEAR'S BUDGETS AND RATES All indicators are painting to continued growth of the Denton community, and the 2007-OS Budget includes the resources to provide City services to meet demands. The 2007-08 budget includes a $0.041$100 valuation increase in the ad valorem tax rate to accommodate the debt associated with the 2005 bond program and additional drainage improvements. Sales tax revenue is projected to increase 2.0%, and the general fund balance reserve has been increased to 15.0% of budgeted expenditures. The 2007-OS budget includes no base rate increases for electric customers. The water budget includes a 3% rate revenue increase for retail customers. No base rates changes are proposed far wastewater retail or wholesale customers. Solid Waste adopted budget includes a rate increase of $0.50 per month to the single- family residential recycling rate, REQUESTS FQR INFQRMATIQN This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Denton Finance Department, 215 E. McKinney, Denton, Texas 76201, 10 CITY QF DENTQN, TEXAS Exhibit I STATEMENT QF NET ASSETS SEPTEMBER 30, 2007 Primary Government Governmental Business-type Activities Activities Total ASSETS: Current assets: Cash, cash equivalents and investments, at fair value $ 35,219,984 $ 112,994,437 $ 148,214,421 Receivables, net of allowances: Taxes 4,424,110 - 4,424,110 Accounts - 10,495,699 10,495,699 Unbilled utility service - 8,62D,D54 8,620,054 Interest 587,590 1,174,89D 1,762,480 Qther 2,829,239 1,970 2,831,209 Internal balances X7,954,141} 7,954,141 - Duefrom fiduciary funds 80,309 35,156 115,465 Due Pram other governments 1,075,398 - 1,075,398 Inventory 6,523,928 - 6,523,928 Prepaid items 140 18,310 18,450 Deferred debt issuance costs 96,629 272,0$2 368,711 Total current assets 42 883 l86 141,566,739 184,449,925 Noncurrent assets: Restricted assets: Cash, cash equivalents and investments, at fair value 51,033,505 123,889,435 174,922,940 Escrow deposits 5,257 716,273 721,530 Accrued interest 222 1,270,993 1,271,215 Uther receivables - 26,337 26,337 Deferred debt issuance casts 735,595 1,963,896 2,699,491 Capital assets not being depreciated: Land 7,839,654 1D,D15,175 17,854,829 Construction in progress 13,868,587 34,294,162 48,162,749 Capital assets, net of accumulated depreciation: Buildings 41,766,340 4,801,695 46,568,035 Plant, machinery and equipment 20,880,854 116,624,565 137,505,419 Infrastructure 95,547,903 226,441,491 322,D09,394 Landfill improvements - 253,199 253,199 Water rights - 57 099 D88 57,099,088 Total noncurrent assets 231697 917 577,396,309 8D9 094 226 Total assets 274,581,103 718,963,D48 993,544,151 LIABILITIES: Current liabilities: Accounts payable 4,674,006 19,472,465 24,146,471 Retainage payable 140,246 - 140,246 Deposits - 3,505,469 3,505,469 Accrued interest 808,934 - 808,934 Due to other governments 18 - 18 Noncurrent liabilities due within one year 12,696,621 20,224,590 32,921,211 Uther liabilities 627,775 - 627,775 Unearned revenue 8,750 81,325 90,075 Payable from restricted assets: Accounts payable 16,09D 1,202,204 1,218,294 Retainage payable - 343,9$7 343,987 Accrued interest - 4,561,500 4,561,SOD Total current liabilities 18 472 44D 49,391,540 b$ 3, 63,980 Noncurrent liabilities: Noncurrent liabilities due in mare than one year 124126113 288,702,881 412 828 994 Total noncurrent liabilities 124,126,113 ~ 288 702 881 412,828,994 Total liabilities 143 098 553 338,094,421 481,192,974 NET ASSETS: Invested in capital assets, net of related debt 99,858,383 242,015,614 341,873,997 Restricted: Restricted for debt service 886,141 29,097,159 29,983,300 Restricted for capital acquisition - 1,918,D29 1,918,029 Unrestricted 3D 738 026 107,837,825 138 575,851 Total net assets _S_131.482.55~ S 380.868.627 S 12.351.177___ The notes to the basic financial statements are an integral part of this statement. 11 CITY QF DENTQN, TEXAS STATEMENT ~F ACTIVITIES FQR THE YEAR ENDED SEPTEMBER 30, 2DD7 Program Revenues Qperating Capital Charges far Grants and Grants and FunctianslPragrams Expenses Services Contributions Contributions Primary government: Governmental activities: General government $ 22,145,804 $ 3,694,869 $ 2,291,182 $ - Publicsafety 42,161,674 6,160,61 l 606,381 - Publicworks 14,OD8,867 80D,378 62,143 5,399,220 Parks and recreation 11,564,247 3,220,837 31,518 - Interest expense 4,658,128 - - - Tatal governmental activities 94,538,720 13,876,695 2,991,224 5,399,22D Business-type activities: Electric system 123,926,967 128,973,477 - - Watersystem 25,839,614 27,83D,767 - 2,246,754 Wastewater system 18,785,353 22,634,454 - 6,193,880 Solid waste 15,451,025 15,967,051 - - Total business-type activities 184,002,959 195,405,749 - 8,44D,634 Total primary government $ 278,541,679 $ 209,282,444,_ $ 2,991,224 $ 13,839,854 General revenues: Taxes: Property tax Sales tax Franchise fees Hotel occupancy tax Beverage tax Bingo tax Investment income Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets at beginning of year Net assets at end of year The notes to the basic financial statements are an integral part of this statement. 12 Exhibit II Net (Expense) Revenue and Changes in Net Assets Primar Government Governmental Business-type A ..+;..;+;..n A ~+;.ri+;..h T~+.,1 $ (16,159,753} ~ - $ (16,159,753) (35,394,682) - (35,394,682} (7,747,126) - (7,747,126} (8,311,892) - (8,311,892) (4,658,12$) - (4,658,128} _~~71,581) - 72,271,581} - 5,x46,51x 5,046,510 - 4,237,9x7 4,237,9x7 - lx,x42,981 10,042,981 - 516,026 516,x26 - 19,843,424 19,843 4, 24 (72,271,581)_ 19,843,424 (52,428,157} 34,756,356 - 34,756,356 2x,653,932 - 2x,653,932 15,197,943 - 15,197,943 1,268,627 - 1,268,627 294,623 - 294,623 23,7x8 - 23,708 3,632,744 12,1x8,632 15,741,376 3,199,131 548,189 3,747,32x 13,475,571 13,475,571 - 65,551,493 26,132,392 91,683,885 (6,72x,x88) 45,975,816 39,255,728 138,2x2,638 334,892,811 473,x95,449 $ 131,482,55a _ $ 38x,868,627 $ 512,351,177 13 CITY aF DENTQN, TEXAS Exhibit III BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2007 Other Total General Capital Governmental Governmental Fund Debt Service Pro'ects Funds Funds ASSETS: Cash, cash equivalents and investments, at fair value ~ 19,5$4,045 ~ $47,$04 $ 49,30$,152 $ $,725,992 $ 7$,466,043 Escrow Deposits 5,257 - - - 5,257 Receivables, net of allowances for uncollectibles: Taxes 4,155,269 268,841 - - 4,424,110 Accrued interest 162,149 - 313,712 52,881 528,742 Qther 2,251,491 - 219,714 152,534 2,623,739 Interfund receivables 471,252 - - 6D,611 531,863 Due from other governments - - - _ 1,075,398 1,075,39$ Total assets ~ 26.629.513 ~ .116.645 ~ t4.067.416 S 87.655152___ LIABILITIES AND FUND BALANCES LIABILITIES: Accounts payable 2,423,114 - 665,772 475,169 3,564,055 Retaina~e payable - - 133,504 b,742 140,246 Interfund payables - - - 60,611 60,611 Due to other governments 18 - - - 18 Qther liabilities 627,775 - - - 627,775 Deferred revenues 1,D18,796 ~ 230,504 70,692 - 628 783 1,948,775 Total liabilities 4 069 703 230,504 ~ 8b9,96$ 1,171,305 6,341,4$0 FUND BALANCES: Reserved for: Debt service - $$6,141 - - 886,141 Capital pro3ects - - 4$,971,610 - 4$,971,610 Unreserved, designated far, reported in: Vehicle replacement 4,360,649 - - - 4,360,649 Unreserved, undesignated reported in: General fund 1$,199,161 - - - 1$,199,161 Special revenue funds - - - 8,596,111 8,896,111 Total fund balances 22,559,810 886,141 4$,971,610 8,$96,111 81,313,672 Total liabilities and fund balances S 26. 29.513 ~ 1.116.645 ~ 49.841.578 ~ 57.655.152 The notes to the basic financial statements are an integral part of this statement, 14 CITY OF DENTON, TEXAS Exhibit IV RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS AS OF SEPTEMBER 30, 2007 Total fund balances -governmental funds (Exhibit III} $ 81,313,672 Amounts reported far governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. 179,923,338 Certain receivables will be collected next year but are not available soon enough to pay for the current period's expenditures and therefore are reported as deferred revenues in the funds. 1,940,026 An internal charge to business-type activities is not recorded at the fund level. (2,571,266} Several internal service funds are used by the City's management. The assets and liabilities of the internal service funds are included with governmental activities. Total assets of internal service funds ~ 23,189,963 Less: Capital assets reported above (8,587,636} Less: Total liabilities of internal service funds (16,645,955} Liabilities reported below 6,424,614 4,380,986 Long-term liabilities, including bands payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: General obligation bonds payable S (70,650,317} Certificates of obligation payable (51,355,100} Less: Deferred charge far issuance costs 249,288 Arbitrage payable (3,335} Accrued interest on the bonds (808,934} Capital leases payable (2,393,684) Compensated absences (8,542,124) (133,504,206} Total net assets of governmental activities (Exhibit I} S 131,482,550 The notes to the basic financial statements are an integral part of this exhibit. 15 CITY OF DENTON, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Exhibit V Other Total REVENUES: Taxes Licenses and permits Franchise fees Fines and forfeitures Fees for services Investment revenue Intergovernmental Miscellaneous Total revenues EXPENDITURES: Current: General government Public safety Public works Parks and recreation Capital outlay Debt service: Principal retirement Bond issuance costs Interest and other charges Total expenditures Excess deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES BUSES): General Capital Governmental Governmental Fund Debt Service P~ects Funds Funds $ 45,842,915 $ 9,791,684 $ - $ 1,268,627 $ 56,903,226 1,097,323 - - - 1,097,323 15,197,943 - - - 15,197,943 4,468,692 - - 596,357 5,065,049 4,439,570 - - 3,184,695 7,624,265 1,441,299 82,748 1,810,561 298,136 3,632,744 380,887 - 1,639 3,469,987 3,852,513 529,753 - 1,999,374 477,624 3 006 751 73,398,382 9 874 432 3,$11,574 9,295,426 96,379,814 16,142,835 - 274,026 3,741,878 20,158,739 36,776,654 - 74,804 862,513 37,713,971 5,561,166 - 978 62,143 5,624,287 7,312,078 - 2,690 2,919,593 10,234,361 2,409,001 - 14,480,371 345,550 17,237,922 41,301 6,805,439 - - 6,849,740 - - 314,286 - 314,286 - 4 359 307 - - 4,389,307 68 243 035 11 197 746 15,147,155 7,934,677 102,522,613 5,155 347 1323 314 11335 551 1,360,749 (6,142 7~ Issuance of long-term debt - - 24,780,000 - 24,780,000 Premium an debt issuance - - 528,630 - 528,630 Capital leases 1,108,131 - - - 1,108,131 Transfers in 5,278,998 1,769,797 2,588,960 2,685,377 12,323,132 Transfers out (4,038,751 - 431 D39 ~684,716~_ {5,154,536) Total other financing sources fuses) 2,348,348 _ 1,769,797 _ 27 466 551 2,000,661 33,585,357 Net change in fund balances 7,503,695 446,453 16,130,970 3,361,41D 27,442,558 Fund balances at beginning of year 15,056,115 439,658 32,840,640 5,534,701 53,871114 Fund balances at end of year S 22,559.810 ~ 8$6,141 $ 48,971,b10 S 8.596,111 S 81,313,672 The notes to the basic financial statements are an integral part of this statement. 16 CITY OF DENTUN, TEXAS Exhibit VI RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FUR THE YEAR ENDED SEPTEMBER 30, 2007 Net change in fund balances -total governmental funds (Exhibit V) $ 27,442,558 Amounts reported for governmental activities in the statement of activities are different because; Governmental funds report capital outlays as expenditures. However, in the statement of activities the cast of those assets is allocated over their estimated useful lives and reported as depreciation expense, This is the amount by which depreciation and retirement of assets ($14,911,525$16,252,128 - $1,350,603 internal service portion} exceeded capital outlays ($17,237,922} in the current period. 2,326,397 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Such amounts are recorded in the funds when considered available. (210,810) The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins and donations) is to increase net assets. 5,155,928 Band proceeds provide current financial resources to governmental funds, but issuing debt increases fang-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which proceeds exceeded payments. (19,038,391) Fund-level financials report casts related to bonds as expenditures; however, these are deferred and amortized an the government-wide financials. (317,065) Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (1,318,845) Governmental funds include transfers in far the dissolution of the internal service fund Motor Paal. As internal service fund assets are classified an the government-wide statements as governmental, the statement of activies would not include these amounts as a change in net assets. (6,523,661) Amounts retarded in the statement of activities include transfers out for the dissolution of the internal service fund Matar Paal to business-type activities. Governmental funds do not report this amount. (14,332,928) Internal service funds are used by management to charge the costs of certain activities, such as insurance and telecommunications, to individual funds. A portion of the net revenue (expense) of certain internal service funds is reported with governmental activities. The amount reported with business-type activities is $103,040. 96,729 Change in net assets of governmental activities (Exhibit II) $ (6,720,088) The notes to the basic financial statements are an integral part of this statement. ~7 18 CITY OF DENTON, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET TO ACTUAL GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2007 Exhibit VII Variance with Adjustments - Actual on a Final Budget - Budgeted Amounts Actual Budgetary Budgetary Positive Original Final Amounts Basis Basis (Negative) REVENUES: Taxes $ 45,58$,$21 $ 45,5$$,$21 $ 45,842,915 $ - $ 45,$42,915 $ 254,094 Licenses and permits 1,492,680 1,492,680 1,097,323 - 1,097,323 (395,357) Franchise fees 15,791,387 15,791,3$7 15,197,943 - 15,197,943 (593,444) Fines and forfeitures 4,343,843 4,343,$43 4,468,692 - 4,468,692 124,849 Fees for services 3,9D7,596 3,907,596 4,439,570 - 4,439,570 531,974 Investment revenue 550,D00 550,000 1,441,299 - 1,441,299 891,299 Intergovernmental 363,162 363,162 380,887 - 380,887 17,725 Miscellaneous 154,599 285,081 529,753 - 529,753 244,672 Total revenues 72,192,088 72,322,570 73,398,382 - 73,398,382 1,075,812 EXPENDITURES: Current; General government 23,332,793 20,059,041 16,142,835 3,771,385 19,914,220 144,821 Public safety 37,654,912 36,782,059 36,776,654 - 36,776,654 5,405 Public works 6,526,281 5,76$,446 5,561,166 - 5,561,166 207,280 Parks and recreation 7,484,603 7,438,752 7,312,078 - 7,312,078 126,674 Capital outlay 1,116,$60 2,563,256 2,409,001 - 2,409,001 154,255 Debt service: Principal retirement 41,301 41,301 41,301 - 41,301 - Tatal expenditures 76,156,750 72,652,855 68,243,035 3,771,385 72,014,420 63$,435 Excess (deficiency) of revenues aver expenditures (3,964,662) (330,285) 5,155,347 (3,771,385) 1,383,962 1,714,247 OTHER FINANCING SOURCES (USES): Capital leases - - 1,108,131 - 1,108,131 1,108,131 Transfer in 5,106,792 4,976,310 5,278,998 3,771,385 9,050,383 4,074,073 Transfers out (742,446) (4,246,341) (4,038,781) - (4,038,781) 207,560 Total other financing sources (uses) 4,364,346 729,969 2,348,348 3,771,385 6,119,733 5,389,764 Excess (deficiency) of revenues and other sources over (under) expenditures and other uses 399,684 399,684 7,503,695 - 7,503,695 7,104,011 Fund balances at beginning of year 15,056,115 15,056,115 15,056,115 - 15,056,115 - Fund balance at end of year $ 15,455,799 $ 15,455,799 $ 22,559,810 $ - $ 22,559,810 $ 7,104,011 Adjustments -Budgetary Basis are expenditures allocated to and reimbursed by other funds. These expenditures are recorded in the other funds' financials. The notes to the basic financial statements are an integral part of this statement. 19 CITY OF DENTON, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS AS OF SEPTEMBER 30, 2007 ASSETS: Current assets: Cash, cash equivalents and investments, at fair value Receivables, net of allowances: Accounts Unbilled utility service Accrued interest Other Interfund receivables Merchandise inventory Prepaid items Deferred debt issuance casts Total current assets Noncurrent assets: Restricted assets: Cash, cash equivalents and investments, at fair value Escrow deposit Accrued interest Other receivables Interfund receivables Deferred debt issuance casts Capital assets, net of accumulated depreciation Total noncurrent assets Total assets LIABILITIES: Current liabilities: Accounts payable Claims payable Compensated absences payable Leases payable Deposits Accrued interest Interfund payables Unearned revenue Payable from restricted assets: Accounts payable Retainage payable Accrued interest Revenue and certificate and general obligation bonds Total current liabilities paid from restricted assets Total current liabilities Business-type Activities -Enterprise Funds Electric Water Wastewater Solid System S stem S stem Waste $ 78,509,502 $ 19,b15,484 $ 7,752,223 $ 7,117,228 b,876,b26 1,594,954 1,140,402 883,717 5,878,927 1,168,208 901,675 671,244 783,341 211,883 11 b,983 b2,683 - 1,970 - - 486,759 91,843 189,b44 13,746 14,375 - 3,935 - 83,566 111,082 55,789 21,b45 92,b33,096 22,795,424 10,164,651 8,770,223 3b,564,844 54,034,427 2b,224,9b6 7,065,198 126,311 97,69b 57,b92 434,574 492,610 439,858 206,b13 131,912 - 2b,337 - - 4,321,244 249,542 105,293 - 575,891 9b4,Ob1 318,605 105,339 140,383,585 185,169,551 142,353,969 21,622,270 142 464,485 244,941,472 1b9,267,138 29,359,293 235,097,581 263,73b,896 179,427,789 38,129,516 18,b11,735 251,384 303,597 305,749 4b7,766 494,b47 241,549 240,500 - - 135,929 1,043,b41 3,239,502 224,819 - 41,148 81,325 - - - 52,084 319,933 414,449 419,738 - 228,b49 97,125 18,213 1,35b,773 2,148,593 951,113 105,021 5,49b,141 5,926,483 4,125,689 2,052,245 6 944 998 8 b23,658 5,584 376 2,595,217 w 29,305,32b 9,594,508 6,265,451 4,226,255 20 Exhibit VIII Gavernmental Activities - Tatal Internal Enterprise Service PJ•~rir~n t.1 ~tiNAC $ 112,994,437 $ 6,909,897 10,495,699 - 8,620,054 - 1,174,890 58,848 1,970 205,500 781,952 4,68b - 6,523,928 18,310 140 272,082 5,119 134,359,394 13,708,118 123,889,435 877,549 716,273 - 1,270,993 222 26,337 - 9 4,636,07 - 1,963,896 16,438 449,529,375 8,587,636 582,032 3, 88 9,481,845 716,391,782 23,189,963 19,472,465 1,109,951 - 437,500 1,444,462 226,488 1,179,570 442,279 3,505,469 4 - 25,640 - 5,778,504 81,325 - 1,202,204 16,090 343,987 - 4,561,500 - 17,600,558 469,732 23 708,249 485,822 49,391,540 8,506,184 (continued} 21 CITY QF DENTON, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS AS OF SEPTEMBER 30, 2007 Business-type Activities -Enterprise Funds Noncurrent liabilities: Leases payable Payable from restricted assets: Arbitrage payable General obligation bonds payable Certificates of obligation Revenue bonds payable, net of premiumldiscount Deferred amount on refunding Notes payable Compensated absences payable Claims payable Landfill clvsurelpostclosure costs Total noncurrent liabilities Total liabilities NET ASSETS: Invested in capital assets, net of related debt Restricted for debt service Restricted for capital acquisition Unrestricted Total net assets Electric Water Wastewater Solid System System System Waste ~ - S 24,692 82,753,134 (2,645,894} 5Q,915 5,525 133,623,217 (5,226,934} 3,141,222 35,444 -. -~ 109,488,173 141,172,982 42,769,813 9Q,349,270 1Q,737,987 12,375,QQ6 - 820,101 $ 19Q,Q98 $ 2,522,096 17,Q37 - - 2,67Q,243 - 12,323,127 56,606,213 - (1,37Q,727} (96,130} 3Q,OQ8 75,133 - 3,974,462 55,472,629 21,468,931 . . l OQ,597,301 8,299,23Q 5,984,166 - 1,Q97,928 - ---~--- ~--- - ---J---~- - ~ - ---~ -- ~- -- - --~-- -~--- Ad~ustment to reflect inclusion of internal service fund activities related to enterprise funds. Net assets of business-type activities Exhibit I} The notes to the basic financial statements are an integral part of this statement. ZZ Exhibit VIII Governmental Activities - Totai Internal Enterprise Service Funds Funds $ 2,712,194 $ 884,574 47,254 - 2,670,243 53,312 12,323,127 4,292,209 272,982,5b4 - ~9,339,685) - 3,141,222 - 191,500 30,380 - 2,879,29b 3,974,4b2 - 288,702,881 8,139,771 338,094,421 1b,b45,955 242,015,b14 3,344,b36 29,097,159 - 1,918,029 - 105,2bb,559 3,199,372 - $ 378,297361 , $ b,544,008 2,571,266 $ 380,8b8,b27 (concluded) 23 CITY OF DENTON, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 Business-type Activities -Enterprise Funds Electric Water Wastewater Solid System System System Waste OPERATING REVENUES; Utility services $ 124,727,137 $ 20,b24,118 $ 20,103,918 $ 15,809,048 Charges far goods and services - - - - Otherfees 4,246,340 3,057,387 1,088,519 158,003 Miscellaneous - - 32,294 - Total operating revenues 128,973,477 23,681,505 21,224,731 15,9b7,051 OPERATING EXPENSES: Operating expenses before depreciation 116,650,348 15,167,255 11,073,000 11,796,867 Depreciation 4,255,715 5,033,989 5,087,019 2,910,127 Total operating expenses 120,906,063 20,201,244 1b,1b0,019 14,706,994 Operating income 8,067,414 3,480,261 5,Ob4,712 1,260,057 NON-OPERATING REVENUES (EXPENSES): Investment revenue 5,934,612 3,623,792 1,831,738 718,490 Interest expense and fiscal charges (3,049,271) (5,665,918) (2,641,555) (774,935} Impact fee revenue - 4,149,2b2 1,409,723 - Gain (lass) on disposal of capital assets (45,703) (120,160} (9,220) 319,857 Other non-operating revenues (expenses) - 136,107 28,634 238,b74 Total non-operating revenues (expenses) 2,839,b38 2,123,083 619,320 502,08b Income before contributions and transfers 10,907,052 5,603,344 5,684,032 1,762,143 CONTRIBUTIONS AND TRANSFERS: Capital contributions - 2,246,754 6,193,880 - Transfers in 5,154,417 3,102,983 3,901,029 2,486,595 Transfers out (74,829) (109,8b3} (923,197) (b1,564) Total contributions and transfers 5,079,588 5,239,874 9,171,712 2,425,031 Change in net assets 15,986,640 10,843,218 14,855,744 4,187,174 Total net assets at beginning of year 109,622,768 111,720,696 102,833,9b5 8,247,156 Total net assets at end of year $ 125,609,408 $ 122,563,914 $ 117,689,709 $ 12,434,330 Change in fund net assets of proprietary funds Adjustment to reflect inclusion of internal servi ce fund activities related to enterprise funds. Change in net assets of business-type activities (Exhibit II) The Hates to the basic financial statements are an integral part of this statement. 24 Exhibit IX Governmental Activities - Total Internal Enterprise Serviee S 181,264,221 $ - - 18,767,700 8,550,249 - 32,294 295,b28 189,846,764 19,063,328 154,687,470 17,875,080 17,286,850 1,350,403 171,974,320 19,225,483 12,108,632 341,451 (12,131,679} (211,748} 5,558,985 - 144,774 - 403,415 - 6,084,127 149,703 23,954,571 (12,452} 8,440,634 14,645,024 (1,169,453} - 212,422 (24,233,124} 21,914,205 (24,020,704} 45,872,776 (24,033,354) 332,424,585 30,577,364 S 378,297,361 $ 4,544,008 45,872,776 25 CITY OF DENTON, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 131,199,927 Cash paid to employees far services (5,959,780) Cash paid to suppliers _ _ (115,5211 Net cash provided by operating activities 9,718,953 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers out (74,829) Transfers in 5154,417 Net cash used by nancapital financing activities: 5,079,588 CASH FLUWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal payments on capital debt (5,321,239) Interest and fiscal charges (2,978,544) Principal payments under capital lease obligation - Proceedsfrom issuance of capital debt 7,051,915 Proceeds from impact fees - Proceeds from sale of capital assets - Acquisition and construction of capital assets (13,442 3~ Net cash used by capital financing activities _ (14,690,247 CASH FLUWS FROM INVESTING ACTIVITIES: Proceeds from sale and maturities of investment securities 295,130,509 Purchase of investment securities (300,359,367) Interest received on investments 5,473,772 Net cash provided (used) by investing activities 244,914 Net increase (decrease) in cash and cash equivalents 353,208 Business-t a Activities -Enter rise Funds Electric Water Wastewater System System System $ 23,968,104 $ 21,316,52b (9,155,896) (4,638,448) 6 610 552 6 035 80b 8,201,656 10,642,272 (109,862) (923,197) 3102,983 _ 3,901,029 , 2,993,121 2 977 832 (5,146,586) (3,530,246) (5,897,696) (2,680,390) - (130,340) 9,692,632 - 4,149,262 1,409,723 (b,312,592 (7,064,986) 3( ,514,980) _ (11,996,239 Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Investments, at fair value (Note IV.A.) Cash, cash equivalents and investments, at fair value RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income Adjustments: Depreciation expense Decrease (Increase) in receivables Decrease (Increase) in interfund receivables Increase in inventories Decrease (Increase) in prepaid items Increase (Decrease) in accounts payable Increase (Decrease) in compensated absences payable Increase in closurelpostclosure liability Increase (Decrease) in interfund payables Total adjustments Net cash provided by operating activities 39,859,Sb2 (46,255,000) 3,473,212 (2,922 226 4,757,571 10,353,381 1,350,316 10,706,589 6,107,887 104,367,757 67 542 024 ~ 115.074,346 649 911 25,754,151 (22,562,000) 1,731.207 4 923 358 b,547,223 1,618,430 8,165,653 25 811,536 S 33977,189 $ 8 067 414 $ 3,480,261 $ 5 064,712 4,255,715 5,033,989 5,087,019 3,224,274 19,541 58,605 (997,824) 267,059 33,190 (13,422) 2,170 5,509 (4,800,863) (226,342) 485,433 51,323 36,242 (14,212) (67,664) 411,264) 77 984 1,651,539 4,721,395 5,577,5b0 $ 9,718,953 8 201 b56 $ 10,642,272 NONCASH CAPITAL, INVESTING AND FINANCING ACTIVITIES: Noncash activity during the year consisted of contributed capital assets for the Water and Wastewater funds in the amounts of $2,246,754 and $6,193,880, respectively; the change in the fair value of investments of $1,b68,b00, $664,497, $377,645 and $122,447 for the Electric, Water, Wastewater and Solid Waste funds, respectively; the addition of capital leases in Solid Waste and the Internal Service funds of $1,313,791 and $1,547,995, respectively; and the change in fair value of investments of $226,8b2 for the Internal Service funds. The notes to the basic f nancial statements are an integral part of this statement. 26 Exhibit ~ Governmental Activities Total Internal Solid Enterprise Service [s 1....a., ri ~, n a r T--..1,. $ 15,575,560 $ 192,060,117 $ 19,336,778 (6,923,301) (26,677,425) (3,745,944} (5,334,308} (133,501,860) (13,521,202} 3,317,951 31,880,832 2,069,632 (61,564} (1,169,452) (24,233,126) 2,486,595 14,645,024 212,422 2 425 031 13,475,572 24 020 744 (1,167,945} (15,165,976} (4,784,786) (757,730) (12,314,364} (203,919) X851,429) (981,769} (1,846,117) 2,631,889 19,376,436 15,7x5,581 - 5,558,985 - 319,857 319,857 (4,371,496) (31,191,453} _ (713,107) (4,196,814) (34,398,284 8,161,652 6,958,623 367,702,845 14,448,284 (8,300,a0a) (377,476,367} (9aa,aaa} 627,20a 11,305,391 402,112 (714,177) 1,531,869 13,55x,392 831,991 12,489,993 (239,428) 1,365,146 14,687,233 2,843,911 2,197,497 27,177,226 2,604,883 11,985,329 209,706,646 5,182,563 $ 14.182.426_ S 236.883.872 ~ 7.787.446 $ 1,260,x57 $ 17,872,444 $ 162 355 2,914,127 17,286,85p 1,35a,6a3 (549,x91) 2,753,329 (91,973) 157,6x1 (539,974} 365,424 - - (2,490,582) - X5,743} 34,646 272,269 (4,269,5x3) 772,427 2,527 75,880 43,156 285,x54 285,x54 _ (1,x20,593) (1,577,5x5) 2,252,326 2,x57,894 14,008,388 2,231,987 ~ 3,317,951 $ 31,880,832 $ 2,x69,632 27 CITY OF DENTON, TEXAS STATEMENT OF ASSETS AND LIABILITIES AGENCY FUNDS AS OF SEPTEMBER 30, 2407 Total Agency Funds ASSETS: Cash, cash equivalents and investments, at fair value $ 1,530,883 Interfund receivables 49 Other receivables 195,457 Total assets $ 1,72b,419 LIABILITIES: Accounts payable $ 1,610,903 Interfund payables 115,51b Tatalliabilities $ 1,72b,419 The Hates to the basic financial statements are an integral part of this statement, Exhibit XI 28 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2aa~ I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Denton is a municipal corporation governed by an elected mayor and six-member council. The City receives funding from state and federal government sources and must comply with the requirements of these funding source entities. However, the City is not included in any other governmental "reporting entity," as defined in pronouncements by the Governmental Accounting Standards Board GASB} Statement No. 14, "The Financial Reporting Entity," since council members are elected by the public and have decision-making authority, the authority to levy taxes, the power to designate management, the ability to significantly influence operations, and primary accountability for fiscal matters. The financial statements of the City have been prepared to conform to accounting principles generally accepted ~GAAP} in the United States of America as applicable to state and local governments. GASB is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant policies. A. Reporting entity An elected mayor and asix-member council govern the City. As required by accounting principles generally accepted in the United States of America, these financial statements present the City the primary government} and its component units, which axe entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City's operations, and so data from these units are combined with data of the primary government. A discretely presented component unit, on the other hand, is reported in a separate column in the government-wide financial statements to emphasise it is legally separate from the City. The City had no discretely presented or blended component units at September 3D, 2QQ7. B. Government-wide and fund financial statements The basic financial statements include both government-wide abased on the City as a whole} and fund financial statements. The reporting focus is either the City as a whole government-wide financial statements} or major individual funds within the fund financial statements}. The government-wide financial statements ~i.e., the statement of net assets and the statement of activities} report information on all non-fiduciary activities of the primary government. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The government-wide statement of activities demonstrates the degree to which the direct expenses of a functional category public safety, public works, etc.} or segment are offset by program revenues. Direct expenses are those that axe clearly identifiable with a specific function or segment. Program revenues include ~1} charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment; ~2} grants and contributions that are restricted to meeting operational requirements of a particular function or segment; and ~3} grants and contributions that axe restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The net cost Eby function or business-type activity} is normally covered by general revenue property taxes, sales taxes, franchise fees, interest income, etc.}. Separate fund financial statements axe provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major governmental funds and major enterprise funds are reported as separate columns in the fund financial statements. GASB Statement No. 34 sets forth minimum criteria percentage of assets, liabilities, revenues or expenditureslexpenses of either fund category and for the governmental and enterprise funds combined} for the determination of major funds. Non-major funds are combined in a column in the fund financial statements. 29 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, ~OU7 Internal service funds, which traditionally provide services primarily to other funds of the government, are presented in summary form as part of the proprietary fund financial statements. The financial statements of internal service funds are allocated abased on the percentage of goods or services provided) between the governmental and business-type activities when presented at the government-wide level. The City's fiduciary funds are presented in the fund financial statements. Since by definition these assets are being held for the benefit of a third party bother local governments, individuals, etc.} and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. The focus of the fund financial statements is on the major individual funds of the governmental and business-type categories, as well as the fiduciary funds Eby category). Each presentation provides valuable information that can be analyzed and compared to enhance the usefulness of the information. C. Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund-level financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within bD days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property tax, franchise fees, sales tax and other taxes associated with the current fiscal period are all susceptible to accrual and so have been recognized as revenues of the current fiscal period. All of the other revenue items are considered to be measurable and available only when cash is received. The City reports the following major governmental funds: The general fund is the City's primary operating fund. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund axe accounted for in this fund. From the fund are paid general operating costs, fixed charges and capital improvement costs that are not paid through other funds. The debt service fund accounts for the payment of principal and interest on general long-term liabilities, paid primarily by taxes levied by the City, and for payment of principal and interest on capital leases in the governmental funds. The capital projects fund accounts for financial resources used for the acquisition or construction of major capital facilities being financed from bond proceeds, capital contributions, or transfers from other funds, other than those recorded in the enterprise funds and internal service funds. Other governmental funds is a summarization of all of the non-major governmental funds. 3U CITY QF DENTUN, TEXAS NUTES TQ BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2447 The City reports the following major proprietary funds: The City utility system is made up of three separate funds as follows; The electric fund accounts for electrical utility services to the residents and commercial establishments of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The water fund accounts for water utility services to the residents and commercial establishments of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The wastewater fund accounts for sewer and storm water services to the residents and commercial establishments of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The City provides additional services through the following fund: The solid waste fund accounts for the provision of solid waste services to the residents of the City. Activities necessary to provide such services are accounted for in the fund, including, but not limited to, administration, operations, maintenance, finance and related debt service. The City additionally reports the following funds: Internal service funds are used to account for the financing of materials and services provided by one department of the City to other departments of the City on acost-reimbursement basis. Agency funds are used to account for the payment of payroll, employee insurance, and other similar liabilities. The City holds the assets in an agency capacity for individuals, private organizations or other governments. The City follows private-sector standards of accounting and financial reporting (as issued by the Financial Accounting Standards Board} issued prior to December 1, 1959 in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for business-type activities and enterprise funds, subject to this same limitation. Proprietary funds distinguish operating revenues and expenses from non-operating items. operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the City's electric, water, wastewater and solid waste funds are charges to customers for services. operating expenses for the enterprise funds and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. For deferred charges, the City recognizes, as an asset or a liability, the difference between the electric fund's energy cost adjustment ~ECA} revenue collected and related costs, in compliance with Financial Accounting Standards Board Statement No. 71. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. 3I CITY OF DENTUN, TEXAS NOTES TD BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, Zog7 D. Assets, liabilities and net assets or equity 1. Cash cash a uivalents and investments The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments are carried at fair value or cost, if maturities are one year or less. Fair value is determined as the price at which two willing parties would complete an exchange. Interest earned on investments is recorded in the funds in which the investments are recorded. 2. Receivables Outstanding balances between funds are reported as "interfund receivableslpayables." Any residual balances between governmental activities and business-type activities are reported in the government-wide statements as "internal balances." Trade and property tax receivables are shown net of an allowance for uncollectibles. The City accrues amounts for utility services provided in September, but not billed at September 30, 2007. 3. Inventories Inventories of supplies are maintained at the City warehouse for use by all City funds and are accounted for by the consumption method. Cost is determined using a moving average method. No inventories exist in the governmental fund types. 4. Restricted Assets Certain proceeds of the City's governmental and proprietary fund revenue bonds, general obligation bonds, and certificates of obligation, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Assets collected from impact fees are limited by state statute in use and also shown as restricted on the balance sheet of the Water and Wastewater funds. 5. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items} are reported in applicable governmental or business-type activities columns in the government-wide financial statements and in the proprietary fund financial statements. The City defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the time received. Major outlays for capital assets and improvements are capitalized as projects are constructed, Net interest incurred during the construction phase of capital assets of business-type activities and enterprise funds is included as part of the capitalized value of the assets constructed. For 2007, net interest capitalization of $754,863 was recorded for electric fund projects, $217,724 was recorded for water fund projects and $158,218 was recorded for wastewater fund projects. 32 CITY QF DENT4N, TEXAS NUTES TQ BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 Capital assets are depreciated using the straight-line method over the following useful lives: Assets Years Buildings 40 Infrastructure 20 - 40 General improvements 10 Machinery and equipment 10 - 20 Furniture and office equipment 10 Computer equipmentlsoftwaxe 3--10 Plant and equipment 5 Underground pipe 40 Water storage rights 50 -100 Water recreation rights 50 Communication equipment 5 Vehicles 3 -10 Renewals and betterments of property and equipment are capitalized, whereas normal repair and maintenance are charged to expense as incurred. 6. Compensated Absence The City allows employees to accumulate unused vacation up to 320 hours X480 for Civil Service Fire employees.} Upon termination, any accumulated vacation time will be paid to an employee. Generally, sick leave is not paid upon termination except for ire fighters and police officers. Firefighters and police officers accumulate unused sick leave up to a maximum of 1080 hours and 720 hours, respectively, All other employees are paid only upon illness while in the employ of the City. Accumulated vacation and sick leave is accrued when incurred in the government-wide, proprietary and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. The General Fund has been used in prior years to liquidate governmental funds' related liability. 7. Arbitrage Arbitrage involves the investment of the proceeds from the sale of tax-exempt securities in a taxable money market instrument that yields a higher rate, resulting in interest revenue in excess of interest costs. Federal tax code requires that these excess earnings be rebated to the federal government. The Capital Projects Fund has been used in prior years to liquidate governmental funds' related liability. S. Lon -term obli ations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term obligations are reported as liabilities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premiurr~ or discount. Gains and losses on refunding are amortized over the life of the refunded debt or the life of the new issue, whichever is shorter. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing saurces. Premiums received on debt issuances axe reported as other financing sources while discounts on debt issuances are reported as other financing uses, Issuance casts, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 33 CITY OF DENT4N, TEXAS NOTES TQ BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, 2047 9. Fund equitX In the fund financial statements, governmental funds report reservations of fund balance for accounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose, Designations of fund balances represent management plans that are subject to change. II. RECUNCILIATIQN 4F GUVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government-wide statement of activities Another element of that reconciliation states, "Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which proceeds exceeded payments." The details of this $(19,035,391) difference are as follows. Debt issued or incurred: Issuance of general obligation debt $(15,925,000} Issuance of certificates of obligation (8,855,000} Issuance of capital lease debt (1,108,131 } Principal repayments: Principal retirement ~ 6,849,740 Net adjustment to decrease net changes in fund balances -- total governmental funds to arrive at changes in net assets of governmental activities 1 S 1 Another element of that reconciliation states, "The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins and donations} is to increase net assets." The details of this $5,155,928 difference are as follows: Loss on disposal of capital assets $ (241,653} Donations of capital assets increase net assets in the statement of 5 397 5S 1 activities but do not appear in the governmental funds because they are not financial resources Net adjustment to increase net changes in fund balances -- total 1 2 governmental funds Another element of that reconciliation states, "Certain expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds." The details of the $(1,31$,845) difference are as follows: Compensated absences $(1,175,378} Arbitrage liability 22,633 Accrued interest 166100 Net adjustments to decrease net changes in fund balances -total governmental funds to arrive at changes in net assets of governmental activities 1 1 4 34 CITY aF DENTON, TEXAS NDTES TD BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information The City Council follows these procedures, as prescribed by City Charter, in establishing the budgets reflected in the financial statements: 1. V~ithin the time period required by law, the City Manager submits to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted prior to the adoption of the budget in order to obtain taxpayer comments. 3. The annual budget adopted by the City Council covers the general fund, special revenue funds Recreation Fund, Police Confiscation Fund, and Tourist and Convention Fund only}, the debt service fund, the enterprise funds, and internal service funds. The budget is legally enacted by the City Council through passage of an ordinance prior to the beginning of the fiscal year. The basic financial statements reflect the legal level of control, ~i.e. the level at which expenditures cannot legally exceed the appropriated amount} which is established by function activity within an individual fund as approved by City Council. 4. The City Charter provides that the City Manager has the authority to transfer any unencumbered appropriation balances from one appropriation to another within a single function office, department, or agency}. City Council approval is not required at this level. The Charter also provides that at any time during the year, at the request of the City Manager, City Council may by resolution transfer any part of the unencumbered appropriation balances or the entire balance thereof between functions, as well as make any increases in fund appropriations. Budgets are adopted on a basis for the governmental funds and the budgeted special revenue funds that is generally consistent with generally accepted accounting principles. Budgets for enterprise funds are prepared on the full accrual basis, except certain noncash transactions such as depreciation expense and amortization on debt issuance costs where it is not budgeted, and debt service payments where it is budgeted. At the beginning of the subsequent year, management reviews all open encumbrances from the prior year and, as provided in the budget ordinance, appropriations for the encumbrances may be carried forward. In the current fiscal year, no appropriations were carried forward. Also, during the budgetary process, amounts are included in all fund budgets to recognize administrative transfers between funds for goods or services. These amounts are not included in the reporting of actual activity for the funds. For funds reporting required budget-to-actual comparisons, these administrative transfers are included as adjustments -budgetary basis. B. Deficit fund equity The Criminal Justice special revenue fund had a deficit fund balance of $77,270} at September 30, 2407. This deficit was a result of the reimbursement timing. Elimination of the deficit fund balance is anticipated in 2008. IV. DETAILED NDTES DN ALL FUNDS A. Deposits and investments In order to facilitate effective cash management practices, the operating cash of all funds is pooled into common accounts for the purpose of increasing income through combined investment activities. At year-end, the City had $47,982,883 in cash and cash equivalents, including $31,174,367 invested in money market funds that the City considers cash equivalent. Of the $47,982,883, agency funds reported $1,530,883. In addition, the City had $12,993 in petty cash at year-end. Statutes authorize the City to invest in obligations of the U.S. Treasury; U.S. agencies, fully collateralized repurchase agreements, public fund investment pools, SEC-registered, no-load, money market mutual funds, investment-grade, rated municipal securities of any state and fully collateralized certificates of deposit. The investments reported at September 30, 2007, were similar to those held during the fiscal year. 35 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 The City reports all investments in the financial statements at fair value. At September 30, 2007, the City's investments carried a fair value of $276,672,368. As of September 30, 2007, City investments were as follows: Wei~,hted Average Investment Type Fair Value Maturity ~Years~ U.S. Treasury Securities $ 28,735,966 1.12 U.S. Agency Securities-Coupon 149,132,2$7 0.77 U.S. Agency Securities-Callable 74,098,997 0.92 U.S. Agency Securities-Discount 9,708,000 0.66 U.S. Agency Securities-Step-Up 14,997,118 0.89 Total fair value of investments $ 276,672,368 Portfolio weighted average maturity 0.76 interest rate risk. In accordance with its investment policy, the City manages its exposure to declines in fair values due to interest rate fluctuations by limiting the weighted average maturity of its investment portfolio to less than eighteen months. With review and approval of the City's investment committee, the weighted average maturity of its investment portfolio may be extended beyond eighteen months. Credit risk, The City's investment policy limits investments to obligations of the United States of America and its agencies, investment quality obligations of the States with a rating not less than AA, fully insured Certificates of Deposit, and commercial paper that has a maturity of 270 days or less and a rating of A-1 or P-1. The City's investments in the bonds of U.S. agencies were rated AAA by Standard & Poor's and Fitch Ratings and Aaa by Moody's Investors Service. Custodial credit risk. This is the risk that in the event of a bank or counterparty failure, the City's deposits may not be returned. The policy states that all bank deposits and bank investments of City funds shall be secured by pledged collateral with a market value equal to no less than 102 percent of the principal plus accrued interest less an amount insured by FDIC, if a deposit. As of September 30, 2007, the bank balance for deposits was $3,354,570 which was insured by FDIC for $100,000 and covered by collateral with a fair value of $6,842,791 held by an independent third party custodian pledged for the City, but not in the City's name. 36 CITY QF DENTIN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued) SEPTEMBER 30, 2007 Cash, cash equivalents and investments, at fair value are reported together on the financial statements. Investments, at fair value, by fund were as follows: Other General Capital Governmental Fund Projects Funds Electric Unrestricted investments $ 1$,794,547 $ 3$,710,127 $ 4,176,59$ $ 66,8$8,143 Change in fair value 2,4$3 75,145 24,259 (242,757} Restricted investments - - - 37,663,721 Change in fair value - - - 5$,650 Total $ 1$,797,030 $ 3$,7$5,272 $ 4,200,857 $ 104,367,757 Internal Total Service City Water Wastewater Solid Waste Funds Investments Unrestricted investments $ 1$,206,14$ $ 5,922,576 $ 5,499,9$5 $ 4,$05,203 $ 163,003,327 Change in fair value 94,471 86,451 3,257 (l 9,765} 23,544 Restricted investments 49,365,535 19,87$,600 6,406,628 400,000 113,714,484 Change in fair value (124, i30} X76,091} 75,459 X2,875} (68,9$7} Total $ 67,542,024 $ 25,$11,536 $ 11,985,329 $ 5,1$2,563 $ 276,672,36$ B. Property tax revenue Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on October 1 and are due and payable at that time; therefore, the legally enforceable claim arises on October 1. A receivable is recorded at that time. All unpaid taxes levied October 1 become delinquent February 1 of the following year. Property taxes at the fund level are recorded as receivables and revenue at the time the tax levy is billed. Current-year revenues recognized are those ad valorem taxes collected within the current period or soon enough thereafter to pay current liabilities, which is sixty days after year-end. All other outstanding receivables are adjusted from revenue and recognized as deferred for future collections. Current tax collections for the year ended September 30, 2007, were 9$.7% of the tax levy. An allowance is provided for delinquent taxes not expected to be collected in the future. At September 30, 2007, the City had a tax rate of $0.62652 per $10o valuation. Based upon the maximum ad valorem tax of $2.50 per $100 valuation imposed by Texas Constitutional law, the City had a tax rate margin of $1.87348. Additional revenues up to $101,940,335 could be raised per year based on the current year's assessed value of $5,441,228,909 before the limit is reached. 37 CITY qF DENTgN, TEXAS NQTES Tq BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 3Q, 24D7 C. Receivables Receivables at September 30, 2007, for the City's individual major funds and other funds anon-major funds, internal service funds and fiduciary funds}, including the applicable allowances for uncollectible accounts, are shown below. Capital General Debt Service Projects Electric Water Receivables: Taxes $ 4,460,129 $ 3 75,110 $ - $ - $ - Accounts - - - 18,800,140 3,027,975 Accrued interest 162,149 - 313,712 1,275,95 l 651,741 Unbilled utility service - - - 5,878,927 1,168,208 Other 9,136134 - _ 219,714 - 28,307 Gross receivables 13,758,412 375,110 533,426 25,9SS,018 4,876,231 Less: Allowance for uncollectibles 7,189,503 106,269 - 11,923,514 1,433,021 Net total receivables 6 S68 909 268 841 533 426 $ 14,031,504 3 443 210 tither Internal Waste- Solid Governmental Service water Waste Funds Funds Total Receivables; Taxes $ - $ - $ - $ - $ 4,835,239 Accounts 2,801,888 2,146,014 - - 26,776,017 Accrued interest 323,596 194,595 52,881 59,070 3,033,695 Unbilled utility service 901,675 671,244 - - 8,620,054 Other - - 1 S2,S34 205,500 9,742,189 Gross receivables 4,027,159 3,011,853 205,415 264,570 53,007,194 Less: Allowance for uncollectibles 1,661,486 1,262 297 - - 23,576,090 Net total receivables 2 365 673 $ 1749 556 205 415 $ 264,570 29 431104 3$ CITY OF DENTUN, TEXAS NUTES TU BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 3D, Zoos D. Capital assets Capital assets balances and transactions for the year ended September 30, 2007 are summarized below and on the following page. Governmental activities: Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Infrastructure Machinery and equipment and other improvements Total capital assets being depreciated Less accumulated depreciation for: Buildings Infrastructure Machinery and equipment and other improvements Total accumulated depreciation Total capital assets, being depreciated, net Governmental activities capital assets, net Balance at Balance at October 1, 2006 Increases Decreases Se tember 30, 2007 $ 7,829,494 $ 14,160 $ - $ 7,839,654 9,630,063 1546 10 831922 13,868,587 17,459,557 15,084,646 10 831922 21,708,241 50,869,538 3,986,348 (46,499} 54,809,387 166,183,829 8,715,548 - 174,899,377 63 056,733 7,872,160 20 l 07 084 50,821,809 280110,100 20,574,056 20153 583 280,530,573 11,785,097 1,291,973 X34,023} 13,043,047 70,928,830 8,402,644 - 79,331,474 34,391.026 6,567,511 11017 582 29,940,955 117,104,953 16 262,128 l 1051605 122,315,476 163,005,147 4,311,928 9101978 158,215,097 1 0 464 704 1 92 4 1 2 38 Capital assets for governmental activities include capital assets held in the internal service funds. Governmental activities Accumulated Depreciation included an adjustment of $1,122,534 to reflect appropriate depreciation based on asset lives. Gn October 1, 2006, the City eliminated the Motor Pool Fund, an internal service fund. The elimination of the Motor Pool Fund resulted in $15,129,071 of original cost and $8,274,953 of accumulated depreciation being transferred to governmental fixed assets and other internal service funds. Continued} 39 CITY ~F DENT4N, TEXAS NQTES T4 BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, X007 Business-type activities: Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Landfill improvements W ater ri ghts Infrastructure Plant, machinery, equipment and other improvements Total capital assets being depreciated Less accumulated depreciation for: Buildings Landfill improvements Water rights Infrastructure Plant, machinery, equipment and other improvements Total accumulated depreciation Total capital assets, being depreciated, net Balance at Balance at October 1, 2006 Increases Decreases Se tember 30, 2007 $ 9,779,660 $ 235,515 $ - $ 10,015,175 37,250,781 23,049,614 26 006 233 34 294162 47,030,441 23,285,129 26 006 233 44,309,337 6,619,392 840,654 (93,600} 7,366,446 9,885,664 15,002 - 9,900,666 69,883,098 - - 69,883,098 277,031,029 20,700,091 (8,003,853} 289,727,267 178,651,701 36,218,210 3 271394 211,598,517 542,070,884 57 773 957 11368 847 588,475994 2,448,276 189,915 (73,440} 2,564,751 9,336,374 311,093 - 9,647,467 12,087,680 696,330 - 12,784,010 63,394,239 7,781,697 (7,890,160} 63,285,776 79,772,628 17 711,345 2 510 021 94,973,952 167,039,197 26 690 380 l 0 473 621 183,255,956 375,031,687 31083,577 895 226 405,220,038 Business-type activities capital assets, net 422 2128 54 3 8 7 2 14 44 2 7 Business-type activities Accumulated Depreciation included an adjustment of $168,661 to reflect appropriate depreciation based on asset lives. The prior period included $91,200 of Land that has been reclassified as Infrastructure and $294,790 of Infrastructure that has been reclassified as Land, The elimination of the Motor Pool fund resulted in $18,255,023 of original cost and $9,403,530 of accumulated depreciation being transferred to business-type activities. Depreciation expense was charged to governmental activities functionslprograms as follows: Governmental activities: General government $ 2,020,606 Public Safety 3,226,582 Public Works 8,377,166 Parks & Recreation 1,287,171 Capital assets held by the internal service funds are Charged to the various functions based upon usage 1,350,603 Total depreciation expense-governmental activities Business-type activities: Electric $ 4,255,715 Water 5,033,989 Wastewater 5,087,019 Solid Waste 2,910127 Total depreciation expense-business-type activities 17 286 850 40 CITY QF DENTQN, TEXAS NQTES TQ BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2007 Construction commitments The City has several major construction projects planned or in progress as of September 30, 2007. These projects are evidenced by contractual commitments with contractors and include: Remaining Pr_ of ect Spent-to-Date Commitment Landfill Cell 3A $837,895 $2,536,428 R D Wells Interchange -~ Electric System Infrastructure b82,1 b8 2,417,795 R D Wells Substation D --Electric System Infrastructure 953,688 1,864,962 Fort Worth Substation --Electric System Infrastructure 356,838 1,239,120 Solid Waste Scale House 719,607 1,016,485 Russell Newman Blvd 874,461 915,531 Bonnie Brae Distribution Substation 67,442 899,098 E. Interfund receivables, payables and transfers A summary of Interfund receivables and payables din thousands} at September 30, 2007, is as follows: Interfund Receivables: Interfund payables: Agency Funds Non-Major Governmental Funds Internal Service Funds Total Governmental ^ r r ~ Business-Type Major Funds Non-Major Govemmental Solid General Fund Funds Electric Water Wastewater Waste Intemal Service Funds Total $ 75 $ 396 - $ 6 $ 13 $ 6] - - - 4,82 288 7 $ 9 $ 5 $ 115 - - - 61 288 5 - 5,779 $ 471 $ 61 $ 4,88 $ 3~1 $ 295 $ l4 $ 5 $ 5,955 41 CITY OF DENTUN, TEXAS NQTES TU BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 3~U, Zoos The more significant Interfund receivables and payables include the following: Interfund receivables Electric fund General fund Water fund Wastewater fund The outstanding balances between the Electric, General, Water and Wastewater Funds and the Materials Management Fund are a result of the cash position in the Materials Management Fund due to inventory purchases. Transfers between funds din thousands} during the year were as follows: Transfers Out: Governmental Major Funds Total Capita] Non-Major Internal General Projects Governmental Solid Service Transfers In: Fund Fund Funds Electric Water Wastewater Waste Funds Governmental Major Funds: General Fund $ - S - $ Debt Service Fund 887 255 Capital Projects Fund 1,095 - Non-Major Govemmental Funds 2,033 176 Electric - - Water 24 - Wastewater - - Solid Waste - - IntemaI Service Funds - - Government-widel Govemmental Activities - - Total $ 4,039 $ 431 $ Interfund payables Amount Internal service funds-materials management $4,802,009 Internal service funds-materials management 395,G29 Internal service funds-materials management 287,702 Internal service funds-materials management 287,702 Business-Type Major Funds 82 $ - $ - $ 374 - - 10 75 110 73 - - 14b - - - $ - $5,197 $ 5,279 628 - - 1,770 6 - 1,114 2,589 220 61 - 2,b85 - - 5,154 5,154 69 - 2,937 3,103 - - 3,755 3,901 - - 2,487 2,487 - - 212 212 - - 3,377 3,377 685 $ 75 $ I10 $ 923 $ 61 $24,233 $ 30,557 42 CITY ~F DENT4N, TEAS N4TE5 T4 BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, X007 The more significant transfers include the following: Transfers from fund Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool Internal service funds-Motor Pool General Fund Internal service funds-Motor Pool Transfers to fund Amount General Fund $5,196,998 Electric 5,154,417 Wastewater 3,755,083 Government-wide activities 3,376,537 Water 2,93 6, 83 3 Solid Waste 2,486,595 Aquatics 1,875,466 Capital Projects 1,114,241 Transfers from the General Fund to Aquatics were to cover the deficit in fund equity. Transfers from the Motor Pool fund were due to the elimination of the fund and the transfers of the equity balances on October 1, 2006. F. Leases Leases payable represent the remaining principal amounts payable under lease purchase agreements for the acquisition of equipment through the General, Solid Waste, Tech Services, and Wastewater funds. These leases are recorded as capital leases. Remaining requirements, including interest, under these leases are as follows: Year Pa menu 2008 $1,983,495 2009 1,877,654 2010 1,724,957 2011-2017 1,160,836 Total minimum lease payments 6,746,942 Less: amount representing interest 461,494 Present value of minimum future lease payments 2 5 44 The following schedule provides an analysis of the City's investments in equipment under capital lease arrangements as of September 30, 2007: Equipment $5,035,769 Less: Accumulated Depreciation 1895 772 Total 1 7 43 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS ~continued~ SEPTEMBER 30, 2007 G. Long-term debt Long-term liabilities transactions for the year ended September 34, 2007, are summarized as follows below and on the following page: Balance at Balance at October 1, September 30, Due Within 2006 Increases Decreases 2007 One Year Governmental Activities: General obligation bonds Certificates of obligation Obligations under capital leases Arbitrage payable Compensated absences payable Claims payable Llnamortized premiuml~discounts} Unamortized deferred gainl~loss} Total governmental long-term liabilities Business-type Activities: Revenue bonds General obligation bonds Certificates of obligation obligations under capital leases Arbitrage payable Compensated absences payable Note payable Landfill closurelpost-closure costs Llnamortized premiuml~discounts} Llnamortized deferred gainl~loss} Total business-type activities Total long-term liabilities $ 58,742,900 $ 15,925,000 $ 4,017,583 $ 70,650,317 $ 4,340,723 46,700,000 8,855,000 4,199,900 51,355,100 4,047,550 3,559,742 2,656,127 3,822,185 2,393,684 635,615 25,968 - 22,633 3,335 - 7,323,590 8,542,124 7,3 23,590 8,542,124 3,242,1 l b 2,995,213 1,198,862 877,279 3,316,796 437,500 418,591 528,630 97,646 849,575 94,267 X393,205} X94} ~ 105,102} X288,197} ~ 1 O 1,150} $119,372,799 $37,705,649 $20,255,714 $136,822,734 $12,696,621 $277,305,000 $58,535,000 $54,090,000 $281,750,000 $14,840,000 3,582,100 - 482,417 3,099,683 449,277 11,975,000 3,535,050 1,620,150 13,889,900 1,592,450 - 4,873,533 981,769 3,891,764 1,179,570 5,105 42,773 624 47,254 - 1,560,082 1,635,962 1,560,082 1,635,962 1,444,462 3,141,222 - - 3,141,222 - 3,689,408 285,054 - 3,974,462 - 7,419,303 200,519 782,913 6,836,909 718,831 8,277,227 2,281,076 1,218,618 (9,339,685} - 300,399,993 66,826,815 58,299,337 308,927,471 20,224,590 $419,772,792 $104,532,464 $75,555,051 $445,750,205 $32,921,211 [The elimination of the Motor Pool Fund resulted in the transfer of $945,050 in certificates of obligation and $3,559,742 of Capital Lease obligations from Governmental Activities toBusiness-type Activities.] 44 CITY OF DENT4N, TEXAS NOTES T4 BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 2007 Generai bonded debt -General bonded debt at September 30, 2007, is comprised of the following: Gross Amount Original Outstanding at Interest Rate Final Amount September 30, Bonded Debt ~% Issue Date Maturity of Issue 2007 General obligation 5.0 to 7,0 1997 2017 $ 4,700,000 $ 235,000 General obligation 5.25 to 5.25 1998 2018 9,660,000 5,295,000 General obligation 4.1 to 5.0 1999 2019 8,215,000 4,920,000 General obligation refunding 3.2 to 5.0 l 999A 2016 5,538,780 3,708,300 General obligation 5.25 to 6.125 2000 2020 3,750,000 755,000 General obligation 4.5 to 5.5 2001 2021 14,245,000 9,985,000 General obligation 5.0 to 5.25 2002 2022 12,075,000 10,320,000 General obligation refunding 3.0 to 4.75 2003 2023 7,222,999 4,217,017 General obligation refunding 2.5 to 5.0 2004 2020 7,370,000 6,965,000 General obligation 3.0 to 5.0 2005 2025 5,000,000 4,730,000 General obligation 4.25 to 4.875 2006 2026 3,695,000 3,595,000 General obligation 4,0 to 4,5 2007 2026 15,925,000 15,925,000 Total general obligation bonds 97,396,779 70,650,317 Certificates of obligation 4.0 to 5.0 1998 201 S 5,625,000 850,000 Certificates of obligation 4.1 to 5.0 1999 2019 5,926,273 3,540,000 Certificates of obligation 5.25 to 6.125 2000 2020 3,125,000 620,000 Certificates of obligation 4.25 to 5.25 2001 2021 8,2?5,000 4,030,000 Certificates of obligation 4.7 to 5.25 2002 2022 8,045,000 5,995,000 Certificates of obligation 3.0 to 4.75 2003 2023 5,650,000 4,325,000 Certificates of obligation 2.0 to 5.0 2004 2024 12,505,000 11,625,000 Certificates of obligation 3.0 to 4.375 2005 2025 5,575,000 4,765,000 Certificates of obligation 4.0 to 4.75 2006 2026 7,214,950 6,750,100 Certificates of obligation 4.7 to 5.0 2007 2027 8,855,000 $,$55,000 Total certificates of obligation 71,096,223 51,355,100 Total general bonded debt $168,493,002 $122,005,417 [These amounts do not include net unamortized premiumsl~discounts} of $849,57 5 nor net deferred gainl~loss} on refunding of x$288,197}.] Proceeds of general bonded debt are restricted to the uses for which they were approved in the bond elections. The City Charter expressly prohibits the use of bond proceeds to fund operating expenses. The general obligations are collateralized by the full faith and credit of the City and, primarily, payable from property taxes. In prior years, the City defeased general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City's financial statements. On September 30, 2007, $3,060,000 of general obligation bonds considered defeased are still outstanding. 45 CITY QF DENTUN, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, X007 In July 2007, the City issued $11,445,000 x$2,590,000 of which is included as part of business-type activities} in certificates of obligation and $15,925,000 of general obligation bonds. The debt was issued to pay the cost of various Capital Project improvements x$24,700,000} and proprietary fund capital improvements x$2,590,000}. The bonds and obligations are payable over the next 20 years. Revenue bonds --Revenue bond debt at September 30, 2007, is comprised of the following issues: Principal Net Net Original Outstanding at Unamortized Outstanding at Interest Rate Issue Final Amount September 30, Premium) September 30, Revenue Bonds ~%} Date Maturity of Issue 2007 Discount) 2007 Utility system refunding 3.55 to b.75 1993 2008 $ b,045,000 $ 385,000 $ (281) $ 3$4,719 Utility system 4.3 to b.3 1998 2018 7,175,000 1,440,000 - 1,440,000 Utility system refunding 4.b5 to b.b5 199$ 2030 3b,795,000 3,210,000 ~2b,21 b} 3,183,784 utility system refunding 4.0 to 5.0 199$ 2015 7,b40,000 5,7b0,000 - 5,7b0,000 Utility system 4.974 to b.0 2000 2020 54,880,000 15,b90,000 15,111 15,705,1 l 1 Utility system 4.0 to 5.4 2001 2021 59,545,000 23,825,000 18b,089 24,D11,089 Utility system 4.25 to 5.0 2002 2022 5b,710,000 47,180,000 254,54b 47,434,54b Utility system 5.0 to b.5 2002 2022 13,985,000 3,405,000 (8,28b} 3,39b,714 Utility system 3.b25 to refunding 5.b25 2003 2022 50,180,000 3b,555,000 1,118,4b 1 37,b73,4b 1 Utility system refunding 2.0 to 5.25 2004 2024 24,850,000 23,8b5,000 1,048,084 24,913,084 Utility system refunding 3.0 to 5.0 2005 2023 53,845,000 53,b90,000 4,053,840 57,743,840 Utility system refunding 4.5 to 5.0 200b 202b 8,515,000 8,210,000 - 8,210,000 Utility system 4.0 to 4.25 2007 202b 1 b,740,000 1 b,740,000 4,19b 1 b,744,19b Utility system refunding 4.0 to 4.25 2007 2029 41,795,000 41,795,000 135,333 41,930,333 Total revenue Bonds $438,700,000 $281,750,000 $b,780,87? $288,530,877 [These amounts do not include net unamortized gainl(loss} on refunding of x$9,243,555}.] 46 CITY OF DENTQN, TEXAS NUTES TD BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 Other enterprise obligations -- General obligation bonds and certificates of obligation issued for solid waste fund at September 30, 2007, is comprised of the following: Gross Amount Interest Qriginal Qutstanding at Rate Issue Final Amount September 30, Qther Qbligations ~%} Date Maturity of Issue 2007 General obligation refunding 3.2 to 5.0 1999 2016 $ 1,481,220 $ 991,700 General obligation refunding 3.0 to 4.75 2003 2023 $57,001 472,983 General obligation refunding 2.5 to 5.0 2004 2015 2,040,000 1,635,000 Total general obligation bonds 4r378L221 _ 3,099,683 Certificates of obligation 4.25 to 5.25 2001 2021 3,845,000 945,000 Certificates of obligation 4.7 to 5.25 2002 2022 4,545,000 2,600,000 Certificates of obligation 3.0 to 4.75 2003 2023 1,755,000 695,000 Certificates of obligation 2.0 to 5.0 2004 2024 1,195,000 905,000 Certificates of obligation 3.0 to 4.375 2005 2025 1,570,000 1,240,000 Certificates of obligation 4.0 to 4.75 2006 2026 5,450,050 4,914,900 Certificates of obligation 4.7 to 5.0 2007 2027 2,590,000 2,590,000 Total certificates of obligation 20,950,050 13 889 900 Total other enterprise obligations $25,328,271 $16,989,583 [These amounts do not include net unamortized premiums)(discounts} of $56,032 nor net deferred gainl(loss} on refunding of x$96, l 30).] The revenue bonds are collateralized by the revenue of the Denton utility system funds (System} and the various special funds established by the bond ordinance. The ordinance provides that the revenue of the System is to be used first to pay operating and maintenance expenses of the System and second to establish and maintain the revenue bond funds. Any remaining revenues may then be used for any lawful purpose. The ordinance also contains provisions, which among other items restrict the issuance of additional revenue bonds unless the special funds noted above contain the required amounts and certain financial ratios are met. Management believes the City is in compliance with all significant requirements. Assets in these accounts consist of cash and U.S. government securities. Below is a summary of the various net asset balances in the funds required by the bond ordinance to be restricted for debt service, Interest and sinking fund $11,377,144 Reserve fund 17,720,015 Total restricted net assets restricted for debt service $29,097,159 In prior years, the City defeased revenue bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City's financial statements. Qn September 30, 2007, $72,861,000 of revenue bonds considered defeased are still outstanding. 47 CITY OF DENTON, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 In February 2007, the City issued $41,795,000 of revenue refunding bonds. The reacquisition price exceeded the net carrying amount of the old debt by $2,281,076. This amount is being amortized over the remaining life of the refunded debt, which is shorter than the life of the new debt issued. This advanced refunding was undertaken to reduce total debt service payments over the next 20 years by $3,996,164 and resulted in a net present value savings of $2,238,899. In July 2007, the City issued $16,740,000 in revenue bond debt. The debt was issued to pay for the cost of various utility system improvements and upgrades. The bonds are payable over the next 20 years. Note payable In 1980, the City and the City of Dallas contracted with the Corps of Engineers for the construction and development of Ray Roberts Reservoir in Denton County. In contracts with the Corp of Engineers, the City will pay for twenty-six (26%} percent of the estimated water storage rights of the reservoir. V~ater obtained from the reservoir will be pro rata on the basis of each city's proportional share of total construction cost. The closing of the dam was completed in 1987 with water being available from the reservoir in 1989. Schedule of long-term debt maturities Aggregate maturities of the long-term debt principal and interest} for the years subsequent to September 30, 2007, are shown below and on the following page: Governmental Activities: Fiscal Year 2008 2009 2010 2011 2012 2013-2017 2018-2022 2023-2027 Total General Obligation Princi al lnterest $ 4,340,723 $ 3,307,718 4,263,569 3,056,747 4,215,885 2,871,391 4,457,630 2,676,730 4,719,305 2,468,204 23, l 18,205 9,087,695 17,620,000 3,968,935 7,915,000 901,622 Certificates of Obli anon Pr~~pCl~, Interest 4,047,550 $ 2,294,136 4,216,400 2,084,539 4,258,200 1,901,932 4,027,950 1,717,795 3,275,000 1,552,545 13,625,000 5,856,758 12,195,000 2,778,999 5,710,000 454,199 Capital Leases Pn~ncipal lnterest $ 635,615 $ 40,512 643,329 32,798 604,497 24,775 120,684 19,440 125,203 14,920 264,356 31,468 Total Principal, $ 9,023,888 9,123,298 9,078,582 8,606,264 8,119,508 37,007,561 29,815,000 13,625,000 lnterest $ 5,642,366 5,174,084 4,798,098 4,413,965 4,035,669 14,975,92 6,747,934 1,355,821 $70,650,317 $28,339,042 $51,355,100 $18,640,903 $2,393,684 $163,913 $124,399,101 $47,143,858 48 CITY QF DENTQN, TEXAS NQTES TQ BASIC FINANCIAL STATEMENTS (continued) SEPTEMBER 30, Zoo? Business-Type Activities: Fiscal Year 2008 2009 2010 2011 2012 2013-2017 2018-2022 2023-2027 2028-2032 Total General Obligation Principa] Interest $ 449,277 $115,145 471,431 100,124 474,115 83,630 332,370 68,146 345,695 54,068 1,02b,795 77,468 $3,099,683 $498,581 $13,889,900 $4,440,936 $281,750,000 $120,175,132 Certificates of Obli anon Pn'ncipal lnterest $ 1,592,450 $ 611,451 1,453,600 537,231 1,431,800 474,224 1,322,050 411,641 1, l 60,000 354,148 2,825,000 1,276,376 2,790,000 649,03 b 1,315,000 126,829 Revenue Principal Interest $14,840,000 $ 13,088,928 14,865,000 12,431,555 15,430,000 11,650,536 14,320,000 10,887,021 14,955,000 10,168,263 83,590,000 39,295,695 88,130,000 17,956,806 28,190,000 4,213,528 7,430,000 482,800 Notes Payable Capital Leases Total Fiscal Year Princi al Interest Pr_ .ncipal Interest Principal Interest 2008 $3,141,222 $ - $1,179,570 $127,797 $21,202,519 $13,943,321 2009 - - 1,113,259 88,268 17,903,290 13, l 57,178 2010 - - 1,044,855 50,831 18,380,770 12,259,221 2011 - - 272,04$ 20,335 16,246,468 11,387,143 2012 - - 282,032 10,350 16,742,727 10,586,829 2013-2017 - - - - 87,441,795 40,649,539 2018-2022 - - - - 90,920,000 18,605,842 2023-2027 - - - - 29,505,000 4,340,357 2028-2032 - - - - 7,430,000 482,800 Total $3,141,222 $ - $3,891,764 $297,581 $305,772,569 $125,412,230 [These amounts do not include net unamortized premiuml(discount} of $7,686,484 nor net unamortized gainl(loss} on refunding of ($9,627,882).] Bonds authorized and unissued General obligation bonds authorized but unissued as of September 30, 2007, amounted to $22,102,000. when issued, the proceeds will be allocated to the applicable capital projects. H. Landfill closure and post-closure cost State and federal laws and regulations require the City to place a final cover on its Mayhill Road landfill site upon closure and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and post-closure care costs will be paid only upon anticipated closure, the City reports a portion of these costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. Based on a model created by a 2005 engineering study, total landfill closure and post- closure cost increased from $14,582,641 to $14,947,207 and increased this year's reported landfill closure and post-closure expense by $285,054. The $3,974,462 reported as landfill closure and post-closure care liability represents the cumulative amount incurred to date based on the use of 26.6% of the estimated capacity of the entire landfill at September 30, 2007. Based on this estimate, the remaining potential estimated liability for closure and post-closure care of the entire landfill is $10,972,745. The City will recognize the remaining estimated cost of closure and post-closure care as the remaining capacity is filled. These amounts are based on what it would cost to perform closure and post- closure care in 2007. Actual cost may fluctuate due to inflation, changes in technology, or changes in 49 CITY ~F DENTIN, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 34, 2447 regulations. The landfill has a remaining life of 27 years, and the City expects to close the landfill in fiscal year 2034. The solid waste fund has provided for a designation of cash and investments of $3,974,4b2 at September 30, 2007, and anticipates increasing the reserve in future periods as the closure and post-closure activities are carried out. V, UTHER INF~RMATIUN A. Pension plans Texas Municipal Retirement Plan Plan description The City provides pension benefits for all of its full-time employees (except fire fighters} through a non- traditional, joint contributory, hybrid-defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS}, one of 821 administered by TMRS, an agent multiple-employer public employee retirement system. Benefits Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City-financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (200%} of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of their salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 60 and above with five regardless of age. A member is vested after five years. of the City, within the options available in the sta constraints also in the statutes. or more years of service or with 20 years of service The plan provisions are adopted by the governing body e statutes governing TMRS and within the actuarial Contributions The contribution rate for the employees is 7%, and the City matching ratio is currently 2 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the actuary annually determines the city contribution rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cast contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time a retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 25 -year amortization period. The unit credit actuarial cast method is used far determining the City contribution rate. Bath the employees and the City make contributions monthly, Three-Year Trend Information for TMRS Funding Year ending 12 3110b 12/31/05 12/31/04 Annual required contribution (ARC} $9,311,315 $9,347,195 $8,707,103 Actual contributions $9,311,315 $9,347,195 $8,707,1 D3 Percent contributed 1 DD°/a 100% 1 DD°/a 50 CITY QF DENTaN, TEXAS NOTES Ta BASIC FINANCIAL STATEMENTS 4continued) SEPTEMBER 30, 2007 Actuarial cost method Amortization method Remaining amortization period Asset valuation method Investment rate of return Projected salary increases Includes inflation at Cost-of living adjustments Actuarial Assumptions 1213 ll0b Unit credit Level percent of payroll 25 years -open period Amortized cost 7% None 3.5% None At its December 8, 2007 meeting, the TMRS Board of Trustees adopted actuarial assumptions to be used in the actuarial valuation for the year ended December 31, 2007. A summary of actuarial assumptions and definitions can be found in the December 31, 2007 TMRS Comprehensive Annual Financial Report. Since its inception, TMRS has used the traditional Unit Credit actuarial funding method. This method accounts for liability accrued as of the valuation date but does not project the potential future liability of provisions adopted by a city. Two-thirds of the cities participating in TMRS have adopted the Updated Service Credit and Annuity Increases provisions on an annually repeating basis. These provisions are considered to be "committed" benefits for likely to be guaranteed}; as such, the TMRS Board has adopted the Projected Unit Credit ~PUC}actuarial funding method, which facilitates advance funding for future updated service credits and annuity increases that are adopted on an annually repeating basis. For the December 31, 2007 valuation, the TMRS Board determined the PUC method will be used. In addition, the Board also adopted a change in the amortization period from a 25-year "open" to a 25-year "closed" period. TMRS Board of Trustee rules provide, whenever a change in actuarial assumptions or methods results in a contribution rate increase in an amount greater than 0.5%, the amortization period may be increased up to 30 years, unless a city requests the period remain at 25 years. For cities with repeating features, these changes will likely result initially in higher required contributions and lower funded ratios. To assist in this transition to higher rates, the Board also approved an eight-year phase-in period, which will allow cities the opportunity to increase their contributions gradually approximately 12.5% each year} to their full rate for their required contribution rate}. Using demographic date from the December 31, 200b valuation, TMRS' actuary has made calculations with the new actuarial assumptions. For cities with annually repeating benefits, those calculations resulted in estimated higher contribution rates, increased unfunded actuarial liabilities, and lower funded ratios. The City adopted the Updated Service Credit provision in 1992, on a repeating basis. Additionally, the City adopted annuity increases for its retirees, on a repeating basis in 1992 equal to 70% of the change in consumer price index. The City of Denton is one of 821 municipalities having the benefit plan administered by TMRS. Each of the 821 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 200b, valuations are contained in the 200b TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.Q. Box 149153, Austin, Texas 78714-9153. In December 2007 the TMRS Board of Trustees adopted a change in actuarial cost methods, The effect of the change will result in an increase in city contribution rates for most Texas cities. Currently this impact is unknown but will be distributed by TMRS based on an actuarial valuation as of December 31, 2007. 5~ CITY OF DENTDN, TEXAS NUTES TU BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, 2007 Denton Firemen's Relief and Retirement Plan Plan description The Board of Trustees of the Denton Firemen's Relief and Retirement Fund is the administrator of a single- employer defined benefit pension plan. The Denton Firemen's Relief and Retirement Fund cover firefighters in the Denton Fire Department. The table below summarizes the membership of the fund as of December 31, 2005, the most recent biennial actuarial valuation. 12/31/05 1. Retirees and beneficiaries currently receiving benefits and terminated employees entitled to 53 benefits but not yet receiving them 2. Current employees a. Vested 73 b. Nonvested 92 3 . Total 218 The Denton Firemen's Relief and Retirement Fund provides service retirement, death, disability and withdrawal benefits. These benefits vest after 10 years of credited service. Firefighters may retire at age 50 with 20 years of service. As of the December 31, 2005 actuarial valuation date, the Plan effective May 1, 2005 and amended June 14, 2007 provided a monthly normal service retirement benefit, payable in a Joint and Two-Thirds to Spouse form of annuity, equal to 2.44% of Highest 36-Month Average Salary for each year of service. There is no provision for automatic postretirement benefit increases. The fund has the authority to provide, and has periodically in the past provided for, ad hoc postretirement benefit increases. The benefit provisions of this plan are authorized by the Texas Local Fire Fighter's Retirement Act ~TLFFRA}. TLFFRA provides the authority and procedure to amend benefit provisions. Contributions Required and Contributions Made The contribution provisions of this plan are authorized by TLFFRA. The TLFFRA provides the authority and procedure to change the amount of contributions determined as a percentage of pay by each firefighter and a percentage of payroll by the city. while the contribution requirements are not actuarially determined, state law requires that an eligible actuary must approve each plan of benefits adopted by the fund. The actuary certifies that the contribution commitment by the firefighters and the city provides an adequate financing arrangement. Using the entry age actuarial cost method, the plans' normal cost contribution rate is determined as a percentage of payroll. The excess of the total contribution rate over the normal cost contribution rate is used to amortize the plan's unfunded actuarial accrued liability, and the number of years needed to amortize the plan's unfunded actuarial accrued liability is determined using an open, level percentage of payroll method. The costs of administering the plan are financed from the fund. The funding policy of the Denton Firemen's Relief and Retirement Fund requires contributions equal to 12% of pay by the firefighters. The City of Denton contributed 10% of payroll during January through September 2006, will contribute 11 % of payroll Dctober 2006 through September 2007, and is planning to contribute 12% of payroll Qctober 2007 through September 2005 and then to begin contributing the same percentage of payroll that the city contributes to the Texas Municipal Retirement System for other employees. The December 31, 2005 actuarial valuation assumes that the city contribution rate will average 12.75% beginning October 2005. 52 CITY 4F DENTON, TEXAS NUTES TO BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, 2007 Three-Year Trend Information for Denton Firemen's Relief and Retirement Funding Year ending 12/31/06 12/31/05 12/31/04 Annual required contribution ARC} $2,071,542 $1,970,632 $1,86$,444 Actual contributions Percent contributed $2,071,542 100°/n $1,970,632 ~ 00°/a $1,868,444 Actuarial Assumptions 12/31/05 Actuarial cost method Entry age Amortization method Level percent of payroll, open Amortization period for ARC 23 years Asset valuation method 5-year adjusted market value Investment rate of return 7.75% Projected salary increases 4,50% plus promotion and longevity Includes inflation at 4.0% Cost-of living adjustments None Payroll increases 4.50% ARC as percent of payroll Budgeted rates 100% Financial statements are available and can be obtained by contacting the Denton Fire Department at the City of Denton at 332 E. Hickory, Denton, Texas 76201, B. Deferred compensation plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all permanent City employees, permits them to defer, until future years, up to 25% of annual gross earnings not to exceed $15,500. Employees who are age 50 or older may contribute an amount not to exceed $20,500. Employees who are within three years of retirement eligibility may elect to participate in a catch-up provision allowed by Section 457, which has an annual maximum contribution amount of $31,000. The withdrawal of deferred compensation funds is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are, until paid or made available to the employee or other beneficiary, solely the property and rights of the employees. Accordingly, the assets and associated liability of the plan are not included in the City's financial statements. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan. C. Self-insurance plan The City has established a self insurance plan for workers' compensation benefits and general liability. Employee health insurance is afully-insured plan, however, the City will move to self-insurance starting January 2008. Accrued claims payable include provisions for claims reported and claims incurred but not reported. The provision for reported claims is determined by estimating the amount which will ultimately be 53 CITY OF DENTUN, TEXAS NUTES TQ BASIC FINANCIAL STATEMENTS continued} SEPTEMBER 30, Zoos paid each claimant. The provision far claims incurred but not yet reported is estimated based on actuarial studies. The City's casts associated with the self insurance plan are reported as interfund transactions. Accordingly, they are treated as operating revenues of the Internal Service Risk Retention Fund and operating expenditures (expenses) of the other funds. Workers' compensation and general liability insurance It is the policy of the City of Denton not to purchase commercial insurance far workers' compensation claims or general liability. Commercial liability insurance coverage is purchased for public officials, airport operations, emergency medical services, take-home vehicles, and employee theft and dishonesty. Additionally, excess insurance is purchased far general liability and workers' compensation exposure. The City reports liabilities when it is probable that a lass has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Because actual claims liabilities depend an such complex factors as inflation, changes in legal doctrines, and damage awards, the process used in computing claims liability does not necessarily result in an exact amount. Claims liabilities are re-evaluated periodically to take into consideration settlement of claims, new claims and other factors. As of September 30, 2007, the estimated value of these liabilities was $3,316,796. Changes in balances of claims liabilities during fiscal years 2007 and 2006 were as follows: Claims Liability Beginning of Fiscal Year Claims and Change in Estimates Claims Payments Claims Liability End of Fiscal Year Workers' Carnpensatian 2007 $2,418,698 $ 958,944 $738,947 $2,638,696 2006 1,450,000 1,437,485 468,787 2,418,698 General Liability 2007 $ 576,515 $ 239,918 $138,332 $ 678,100 2006 353,000 302,868 79,353 576,515 4n September 30, 2007, the City of Denton held net assets of $1,733,246 in the Risk Retention Fund far payment of claims. There were na significant reductions in insurance coverage from coverage in the prior year, and the amount of settlements did not exceed insurance coverage in the current year ar in any of the past three fiscal years. D. Commitments and contingencies Agreement with TMPA In 1976, the City, along with the cities of Bryan, Greenville, and Garland, Texas (the Cities} entered into a Power Sales Contract with the Texas Municipal Power Agency TMPA}, TMPA was created through concurrent ordinances of the Cities and is governed by a Board of Directors consisting of eight members, two appointed by the governing body of each city. Under the terms of the agreement, TMPA agreed to construct ar acquire electric generating plants to supply energy and power to the Cities for a period of not less than 35 years. The Cities in turn agreed to purchase all future power and energy requirements in excess of the amounts generated by their systems from TMPA at prices intended to cover operating costs and retirement of debt. In the event that revenues are insufficient to cover all casts and retire the outstanding debt, each of the Cities has guaranteed a portion of the unpaid debt based, generally, upon its pro rata share of the energy delivered to consumers in the prior operating year. 54 CITY ~F DENTIN, TEAS NOTES TQ BASIC FINANCIAL STATEMENTS (continued} SEPTEMBER 30, ZUU7 As of September 30, 2007, total TMPA long-term debt outstanding was approximately $1,026,502,000, and the City's percentage was approximately 21.3%. In the opinion of management, the possibility of a material payment in the near future under this guarantee is remote in that TMPA is generating operating profits and assets exceed liabilities. TMPA operates a 462-megawatt, coal-fired generating plant. In 1996, TMPA switched to an external source of coal to reduce costs. Should TMPA be dissolved, each city would be entitled to an undivided interest in the property. Selected financial statement information of TMPA is as follows: September 30 Unaudited} 2007 2006 ~OOOs} ~OOOs} Operating revenues $ 248,977 $ 244,480 Operating expenses 112,916 103,876 Operating income 136,061 140,604 Other non-operating sources 9,361 8,413 Current assets 48,166 55,778 Total assets 1,203,288 1,245,503 Long-term debt 1,026,502 1,072,169 Total liabilities 1,165,858 1,209,944 Total equity 37,430 35,559 Agreement with the City of Dallas During 1985, the City entered into an agreement with the City of Dallas that provides for the purchase of a minimum of 500,000 gallonslday of untreated water from the City of Dallas from Lake Lewisville. This contract will be effective for 30 years. The cost of water purchased under this agreement during fiscal year 2007 was $52,974. E. Litigation Various claims and lawsuits are pending against the City. In accordance with GAAP, those judgments considered "probable" are accrued, while those claims and judgments considered "reasonably possible" are disclosed but not accrued. In the opinion of City management and legal counsel, the maximum amount of all significant claims considered reasonably possible, excluding condemnation proceedings, is approximately $500,000 as of September 30, 2007. Potential losses after insurance coverage on all probable claims and lawsuits will not have a material effect on the City's financial position as of September 30, 2007. ~~*~ 55 56 CITY OF DENTON, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF TMRS FUNDING PROGRESS AND CONTRIBUTIONS LAST THREE FISCAL YEARS (Unaudited) Exhibit XII Actuarial Unfunded Accrued Actuarial Actuarial Actuarial Liability (AAL} Accrued Fiscal Valuation Value of Unit Credit Liability Funded Year Date Assets Method (UAAL} Percent 2445 1213112444 $ 95,244,213 $ 127,827,843 $ (32,623,594} 74.5 2446 1213112445 98,451,747 133,853,457 (35,841,714} 73.3 2447 1213112446 145,951,245 145,349,633 (39,358,388} 72,9 UAAL as Percent of Annual Fiscal Covered Covered Required Actual Percent Year Payroll Payroll Contributions Contributions Contributed 2445 $ 46,415,828 74.3 $ 8,747,143 S 8,747,103 144,4 2406 46,394,343 77.2 9,347,195 9,347,195 144,4 2447 47,271,473 83.3 9,311,315 9,311,315 144.0 57 CITY OF DENTON, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DENTON FIREMEN'S RELIEF AND RETIREMENT PLAN FUNDING PROGRESS AND CONTRIBUTIONS LAST THREE VALUATION YEARS (Unaudited) Exhibit XIII Actuarial Unfunded Accrued Actuarial Actuarial Actuarial Liability (AAL} Accrued Fiscal Valuation Value of Unit Credit Liability Funded Year Date Assets Method ~UAAL) Percent 2002 12131/2041 $ 26,061,756 $ 29,786,004 $ (3,724,248) 87.5% 2004 12/3112403 30,538,352 37,557,733 (7,019,381) 81.3 2446 12/31/2005 34,677,009 45,341,724 (10,664,715) 76.5 UAAL as Percent of Annual Fiscal Covered Covered Required Actual Percent Year Payroll Payroll Contributions Contributions Contributed 2002 $ 7,947,098 46.9% $ 1,544,822 $ 1,504,822 100.0% 2004 8,459,472 83.4 1,846,396 1,846,396 100.0 204d 10,445,026 102.1 1,970,632 1,970,632 100.0 58 APPENDIX D FARM OF BAND COUNSEL'S QPINI~N Proposed Form of Opinion of Bond Counsel An opinion in substantially the following form will be delivered by McCatt, Parkhurst c~ Horton ~.~.P., fond Counsel, upon the delivery of the fonds, assuming no material changes in facts or law. CITY GF DENTGN UTILITY SYSTEM REVENUE BOND SERIES 2008 DATED AUGUST 15, 2008 IN THE PRINCIPAL AMOUNT GF $15,290,000 AS BOND COUNSEL for the City of Denton, in Denton County, Texas the "Issuer"}, we have examined into the legality and validity of the bond issue initially evidenced by the bond described above the "Initial Bond"}, which Initial Bond originally has been issued and delivered as a single fully registered bond, without interest coupons, with the principal amount thereof payable as set forth in the Initial Bond, and with the unpaid balance of each installment of principal, respectively, bearing interest from the date of the Initial Bond to the scheduled due date ~"maturity"}, or to the date of pre-payment or redemption, of each installment of principal, at the rates per annum for each maturity set forth in the Initial Bond with interest, calculated on the basis of a 360-day year composed of twelve 30-day months, payable on December 1, 2008, and semiannually on each June 1 and December 1 thereafter, and with the then outstanding principal of the Initial Bond being subject to prepayment or redemption, as a whole, or in part, prior to scheduled maturity, at the option of the Issuer, on December 1, 2018, or on any date whatsoever thereafter, in accordance with the terms and conditions stated on the face of the Initial Bond. The Initial Bond may, at the request of the registered owner, be transferred and converted into, andlor exchanged for, fully registered bonds, without interest coupons, in the denomination of $5,000 or any integral multiple of $5,000, and such bonds again may be transferred andlor exchanged, all subject to the conditions stated and in the manner provided in the Ordinance authorizing the issuance of the Initial Bond the "Bond Ordinance"},with any such bonds which are registered, authenticated, and delivered in accordance with the Bond Ordinance being hereinafter called "Definitive Bonds". WE HAVE EXAMINED the applicable and pertinentprovisions of the Constitution and laws of the State of Texas, and have examined and relied upon a transcript of certified proceedings of the Issuer and other pertinent instruments furnished by the Issuer relating to the authorization of the Initial Bond and Definitive Bonds and the issuance and delivery of the Initial Bond, including the executed Initial Bond and a printed specimen of the farm for Definitive Bonds initially made available by the Issuer for completion and exchange for the Initial Bond; and we have examined and relied upon the Issuer's Federal Tax Certificate, of even date herewith, incorporating certain schedules prepared by First Southwest Company, financial advisor to the Issuer. BASED ON SAID EXAMINATION, IT IS OUR OPINION that the Initial Bond and Definitive Bonds collectively, the "Bonds") have been duly authorized, and that the Initial Bond has been duly issued and delivered, all in accordance with law, and that, except as may be limited by laws relating to bankruptcy, reorganization, and other similar matters affecting creditors' rights or by general principles of equity which permit the exercise of judicial discretion, the covenants and agreements in the Bond Ordinance constitute valid and binding obligations of the Issuer, and the Initial Bond constitutes and Definitive Bonds will constitute valid and legally binding special obligations of the Issuer, secured by. and payable, together with other bonds, from a first lien on and pledge of the "Pledged Revenues",which include initially the "Net Revenues of the System" as such terms are defined in the Bond Grdinance, with the System consisting of the City's entire combined waterworks, sewer, and electric light and power system. THE ISSUER has reserved the right, subject to the restrictions stated in the Bond Ordinance, to issue additional parity revenue bonds which also may be secured by and made payable from a first lien on and pledge of the Pledged Revenues, THE ISSUER also has reserved the right, subject to the restrictions stated in the Bond Grdinance, to amend the Bond Grdinance with the approval of the holders orowners offifty-one percent in principal amount of all outstanding Bonds which are secured by and payable from a first lien on and pledge of the Pledged Revenues. THE REGISTERED OWNERS of the Bonds shall never have the right to demand payment of the principal thereof or interest thereon out of any funds raised or to be raised by taxation, or from any source whatsoever other than specified in the Bond Grdinance. IT IS FURTHER GUR GPINIGN, except as discussed below, that the interest on the Bonds is excludable from the gross income of the owners for federal income tax purposes under the statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "specified private activity bonds" and that, accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57~a}~5} of the Internal Revenue Code of 198b the "Code"}. In expressing the aforementioned opinions, we have relied on certain representations, the accuracy of which we have not independently verified, and assume compliance with certain covenants regarding the use and investment of the proceeds of the Bonds and the use of the property financed therewith. We call your attention to the fact that if such representations are determined to be inaccurate or if the Issuer fails to comply with such covenants, interest on the Bonds may become includable in gross income retroactively to the date of issuance of the Bonds. WE CALL YGUR ATTENTION TG THE FACT that the interest on tax-exempt obligations, such as the Bonds, is included in a corporation's alternative minimum taxable income for purposes of determining the alternative minimum tax imposed on corporations by section 55 of the Code, EXCEPT AS STATED ABGVE, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. GUR GPINIGNS ARE BASED GN EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service the "Service"}; rather, such opinions represent our legal judgment based upon our review of existing Iaw and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS ND 4PINIQN as to any insurance policies issued with respect to the payments due for the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future . DLTR SGLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions with respect to the legality and validity of the Bonds under the Constitution and laws of the State of Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in connection with the sale of the Bonds, and have not assumed any responsibility with respect thereto. We express no opinion and make no comment with respect to the marketability of the Bonds. Our role in connection with the Issuer's Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. Respectfully, Exhibit 4 NOTICE OF SALE AND BIDDING INSTRUCTIONS ON $15,290,aaa CITY OF DENTON, TEXAS (Denton County} UTILITY SYSTEM REVENUE BONDS, SERIES 2aa8 Sealed Bids Due Tuesday, August 19, 2aa8, at 1a:3a AM, CDT THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. THE SALE BONDS OFFERED FOR SALE AT COMPETITIVE BIDDING ...The City of Denton, Texas the "City"} is offering for sale its $15,294,444 Utility System Revenue Bonds, Series 2448 the "Bonds"). Bidders may submit bids for the Bonds by any of the following methods: (1} Deliver bids directly to the City as described below in "Bids Delivered to the City;" (2} Submit bids electronically as described below in "Electronic Bidding Procedures;" or (3) Submit bids by telephone or facsimile as described below in "Bids by Telephone or Facsimile." BIDS DELNERED TO CITY ...Sealed bids, plainly marked "Bid for Bands," should be addressed to "Mayor and City Council, City of Denton, Texas," and should be delivered to the City's Financial Advisor at 777 Main Street, Suite 1200, Fort Worth, Texas 761x2, prior to 10:34 AM, CDT, on the date of the sale. ELECTRONIC BIDDING PROCEDURE ...Any prospective bidder that intends to submit an electronic bid must submit its electronic bid through the facilities of PARITY. Subscription to i-Deal's BIDCOMP Competitive Bidding System is required in order to submit an electronic bid. The City will neither confirm any subscription nor be responsible for the failure of any prospective bidder to subscribe. Bidders submitting an electronic bid shall not be required to submit Official Bid Forms. An electronic bid made through the facilities of PARITY shall be deemed an irrevocable offer to purchase the Bonds on the terms provided in this Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the City. The City shall not be responsible for any malfunction or mistake made by, or as a result of the use of the facilities of, PARITY, the use of such facilities being the sole risk of the prospective bidder. If any provisions of the Notice of Sale shall conflict with infarmatian provided by PARITY as the approved provider of electronic bidding services, this Notice of Sale shall control, Further infarmatian about PARITY, including any fee charged, may be obtained from Parity Customer Support, 4a West 23rd Street, 5th Floor, New York, New York 10010, (212} 4x4-Slat. For purposes of the bidding process, regardless of the bidding method, the time as maintained by i-Deal shall constitute the official time. For information purposes only, bidders are requested to state in their electronic bids the true interest cost to the City, as described under "Basis for Award" below. All electronic bids shall be deemed to incorporate the provisions of this Notice of Sale and the Official Bid Form. BIDS BY TELEPHONE OR FACSIMILE ...Bidders must submit, prior to August 19, 200$, SIGNED Official Bid Forms to Laura Alexander, First Southwest Company, 777 Main Street, Suite l 200, Fort Worth, Texas 76102, and submit their bid by telephone or facsimile Sfax) on the date of the sale. Telephone bids will be accepted at x$17) 332-9714, between 9:34 AM, CDT and 10:30 AM, CDT on the date of the sale. Fax bids will be received between 9:34 AM, CDT and 10:30 AM, CDT, on the date of the sale at x$17} 336.5572, attention: Rhonda Van Iderstine. First Southwest Company will not be responsible for submitting any bids received after the above deadlines. The City and First Southwest Company are not responsible if such telephone or facsimile numbers are busy which prevents a bid or bids from being submitted on a timely basis. First Southwest Company assumes no responsibility or liability with respect to any irregularities associated with the submission of bids if any options are exercised. PLACE AND TIME OF BID OPENING ...The bids for the Bands will be publicly opened and read at the offices of the Financial Advisor, at 10;30 AM, CDT, Tuesday, August 19, 2008. AWARD OF THE BLINDS ...The City Council will take action to award the Bonds for reject all bids) at a meeting scheduled to convene at 6:30 PM, CDT, on the date of the bid opening, and adopt an ordinance authorizing the Bonds and approving the Official Statement the "Bond Ordinance"}. THE BLINDS DESCRIPTION ...The Bonds will be dated August 15, 2008 the "Dated Date"). Interest will accrue from the Dated Date and will be due an December 1, 2008, and each June 1 and December 1 thereafter until the earlier of maturity or prior redemption. The Bonds will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity. The Bonds will mature on December 1 in each year as follows; MATURITY SCHEDULE Principal Principal Principal Year Amount Year Amount Year Amount 2008 $ 630,000 2015 $ 635,000 2021 $ 855,000 2009 505,000 2016 670,000 2022 900,000 2010 525,000 2017 700,000 2023 945,000 2011 540,000 2018 735,000 2024 1,000,000 2012 560,000 2019 770,000 2025 1,050,000 2013 580,000 2020 815,000 202b 1,105,000 2014 605,000 2027 1, l b5,000 QPTIONAL REDEMPTION ...The City reserves the right, at its option, to redeem Bonds having stated maturities on and after December 1, 2019, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on December 1, 2018, or any date thereafter, at the par value thereof plus accrued interest to the date fixed for redemption. SERIAL BONDS ANDIOR TERM BONDS ...Bidders may provide that all of the Bonds be issued as serial Bonds or may provide that any two or more consecutive annual principal amounts be combined into one or more term Bonds. MANDATORY SINKING HIND ... If the successful bidder elects to alter the Maturity Schedule reflected above and convert principal amounts of the Serial Bonds into "Term Bonds", such "Term Bonds" shall be subject to mandatory redemption on the first December 1 next following the last maturity for Serial Bonds, and annually thereafter on each December 1 until the stated maturity for the Term Bonds at the redemption prices of par plus accrued interest to the date of redemption. The principal amounts of the Term Bonds to be redeemed on each mandatory redemption date shall be the principal amounts that would have been due and payable in the Maturity Schedule shown above had no conversion to Term Bonds occurred. At least thirty (30} days prior to each mandatory redemption date, the Paying AgentlRegistrar shall select by lot the Term Bonds to be redeemed and cause a notice of redemption to be given in the manner provided in the Preliminary Official Statement. The principal amount of the Term Bonds required to be redeemed pursuant to the operation of such mandatory redemption provisions may be reduced, at the option of the City, by the principal amount of the Term Bonds of the same maturity which ~i} shall have been acquired by the City at a price not exceeding the principal amount of such Term Bonds plus accrued interest to the date or purchase thereof, and delivered to the Paying AgentlRegistrar for cancellation or (ii) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory redemption requirement. A final official statement will incorporate the mandatory redemption provisions for the Bonds in the event the successful bidder elects to convert serial maturities into one or more Term Bonds. BOOK-ENTRY-QNLY SYSTEM ...The City intends to utilize the Book-Entry-Only System of The Depository Trust Company ~"DTC"). See "The Bonds -Book-Entry-Only System" in the Preliminary Official Statement. PAYING AGENTIREGISTRAR ...The initial Paying AgentlRegistrar shall be The Bank of New York Mellon Trust Company, National Association (see "The Bonds -Paying AgentlRegistrar" in the Preliminary Official Statement). SOURCE OF PAYMENT , ..The Bonds are payable, both as to principal and interest, solely from and secured by a first lien on and a pledge of the Pledged Revenues including the Net Revenues of the Utility System after payment of maintenance and operating expenses (see "The Bonds -Security and Source of Payment"). Further details regarding the Bonds are set forth in the Preliminary Official Statement. ii CONDITIONS OF THE SALE TYPE QF BIDS AND INTEREST RATES ...The Bonds will be sold in one block on an "All or None" basis, and at a price of not less than par value plus accrued interest from the dated date of the Bonds (the "Dated Date"} to the date of delivery of the Bonds. Bidders are invited to name the rates} of interest to be borne by the Bonds, provided that each rate bid must be in a multiple of 118 of 1% or 11100 of 1% and the net effective interest rate must not exceed l 5%. The highest rate bid may not exceed the lowest rate bid by more than 2% in rate. Using the interest rate established for the December 1, 2019 maturity as the base year, interest rates for successive maturities shall be structured in ascending order such that for each succeeding maturity, rates shall be equal to or greater than the interest rate for the maturity of the preceding year. No limitation is imposed upon bidders as to the number of rates or changes which may be used. All Bonds of one maturity must bear one and the same rate. No bids involving supplemental interest rates will be considered. BASIS FQR AWARD ...The sale of the Bonds will be awarded to the bidder making a bid that conforms to the specifications herein and which produces the lowest True Interest Cost rate to the City. The True Interest Cost rate is that rate which, when used to compute the total present value as of the Dated Date of all debt service payments on the Bonds an the basis of semi-annual compounding, produces an amount equal to the sum of the par value of the Bonds plus any premium bid abut not interest accrued from the Dated Date to the date of their delivery). In the event of a bidder's error in interest cost rate calculations, the interest rates, and premium, if any, set forth in the Oflicial Bid Form will be considered as the official bid. GooD FAITH DEP(}SIT ... A Good Faith Deposit, payable to the "City of Denton, Texas", in the amount of $305,$00.00, is required. Such Good Faith Deposit shall be a bank cashier's check or certified check, which is to be retained uncashed by the City pending the Initial Purchaser's compliance with the terms of the bid and the Notice of Sale and Bidding Instructions. The Good Faith Deposit may accompany the Official Bid Form or it may be submitted separately. If submitted separately, it shall be made available to the City prior to the opening of the bids, and shall be accompanied by instructions from the bank on which drawn which authorize its use as a Good Faith Deposit by the Initial Purchaser who shall be named in such instructions. The Good Faith Deposit of the Initial Purchaser will be returned to the Initial Purchaser upon payment far the Bands. No interest will be allowed on the Good Faith Deposit. In the event the Initial Purchaser should fail or refuse to take up and pay for the Bonds in accordance with the bid, then said check shall be cashed and accepted by the City as full and complete liquidated damages. The checks accompanying bids other than the winning bid will be returned immediately after the bids are opened, and an award of the Bonds has been made. DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS CUSIP NUMBERS ... It is anticipated that CUSIP identification numbers will appear on the Bonds, but neither the failure to print or type such number on any Band nor any error with respect thereto shall constitute cause for a failure or refusal by the Initial Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this Notice of Sale and Bidding Instructions and the terms of the Official Bid Form. All expenses in relation to the printing or typing of CUSIP numbers on the Bonds shall be paid by the City; provided, however, that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid for by the Initial Purchaser. DELIVERY OF BONDS ...Initial Delivery will be accomplished by the issuance of one Initial Bond also called the "Bond" or "Bonds"), either in typed or printed farm, in the aggregate principal amount of $15,290,000, payable in stated installments to the Initial Purchaser or its designee, signed by the Mayor and City Secretary, approved by the Attorney General, and registered and manually signed by the Comptroller of Public Accounts. Upon delivery of the Initial Bond, it shall be immediately cancelled and one definitive Band for each maturity will be registered and delivered only to Cede & Co., and deposited with DTC in connection with DTC's Book-Entry-Only System. Delivery will be at the corporate trust office of the Paying AgentlRegistrar in Dallas, Texas. Payment for the Bonds must be made in immediately available funds for unconditional credit to the City, or as otherwise directed by the City. The Initial Purchaser will be given six business days' notice of the time fixed for delivery of the Bonds. It is anticipated that delivery of the Bonds can be made on or about September 23, 2008, and it is understood and agreed that the Initial Purchaser will accept delivery and make payment for the Bonds by 10:00 AM, CDT, on September 23, 2008, or thereafter on the date the Bond is tendered for delivery, up to and including October 7, 2008. If for any reason the City is unable to make delivery on or before October 7, 200$, the City shall immediately contact the Initial Purchaser and offer to allow the Initial Purchaser to extend its offer for an additional thirty days. if the Initial Purchaser does not elect to extend its offer within six days thereafter, then its Good Faith Deposit will be returned, and both the City and the Initial Purchaser shall be relieved of any further obligation. In no event shall the City be liable for any damages by reason of its failure to deliver the Bonds, provided such failure is due to circumstances beyond the City's reasonable control. CONDITIONS T4 DELIVERY , , .The obligation of the Initial Purchaser to take up and pay for the Bonds is subject to the Initial Purchaser's receipt of (a} the legal opinion of McCall, Parkhurst & Horton, L.L.P., Dallas, Texas, Bond Counsel for the City ~"Bond Counsel"}, (b) the no-litigation certificate, and ~c) the certification as to the Preliminary Official Statement, all as further described in the Preliminary Official Statement, In order to provide the City with information required to enable it to comply with certain conditions of the Internal Revenue Code of 19$b relating to the exemption of interest on the Bonds from the gross income of their owners, the Initial Purchaser will be required to complete, execute, and deliver to the City ion or before the bth business day prior to the delivery of the Bonds) a certification as to their "issue price" substantially in the form and to the effect attached hereto or accompanying this Notice of iii Sale and Bidding Instructions. In the event the successful bidder will not reoffer the Bonds for sale, such certificate may be modified in a manner approved by the City. In no event will the City fail to deliver the Bands as a result of the initial Purchaser's inability to sell a substantial amount of the Bonds at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver such a certificate by the date of delivery of the Bonds, if its bid is accepted by the City. It will be the responsibility of the Initial Purchaser to institute such syndicate reporting requirements to make such investigation, or otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certification should be directed to Bond Counsel. LEGAL OPINIONS .. ,The Bonds are offered when, as and if issued, subject to the approval of the Attorney General of the State of Texas. Delivery of and payment for the Bonds is subject to the receipt by the Initial Purchaser of opinions of Bond Counsel, to the effect that the Bonds are valid and binding obligations of the City and that the interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "Tax Matters" in the Preliminary Official Statement, including alternative minimum tax consequences for corporations. CERTIFICATION OF PRELIMINARY OFFICIAL STATEMENT ... At the time of payment for and Initial Delivery of the Bonds, the City will execute and deliver to the Initial Purchaser a certificate in the form set forth in the Preliminary Official Statement. CHANGE IN TAX EXEMPT STATUS ....At any time before the Bonds are tendered far delivery, the lnitial Purchaser may withdraw its bid if the interest received by private holders on obligations of the same type and character shall be declared to be includable in gross income under present federal income tax laws, either by ruling of the Internal Revenue Service or by a decision of any Federal court, or shall be declared taxable or be required to be taken into account in computing any federal income taxes, by the terms of any federal income tax law enacted subsequent to the date of this Notice of Sale and Bidding Instructions. GENERAL FINANCIAL ADVISOR . , ,First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of the Bonds. First Southwest Company may submit a bid for the Bonds, either independently or as a member of a syndicate organized to submit a bid for the Bonds. 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 Bonds, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. In the normal course of business, the Financial Advisor may from time to time sell investment securities to the City for the investment of bond proceeds or other funds of the City upon the request of the City. BLUE SxY LAWS ... By submission of its bid, the Initial Purchaser represents that the sale of the Bonds in states other than Texas will be made only pursuant to exemptions from registration or, where necessary, the Initial Purchaser will register the Bonds in accordance with the securities law of the states in which the Bonds are offered or sold. The City agrees to cooperate with the Initial Purchaser, at the Initial Purchaser's written request and expense, in registering the Bonds or obtaining an exemption from registration in any state where such action is necessary, provided, however, that the City shall not be obligated to qualify as a foreign corporation or to execute a general or special consent to service of process in any such jurisdiction. NOT AN OFFER TO SELL ...This Notice of Sale and Bidding Instructions does not alone constitute an offer to sell the Bonds, but is merely notice of the sale of the Bonds. The offer to sell the Bonds is being made by means of the Notice of Sale and Bidding lnstructions, the Official Bid Form and the Preliminary Official Statement. Prospective purchasers are urged to carefully examine the Preliminary Official Statement to determine the investment quality of the Bonds. ISSUANCE OF ADDITIONAL DEBT ...The City does not anticipate the issuance of additional utility system revenue debt within the next 12 months. RATINGS ...The presently outstanding tax supported debt of the City is rated "A 1" by Moody's Investors Service, Inc. ~"Moody's"} and "A+" by Standard & Poor's Ratings Services, A Division of McGraw-Hill Companies, lnc. ~"S&P"}. Applications for contract ratings on this issue have been made to Moody's and S&P. The results of their determinations will be provided as soon as possible. MUNICIPAL BOND INSURANCE ... In the event the Bonds are qualified for municipal bond insurance, and the Purchaser desires to purchase such insurance, the cost therefor will be paid by the Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. It will be the responsibility of the Purchaser to disclose the existence of insurance, its terms and the effect thereof with respect to the reoffering of the Bonds. Any rating downgrade by Moody's, S&P, or Fitch Ratings, respectively, of the bond insurance provider after the Bid Opening shall not relieve the Purchaser of its obligation under the heading "DELIVERY OF THE BANDS AND ACCOMPANYING DOCUMENTS". 1V THE PREWMINARY UFFICIAl, STATEMENT AND CGMPLIANCE WITH SEC RULE 15C2-1~ ...The City has prepared the accompanying Preliminary Official Statement and, far the limited purpose of complying with SEC Rule 15c2-12, deems such Preliminary Official Statement to be final as of its date within the meaning of such Rule far the purpose of review prior to bidding, To the best knowledge and belief of the City, the Preliminary Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Bands. Representations made and to be made by the City concerning the absence of material misstatements and omissions in the Preliminary Official Statement are addressed elsewhere in this Notice of Sale and Bidding Instructions and in the Preliminary Official Statement. The City will furnish to the Initial Purchaser, acting through a designated senior representative, in accordance with instructions received from the Initial Purchaser, within seven ~7} business days from the sale date an aggregate of l50 copies of the Official Statement reflecting interest rates and other terms relating to the initial reoffering of the Bonds. The cost of any Official Statement in excess of the number specified shall be prepared and distributed at the cast of the Initial Purchaser. The Initial Purchaser shall be responsible for providing in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day after the award. Except as noted above, the City assumes no responsibility or obligation for the distribution or delivery of any copies of the Official Statement in connection with the offering or reoffering of the subject securities. CONTINUING DISCLQSURE AGREEMENT ...The City will agree in the Bond Ordinance to provide certain periodic information and notices of material events in accordance with Securities and Exchange Commission Rule 15c2-12, as described in the Preliminary Official Statement under "Continuing Disclosure of Information". The Initial Purchaser's obligation to accept and pay for the Bonds is conditioned upon delivery to the Initial Purchaser or agent of a certified copy of the Bond Ordinance containing the agreement described under such heading. COMPLIANCE WITH PRIOR UNDERTAKINGS ...The City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2.12. ADDITIQNAL COPIES OF NQTICE, BID FORM AND STATEMEi~T ... A limited number of additional copies of this Notice of Sale and Bidding Instructions, the Official Bid Form and the Preliminary Official Statement, as available aver and above the normal mailing, may be obtained at the offices of First Southwest Company, Investment Bankers, 325 North St. Paul, Suite 500, Dallas, Texas 75201, Financial Advisor to the City. On the date of the sale, the City will, in the Band Ordinance authorizing the issuance of the Bands, confirm its approval of the form and content of the Preliminary Official Statement, and any addenda, supplement or amendment thereto, and authorize its use in the reoffering of the Bonds by the Initial Purchaser. MARK BURROUGHS Mayor City of Denton, Texas ATTEST: JENNIFER WALTERS City Secretary August 7, 2008 BLIND YEARS Bonds Accumulated Bonds Maturin Amount Band Years Bond Years Maturing 2008 630,000 185.500 185.500 2008 2009 505,000 653.694 839,194 2009 2010 525,000 1,204.583 2,043.778 2010 2011 540,000 1,779.000 3,822.778 2011 2012 560,000 2,404.889 6,227.667 2012 2013 580,000 3,070.778 9,298.444 2013 2014 605,000 3,808.139 13,106.583 2014 2015 635,000 4,631.972 17,738.556 2015 2016 670,000 5,557.278 23,295.833 2016 2017 700,000 6,506.111 29,801.944 2017 2018 735,000 7,566.417 37,368.361 2018 2019 770,000 8,696.722 46,065.0$3 2019 2020 815,000 10,019.972 56,085.056 2020 2021 855,000 11,366.750 67,451.806 2021 2022 900,OOD 12,865A00 80,316.806 2022 2023 945,000 14,453.250 94,770.056 2023 2024 1,000,000 16,294.444 111,064.500 2024 2025 1,050,000 18,159.167 129,223.667 2025 2026 1,105,000 20,215.361 149,439.028 2026 2027 1,165,000 22,478.028 171,917,056 2027 Average Maturity .... ................ ...... . ..11.244 Years QFFICIAL BID FORM Honorable Mayor and City Council City of Denton, Texas August 19, 2448 Honorable Mayor and Members of the City Council: Reference is made to your Preliminary official Statement and Notice of Sale and Bidding Instructions, dated August 7, 2448 of $15,294,004 CITY OF DENTIN, TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 2448, both of which constitute a part hereof. For your legally issued Bonds, as described in said Notice of Sale and Bidding Instructions and Preliminary official Statement, we will pay you par and accrued interest from date of issue to date of delivery to us, plus a cash premium of $ for Bonds maturing and bearing interest as follows: Principal Interest Principal Interest Principal Interest Maturity Amount Rate Maturi Amount Rate Maturity Amount Rate .~ 1211120x$ $ 63a,aaa % 121112a 1 S $ 635,axa % 121112x21 $ BSS,aaa I21112axg sxS,aaa % 121112a1b b7x,aaa % 121112x22 9aa,axa I21112x i a 525,xx0 % l21112017 7xx,axx % 121112x23 945,axD 121112x11 S4a,aaa % 121112x18 735,aaa % 121112x24 l,aoo,xxa 121112a 12 56a,aaa % 121112a 19 77a,aaa % 121112x25 I,aSx,xaa 121112x13 58a,axa % 121112x2a 815,aaa % 121112x2b l,las,aaa 121112x 14 6as,xox °i° 121112x27 l,165,xxx % 0f the principal maturities set Earth in the table above, term bonds have been created as indicated in the following table which may include multiple term bonds, one term band or no term bond if none is indicated}. Far Chase years which have been combined into a term bond, the principal amount shown in the table above shall be the mandatary sinking fund redemption amounts in such years except that the amount shown in the year of the term bond maturity date shall mature in such year. The term bonds created are as follows: Year of Maturity Date First Mandatory Principal Interest December 1 Redemption Amount Rate "/a $ °~a °~a m ni fur calculation (which is not a part of this bid} of the true interest cost from the above is: TRUE INTEREST COST We are having the Bonds of the fallowing maturities insured by at a premium of $ ,said premium to be paid by the Initial Purchaser. Any fees to be paid to the rating agencies as a result of said insurance will be paid by the City. The Initial Bonds shall be registered in the name of ,which will, upon payment for the Bonds, be canceled by the Paying AgentlRegistrar. The Bonds will then be registered in the name of Cede & Co. (DTC's partnership nominee}, under the Book-Entry-only System. A bank cashier's check or certified check of the Bank, , in the amount of $3a5,Saa.aa, which represents our Good Faith Deposit (is attached hereto) or (has been made available to you prior to the opening of this billy, and is submitted in accordance with the terms as set forth in the Preliminary DfFicial Statement and Notice of Sale and Bidding Instructions. We agree to accept delivery of the Bonds utilizing the Book-Entry-only System through DTC and make payment for the Initial Bond in immediately available funds in the Corporate Trust Division, The Bank of New York Mellon Trust Company, National Association, not later than l0:aa AM, CDT, on September 23, 2aa8, or thereafter on the date the Bonds are tendered for delivery, pursuant to the terms set forth in the Notice of Sale and Bidding Instructions. It will be the obligation of the purchaser of the Bonds to complete the DTC Eligibility Questionnaire. The undersigned agrees to complete, execute, and deliver to the City, at least six business days prior to delivery of the Bands, a certificate relating to the "issue price" of the Bonds in the form and to the effect accompanying the Notice of Sale and Bidding Instructions, with such changes thereto as may be acceptable to the City, We agree to provide in writing the initial reoffering prices and other terms, if any, to the Financial Advisor by the close of the next business day aver the award. Respectfully submitted, Syndicate Members: Name of Underwriter or Manager Authorized Representative Phone Number Signature ACCEPTANCE CLAUSE The above and foregoing bid is hereby in all things accepted by the City of Denton, Texas, subject to and in accordance with the Notice of Sale and Bidding Instructions, this the 19th day of August, 2aa8. ATTEST: Mayor City of Denton, Texas City Secretary CERTIFICATE OF UNDERWRITER The undersigned hereby certifies as follows with respect to the bid and purchase of the City of Denton, Texas Utility System Revenue Bonds, Series 2008 (the "Bonds"}: 1. The undersigned is the duly authorized representative of the purchaser (the "Purchaser"} of the Bonds from the City of Denton, Texas (the "Issuer"}. 2. All of the Bonds have been offered to members of the public in a bona fide initial offering. For purposes of this Certificate, the term "public" does not include any bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers (including the Purchaser or members of the selling group or persons that are related to, or controlled by, or are acting on behalf of or as agents for the undersigned or members of the selling group}. 3. Each maturity of the Bonds was offered to the public at a price which, on the date of such offering, was reasonably expected by the Purchaser to be equal to the fair market value of such maturity. 4. Other than the obligations set forth in paragraph 5 hereof (the "Retained Maturity" or "Retained Maturities"}, the first pricelyield at which a substantial amount (i.e., at least ten (14} percent) of the principal amount of each maturity of the Bonds was sold to the public is set forth below. Principal Offering Principal Offering Amount Year of Price Amount Year of Price Ma.~.. Maturity (°/dYield) Maturin Maturity (%IYield) $ b34,404 2448 $'135,444 2018 545,444 2409 '1'14,444 2419 525,444 2414 815,004 2424 544,444 2411 855,404 2021 560,040 2012 944,404 2022 584,440 2413 945,400 2423 605,040 2014 1,004,000 2424 635,444 2415 1,454,444 2425 6'10,444 201b 1,145,440 2426 '144,444 241'1 1,1 b5,440 242'1 5. In the case of the Retained Maturities, the Purchaser reasonably expected on the offering date to sell a substantial amount (i.e., at least ten (10}percent} of each Retained Maturity at the initial offering pricelyield as set forth below: Principal Offering Principal Offering Amount Year of Price Amount Year of Price Maw., Maturi (°/dYield) Maturin Maturi %IYield} $ b30,004 2008 $'135,004 2018 545,444 2009 '1'10,404 2019 525,440 2010 815,404 2024 540,040 2011 855,004 2021 560,040 2012 900,004 2022 580,040 2013 945,004 2023 605,000 2014 1,004,000 2424 635,000 2015 1,054,000 2425 670,000 2016 1,105,000 2026 '100,000 241'1 1,1b5,440 242'1 6. Please choose the appropriate statement: } The Purchaser will not purchase bond insurance for the Bonds. ( }The Purchaser will purchase bond insurance from the "Insurer"} for a feelpremium of $ (the "Fee"}. The Fee is a reasonable amount payable solely for the transfer of credit risk for the payment of debt service on the Bonds and does not include any amount payable for a cost other than such guarantee, e.g., a credit rating or legal fees. The Purchaser represents that the present value of the Fee for each obligation constituting the Bonds to which such Fee is properly allocated and which are insured thereby is less than the present value of the interest reasonably expected to be saved as a result of the insurance on each obligation constituting the Bonds. The Fee has been paid to a person who is not exempt from federal income taxation and who is not a user or related to the user of any proceeds of the Bonds. In determining present value for this purpose, the yield of the Bonds (determined with regard to the payment of the guarantee fee} has been used as the discount rate. No portion of the Fee is refundable upon redemption of any of the Bonds in an amount which would exceed the portion of such Fee that has not been earned. 7. The Purchaser understands that the statements made herein will be relied upon, by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 19$6, and by Bond Counsel in rendering their opinion that the interest on the Bonds is excludable from the gross income of the owners thereof. EXECUTED and DELIVERED this day of August, 20~$. (Name of Underwriter or Manager} By Title} Exhibit 5 PAYING AGENT/REGISTRAR AGREEMENT THIS AGREEMENT entered into as of August 19, 2008 (this "Agreement"), by and between the City of Denton, Texas (the "Issuer"), and The Bank of New York Mellon Trust Company, National Association, a national banking association (the "Bank"). RECITALS WHEREAS, the Issuer has duly authorized and provided for the issuance of its Utility System Revenue Bonds, Series 2008 (the "Securities") in the aggregate principal amount of $15,290,000 such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Securities are scheduled to be delivered to the initial purchaser thereof on or about September 23, 2008; and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Ordinance" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Ordinance." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. "Bank Office" means the principal corporate trust office of the Bank as indicated on the signature page hereof. The Bank will notify the Issuer in writing of any change in location of the Bank Office. "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Ordinance" means a written request or ordinance signed in the name of the Issuer by the Mayor of the Issuer delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Ordinance" means the ordinance of the governing body of the Issuer pursuant to which the Securities are issued, certified by the City Secretary or any other officer of the Issuer and delivered to the Bank. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by such particular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.06 hereof and the Ordinance). "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Responsible Officer" when used with respect to the Bank means the Chairman orVice-Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above 2 designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity" means the date specified in the Ordinance the principal of a Security is scheduled to be due and payable. Section 2.02. Other Definitions. The terms "Bank," "Issuer," and Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.01. Duties of Paying_Agent. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Ordinance. Section 3.03. Reporting Requirements. To the extent required by the Code or the Treasury Regulations, the Bank shall report to the Holders and the Internal Revenue Service the amount of interest paid or the amount treated as interest accrued on the Bond which is required to be reported by the Holders on their returns of federal income tax. ARTICLE FOUR REGISTRAR Section 4.01. Security Register -Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register"), and, if the Bank Office is located outside the State of Texas, a copy of such books and records shall be kept in the State of Texas, for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re-registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be cancelled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Bonds. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Re is~ter. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders. The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank toprovide an up-to-date listing or to convert the information into written form. 4 The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Cancelled Bonds. All bonds surrendered to the Bank, at the designated Payment/Transfer Office, for payment, redemption, transfer, or replacement, shall be promptly cancelled by the Bank. The Bank will provide to the Issuer, at reasonable intervals determined by the bank, a bond evidencing the destruction of canceled bonds. Section 4.06. Mutilated, Destroyed, Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. Incase any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security, or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the furnishing to the Bank of indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on bonds or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent ofthe Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. (~ The Bank may exercise any ofthe powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the state- ments ofthe Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.04. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a segregated account to be held by the Bank solely for the benefit of the owners of the Securities to be used solely for the payment of the Securities, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collateralized with securities or obligations that are eligible under the laws of the State of Texas and to the extent permitted by the laws ofthe United States of America to secure and be pledged as collateral for such accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such account shall be made by check drawn on such account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank 6 for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof, and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemnification. To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction within the State of Texas to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for "Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1,1987, which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. ARTICLE SIX MISCELLANEOUS PROVISIONS hereto. Section 6.01. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties Section 6.02. Assi n.~. This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the 7 Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. hereof. Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. Merger, Conversion, Consolidation, or Succession. Any corporation into which the Bank may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Bank shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Bank shall be the successor of the Bank hereunder without the execution or filing of any paper or any further act on the part of either of the parties hereto, provided that the successor or resulting corporation is a bank, trust company, financial institution or other agency competent and legally qualified to act as Paying Agent/Registrar under this Agreement and the Order. The Bank shall provide immediate notice to the Issuer of any such pending merger, conversion, consolidation or of any such pending transfer to a successor corporation. Section 6.07. Severabili . In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.08. Benefits of A reg ement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.09. Entire A reg ement. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between his Agreement and the Ordinance, the Ordinance shall govern. Section 6.10. Counterparts. This Agreement maybe executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 6.11. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon sixty (60) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such appointment accepted and 8 (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereo fl, together with other pertinent books and records relating to the Securi- ties, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement. Section 6.12. Governing. Texas. This Agreement shall be construed in accordance with and governed by the laws of the State of 9 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, Dallas, Texas By _ Title 2001 Bryan Street 10th Floor Dallas, Texas 75201 CITY OF DENTON, TEXAS By Mayor 215 E. McKinney Denton, Texas 76201 SCHEDULE A Paying Agent/Registrar Fee Schedule AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Finance ACM. Jon Fortune ~T IR.TF,CT Consider approval of a resolution of the City Council of the City of Denton, Texas placing a proposal on the September 23, 2008 City Council public meeting agenda to adopt a 2008 Tax Rate that will exceed the lower of the rollback rate or the effective tax rate; calling two public hearings on a tax increase to be held on September 9, 2008 and September 16, 2008 and calling a third public hearing on the Fiscal Year 2008-2009 Annual Program of Services of the City of Denton to be held on September 9, 2008; requiring publication of a notice of the public hearings in accordance with the law; requiring the posting of the notice of the public hearings on a tax increase on the City's Internet website; requiring the posting of the notice on the City's public access channel; and providing an effective date. BACKGROUND The Texas Constitution and Texas Property Tax Code require taxing units to comply with specific guidelines in adopting tax rates. The guidelines are related to a concept known as truth- in-taxation. This concept is a way to make taxpayers aware of tax rate proposals and allow tax payers in certain circumstances, to roll back or limit a tax increase. The truth-in-taxation guidelines require taxing entities to calculate and publish their effective and rollback tax rates. The effective rate is the calculated rate that would provide the taxing unit approximately the same amount of revenue it received in the previous year on properties taxed in both years. This rate excludes taxes on properties no longer in the taxing unit and also excludes any growth due to new property values. The City of Denton's 2008 effective rate is $0.66502/$100 valuation. The proposed 2008 tax rate is $0.66652/$100 valuation, which exceeds the effective rate. It is important to note that the City of Denton's proposed tax rate remains unchanged. No tax rate increase is recommended for FY 2008-09. The rollback rate is a calculated maximum tax rate amount prior to voter approval. The rollback rate divides the total property tax revenue into support for maintenance and operations (M&0) taxes and debt service taxes. It provides approximately the same amount to revenue it spent in the previous year for maintenance and operations expenses, plus an extra eight percent. If a taxing unit adopts a tax rate higher than the rollback rate, the voters have the option to petition for an election to limit the size of the tax increase. The City of Denton's 2008 rollback rate is $0.71409/$100 valuation. In compliance with state law, staff published the effective and rollback rate calculation in the Sunday, August 3rd Denton Record Chronicle. The City Council was provided a copy of the notice on August 1, 2008. Agenda Information Sheet August 19, 2008 Page 2 Because the proposed tax rate exceeds the effective rate, state law requires the governing body to vote to place a proposal to adopt the rate on an agenda. In addition, state law requires that two public hearings be held on the proposed tax increase, with the second hearing occurring three to 14 days after the first. Publication of quarter-page notices ("Notice of Public Hearing on Tax Increase"} informing the public of the hearings and the publication of a quarter-page notice ("Notice of Tax Revenue Increase") prior to the adoption of the tax rate are also required. A new truth in taxation guideline in 2008 is the requirement of publishing a "Notice of Tax Revenue Increase" which states the percentage by which the proposed tax rate exceeds the lower of the rollback or effective tax rate, the dates of the two public hearings, and the date, time and location, including mailing address, where the governing body is scheduled to vote on the tax rate and the revenue comparisons. This notice will be published in the Denton Record Chronicle on Friday, September 19, 2008. In addition, the notice will appear on the City of Denton's Web site, http://www.cityofdenton.com and air on the public access channel. In addition to the state requirements for the truth in taxation legislation, the City Charter and Chapter 102 of the Texas Local Government Code require the City Council to set a public hearing on the FY 2008-09 Annual Program of Services. In compliance with the Charter and Chapter 102, we are also required to publish a notice of the public hearing in the Denton Record Chronicle not earlier than the 30th day or later than the 10th day before the date of the public hearing. The attached "Notice of Public Hearing on Budget" and "Notice of Public Hearing on Tax Increase" will appear in the Denton Record Chronicle on Sunday, August 24, 2008 and Sunday, August 31, 2008, respectively. It will also be posted on the City of Denton's ~Ueb site, htt ://www.cityofdenton.com and air on the public access channel. The City Council vote related to this item will be included in the "Notice of Public Hearing on Tax Increase". The Denton Central Appraisal District (DCAD) has changed how the average home value is calculated. In 2007, the homestead exemption amount was included in determining the average home value. For 2008, the average home value calculation excludes the homestead exemption. According to data from the (DCAD), from 2007 to 2008 the average home value in Denton increased by 14.5 percent. However, the parcel count for single family homes in Denton only increased 3.2 percent, and the market value of the parcel count increased by only 6.3 percent. DCAD attributes the significant increase in home value data to a new appraisal calculation software system implemented during the appraisal process in 2008. An unintended result of the calculation interpretation change and the appraisal methodology change is the report of "higher" taxes on the average home in Denton in the "Notice of Public Hearing on Tax Increase". So, although there is no tax rate increase in 2008, the notice shows a higher tax amount in 2008 than in 2007. This is due to the new calculation methodology. Agenda Information Sheet August 19, 2008 Page 3 ESTIMATED SCHEDULE August 19, 2008 September 9, 2008 September 16, 2008 September 23, 2008 PRIOR ACTION/REVIEW Vote to Place Proposal on Future Agenda Hold First Public Hearing Hold Second Public Hearing Adopt Tax Rate On Thursday, August 7, 2008, the Clty Council was provided information regarding the proposed FY 2008-09 Proposed Budget, including the proposed tax rate. FISCAL INFORMATION The proposed tax rate is included in the FY 2008-09 Proposed Budget. F,XTTTRTTC 1. Notice of Public Hearing on Tax Increase 2. Notice of Tax Revenue Increase 3. Notice of Public Hearing on Budget 4. Resolution Respectfully Submitted By: Bryan Langley Director of Finance Publish in August 31, 2008 Denton Record Chronicle Notice of Public Hearing on Tax Increase The City of Denton, Texas, will hold two public hearings on a proposal to increase total tax revenues from properties on the tax roll in the preceding tax year by 0.23 percent (percentage by which proposed tax rate exceeds lower of rollback rate or effective tax rate calculated under Chapter 26, Tax Code). Your individual taxes may increase at a greater or lesser rate, or even decrease, depending on the change in the taxable value of your property in relation tothe change in taxablevalue ofall other propertyand thetax rate that is adopted. The first public hearing will be held on September 9, 2008 at 6:30 p.m. in the City Council Chambers at City Hall, 215 E. McKinney Street, Denton, Texas 76201. The second public hearing will be on September 16, 2008 at 6:30 p.m. in the City Council Chambers at City Hall, 215 E. McKinney Street, Denton, Texas 76201. The members of the governing body voted on the proposal to consider the tax increase as follows: FOR: AGAINST: PRESENT and not voting: ABSENT: The average taxable value of a residence homestead in Denton, Texas last year was $136,546 (average taxable value of a residence homestead in the taxing unit for the preceding tax year, disregarding residence homestead exemptions available only to disabled persons or persons 65 years of age or older). Based on last year's tax rate of $0.66652 (preceeding year's adopted tax rate) per $100 of taxable value, the amount of taxes imposed last year on the average home was $910.11(tax on average taxable value of a residence homestead in the taxing unit for the preceding tax year, disregarding residence homestead exemptions available only to disabled persons or persons 65 years of age or older). The average taxable value of a residence homestead in Denton, Texas this year is $156,339 (average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only to disabled persons or persons 65 years of age or older). If the governing body adopts the effective tax rate this year of $0.66502 per $100 of taxable value, the amount of taxes imposed this year on the average home would be $1,039.69 (tax on average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only to disabled persons or persons 65 years of age or older). If the governing body adopts the proposed tax of $0.66652 per $100 of taxable value, the amount of taxes imposed this year on the average home would be $1,042.03 (tax on average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only to disabled persons or persons 65 years of age or older). Members of the public are encouraged to attend the hearings and express their views. Publish in September 19, 2008 Denton Record Chronicle Notice of Tax Revenue Increase The City of Denton, Texas, conducted public hearings on September 9, 2008 and September 16, 2008 on a proposal to increase the total tax revenues of the City of Denton, Texas from properties on the tax roll in the preceding year by 0.23 percent. The total tax revenue raised last year at last year's tax rate of $0.66652 for each $100 of taxable value was $40,587,734. The total tax revenue proposed to be raised this year at the proposed tax rate of $0.66652 for each $100 of taxable value, excluding tax revenue to be raised from new property added to the tax roll this year, is $40,728,659. The total tax revenue proposed to be raised this year at the proposed tax rate of $0.66652 for each $100 of taxable value, including tax revenue to be raised from new property added to the tax roll this year, is $41,933,167. The City Council of the City of Denton, Texas, is scheduled to vote on the tax rate that will result in that tax increase at a public meeting to be held on September 23, 2008 at the City Council Chambers in City Hall, 215 E. McKinney Street, Denton, Texas, 76201 at 6:30 p.m. Publish in August 24, 2008 Denton Record Chronicle NOTICE OF PUBLIC HEARING ON BUDGET The City Council for the City of Denton, Texas, will hold a public hearing on the Fiscal Year 2008-2009 Annual Program of Services (Budget), on Tuesday, September 9, 2008 at 6:30 p.m. in the City Council Chambers at City Hall, located at 215 East McKinney Street in Denton, Texas, 76201. The meeting will be held for the purpose of receiving community input on the Budget. THIS BUDGET WILL RAISE MORE TOTAL PROPERTY TAXES THAN LAST YEAR'S BUDGET BY $1,345,433, or 3.3%, AND OF THAT AMOUNT $1,204,508 IS TAX REVENUE TO BE RAISED FROM NEW PROPERTY ADDED TO THE TAX ROLL THIS YEAR. All interested citizens are encouraged to attend and express their views. ~:I~ur Docun7entslResolutions1081Budget Tex Rats Pu~~~c ~Iear~ng,doc RES~LUT'I~N ~~. A RESOLUTION F THE CITY COUNCIL QF THE CITY ~F DENTIN, TEAS PLA.CIN A PROPOSAL ~N THE SEPTEMBER 23, 2008 CITY COUNCIL PUBLIC MEETING AGENDA TO ADOPT A 2045 TAB RATE THAT WILL EMCEED THE LOWER OF THE ROLLBACK RATE OR THE EFFECTIVE TAx RATE; CALLING Two PUBLIC HEARINGS ON A TAB INCREASE TC ~E HELD ON SEPTEMBER 9, 2005 AND SEPTEMBER I6, 2008 AND CALLING A THIRD PUBLIC HEARING ON THE FISCAL YEAR 2005w200 ANNUAL PROGRAM OF SERVICES OF THE CITY OF DENTON TO BE HELD ON SEPTEMBER 9, 2005; REUIRTNO PUBLICATION OF A NOTICE OF THE PUBLIC HEARINGS IN ACCGRDANCE WITH THE LAW; REUIl~ING THE POSTIl~C~ OF THE NOTICE OF THE PUBLIC HEARINCxS ON A TAB INCREASE ON THE CITY' S INTERNET wEBSITE; REUIRINO THE POTINO OF THE NOTICE ON THE CITY'S PUBLIC ACCES C L; AND PRO~IDIN~ AN EFFECTIVE DATE. wHER.EAS, the City Council desires to adapt the Fiscal Year 208-20a9 Annual Frograrn of Ser~rices Budget} for the City of Denton, Texas; and WHEREAS, in order to adapt the Budget, the City Council moat first hold ~. public hearing an the Budget and provide native of sane in accordance with Article VIII "Budget" of the City Charter and other applicable law; and wHEREA, the C1ty Council desires to canslder adopting a tax rate of 0.66~~ per $100 valuation, which will exceed the lower of the rollback rate ar effective tax rate, in accordance with the requirements of the Texas Tax Code Chapter 26 Tax Cadet and to schedule two public hearings an the proposed tax increase; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLES: SECTION I, 'The findings set forth in the preamble of this Resolution are incorporated by reference into the body of this Resolution as if fu11y set Earth herein. SECTION 2. The City Council desires to consider adapting ~. tax rate far the 2008 tax year of $~.666~2 per $ I00 per valuation that wi11 exceed the lower of the rollback rate ar the effective tax rate. SECTION The City Council hereby approves the placement of an item an the September 2, 2~~8 City Council public meeting agenda to vote on a proposed tax rate of $0.6662 per $100 valuation that will exceed the lower of the rollback rate or the effective tax rate. SECTION 4. The City Council hereby calls t4vo public hearings on the proposed tax increase to be held in the City Council Chambers at City Hall located at ~ 15 East McKinney Street in Denton, Texas 76201 an September ~, 2008 and September 1~, 2408 at 6:0 P•m. The public hearings will not beheld until at least seven days aver notice of the public hearings have been published in the ~~n~on ~co~~ C'hronic~e, a newspaper having general circulation within the City, in the form of the attached Notice of Public Hearing on Tax Increase, which ~s made a ~:l~ur DacutnentslResalutions14811~ud~e# Tax Rats Public Hearing.doc part of this ~esalutian far all purposes. The pity Manager, or his designee, ~~ hereby directed to publish said notice in accordance with this Resolution and in accordance with Tax Code ~~.0~, The City Manager or his designee is directed to post e attached Notice of Public Hearing on Tax Increase on the City's Internet website and shall request that the Crty's public access television channel carry a ~~-second notice of the public hearing at the times and for the periods and in accordance with the requirements of Chapter ~~ ofthe Tax Code and other applicable law. A.t the public hearings, the City Council will afford adequate opportunity for both proponents and opponents ofthe tax increase to present their views SECTION 5. The City Council hereby calls a public hearing on the proposed Budget to be held in the City Council Chan~.bers at City Hall located at ~ 15 East Mcl~nney Street in Denton, Texas 7'~~01 an September 9, ~~~~ at ~.3~ p.>n. The public hearing will not be held until notice of the public hearing has been published in the ~~n~Qn Record-'h~o~a~~~, a newspaper having general circulatian within the City, in the farm of the attached Notice of Public Hearing an the Budget, which is made a part of this Resolution far all purposes. This notice shall be published not earlier than the 30~h or later than the ~ ~~~ day before the date of the public hearing. The City 1Vlanger, ar his designee, is hereby directed to publish said native and to provide such other public notice as may be required in accordance with this ~.esolution and in accordance with Article VIII of the City Charter, Chapter 1 ~2 of the Texas Local C~avernment Code and all other applicable law. SECTION ~. This Resolution shall became effective immediately upon its passage and approval at a regular meeting of the Cit~r Council of the City of Denton, Texas on this the 19#~ day of August, ~~~~, at which meeting a quorum was present and the meeting was held in accordance with the provisions of Tex. Gov't Code ~~51.~a1, e~ seq. The City Secretary is hereby directed to record this Resolution and the vote on the proposal to place the ite~n~ for a tax increase an the September 2~, ~~~5 City Council agenda. PASSED AND APPROVED this the day of ~~~8. MARK A~ B~URR~UHS, MAYOR ATTEST. JENNIFER wALTERS, CfI'Y SECIRETARY i . APPROVED AS T LEGAL FARM. JOHN 1VI. IIC~HT, INTERhVI CITY ATTORNEY BY: t Page ~ ~:I~ur DocumentslR~solut~onsl~$IBudge# Tax Rai ~ub~ic ~ea~ing.~ac 01C1~ ~1~1~~r ark ~4. Bu~`~'~uh, N~a~yor ~~.r~~e Heins R~d~ ~ren~ Jacl~ T~an~on Cris t~~ Aete ~np7 ll~~or Pry Tens ,doe ulroy, ~~~~(~ ~'Or ~Ot~d ~ nS~ Pale 3 Publish in August ~1, 208 ~err~or~ Record Chr~r~icfe Notice of Public Hearing on Tax Increase The City of Benton, Texas, will hold two public hearings an a proposal to increase total tax revenues from properties an the tax roll in the preceding tax year by a,23 percent percentage by which proposed tax rate exceeds louver of rollback rate or effective tax rate calculated under Chapter ~~, Tax Cade. Your 'individual taxes may increase at a greater or lesser rate, or even decrease, depending on the change in the taxable value of your property in relation to the change in taxable value of all other property and the tax rate that is adopted. The first public hearing will be held are September 9, 2D~S at 6:3a p.m, in the City Council Chambers at City Hall, ~~.5 E. i111cKinney Street, Denton, Texas 7~~a1. The second public hearing will be an September ~6, ~D08 at 6:~a p.m. in the pity Council Chambers at City Hall, X15 E. f~cKinney Street, Denton, Texas 7G~01. The members of the governing body voted on the proposal to consider the tax increase as fallauvs: ~~R: AGAINST: PRESENT and not voting; ABSENT; The average taxable value of a residence homestead in Denton, Texas last year was ~,36,54G average taxable value of a residence homestead in the taxing unit far the preceding tax year, disregarding residence homestead exemptions available only to disabled persons ar persons 65 years of age or older. based ors last year's tax rate of ~a.~G~5Z ~preceeding yeas adopted tax rated per MoD of taxable value, the amount of taxes imposed last year an the average home was 91a~1~ {tax on average taxable value of a residence homestead in the taxing unit for the preceding tax year, disregarding residence homestead exemptions available only to disabled persons ar persons ~5 years of age or alder. The average taxable value of a residence homestead in Denton, Texas this year is x.55,339 average taxable value of a residence homestead ire thetaxing unit farthe current tax year, disregarding residence homestead exemptions available only to disabled persons ar persons 65 years of age or alder. If the governing body adapts the effective tax rate this year of ~.6~50~ per ~4~ of taxable value, the arr~ount of taxes imposed this year on the average borne would be ~,439.G9 tax are average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only to disabled persons ar persons ~5 years of age ar olden. If the governing body adapts the proposed tax of Q.G66~~ per x.00 of taxable value, the amount of taxes imposed this year an the average home would be ~,~42~43 tax an average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence han~estead exemptions available only to disabled persons or persons GS years ofage ar olden, Nierr~bers of the public are encouraged to attend the hearings and express their views Pubi~sh in ~~nfari Record Cl~r~nicre on Aug, ~4, ~~a8 NOTICE OF PUBLIC HEARING ON BUDGET The pity oncil for the City of Denton, Texas, mill hold public hearing on the Fiscal dear 2o~S ~ ~~09 Annual Program of Services ~Budget~, on Tuesday, September 9, 200 at ~.3~ p.m. in the pity council ha~nbers at qty Hall located at Z 1 S East cI~ma.ey Street in Denton, Texas ?6~~~. The meeting ~v~ll be held for the purpose of receiving comrtnunity input on. the budget. THIS BUDGET WILL RAISE MORE TOTAL PROPERTY TAXES THAN LAST YEAR'S BUDGET BY $1,345,433 or 3.3%, AND OF THAT AMOUNT $1,204,508 IS TAX REVENUE TO BE RAISED FROM NEW PROPERTY ADDED TO THE TAX ROLL THIS YEAR. Alt interested eit~~ens are encouraged to attend and express their vies. s:lour docurnentslmiscellaneousl0$lnatice of public bearing ~n bu~get.d~c AGENDA INFORMATION SHEET AGENDA DATE: August 19, 2008 DEPARTMENT: Planning and Development Department ACM: Fred Greene SUBJECT - MPC07-0001 (Inspiration Master Planned Community) Consider the adoption of an ordinance of the City of Denton, Texas, for a zoning change from a Agriculture (A), Industrial Center General (IC-G), Neighborhood Residential 2 (NR-2), Regional Center Residential 1 (RCR-1), Community Mixed Use Employment (CM-E), and Planned Development 13 8 (PD-13 8) zoning districts to the Inspiration Master Planned Community (MPC) zoning district classification and use designation; the area for zoning change encompasses 3,331 acres of land located on both sides of I-35W between Robson Ranch Road and Vintage Boulevard and is legally described as certain tracts of land in the E. Pizono Survey, Abstract Number 1269, G. Pettingale Survey, Abstract Number 1041, J. Taft Survey, Abstract Number 1269, G. West Survey, Abstract Number 1393, B.B.B. & C. Railroad Company Survey, Abstract Number 158, S. Pritchett Survey, Abstract Number 1021 and the McCutchin Lands known as Pilot Knob Ranch in the City of Denton, Denton County, Texas, providing for a penalty in the maximum amount of $2,000.00 for violations thereof, severability and an effective date. The Planning and Zoning Commission recommends approval (7-0). BACKGROUND Applicant: L. Reichhart, Spring Brook Planning Group Grapevine, TX This rezoning request was tabled from the August 5, 2008 City Council meeting. The applicant was directed to work with city staff to submit documents to more clearly address Subchapter 35.7.12.6.E. Findings, of the Denton Development Code. This section requires the applicant to propose a Development Plan which sets forth the phasing of the infrastructure, as well as plans for financing the infrastructure and responsibilities for payment. City officials met with the applicant and determined the criteria that would satisfy the Findings requirements. This information was also provided to the applicant in a letter dated July 17, 2008. The applicant is currently in the process of gathering the information and performing the required analyses related to these requirements. Once the applicant completes the analyses and submits them to staff for review, this case will be presented to City Council as a Public Hearing Item. On August 5, 2008 Clty Council adopted a motion to table this item to September 9, 2008, and to consider this as a public hearing item at that time. PRIOR ACTION/REVIEW (Council, Boards, Commissions) 1. July 1 1, 2007 Planning and Zoning Commission Work Session 2. August 8, 2007 Planning and Zoning Commission Work Session on Planning Issues 3. August 22, 2007 Planning and Zoning Commission Work Session 4. March 26, 2008 Planning and Zoning Commission Work Session 5. April 23, 2008 Planning and Zoning Commission Public Hearing 6. June 3, 2008 City Council Work Session 7. June 17, 2008 City Council Public Hearing 8. July 15, 2008 City Council Item for Individual Consideration 9. August 5, 2008 City Council Item for Individual Consideration a. Item taken off table, motion was made to bring the case back as a public hearing item at the September 9th City Council meeting b. Item tabled to September 9th City Council meeting Prepared by: Jane Gurney Associate Planner Respectfully submitted: N4~d'~- Mark Cunningham, AICP Director of Planning and Development Handout to City Council ~:lou~ l~ocumentslR~so~uti~ns1~81Bu~~et Tax Rats Pubic H~aring,doc Item 4D ~~ RES~LUTIDN N. A RES~LUTIDN DF THE CITY ~t~N~IL DF THE CITY' ~F DENTDN, TEAS PLAINC A PROP~AL ~N THE SEPTEIVIBER Z3, 200 CITY ~~TNCIL PI~BLI~ MEETING AGENDA T~ ADDPT A ZOOS TAB RATE THAT wILL ExEED THE LDwER DF THE R~LL~A.I~ RATE ~ THE EFFETI~E TA.~ RATE; ALLINC~ Two PUBLIC HEARINGS QN A TAB INR~AE T~ BE HELD ~N SEPTEMBER 9, ZOOS AND SEPTEMBER 1 ~, 245 AND ALLIN~x A THIRD PUBLIC HEARING ON THE FIAL YEAR Z008~ZOO ANNC~AL PR~CRAM OF SERVICES DF THE iTY DF DENTDN T~ BE HELD ~N SEPTEMBER , 20~~; REUIRIN~ PL~BLICATI~N DF A NOTICE ~F THE PLIC HEARINCrS IN ACCORDANCE wITH THE LAw; REUIRIN THE PDSTIN ~F THE NOTICE ~F THE PUBLIC HEARINGS ~N A TAB INCREASE ON THE CITY' INTERNET wEEITE; REUIRIN THE P~TINC QF THE NOTICE DN THE ITY~'S PUBLIC ACCESS C L; AND PR~~ID~N AN EFFECTS DATE. WHEREAS, the City Council desires to adapt the Fiscal Year Zoos-2009 Annual Program of Services Budget} for the City of Denton, Texas; d WHEREAS, in order to adopt the Budget, the City council must first hold a Public hearing on the Budget and provide notice of same in accordance with Article VIII "Budget" of the City charter and other applicable law; and WHEREAS, the pity Council desires to consider adopting a tax rate of X0.66652 per I ~0 valuation, which will exceed the lower of the rollback rate or effective tax rate, in accordance with the requirements of the Texas Tax Code Chapter 26 Tax Coded and to schedule two public hearings on the proposed tax increase; NDw, THEREFORE, THE COUNCIL DF THE CITY OF DENTIN HEREBY RESOLVES: SECTION 1, The findings set forth in the preamble of this Resolution are incorporated by reference into the body of this Resolution as if fully set forth herein, SECTION Z. The pity council desires to consider adopting a tax rate for the ZOOS tax year of ~O.6G62 per ~ 100 per valuation that will exceed the lower of the rollback rate or the effective tax rate, SE~TIQN ~. The City Council hereby approves the placement of an item on the September 2, Z~o~ City Couu.cil public meeting agenda to vote on a proposed tax rate of 0.6652 per Ioo valuation that will exceed the lower of the rollback rate or the effective tax rate. SECTION 4. The pity Council hereby calls two public hearings on the proposed tax increase to be held the Oity Council Chambers at City Hall located at ~ 15 East Mcl~inney Street in Denton, Texas 76201 on September ~, 2~oS and September 16, 2008 at 6:30 p.m, The public hearings will not be held unt11 at least seven days after notice of the public hearings have been published in the ~en~~~ ~eco~a~ '~t~o~ic~~, a newspaper having general circulation within the City, in the form of the attached Notice of Public Hearing on Tax Increase, which is made a :14ur DocurnentslR.esolutians1081Budget Tax R~.~e ~~ab~ic ~iearir~g,~oc part of this Resolution for all purposes. The City ~Vlanager, ar his designee is hereby directed to publish said nat~ce m accordance with this Resolution and in accordance w1~ Tax Code ~~G.~G. The City manager ar his designee is directed to post the attached Notice of Public Hewing on Tax Increase on the City's Internet website and shall request that e City's public access television channel carry a b~-second notice of the public hearing at the times and for the periods and in accordance with the requirements of Chapter ~~ of the Tax Cade and other applicable law. ,At the public hearings, the City Council will afford adequate opportunity far both proponents and opponents of the tax increase to present their views. SECTI~~ 5. The City Council hereby calls public hearing on the proposed budget to be held in the City Council Chambers at City Hall located at 2 ~ 5 East cl~inney Street in I~entan, Texas 7d~~1 an September 9, ~~~8 t ~:3~ p.m. The public hearing will not be held until notice of the public hearing has been published in the ~en~~~ eo~d-~r~nic~~, a newspaper having general circulation within the City, in the fon of the attached I~oti.ce of Public Hearing an the Eudget, which is made a part of this Resolution far all purposes. This notice shall be published not earlier than the ~ Ot~ ar later than the 1 ~~~ day before the date of the public hearing. The City ~Vlanger, ar his des~griee, is hereby directed to publish said notice and to provide such other public notice as may be required in accordance v~ith this Resolution and in accordance with Article V~ of the City Charter, Chapter ~ ~~ of the Texas Local Government Cade and all other applicable law. SECTION ~, This Resolution shall become effective immediately upon its passage and approval at a regular meeting of the City Council of the City of Denton, Texas on this the 19~' day of August, ~a~g, at which meeting a quorum was present and the ~.eetxng was held in accordance urith the provisions of Tex. Gov't Cade 5~ 1.~~1, e~ seq. The City Secretary is hereby directed to record this Resolution and the vote on the proposal to place the item far a tax increase on the September ~, OaS City Council agenda. PASSED A APPROVED this the day of , 2aa8. 1VIAR A. BURRQ~TGH~, MAYOR ATTEST. JE~`E wALTERS, CITY SECRETARY 1 . APPROVED AS T~ LEGAL FORM. JOHN . I~1~IGHT, INTERIM CITY' ATTORNEY i . Page ~ .v :I~ur Documen~slResolutions1081~udget'Tax Rate Public ~earit~g.doc ~~ ounci~ ~Vlenlbe~ M~rl~ ~. urrot~gh}Mayor h~r~ye Heg~n r~dy Moreno Jaek Ton~son Chris t~s Peke ~arn~, Mayor Fro Teri Joe ~Vlulroy, Page Vo#ed Far Vo~~ A~ain~t Publish in August ~1, ~~08 Der~~arr Record-Cf~ra~r~cle Notice of Public Hearing on Tax Increase The City of aentan, Texas, vuill hall tvuo public hearings an a propasal to increase total tax revenues frar~ properties on the tax roll in the preceding tax year by x.23 percent percentage by which proposed tax rate exceeds lovwrer of rollback rate or effective tax rate calculated under Chapter 2G, Tax Cade. Your individual taxes ray Increase at a greater or lesser rate, ar even decrease, depending on the change in the taxable value of your property in relation to the change in taxable value of all other property and the tax rate that is adopted. The first public hearing will be held on September 9, 208 at G:~ p.m. in the City Council Chambers at City Hall, Z~5 E.1111cKinney Street, aentan, Texas 16~~~. The second public hearing will bean September 1G, ~0~8 at 6:~0 p,m. in the City Council Chambers at City Mall, X15 E. McKinney street, Penton, Texas 7G~~1. The members of the governing body voted on the propasal to consider the tax increase as follows: FAR: AGAINST. I~RE~NT and not voting; ABSENT: The average taxable value of a residence homestead ,in Penton, Texas last year was ~36,54~ {average taxable value of a residence homestead in the taxing unit far tl~e preceding tax year, disregarding residence homestead exemptions available only to disabled persons ar persons b5 years of age ar olden. based an last year's tax rate of 0.66fi5~ {preceding year's adopted tax rated per ~4~ of taxable value, the amount of taxes imposed last year an the average home was $910.1 {tax an average taxable value of a residence homestead in the taxing unit for the preceding tax year, disregarding residence hor~estead exemptions available only to disabled persons or persons fi5 years of age ar olden. The average taxable value of a residence homestead in Penton, Texas this year is $156,39 average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exernptians available only to disabled persons or persons 65 years of age or older}, If the governing body adopts the effective tax rate this year of ~.~b5~2 per 19~ of taxable value, the amount of taxes imposed this year an the average home would be $1,039.69 tax an average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only to disabled persons or persons G5 years of age orolder~. If the governing body adopts the proposed tax rate of ~.G6fi5~ per ~.DO of taxable value, the amount of taxes imposed this year an the average borne would be 1,04~.~3 tax on average taxable value of a residence homestead in the taxing unit for the current tax year, disregarding residence homestead exemptions available only tQ disabled persons ar persons G5 years of age ar alders. Members of the pudic are encouraged to attend the hearings and express their views ~u~lish in Derato~ Record-Cf~ror~a~de on Auk. ~4, ~f108 NOTICE OF PUBLIC HEARING ON BUDGET The City Council far the City of Denton, Texas, will hold a public hewing on the Fiscal dear ~~~5 - ~a~ Annual Froratn of services ~~udet~, an Tuesday, September 9, ~aa at ~.~ p.m. ~n tl~e City Council Chambers at City Hall located at ~1 East 1V~cI~inney street in Denton, Teas 7~~a ~ . The mectxn mill be held far the purpose of recel~ing C~n'nnun~ty 1npUt on the budget. THIS BUDGET WILL RAISE MORE TOTAL PROPERTY TAXES THAN LAST YEAR'S BUDGET BY $1,345,433 OR 3.3%, AND OF THAT AMOUNT $1,204,508 IS TAX REVENUE TO BE RAISED FROM NEW PROPERTY ADDED TO THE TAX ROLL THI5 YEAR. ill interested citizens are encouraged to attend and express their ~riev~s. s;lour doe~mentslmisceilan~ousl~~lnotice afpubli~ hearing on budget.doc