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GEORGT W NAMLRE V 2001: ORD IN DR l
E#1 ti 11 leg i• 1 i• iI CIN 1
STATEMENT, A PAYING AGENT/REGISTRAR AGREEMENT AND OTHER
AGREEMENTS RELATED TO THE ISSUANCE AND SALE OF 1 BONDS,
AUTHORIZING OTHER TO THE ISSUANCEOF 1 BONDS;
! DECLARING AN EMERGENCY
TABLE OF CONTENTS
Page
RECITALS 1
SECTION L CENTURY PLAN AND DEFINITIONS 1 1 1 . 1 . . ..........................1 1
SECTION 2. AMOUNT AND PURPOSE OF THE SERIES 2001 BONDS. ............ . .... I
SECTION 3, DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND
MATURITIES OF THE SERIES 2001 BONDS 1 0 1 1 1 4 1 4 ... , 9 1 1 .. 0 .. 011 1 ... 2
SECTION 4. INTEREST.........................................................2
SECTION 5. CHARACTERISTICS OF THE SERIES 2001 BONDS. I 1 3
(a) Re i�tion, Transfer, and Exchange; Authentication ...................... 3
(b) Payment of Series 2001 Bonds and Interest ............................ 4
(c) In General.....................................................4
(d) Substitute Pang A eg nt/Reaistrar .............. 1 . 0 0 ............... 1 .. 5
(e) Book -Entry -Only System for Series 2001 Bonds .. . ..................... 5
(f) Successor Securities Depository; Transfers Outside Book -Entity
Systems....................................................6
(g) Payments to Cede & Co ........ . ....................... 1 , .. , .... , . 6
(h) DTC Blanket Letter of Representations ................. . ............. 6
SECTION 6. FORM OF SERIES 2001 BONDS ....................................... 7
SECTION 7. PLEDGE OF PLEDGED REVENUES ............... . ..................... 7
SECTION & SPECIAL FUNDS 7
SECTION 9. REVENUE FUND .................................................... 7
SECTION 10, FLOW OF FUNDS .................................................. 7
SECTION 11. INTEREST AND SINKING FUND. ................. 8
SECTION 12, RESERVE FUND ................................................... 9
SECTION 13. EXCESS BOND PROCEEDS ............. . ........................... 12
SECTION 14. DEFICIENCIES - EXCESS PLEDGED OR NET REVENUES .............. 1 12
SECTION 15. INVESTMENT OF FUNDS - VALUATION" TRANSFER OF
INVESTMENT INCOME, 12
SECTION 16. PAYMENT OF PARITY OBLIGATIONS. .............................. 13
SECTION 17, RATES AND CHARGES ............................................. 13
SECTION 18. GENERAL COVENANTS ........................................... 14
GEORGTWNILMLREV2001: ORDIN.DRi 1
(a) Performance..................................................14
(b) CitsLegal Authority........................................... 14
(c) Title.........................................................14
(d) Liens .................... 14
(e) Operation of System; No Free Service .............................. .
15
(f} Further Encumbrance............................................ 15
(g) Sale or Disposal of Property...................................... 15
(h) Insurance.....................................................15
(i) Governmental Agencies.......................................... 4 17
0) No Competition................................................17
�)
Di=uenation of System ........................................ 0 17
SECTION 19. RECORDS AND ACCOUNTS - ANNUAL AUDIT ....................... 17
SECTION 20, COVENANTS REGARDING TAX EXEMPTION OF INTEREST
ON THE BONDS.................................................18
SECTION 21, CONTINUING DISCLOSURE UNDERTAKING ......................... 20
(a) Annual Reports................................................20
(b) Material Event Notices.......................................... 21
(c) Limitations Disclaimers and Amendments ................... 22
SECTioN 22, ISSUANCE OF ADDITIONAL PARITY OBLIGATIONS .................. 23
SECTION 23. FURTHER REQUIREMENTS FOR ADDITIONAL PARITY
OBLIGATIONS..................................................24
SECTION 24. ISSUANCE OF SUBORDINATE LIEN OBLIGATIONS ................... 24
SEcTioN 25. ISSUANCE OF SPECIAL PROJECT OBLIGATIONS ..................... 25
SEcTioN 26. LIMITED OBLIGATIONS OF THE CITY .. 1 0 4 .. 1 ....................... 25
SECTION 27. SECURITY FOR FUNDS............................................ 25
SECTION 28, REMEDIES IN EVENT OF DEFAULT 1 ............... memo ............. 25
SECTION 29, DEFEASANCE OF SERIES 2001 BONDS .............................. 25
SEcTioN 30. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED
SERIES 2001 BONDS.............................................27
(a) Replacement Bonds............................................. 27
(b) pplication for Reeelooleplacement Bonds................................. 27
(c) No Default Occurred............................................ 27
(d) Charge for Issuing Replacement Series 2001 Bonds .................:... 27
(e) Authority for Issuing Replacement Series 2001 Bonds ................... 28
SECTION 31. AMENDMENT OF ORDINANCE.................................... 28
SEcTioN 32, SALE AND DELIVERY OF SERIES 2001 BONDS ....................... 30
SEcTioN 33. CUSTODY, APPROVAL AND REGISTRATION OF SERIES 2001
BONDS; BOND COUNSEL'S OPINION, BOND INSURANCE AND
CUSIP NUMBERS................................................ 30
SEcTioN 34, APPROVAL OF OFFICIAL STATEMENT .............................. 31
GEORGIWN/UrILREV2001: ORDIN.DRI ll
SEmoN 35, INSURANCE PROVISIONS ......................................... 31
SEcTioN 36. NO RECOURSE AGAINST CITY OFFICIALS . . ...................... 1, 31
SECTIoN 37, FURTHER ACTIONS ........................ . ...................... 31
SECTION 38. INTERPRETATIONS............................................... 32
SEcTioN 39, INCONSISTENT PROVISIONS ...................................... 32
SECTION 40. INTERESTED PARTIES ... .......................................... 32
SEcTioN 41. INCORPORATION OF RECITALS ................................... 32
SECTION 42. SEVERABILITY................................................... 32
SEcTioN 43. REPEALER.......................................................32
SECTION 44. EMERGENCY .................................................... 32
SECTION 44. EFFECTIVE DATE ................................................. 32
Signaturesand Seal............................................................33
Exhibit A - Definitions
Exhibit B - Farm of Series 2001 Bond
Exhibit C - Description of Amual Financial Information
GEORGTWN/UTILREV2001: ORDIN.DRI m
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STATE OF TEXAS §
COUNTY OF WILLIAMSON §
CITY OF GEORGETOWN §
WHEREAS, the City has determined to issue $1,910,000 of revenue bonds for the purpose of
improvements and extensions to the City's System (hereinafter defined) and payment of professional
services including legal, fiscal, architectural, engineer and any costs of issuance and the City Council deems
it necessary and desirable to issue such bonds at this time; and
WHEREAS, the Series 2001 Bonds (hereinafter defined) authorized by this Ordinance are being
issued and delivered pursuant to the City Charter and to Chapter 1502, Texas Government Code, as
amended, and other applicable laws; and
WHEREAS, it is hereby officially found and determined that the meeting at which this Ordinance
was passed was open to the public, and public notice of the time, place and purpose of said meeting was
given, all as required by Chapter 551, Texas Government Code.
THEREFORE, By 1 COUNCIL 1 OF
GEORGETOWN,
SEcnoN 1. CENTURY PLAN AND DEFINITIONS. (a) Centue Plan. The City hereby
finds that the issuance of the bonds implements Finance Policy 14.00 of the Century Plan - Policy Plan
Element, which states: "All municipal operations are conducted in an efficient businesslike manner and
different financial resources for both current and future needs are provided," and Utilities Energy Policy
12.00 which states "City owned, sponsored or managed utilities provide safe, adequate and reliable
services to all customers;" and further finds that the enactment of this Ordinance is not inconsistent or in
conflict with any other Century Plan Policies.
(b) Definitions. For all purposes of this Ordinance, except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in Exhibit A to this Ordinance have the meanings
assigned to them in Exhibit A.
GEORGT W N/UTILRE V 2001: ORDIN.DR I
1
bonds of the City further described in Section 3 of this Ordinance and herein defined as the Series 2001
Bonds are hereby authorized to be issued and delivered in the aggregate principal amount of $1,910,000
FOR THE PURPOSE OF ]IMPROVEMENTS AND EXTENSIONS TO THE CITY'S UTILITY
SYSTEM (HEREINAFTER DEFINED) AND PAYMENT OF PROFESSIONAL SERVICES
INCLUDING LEGAL, FISCAL, ARCHITECTURAL, ENGINEER AND COSTS OF
SECTION 3. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND
MATURITIES OF THE SERIES 2001 BONDS. Each bond issued pursuant to this Ordinance for
the purpose described in Section 2 of this Ordinance shall be designated: "CITY OF GEORGETOWN,
TEXAS UTILITY SYSTEM REVENUE BONDS, SERIES 2001," and initially there shall be issued,
sold, and delivered hereunder fully registered bonds, without interest coupons, dated April 15,2001 , in the
respective denominations and principal amounts hereinafter stated, numbered consecutively from R4
upward (except the initial Bonds delivered to the Attorney General of the State of Texas which shall be
numbered T-1 upward), payable to the respective initial registered owners thereof (as designated in
Section 32 hereof), or to the registered assignee or assignees of said bonds or any portion or portions
thereof (in each case, the "Registered Owner"), and the Series 2001 Bonds shall mature and be payable
serially on August 15 in each of the years and in the principal amounts, respectively, as set forth in the
following schedule:
Year Principal Amount Year Principal Amount
2001 $115,000 2012 $ 90,000
2002 55,000 2013 905000
2003 55,000 2014 95,000
2004 60,000 2015 105,000
2005 60,000 2016 110,000
2006 65,000 2017 115,000
2007 70,000 2018 1207000
2008 70,000 2019 125,000
2009 75,000 2020 130,000
2010 80,000 2021 140,000
2011
85,000
SECTION 4. INTEREST. The Series 2001 Bonds scheduled to mature during the years,
respectively, set forth below shall bear interest from the dates specified in the FORM OF BOND set forth
in Exhibit B to this Ordinance to their respective dates of maturity or redemption prior to maturity in the
manner and at the following rates per annum:
GEORGTWNWILREV2001: ORDIN.DRI 2
Year of
Maturity
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Year of
Interest Rate Maturi Interest Rate
% 2012 %
2013
2014
2015
2016
2017
2018
2019
2020
2021
Said interest shall be payable in the manner provided and on the dates stated in the FORM OF BOND set
forth in Exhibit B to this Ordinance.
SEmoN 5. CHARACTERISTICS OF THE SERIES 2001 BONDS. (a) Registration,
Transfer, and Exchange; Authentication. The City shall keep or cause to be kept at the designated office
for payment of The Bank of New York, New York, New York (the "Paying Agent/Registrar") books or
records for the registration of the transfer and exchange of the Series 2001 Bonds (the "Registration
Books"), and the City hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep
such books or records and make such registrations of transfers and exchanges under such reasonable
regulations as the City and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall
make such registrations, transfers and exchanges as herein provided. The Paying Agent/Registrar
Agreement between the City and the Paying Agent/Registrar, in substantially the form presented to the City
Council at the meeting at which this Ordinance was considered, is hereby approved and the Mayor and
City Secretary of the City are hereby authorized to execute the Paying Agent/Registrar Agreement and
approve any changes in the final form thereof.
The Paying Agent/Registrar shall obtain and record in the Registration Books the address of
the registered owner of each Series 2001 Bond to which payments with respect to the Series 2001 Bonds
shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying
Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments
shall not be mailed unless such notice has been given. To the extent possible and under reasonable
circumstances, all transfers of the Series 2001 Bonds shall be made within three business days after request
and presentation thereof. The City shall have the right to inspect the Registration Books during regular
business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the
GEORGTWN/UTILREV2001: ORDIN.DRI 3
Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by
any other entity. The Paying Agent/Registrar's standard or customary fees and charges for making such
registration, transfer, exchange and delivery of a substitute Series 2001 Bond or Series 2001 Bonds shall
be paid as provided in the FORM OF BOND set forth in Exhibit B to this Ordinance. Registration of
assignments, transfers and exchanges of Series 2001 Bonds shall be made in the manner provided and with
the effect stated in the FORM OF BOND set forth in Exhibit B to this Ordinance. Each substitute Series
2001 Bond shall bear a letter and/or number to distinguish it from each other Series 2001 Bond.
Except as provided in (c) below, an authorized representative of the Paying Agent/Registrar
shall, before the delivery of any such Series 2001 Bond, date and manually sign the Paying
Agent/Registrar's Authentication Certificate, and no such Series 2001 Bond shall be deemed to be issued
or outstanding unless such Certificate is so executed. The Paying Agent/Registrar Promptly shall cancel
all paid Series 2001 Bonds and Series 2001 Bonds surrendered for transfer and exchange. No additional
ordinances, orders or resolutions need be passed or adopted by the governing body of the City or any
other body or person so as to accomplish the foregoing transfer and exchange of any Series 2001 Bond
or portion thereof, and the Paying Agent/Registrar shall provide for the preparation, execution and delivery
of the substitute Series 2001 Bonds in the manner prescribed herein. Pursuant to Chapter 1201, Texas
Government Code, and particularly Subchapter D thereof, the duty of transfer and exchange of Series 2001
Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said
Certificate, the transferred and exchanged Series 2001 Bond shall be valid, incontestable and enforceable
in the same manner and with the same effect as the Series 2001 Bonds which initially were issued and
delivered pursuant to this Ordinance, approved by the Attorney General and registered by the Comptroller
of Public Accounts.
(b) Payment of Series 2001 Bonds and Interest. The City hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal of and interest on the Series 2001 Bonds,
all as provided in this Ordinance. The Paying Agent/ Registrar shall keep proper records of all payments
made by the City and the Paying Agent/Registrar with respect to the Series 2001 Bonds.
(c) In General The Series 2001 Bonds (i) shall be issued in fully registered form, without
interest coupons, with the principal of and interest on such Series 2001 Bonds to be payable only to the
registered owners thereof, (ii) may and shall be redeemed prior to their scheduled maturities, (iii) may be
transferred and assigned, (iv) may be exchanged for other Series 2001 Bonds of the same Series, (v) shall
have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and
interest on the Series 2001 Bonds shall be payable, and (viii) shall be administered and the Paying
Agent/Registrar and the City shall have certain duties and responsibilities with respect to the Series 2001
Bonds, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF
BOND set forth in Exhibit B to this Ordinance. The Series 2001 Bonds initially issued and delivered
pursuant to this Ordinance are not required to be, and shall not be, authenticated by the Paying Agent/
Registrar, but on each substitute Series 2001 Bond issued in exchange for any Series 2001 Bond or Series
2001 Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING
GEORGTWNAYMREV2001: ORDIN.DRI 4
AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF
BOND.
(d) Substitute Pang A eg nt/Registrar. The City covenants with the registered owners of the
Series 2001 Bonds that at all times while the Series 2001 Bonds are outstanding the City will provide a
competent and legally qualified bank, trust company, financial institution or other entity to act as and
perform the services of Paying Agent/Registrar for the Series 2001 Bonds under this Ordinance, and that
the Paying Agent/Registrar will be one entity. The City reserves the right to, and may, at its option and to
the extent permitted by law, (i) act in the capacity of Paying Agent/Registrar or (ii) change the Paying
Agent/Registrar upon not less than 30 days written notice to the Paying Agent/Registrar, to be effective at
such time which will not disrupt or delay payment on the next principal or interest payment date after such
notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger,
acquisition or other method) should resign or otherwise cease to act as such, the City covenants that
promptly it will assume the duties or will 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/Regis w, the previous Paying Agent/Registrar promptly shall transfer and
deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating
to the Series 2001 Bonds, to the new Paying Agent/Registrar designated and appointed by the City. Upon
any change in the Paying Agent/Registrar, the City promptly will cause a written notice thereof to be sent
by the new Paying Agent/Registrar to each registered owner of the Series 2001 Bonds, by United States
mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar.
By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have
agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each
Paying Agent/Registrar.
(e) Book-Entr,Y_Only System for Series 2001 Bonds. The Series 2001 Bonds issued in
exchange for the Series 2001 Bonds initially issued to the underwriter specified in Section 32 herein shall
be initially issued in the form of a separate single fully registered Series 2001 Bond for each of the maturities
thereof. Upon initial issuance, the ownership of each such Series 2001 Bond shall be registered in the name
of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and except as
provided in subsection (f) hereof, all of the outstanding Series 2001 Bonds shall be registered in the name
of Cede & Co., as nominee of DTC.
Withrespect to Series 2001 Bonds registered in the name of Cede & Co., as nominee of DTC,
the City and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers
and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf
DTC was created ("DTC Participant") to hold securities to facilitate the clearance and settlement of
securities transactions among DTC Participants or to any person on behalf of whom such DTC Participant
holds an interest in the Series 2001 Bonds. Without limiting the immediately preceding sentence, the City
and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy
of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the
Series 2001 Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered
GEORGTWN/IMLREV2001: ORDIN.DRI 5
owner of the Series 2001 Bonds, as shown on the Registration Books, of any notice with respect to the
Series 2001 Bonds or (iii) the payment to any DTC Participant or any other person, other than a registered
owner of Series 2001 Bonds, as shown in the Registration Books of any amount with respect to principal
of or interest on the Series 2001 Bonds. Notwithstanding any other provision of this Ordinance to the
contrary, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose
name each Series 2001 Bond is registered in the Registration Books as the absolute owner of such Series
2001 Bond for the purpose of payment of principal and interest with respect to such Series 2001 Bond,
for the purpose of registering transfers with respect to such Series 2001 Bond and for all other purposes
whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Series 2001 Bonds
only to or upon the order of the registered owners, as shown in the Registration Books as provided in this
Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and
effective to fully satisfy and discharge the City's obligations with respect to payment of principal of and
interest on the Series 2001 Bonds to the extent of the sum or sums so paid. No person other than a
registered owner, as shown in the Registration Books, shall receive a Series 2001 Bond certificate
evidencing the obligation of the City to make payments of principal and interest pursuant to this Ordinance.
Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has
determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this
Ordinance with respect to interest checks being mailed to the registered owner at the close of business on
the Record Date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC.
(f) Successor Securities Depository; Transfers Outside Book -Entry -Only Systems. In the
event that the City determines to discontinue the use of the Book -Entry -Only System through DTC, or
DTC determines to discontinue providing its services with respect to the Series 2001 Bonds, the City shall
(i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities
and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such
successor securities depository and transfer one or more separate Series 2U0 i Bonds to such successor
securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Series
2001 Bonds and transfer one or more separate Series 2001 Bonds to DTC Participants having Series
2001 Bonds credited to their DTC accounts. In such event, the Series 2001 Bonds shall no longer be
restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC,
but may be registered in the name of the successor securities depository, or its nominee, or in whatever
name or names registered owners transferring or exchanging Series 2001 Bonds shall designate, in
accordance with the provisions of this Ordinance. Whenever a successor securities depository has been
appointed pursuant to this paragraph, the terms DTC and DTC Participant as used in this Ordinance shall
refer to such successor securities depository and its participants, respectively.
(g) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the
contrary, so long as any Series 2001 Bond is registered in the name of Cede & Co., as nominee for DTC,
all payments with respect to principal of and interest on such Series 2001 Bond and all notices with respect
to such Series 2001 Bond shall be made and given, respectively, in the manner provided in the
representation letter of the City to DTC.
GEORGTWN/UTILREV2001: ORDIN.DRt 6
(h) DTC Blanket Letter of Representations. The City confines execution of a Blanket Letter
of Representations with DTC establishing the Book -Entry -Only System with respect to the Series 2001
Bonds.
SECTION 6. FORM OF SERIES 2001 BONDS. The form of each Series 2001 Bond,
including the form of Paying AgentRegisft&s Authentication Certificate, the form of Assignment and the
form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached
only to the Series 2001 Bonds initially issued and delivered pursuant to this Ordinance, shall be,
respectively, substantially in the form set forth in Exhibit B hereto, with such appropriate variations,
omissions or insertions as are permitted or required by this Ordinance.
SECTION 7. PLEDGE OF PLEDGED REVENUES. The City hereby covenants and
agrees that the Pledged Revenues are hereby irrevocably pledged to the payment and security of the Parity
Obligations including the establishment and maintenance of the special funds created, established and
maintained for the payment and security thereof, all as hereinafter provided; and it is hereby ordained that
the Parity Obligations, and the interest thereon, shall constitute a lien on and pledge of the Pledged
Revenues and be valid and binding without any physical delivery thereof or further act by the City, and the
lien created hereby on the Pledged Revenues for the payment and security of the Parity Obligations,
including the establishment and maintenance of the special firrids created, established and maintained for
the payment and security thereof, shall be superior to the lien on and pledge of the Pledged Revenues
securing payment of any Subordinate Lien Obligations hereafter issued by the City.
SECTION 8. SPECIAL FUNDS. The establishment and maintenance on the books of the
City, so long as any of the Series 2001 Bonds are outstanding and unpaid, of the below limited Special
Funds is hereby confirmed:
(a) City of Georgetown, Texas Utility System Revenue Fund, hereinafter called the "Revenue
Fund."
(b) City of Georgetown, Texas Utility. System Revenue Bonds Interest and Sinking Fund,
hereinafter called the "Interest and Sinking Fund."
Though all of such funds may be subaccounts of the City's General Fund held by the City's depository, and,
as such, not held in separate bank accounts, such treatment shall not constitute a commingling of the monies
in such Funds or of such Funds and the City shall keep full and complete records indicating the monies and
investments credited to each of such Funds.
SECTION 4. REVENUE FUND. The City hereby covenants, agrees and establishes that the
Gross Revenues shall be deposited and credited to the Revenue Fund immediately as collected and
received. All Maintenance and Operating Expenses are and shall be paid from such Gross Revenues as
a first charge against same.
GEORGTWNWILREV2001: ORDIN.DR1 7
SEcrIoN 10. FLOW OF FUNDS. All Gross Revenues deposited and credited to the
Revenue Fund shall be pledged and appropriated to the extent required for the following uses and in the
order of priority shown:
FIRST: to the payment of all necessary and reasonable Maintenance and Operating Expenses
as defined herein or required by statute, including, but not limited to, Chapter 1502, Texas
Government Code, as amended, to be a first charge on and claim against the Gross Revenues,
including a two (2) -month reserve amount based upon the budgeted amount of Maintenance
and Operating Expenses for the current Fiscal Year, which amount shall be retained in the
Revenue Fund.
SECOND: to the payment of the amounts required to be deposited and credited to the
Interest and Sinking Fund created and established for the payment of the Series 2001 Bonds,
the Previously Issued Parity Obligations and any Additional Parity Obligations issued by the
City as the same become due and payable.
THIRD: pro rata to the payment of the amounts required to be deposited and credited (i) to
the Reserve Fund created and established to maintain the Required Reserve Amount in
accordance with the provisions of this Ordinance, including amounts owed with respect to any
Reserve Fund Obligation to restore the Required Reserve Amount and (ii) to each other
reserve fund created and established to maintain a reserve in accordance with the provisions
of the ordinances relating to the issuance of any Additional Parity Obligations hereafter issued
by the City.
FOURTH: to the payment of Subordinate Lien Obligations.
FIFTH: to the payment of the amounts required for any lawful purpose.
SEmoN 11. INTEREST AND SINKING FUND. For purposes of providing funds to
pay the principal of, premium, if any, and interest on the Parity Obligations as the same become due and
payable, including any mandatory sinking field redemption payments, the City agrees that it shall maintain
the Interest and Sinking Fund, The City covenants to deposit and credit to the Interest and Sinking Fund
prior to each principal, interest payment or redemption date from the available Pledged Revenues an
amount equal to one hundred percent (100%) of the amount required to fully pay the interest on and the
principal of the Parity Obligations then falling due and payable. The City shall make such deposits and
credits to pay maturing principal, accrued interest, and mandatory sinking fund redemptions on the Parity
Obligations in substantially equal semi-annual installments on or before each August 15 and February 15.
The required semi-annual deposits and credits to the Interest and Sinking Fund shall continue
to be made as hereinabove provided until such time as (i) the total amount on deposit in and credited to
the Interest and Sinking Fund and the Reserve Fund (excluding any Reserve Fund Obligation) is equal to
GEORGTWN/UTILREV2001: ORDIN.DRI 8
the amount required to fully pay and discharge all Outstanding Parity Obligations (principal, premium, if any,
and interest) or (ii) the Parity Obligations are no longer outstanding.
Accrued interest and capitalized interest, if any, received from the purchaser of any Parity
Obligation shall be taken into consideration and reduce the amount of the semi-annual deposits and credits
hereinabove required into the Interest and Sinking Fund.
SEmoN 12. RESERVE FUND. (a) To accumulate and maintain a reserve for the payment
of the Series 2001 Bonds and the Outstanding Parity Obligations equal to the Average Annual Debt
Service Requirements of the Series 2001 Bonds and the Outstanding Parity Obligations (calculated by the
City at the beginning of each Fiscal Year) (the "Required Reserve Amount"), the Reserve Fund has been
established and shall be maintained by the City. Earnings and income derived from the investment of
amounts held for the credit of the Reserve Fund shall be retained in the Reserve Fund until the Reserve
Fund contains the Required Reserve Amount; thereafter, such earnings and income shall be deposited to
the credit of the Revenue Fund. As provided in Section 11, the City shall deposit and credit to the Reserve
Fund amounts required to maintain the balance in the Reserve Fund in an amount equal to the Required
Reserve Amount. There shall be deposited into the Reserve Fund any Reserve Fund Obligations so
designated by the City. All funds, investments and Reserve Fund Obligations on deposit and credited to
the Reserve Fund shall be used solely for (i) the payment of the principal of and interest on the Series 2001
Bonds and the Outstanding Parity Obligations, when and to the extent other funds available for such
purposes are insufficient, (ii) to make Reserve Fund Obligation Payments and (iii) to retire the last Stated
Maturity or Stated Maturities of or interest on the Series 2001 Bonds and the Outstanding Parity
Obligations.
(b) When and for so long as the cash, investments and Reserve Fund Obligations in the
Reserve Fund equal the Required Reserve Amount, no deposits need be made to the credit of the Reserve
Fund; but, if and when the Reserve Fund at any time contains less than the Required Reserve Amount, the
City covenants and agrees that the City shall cure the deficiency in the Reserve Fund by resuming the
Required Reserve Fund Deposits to such Fund from the Pledged Revenues in accordance with Section 10
by monthly deposits and credits in amounts equal to not less than 1160th of the Required Reserve Amount
with any such deficiency payments being made on or before each August 15 and February 15 until the
Required Reserve Amount has been fully restored; provided, however, that no such deposits shall be made
into the Reserve Fund during any six month period beginning on August 15 and February 15 until there has
been deposited into the Interest and Sinking Fund the full amount required to be deposited therein by the
next following August 15 and February 15, as the case may be. In addition, in the event that a portion of
the Required Reserve Amount is represented by a Reserve Fund Obligation, the Required Reserve Amount
shall be restored as soon as possible from monthly deposits of Pledged Revenues on deposit in the Revenue
Fund in accordance with Section 10, but subject to making the full deposits and credits to the Interest and
Sinking Fund required to be made by the next following August 15 and February 15, as the case may be.
The City fiurther covenants and agrees that, subject only to the prior deposits and credits to be made to
the Interest and Sinking Fund, the Pledged Revenues shall be applied and appropriated and used to
GE0RG1WAI/UTII.REV2001: ORDIN.DRI 9
establish and maintain the Required Reserve Amount, including by paying Reserve Fund Obligation
Payments when due, and any reserve established for the benefit of any issue or series of Additional Parity
Obligations and to cure any deficiency in such amounts as required by the terms of this Ordinance and any
other ordinance pertaining to the issuance of Additional Parity Obligations.
During such time as the Reserve Fund contains the Required Reserve Amount, the obligation
to maintain the Required Reserve Amount has been suspended pursuant to subsection (d) below or any
cash is replaced with a Reserve Fund Obligation pursuant to subsection (c) below, the City may, at its
option, withdraw all surplus funds in the Reserve Fund and deposit such surplus in the Interest and Sinking
Fund or otherwise use such amount in any manner permitted by law.
(c) A Reserve Fund Obligation issued in an amount equal to all or part of the Required
Reserve Amount for the Series 2001 Bonds and the Outstanding Parity Obligations may be used in lieu of
depositing cash into the Reserve Fund. In addition, a Reserve Fund Obligation may be substituted for
monies and investments in the Reserve Fund if the substitution of the Reserve Fund Obligation will not, in
and of itself, cause any ratings then assigned to the Series 2001 Bonds and the Outstanding Parity
Obligations by any Rating Agency to be lowered and the ordinance authorizing the substitution of the
Reserve Fund Obligation for all or part of the Required Reserve Amount contains a finding that such
substitution is cost effective.
(d) Notwithstanding anything to the contrary contained herein, the requirement set forth in
subsection (a) above to maintain the Required Reserve Amount in the Reserve Fund shall be suspended
for such time as the Net Revenues for each Fiscal Year are equal to at least 1.35 times the Average Annual
Debt Service Requirements. In the event that the Net Revenues for any Fiscal Year are less than 1.35
times the Average Annual Debt Service Requirements, the City will be required to commence making
Required Reserve Fund Deposits, as provided in subsection (b) above, and to continue such Required
Reserve Fund Deposits until the earlier of (i) such time as the Reserve Fund contains the Required Reserve
Amount or (ii) the Net Revenues in each of two consecutive years have been equal to not less than 1.35
times the Average Annual Debt Service Requirements.
(e) A Reserve Fund Obligation permitted under (a) above, must be in the form of a surety
bond or insurance policy meeting the requirements described. below.
(1) (i) A surety bond or insurance policy issued to the Paying Agent/Registrar, as agent of the
Holders, by a company licensed to issue an insurance policy guaranteeing the timely payment
of debt service on the Parity Obligations (a "municipal bond insurer") if the claims paying ability
of the issuer thereof shall be rated "AAA" or "Aad", respectively, by S&P and Moody's, or (ii)
a surety bond or insurance policy issued to the Paying Agent/Registrar, as agent of the Holders,
by an entity other than a municipal bond insurer, if the form and substance of such instrument
and the issuer thereof shall be approved in writing by each Bond Insurer of record.
GEORGTWNAnU.REV2001: ORDIN.DRt 10
(2) The obligation to reimburse the issuer of a Reserve . Fund Obligation for any claims or
draws upon such Reserve Fund Obligation in accordance with its terms, including expenses
incurred in connection with such claims or draws, to the extent permitted by law, (a Reserve
Fund Obligation Payment) shall be made from the deposits made to the Reserve Fund as
provided in this Section and in Section 10, The Reserve Fund Obligation shall provide for a
revolving feature under which the amount available thereunder will be reinstated to the extent
of any reimbursement of draws or claims paid. If the revolving feature is suspended or
terminated for any reason, the right of the issuer of the Reserve Fund Obligation to
reimbursement will be subordinated to the cash replenishment of the Reserve Fund to an
amount equal to the difference between the full original amount available under the Reserve
Fund Obligation and the amount then available for further draws or claims. In the event (a) the
issuer of a Reserve Fund Obligation becomes insolvent, or (b) the issuer of a Reserve Fund
Obligation defaults in its payment obligations thereunder, or (c) the claims paying ability of the
issuer of the insurance policy or surety bond falls below "AAA" or "Aaa", by S&P and
Moody's, respectively, the obligation to reimburse the issuer of the Reserve Fund Obligation
shall be subordinated to the cash replenishment of the Reserve Fund.
(3) In the event (a) the revolving reinstatement feature described in the preceding paragraph
is suspended or terminated, or (b) the rating of the claims paying ability of the issuer of the
surety bond or insurance policy falls below "AAA" or "Aaa', by S&P and Moody's,
respectively, the City shall either (i) deposit into the Reserve Fund, in accordance with this
Section and Section 11, an amount sufficient to cause the cash or investments credited to the
Reserve Fund to accumulate to the Required Reserve Amount, or (ii) replace such instrument
with a surety bond or insurance policy meeting the requirements of 1 and 2 above, within six
months of such occurrence. In the event (a) the rating of the claims -paying ability of the issuer
of the surety bond or insurance policy falls below "A" by S&P and Moody's, or (b) the issuer
of the Reserve Fund Obligation defaults in its payment obligations hereunder, or (c) the issuer
of the Reserve Fund Obligation becomes insolvent, the City shall either (i) deposit into the
Reserve Fund, in accordance with this Section, amounts sufficient to cause the cash or
investments on deposit in the Reserve Fund to accumulate to the Required Reserve Amount,
or (ii) replace such instrument with a surety bond or insurance policy meeting the requirements
of 1 and 2 above within six months of such occurrence.
(4) The Paying Agent/Registrar shall ascertain the necessity for a claim or draw upon any
Reserve Fund Obligation and provide notice to the issuer of the Reserve Fund Obligation in
accordance with its terms not later than three days (or such appropriate time period as will,
whencombined with the timing of required payment under the Reserve Fund Obligation, ensure
payment under the Reserve Fund Obligation on or before the interest payment date) prior to
each date upon which the principal of or interest on the Parity Obligations will be due.
GEORGTWNAJTILREV2001: ORDIN.DRI 11
It is recognized that a Reserve Fund Obligation may be issued which is payable only with
respect to a part of the Series 2001 Bonds and the Outstanding Parity Obligations with the remainder of
the Required Reserve Amount being satisfied by monies and investments and in that case any draws upon
the Reserve Fund will have to be made on a pro -ratty basis to ensure that every Parity Obligation enjoys
an equal amount of security. Therefore, (i) draws upon one or more such Reserve Fund Obligations shall
be made on a pro -rata basis with cash and investments available in the Reserve Fund and (ii) deposits and
credits to the Reserve Fund to restore it to the Required Reserve Amount shall be utilized on a pro -rata
basis to pay Reserve Fund Obligation Payments to reimburse the issuers of the Reserve Fund Obligations,
thus restoring that part of the Required Reserve Amount, and to restore with cash and investments the
balance of the Required Reserve Amount.
SECTmoN 13. EXCESS BOND PROCEEDS. Any proceeds of Parity Obligations not
required to effectuate the purposes for which such Parity Obligations were issued, as provided in the
respective ordinances authorizing the issuance of such Parity Obligations, or for the payment of the costs
of issuance of such Parity Obligations shall be deposited and credited to the Interest and Sinking Fund and
shall be taken into consideration and shall reduce the amount of semi-annual deposits and credits to the
Interest and Sinking Fund from the Pledged Revenues or used to redeem or purchase Parity Obligations.
SECTION 14. DEFICIENCIES - EXCESS PLEDGED OR NET REVENUES. (a) If
on any occasion there shall not be sufficient Pledged Revenues (after making all payments pertaining to all
Parity Obligations) to make the required deposits and credits to the Interest and Sinking Fund and the
Reserve Fund, then such deficiency shall be cured as soon as possible from the next available unallocated
Pledged Revenues, or from any other sources available for such purpose, and such deposits and credits
shall be in addition to the amounts otherwise required to be deposited and credited to these Funds.
(b) Subject to making the deposits and credits required by this Ordinance, or any ordinances
authorizing the issuance of Additional Parity Obligations, or the payments and credits required by the
provisions of the ordinances authorizing the issuance of Subordinate Lien Obligations hereafter issued by
the City, the excess Net Revenues may be used for any lawful purpose.
11111p11111111111 I I I I I I I I I
INVESTMENT INCOME. (a) Money in the Revenue Fund, the Interest and Sinking Fund and the
Reserve Fund may, at the option of the City, be invested in Permitted Investments; provided that all such
deposits and investments shall be made in such manner that the money required to be expended from any
fund will be available at the proper time or times. All such investments shall be valued in terms of current
market value no less frequently than the last business day of the City's Fiscal Year, except that any direct
obligations of the United States of America - State and Local Goverment Series shall be continuously
valued at their par value or principal face amount Any obligation in which money is so invested shall be
kept and held at the Depository, except as otherwise permitted by the laws applicable to the City. For
purposes of maximizing investment returns, money in such funds may be invested, together withmoney in
other funds or with other money of the City, in common investments of the kind described above, or in a
GE0RGfWNNPtLREV2001: ORDIN.DRI 12
common pool of such investments held by the City or its designated agent, which shall not be deemed to
be or constitute a commingling of such money or funds provided that safekeeping receipts or certificates
of participation clearly evidencing the investment or investment pool in which such money is invested and
the share thereof purchased with such money or owned by such fund are held by or on behalf of each such
fund. If necessary, such investments shall be promptly sold to prevent any default.
(b) All interest and income derived from such investments (other than interest and income
derived from amounts credited to the Reserve Fund if the Reserve Fund does not contain the Required
Reserve Amount) shall be credited to the Revenue Fund semi-annually and shall constitute Gross Revenues.
SECTION 16. PAYMENT OF PARITY OBLIGATIONS. While any of the Parity
Obligations are outstanding, the City shall transfer to the respective paying agent/registrar therefor, from
funds on deposit in and credited to the Interest and Sinking Fund, and, if necessary, in the Reserve Fund,
amounts sufficient to fully pay and discharge promptly the interest on and principal of the Parity Obligations
as shall become due on each interest or principal payment date, or date of redemption of the Parity
Obligations; such transfer of funds must be made in such manner as will cause immediately available funds
to be deposited with each respective paying agent/registrar for the Parity Obligations not later than the
business day next preceding the date such payment is due on the Parity Obligations. The Paying
Agent/Registrar shall destroy all paid Parity Obligations and furnish the City with an appropriate certificate
of cancellation or destruction.
SECTION 17. RATES AND CHARGES. For the benefit of the Holders of the Parity
Obligations and in addition to all provisions and covenants in the laws of the State of Texas and in this
Ordinance, the City hereby expressly stipulates and agrees, while any of the Parity Obligations are
outstanding, tQ establish and maintain rates and charges for facilities and services afforded by the System
that are reasonably expected, on the basis of available information and experience and with due allowance
for contingencies, to produce Gross Revenues in each Fiscal Year reasonably anticipated to be sufficient:
A. to pay Maintenance and Operating Expenses;
B. to produce Pledged Revenues at least equal to the greater of 1.25 times the Average
Annual Debt Service Requirements or 1.10 times the Maximum Annual Debt Service Requirements;
C. to produce Pledged Revenues in amounts sufficient to enable the City to make the deposits
and credits, if any, from Pledged Revenues (i) to the Reserve Fund to restore the Required Reserve
Amount in accordance with Section 12 of this Ordinance, including the payment of any Reserve Fund
Obligation Payment then due, and (ii) to other reserve funds to establish or restore the reserve securing any
issue or series of Additional Parity Obligations;
D. to produce Pledged Revenues, together with any other lawfully available funds {including
the proceeds of Debt which the City expects will be utilized to pay all or part of the principal of and/or
GE0RGTWNAnMREV2001: ORDINDRI 13
interest on any obligations described in this subsection D), sufficient to pay the principal of and interest on
any Subordinate Lien Obligations issued by the City and the amounts required to be deposited in any
reserve or contingency fund created for the payment and security of the Subordinate Lien Obligations and
any other obligations or evidences of indebtedness issued or incurred that are payable from, in whole or
in part, a subordinate lien on and pledge of the Pledged Revenues; and
E. to pay any other Debt payable from the Pledged Revenues and/or secured by a lien on the
Pledged Revenues.
Should the annual audit report required by Section 19 hereof reflect that the Pledged Revenues
for the Fiscal Year covered thereby were less than necessary to meet the requirements of this Section, the
City Council will review the operations of the System and the rates and charges for services provided, and
the City Council will make the necessary adjustments or revisions, if any, in order that the Pledged
Revenues for the succeeding year will be sufficient to satisfy the foregoing coverage requirements.
SEmoN 18. 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 any ordinance authorizing the issuance of Parity Obligations,
including this Ordinance, and in each and every Parity Obligation; it will promptly pay or cause to be paid
the principal of and interest on every Parity Obligation on the dates and in the places and manner
prescribed in such ordinances and obligations; and it will, at the times and in the manner prescribed, deposit
and credit or cause to be deposited and credited the amounts required to be deposited and credited to the
Interest and Sinking Fund and the Reserve Fund.
(b) Ci ,�s Legal Authority. It 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 Series 2001
Bonds; that all action on its part for the creation and issuance of the Series 2001 Bonds has been duly and
effectively taken, and that the Series 2001 Bonds in the hands of the Holders thereof are and will be valid
and enforceable special obligations of the City in accordance with their terms.
(c) Title. It 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 of the Series 2001 Bonds,
the Previously Issued Parity Obligations and Additional Parity Obligations, against the claims and demands
of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment of
the Series 2001 Bonds, the Previously Issued Parity Obligations and Additional Parity Obligations in the
manner prescribed herein, and has lawfully exercisedd such rights.
GEORGTWN/U U,REV2001: ORDIN.DRt 14
(d) Liens. It 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; 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 it will not create or suffer to be created any mechanic's, lager's, materialrnan'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. It will, while the Parity Obligations are outstanding
and unpaid, continuously and efficiently operate the System, and shall maintain the System in good
condition, repair and working order, all at reasonable cost. No free service of the System shall be allowed,
and should the City or any of its agencies or instrumentalities make use of the services and facilities of the
System, payment of the reasonable value shall be made by the City out of funds from sources other than
the Gross Revenues of the System, unless made from surplus or excess Pledged Revenues as permitted
in Section 14.
(f) Further Encumbrance. While the Parity Obligations are outstanding and unpaid, it will not
additionally encumber the Pledged Revenues in any manner, except as permitted in this Ordinance in
connection with Additional Parity Obligations, unless said encumbrance is made junior and subordinate in
all respects to the liens, pledges, covenants and agreements of this Ordinance; but the right of the City to
issue or incur obligations payable from a subordinate lien on the Pledged Revenues is specifically
recognized and retained.
(g) Sale or Disposal of Property. While the Parity Obligations are outstanding and unpaid, it
will not sell, convey, mortgage, encumber, lease or in any manner transfer title to, or otherwise dispose of
the System, or any significant or substantial part thereof; provided that whenever the City deems it
necessary to dispose of any other property, machinery, fixtures or equipment, it may sell or otherwise
dispose of such property, machinery, fixtures or equipment when it has made arrangements to replace the
same or provide substitutes therefor, unless it is determined that no such replacement or substitute is
necessary; and, provided further, that the City retains the right to sell, convey, mortgage, encumber, lease
or otherwise dispose of any significant or substantial part of the System if (i) the City Manager delivers a
certificate to the City Council to the effect that, following such action by the City, the System is expected
to produce Gross Revenues in amounts sufficient in each Fiscal Year while any of the Parity Obligations
are to be outstanding to comply with the obligations of the City contained in this Ordinance and in the
ordinances authorizing the issuance of Additional Parity Obligations; (ii) the City Council makes a finding
and determination to the same effect as the certificate of the City Manager set forth in (i) above and (iii)
each Rating Agency then maintaining a rating on any Parity Obligation delivers a letter to the City to the
GEORG11Y AMLREV2001: ORDIN.DRI 15
effect that such sale, conveyance, mortgage, encumbrance, lease or other disposition will not cause the
Rating Agency to withdraw or lower the rating then in effect. Proceeds from any sale hereunder not used
to replace or provide for substitution of such property sold, shall be used for improvements to the System
or to purchase or redeem Parity Obligations.
(h) Insurance.. (1) It shall cause to be insured such parts of the System as would usually be
insured by municipal 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 municipal 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 shalll also be carried unless the City Attorney of the City
gives a written opinion to the effect that the City is not liable for claims which would be protected by such
insurance. 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 Holders
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 are hereby pledged as security for the Parity Obligations and,
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 for such purpose, then said insurance proceeds
pertaining to the System shall be used promptly as follows:
(i) for the redemption prior to maturity of the Parity Obligations, ratably
in the proportion that the Outstanding principal of each series of Parity Obligations bears to the
total Outstanding principal of all Parity Obligations, provided that if on any such occasion the
principal of any such series is not subject to redemption, it shall not be regarded as Outstanding
in making the foregoing computation; or
(n) if none of the Outstanding Parity Obligations is subject to
redemption, then for the purchase on the open market and retirement of said Parity Obligations
in the same proportion as prescribed in the foregoing clause (i), to the extent practicable;
provided that the purchase price for any Parity Obligation shall not exceed the redemption
price of such Parity Obligation on the first date upon which it becomes subject to redemption;
or
(m) to the extent that the foregoing clauses (i) and (ii) cannot be
complied with at the time, the insurance proceeds, or the remainder thereof, shall be deposited
in a special and separate trust fund, at an official depository of the City, to be designated the
Insurance Account. The Insurance Account shall be held until such time as the foregoing
GEORGTWN/UTILREV2001: ORDIN.DRI 16
clauses (i) and/or (ii) can be complied with, or until other funds become available which,
together with the Insurance Account, will be sufficient to make the repairs or replacements
originally required, whichever of said events occurs first.
(2) The foregoing provisions of (1) above notwithstanding, the City shall have authority to enter
into coinsurance or similar plans where risk of loss is shared in whole or in part by the City.
(3) The annual audit hereinafter required shall 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 listing all policies carried, and whether or not all insurance premiums upon the
insurance policies to which reference is hereinbefore made have been paid.
(4) The payment of premiums for all insurance policies required under the provisions hereof
and the costs associated with the maintenance of any self-insurance program shall be considered
Maintenance and Operating Expenses. Nothing in this Ordinance shall be construed as requiring
the City to expend any funds which are derived from sources other than the operation of the
System, but nothing herein shall be construed as preventing the City from doing so.
(i) Governmental eg ncies. 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.
0) No Competition It will not grant any franchise or permit for the acquisition, construction or
operation of any competing facilities which might be used as a substitute for the System's facilities and, to
the extent that it legally may, the City will prohibit any such competing facilities. Notwithstanding the
foregoing, the City retains the right, however, to "opt in" to electric competition in accordance with State
law if "opting in" will not materially adversely impact the Net Revenues of the System as evidenced by a
certification of the City Manager.
(k) Disaggregation of System The City retains the right to disaggregate the System into one or
more independent resulting systems if (i) the City Manager delivers a certificate to the City Council to the
effect that, following such action by the City, the remaining System is expected to produce Gross Revenues
in amounts sufficient in each Fiscal. Year while any of the Parity Obligations are to be outstanding to comply
with the obligations of the City contained in this Ordinance and in the ordinances authorizing the Previously
Issued Parity Obligations and the issuance of Additional Parity Obligations; (ii) the City Council makes a
finding and determination to the same effect as the certificate of the City Manager set forth in (i) above and
(m) each Rating Agency then maintaining a rating on any Parity Obligation delivers a letter to the City to the
effect that such disaggregation will not cause the Rating Agency to withdraw or lower the rating then in
effect on the Outstanding Parity Obligations,
GEORGTWN/UTR.REV2001: ORDTNDRi 17
SOON 19. RECORDS AND ACCOUNTS - ANNUAL AUDIT. The City covenants and
agrees that so long as any of the Parity Obligations remain Outstanding, the City will keep and maintain a
separate and complete system of records and accounts pertaining to the operations of the System in which
full, complete, true, proper, and correct entries shall be made of all dealings, transactions, business and
affairs relating thereto, or which in any way affect or pertain to the System or the Gross Revenues or the
Net Revenues thereof, as provided by generally accepted accounting principles, consistently applied, and
by Sections 1502.067 and 1502.068, Texas Government Code, as amended, or other applicable law. The
Holders of the Parity Obligations or any duly authorized agent or agents of such Holders shall have the right
to inspect the System and all properties comprising the same. The City further agrees that, following the
close of each Fiscal Year, the City will cause an audit report of such records and accounts to be made by
an Accountant. Copies of each annual audit shall be made available for public inspection during normal
business hours at the City's principal office and the City Secretary's office and may be furnished to, upon
written request, any Holder upon payment of the reasonable copying and mailing charges. Expenses
incurred in making the annual audit of the operations of the System shall be considered as Maintenance and
BONDS. (a) Covenants. The Issuer covenants to take any action necessary to assure, or refrain from
any action which would adversely affect, the treatment of the Bonds as obligations described in section 103
of the Internal Revenue Code of 1986, as amended (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:
(1) to take any action to assure that no more than 10 percent of the proceeds of the Bonds
or the projects financed therewith (less amounts deposited to a reserve fiord, if any) are used for
any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent
of the proceeds or the projects financed therewith are so used, such amounts, whether or not
received by the Issuer, with respect to such private business use, do not, under the terms of this
Ordinance or any underlying arrangement, directly or indirectly, secure or provide for the payment
of more than 10 percent of the debt service on the Bonds, in contravention of section 141(b)(2)
of the Code;
(2) to take any action to assure that in the event that the "private business use" described in
subsection (1) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed
therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5
percent is used for a "private business use" which is "related" and not "disproportionate," within the
meaning of section 141(b)(3) of the Code, to the governmental use;
(3) to take any action to assure that no amount which is greater than the lesser of $5,000,000,
or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is
GEORGTWN/ MLREV2001: ORDIN.DRI 18
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;
(4) 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;
(5) 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;
(6) 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 --
(A) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less
or, in the case of a refunding bond, for a period of 30 days or less until such proceeds are
needed for the purpose for which the bonds are issued,
(B) amounts invested in a bona fide debt service fund, within the meaning of section
1.148-1(b) of the Treasury Regulations, and
(C) amounts deposited in any reasonably required reserve or replacement fund to the
extent such amounts do not exceed 10 percent of the proceeds of the Bonds;
(7) 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) and, to the extent applicable, section
149(d) of the Code (relating to advance refundings); and
(8) 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 meaning of section 148(f) ofthe Code and to pay to the United
States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the
amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code.
(b) Rebate Fund. In order to facilitate compliance with the above covenant (8), a "Rebate Fund"
is hereby established by the Issuer for the sole benefit of the United States of America, and such fund shall
not be subject to the claim of any other person, including without limitation the bondholders. The Rebate
Fund is established for the additional purpose of compliance with section 148 of the Code.
GEORGTWNIUTILREV2001: ORDINDRI 19
(c) Proceeds. 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
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 comply, in the opinion of nationally recognized bond counsel, will
not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103
of the Code. 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, in the opinion of nationally recognized bond counsel, to preserve the
exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In
fintherance of such intention, the Issuer hereby authorizes and directs the City Manager to execute any
documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer,
which may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds.
(d) Allocation Of, and Limitation On, Expenditures for the Project. The Issuer covenants to
account for the expenditure of sale proceeds and investment earnings to be used for the purposes described
in Section 1 of this Ordinance (the "Project") on its books and records in accordance with the requirements
of the Internal Revenue Code. The Issuer recognizes that in order for the proceeds to be considered used
for the reimbursement of costs, the proceeds must be allocated to expenditures within 18 months of the
later of the date that (1) the expenditure is made, or (2) the Project is completed; but in no event later than
three years after the date on which the original expenditure is paid. The foregoing notwithstanding, the
Issuer recognizes that in order for proceeds to be expended under the Internal Revenue Code, the sale
proceeds or investment earnings must be expended no more than 60 days after the earlier of (1) the fifth
anniversary of the delivery of the Bonds, or (2) the date the Bonds are retired. The Issuer agrees to obtain
the advice of nationally recognized bond counsel if such expenditure fails to comply with the foregoing to
assure that such expenditure will not adversely affect the tax-exempt status of the Bonds. For purposes
hereof, the issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure
to comply will not adversely affect the excludability for federal income tax purposes from gross income of
the interest.
(e) Disposition of Project The Issuer covenants that the property constituting the Project will not
be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other
compensation, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such sale or
other disposition will not adversely affect the tax-exempt status of the Bond. For purposes of the foregoing,
the portion of the property comprising personal property and disposed 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.
GEORGE"/UnILREV2001: ORDIN.DRI 20
(f) Desimation as Qualified Tax -Exempt Bonds. The Issuer hereby designates the Bonds as
"qualified tax-exempt bonds" as defined in section 265(b)(3) of the Code. In furtherance of such
designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year
in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will
designate bonds, which when aggregated with the Bonds, will result in more than $10,000,000 of "qualified
tax-exempt bonds" being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt
obligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate
entities) will not exceed $10,000,000; and, (c) that the Issuer will take such action or refiain from such
action as necessary, and as more particularly set forth in this Section, in order that the Bonds will not be
considered "private activity bonds" within the meaning of section 141 of the Code.
SEcrioN 21. CONTINUING DISCLOSURE UNDERTAKING. (a) Annual Reports. The
City shall provide annually to each NRMSIR and any SID, within six months after the end of any Fiscal
Year, financial information and operating data with respect to the System of the general type included in
the final Official Statement authorized by this Ordinance being the information described inEYJiibit C hereto.
Any financial statements so to be provided shall be (1) prepared in accordance with the accounting
principles described in Exhibit C hereto, or such other accounting principles as the City may be required
to employ from time to time pursuant to state law or regulation, and (2) audited, if the City commissions
an audit of such statements and the audit is completed within the period during which they must be
provided If the audit of such financial statements is not complete within such period, then the City shall
provide (1) unaudited financial statements for the applicable Fiscal Year within six months after the end of
such Fiscal Year, and (2) audited financial statements for the applicable Fiscal Year to each NRMSIR and
any SID, when and if the audit report on such statements become available.
If the City changes its Fiscal Year, it will notify each NRMSIR. and any SID of the change (and of
the date of the new Fiscal Year end) prior to the next date by which the City otherwise would be required
to provide financial information and operating data pursuant to this paragraph (a).
The financial information and operating data to be provided pursuant to this paragraph (a) may be
set forth in full in one or more documents or may be included by specific reference to any document
(including an official statement or other offering document, if it is available from the MSRB) that theretofore
has been provided to each NRMSIR and any SID or filed with the SEC.
(b) Material Event Notices. The City shall notify any SID and either each NRMSIR or the
MSRB, in a timely manner, of any of the following events with respect to the Series 2001 Bonds, if such
event is material within the meaning of the federal securities laws:
A Principal and interest payment delinquencies,
B. Non-payment related defaults;
GEORGTWNAYrnAEV2001: ORDiN.DRI 21
C. Unscheduled draws on debt service reserves reflecting financial difficulties;
E. Substitution of credit or liquidity providers, or their failure to perform;
F. Adverse tax opinions or events affecting the tax exempt status of the Series 2001 Bonds;
G. Modifications to rights of holders of the Series 2001 Bonds;
H. Bond calls;
I. Defeasances;
J. Release, substitution or sale of property securing repayment of the Series 2001 Bonds; and
;.••.,_.
The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any
failure by the City to provide financial information or operating data in accordance with paragraph (a) of
this Section by the time required by such paragraph.
(c) Limitations Disclaimers and Amendments. The City shall be obligated to observe and perform
the covenants specified in this Section for so long as, but only for so long as, the City remains an "obligated
person' with respect to the Series 2001 Bonds within the meaning of the Rule, except that the City in any
event will give notice of any deposit made in accordance with Section 31 of this Ordinance that causes
Series 2001 Bonds no longer to be outstanding.
The provisions of this Section are for the sole benefit of the Holders and beneficial owners of the
Series 2001 Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or
equitable right, remedy or claim hereunder to any other person. The City undertakes to provide only the
financial information, operating data, -financial statements and notices which it has expressly agreed to
provide pursuant to this Section and does not hereby undertake to provide any other information that may
be relevant or material to a complete presentation of the System's financial results, condition or prospects
or hereby undertake to update any information provided in accordance with this Section or otherwise,
except as expressly provided herein. The City does not make any representation or warranty concerning
such information or its usefulness to a decision to invest in or sell Series 2001 Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR
BENEFICIAL OWNER OF ANY SERIES 2001 BOND OR ANY OTHER PERSON, IN
CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY
GEORGTWN/LMLREV2001: ORDIN.DRI 22
BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF
ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF
ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH
BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
No default by the City in observing or performing its obligations under this Section shall comprise
a breach of or default under the Ordinance for purposes of any other provision of this Ordinance.
Nothing in this Section is intended or shall act to disclaim, waive or otherwise limit the duties of the
City under federal and state securities laws.
The provisions of this Section may be amended by the City from time to time to adapt to changed
circumstances 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 System, but only if (1) the provisions of this Section, as so
amended, would have permitted an underwriter to purchase or sell Series 2041 Bonds in the primary
offering of the Series 2001 Bonds in compliance with the Rule, taking into account any amendments or
interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the
Holders of a majority in aggregate principal amount (or any greater amount required by any other provision
of this Ordinance that authorizes such an amendment) of the Outstanding Series 2001 Bonds consent to
such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond
counsel) determined that such amendment will not materially impair the interest of the Holders and beneficial
owners of the Series 2041 Bonds. The City may also amend or repeal the provisions of this continuing
disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final
jurisdiction enters judgment that suchprovisions of the Rule are invalid, but only if and to the extent that the
provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Series 2001
Bonds in the primary offering of the Series 2001 Bonds. If the City so amends the provisions of this
Section, it shall include with any amended financial information or operating data next provided in
accordance with paragraph (a) of this Section an explanation, in narrative form, of the reason for the
amendment and of the impact of any change in the type of financial information or operating data so
provided.
SEc noN 22. ISSUANCE OF ADDITIONAL PARITY OBLIGATIONS. (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 or other obligations (herein called "Additional Parity
Obligations"), in accordance with law, in any amounts, for purposes of extending, improving or repairng
the System or for the purpose of refunding of any Parity Obligations, Subordinate Lien Obligations or other
obligations of the City incurred in connection with the ownership or operation of the System: Such
Additional Parity Obligations, if and when authorized, issued and delivered in accordance with this
Ordinance, shall be secured by and made payable equally and ratably on a parity with all other Outstanding
Parity Obligations, from the lien on and pledge of the Pledged Revenues herein granted.
GEORGTWNAMLPFV2001: ORDIN.DRt 23
(b) The Interest and Sinking Fund shall secure and be used to pay all Parity Obligations. Each
ordinance under which Additional Parity Obligations are issued shall provide and require that, in addition
to the amounts required by the provisions of this Ordinance and the provisions of any other ordinance or
ordinances authorizing the Previously Issued Parity Obligations and Additional Parity Obligations to be
deposited to the credit of the Interest and Sinking Fund, the City shall deposit to the credit of the Interest
and Sinking Fund at least such amounts as are required for the payment of all principal of and interest on
said Additional Parity Obligations then being issued, as the same come due.
(c) The City may create and establish a reserve fund pursuant to the provisions of any ordinance
authorizing the issuance of Additional Parity Obligations for the purpose of securing that particular issue or
series of Parity Obligations or any specific group of issues or series of Parity Obligations and the amounts
once deposited or credited to said reserve funds shall no longer constitute Net Revenues and shall be held
solely for the benefit of the Holders of the particular Parity Obligations for which such reserve fiord was
established. Each such reserve fund shall be designated in such manner as is necessary to identify the Parity
Obligations it secures and to distinguish such reserve fund from the Reserve Fund and the reserve funds
created for the benefit of other Parity Obligations.
S EmoN 23. FURTHER REQUIREMENTS FOR ADDITIONAL PARITY
OBLIGATIONS. That Additional Parity Obligations shall be issued only in accordance with this
Ordinance, but notwithstanding any provisions of this Ordinance to the contrary, no installment, Series or
issue of Additional Parity Obligations shall be issued or delivered unless:
(a) The City Manager and the City Secretary of the City 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 Outstanding Parity
Obligations, and the ordinances authorizing same, and that the Interest and Sinking Fund, the Reserve Fund
and any reserve fund securing any other series or issue of Parity Obligations each contains the amount then
required to be therein.
(b) An Accountant signs and delivers to the City a written certificate to the effect that, during either
the next preceding Fiscal Year, or any twelve consecutive calendar month period ending not more than
ninety days prior to the date of the then proposed Additional Parity Obligations, the Net Earnings were,
in the opinion thereof, at least equal to the sum of 1.25 times the Average Annual Debt Service
Requirements (computed on a Fiscal Year basis), including Amortization Installments, of the Parity
Obligations and the Additional Parity Obligations to be outstanding after the issuance of the then proposed
Additional Parity Obligations and 1.10 times the average annual debt service requirement (computed in the
same manner as for Parity Obligations) of the Subordinate Lien Obligations to be outstanding after the
issuance of the then proposed Additional Parity Obligations.
(c) In making a determination of Net Earnings for any of the purposes described in this Section,
the Accountant may take into consideration a change in the rates and charges for services and facilities
afforded by the System that became effective at least 60 days prior to the last day of the period for which
GEORGTWN/UTILREV2001: ORDIN.DRI 24
Net Earnings are determined and, for purposes of satisfying the Net Earnings tests described above, make
a pro forma determination of the Net Earnings of the System for the period of time covered by said
Accountant's certification or opinion based on such change in rates and charges being in effect for the entire
period covered by said Accountant's certificate or opinion.
As used in this Section, the term 'Net Earrings" shall mean the Gross Revenues of the System after
deducting the Maintenance and Operating Expenses of the System but not expenditures which, under
standard accounting practice, should be charged to capital expenditures.
SEmoN 24. ISSUANCE OF SUBORDINATE LIEN OBLIGATIONS. The City hereby
reserves the right to issue, at any. time, obligations including, but not limited. to, Subordinate Lien
Obligations, payable from and equally and ratably secured, in whole or in part, by a lien on and pledge of
the Net Revenues, subordinate and inferior in rank and dignity to the lien on and pledge of such Net
Revenues securing the payment, of the Parity Obligations, as may be authorized by the laws of the State of
Texas.
SEMON 25, ISSUANCE OF SPECIAL PROJECT OBLIGATIONS. Nothing in this
Ordinance shall be construed to deny the City the right and it shall retain, and hereby reserves unto itself,
the right to issue Special Project obligations secured by liens on and pledges of revenues and proceeds
derived from Special Projects,
SEmoN 26. LIMITED OBLIGATIONS OF THE CITY. The Parity Obligations are limited,
special obligations of the City payable from and equally and ratably secured solely by a first lien on and
pledge of the Pledged Revenues, and the Holders thereof shall never have the right to demand payment of
the principal or interest on the Parity Obligations from any funds raised or to be raised through taxation by
the City.
SECTioN 27. SECURITY FOR FUNDS. All money on deposit in the Funds for which this
Ordinance makes provision (except any portion thereof as may be at any time properly invested as
provided herein) shall be secured in the manner and to the fullest extent required by the laws of Texas for
the security of public funds, and money on deposit in such Funds shall be used only for the purposes
permitted by this Ordinance.
SEmoN 28. REMEDIES IN EVENT OF DEFAULT. In addition to all the rights and
remedies provided by the laws of the State of Texas, it is specifically covenanted and agreed particularly
that in the event the City (i) defaults in the payment of the principal, premium, if any, or interest on the
Series 2001 Bonds, (ii) defaults in the deposits and credits required to be made to the Interest and Sinking
Fund or Reserve Fund, or (iii) defaults in the observance or performance of any other of the covenants,
conditions, or obligations set forth in this Ordinance, the following remedies shall be available:
GEORGTWN/UTILREV2001: ORDINARI 25
(a) the Holders of any of the Series 2001 Bonds shall be entitled to seek a writ of mandamus
issued by a court of proper jurisdiction compelling and requiring the governing body of the City and other
officers of the City to observe and perform any covenant, condition or obligation prescribed in this
Ordinance; and
(b) no delay or omission to exercise any right or power accruing upon any default shall impair any
such right or power or shall be construed to be a waiver of any such default or acquiescence therein, and
every such right and power may be exercised from time to time and as often as may be deemed expedient.
The specific remedy herein provided shall be cumulative of all other existing remedies, and the specification
of such remedy shall not be deemed to be exclusive.
SF.t nON 29. DEFEASANCE OF SERIES 2001 BONDS. (a) Any Series 2001 Bond and the
interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Bond") within
the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when
payment of the principal of such Series 2001 Bond, plus interest thereon to the due date (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 (ii) shall have been provided for on or before such due date by irrevocably depositing with or making
available to the Paying Agent/Registrar for such payment (1) lawful money of the United States of America
sufficient to make such payment, (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 as will
ensure the availability, without reinvestment, of sufficient money to provide for such payment and when
proper arrangements have been made by the City with the Paying Agent/Registrar for the payment of its
services until all Defeased Series 2001 Bonds shall have become due and payable or (3) any combination
of (1) and (2). At such time as a Series 2001 Bond shall be deemed to be a Defeased Series 2001 Bond
hereunder, as aforesaid, such Series 2001 Bond and the interest thereon shall no longer be secured by,
payable from, or entitled to the benefits of, the Pledged Revenues as provided in this Ordinance, and such
principal and interest shall be payable solely from such money or Defeasance Securities.
(b) The deposit under clause (ii) of subsection (a) shall be deemed a payment of a Series 2001
Bond as aforesaid when proper notice of redemption of such Series 2001 Bonds shall have been given,
in accordance with this Ordinance. Any money so deposited with the Paying Agent/Registrar as provided
in this Section may at the discretion of the City also be invested in Defeasance Securities, maturing in the
amounts and at the times as hereinbefore set forth, and all income from all Defeasance Securities in
possession of a paying agent pursuant to this Section which is not required for the payment of such Series
2001 Bond and 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 in writing by the City.
(c) Notwithstanding any provision of any other Section of this Ordinance which may be contrary
to the provisions of this Section, all money or Defeasance Securities set aside and held in trust pursuant to
the provisions of this Section for the payment of principal of the Series 2001 Bond and premium, if any,
GEORGTWNUMREV2001: ORDIN.DRI 26
and interest thereon, shall be applied to and used solely for the payment of the particular Series 2001
Bonds and premium, if any, and interest thereon, with respect to which such money or Defeasance
Securities have been so set aside in trust.
(d) Notwithstanding anything elsewhere in this Ordinance contained, if money or Defeasance
Securities have been deposited or set aside with a paying agent pursuant to this Section for the payment
of Series 2001 Bonds and such Series 2001 Bonds shall not have in fact been actually paid in full, no
amendment of the provisions of this Section shall be made without the consent of the registered owner of
each Bond affected thereby.
(e) Notwithstanding the provisions of subsection (a) above, to the extent that, upon the defeasance
of any Defeased Series 2001 Bond to be paid at its maturity, the City retains the right under Texas law to
later call that Defeased Series 2001 Bond for redemption in accordance with the provisions of the
Ordinance authorizing its issuance, the City may call such Defeased Series 2001 Bond for redemption upon
complying with the provisions of Texas law and upon the satisfaction of the provisions of subsection (a)
above with respect to such Defeased Series 2001 Bond as though it was being defeased at the time of the
exercise of the option to redeem the Defeased Series 2001 Bond and the effect of the redemption is taken
into account in determining the sufficiency of the provisions made for the payment of the Defeased Series
2001 Bond.
As used in this section, "Defeasance Securities" means (i) Federal Securities, (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 the City Council,
adopts or approves proceedings authorizing the issuance of refunding bonds or otherwise provide for the
funding of an escrow to effect the defeasance of the Series 2001 Bonds 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 City Council adopts or approves proceedings authorizing the
issuance of refunding bonds or otherwise provide for the funding of an escrow to effect the defeasance of
the Series 2001 Bonds, are rated as to investment quality by a nationally recognized investment rating fpm
no less than "AAA" or its equivalent. "Federal Securities" as used herein means direct, noncallable
obligations of the United States of America, including obligations that are unconditionally guaranteed by the
United States of America (including Interest Strips of the Resolution Funding Corporation),
SEcrloN 30. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED SERIES
2001 BONDS. (a) Replacement Bonds. In the event any outstanding Series 2001 Bond is damaged,
mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed and
delivered, a new bond ofthe same principal amount, maturity and interest rate, as the damaged, mutilated,
lost, stolen or destroyed Series 2001 Bond, in replacement for such Series 2001 Bond in the manner
hereinafter provided.
GEORGTWN/LMLREV2001: ORDIN.DRi 27
(b) Apnlication for Replacement Bonds. Application for replacement of damaged, mutilated, lost,
stolen or destroyed Series 2001 Bonds shall be made by the registered owner thereof to the Paying
Agent/Registrar. In every case of loss, theft or destruction of a Series 2001 Bond, the registered owner
applying for a replacement bond shall fumish to the City 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 Series 2001 Bond, the registered
owner shall furnish to the City and to the Paying Agent/Registrar evidence to their satisfaction of the loss,
theft or destruction of such Series 2001 Bond, as the case may be. In every case of damage or mutilation
of a Series 2001 Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation
the Series 2001 Bond so damaged or mutilated.
(c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event
any such Series 2001 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 Series 2001 Bond, the City may
authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated
Series 2001 Bond) instead of issuing a replacement Series 2001 Bond, provided security or indm ity is
furnished as above provided in this Section.
(d) Charge for Issuing Replacement Series 2001 Bonds. Prior to the issuance of any replacement
bond, the Paying Agent/Registrar shall charge the registered owner of such Series 2001 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 Series 2001 Bond is lost, stolen or destroyed shall
constitute a contractual obligation of the City whether or not the lost, stolen or destroyed Series 2001 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 Series 2001 Bonds duly issued under this
Ordinance.
(e) Authority for Issuing Replacement Series 2001 Bonds. In accordance with Subchapter D of
Chapter 1201, Texas Government Code, this Section of this Ordinance shall constitute authority for the
issuance of any such replacement bond without necessity of further action by the governing body of the City
or any other body or person, and the duty of the replacement of such bonds is hereby authorized and
imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver
such Series 2001 Bonds in the form and manner and with the effect, as provided in Section 5(a) of this
Ordinance for Series 2001 Bonds issued in exchange for other Series 2001 Bonds,
SEcnm 31, AMENDMENT OF ORDINANCE. (a) The holders of the Parity Obligations
aggregating a majority in principal amount of the aggregate principal amount of then Outstanding Panty
Obligations 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 without the consent of the holders
of all of the effected Parity Obligations at the time outstanding, nothing herein contained shall permit or be
GEORGTWN/UTILREV2001: ORDIN.DRI 28
construed to permit the amendment of the terms and conditions in this Ordinance or in the Parity
Obligations so as to:
(1) Make any change in the maturity of the Outstanding Parity Obligations;
(2) Reduce the rate of interest borne by any of the outstanding Parity Obligations;
(3) Reduce the amount of the principal payable on the outstanding Parity Obligations;
(4) Modify the terms of payment of principal of or interest on the outstanding Parity Obligations
or impose any conditions with respect to such payment;
(5) Affect the rights of the holders of less than all of the Parity Obligations then outstanding;
(b) Change the minimum percentage of the principal amount of Parity Obligations necessary for
consent to such amendment.
(b) If at any time the City shall desire to amend this Ordinance under this Section, the City shall
cause notice of the proposed amendment to be published in a financial newspaper or journal 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 for inspection by all registered owners of Parity Obligations at the
designated trust office of the registrar for the Parity Obligations. Such publication is not required, however,
if notice in writing is given to each registered owner of the Parity Obligations.
(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 of at least a majority in aggregate principal amount of all Parity
Obligations then outstanding, which instrument or instruments shall refer to the proposed amendment
described in said notice and which specifically consent to and approve such amendment in substantially the
form of the copy thereof on file with the Paying Agent/Registrar, 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 of then
outstanding Parity Obligations shall thereafter be determined, exercised and enforced hereunder, subject
in all respects to such amendments.
(e) Any consent given by the registered owner of a Parity Obligation pursuant to the provisions
of this Section shall be irrevocable for a period of six months from the date of the first publication of the
GE.ORGTWNAMLREV2001: ORDIN.DRI 29
notice provided for in this Section, and shall be conclusive and binding upon all fir ure holders of the same
Parity Obligation during such period. Such consent may be revoked at any time after six months from the
date of the first publication of such notice by the holder who gave such consent, or by a successor in title,
by filing notice thereof with the Paying Agent and the City, but such revocation shall not be effective if the
registered owners of at least a majority in aggregate principal amount of the then outstanding Parity
Obligations as in this Section defined have, prior to the attempted revocation, consented to and approve
the amendment.
(f) For the purpose of this Section, the fact of the holding of Parity Obligations issued in registered
form without coupons and the amounts and numbers of such Parity Obligations and the date of their holding
same shall be proved by the Registration Books of the Paying Agent/Registrar. For purposes of this
Section, the holder of a Parity Obligation in such registered form shall be the owner thereof as shown on
such Registration Books. The City may conclusively assume that such ownership continues until written
notice to the contrary is served upon the City.
(g) The foregoing provisions of this Section notwithstanding, the City by action of the City Council
may amend this Ordinance for any one or more of the following purposes:
(1) To add to the covenants and agreements of the City. in this Ordinance contained, other
covenants and agreements thereafter to be observed, grant additional rights or remedies to
bondholders or to surrender, restrict or limit any right or power herein reserved to or conferred
upon the City;
(2) To make such provisions for the purpose of curing any ambiguity, or curing, correcting or
supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters
or questions arising under this Ordinance, as are necessary or desirable and not contrary to or
inconsistent with this Ordinance and which shall not adversely affect the interests of the holders of
the Parity Obligations;
(3) To make any changes or amendments requested by any Rating Agency, as a condition to
the issuance or maintenance of a rating, which changes or amendments do not, in the judgment of
the City, materially adversely affect the interests of the owners of the outstanding Parity Obligations;
(4) To make such changes, modifications or amendments as may be necessary or desirable,
which shall not adversely affect the interests of the owners of the outstanding Parity Obligations,
in order, to the extent permitted by law, to facilitate the economic and practical utilization of credit
agreements with respect to the Parity Obligations including, without limitation, supplementing the
definition of "Annual Debt Service Requirements" to address the amortization of payments due and
owing under a credit agreement;
GEORGTWNI YMMV2001: ORDIN.DRI 30
(5) To modify any of the provisions of this Ordinance in any other respect whatever, provided
that (i) such modification shall be, and be expressed to be, effective only after all Parity Obligations
outstanding at the date of the adoption of such modification shall cease to be outstanding, and (ii)
such modification shall be specifically referred to in the text of all Additional Parity Obligations
issued after the date of the adoption of such modification.
Notice of any such amendment may be published or given by the City in the manner described in subsection
(b) of this Section; provided, however, that the publication of such notice shall not constitute a condition
precedent to the adoption of such amendatory ordinance and the failure to publish such notice shall not
adversely affect the implementation of such amendment as adopted pursuant to such amendatory ordinance.
SEmoN 32. SALE AND DELIVERY OF SERIES 2001 BONDS. The Series 2001 Bonds
are hereby sold and shall be delivered to Dain Rauscher Incorporated, (the "Underwriter") in accordance
withthe terms and provisions of a Purchase Contract in substantially the form presented to the City Council
at the meeting to consider this Ordinance which the Mayor of the City is hereby authorized to execute and
deliver and which the City Secretary of the City is hereby authorized to attest. The City will initially deliver
to the Underwriter one bond for each maturity of the Series 2001 Bonds authorized under this Ordinance.
The Series 2001 Bonds shall initially be registered in the name of Dain Rauscher Incorporated.
SEmoN 33. CUSTODY, APPROVAL AND REGISTRATION OF SERIES 2001
BONDS; BOND COUNSEL'S OPINION, BOND INSURANCE AND CUSIP NUMBERS. The
Mayor of the City is hereby authorized to have control of the Series 2001 Bonds initially issued and
delivered hereunder and all necessary records and proceedings pertaining to the Series 2001 Bonds
pending their delivery and their investigation, examination and approval by the Attorney General of the State
of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon
registration of the Series 2001 Bonds said Comptroller of Public Accounts (or a deputy designated in
writing to act for said Comptroller) shall manually sign the Comptroller's Registration Certificate attached
to such Series 2001 Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on
such Certificate. The approving legal opinion of the City's Bond Counsel (with an appropriate certificate
pertaining thereto executed by facsimile signature of the City Secretary of the City), a statement regarding
any insurance policy and the assigned CUSIP numbers may, at the option of the City, be printed on or
attached to the Series 2001 Bonds issued and delivered under this Ordinance, but such additions or
attachments shall not have any legal effect, and shall be solely for the convenience and information of the
registered owners of the Series 2001 Bonds.
SEmoN 34. APPROVAL OF OFFICIAL STATEMENT. The City hereby approves the
form and content of the Official Statement relating to the Series 2001 Bonds and any addenda, supplement
or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the
Series 2001 Bonds by the Underwriter in final form, with such changes therein or additions thereto as the
officer executing the same may deem advisable, such determination to be conclusively evidenced by his
execution thereof. The distribution and use of the Preliminary Official Statement dated March 27, 2001,
GE0RGTWN/UTULREV2001: ORDIN.DRI 31
prior to the date hereof is ratified and confirmed. The City Council of the City hereby finds and determines
that the Preliminary Official Statement and the Official Statement were and are "deemed final" (as that term
is defined in 17 C.F.R. Section 240.15c-12) as of their respective dates.
SECrioN 35. INSURANCE PROVISIONS. In the event that insurance is purchased for the
Series 2001 Bonds prior to final passage of this Ordinance, bond counsel to the City may revise this
Ordinance to include the necessary provisions for such insurance.
SECTION 36. NO RECOURSE AGAINST CITY OFFICIALS. No recourse shall be had for
the payment of principal of or interest on any Parity Bonds or for any claim based thereon or on this
Ordinance against any official of the City or any person executing any Parity Bonds.
SECTION 37. FURTHER ACTIONS. The officers and employees of the City are hereby
authorized, empowered and directed from time to time and at any time to do and perform all such acts and
things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of
the City all such instruments, whether or not herein mentioned, as may be necessary or desirable in order
to carry out the terms and provisions of this Ordinance, the Series 2001 Bonds, the initial sale and delivery
of the Series 2001 Bonds, the Paying Agent/Registrar Agreement, any insurance commitment letter or
insurance policy and the Official Statement In addition, prior to the initial delivery of the Series 2001
Bonds, the Mayor, the City Manager or Assistant City Manager, the City Attorney and Bond Counsel
are hereby authorized and directed to approve any technical changes or corrections to this Ordinance or
to any of the instruments authorized and approved by this Ordinance necessary in order to (i) correct any
ambiguity or mistake or properly or more completely document the transactions contemplated and
approved by this Ordinance and as described in the Official Statement, (ii) obtain a rating from any of the
national bond rating agencies or satisfy requirements of the Bond Insurer, or (iii) obtain the approval of the
Series 2001 Bonds by the Texas Attorney General's office.
In case any officer of the City whose signature shall appear on any Series 2001 Bond shall cease
to be such officer before the delivery of such Series 2001 Bond, such signature shall nevertheless be valid
and sufficient for all purposes the same as if such officer had remained in office until such delivery.
SECTION 38, INTERPRETATIONS. All terms defined herein and all pronouns used in this
Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and
headings of the articles and sections of this Ordinance and the Table of Contents of this Ordinance have
been inserted for convenience of reference only and are not to be considered a part hereof and shall not
in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and
provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the
validity of the Series 2001 Bonds and the validity of the lien on and pledge of the Pledged Revenues to
secure the payment of the Series 2001 Bonds.
GEORGTWNWILREV2001: ORDIN.DRI 32
SEcnoN 39. INCONSISTENT PROVISIONS. All ordinances, orders or resolutions, or parts
thereof, which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to
the extent of such conflict and the provisions of this Ordinance shall be and remain controlling as to the
matters contained herein.
SEmoN 40. INTERESTED PARTIES. Nothing in this Ordinance expressed or implied is
intended or shall be construed to confer upon, or to give to, any person or entity, other than the City and
the registered owners of the Series 2001 Bonds, any right, remedy or claim under or by reason of this
Ordinance or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and
agreements in this Ordinance contained by and on behalf of the City shall be for the sole and exclusive
benefit of the City and the registered owners of the Series 2001 Bonds,
SEmoN 41. INCORPORATION OF RECITALS. The City hereby finds that the statements
set forth in the recitals of this Ordinance are true and correct, and the City hereby incorporates such recitals
as a part of this Ordinance.
SECTION 42. SEVERABILITY. If any provision of this Ordinance or the application thereof to
any circumstance shall be held to be invalid, the remainder of this Ordinance and the application thereof
to other circumstances shall nevertheless be valid, and this governing body hereby declares that this
Ordinance would have been enacted without such invalid provision.
SECTION 43. REPEALER. All orders, resolutions and ordinances, or parts thereof, inconsistent
herewith are hereby repealed to the extent of such inconsistency.
SECTION 44. EMERGENCY. Due to needed repairs and improvements to the City's System,
the City Council finds it to be in the best interest of the citizens of Georgetown to adopt this Ordinance on
an emergency basis.
SECTION 45. EFFECTIVE DATE. This Ordinance shall become effective upon adoption in
accordance with the provisions of the Charter of the City.
PASSED AND APPROVED on Emergency Reading on the 24th day of April, 2001.
Kersch,
City of Georgetown, Texas
GEORGTWN/UTILREV2001: ORDINDRI 33
City Secretary
(CITY SEAL)
APPROVED AS TO FORM:
By:
City Attorney
Exhibit A - Definitions
Exhibit B - Form of Bonds
Exhibit C - Description of Annual Financial Information
GEORGTWNAMLREV2001: ORDIN DRI 34
As used in this Ordinance, the following terms and expressions shall have the meanings set forth
below, unless the text hereof specifically indicates otherwise:
"Accountant" means an independent certified public accountant or accountants or a firm of an
independent certified public accountants, in either case, with demonstrated expertise and competence in
public accountancy.
"Additional Parity Obligations" means bonds, notes, warrants, certificates of obligation,
contractual obligations or other Debt which the City reserves the right to issue or enter into, as the case may
be, in the future under the terms and conditions provided in Sections 22 and 23 of this Ordinance and which
obligations are equally and ratably secured solely by a first lien on and pledge of the Pledged Revenues on
a parity with the outstanding Parity Obligations and the Series 2001 Bonds.
"Amortization Installment" means, with respect to any Term Bonds of any series of Parity
Obligations, the amount of money which is required to be deposited into a mandatory redemption account
for retirement of such Term Bonds (whether at maturity or by mandatory redemption and including
redemption premium, if any) provided that the total Amortization Installments for such Term Bonds shall
be sufficient to provide for retirement of the aggregate principal amount of such Term Bonds.
"Annual Debt Service Requirements" means, as of the date of calculation, the principal of and
interest on all Parity Obligations coming due at Maturity or Stated Maturity (or that could come due on
demand of the owner thereof other than by acceleration or other demand conditioned upon default by the
City on such Debt, or be payable in respect of any required purchase of such Debt by the City) in such
Fiscal Year, and, for such purposes, any one or more of the following rules shall apply at the election of
the City:
(1) BalloonDebt If the principal (including the accretion of interest resulting from original issue
discount or compounding of interest) of any series or issue of Funded Debt due (or payable in
respect of any required purchase of such Funded Debt by the City) in any Fiscal Year either is
equal to at least 25% of the total principal (including the accretion of interest resulting from original
issue discount or compounding of interest) of such Funded Debt or exceeds by more than 50% the
greatest amount of principal of such series or issue of Funded Debt due in any preceding or
succeeding Fiscal Year (such principal due in such Fiscal Year for such series or issue of Funded
Debt being referred to herein and throughout this Ordinance as "Balloon Debt"), the amount of
principal of such Balloon Debt taken into account during any Fiscal Year shall be equal to the debt
service calculatedusing the original principal amount of such Balloon Debt amortized over the Term
of Issue on a level debt service basis at an assumed interest rate equal to the rate borne by such
Balloon Debt on the date of calculation;
GEORGTWNWILPEV2001: ORDIN.DR1 A4
(2) Consent Sinking Fund. In the case of Balloon Debt, if a Designated Financial Officer shall
deliver to the City a certificate providing for the retirement of (and the instrument creating such
Balloon Debt shall permit the retirement of), or for the accumulation of a sinking fund for (and the
instrument creating such Balloon Debt shall permit the accumulation of a sinking fund for), such
Balloon Debt according to a fixed schedule stated in such certificate ending on or before the Fiscal
Year in which such principal (and premium, if any) is due, then the principal of (and, in the case of
retirement, or to the extent provided for by the sinking fund accumulation, the premium, if any, and
interest and other debt service charges on) such Balloon Debt shall be computed as if the same
were due in accordance with such schedule, provided that this clause (2) shall apply only to
Balloon Debt for which the installments previously scheduled have been paid or deposited to the
sinking fund established with respect to such Debt on or before the times required by such
schedule; and provided firther that this clause (2) shall not apply where the City has elected to
apply the rule set forth in clause (1) above;
(3) Prepaid Debt. Principal of and interest on Series 2001 Bonds and Additional Parity
Obligations, or portions thereof, shall not be included in the computation of the Annual Debt
Service Requirements for any Fiscal Year for which such principal or interest are payable from
funds on deposit or set aside in trust for the payment thereof at the time of such calculations
(including without limitation capitalized interest and accrued interest so deposited or set aside in
trust) with a financial institution acting as fiduciary with respect to the payment of such Debt; and
(4) Variable Rate. As to any Parity Obligations that bear interest at a variable interest rate
which cannot be ascertained at the time of calculation of the Annual Debt Service Requirement
then, at the option of the City, either (A) an interest rate equal to the average rate borne by such
Parity Obligations (or by comparable debt in the event that such Parity Obligations has not been
outstanding during the preceding 24 months) for any 24 month period ending within 30 days prior
to the date of calculation, or (B) an interest rate equal to the 30 year Revenue Bond Index (as
most recently published in The Bond Bu3Ler), shall be presumed to apply for all future dates, unless
such index is no longer published in The Bond Buyer, in which case an index of revenue bonds
with maturities of at least 20 years which is published in a financial newspaper or journal with
national circulation may be used for this purpose (if two Series of Parity Obligations which bear
interest at variable interest rate, or one or more maturities within a Series, of equal par amounts,
are issued simultaneously with inverse floating interest rates providing a composite fixed interest rate
for such Parity Obligations taken as a whole, such composite fined rate shall be used in determining
the Annual Debt Service Requirement with respect to such Parity Obligations);
With respect to any calculation of historic data, only those payments actually made in the subject period
shall be taken into account in making such calculation and, with respect to prospective calculations, only
those payments reasonably expected to be made in the subject period shall be taken into account in making
the calculation.
GEORGTWNAMLMV2001: ORDIN.DR1 A'2
"Average Annual Debt Service Requirements" means that average amount which, at the time of
computation, will be required to pay the Annual Debt Service Requirements when due (either at Stated
Maturity or mandatory redemption) and derived by dividing the total of such Annual Debt Service
Requirements by the number of Fiscal Years then remaining before Stated Maturity of such Parity
Obligations. For the purposes of this definition, a fractional period of a Fiscal Year shall be treated as an
entire Fiscal Year. Capitalized interest payments provided from bond proceeds, accrued interest on any
Debt, and interest earnings thereon shall be excluded in making such computation.
"Bond Insurer" means
guarantees the payment of principal and interest on any
Obligation.
or any other entity that insures or
Bonds or the provider of a Reserve Fund
"Book -Entry -Only System "means the book -entry system of bond registration provided in Section
5, or any successor system of book -entry registration.
"Cede & Co. " means the designated nominee and its successors and assigns of The Depository
Trust Company, New York.
"City" and 'Issuer" mean the City of Georgetown, Texas, and where appropriate, the City
Council.
"Debt" and "Debt of the City payable from Pledged Revenues" mean:
(1) all indebtedness payable from Pledged Revenues and/or Net Revenues incurred or
assumed by the City for borrowed money and all other financing obligations of the System payable
from Pledged Revenues and/or Net Revenues that, in accordance with generally accepted
accounting principles, are shown on the liability side of a balance sheet, and
(2) all other indebtedness payable from Pledged Revenues and/or Net Revenues (other than
indebtedness otherwise treated as Debt hereunder) for borrowed money or for the acquisition,
construction or improvement of property or capitalized lease obligations pertaining to the System
that is guaranteed, directly or indirectly, in any manner by the City, or that is in effect guaranteed,
directly or indirectly, by the City through an agreement, contingent or otherwise, to purchase any
such indebtedness or to advance or supply funds for the payment or purchase of any such
indebtedness or to purchase property or services primarily for the purpose of enabling the debtor
or seller to make payment of such indebtedness, or to assure the owner of the indebtedness against
loss, or to supply funds to or in any other manner invest in the debtor (including any agreement to
pay for property or services irrespective of whether or not such property is delivered or such
services are rendered), or otherwise.
For the purpose of determining Debt, there shall be excluded any particular Debt if, upon or prior to the
Maturity thereof, there shall have been deposited with the proper depository (a) in trust the necessary funds
GEORGTWNWILREV2001: ORDIN.DRI A-3
(or investments that will provide sufficient fiords, if permitted by the instrument creating such Debt) for the
payment, redemption, or satisfaction of such Debt or (b) evidence of such Debt deposited for cancellation;
and thereafter it shall not be considered Debt. No item shall be considered Debt unless such item
constitutes indebtedness under generally accepted accounting principles applied on a basis consistent with
the financial statements of the System in prior Fiscal Years.
"Depository" means one or more official depository banks of the City.
"DTC" means The Depository Trust Company, New York, New York and its successors and
assigns.
"DTC Participant" means securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations on whose behalf DTC was created to hold securities to
facilitate the clearance and settlement of securities transactions among DTC Participants.
"Designated Financial Officer" means the chief financial officer of the City, or such other financial
or accounting official of the City so designated by the City Council.
"Fiscal Year" means the twelve-month accounting period used by the City in connection with the
operation of the System, currently ending on September 30 of each year, which may be any twelve
consecutive month period established by the City, but in no event may the Fiscal Year be changed more
than one time in any three calendar year period.
"Funded Debt" means all Parity Obligations created or assumed by the City that mature by their
terms (in the absence of the exercise of any earlier right of demand); or that are renewable at the option
of the City to a date, more than one year after the original creation or assumption of such Debt by the City.
"Gross Revenues" and "Gross Revenues of the City's System" mean all revenues, income and
receipts of every nature derived or received by the City from the operation and ownership of the System;
including the interest income from investment or deposit of money in any Fund created by this Ordinance
or maintained by the City in connection with the System; and any other revenues hereafter pledged to the
payment of all Parity Obligations.
"Holder" or "Holders" means the registered owner, whose name appears in the Security Register,
for any Parity Obligation.
"Independent Engineer" means an individual, firm or corporation engaged in the engineering
profession, being a registered professional engineer under the laws of the State of Texas, having specific
experience with respect to electric, water, wastewater, reuse water and/or stormwater drainage systems
similar to the System.
GEORGTWNAYrILREV2001: ORDW DRI A4
"Interest and Sinking Fund"means the special Fund maintained by the provisions ofSections 8
and 11 of this Ordinance.
"MSRB" means the Municipal Securities Rulemaking Board.
"Maintenance and Operating Expenses" means the reasonable and necessary expenses of
operation and maintenance of the System as required by Section 1502.058, Texas Government Code, as
amended, including all salaries, labor, materials, repairs and extensions necessary to render efficient service
(but only such repairs and extensions as, in the judgment of the governing body of the City, are necessary
to keep the System in operation and render adequate service to the City and the inhabitants thereof, or such
as might be necessary to meet some physical accident or conditions which would otherwise impair the
Parity Obligations), and all payments under contracts now or hereafter defined as operating expenses by
the Legislature of Texas. Depreciation shall never be considered as a Maintenance and Operating
"Maturity" means, when used with respect to any Debt, the date on which the principal of such
Debt or any installment thereof becomes due and payable as therein provided, whether at the Stated
Maturity thereof or by declaration of acceleration, call for redemption, or otherwise.
"Maximum AnnualDebtServiceRequirements" means the greattestrequirementsofAnnualDebt
Service Requirements (taking into account all mandatory principal redemption requirements) scheduled to
occur in any future Fiscal Year or in the then current Fiscal Year for the particular obligations for which
such calculation is made. Capitalized interest payments provided from Debt proceeds, accrued interest
on any Debt, and interest earnings thereon shall be excluded in making such computation.
"Net Revenues" and'Net Revenues of the City's System" mean all Gross Revenues remaining
"NRMSIR" means each person whom the SEC or its staff has determined to be a nationally
recognized municipal securities information repository within the meaning of the Rule from time to time.
"Ordinance" means this ordinance finally adopted by the City Council on April 24, 2001.
"Outstanding", when used with respect to Parity Obligations, means, as of the date of
determination, all Parity Obligations theretofore delivered under this Ordinance and any ordinance
authorizing Additional Parity Obligations, except.
(1) Parity Obligations theretofore cancelled and delivered to the City or delivered to the
Paying Agent/Regisiiw for cancellation;
(2) Parity Obligations deemed paid pursuant to the provisions of Section 31 of this Ordinance
or any comparable section of any ordinance authorizing Additional Parity Obligations;
GEORGTWNILMLREV2001: ORDIN.DRi A'5
(3) Parity Obligations upon transfer of or in exchange for and in lieu of which other Parity
Obligations have been authenticated and delivered pursuant to this Ordinance and any ordinance
authorizing Additional Parity Obligations; and
(4) Parity Obligations under which the obligations of the City have been released, discharged
or extinguished in accordance with the terms thereof.
"Paying Agent/Registrar" shall have the meaning set forth in Section 5(a) hereof.
"Parity Obligations" means the Series 2001 Bonds, the Previously Issued Parity Obligations and
any Additional Parity Obligations hereafter issued by the City or obligations issued to refund any of the
foregoing (as determined within the sole discretion of the City Council in accordance with applicable law)
if issued in a marurer that provides that the refunding bonds are payable from and equally and ratably
secured by a first lien on and pledge of the Pledged Revenues.
"Permitted Investments" means any security orobligationorcombinationthereofpermittedunder
the Public Funds Investments Act, Chapter 2256, Texas Government Code, as amended or other
applicable law.
"Pledged Revenues" means (1) the Net Revenues, plus (2) any additional revenues, income,
receipts, or other resources, 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 hereafter are pledged by the City to the payment of the Parity
Obligations, and excluding those revenues excluded from Gross Revenues.
"Previously Issued Parity Obligations" means the Outstanding Parity Obligations of the City
entitled "City of Georgetown, Texas Utility System Revenue and Refunding Bonds, Series 1998A," "City
of Georgetown, Texas Utility System Revenue Refunding Bonds, Taxable Series 1998B" and "City of
Georgetown, Texas Utility System Revenue Bonds, Series 2000."
"Prudent Utility Practice" means any of the practices, methods and acts, in the exercise of
reasonable judgment, in the light of the facts, including but not limited to the practices, methods and acts
engaged in or previously approved by a significant portion of the public utility industry, known at the time
the decision was made, that would have been expected to accomplish the desired result at the lowest
reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent Utility
Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others,
but rather is a spectrum of possible practices, methods or acts which could have been expected to
accomplishthe desired result at the lowest reasonable cost consistent with reliability, safety and expedition.
In the case of any facility included in the System which is operated in common with one or more other
entities, the term Prudent Utility Practice, as applied to such facility, shall have the meaning set forth in the
agreement governing the operation of such facility.
GEORGTWNMMREV2001: ORDIN.DRI A-6
"Rating Agency" means any nationally recognized securities rating agency which has assigned, at
the request of the City, a rating to the Parity Obligations.
"Record Date" means Record Date as defined in the Form of Bonds in Exhibit B to this
Ordinance.
"Required Reserve Amount" means the amount required to be maintained in the Reserve Fund
pursuant to the provisions of Section 12 of this Ordinance.
"Required Reserve Fund Deposits" means the deposits and credits, if any, required to be made
to the Reserve Fund pursuant to the provisions of Section 12 of this Ordinance.
"Reserve Fund" means the special fund created, established and maintained by the provisions of
Sections g and 12 of this Ordinance.
"Reserve Fund Obligation" means, to the extent permitted by law, as evidenced by an opinion of
nationally recon bond counsel, a surety bond or insurance policy deposited in the Reserve Fund to
satisfy the Required Reserve Amount whereby the issuer is obligated to provide funds up to and including
the maximum amount and under the conditions specified m such agreement or instrument.
"Reserve Fund Obligation Payment" means any subrogation payment the City is obligated to
make from Pledged Revenues deposited in the Reserve Fund with respect to a Reserve Fund Obligation.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Series 2001 Bonds" means, the City of Georgetown, Texas Utility System Revenue Bonds, Series
2001 authorized by this Ordinance.
"SID" means any person designated by the State of Texas or an authorized department, officer, or
agency thereof as, and determined by the SEC or its staff to be, a state information depository within the
meaning of the Rule from time to time.
"Special Project" means, to the extent permitted by law, any electric, waterworks, sanitary sewer,
wastewater reuse or municipal drainage system properly, improvement or facility declared by the City not
to be part of the System, for which the costs of acquisition, construction and installation are paid from
proceeds of a financing transaction other than the issuance of bonds payable from ad valorem taxes,
Pledged Revenues or Net Revenues and for which all maintenance and operation expenses are payable
from sources other than ad valorem taxes, Pledged Revenues or Net Revenues, but only to the extent that
and for so long as all or any part of the revenues or proceeds of which are or will be pledged to secure the
GEORGT krN/LMLREV2001: ORDIN.DRI A-7
payment or repayment of such costs of acquisition, construction and installation under such financing
transaction.
"Stated Maturity " means the annual principal payments of the Parity Obligations payable on the
respective dates set forth in the Ordinances which authorized the issuance of such Parity Obligations.
"Subordinate Lien Obligations" means (i) any bonds, notes, warrants, certificates of obligation,
contractual obligations or other Debt issued by the City that are payable, in whole or in part, from and
equally and ratably secured by a lien on and pledge of the Net Revenues, such pledge being subordinate
and inferior to the lien on and pledge of the Net Revenues that are or will be pledged to the payment of any
Parity Obligations issued by the City, and (ii) obligations hereafter issued to refund any of the foregoing if
issued in a manner that provides that the refunding bonds are payable from and equally and ratably secured,
in whole or in part, by alien on and pledge of the Net Revenues on a parity with the Subordinate Lien
Obligations.
"System" means as currently comprised, the City's combined electric, waterworks and sewer
system, which includes all properties, facilities, plants, improvements, equipment, interests and rights
currently owned, operated and maintained by the City for the (i) generation, transmission, distribution or
sale of electric power and energy, (ii) supply, treatment, and transmission and distribution of treated potable
water and (iii) collection and treatment of wastewater, and for water reuse, together with all future
extensions, improvements, purchases, repairs, replacements and additions thereto, whether situated within
or without the limits of the City, and all water (in any form) owned by the City; provided, however, that the
City expressly retains the right to (i) sale or disaggregate the System as set forth in Section 18 of this
Ordinance and (ii) incorporate any other utility system as provided by the laws of the State of Texas as a
part of the System. The System shall not include any Special Project or any disaggregated part of the
System as provided in Section 18 of this Ordinance.
"Term Bonds" means those Parity Obligations so designated in the ordinances authorizing such
bonds which shall be subject to retirement by operation of a mandatory redemption account.
"Term of Issue" means with respect to any Balloon Debt, a period of time equal to the greater of
(i) the period of time commencing on the date of issuance of such Balloon Debt and ending on the final
maturity date of such Balloon Debt or (ii) twenty-five years.
GEORGTWN/UTILREV2001: ORDIN.DRI A4
10
CITY I OF i• iTEXAS
�jr,.VJFwl. L
1\: 101 1 '' i.V4 V i` i 1
April 15, 2001
CUSIP NO.
ON THE MATURITY DATE specified above, the CITYOF GEORGETOWN, TEXAS (the
"Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises
to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered
Owner"), the Principal Amount specified above, and to pay interest thereon (calculated on the basis of a
360 -day year of twelve 30 -day months) from April 15, 2001 at the Interest Rate per annum specified
above, payable on August 15, 2001, and semiannually on each February 15 and August 15 thereafter to
the Maturity Date specified above, or the date of redemption prior to maturity; except that if this Bond is
required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter
defined), such Principal Amount shall bear interest from the interest payment date next preceding the date
of authentication, unless such date of authentication is after any Record Date 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; provided, however, that if on the date of authentication hereof the interest
on the Bond or Bonds, if any, for which this Bond is being exchanged is due but has not been paid, then
this Bond shall bear interest from the date to which such interest has been paid in full. Notwithstanding the
foregoing, during any period in which ownership of the Bonds is determined only by a book entry at a
securities depository for the Bonds, any payment to the securities depository, or its nominee or registered
assigns, shall be made in accordance with existing arrangements between the Issuer and the securities
depository.
THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the
United States of America, without exchange or collection charges. The principal of this Bond shall be paid
to the Registered Owner hereof upon presentation and surrender of this Bond at maturity or upon the date
GEORGTWNAITILREV2001: ORDIN.DRI B' 1
fixed for its redemption prior to maturity, at the designated office for payment of The Bank of New York,
New York which is the "Paying Agent/Registrar" for this Bond The payment of interest on this Bond shall
be made by the Paying Agent/Registrar to the Registered Owner hereof on each interest payment date by
check, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely
from, funds of the Issuer required by the Ordinance authorizing the issuance of this Bond (the "Bond
Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided;
and such check shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid,
on each such interest payment date, to the Registered Owner hereof, at its address as it appeared on the last
business day of the month next preceding each such date (the "Record Date") on the Registration Books kept
by the Paying Agent/Registrar, as hereinafter described. In the event of a non-payment of interest on a
scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special
Record Date") will be established by the Paying Agent/Registrar if and when funds for the payment of such
interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled
payment date of the past due interest (the "Special Payment Date" which shall be 15 days after the Special
Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail,
first class, postage prepaid, to the address of each Registered Owner appearing on the Registration Books
of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of
mailing of such notice. Any accrued interest due upon the redemption of this Bond prior to maturity as
provided herein shall be paid to the Registered Owner upon presentation and surrender of this Bond for
redemption and payment at the principal office for payment of the Paying Agent/Registrar (unless the
redemption date is a regularly scheduled interest payment date, in which case accrued interest on such
redeemed Bonds shall be payable in the regular manner described above). The Issuer covenants with the
Registered Owner of this Bond that on or before each principal payment date, interest payment date, and
accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the
"Interest and Sinking Fund" referred to in and maintained 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. Terms used in this Bond and not otherwise defined shall have the meaning given in the Bond Ordinance.
DURING ANY PERIOD in which ownership ofthe Bonds is determined only by a book entry
at a securities depository for the Bonds, if fewer than all of the Bonds of the same maturity and bearing the
same interest rate are to be redeemed, the particular Bonds of such maturity and bearing such interest rate
shall be selected in accordance with the arrangements between the Issuer and the securities depository.
IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday,
Sunday, legal holiday, or day on which banking institutions in the city where the principal office for payment
of the Paying Agent/Registrar is located are authorized by law or executive order to close, or the United
States Postal Service is not open for business (each a "Non -Business Day"), then the date for such payment
shall be the next succeeding day which is not a Non -Business Day, and payment on such date shall have the
same force and effect as if made on the original date payment was due.
ON AUGUST 15, 2011 OR ON ANY DATE THEREAFTER, the Bonds maturing on and after
August 15, 2012 through 2021, inclusive, may be redeemed prior to their scheduled maturities, at the option
of the Issuer, with funds derived from any available and lawful source, at a redemption price equal to the
principal amount to be redeemed plus accrued interest to the date fixed for redemption as a whole, or from
time to time in part, and, if in part, the particular Bonds, or portions thereof; to be redeemed shall be selected
GEORGTWNAYr LREV2001: ORDINDRt 13-2
and designated by the Issuer, and if less than all of a maturity is to be redeemed the Paying Agent/Registrar
shall determine by lot the Bonds, or portions thereof within such maturity to be redeemed (provided that a
portion of a Bond may be redeemed only in integral multiples of $5,000 of principal amount).
THE BONDS maturing on August 15, 20_ (the "Term Bonds") are subject to mandatory
redemption prior to maturity in part, with the particular Bonds to be redeemed to be determined by the Paying
Agent/Registrar by lot or other customary method, at a price equal to the principal amount thereof plus
accrued interest to the date of redemption, on August 15 in the years and principal amounts shown below:
Term Bonds Maturing
August 15, 20_
Redemption Date
August 15, 20
August 15, 20_
vire • �� ��
The principal amount of the Term Bonds of a maturity required to be redeemed pursuant to the operation
of such mandatory redemption requirements may be reduced, at the option of the Issuer, by the principal
amount of the Term Bonds of such maturity which, prior to the date of the mailing of notice of such
mandatory redemption, (i) shall have been acquired by the Issuer and delivered to the Paying
Agent/Registrar for cancellation, (ii) shall have been purchased and canceled by the Paying Agent/Registrar
at the request of the Issuer, or (iii) shall have been redeemed pursuant to the optional redemption provisions
described in the preceding paragraph and not theretofore credited against a mandatory redemption
requirement.
AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior
to maturity, a written notice of such redemption shall be sent by the Paying Agent/Registrar by United
States mail, fust -class postage prepaid, at least 30 days prior to the date fixed for any such redemption to
the Registered Owner of each Bond to be redeemed at its address as it appeared on the Registration
Books maintained by the Paying Agent/Registrar on the day such notice of redemption is mailed. By the
date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the
payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed.
If such written notice of redemption is mailed and if due provision for such payment is made, all as provided
above, the Bonds or portions thereof which are to be so redeemed thereby automatically shall be treated
as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for
redemption, and they shall not be regarded as being outstanding except for the right of the Registered
Owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such
payment. If a portion of any Bond shall be redeemed a substitute Bond or Bonds having the same maturity
date, bearing interest at the same rate, m any denomination or denominations m any integral multiple of
$5,000, at the written request ofthe Registered Owner, and in an aggregate principal amount equal to the
GEORGTWNIU ILREV2001: ORDIN.DRI 13-3
unredeemed portion thereof, will be issued to the Registered Owner upon the surrender thereof for
cancellation, at the expense of the issuer, all as provided in the Bond Ordinance,
coupons, in the denomination of any integral multiple of $5,000 (an "Authorized Denomination"). As
provided in the Bond Ordinance, this Bond, or any unredeemed portion hereof, may, at the request of the
Registered Owner or the assignee or assignees hereof, be assigned, transferred and exchanged for a like
aggregate principal amount of fully registered Bonds, without interest coupons, payable to the appropriate
Registered Owner, assignee or assignees, as the case may be, having the same denomination or
denominations in any integral multiple of $5,000 as requested in writing by the appropriate Registered
Owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying
Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond
Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and
surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with
guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or
any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name
or names this Bond or any such portion or portions hereof is or are to be registered. The form of
Assignment printed or endorsed on this Bond may be executed by the Registered Owner to evidence the
assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the
Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions
hereof from time to time by the Registered Owner. The Paying Agent/Registrar's reasonable standard or
customary fees and charges for transferring and exchanging any Bond or portion thereof shall be paid by
the Issuer, but any taxes or governmental charges required to be paid with respect thereto shall be paid by
the one requesting such assignment; transfer or exchange as a condition precedent to the exercise of such
privilege. The Paying Agent/Registrar shall not be required to make any such transfer or exchange (i)
during the period commencing with the close of business on any Record Date and ending with the opening
of business on the next following principal or interest payment date, or, (ii) with respect to any Bond or any
portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date;
provided, however, such limitation of transfer shall not be applicable to an exchange by the Registered
Owner of an unredeemed balance of a Bond called for redemption in part.
WHENEVER the beneficial ownership of this Bond is determined by a book entry at a securities
depository for the Bonds, the foregoing requirements of holding, delivering or transferring this Bond shall
be modified to require the appropriate person or entity to meet the requirements of the securities depository
as to registering or transferring the book entry to produce the same effect.
IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns or
otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will
appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed
to the Registered Owners of the Bonds.
GEORGTWNATMREV2001: ORDIN.DRI B4
IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly
authorized, issued and delivered; that all acts, conditions and things required or proper to be performed,
exist, and be done precedent to or in the authorization, issuance and delivery of this Bond have been
performed, existed and been done in accordance with law, that this Bond is a special obligation of the
Issuer, and that the interest on and principal of this Bond, together with the Previously Issued Parity
Obligations and all other outstanding "Parity Obligations" (as defined in the Bond Ordinance), as such
interest comes due, and as such principal matures, are payable from and secured by a lien on and pledge
of the "Pledged Revenues" of the "System" (which is generally described as the Issuer's combined electric,
waterworks and sewer system), all as provided in the Bond Ordinance,
THE ISSUER also has reserved the right, subject to restrictions stated in the Ordinance, to issue
Additional Parity Obligations which also may be made payable from and equally and ratably secured by
a first lien on and pledge of, the Pledged Revenues of the System in the same manner and to the same
extent as this Series of Bonds.
THE ISSUER also has reserved the right, subject to restrictions stated in the Bond Ordinance to
issue Subordinate Lien Obligations payable from and equally and ratably secured, in whole or in part, by
a lien on and pledge of the Net Revenues (as defined in the Bond Ordinance), subordinate and inferior in
rank and dignity to the lien on and pledge of such Net Revenues. securing payment of the Bonds, the
Previously Issued Parity Obligations or any Additional Parity Obligations.
THE OWNER HEREOF shall never have the right to demand payment of this Bond out of any
funds raised or to be raised by taxation.
BY BECOMING the Registered Owner of this Bond, the Registered Owner thereby
acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms
and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the
official minutes and records of the governing body of the Issuer and agrees that the terms and provisions
of this Bond and the Bond Ordinance constitute a contract between each Registered Owner hereof and
the Issuer.
IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or
facsimile signature of the Mayor of the Issuer, and countersigned with the manual or facsimile signature of
the City Secretary of the Issuer and the official seal of the Issuer has been duly impressed, or placed in
facsimile, on this Bond.
Countersigned:
(facsimile si��
City Secretary, City of Georgetown, Texas
(CITY SEAL)
GEORGTVINAMLREV2001: ORDIN.DRI B-5
(facsimile signature)
Mayor, City of Georgetown, Texas
i, 1, i 1► . i ,1 ► i
I hereby certify that this Bond has been examined, certified as to validity, and approved by the
Attorney General of the State of Texas, and that this Bond has been registered by the Comptroller of Public
Accounts of the State of Texas.
Witness my signature and seal this
(COMPTROLLER'S SEAL) Comptroller of Public Accounts
of the State of Texas
f . i AM19EMVI M 0 1 VJ 1414 QM of 1019 1 V Qj '
PAYING AGENT/REGISTRAW S AUTHENTICATION CERTIFICATE
(To be executed if this Bond is not accompanied by an executed Registration
Certificate of the Comptroller of Public Accounts of the State of Texas)
It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance
described in the text of this Bond; and that this Bond has been issued in exchange for a bond or bonds, or
a portion of a bond or bonds of a series which originally was approved by the Attorney General of the
State of Texas and registered by the Comptroller of Public Accounts of the State of Texas.
Dated:
TIE BANK. OF NEW YORK
New York, New York
Paying Agent/Registrar
GEORGTWN/ YMMV2001: ORDINDRI B_6
Authorized Representative
FORINT OF ASSIGNMENT:
FOR VALUE RECEIVED, the undersigned Registered Owner of this Bond, or duly authorized
representative or attorney thereof, hereby sells, assigns and transfers this Bond and all rights hereunder unto
(Assignee's Social Security or
Taxpayer Identification Number
(Please print or typewrite Assignee's name and address,
including zip code)
and hereby irrevocably constitutes and appoints attorney
to transfer the registration of this Bond on the Paying Agent/Regisft&s Registration Books with full power
of substitution in the premises.
Dated:
Signature Guaranteed:
NOTICE: Signature(s) must be guaranteed by a
member firm of the New York Stock Exchange
or a commercial bank or trust company.
GEORGTWN/LMLREV2001: ORDINDRI B-7
NOTICE: The signature above must correspond
with the name of the Registered Owner as it
appears upon the front of this Bond in every
particular, without alteration or enlargement or
any change whatsoever.
The following information is referred to in Section 21 of this Ordinance.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the City to be provided annually in
accordance with such Section are as specified (and included in the Appendix or under the headings of the
Official Statement referred to) below:
1. The annual audited financial statements of the City of Georgetown, Texas or the unaudited financial
statements of the City of Georgetown, Texas in the event audited financial statements are not completed
within six months after the end of any Fiscal Year.
2. Alt quantitative financial information and operating data with respect to the City of the general type
included in the Official Statement under Tables 1 through 11 and Table 13.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles described in the
notes to the financial statements referred to in paragraph 1 above.
GEORG WNftJMREV2001: ORDIN.DRI C4
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PRELIMINARY OFFICIAL STATEMENT
Dated March 27, 2001
Ratings:
Moody's: Applied For
S&P: Applied For
See ("OTHER INFORMATION -
NEW ISSUE - Book -Entry -Only RATINGS" herein)
In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes,
regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein,
including the alternative minimum tax on corporations.
Dated Date: April 15, 2001
THE BONDS ARE EXPECTED TO BE DESIGNATED AS
"QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS
$1,910,000
CITY OF GEORGETOWN, TEXAS
(Williamson County)
UTILITY SYSTEM REVENUE BONDS, SERIES 2001
Due: August 15, as shown on inside front cover
PAYMENT TERMS ... Interest on the $1,910,000 City of Georgetown, Texas Utility System Revenue Bonds, Series 2001 (the "Bonds") will accrue
from April 15, 2001 (the "Dated Date") and will be payable August 15 and February 15 of each year commencing August 15, 2001, and will be
calculated on the basis of a 360 -day year consisting of twelve 30 -day months. The definitive Bonds will be initially registered and delivered only to
Cede & Co., the nominee of The Depository Trust Company, New York, New York ("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 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 `BOND INFORMATION - BOOK -ENTRY -ONLY SYSTEM" herein.) The initial Paying Agent/Registrar
is The Bank of New York, New York, New York (see `BOND INFORMATION - PAYING AGENT)REGISTRAR").
AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the general laws of the State of Texas, particularly, Chapter 1502, Texas
Government Code, as amended, and an ordinance (the "Ordinance") passed by the City Council, and are special obligations of the City of
Georgetown, Texas (the "City"), payable, together with any Additional Parity Obligations (as defined in the Ordinance), both as to principal and
interest, solely from and equally and ratably secured by a fust lien on and pledge of the Pledged Revenues (as defined in the Ordinance), including
the Net Revenues derived from the operation of the City's Utility System, as defined in the Ordinance (the "System"). See "BOND
INFORMATION - SECURITY AND SOURCE OF PAYMENT". The City has not covenanted nor obligated itself to pay the Bonds from
monies raised or to be raised from taxation. The Bonds are not a charge upon any other income or revenue of the City and shall never
constitute an indebtedness of the general credit or taxing power of either the City or the State of Texas. The Ordinance does not create a
mortgage on the System (see `BOND INFORMATION - AUTHORITY FOR ISSUANCE"). As additional security, there has been established a Reserve
Fund which shall be funded (but beginning only after Net Revenues for any fiscal year are less than 1.35 times the average annual debt service
requirements) in an amount at least equal to the Average Annual Debt Service Requirements (as defined in the Ordinance) of the Parity Obligations
(as defined in the Ordinance) issued by the City. Due to the coverage currently maintained by the City, at the time of delivery of the Bonds, it is
not anticipated that the Reserve Fund will be funded. The amount required to be on deposit in the Reserve Fund can, at the option of the City, be
satisfied by the issuance of a surety bond or insurance policy (defined in the Ordinance as a "Reserve Fund Obligation").
PURPOSE ... Proceeds from the sale of the Bonds will be used for improvements and extensions to the City's Utility System and to pay the costs
associated with the issuance of the Bonds.
INSURANCE ... The City has applied to several bond insurance companies and will consider the purchase of insurance after an analysis of bids has
been made.
MATURITY SCHEDULE
See Inside Front Cover Paee
LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriter and subject to the approving opinion of
the Attorney General of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Bond Counsel, Austin, Texas (see APPENDIX D -"FORM
OF BOND COUNSEL'S OPINION"). McCall, Parkhurst & Horton L.L.P. will also render an opinion to the City concerning their participation in the
preparation of the Preliminary Official Statement. Certain legal matters will be passed upon for the Underwriter by Andrews & Kurth L.L.P.,
Austin and Houston, Texas, Counsel for the Underwriter.
DELrvERY ... It is expected that the Bonds will be available for delivery through DTC on May 22, 2001.
CUSIP
Numbers('
(Accrued Interest from April 15, 2001 to be added)
*Preliminary, subject to change.
(1) CUSIP numbers have been assigned to this issue by the CUSIP Service Bureau and are included solely for the convenience of the owners
of the Bonds. Neither the City nor the Underwriter shall be responsible for the selection or the correctness of the CUSIP numbers shown on
the inside cover page.
REDEMPTION ... The Bonds are subject to mandatory and optional redemption as described herein (see "BOND INFORMATION -
REDEMPTION").
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALL Y BLANK)
2
MATURITY SCHEDULE*
Maturity
Amount
8115 Rate Yield
$ 115,000
2001
557000
2002
55,000
2003
60,000
2004
60,000
2005
65,000
2006
70,000
2007
70,000
2008
75,000
2009
80,000
2010
85,000
2011
905000
2012
90,000
2013
95,000
2014
105,000
2015
110,000
2016
1157000
2017
120,000
2018
125,000
2019
130,000
2020
1402000.
2021
CUSIP
Numbers('
(Accrued Interest from April 15, 2001 to be added)
*Preliminary, subject to change.
(1) CUSIP numbers have been assigned to this issue by the CUSIP Service Bureau and are included solely for the convenience of the owners
of the Bonds. Neither the City nor the Underwriter shall be responsible for the selection or the correctness of the CUSIP numbers shown on
the inside cover page.
REDEMPTION ... The Bonds are subject to mandatory and optional redemption as described herein (see "BOND INFORMATION -
REDEMPTION").
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALL Y BLANK)
2
For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document may be treated as an Oficial
Statement of the City with respect to the Bonds described herein 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 15c2 -12(b)(1).
This Preliminary
Oficial Statement, which includes the cover page and
the Appendices hereto,
does
not constitute an offer to sell or the
solicitation of an
offer to buy in any jurisdiction to any person to whom it is unlawful to make such
offer,
solicitation or sale.
No dealer, broker, salesman or other person has been authorized by the City or the Underwriter to give any information, or to make any
representations other than those contained in this Preliminary Oficial Statement, and, if given or made, such other information or
representations must not be relied upon.
The information set forth or included in this Preliminary Oficial Statement has been provided by the City and from other sources believed by
the City to be reliable. While the Underwriter has performed a review sufficient to form a reasonable basis for its belief in the accuracy and
completeness of the key representations of the City contained in this Preliminary Oficial Statement. The information and expressions of
opinion herein are subject to change without notice, and neither the delivery of this Preliminary Ojjicial Statement nor any sale hereunder
shall create any implication that there has been no change in the financial condition or operations of the City described herein since the date
hereof. This Preliminary Official Statement contains, in part, estimates and matters of opinion that are not intended as statements of fact, and
no representation or warranty is made as to the correctness of such estimates and opinions or that they will be realized.
The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Preliminary
Oficial Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the
affairs of the City or other matters described.
IN CONNECTION WITH THE OFFERING OF BONDS, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS ATA LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAYBE DISCONTINUED AT ANY TIME.
Neither the City nor the Underwriter make any representation as to the accuracy, completeness, or adequacy of the information supplied by
The Depository Trust Company for use in this Preliminary Oficial Statement.
TABLE OF CONTENTS
CITY OFFICIALS, STAFF AND CONSULTANTS......4
PRELIMINARY OFFICIAL STATEMENT SUMMARY5
INTRODUCTION..............................................................7
PLANOF FINANCING.....................................................7
BOND INFORMATION...................................................7
BOND INSURANCE.......................................................13
THESYSTEM..................................................................14
TABLE 1 - WATER USAGE.........................................15
TABLE 2 - TEN LARGEST WATER CUSTOMERS ...........15
TABLE 3 - MONTHLY WATER RATES ......................... 16
TABLE 4 - CONSERVATION WATER RATES.................16
TABLE 5 - DAILY FLOW............................................16
TABLE 6 - MONTHLY WASTEWATER RATES..............16
TABLE 7 - TEN LARGEST WASTEWATER CUSTOMERS 17
TABLE 8 - MONTHLY ELECTRIC RATES.....................18
TABLE 9 - TEN LARGEST ELECTRIC CUSTOMERS ........ 19
DEBT INFORMATION...................................................20
TABLE 10 - PRO -FORMA UTILITY SYSTEM REVENUE
DEBT SERVICE REQUIREMENTS .........................20
FINANCIAL INFORMATION........................................21
TABLE I 1 - UTILITY SYSTEM CONDENSED STATEMENT
OF OPERATIONS...............................................21
3
TABLE 12 - COVERAGE AND FUND BALANCES .......... 21
TABLE 13 - CITY'S EQUITY IN UTILITY SYSTEM .........22
IlVVESTMENTS...............................................................23
RECENT CHANGES IN REGULATORY
ENVIRONMENT OF THE SYSTEM...................25
FEDERAL REGULATION OF ELECTRIC
TRANSMISSION SERVICES..............................2$
SUN CITY GEORGETOWN..........................................29
TAX MATTERS...............................................................30
CONTINUING DISCLOSURE OF INFORMATION .32
OTHER INFORMATION...............................................33
APPENDICES
GENERAL INFORMATION REGARDING THE CITY ........ A
EXCERPTS FROM THE ANNUAL FINANCIAL REPORT... B
EXCERPTS FROM THE BOND ORDINANCE ........ I........... C
FORM OF BOND COUNSEL'S OPINION ....................... D
The cover page hereof, this page, the appendices included
herein and any addenda, supplement or amendment hereto,
are part of the Preliminary Official Statement.
CITY OFFICIALS, STAFF AND CONSULTANTS
Policy making and supervisory functions are the responsibility of and are vested in a seven -member City Council ("Council").
The Council serves three-year staggered terms with elections being held in May of each year. The City's Charter delegates
administrative responsibilities to the City Manager. Various support services are provided by independent consultants and
advisors.
ELECTED OFFICIALS
Length of Term
City Council Service Expires Occupation
MaryEllen Kersh 2 Years May, 2002 Realtor
Mayor
Lee Bain 6 Years May, 2001 Attorney
Mayor Pro Tem and
Councilmember District 4
Llorente Navarrette 1 Year May, 2003 Officer/Travis County Juvenile Services
Councilmember District 1
Clark Lyda 2 Years May, 2002 Investor
Councilmember District 2
Susan Hoyt 6 Years May, 2001 Accountant
Councilmember District 3
Sam Pfiester 1 Year May, 2003 Self -Employed
Councilmember District 5
Charles "Hoss" Burson 5 Years May, 2002 Retired Civil Service
Councilmember District 6
Ferd Tonn 1 I Years May, 2001 Cabinet Maker
Councilmember District 7
SELECTED ADMINISTRATIVE STAFF
Name
George Russell
Micki Rundell
Length of
Position Service
City Manager 3 '/2 Years
Director of Finance and Administration 8 Years
Marianne Landers Banks City Attorney 10 Years
Sandra Lee City Secretary 7 Years
CONSULTANTS AND ADvISORS
Auditors.......................................................................................................................................................Davis, Kinard & Co., P.C.
Abilene, Texas
BondCounsel.., .......... ..., ....... 4 ....... I ........... I ................ 0 .............. I .................................................. McCall, Parkhurst & Horton L.L.P.
Austin, Texas
FinancialAdvisor..." .............. * ............ * ........ ......... 4* .......... ...... * ........................ *.qo* .................... First Southwest Company
Austin, Texas
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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. 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 Georgetown, Texas (the "City"), is a political subdivision located in Williamson
County operating as a home -rule city under the laws of the State of Texas and a charter approved
by the voters in 1970 as subsequently amended (the "Home Rule Charter"). The City operates
under the City Council/Manager form of government where the Mayor and seven City
Councilmembers are elected for staggered three-year terms from seven single -member districts.
The City Council formulates operating policy for the City while the City Manager is the chief
administrative officer.
The City is approximately 23.8 square miles in area (see APPENDIX A - "GENERAL
INFORMATION REGARDING THE CITY").
THE BONDS ............................... The Bonds are issued as $1,910,000 Utility System Revenue Bonds, Series 2001. The Bonds are
issued as Serial Bonds maturing August 15, 2001 through August 15, 2021 and Term Bonds
maturing on August 15, 20_ (see `BOND INFORMATION - GENERAL").
PAYMENT OF INTEREST ............ Interest on the Bonds accrues from April 15, 2001, and is payable August 15, 2001, and each
February 15 and August 15 thereafter until maturity or prior redemption (see "BOND
INFORMATION- GENERAL").
AUTHORITY FOR ISSUANCE....... The Bonds are issued pursuant to the general laws of the State, including particularly Chapter
1502, Texas Government Code, as amended, and an Ordinance passed by the City Council of the
City (see `BOND INFORMATION - AUTHORITY FOR ISSUANCE ").
SECURITY FOR THE BONDS....... The Bonds, together with the Previously Issued Parity Obligations and any Additional Parity
Obligations, constitute special obligations of the City and are payable solely from and equally
and ratably secured by a first lien on and pledge of the Pledged Revenues (as defined in the
Ordinance) derived from the operation of the City's utility system, as defined in the Ordinance
(the "System"). See `BOND INFORMATION -SECURITY AND SOURCE OF PAYMENT" herein.
Additional security for the Bonds is provided in the Reserve Fund as defined and described in the
Ordinance (see APPENDIX C - "EXCERPTS FROM THE BOND ORDINANCE ") which is required to
be funded only after Net Revenues for any fiscal year are less than 1.35 times the average annual
debt service requirements of the Outstanding Parity Obligations and the Bonds. Due to the
coverage currently maintained by the City, at the time of delivery of the Bonds, it is not
anticipated that the Reserve Fund will be funded. The City has not covenanted or obligated itself
to pay the Bonds from money raised or to be raised from taxation by the City (see "BOND
INFORMATION- SECURITY AND SOURCE OF PAYMENT").
REDEMPTION ............................. The Bonds maturing on and after August 15, 2012 are subject to redemption at the option of the
City on August 15, 2011 or any date thereafter at par plus accrued interest to the date of
redemption. Additionally, the Bonds maturing on August 15, are subject to mandatory
sinking fund redemption (see `BOND INFORMATION - REDEMPTION").
TAx EXEMPTION ......"I .............. In the opinion of Bond Counsel, the 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 the caption "TAX
MATTERS" herein, including the alternative minimum tax on corporations.
USE OF PROCEEDS ..................... The Bonds are being issued for improvements and extensions of the City's Utility System and to
pay the costs associated with the issuance of the Bonds.
QUALIFIED TAX-EXEMPT
OBLIGATIONS ......................... The City expects to designate the Bonds as "Qualified Tax -Exempt Obligations" for financial
institutions (see "TAX MATTERS —QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL
INSTITUTIONS").
RATINGS,. ................... * ............ The Outstanding Parity Obligations of the City are rated "A2" by Moody's Investors Service
("Moody's"), "A" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill
5
Companies, Inc. ("S&P") and "A" by Fitch Investors Service ("Fitch"). The City also has
various issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through
insurance by various commercial insurance companies. Applications for ratings on the Bonds
have been made to Moody's and S&P (see "OTHER INFORMATION - RATINGS").
BOOK -]ENTRY -ONLY
SYSTEM ................................... The definitive Bonds 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 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 `BOND INFORMATION -
BOOK -ENTRY -ONLY SYSTEM").
PAYMENT RECORD .................... The City has never defaulted in payment of its debt.
For additional information regarding the City, please contact:
Micki Rundell
Director of Finance and Administration
City of Georgetown, Texas
609 Main Street
Georgetown, Texas 78627
(512) 930-3676
(512) 930-3681 Fax
Garry Kimball
First Southwest Company
98 San Jacinto Blvd.
or Suite 370
Austin, Texas 78701
(512) 481-2000
(512) 481-2010 Fax
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALL Y BLANK)
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1JO tae •:
$1,910,000
CITY OF GEORGETOWN, TEXAS
UTILITY SYSTEM REVENUE BONDS, SERIES 2001
INTRODUCTION
This Preliminary Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$1,910,000 City of Georgetown, Texas Utility System Revenue Bonds, Series 2001 (the "Bonds"). Capitalized terms used in this
Preliminary Official Statement have the same meanings assigned to such terms in the Ordinance to be adopted on the date of sale
of the Bonds (the "Ordinance") which will authorize the issuance of the Bonds, except as otherwise indicated herein (see
APPENDIX C - "EXCERPTS FROM THE BOND ORDINANCE ").
There follows in this Preliminary Official Statement descriptions of the Bonds 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 by written request and payment of reasonable costs of copying
from the City's Financial Advisor, First Southwest Company, 98 San Jacinto Blvd., Suite 370, Austin, Texas 78701,
DESCRIPTION OF THE CrrY ... The City is a political subdivision located in Williamson County operating as a home -rule city
under the laws of the State of Texas and a charter approved by the voters in 1970, as subsequently amended (the "Home Rule
Charter"). The City operates under the City Council/Manager form of government where the Mayor and seven City
Councilmembers are elected for staggered three-year terms from seven single -member districts. The City Council formulates
operating policy for the City while the City Manager is the chief administrative officer. The City is approximately 23.8 square
miles in area. For more information regarding the City, see APPENDIX A - "GENERAL INFORMATION REGARDING THE CITY."
PLAN OF FINANCING
PURPOSE.. . The Bonds are being issued for improvements and extensions to the City's Utility System and to pay the costs
associated with the issuance of the Bonds.
SOURCES AND USES OF PROCEEDS ... The proceeds from the sale of the Bonds, not included accrued interest, will be applied
approximately as follows:
ses:
Deposit to Project Fund
Deposit to Debt Service Fund
Underwriter's Discount
Costs of Issuance( )
Total Uses
(1) Includes insurance premium.
GENERAL... The Bonds are dated April 15, 2001, and mature on August 15 in each of the years and in the amounts shown on
the inside cover page hereof. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be
payable on August 15 and February 15, commencing August 15, 2001. 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 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 `SOOK-ENTRY-ONLY
7
SYSTEM" herein. Certain provisions of the Ordinance which authorizes the issuance of the Bonds are included in this Preliminary
Official Statement as APPENDIX C.
AUTHORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas,
particularly Chapter 1502, Texas Government Code, as amended, and pursuant to the Ordinance.
S ECURITY AND S OURCE OF PAYMENT... The Bonds, together with the Previously Issued Parity Obligations and any Additional
Parity Obligations, constitute special obligations of the City and are payable solely from and equally and ratably secured by a
first lien on and pledge of the Pledged Revenues derived from the operation of the City's Utility System, as defined in the
Ordinance (collectively, the "System"). The Ordinance defines Pledged Revenues as (1) the Net Revenues of the System, plus (2)
any additional revenues, income, receipts, or other resources, 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 hereafter are pledged by the City to the payment of the Parity Obligations, and excluding those
revenues excluded from Gross Revenues. The Bonds are not a charge upon any other income or revenues of the City and will
never constitute a legal or equitable pledge, charge, lien, mortgage, or encumbrance upon any property of the City or the System,
except the Pledged Revenues. In the Ordinance, the City has reserved the right to issue (i) Additional Parity Obligations (as
defined in the Ordinance), which includes general debt issued by the City which is equally and ratably secured solely by a first
lien on Pledged Revenues on a parity with the Bonds and the Previously Issued Parity Obligations, and (ii) Subordinate Lien
Obligations (as defined in the Ordinance) which includes general debt issued by the City which is payable, in whole or in part,
from and equally and ratably secured by a lien on Net Revenues which lien is subordinate and inferior to the lien and pledge on
Net Revenues securing the Bonds. As additional security, there has been established a Reserve Fund which shall be funded (but
beginning only after Net Revenues for any fiscal year are less than 1.35 times the average annual debt service requirements) in an
amount at least equal to the Average Annual Debt Service Requirements (as defined in the Ordinance) of the Outstanding Parity
Obligations and the Bonds (as defined in the Ordinance) issued by the City. The amount required to be on deposit in the Reserve
Fund can, at the option of the City, be satisfied by the issuance of a Reserve Fund Obligation (as defined in the Ordinance). Due
to the coverage currently maintained by the City, at the time of delivery of the Bonds itis not anticipated that the Reserve Fund
will be funded. See APPENDIX C - "EXCERPTS FROM THE BOND ORDINANCE ".
RATE COVENANT ... The Cityexpressly stipulates and agrees, while any Parity Obligations are outstanding, to establish and
maintain rates and charges for facilities and services afforded by the System that are reasonably expected, on the basis of available
information and experience and with due allowance for contingencies, to produce Gross Revenues in each Fiscal Year reasonably
anticipated to be sufficient:
A. to pay Maintenance and Operating Expenses;
B. to produce Pledged Revenues at least equal to the greater of 1.25 times the Average Annual Debt Service Requirements or
1.10 rimes the Maximum Annual Debt Service Requirements;
C. to produce Pledged Revenues in amounts sufficient to enable the City to make the deposits and credits, if any, from Pledged
Revenues to the Reserve Fund to restore the Required Reserve Amounts;
D. to produce Pledged Revenues in amounts sufficient to pay principal and interest on any Subordinate Lien Obligations and
amounts required to be deposited in any reserve or contingency fund created for payment and security of the Subordinate
Lien Obligations and any other obligations issued or incurred that are payable from, in whole or in part, a subordinate lien on
and pledge of Pledged Revenues;
E. to pay any other debt payable from the Pledged Revenues and/or secured by a lien on the Pledged Revenues; and
F. to pay all other obligations of the City related to the System.
ADDITIONAL. OBLIGATIONS ... In the Ordinance, the City has reserved the right to issue Additional Parity Obligations (as
defined in the Ordinance) which are equally and ratably secured solely by a first lien on and pledge of Pledged Revenues on parity
with the Bonds, upon satisfying certain covenants contained in the Ordinance. See Sections 24 and 25 in the Ordinance which are
described in APPENDIX C attached hereto.
E6
REDEMPTION:
OP77ONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
August 15, 2012, in whole or from time to time in part in principal amounts of $5,000 or any integral multiple thereof, on August
15, 2011, 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 Bonds of any maturity
are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds are in Book -Entry -Only form) shall determine by lot the
Bonds, 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 redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying
Agent/Registrar on the redemption date.
MANDATORY SINKING FUND REDEMPTION ... The Bonds maturing August 15, 20_ ("Term Bonds") are subject to mandatory
sinking fund redemption prior to maturity at the redemption price of par and accrued interest to the date of redemption on the
respective dates and in principal amounts as follows:
Term Bonds due
August 15, 20
Redemption Date Amount
*Final Maturity
On or prior to each August 15 in each of the years specified above that the Term Bonds are to be mandatorily redeemed, the
Paying Agent/Registrar shall select by lot the numbers of the Term Bonds within the applicable maturity to be redeemed on the
next following August 15 from moneys set aside for that purpose in the Interest and Sinking Fund. Any Term Bonds not selected
for prior redemption shall be paid on the date of their Stated Maturity.
The principal amount of the Term Bonds for a given stated maturity required to be redeemed pursuant to the operation of such
mandatory redemption provisions shall be reduced, at the option of the City, by the principal amount of Term Bonds of like
stated maturity which, at least 50 days prior to the mandatory redemption date, (1) 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 of purchase thereof, and delivered
to the Paying Agent(Registrar for cancellation (2) shall have been redeemed pursuant to the optional redemption provisions and
not theretofore credited against a mandatory redemption requirement or (3) shall have been purchased and cancelled by the Paying
Agent/Registrar at the request of the City with monies in the Interest and Sinking Fund at a price not exceeding the principal
amount of the Term Bonds plus accrued interest to the date of purchase thereof.
NOTICE Or; REDEMPTION ... Not less than 30 days prior to a redemption date for the Bonds, 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 to be redeemed, in
whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the
close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE
CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER
RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS 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.
DEFEASANCE ... Any Bond and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased
Bond") within the meaning of the Ordinance except to the extent provided below, when payment of the principal of such Bond,
plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made
or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by
irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other
instrument (the "Future Escrow Agreement') for such payment (1) lawful money of the United States of America sufficient to
make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will
0
insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements
have been made by the City with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have
become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and
the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the revenues herein levied and
pledged as provided in the Ordinance and such principal and interest shall be payable solely from such money or Defeasance
Securities. Notwithstanding any other provision of the Ordinance to the contrary, any determination not to redeem Defeased
Bonds that is made in conjunction with the payment arrangements specified in (i) or (ii) above shall not be irrevocable, provided
that: (1) in the proceedings providing for such payment arrangements, the City expressly reserves the right to call the Defeased
Bonds for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Bonds immediately following
the making of the payment arrangements; and (3) directs that notice of the reservation be included in any redemption notices that
it authorizes. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the
payment of Defeased Bonds may contain provisions permitting the investment or reinvestment of such moneys in Defeasance
Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in (i) or (ii) above.
The term "Defeasance Securities" means (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 raring 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 on the date the City Council
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.
Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. After firm banking
and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as described above, all
rights of the City to initiate proceedings to call the Bonds for redemption or take any other action amending the terms of the
Bonds are extinguished; provided, however, that the right to call the Bonds for redemption is not extinguished if the City: (i) in
the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for
redemption; (ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the
firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that
it authorizes.
Booz -ENTRY ONLY SYSTEM... This section describes how ownership of the Bonds are to be transferred and how the principal
of, premium, if any, and interest on the Bonds are to be paid to and credited by DTC while the Bonds are registered in its
nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC
for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable,
but takes no responsibility for the accuracy or completeness thereof.
The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, 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 Bonds), or redemption or other notices, to the Beneficial Owners, defined
below, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement.
The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC
to be followed in dealing with DTC Participants are on file with DTC.
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). One fully -
registered Bond will be issued for each maturity of the Bonds in the aggregate principal amount of each such maturity and will be
deposited with DTC.
DTC is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities
10
through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical
movement of securities Bonds. Direct Participants include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants'). The Rules applicable to
DTC and its Participants are on file with the Securities and Exchange Commission.
Purchases of Bonds under the DTC system must be made by or through DTC Participants, which will receive a credit for such
purchases on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in tum to be
recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interest in the Bonds are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in
the Bonds, except in the event that use of the book -entry system described herein 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. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only
the identity of the Direct Participants to whose accounts 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 Cede & Co. If less than
all of the Bonds within a maturity are
being redeemed, DTC's
practice is to
determine by lot the
amount of the interest of each
Direct Participant in such
maturity to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an
Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the Record Date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on
each payable date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it
will not receive payment on such payable date. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar or the City,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to
DTC is the responsibility of the City, disbursement 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. Under such circumstances, in the event `that a successor securities depository is not obtained, Bonds 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, Bonds will be printed and delivered.
USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT. In reading this Official Statement it should be
understood that while the 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 DTC.
11
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.
DTC REDEMPTION PROVISIONS... The Paying Agent/Registrar and the City, so long as a Book -Entry -Only System is used for
the Bonds, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to
the Bonds only to DTC. Any failure by DTC to advise any DTC Participant, or of any Direct Participant or Indirect Participant
to notify the beneficial owner, shall not affect the validity of the redemption of the Bonds called for redemption or any other
action premised on any such notice. Redemption of portions of the Bonds by the City will reduce the outstanding principal
amount of such Bonds held by DTC. In such event, DTC may implement, through its Book -Entry -Only System, a redemption
of such Bonds held for the account of DTC Participants in accordance with its rules or other agreements with DTC Participants
and then Direct Participants and Indirect Participants may implement a redemption of such Bonds and such redemption will not
be conducted by the City or the Paying Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any
responsibility to DTC Participants, Indirect Participants or the persons for whom DTC Participants act as nominees with
respect to the payments on the Bonds or the providing of notice to Direct Participants, Indirect Participants, or beneficial owners
of the selection of portions of the Bonds for redemption. (See `BOND INFORMATION - BOOK -ENTRY -ONLY SYSTEM"
herein.)
PAYING AGENT/REGISTRAR ... The initial Paying Agent/Registrar is The Bank of New York, New York, New York. Interest on
and principal of the Bonds will be payable, and transfer functions will be performed, at the office for payment of the Paying
Agent/Registrar in Jacksonville, Florida (the "Designated Payment/Transfer Office'). In the Ordinance, the City retains the right
to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all rimes until the
Bonds are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the
laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of
Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to
promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class,
postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar,
TRANSFER, ExCHANGE AND REGISTRATION ... In the event the Book -Entry -Only System should be discontinued, the Bonds
may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender
thereof at the Designated Payment/Transfer Office of the Paying Agent/Registrar and such transfer or exchange shall be without
expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with
respect to such registration, exchange and transfer. 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 Agent/Registrar. New Bonds will be
delivered by the Paying Agent/Registrar, in lieu of the Bonds being transferred or exchanged, at the Designated Payment/Transfer
Office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or
his designee. To the extent possible, new 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 Agent/Registrar. New Bonds 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 Bonds surrendered for exchange
or transfer. See `BOOK -ENTRY -ONLY SYSTEM" herein for a description of the system to be utilized initially in regard to
ownership and transferability of the Bonds.
RECORD DATE FOR INTEREST PAYMENT... The record date ("Record Date") for the interest payable on the Bonds on any interest
payment date means the close of business on the last business day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five
business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of
a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next
preceding the date of mailing of such notice.
12
BONDHOLDERS' REMEDIES ... Except for the remedy of mandamus to enforce the City's covenants and obligations under the
Ordinance, the Ordinance does not establish other remedies or specifically enumerate the events of default with respect to the
Bonds. The Ordinance does not provide for a trustee to enforce the covenants and obligations of the City. In no event will
registered owners have the right to have the maturity of the Bonds accelerated as a remedy. The enforcement of the remedy of
mandamus may be difficult and time consuming. No assurance can be given that a mandamus or other legal action to enforce a
default under the Ordinance would be successful. Furthermore, the City is eligible to seek relief from its creditors under Chapter
9 of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a
specifically pledged source of revenues, 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
bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9
protection from creditors, the ability to enforce any remedies under the Ordinance 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 opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds
are qualified with respect to the customary rights of debtors relative to their creditors.
POSSIBLE AVOIDANCE OF PLEDGE IN BANKRUPTCY ... Texas has adopted the 1998 revisions to Article 9 of the Uniform
Commercial Code (the "UCC"), to become effective July 1, 2001. The revisions would for the first time provide means to perfect
pledges by government entities and, in addition, would make unperfected pledges subject to the interests of a bankruptcy trustee,
whether or not the pledged collateral is exempt from judicial liens. Security interests arising before July 1, 2001 that are not
perfected by July 1, 2002 will be considered unperfected pledges. For a number of reasons, it will be impractical and perhaps
impossible to perfect the City's pledge of ad valorem tax receipts under the revised Article 9. In proceedings for the adjustments
of their debts under the Bankruptcy Code, municipalities are generally authorized to exercise the powers of a bankruptcy trustee.
Accordingly, after July 1, 2002, it is likely that the City could avoid its pledge of the ad valorem tax receipts to secure payments
of the Bonds, unless the Texas UCC is further amended, or other statutes are enacted, to avoid this result. Since the pledge of the
ad valorem tax receipts may be legally unenforceable in the circumstances in which it would be most valuable, no person should
rely upon the pledge as providing asset security or a preference right in the event that the City should become insolvent.
Even under the 1998 UCC revisions, the rights of Bond holders with respect to the ad valorem tax receipts and the amounts in the
funds created under the Ordinance, and other financial covenants of the City made in the Ordinance are valid and enforceable,
except in the event of bankruptcy. Thus, for example, outside of the occurrence of municipal bankruptcy, Bond holders may
enforce the obligation of the City to apply the ad valorem tax receipts to pay holders of the Bonds, as described above (see
"BOND INFORMATION— SECURITY AND SOURCE OF PAYMENT"). Moreover, the City is aware that proposed legislation has
been drafted and introduced for consideration by the Texas Legislature in the legislative session that began in January 2001 to
amend Texas law to avoid the results of the adoption of the 1998 UCC revisions mentioned above. No assurance can be given,
however, that any such legislation will be adopted by the Texas Legislature, or that, if it is adopted, it can be given legal effect
prior to July 1, 2002.
AMENDMENTS ... The City may amend the Ordinance in the manner described in Section 33 of the Ordinance, excerpts from
which are set forth in APPENDIX C attached hereto.
ADDITIONAL COVENANTS... In the Ordinance, the City has additionally covenanted that it will (1) maintain insurance (including
a program of self-insurance) on the System of a kind and in an amount which usually would be carried by municipal corporations
operating like properties, but with respect to public liability and property damage insurance considering any governmental
immunities to which the City may be entitled, (2) keep accurate records and accounts and employ an independent certified public
accountant to audit its affairs at the close of each fiscal year, such audit to be in accordance with applicable law, rules and
regulations, and open to inspection in the office of the City during normal office hours, (3) maintain the System in good condition,
repair and working order, all at a reasonable cost, (4) not allow free service of the System, (5) not additionally encumber the
Pledged Revenues in any manner, except as permitted in the Ordinance, (6) not sell, convey, mortgage, encumber, lease or in any
manner transfer title to, or otherwise dispose of the System, or any significant part thereof, except as permitted in the Ordinance,
(7) 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 which have been obtained from any governmental agency and keep all of such in full force and effect,
and (8) not grant any franchise or permit for any competing facilities which might be used as a substitute for the System's
facilities, and to the extent it legally may, prohibit any such competing facilities; provided, however, the City has retained the
right to `opt in" to electric competition in accordance with State law if "opting in" will not materially adversely impact the Net
Revenues of the System (see APPENDIX C -"EXCERPTS FROM THE BOND ORDINANCE
13
THE SYSTEM
Pursuant to its Home Rule Charter, the City currently owns and operates a combined water, wastewater and electric utility
system which provides the City and certain areas outside the City electric, water and sewer services. All facilities of the System
are owned by the City.
The electric system, in the fiscal year ending September 30, 2000, served approximately 13,482 customers and accounted for
approximately 63% of the operating revenues of the System. The water system, during the same period, served approximately
12,652 customers and accounted for approximately 24% of the System's operating revenue. The sewer system, in the fiscal year
ending September 30, 2000, served approximately 10,450 customers and accounted for approximately 13% of the operating
revenues of the System. See "FINANCIAL INFORMATION - UTILITY SYSTEM CONDENSED STATEMENT OF OPERATIONS."
WATERWORKS SUPPLY ... The City currently has a dual water supply of both surface water and ground water. The surface
water is secured from Lake Georgetown which is a federally financed project with water rights derived from the Brazos River
Authority (`BRA"). The City has rights to six (6) million gallons per day ("MGD") through its contract with the BRA in Lake
Georgetown. The City's water treatment plant is located at the lake and has a treatment capacity of 7.5 MGD. This source of
water currently supplies approximately 50% of the City's annual average water usage.
In addition, the City has a ground water supply from twelve (12) wells drawing from the Edwards Aquifer. Currently, the City
has only three (3) of these wells in production and has the capacity to treat six and one half (6.5) MGD at its second water
treatment plant located in San Gabriel Park. Approximately 50% of the City's current annual average usage of water is supplied
through this source. Two additional wells were placed into service in the summer of 2000, with added plant capacity of 2 MGD.
The City has four separate agreements with the BRA for water supply. Each of these agreements are summarized below.
(a) The City has an agreement, dated April 20, 1978 and expiring in April, 2078, to purchase and withdraw up to 6,725 acre-feet
of water per year from Lake Georgetown (the "Lake Georgetown Agreement"). The City is committed to pay an annual amount
for the entire 6,725 acre-feet with separate rates for water withdrawn by the City (`Election Use Water") and water not
withdrawn ("Option Water"). The City is committed to withdraw 2,240 acre-feet of Election Use Water per year leaving, 4,480
acre feet of Option Water. The City is not able to reduce in future years the volume of Election Use Water once taken.
On September 16, 1991, the City and BRA signed an amendment to the original agreement which reduced the rates provided
under the original agreement. The cost of Election Use Water is $23.28 per acre-foot and that for Option Water is $11.64. In the
future and at the option of BRA thirty percent of each rate may be changed according to a formula based upon the changes in the
US City average CPI.
(b) On September 16, 1991, the City and BRA entered into a supply agreement for up to 5,448 acre-feet of water per year from
Lake Stillhouse Hollow. The agreement terminates December 31, 2040. Election Use Water and Option Water are priced as in
the Lake Georgetown Agreement.
(c) On September 10, 1996, the City and BRA entered into a supply agreement to purchase up to an additional 10,000 acre-feet
of water per year from Lake Stillhouse Hollow. The agreement terminates September 1, 2038. The water is priced at the BRA
system wide rate which was set at $23.50 per acre-foot for 1999/00.
(d) The City is a party to an agreement dated June 30, 1986, with the BRA, the City of Round Rock and the Jonah Water
Supply Corporation. This Agreement was amended in 1998 to allow two new participants, Brushy Creek MUD and Chisholm
Trail SUD into the project. BRA is to design, construct and operate a pipeline to transport water from Lake Stillhouse Hollow to
Lake Georgetown. The BRA was appointed manager of the project and is responsible for operations, budgeting and financing.
The participants and their percentage shares of the project are as follows:
City of Round Rock 43.36%
City of Georgetown 36.89%
Jonah Water Supply Corporation 5.82%
Brushy Creek MUD 9.55%
Chisholm Trail SUD 4.44°
100.0%
14
The preliminary phase of the project (design and easement acquisition) is complete and construction is scheduled to begin this
spring. Project completion is scheduled for December 2001 and the total project cost is estimated at $44,713,112. State
Participation Program financing through the Texas Water Development Board for up to $20,000,000 of the total project cost was
closed in October 1999.
WATER STORAGE ... The City has three overhead storage tanks of 500,000 gallons each and one 400,000 gallon tank. In
addition, six ground storage tanks provide storage capacity for approximately 7,500,000 gallons, bringing the total capacity of the
storage facilities to 9,400,000 gallons.
WATER DISTRIBUTION ... Currently, the City has 305 miles of water distribution lines throughout its service area. The water
distribution system is in good repair and the City is proceeding with regularly scheduled normal repair and replacement of water
lines.
WATER CONTRACT... In February 1999, the City and Chisholm Trail Special Utility District ("CTSUD") entered into an
agreement for the City to provide water to CTSUD in exchange for allowing the City to provide water service in the Highway 195
and expanded Sun City areas. Until approval of the exchange is received by the Texas Natural Resource Conservation
Commission, the City will initially sell up to 1 mgd of water at $1.50 per/1,000. Once approval is received, the City will transfer
to CTSUD in phases capacity in the Lake Water Treatment Plant up to 4.26 mgd, not to exceed 28% of the plant capacity, for
use in off-peak times only. CTSUD will pay its share of prorata operating costs for all water utilized. In addition, upon
completion of the Williamson County Raw Water Line, the City will transfer 840 acre feet of the Lake Stillhouse Hollow water
rights to CTSUD which will assume payment for these rights to the BRA.
TABLE I - WATER USAGE (GALLONS)
Water Usaee (Gallons
Fiscal
Average
Peak
Customer
Year
Day
Day
Total
Ended
Usage
Usage
Usage
9-30
000's
(000's)
(000's)
1992
31142
71185
1,163,741
1993
32721
81297
1,362,421
1994
47041
91610
1,4781514
1995
49193
10,707
11530,236
1996
45466
10,492
1163%257
1997
51130
12,093
1,877,073
1998
6,397
13,479
21335,035
1999
61266
13,117
2,287,137
2000
71425
15,800
21710,006
TABLE 2 - TEN LARGEST WATER CUSTOMERS (I2 MONTHS'I LADING 9-30-00)
15
(000 Gal)
Customer
Consumed
% Total
Sun City Georgetown
3443074
12.70%
Southwestern University
91,324
3.37%
Southwest Materials
467423
1.71%
City of Georgetown
341185
1.26%
Georgetown Housing Authority
215453
0.79%
Williamson County
1%777
0.73%
Indian Creek Apartments
1%705
0.73%
Georgetown ISD
17,632
0.65%
Del Webb
162235
0.60%
The Oaks at Georgetown
11,921
0.44%
15
TABLE 3 - MONTHLY WATER RATES (EFFECTIVE 10-1-91)
Customer Type
3/4 inch meter
1 inch meter
1-1/2 inch meter
2 inch meter
3 inch meter
4 inch meter
6 inch meter
Cost per thousand
Customer
Charge:
Inside City
Gallons
1992
11878,000
$16.50 per
month
$17.85 per
month
$21.80 per
month
$26.00 per
month
$43.00 per
month
$63.00 per
month
$111.00 per month
$1.95
TABLE 4 - CONSERVATION WATER RATES (EFFECTIVE 06-01-97)
Residential Only
Effective on Billings June 1 - September 30
0 Thru 24,000 Gallons
25,000 Thru 39,000 Gallons
40,000 Thru 59,000 Gallons
60,000 And Up
Outside City
$21.80 per month
$23.40 per month
$28.00 per month
$32.00 per month
$54.00 per month
$74.00 per month
$133.00 per month
$2.27
Inside City Outside City
Per 1.000 Gallons Per 1.000 Gallons
$ 1.95 $ 2.27
2.50 2.90
3.50 4.10
4.50 5.25
SEWER SYSTEM ... The City's wastewater system currently serves some 98% of the current Georgetown population. The
existing treatment facilities provide the City with an approximate 3.85 MGD treatment capability. The system also includes
some 205 miles of wastewater lines and twenty-one (21) lift stations. The existing wastewater treatment plants of the City are
currently being operated by a private operator, OMI, Inc., pursuant to a management contract with the City.
In connection with the Sun City Georgetown project discussed below, the City has constructed a new treatment plant to provide
sewer treatment services for the development. The City currently envisions the treatment plant to be operational no later than
2002. See "SUN CITY GEORGETOWN" below.
TABLE 5 - DAILY FLOW (WASTEWATER TREATMENT)
Average Daily Wastewater Flow
Fiscal
Year
Ended
Gallons
1992
11878,000
1993
210273000
1994
11884,000
1995
11871,000
.1996
118122000
1997
2,557,000
1998
2,7092000
1999
21688,000
2000
218402000
TABLE 6 - MONTHLY WASTEWATER RATES (EFFECTIVE 4-1-92)
Customer Charge $11.75 per month
Cost per 1,000 gallons $2.70
The City does not anticipate an increase in sewer rates within the next twelve months.
16
TA&LE 7 - TEN LARGEST WASTEWATER CUSTOMERS (12 MONTHS ENDING 9-30-00)
Customer
Volume
° Tota
Southwestern University
72,731
7.50°/o
The Oaks at Georgetown
612390
6.33%
San Gabriel Apartments
28,356
2.93%
Georgetown ISD
14,768
1.52%
Williamson County
13,870
1.43%
Georgetown Housing
132458
1.39%
Authority
Indian Creek Apartments
13,362
1.38%
Georgetown Hospital
8,280
0.85%
Wesleyan Homes
72860
0.81%
Georgetown Park Apartments
7,286
0.75%
ELECTRIC SYSTEM ... The City owns and operates its electric distribution system, purchasing its wholesale power from the
Lower Colorado River Authority ("LCRA") under a long-term contract extending through the year 2016. Under the City's billing
from LCRA, the cost of power during the fiscal year ending September 30, 2000 averaged $1,135,249 per month. For a
discussion of other factors which may affect the City's electric system, see "RECENT CHANGES IN REGULATORY
ENVIRONMENT OF THE SYSTEM" and "FEDERAL REGULATION OF ELECTRIC TRANSMISSION SERVICES"
herein.
The City's electric system, like other municipal electric systems in the State, presently is confronted by fundamental changes to
the system of electric regulation in the State, which have been brought about by the enactment of Senate Bill 7 ("SB 7") by the
Texas Legislature in 1999. As further described below, SB 7 provides for open competition in the provision of retail electric
service in the State commencing January 1, 2002. Municipal utilities, like the City's electric system, are not required to
participate in the competitive market, although they may "opt in" to retail electric competition. To date, City staff has been
directed to maintain an "Opt -In" preparedness status. Staff has concluded that retail electric competition will not materially
adversely impact the percentage of electric system revenues transferred annually to the city's general fund. Upon completion of a
comprehensive study by Navigant Consulting, City staff and council decided in the fall of 2000 to wait until the market opens
and to monitor events before taking formal action to "Opt -In". Recent action by several state utilities indicates that providing
consumer choice will not immediately provide lower cost energy. With the statewide pilot scheduled to begin in June 2001, the
average cost of retail energy has increased significantly over the last year. Primarily due to the increases in the cost of generation
fuels, mainly natural gas, wholesale generators have been forced to increase the cost of supplied electrical energy. This has forced
the best statewide price to escalate over the last two years by 2.5-3 cents over the legislated price of 6.5c/lcwh. Currently
Georgetown has been able to pass on the increases in the cost of fuel to its customers and still maintain a lower cost supply than
that of our immediate competitors. The City currently anticipates that under retail competition it will be designated a "provider
of last resort" in instances where customers have not chosen another energy provider. See "RECENT CHANGES IN
REGULATORY ENVIRONMENT OF THE SYSTEM — PROVISIONS OF SB 7."
The Navigant study generally
outlines the considerations involved in the decision
of whether the City "opts in" to
offer electric
retail competition. One of the
major considerations outlined in the Navigant study
is the fact that the City currently
competes for
customers in the multi -certificated service area with Pedernales Electric Cooperative and TXU Electric Company, as further
described below. Because of competition within the multi -certificated area the study points out that if the City does not "opt in"
the System could lose wires (distribution) customers, existing and new, within the multi -certificated area which could (i) reduce
revenue support to the City's general fund (estimated at $225,000 a year for the multi -certificated area above) which currently
represents $0.09211 to $0.11 per hundred dollar valuation in tax rate, (ii) result in a loss of economies of scale in distribution
operations, (iii) result in stranded costs for current investment in distribution facilities of between $500,000 to $1,000,000, and
(iv) result in the loss of some commercial and industrial customers.
If the City does "opt in" to electric retail competition the study concludes that the relationship with LCRA may change due to
the risk of losing energy sales should System customers elect to buy energy from another Retail Electric Provider, as further
defined below. Additionally, the study points out that under the open competition system the City, (i) or a competitor can
petition the PUC to singly certificate existing multi -certificated service area; (ii) continues to establish transfers to the general fund
through a distribution charge to customers, (iii) customers would be obligated to pay into the statewide system benefit fund an
amount calculated as necessary to compensate the Foundation School Program for property wealth lost as a result of open
17
competition, (iv) would need to adopt rules consistent with the PUC's customer protection rules for services within the service
territory, (v) risks some exposure to federal tax law restrictions on private use for tax-exempt debt financed facilities, (vi) would
need to adapt the billing system to accommodate competition and (vii) would experience greater customer inquiries on billing and
how to choose retail electric providers. A complete copy of the Navigant study is available from the City's financial advisor.
While SB 7 deregulates the generation and sale of energy in the State (subject to certain local option provisions, as described
below) SB 7 maintains a regulated structure with respect to electric transmission and distribution services in the State. City staff
believe the City's facilities will provide a regulated return on investment, whether or not the City Council elects to open the City
to full retail electric service competition. City staff notes that the electric utility 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.
For the year ended September 30, 2000 the electric system provided electric service to a monthly average of 13,482 industrial,
commercial, residential and governmental customers located in the City's service area. The customer base that is served by the
City's electric system is approximately 88% residential and approximately 12% commercial and industrial in character. In 1976,
the Public Utility Commission of Texas (the "PUC") issued the City a Certificate of Convenience and Necessity ("CCN") to
provide electric service to an approximately 10 square mile area encompassing the City's then city boundaries, plus its
extraterritorial jurisdiction area ("ETJ"). The ET1 certification area extends approximately two miles beyond the City's current
city boundaries or to a neighboring city's boundary, whichever is closest. The City is the exclusive provider of electric services to
60% of the area included within the 1976 service territory. In the remaining 40% of the area included within the 1976 service
territory dual certification was also granted to Pedernales Electric Cooperative in approximately 10% of the dual certified territory
and Texas Power and Light Co. (now TXU Electric Company, and referred to herein as "TXU Electric") in approximately 90% of
the dual certified area. According to records of the electric system, approximately 98% of the new electric accounts in the dual
certified service area have become customers of the City during the last five fiscal years. Upon entry into the market the City will
make a filing with the PUC to single certify all the areas that are now multiply certificated. Currently the ability to attract and
retain customers within the multiply certificated areas has not been compromised. Feedback from our customers indicates that
price not choice will drive decisions in the near term, 2-5 years. Considering that our price will continue to be competitive and
primarily lower than that of other providers in the area the risk of losing customer base is minimal. See "RECENT CHANGES
IN REGULATORY ENVIRONMENT OF THE SYSTEM —PROVISIONS OF SB 7 — IkOVISIONS OF SB 7 THAT APPLY TO
MUNICIPAL UTILITIES AND ELECTRIC Coops," below.
TABLE 8 - MONTHLY ELECTRIC RATES (EFFECTIVE 10-I-91)
All Customers
Purchased Power Cost Adjustment
Residential Sales Tax
Commercial Sales Tax
Seasons
Summer: May through October billings
Winter: November through April billings
Residential Service
Customer Charge:
Energy Charge:
Small General Service
Customer Charge:
Energy Charge:
School Charge
Customer Charge:
Energy Charge:
Varies Monthly
1% of total electric charges; outside City limits: None
7.25% of total electric charges; outside City limits: 6.25%
$6.00 per month
Summer: $0.0678 per kWh
Winter: $0.0678 per kWh for first 1,000 kWh per month
$0.0475 per kWh for additional kWh
$12.00 per month
Summer: $0.0654 per kWh
Winter: $0.0654 per kWh for first 5,000 kWh per month
$0.0554 per kWh for additional kWh
$12.00 per month
Summer: $0.0760 per kWh
Winter: $0.0760 per kWh for first 5,000 kWh per month
$0.0660 per kWh for additional kWh
In
Water & Wastewater Pumping Service
Customer Charge:
Energy Charge:
Large General Service
Customer Charge:
Demand Charge:
Energy Charge
Load Factor Credit:
Guard Light Service
Customer Charge
$12.00 per month
Summer. $0.0650 per kWh
Winter: $0.0550 per kWh
$20.00 per month
Summer. $7.70 per kWh, but not less than $385.00
Winter: $6.90 per kWh, but not less than $345.00
Summer: $0.0380 per kWh
Winter: $0.0290 per kWh
$0.008 per kWh for all kWh in excess of 400 kWh
$7.50 per lamp
The City also offers credits for electric users who agree to curtail power upon the request of the City as well as experimental
interruptible power service. Currently, the City's water and wastewater plants are the only entities taking advantage of the
curtailable power credit.
TABLE 9- TEN LARGEST ELECTRICAL CUSTOMERS (12 MONTHS ENDING 9-30-00)
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALL Y BLANK)
19
KWH
Customer
Consumed
% Total
Southwestern University
181883,726
6.31%
City of Georgetown
12,658,447
4.23%
Georgetown ISD
121234,427
4.09%
Williamson County
71197,007
2.41%
Georgetown Hospital
51677,558
1.91%
HEB
53046,600
1.69%
Triple S Technologies
31671,400
1.23%
Wesleyan Homes
39026,851
1.01%
Sun City Georgetown
2,7051190
0.90%
Albertsons
21627,200
0.88%
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALL Y BLANK)
19
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TABLE 11 -UTILITY SYSTEM CONDENSED STATEMENT OF OPERATIONS
RevenuesM
Waterworks System
Sewer System
Electric System
Miscellaneous
Interest Earnings
Total
Expenses (2)
Waterworks System
Sewer System
Electric System
Utility Contracts (3)
Total
Net Available for Debt
Service
2000
$ 8,011,206
4,379,611
20,790,680
3,035,406
95,272
$ 37,212.175
$ 637,232
454,533
995,767
19,785,388
$ 21,8724920
For Fiscal Year Ended September 30,
IV
$ 6,7441444
3,833,126
17,843,712
2,686,181
879,406
$ 504,394
375,129
935,020
17,391,433
$ 19205,976
1998
$ 61472,229
3,396,930
17,033,314
2,780,054
754,178
$ 30,436,705
$ 475,444
364,103
1,006,370
16.567,595
$ 18,413,512
1997
$ 51348,446
3,176,383
14,814,125
2,922,492
585.650
$ 519,194
314,233
960,152
14,348,059
$ 16,1414638
02)
$ 5,8261471
3,159,357
14,010,520
3,308,950
649.084
$ 26,954,3o
82
$ 471,573
314,400
730,325
13,433,120
$ 14,949AI8
Metered
Water Customers
12,652
11,573
11,035
10,173
91192
Metered
Sewer Customers
10,450
97519
8,887
81100
72084
Metered
Electric Customers
13,482
12,413
11,718
103811
92678
(2) Capital Recovery Fees and Developer Contributions excluded from revenues.
(3) Excludes depreciation costs.
(4) BRA contracts are a maintenance and operations expense of the System and are paid prior to debt service on the Parity
Obligations.
TABLE 12 - COVERAGE AND FUND BALANCES (I)
Average Annual Principal and Interest Requirements, 2001 - 2021..................................................................................$2,291,987
Coverage of Average Requirements by 2000 Net Revenue................................................................................................ 6.69 Times
Maximum Principal and Interest Requirements, 2004.."111.1 .......... I.. ... I ................................................................... d ......... $32617,426
Coverage of Maximum Requirements by 2000 Net Revenue............................................................................................ 4.24 Times
Utility System Revenue Bonds to be Outstanding after the Issuance of the Bonds at 4-24-2001 ....................................$33,200,000
(1) Includes the Bonds; excludes system -supported general obligation debt service.
ADDITIONAL SYSTEM REVENUE DEBT
Concurrently with the issuance of the Bonds, the City is issuing its $5,470,000 Combination Tax and Utility System Limited
Revenue Certificates of Obligation, Series 2001 which are secured in part by a pledge of certain surplus Net Revenues of the
System limited to $10,000. The City does not currently anticipate issuing any additional utility system debt within the next 12
month period.
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK)
21
TABLE 13 - CITY'S EQUITY INUTILITY SYSTEM
Utility System(l)
Less Accumulated Depreciation
Net Value of the System
Plus Construction Fund
Net Plant
Plus Working Capital
Total
Revenue Bond Debtt�1
Less Interest and Sinking Fund
and Reserve Fund
Net Revenue Debt
2000
$ 78,0501279
(19,22346811
$58,826,598
4,660,467
$63,487,065
18.008.284
$81,4952349
1999
$701807,624
(17.249,590)
$53,558,034
4,853,440
$58,411,474
14,246.430
$72,6571904
$ 32,090,000 $28,8507000
0
$327090,000
0
$28,850,000
1998(2) 1997 1996
$66,9031302 $60,718,057 $54)785,196
(15,321,967) (13,509,375} (11,910.411)
$514581,335 $47208,682 $42,874,785
1,406,669 1,653291 1,419.671
$52,988,004 $48,861,973 $44,294,456
8,008,260 7,107,840 4,365,016
$60,9961264 $557969,813 $487659,472
$28,995)000 $24,6707000 $21,620,000
0 52,724,428 (2,452,215
$28,995,000 $211945,572 $192167,785
City's Equity in System $49,405,349 $43,807,904 $32,0012264 $34,024,241 $29,4911687
Percentage City's Equity in
System 60.62% 60.29% 52.46% 60.79% 60.61%
(1) Electric, Water and Wastewater Funds only.
(2) Effective in Fiscal Year 1998, the new Utility System Bond Ordinance adopted by the City only requires the Reserve Fund
be funded if Net Revenues for any Fiscal Year are less than 1.35 times the average annual debt service requirement on the
Parity Obligations.
FINANCIAL ADMINISTRATION ... The financial administration of the City is vested in the Department of Finance. The
Department of Finance operates under the Director of Finance, who is appointed by the City Manager. Required activities of the
Department of Finance are control, custody and disbursement of City funds, utility billing and collections, City-wide purchasing,
fleet and building management, annual budget preparation and interim and annual financial reports.
FINANCIAL POLICIES
Basis of Accounting . ..The City's accounting records of the governmental fund revenues and expenditures are recognized on the
modified accrual basis. Revenues are recognized in the accounting period in which they are available and measurable.
Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured
interest on general long-term debt.
The accrual basis of accounting is utilized by proprietary funds. Under the accrual basis of accounting, revenues are recognized in
the accounting period in which they are earned and become measurable. Expenses are recorded in the accounting period incurred,
if measurable.
General Fund Balance . . .The City policy is to maintain surplus and unencumbered funds at a minimum of 60 days budgeted
expenditures. The reserve at September 30, 2000 was $3,942,069 or approximately 125 days of fiscal 2000 expenditures. This
allows the City to avoid interim borrowing pending tax receipts and provides flexibility should actual revenues fall short of budget
estimates.
Use of Bond Proceeds, Grants, etc .. .The City's policy is to use bond proceeds, grants, revenue sharing or other non-recurring
revenues for capital expenditures only. Such revenues are never to be used to fund City operations.
Budgetary Procedures ...The City Charter establishes the City's fiscal year as the twelve-month period beginning October I .
The departments submit to the City Manager a budget of estimated expenditures for the ensuing fiscal year by the first of June.
The City Manager subsequently submits a budget of estimated expenditures and revenues to the City Council by August 31. The
City Council then holds a public hearing on the budget after giving at least seven days notice of the hearing in the official
22
newspaper of the City. The Council shall then make any changes in the budget as it deems advisable and adopts a budget not
later than the 27th day of the last month of the fiscal year.
During the fiscal year, budgetary control is maintained by the review of departmental appropriation balances with purchase
orders prior to their release to vendors.
Departmental appropriations that have not been encumbered lapse at the end of the fiscal year. Therefore, funds that were
budgeted and not used by the departments during the fiscal year are not available for their use unless appropriated by the City
Council in the ensuing fiscal year's budget.
INVESTMENTS
The City of Georgetown invests its invertible funds in investments authorized by Texas law in accordance with investment
policies approved by the City Council of the City of Georgetown. Both state law and the City's investment policies are subject
to change.
UGALINVESTMENTS... Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies
and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage
obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is
guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are
unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their
respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of
any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6)
bonds issued, assumed, or guaranteed by the State of Israel, (7) certificates of deposit issued by a state or national bank domiciled
in Texas, a savings bank domiciled in Texas, or a state or federal credit union domiciled in Texas that are (i) guaranteed or insured
by the Federal Deposit Insurance Company or its successor or the National Credit Union`Share Insurance Fund or its successor
or (ii) secured by obligations that are described in clauses (1) through (6) above, including mortgage backed securities directly
issued by a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates or
(iii) in any other manner and amount provided by law for deposits of the City, (8) fully collateralized repurchase agreements that
have a defined termination date, are fully secured by obligations described in clause (1) above and are placed through a primary
government securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the
remaining term of 270 days oi less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P -I or
the equivalent by at least one nationally recognized credit raring agency, (10) commercial paper that is rated at least A-1 or P-1 or
the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if
the paper is fully secured by an irrevocable letter of credit issued by a United States 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
portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1
for each share, (12) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted
maturity of less than two years; invests exclusively in obligations described in the preceding clauses; and are continuously rated as
to investment quality by at least one nationally recognized investment raring firm of not less than AAA or its equivalent and (13)
for bond proceeds, guaranteed investment contracts that have a defined termination date, are secured by obligations of the United
States or its agencies and instrumentalities in an amount at least equal to the amount invested under the contract, and are pledged
to the City and deposited with the City or with a third party selected and approved by the City.
The City may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no lower than AAA or AAA- 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.
INVESTMENT POLICIES ... 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 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. As an
integral part of its investment policy, the City is required to adopt a separate written investment strategy for each of the funds
23
under its control. Each Investment Strategy Statement must describe the investment objectives for the particular fund using the
following priorities: (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.
In addition, Texas law requires that City investments must be made "with judgment and care, under prevailing circumstances, that
a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for
speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least
quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City,
(2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to
market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset
at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or
pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it
relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express
written authority from the City Council. Pursuant to Texas law, the City may contract with an investment management firm
registered under the Investment Advisors Act of 1940 or with the State Securities Board to provide for the investment and
management of its public funds or other funds under its control. Such contract may not be for a term longer than two years.
ADDITIONAL PROVISIONS... 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 funis 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 Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the
investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the
investment in 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, and to invest no portion of bond proceeds, reserves and funds held
for debt service in market mutual, and (8) require local government investment pools to conform to the new disclosure, rating, net
asset value, yield calculation, and advisory board requirements.
CURRENT INVESTMENTS ... Current investment policy of the City restricts investments to U.S. Treasury securities or U.S.
agency securities, certificates of deposit of the City's depositories, interlocal government investment pools or other investments
authorized by the City Council. The City is currently invested in a portfolio of U.S. Treasury and Agency securities, and
investment pools which comply with the above -noted legal investment criteria and policy. Governmental investment pools and
other comparable investment vehicles must meet the following criteria under City investment policies:
(a) Each pool or other comparable investment must be established under State Law or other regulatory body.
(b) If privately held, the pool or comparable investment vehicle shall invest in securities with ratings of AAA from a
recognized national rating service thus ensuring quality and safety.
(c) Investment policies of the pool or investment shall be in accordance with State Law and follow the guidelines of the
City's investment policy.
(d) Investment in a new pool or other comparable investment vehicle shall require the approval of the City Council.
The City's current investment portfolio of U.S. Government Securities, Local Government Investment Pools and Certificates of
Deposit is generally representative of the City's investment practices although the City has in the past or may in the future also
invest in other investments approved by the City Council which meet the above -noted legal criteria. State Law does not require
the City to periodically mark its investments to market price, but it is the City's practice to value its investments at least
quarterly. GASB Statement 31 now requires annual market to market with any gain or loss reported in the annual financial
statements. Based upon the most recent valuation of its investments which occurred, the City reports its investments totaling
$31,627,837 in book value had a market price at September 30, 2000 of 99.90% of 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, or
commodity.
F•LI
RECENT CHANGES IN REGULATORY ENVIRONMENT OF THE SYSTEM
INTRODUCTION ... The electric industry in Texas has experienced dramatic statutory and regulatory changes in the past several
years which will have significant impact on the City, and, in particular, the operations of the electric system. Legislation was
enacted by the Texas Legislature in 1995 that deregulated wholesale electric rates and services. In order to promote wholesale
electric competition, such legislation directed the Public Utility Commission (the "PUC") to adopt rules requiring all transmission
system owners to make their transmission systems available for use by others at prices and terms comparable to each respective
owner's use of its system for its own wholesale transactions. The PUC implemented its initial transmission open access rules in
January 1997. Overall, the opening of the Electric Reliability Council of Texas ("ERCOT") transmission system and the increased
competition at the wholesale level is expected to be a benefit to the electric system because it increases the options available to
the electric system for acquiring generating capacity to serve its customers without having to risk the large capital investment
required to build new generation.
During the 1999 legislative session, the Texas Legislature enacted SB 7, which provides for retail electric open competition
beginning in 2002, continues electric transmission open access and fundamentally redefines and restructures the Texas electric
industry.
SB 7 includes provisions that apply directly to municipally owned utilities ("Municipal Utilities"), such as the City's electric
system, as well as other provisions that will govern investor owned utilities ("IOUs") and electric cooperatives ("Electric
Coops'). SB 7 allows retail customers of IOU's to choose their electric supplier beginning January 1, 2002 as well as the retail
customers of those Municipal Utilities and Electric Coops that have elected to participate in retail electric competition.
Provisions of SB 7 that apply to the City's electric system, as well as provisions that apply only to IOU's and Electric Coops
are described below, the latter for the purpose of providing information concerning the overall restructured electric utility market
in which the City's electric system could choose to directly participate in the future.
PROVISIONS OF SB 7
UNBUNDLING ... SB 7 requires IOUs to separate retail energy service activities from regulated utility activities by September 1,
2000 and to unbundle generation and transmission and distribution functions into separate companies by January 1, 2002. An
IOU may choose to sell one or more of its lines of business to independent entities, or it may create separate but affiliated
companies, and possibly operating divisions, that may be owned by a common holding company, but which must operate largely
independent of each other. The services offered by such separate entities must be available to other parties on a non-
discriminatory basis. Certain Texas river authorities that operate electric generation and transmission systems are also required to
unbundle their electric operations but need not operate such separated functions independently from one another. Municipal
Utilities and Electric Coops which opt into competition are not required to unbundle their electric system components.
UNBUNDLED COMPANIES ... Generating assets will be owned by "Power Generation Companies," which must register with the
PUC and must comply with certain rules that are intended to protect consumers, but they will otherwise be unregulated and may
sell electricity at market prices. Owners of transmission and/or distribution facilities will be "Transmission and Distribution
Utilities" and will be fully regulated by the PUC. Retail sales activities will be performed by new companies called "Retail
Electric Providers" ("REPs") which are the only entities authorized to sell electricity to retail customers (other than Municipal
Utilities and Electric Coops irrespective of whether they have opened their service areas to retail competition). REPS must
register with the PUC, demonstrate financial capabilities and comply with certain consumer protection requirements. They will
buy electricity from Power Generation Companies, power marketers or other parties and may resell that electricity to retail
customers at any location in the State (other than within Municipal Utilities and Electric Coops irrespective of whether they have
opened their service areas to retail competition). Transmission and Distribution Utilities will be obligated to deliver the electricity.
The PUC is required to approve the construction of new transmission facilities, and may order the construction of new facilities
to relieve transmission bottlenecks. Transmission and Distribution Utilities will be required to provide access to both their
transmission and distribution systems on a non-discriminatory basis to all eligible customers. Rates for wholesale transmission
and distribution systems of Municipal Utilities and Electric Coops shall be determined by such entities rather than the PUC.
Each type of unbundled company is prohibited from providing services that are provided by the other types of unbundled
companies.
MEASURES TO FOSTER COMPETITION AND ASSURE S ERVICE ... SB 7 also provides a number of consumer protection provisions.
Every area of the State will have a "Provider of Last Resort" approved by the PUC. The Provider of Last Resort is a REP that
must offer to sell electricity to any retail customer in its designated area at a standard rate approved by the PUC. The Provider of
25
Last Resort must also serve any customer whose REP has failed to provide service. Each Municipal Utility and Electric Coop
that opts into open competition shall appoint itself or another entity as the provider of last resort for such service territory and
the respective Municipal Utility or Electric Coop shall set the rates for such respective provider of last resort rather than the
PUC. Management of the Electric System believes that if the City opts in to retail electric competition, the City will designate the
Electric Utility as the distributor within the City as well as the provider of last resort within the City.
Beginning September 1, 1999, each IOU was required to freeze its then existing rates (except for a fuel factor passthrough) and
must continue to serve its retail customers at such rates until 2002. Beginning in 2002, the unbundled REP of the IOU that held
the certificate to provide retail service to an area (the "Affiliated REP") must reduce electric rates by 6% below the frozen rates
and offer that reduced rate (the "price to beat") to all retail customers in the area formerly served by the IOU. The Affiliated REP
must serve all residential and commercial customers who do not choose a different REP at such reduced rate. The Affiliated REP
may not sell electricity to residential or commercial customers (generally small businesses) at any other rate until either 40% of
the residential or commercial customers in the area have chosen to be served by other REPS or until January 1, 2005, whichever
occurs first. Although the Affiliated REP may thereafter compete by offering prices that differ from the reduced rate, it must
continue to offer such rate until January 1, 2007, to assure a maximum price that consumers will have to pay. SB 7 does allow
Affiliated REPS to compete for industrial customers, and for certain aggregated commercial loads owned by a common entity.
The price to beat provisions of SB 7 have no direct impact on the electric system if the City Council elects not to opt in to
competition except with respect to the triple certified service area.
To prevent concentration of generation in a single Power Generation Company, SB 7 requires IOUs to hold periodic "Capacity
Auctions," supervised by the PUC, in which they must sell 15% of their energy to others. Affiliated REPS are not allowed to
purchase energy from a related Power Generation Company. The Capacity Auctions will end four years after retail competition
begins. SB 7 also provides protection by limiting the amount of generation that any single Power Generation Company, or group
of commonly owned Power Generation Companies, may own to 20% of the available generation within a "power region" which
will be created by the PUC. SB 7 requires any IOU (or affiliated Power Generation Company) that owns more that 20% of the
installed electric generation within a power region to file a mitigation plan with the PUC by December 31, 2001 whereby (i) its
excess generation plants will be sold at an independent sale, (ii) its excess generation capacity will be auctioned off to an
independent party in a Capacity Auction, (iii) it sells its excess capacity for at least a four year period to an independent party,
or (iv) it implements some other reasonable mitigation method. The City is not subject to SB 7's Capacity Auction requirements
or the 20% maximum generation ownership within a power region restriction.
SB 7 preserves the PUC's regulatory authority over electric transmission facilities and open access to such transmission facilities.
SB 7 provides for a transmission system operator that would be independent of market participants and which will be
responsible for directing and controlling the operation of the transmission network within ERCOT. In addition, SB 7 directs the
PUC to determine electric transmission open access rates on a 100°% "postage stamp" pricing methodology.
STRANDED COST RECOVERY... Under SB 7, IOUs may recover a portion of their "stranded costs" (the net book value of certain
"non -economic" assets less market value and certain "above market" purchased -power costs) and "regulatory assets," which
recovery is intended to permit recovery of the difference between the amount necessary to pay for the assets required under prior
electric regulation and the amount that can be collected through market based rates in the open competition market. Such stranded
costs are based, in large measure, on the amount of stranded costs associated with the respective IOUs determined in the PUC's
April 1998 Potentially Strandable Investment (ECOM) Report: 1998 Update (the "PUC Stranded Cost Report"). SB 7
establishes the procedure to determine the amount of stranded costs and regulatory assets. Once determined, the stranded costs
will be collected through a non -by -passable competition transition charge collected from the end retail electric users within the
IOU's service territory as it existed on May 1, 1999, through, primarily, an additional component to the rate for the use of the
retail electric distribution system delivering electricity to such end user.
IOUs may recover a certain portion of their respective stranded costs through the issuance of bonds, with a maturity not to
exceed 15 years, whereby the principal, interest and reasonable costs of issuing, servicing and refinancing such bonds is secured
by a qualified rate order of the PUC that creates the "competition transition charge." Neither the State nor the PUC may amend
the qualified rate order in any manner that would impair the rights of the "securitized" bondholders.
PROVISIONS OF SB 7 THAT APPLYTO MUNICIPAL UTILITIES AND')E`LECTRIC Coops... Municipal Utilities and Electric Coops are
largely exempt from the requirements of SB 7. While IOUs will be subject to open competition on January 1, 2002, the governing
bodies of Municipal Utilities and Electric Coops have the sole discretion to determine whether and when to open their service
territories to retail competition. However, if a Municipal Utility or Electric Coop has not voted to open its territory, it will not
26
be able to compete for retail customers at unregulated rates outside its traditional service territory. While IOUs must unbundle
their generation from transmission and distribution and from retail sales activities, Municipal Utilities and Electric Coops retain
the discretion to determine whether to unbundle those business activities.
The greatest potential impact on the City's electric system from SB 7 could result from a decision by the City Council to
participate or not to participate in a fully -competitive market particularly in light of the fact that approximately 40% of the
City's service area is dual certified (see "THE SYSTEM — ELEC UC SYSTEM). Should the City decide to "Opt -In" to electric
retail competition, City Staff does not currently believe that the City will lose customers to other REPS thereby reducing the
electric load. This outcome is anticipated largely due to the fact that the City will continue to provide electricity to its service
area through the City's electric distribution system irrespective of whether the City's customers choose an energy provider
different from the LCRA, the City's current wholesale energy provider. Pursuant to the terms of the City's current contract with
LCRA, LCRA agrees to provide the City its electric generation requirements through the year 2016, however, no assurances can
be given regarding what impact, if any, electric competition may have on the terms, provisions and enforceability of such contract.
The City has utilized negotiations with the LCRA, along with an alliance of other wholesale customers, to diversify its current
energy portfolio. Currently the City has energy contracts with the LCRA until the year 2016. Uncertainty over how these
contracts will be handled in a deregulated market has allowed the alliance of customers to successfully negotiate a reduction of
some load from LORA, replacing this load under contract with Calpine Energy. This new arrangement is allowing the City to
better hedge the escalation of gas prices and stabilize the energy portfolio for the electric utility. Further diversity is expected
with the completion of the GenTex contract and aggregation of additional load to expand the wholesale energy portfolio of the
electric utility.
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 consequences such as decreases in economic development activity within the City due to the
"protected" rate structure of the electric system if the rate structure is higher in cost than rates in areas that are open to
competition. Additionally the City may lose existing and future customers within the triple certified portion of the City's service
area.
As discussed above, Municipal Utilities and Electric Coops will also determine the rates for use of their distribution systems after
they open their territories to competition, although the PUC will determine the terms and conditions for access to those systems.
Additionally, Municipal Utilities and Electric Coops that do not elect to participate in open competition are required to offer
distribution services upon conditions and terms established by the PUC.
SB 7 also permits Municipal Utilities and Electric Coops to recover their "stranded costs," through collection of a non -by-
passable transition charge from their customers if so determined by such entities in a similar fashion to IOUs. Unlike IOUs, the
governing board of a Municipal Utility (in the case of the electric system, the City Council) determines the amount of stranded
costs to be recovered pursuant to rules and procedures established by such governing board. The stranded costs of Electric
Coops is determined by their board of directors pursuant to rules and procedures established by the PUC. Municipal Utilities
and Electric Coops are also permitted to recover their respective stranded costs through the issuance of bonds in a similar fashion
to the IOUs.
MISCELLANEOUS PROVISIONS of SB 7 ... SB 7 requires all old grandfathered" power plants, being plants that have not
previously been required to comply with air quality emissions standards administered by the Texas Natural Resource
Conservation Commission that are owned by IOUs, Municipal Utilities and Electric Coops to be brought into compliance with
the air quality emissions standards by May 2003. The cost of bringing the old plants into compliance may be included in the
determination of stranded costs of an IOU, Municipal Utility or Electric Coop.
SB 7 also sets goals for the development of renewable generating technologies that do not bum oil and gas and do not produce air
pollution. SB 7 requires that the amount of renewable energy triple in Texas by 2009. SB 7 sets certain renewable generation
target levels. If the City's electric system owns electric generation but has not met its required renewable generation level, it may
be required to purchase renewable energy credits established by the PUC to comply with SB 7.
27
FEDERAL REGULATION OF ELECTRIC TRANSMISSION SERVICES
THE ENERGY POLtcY ACT OF 1992 ... The Federal Energy Policy Act of 1992 (the `Energy Act"), greatly expands the authority
of the United States Federal Energy Regulatory Commission (the "FERC") to order utilities, including utilities within ERCOT, to
provide transmission service for other utilities, qualifying facilities, and independent power producers. The 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 ERCOT.
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
to the 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 ANAL RULES AND PROPOSED RULEMAKINGS IN FEDERAL RULEMAKINGS IN FEDERAL REGULATION OF ELECTRIC
UTILITIES ... To establish foundations necessary to develop a competitive wholesale electricity market and effectuate the
transmission access provisions of the Energy Policy Act, on April 24, 1996, FERC issued two final rules ("FERC Rules") on
non-discriminatory open access transmission services by public utilities and stranded cost recovery rules. 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 (1) 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 final rule, Order No. 889, requires all public utilities to establish or participate in
an Open Access Same -Time Information System (OASIS) 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.
The 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. The 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.
In addition, on May 12, 1999 the FERC released a Notice of Proposed Rulemaking to establish Regional Transmission
Organizations ("RTOs"). The proposed rulemaking contemplates RTOs as voluntary participation associations of power
transmission owning entities, comprising public and non-public utility entities, which would more efficiently address operational
and reliability issues confronting the industry in particular by improving grid reliability, increasing efficiencies in transmission grid
management, preventing discriminatory practices and improving market performance.
Although the FERC Rules do not directly regulate municipally owned and other non -FERC -regulated utilities such as the City's
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.
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 Q.e., retail wheeling). In addition, various bills have been
introduced that would impact the issuance of tax-exempt bonds for 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 become law, what their final form
or effect would be.
M
ELECTRIC AND MAGNETIC FIELDS ... The City is aware of the ongoing research effort focusing on biological effects of electric
and magnetic fields ("EMF") and the scientific endeavor to determine if such effects have any implications to human health. At
this time, it is a matter of scientific uncertainty as to whether human exposure to EMF poses a significant health risk.
SUN CITY GEORGETOWN
The Del Webb Corporation ("Del Webb") began development in April, 1995 of a 9,500 home, 5,300 acre active retirement
community to be called Sun City Georgetown. The City Council approved a development agreement with Del Webb that
provides for fire protection, wastewater, water and electric services and infrastructure as well as phased annexation of the
development. Horne sales began in June, 1995 and are expected to average 425 homes per year over the next 20 years. As of
September 30, 2000, 2,247 homes were occupied and approximately 100 homes were under construction as of February 1, 2001.
Additional long-term retail and commercial growth is anticipated in connection with the Sun City Georgetown development.
The City has agreed to fund the off-site costs of infrastructure improvements required to serve the project for fire protection,
road improvements, wastewater services and water services by issuing general obligation and revenue debt. Del Webb will
reimburse the City for all costs, including carrying charges for debt, by paying the City a service improvement program fee ("SIP
fee") on a per home basis. Del Webb posted a surety bond of $4,000,000 to assure that SIP fees will be paid. The City
anticipates to be able to make all infrastructure and debt payments using the SIP fees without cash shortfalls or increases in
overall service rates for water and wastewater. The City began to see significant impacts on service demands and operating costs
during the 1995 fiscal year when the first homes were completed. Additional costs of services have been offset by increased tax
and fee revenue. In March, 2001 Del Webb announced it was seeking a development partner as a possible means of accelerating
the pace of development within Sun City. In addition, Del Webb noted it may consider the future sale of the Sun City project.
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK)
29
OPINION ... On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel, will
render their opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date
thereof, (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)(5) of the Internal Revenue Code of 1986 (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 their 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 (b) covenants of the City contained in the Bond
documents relating to certain matters including arbitrage, the use of the proceeds of the Bonds and the property to be financed
therewith. Although it is expected that the Bonds will qualify as tax-exempt obligations for federal income tax purposes as of the
date of issuance, the tax-exempt status of the Bonds could be affected by future events. However, future events beyond the
control of the City, as well as the failure to observe the aforementioned representations or covenants, could cause the interest on
the Bonds to become taxable retroactively to the date of issuance.
Bond Counsel's opinion represents its Iegal judgment based upon its review of the Existing Law and the reliance on the
aforementioned information, representations, and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing
Law is subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the
Department of the Treasury. There can be no assurance that such Existing Law or the interpretation thereof will not be changed
in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Bonds.
Bond Counsel's opinion represents its legal judgement based upon its review of Existing Law and the representations of the City
that it deems relevant to render such opinion and is not a guarantee of a result. No assurances can be given as to whether or not
the Internal Revenue Service will commence an audit of the Bonds, or as to whether the Internal Revenue Service would agree with
the opinion of Bond Counsel. If an audit is commenced, under current procedures the Internal Revenue Service is likely to treat
the City as the taxpayer and the 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 ORIGINAL ISSUE DISCOUNT ... The initial public offering price to be paid
for one or more maturities of the Bonds (the "Original Issue Discount Bonds") is less than the principal amount thereof. The
difference between (i) the amount payable at the 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 with respect to such Original Issue
Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond in the initial public offering of
the Bonds. Under Existing Law, such initial owner is entitled to exclude from gross income (as defined in section 61 of the Code)
an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue
discount allocable to the period that such Original Issue Discount Bond continues to be owned by such owner. For a discussion
of certain collateral federal tax consequences, see discussion set forth below.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity,
however,the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such
owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue
Discount Bond was held by such initial owner) is includable in gross income.
Under Existing Law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity
thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary
dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial
owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such
owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to
(a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated
maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the
accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond.
30
The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount
Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ
from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with respect to
the determination for federal, state and local income tax purposes of the treatment of interest accrued upon redemption, sale or
other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences
of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds.
COLLATERAL FEDERAL INCOME 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, owners of an interest in FASIT, individuals allowed an earned income credit, certain S
corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued
indebtedness to purchase tax-exempt obligations.
INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISION 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 BONDS BEFORE
DETERMINING WHETHER TO PURCHASE THE BONDS.
Interest on the Bonds is includable in the "alternative minimum taxable income" of a corporation (other than a regulated
investment company or a real estate investment trust) for purposes of determining the environmental tax (if re-enacted) imposed
by section 59A of the Code. Section 59A of the Code imposes on a corporation an environmental tax, in addition to any other
income tax imposes by the Code, equal to 0.12 percent of the excess of the modified alternative minimum taxable income of such
corporation for the taxable year over $2,000,000.
Interest on the Bonds may be subject to the "branch profits tax" imposed by Section 884 of the Code on the effectively -
connected earnings and profits of a foreign corporation doing business in the United States.
Under Section 6012 of the Code, holders
of
tax-exempt
obligations, such
as the Bonds, may be required to disclose interest
received or accrued during each taxable year
on
their returns
of federal income
taxation.
Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt
obligation, such as the 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 tax exempt bonds" to the extent
such gain does not exceed the accrued market discount of such tax exempt bonds; although for this purpose, a de minimis amount
of market discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price which is less
than the stated redemption price at maturity or, in the case of an obligation 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 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.
QUALIFIED TAX-FXEMPTOBLIGATIONS FORFINANCIAL INSTITUTIONS... Section 265(x) of the Code provides, in pertinent part,
that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase
or carry tax-exempt obligations is not deductible by such taxpayer in determining taxable income. Section 265(b) of the Code
provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a
taxpayer which is a "financial institution" allocable to tax-exempt obligations, other than "private activity bonds," which are
designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer" is any governmental
issuer (together with any subordinate issuers) who issues no more than $10,000,000 of tax-exempt obligations during the calendar
year. Section 265(b)(5) of the Code defines the term "financial institution" as referring to any corporation described in section
31
585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business
which is subject to federal or state supervision as a financial institution.
The City expects to designate the Bonds as "qualified tax-exempt obligations" within the meaning of section 265(b) of the Code.
In furtherance of that designation, the City will covenant to take such action which would assure or to refrain from such action
which would adversely affect the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers should be
aware that if the issue price to the public (or, in the case of discount bonds, the amount payable at maturity) exceeds
$10,000,000, then such obligations might fail to satisfy the $10,000,000 limitation and the obligations would not be "qualified tax-
exempt obligations."
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the 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 ... Under Texas law, including, but not limited to, Chapter 103, as amended, Texas Local Government Code,
the City must keep its fiscal records in accordance with generally accepted accounting principles, must have its financial accounts
and records audited by a certified public accountant, and must file each audit report with the City Secretary within 180 days after
the close of the City's fiscal year. The City's fiscal records and audit reports are available for public inspection during the regular
business hours of the City Secretary. Additionally, upon the filing of these financial statements and the annual audit, these
documents are subject to the Texas Open Records Act, as amended, Texas Government Code Chapter 552. Thereafter, any
person may obtain copies of these documents upon submission of a written request to the Director of Finance at City of
Georgetown, Texas, P.O. Box 409, Georgetown, Texas 78627, and upon paying the reasonable copying, handling, and delivery
charges for providing this information.
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 Preliminary Official Statement under the headings Table 1 through Table I1 and Table 13,
"INVESTMENTS -CURRENT INvEsTmENTs" and the City's financial statements in APPENDIX B. The City will update and
provide this information within six months of the close of any fiscal year. The City will provide the updated information to each
nationally recognized municipal securities information repository ("NRMSIR") and to any state information depository ("SID")
that is designated by the State of Texas and approved by the 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 provided by that time, the
City will provide unaudited financial statements by the required time and will provide audited financial statements when and if
they become available. Any such financial statements will be prepared in accordance with the accounting principles described in
APPENDIX B, the Ordinance 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
any SID of the change.
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 Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled
draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting
the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances;
(10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. 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
32
agreement described above under "ANNUAL REPORTS". The City will provide each notice described in this paragraph to any SID
and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB").
AVAILABILITY OF INFORMATION FROM NRMSIRS AND SII) ... The City has agreed to provide the foregoing information only to
NRMSIRs and any 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.
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.O. Box 2177, Austin, Texas 78768-2177, and its
telephone number is 512/476-6947.
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 continuing disclosure agreement may be amended by the City from time to time to adapt to changed circumstances that arise
from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City,
but only if (1) the provisions, as amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering
of the bonds in compliance with the Rule, taking into account any amendments or interpretation of the Rule since such offering as
well as such changed circumstances and (2) either (a) the Holders of a majority in aggregate principal amount (or any greater
amount required by any other provision of the Ordinance that authorizes such an amendment) of the Outstanding Bonds consent
to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that
such amendment will not materially impair the interest of the holders and beneficial owners of the Bonds. The City may also
amend or repeal the provisions of the continuing disclosure agreement if the SEC amends or repeals the applicable provisions of
the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent
that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary
offering of the Bonds. If the City amends its agreement, it must 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 information and data provided.
COMPLIANCE WITH PRIOR AGREEMENTS ... The City is in compliance with its continuing disclosure agreements in accordance
with SEC Rule 15c2-12.
RATINGS... The presently outstanding uninsured Parity Obligations of the City, which is on a parity with the Bonds, is rated
"A2" by Moody's, "A" by S&P and "A" by Fitch. Four outstanding utility system issues are rated "Aaa" by Moody's and
"AAA" by S&P by virtue of municipal bond insurance relating to such issues provided by various commercial insurance
companies. Applications for ratings on the Bonds have been made to Moody's and S&P. The ratings reflect only the respective
views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance
that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by
one or more of such rating companies, if in the judgment of such companies, circumstances so warrant. Any such downward
revision or withdrawal of any of such ratings may have an adverse effect on the market price of the Bonds.
LITIGATION ... The City is a defendant in various tort claims and lawsuits involving general liability, civil rights actions, and
various contractual matters. In the opinion of the City's management and the City Attorney's office, the outcome of the pending
litigation will not have a material adverse effect on the City's financial position or operations of the City.
The City is a party to lawsuit in the 277th District Court of Williamson County whereby the plaintiffs, Georgetown Waterpark,
Ltd., have alleged a breach of contract by the City Council and are seeking $15,000,000 in damages. The City was awarded an
economic development grant from the State of Texas for infrastructure improvements for the benefit of the proposed waterpark
for which the plaintiff is the developer. The City refused to incur the risk of repayment of grant funds and refused to execute a
contract for Plaintiff to
receive the benefit of the
grant funds when the Plaintiff failed to
produce proof of financing for the
waterpark
construction
in a form acceptable to the
City's financial advisor. The City has
maintained that no written contract
exists and
no claim for
an oral contract can be pursued against the City. The parties are in
the discovery phase of the litigation
with trial
anticipated in late 2001 or early 2002.
If the plaintiffs are successful, any such damages will not be covered by
insurance.
No assurances can be given regarding the
outcome of such litigation.
Additionally, the City is a party to a lawsuit in 26th District Court in Williamson County whereby the City in pursuing a code
enforcement action enjoining the Pierces from constructing a wall on their property, have been countersued for nuisance, violation
of the Texas Water Code and inverse condemnation. No damages have yet been alleged in the counter suit. If the counter suit is
successful, certain of such damages may not be covered by insurance. No assurances can be given regarding the outcome of such
litigation.
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 Bonds
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 ]ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS... Under the Texas Public Security PIocedures Act,
Chapter 1201, Texas Government Code, the Bonds (1) are negotiable instruments, (2) are investment securities to which Chapter
8 of the Texas Uniform Commercial Code applies, and (3) are legal and authorized investments for (a) an insurance company, (b)
a fiduciary or trustee, or (c) a sinking fund of a municipality or other political subdivision or public agency of the State of Texas.
The Bonds are eligible to secure deposits of any public funds of the State, its agencies and political subdivisions, and are legal
security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment
policies and guidelines in accordance with the Public Funds Investment Act, Chapter 2236, Texas Government Code, as amended,
the Bonds may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before
such obligations are eligible investments for sinking funds and other public funds. See "OTHER INFORMATION — 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 least $1 million of capital, and savings and loan
associations. No review has been made of the laws in other states to determine whether the Bonds are legal investments for
various institutions in those states.
LEGAL OPINION AND NO -LITIGATION CERTIFICATE ... Except as hereinafter noted, Bond Counsel has not verified and has not
passed upon, and assumes no responsibility for the accuracy, completeness or fairness of the information and statements
contained in the Preliminary Official Statement. In the performance of its duties, Bond Counsel has reviewed the information
relating to the Bonds and the Ordinance contained under the captions, "PLAN OF FINANCING" (except for the subcaption
"SOURCES AND USES OF PROCEEDS", `BOND INFORMATION' (exclusive Of subcaption `BOOK -ENTRY -ONLY SYSTEM"),
"TAX MATTERS", "CONTINUING DISCLOSURE OF INFORMATION" (exclusive of the subcaption "COMPLIANCE WITH
PRIOR AGREEMENTS"), "OTHER INFORMATION - REGISTRATION AND QUALIFICATION OF BONDS FOR SALE", "OTHER
INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS", and "OTHER INFORMATION
- LEGAL OPINION AND No -LITIGATION CERTIFICATE ", APPENDIX C - "EXCERPTS FROM THE BOND ORDINANCE " and APPENDIX
D - "FORM OF BOND COUNSEL'S OPINION" contained in the Preliminary Official Statement to determine whether such information
is a fair and accurate summary of the information purported to be shown therein and that the information and descriptions
contained under such captions relating to the provisions of applicable state and federal laws conform to such state and federal
laws. McCall, Parkhurst & Horton L.L.P. will deliver an additional opinion at the time of the delivery of the Bonds, addressed to
the City, concerning the Preliminary Official Statement and certain procedures taken by such firm during their participation in the
preparation of the Preliminary Official Statement. The legal fee to be paid Bond Counsel for services rendered in connection with
the issuance of the Bonds is contingent on the sale and delivery of the Bonds. 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. In
connection with the issuance of the Bonds, Bond Counsel has been engaged by, and only represents, the City.
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, in its capacity as Financial Advisor, has relied on the opinion of
MLI
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.
The Financial Advisor to the City has provided the following sentence for inclusion in this Preliminary Official Statement. The
Financial Advisor has reviewed the information in this Preliminary 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.
UNDERWRITING ... The Underwriter of the Bonds has agreed, subject to certain conditions, to purchase the Bonds from the City,
at an underwriting discount of $ . The Underwriter will be obligated to purchase all of the Bonds if any Bonds are
purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other
dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public
offering prices may be changed, from time to time, by the Underwriter.
FORWARD-LoOKING STATEMENTS... 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 within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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. It is important to
note that the City's actual results could differ materially from those in such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to
various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions
and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory
circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business
partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the
foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future
business decisions, all of which are difficult or impossible to predict accurately and, therefore, there can be no assurance that the
forward-looking statements included in this Official Statement would prove to be accurate.
MtsCELLANEOUs ... The financial data and other information contained herein have been obtained from the City's records,
audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions
or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this
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.
The Ordinance authorizing the issuance of the Bonds will also approve the form and content of this Preliminary Official
Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the
Underwriter.
This Preliminary
Official Statement has been approved
by the City
Council
for distribution in accordance with the provisions of
the Securities and
Exchange Commission's rule codified
at 17 C.F.R
Section
240.15c2-12.
ATTEST:
City Secretary
City of Georgetown, Texas
35
Mayor
City of Georgetown, Texas
APPENDIX A
GENERAL INFORMATION REGARDING THE CITY
The City
Location
The City of Georgetown, Texas (the "City") with a 1980 census population of 9,468, a 1990 census population of approximately
14,842, and a 2000 estimated population of 28,600, is located 26 miles north of Austin, Texas on Interstate Highway 35.
Georgetown is the county seat of Williamson County which borders Travis County on the south and Bell County on the north.
Economy
Founded in 1848, Georgetown was originally an agricultural trade center for the county and the surrounding area. In recent years
the City has become more industrialized and commercially oriented. Along with the commercial growth, Georgetown has
successfully promoted tourism in the area which has become a significant economic benefit to the community. Industries in the
immediate area include a large crushed stone operation, several electronic manufacturers and agricultural related businesses.
Major Employers in the Area:
Name of Company/Industry
Georgetown Independent School District
Sun City Georgetown
City of Georgetown
Georgetown Healthcare System
Southwestern University
HEB
Airbom, Inc.
Wesleyan Homes, Inc.
Bluebonnet Trails MHMR Center
CPI Chatsworth
Source: Georgetown Chamber of Commerce
Labor Market Profile
Approximate
The most recent civilian labor force estimates for the metropolitan statistical area of Georgetown and for the State of Texas are as
follows:
Number of
Nature of Business
Em 10ees
School District
1,200
Retirement Community
375
City Government
280
Hospital
260
College
260
Grocery Store
245
Electronic Assembly
239
Retirement/Asst. Living
185
Mental Health Care
150
General Contractor
150
The most recent civilian labor force estimates for the metropolitan statistical area of Georgetown and for the State of Texas are as
follows:
Source: Texas Employment Commission.
Educational Facilities
Williamson County
February 2001
158,183
155,465
2,718
1.7%
Georgetown Independent School District serves the City and the surrounding area, having a current enrollment of approximately
7,321 students. The District operates seven elementary schools, two middle schools, one ninth grade campus, one senior high
school and one alternative education school. There are also three private schools and one parochial school in the area.
A - I
State of Texas
February 2001
Total Civilian Labor Force
10,4005900
Number Employed
10,0042100
Number Unemployed
396,800
Percent Unemployed
3.8%
Source: Texas Employment Commission.
Educational Facilities
Williamson County
February 2001
158,183
155,465
2,718
1.7%
Georgetown Independent School District serves the City and the surrounding area, having a current enrollment of approximately
7,321 students. The District operates seven elementary schools, two middle schools, one ninth grade campus, one senior high
school and one alternative education school. There are also three private schools and one parochial school in the area.
A - I
Southwestern University is located in the City and is the oldest institution of higher learning in Texas, being established in 1843.
Present facilities of the University include some 37 buildings located on approximately 500 acres, located approximately 10
blocks from Georgetown's central business district. The 2000 enrollment of Southwestern University was approximately 1,300.
Transportation
Interstate Highway 35 and State Highway 29 intersect in Georgetown. Rail transportation includes the MKT Railroad and the
Georgetown Railroad. The City also operates an airport with a paved and lighted main runway of 5,000 feet and crosswind
runway of 4,100 feet.
Recreation and Tourism
The City operates a one hundred acre park along the banks of the San Gabriel River inside the City limits. The park and the
adjoining property contain playscape, playground and picnic facilities, a 3 1/2 mile lighted and landscaped hike and bike trail, a
community center, a tennis center, a high school football stadium, a high school baseball field and numerous softball, baseball,
soccer, tennis and basketball facilities. The City also provides fifteen smaller neighborhood parks.
There are four golf courses in Georgetown, two being country club operations, one at Sun City Georgetown and one being a nine
hole course operated for the public by Southwestern University.
Lake Georgetown, on the North San Gabriel River on the western edge of the City offers State park facilities along with fishing
and boating.
Located on the southern borders of Georgetown is Inner Space Cavern, a popular tourist attraction for the area. These facilities,
along with three historical districts and many special events, have boosted Georgetown's tourism traffic considerably over the last
few years.
Medical Services
Georgetown Hospital, a 98 bed full service medical facility and 65 active admitting physicians, provides obstetrical, surgical,
diagnostic and emergency services to the local area. Scott & White operates a 34,000 square foot outpatient clinic on the City's
northwest side.
Williamson County
Williamson County, with a 1990 census population of 139,551, is located in Central Texas just north of the Austin metropolitan
area and covers an area of 1,124 square miles. In 1990 the county contained over 1,180 manufacturing and service industries and
produced goods and services valued at 989.6 million dollars. The total effective buying power in 1990 was 1.8 billion dollars with
a median of $29,604 per household. The county contains several medium size cities such as Georgetown, Round Rock, Taylor
and Cedar Park.
/:w
I / e
EXCERPTS FROM THE
CITY OF GEORGETOWN, TEXAS
ANNUAL FINANCIAL REPORT
For the Year Ended September 30, 2000
The information contained in this Appendix consists of excerpts from the City of
Georgetown, Texas Annual Financial Report for the Year Ended September 30, 2000, 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.
Falliamizii «
EXCERPTS FROM THE BOND ORDINANCE
EXCERPTS FROM THE BOND ORDINANCE
The following are excerpts of certain provisions of the Ordinance to be adopted by the City Council authorizing the issuance of the
Bonds. Such excerpts do not purport to be complete and reference should be Houle to the Ordinance for the entirety thereof. Copies
of the Ordinance are available upon request to the City or the City's Bond Counsel.
As used in this Ordinance, the following terms and expressions shall have the meanings set forth below, unless the text
hereof specifically indicates otherwise:
"Additional Parity Obligations" means bonds, notes, warrants, certificates of obligation, contractual obligations or other
Debt which the City reserves the right to issue or enter into, as the case may be, in the future under the terms and conditions
provided in Sections 24 and 25 of this Ordinance and which obligations are equally and ratably secured solely by a first lien on
and pledge of the Pledged Revenues on a panty with the outstanding Parity Obligations and the Series 2001 Bonds.
"Amortization Installment" means, with respect to any Term Bonds of any series of Parity Obligations, the amount of
money which is required to be deposited into a mandatory redemption account for retirement of such Term Bonds (whether at
maturity or by mandatory redemption and including redemption premium, if any) provided that the total Amortization
Installments for such Term Bonds shall be sufficient to provide for retirement of the aggregate principal amount of such Term
Bonds.
"Annual Debt Service Requirements" means, as of the date of calculation, the principal of and interest on all Parity
Obligations corning due at Maturity or Stated Maturity (or that could come due on demand of the owner thereof other than by
acceleration or other demand conditioned upon default by the City on such Debt, or be payable in respect of any required
purchase of such Debt by the City) in such Fiscal Year, and, for such purposes, any one or more of the following rules shall
apply at the election of the City:
(1) Balloon Debt. If the principal (including the accretion of interest resulting from original issue
discount or compounding of interest) of any series or issue of Funded Debt due (or payable in respect of any required
purchase of such Funded Debt by the City) in any Fiscal Year either is equal to at least 25% of the total principal
(including the accretion of interest resulting from original issue discount or compounding of interest) of such Funded
Debt or exceeds by more than 50% the greatest amount of principal of such series or issue of Funded Debt due in any
preceding or succeeding Fiscal Year (such principal due in such Fiscal Year for such series or issue of Funded Debt being
referred to herein and throughout this Ordinance as "Balloon Debt'), the amount of principal of such Balloon Debt
taken into account during any Fiscal Year shall be equal to the debt service calculated using the original principal amount
of such Balloon Debt amortized over the Term of Issue on a level debt service basis at an assumed interest rate equal to
the rate borne by such Balloon Debt on the date of calculation;
(2) Consent Sinking Fund. In the case of Balloon Debt, if a Designated Financial Officer shall deliver to
the City a certificate providing for the retirement of (and the instrument creating such Balloon Debt shall permit the
retirement of), or for the accumulation of a sinking fund for (and the instrument creating such Balloon Debt shall permit
the accumulation of a sinking fund for), such Balloon Debt according to a fixed schedule stated in such certificate ending
on or before the Fiscal Year in which such principal (and premium, if any) is due, then the principal of (and, in the case
of retirement, or to the extent provided for by the sinking fund accumulation, the premium, if any, and interest and
other debt service charges on) such Balloon Debt shall be computed as if the same were due in accordance with such
schedule, provided that this clause (2) shall apply only to Balloon Debt for which the installments previously
scheduled have been paid or deposited to the sinking fund established with respect to such Debt on or before the rimes
required by such schedule; and provided further that this clause (2) shall not apply where the City has elected to apply
the rule set forth in clause (1) above;
(3) Prepaid Debt. Principal of and interest on Series 2001 Bonds and Additional Parity Obligations, or
portions thereof, shall not be included in the computation of the Annual Debt Service Requirements for any Fiscal Year
C-1
"Accountant" means an
independent certified public accountant or accountants or a fine of an
independent certified
public
accountants, in either case,
with demonstrated expertise and competence in public accountancy.
"Additional Parity Obligations" means bonds, notes, warrants, certificates of obligation, contractual obligations or other
Debt which the City reserves the right to issue or enter into, as the case may be, in the future under the terms and conditions
provided in Sections 24 and 25 of this Ordinance and which obligations are equally and ratably secured solely by a first lien on
and pledge of the Pledged Revenues on a panty with the outstanding Parity Obligations and the Series 2001 Bonds.
"Amortization Installment" means, with respect to any Term Bonds of any series of Parity Obligations, the amount of
money which is required to be deposited into a mandatory redemption account for retirement of such Term Bonds (whether at
maturity or by mandatory redemption and including redemption premium, if any) provided that the total Amortization
Installments for such Term Bonds shall be sufficient to provide for retirement of the aggregate principal amount of such Term
Bonds.
"Annual Debt Service Requirements" means, as of the date of calculation, the principal of and interest on all Parity
Obligations corning due at Maturity or Stated Maturity (or that could come due on demand of the owner thereof other than by
acceleration or other demand conditioned upon default by the City on such Debt, or be payable in respect of any required
purchase of such Debt by the City) in such Fiscal Year, and, for such purposes, any one or more of the following rules shall
apply at the election of the City:
(1) Balloon Debt. If the principal (including the accretion of interest resulting from original issue
discount or compounding of interest) of any series or issue of Funded Debt due (or payable in respect of any required
purchase of such Funded Debt by the City) in any Fiscal Year either is equal to at least 25% of the total principal
(including the accretion of interest resulting from original issue discount or compounding of interest) of such Funded
Debt or exceeds by more than 50% the greatest amount of principal of such series or issue of Funded Debt due in any
preceding or succeeding Fiscal Year (such principal due in such Fiscal Year for such series or issue of Funded Debt being
referred to herein and throughout this Ordinance as "Balloon Debt'), the amount of principal of such Balloon Debt
taken into account during any Fiscal Year shall be equal to the debt service calculated using the original principal amount
of such Balloon Debt amortized over the Term of Issue on a level debt service basis at an assumed interest rate equal to
the rate borne by such Balloon Debt on the date of calculation;
(2) Consent Sinking Fund. In the case of Balloon Debt, if a Designated Financial Officer shall deliver to
the City a certificate providing for the retirement of (and the instrument creating such Balloon Debt shall permit the
retirement of), or for the accumulation of a sinking fund for (and the instrument creating such Balloon Debt shall permit
the accumulation of a sinking fund for), such Balloon Debt according to a fixed schedule stated in such certificate ending
on or before the Fiscal Year in which such principal (and premium, if any) is due, then the principal of (and, in the case
of retirement, or to the extent provided for by the sinking fund accumulation, the premium, if any, and interest and
other debt service charges on) such Balloon Debt shall be computed as if the same were due in accordance with such
schedule, provided that this clause (2) shall apply only to Balloon Debt for which the installments previously
scheduled have been paid or deposited to the sinking fund established with respect to such Debt on or before the rimes
required by such schedule; and provided further that this clause (2) shall not apply where the City has elected to apply
the rule set forth in clause (1) above;
(3) Prepaid Debt. Principal of and interest on Series 2001 Bonds and Additional Parity Obligations, or
portions thereof, shall not be included in the computation of the Annual Debt Service Requirements for any Fiscal Year
C-1
for which such principal or interest are payable from funds on deposit or set aside in trust for the payment thereof at
the time of such calculations (including without limitation capitalized interest and accrued interest so deposited or set
aside in trust) with a financial institution acting as fiduciary with respect to the payment of such Debt; and
(4) Variable Rate. As to any Parity Obligations that bear interest at a variable interest rate which
cannot be ascertained at the time of calculation of the Annual Debt Service Requirement then, at the option of the City,
either (A) an interest rate equal to the average rate borne by such Parity Obligations (or by comparable debt in the event
that such Parity Obligations has not been outstanding during the preceding 24 months) for any 24 month period ending
within 30 days prior to the date of calculation, or (B) an interest rate equal to the 30 -year Revenue Bond Index (as
most recently published in The Bond Buyer), shall be presumed to apply for all future dates, unless such index is no
longer published in The Bond Buyer, in which case an index of revenue bonds with maturities of at least 20 years
which is published in a financial newspaper or journal with national circulation may be used for this purpose (if two
Series of Parity Obligations which bear interest at variable interest rate, or one or more maturities within a Series, of
equal par amounts, are issued simultaneously with inverse floating interest rates providing a composite fixed interest
rate for such Parity Obligations taken as a whole, such composite fixed rate shall be used in determining the Annual
Debt Service Requirement with respect to such Parity Obligations);
With respect to any calculation of historic data, only those payments actually made in the subject period shall be taken into
account in making such calculation and, with respect to prospective calculations, only those payments reasonably expected to be
made in the subject period shall be taken into account in making the calculation.
"Average Annual Debt Service Requirements" means that average amount which, at the time of computation, will be
required to pay the Annual Debt Service Requirements when due (either at Stated Maturity or mandatory redemption) and
derived by dividing the total of such Annual Debt Service Requirements by the number of Fiscal Years then remaining before
Stated Maturity of such Parity Obligations. For the purposes of this definition, a fractional period of a Fiscal Year shall be
treated as an entire Fiscal Year. Capitalized interest payments provided from bond proceeds, accrued interest on any Debt, and
interest earnings thereon shall be excluded in making such computation.
"Bond Insurer" means or any other entity that insures or guarantees the payment of principal
and interest on any Bonds or the provider of a Reserve Fund Obligation.
"Book -Entry -Only System" means the book -entry system of bond registration provided in Section 5, or any successor
system of book -entry registration.
York.
"Cede & Co. " means the designated nominee and its successors and assigns of The Depository Trust Company, New
"City" and "Issuer" mean the City of Georgetown, Texas, and where appropriate, the City Council.
"Debt" and "Debt of the City payable from Pledged Revenues" mean:
(1) all indebtedness payable from Pledged Revenues and/or Net Revenues incurred or assumed by the City
for borrowed money and all other financing obligations of the System payable from Pledged Revenues and/or Net
Revenues that, in accordance with generally accepted accounting principles, are shown on the liability side of a balance
sheet; and
(2) all other indebtedness payable from Pledged Revenues and/or Net Revenues (other than indebtedness
otherwise treated as Debt hereunder) for borrowed money or for the acquisition, construction or improvement of
property or capitalized lease obligations pertaining to the System that is guaranteed, directly or indirectly, in any
manner by the City, or that is in effect guaranteed, directly or indirectly, by the City through an agreement, contingent
or otherwise, to purchase any such indebtedness or to advance or supply funds for the payment or purchase of any
such indebtedness or to purchase property or services primarily for the purpose of enabling the debtor or seller to make
payment of such indebtedness, or to assure the owner of the indebtedness against loss, or to supply funds to or in any
other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether or
not such property is delivered or such services are rendered), or otherwise.
C-2
For the purpose of determining Debt, there shall be excluded any particular Debt if, upon or prior to the Maturity thereof, there
shall have been deposited with the proper depository (a) in trust the necessary funds (or investments that will provide sufficient
funds, if permitted by the instrument creating such Debt) for the payment, redemption, or satisfaction of such Debt or (b)
evidence of such Debt deposited for cancellation; and thereafter it shall not be considered Debt. No item shall be considered Debt
unless such item constitutes indebtedness under generally accepted accounting principles applied on a basis consistent with the
financial statements of the System in prior Fiscal Years.
"Depositor)' means one or more official depository banks of the City.
"DTC" means The Depository Trust Company, New York, New York and its successors and assigns.
"DTC Participant" means securities brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities
transactions among DTC Participants.
"Designated Financial Officer" means the chief financial officer of the City, or such other financial or accounting official
of the City so designated by the City Council.
Fiscal Year" means the twelve-month accounting period used by the City in connection with the operation of the
System, currently ending on September 30 of each year, which may be any twelve consecutive month period established by the
City, but in no event may the Fiscal Year be changed more than one time in any three calendar year period.
"Funded Debt" means all Parity Obligations created or assumed by the City that mature by their terms (in the absence
of the exercise of any earlier right of demand), or that are renewable at the option of the City to a date, more than one year after
the original creation or assumption of such Debt by the City.
"Gross Revenues" and "Gross Revenues of the City's System" mean all revenues, income and receipts of every nature
derived or received by the City from the operation and ownership of the System; including the interest income from investment or
deposit of money in any Fund created by this Ordinance or maintained by the City in connection with the System; and any other
revenues hereafter pledged to the payment of all Parity Obligations.
"Holder" or "Holders" means the registered owner, whose name appears in the Security Register, for any Parity
Obligation.
"Independent Engineer" means an individual, firm or corporation engaged in the engineering profession, being a
registered professional engineer under the laws of the State of Texas, having specific experience with respect to electric, water,
wastewater, reuse water and/or stormwater drainage systems similar to the System.
`Interest and Sinking Fund' means the special Fund maintained by the provisions of Sections 8 and 11 of this
Ordinance.
"MSRB" means the Municipal Securities Rulemaking Board.
"Maintenance and Operating Expenses" means the reasonable and necessary expenses of operation and maintenance of
the System as required by Section 1502.058, Texas Government Code, as amended, including all salaries, labor, materials, repairs
and extensions necessary to render efficient service (but only such repairs and extensions as, in the judgment of the governing
body of the City, are necessary to keep the System in operation and render adequate service to the City and the inhabitants
thereof, or such as might be necessary to meet some physical accident or conditions which would otherwise impair the Parity
Obligations), and all payments under contracts now or hereafter defined as operating expenses by the Legislature of Texas.
Depreciation shall never be considered as a Maintenance and Operating Expense.
"Maturity" means, when used with respect to any Debt, the date on which the principal of such Debt or any installment
thereof becomes due and payable as therein provided, whether at the Stated Maturity thereof or by declaration of acceleration,
call for redemption, or otherwise.
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"Maximum Annual Debt Service Requirements" means the greatest requirements of Annual Debt Service Requirements
(taking into account all mandatory principal redemption requirements) scheduled to occur in any future Fiscal Year or in the then
current Fiscal Year for the particular obligations for which such calculation is made. Capitalized interest payments provided from
Debt proceeds, accrued interest on any Debt, and interest earnings thereon shall be excluded in making such computation.
"Net Revenues" and "Net Revenues of the City's System" mean all Gross Revenues remaining after deducting the
Maintenance and Operating Expenses.
"NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal
securities information repository within the meaning of the Rule from time to time.
"Ordinance" means this ordinance finally adopted by the City Council on April 24, 2001.
"Outstanding", when
used with
respect to Parity
Obligations, means,
as of the date of determination, all Parity
Obligations theretofore delivered
under this
Ordinance and any
ordinance authorizing
Additional- Parity Obligations, except:
(1) Parity Obligations theretofore cancelled and delivered to the City or delivered to the Paying
Agent/Registrar for cancellation;
(2) Parity Obligations deemed paid pursuant to the provisions of Section 31 of this Ordinance or any
comparable section of any ordinance authorizing Additional Parity Obligations;
(3) Parity Obligations upon transfer of or in exchange for and in lieu of which other Parity Obligations have
been authenticated and delivered pursuant to this Ordinance and any ordinance authorizing Additional Parity
Obligations; and
(4) Parity Obligations under which the obligations of the City have been released, discharged or extinguished
in accordance with the terms thereof.
"Paying Agent/Registrar" shall have the meaning set forth in Section 5(a) hereof.
"Parity Obligations" means the Series 2001 Bonds, the Previously Issued Parity Obligations and any Additional Parity
Obligations hereafter issued by the City or obligations issued to refund any of the foregoing (as determined within the sole
discretion of the City Council in accordance with applicable law) if issued in a manner that provides that the refunding bonds are
payable from and equally and ratably secured by a first lien on and pledge of the Pledged Revenues.
"Permitted Investments" means any security or obligation or combination thereof permitted under the Public Funds
Investments Act, Chapter 2256, Texas Government Code, as amended or other applicable law.
"Pledged Revenues" means (1) the Net Revenues, plus (2) any additional revenues, income, receipts, or other resources,
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 hereafter are pledged by the City to the
payment of the Parity Obligations, and excluding those revenues excluded from Gross Revenues.
"Previously Issued Parity Obligations" means the Outstanding Parity Obligations of the City entitled "City of
Georgetown, Texas Utility System Revenue and Refunding Bonds, Series 1998A" and "City of Georgetown, Texas Utility
System Revenue Refunding Bonds, Taxable Series 199813" and "City of Georgetown, Texas Utility System Revenue Bonds,
Series 2000."
"Prudent Utility Practice" means any of the practices, methods and acts, in the exercise of reasonable judgment, in the
light of the facts, including but not limited to the practices, methods and acts engaged in or previously approved by a significant
portion of the public utility industry, known at the time the decision was made, that would have been expected to accomplish the
desired result at the lowest reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent Utility
Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather is a spectrum
C-4
of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable
cost consistent with reliability, safety and expedition. In the case of any facility included in the System which is operated in
common with one or more other entities, the term Prudent Utility Practice, as applied to such facility, shall have the meaning set
forth in the agreement governing the operation of such facility.
"Rating Agency" means any nationally recognized securities rating agency which has assigned, at the request of the City,
a rating to the Parity Obligations.
"Record Date" means Record Date as defined in the Form of Bonds in Exhibit B to this Ordinance.
"Required Reserve Amount" means the amount required to be maintained in the Reserve Fund pursuant to the
provisions of Section 12 of this Ordinance.
"Required Reserve Fund Deposits" means the deposits and credits, if any, required to be made to the Reserve Fund
pursuant to the provisions of Section 12 of this Ordinance.
"Reserve Fund" means the special fund created, established and maintained by the provisions of Sections 8 and 12 of
this Ordinance.
"Reserve Fund Obligation" means, to the extent permitted by law, as evidenced by an opinion of nationally recognized
bond counsel, a surety bond or insurance policy deposited in the Reserve Fund to satisfy the Required Reserve Amount whereby
the issuer is obligated to provide funds up to and including the maximum amount and under the conditions specified in such
agreement or instrument.
"Reserve Fund Obligation Payment" means any subrogation payment the City is obligated to make from Pledged
Revenues deposited in the Reserve Fund with respect to a Reserve Fund Obligation.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Series 2001 Bonds" means, the City of Georgetown, Texas Utility System Revenue Bonds, Series 2001 authorized by
this Ordinance.
"SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as,
and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time.
"Special Project" means, to the extent permitted by law, any electric, waterworks, sanitary sewer, wastewater reuse or
municipal drainage system property, improvement or facility declared by the City not to be part of the System, for which the
costs of acquisition, construction and installation are paid from proceeds of a financing transaction other than the issuance of
bonds payable from ad valorem taxes, Pledged Revenues or Net Revenues and for which all maintenance and operation expenses
are payable from sources other than ad valorem taxes, Pledged Revenues or Net Revenues, but only to the extent that and for so
long as all or any part of the revenues or proceeds of which are or will be pledged to secure the payment or repayment of such
costs of acquisition, construction and installation under such financing transaction.
"Stated Maturity " means the annual principal payments of the Parity Obligations payable on the respective dates set
forth in the Ordinances which authorized the issuance of such Parity Obligations.
"Subordinate Lien Obligations" means (i) any bonds, notes, warrants, certificates of obligation, contractual obligations
or other Debt issued by the City that are payable, in whole or in part, from and equally and ratably secured by a lien on and
pledge of the Net Revenues, such pledge being subordinate and inferior to the lien on and pledge of the Net Revenues that are or
will be pledged to the payment of any Parity Obligations issued by the City, and (ii) obligations hereafter issued to refund any of
the foregoing if issued in a manner that provides that the refunding bonds are payable from and equally and ratably secured, in
whole or in part, by a lien on and pledge of the Net Revenues on a parity with the Subordinate Lien Obligations.
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"System" means as currently comprised, the City's combined electric, waterworks and sewer system, which includes all
properties, facilities, plants, improvements, equipment, interests and rights currently owned, operated and maintained by the
City for the (i) generation, transmission, distribution or sale of electric power and energy, (ii) supply, treatment, and transmission
and distribution of treated potable water and (iii) collection and treatment of wastewater, and for water reuse, together with all
future extensions, improvements, purchases, repairs, replacements and additions thereto, whether situated within or without the
limits of the City, and all water (in any form) owned by the City; provided, however, that the City expressly retains the right to
(i) sale or disaggregate the System as set forth in Section 18 of this Ordinance and (ii) incorporate any other utility system as
provided by the laws of the State of Texas as a part of the System. The System shall not include any Special Project or any
disaggregated part of the System as provided in Section 18 of this Ordinance.
"Term Bonds" means those Parity Obligations so designated in the ordinances authorizing such bonds which shall be
subject to retirement by operation of a mandatory redemption account.
"Term of Issue" means with respect to any Balloon Debt, a period of time equal to the greater of (i) the period of time
commencing on the date of issuance of such Balloon Debt and ending on the final maturity date of such Balloon Debt or (ii)
twenty-five years.
S ECTION 7. PLEDGE OF PLEDGED REVENUES, The City hereby covenants and agrees that the Pledged Revenues
are hereby irrevocably pledged to the payment and security of the Parity Obligations including the establishment and maintenance
of the special funds created, established and maintained for the payment and security thereof, all as hereinafter provided; and it is
hereby ordained that the Parity Obligations, and the interest thereon, shall constitute a lien on and pledge of the Pledged Revenues
and be valid and binding without any physical delivery thereof or further act by the City, and the lien created hereby on the
Pledged Revenues for the payment and security of the Parity Obligations, including the establishment and maintenance of the
special funds created, established and maintained for the payment and security thereof, shall be superior to the lien on and pledge
of the Pledged Revenues securing payment of any Subordinate Lien Obligations hereafter issued by the City.
SECTION 8.
SPECIAL FUNDS. The establishment and
maintenance
on the books of the City, so long as any of the
Series 2001 Bonds are
outstanding and unpaid, of the below limited
Special Funds
is hereby confirmed:
(a) City of Georgetown, Texas Utility System Revenue Fund, hereinafter called the "Revenue Fund."
(b) City of Georgetown, Texas Utility System Revenue Bonds Interest and Sinking Fund, hereinafter called the
"Interest and Sinking Fund."
Though all of such funds may be subaccounts of the City's General Fund held by the City's depository, and, as such, not held in
separate bank accounts, such treatment shall not constitute a commingling of the monies in such Funds or of such Funds and the
City shall keep full and complete records indicating the monies and investments credited to each of such Funds.
S ECTION 4. REVENUE FUND. The City hereby covenants, agrees and establishes that the Gross Revenues shall be
deposited and credited to the Revenue Fund immediately as collected and received. All Maintenance and Operating Expenses are
and shall be paid from such Gross Revenues as a first charge against same.
SECTION
10*
FLOW OF FUNDS.
All Gross
Revenues deposited
and credited to the Revenue Fund shall be pledged
and appropriated to
the
extent required for the
following
uses and in the order
of priority shown:
FIRST: to the payment of all necessary and reasonable Maintenance and Operating Expenses as defined herein or
required by statute, including, but not limited to, Chapter 1502, Texas Government Code, as amended, to be a first
charge on and claim against the Gross Revenues, including a two (2) -month reserve amount based upon the budgeted
amount of Maintenance and Operating Expenses for the current Fiscal Year, which amount shall be retained in the
Revenue Fund.
SECOND: to the payment of the amounts required
to be
deposited
and credited to the Interest and Sinking Fund
created and established for the payment of
the Series
2001
Bonds, the
Previously Issued Parity Obligations and any
Additional Parity Obligations issued by the
City as the
same
become due
and payable.
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THIRD: pro rata to the payment of the amounts required to be deposited and credited (i) to the Reserve Fund created
and established to maintain the Required Reserve Amount in accordance with the provisions of this Ordinance,
including amounts owed with respect to any Reserve Fund Obligation to restore the Required Reserve Amount and (ii)
to each other reserve fund created and established to maintain a reserve in accordance with the provisions of the
ordinances relating to the issuance of any Additional Parity Obligations hereafter issued by the City.
FOURTH: to the payment of Subordinate Lien Obligations.
FIFTH: to the payment of the amounts required for any lawful purpose.
SECTION 11. INTEREST AND SINKING FUND. For purposes of providing funds to pay the principal of,
premium, if any, and interest on the Parity Obligations as the same become due and payable, including any mandatory sinking
fund redemption payments, the City agrees that it shall maintain the Interest and Sinking Fund. The City covenants to deposit
and credit to the Interest and Sinking Fund prior to each principal, interest payment or redemption date from the available Pledged
Revenues an amount equal to one hundred percent (100%) of the amount required to fully pay the interest on and the principal of
the Parity Obligations then falling due and payable. The City shall make such deposits and credits to pay maturing principal,
accrued interest, and mandatory sinking fund redemptions on the Parity Obligations in substantially equal semi-annual
installments on or before each August 15 and February 15.
The required semi-annual deposits and credits to the Interest and Sinking Fund shall continue to be made as hereinabove
provided until such time as (i) the total amount on deposit in and credited to the Interest and Sinking Fund and the Reserve Fund
(excluding any Reserve Fund Obligation) is equal to the amount required to fully pay and discharge all Outstanding Parity
Obligations (principal, premium, if any, and interest) or (ii) the Parity Obligations are no longer outstanding.
Accrued interest and capitalized interest, if any, received from the purchaser of any Parity Obligation shall be taken into
consideration and reduce the amount of the semi-annual deposits and credits hereinabove required into the Interest and Sinking
Fund.
SECTION 12. RESERVE FUND. (a) To accumulate and maintain a reserve for the payment of the Series 2001 Bonds
equal to the Average Annual Debt Service Requirements of the Outstanding Parity Obligations and the Series 2001 Bonds
(calculated by the City at the beginning of each Fiscal Year) (the "Required Reserve Amount"), the Reserve Fund has been
established and shall be maintained by the City. Earnings and income derived from the investment of amounts held for the credit
of the Reserve Fund shall be retained in the Reserve Fund until the Reserve Fund contains the Required Reserve Amount;
thereafter, such earnings and income shall be deposited to the credit of the Revenue Fund. As provided in Section 11, the City
shall deposit and credit to the Reserve Fund amounts required to maintain the balance in the Reserve Fund in an amount equal to
the Required Reserve Amount. There shall be deposited into the Reserve Fund any Reserve Fund Obligations so designated by
the City. All funds, investments and Reserve Fund Obligations on deposit and credited to the Reserve Fund shall be used solely
for (i) the payment of the principal of and interest on the Outstanding Parity Obligations and the Series 2001 Bonds, when and to
the extent other funds available for such purposes are insufficient, (ii) to make Reserve Fund Obligation Payments and (iii) to
retire the last Stated Maturity or Stated Maturities of or interest on the Outstanding Parity Obligations and the Series 2001
Bonds.
(b) When and for so long as the cash, investments and Reserve Fund Obligations in the Reserve Fund equal the
Required Reserve Amount, no deposits need be made to the credit of the Reserve Fund; but, if and when the Reserve Fund at any
time contains less than the Required Reserve Amount, the City covenants and agrees that the City shall cure the deficiency in the
Reserve Fund by resuming the Required Reserve Fund Deposits to such Fund from the Pledged Revenues in accordance with
Section 10 by monthly deposits and credits in amounts equal to not less than 1/60th of the Required Reserve Amount with any
such deficiency payments being made on or before each August 15 and February 15 until the Required Reserve Amount has been
fully restored; provided, however, that no such deposits shall be made into the Reserve Fund during any six month period
beginning on August 15 and February 15 until there has been deposited into the Interest and Sinking Fund the full amount
required to be deposited therein by the next following August 15 and February 15, as the case may be. In addition, in the event
that a portion of the Required Reserve Amount is represented by a Reserve Fund Obligation, the Required Reserve Amount shall
be restored as soon as possible from monthly deposits of Pledged Revenues on deposit in the Revenue Fund in accordance with
Section 10, but subject to making the full deposits and credits to the Interest and Sinking Fund required to be made by the next
following August 15 and February 15, as the case may be. The City further covenants and agrees that, subject only to the prior
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deposits and credits to be made to the Interest and Sinking Fund, the Pledged Revenues shall be applied and appropriated and
used to establish and maintain the Required Reserve Amount, including by paying Reserve Fund Obligation Payments when due,
and any reserve established for the benefit of any issue or series of Additional Parity Obligations and to cure any deficiency in
such amounts as required by the terms of this Ordinance and any other ordinance pertaining to the issuance of Additional Parity
Obligations.
During such time as the Reserve Fund contains the Required Reserve Amount, the obligation to maintain the Required
Reserve Amount has been suspended pursuant to subsection (d) below or any cash is replaced with a Reserve Fund Obligation
pursuant to subsection (c) below, the City may, at its option, withdraw all surplus funds in the Reserve Fund and deposit such
surplus in the Interest and Sinking Fund or otherwise use such amount in any manner permitted by law.
(c) A Reserve Fund Obligation issued in an amount equal to all or part of the Required Reserve Amount for the Series
2001 Bonds may be used in lieu of depositing cash into the Reserve Fund. In addition, a Reserve Fund Obligation may be
substituted for monies and investments in the Reserve Fund if the substitution of the Reserve Fund Obligation will not, in and of
itself, cause any ratings then assigned to the Outstanding Parity Obligations and the Series 2001 Bonds by any Rating Agency to
be lowered and the ordinance authorizing the substitution of the Reserve Fund Obligation for all or part of the Required Reserve
Amount contains a finding that such substitution is cost effective.
(d) Notwithstanding anything to the contrary contained herein, the requirement set forth in subsection (a) above to
maintain the Required Reserve Amount in the Reserve Fund shall be suspended for such time as the Net Revenues for each Fiscal
Year are equal to at least 1.35 rimes the Average Annual Debt Service Requirements. In the event that the Net Revenues for any
Fiscal Year are less than 1.35 times the Average Annual Debt Service Requirements, the City will be required to commence
making Required Reserve Fund Deposits, as provided in subsection (b) above, and to continue such Required Reserve Fund
Deposits until the earlier of (i) such time as the Reserve Fund contains the Required Reserve Amount or (ii) the Net Revenues in
each of two consecutive years have been equal to not less than 1.35 times the Average Annual Debt Service Requirements.
(e) A Reserve Fund Obligation permitted under (a) above, must be in the form of a surety bond or insurance policy
meeting the requirements described below.
(1) (i) A surety bond or insurance policy issued to the Paying Agent/Registrar, as agent of the Holders, by a company
licensed to issue an insurance policy guaranteeing the timely payment of debt service on the Parity Obligations (a
"municipal bond insurer") if the claims paying ability of the issuer thereof shall be rated "AAA" or "Aaa", respectively,
by S&P and Moody's, or (ii) a surety bond or insurance policy issued to the Paying Agent/Registrar, as agent of the
Holders, by an entity other than a municipal bond insurer, if the form and substance of such instrument and the issuer
thereof shall be approved in writing by each Bond Insurer of record.
(2) The obligation to reimburse the issuer of a Reserve Fund Obligation for any claims or draws upon such Reserve
Fund Obligation in accordance with its terms, including expenses incurred in connection with such claims or draws, to
the extent permitted by law, (a Reserve Fund Obligation Payment) shall be made from the deposits made to the Reserve
Fund as provided in this Section and in Section 10. The Reserve Fund Obligation shall provide for a revolving feature
under which the amount available thereunder will be reinstated to the extent of any reimbursement of draws or claims
paid. If the revolving feature is suspended or terminated for any reason, the right of the issuer of the Reserve Fund
Obligation to reimbursement will be subordinated to the cash replenishment of the Reserve Fund to an amount equal to
the difference between the full original amount available under the Reserve Fund Obligation and the amount then
available for further draws or claims. In the event (a) the issuer of a Reserve Fund Obligation becomes insolvent, or (b)
the issuer of a Reserve Fund Obligation defaults in its payment obligations thereunder, or (c) the claims paying ability
of the issuer of the insurance policy or surety bond falls below "AAA" or "Aaa", by S&P and Moody's, respectively,
the obligation to reimburse the issuer of the Reserve Fund Obligation shall be subordinated to the cash replenishment of
the Reserve Fund.
(3) In the event (a) the revolving reinstatement feature described in the preceding paragraph is suspended or terminated,
or (b) the rating of the claims paying ability of the issuer of the surety bond or insurance policy falls below "AAA" or
"Aaa", by S&P and Moody's, respectively, the City shall either (i) deposit into the Reserve Fund, in accordance with
this Section and Section 11, an amount sufficient to cause the cash or investments credited to the Reserve Fund to
accumulate to the Required Reserve Amount, or (ii) replace such instrument with a surety bond or insurance policy
Wo
meeting the requirements of I and 2 above, within six months of such occurrence. In the event (a) the rating of the
claims -paying ability of the issuer of the surety bond or insurance policy falls below "A" by S&P and Moody's, or (b)
the issuer of the Reserve Fund Obligation defaults in its payment obligations hereunder, or (c) the issuer of the Reserve
Fund Obligation becomes insolvent, the City shall either (i) deposit into the Reserve Fund, in accordance with this
Section, amounts sufficient to cause the cash or investments on deposit in the Reserve Fund to accumulate to the
Required Reserve Amount, or (ii) replace such instrument with a surety bond or insurance policy meeting the
requirements of 1 and 2 above within six months of such occurrence.
(4) The Paying Agent/Registrar shall ascertain the necessity for a claim or draw upon any Reserve Fund Obligation and
provide notice to the issuer of the Reserve Fund Obligation in accordance with its terms not later than three days (or
such appropriate time period as will, when combined with the timing of required payment under the Reserve Fund
Obligation, ensure payment under the Reserve Fund Obligation on or before the interest payment date) prior to each
date upon which the principal of or interest on the Parity Obligations will be due.
It is recognized that a Reserve Fund Obligation may be issued which is payable only with respect to a part of the
Series 2001 Bonds with the remainder of the Required Reserve Amount being satisfied by monies and investments and in that
case any draws upon the Reserve Fund will have to be made on a pro -rata basis to ensure that every Parity Obligation enjoys an
equal amount of security. Therefore, (i) draws upon one or more such Reserve Fund Obligations shall be made on a pro -rata basis
with cash and investments available in the Reserve Fund and (ii) deposits and credits to the Reserve Fund to restore it to the
Required Reserve Amount shall be utilized on a pro -rata basis to pay Reserve Fund Obligation Payments to reimburse the issuers
of the Reserve Fund Obligations, thus restoring that part of the Required Reserve Amount, and to restore with cash and
investments the balance of the Required Reserve Amount.
SECTION 13, EXCESS BOND PROCEEDS. Any proceeds of Parity Obligations not required to effectuate the
purposes for which such Parity Obligations were issued, as provided in the respective ordinances authorizing the issuance of such
Parity Obligations, or for the payment of the costs of issuance of such Parity Obligations shall be deposited and credited to the
Interest and Sinking Fund and shall be taken into consideration and shall reduce the amount of semi-annual deposits and credits to
the Interest and Sinking Fund from the Pledged Revenues or used to redeem or purchase Parity Obligations.
S ECTION 14. DEFICIENCIES - EXCESS PLEDGED OR NET REVENUES . (a) If on any occasion there shall not
be sufficient Pledged Revenues (after making all payments pertaining to all Parity Obligations) to make the required deposits and
credits to the Interest and Sinking Fund and the Reserve Fund, then such deficiency shall be cured as soon as possible from the
next available unallocated Pledged Revenues, or from any other sources available for such purpose, and such deposits and credits
shall be in addition to the amounts otherwise required to be deposited and credited to these Funds.
(b) Subject to making
the deposits and credits required by
this Ordinance, or
any ordinances authorizing the issuance of
Additional Parity Obligations, or the payments and credits required
by the provisions
of the ordinances authorizing the issuance
of Subordinate Lien Obligations
hereafter issued by the City, the excess Net Revenues
may be used for any lawful purpose.
SECTION 15. INVESTMENT OF FUNDS - VALUATION - TRANSFER OF INVESTMENT INCOME. (a)
Money in the Revenue Fund, the Interest and Sinking Fund and the Reserve Fund may, at the option of the City, be invested in
Permitted Investments; provided that all such deposits and investments shall be made in such manner that the money required to
be expended from any fund will be available at the proper time or times. All such investments shall be valued in terms of current
market value no less frequently than the last business day of the City's Fiscal Year, except that any direct obligations of the
United States of America - State and Local Government Series shall be continuously valued at their par value or principal face
amount. Any obligation in which money is so invested shall be kept and held at the Depository, except as otherwise permitted
by the laws applicable to the City. For purposes of maximizing investment returns, money in such funds may be invested,
together with money in other funds or with other money of the City, in common investments of the kind described above, or in a
common pool of such investments held by the City or its designated agent, which shall not be deemed to be or constitute a
commingling of such money or funds provided that safekeeping receipts or certificates of participation clearly evidencing the
investment or investment pool in which such money is invested and the share thereof purchased with such money or owned by
such fund are held by or on behalf of each such fund. If necessary, such investments shall be promptly sold to prevent any
default.
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(b) All interest and income derived from such investments (other than interest and income derived from amounts
credited to the Reserve Fund if the Reserve Fund does not contain the Required Reserve Amount) shall be credited to the Revenue
Fund semi-annually and shall constitute Gross Revenues.
S ECTION 16. PAYMENT OF PARITY OBLIGATIONS. While any of the Parity Obligations are outstanding, the
City shall transfer to the respective paying agent/registrar therefor, from funds on deposit in and credited to the Interest and
Sinking Fund, and, if necessary, in the Reserve Fund, amounts sufficient to fully pay and discharge promptly the interest on and
principal of the Parity Obligations as shall become due on each interest or principal payment date, or date of redemption of the
Parity Obligations; such transfer of funds must be made in such manner as will cause immediately available funds to be deposited
with each respective paying agent/registrar for the Parity Obligations not later than the business day next preceding the date such
payment is due on the Parity Obligations. The Paying Agent/Registrar shall destroy all paid Parity Obligations and furnish the
City with an appropriate certificate of cancellation or destruction.
SECTION I7. RATES AND CHARGES. For the benefit of the Holders of the Parity Obligations and in addition to all
provisions and covenants in the laws of the State of Texas and in this Ordinance, the City hereby expressly stipulates and agrees,
while any of the Parity Obligations are outstanding, to establish and maintain rates and charges for facilities and services afforded
by the System that are reasonably expected, on the basis of available information and experience and with due allowance for
contingencies, to produce Gross Revenues in each Fiscal Year reasonably anticipated to be sufficient:
A. to pay Maintenance and Operating Expenses;
B.
to
produce Pledged Revenues at
Ieast
equal to the greater of 1.25 times the Average Annual Debt Service
Requirements
or
1.10 times the Maximum Annual
Debt
Service Requirements;
C. to produce Pledged Revenues in amounts sufficient to enable the City to make the deposits and credits, if any, from
Pledged Revenues (i) to the Reserve Fund to restore the Required Reserve Amount in accordance with Section 12 of this
Ordinance, including the payment of any Reserve Fund Obligation Payment then due, and (ii) to other reserve funds to establish
or restore the reserve securing any issue or series of Additional Parity Obligations;
D. to produce Pledged Revenues, together with any other lawfully available funds (including the proceeds of Debt
which the City expects will be utilized to pay all or part of the principal of and/or interest on any obligations described in this
subsection D), sufficient to pay the principal of and interest on any Subordinate Lien Obligations issued by the City and the
amounts required to be deposited in any reserve or contingency fund created for the payment and security of the Subordinate Lien
Obligations and any other obligations or evidences of indebtedness issued or incurred that are payable from, in whole or in part, a
subordinate lien on and pledge of the Pledged Revenues; and
E. to pay any other Debt payable from the Pledged Revenues and/or secured by a lien on the Pledged Revenues.
Should the annual audit report required by Section 19 hereof reflect that the Pledged Revenues for the Fiscal Year
covered thereby were less than necessary to meet the requirements of this Section, the City Council will review the operations of
the System and the rates and charges for services provided, and the City Council will make the necessary adjustments or
revisions, if any, in order that the Pledged Revenues for the succeeding year will be sufficient to satisfy the foregoing coverage
requirements.
SECTION 18. 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 rimes any and all covenants, undertakings, stipulations and provisions
contained in any ordinance authorizing the issuance of Parity Obligations, including this Ordinance, and in each and every Parity
Obligation; it will promptly pay or cause to be paid the principal of and interest on every Parity Obligation on the dates and in
the places and manner prescribed in such ordinances and obligations; and it will, at the times and in the manner prescribed, deposit
and credit or cause to be deposited and credited the amounts required to be deposited and credited to the Interest and Sinking
Fund and the Reserve Fund.
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(b) City's Legal Authority. It 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 Series 2001 Bonds; that all action on its part for the creation and
issuance of the Series 2001 Bonds has been duly and effectively taken, and that the Series 2001 Bonds in the hands of the Holders
thereof are and will be valid and enforceable special obligations of the City in accordance with their terms.
(c) Title. It 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 of the Series 2001 Bonds, the Previously Issued Parity Obligations and Additional Parity Obligations,
against the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the
payment of the Series 2041 Bonds, the Previously Issued Parity Obligations and Additional Parity Obligations in the manner
prescribed herein, and has lawfully exercised such rights.
(d) Liens. It 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; 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 it will not create or suffer to be created any mechanic's, laborer's, materialrnan'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. It will, while the Parity Obligations are outstanding and unpaid,
continuously and efficiently operate the System, and shall maintain the System in good condition, repair and working order, all at
reasonable cost. No free service of the System shall be allowed, and should the City or any of its agencies or instrumentalities
make use of the services and facilities of the System, payment of the reasonable value shall be made by the City out of funds from
sources other than the Gross Revenues of the System, unless made from surplus or excess Pledged Revenues as permitted in
Section 14.
(f) Further Encumbrance. While the Parity Obligations are outstanding and unpaid, it will not additionally encumber
the Pledged Revenues in any manner, except as permitted in this Ordinance in connection with Additional Parity Obligations,
unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants and agreements of this
Ordinance; but the right of the City to issue or incur obligations payable from a subordinate lien on the Pledged Revenues is
specifically recognized and retained.
(g) Sale or Disposal of Property. While the Parity Obligations are outstanding and unpaid, it will not sell, convey,
mortgage, encumber, lease or in any manner transfer title to, or otherwise dispose of the System, or any significant or substantial
part thereof; provided that whenever the City deems it necessary to dispose of any other property, machinery, fixtures or
equipment, it may sell or otherwise dispose of such property, machinery, fixtures or equipment when it has made arrangements
to replace the same or provide substitutes therefor, unless it is determined that no such replacement or substitute is necessary;
and, provided further, that the City retains the right to sell, convey, mortgage, encumber, lease or otherwise dispose of any
significant or substantial part of the System if (i) the City Manager delivers a certificate to the City Council to the effect that,
following such action by the City, the System is expected to produce Gross Revenues in amounts sufficient in each Fiscal Year
while any of the Parity Obligations are to be outstanding to comply with the obligations of the City contained in this Ordinance
and in the ordinances authorizing the issuance of Additional Parity Obligations; (ii) the City Council makes a finding and
determination to the same effect as the certificate of the City Manager set forth in (i) above and (iii) each Rating Agency then
maintaining a rating on any Parity Obligation delivers a letter to the City to the effect that such sale, conveyance, mortgage,
encumbrance, lease or other disposition will not cause the Rating Agency to withdraw or lower the rating then in effect. Proceeds
from any sale hereunder not used to replace or provide for substitution of such property sold, shall be used for improvements to
the System or to purchase or redeem Parity Obligations.
(h) Insurance. (1) It shall cause to be insured such parts of the System as would usually be insured by municipal
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 municipal corporations operating like properties, including, to the
extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy
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insurance. Public liability and property damage insurance shall also be carried unless the City Attorney of the City gives a
written opinion to the effect that the City is not liable for claims which would be protected by such insurance. 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 Holders 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 are hereby pledged as security for the Parity Obligations and, 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 for such purpose, then said insurance proceeds
pertaining to the System shall be used promptly as follows:
(i) for the redemption prior to maturity of the Parity Obligations, ratably in the proportion that the
Outstanding principal of each series of Parity Obligations bears to the total Outstanding principal of all Parity
Obligations, provided that if on any such occasion the principal of any such series is not subject to redemption, it shall
not be regarded as Outstanding in making the foregoing computation; or
(ii) if none of the Outstanding Parity Obligations is subject to redemption, then for the purchase on the open
market and retirement of said Parity Obligations in the same proportion as prescribed in the foregoing clause (i), to the
extent practicable; provided that the purchase price for any Parity Obligation shall not exceed the redemption price of
such Panty Obligation on the first date upon which it becomes subject to redemption; or
(iii) to the extent that the foregoing clauses (i) and (ii) cannot be complied with at the time, the insurance
proceeds, or the remainder thereof, shall be deposited in a special and separate trust fund, at an official depository of
the City, to be designated the Insurance Account. The Insurance Account shall be held until such time as the foregoing
clauses (i) and/or (ii) can be complied with, or until other funds become available which, together with the Insurance
Account, will be sufficient to make the repairs or replacements originally required, whichever of said events occurs first.
(2) The foregoing provisions of (1) above notwithstanding, the City shall have authority to enter into coinsurance
or similar plans where risk of loss is shared in whole or in part by the City.
(3) The annual audit hereinafter required shall 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 listing all policies
carried, and whether or not all insurance premiums upon the insurance policies to which reference is hereinbefore made
have been paid.
(4) The payment of premiums for all insurance policies required under the provisions hereof and the costs
associated with the maintenance of any self-insurance program shall be considered Maintenance and Operating
Expenses. Nothing in this Ordinance shall be construed as requiring the City to expend any funds which are derived
from sources other than the operation of the System, but nothing herein shall be construed as preventing the City from
doing so.
(i)
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.
0) No Competition. It will not grant any franchise or permit for the acquisition, construction or operation of any
competing facilities which might be used as a substitute for the System's facilities and, to the extent that it legally may, the City
will prohibit any such competing facilities. Notwithstanding the foregoing, the City retains the right, however, to "opt in" to
electric competition in accordance with State law if "opting in" will not materially adversely impact the Net Revenues of the
System as evidenced by a certification of the City Manager.
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(k) Disaggregation of Sy stem. The City retains the right to disaggregate the System into one or more independent
resulting systems if (i) the City Manager delivers a certificate to the City Council to the effect that, following such action by the
City, the remaining System is expected to produce Gross Revenues in amounts sufficient in each Fiscal Year while any of the
Parity Obligations are to be outstanding to comply with the obligations of the City contained in this Ordinance and in the
ordinances authorizing the Previously Issued Parity Obligations and the issuance of Additional Parity Obligations; (ii) the City
Council makes a finding and determination to the same effect as the certificate of the City Manager set forth in (i) above and (iii)
each Rating Agency then maintaining a rating on any Parity Obligation delivers a letter to the City to the effect that such
disaggregation will not cause the Rating Agency to withdraw or lower the rating then in effect on the Outstanding Parity
Obligations.
S ECTION 19. RECORDS AND ACCOUNTS - ANNUAL AUDIT. The City covenants and agrees that so long as
any of the Parity Obligations remain Outstanding, the City will keep and maintain a separate and complete system of records and
accounts pertaining to the operations of the System in which full, complete, true, proper, and correct entries shall be made of all
dealings, transactions, business and affairs relating thereto, or which in any way affect or pertain to the System or the Gross
Revenues or the Net Revenues thereof, as provided by generally accepted accounting principles, consistently applied, and by
Sections 1502.067 and 1502.068, Texas Government Code, as amended, or other applicable law. The Holders of the Parity
Obligations or any duly authorized agent or agents of such Holders shall have the right to inspect the System and all properties
comprising the same. The City further agrees that, following the close of each Fiscal Year, the City will cause an audit report of
such records and accounts to be made by an Accountant. Copies of each annual audit shall be made available for public inspection
during normal business hours at the City's principal office and the City Secretary's office and may be furnished to, upon written
request, any Holder upon payment of the reasonable copying and mailing charges. Expenses incurred in making the annual audit
of the operations of the System shall be considered as Maintenance and Operating Expenses.
SECTION 24, ISSUANCE OF ADDITIONAL PARITY OBLIGATIONS. (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 or other obligations (herein called "Additional Parity Obligations'), in accordance with law, in any amounts, for
purposes of extending, improving or repairing the System or for the purpose of refunding of any Parity Obligations, Subordinate
Lien Obligations or other obligations of the City incurred in connection with the ownership or operation of the System. Such
Additional Parity Obligations, if and when authorized, issued and delivered in accordance with this Ordinance, shall be secured by
and made payable equally and ratably on a parity with all other Outstanding Parity Obligations, from the lien on and pledge of the
Pledged Revenues herein granted.
(b) The Interest and Sinking Fund shall secure and be used to pay all Parity Obligations. Each ordinance under which
Additional Parity Obligations are issued shall provide and require that, in addition to the amounts required by the provisions of
this Ordinance and the provisions of any other ordinance or ordinances authorizing the Previously Issued Parity Obligations and
Additional Panty Obligations to be deposited to the credit of the Interest and Sinking Fund, the City shall deposit to the credit of
the Interest and Sinking Fund at least such amounts as are required for the payment of all principal of and interest on said
Additional Parity Obligations then being issued, as the same come due.
(c) The City may create and establish a reserve fund pursuant to the provisions of any ordinance authorizing the
issuance of Additional Parity Obligations for the purpose of securing that particular issue or series of Parity Obligations or any
specific group of issues or series of Parity Obligations and the amounts once deposited or credited to said reserve funds shall no
longer constitute Net Revenues and shall be held solely for the benefit of the Holders of the particular Parity Obligations for
which such reserve fund was established. Each such reserve fund shall be designated in such manner as is necessary to identify
the Parity Obligations it secures and to distinguish such reserve fund from the Reserve Fund and the reserve funds created for the
benefit of other Parity Obligations.
SECTION 25. FURTHER REQUIREMENTS FOR ADDITIONAL PARITY OBLIGATIONS. That Additional
Parity Obligations shall be issued only in accordance with this Ordinance, but notwithstanding any provisions of this Ordinance
to the contrary, no installment, Series or issue of Additional Parity Obligations shall be issued or delivered unless:
(a) The City Manager and the City Secretary of the City 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 Outstanding Parity Obligations, and the ordinances
authorizing same, and that the Interest and Sinking Fund, the Reserve Fund and any reserve fund securing any other series or issue
of Parity Obligations each contains the amount then required to be therein.
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(b) An Accountant signs and delivers to the City a written certificate to the effect that, during either the next preceding
Fiscal Year, or any twelve consecutive calendar month period ending not more than ninety days prior to the date of the then
proposed Additional Parity Obligations, the Net Earnings were, in the opinion thereof, at least equal to the sum of 1.25 times the
Average Annual Debt Service Requirements (computed on a Fiscal Year basis), including Amortization Installments, of the Parity
Obligations and the Additional Parity Obligations to be outstanding after the issuance of the then proposed Additional Parity
Obligations and 1.10 times the average annual debt service requirement (computed in the same manner as for Parity Obligations)
of the Subordinate Lien Obligations to be outstanding after the issuance of the then proposed Additional Parity Obligations.
(c) In making a determination of Net Earnings for any of the purposes described in this Section, the Accountant may
take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at
least 60 days prior to the last day of the period for which Net Earnings are determined and, for purposes of satisfying the Net
Earnings tests described above, make a pro forma determination of the Net Earnings of the System for the period of time covered
by said Accountant's certification or opinion based on such change in rates and charges being in effect for the entire period
covered by said Accountant's certificate or opinion.
As used in this Section, the term "Net Earnings" shall mean the Gross Revenues of the System after deducting the
Maintenance and Operating Expenses of the System but not expenditures which, under standard accounting practice, should be
charged to capital expenditures.
S ECTION 26. ISSUANCE OF SUBORDINATE LIEN OBLIGATIONS. The City hereby reserves the right to issue,
at any time, obligations including, but not limited to, Subordinate Lien Obligations, payable from and equally and ratably secured,
in whole or in part, by a lien on and pledge of the Net Revenues, subordinate and inferior in rank and dignity to the lien on and
pledge of such Net Revenues securing the payment of the Parity Obligations, as may be authorized by the laws of the State of
Texas.
SECTION 27. ISSUANCE OF SPECIAL PROJECT OBLIGATIONS. Nothing in this Ordinance shall be construed
to deny the City the right and it shall retain, and hereby reserves unto itself, the right to issue Special Project obligations secured
by liens on and pledges of revenues and proceeds derived from Special Projects,
SECTION 28. LIMITED OBLIGATIONS OF THE CITY. The Parity Obligations are limited, special obligations of
the City payable from and equally and ratably secured solely by a first lien on and pledge of the Pledged Revenues, and the
Holders thereof shall never have the right to demand payment of the principal or interest on the Parity Obligations from any
funds raised or to be raised through taxation by the City.
SECTION 29. SECURITY FOR FUNDS. All money on deposit in the Funds for which this Ordinance makes
provision (except any portion thereof as may be at any time properly invested as provided herein) shall be secured in the manner
and to the fullest extent required by the laws of Texas for the security of public funds, and money on deposit in such Funds shall
be used only for the purposes permitted by this Ordinance.
S ECTION 30. REMEDIES IN EVENT OF DEFAULT. In addition to all the rights and remedies provided by the laws
of the State of Texas, it is specifically covenanted and agreed particularly that in the event the City (i) defaults in the payment of
the principal, premium, if any, or interest on the Series 2001 Bonds, (ii) defaults in the deposits and credits required to be made to
the Interest and Sinking Fund or Reserve Fund, or (iii) defaults in the observance or performance of any other of the covenants,
conditions, or obligations set forth in this Ordinance, the following remedies shall be available:
(a) the Holders of any of the Series 2001 Bonds shall be entitled to seek a writ of mandamus issued by a court of
proper jurisdiction compelling and requiring the governing body of the City and other officers of the City to observe and perform
any covenant, condition or obligation prescribed in this Ordinance; and
(b) no delay or omission to exercise any right or power accruing upon any default shall impair any such right or power
or shall be construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised
from time to time and as often as may be deemed expedient. The specific remedy herein provided shall be cumulative of all other
existing remedies, and the specification of such remedy shall not be deemed to be exclusive.
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SECTION 31. DEFEASANCE OF SERIES 2001 BONDS. (a) Any Series 2001 Bond and the interest thereon shall be
deemed to be paid, retired and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the
extent provided in subsection (d) of this Section, when payment of the principal of such Series 2001 Bond, plus interest thereon
to the due date (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 (ii) shall
have been provided for on or before such due date by irrevocably depositing with or making available to the Paying
Agent/Registrar for such payment (1) lawful money of the United States of America sufficient to make such payment, (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 as will ensure the availability, without reinvestment, of sufficient money to provide for
such payment and when proper arrangements have been made by the City with the Paying Agent/Registrar for the payment of its
services until all Defeased Series 2001 Bonds shall have become due and payable or (3) any combination of (1) and (2). At such
time as a Series 2001 Bond shall be deemed to be a Defeased Series 2001 Bond hereunder, as aforesaid, such Series 2001 Bond and
the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the Pledged Revenues as provided
in this Ordinance, and such principal and interest shall be payable solely from such money or Defeasance Securities.
(b) The deposit under clause (ii) of subsection (a) shall be deemed a payment of a Series 2001 Bond as aforesaid when
proper notice of redemption of such Series 2001 Bonds shall have been given, in accordance with this Ordinance. Any money so
deposited with the Paying Agent/Registrar as provided in this Section may at the discretion of the City also be invested in
Defeasance Securities, maturing in the amounts and at the times as hereinbefore set forth, and all income from all Defeasance
Securities in possession of a paying agent pursuant to this Section which is not required for the payment of such Series 2001
Bond and 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 in writing by the City.
(c) Notwithstanding any provision of any other Section of this Ordinance which may be contrary to the provisions of
this Section, all money or Defeasance Securities set aside and held in trust pursuant to the provisions of this Section for the
payment of principal of the Series 2001 Bond and premium, if any, and interest thereon, shall be applied to and used solely for
the payment of the particular Series 2001 Bonds and premium, if any, and interest thereon, with respect to which such money or
Defeasance Securities have been so set aside in trust.
(d) Notwithstanding anything elsewhere in this Ordinance contained, if money or Defeasance Securities have been
deposited or set aside with a paying agent pursuant to this Section for the payment of Series 2001 Bonds and such Series 2001
Bonds shall not have in fact been actually paid in full, no amendment of the provisions of this Section shall be made without the
consent of the registered owner of each Bond affected thereby.
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FORM OF BOND COUNSEL'S OPINION