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Item 02 - General Obligation Refunding and Improvement Bonds, Series 2003
r 'd T A � S w` $159710,000 GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2003 AND $3,175,000 COMINTATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003 Tuesday, January 7, 2003 The following ratings have been assigned: Moody's Investors Service, Inc. Standard & Poor's Rating Group A Division of McGraw-Hill, Inc. Underlying FGIC Credit Insured Rating "Aaa" "A 1" "AAA" "A+" PREPARED BY: =FFIRST SOUTHWEST COMPANY Global Credit Research 0 New Issue ows fav"tom sono e 3 JAN 2003 New Issue: Grapevine (City of) TX MOODY'S ASSIGNS Al RATING TO CITY OF GRAPEVINE'S GO REFUNDING AND IMPROVEMENT BONDS, SERIES 2003 AND COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003 Rating Affects $165 Million in Debt Municipality TX Moody's Rating ISSUE RATING Combination Tax and Revenue Certificates of Obligation, Series 2003 Al Sale Amount $3,220,000 Expected Sale Date 01/07/03 Rating Description General Obligation, Limited Tax General Obligation Refunding and Improvement Bonds, Series 2003 Al Sale Amount $16,040,000 Expected Sale Date 01/07/03 Rating Description General Obligation, Limited Tax Opinion NEW YORK, Jan 3, 2003 -- Moody's Investors Service has assigned an Al rating to the City of Grapevine's $16,040,000 General Obligation Refunding and Improvement Bonds, Series 2003 and $3,220,000 Combination Tax and Revenue Certificates of Obligation, Series 2003. At the same time, Moody's has affirmed the Al underlying rating on the city's $145.9 million outstanding general obligation debt. Both issues are secured by an ad valorem tax levied on all taxable property within the City within the limits prescribed by law. The Certificates are additionally secured by a pledge of surplus net revenues of the Water and Sewer System. Approximately $10.7 million of the bond proceeds will be used to refund a portion of the City's Series 1993 outstanding debt and the remaining $5.3 million will make street improvements throughout the City. The refunding is expected to produce a net present value savings over $400,000, or 5% of the refunded principal. Proceeds from the Certificates will be used to purchase various equipment and property. Assignment of the Al rating is based on a sizeable tax base, satisfactory financial position, and a relatively high but manageable debt burden. Grapevine is a suburban community, which encompasses a large portion of the Dallas/Fort Worth International Airport (DFW). The large dominance of the airport is reflected in the substantial amount of tangible personal (commercial) property values of over $1.9 billion, largely from aircraft, and the ten largest employers, most of which are related to airport activities. Despite ongoing commercial and residential development, the most recent full valuation decreased from the previous year. The tax base decreased from $4.86 billion in fiscal 2002 to $4.81 billion in fiscal 2003 due to a decrease in value from American Airlines property. American Airlines has given advance notice to the City that further property losses are likely in the coming fiscal year. Despite pressures on the tax base, the City maintained its $3.66/$1,000 assessed valuation tax rate for the 2003 fiscal year. Prior to the current fiscal year, the City experienced an average growth of 4.8% annually on the tax base. Grapevine Mills Mall, a 1.8 million square foot mall opened in 1997, continues to contribute to the local economy spurring restaurant and other retail development around the site. In fiscal 1999, a 24% growth in sales tax receipts built on the 58% increase in the prior year, which were largely attributed to the opening of the Grapevine Mills Mall. Fiscal 2000 realized a 10% growth and fiscal 2001 grew another 11% in sales tax collections. The development of the Opryland convention center and hotel complex, located in the tax increment reinvestment zone, is projected to facilitate further growth and diversification. The complex is expected to open in 2004 and have 1,500 rooms with space for conventions, meeting rooms and banquet facilities, and a large entertainment facility. The city has also benefited from significant residential development, which has translated into strong residential wealth and income levels that well exceed state and national levels. After experiencing sales tax growth rates averaging 17% annually the last ten years, preliminary unaudited results for 2002 indicate the City had a sales tax revenue drop of 6.9% between the 2001 and 2002 fiscal years. The revenue decrease is the result of a softening in the local economy similar to the slowdown at the National level. As a result of this revenue loss and a decrease in interest income, the General Fund balance is expected to decrease from $7.6 million, or 21 % of General Fund revenues, to $6.1 million, or 16% of General Fund revenues, in fiscal 2002. The 2003 budget anticipates decreasing the fund balance an additional $800,000. During fiscal 2002, General Fund operations were supported 38% from property taxes and 30% from sales taxes. Given the reliance on sales taxes for operations and the decreasing sales tax revenues, a sufficient fund balance is an important credit factor in maintaining the City's current bond rating. Moody's anticipates the city's direct debt burden of 3.4% will remain high given future debt plans. Payout is average with 55% of principal repaid in ten years and all debt retires by 2026. Similarly, the city's overall debt burden is high at 7.4% and reflects the significant debt of the Grapevine-Colleyville ISD. Debt service represents a significant fixed cost, comprising 23.6% of fiscal 2001 operating expenditures. KEY STATISTICS: 2002 population: 46,400 Tarrant County Unemployment (10/02): 5.6% 2003 full valuation: $4.81 billion 2003 full value per capita: $103,846 2000 Per Capita Income: $31,549; 161% of State Debt burden: 7.4% Principal Payout 10 years: 55.6% FY2001 General Fund Balance: $7.65 million (21% of General Fund revenues) FY2002 Unaudited General Fund Balance: $6.1 million (16.6% of General Fund revenues) Analysts Kristin Button Analyst Public Finance Group Moody's Investors Service Nora Vlfittstruck Backup Analyst Public Finance Group Moody's Investors Service Douglas Benton Senior Credit Officer Public Finance Group Moody's Investors Service Contacts Journalists: (212) 553-0376 Research Clients: (212) 553-1653 © Copyright 2003, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, MOODY'S). All rights reserved. r Summary: Grapevine, TX; Tax Secured, General Obligation Publication date: 06 -Jan -2003 Credit Analyst: Theodore Chapman, Dallas (1) 214-871-1401; Wendy Wipperman, Dallas (1) 214-871-1421 Credit Profile $3.22 mil comb tax and rev certs of oblig ser 2003 dtd 01/01/2003 due 02/15/2015 A+ Sale date: 06 -JAN -2003 $16.04 mil GO rfdg and imp bnds ser 2003 dtd 01/01/2003 due 02/15/2015 A+ Sale date: 06 -JAN -2003 $1.435 mil. Grapevine A+ $10.100 mil. Grapevine GO rfdg & imp bnds ser 2002 dtd 03/15/2002 due 02/15/2003-2022 AAA/A+(SPUR) $5.345 mil. Grapevine comb tax & rev certs of oblig ser 1998 dtd 07/15/1998 due 02/15/2000-2019 AAA/A+(SPUR) $31.580 mil. Grapevine comb tax & tax incre reinvest zone rev certs of oblig ser 2000 dtd 06/01/2000 due 08/15/2005-2021 2024 2026 AAA/A+(SPUR) $7.390 mil. Grapevine comb tax and rev certs of oblig bnds ser 2000A dtd 11/01/2000 due 02/15/2002-2021 AAA/A+(SPUR) $4.280 mil. Grapevine comb tax and rev cents of oblig bnds ser 2001 dtd 07/15/2001 due 08/15/2002-2021 AAA/A+(SPUR) $4.805 mil. Grapevine combination tax & rev certs of oblig ser 2000 dtd 03/01/2000 due 08/15/2001-2010 AAA/A+(SPUR) $7.390 mil. Grapevine go bnds ser 2000 dtd 03/01/2000 due 02/15/2001-2019 AAA/A+(SPUR) $7.000 mil. Grapevine go bnds ser 2000A dtd 11/01/2000 due 02/15/2003-2021 AAA/A+(SPUR) $29.805 mil. Grapevine go rfdg & imp bnds ser 1999 dtd 02/15/1999 due 02/15/2001-2017 2019 AAA/A+(SPUR) OUTLOOK: STABLE in Rationale The 'A+' rating on Grapevine, Texas' GO refunding and improvement bonds and certificates of obligation reflects the city's: • Strong financial position with good reserves; • Solid and growing retail base and a competitive tax rate, both of which should allow the city to get past the current downturn; and • High wealth and income levels, boosted by participation in the Dallas -Fort Worth MSA. Offsetting factors include the city's: • Economic base that, while deep, is heavily dependent on Dallas -Fort Worth International Airport and related industries; and • High overall net debt burden. The city's ad valorem tax pledge secures the bonds and certificates. The bonds will be used to refund various outstanding maturities of the city's series 1993 GO bonds, as well as fund street improvements. The certificates will be used for capital equipment outlays. The 33 square -mile Grapevine, with an estimated population of 46,000, is centrally located between Dallas, Texas and Fort Worth, Texas and has easy access throughout the entire MSA. The city's development has been greatly influenced by the Dallas -Fort Worth International Airport --two-thirds of ' which is within Grapevine's corporate city limits. The airport's presence contributes substantial direct and indirect employment, sales and hotel tax revenues, and industrial and commercial real property taxes. While most of these revenue sources have been at least somewhat affected by the nationwide u economic downturn, as well as the events of Sept. 11, airport volume has stabilized. Concentration of the property tax base is moderately high with 24% of assessed value (AV) held by the 10 leading taxpayers, although the share of total AV, as well as the fiscal 2003 AV of $4.8 billion, has declined slightly from last year --primarily reflecting the airline industry's current plight in general and, more specifically, fleet and personnel downsizing. The city's median household income levels exceed state and national levels at 183% and 185%, respectively. Grapevine's financial performance remains sound, although the city was projected to slightly draw down its reserves in fiscal 2002 from the 2001 level of 18% of expenditures due mainly to well -below budget sales tax revenues. The 36 cents per $100 of AV property tax rate, however, remains low and stable. In 2002, the city implemented cost-cutting measures in anticipation of sales tax revenue shortfalls and the sluggish economy. While the city continues to budget conservatively, the recent addition of several large retailers, as well as the 2004 opening of the 1,500 -room Gaylord Opryland Texas hotel and convention center, should get the city past the near-term downturn. Overall net debt remains a high 6.3% of market value, which is almost entirely attributable to the Grapevine-Colleyville Independent School District ('AA -'Standard & Poor's underlying rating (SPUR) GO debt rating). Debt service is a high portion of total expenditures and is in-line with historical levels; debt service, however, is somewhat offset by self-supporting revenue streams. The city's five-year capital plan is manageable and consists almost entirely of street and quality -of -life projects. The city $5.3 million of authorized, but unissued, GO bonds remaining Outlook The stable outlook reflects the expectation that the economic effects on the aviation, hotel, and related spin-off sectors stemming from the events of Sept. 11 has stabilized. In addition, the stable outlook reflects the expectation that the city's continued sound financial performance will offset short-term downturns in retail sales, which is a significant component of general fund revenues. The stable outlook also reflects the expectation that the city's long-term capital requirements will remain manageable, offsetting its continued high overall net debt burden. Copyright ©1994-2002 Standard & Poor's, a division of The McGra*Hill Companies. All Rights t"I Reserved. Privacy Policy FINAL NET PRESENT VALUE BENEFIT ........................................ $679,798.44 NET PV BENEFIT / $10,745,000 REFUNDED PRINCIPAL.. 6.327% First Southwest Company File= GRAPEVINE GO.sf-Ser 2003 Ref & Imp FINAL -Refunding Public Finance 1/ 7/2003 4:41 PM City of Grapevine, Texas General Obligation Refunding & Improvement Bonds Series 2003 [current refunding] DEBT SERVICE COMPARISON Ser 2003 Ref Refunded Debt Date Debt Service Service Savings 9/30/2003 191,909.45 299,015.00 107,105.55 9/30/2004 1,764,325.00 1,838,642.50 74,317.50 9/30/2005 1,598,900.00 1,672,750.00 73,850.00 9/30/2006 1,594,825.00 1,671,625.00 76,800.00 9/30/2007 1,610,275.00 1,685,770.00 75,495.00 9/30/2008 1,603,925.00 1,679,927.50 76,002.50 9/30/2009 1,611,162.50 1,684,702.50 73,540.00 9/30/2010 1,071,250.00 1,144,550.00 73,300.00 9/30/2011 1,077,906.25 1,154,852.50 76,946.25 9/30/2012 361,656.25 435,837.50 74,181.25 Total 12,486,134.45 13,267,672.50 781,538.05 NET PRESENT VALUE BENEFIT ........................................ $679,798.44 NET PV BENEFIT / $10,745,000 REFUNDED PRINCIPAL.. 6.327% First Southwest Company File= GRAPEVINE GO.sf-Ser 2003 Ref & Imp FINAL -Refunding Public Finance 1/ 7/2003 4:41 PM FINAL YIELD STATISTICS Accrued Interest from 01/01/2003 to 02/11/2003.. .................................................................. 64,875.00 AverageLife........................................................................................................................... 6.939 Years TrueInterest Cost (TIC).......................................................................................................... 3.7402137% First Southwest Company Public Finance 1/ 7/2003 9:96 PM City of Grapevine, Texas General Obligation Refunding & Improvement Bonds Series 2003 DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P+1 9/30/2003 - - 363,300.00 363,300.00 9/30/2004 1,580,000.00 3.000% 560,175.00 2,140,175.00 9/30/2005 1,460,000.00 3.000% 514,575.00 1,974,575.00 9/30/2006 1,500,000.00 3.000% 470,175.00 1,970,175.00 9/30/2007 1,575,000.00 5.000% 408,300.00 1,983,300.00 9/30/2008 1,635,000.00 3.000% 344,400.00 1,979,400.00 9/30/2009 1,695,000.00 3.500% 290,212.50 1,985,212.50 9/30/2010 1,210,000.00 3.750% 237,862.50 1,447,862.50 9/30/2011 1,260,000.00 3.750% 191,550.00 1,451,550.00 9/30/2012 580,000.00 3.750% 157,050.00 737,050.00 9/30/2013 235,000.00 3.875% 141,621.88 376,621.88 9/30/2014 240,000.00 4.000% 132,268.76 372,268.76 9/30/2015 250,000.00 4.250% 122,156.26 372,156.26 9/30/2016 265,000.00 4.375% 111,046.88 376,046.88 9/30/2017 275,000.00 4.500% 99,062.50 374,062.50 9/30/2018 290,000.00 4.500% 86,350.00 376,350.00 9/30/2019 300,000.00 4.625% 72,887.50 372,887.50 9/30/2020 315,000.00 4.750% 58,468.75 373,468.75 9/30/2021 330,000.00 4.750% 43,150.00 373,150.00 9/30/2022 350,000.00 4.875% 26,781.25 376,781.25 9/30/2023 365,000.00 5.000% 9,125.00 374,125.00 Total 15,710,000.00 - 4,440,518.78 20,150,518.78 YIELD STATISTICS Accrued Interest from 01/01/2003 to 02/11/2003.. .................................................................. 64,875.00 AverageLife........................................................................................................................... 6.939 Years TrueInterest Cost (TIC).......................................................................................................... 3.7402137% First Southwest Company Public Finance 1/ 7/2003 9:96 PM 1 FINAL YIELD STATISTICS Accrued Interest from 01/01/2003 to 02/11/2003....................................................................... 11,235.42 „ Average Life.............................................................................................................................. 4.966 Years TrueInterest Cost (TIC)............................................................................................................. 3.1578959% First Southwest Company Public Finance 1/ 7/2003 1:24 PM City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligations Series 2003 [$3,500, 000 - Not to Exceed Amount] DEBT SERVICE SCHEDULE Date Principal Coupon Interest Total P+I 9/30/2003 310,000.00 3.000% 62,918.34 372,918.34 9/30/2004 430,000.00 3.000% 91,818.76 521,818.76 9/30/2005 435,000.00 3.000% 78,918.76 513,918.76 9/30/2006 450,000.00 3.000% 65,868.76 515,868.76 9/30/2007 245,000.00 3.000% 52,368.76 297,368.76 9/30/2008 245,000.00 3.000% 45,018.76 290,018.76 9/30/2009 220,000.00 3.000% 37,668.76 257,668.76 9/30/2010 220,000.00 3.375% 31,068.76 251,068.76 9/30/2011 180,000.00 3.500% 23,643.76 203,643.76 9/30/2012 105,000.00 3.750% 17,343.76 122,343.76 9/30/2013 110,000.00 3.875% 13,406.26 123,406.26 9/30/2014 110,000.00 4.000% 9,143.76 119,143.76 9/30/2015 115,OOOA0 4.125% 4,743.76 119,743.76 Total 3,175,000.00 - 533,930.96 3,708,930.96 YIELD STATISTICS Accrued Interest from 01/01/2003 to 02/11/2003....................................................................... 11,235.42 „ Average Life.............................................................................................................................. 4.966 Years TrueInterest Cost (TIC)............................................................................................................. 3.1578959% First Southwest Company Public Finance 1/ 7/2003 1:24 PM CII V1 rn rn ra rn ry) rn rn rn rn rn M t M N d• h to h 1p a 00 00 00 h M I'D to 00 Vl 0o 00 a\ 00 Q\ � �a 01 � �; O M a1 a1 D\ � N N N DD .-•, �p d o0 d N N O1 N DD O N a h M h [moi O� t� t—dam' pM p kn 'Zh 000dN M to d h O� d- QM M O O O Q O O O a 00 00 h O O O 0 O N N N 00 aCl ^rJ O bD N � � U •U U � U sem., il� � °? «t O o O Cd aoi aoi o Q U go C7 H U C7 U C40 U Wu W e DC v rn cd n «t «t cd U >C tF cc3 n n «i >C rn cC n U O rn N N CIO R. 03 b ani O~ ayi i2 ' z cd U t1 S�, ami C/) sem-, N ��, 00 ^O y v ci CJ acq o cF �" a cH vi CJ O O O n° 0 0 O n ° O O rn 0 CYi''' U U U o o° o o o° o �o 0 ooc�o go -E O2 Qo to Co 00 to a o cd 0bj�0 00wtr; t:> trn io�o >o Oh bA O C it Hh�Uc 00 p M = �Oshra O 00 00 '= O eNs sn'Oss s4q OsMra 60C) 6`04 Gq 111 OFFICIAL STATEMENT Ratings: Moody's: "Aaa" Dated January 7, 2003 S&P: "AAA" (Financial Guaranty Insured, see "Municipal Bond Insurance" and "Other Information — Ratings" NEW ISSUE - Book -Entry -Only herein) 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 are not private activity bonds. See "Tax Exemption" herein for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. THE BONDS WILL NOT BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $15,710,000 CITY OF GRAPEVINE, TEXAS (Tarrant County) GENERAL OBLIGATION REFUNDING AND IMPROVEMENT BONDS, SERIES 2003 Dated Date: January 1, 2003 Due: February 15, as shown below PAYMENT TERMS ... Interest on the $15,710,000 City of Grapevine, Texas General Obligation Refunding and Improvement Bonds, Series 2003 (the "Bonds") will accrue from January 1, 2003 (the "Dated Date"), will be payable February 15 and August 15 of each year, commencing August 15, 2003, and will be calculated on the basis of a 360 -day year consisting of twelve 30 -day months. The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "The Bonds and Certificates - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is Bank One, National Association, Austin, Texas (see "The Bonds and Certificates - 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 particularly Texas Government Code, Chapters 1207 and 1331, as amended, Section 9.26 of the City's Home Rule Charter, and are direct obligations of the City of Grapevine (the "City"), payable from a continuing 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") (see "The Bonds and Certificates - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding General Obligation Refunding and Improvement Bonds, Series 1993 (the "Refunded Bonds") in order to lower the overall debt service requirements of the City. See "Schedule I -Schedule of Refunded Bonds". Additionally, the 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. Financial Guaranty Insurance FGIC Company F°If. fr v,cXrcu�ml wnia mah uud by FuwnclW fussm�ty lnxurau�w fnmpany, r nHrme wmµ++vy rut xfG°xtnl M,h aqr 1.5. fm.amunm am�m,. Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be issued by Financial Guaranty Insurance Company simultaneously with the delivery of the Bonds. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"). SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with the "City of Grapevine, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2003" (the "Certificates"), under a common Official Statement, and such Bonds and Certificates are hereinafter sometimes referred to collectively as the "Obligations". The Bonds and Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and other features. LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriters 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"). Certain legal matters will be passed upon for the Underwriters by Locke Liddell & Sapp LLP, Dallas, Texas, Counsel for the Underwriters. DELIVERY ... Itis expected that the Bonds will be available for delivery through The Depository Trust Company on February 11, 2003. SWS SECURITIES COASTAL SECURITIES SAMCO CAPITAL MARKETS MATURITY SCHEDULE Amount Maturity Rate Yield Amount Maturity Rate Yield $ 1,580,000 2004 3.000% 1.29% $ 240,000 2014 4.000% 4.09% 1,460,000 2005 3.000% 1.56% 250,000 2015 4.250% 4.20% 1,500,000 2006 3.000% 1.95% 265,000 2016 4.375% 4.36% 1,575,000 2007 5.000% 2.33% 275,000 2017 4.500% 4.51% 1,635,000 2008 3.000% 2.76% 290,000 2018 4.500% 4.60% 1,695,000 2009 3.500% 3.14% 300,000 2019 4.625% 4.69% 1,210,000 2010 3.750% 3.42% 315,000 2020 4.750% 4.78% 1,260,000 2011 3.750% 3.65% 330,000 2021 4.750% 4.87% 580,000 2012 3.750% 3.80% 350,000 2022 4.875% 4.95% 235,000 2013 3.875% 3.94% 365,000 2023 5.000% 4.98% (Accrued Interest from January 1, 2003 to be added) OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"). SEPARATE ISSUES ... The Bonds are being offered by the City concurrently with the "City of Grapevine, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2003" (the "Certificates"), under a common Official Statement, and such Bonds and Certificates are hereinafter sometimes referred to collectively as the "Obligations". The Bonds and Certificates are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and while the Obligations share certain common attributes, each issue is separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment, the rights of the holders, and other features. LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriters 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"). Certain legal matters will be passed upon for the Underwriters by Locke Liddell & Sapp LLP, Dallas, Texas, Counsel for the Underwriters. DELIVERY ... Itis expected that the Bonds will be available for delivery through The Depository Trust Company on February 11, 2003. SWS SECURITIES COASTAL SECURITIES SAMCO CAPITAL MARKETS THIS PAGE LEFT BLANK INTENTIONALLY 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 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 $3,175,000 CITY OF GRAPEVINE, TEXAS (Tarrant County) COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003 Dated Date: January 1, 2003 Due: August 15, as shown below PAYMENT TERMS ... Interest on the $3,175,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2003 (the "Certificates") will accrue from January 1, 2003 (the "Dated Date"), will be payable August 15 and February 15 of each year, commencing August 15, 2003, 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 Bank One, National Association, Austin, 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 (the Certificate of Obligation Act of 1971), as amended, Section 9.26 of the City's Home Rule Charter and constitute direct Obligation of the City of Grapevine, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues (not to exceed $1,000) of the City's Water and Sewer System (the "System"), as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance") (see "The Bonds and Certificates - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Certificates will be used to (i) acquire building in downtown Grapevine for municipal purposes; (ii) acquire land and parking lot in downtown Grapevine; (iii) acquire equipment and vehicles for police department; (iv) acquire equipment and fire truck for fire department; (v) acquire equipment and a vehicle for public works department; (vi) acquire equipment and vehicles for utility department; (vii) acquire equipment and golf carts for City golf course; (viii) acquire computers, hardware, software and related equipment for various City departments; and (ix) pay costs of issuance of the Certificates. �f�I� Financial Guaranty Insurance FVC,. Company sic ia,"rtAi«.aM..�r uw.n"wn irr+vm,.mi c�..vur num.�«com,.,or."m+wum"w"rr "w oramn,a."n Hn ck cn.,�nwm „a, s, Payment of the principal of and interest on the Certificates when due will be insured by a municipal bond insurance policy to be issued by Financial Guaranty Insurance Company simultaneously with the delivery of the Certificates. MATURITY SCHEDULE * r Amount Maturity Rate Yield Amount Maturity Rate Yield $ 310,000 2003 $ 220,000 2010 430,000 2004 3.00% 180,000 2011 435,000 2005 3.00% 105,000 2012 450,000 2006 3.00% 110,000 2013 245,000 2007 3.00% 110,000 2014 245,000 2008 3.00% 115,000 2015 (Accrued Interest from January 1, 2003 to be added) Optional Redemption ... The City reserves the right, at its option, to redeem Certificates having stated maturities on and after August 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"), SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with the "City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2003" (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligation". The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligation 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 Underwriters 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"). Certain legal matters will be passed upon for the Underwriters by Locke Liddell & Sapp LLP, Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Certificates will be available for delivery through The Depository Trust Company on February 11, 2003. SWS SECURITIES COASTAL SECURITIES SAMCO CAPITAL MARKETS 3 OFFICIAL STATEMENT Ratings: Moody's: "Aaa" i Dated January 7, 2003 S&P: "AAA" (Financial Guaranty Insured, see "Municipal Bond Insurance" and "Other Information — Ratings" NEW ISSUE - Book -Entry -Only 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 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 $3,175,000 CITY OF GRAPEVINE, TEXAS (Tarrant County) COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2003 Dated Date: January 1, 2003 Due: August 15, as shown below PAYMENT TERMS ... Interest on the $3,175,000 City of Grapevine, Texas Combination Tax and Revenue Certificates of Obligation, Series 2003 (the "Certificates") will accrue from January 1, 2003 (the "Dated Date"), will be payable August 15 and February 15 of each year, commencing August 15, 2003, 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 Bank One, National Association, Austin, 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 (the Certificate of Obligation Act of 1971), as amended, Section 9.26 of the City's Home Rule Charter and constitute direct Obligation of the City of Grapevine, Texas (the "City"), payable from a combination of (i) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues (not to exceed $1,000) of the City's Water and Sewer System (the "System"), as provided in the ordinance authorizing the Certificates (the "Certificate Ordinance") (see "The Bonds and Certificates - Authority for Issuance"). PURPOSE ... Proceeds from the sale of the Certificates will be used to (i) acquire building in downtown Grapevine for municipal purposes; (ii) acquire land and parking lot in downtown Grapevine; (iii) acquire equipment and vehicles for police department; (iv) acquire equipment and fire truck for fire department; (v) acquire equipment and a vehicle for public works department; (vi) acquire equipment and vehicles for utility department; (vii) acquire equipment and golf carts for City golf course; (viii) acquire computers, hardware, software and related equipment for various City departments; and (ix) pay costs of issuance of the Certificates. �f�I� Financial Guaranty Insurance FVC,. Company sic ia,"rtAi«.aM..�r uw.n"wn irr+vm,.mi c�..vur num.�«com,.,or."m+wum"w"rr "w oramn,a."n Hn ck cn.,�nwm „a, s, Payment of the principal of and interest on the Certificates when due will be insured by a municipal bond insurance policy to be issued by Financial Guaranty Insurance Company simultaneously with the delivery of the Certificates. MATURITY SCHEDULE * r Amount Maturity Rate Yield Amount Maturity Rate Yield $ 310,000 2003 $ 220,000 2010 430,000 2004 3.00% 180,000 2011 435,000 2005 3.00% 105,000 2012 450,000 2006 3.00% 110,000 2013 245,000 2007 3.00% 110,000 2014 245,000 2008 3.00% 115,000 2015 (Accrued Interest from January 1, 2003 to be added) Optional Redemption ... The City reserves the right, at its option, to redeem Certificates having stated maturities on and after August 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"), SEPARATE ISSUES ... The Certificates are being offered by the City concurrently with the "City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2003" (the "Bonds"), and such Certificates and Bonds are hereinafter sometimes referred to collectively as the "Obligation". The Certificates and Bonds are separate and distinct securities offerings being issued and sold independently except for the common Official Statement, and, while the Obligation 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 Underwriters 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"). Certain legal matters will be passed upon for the Underwriters by Locke Liddell & Sapp LLP, Dallas, Texas, Counsel for the Underwriters. DELIVERY ... It is expected that the Certificates will be available for delivery through The Depository Trust Company on February 11, 2003. SWS SECURITIES COASTAL SECURITIES SAMCO CAPITAL MARKETS 3 THIS PAGE LEFT BLANK INTENTIONALLY This Official 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 Official Statement, and, if given or made, such other information or representations must not be relied upon. Certain information set forth herein has been provided by sources other than the City that the City believes is reliable, but the City makes no representation as to the accuracy of such information. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein 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. THE BONDS AND THE 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 THE CERTIFICATES IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED ASA RECOMMENDATION THEREOF. NEITHER THE CITY NOR THE UNDERWRITERS MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK -ENTRY -ONLY SYSTEM, AS SUCHINFORMATION HAS BEEN FURNISHED BY THE DEPOSITORY TRUST COMPANY. IN CONNECTION WITH THE OFFERING OF THE BONDS AND THE CERTIFICATES, THE UNDERWRITERS MAY OVER -ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AND/OR THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCHSTABILIZING, IF COMMENCED, MAYBE DISCONTINUED ATANYTIME. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness ofsuch information. TABLE OF CONTENTS OFFICIAL STATEMENT SUMMARY.....................................6 CITY OFFICIALS, STAFF AND CONSULTANTS.................9 ELECTED OFFICIALS............................................................9 SELECTED ADMINISTRATIVE STAFF.....................................9 CONSULTANTS AND ADVISORS............................................9 INTRODUCTION......................................................................10 PLAN OF FINANCING............................................................10 THE BONDS AND CERTIFICATES ....................................... i l BOND INSURANCE..................................................................16 TAX INFORMATION...............................................................17 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT .................................................. 20 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY.............................................................. 21 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY.................................................................. 22 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY. 22 TABLE 5 - TEN LARGEST TAXPAYERS..............................22 TABLE 6 - TAX ADEQUACY .............................................. 23 TABLE 7 - ESTIMATED OVERLAPPING DEBT.....................23 DEBT INFORMATION............................................................24 TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ........................................ 24 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION............................................................ 24 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT.. 25 TABLE 1 I - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS................................................25 TABLE 12 - OTHER OBLIGATIONS.....................................25 FINANCIAL INFORMATION.................................................26 TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY..................................................................26 TABLE 14 - MUNICIPAL SALES TAX HISTORY...................27 TABLE 15 - CURRENT INVESTMENTS..................................29 TAXMATTERS.........................................................................30 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 LEGALMATTERS................................................................32 AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION..........................................................33 CONTINUING DISCLOSURE OF INFORMATION .....................33 FINANCIAL ADVISOR..........................................................34 FORWARD-LOOKING STATEMENTS DISCLAIMER................34 VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS.......................................................3 5 UNDERWRITING..................................................................3 5 APPROVAL OF OFFICIAL STATEMENT.................................35 SCHEDULE OF REFUNDED BONDS .......................Schedule I APPENDICES GENERAL INFORMATION REGARDING THE CITY ................ A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT ......... B FORM OF BOND COUNSEL'S OPINIONS .............................. C SPECIMEN BOND INSURANCE POLICY ............................... D 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 is a political subdivision and municipal corporation of the State, located in Tarrant County, Texas. The City covers approximately 33 square miles (see "Introduction - Description of City"). THE BONDS .................................. The $15,710,000 General Obligation Refunding and Improvement Bonds, Series 2003 are to mature on February 15 in the years 2004 through 2023 (see "The Bonds and Certificates - Description of the Bonds"). THE CERTIFICATES ..................... The $3,175,000 Combination Tax and Revenue Certificates of Obligation, Series 2003 are to mature on August 15 in the years 2004 through 2015 (see "The Bonds and Certificates - Description of the Certificates"). PAYMENT OF INTEREST .............. Interest on the Obligation accrues from January 1, 2003, and is payable August 15, 2003, and each August 15 and February 15 thereafter until maturity or prior redemption (see "The Bonds and Certificates - Description of the Bonds and Certificates"). AUTHORITY FOR ISSUANCE ......... The Bonds are issued pursuant to the general laws of the State, including particularly Chapters 1207 and 1331, Texas Government Code, as amended, Section 9.26 of the City's Home Rule Charter, and the Bond Ordinance passed by the City Council of the City (see "The Bonds and Certificates - Authority for Issuance"). The Certificates are issued pursuant to the general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, Section 9.26 of the City's Home Rule Charter and a 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 obligations of the City, payable from a direct and continuing 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) the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a pledge of surplus net revenues (not to exceed $1,000) of the System (see "The Bonds and Certificates - Security and Source of Payment"). REDEMPTION ............................... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"). The City reserves the right, at its option, to redeem Certificates having stated maturities on and after August 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds and Certificates - Optional Redemption"). TAX EXEMPTION ........................... In the opinion of Bond Counsel, the interest on the Bonds and Certificates will be excludable from gross income for federal income tax purposes under existing law 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. K USE OF PROCEEDS ....................... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding General Obligation Refunding and Improvement Bonds, Series 1993 (the "Refunded Bonds") in order to lower the overall debt service requirements of the City. See "Schedule I - Schedule of Refunded Bonds". Additionally, the proceeds from the sale of the Bonds will be used for street improvements and to pay the costs of issuance related to the Bonds. ................................................ Proceeds from the sale of the Certificates will be used to (i) acquire building in downtown Grapevine for municipal purposes; (ii) acquire land and parking lot in downtown Grapevine; (iii) acquire equipment and vehicles for police department; (iv) acquire equipment and fire truck for fire department; (v) acquire equipment and a vehicle for public works department; (vi) acquire equipment and vehicles for utility department; (vii) acquire equipment and golf carts for City golf course; (viii) acquire computers, hardware, software and related equipment for various City departments; and (ix) pay costs of issuance of the Certificates. RATINGS ..................................... The Bonds and Certificates are rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, A Division of the McGraw-Hill Companies, Inc. ("S&P") through an insurance policy to be issued by Financial Guaranty Insurance Company. The uninsured tax supported debt of the City is rated "Al" by Moody's and "A+" 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 (see "Other Information - Ratings"). BOOK -ENTRY -ONLY SYSTEM ...................................... The definitive Bonds and Certificates will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Bonds and Certificates may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds and Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds and Certificates will be payable by the Paying 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 Fiscal Per Capita Per Capita Year Estimated Taxable Taxable Funded Funded Ended City Assessed Assessed Tax Tax 9/30 Population (l) Valuation (2) Valuation Debt Debt 1999 39,190 $ 3,994,671,130 $ 101,931 $ 103,132,152 $ 2,632 2000 39,523 4,089,979,800 103,484 143,995,000 3,643 2001 44,390 4,372,544,371 98,503 156,815,000 3,533 2002 45,500 4,859,882,189 106,811 157,940,000 3,471 2003 46,400 4,818,432,568 103,846 158,330,000 (3) 3,412 (1) Source: The City of Grapevine. (2) Source: Tarrant County Appraisal District (3) Projected, includes the Bonds and Certificates. Excludes the Refunded Bonds. For additional information regarding the City, please contact: Fred Werner David K. Medanich Director of Finance or Laura Alexander City of Grapevine First Southwest Company 200 South Main 777 Main Street, Suite 1200 Grapevine, Texas 76051 Fort Worth, Texas 76102 (817)410-3111 (817)332-9710 8 Ratio Funded Tax Debt to Taxable % of Assessed Total Tax Valuation Collections 2.58% 100.32% 3.52% 99.77% 3.59% 99.10% 3.25% 99.09% 3.29% N.A. ELECTED OFFICIALS City Council William D. Tate Mayor Ted R. Ware Mayor Pro Tem C. Shane Wilbanks CounciImember, Place 1 Sharron Spencer Councilmember, Place 2 Clydene Johnson Councilmember, Place 3 Darlene Freed Councilmember, Place 4 Roy Stewart Councilmember, Place 6 CITY OFFICIALS, STAFF AND CONSULTANTS Length of Term Service Expires 14 Years �I� May, 2003 23 Years May, 2005 17 Years May, 2003 Occupation Attorney -at -Law Commercial Contractor Personnel Director 17 Years May, 2003 Retired Sales Representative 7 Years May, 2004 Independent Insurance Agent 4 Years May, 2004 Commercial Real Estate Agent 6 Years May, 2005 Construction Company Owner (1) Previously served 12 years as Mayor and Councilmember. SELECTED ADMINISTRATIVE STAFF Name Position Length of Service Roger Nelson City Manager 5 Years(') Bruno Rumbelow Assistant City Manager 5 Years Bill Gaither Administrative Services Director 6 Years Fred Werner Director of Finance 5 Years Linda Huff City Secretary 15 Years (2) (1) 7 years with City; 5 years in present position. (2) 20 years with City; 15 years in present position. CONSULTANTS AND ADVISORS Auditors........................................................................................................................................................Deloitte & Touche LLP Fort Worth, Texas BondCounsel................................................................................................................................................ Vinson & Elkins L.L.P. Dallas, Texas FinancialAdvisor...................................................................................................................................... First Southwest Company Fort Worth, Texas 9 OFFICIAL STATEMENT RELATING TO $15,710,000 $3,175,000 GENERAL OBLIGATION REFUNDING COMBINATION TAX AND REVENUE AND IMPROVEMENT BONDS, SERIES 2003 CERTIFICATES OF OBLIGATION, SERIES 2003 INTRODUCTION This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of $15,710,000 City of Grapevine, Texas, General Obligation Refunding and Improvement Bonds, Series 2003 (the "Bonds") and $3,175,000 City of Grapevine, Texas, Certificates of Obligation, Series 2003 (the "Certificates"). 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") which will authorize the issuance of the Bonds and Certificates, respectively, except as otherwise indicated herein. There follows 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, duly organized and existing under the laws of the State, including the City's Home 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, electric, 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 2003 estimated population is 46,400. The City covers approximately 33 square miles. PLAN OF FINANCING PURPOSE .... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding General Obligation Refunding and Improvement Bonds, Series 1993 (the "Refunded Bonds") in order to lower the overall debt service requirements of the City. Additionally, the 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 to pay the costs of issuance related to the Bonds. See "Schedule I - Schedule of Refunded Bonds" for a detailed listing of the Refunded Bonds and their call date at par. Proceeds from the sale of the Certificates will be used to (i) acquire building in downtown Grapevine for municipal purposes; (ii) acquire land and parking lot in downtown Grapevine; (iii) acquire equipment and vehicles for police department; (iv) acquire equipment and fire truck for fire department; (v) acquire equipment and a vehicle for public works department; (vi) acquire equipment and vehicles for utility department; (vii) acquire equipment and golf carts for City golf course; (viii) acquire computers, hardware, software and related equipment for various City departments; and (ix) pay costs of issuance of the Certificates. REFUNDED BONDS ... The principal and interest due on the Refunded Bonds are to be paid on the scheduled interest payment dates and the respective redemption dates of such Refunded Bonds, from funds to be deposited pursuant to a certain Escrow Agreement (the "Escrow Agreement") between the City and Bank One, National Association (the "Escrow Agent"). The Ordinance provides that from the proceeds of the sale of the Bonds received from the Underwriters, together with other funds of the City, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Bonds on their respective redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Federal Securities"). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Bonds. Grant Thornton LLP, certified public accountants, a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Underwriters thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Bonds. Such maturing principal of and interest on the Federal Securities will not be available to pay the Bonds (see "Other Information — Verification of Arithmetical and Mathematical Computations"). 10 I In By deposit of the Federal Securities and cash, if necessary, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of all the Refunded Bonds in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Grant Thornton LLP, certified public accountants, the Refunded Bonds will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the ' Escrow Agent and such Refunded Bonds will not be deemed as being outstanding bonds of the City payable from taxes nor for the purpose of applying any limitation on the issuance of debt. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Bonds, if for any reason, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payment. SOURCES AND USE OF PROCEEDS ... The proceeds from the sale of the Bonds and Certificates, together with funds contributed by the City, will be applied as follows: Sources: The Bonds The Certificates Par Amount $ 15,710,000.00 $ 3,175,000.00 Reoffering Premium 341,174.80 54,559.65 Accrued Interest 64,875.00 11,235.42 Transfers from Prior Issue Debt Service Fund 236,000.00 - $ 16,352,049.80 $ 3,240,795.07 Uses: Original Issue Discount $ - $ 7,182.50 Deposit to Escrow Fund 11,051,124.49 - Deposit to Project Fund 5,000,000.00 3,152,317.00 Deposit to Interest and Sinking Fund 64,875.00 11,235.42 Costs of Issuance (1) 236,050.31 70,060.15 Total Uses of Funds $ 16,352,049.80 $ 3,240,795.07 (1) Including Underwriters' Discount and Insurance Premium. THE BONDS AND CERTIFICATES DESCRIPTION OF THE BONDS AND CERTIFICATES ... The Bonds are dated January 1, 2003, and mature on February 15 in each of the years and in the amounts shown on the cover pages. Interest on the Bonds will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be payable on February 15 and August 15 of each year, commencing August 15, 2003 until maturity or prior redemption. The Certificates are dated January 1, 2003, and mature on August 15 in each of the years and in the amounts shown on page 3 hereof. Interest on the Certificates will be computed on the basis of a 360 -day year of twelve 30 -day months, and will be payable on August 15 and February 15 of each year, commencing August 15, 2003 until maturity or prior redemption. 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, Texas Government Code, Chapters 1207 and 1331, Section 9.26 of the City's Home Rule Charter, and the Bond Ordinance passed by the City Council. A portion of the Bonds being issued were approved at an election held on December 5, 1998 (see "Table 11 — Authorized But Unissued Bonds" herein). The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas, particularly Subchapter C of Chapter 271, Texas Local Government Code (the Certificate of Obligation Act of 1971), as amended, Section 9.26 of the City's Home Rule Charter, and a 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 continuing direct annual ad valorem tax levied by the City, within the limits prescribed by law, upon all taxable property in the City. 11 The Certificates ...All taxable property within the City is subject to a continuing direct annual ad valorem tax levied by the City sufficient to provide for the payment of principal of and interest on all obligations payable in whole or in part from ad valorem taxes, which tax must be levied within limits prescribed by law. Additionally, the Certificates are payable from and secured by a pledge of surplus net revenues (not tot exceed $1,000) of the System, as provided in the Certificate Ordinance authorizing the Certificates. TAx RATE LIMITATION ... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City adopts the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after February 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at a price equal to the principal amount of the Bonds called for redemption plus accrued interest to the fixed date for redemption. If less than all of the Bonds are to be redeemed, the City shall determine the maturity or maturities and amounts thereof to be redeemed. If less than all the Bonds of any maturity are to be redeemed, the City shall direct the Paying Agent/Registrar (or DTC while the Bonds are in Book -Entry -Only form) to call by lot the Bonds, or portions thereof, within such maturity or maturities and in such principal amounts for redemption. 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 City reserves the right, at its option, to redeem Certificates having stated maturities on and after August 15, 2014, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on February 15, 2013, or any date thereafter, at a price equal to the principal amount of the Certificates called for redemption plus accrued interest to the fixed date for redemption. If less than all of the Certificates are to be redeemed, the City shall determine the maturity or maturities and amounts thereof to be redeemed. If less than all the Certificates of any maturity are to be redeemed, the City shall direct the Paying Agent/Registrar (or DTC while the Certificates are in Book -Entry -Only form) to call by lot the Certificates, or portions thereof, within such maturity or maturities and in such principal amounts for redemption. If a Certificate (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Certificate (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE of REDEMPTION ... Not less than 30 days prior to a redemption date for the Obligations, 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 Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. 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 such Obligations to maturity or 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 such Obligations; provided that such deposits may be invested and reinvested only in (a) direct 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 obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; and (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the City adopts or approves the proceedings authorizing the issuance of refunding obligations to refund the Obligations, as applicable, 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, as the case may be. If any of such Obligations are to be redeemed prior to their respective dates of maturity, provision must have been made for giving notice of redemption as provided in the Ordinance. Upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of Obligations have been made as 12 1a described above, all rights of the City to initiate proceedings to call such Obligations for redemption or take any other action amending the terms of such Obligations are extinguished; provided, however, that the right to call such Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call such Obligations for redemption; (ii) gives notice of the reservation of that right to the owners of such Obligations immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Obligations. Because the order does not contractually limit such investments, registered owners may be deemed to have consented to defeasance with such other investments notwithstanding the fact that such investments may not be for the same investment quality as those currently permitted under Texas law. Boox-ENTRY-ONLY SYSTEM ... This section describes how ownership of the Obligations are to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by DTC while the Bonds or Certificates are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the 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. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds and Certificates (collectively 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 Bonds and Certificates, as set forth on the cover page and page 3 hereof, 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 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. 1 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 13 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, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (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). Redemption proceeds, distributions, and dividend 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, distributions, and dividend 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 the 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 the 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 for the Obligations. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT. In reading this Official Statement it should be understood that while the Obligations are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Information concerning DTC and the Book -Entry -Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City. PAYING AGENT/REGISTRAR ... The initial Paying Agent/Registrar is Bank One, National Association, Austin, Texas. In the Bond Ordinance and Certificate 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 Obligations, 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 Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligations 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 the designated payment/transfer office of the Paying Agent/Registrar, If the date for the 14 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. In the event the Book Entry Only System is discontinued and printed certificates are issued to the registered owners, the City and the Paying Agent/Registrar shall not be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transferability shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. TRANSFER, EXCHANGE AND REGISTRATION . . . In the event the Book -Entry -Only System should be discontinued, the Obligations 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. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "Book -Entry -Only System" herein for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. 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 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. BONDHOLDERS' REMEDIES ... The respective Ordinances establish as "events of default" (i) the failure to make payment of principal of, redemption premium, if any, or interest on any of Bonds or Certificates, as applicable, when due and payable; or (ii) default in the performance or observance of any other covenant, agreement, or obligation of the City, which default materially and adversely affects the rights of the Owners, including but not limited to their prospect or ability to be repaid in accordance with the respective Ordinances, and the continuation thereof for a period of sixty days after the notice of such default is given by any Owner to the City. 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 be 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 Bonds and Certificates are qualified with respect to the customary rights of debtors relative to their creditors. 15 BOND INSURANCE Concurrently with the issuance of the Obligations, Financial Guaranty Insurance Company ("Financial Guaranty") will issue its Municipal Bond New Issue Insurance Policy (the "Policy") for the Obligations described in the Policy (as used under the heading, the "Obligations"). The Policy unconditionally guarantees the payment of that portion of the principal or accreted value (if applicable) of and interest on the Obligations which has become due for payment, but shall be unpaid by reason of nonpayment by the issuer of the Obligations (the "Issuer"). Financial Guaranty will make such payments to State Street Bank and Trust Company, N.A., or its successor as its agent (the "Fiscal Agent"), on the later of the date on which such principal or accreted value (if applicable) and interest is due or on the business day next following the day on which Financial Guaranty shall have received telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from an owner of Obligations or the Paying Agent of the nonpayment of such amount by the Issuer. The Fiscal Agent will disburse such amount due on any Obligation to its owner upon receipt by the Fiscal Agent of evidence satisfactory to the Fiscal Agent of the owner's right to receive payment of the principal, accreted value or interest (as applicable) due for payment and evidence, including any appropriate instruments of assignment, that all of such owner's rights to payment of such principal, accreted value or interest (as applicable) shall be vested in Financial Guaranty. The term "nonpayment" in respect of a Obligation includes any payment of principal, accreted value or interest (as applicable) made to an owner of a Obligation which has been recovered from such owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. The Policy is non -cancellable and the premium will be fully paid at the time of delivery of the Obligations. The Policy covers failure to pay principal or accreted value (if applicable) of the Obligations on their respective stated maturity dates or dates on which the same shall have been duly called for mandatory sinking fund redemption, and not on any other date on which the Obligations may have been otherwise called for redemption, accelerated or advanced in maturity, and covers the failure to pay an installment of interest on the stated date for its payment. This Official Statement contains a section regarding the ratings assigned to the Obligations and reference should be made to such section for a discussion of such ratings and the basis for their assignment to the Obligations. Reference should be made to the description of the City for a discussion of the ratings, if any, assigned to such entity's outstanding parity debt that is not secured by credit enhancement. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the "Corporation"), a Delaware holding company. The Corporation is a subsidiary of General Electric Capital Corporation ("GE Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts of or the claims against Financial Guaranty. Financial Guaranty is a monoline financial guaranty insurer domiciled in the State of New York and subject to regulation by the State of New York Insurance Department. As of June 30, 2002, the total capital and surplus of Financial Guaranty was approximately $1.01 billion. Financial Guaranty prepares financial statements on the basis of both statutory accounting principles and generally accepted accounting principles. Copies of such financial statements may be obtained by writing to Financial Guaranty at 125 Park Avenue, New York, New York 10017, Attention: Communications Department (telephone number: 212-312-3000) or to the New York State Insurance Department at 25 Beaver Street, New York, New York 10004-2319, Attention: Financial Condition Property/Casualty Bureau (telephone number: 212-480-5187). 16 TAX INFORMATION AD VALOREM TAX LAW ... The appraisal of property within the City is the responsibility of the Tarrant County Appraisal District (the "Appraisal District"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.T.C.A., Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation F of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. `~ Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 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 Section 1-b, Article VIII, ad valorem taxes may continue to be s 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 Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. 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. 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. To date, the City has created two tax increment financing districts ("TIFDs") within the boundaries of the City. See "Tax Increment Financing Zone" below. The difference between any increase in the assessed valuation of taxable real property in the TIFD in excess of the base value of taxable real property in the TIFD is known as the "Incremental Value", and during the existence of the TIFDs, taxes levied by the City against the Incremental Value in the TIFDs are restricted to paying project and financing costs within the TIFDs and are not available for the payment of other obligations of the City, including the Bonds and the Certificates. 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. 17 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 60th day after the date the certified appraisal roll is received by the taxing unit, and a failure to adopt a tax rate by such required date will result in the tax rate for the taxing unit for the tax year to be the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the taxing unit for the preceding tax year. Furthermore, Section 26.05 provides the City Council may not adopt a tax rate that exceeds the lower of the rollback tax rate or 103 per cent of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted 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: After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, 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. 18 Cumulative Cumulative Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney's collection fee is added to the total tax penalty and interest charge. Under certain circumstances, 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. 18 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; minimum exemption of $5,000. See Table I for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City does not tax nonbusiness personal property; 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 1-1-02 the Reinvestment Zone Number One Taxable Assessed Value is $206,207,211. The project 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. As of 1-1-02 the Reinvestment Zone Number Two Taxable Assessed Value is $62,009,703. As of September 30, 2002 approximately $90,000,000 of permanent improvements has been made to Reinvestment Zone Number Two. 19 A TABLE I - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT 2002/03 Market Valuation Established by Tarrant Appraisal District Less Exemptions/Reductions at 100% Market Value: Residence Homestead Exemptions Over 65 Years of Age/Disabled Disabled Exemptions Veterans Exemptions Pollution Control Exemptions Solar/Wind Power Exemptions Freeport Exemptions Open -Space Land Use Reductions Prorated Absolutes Nominal Value Reductions 2002/03 Taxable Assessed Valuation $ 5,826,639,788 $ 327,182,706 51,353,818 762,383 1,112,555 38,199 9,774 569,905,541 57,282,406 550,476 9,362 1,008,207,220 2002/03 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number One 2002/03 Incremental Taxable Assessed Value of Real Property within Reinvestment Zone Number Two 2002/03 Taxable Assessed Valuation available for General Fund Obligations and Debt of City City Funded Debt Payable from Ad Valorem Taxes (i) General Obligation Bonds (as of 12/1/02) (2) $ 66,750,000 Certificates of Obligation (as of 12/1/02) 78,285,000 Equipment Acquisition Notes (as of 12/1/02) 2,160,000 The Bonds 15,710,000 The Certificates 3,175,000 Funded Debt Payable from Ad Valorem Taxes Less Self -Supporting Debt: (3) Combination Tax and Tax Increment Reinvestment Zone Revenue Certificates of Obligation (as of 12/1/02) Net Funded Debt Payable From Ad Valorem Taxes Interest and Sinking Fund as of September 30, 2002 Ratio Total Funded Debt to Taxable Assessed Valuation ................................................. . 2003 Estimated Population - 46,400 Per Capita Taxable Assessed Valuation - $103,846 Per Capita Total Funded Debt - $3,579 $ 4,818,432,568 (198,559,886) (61,264,817) $ 4,558,607,865 $ 166,080,000 56,465,000 $ 109,615,000 $ 2,204,991 3.45% (1) This statement of indebtedness does not include currently outstanding $29,931,456 system revenue bonds, as these bonds are payable solely from the net revenues of the Waterworks and Sewer System (the "System"), as defined in the ordinances authorizing the system revenue bonds. (2) Excludes the Refunded 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 for with ad valorem taxes. TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY 111, Category Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Lots Tracts Real, Acreage (Land Only) Real, Farm and Ranch Improvements Real, Commercial Real, Industrial Real and Tangible Personal, Utilities Real, Mobile Homes Tangible Personal, Business Tangible Personal, Commercial Tangible Personal, Industrial Tangible Personal, Mobile Homes Tangible Personal, Other Real Property, Inventory Total Appraised Value Before Exemptions Adjustments Less: Total Exemption/Reductions Taxable Assessed Value Category Real, Residential, Single -Family Real, Residential, Multi -Family Real, Vacant Lots Tracts Real, Acreage (Land Only) Real, Farm and Ranch Improvements Real, Commercial Real, Industrial Real and Tangible Personal, Utilities Real, Mobile Homes Tangible Personal, Business Tangible Personal, Commercial Tangible Personal, Industrial Tangible Personal, Mobile Homes Tangible Personal, Other Real Property, Inventory Total Appraised Value Before Exemptions Adjustments Less: Total Exemption/Reductions Taxable Assessed Value Taxable Appraised Value for Fiscal Year Ended September 30 2003 2002 2001 % of % of % of Amount Total Amount Total Amount Total $ 1,848,342,618 31.72% $ 1,673,214,512 30.17% $ 1,522,401,913 29.49% 252,912,480 4.34% 200,728,832 3.62% 151,579,484 2.94% 100,697,189 1.73% 104,297,996 1.88% 109,952,787 2.13% 138,891,577 2.38% 171,706,596 3.10% 165,569,051 3.21% 2,353,699 0.04% 2,160,035 0.04% 2,441,498 0.05% 1,198,547,815 20.57% 1,086,095,366 19.59% 932,109,580 18.06% 14,825,922 0.25% 14,530,371 0,26% 10,891,084 0.21% 147,113,035 2.52% 102,859,092 1.85% 88,123,888 1.71% 8,173,982 0.14% 9,059,623 0.16% 4,239,290 0.08% - 0.00% - 0.00% - 0.00% 1,966,523,825 33.75% 2,126,886,729 38.35% 2,127,859,776 41.22% 138,115,671 2.37% 46,334,087 0.84% 40,389,885 0.78% - 0.00% - 0.00% - 0.00% - 0.00% 111,976 0.00% 146,674 0.00% 10,141,975 0.17% 7,290,582 0.13% 6,679,162 0.13% $ 5,826,639,788 100.00% $ 5,545,275,797 100.00% $ 5,162,384,072 100.00% (1,008,207,220) (685,393,608) (789,839,701) $ 4,818,432,568 $ 4,859,882,189 $ 4,372,544,371 Taxable Appraised Value for Fiscal Year Ended September 30, 2000 1999 Amount $ 1,429,819,700 129,208,574 78,468,029 144,983,152 3,191,100 756,002,113 9,795,363 76,908,376 141,400 2,089,790,810 27,055,281 3,120,287 3,768,771 8,389,970 $ 4,760,642,926 (670,663,126) $ 4,089,979,800 % of Total 30.03% 2.71% 1.65% 3.05% 0.07% 15.88% 0.21% 1.62% 0.00% 0.00% 43.90% 0.57% 0.07% 0.08% 0.18% 100.00% Amount $ 1,324,311,480 117,908,272 72,832,010 144,782,450 3,879,434 572,358,423 8,731,223 66,444,170 152,200 1,646,479,365 26,974,631 3,187,135 3,723,954 6,450,400 $ 3,998,215,147 348,874,464 (352,418,481) $ 3,994,671,130 % of Total 33.12% 2.95% 1.82% 3.62% 0.10% 14.32% 0.22% 1.66% 0.00% 0.00% 41.18% 0.67% 0.08% 0.09% 0.16% 100.00% NOTE: Valuations shown are certified taxable assessed values reported by the Tarrant County 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. 21 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY (1) Source: The City of Grapevine. (2) Source: Tarrant County Appraisal District. (3) Projected, includes the Bonds and Certificates. Excludes the Refunded Bonds. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year Distribution % of Total Ratio Ended Fiscal General Interest and Taxable Tax Debt Tax Debt Funded Year Fund 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 1999 39,190 $ 3,994,671,130 $ 101,931 $ 103,132,152 2.58% $ 2,632 2000 39,523 4,089,979,800 103,484 143,995,000 3.52% 3,643 2001 44,390 4,372,544,371 98,503 156,815,000 3.59% 3,533 2002 45,500 4,859,882,189 106,811 157,940,000 3.25% 3,471 2003 46,400 4,818,432,568 103,846 157,645,000 (3) 3.27% 3,398 (1) Source: The City of Grapevine. (2) Source: Tarrant County Appraisal District. (3) Projected, includes the Bonds and Certificates. Excludes the Refunded Bonds. TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY Fiscal Year Distribution % of Total Ended Tax General Interest and Assessed % Current % Total 9/30 Rate Fund Sinking Fund Tax Levy Collections Collections 1999 $ 0.38500 $ 0.218736 $ 0.166264 $ 13,935,727 99.13% 100.32% 2000 0.38000 0.201983 0.178017 15,371,388 99.41% 99.77% 2001 0.37500 0.189641 0.185359 16,333,571 98.80% 99.10% 2002 0.36600 0.135924 0.230076 17,431,826 98.39% (1) 99.09%11) 2003 0.36600 0.148900 0.217100 17,635,463 In Process of Collection (1) Preliminary numbers furnished by City officials. TABLE 5 - TEN LARGEST TAXPAYERS 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 Bonds and Certificates — Tax Rate Limitation"). 22 2002/03 % of Total Taxable Taxable Assessed Assessed Name of Taxpayer Nature of Property Valuation Valuation American Airlines Inc. Commercial Airline $ 404,890,143 8.40% Grapevine Mills Ltd. Partnership Regional Shopping Mall 190,774,885 3.96% Delta Airlines Inc. Commercial Airline 121,440,144 2.52% GTE Directories Real Estate 108,533,958 2.25% GE Capital Services Simuflite Training School 107,612,820 2.23% Opryland Hotel Hotel 66,861,118 1.39% Atlantic Southwest Airlines Commercial Airline 48,504,115 1.01% United Parcel Services Co. Parcel Service 44,073,742 0.91% Quest Communications Corp. Telecommunication 42,721,429 0.89% Industrial Property Holding Lp Real Estate 37,258,600 0.77% $ 1,172,670,954 24.34% 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 Bonds and Certificates — Tax Rate Limitation"). 22 i TABLE 6 - TAX ADEQUACY (1) 2003 Principal and Interest Requirements $ 10,969,489 $0.2300 Tax Rate at 99.00% Collection Produces $ 10,971,571 Average Annual Principal and Interest Requirements, 2003 - 2026 $ 6,264,145 $0.1314 Tax Rate at 99.00% Collection Produces $ 6,268,106 Maximum Principal and Interest Requirements, 2004 $ 12,698,619 $0.2663 Tax Rate at 99.00% Collection Produces $ 12,703,171 (1) Includes the Bonds and Certificates, less self-supporting debt. Excludes the Refunded Bonds. 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. Total Direct and Overlapping Funded Debt $ 301,845,762 Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation ............................................... 6.26% Per Capita Overlapping Funded Debt................................................................................ $ 6,505.30 (1) Includes the Bonds and Certificates, less self-supporting debt and Refunded Bonds. 23 2002/03 Net City's Taxable 2002/03 Total Estimated Overlapping Assessed Tax Funded % Funded Debt Taxing Jurisdiction Value Rate Debt Applicable 12/1/2002 City of Grapevine $ 4,818,432,568 $ 0.3660 $ 109,990,000 "1 100.00% $ 109,990,000 Carroll Independent School District 4,129,748,520 1.9350 172,449,083 5.38% 9,277,761 Coppell Independent School District 3,420,395,257 0.6486 127,639,980 0.48% 612,672 Dallas County 126,261,793,442 0.1960 156,282,395 0.01% 15,628 Dallas County Community College District 130,932,366,627 0.0600 - 0.01% 0 Dallas County Hospital District 126,261,793,442 0.2540 - 0.01% 0 Grapevine-Colleyville Independent School District 12,196,358,521 1.6597 250,415,813 67.47% 168,955,549 Tarrant County 100,261,880,573 0.2725 163,415,000 5.24% 8,562,946 Tarrant County Hospital District 100,261,880,573 0.2324 3,665,000 5.24% 4,239,160 Tarrant County Junior College District 100,261,880,573 0.1394 80,900,000 5.24% 192,046 Total Direct and Overlapping Funded Debt $ 301,845,762 Ratio of Direct and Overlapping Funded Debt to Taxable Assessed Valuation ............................................... 6.26% Per Capita Overlapping Funded Debt................................................................................ $ 6,505.30 (1) Includes the Bonds and Certificates, less self-supporting debt and Refunded Bonds. 23 DEBT INFORMATION TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Fiscal Year Total Less TIF Total Debt % of Ended Outstanding Debt t�1 The Bonds (2) The Certificates t3) Debt Self -Supporting Less TIF Principal 9/30 Principal Interest Principal Interest Principal Interest Requirements Requirements Requirements Retired 2003 $ 6,855,000 $ 7,725,364 $ - $ 356,376 $ - $ 66,486 $ 15,345,678 $ 4,376,189 $ 10,969,489 2004 7,335,000 7,143,048 1,625,000 548,373 500,000 99,353 17,060,458 4,361,839 12,698,619 2005 7,605,000 6,755,711 1,505,000 501,423 515,000 84,128 16,775,971 5,083,559 11,692,412 2006 7,460,000 6,355,024 1,550,000 455,598 540,000 68,303 16,232,209 5,072,579 11,159,631 2007 7,550,000 5,961,811 1,615,000 408,123 270,000 56,153 15,946,921 5,080,626 10,866,295 27.20% 2008 7,775,000 5,571,010 1,660,000 357,338 265,000 47,863 15,775,135 5,083,698 10,691,438 2009 7,850,000 5,174,043 1,715,000 301,623 230,000 39,713 15,040,665 5,087,704 9,952,961 2010 8,115,000 4,774,673 1,225,000 249,499 245,000 31,209 14,364,171 5,092,610 9,271,561 2011 7,830,000 4,356,305 1,290,000 200,730 190,000 22,815 13,677,035 5,093,023 8,584,013 2012 7,750,000 3,976,916 610,000 162,730 115,000 16,715 12,499,646 5,114,129 7,385,518 55.57% 2013 8,295,000 3,580,650 235,000 145,830 115,000 12,II5 12,256,480 5,135,360 7,121,120 2014 8,745,000 3,150,225 245,000 136,108 115,000 7,458 12,276,333 5,156,323 7,120,010 2015 9,095,000 2,689,485 255,000 125,666 120,000 2,550 12,165,151 5,180,118 6,985,034 2016 9,140,000 2,214,376 265,000 114,418 - - 11,733,793 5,201,774 6,532,019 2017 5,550,000 1,827,538 275,000 102,331 - 7,754,869 2,591,176 5,163,693 81.27% 2018 4,955,000 1,547,706 290,000 89,333 - 6,882,039 2,591,939 4,290,100 2019 5,245,000 1,275,739 305,000 75,346 - 6,901,086 2,597,814 4,303,272 2020 3,510,000 1,039,291 320,000 60,343 - 4,929,634 2,602,404 2,327,230 2021 3,720,000 841,588 335,000 44,291 - 4,940,879 2,606,194 2,334,685 2022 2,460,000 662,019 350,000 27,250 - 3,499,269 2,608,894 890,375 94.28% 2023 2,075,000 533,744 370,000 9,250 - 2,608,744 2,608,744 - 2024 2,200,000 411,838 - - - 2,611,838 2,611,838 2025 2,335,000 282,588 - 2,617,588 2,617,588 2026 2,475,000 145,406 - - - - 2,620,406 2,620,406 - 100.00% $ 145,925,000 $ 77,996,095 $ 16,040,000 $ 4,471,975 $ 3,220,000 $ 554,857 $ 222,687,638 $ 77,900,456 $ 144,787,183 (1) "Outstanding Debt" includes lease/purchase obligations and self-supporting debt. Excludes the Refunded Bonds. (2) Average life of the issue - 6.939 years. Interest on the Bonds has been calculated at the rates illustrated on the cover page hereof. (3) Average life of the issue - 4.966 years. Interest on the Certificates has been calculated at the rates illustrated on page 3 hereof. TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION Tax Supported Debt Service Requirements, Fiscal Year Ending 9/30/2003 .............................. $ 11,809,510 (11 Interest and Sinking Fund Balance as of 9/30/02 ................................. $ 2,204,990 Interest and Sinking Fund Tax Levy ........................................... 9,471,057 Penalty and Interest........................................................ 65,000 Budgeted Transfers (2) ......................................................... 2,148,454 Estimated Investment Income .................................................. 125,000 14,014,501 Estimated Balance, 9/30/2003................................................................. $ 2,204,991 (1) Excludes TIF self-supporting debt service. (2) Includes Golf Course user fees. 24 TABLE 10 - COMPUTATION OF SELF-SUPPORTING DEBT BeginningFund Balance, 9-30-02 c,>........................................................................................................................................ $ 5,675,988 Projected Net Tax Increment Reinvestment Zone Revenue Available for Debt Service....................................................... 5,914,389 Requirements for Tax Increment Reinvestment Zone Certificates......................................................................................... 4,376,189 ProjectedFund Balance, 9-30-03............................................................................................................................................. $ 7,214,188 Percentage of Tax Increment Reinvestment Zone Revenue Certificates Self -Supporting g Pp g ..................................................... 100.00% TABLE 11 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Amount Amount Date Amount Previously Being Unissued Purpose Authorized Authorized Issued Issued Balance Street Improvements 12/5/1998 $ 30,245,000 $ 20,000,000 $ 5,000,000 $ 5,245,000 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT ... The City does not anticipate the issuance of additional general obligation debt within the next six months. TABLE 12 - OTHER OBLIGATIONS The City has no unfunded debt outstanding as of September 30, 2002. 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".) (The remainder of this page left blank intentionally.) 25 Expenditures General Government FINANCIAL INFORMATION 11,686,622 $ TABLE 13 - GENERAL FUND REVENUES AND EXPENDITURE HISTORY $ 5,625,351 $ 4,792,874 Public Safety Fiscal Year Ended September 30, 15,532,602 Revenues 2002(') 2001 2000 1999 1998 Taxes $ 27,165,580 $ 29,239,672 $ 27,051,303 $ 25,160,401 $ 23,365,424 Licenses and Permits 1,536,786 1,146,428 1,494,428 1,163,306 1,246,991 Intergovernmental 217,614 4,381,910 182,863 190,189 216,171 Charges for Services 5,009,819 2,984,179 3,003,353 2,693,057 2,522,115 Fines and Forfeitures 2,101,526 2,149,638 2,360,028 1,850,076 1,599,870 Interest and Miscellaneous 792,073 876,507 776,140 687,619 865,135 Total Revenues $ 36,823,398 $ 40,778,334 $ 34,868,115 $ 31,744,648 $ 29,815,706 Expenditures General Government $ 11,686,622 $ 10,510,527 $ 5,683,237 $ 5,625,351 $ 4,792,874 Public Safety 15,532,602 17,640,884 15,404,767 13,245,400 12,098,657 Culture and Recreation 5,184,010 5,737,648 5,183,727 4,519,957 4,021,478 Public Works 4,772,777 6,067,277 5,657,648 5,062,397 4,188,152 Total Expenditures $ 37,176,011 $ 39,956,336 $ 31,929,379 $ 28,453,105 $ 25,101,161 Excess (deficiency) of Revenues Over Expenditures $ (352,613) $ 821,998 $ 2,938,736 $ 3,291,543 $ 4,714,545 Other Financing Sources Budgeted Transfers In $ 300,000 $ 400,000 $ - $ 13,090 $ 14,170 Budgeted Transfers Out (1,753,450) (1,295,979) (2,098,598) (1,900,345) (5,610,764) Total Transfers $ (1,453,450) $ (895,979) $ (2,098,598) $ (1,887,255) $ (5,596,594) Net Increase (Decrease) $ (1,806,063) $ (73,981) $ 840,138 $ 1,404,288 $ (882,049) Other Miscellaneous Adjustments - - - - - Residual Equity Transfer 262,087 - 1,172 79,788 - Beginning Fund Balance 7,658,665 7,732,646 6,891,336 5,407,260 6,289,309 Ending Fund Balance $ 6,114,689 $ 7,658,665 $ 7,732,646 $ 6,891,336 $ 5,407,260 (1) Unaudited. Preliminary numbers provided by City officials. 26 I TABLE 14 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, V.A.T.C.S., 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 and Certificates. Collections and enforcements are effected through the offices of the Comptroller of Public Accounts, State of Texas, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Fiscal Year % of Equivalent of Ended Total Ad Valorem Ad Valorem Per 9/30 Collected Tax Levy Tax Rate Capita 1998 $ 10,556,089 80.11% $ 0.3245 $ 278 1999 13,058,268 93.70% 0.3269 333 2000 14,340,693 93.29% 0.3506 363 2001 16,048,266 98.25% 0.3670 362 2002 14,939,771 85.70% 0.3074 328 FINANCIAL POLICIES Basis of Accounting ... The City's accounting records of the governmental fund revenues and expenditures are recognized on the modified accrual basis. Revenues are recognized in the accounting period in which they are available and measurable. Expenditures are recognized in the accounting period in which the fund liability occurred, if measurable, except for unmatured interest on general long-term debt. Proprietary Fund revenues and expenses are recognized on the fall accrual basis. Revenues are recognized in the accounting period in which they are earned and become measurable. Expenses are recognized in the accounting period in which they are incurred. 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 10% of the Fund's operating expenditure budget. The City maintains its various debt service funds in accordance with the covenants of the bond 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. 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. 27 INVESTMENTS The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by the City Council of the City. Both state law and the City's investment policies are subject to change. LEGAL INVESTMENTS ... Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issued, assumed or guaranteed by the State of Israel, (7) certificates of deposit that are guaranteed or insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits, (8) certificates of deposit and share certificates issued by a state or federal credit union domiciled 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 obligations described in the clauses (1) through (6) or in any other manner and amount provided by law for City deposits, (9) 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, (10) bankers' acceptances with the remaining term of 270 days or less, if the short- term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (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-load money market mutual funds regulated by the Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (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 the preceding clauses; 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; provided, however, that the City is not authorized to invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in such no-load mutual funds, and (14) guaranteed investment contracts secured by obligations of the United States of America or its agencies and instrumentalities, other than the prohibited obligations described below. 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 AAAin or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES ... Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. 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. 28 7 ADDITIONAL PROVISIONS ... Under Texas law the City is additionally required to: (1) annually review its adopted policies and t strategies; (2) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the investment in non -money market mutual funds of any portion of bond proceeds, reserves and funds held for debt service to no more than 15% of the entity's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. TABLE 15 - CURRENT INVESTMENTS As of September 30, 2002, the City's investable funds were invested in the following categories: (The Remainder of This Page Left Blank Intentionally.) 29 Book Market Description Percent Value Value Government Securities 13.42% $ 11,405,795 $ 11,477,914 TexPool 86.58% 73,566,013 73,618,964 100.00% $ 84,971,808 $ 85,096,878 (The Remainder of This Page Left Blank Intentionally.) 29 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 law and (ii) the Obligations are not "private activity bonds" under the Internal Revenue Code of 1986, as amended (the "Code"), and interest on the Obligations will not be 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 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 proceeds and the source of repayment, limitations on the investment of proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of proceeds be paid periodically to the United States, and requirement that the issuer file an information report with the Internal Revenue Service. The City has covenanted in the respective 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 which 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 City, the City's Financial Advisor and the Underwriters with respect to matters solely within the knowledge of the City, the City's Financial Advisor and the Underwriters, respectively, which Bond Counsel has not independently verified. If the City should fail to comply with the covenants in the respective Ordinances or if the foregoing representations 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. 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. Except as stated above, and as stated below in "Tax Accounting Treatment of Original Issue Discount Obligations", Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Obligations. 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 U.S. 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. 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 hereof. 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 City as the taxpayer and the Owners of the Obligations 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. 30 TAX ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT OBLIGATIONS ... The initial public offering price for certain of the respective Obligations may be less than the principal amount thereof (the "Original Issue Discount Obligations"). In such case, Bond Counsel, under existing law and based upon the assumptions hereinafter stated, will render an opinion to the effect that: (a) 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; and (b) 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 s,. the period that such Original Issue Discount Obligation continues to be owned by such owner. 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 y 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. (Because original issue discount is treated as interest for federal income tax purposes, the discussion regarding interest on the Obligations under the caption "Tax Exemption" generally applies, except as otherwise provided below, to original issue discount on an Original Issue a, Discount Obligation held by an owner who purchased such Obligation at the initial offering price in the initial public offering of the Obligations, and should be considered in connection with the discussion in this portion of the Official Statement.) In rendering the foregoing opinion, Bond Counsel will assume, in reliance upon certain representations of the Underwriters, that (a) the Underwriters have 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. Neither the City nor Bond Counsel warrants that the Original Issue Discount Obligations will be offered and sold in accordance with such assumptions. Certain of the representations of the initial purchaser, upon which Bond Counsel will rely in rendering the foregoing opinion, will be based on records or facts the initial purchaser had no reason to believe were not correct. 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 semi-annual 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. 31 OTHER INFORMATION RATINGS The Bonds and Certificates are rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, A Division of the McGraw-Hill Companies, Inc. ("S&P") through an insurance policy to be issued by Financial Guaranty Insurance Company The uninsured tax supported debt of the City is rated "Al" by Moody's and "A+" 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. 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 litigation 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 at 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. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds and Certificates, including the approving legal opinion of the Attorney General of the State of Texas to the effect that each Initial Obligation is a valid and binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel to the effect that the Bonds and Certificates issued in compliance with the provisions of the Bond Ordinance and Certificate Ordinance are valid and legally binding obligations of the City and the interest on such Bonds and Certificates is excludable from gross income for federal income tax purposes under existing law and the Bonds and Certificates are not private activity bonds, subject to the matters described under "Tax Matters" herein. A form of such opinion is attached hereto as Appendix C. Bond Counsel did not take part in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the information describing the Bonds and Certificates in the Official Statement under the captions Plan of Financing (except under the subcaption "Sources and Uses of Proceeds"), "The Bonds and Certificates" (except for the subception "Book -Entry -Only System"), "Tax Matters" and "Continuing Disclosure of Information" (except for under the subcaption "Compliance with Prior Undertakings") and the subcaptions "Legal Investments and Eligibility to Secure Public Fund in Texas", and "Legal Matters" under the caption "Other Information" and is of the opinion that the information relating to the Bonds and Certificates and the Bond Ordinance and Certificate Ordinance contained therein fairly and accurately describe the provisions thereof. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds and Certificates are contingent on the sale and delivery of the Bonds and Certificates. The legal opinion will accompany the Bonds and Certificates deposited with DTC or will be printed on the Bonds and 32 Certificates in the event of the discontinuance of the Book -Entry -Only System. Certain legal matters will be passed upon for the 6 Underwriters by Locke Liddell & Sapp LLP, Dallas, Texas, Counsel to the Underwriters. 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. CONTINUING DISCLOSURE OF INFORMATION In the Bond Ordinance and the Certificate Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds and Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds or Certificates. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. ANNUAL REPORTS ... 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 2002. 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 15c2-12. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements 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, y unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change. The Municipal Advisory Council of Texas has been designated by the State of Texas and approved by the SEC staff as a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768- 2177, and its telephone number is 512/476-6947. MATERIAL EVENT NOTICES ... The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Bonds and Certificates, if such event is material to a decision to purchase or sell Bonds and Certificates: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds or Certificates; (7) modifications to rights of holders of the Bonds or Certificates; (8) Bond or Note calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds or Certificates; and (11) rating changes. (Neither the Bonds, the Certificates nor the respective Ordinances make any provision for debt service reserves or liquidity enhancement.) In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to the SID and to 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 Bonds and Certificates only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. 33 LIMITATIONS AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds or Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds or Certificates, or both, may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds or Certificates in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds or Certificates, as the case may be, consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds or Certificates, as the case may be. 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 Bonds or Certificates in the primary offering thereof. 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 ... The City has compiled in all material respects with all continuing disclosure agreements made by it in accordance with SEC Rule 15c2-12. FINANCIAL ADVISOR First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, in its capacity as Financial Advisor, has relied on the opinion of Bond Counsel and has not verified and does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. FORWARD-LOOKING STATEMENTS DISCLAIMER The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City' expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. The City' 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 judgements 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. 34 VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by First Southwest Company on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the forecasted payments of principal and interest to redeem the Refunded Bonds and (b) computation of the yields of the Refunding Bonds and the restricted Federal Securities were Iverified by Grant Thornton, LLP, certified public accountants. Such computations were based solely on assumptions and information supplied by First Southwest Company on behalf of the City. Grant Thornton, LLP has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. UNDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of $89,930.95. The Underwriters have agreed, subject to certain conditions, to purchase the Certificates from the City, at an underwriting discount of $18,199.00. The Underwriters will be obligated to purchase all of the Obligations if any Obligations are purchased. The Obligations to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Obligations into investment trusts) at prices lower than the public offering prices of such Obligations and such public offering prices may be changed, from time to time, by the Underwriters. APPROVAL OF OFFICIAL STATEMENT The Ordinances will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds and Certificates by the Underwriters. ATTEST: /s/ LINDA HUFF City Secretary 35 /s/ WILLIAM D. TATE Mayor City of Grapevine, Texas THIS PAGE LEFT BLANK INTENTIONALLY Schedule I SCHEDULE OF REFUNDED BONDS General Obligation Refunding and Improvement Bonds, Series 1993 Original Maturity Interest Principal Dated Date Date Rate Amount 9/1/1993 2/15/2004 4.70% $ 1,335,000 2/15/2005 4.80% 1,230,000 2/15/2006 4.90% 1,290,000 2/15/2007 5.00% 1,370,000 2/15/2008 5.10% 1,435,000 2/15/2009 5.10% 1,515,000 2/15/2010 5.10% 1,040,000 2/15/2011 5.10% 1,105,000 2/15/2012 5.10% 425,000 The 2004 - 2012 maturities will be redeemed prior to original maturity on March 19, 2003 at par, plus accrued interest, if any. THIS PAGE LEFT BLANK INTENTIONALLY I 11:1", mnaummom GENERAL INFORMATION REGARDING THE CITY THE CITY ... The City is a political subdivision of the State of Texas incorporated in 1907 and operates as a home -rule City under the general laws of the State of Texas 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 1992 31,400 City Estimate 1980 11,801 U.S. Census 1993 31,902 City Estimate 1981 15,245 Grapevine Community Profile 1994 32,727 City Estimate 1982 16,183 Grapevine Community Profile 1995 33,211 City Estimate 1983 18,121 Grapevine Community Profile 1996 34,950 City Estimate 1984 19,405 Grapevine Community Profile 1997 36,000 City Estimate 1985 22,002 Grapevine Community Profile 1998 37,946 City Estimate 1986 24,493 Grapevine Community Profile 1999 39,190 City Estimate 1987 25,853 Grapevine Community Profile 2000 39,523 U.S. Census 1988 27,132 City Estimate 2001 44,390 City Estimate 1989 27,257 City Estimate 2002 45,500 City Estimate 1990 29,202 U.S. Census 2003 46,400 City Estimate 1991 30,300 City Estimate ECONOMICS ... 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 International, 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 $2.0 million in annual hotel/motel tax revenue. EMPLOYMENT ... The labor market in the City continues to be strong. Employment figures furnished by Texas Employment Commission are: A-1 October Annual Annual Annual Annual Annual 2002 2001 2000 1999 1998 1997 Labor Force 22,436 22,001 21,757 21,309 20,796 20,096 Employed 21,752 21,509 21,393 20,956 20,430 19,705 Unemployed 684 492 364 353 366 391 Percent of Unemployed 3.05% 2.24% 1.67% 1.66% 1.76% 1.95% A-1 MAJOR EMPLOYERS Source: City of Grapevine, Department of Development Services. BANKING AND FINANCIAL... Banking facilities for the City are provided by four banks, the Texas Bank of Grapevine, the First State Bank of Grapevine, Frost Bank and a branch of NationsBank of Texas, Independent National Bank, Bank One and of Bank of America. Also located in the City is a branch of the Omni Federal Credit Union. Source: City of Grapevine, Finance Department. BUILDING PERMITS... The number and value of building permits issued by the City are: Fiscal Commercial Permits Estimated Total Number of Company Product Employees Dallas/Fort Worth International Airport Airport 33,000 Grapevine/Colleyville Independent School District School District 1,656 United Parcel Service Parcel Service 1,218 GTE Directory Corporation Yellow Pages Directory 1,200 Baylor Medical Center Health Services 874 Hyatt Regency Hotel Hotel 815 City of Grapevine City Government 474 D/FW Hilton Hotel Hotel 380 Super Shuttle Airport Shuttle Service 320 SimuFlite Training International Pilot Training 260 Embassy Suites Hotel 250 Trencor Heavy Equipment Manufacturing 180 Source: City of Grapevine, Department of Development Services. BANKING AND FINANCIAL... Banking facilities for the City are provided by four banks, the Texas Bank of Grapevine, the First State Bank of Grapevine, Frost Bank and a branch of NationsBank of Texas, Independent National Bank, Bank One and of Bank of America. Also located in the City is a branch of the Omni Federal Credit Union. Source: City of Grapevine, Finance Department. 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 1998 35 $ 85,231,406 228 $ 37,995,929 263 $ 123,227,335 1999 32 59,920,763 185 21,026,688 217 80,947,451 2000 56 84,742,336 211 56,040,989 267 140,783,325 2001 53 364,294,642 89 12,445,025 142 376,739,667 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 18 -hole golf course and has plans for a 9 -hole expansion. 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. A-2 HOTEL AND CONVENTION FACILITIES... There are three 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. EDUCATION... 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: 2 High schools 4 Middle schools I I Elementary schools 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: 1982 3,646 1992 9,459 1983 3,732 1993 10,878 1984 4,037 1994 10,957 1985 4,675 1995 11,316 1986 5,617 1996 12,373 1987 6,107 1997 12,893 1988 6,604 1998 13,319 1989 7,156 1999 13,159 1990 7,984 2000 13,615 1991 8,706 2001 14,276 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: College/University 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 L EXCERPTS FROM THE CITY OF GRAPEVINE, TEXAS ANNUAL FINANCIAL REPORT For the Year Ended September 30, 2001 The information contained in this Appendix consists of excerpts from the City of Grapevine, Texas Annual Financial Report for the Year Ended September 30, 2001, and is not intended to be a complete statement of the City's financial condition. Reference is made to the complete Report for further information. THIS PAGE LEFT BLANK INTENTIONALLY I III APPENDIX C FORM OF BOND COUNSEL'S OPINIONS THIS PAGE LEFT BLANK INTENTIONALLY APPENDIX D SPECIMEN BOND INSURANCE POLICY THIS PAGE LEFT BLANK INTENTIONALLY