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HomeMy WebLinkAboutORD 2001-30 - Tax & Utility System C.O.'sORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF GEORGETOWN, TEXAS COMBINATION TAX AND UTILITY SYSTEM LIMITED REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001; AUTHORIZING THE LEVY OF AN AD VALOREM TAX AND THE PLEDGE OF CERTAIN REVENUES IN SUPPORT OF THE CERTIFICATES; APPROVING AN OFFICIAL STATEMENT, A PAYING AGENT/REGISTRAR AGREEMENT, AND OTHER AGREEMENTS RELATED TO THE SALE AND ISSUANCE OF THE CERTIFICATES; AND AUTHORIZING OTHER MATTERS RELATED TO THE ISSUANCE OF THE CERTIFICATES G EORGT W N/CO2001: ORDIN.DR 1 ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF GEORGETOWN, TEXAS COMBINATION TAX AND UTILITY SYSTEM LIMITED REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001; AUTHORIZING THE LEVY OF AN AD VALOREM TAX AND THE PLEDGE OF CERTAIN REVENUES IN SUPPORT OF THE CERTIFICATES; APPROVING AN OFFICIAL STATEMENT, A PAYING AGENT/REGISTRAR AGREEMENT, AND OTHER AGREEMENTS RELATED TO THE SALE AND ISSUANCE OF THE CERTIFICATES; AND AUTHORIZING OTHER MATTERS RELATED TO THE ISSUANCE OF THE CERTIFICATES TABLE OF CONTENTS PAGE RECUALS....................................................................1 SECTION 1. RECITALS, AMOUNT PURPOSE OF THE CERTIFICATES . 0 1 0 1 ............ 2 (a) Recitals and Purpose .................................................... 2 (b)Century Plan..........................................................2 SEcTioN 2, DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES OF CERTIFICATES .................................... 2 SECTION 3. INTEREST.........................................................3 SECTION 4, CHARACTERISTICS OF THE CERTIFICATES ............................ 4 (a) Registration Transfer. Conversion and Exchange; Authentication .................. 4 (b) Payment of Certificates and Interest ........................................ 4 (c) In General...........................................................5 (d) Substitute Paying Agent/Reglstrar.......................................... 5 (e) Back -Entry Only Sstem1101,600 11114*6 (� Successor Securities Depository; Transfer Outside Book -Entry -Only System ......... 7 (g) Payments to Cede & Co ................................................. 7 (h) Initial Certifica&U ............. . ............................... 7 SEcrioN 5, FORM OF CERTIFICATE ............................................. 7 SECTION 6. INTEREST AND SINKING FUND ..................................... 15 SECTION 7. REVENUES.......................................................15 SECTION 8. DEFEASANCE OF CERTIFICATES .................................... 16 SECTION 9, DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES..................................................17 (a) Replacement Certificates ............................................... 17 (b) Application for Replacement Certificates ......... . ......................... 17 (c) No Default Occurred .................................................. 18 (d) Charge for Issuing Replacement Certificates 18 (e) Authority for Issuing Replacement Certificates ............................... 18 GEORGTWN/CO2001: ORDIN.DRI 1 SECTION 10, CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED .............. 18 SECTION 11. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE CERTIFICATES..............................................................19 (a) Covenants..........................................................19 {b) Rebate Fund ........................................................ 20 (c) Proceeds..........................................................20 (d) Allocation Of, and Limitation On, Expenditures for the Project ................... 21 (e) Disposition of Project 0.44.0..... , . 1 140 ................................. 21 (f) Desimtian as Qualified Tax -Exempt Certificates ............................. 21 SECTION 12. SALE OF CERTIFICATES ........................................... 21 SECTION 13. REMEDIES IN EVENT OF DEFAULT ................................. 22 SECTION 14. INTEREST EARNINGS ON CERTIFICATE PROCEEDS .................. 22 SECTION 15. APPROVAL OF PAYING AGENT/REGISTRAR AGREEMENT,' LETTER OF REPRESENTATIONS AND OFFICIAL STATEMENT ......... 22 SECTION 16, CONTINUING DISCLOSURE UNDERTAKING ......................... 23 (a) Annual Reports...................................................23 (b) Material Event Notices .............................................. 23 (c) Limitations Disclaimers and Amendments .......................... 1 1 1 1 .24 (d) Definitions.......................................................25 SECTION 17. INSURANCE PROVISIONS ............................... 0 1 . 1 1.....25 SECTION 18, NO RECOURSE AGAINST CITY OFFICIALS .......................... 26 SECTION 19. FURTHER ACTIONS ............................................... 26 SECTION 20. APPROPRIATIONS................................................ 26 SECTION 21. INTERPRETATIONS............................................... 26 SECTION 22. INCONSISTENT PROVISIONS ...................................... 26 SEcnoN 23. INTERESTED PARTIES . 1 0 . 0 1 . .............. _........... 26 SECTION 24. INCORPORATION OF RECITALS ................ 27 SECTION 25. SEVERABILITY................................................... 27 SECTION26. REPEALER.......................................................27 SECTION 27. EFFECTIVE DATE ................................................ . 27 Exhibit A - Paying Agent/Registrar Agreement Exhibit B - Description of Annual Financial Information GEORGTWN/COZOOt: ORDIN.DRI n Ordinance No. 2001-.50 i i C i {t •' 1 1 i i i' , , ,DI Did1 i i i . 1 i � 1 1 i• i 1' a i 1 i 1 1 OF COUNTY OF t CITY OF i' i WHEREAS, the City Council of the City of Georgetown, Texas (the "City") deems it advisable to issue certificates of obligation in the amount of $5,470,000 (the "Certificates") for the purpose of paying contractual obligations incurred or to be incurred by the City for: (1) construction, acquisition, renovation and equipment of city facilities including animal shelter, city offices and city hall, (2) acquisition, construction and equipment of City parks and park improvements, and (3) professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates; and WHEREAS, the Certificates hereinafter authorized and designated are to be issued and delivered for cash pursuant to Subchapter C of Chapter 271, Local Government Code, as amended, and Section 1502.052, Texas Government Code, as amended; and WHEREAS, on March 27, 2001 the City Council passed a resolution authorizing and directing the City Secretary to give notice of intention to issue Certificates; and WHEREAS, the notice was published on April 4, 2001 and April 11, 2001 in the Williamson County Sun, a newspaper of general circulation in the City and a "newspaper" as defined in Section 2051.044, Government Code; and WHEREAS, the City has not received a petition from the qualified electors of the City protesting the issuance of the Certificates; and WHEREAS, the City hereby finds that the issuance of the Certificates implements Finance Policy 14.00 of the Century Plan and further finds that the enactment of this Ordinance is not inconsistent or in conflict with any other Century Plan Policies; and GEORGTWN/CO2001: ORDIN.DRI 1 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; and WHEREAS, it is considered to be in the best interest of the City that the interest bearing Certificates be issued. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS: S SECTION 1. RECITALS, AMOUNT PURPOSE OF THE CERTIFICATES AND CENTURY PLAN. (a) Recitals and Purpose. The recitals set forth in the preamble hereof are incorporated by reference herein and shall have the same force and effect as if set forth in this Section. The certificates of the City of Georgetown, Texas (the "City") are hereby authorized to be issued and delivered in the aggregate principal amount of $5,470,000 for the purpose of paying contractual obligations incurred or to be incurred by the City for: (1) construction, acquisition, renovation and equipment of city facilities including animal shelter, city offices and city hall, (2) acquisition, construction and equipment of City parks and park improvements, and (3) professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates. (b) Century Plan The City Council hereby finds that the issuance of the Certificates implements the following policy of the Century Plan - Policy Plan Element: Finance Policy End 14. 00 which states; "All municipal operations are conducted in an efficient, business -like manner and sufficient financial resources for both current and future needs are provided." SECTION 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES OF CERTIFICATES. Each Certificate issued pursuant to this Ordinance shall be designated: "CITYOF GEORGETOWN, TEXAS COMBINATION TAX AND UTILITY SYSTEM LTNIITED REVENUE CERTIFICATE OF OBLIGATION, SERIES 2001". and initially there shall be issued, sold, and delivered hereunder fully registered certificates, without interest coupons, dated April 15, 2001, in the respective denominations and principal amounts hereinafter stated, numbered consecutively from R4 upward (except the initial Certificates 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 12 hereof), or to the registered assignee or assignees of said certificates or any portion or portions thereof (in each case, the "Registered Owner"), and said certificates 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: GEORGTWNICO2001: ORDINARI 2 YEAR AMOUNT YEAR AMOUNT 2001 $ 325,000 2012 $ 255,000 2002 150,000 2013 265,000 2003 1605000 2014 2803000 2004 170,000 2015 2952000 2005 180,000 2016 310,000 2006 185,000 2017 3252000 2007 195,000 2018 345,000 2008 205,000 2019 360,000 2009 215,000 2020 380,000 2010 230,000 2021 400,000 2011 240,000 The term "Certificates" as used in this Ordinance shall mean and include collectively the Certificates initially issued and delivered pursuant to this Ordinance and all substitute Certificates exchanged therefor, as well as all other substitute certificates and replacement Certificates. issued pursuant hereto, and the term "Certificate" shall mean any of the Certificates. SEmoN 3. INTEREST, The Certificates scheduled to mature during the years, respectively, set forth below shall bear interest from the dates specified in the FORM OF CERTIFICATE set forth in this Ordinance to their respective dates of maturity or redemption prior to maturity at the following rates per annum: YEAR RATE 2001 % 2002 2003 2004 2005 2007 2008 2009 2010 2011 GEORGTWN/CO2001: ORDIN.DRI 3 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Interest shall be payable in the manner provided and on the dates stated in the FORM OF CERTIFICATE set forth in this Ordinance. SECTION 4. CHARACTERISTICS OF THE CERTIFICATES. (a) Registration, Transfer, Conversion and Exchange; Authentication. The City shall keep or cause to be kept at The Bank of New York, New York, New York (the "Paying Agent/Registrar") books or records for the registration of the transfer, conversion and exchange of the Certificates (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, conversions and exchanges under such reasonable regulations as the City and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such regis- trations, transfers, conversions and exchanges as herein provided The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the Registered Owner of each Certificate to which payments with respect to the Certificates shall be mailed, as herein provided; but it shall be the duty of each Registered Owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The 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 Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Paying Agent/Registrar shall make the Registration Books available within the State of Texas. The City shall pay the Paying Agent/Regisft&s standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Certificate or Certificates. Registration of assignments, transfers, conversions and exchanges of Certificates shall be made in the manner provided and with the effect stated in the FORM OF CERTIFICATE set forth in this Ordinance. Each substitute Certificate shall bear a letter and/or number to distinguish it from each other Certificate. Except as provided in Section 4(c) of this Ordinance, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Certificate, date and manually sign said Certificate, and no such Certificate shall be deemed to be issued or outstanding unless such Certificate is so executed The Paying Agent/Registrar promptly shall cancel all paid Certificates and Certificates surrendered for conversion 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 conversion and exchange of any Certificate or portion thereof; and the Paying Agent/Registrar shall provide for the printing, execution, and delivery of the substitute Certificates in .the manner prescribed herein, and said Certificates shall be printed or typed on paper of customary weight and strength. Pursuant to Chapter 1201, Texas Government Code, as amended, and particularly Subchapter D thereof, the duty of conversion and exchange of Certificates as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Certificate, the converted and exchanged Certificate shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Certificates 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 Certificates 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 Certificates, all as GEORGTWN/CO2001: ORDINDRI 4 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 Certificates, and of all conversions and exchanges of Certificates, and all replacements of Certificates, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the past due interest shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first-class postage prepaid, to the address of each Registered Owner appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (c) In GeneraL The Certificates (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Certificates to be payable only to the Registered Owners thereof, (ii) may be redeemed prior to their scheduled maturities (notice of which shall be given to the Paying Agenb egistrar by the City at least 45 days prior to any such redemption date), (iii) may be converted and exchanged for other Certificates, (iv) may be transferred and assigned, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Certificates 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 Certificates, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF CERTIFICATE set forth in this Ordinance. The Certificates 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 Certificate issued in conversion of and exchange for any Certificate or Certificates issued under this Ordinance the Paying Agent/Registrar shall execute the PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE, in the form set forth in the FORM OF CERTIFICATE. (d) Substitute Paging Agent/Registrar. The City covenants with the Registered Owners of the Certificates that at all times while the Certificates are outstanding the City will provide a competent and legally qualified bank, trust company, financial institution, or other agency to act as and perform the services of Paying Agent/Registrar for the Certificates under this Ordinance, and that the Paying Agent/Registrar will be one entity. The City reserves the right to, and may, at its option, 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 disnipt 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 appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Certificates, 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 Certificates, 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 GEORGT"/CO2001: ORDIN.DRI 5 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-EnML--OnlySystern. The Certificates issued in exchange for the Certificates initially issued as provided in Section 4(h) shall be issued in the form of a separate single fully registered Certificate for each of the maturities thereof registered in the name of Cede & Co. as nominee of DTC and except as provided in subsection (f) hereofy all of the Outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. With respect to Certificates 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 to hold securities to facilitate the clearance and settlement of securities transactions among DTC participants (the "DTC Participant") or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. 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 Certificates, (ii) the "delivery to any DTC participant or any other person, other than a Registered Owner, as shown on the Registration Books, of any notice with respect to the Certificates, including any notice of redemption, or (iii) the payment to any DTC Participant or any person, other than a Registered Owner, as shown on the Registration Books of any amount with respect to principal of, premium, if any, or interest on the Certificates. Notwithstanding any other provision of this Ordinance to the contrary, but to the extent permitted by law, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Registration Books as the absolute owner of such Certificate for the purpose of payment of principal, premium, if any, and interest, with respect to such Certificate, for the purposes of registering transfers with respect to such Certificates, and for all other purposes of registering transfers with respect to such Certificates, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of, premium, if any, and interest on the Certificates only to or upon the order of the respective Registered Owners, as shown in the Registration Books as provided in the 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 o% premium, if any, and interest on the Certificates 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 Certificate evidencing the obligation of the City to make payments of principal, premium, if any, and interest pursuant to the 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 word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (fl Successor Securities DepositorX; Transfer Outside Book -Entry WY System In the event that the City determines to discontinue the book -entry system through DTC or a successor or DTC determines to discontinue providing its services with respect to the Certificates, the City shall either (i) appoint a GEORGTWN/CO2001: ORDIN.DRI 6 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 Certificates to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates 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 Owner transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. (g) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Certificate is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Certificate and all notices with respect to such Certificate shall be made and given, respectively, in the manner provided in the Blanket Representation of the City to DTC. (h) Initial Certificates). The Certificates herein authorized shall be initially issued as fully registered certificates, being one certificate for each maturity in the denomination of the applicable principal amount and the initial Certificate(s) shall be registered in the names of the Underwriter or the designees thereof as set forth in Section 12 hereof, The initial Certificate(s) shall be the Certificates submitted to the Office of the Attorney General of the State of Texas for approval, certified and registered by the Office of the Comptroller of Public Accounts of the State of Texas and delivered to the Underwriter. Irnmediately after the delivery of the initial Certificate(s), the Paying Agent/Registrar shall cancel the initial Certificate(s) delivered hereunder and exchange therefor Certificates in the form of a separate single fully registered Certificate for each of the maturities thereof registered in the name of Cede & Co., as nominee of DTC and except as provided in Section 4(f), all of the outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. SEmoN 5. FORM OF CERTIFICATE. The form of the Certificate, including the form of Paying Agent/Registrar'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 to the Certificates initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions or insertions as are permitted or required by this Ordinance. NO. R- UNITED STATES OF AMERICA PRINCIPAL STATE OF TEXAS AMOUNT COUNTY OF WILLIAMSON S CITY OF GEORGETOWN, TEXAS COMBINATION TAX AND UTILITY SYSTEM LIMITED REVENUE CERTIFICATE OF OBLIGATION SERIES 2001 : ORDIN.DRI 7 INTEREST REGISTERED OWNER: PRINCIPAL AMOUNT. DATE OF CERTIFICATES April 15, 2001 u DATE CUSIP NO. ON THE MATURITY DATE specified above, the CITY OF GEORGETOWN, in Williamson County, Texas (the "City"), being a political subdivision of the State of Texas, hereby promises to pay to the Registered Owner set forth above, or registered assigns (hereinafter called the "Registered Owner") the principal amount set forth above, and to pay interest thereon from the Date of Certificates set forth above, 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, at the interest rate per annum specified above; except that if this Certificate 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 Certificate or Certificates, if any, for which this Certificate is being exchanged or converted from is due but has not been paid, then this Certificate 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 Certificates is determined only by a book entry at a securities depository for the Certificates, any payment to the securities depository, or its nominee or registered assigns, shall be made in accordance with existing arrangements between the City and the securities depository. THE PRINCIPAL OF AND INTEREST ON this Certificate are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Certificate shall be paid to the Registered Owner hereof upon presentation and surrender of this Certificate at maturity, or upon the date fixed for its redemption prior to maturity, at The Bank of New York, New York, which is the "Paying Agent/Registrar" for this Certificate at their office in Jacksonville, Florida (the "Designated Payment/Transfer Office"). The payment of interest on this Certificate shall be made by the Paying Agent/Registrar to the Registered Owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the City required by the ordinance authorizing the issuance of this Certificate (the "Certificate Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft 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 preceding each such date (the "Record Date") on the ORDIN.DRt 8 registmationbooks kept by the Paying Agent/Registrar (the "Registration Books"). In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Registered Owner. 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 (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 owner of a Certificate appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. Notwithstanding the foregoing, during any period in which ownership of the Certificates is determined only by a book entry at a securities depository for the Certificates, payments made to the securities depository, or its nominee, shall be made in accordance with arrangements between the City and the securities depository. DURING ANY PERIOD in which ownership of the Certificates is determined only by a book entry at a securities depository for the Certificates, if fewer than all of the Certificates of the same maturity and bearing the same interest rate are to be redeemed, the particular Certificates of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the City and the securities depository. ANY ACCRUED INTEREST due at maturity or upon, the redemption of this Certificate prior to maturity as provided herein shall be paid to the Registered Owner upon presentation and surrender of this Certificate for redemption and payment at the Designated Payment/Transfer Office of the Paying Agent/Registrar. The City covenants with the Registered Owner of this Certificate that on or before each principal payment date, interest payment date, and accrued interest payment date for this Certificate it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Certificate Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Certificates, when due. IF THE DATE for the payment of the principal of or interest on this Certificate shall be a Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS CERTIFICATE is one of a Series of Certificates dated April 15, 2001, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $5,470,000, for the purpose of paying contractual obligations incurred or to be incurred by the City for: (1) construction, acquisition, renovation and equipment of city facilities including animal shelter, city offices and city hall, (2) acquisition, construction and equipment of City parks and park improvements, and (3) professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates. GEORGTWN(CO2001: ORDIN.DR1 9 ON AUGUST 15, 2011, or on any date thereafter, the Certificates of this Series maturing on and after August 15, 2012 may be redeemed prior to their scheduled maturities, at the option of the City, with funds derived from any available and lawful source, at par plus accrued interest to the date fixed for redemption as a whole, or in part, and, if in part, the particular maturities to be redeemed shall be selected and designated by the City and if less than all of a maturity is to be redeemed, the Paying Agent/Registrar shall determine by lot the Certificates, or a portion thereof, within such maturity to be redeemed (provided that a portion of a Certificate may be redeemed only in an integral multiple of $5,000), THE CERTIFICATES maturing on August 15, 20_ are subject to mandatory sinking fund redemption by lot prior to maturity in the following amounts, on the following dates and at a price of par plus accrued interest to the redemption date. Certificates Maturing August 15 2a 0� Redemption Date Principal Amount August 15, 20_ $ August 15, 20_ THE PRINCIPAL AMOUNT of the Certificates required to be redeemed pursuant to the operation of the mandatory sinking fund redemption provisions shall be reduced, at the option of the City by the principal amount of any Certificates of the stated maturity which, at least 50 days prior to a mandatory redemption date, (1) shall have been acquired by the City at a price not exceeding the principal amount of such Certificates plus accrued interest to the date of purchase thereof, and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and canceled 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 Certificates plus accrued interest to the date of purchase thereof, or (3) shall have been redeemed pursuant to the optional redemption provisions and not theretofore credited against a mandatory sinking fund redemption requirement. NO LESS THAN 30 days prior to the date fixed for any such redemption, the City shall cause the Paying Agent/Registrar to send notice by United States mail, first-class postage prepaid to the Registered Owner of each Certificate to be redeemed at its address as it appeared on the Registration Books of the Paying Agent/Registrar at the close of business on the 45th day prior to the redemption date and to major securities depositories, national bond rating agencies and bond information services; provided, however, that the failure to send, mail or receive such notice, or any defect therein or in the sending or mailing thereof; shall not affect the validity or effectiveness of the proceedings for the redemption of any Certificates. 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 Certificates or portions thereof which are to be so redeemed. If due provision for such payment is made, all as provided above, the Certificates 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 GEORGTWN/CO200I: ORDIN.DRI 10 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 Certificates shall be redeemed a substitute Certificates or Certificates having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the Registered Owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the Registered Owner upon the surrender thereof for cancellation, at the expense of the City, all as provided in the Certificate Ordinance. DURING ANY PERIOD in which ownership of the Certificates is determined only by a book entry at a securities depository for the Certificates, if fewer than all of the Certificates of the same maturity and bearing the same interest rate are to be redeemed, the particular Certificates of such maturity and bearing such interest rate shall be selected in accordance with the arrangements between the City and the securities depository. ALL CERTIFICATES OF THIS SERIES are issuable solely as fully registered certificates, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Certificate Ordinance, this Certificate may, at the request of the Registered Owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate principal amount of fully registered certificates, 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 Certificate to the Paying Agent/Registrar for cancella- tion, all in accordance with the form and procedures set forth in the Certificate Ordinance. Among other requirements for such assignment and transfer, this Certificate 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 Certificate or any portion or portions hereof in any integral multiple of$5,000 to the assignee or assignees in whose name or names this Certificate or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Certificate 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 Certificate 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 assigning, transferring, converting and exchanging any Certifi- cate or portion thereof will be paid by the City. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion 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, conversion, or exchange (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date, or (ii) with respect to any Certificate 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 the unredeemed balance of the Certificate. GEORGTWN/COMOI: ORDIN.DRI I 1 WHENEVER the beneficial ownership of this Certificate is determined by a book entry at a securities depository for the Certificates, the foregoing requirements of holding, delivering or transferring this Certificate 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 Certificates is changed by the City, resigns, or otherwise ceases to act as such, the City has covenanted in the Certificate 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 Certificates. IT IS HEREBY certified, recited and covenanted that this Certificate 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 Certificate have been performed, existed and been done in accordance with law; that this Certificate is a general obligation of said City, issued on the full faith and credit thereof; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied against all taxable property in said City, and have been pledged for such payment, within the limit prescribed by law, and that this Certificate, together with other obligations of the City, is additionally secured by and payable from the surplus revenues of the City's Utility System, as defined in Ordinance No. 98-34, remaining after payment of all operation and maintenance expenses thereof, and all debt service, reserve and other requirements in connection with all of the City's revenue bonds or other obligations (now or hereafter outstanding), which are payable from all or part of the Net Revenues of the City's Utility System, which amount shall not exceed $14,000 all as provided in the Certificate Ordinance. BY BECOMING the Registered Owner of this Certificate, the Registered Owner thereby acknowledges all of the terms and provisions of the Certificate Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Certificate Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the City, and agrees that the terms and provisions of this Certificate and the Certificate Ordinance constitute a contract between each Registered Owner hereof and the City. IN WITNESS WHEREOF, the City has caused this Certificate to be signed with the manual or facsimile signature of the Mayor ofthe City and countersigned with the manual or facsimile signature of the City Secretary of said City, and has caused the official seal of the City to be duly impressed, or placed in facsimile,,on this Certificate. City Secretary (SEAL) GEORGTWN/CO2001: ORDIN.DRI 12 mayor (To be executed if this Certificate 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 Certificate has been issued under the provisions of the Certificate Ordinance described in the text of this Certificate; and that this Certificate has been issued in conversion or replacement of, or in exchange for, a certificate, certificates, or a portion of a certificate or certificates 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 The Bank of New York, New York Paying Agent/Registrar By Authorized Representative FORM OF ASSIGNMENT: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto Please insert Social Security or Taxpayer Identification Number of Transferee (Please print or typewrite name and address, including zip code, of Transferee) GEORGTWN/CO2001: ORDIN.DR1 13 the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to register the transfer of the within Certificate on the books kept for registration thereof, 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. NOTICE: The signature above must correspond with the name of the Registered Owner as it appears upon the front of this Certificate in every particular, without alteration or enlargement or any change whatsoever. i' U,1 i COMPTROLLER'S REGISTRATION CERTIFICATE: REGISTER NO. I hereby certify that this Certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this Certificate has been registered by the Comptroller of Public Accounts of the State of Texas. Witness my signature and seal this I (COMPTROLLER'S SEAL) Comptroller of Public Accounts of the State of Texas S>1t, oN 6. INTEREST AND SINKING FUND. A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the City at an official depository bank of said City. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of said City, and shall be used only for paying the interest on and principal of said Certificates. All ad valorem taxes levied and collected for and on account of said Certificates shall be deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any of said Certificates are outstanding and unpaid, the governing body of said City shall compute and ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the money required to pay the interest on said Certificates as such interest comes due, and to provide and maintain a sinking fund adequate to pay the GEORGT"/CO2001: ORDIN.DRt 14 principal of said Certificates as such principal matures (but never less than 2% of the original amount of said Certificates as a sinking field each year); and said tax shall be based on the latest approved tax rolls of said City, with full allowances being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in said City, for each year while any of said Certificates are outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Certificates, as such interest comes due and such principal matures, are hereby pledged for such payment, within the limit prescribed by law. SEcnoN 7. REVENUES. The Certificates together with other obligations of the City, are additionally secured by and shall be payable from and secured by the surplus revenues of the City's utility system, as defined in Ordinance No. 98-34 (the "Utility System"), after payment of all operation and maintenance expenses or collections thereof, and all debt service, reserve, and other requirements in connection with all of the City's revenue bonds or other obligations (now or hereafter outstanding) which are payable from all or any part of the net revenues of the City's Utility System, with such amount not exceeding $10,400, constituting "Surplus Revenues" The City shall deposit such Surplus Revenues to the credit of the Interest and Sinking Fund created pursuant to Section 6, to the extent necessary to pay the principal and interest on the Certificates. Notwithstanding the requirements of Section 6, if Surplus Revenues are actually on deposit or budgeted for deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes which otherwise would have been required to be levied pursuant to Section 6 may be reduced to the extent and by the amount of the Surplus Revenues then on deposit in the Interest and Sinking Fund or budgeted for deposit therein. The Mayor and the Director of Finance are hereby ordered to do any and all things necessary to accomplish the transfer of monies to the Interest and Sinking Fund of this issue in ample time to pay such items of principal and interest. SEmoN 8. DEFEASANCE OF CERTIFICATES .(a) Any Certificate and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Certificate") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section 8, when payment of the principal of such Certificate, 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 Certificates shall have become due and payable or (3) any combination of (1) and (2). At such time as a Certificate shall be deemed to be a Defeased Certificate hereunder, as aforesaid, such Certificate and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits GEORGTWNICO2001: ORDIN.DRI 15 of, the ad valorem taxes herein levied and surplus 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 Certificate as aforesaid when proper notice of redemption of such Certificates shall have been given, in accordance with this Ordinance. Any money so deposited with a paying agent 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 Certificate 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 Certificate and premium, if any, and interest thereon, shall be applied to and used solely for the payment of the particular Certificates 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 Certificates and such Certificates 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 Certificate affected thereby. (e) Notwithstanding the provisions of subsection (a) above, to the extent that, upon the defeasance of any Defeased Certificate to be paid at its maturity, the City retains the right under Texas law to later call that Defeased Certificate for redemption in accordance with the provisions of this Ordinance, the City may call such Defeased Certificate 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 Certificate as though it was being defeased at the time of the exercise of the option to redeem the Defeased Certificate and the effect of the redemption is taken into account in determining the sufficiency of the provisions made for the payment of the Defeased Certificate. 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 Certificates 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 Certificates, are rated as to investment quality by a nationally recognized investment rating firm no less than "AAA" or its equivalent. "Federal Securities" as used herein means direct, noncallable obligations of GEORGTWN/COMOI: ORDIN.DRI 16 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). SE4moN 9. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED CERTIFICATES. (a) Replacement Certificates. In the event any outstanding Certificate is damaged, mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed and de- livered, a new certificate of the same principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or destroyed Certificate, in replacement for such Certificate in the manner hereinafter provided. (b) Application for Replacement Certificates. Application for replacement of damaged, mutilated, lost, stolen or destroyed Certificates shall be made by the Registered Owner thereof to the Paying Agent/Registrar. In every case of loss, theft or destruction of a Certificate, the Registered Owner applying for a replacement certificate shall furnish 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 Certificate, the Registered Owner shall fiunish to the City and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft or destruction of such Certificate, as the case may be. In every case of damage or mutilation of a Certificate, the Registered Owner shall surrender to the Paying Agent/Registrar for cancellation the Certificate so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Certificate 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 Certificate, the City may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Certificate) instead of issuing a replacement Certificate, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuingolacement Certificates. Prior to the issuance of any replacement certificate, the Paying Agent/Registrar shall charge the Registered Owner of such Certificate with all legal, printing, and other expenses in connection therewith. Every replacement certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is lost, stolen or destroyed shall constitute a contractual obligation of the City whether or not the lost, stolen or destroyed Certificate 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 Certificates duly issued under this Ordinance. (e) Authority for Issuing flacement Certificates. In accordance with Subchapter D of Chapter 1201, Texas Government Code, this Section 9 of this Ordinance shall constitute authority for the issuance of any such replacement certificate without necessity of fiuther action by the governing body of the City or any other body or person, and the duty of the replacement of such certificates is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Certificates in the form and manner and with the effect, as provided in Section 4(a) of this Ordinance for Certificates issued in conversion and exchange for other Certificates. GEORGCWN/CO2001: ORDIN.DRI 17 SECTION 10. CUSTODY, APPROVAL, AND REGISTRATION OF CERTIFICATES; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED. The Mayor of the City is hereby authorized to have control of the Certificates initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Certificates 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 Certificates 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 Certificates, 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 and the assigned CUSIP numbers may, at the option of the City, be printed on the Certificates issued and delivered under this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and information of the Registered Owners of the Certificates. In addition, if bond insurance is obtained, the Certificates may bear an appropriate legend as provided by the insurer. SECTION 11. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE CERTIFICATES. (a) Covenants. The City covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment of the Certificates 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 fin therance thereof, the City covenants as follows: (1) to take any action to assure that no more than 10 percent of the proceeds of the Certificates or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) ofthe 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 City, 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 ofthe debt service on the Certificates, 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 Certificates 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 ofthe proceeds ofthe Certificates (less amounts deposited into a reserve Rind, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (4) to refrain from taking any action which would otherwise result in the Certificates being treated as "private activity Certificates" within the meaning of section 141(b) of the Code; GEORGTWN/CO2001: ORDIN.DRI 18 (5) to refrain from taking any action that would result in the Certificates 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 Certificates, 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 Certificates, other than investment property acquired with — (A) proceeds of the Certificates 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 Certificates 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 Certificates; (7) to otherwise restrict the use of the proceeds of the Certificates or amounts treated as proceeds of the Certificates, as may be necessary, so that the Certificates 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 Certificates) an amount that is at least equal to 90 percent of the "Excess Earnings," within the meaning of section 148(f) of the Code and to pay to the United States of America, not later than 60 days after the Certificates 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 City 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. (c) Proceeds. The City understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding Certificates, transferred proceeds (if any) and proceeds of the refunded Certificates expended prior to the date of issuance of the Certificates. It is the understanding of the City 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 Certificates, the City 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 Certificates under section 103 of the Code. In the event that regulations or rulings are hereafter GEORGTWN/CO2001: ORDIN.DRI 19 promulgated which impose additional requirements which are applicable to the Certificates, the City 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 Certificates under section 103 of the Code. In furtherance of such intention, the City 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 City, which may be permitted by the Code as are consistent with the purpose for the issuance of the Certificates. (d) Allocation Of. and Limitation On, EApenditures for the Project. The City covenants to account for the expenditure of sale proceeds and investment earnings to be used for the purposes described in Section 1 of this Ordinance (the "Project") on its books and records in accordance with the requirements of the Internal Revenue Code. The City recognizes that in order for the proceeds to be considered used for the reimbursement of costs, the proceeds must be allocated to expenditures within 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 City 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 Certificates, or (2) the date the Certificates are retired The City 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 Certificates. For purposes hereof•; the City shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (e) Disposition of Project. The City covenants that the property constituting the Project will not be sold or otherwise disposed in a transaction resulting in the receipt by the City of cash or other compensation, unless the City obtains an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Certificates. 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 City shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (f) Designation as Qualified Tax -Exempt Certificates. The City hereby designates the Certificates as "qualified tax-exempt Certificates" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the City represents, covenants and warrants the following: (a) that during the calendar year in which the Certificates are issued, the City (including any subordinate entities) has not designated nor will designate Certificates, which when aggregated with the Certificates, will result in more than $10,000,000 Of "qualified tax-exempt Certificates" being issued; (b) that the City reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Certificates are issued, by the City (or any subordinate entities) will not exceed $10,000,000; and, (c) that the City will take such action or refrain from such action as necessary, and as more particularly set forth in this Section, in order that the Certificates will not be considered "private activity Certificates" within the meaning of section 141 of the Code. GF.ORGT MCO2001:ORDIN.DRI 20 SEcrtoN 12. SALE OF CERTIFICATES, The Certificates are hereby initially sold and shall be delivered to Legg Mason Wood Walker, Inc. (the "Underwriter") at the price and in accordance with the terms and provisions of a Purchase Contract in substantially the form presented to the Council, which the Mayor of the City is hereby authorized and directed to execute and deliver and the City Secretary is further authorized and directed to attest such agreement. It is hereby officially found, determined, and declared that the terms of this sale are the most advantageous reasonably obtainable. The Initial Certificates shall be registered in the name of Legg Mason Wood Walker, Inc. SEcnoN 13. REMEDIES IN EVENT OF DEFAULT. In addition to all of the rights and remedies provided by the laws of the State of Texas, the City covenants and agrees that in the event of default in payment of principal or interest on any of the Certificates when due, or, in the event it fails to make the payments required to be made into the Interest and Sinking Fund or defaults in the observance or performance of any other of the contracts, covenants, conditions or obligations set forth in this Ordinance or in the Certificates, the following remedies shall be available: (a) the Registered Owners shall be entitled to a writ of mandamus issued by a court of competent jurisdiction compelling and requiring the City and the officials thereof to observe and perform the contracts, covenants, obligations or conditions prescribed in this Ordinance; and (b) any delay or omission to exercise any right or power accruing upon any default shall not impair any such right or power nor 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. SE moN 14. INTEREST EARNINGS ON CERTIFICATE PROCEEDS. Interest earnings derived from the investment of proceeds from the sale of the Certificates shall be used along with other certificate proceeds for the purpose for which the Certificates are issued set forth in Section 1 hereof; provided that after completion of such purpose, if any of such interest earnings remain on hand, such interest earnings shall be deposited in the Interest and Sinking Fund. It is further provided, however, that any interest earnings on certificate proceeds which are required to be rebated to the United States of America pursuant to Section 11 hereof in order to prevent the Certificates from being arbitrage certificates shall be so rebated and not considered as interest earnings for the purposes of this Section. SEMON15. APPROVAL OFPAYINGAGENT/REGISTRARAGREEMENTI LETTER OF REPRESENTATIONS AND OFFICIAL STATEMENT. Attached hereto as Exhibit "A" is a substantially final form of Paying Agent/Registrar Agreement with an attached Blanket Letter of Representations. Each the Mayor, the City Manager and the Director of Finance are hereby authorized to amend, complete or modify such agreement as necessary and are further authorized to execute such agreement and the City Secretary is hereby authorized to attest such agreement. The City hereby approves the form and content of the Official Statement relating to the Certificates and any addenda, supplement or amendment thereto, and approves the distribution of such Official Statement in the reoffering of the Certificates by the Underwriters in final form, with such changes therein or additions thereto as the officer executing the same may deem advisable, such determination to be GEORGMVCO2001: ORDIN.DRI 21 conclusively evidenced by his execution thereof. The distribution and use of the Preliminary Official Statement dated March 27, 2001, 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. SEMON 16. 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 City of the general type included in the final Official Statement authorized by Section 15 of this Ordinance, being the information described in Exhibit'B" hereto. Any financial statements to be so provided shall be (1) prepared in accordance with the accounting principles described in Exhibit 'B' hereto, or such other accounting principles as the City maybe 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 unaudited financial statements within such period, and 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 Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. (b) Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws. A. Principal and interest payment delinquencies; B. Non-payment related defaults; 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 Certificates; G. Modifications to rights of holders of the Certificates; OEORGTWN/CO200I: ORDIN.DRI 22 H. Certificate calls; I. Defeasances; J. Release, substitution, or sale of property securing repayment of the Certificates; K. Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 16(a) of this Ordinance by the time required by such Section. (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 Certificates within the meaning of the Rule, except that the City in any event will give notice of any deposit made in accordance with Section 8 that causes the Certificates no longer to be outstanding. The provisions of this Section are for the sole benefit of the holders and beneficial owners of the Certificates, and nothing in this Section, express ©r implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or herebyundertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any firture date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY Certificate OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WI'T'HOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Section shall 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, GEORGMN/CO2001: ORDIN.DRt 23 nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule 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 Certificates consents 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 Certificates. 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 Section 16(a) an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. The 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 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 Certificates in the primary offering of the Certificates. (d) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: WSRB" means the Municipal Securities Rulemaking Board "AWMSIR" means each person whom the SEC or its staffhas determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time, "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. SEcnoN 17. INSURANCE PROVISIONS. In the event that insurance is purchased for the Certificates prior to final passage of this Ordinance, bond counsel to the City may revise this Ordinance to include the necessary provisions for such insurance, SEMON 18. NO RECOURSE AGAINST CITY OFFICIALS. No recourse shall be had for the payment of principal of or interest on any Certificates or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificates. SEcnoN 19. 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 GGORGCWN/CO2001: ORDIN.DRI 24 to carry out the terms and provisions of this Ordinance, the Certificates, the initial sale and delivery of the Certificates, 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 Certificates, 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 Certificates by the Texas Attorney Generars office. In case any officer of the City whose signature shall appear on any Certificate shall cease to be such officer before the delivery of such Certificate, 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 20. APPROPRIATIONS. The City hereby appropriates from lawfully available funds the monies necessary to make the principal and interest payments on the Certificates on August 15, 2001, SEcnoN 21. INTERPRETATIONS. All terns 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 ofthe Certificates and the validity of the lien on and pledge of the Pledged Revenues to secure the payment of the Certificates. SECTION 22. INCONSISTENT PROVISIONS. All ordinances, orders or resolutions, orparts 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. SEcnoN 23. 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 Certificates, 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 Certificates. SECTION 24. 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 25, 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 GF.ORGT"/CO2I01: ORDIN.DRI 25 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 26. REPEALER. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. SECTION 27. EFFECTIVE DATE. This Ordinance shall become effective upon the final passage of this Ordinance, and no petition was received from the qualified electors of the City protesting the issuance of such Certificates. GFORGTW WCO200I: ORDIN.DRI 26 PASSED AND APPROVED on First Reading on the 10th day of April, 2001. PASSED AND APPROVED on Second Reading on the 24th day of April, 2001. THE CITY OF GEORGETOWN. riy: Maryhuen Kerscih, Mayor City of Georgetown, Texas Rv le Sandra Lee City Secretary Marianne Landers Banks City Attorney GFORGTWNICO2001: ORDIN.DRI 27 1 WX 11: IMM THIS AGREEMENT entered into as of April 15,2001 (this "Agreement"), by and between the City of Georgetown, Texas (the "Issuer"), and The Bank of New York, New York, a banking corporation duly organized and existing under the laws of the State of New York (the 'Bank"). V WHEREAS, the Issuer has duly authorized and provided for the issuance of its Combination Tax and Utility System Limited Revenue Certificates of Obligations, Series 2001 in the aggregate principal amount of $5,470,000 (the "Securities"), such Securities to be issued in fully registered form only as to the payment of principal and interest thereon; and WHEREAS, the Securities are scheduled to be delivered to the initial purchasers thereof on or about May 22, 2001: and WHEREAS, the Issuer has selected the Bank to serve as Paying Agent/Registrar in connection with the payment of the principal of, premium, if any, and interest on said Securities and with respect to the registration, transfer and exchange thereof by the registered owners thereof; and WHEREAS, the Bank has agreed to serve in such capacities for and on behalf of the Issuer and has full power and authority to perform and serve as Paying Agent/Registrar for the Securities; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer hereby appoints the Bank to serve as Paying Agent with respect to the Securities. As Paying Agent for the Securities, the Bank shall be responsible for paying on behalf of the Issuer the principal, premium (if any), and interest on the Securities as the same become due and payable to the registered owners thereof, all in accordance with this Agreement and the "Ordinance" (hereinafter defined). The Issuer hereby appoints the Bank as Registrar with respect to the Securities. As Registrar for the Securities, the Bank shall keep and maintain for and on behalf of the Issuer books and records as to the ownership of said Securities and with respect to the transfer and exchange thereof as provided herein and in the "Ordinance." The Bank hereby accepts its appointment, and agrees to serve as the Paying Agent and Registrar for the Securities. GLORG7WN/CO2001: PAYING.AGR Section 1.02. Compensation. As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby agrees to pay the Bank the fees and amounts set forth in Schedule A attached hereto for the first year of this Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then in effect for services as Paying Agent/Registrar for municipalities, which shall be supplied to the Issuer on or before 90 days prior to the close of the Fiscal Year of the Issuer, and shall be effective upon the first day of the following Fiscal Year. In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bank in accordance with any of the provisions hereof (including the reasonable compensation and the expenses and disbursements of its agents and counsel). ARTICLE TWO DEFINITIONS Section 2.01. Definitions . For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Acceleration Date" on any Security means the date on and after which the principal or any or all installments of interest, or both, are due and payable on any Security which has become accelerated pursuant to the terms of the Security. Office" 1 designated office of • • on a page her.• office •- . - i 1 Jacksonville,• • . Bank • Rwriting of any change in location of Bank Office, "Fiscal Year" means the fiscal year of the Issuer, ending September 30. "Holder" and "Security Holder" each means the Person in whose name a Security is registered in the Security Register. "Issuer Request" and "Issuer Order" means a written request or order signed in the name of the Issuer by the Mayor of the Issuer, any one or more of said officials, delivered to the Bank. "Legal Holiday" means a day on which the Bank is required or authorized to be closed. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government. GEORGTWNICO2001: PAYING.AGR A-2 "Predecessor Securities" of any particular Security means every previous Security evidencing all or a portion of the same obligation as that evidenced by suchparticular Security (and, for the purposes of this definition, any mutilated, lost, destroyed, or stolen Security for which a replacement Security has been registered and delivered in lieu thereof pursuant to Section 4.46 hereof and the Ordinance). "Redemption Date" when used with respect to any Bond to be redeemed means the date fixed for such redemption pursuant to the terms of the Ordinance. "Ordinance" means the order, ordinance or resolution of the governing body of the Issuer pursuant to which the Securities are issued, certified by the City Secretary of the Issuer or any other officer of the Issuer and delivered to the Bank. "Responsible Officer" when used with respect to the Bank means the Chairman or Vice -Chairman of the Board of Directors, the Chairman or Vice-chairman of the Executive Committee of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of the Bank customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Security Register" means a register maintained by the Bank on behalf of the Issuer providing for the registration and transfer of the Securities. "Stated Maturity" means the date specified in the Ordinance the principal of a Security is scheduled to be due and payable. Section 2.42. Other Definitions . The terms 'Bank," Issuer," and Securities (Security)" have the meanings assigned to them in the recital paragraphs of this Agreement. The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties and functions of this Agreement. ARTICLE THREE PAYING AGENT Section 3.41. Duties of Paying Agent, As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf ofthe Issuer, pay on behalf of the Issuer the principal of each Security at its Stated Maturity, Redemption Date, or Acceleration Date, to the Holder upon surrender of the Security to the Bank at the Bank Office. GE0RGTWN/C0W01: PAYING.AGR A-3 As Paying Agent, the Bank shall, provided adequate collected funds have been provided to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the interest on each Security when due, by computing the amount of interest to be paid each Holder and preparing and sending checks by United States Mail, first class postage prepaid, on each payment date, to the Holders of the Securities (or their Predecessor Securities) on the respective Record Date, to the address appearing on the Security Register or by such other method, acceptable to the Bank, requested in writing by the Holder at the Holder's risk and expense. Section 3.02. Payment Dates. The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities on the dates specified in the Ordinance. ARTICLE FOUR REGISTRAR Section 4.01. Security Register - Transfers and Exchanges. The Bank agrees to keep and maintain for and on behalf of the Issuer at the Bank Office books and records (herein sometimes referred to as the "Security Register") for recording the names and addresses of the Holders of the Securities, the transfer, exchange and replacement of the Securities and the payment of the principal of and interest on the Securities to the Holders and containing such other information as may be reasonably required by the Issuer and subject to such reasonable regulations as the Issuer and the Bank may prescribe. All transfers, exchanges and replacement of Securities shall be noted in the Security Register. Every Security surrendered for transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer, the signature on which has been guaranteed by an officer of a federal or state bank or a member of the National Association of Securities Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof or his agent duly authorized in writing. The Bank may request any supporting documentation it feels necessary to effect a re -registration, transfer or exchange of the Securities. To the extent possible and under reasonable circumstances, the Bank agrees that, in relation to an exchange or transfer of Securities, the exchange or transfer by the Holders thereof will be completed and new Securities delivered to the Holder or the assignee of the Holder in not more than three (3) business days after the receipt of the Securities to be canceled in an exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Holder, or his duly authorized agent, in form and manner satisfactory to the Paying Agent/Registrar. Section 4.02. Certificates. The Issuer shall provide an adequate inventory of printed Securities to facilitate transfers or exchanges thereof. The Bank covenants that the inventory of printed Securities will be kept in safekeeping GEGRMM/CO2001: BAYINGAGR A4 pending their use, and reasonable care will be exercised by the Bank in maintaining such Securities in safekeeping, which shall be not less than the care maintained by the Bank for debt securities of other political subdivisions or corporations for which it serves as registrar, or that is maintained for its own securities. Section 4.03. Form of Security Register. The Bank, as Registrar, will maintain the Security Register relating to the registration, payment, transfer and exchange of the Securities in accordance with the Bank's general practices and procedures in effect from time to time. The Bank shall not be obligated to maintain such Security Register in any form other than those which the Bank has currently available and currently utilizes at the time. The Security Register may be maintained in written form or in any other form capable of being converted into written form within a reasonable time. Section 4.04. List of Security Holders . The Bank will provide the Issuer at any time requested by the Issuer, upon payment of the required fee, a copy of the information contained in the Security Register. The Issuer may also inspect the information contained in the Security Register at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the contents of the Security Register to any person other than to, or at the written request of; an authorized officer or employee of the Issuer, except upon receipt of a court order or as otherwise required by law. Upon receipt of a court order and prior to the release or disclosure of the contents of the Security Register, the Bank will notify the Issuer so that the Issuer may contest the court order or such release or disclosure of the contents of the Security Register. Section 4.05. Return of Canceled Certificates. The Bank will, at such reasonable intervals as it determines, surrender to the Issuer, Securities in lieu of which or in exchange for which other Securities have been issued, or which have been paid Section 4.06. Mutilated, Destroyed Lost or Stolen Securities. The Issuer hereby instructs the Bank, subject to the applicable provisions of the Ordinance, to deliver and issue Securities in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities as long as the same does not result in an overissuance. In case any Security shall be mutilated, or destroyed, lost or stolen, the Bank, in its discretion, may execute and deliver a replacement Security of like form and tenor, and in the same denomination and bearing a number not contemporaneously outstanding, in exchange and substitution for such mutilated Security; or in lieu of and in substitution for such destroyed lost or stolen Security, only after (i) the filing by the Holder thereof with the Bank of evidence satisfactory to the Bank of the destruction, loss or theft of such Security, and of the authenticity of the ownership thereof and (ii) the firmishing to the Bank of GE.ORGTWN/CO2001: PAYWG.AGR A -S indemnification in an amount satisfactory to hold the Issuer and the Bank harmless. All expenses and charges associated with such indemnity and with the preparation, execution and delivery of a replacement Security shall be borne by the Holder of the Security mutilated, or destroyed, lost or stolen.. Section 4.07. Transaction Information to Issuer. The Bank will, within a reasonable time after receipt of written request from the Issuer, furnish the Issuer information as to the Securities it has paid pursuant to Section 3.0 1, Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section 4.01, and Securities it has delivered in exchange for or in lieu of mutilated, destroyed, lost, or stolen Securities pursuant to Section 4.06. ARTICLE FIVE THE BANK Section 5.01. Duties of Bank. The Bank undertakes to perform the duties set forth herein and agrees to use reasonable care in the performance thereof. Section 5.02. Reliance on Documents Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank. (b) The Bank shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the pertinent facts. (c) No provisions of this Agreement shall require the Bank to expend or risk its own funds or otherwise incur any financial liability for performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is not assured to it. (d) The Bank may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Without limiting the generality of the foregoing statement, the Bank need not examine the ownership of any Securities, but is protected in acting upon receipt of Securities containing an endorsement or instruction of transfer or power of transfer which appears on its face to be signed by the Holder or an agent of the Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note, security or other paper or document supplied by Issuer. (e) The Bank may consult with counsel, and the written advice of such counsel or any opinion of counsel shall be full and complete authorization and protection with respect to any action taken, suffered, or omitted by it hereunder in good faith and in reliance thereon. GEORGTWN/CO2001: PAYING.AGR A-6 (f) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys of the Bank. (g) The Bank shall maintain a copy of the Bond Register within the State of Texas. Section 5.03. Recitals of Issuer. The recitals contained herein with respect to the Issuer and in the Securities shall be taken as the statements of the Issuer, and the Bank assumes no responsibility for their correctness. The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security, or any other Person for any amount due on any Security from its own funds. Section 5.0.4. May Hold Securities. The Bank, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Issuer with the same rights it would have if it were not the Paying Agent/Registrar, or any other agent. Section 5.05. Moneys Held by Bank. The Bank shall deposit any moneys received from the Issuer into a trust account to be held in a fiduciary capacity for the payment of the Securities, with such moneys in the account that exceed the deposit insurance available to the Issuer by the Federal Deposit Insurance Corporation, to be fully collater- alized with securities or obligations that are eligible under the laws of the State of Texas and the laws of the United States of America to secure and be pledged as collateral for trust accounts until the principal and interest on such securities have been presented for payment and paid to the owner thereof. Payments made from such trust account shall be made by check drawn on such trust account unless the owner of such Securities shall, at its own expense and risk, request such other medium of payment. Subject to the Unclaimed Property Law of the State of Texas, any money deposited with the Bank for the payment of the principal, premium (if any), or interest on any Security and remaining unclaimed for three years after the final maturity of the Security has become due and payable will be paid by the Bank to the Issuer if the Issuer so elects, and the Holder of such Security shall hereafter look only to the Issuer for payment thereof? and all liability of the Bank with respect to such monies shall thereupon cease. If the Issuer does not elect, the Bank is directed to report and dispose of the funds in compliance with Title Six of the Texas Property Code, as amended. Section 5.06. Indemnification To the extent permitted by law, the Issuer agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. GBORGT"/CO2001: PAYING.AGR A-7 Section 5.07. Interpleader. The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the State and County where either the Bank Office or the administrative offices of the Issuer is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to in Section 6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree that the Bank has the right to file a Bill of interpleader in any court of competent jurisdiction to determine the rights of any Person claiming any interest herein. Section 5.08. Depository Trust Company Services. It is hereby represented and warranted that, in the event the Securities are otherwise qualified and accepted for 'Depository Trust Company" services or equivalent depository trust services by other organizations, the Bank has the capability and, to the extent within its control, will comply with the "Operational Arrangements," effective August 1, 1987, which establishes requirements for securities to be eligible for such type depository trust services, including, but not limited to, requirements for the timeliness of payments and funds availability, transfer turnaround time, and notification of redemptions and calls. Attached hereto is a copy of the Blanket Letter of Representations with The Depository Trust Company, hereto. ARTICLE SIX MISCELLANEOUS PROVISIONS Section 6.01. Amendment. Section 6.02. Assignment, This Agreement may not be assigned by either party without the prior written consent of the other. Section 6.03. Notices. Any request, demand, authorization, direction, notice, consent, waiver, or other documentprovided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of this Agreement. GEORGTWN/CO200t: PAYINGAGR A-8 Section 6.04. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 6.05. Successors and Assigns. All covenants and agreements herein by the Issuer shall bind its successors and assigns, whether so expressed or not. Section 6.06. SeverabilitX. In case any provision herein shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 6.07. Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim hereunder. Section 6.08. Entire Agreement, This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent/Registrar and if any conflict exists between this Agreement and the Ordinance, the Ordinance shall govern. Section 6.09. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement Section 6.10. Termination. This Agreement will terminate (i) on the date of final payment of the principal of and interest on the Securities to the Holders thereof or (ii) may be earlier terminated by either party upon thirty (30) days written notice; provided, however, an early termination of this Agreement by either party shall not be effective until (a) a successor Paying Agent/Registrar has been appointed by the Issuer and such ap- pointment accepted and (b) notice has been given to the Holders of the Securities of the appointment of a successor Paying Agent/Registrar. Furthermore, the Bank and Issuer mutually agree that the effective date of an early termination of this Agreement shall not occur at any time which would disrupt, delay or otherwise adversely affect the payment of the Securities. GEORGTWN/CO2001: PAYING.AGR A-9 Upon an early termination of this Agreement, the Bank agrees to promptly transfer and deliver the Security Register (or a copy thereof j, together with other pertinent books and records relating to the Securities, to the successor Paying Agent/Registrar designated and appointed by the Issuer. The provisions of Section 1.02 and of Article Five shall survive and remain in full force and effect following the termination of this Agreement Section 6.11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas. G&ORGTWN/CO200I: PAYING.AGR A40 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. M Title 10161 Centurion Parkway, 3rd Floor Tower Marc Plaza Jacksonville, Florida 32256 Attest: Title GEORGTWNICO2001: PAYING.AGR A-11 CITY OF GEORGETOWN, TEXAS m [ISSUER SEAL] City Secretary 113 East 8th Street, Georgetown, Texas 78626 GEORGTWN/CO2001: PAYING.AGR A-12 SCHEDULE A Paying Agent/Registrar Fee Schedule Acceptance Fee $ Annual Administration Fee $ GEORGTWN/CO2001: PAYING.AGR EXHIBIT "B" The following information is referred to in Section 16 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 areas specified (and included in the Appendix or under the headings of the Official Statement referred to) below: (1) Table 1 - Valuation, Exemptions and General Obligation Debt; (2) Table 2 - Taxable Assessed Valuations by Category; (3) Table 3 - Valuation and General Obligation Debt History; (4) Table 4 - Tax Rate Levy and Collection History; (5) Table 5 - Ten Largest Taxpayers; (6) Table 8 - General Obligation Debt Service Requirements; (7) Table 10 - General Fund Revenues and Expenditure History; (8) Table 11 - Municipal Sales Tax History; (9) "Investments - Current Investments;" and (10) Appendix B 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. GEORGTWN/CO2001: PAYING.AGR U U � of •� N o � o a N R y � c R c o o {moi o N w c ow,w c• v c y N .a N o y T � � o ❑ N � o c c U U U L H � o O V V i••.r •csE� E 0 0 rZ a; '` 3 U s �a ca Nyy U. N U p r � c p U O y c � o w ca G a " � 3 a •� o a] a) O ^ >1 Q ei .CC � B •o C U y Gtr y N � r � � W H <7 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 Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. THE CERTIFICATES ARE EXPECTED TO BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS Dated Date: April 15, 2001 $5,470,000 CITY OF GEORGETOWN, TEXAS (Williamson County) COMBINATION TAX AND UTILITY SYSTEM LIMITED REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 Due: August 15, as shown on inside front cover PAYMENT TERMS ... Interest on the $5,470,000 City of Georgetown, Texas, Combination Tax and Utility System Limited Revenue Certificates of Obligation, Series 2001 (the "Certificates") 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 Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "THE CERTIFICATES - BOOK -ENTRY -ONLY SYSTEM" herein. The initial Paying Agent/Registrar is The Bank of New York, New York, New York (see "THE CERTIFICATES - PAYING AGENT/REGISTRAR"). AUTHORITY FOR ISSUANCE ... The Certificates are issued pursuant to the Constitution and general laws of the State of Texas (the "State"), particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended (the "Certificate of Obligation Act of 1971"), and Chapter 1502, Texas Government Code, as amended. The Certificates constitute direct obligations of the City of Georgetown, Texas (the "City"), payable from a combination of (i) the levy and collection of a continuing, direct annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge of surplus net revenues of the City's combined water, sewer and electric systems (the "Utility System"), not to exceed $10,000 as provided in the ordinance authorizing the issuance of the Certificates (the "Ordinance") (see "THE CERTIFICATES - AUTHORITY FOR ISSUANCE" and "THE CERTIFICATES - SECURITY AND SOURCE OF PAYMENT"). PURPOSE ... Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations incurred or to be incurred by the City for (i) construction, acquisition, renovation and equipment of city facilities including animal shelter, city offices and city hall, (ii) acquisition, construction and equipment of City parks and park improvements, and (iii) professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates. See "THE CERTIFICATES - USE OF PROCEEDS." INSURANCE ... The City has applied to several insurance companies and will consider the purchase of insurance after an analysis of bids has been made. MATURITY SCHEDULE See Inside Front Cover LEGALITY ... The Certificates 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 the State of Texas and the opinion of McCall, Parkhurst & Horton L.L.P., Austin, Texas, Bond Counsel (see APPENDIX C - "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. DELIVERY... It is expected that the Certificates will be available for delivery through DTC on May 22, 2001. MAW INNOIL42112 Amount $ 325,000 150,000 160,000 170,000 180,000 185,000 195,000 205,000 215,000 230,000 240,000 255,000 265,000 280,000 295,000 310,000 325,000 345,000 360,000 380,000 400,000 MATURITY SCHEDULE* Maturity 8/15 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Rate Yield CUSIP Numbers(' (Accrued Interest from April 15, 2001 to be added) *Preliminary, subject to change. (1) The CUSIP numbers have been assigned to the Certificates by an organization not affiliated with the City and are included solely for the convenience of the owners of the Certificates. Neither the City nor the Underwriter shall be responsible for the selection or use of these CUSIP numbers, nor is any representation made as to the correctness of such numbers on the Certificates. REDEMPTION . . . The Certificates are subject to mandatory and optional redemption as described herein (see "THE CERTIFICATES - REDEMPTION"). (THE REMAINDER OF THIS PAGE INTENTIONALLYLEFT BLANK) F For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document may be treated as an Official Statement of the City with respect to the Certificates described herein 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, salesperson or other person has been authorized by the City or the Underwriter to give information or to make any representation 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. White the Underwriter has performed a review sujftcient to forma reasonable basis for its belief in the accuracy and completeness of the key representations of the City contained in this Preliminary Oficial Statemen4 the Underwriter does not guarantee the accuracy or completeness of the Preliminary Official Statement. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Preliminary Official 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 THE CERTIFICATES, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE CERTIFICATES AT A 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 Companyfor use in this Preliminary Official Statement. TABLE OF CONTENTS CITY OFFICIALS, STAFF AND CONSULTANTS ............4 FINANCIAL INFORMATION...........................................22 TABLE 10 - GENERAL FUND REVENUES AND PRELIMINARY OFFICIAL STATEMENT SUMMARY ...... 5 EXPENDITURE HISTORY....................................22 TABLE 11 - MUNICIPAL SALESTAXHISTORY ..........23 INTRODUCTION................................................................7 THE CERTIFICATES...........................................................7 TAXINFORMATION........................................................14 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT............................................16 T ABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY.......................................................17 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBTHISTORY..................................................18 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY...........................................................18 TABLE 5 - TEN LARGEST TAXPAYERS .....................18 TABLE6 - TAXADEQUACY.....................................19 T ABLE 7 - ESTIMATED OVERLAPPING DEBT.............19 DEBT INFORMATION......................................................20 TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS...................................20 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION.....................................................21 3 UTILITY SYSTEM..............................................................24 RECENT CHANGES IN REGULATORY ENVIRONMENT OFTHE SYSTEM.....................................................25 SUN CITY GEORGETOWN.............................................28 INVESTMENTS..................................................................28 TAXMATTERS...................................................................31 CONTINUING DISCLOSURE OF INFORMATION ...... 33 OTHER INFORMATION..................................................35 APPENDICES GENERAL INFORMATION REGARDING THE CITY ............. A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT........ B FORM OF BOND COUNSEL 7S OPINION ............................. C The cover and inside of cover pages 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 CitvCouncil 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 I Year May, 2003 Self -Employed Councilmember District 5 Charles "Hoss" Burson 5 Years May, 2002 Retired Civil Service Councilmember District 6 Ferd Tonn 11 Years May, 2001 Cabinet Maker Councilmember District 7 SELECTED ADMINISTRATIVE STAFF Name George Russell Micki Rundell TWO CONSULTANTS AND ADVISORS Length of Position Service City Manager 3 '/2 Years Director of Finance and Administration 8 Years City Attorney 10 Years City Secretary 7 Years Auditors.......................................................................................................................................................Davis, Kinard & Co., P.C. Abilene, Texas BondCounsel............................................................................................................................... McCall, Parkhurst & Horton L.L.P. Austin, Texas FinancialAdvisor........................................................................................................................................ First Southwest Company Austin, Texas 0 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 Certificates to potential investors is made only by means of this entire Preliminary Official Statement. No person is authorized to detach this summary from this Preliminary Official Statement or to otherwise use it without the entire Preliminary Official Statement. THE CITY ...................................... The City of 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 (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 CERTIFICATES ...................... The Certificates are issued as $5,470,000 Combination Tax and Utility System Limited Revenue Certificates of Obligation, Series 2001. The Certificates are issued as serial Certificates maturing August 15, 2001 through August 15, 2021 and Term Certificates maturing on August 15, 20_ (see "THE CERTIFICATES - DESCRIPTION OF THE CERTIFICATES'). PAYMENT OF INTEREST ................ Interest on the Certificates Will accrue from April 15, 2001, and is payable August 15, 2001, and each February 15 and August 15 thereafter until maturity or prior redemption (see "THE CERTIFICATES - DESCRIPTION of THE CERTIFICATES" and "THE CERTIFICATES - REDEMPTION"). AUTHORITY FOR ISSUANCE........... The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended (the "Certificate of Obligation Act of 1971"), as amended, Chapter 1502, Texas Government Code, as amended, and the Ordinance (the "Ordinance") passed by the City Council of the City authorizing the issuance of the Certificates (see "THE CERTIFICATES - AUTHORITY FOR ISSUANCE"). SECURITY FOR THE CERTIFICATES ............................ The Certificates constitute direct obligations of the City, payable from a combination of the levy and collection of a continuing direct annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City and a limited pledge of surplus net revenues of the City's Utility System not to exceed $10,000, as provided in the Ordinance (see "THE CERTIFICATES -SECURITY AND SOURCE OF PAYMENT"). REDEMPTION ................................. The City reserves the right, at its option, to redeem Certificates 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. Additionally, the Certificates maturing on August 15, are subject to mandatory sinking fund redemption, as described herein (see "THE CERTIFICATES - REDEMPTION"). TAX EXEMPTION .......I ................... In the opinion of Bond Counsel, the interest on the Certificates will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under the caption "TAX MATTERS" herein, including the alternative minimum tax on corporations. USE OF PROCEEDS ............ I .......... .. Proceeds from the sale of the Certificates will be used for purpose of paying contractual obligations incurred or to be incurred by the City for: (i) construction, acquisition, renovation and equipment of city facilities including animal shelter, city offices and city hall, (ii) acquisition, construction and equipment of City parks and park improvements, and (iii) 5 professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates. See "THE CERTIFICATES - USE of PROCEEDS" QUALIFIED TAX-EXEMPT OBLIGATIONS ............................. The City expects to designate the Certificates as "Qualified Tax -Exempt Obligations" for financial institutions (see "TAX MATTERS - Qualified Tax -Exempt Obligations for Financial Institutions"). RATINGS ...................................... The presently outstanding general obligation debt of the City is rated "A2" by Moody's Investors Service ("Moody's"), "A" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill 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, "AAA" by S&P and "AAA" by Fitch through insurance by various commercial insurance companies. Applications for ratings on the Certificates have been made to Moody's and S&P (see "OTHER INFORMATION - RATINGS"). Booz B4TRY ONLY SYSTEM....... Thedefinitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof No physical delivery of the Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates (see "THE CERTIFICATES - BOOK -ENTRY -ONLY SYSTEM"). PAYMENT RECORD ........................ The City has never defaulted on payment of its debt. SELECTED FINANCIAL INFORMATION Ratio Fiscal Per Capita Per Capita Funded Year Estimated Taxable Taxable Funded Funded Debt to Taxable % of Ended City Assessed Assessed Tax Debt Tax Assessed Total Tax 9-30 Population(') Valuation Valuation Debt (2) Debt Valuation Collections 1996 20,300 $ 538,947,506 $ 26,549 $ 6,8052000 $ 335 1.26% 99.87% 1997 24,000 633,469,050 262395 11,330,000 472 1.79% 100.22% 1998 25,500 984,1233199 383593 151810,000 620 1.61% 100.471/6 1999 26,400 1,1991831,232 45,448 21,545,000 816 1.80% 99.95% 2000 283600 1,410,0721042 49,303 22,0051000 769 1.56% 96.58% 2001 30,000 116495654,295 54,988 26,105,000 t3) 870 t3) 1.58% t3) 97.700/. (4) (1) Estimates provided by the City. (2) Includes self-supporting debt paid from non -property tax sources. (3) Projected, includes the Certificates. (4) As of February 28, 2001. For additional information regarding the City, please contact: Micki Rundell Garry Kimball Director of Finance and Administration First Southwest Company City of Georgetown, Texas 98 San Jacinto Blvd. 609 Main Street or Suite 370 Georgetown, Texas 78627 Austin, Texas 78701 (512) 930-3676 (512) 481-2000 (512) 930-3681 Fax (512) 481-2010 Fax 0 PRELIMINARY OFFICIAL STATEMENT RELATING TO $5,470,000 CITY OF GEORGETOWN, TEXAS COMBINATION TAX AND UTILITY SYSTEM LIMITED REVENUE CERTIFICATES OF OBLIGATION, SERIES 2001 INTRODUCTION This Preliminary Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $51470,000 City of Georgetown, Texas Combination Tax and Utility System Limited Revenue Certificates of Obligation, Series 2001 (the "Certificates"). Capitalized terms used in this Preliminary Official Statement have the same meanings assigned to such terms in the Ordinance adopted on the date of sale of the Certificates (the "Ordinance") which will authorize the issuance of the Certificates, except as otherwise indicated herein. There follows in this Preliminary Official Statement descriptions of the Certificates and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained 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 CITY ... 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 (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." THE CERTIFICATES DESCRIPTION OF THE CERTIFICATES ... The Certificates 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 consisting of twelve 30 -day months, and will be payable on August 15 and February 15, commencing August 15, 2001. The definitive Certificates will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC"), pursuant to the Book - Entry -Only System described herein. No physical delivery of the Certificates will he made to the owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. USE OF PROCEEDS ... The proceeds from the sale of the Certificates, not including accrued interest, are currently estimated to be applied as follows: Deposit to Project Fund Underwriter's Discount Costs of Issuance & Contingency(t) Total Uses of Funds (1) Includes insurance premium. AUTHORITY FOR ISSUANCE ... The Certificates are being issued pursuant to the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended (the "Certificate of Obligation Act of 1971 "), Chapter 1502, Texas Government Code, as amended, and the Ordinance. 7 K SECURITY AND SOURCE OF PAYMENT... All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all obligations payable in whole or in part from such ad valorem tax (including the Certificates), which tax must be levied within limits prescribed by law. Additionally, the Certificates are payable from and secured by a limited pledge of surplus net revenues of the City's Utility System not to exceed $10,000, as provided in the Ordinance. TAx RATE LIMITATION ... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt of the City within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for general obligation debt service. The City's 2000 tax rate is $0.3141, of which $0.1156 is for debt service purposes. REDEMPTION: OPHONALREDEnpTroN... The City reserves the right, at its option, to redeem Certificates 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 Certificates are to be redeemed, the City may select the maturities of Certificates to be redeemed. If Iess than all the Certificates of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Certificates are in Book -Entry -Only form) shall determine by lot the Certificates, or portions thereof, within such maturity to be redeemed. If a Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Certificate (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. MANDATORYSINmNG FUND REDEMPTION ... The Certificates maturing August 15, 20_ ("Term Certificates") 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 Certificates due August 15, 20 Redemption Date Amount *Final Maturity r� On or prior to each August 15 in each of the years specified above that the Term Certificates are to be mandatorily redeemed, the Paying Agent/Registrar shall select by lot the numbers of the Term Certificates 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 Certificates not selected for prior redemption shall be paid on the date of their Stated Maturity. The principal amount of the Term Certificates 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 Certificates 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 Certificates 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 Certificates plus accrued interest to the date of purchase thereof. NOTICE OF REDEMMON ... Not less than 30 days prior to a redemption date for the Certificates, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Certificates to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying 0 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 CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. DEFEASANCE ... Any Certificate and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Certificate") within the meaning of the Ordinance except to the extent provided below, when payment of the principal of such Certificate, 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 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 Certificates shall have become due and payable. At such time as a Certificate shall be deemed to be a Defeased Certificate, as aforesaid, such Certificate and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the taxes 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 Certificates 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 Certificates for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Certificates 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 Certificates 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 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 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 Certificates 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 Certificates have been made as described above, all rights of the City to initiate proceedings to call the Certificates for redemption or take any other action amending the terms of the Certificates are extinguished; provided, however, that the right to call the Certificates 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 Certificates for redemption; (ii) gives notice of the reservation of that right to the owners of the Certificates 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. AMENDMENTS... In the Ordinance, the City has reserved the right to amend the Ordinance without consent of any holder for the purpose of amending or supplementing the Ordinance to (i) cure any ambiguity, defect or omission in the Ordinance that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of the Ordinance that do not materially adversely affect the interests of the holders, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions of the Ordinance and which, in the opinion of Bond Counsel for the City, do not materially adversely affect the interests of the holders. 0 The Ordinance further provides that the holders of Certificates aggregating in principal amount 51% of the principal amount outstanding shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary to desirable by the City; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Certificates, no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment of the Ordinance. Booic ENTRY -ONLY SYSTEM ... This section describes how ownership of the Certificates is to be transferred and how the principal of, premium, if any, and interest on the Certificates are to be paid to and credited by DTC while the Certificates 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 Certificates, 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 Certificates), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Certificates. The Certificates will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully -registered Certificate will be issued for each maturity of the Certificates 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 `blearing 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 1434. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities Certificates. 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 Certificates 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 Certificate (`Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Certificates are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Certificates representing their ownership interests in the Certificates, except in the event that use of the book -entry system described herein is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Certificates 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 Certificates; DTC's records 10 reflect only the identity of the Direct Participants to whose accounts such Certificates 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 Certificates 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 Certificates. 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 Certificates are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates 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 Certificates at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Certificates 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 Certificates 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 Certificates, 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. 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. EFFECT OF TERMINATION OF BOOK"ENTRY-ONLY SYSTEM. In the event that the Book -Entry -Only System is discontinued by DTC or the use of the Book -Entry -Only System is discontinued by the City, the following provisions will be applicable to the Certificates. The Certificates may be exchanged for an equal aggregate principal amount of the Certificates in authorized denominations and of the same maturity upon surrender thereof at the principal office for payment of the Paying Agent/Registrar. The transfer of any Certificate may be registered on the books maintained by the Paying Agent/Registrar for such purpose only upon the surrender of such Certificate to the Paying Agent/Registrar with a duly executed assignment in form satisfactory to the Paying Agent/Registrar. For every exchange or transfer of registration of Certificates, the Paying Agent/Registrar and the City may make a charge sufficient to reimburse them for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer. The City shall pay the fee, if any, charged by the Paying Agent/Registrar for the transfer or exchange. The Paying Agent/Registrar will not be required to transfer or exchange any Certificate after its selection for redemption. The City and the Paying Agent/Registrar may treat the person in whose name a Certificate is registered as the absolute owner thereof for all purposes, whether such Certificate is overdue or not, including for the purpose of receiving payment of, or on account of, the principal of, premium, if any, and interest on, such Certificate. 11 DTC REDEMPTION PROVISIONS... The Paying Agent/Registrar and the City, so long as a Book -Entry -Only System is used for the Certificates, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Certificates 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 Certificates called for redemption or any other action premised on any such notice. Redemption of portions of the Certificates by the City will reduce the outstanding principal amount of such Certificates held by DTC. In such event, DTC may implement, through its Book - Entry -Only System, a redemption of such Certificates 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 Certificates 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 Certificates or the providing of notice to Direct Participants, Indirect Participants, or beneficial owners of the selection of portions of the Certificates for redemption. See "THE CERTIFICATES - 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 Certificates will be payable, and transfer functions will be performed, at the corporate trust office of the Paying Agent/Registrar in Jacksonville, Florida (the "Designated Payment/Transfet 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 times until the Certificates are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized, under the laws of the State or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Certificates by United States mail, first-class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. TRANSFER, &CHANGE AND REGISTRATION . . . In the event the Book -Entry -Only System should be discontinued, the Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Certificates may be assigned by the execution of an assignment form on the respective Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Certificates will be delivered by the Paying Agent/Registrar, in lieu of the Certificates 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 Certificates issued in an exchange or transfer of Certificates 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 Certificates 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 Certificates 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 Certificates 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 Certificates. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate. RECORD DATE FOR INTEREST PAYMENT... The record date ("Record Date") for the interest payable on the Certificates 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 Certificate appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. CERTIFICATEHOLDERS' REMEDIES . . . The Ordinance does not establish specific events of default with respect to the Certificates. Under State law there is no right to the acceleration of maturity of the Certificates upon the failure of the City to 12 observe any covenant under the Ordinance. Although a registered owner of Certificates could presumably obtain a judgment against the City if a default occurred in the payment of principal of or interest on any such Certificates, such judgment could not be satisfied by execution against any property of the City. Such registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as it becomes due. The enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The Ordinance does not provide for the appointment of a trustee to represent the interests of the Certificateholders upon any failure of the City to perform in accordance with the terms of the Ordinance, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Cade. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Certificateholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Certificates 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 Certificates, 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 Certificate 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, Certificate holders may enforce the obligation of the City to apply the ad valorem tax receipts to pay holders of the Certificates, as described above (see "THE CERTIFICATES — 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. (THE REMAINDER OF THIS PAGE INTENHONALLYLEFT BLANK) 13 An VALOREM TAx Law ... The appraisal of property within the City is the responsibility of the Williamson County Appraisal District (the "Appraisal District"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is. required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the Texas Constitution ("Article VIII' and State law provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Article VIII, Section 1-b, and State law, the governing body of a political subdivision, at its option, may grant, or upon presentation of a petition must call an election on whether to grant: (1) an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; and (2) an exemption of up to 20% of the market value of residence homesteads, with the minimum exemption under this provision being $5,000. State law and Article VIII, Section 2, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-J, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under such agreements, a property owner agrees to construct certain improvements on its property and the City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. Tax abatement agreements can last for a period of up to 10 years. 14 EFFECrtvE TAx RATE AND ROLLBACK TAx RATE ... By the later of September 30 or the 60'' day after the date the certified appraisal rather is received by the City, the City is required to adopt a tax rate per $100 taxable value for the current year. If the City does not adopt a tax rate by such required date, the tax rate for that tax year is the lower of the effective tax rate selected for that tax year, the tax rate adopted by the City for that preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Counsel that exceeds the lower of the rollback tax rate or 103 percent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted or the City's website if the City owns, operates or controls an intemet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAx PAYMENT ... Property within the City is generally assessed as of January I of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first installment due before February 1 of each year and the final installment due before August 1. PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, takes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured 15 Cumulative Cumulative Month Penal Interest Total February 6% 1% 7% March 7% 2% 9% April 8% 3% 11% May 9% 4% 13% June 10% 5% 15% July 12% 6% 18% After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, takes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured 15 creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF TAx CODE ... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $12,000. The City has granted an additional exemption of $5,000 of the market value of residence homesteads. The City does not tax nonbusiness personal property. Williamson County Tax Collector collects taxes for the City. The City is authorized to enter into tax abatement agreements from time to time to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property, the City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City has adopted criteria for granting tax abatements which establish guidelines regarding the number of jobs to be created and the amount of new value to be added by the taxpayer in return for the abatement. The City has granted abatements under agreements with Manitowoc Company, Inc., House of Hatten, Inc. and Chatsworth Products, Inc. The agreements have seven year terms and provide for 100% tax abatement for 5 years and 50% for the remaining two years. Two of such agreements expire in 2001 and the third expires in 2003. The City lost approximately $11,152,000 in assessed value in 2000 as a result of such abatements. TABLE 1 - VALUATION 9 EXEMPTIONS AND GENERAL OBLIGATION DEBT 2000/01 Market Valuation Established by Williamson County Appraisal District $ 25069,0573966 Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions $ 785916,654 Disabled Veterans Exemptions 21733,023 Open Space Land Use Reductions 30,056,626 Abatements 11,1512762 Exempt Properties - Public US 2961545,606 419,403,671 2000/01 Taxable Assessed Valuation $ 12649,6541295 City Funded Debt Payable from Ad Valorem Taxes (as of 1-31-01)(') General Obligation Bonds $16,948,092 The Certificates 5.470.000 Funded Debt Payable from Ad Valorem Taxes $ 22,4182092 Interest and Sinking Fund as of 9-30-00 $ 868,584 Ratio General Obligation Tax Debt to Taxable Assessed Valuation 1.36% 2001 Estimated Population - 30,000 Per Capita Taxable Assessed Valuation - $54,988 Per Capita General Obligation Debt Payable from Ad Valorem Taxes - $747 (1) Any transfer of Utility System revenues for the payment of general obligation debt in excess of the limited pledge of surplus net revenues of the Utility System is discretionary. The pledge of surplus net revenues of the Utility System to the payment of the Certificates is limited and no assurance can be given that the City Council will, in the future, authorize the use of any Utility System revenues in excess of such amount to pay debt service on the Certificates or any other City debt payable from ad valorem taxes. See "THE CERTIFICATES — Security and Source of Payment." 16 m NO O o 0 0 0 0 0 0 0 0 O h •-- N �O M Q\ d• 00 O N O p o EO vi m M6 ^' �O "' O O C) 00 N 00 M O N O d• 00 00 M •^ W O d• O d, �,o 00 �o N M O tT 00 O Q\ O M h �O GO WM h t• 0') 00 00 h d" p00 d• vt O\ W) h h �o h In N O� h to cn •-+ N O kn N M CK � N dM' � dam• N 000 t-- t� 00 N 6R 6S 0 0 0 0 0 0 0 0 0 0 0 y„ O.-. c. -••. +-+ N M h N O O o EO r� In d• m O O �o ^" 00 .� 00 in O\ et O h m et N O O N 0 M 0 0 �o d1" d• X00 V .- p 00 � +•-� Ntn th O N• %4 h O p �n N� d' dw kn N m N N d' d' E ON r� N �o t � kr O 0 00 00 ON h h d• �o O 00 h &9 K \ 0 0 o o 0 0 0 0 0 0 0 p O M N O OO N ON O O O (.O V'1 M M O O r+ O m to (aN ON a� O d• N md• Q1tr O �a 00 ON 01 d• M kn 'ct an eY Q\ t p d' to v? xn N O vt \O to to m ON et O� v1 O p M vl M 00 0 0 0 0 k%a d• d' QE�10OONW)tn NNcqN hN .- � sr3 0 0 0 0 0 0 0 0 0 0 0 c0 •— 00 00 \ \ \ \ \ c \I O O00 W N d• O Q\ et � O o O M� 00 h O N d• 0 0 0 c H r� t� m ri O m m Ci fV O O kn O .-. CN �o N d• M h d• d• et h h M � 4tt Oho dam• h V�'1 N ONO OO e} vi O� N O\ 6 N •-+ M o0 i-' ON d' �c 00 %,O N to .-• N N to O N O O w N N ON h O m 00 m It E c N N Q\ eq �o .� Q M b9 � O O O O O O O O O O O a Y�� �� HO0 iInd momoio0 oOD m Wn Oti N M Rn �o in m o0 h M d to W) O do h 01 ON N O O N O n N d to M \0 00 Q\ C) N O -+ O •-•� N l� d• O M O MO\ Itt In M h CD r� 00 W h •-•� v1 oa vi O N t` 00 a; eY O V1 'd• d' "tt N 00 en e!' oc 6s to h TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY Fiscal Year Ended 9-30 1996 1997 1998 1999 2000 2001 Estimated Population(') 20,300 24,000 25,500 26,400 28,600 3%000 Taxable Assessed Valuation $ 538,9475506 633,4693050 984,123,199 1,19918315232 114101072,042 1,649,6541295 Taxable Assessed Valuation Per Capita $ 26,549 26,395 38,593 45,448 49,303 54,988 (1) Figures are estimates provided by the City. (2) Includes self-supporting debt paid from non -property tax sources. (3) Projected, includes the Certificates. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal % Current Distribution Year Collections Collections Interest and Ended Tax General Sinking 9-30 Rate Fund Fund 1996 $ 0.3700 $ 0.2000 $ 0.1700 1997 0.3785 0.2090 0.1695 1998 0.3500 0.2030 0.1470 1999 0.3500 0.2068 0.1433 2000 0.3400 0.2074 0.1326 2001 0.3141 0.1985 0.1156 (1) As of February 28, 2001. TABLE 5 - TEN LARGEST TAXPAYERS Name of Taxpayer Del Webb Texas Ltd. GTE Telephone Operations KH -Georgetown Partners LTD Hewlett Holdings LTD Oaks at Georgetown LP Republic Square Joint Venture H.E. Butt, Inc. Waters edge -Georgetown II LTD Parkview Place LTD Sun City Georgetown Community Debt Outstanding at End of YeaP $ 63805,000 11,330,000 15,810,000 21,545,000 22,005,000 26,105,000 (3) Ratio Funded Debt to Taxable Assessed Valuation 1.26% 1.79% 1.61% 1.80% 1.56% 1.58% (3 Funded Debt Per Capita $ 335 472 620 816 769 1 870 (3) Adjusted % Current % Total Tax Levy Collections Collections $1,985,203 97.67% 99.87% 21466,560 98.22% 100.22% 3,442,328 98.60% 100.47% 41195,903 98.80% 99.95% 41952,688 95.43% 96.58% 5,239,610 95.89% (1) 97,70%(1) Nature of Business Development Utility Development Vehicle Dealership Apartments Retail Grocer Apartments Development Development In 2000/01 % of Total Taxable Taxable Assessed Assessed Valuation Valuation $ 369122,977 2.19% 127716,613 0.77 % 91319,784 0.56 % 9,1263303 0.55 % 71332,890 0.44% 7,2851171 0.44% 6,9253232 0.42% 61855,824 0.42% 6,611,070 0.40 % 6,075,471 0.37 % $ 108,371,335 6.57 % GENERAL OBLIGATION DEBT 11MITATION ... The City of Georgetown has no legal debt limit established by its Home Rule charter or ordinances. For a description of limitations on the City's maximum ad valorem tax rate, see "THE CERTIFICATES - TAx RATE LIMITATION." TABLE 6 - TAX ADEQUACY Projected 2001 Principal and Interest Requirements(') ....... ..... ...................................... .......................... ............ I......... $ 2,2621123 $0.1399 Tax Rate at 98% Collections.,. .............. I ................................ I ...... I ................................. I ................................. $ 212623123 Projected Average Annual Principal and Interest Requirements, 2001— 202W)..".1 .................................................... $ 1,320,433 $0.0817 Tax Rate at 98% Collections............................................................................................................................ $ 11320,433 (1) Tax -supported debt only; excludes self-supporting general obligation debt. TABLE 7 - EsTIRIATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax bonds ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional bonds since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional bonds, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. (THE REMAINDER OF THIS PAGE INTENTIONALLYLEFT BLANK) 19 Authorized Total Estimated City's Overlapping But Unissued Net Funded % Funded Debt Debt As Of Taxing Jurisdiction Tax DebtAbDlicable As of 4!1!01 As of 4/1/01 Williamson County $ 254,5001000 12.25% $ 3121763250 trl $276,535,000 Georgetown Independent School District 805854,996 72.08% 581280,281 None City of Georgetown 285585,000 100.00% 28.585.000 (z) None Total Direct and Overlapping Net Funded Debt $ 1183041,531 Ratio of Direct and Overlapping Net Funded Debt to Taxable Assessed Valuation 7.16% Per Capita Overlapping Net Funded Debt $ 32935 (1) Includes the anticipated issuance of $98,465,000 in General Obligation Bonds and $47,550,000 in General Obligation Refunding Bonds which are being issued in early May. (2) Includes the Certificates. (THE REMAINDER OF THIS PAGE INTENTIONALLYLEFT BLANK) 19 0 N 00 M 00 d' \o 0\ t� vl d• �/'1 d• O M d• O\ C� t� O O W V cq v1 %%o t� d•00 0\ O\ O N P� M \o to ^� •-+ r^ \O vl O 00 ,w CO O M r� w (� O\ t� rt 00 in d' N CTS %C N O [� w O O N \O CJ; \O vi h� •+ 00 C\ M vi N O r N N 00 \0 O ON Rj Ly �o 00 00 vl d• M d• d• M \O \o \O \o t1 \o M M M d' N N N G d N .� •-+ O N t� h t� t` r t� C`^ h t t� 00 00 N ON ^ d• t` C N N N N F r.+ N X FA 6 6A p„ rj N M 0\ O\ O\ 00 \o M M d• N d• N 00 O\ •-+ .- d' \o •-+ O O 00 r� t� 00 O d' N O1 D\ h O •y. t� M 00 M N 00 \o M t� ON �10 a\ O\ O O\ •-� L r CS et \O O; t` \0 CT \O Cj d^ O N 00 N � M r%j O d b d- v) t� d• d• d• d• d' N N NN N � h roa M !.t d' d• d• d• d• d• d• d• d• d• d• d• d' M M M 00 A rj y3 vt - M kn O CT vl O 00 00 \O 0\ \o M CT h M W) \o O O t� M O M a\ v) 00 00 11 t� O d' Rzr Vl ON M t� d' in O 00 • 00 N O \O 00 O\ C� �10 O N N d• 00 00 \0 M o t� 00 \O d' N d� et t� O v) (0 00 \o Wt O; 00 00 ON O C) \O O 00 OON O N M d' M O1 00 00 O\ 00 ON 00 00 00 00 00 00 00 M O N N \o 'tt 00 CV N N N N N CN CV N N N N N N N N N M A 6g 64 M O O O o O O O O o O O O o O O o o O o O O •-+ d• d' N 00 N O \O O N \o 00 Cl d• 00 d' N N 00 \o O 00 in t� et Vl N 40 rt 00 in N N N wl 00 t`• O+ t� ON .-. 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M vl O O\ to O 00 00 \o aN �o M 0� N M vl \O O 00 r 00 00 M N m � W vt a vt h^t O \O N [� O 0 \Oo M v1 W) M O M O M m\ M M N d' t` tom- d' O N klo O\ N d\O (2% 00 00 C) 00 O � h •-� •� N \D \O \O \o \o \O t� O 00 N 00 G N t� t� N F N N N N M 6A 69 .r •-� M kn O ON in O W 00 \D !T \D M ON C) 00 A N �o ON t� t� \O r� a0 00 M N CT M to \o M vl M Ol M O M M M to d' t� t� d• kn M d• O N \o O1 N N 00 M W-1 - M 00 C=> 00 O \o N O •-+ wl O\ d' O\ vl O d' O1 M C� O M vl 00 O\ d- W 2f L o O ON 00 00 r' r� r� \0 knvl d' et M N ty Of 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o O O o o O O o O O O o O O O O o O O O O O O O O O o O O o O O O O O O O O O O O O O wl wl 0 0 0 0 0 o vi o v, C) vi vi vi o ci o 0 0 vl •v d' d• \O 00 N C� N \O N C� M 0\ \o M ... Ch d• N O O •--� N •-+ 00 C% CT O (D N N m do vt W) C •y N a, 64 m N M d• vt \O tom- 00 O\ O N M d' to W t� 00 a\ O •-� ;O 0 0 0 0 0 0 0 0 0 N N N N N N N >✓ W C\ N N N. N COV N N N N N N N COV W 0 N TABLE 9 - INTEREST AND S INKING FUND BUDGET PROJECTIONO) General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-01 ......................................0... 0.......................... $ 2,262,123 Interest and Sinking Fund, 9-30-00........................................................................................................... $ 868,584 Interest and Sinking Fund Tax Levy @ 98% Collection........................................................................... 11889,796 Estimated Interest Income ........ ................................. ................... ............. ............ ........... I........................ 500,000 33258,380 EstimatedBalance, 9-30-01................................................................................................................................................. $ 996,257 (1) Excludes self-supporting debt. AUTHORIZED BUT UNISSUED GENERAL OBLIGATION CERTIFICATES ..The City does not have any authorized but unissued general obligation debt. ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... The City does not anticipate the issuance of any additional tax supported debt over the next 12 months. OTHER OBLIGATIONS ...The City has no unfunded debt as of September 30, 2000. PENSION FUND ... The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"), a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. (For more detailed information concerning the retirement plan, see APPENDIX B - "ExcERPTS FROM THE Cny'S ANNUAL FINANCIAL REPORT".) (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 21 TABLE 10 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY Revenues: Taxes Licenses and Permits Charges for Services Fines and Forfeitures Miscellaneous and Interest Total Revenues Expenditures: General Government Finance and Administration Development Services Community Owned Utilities Community Service Parks and Recreation Fire Services Police Services Other Interfund Charges for Service Total Expenditures Excess (deficiency of revenues over Expenditures) Budgeted Transfers In Budgeted Transfers Out Total Transfers Net Increase (Decrease) Fund Equity at Beginning of Year Net Gain (Loss) on Investments Fund Equity at End of Year Fiscal Year Ending September 30, 2000 1999 1998 1997 1996 $ 527443849 662,344 121,931 319,886 332.497 $ 7,181,507 $ 1,9897287 156,030 1,282,168 1,175,297 1,441,796 2,534,940 3,588,983 (821,512) $ 11,346,989 $ (471652482) $ 51578,707 (156.526) $ 5.422,181 $ 13256,699 2,642,428 42,942 $ 3,942,069 Source: City's Audited Financial Statements. See "UTILITY SYSTEM." $ 4,8731636 530,896 116,541 239,511 149.388 .L.1209 ,972 $ 11850,622 135,221 1,276,021 352,675 1,986,615 2,415,371 3,385,835 (734,213) $ 10,668,147 $ (42758,175) $ 4,120,196 512,818 110,415 219,791 607,044 $ 5,570,264 $ 23027,714 924,464 1,301,416 278,253 1,817,161 1,815,629 2,849,408 (I 38U48) $ 9,227,197 $ (3,656,933) $ 3,772,003 $ 52343,128 (110.222) (302.810) $ 31661,781 $ (15096,394) 3,738,822 $ 51040,318 $ 11383,385 2,355,437 $ 37442,045 567,936 105,104 162,607 $ 4,465.565 $ 126681570 793,699 1,034,875 4,252 244,208 1,034,540 1,757,429 2,712,985 821,516 (11423,881) $ 8,648,193 $ (4,182,628) $ 3,4891542 (261.473) $ 3,2281069 $ (954,559) 3,309,996 $ 33876,246 809,909 101,933 116,027 339.477 $ 5,243,592 $ 12562,102 517,795 788,069 620,105 234,581 940,668 1,481,988 2,218,453 630,086 (950,958) $ 81042,889 $ (2,7991297) $ 32990,463 (500,688) $ 3,489,775 $ 690,478 2,619,518 $ 2,642,428 $ 31738,822 $ 2,3551437 $ 3,309,996 (THE REMAINDER OF THIS PAGE INTENTIONALL Y LEFT BLANK) 22 TABLE 11 - MUNICIPAL SALES TAx HISTORY The City has adopted the Municipal Sales and Use Tax Act, Chapter 321, Texas Tax Code, which grants the City the power to impose and levy a 1.0% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Certificates. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, of the State of Texas, which remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. The following table summarizes the City's sales tax collections for fiscal years 1995-2000. Fiscal Equivalent Year % of of Ended Total Ad Valorem Ad Valorem Per 9-30 Collected Tax Levy Tax Rate Capita(') 1995 $ 11623,370 94.15% $ 0.3363 $ 87.75 1996 1,896,310 95.52% 0.3519 93.41 1997 2,159,689 87.56% 0.3309 89.99 1998 2,4151396 70.12% 0.2454 94.72 1999 2,858,474 68.11% 0.2384 108.28 2000 3,4161760 68.99% 0.2071 119.47 (1) Based on estimated or U.S. Census population for all years. 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 and Administration, 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 actual 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's Home Rule Charter establishes the City's fiscal year as the twelve-month period beginning October 1. 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 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. 23 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. UTILITY SYSTEM The Certificates are payable from the levy and collection of an annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City. The limited pledge of surplus net revenues of the City's combined water, sewer and electric systems (not to exceed $10,000) is solely for the purpose of complying with certain state law requirements in order to sell the Certificates for cash. It is not anticipated that utility system revenues will be used to pay debt service on the Certificates. However, in the past the City has made transfers from excess utility system revenues to the general fund. In 2000, 1999, 1998 and 1997 excess utility system revenues represented 31%, 24%, 26% and 20% respectively of the City's general fund expenditures. 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 6.5c1kwh. 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. Additionally, City Staff believes that if the City "opts in" the City will continue to provide electricity to customers within its service area through the City's electric distribution system irrespective of whether the City's customers choose an energy provider different from LCRA, the City's wholesale energy provider. 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 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 24 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 ETJ 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 tern, 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 — FkOVISIONs of SB 7 THAT APPLY TO MUNICIPAL UTILITIES AND ELECTRIC COOPS," below. 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 - 25 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 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 must freeze its 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. 26 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. S TRANDED 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 r 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 are 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 ELECTRIC 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 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 — ELECTRIC 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 terns, 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 LCRA, 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. 27 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 burn 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. 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 located in the City's ETJ. 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. Home 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 it will 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 1996 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. INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENTS... Under Texas law, the City is authorized to invest in (1) obligations 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 28 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 City 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 or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit raring 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 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 firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on 29 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 mutual funds, and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. 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 comparable 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 investment portfolio 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 mark 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 99.9% 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. (THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 30 OPINION ... On the date of initial delivery of the Certificates, 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 Certificates will be excludable from the "gross income" of the holders thereof and (2) the Certificates 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 Certificates. See APPENDIX C - "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 Certificate documents relating to certain matters including arbitrage, the use of the proceeds of the Certificates and the property to be financed therewith. Although it is expected that the Certificates will qualify as tax-exempt obligations for federal income tax purposes as of the date of issuance, the tax-exempt status of the.Certificates 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 Certificates to become taxable retroactively to the date of issuance. Bond Counsel's opinion represents its legal 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 Certificates. 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 Certificates, 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 Certificateholders 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 Certificates (the "Original Issue Discount Certificates") is less than the principal amount thereof. The difference between (i) the amount payable at the maturity of each Original Issue Discount Certificate, and (ii) the initial offering price to the public of such Original Issue Discount Certificate would constitute original issue discount with respect to such Original Issue Discount Certificate in the hands of any owner who has purchased such Original Issue Discount Certificate in the initial public offering of the Certificates. 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 Certificate equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Certificate 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 Certificate prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Certificate in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Certificate was held by such initial owner) is includable in gross income. Under Existing Law, the original issue discount on each Original Issue Discount Certificate 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 Certificates and ratably within each such six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Certificate for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Certificate. 31 The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Original Issue Discount Certificates which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Original Issue Discount Certificates 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 Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Certificates. 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 Certificates. This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, owners of an interest in a 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 CERTIFICATES BEFORE DETERMINING WHETHER TO PURCHASE THE CERTIFICATES. Interest on the Certificates will be includable as an adjustment for "adjusted earnings and profits" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for corporation, or 26 percent for noncorporate taxpayers (28 percent for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Interest on the Certificates 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 Certificates, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Certificates, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount Certificates" to the extent such gain does not exceed the accrued market discount of such Certificates; although for this purpose, a de minimis amount of market discount is ignored. A "market discount Certificate" 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 Certificates 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-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS... Section 265(a) 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 32 585(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 Certificates 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 Certificates as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the public (or, in the case of discount Certificates, 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 Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. 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 120 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 Tables 1 through 5, Table 8, Table 10 and Table 11, "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 Certificates, if such event is material to a decision to purchase or sell Certificates: (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 Certificates; (7) modifications to rights of holders of the Certificates; (8) Certificate calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates; 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 33 accordance with its 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"). AvAILASILITY OF INFORMATION FROM NRMSIRs AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and any SID. The information will be available to holders of Certificates 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 Certificates 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 Certificates 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 Certificates in the primary offering of the Certificates 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 Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized Bond Counsel) determines that such amendment will not materially impair the interest of the holders and beneficial owners of the Certificates. 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 Certificates in the primary offering of the Certificates. 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 currently in compliance with its previous continuing disclosure agreements in accordance with SEC Rule 15c2-12. (THE REMAINDER OF THIS PAGE INTENTIONA LL Y LEFT BLANK) 34 OTHER INFORMATION RATINGS... The presently outstanding uninsured general obligation debt of the City is rated "A2" by Moody's, "A" by S&P and "A" by Fitch. The City also has various issues outstanding which are rated "Aaa" by Moody's, "AAA" by S&P and "AAA" by Fitch through insurance by various commercial insurance companies. Applications for ratings on the Certificates have been made to Moody's and S&P. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such 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 Certificates. LITIGATION ... 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 watelpark 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 CERTIFICATES FOR SALE ... The sale of the Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO S ECURE PUBLIC FUNDS IN TEXAS... Under the Texas Public Security Procedures Act, Chapter 1201, Texas Government Code, the Certificates (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 Certificates 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 Certificates 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 Certificates 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 Certificates are legal investments for various institutions in those states. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Certificates for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Certificates for such purposes. The City has made no review of laws in other states to determine whether the Certificates are legal investments for various institutions in those states. 35 LEGAL OPINIONS AND N041TIGATION 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 Certificates and the Ordinance contained under the captions, "THE CERTIFICATES" (exclusive of subcaptions "BOOK -ENTRY -ONLY SYSTEM" and "USE OF PROCEEDS"} "TAX MATTERS", "CONTINUING DISCLOSURE OF INFORMATION" (exclusive of the subcaptions "AVAILABILITY OF INFORMATION FROM NRMSIRS AND SID" and "COMPLIANCE WITH PRIOR AGREEMENTS"), "OTHER INFORMATION - REGISTRATION AND QUALIFICATION OF CERTIFICATES FOR SALE", "OTHER INFORMATION - LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS", and "OTHER INFORMATION - LEGAL OPINIONS AND NO -LITIGATION CERTIFICATE" and APPENDIX C - "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 Certificates, 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 Certificates is contingent on the sale and delivery of the Certificates. The legal opinion will accompany the Certificates deposited with DTC or will be printed on the Certificates in the event of the discontinuance of the Book -Entry -Only System. In connection with the issuance of the Certificates, Bond Counsel has been engaged by, and only represents, the City. The legal opinion to be delivered concurrently with the delivery of the Certificates express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. FINANCIAL ADVISOR ... First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Certificates. The Financial Advisor's fee for services rendered with respect to the sale of the Certificates is contingent upon the issuance and delivery of the Certificates. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Certificates, 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. 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. UNDERWRITING... The Underwriter has agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $.. The Underwriter wilt be obligated to purchase all of the Certificates if any Certificates 36 are purchased. The Certificates to be offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing Certificates into investment trusts) at prices lower than the public offering prices of such Certificates, and such public offering prices may be changed, from time to time, by the Underwriter. MISCELLANEOUS. . . 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 Certificates 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 Certificates 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 37 Mayor City of Georgetown, Texas n 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: State of Texas February 2001 Total Civilian Labor Force 102400,900 Number Employed 10,004,100 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 7,900 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-1 Number of Nature of Business Employees School District 11200 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: State of Texas February 2001 Total Civilian Labor Force 102400,900 Number Employed 10,004,100 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 7,900 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-1 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 2001 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 3 112 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. A-2 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. APPENDIX C FORM OF BOND COUNSEL'S OPINION