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HomeMy WebLinkAboutItem 11 & 12 - BondsGeneral Obligation Bonds and Certificates of Obligation Sale General Obligation Bonds Project (Glade Road) $5,245,000 Certificates for: Vehicles and Equipment $2,907,000 Street Improvements 800,000 Issuance Cost 53,000 Total Certificates of Obligation $3,760,000 Total GO Bonds and Certificates of Obligation: $9,005,000 Copies of the draft official statements are included in your packets. The draft sale ordinances are on file in the City Secretary's office for public inspection. Staff recommends acceptance of the First Southwest Company's recommendations and approval of the sale ordinances. WAG/sIt PRELIMINARY OFFICIAL. STATENIENT Ratings: c Moody's: Applied For Dated July 7, 2006 S&P: Applied For See ("Other Information - a w � NEW ISSUE - Book -Entry -Only Ratings" herein) s � � w In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes under existing law and the Bonds a o are not private activity bonds. See "Tax Matters - Tax Exemption" herein for a discussion of the opinion of Bond Counsel, including a description of Y y alternative minimum tax consequences for corporations. c .. S THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS D � $5,245,000 v � CITY OF GRAPEVINE, TEXAS ami (Tarrant County) GENERAL OBLIGATION BONDS, SERIES 2006 = Dated Date: July 15, 2006 Due: February 15, as shown below � PAYMENT TERMS ...Interest on the $5,245,000 City of Grapevine, Texas General Obligation Bonds, Series 2006 (the "Bonds") will accrue from July 15, 0 2006 (the "Dated Date"), will be payable February IS and August 15 of each year, commencing February 15, 2007, and will be calculated on the basis of a 360 -day year consisting of twelve 30 -day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds may be acquired in E denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if `o [ any, and interest on the Bonds will be payable by the Paying AgenURegistrar to Cede & Co., which will make distribution of the amounts so paid to the c participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Bonds and Certificates - Book -Entry -Only �. Bank, National Association, Dallas, Texas (see "The Bonds and Certificates - System" herein. The initial Paying Agent/Registrar is JPMorgan Chase Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE ... The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, (the "State") including c 4 particularly Vernon's Texas Codes Annotated ("V.T.C.A."), Texas Government Code, Chapter 1331, as amended, and Section 9.26 of the City's Home E _ c Rule Charter and are direct obligations of the City of Grapevine, Texas (the "City"), payable from a direct and continuing annual ad valorem tax levied on all taxable property within the City, within the limits prescribed by law, as provided in the ordinance authorizing the Bonds (the "Bond Ordinance" and n ° together with the Certificates Ordinance, the "Ordinances") (see "The Bonds and Certificates - Authority for Issuance"). y c a PURPOSE ...Proceeds from the sale of the Bonds will be used for (i) constructing, improving and widening streets and thoroughfares and related utility relocation, drainage, landscaping, sidewalk and signalization improvements, and acquiring land and interest in land and (ii) to pay the costs of issuance s related to the sale of the Bonds. V MATURITY SCHEDULE CUSIP Prefix tit: 388622 E y co CUSIP CUSIP E Amount Maturity Rate Yield Suffx") Amount Maturity Rate Yield Suffix(,) $ m $ 140,000 2007 $ 260,000 2017 c 1 270,000 2018 70,000 2008 J E c 180,000 2009 285,000 2019 185,000 2010 300,000 2020 c V 195,000 2011 315,000 2021 2205,000 2012 330,000 2022 c345,000 2023 215,000 2013 ro 225,000 2014 360,000 2024 5 3 7380,000 2025 r 235,000 2015 250,000 2016 400,000 2026 c 7 o (Accrued Interest from July 15, 2006 to be added) E 'v C, ' (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, c v a division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in anyway as a substitute for the CUSIP h N Services. o a o REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2017, in whole or in part in Yprincipal amounts of $5,000 or any integral multiple thereof, on February 15, 2016, or any date thereafter, at the par value thereof plus accrued interest to $ the date of redemption. 0 SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with the "City of Grapevine, Texas, Combination Tax and Revenue 82 Certificates of Obligation, Series 2006" (the "Certificates"), under a common Official Statement, and such Bonds and Certificates are hereinafter csometimes referred to collectively as the "Obligations." The Bonds and Certificates are separate and distinct securities offerings being issued and sold r independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other � and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the v N rights of the holders, and other features. E5 E LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Initial Purchaser of the Bonds and subject to the approving r o opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond E � � Counsel's Opinions"). ` cry v DELIVERY ... It is expected that the Bonds will be available for delivery through The Depository Trust Company on August 22, 2006. T r- o BIDS DUE TUESDAY, JULY 18, 2006, AT 12:00 PM, CDT THIS PAGE LEFT BLANK INTENTIONALLY PRELIMINARY OFFICIAL STATEMENT Dated July 7, 2006 NEW ISSUE - Book -Entry -Only Ratings: Moody's: Applied For S&P: Applied For See ("Other Information - Ratings" herein) In the opinion of Bond Counsel, interest on the Certificates is excludable from gross income for federal income tax purposes under existing law and the Certificates are not private activity bonds. See "Tax Matters - Tax Exemption" herein for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. THE CERTIFICATES WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $3,760,000 CITY OF GRAPEVINE, TEXAS (Tarrant County) COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006 Dated Date: July 15, 2006 Due: February 15, as shown below PAYMENT TERMS ... Interest on the $3,760,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") will accrue from July 15, 2006 (the "Dated Date"), will be payable February 15 and August 15 of each year, commencing February 15, 2007, 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 Bonds and Certificates - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is JPMorgan Chase Bank, National Association, Dallas, Texas (see "The Bonds and 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, and constitute direct obligations of the City of Grapevine, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing annual ad valorem tax levied , within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of surplus revenues of the City's Waterworks and Sewer System as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance" and together with the Bond Ordinance, the "Ordinances") (see "The Bonds and Certificates - Authority for Issuance"). , PURPOSE ... Proceeds from the sale of the Certificates will be used for (i) acquisition of computers, software and computer equipment for the City Manager's office and Police Department; (ii) acquisition of new and replacement vehicles for the Public Works, Police, Fire, and Parks Departments, the Convention and Visitors Bureau and golf course, including the acquisition of golf carts; (iii) acquisition of radios and radio equipment for the Police and Fire Departments; (iv) acquisition of firefighting equipment for the Fire Department; (v) acquisition of exercise and maintenance equipment for the Parks Department; (vi) acquisition of maintenance equipment for the Public Works Department and the golf course; (vii) designing, constructing, improving, extending, and expanding streets, thoroughfares, sidewalks, bridges, and other public ways of the City, including signage, signalization, street lighting, related storm drainage and environmental improvements; and acquiring land, rights-of-way and other interests in land in connection therewith; (items (i) through (vii), collectively, the "Project"); and (viii) to pay for professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. MATURITY SCHEDULE Amount Maturity Rate $ 215,000 2012 215,000 2013 215,000 2014 100,000 2015 95,000 2016 (Accrued Interest from July 15, 2006 to be added) CUSIP Prefix ('): 388622 CUSIP Yield Suffix', (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. REDEMPTION ... The Certificates are not subject to redemption prior to maturity, but may be subject to mandatory sinking fund redemption if the purchaser designates a portion of the Certificates as "Term Certificates". SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with the "City of Grapevine, Texas, General Obligation Bonds, Series 2006" (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligations." The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and other features. LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Initial Purchaser of the Certificates and subject to the approving opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). DELIVERY... It is expected that the Certificates will be available for delivery through The Depository Trust Company on August 22, 2006 BIDS DUE TUESDAY, JULY 18, 2006, AT 12:00 PM, CDT CUSIP Amount Maturity Rate Yield suffix", $ 730,000 2007 730,000 2008 730,000 2009 505,000 2010 225,000 2011 Amount Maturity Rate $ 215,000 2012 215,000 2013 215,000 2014 100,000 2015 95,000 2016 (Accrued Interest from July 15, 2006 to be added) CUSIP Prefix ('): 388622 CUSIP Yield Suffix', (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard and Poor's CUSIP Service Bureau, a division of the McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. REDEMPTION ... The Certificates are not subject to redemption prior to maturity, but may be subject to mandatory sinking fund redemption if the purchaser designates a portion of the Certificates as "Term Certificates". SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with the "City of Grapevine, Texas, General Obligation Bonds, Series 2006" (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligations." The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and other features. LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Initial Purchaser of the Certificates and subject to the approving opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas (see Appendix C, "Form of Bond Counsel's Opinions"). DELIVERY... It is expected that the Certificates will be available for delivery through The Depository Trust Company on August 22, 2006 BIDS DUE TUESDAY, JULY 18, 2006, AT 12:00 PM, CDT THIS PAGE LEFT BLANK INTENTIONALLY This 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 to give information or to make any representation other than those contained in this Oficial Statement, and, ifgiven or made, such other information or representations must not be relied upon. For purposes of compliance with Rule 15c 2-12 of the Securities and Exchange Commission (the 'Rule'), this document constitutes an Oficial Statement of the City with respect to the Bonds and Certificates that has been "deemed final" by the City as of its date except for the omission of no more than the information permitted by the Rule. The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as the representation, promise, or guarantee of the Financial Advisor. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this 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 herein since the date hereof. See "Other Information - Continuing Disclosure of Information "for a description of the City's undertaking to provide certain information on a continuing basis. Neither the City nor its Financial Advisor make any representation as to the accuracy, completeness, or adequacy of the information supplied by The Depository Trust Companyfor use in this Official Statement. This Oficial Statement contains "Forward -Looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, and achievements to be different from future results, performance, and achievements expressed or implied by such forward-looking statements. Investors are cautioned that the actual results could differ materially from those set forth in the forward- looking statements. The Bonds and Certificates are exempt from registration with the Securities and Exchange Commission and consequently have not been registered therewith. The registration, qualification, or exemption of the Bonds and Certificates in accordance with applicable securities law provisions of the jurisdiction in which these securities have been registered or exempted should not be regarded as a recommendation thereof. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY .........................6 CITY OFFICIALS, STAFF, AND CONSULTANTS .... 8 ELECTED OFFICIALS ................................................... 8 SELECTED ADMINISTRATIVE STAFF ............................. 8 CONSULTANTS AND ADVISORS .................................... 8 INTRODUCTION............................................................ 9 THE BONDS AND CERTIFICATES .............................9 TAX INFORMATION...................................................14 TABLE 8 - GENERAL OBLIGATION DEBT SERVICE TABLE I - VALUATION, EXEMPTIONS AND GENERAL REQUIREMENTS ............................................... OBLIGATION DEBT .......................................... 17 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY PROJECTION.................................................... CATEGORY......................................................19 TABLE 10 - COMPUTATION OF SELF-SUPPORTING TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT..................................................................22 DEBT HISTORY................................................20 TABLE I I - AUTHORIZED BUT UNISSUED GENERAL TABLE 4 - TAX RATE, LEVY AND COLLECTION OBLIGATION BONDS........................................23 HISTORY......................................................... 20 TABLE 5 - TEN LARGEST TAXPAYERS .......................20 33 TABLE 6 - TAX ADEQUACY.......................................21 33 TABLE 7 - ESTIMATED OVERLAPPING DEBT ..............21 33 DEBT INFORMATION.................................................21 TABLE 8 - GENERAL OBLIGATION DEBT SERVICE RATINGS.................................................................. REQUIREMENTS ............................................... 21 TABLE 9 - INTEREST AND SINKING FUND BUDGET REGISTRATION AND QUALIFICATION OF BONDS AND PROJECTION.................................................... 22 TABLE 10 - COMPUTATION OF SELF-SUPPORTING LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE DEBT..................................................................22 PUBLIC FUNDS IN TEXAS ................................. TABLE I I - AUTHORIZED BUT UNISSUED GENERAL LEGAL MATTERS ...................................................... OBLIGATION BONDS........................................23 AUTHENTICITY OF FINANCIAL DATA AND OTHER TABLE 12 - OTHER OBLIGATIONS..............................23 INFORMATION ................................................. FINANCIAL INFORMATION ..................................... 24 TABLE 13 — CHANGES IN NET ASSETS ...................... 24 TABLE 13A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY .................................. 25 TABLE 14 - MUNICIPAL SALES TAX HISTORY ........... 26 TABLE 15 - CURRENT INVESTMENTS ......................... 28 TAXMATTERS............................................................. 29 CONTINUING DISCLOSURE OF INFORMATION 31 OTHER INFORMATION ............................................. 32 RATINGS.................................................................. 32 LITIGATION.............................................................. 32 REGISTRATION AND QUALIFICATION OF BONDS AND CERTIFICATES FOR SALE ................................. 32 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ................................. 32 LEGAL MATTERS ...................................................... 33 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION ................................................. 33 FINANCIAL ADVISOR ................................................ 33 INITIAL PURCHASER OF THE BONDS .......................... 33 INITIAL PURCHASER OF THE CERTIFICATES ............... 33 FORWARD LOOKING STATEMENTS ............................ 34 CERTIFICATION OF THE OFFICIAL STATEMENT .......... 34 APPENDICES GENERAL INFORMATION REGARDING THE CITY ........ A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT.. B FORM OF BOND COUNSEL'S OPINIONS ...................... C The cover page hereof, this page, the appendices included herein and any addenda, supplement, or amendment hereto, are part of the Official Statement. OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds and Certificates to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY ..................................... The City of Grapevine, Texas (the "City') is a political subdivision and municipal corporation of the State, located in Tarrant County, Texas. The City covers approximately 35.8 square miles (see "Introduction - Description of City"). THE BONDS .................................. The $5,245,000 General Obligation Bonds, Series 2006 are to mature on February 15 in the years 2007 through 2026 (see "The Bonds and Certificates - Description of the Bonds and Certificates"). THE CERTIFICATES ..................... The $3,760,000 Combination Tax and Revenue Certificates of Obligation, Series 2006 are to mature on February 15 in the years 2007 through 2016 (see "The Bonds and Certificates - Description of the Bonds and Certificates"). PAYMENT OF INTEREST ............... Interest on the Obligations accrues from July 15, 2006, and is payable February 15, 2007, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Bonds and Certificates - Description of the Bonds and Certificates," "The Bonds and Certificates - Optional Redemption"). AUTHORITY FOR ISSUANCE OF THE BONDS .......................... The Bonds are issued pursuant to the general laws of the State, including particularly V.T.C.A., Texas Government Code, Chapter 1331, as amended, Section 9.26 of the City's Home Rule Charter and a Bond Ordinance passed by the City Council of the City (see "The Bonds and Certificates - Authority for Issuance"). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES .............. The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and the Certificate Ordinance passed by the City Council of the City (see "The Bonds and Certificates - Authority for Issuance"). SECURITY FOR THE BONDS .......... The Bonds constitute direct and voted obligations of the City, payable from a direct and continuing annual ad valorem tax levied, within the limit prescribed by law, on all taxable property located within the City (see "The Bonds and Certificates - Security and Source of Payment"). SECURITY FOR THE CERTIFICATES... .......................... The Certificates constitute direct obligations of the City, payable from a combination of (i) a direct and continuing annual ad valorem tax levied, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge of the surplus revenues (not to exceed $1,000) of the City's Waterworks and Sewer System as provided in the Certificate Ordinance (see "The Bonds and Certificates - Security and Source of Payment"). REDEMPTION OF THE BONDS....... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2017, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2016, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates — The Bonds Optional Redemption"). REDEMPTION OF THE CERTIFICATES .......................... The Certificates are not subject to redemption prior to maturity (see "The Bonds and Certificates — The Certificates Optional Redemption. TAX EXEMPTION ............................ In the opinion of Bond Counsel, the interest on the Bonds and Certificates will be excludable from gross income for federal income tax purposes under existing law and the Bonds and Certificates are not private activity bonds. See "Tax Matters - Tax Exemption" for a discussion of the opinion of Bond Counsel, including a description of the alternative minimum tax consequences for corporations. USE OF PROCEEDS Proceeds from the sale of the Bonds will be used for (i) constructing, improving and widening streets and thoroughfares and related utility relocation, drainage, landscaping, sidewalk and signalization improvements, and acquiring land and interest in land and (ii) to pay the costs of issuance related to the sale of the Bonds. Proceeds from the sale of the Certificates will be used for (i) acquisition of computers, software and computer equipment for the City Manager's office and Police Department; (ii) acquisition of new and replacement vehicles for the Public Works, Police, Fire, and Parks Departments, the Convention and Visitors Bureau and golf course, including the acquisition of golf carts; (iii) acquisition of radios and radio equipment for the Police and Fire Departments; (iv) acquisition of firefighting equipment for the Fire Department; (v) acquisition of exercise and maintenance equipment for the Parks Department; (vi) acquisition of maintenance equipment for the Public Works Department and the golf course; (vii) designing, constructing, improving, extending, and expanding streets, thoroughfares, sidewalks, bridges, and other public ways of the City, including signage, signalization, street lighting, related storm drainage and environmental improvements; and acquiring land, rights- of-way and other interests in land in connection therewith; (items (i) through (vii), collectively, the "Project"); and (viii) to pay for professional services of attorneys, financial advisors and other professionals in connection with the Project and the issuance of the Certificates. RATINGS ...................................... The presently outstanding general obligation debt of the City is rated "Al" by Moody's Investors Service, Inc. ("Moody's") and "AA-" by Standard & Poor's Ratings Services, A Division of The McGraw-Hill Companies, Inc. ("S&P"). The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through credit enhancement in the form of municipal bond insurance policies. Applications for contract ratings on the Bonds and Certificates have been made to Moody's and S&P (see "Other Information - Ratings"). Boox-ENTRY-ONLY SYSTEM...... The definitive Bonds and Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds and Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds and Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds and Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds and Certificates (see "The Bonds and Certificates - Book -Entry -Only System"). PAYMENT RECORD ...................... The City has not defaulted on its tax -supported debt since 1932 when all defaults were corrected without refunding. SELECTED FINANCIAL INFORMATION Ratio Funded Fiscal Per Capita Per Capita Tax Debt to Year Estimated Taxable Taxable Funded Funded Taxable % of Ended City Assessed Assessed Tax Tax Assessed Total Tax 9/30 Population (1) Valuation (2) Valuation Debt Debt Valuation Collections 2002 45,500 $ 4,773,863,018 $ 104,920 $ 157,940,000 $ 3,471 3.31% 99.20% 2003 46,400 4,766,361,580 102,723 157,645,000 3,398 3.31% 99.40% 2004 46,684 4,880,107,595 104,535 148,300,000 3,177 3.04% 99.70% 2005 47,036 5,227,295,000 111,134 144,685,000 3,076 2.77% 98.90% 2006 47,500 5,427,160,086 114,256 147,615,000 ts� 3,108 2.72% 96.90% 14) (1) Source: The City of Grapevine. (2) Source: Tarrant Appraisal District. (3) Projected, includes the Bonds and the Certificates. (4) Collections for part year only, through June 1, 2006. For additional information regarding the City, please contact: Fred Werner David K. M edanich Director of Finance Laura Alexander City of Grapevine First Southwest Company 200 South Main 777 M ain Street, Suite 1200 Grapevine, Texas 76051 Fort Worth, Texas 76102 (817)410-3111 (817)332-9710 CITY OFFICIALS, STAFF, AND CONSULTANTS ELECTED OFFICIALS Length of Term City Council Service Expires Occupation William D. Tate 18 Years May, 2009 Attorney -at -Law Mayor Ted R. Ware 27 Years May, 2008 Commercial Contractor Mayor Pro Tem C. Shane Wilbanks 21 Years May, 2009 Personnel Director Councilmember, Place I Sharron Spencer 21 Years Councilmember, Place 2 Clydene Johnson 11 Years Councilmember, Place 3 May, 2009 Retired Sales Representative May, 2007 Independent Insurance Agent Darlene Freed 8 Years May, 2007 Commercial Real Estate Agent Councilmember, Place 4 Roy Stewart 10 Years May, 2008 Construction Company Owner Councilmember, Place 6 (1) Previously served 14 years as Mayor and Councilmember. SELECTED ADMINISTRATIVE STAFF Name Position Length of Service Bruno Rumbelow City Manager 8 Years t'} Bill Gaither Administrative Services Director 10 Years Fred Werner Director of Finance 9 Years Linda Huff City Secretary 19 Years (2) (1) 8 years with City; 1 year in present position. (2) 24 years with City; 19 years in present position. CONSULTANTS AND ADVISORS Auditors.........................................................................................................................................................Deloitte & Touche LLP Fort Worth, Texas BondCounsel................................................................................................................................................ Vinson & Elkins L.L.P. Dallas, Texas Financial Advisor...................................................................................................................................... First Southwest Company Fort Worth, Texas 8 PRELIMINARY OFFICIAL STATEMENT RELATING TO $5,245,000 $3,760,000 CITY OF GRAPEVINE, TEXAS CITY OF GRAPEVINE, TEXAS GENERAL OBLIGATION BONDS, SERIES 2006 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $5,245,000 City of Grapevine, Texas, General Obligation Bonds, Series 2006 (the "Bonds") and $3,760,000 City of Grapevine, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") (collectively, the "Obligations"). The Obligations are separate and distinct securities offerings being authorized for issuance under separate ordinances (the "Bond Ordinance" and the "Certificate Ordinance") adopted by the City Council of the City, but are being offered and sold pursuant to a common Official Statement, and while the Bonds and Certificates share certain common attributes, each issue is separate and apart from the other and should be reviewed and analyzed independently, including the kind and type of obligation being issued, its terms of payment, the security for its payment, the rights of the holders and the covenants and agreements made with respect thereto. Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Bond Ordinance and Certificate Ordinance to be adopted on the date of sale of the Bonds and Certificates (collectively, "the Ordinances"), except as otherwise indicated herein. There follow in this Official Statement descriptions of the Bonds and Certificates and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, Dallas, Texas. DESCRIPTION OF THE CITY ... The City is a political subdivision and municipal corporation of the State of Texas (the "State"), duly organized and existing under the laws of the State, including the City's Horne Rule Charter. The City first adopted its Home Rule Charter in 1965. The City operates under the Council/Manager form of government with a City Council comprised of the Mayor and six Councilmembers. The City Manager is the chief administrative officer for the City. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, water and sanitary sewer utilities, health and social services, culture -recreation, public transportation, public improvements, planning and zoning, and general administrative services. The 2000 Census population for the City was 42,059, and the 2006 estimated population is 47,500. The City covers approximately 35.8 square miles. THE BONDS AND CERTIFICATES DESCRIPTION OF THE BONDS AND CERTIFICATES ... The Bonds and Certificates are dated July 15, 2006, and mature on February I5 in each of the years and in the amounts shown on the cover page and on page 3 hereof. Interest will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be payable on August 15 and February 15 of each year, commencing February 15, 2007. The definitive Bonds and Certificates will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. No physical delivery of the Bonds and Certificates will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds and 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 Bonds and Certificates. See "Book - Entry -Only System" herein. AUTHORITY FOR ISSUANCE ... The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, particularly V.T.C.A., Texas Government Code, Chapter 1331, as amended, Section 9.26 of the City's Home Rule Charter and the Bond Ordinance. The Bonds represent the final portion of the principal amount of bonds authorized at an election held in the City on December 5, 1998. See "Table 11 - Authorized But Unissued General Obligation Bonds" hereafter. The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and the Certificate Ordinance passed by the City Council. SECURITY AND SOURCE OF PAYMENT ... The Bonds ... The principal of and interest on the Bonds is payable from a direct and continuing annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City. The Certificates... The principal of and interest on the Certificates is payable from a direct and continuing annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City. Additionally, the Certificates are payable from a limited pledge (not to exceed $1,000) of the surplus revenues of the City's combined Waterworks and Sewer System (the "System"), as provided in the Certificate 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. 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 Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all tax supported debt service, as calculated at the time of issuance. THE Boxes OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem the Bonds having stated maturities on and after February 15, 2017 in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2016 or any date thereafter, at the par value thereof plus accrued interest to the date of redemption or if less than all of the Bonds are to be redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the Bonds are in Book -Entry -Only form) shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. If a Bond (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. THE CERTIFICATES OPTIONAL REDEMPTION ... The Certificates are not subject to redemption prior to maturity. NOTICE OF REDEMPTION ... Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. Boox-ENTRY--ONLY SYSTEM ... This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company ("DTC'), New York, New York, while the Obligations, as applicable, 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 Oficial Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered Security certificate will be issued for each maturity of the Obligations, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing 10 Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC's records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, 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 interests in the Obligations are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Obligations, except in the event that use of the book -entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Obligations are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as 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 nor its nominee, Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Obligations at any time by giving reasonable notice to the City or Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Obligation certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Obligation 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 Obligations are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the 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 or the Financial Advisor. Effect of Termination of Book -Entry -Only System. In the event the Book -Entry -Only System with respect to the Obligations is discontinued by DTC, or the use of the Book -Entry -Only System with respect to the Obligations is discontinued by the City, printed securities certificates will be issued to the respective holders of the Obligations, as the case may be, and the respective Obligations will be subject to transfer, exchange, and registration provisions as set forth in the Ordinance, summarized under "The Bonds and Certificates - Transfer, Exchange, and Registration" below. PAYING AGENT/REGISTRAR ... The initial Paying Agent/Registrar for the Obligations is JPMorgan Chase Bank, National Association, Dallas, Texas. 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 Bonds or Certificates, as the case may be, are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds and Certificates. Upon any change in the Paying Agent/Registrar for the Bonds or Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds and Certificates affected by the changes by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. Interest` on the Obligations shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (hereinafter defined), and such interest shall be paid (i) by check sent United States Mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. Principal of the Obligations will be paid to the registered owner at their stated maturity or earlier redemption upon presentation to designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal of or interest on the Obligations shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the designated payment/transfer office of the Paying Agent/Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book -Entry -Only System should be discontinued, the Bonds and Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender 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. Bonds and Certificates may be assigned by the execution of an assignment form on the respective Bonds and Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds and Certificates will be delivered by the Paying Agent/Registrar, in lieu of the Bonds and Certificates being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Bonds and Certificates issued in an exchange or transfer of Bonds and 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 Bonds and 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 Bonds and 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 Bonds and 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 Bonds and Certificates. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond or 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 Bond or Certificate. RECORD DATE FOR INTEREST PAYMENT ... The record date ("Record Date") for the interest payable on the Bonds and Certificates on any interest payment date means the close of business on the last business day of the month next preceding. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest ("Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered RJ owner of a Bond or Certificate to be paid on the Special Payment Date that appears 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. OBLIGATIONHOLDERs REMEDIES ... The respective Ordinances authorizing the issuance of the Obligations do not establish or identify specific events of default with respect to such Obligations. Under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the ordinance authorizing the issuance of such Obligation. Although a registered owner could presumably obtain a judgment against the City if a default occurred in the payment of the principal of or interest on any such Obligations, 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 Obligations as they become due. The enforcement of such remedy may be difficult and time consuming and a registered owner could he required to enforce such remedy on a periodic basis. The respective Ordinances do not provide for the appointment of a trustee to represent the interest of the registered owners upon any failure of the City to perform in accordance with the terms of such Ordinances, or upon any other condition. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, 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 bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce 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 Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors. DEFEASANCE ... The Ordinances provide that the City may discharge its obligations to the registered owners of any or all of the Obligations to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law, such discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of the State of Texas a sum of money equal to the principal of, premium, if any, and all interest to accrue on the Obligations to maturity or date of redemption or (ii) by depositing with an eligible place of payment (paying agent) for obligations of the City amounts sufficient to provide for the payment and/or redemption of the Obligations; provided that such deposits may be invested and reinvested only in (a) direct noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the City adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investing rating firm not less than AAA or its equivalent; and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the City adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The foregoing obligations may be in book entry form, and shall mature and/or bear interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemption of the Obligations. If any of such Obligations are to be redeemed prior to their date of maturity, provisions must have been made for giving notice of redemption as provided in the Ordinances. 13 TAX INFORMATION AD VALOREM TAx LAW ... The appraisal of property within the City is the responsibility of the Tarrant 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 Texas Property Tax Code (the 'Property Tax Code"), for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Article VIII, Section 1-b, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 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; the minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under, Article VIII, Section 1-b, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. 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. Under Article VIII and State law, the governing body of a county, municipality or junior college district, may freeze the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residence homestead and to a surviving spouse living in such homestead who is disabled or is at least 55 years of age. If improvements (other than maintenance or repairs) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. 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 Sections 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. 14 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 difference between any increase in the assessed valuation of taxable real property in the TIF in excess of the base value of taxable real property in the TIF is known as the "Incremental Value," and during the existence of the TIFs, taxes levied by the City against the Incremental Value in the TIFs are restricted to paying project and financing costs within the TIFs and are not available for the payment of other obligations of the City, including the Obligations. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE ... Section 26.05 of the Property Tax Code provides that the governing body of a taxing unit is required to adopt the annual tax rate for the unit before the later of September 30 or the 60'x' day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. Furthermore, Section 26.05 provides that the City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings are held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet 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. 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." 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 due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: 15 Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 July 10 5 15 July 12 6 18 15 After July, penalty remains at 121/o, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, up to a 20% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 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 $60,000. The City has granted an additional exemption of 20% of the market value of residence homesteads with a minimum exemption of $5,000. See Table I for a listing of the amounts of the exemptions described above. The City has not adopted the tax freeze for citizens who are disabled or are 65 years of age or older, which became a local option and subject to local referendum on January 1, 2004. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; does not tax lease value on personal use vehicles; and the City contracts with the Grapevine-Colleyville Independent School District for the collection of its taxes. The City does not permit split payments, and discounts are not allowed. The City does not tax freeport property. The City does not collect the additional one-half cent sales tax for reduction of ad valorem taxes. TAX ABATEMENT POLICY ... The City does not have a tax abatement policy. TAX INCREMENT FINANCE ZONES.. The City has established the Tax Increment Financing Reinvestment Zone Number One, comprised of approximately 175 acres in the northeast area of the City. The tax increment base for the Reinvestment Zone Number One established on January 1, 1996 was $7,647,325. As of September 30, 2005, the Reinvestment Zone Number One Taxable Assessed Value is $207,460,497. The project for which the Zone was created was completed on October 31, 1997. The City has additionally established the Tax Increment Financing Reinvestment Zone Number Two, comprised of approximately 121.817 acres in the northeast area of the City. The tax increment base for the Reinvestment Zone Number Two established on January 1, 1998 was $744,866. The Gaylord Opryland Hotel ("Gaylord") has entered into litigation with the Tarrant Appraisal District concerning the appraised value of their property located in Tax Increment Reinvestment Zone Number Two. Based upon the ongoing litigation and negotiation, the City anticipates that Gaylord and the Tarrant Appraisal District will agree on an appraised value for the Gaylord property located within Tax Increment Reinvestment Zone Number Two. As a result of such agreement, the City estimates that the taxable value in Tax Increment Reinvestment Zone Number Two will be $167,801,138 for tax year 2004, $204,576,558 for tax year 2005, and $214,576,558 for tax year 2006. These numbers are estimates only and could change based upon the ultimate outcome of the litigation and a settlement agreement, if any, reached by the Gaylord and the Tarrant Appraisal District. The final resolution of the litigation will determine the taxable value of the Gaylord property and the amount of the available TIF Increment in Tax Increment Reinvestment Zone Number Two. As of September 30, 2004, approximately 100% of permanent improvements have been made to Reinvestment Zone Number Two. 16 TABLE I - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2005/06 Market Valuation Established by Tarrant Appraisal District (as of September 1, 2005) Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions $ 374,927,600 Over 65 Years of Age 62,593,082 Disabled Exemptions 1,036,500 Veterans Exemptions 1,153,600 Pollution Control Exemptions 94,952 Solar/Wind Power Exemptions 9,774 Freeport Exemptions 495,069,833 Open -Space Land Use Reductions 52,453,731 Prorated Absolutes 38,183 Nominal Value Reductions 14,853 2005/06 Taxable Assessed Valuation 2005/06 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number One 2005/06 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number Two 2005/06 Taxable Assessed Valuation available for General Fund Obligations and Debt of City 2006/07 Net Taxable Assessed Valuation including property under protest as of June 12, 2006 City Funded Debt Payable from Ad Valorem Taxes (Z) General Obligation Bonds (as of 6-1-06) $ 66,510,000 Certificates of Obligation (as of 6-1-06) 71,930,000 Equipment Acquisition Notes (as of 6-1-06) 1,140,000 The Certificates 3,760,000 The Bonds 5,245,000 Funded Debt Payable from Ad Valorem Taxes Less Self -Supporting Debt: Combination Tax and Tax Increment Reinvestment Zone Revenue Certificates of Obligation (as of 6-1-06)") Lake Enterprise Notes and Certificates of Obligations (as of 6-1-06) (4) Hotel Occupancy Tax System Lake Park Certificates of Obligation Net Funded Debt Payable From Ad Valorem Taxes Interest and Sinking Fund as of June 1, 2006 Ratio Total Funded Debt to Taxable Assessed Valuation ................................................. . 2006 Estimated Population - 47,500 Per Capita Taxable Assessed Valuation - $114,256 Per Capita Total Funded Debt - $3,128 $ 6,414,552,194 987,392,108 $ 5,427,160,086 (199,923,510) (204,576,558) t'} $ 5,022,660,018 $ 5,588,615,453 $ 148,585,000 52,090,000 4,719,145 320,000 2,060,000 $ 91,775,855 $ 2,255,776 2.74% (1) The Gaylord Opryland Hotel ("Gaylord") has entered into litigation with the Tarrant Appraisal District concerning the appraised value of their property located in Tax Increment Reinvestment Zone Number Two. Based upon the ongoing litigation and negotiation, the City anticipates that Gaylord and the Tarrant Appraisal District will agree on an appraised value for the Gaylord property located within Tax Increment Reinvestment Zone Number Two. As a result of such agreement, the City estimates that the taxable value in Tax Increment Reinvestment Zone Number Two will be $167,801,138 for tax year 2004, $204,576,558 for tax year 2005, and $214,576,558 for tax year 2006. These numbers are estimates only and could change based upon the ultimate outcome of the litigation and a settlement agreement, if any, reached by the Gaylord and the Tarrant Appraisal District. The final resolution of the litigation will determine the taxable value of the Gaylord property and the amount of the available TIF Increment in Tax Increment Reinvestment Zone Number Two. (2) This statement of indebtedness does not include currently outstanding $24,447,824 Waterworks and Sewer System (the "System") revenue bonds, as these bonds are payable solely from the net revenues of the System, as defined in the ordinances authorizing such bonds. (3) The self-supporting amount is a projection of debt by the City based on actual historical payments from the Tax Increment Reinvestment Zone Funds. The amount of self-supporting debt is based on the percentage of revenue support as shown in Table 10. There is no guarantee that these payments will continue in the future. If the payments are not made from the revenues in the future, the difference will have to be paid with ad valorem taxes. (4) Certificate and Note debt in the amounts shown for which repayment is provided from revenues of the Lake Enterprise Fund. The amount of self-supporting debt is based on the percentages of revenue support as shown in Table 10. It is the City's current policy to provide these payments from Fund revenues; this policy is subject to change in the future. In the event the payments are not made from Fund revenues, the City will be required to levy an ad valorem tax in an amount sufficient to make such payments. 17 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY Taxable Appraised Value for Fiscal Year Ended September 30, 2006 2005 2004 %of %of %of Category Amount Total Amount Total Amount Total Real, Residential, Single -Family $ 2,131,544,375 33.23% $ 2,052,562,907 32.16% $ 1,964,374,887 33.09% Real, Residential, Multi -Family 307,506,466 4.79% 280,451,216 4.39% 287,029,406 4.83% Real, Vacant Lots Tracts 109,809,741 1.71% 105,098,629 1.65% 106,298,853 1.79% Real, Acreage (Land Only) 105,828,747 1.65% 115,957,997 1.82% 126,583,447 2.13% Real, Farm and Ranch Improvements 2,568,367 0.04% 2,417,897 0.04% 2,382,927 0.04% Real, Commercial 1,545,597,134 24.10% 1,439,927,013 22.56% 1,254,791,876 21.14% Real, Industrial 37,814,770 0.59% 40,705,402 0.64% 14,652,926 0.25% Real and Tangible Personal, Utilities 184,618,607 2.88% 237,407,049 3.72% 166,164,616 2.80% Real, Mobile Homes 7,962,774 0.12% 7,817,281 0.12% 8,176,799 0.14% Tangible Personal, Business - 0.00% - 0.00% - 0.00% Tangible Personal, Commercial 1,799,486,983 28.05% 1,939,745,844 30.39% 1,849,545,899 31.15% Tangible Personal, Industrial 164,504,531 2.56% 143,245,651 2.24% 136,629,168 2.30% Tangible Personal, Mobile Homes - 0.00% - 0.00% - 0.00% Tangible Personal, Other 335,159 0.01% 165,093 0.00% 1,000,000 0.02% Real Property, Inventory 16,974,540 0.26% 17,213,150 0.27% 19,338,550 0.33% Total Appraised Value Before Exemptions $ 6,414,552,194 100.00% $ 6,382,715,129 100.00% $ 5,936,969,354 100.00% Adjustments (125,638,433) (52,543,460) Less: Total Exemption/Reductions (987,392,108) (1,029,781,696) (1,004,318,299) Taxable Assessed Value $ 5,427,160,086 $ 5,227,295,000 $ 4,880,107,595 Taxable Appraised Value for Fiscal Year Ended September 30, 2003 2002 %of %of Category Amount Total Amount Total Real, Residential, Single -Family $ 1,848,342,618 31.72% $ 1,673,214,512 30.17% Real, Residential, Multi -Family 252,912,480 4.34% 200,728,832 3.62% Real, Vacant Lots Tracts 100,697,189 1.73% 104,297,996 1.88% Real, Acreage (Land Only) 138,891,577 2.38% 171,706,596 3.10% Real, Farm and Ranch Improvements 2,353,699 0.04% 2,160,035 0.04% Real, Commercial 1,198,547,815 20.57% 1,086,095,366 19.59% Real, Industrial 14,825,922 0.25% 14,530,371 0.26% Real and Tangible Personal, Utilities 147,113,035 2.52% 102,859,092 1.85% Real, Mobile Homes 8,173,982 0.14% 9,059,623 0.16% Tangible Personal, Business - 0.00% - 0.00% Tangible Personal, Commercial 1,966,523,825 33.75% 2,126,886,729 38.35% Tangible Personal, Industrial 138,115,671 2.37% 46,334,087 0.84% Tangible Personal, Mobile Homes - 0.00% - 0.00% Tangible Personal, Other - 0.00% 111,976 0.00% Real Property, Inventory 10,141,975 0.17% 7,290,582 0.13% Total Appraised Value Before Exemptions $ 5,826,639,788 100.00% $ 5,545,275,797 100.00% Adjustments (52,070,988) (86,019,171) Less: Total Exemption/Reductions (1,008,207,220) (685,393,608) Taxable Assessed Value $ 4,766,361,580 $ 4,773,863,018 NOTE: Valuations shown are certified taxable assessed values reported by the Tarrant Appraisal District to the State Controller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal District updates records. 18 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY (1) Source: The City of Grapevine. (2) Source: Tarrant Appraisal District. (3) Projected, includes the Bonds and Certificates. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal 2005/06 % of Total Taxable Ratio Fiscal Assessed Distribution Taxable Tax Debt Tax Debt Funded Year General Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population (1) Valuation (2) Per Capita of Year Valuation Capita 2002 45,500 $ 4,773,863,018 $ 104,920 $ 157,940,000 3.31% $3,471 2003 46,400 4,766,361,580 102,723 157,645,000 3.31% 3,398 2004 46,684 4,880,107,595 104,535 148,300,000 3.04% 3,177 2005 47,036 5,227,295,000 111,134 144,685,000 2.77% 3,076 2006 47,500 5,427,160,086 114,256 147,615,000 c3' 2.72% 3,108 (1) Source: The City of Grapevine. (2) Source: Tarrant Appraisal District. (3) Projected, includes the Bonds and Certificates. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal 2005/06 % of Total Taxable Taxable Year Assessed Distribution Valuation Valuation Commercial Airline Ended Tax General Interest and 3.96% % Current %Total 9/30 Rate Fund Sinking Fund Tax Levy Collections Collections 2002 $ 0.36600 $ 0.135924 $ 0.230076 $ 17,431,826 98.39% 99.20% 2003 0.36600 0.148900 0.217100 17,662,726 98.60% 99.40% 2004 0.36600 0.123700 0.242300 18,043,645 99.00% 99.70% 2005 0.36350 0.141560 0.221940 19,246,410 97.62% 98.90% 2006 0.36250 0.128532 0.233968 19,541,164 96.30% (�) 96.90% c�) (1) Collections for part year only, through June 1, 2006. TABLE 5 - TEN LARGEST TAXPAYERS Name of Taxpayer American Airlines Inc. Gaylord Texan Resort & Conv. Ctr. CAE Simuflite Grapevine Mills Ltd. Partnership Delta Airlines/Atlantic Southeast Airlines Verizon/GTE Mrah II Lp/Mrah III Lp TXU Electric Delivery John Qu. Hammons Hotel Lp Industrial Prop Holding Lp (1) The agreed upon Taxable Assessed Value. GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "The Certificates — Tax Rate Limitation"). EC 2005/06 % of Total Taxable Taxable Assessed Assessed Nature of Property Valuation Valuation Commercial Airline $ 279,544,698 5.15% Hotel 215,000,000 3.96% Simuflite Training School 189,735,933 3.50% Regional Shopping Mall 179,633,000 3.31% Commercial Airline 153,757,408 2.83% Telecommunication 144,648,117 2.67% Real Estate 57,893,568 1.07% Electric Service 43,823,485 0.81% Hotel 35,000,000 0.64% Real Estate 34,558,610 0.64% $ 1,333,594,819 24.57% (1) The agreed upon Taxable Assessed Value. GENERAL OBLIGATION DEBT LIMITATION ... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "The Certificates — Tax Rate Limitation"). EC TABLE 6 - TAX ADEQUACY (r) 2006 Principal and Interest Requirements $ 10,439,325 $0.1943 Tax Rate at 99.00% Collection Produces $ 10,439,522 Average Annual Principal and Interest Requirements, 2006 - 2027 $ 5,688,558 $0.1059 Tax Rate at 99.00% Collection Produces $ 5,689,889 Maximum Principal and Interest Requirements, 2007 $ 11,937,306 $0.2222 Tax Rate at 99.00% Collection Produces $ 11,938,558 (1) Includes the Bonds and Certificates, less self-supporting debt. TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax 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 Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. (1) Includes the Bonds and Certificates, less self-supporting debt. 20 2005/06 City's Taxable 2005/06 Total Estimated Overlapping Assessed Tax Funded % Funded Debt Taxing Jurisdiction Value Rate Debt Applicable 6/1/2006 City of Grapevine $ 5,427,160,086 $ 0.3625 $ 91,775,855 ' 100.00% $ 91,775,855 Carroll Independent School District 4,476,091,550 1.9350 161,464,522 5.38% 8,686,791 Coppell Independent School District 5,950,974,979 1.7290 111,023,754 0.48% 532,914 Dallas County 135,408,062,459 0.2139 239,293,073 0.01% 23,929 Dallas County Community College District 140,647,666,399 0.0816 106,935,000 0.01% 10,694 Dallas County Hospital District 135,408,062,459 0.2540 - 0.01% - Grapevine-Colleyville Independent School District 13,251,870,194 1.7000 282,953,264 67.47% 190,908,567 Tarrant County 116,397,460,305 0.2725 167,040,000 5.24% 8,752,896 Tarrant County Hospital District 116,397,460,305 0.2354 30,330,000 5.24% 1,589,292 Tarrant County College District 116,397,460,305 0.1394 60,625,000 5.24% 3,176,750 Total Direct and Overlapping Funded Debt $ 305,457,688 Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation .............................................. 5.63% Per Capita Overlapping Funded Debt.............................................................................. $ 6,430.69 (1) Includes the Bonds and Certificates, less self-supporting debt. 20 DEBT INFORMATION a o 0 0 O W V1 �O N rn O o0 .•. �O �D rn co M ^ 'O O, .-• D\ O rn O h �c O N O h "I N O O N 0 [Y lc On N Vlc� O A y T h O+ M M o0 7 h^C2O 31 co" UT V' Q n r 7 rn eY W lD v1 N v1 ... N N� 00 N h V' C tt ,� rn 0. '� O .• .••• O D\ h h n h �D rn 7 7 N N^ ry d ,�, G eY �• .-, vt .-� v1 rn o0 V• 00 U M N �t r r � r r a, a, D\ .• m �O [� op M N V' �D N N �O O EO x N �C m M vi v'i m O0 rn m oo O � � O0 V C h r .�.. 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O N - h- N .-• � N N f a0 O\ O O O O O` O, a, O, O, b N 7 V M N N N N h N O( O 0 0 4 ^ N m ^ ^ h N N N N N N N N C O O O O O O O O O O O O O O O O O O O O O O N N N N N N 21 - C14 In TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/2006. . . ......................... $ 10,439,325 t'l Interest and Sinking Fund Balance as of 9/30/2005 ................................. $ 2,256,776 Interest and Sinking Fund Tax Levy ........................................... 10,849,407 Penalty and Interest........................................................ 110,000 Budgeted Transfers........................................................... 264,849 (2y Estimated Investment Income ............................... . .................. 80,000 13,561,032 Estimated Balance, 9/30/2006.................................................................. $ 3,121,707 (1) Excludes TIF self-supporting debt service. See "Table 10 — Computation of Self -Supporting Debt." (2) Includes Golf Course user fees. TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT (r) Tax Increment Reinvestment Zones Beginning Fund Balance, 9-30-05 ....................................................................... $ 13,222,000 Net Tax Increment Reinvestment Zone Revenue Available for Debt Service ................................ 8,765,561 t2) Requirements for Tax Increment Reinvestment Zone Obligations ........................................ 4,156,473 Projected Fund Balance, 9-30-06 ................................................................. $ 17,831,089 Percentage of Tax Increment Reinvestment Zone Revenue Debt Self -Supporting ............................ 100.00% Lake Enterprise Fund Revenue Available for Debt Service from Lake Enterprise Fund, Fiscal Year Ended 9-30-05 (Z) ................. $ 722,266 Less: Revenue Bond Requirements, 2006 Fiscal Year ................................................. - Balance Available for Other Purposes............................................................ $ 722,266 System General Obligation Bond Requirements, 2006 Fiscal Year ....................................... 595,746 Balance.................................................................................... $ 126,520 Percentage of Lake Enterprise Certificates, Self -Supporting ......................................... 100.00% Hotel Occupancy Tax Fund Revenue Available for Debt Service from Hotel Occupancy Tax Fund, Fiscal Year Ended 9-30-05 .............. $ 1,135,614 Less: Revenue Bond Requirements, 2006 Fiscal Year ................................................. - Balance Available for Other Purposes............................................................ $ 1,135,614 System General Obligation Bond Requirements, 2006 Fiscal Year ....................................... 10,933 Balance.................................................................................... $ 1,124,681 Percentage of Hotel Occupancy Tax Fund Certificates, Self -Supporting ................................... 100.00% Lake Parks Special Revenue Fund (3) Budgeted Revenue Available for Lake Parks Special Revenue Fund, Fiscal Year Ended 9-30-06 ............... $ 102,014 System General Obligation Bond Requirements, 2006 Fiscal Year ....................................... 73,763 Balance.................................................................................... $ 28,252 Percentage of Lake Parks Special Revenue Fund, Self -Supporting ....................................... 100.00% (1) Unaudited. (2) The Gaylord Opryland Hotel ("Gaylord") has entered into litigation with the Tarrant Appraisal District concerning the appraised value of their property located in Tax Increment Reinvestment Zone Number Two. Based upon the ongoing litigation and negotiation, the City anticipates that Gaylord and the Tarrant Appraisal District will agree on an appraised value for the Gaylord property located within Tax Increment Reinvestment Zone Number Two. As a result of such agreement, the City estimates that the taxable value in Tax Increment Reinvestment Zone Number Two will be $167,801,138 for tax year 2004, $204,576,558 for tax year 2005, and $214,576,558 for tax year 2006. These numbers are estimates only and could change based upon the ultimate outcome of the litigation and a settlement agreement, if any, reached by the Gaylord and the Tarrant Appraisal District. The final resolution of the litigation will determine the taxable value of the Gaylord property and the amount of the available TIF Increment in Tax Increment Reinvestment Zone Number Two. (3) Lake Parks Special Revenue fund debt service will be paid from capitalized interest through July 2007. The City expects revenues from the Lake Parks to be sufficient to pay its debt service from that point forward. However, the City cannot guarantee that revenues from the Lake Parks will be sufficient at that time to pay debt service on those obligations. If revenues are insufficient, the City is obligated to pay the debt service on those obligations from ad valorem tax revenue. 22 TABLE I I - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Date Purpose Authorized Street Improvements 12/5/1998 Amount Amount Previously Authorized Issued $ 30,245,000 $ 24,997,314 Amount Being Unissued Issued Balance $ 5,247,686 $ 0 (1) Includes a premium on the Bonds of $2,686. ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... The City anticipates the issuance of approximately $3,000,000 Certificates of Obligation within the next twelve months. TABLE 12 - OTHER OBLIGATIONS The City has no unfunded debt outstanding as of July 1, 2006. 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 City's Annual Financial Report".) 23 FINANCIAL INFORMATION TABLE 13 - CHANGES IN NET ASSETS (i) Revenues: Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Property Taxes Hotel Occupancy Taxes Sales Taxes Mixed Beverage Taxes Franchise Fees Investment Earnings Miscellaneous Gain (Loss) on Sale/Retirement of Fixed Assets Total Revenues Expenses: General Government Public Safety Culture and Recreation Public Works Interest on Long -Term Debt Total Expenses Increase in Net Assets before Transfers Transfers Changes in Net Assets Net Assets - October 1 Net Assets - September 30 Fiscal Year Ended September 30, 2005 2004 2003 $ 11,637,000 $ 13,266,501 $ 13,518,12I 1,944,000 1,813,067 1,893,118 2,732,000 597,366 1,108,954 26,066,000 23,599,775 22,768,284 7,566,000 4,931,201 3,380,659 18,746,000 17,975,926 16,040,397 863,000 685,801 578,218 5,369,000 5,210,589 4,944,789 1,099,000 619,869 1,106,609 101,000 28,788 155,158 - - (58,080) $ 76,123,000 $ 68,728,883 $ 65,436,227 $ 14,564,000 $ I2,382,413 $ 13,062,473 19, 094,000 17, 597,695 16,366,353 17,055,000 16,090,083 14,069,760 9,077,000 10,363,172 14,342,030 5,993,000 7,682,256 7,603,547 $ 65,783,000 $ 64,115,619 $ 65,444,163 $ 10,340,000 $ 4,613,264 $ (7,936) 1,501,000 - - $ 11,841,000 $ 4,613,264 $ (7,936) 32,470,000 27,856,441 27,864,377 $ 44,311,000 $ 32,469,705 $ 27,856,441 (1) In fiscal year ended September 30, 2003, the City implemented Government Accounting Standards Board Statement No. 34 ("GASB 34"). 24 TABLE 13A - GENERAL FUND REVENUES AND EXPENDITURE HISTORY 25 Fiscal Year Ended September 30, Revenues 2005 2004 2003 2002 2001 Taxes $ 32,395,000 $ 29,941,926 $ 28,715,417 $ 27,165,580 $ 29,239,672 Licenses and Permits 1,530,000 1,263,663 1,482,165 1,536,786 1,146,428 Intergovernmental 139,000 112,859 129,428 217,614 4,381,910 Charges for Services 4,024,000 5,593,257 5,784,270 5,009,819 2,984,179 Fines and Forfeitures 1,713,000 1,961,990 2,046,991 2,101,526 2,149,638 interest and Miscellaneous 893,000 902,365 1,119,469 809,259 876,507 Total Revenues $ 40,694,000 $ 39,776,060 $ 39,277,740 $ 36,840,584 $ 40,778,334 Expenditures General Government $ 14,379,000 $ 12,897,174 $ 12,168,352 $ 11,686,622 $ 10,510,527 Public Safety 17,187,000 16,167,628 15,846,568 15,532,602 17,640,884 Culture and Recreation 5,808,000 5,991,741 5,673,980 5,184,010 5,737,648 Capital Outlay 113,000 60,881 80,649 - - Public Works 4,945,000 5,101,265 4,770,722 4,772,777 6,067,277 Total Expenditures $ 42,432,000 $ 40,218,689 $ 38,540,271 $ 37,176,011 $ 39,956,336 Excess (Deficiency) of Revenues Over Expenditures $ (1,738,000) $ (442,629) $ 737,469 $ (335,427) $ 821,998 Other Financing Sources Budgeted Transfers In $ 4,194,000 $ - $ 304,000 $ 300,000 $ 400,000 Budgeted Transfers Out (1,746,000) (1,101,261) (1,068,765) (1,753,450) (1,295,979) Total Transfers $ 2,448,000 $ (1,101,261) $ (764,765) $ (1,453,450) $ (895,979) Net Increase (Decrease) $ 710,000 $ (1,543,890) $ (27,296) $ (1,788,877) $ (73,981) Other Miscellaneous Adjustments - - - Residual Equity Transfer - - - 262,087 - Beginning Fund Balance 4,561,000 6,104,579 6,131,875 7,658,665 7,732,646 Ending Fund Balance $ 5,271,000 $ 4,560,689 $ 6,104,579 $ 6,131,875 $ 7,658,665 25 TABLE 14 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Bonds. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Fiscal Year Ended 9/30 2002 2003 2004 2005 2006 % of Equivalent of Total Ad Valorem Ad Valorem Per Collected Tax Levy Tax Rate Capita $ 14,939,771 85.70% $ 0.3129 $ 328 16,040,397 90.81% 17,975,926 99.62% 18,746,000 97.40% 11,325,647 57.96% 0.3365 346 0.3684 385 0.3586 399 0.2087 238 (1) Earned through April 1, 2006. FINANCIAL POLICIES Basis of Accounting ... The accounting policies of the City conform to generally accepted accounting principles for governmental entities as promulgated by the Government Accounting Standards Board. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the combined balance sheet. Operating statements of these funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the combined balance sheet. Fund equity is segregated into contributed capital and retained earnings components. Proprietary fund -type operating statements present increases (revenues) and decreases (expenses) in net total assets. The modified accrual basis of accounting is used by all governmental funds types, expendable trust funds and agency funds. Under the modified accrual basis of accounting revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). "Measurable" means collectible within the current period of soon enough thereafter to be used to pay liabilities of the current period. Expenditures are generally recorded when the related fund liability is incurred. However, principal of and interest on general long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Major revenue sources which have been treated as susceptible to accrual under the modified basis of accounting include property taxes, charges for services, intergovernmental revenues, and investment of idle funds. The accrual basis of accounting is utilities by proprietary funds types. Under this method, revenue is recorded when earned and expenses are recorded at the time liabilities are incurred. The City reports deferred revenue on its combined balance sheet. Deferred revenues arise when a potential revenue does not meeting both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualified expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Fund Balances ... It is the City's policy regarding the General Fund and Enterprise Funds that working capital resources should be maintained at a minimum of 101/o of the Fund's operating expenditure budget. The City maintains its various debt service funds in accordance with the covenants of the Ordinances. Use of Bond Proceeds... The City's policy is to use bond proceeds for capital expenditures only. Such revenues are never to be used to fund normal City operations. 26 Budgetary Procedures... The City Charter establishes the fiscal year as the twelve-month period beginning each October 1. Each year between May and July, the City Manager analyzes and then after review, submits a budget of estimated revenues and expenditures to the City Council. Subsequently, the City Council will hold work sessions to discuss and amend the budget to coincide with their direction of the City. Various public hearings may be held to comply with state and local statutes. The City Council will adopt a budget prior to September 30. if the Council fails to adopt a budget then the budget presented to the Council by the City Manager becomes the adopted budget. During the fiscal year, budgetary control is maintained by the monthly review of departmental appropriation balances. Actual operations are compared to the amounts set forth in the budget. Departmental appropriations that have not been expended 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 in the ensuing fiscal year's budget. INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENTS. Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) effective September 1, 2005, certificates of deposit (i) issued by a depository institution that has its main office or a branch office in the State of Texas, that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by Bonds described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits, or (ii) where; (a) the funds are invested by the City through a depository institution that has a main office or branch office in this state and that is selected by the City; (b) the depository institution selected by the City arranges for the deposit of funds in one or more federally insured depository institutions, wherever located; (c) the certificates of deposit are insured by the United States or an instrumentality of the United States; (d) the depository institution acts as a custodian for the City with respect to the certificates of deposit; and (e) at the same time that the certificates of deposit are issued, the depository institution selected by the City receives deposits from customers of other federally insured depository institutions, wherever located, that is equal to or greater than the funds invested by the City through the depository institution selected under clause (ii)(a) above„ (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than "A" or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City's name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less, (10) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least "A-1" or "P -I" or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated at least "A-1" or "P-1" or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (12) no -loan money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share and (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 806-1 et. seq.) or with the State Security Board to provide for the investment and management of its public funds or other funds under its control for a term of up to two years but the City retains ultimate responsibility as fiduciary of its 27 assets. 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 pursuant to 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. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt an order or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the said order or resolution, (3) require any investment officers' with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (4) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (6) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in 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 services, and to invest no portion of bond proceeds, reserves and funds held for debt service in mutual funds; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. TABLE I5- CURRENT INVESTMENTS As of March 31, 2006, the City's investable funds were invested in the categories listed above. As of such date, 75% of the City's portfolio will mature within six months. The market value of the investment portfolio was approximately 100% of its purchase price. Book Market Description Percent Value Value Government Securities 42.45% $ 29,129,807 $ 29,158,923 TexPoonogic 57.55% 39,493,144 39,486,434 100.00% $ 68,622,951 $ 68,645,357 28 TAX MATTERS Tax EXEMPTION ... In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on the Obligations is excludable from gross income for federal income tax purposes under existing and (ii) interest on the Obligations is not subject to the alternative minimum tax on individuals and corporations, except as described below in the discussion regarding the adjusted current earnings adjustment for corporations. The Internal Revenue Code of 1986, as amended (the "Code"), imposes a number of requirements that must be satisfied for interest on state or local obligations, such as the Obligations, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of bond proceeds be paid periodically to the United States and a requirement that the issuer file an information report with the Internal Revenue Service. The Issuer has covenanted in the Ordinances that it will comply with these requirements. Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinances pertaining to those sections of the Code that affect the exclusion from gross income of interest on the Obligations for federal income tax purposes and, in addition, will rely on representations by the Issuer, the Issuer's Financial Advisor and the Underwriters with respect to matters solely within the knowledge of the Issuer, the Issuer's Financial Advisor and the Underwriters, respectively, which Bond Counsel has not independently verified. Bond Counsel will further rely on the report of Grant Thornton LLP, certified public accountants, regarding the mathematical accuracy of certain computations. If the Issuer should fail to comply with the covenants in the Ordinances or if the foregoing representations or report should be determined to be inaccurate or incomplete, interest on the Obligations could become taxable from the date of delivery of the Obligations, regardless of the date on which the event causing such taxability occurs. The Code also imposes a 20% alternative minimum tax on the "alternative minimum taxable income" of a corporation if the amount of such alternative minimum tax is greater than the amount of the corporation's regular income tax. Generally, the alternative minimum taxable income of a corporation (other than any S corporation, regulated investment company, REIT, REMIC or FASIT), includes 75% of the amount by which its "adjusted current earnings" exceeds its other "alternative minimum taxable income." Because interest on tax exempt obligations, such as the Obligations, is included in a corporation's "adjusted current earnings," ownership of the Obligations could subject a corporation to alternative minimum tax consequences. Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or disposition of, the Obligations. Bond Counsel's opinions are based on existing law, which is subject to change. Such opinions are further based on Bond Counsel's knowledge of facts as of the date thereof. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Bond Counsel's attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, Bond Counsel's opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather, such opinions represent Bond Counsel's legal judgment based upon its review of existing law and in reliance upon the representations and covenants referenced above that it deems relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross income for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Obligations. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer and the Owners may not have a right to participate in such audit. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit regardless of the ultimate outcome of the audit. ADDITIONAL FEDERAL INCOME TAX CONSIDERATIONS COLLATERAL Tax CONSEQUENCES ... Prospective purchasers of the Obligations should be aware that the ownership of tax exempt obligations may result in collateral federal income tax consequences to financial institutions, life insurance and property and casualty insurance companies, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualifying for the earned income credit. In addition, certain foreign corporations doing business in the United States may be subject to the "branch profits tax" on their effectively connected earnings and profits, including tax exempt interest such as interest on the Obligations. These categories of prospective purchasers should consult their own tax advisors as to the applicability of these consequences. Prospective purchasers of the Obligations should also be aware that, under the Code, taxpayers are required to report on their returns the amount of tax-exempt interest, such as interest on the Obligations, received or accrued during the year. 29 TAx ACCOUNTING TREATMENT OF ORIGINAL ISSUE PREMIUM ... The issue price of all or a portion of the Obligations may exceed the stated redemption price payable at maturity of such Obligations. Such Obligations (the "Premium Obligations") are considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis of a Premium Obligation in the hands of an initial owner is reduced by the amount of such excess that is amortized during the period such initial owner holds such Premium Obligation in determining gain or loss for federal income tax purposes. This reduction in basis will increase the amount of any gain or decrease the amount of any loss recognized for federal income tax purposes on the sale or other taxable disposition of a Premium Obligation by the initial owner. No corresponding deduction is allowed for federal income tax purposes for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Obligation that is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Obligation) is determined using the yield to maturity on the Premium Obligation based on the initial offering price of such Obligation. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of Premium Obligations that are not purchased in the initial offering at the initial offering price may be determined according to rules that differ from those described above. All owners of Premium Obligations should consult their own tax advisors with respect to the determination for federal, state, and local income tax purposes of amortized bond premium upon the redemption, sale or other disposition of a Premium Obligation and with respect to the federal, state, local, and foreign tax consequences of the purchase, ownership, and sale, redemption or other disposition of such Premium Obligations. TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT OBLIGATIONS ... The issue price of all or a portion of the Obligations may be less than the stated redemption price payable at maturity of such Obligations (the "Original Issue Discount Obligations"). In such case, the difference between (i) the amount payable at the maturity of each Original Issue Discount Obligation, and (ii) the initial offering price to the public of such Original Issue Discount Obligation constitutes original issue discount with respect to such Original Issue Discount Obligation in the hands of any owner who has purchased such Original Issue Discount Obligation in the initial public offering of the Obligations. Generally, 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 Obligation equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Obligation continues to be owned by such owner. Because original issue discount is treated as interest for federal income tax purposes, the discussion regarding interest on the Obligations under the caption " Collateral Tax Consequences " generally applies, and should be considered in connection with the discussion in this portion of the Official Statement. In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Obligation prior to stated maturity, however, the amount realized by such owner in excess of the basis of such Original Issue Discount Obligation 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 Obligation was held by such initial owner) is includable in gross income. The foregoing discussion assumes that (a) the Underwriter has purchased the Obligations for contemporaneous sale to the public and (b) all of the Original Issue Discount Obligations have been initially offered, and a substantial amount of each maturity thereof has been sold, to the general public in arm's-length transactions for a price (and with no other consideration being included) not more than the initial offering prices thereof stated on the cover page of this Official Statement. Neither the Issuer nor Bond Counsel has made any investigation or offers any comfort that the Original Issue Discount Obligations will be offered and sold in accordance with such assumptions. Under existing law, the original issue discount on each Original Issue Discount Obligation 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 Obligations 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 Obligation 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 Obligation. The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue Discount Obligations 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 Obligations should consult their own tax advisors with respect to the determination for federal, state, and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Obligations 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 Obligations. 30 CONTINUING DISCLOSURE OF INFORMATION In the Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to certain information vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement under Tables numbered 1 through 6 and 8 through 15 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2006. 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 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 -I2. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial information and operating data which is customarily prepared by the City by the required time, and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas (the "MAC") has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the MAC is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is 512/476-6447. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office" for information filings made by municipal issuers, such as the City. A municipal issuer may submit its information filings with the central post office, which then transmits such information to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and utilized at www.DiselosureUSA.org ("DisclosureUSA" ). The City may utilize DisclosureUSA for the filing of information relating to the Obligations. 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 Obligations, if such event is material to a decision to purchase or sell Obligations: (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 Obligations; (7) modifications to rights of holders of the Obligations; (8) Bond calls; (4) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations; and (11) rating changes. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). AVAILABILITY of INFORMATION FROM NRMSIRS AND SID ... The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be available to holders of Obligations only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Obligations may seek a writ of mandamus to compel the City to comply with its agreement. 31 The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the SEC Rule 15c2-12 or a court of final jurisdiction enters judgment that such provisions of the SEC Rule 15c2-12 are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS ... During the last five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. OTHER INFORMATION RATINGS The presently outstanding tax supported debt of the City is rated "Al" by Moody's and "AA-" by S&P. The City also has issues outstanding which are rated "Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance companies. Applications for contract ratings on these issues have been made to Moody's and S&P. An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The ratings reflect only the respective views of such organization and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Obligations. LITIGATION It is the opinion of the City Attorney and City Staff that there is no pending, or to their knowledge, threatened litigation or other proceeding against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATION AND QUALIFICATION OF BONDS AND CERTIFICATES FOR SALE The sale of the Bonds and Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds and Certificates have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds or Certificates been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds or Certificates under the securities laws of any jurisdiction in which the Bonds and Certificates may be sold, assigned, pledged, hypothecated, or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds and Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Obligations by municipalities or other political subdivisions or public agencies of the state of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Obligations be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "Other Information — Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Obligations are legal investments for various institutions in those states. 32 LEGAL MATTERS The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Certificate and Initial Bond and to th,, effect that the Obligations are valid and legally binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinions of Bond Counsel, to like effect and to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under existing law and the Obligations are not private activity bonds, subject to the matters described under "Tax Matters" herein, including alternative minimum tax consequences for corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations, or which would affect the provision made for their payment or security, or in any manner questioning the validity of said Obligations will also be furnished. Bond Counsel did not take part in the preparation of the Notice of Sale and Bidding Instructions, the Official Bid Form and the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Obligations in the Official Statement to verify that such description conforms to the provisions of the Ordinance. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent on the sale and delivery of the Obligations. The legal opinion will accompany the Obligations deposited with DTC or will be printed on the Obligations in the event of the discontinuance of the Book -Entry -Only System. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements, and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents, and resolutions contained in this 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. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company may submit a bid for the Obligations, either independently or as a member of a syndicate organized to submit a bid for the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and does not assume any responsibility for the information, covenants, and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending, or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. INITIAL PURCHASER OF THE BONDS After requesting competitive bids for the Bonds, the City accepted the bid of (the "Initial Purchaser of the Bonds") to purchase the Bonds at the interest rates shown on the cover page of the Official Statement at a price of par plus a cash premium of $ . The Initial Purchaser of the Bonds can give no assurance that any trading market will be developed for the Bonds after their sale by the City to the Initial Purchaser of the Bonds. The City has no control over the price at which the Bonds are subsequently sold and the initial yield at which the Bonds will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser of the Bonds. INITIAL PURCHASER OF THE CERTIFICATES After requesting competitive bids for the Certificates, the City accepted the bid of (the "Initial Purchaser of the Certificates") to purchase the Certificates at the interest rates shown on page 3 of the Official Statement at a price of par plus a cash premium of $ . The Initial Purchaser of the Certificates can give no assurance that any trading market will be developed for the Certificates after their sale by the City to the Initial Purchaser of the Certificates. The City has no control over the price at which the Certificates are subsequently sold and the initial yield at which the Certificates will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser of the Certificates. 33 FORWARD LOOKING STATEMENTS The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements including in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City's actual results could differ materially from those discussed in such forward-looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official statement will prove to be accurate. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Obligations, the City will furnish a certificate, executed by proper officers, acting in their official capacity, to the effect that to the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement, or amendment thereto, on the date of such Official Statement, on the date of sale of said Obligations, and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The respective Ordinances authorizing the issuance of the Obligations will also approve the form and content of this Official Statement, and any addenda, supplement, or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Initial Purchasers. ATTEST: LINDA HUFF City Secretary 34 WILLIAM D. TATE. Mayor City of Grapevine, Texas APPENDIX A GENERAL INFORMATION REGARDING THE CITY THE Cts ... The City is a political subdivision of the State incorporated in 1907 and operates as a home -rule City under the general laws of the State and a charter approved by the voters in 1965. The City has a Council/Manager form of government in which the mayor and six council members are elected for staggered three-year terms with elections held annually in May. Policy making is the responsibility of, and is vested in, the City Council. The Council delegates the operational authority of the City to the City Manager, who is the chief administrative officer of the City. The City provides all the functions normally associated with a municipality including, but not limited to, public safety (i.e., police and fire personnel and equipment), health inspection and enforcement, water and sewer facilities, streets and drainage facilities and parks and recreational facilities. The City presently employs approximately 497 full-time staff members. POPULATION ... The City has had significant population growth during the past several years. These population estimates are as follows: Year Population Source Year Population Source 1970 7,023 U.S. Census 1993 31,902 City Estimate 1980 11,801 U.S. Census 1994 32,727 City Estimate 1981 15,245 Grapevine Community Profile 1995 33,211 City Estimate 1982 16,183 Grapevine Community Profile 1996 34,950 City Estimate 1983 18,121 Grapevine Community Profile 1997 36,000 City Estimate 1984 19,405 Grapevine Community Profile 1998 37,946 City Estimate 1985 22,002 Grapevine Community Profile 1999 39,190 City Estimate 1986 24,493 Grapevine Community Profile 2000 39,523 U.S. Census 1987 25,853 Grapevine Community Profile 2001 44,390 City Estimate 1988 27,132 City Estimate 2002 45,524 City Estimate 1989 27,257 City Estimate 2003 46,188 City Estimate 1990 29,202 U.S. Census 2004 46,684 City Estimate 1991 30,300 City Estimate 2005 47,036 City Estimate 1992 31,400 City Estimate 2006 47,500 City Estimate EcONonucs ... The proximity of the Dallas/Fort Worth International Airport ("DFW") greatly influences both industrial and residential growth of the City. DFW has been and is expected to continue to be an economic generator of employment, spin-off businesses and tax base, all of which benefit the City and the surrounding area. Approximately 65% of the airport is within the city limits of Grapevine. Several large business operations owe their genesis to DFW including air cargo services, flight kitchens, rent/lease car operations and SimuFlite Training Intemational, a company which provides jet pilot flight training in advanced flight simulators. Seven of the ten largest taxpayers of the City are directly related to DFW either by location or primary business sources. DFW contains approximately 18,000 acres and directly employs some 33,000 personnel. These employees have skills ranging from custodial level to highly trained jet aircraft pilots. A number of these people have purchased homes in the City and conduct their daily business here. DFW has approximately 19,400 parking spaces and is currently expanding parking facilities. Sales tax from parking fees generate about $330,000 in annual income for the City and hotels providing service for travelers at DFW and seminar space for business meetings generate approximately $2 million in annual hotel/motel tax revenue. MAJOR EMPLOYERS Estimated Number of Company Product Employees Dallas/Fort Worth International Airport Airport 16,420 Gaylord Texan Resort & Convention Center Hotel/Convention 1,800 Grapevine/Colleyville Independent School District School District 1,576 United Parcel Service Parcel Service 1,200 Baylor Medical Center Health Services 1,000 Gamestop Electronic/Software Distribution 600 City of Grapevine City Government 540 D/FW Hilton Hotel Hotel 400 SimuFlite Training International Pilot Training 300 Apollo Paper/John Harland Paper Products 200 Source: City of Grapevine, Department of Development Services. A-1 BUILDING PERMITS.. . The number and value of building permits issued by the City are: Fiscal Commercial Permits Residential Permits Total Year Number Number Number Total Ended of Dollar of Dollar of Dollar 9/30 Permits Value Permits Value Permits Value 2001 53 $ 364,294,642 89 $ 12,445,025 142 $ 376,739,667 2002 23 21,888,714 183 48,911,056 206 70,799,770 2003 28 34,396,654 158 43,615,909 186 78,012,563 2004 23 32,790,990 186 40,969,517 209 73,760,507 2005 42 37,857,000 132 45,413,000 174 83,270,000 Source: City of Grapevine records. RECREATION ... Located approximately two miles north of the downtown area of the City lies Grapevine Lake. The lake serves as the City reservoir and supplies approximately 50% of the water supply of the City. The lake covers a surface area of approximately 12,740 acres and has a shore line of 146 miles. The lake is 19 miles long and 2.5 miles wide at its widest point. The lake is owned and operated by the U.S. Corps of Engineers and is a major recreation area for swimming, fishing, picnicking and camping and draws some five million visitors each year to the area. The City also has an extensive park system which includes tennis courts, racquetball courts, baseball and softball diamonds, football and soccer fields, a jogging and biking trail, swimming pool and picnic areas. The City also owns and operates an 27 -hole golf course. TRANSPORTATION... The City is in the center of a highway network that includes seven spokes of an extensive highway system; six U.S. highways, seven major state highways and one interstate highway. This network connects the City to all major entrances to both Dallas and Fort Worth, with major highway systems both north/south and east/west. There are 43 motor freight lines providing service to the City and the City is within the Dallas and Fort Worth Commercial Zone for deliveries. Railroad service is offered by the Cotton Belt Railroad and the Southern Pacific Railroad, both with daily switching service. Greyhound/Trailways Bus Lines provides the City with surface bus transportation. HOTEL AND CONVENTION FACILITIES... There are four major hotels in the City and several other hotels and motels adjacent to the City near DFW. The Hyatt Regency DFW is located on the airport and provides 1,450 rooms, one of the largest hotels in Texas. The Hyatt provides more than 130,000 square feet of meeting and convention facilities, five dining facilities, availability to two 18 -hole championship golf courses, tennis courts, heated swimming pool and health spa and jogging trails. The D/FW Airport Hilton and Executive Conference Center is a 400 -room hotel located 2.5 miles north of DFW offering a 14,400 square foot exhibit hall and ballroom that can accommodate 900 banquet guests. Also provided are three restaurants, tennis courts, racquetball courts, indoor and outdoor swimming pools, steam room, health club and lighted jogging trails. Adjacent to the hotel is the Austin Ranch where horseback riding and other western events are available to hotel guests. The Embassy Suites Conference Center is a 12 -story, 329 -room hotel located just north of DFW Airport. The Embassy Suites offers a 12,640 square foot conference center and ballroom, a 3,432 square foot junior ballroom and 14 other meeting rooms. Also provided is a state-of-the-art fitness center, a heated indoor swimming pool, complimentary, cooked -to -order breakfast and 24-hour in -room dining. The Gaylord Texan on Lake Grapevine is a 1,511 room resort and convention center located just 6 minutes north of D/FW Airport. The Gaylord Texan provides 400,000 square feet of convention, meeting, exhibit and pre -function space featuring 70 breakout rooms, three ballrooms, 180,000 square -feet of dedicated exhibit space, an 80,000 square foot outdoor event lawn and a 2,500 square foot amphitheater. Other amenities include seven restaurants, the Dallas Cowboys Golf Club, a contemporary Southwestern -style outdoor pool, a 25,000 square foot European spa, salon and fitness center with 13 treatment rooms and a 20 - meter indoor lap pool, outdoor tennis courts and marina access for recreational water -craft. A-2 EDUCATION ... Elementary and secondary education is provided to the City by the Grapevine-Colleyville Independent School District (the "District"). The District provides seventeen campuses, all air conditioned, as follows: Fort Worth, Texas 2 High schools Fort Worth, Texas Tarrant County College 4 Middle schools University of Texas at Arlington Arlington, Texas I 1 Elementary schools Denton, Texas In addition to the campuses, the District also owns an administration/service center, an auditorium and a complete athletic complex. Historical school enrollment figures are: Southern Methodist University Dallas, Texas 1983 3,732 1995 11,363 1984 4,037 1996 11,655 1985 4,675 1997 12,398 1986 5,617 1998 12,928 1987 6,107 1999 13,299 1988 6,604 2000 13,369 1989 7,156 2001 13,534 1990 7,984 2002 13,677 1991 8,710 2003 13,619 1992 9,435 2004 13,851 1993 10,236 2005 13,797 1994 10,878 Source: Grapevine-Colleyville Independent School District. Educational opportunities beyond the secondary level are numerous and within easy driving distance of the City. Some of the colleges and universities within a 50 mile radius of the City are as follows: CollegelUniversity Location Texas Christian University Fort Worth, Texas Texas Wesleyan University Fort Worth, Texas Tarrant County College Fort Worth, Texas University of Texas at Arlington Arlington, Texas University of North Texas Denton, Texas Texas Women's University Denton, Texas Southern Methodist University Dallas, Texas Dallas Baptist University Dallas, Texas Dallas Community College Dallas, Texas University of Dallas Irving, Texas University of Texas at Dallas Richardson, Texas A-3