HomeMy WebLinkAboutItem 03 - Refunding Bond IssueITEM t
MEMO TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: ROGER NELSON, CITY MANAGER All
MEETING DATE: SEPTEMBER 3, 2002
SUBJECT: REFUNDING BOND ISSUE
RECOMMENDATION:
City Council to consider approving an ordinance for the issuance of City of Grapevine
Water and Sewer System Refunding Bonds, Series 2002 in the amount of $6,160,000.
BACKGROUND:
At the September 3, 2002 City Council Meeting a representative of the First Southwest
Company, the City Financial Advisor will present bids for the sale of $6,160,000 of
Refunding Bonds. The bonds will be used to defease $5,895,000 of Water and Sewer
Revenue Bonds. The bonds were issued in 1992 ( $3,705,000 ) at an average rate of
5.50%; and 1995 ($2,190,000) at an average rate of 5.45%.
Current market conditions are such that the bonds can be refinanced at an estimated rate
of 4.12%. This will result in a net present value savings to the City of approximately
$400,000 over the remaining life of the bonds.
A copy of the official statement for the bond sale is included in the Council agenda packet.
The draft sale ordinance is available in the City Secretary's office.
Staff recommends acceptance of the First Southwest Company's bid recommendation and
approval of the associated ordinance.
WAG/cjc
H:AW RefundingBondlssueg-3-02
August 21, 2002 (11:15AM)
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PRELIMINARY OFFICIAL sTATEMENr Ratings:
Moody's: Applied For
Dated August 21, 2002 S&P: Applied For
See("Other Information -
NEW ISSUE - Book -Entry -Only Ratings" 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 NOTBE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS
$6,160,000*
CITY OF GRAPEVINE, TEXAS
(Tarrant and Dallas Counties)
WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 2002
Dated Date: September 1, 2002 Due: September 1, as shown below
PAYMENT TER.NIS ... Interest on the 56,160,000* City of Grapevine, Texas, Waterworks and Sewer System Revenue Refunding
Bonds, Series 2002 (the "Bonds") will accrue from September 1, 2002 (the "Dated Date"), and will be payable March I and September
I of each year, commencing March 1, 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 - Book -Entry -Only System" herein. The initial Paying Agent/Registrar is Bank One, National Association,
Austin, Texas (see "The Bonds - Paying Agent/Registrar").
AUTHORITY FOR ISSUANCE . . . The Bonds are issued pursuant to the general laws of the State of Texas, particularly Texas
Government Code, Chapter 1207, as amended, and an ordinance (the "Ordinance") passed by the City Council of the City of Grapevine
(the "City"), and are special obligations of the City, payable, both as to principal and interest, solely from and, together with the
outstanding Previously Issued Bonds, secured by a first lien on and pledge of the Net Revenues of the City's Waterworks and Sewer
System (the "System") The City has not covenanted nor obligated itself to pay the Bonds from monies raised or to be
raised from taxation (see "The Bonds - Authority for Issuance"),
PURPOSE ... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding debt described in Schedule I
(the "Refunded Bonds") in order to lower the overall debt service requirements of the City and to pay the costs associated with the
issuance of the Bonds.
A mnQ
$ 460,000
Mat"rity
2003
480,000
2004
490,000
2005
500,000
2006
515,000
2007
760,000
2008
790,000
2009
MATURITY SCHEDULE*
Amnion �
S 815,000
2010
250,000
2011
260,000
2012
270,000
2013
280,000
2014
290,000
2015
(Accrued Interest from September 1, 2002 to be added)
OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
September 1, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on September 1, 2012, or any
date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "The Bonds - Optional Redemption").
LEGALITY ... The Bonds are offered for delivery when, as and if issued and received by the Underwriter and subject to the approving
opinion of the Attorney General of Texas and the opinion of Vinson & Elkins L.L.P., Bond Counsel, Dallas, Texas (see Appendix C,
"Form of Bond Counsel's Opinion"). Certain legal matters will be passed upon for the Underwriter by Fulbright & Jaworski L.L.P.,
Dallas, Texas, Counsel for the Underwriter.
DELIVERY... It is expected that the Bonds will be available for delivery through The Depository Trust Company on October 8, 2002.
* Preliminary, subject to change.
MORGAN KEEGAN & COMPANY, I c.
For purposes of compliance with Rule 15c3-12 of the Securities and Exchange Commission (the "Rule'), this document constitutes an
Official Statement of the City with respect to the Bonds that has been "deemed final" by the City as of its date except for the omission of
no more than the information permitted by the Rule.
This Preliminary Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or
the solicitation ofan 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 Preliminary Official Statement, and, if given or made, such other information or representations must not be relied
upon.
The information set forth herein has been obtained from the City and other sources believed to be reliable, but such information is not
guaranteed as to accuracy or completeness and is not to be construed as the promise or guarantee of the Financial Advisor. This
Preliminary Official Statement contains, in part, estimates and matters of opinion which are not intended as statements offact, and no
representation is made as to the correctness of such estimates and opinions, or that they will be realized.
The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this
Preliminary Official Statement nor any sale made hereunder shall, tinder any circumstances, create any implication that there has
been no change in the affairs of the City or other matters described.
Neither the City, the Financial Advisors nor the Underwriter make any representation as to the accuracy, completeness, or adequacy of
the information supplied by The Depository Trust Company for use in this Preliminary Official Statement.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER it'I.AY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE THE MARKET PRICE OF THE OBLIGATIONS ATA LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF RECOMMENDED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS ARE
EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT
BEEN REGISTERED THEREWITH. THE REGISTRATION QUALIFICATION, OR EXE.,WPTION OF THE BONDS 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.
The Underwriter Ins provided the following sentence for inclusion in this official statement. The Underwriter has 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 Underwriter does not guarantee the accuracy or completeness of
such information.
TABLE OF CONTENTS
OFFICIAL STATEMENT SUMMARY ............................3 CONTINUING DISCLOSURE OF INFOR_MATION.28
CITY OFFICIALS, STAFF AND CONSULTANTS ...... 5
ELECTED OFFICIALS.....................................................5
SELECTED ADMINISTRATIVESTAFF................................5
CONSULTANTS AND ADVISORS.... ............................ .... 5
INTRODUCTION..............................................................7
PLAN OF FINANCING.....................................................7
THEBONDS......................................................................8
THESYSTEM..................................................................14
TABLE I-WATERUSAGE..........................................14
TABLE 2 -TEN LARGEST WATERCUSTOMERS ............
15
TABLE 3 -MONTHLY WATERRATES ..........................15
TABLE 4 -MONTHLY SEWER RATES ...........................16
TABLE 7 -COVERAGE AND FUND BALANCES.............18
DEBT INFORMATION...................................................17
TABLES -WATERWORKSANDSEWER SYSTEM
REVENUE DEBT SERVICE REQUIREMENTS ..........
17
FINANCIAL INFOR:NATION........................................18
TABLE - CONDENSED STATEMENTOF OPERATIONS. 18
TABLE 7 -COVERAGE AND FUND BALANCES.............18
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE
TABLE 8 - VALUE OFTHE SYSTEM. ... ..... 11.1 ............
19
TABLE 9 - CITY'S EQUITY IN SYSTEM ..........................19
LEGAL MATTERS. ................... ................. .............
TABLE 10- CURRENT INVESTMENTS ...........................21
AUTHENTICITY OF FINANCIAL DATA AND OTHER
SELECTED PROVISIONS OF THE BOND
ORDINANCE...................................................................2 2
TAX MATTERS...............................................................27
OTHER INFORMATION...............................................30
RATINGS. ....... __ ......... ............................ _ ........ --.30
LITIGATION................................................................3
0
REGISTRATION AND QUALIFICATION OF BONDS FOR
SALE................................................................30
LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE
PUBLIC FUNDS IN TEXAS..................................30
LEGAL MATTERS. ................... ................. .............
30
AUTHENTICITY OF FINANCIAL DATA AND OTHER
INFORMATION..................................................3
1
FINANCIAL ADVISOR..................................................3
1
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL
COMPUTATIONS................................................3
1
UNDERWRITING.........................................................31
FORWARD LOOKING STATEMENTS..............................31
MISCELLANEOUS.......................................................32
SCHEDULE OF REFUNDED BONDS ....SCHEDULE I
APPENDICES
GENERAL INFORMATION REGARDING THE CITY.......... A
EXCERPTS FROMTHE ANNUAL FINANCIAL REPORT.... B
FORM OF BOND COU'NSEL'S OPINION .......................... C
The cover page hereof, this page, the appendices included
herein and any addenda, supplement or amendment hereto,
are part of the Official Statement.
PRELINWNARY OFFICIAL STATE,'VIENT SUnM ARY
M
This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official
k n„ Statement. The offering of the Bonds 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 Bonds are issued as $6,160,000* Waterworks and Sewer System Revenue Refunding
Bonds, Series 2002. The Bonds are issued as serial bonds maturing September 1, 2003 through
September 1, 2015 (see "The Bonds -Description of the Bonds").
PAYNIENTOFINTEREST ................ Interest on the Bonds accrues from September 1, 2002, and is payable March 1, 2003, and
each March I and September 1 thereafter until maturity or prior redemption (see "The Bonds -
Description of the Bonds," and "The Bonds - Optional Redemption").
AUTHORITY FOR ISSUANCE........... The Bonds are issued pursuant to the general laws of the State, including particularly Texas
Government Code, Chapter 1207, as amended, and an Ordinance passed by the City Council
of the City (see "The Bonds - Authority for Issuance").
S ECURITY FOR THE BONDS........... The Bonds constitute special obligations of the City, payable, both as to principal and
interest, solely from and, together with the outstanding Previously Issued Bonds, are secured
by a first lien on and pledge of the Net Revenues of the City's Waterworks and Sewer System
(the "System"). The City has not covenanted nor obligated itself to pay the Bonds from
monies raised or to be raised from taxation (see "The Bonds - Security and Source of
Payment").
OPTIONAL REDEMPTION ............... The City reserves the right, at its option, to redeem Bonds having stated maturities on and
after September 1, 2013, in whole or in part in, principal amounts of S5,000 or any integral
multiple thereof, on September 1, 2012, or any date thereafter, at the par value thereof plus
accrued interest to the date of redemption.
TAxExEMrrION ........................... In the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross
income for federal income tax purposes under existing law and the Bonds are not private
activity bonds. See "Tax Matters - Tax Exemption" for a discussion of the opinion of Bond
Counsel, including a description of the alternative minimum tax consequences for corporations.
USE OF PROCEEDS ......................... Proceeds from the sale of the Bonds will be used to refund a portion of the City's outstanding
debt described in Schedule I (the "Refunded Bonds") in order to tower the overall debt service
requirements of the City and to pay costs associated with the issuance of the Bonds.
RATINGS ...................................... The presently outstanding revenue debt of the City is rated "A3" by Moody's Investors
Service, Inc. ("Moody's") and "A" by Standard & Poor's Ratings Services, A Division of The
McGraw-Hill Companies, Inc. ("S&P"). The City also has issues outstanding which are rated
"Aaa" by Moody's and "AAA" by S&P through insurance by various commercial insurance
companies. Applications for contract ratings on the Bonds have been made to Moody's and
S&P (see "Other Information - Ratings").
BOOK -ENTRY -ONLY
S YSTENI....................................... The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee
of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of
the Bonds may be acquired in denominations of S5,000 or integral multiples thereof. No
physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of,
premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to
Cede & Co., which will make distribution of the amounts so paid to the participating members
of DTC for subsequent payment to the beneficial owners of the Bonds (see "The Bonds -
Book -Entry -Only System").
PAYMENT RECORD ........................ The City has never defaulted in payment of its revenue debt or general obligation tax debt.
* Preliminary, subject to change.
S ELECTED FINANCIAL LNFORNLaTION
Fiscal
WatP,�I lsa
2)
Net Revenues
Average
Year
Estimated
Average
Available
Annual Debt
Coverage
Ended
City
Day
Peak Day
Total
For
Service
of
91,30
Pnnnlatinn
Iicag
ITcage
Ileage
Deht Oerviee
Requirement,-
Debt
1998
37,946
6,971,000
19,112,000
2,551,321,000
5,417,208
2,123,920
2.55x
1999
39,190
9,219,000
19,435,000
3,364,937,000
5,350,839
2,584,440
2.07x
2000
42,059
9,749,000
20,300,000
3,558,482,000
7,292,796
2,379,978
3.06x
2001
42,443
9,249,000
19,591,000
3,060,023,000
7,519,160
2,600,665
2.89x
2002
44,390
7,352,000
13375,000
2,007,081,000
N/A
2,574,439
N/A
(*) as of June 30, 2002.
For additional information regarding the City, please contact:
Fred Werner
Director of Finance
City of Grapevine
413 S. Main Street
Grapevine, Texas 76051
(817) 410-3111
David K. Medanich
Laura Alexander
or First Southwest Company
777 Main Street, Suite 1200
Fort Worth, Texas 76102
(817)332-9710
4
CIT Y OFFICIALS, STAFF AND CONSULTANTS
ELECTED OFFICIALS
City CrnmCil
Length of
Term
Roger Nelson
William D. Tate
Service
14 Years
Expires
May, 2003
Occupation
Attomey-at-Law
Mayor
Director of Finance
5 Years
Linda Huff
Ted R. Ware
23 Years
May, 2005
Commercial Contractor
Mayor Pro Tem
C. Shane Wilbanks
17 Years
May, 2003
Personnel Director
Councilmember, Place I
Sharron Spencer
17 Years
May, 2003
Retired Sales Representative
Councilmember, Place 2
Clydene Johnson
7 Years
May, 2004
Independent Insurance Agent
Councilmember, Place 3
Darlene Freed
4 Years
May, 2004
Commercial Real Estate Agent
Councilmember, Place 4
Roy Stewart 6 Years May, 2005 Construction Company Owner
Councilmember, Place 6
(1) Previously served 12 years as Mayor and Councilmember.
SELECTED ADMINISTRATIVE STAFF
(1) 7 years with City, 5 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
Roger Nelson
City Manager
5 YearP
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 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
THIS PAGE LEFT BLANK INTENTIONALLY
PRELIMINARY OFFICIAL STATENIENT
RELATING TO
$6,160,000*
CITY OF GRAPEVINE, TEXAS
WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS, SERIES 2002
INTRODUCTION
This Official Statement, which includes the Appendices hereto, provides certain information regarding the issuance of
$6,160,000* City of Grapevine, Texas, Waterworks and Sewer System Revenue Refunding Bonds, Series 2002 (the "Bonds").
Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance to be adopted
on the date of sale of the Bonds which will authorize the issuance of the Bonds, except as otherwise indicated herein.
There follows in this Official Statement descriptions of the Bonds and certain information regarding the City and its finances. All
descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such
document. Copies of such documents may be obtained 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, while the 2002 estimated population is 44,390. 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 debt described in
Schedule I (the "Refunded Bonds") in order to lower the overall debt service requirements of the City and to pay costs associated
with the issuance of the Bonds.
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, NA, Austin, Texas (the "Escrow Agent"). The Ordinance
provides that from the proceeds of the sale of the Bonds received from the Underwriter, together with other lawfully available
funds, 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, a nationally recognized accounting firm, will verify at the time of delivery of the Bonds to the Underwriter
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").
By the 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 of the Refunded Bonds in accordance with applicable 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, 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 be defeased and cease to be obligations payable from and secured by a lien on and
pledge of the Net Revenues of the System and will not be deemed as outstanding obligations of the City or the System for any
purpose other than being payable from the funds held in the Escrow Fund.
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.
* Preliminary, subject to change.
SOURCES AND USE OF PROCEEDS ... The proceeds from the sale of the Bonds together with other available system funds will be
applied approximately as follows:
Sources of Funds
Par Amount of Bonds S -
Accrued Interest
Total Sources of Funds S -
Uses of Funds
Deposit to Interest and Sinking Fund S
Original Issue Discount
Deposit to Escrow Fund
Cost of Issuance (1)
Total Uses of Funds S
(1) Includes bond insurance and underwriter's discount.
THEBONDS
DESCRIPTION of ME BoN-Ds ... The Bonds are dated September 1, 2002, and mature on September 1 in each of the years and in
the amounts shown on the cover page hereof, Interest will be computed on the basis of a 360 -day year of twelve 30 -day months,
and such interest will be payable on March I and September 1, commencing March 1, 2003. The definitive Bonds will be issued
only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered
only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry -Only System
described herein. No physical delivery of the Bonds will be made to the owners thereof. Principal of, premium, if any, and
interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts
so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "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, Chapter 1207, as amended, and the Ordinance.
SECURITY AND SOURCE of PAYMENT... The Bonds are special obligations of the City payable both as to principal and interest,
solely from and, together with certain outstanding Previously Issued Bonds and any additional parity bonds which may be issued
in the future are equally and ratably secured by a first lien on and pledge of the Net Revenues (as defined in the Ordinance) of the
City's combined Waterworks and Sanitary Sewer System (the "System") after the payment of maintenance and operations
expenses. The Bonds do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any property of the City or
the System, except with respect to the Net Revenues. Maintenance and operating expenses include contractual payments which
under Texas laws and their provisions are established as operating expenses. The City has outstanding Previously Issued Bonds
secured by and payable from Net Revenues on parity with the Bonds, as follows:
Dated Outstanding
9/1/1985
S 1,160,516
Waterworks and Sewer System Refunding and Improvement Revenue Bonds, Series 1985
8/1/1992
355,000
Waterworks and Sewer System Revenue Refunding Bonds, Series 1992
7/15/1995
1,140,000
Waterworks and Sewer System Revenue Bonds, Series 1995
10/1/1996
2,470,000
Waterworks and Sewer System Revenue Bonds, Series 1996
8/1/1997
6,675,000
Waterworks and Sewer System Refunding and Improvement Revenue Bonds, Series 1997
3/1/1999
6,950,000
Waterworks and Sewer System Revenue Bonds, Series 1999
3x"15'2001
6 745 ntl0
Waterworks and Sewer System Revenue Bonds, Series 2001
Total
S 25,495,516
(1) As of August 1, 2002, excludes the Refunded Bonds.
8
The Bonds are not a charge upon any other income or revenues of the City and shall never constitute an indebtedness or
pledge of the general credit or taxing powers of the City. The Ordinance does not create a lien or mortgage on the System or
on any of its properties or assets, except the Net Revenues, and any judgment against the City may not be enforced by levy and
execution against any property owned by the City.
As additional security, a Reserve Fund is required to be maintained in an amount at least equal to the average annual debt service
requirements of the outstanding Previously Issued Bonds, the Bonds and any Additional Bonds issued on a parity with the
Bonds. Any additional amount required to be accumulated in the fund by reason of the issuance of the Bonds will be funded over
a sixty month period in accordance with the provisions of the Ordinance (see " Selected Provisions of the Bond Ordinance").
NET REVENUES ... All of the Net Revenues of the System with the exception of those in excess of the amounts required to
establish and maintain the Reserve Fund and Interest and Sinking Fund are irrevocably pledged for the payment of the Bonds and
interest thereon. The Bonds, the Previously Issued Bonds and Additional Bonds, if any, are equally and ratably secured by a first
lien upon the Net Revenues of the System.
RATES ... The City has covenanted in the Ordinance that it will at all times charge and collect rates for services rendered by the
System sufficient to pay all operating, maintenance, replacement expenses, any other costs deductible in determining Net
Revenues and to pay interest on and the principal of the Previously Issued Bonds, the Bonds and any Additional Bonds, and to
establish and maintain the funds provided in the Ordinance. The City has further covenanted that, if the System should become
legally liable for any other indebtedness, it will fix and maintain rates and collect charges for the services of the System sufficient
to discharge such indebtedness.
OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Bonds having stated maturities on and after
September 1, 2013, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on September 1, 2012, or
any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be
redeemed, the City may select the maturities of Bonds to be redeemed. If less than all the Bonds of any maturity are to be
redeemed, the Paying Agent/Registrar (or DTC while the Bonds are in Book -Entry -Only form) shall determine by lot the Bonds,
or portions thereof, within such maturity to be redeemed. If a Bond (or any portion of the principal sum thereof) shall have been
called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be
redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the
redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying
Agent/Registrar on the redemption date.
NOTICE OF REDENUMON ... Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of
redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in
whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the
close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE
CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER
RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL
BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY
BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR
PORTION THEREOF SHALL CEASE TO ACCRUE.
ADDITIONAL BONDs ... The City may issue Additional Bonds payable from the Net Revenues which together with the Previously
Issued Bonds and the Bonds shall be equally and ratably secured by a parity lien on and pledge of the Net Revenues of the
System, subject, however, to complying with certain conditions in the Ordinance. See " Selected Provisions of Bond Ordinance"
for terms and conditions to be satisfied for the issuance of Additional Bonds.
A.mENUMENTs ... The City may amend the Ordinance without the consent of or notice to any registered owner in any manner not
detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defector
omission therein. In addition, the City may with the written consent of the holder of a majority of aggregate principal amount of
the Bonds then outstanding affected thereby, amend, add to, or rescind any of the provisions of the Ordinance; except that,
without the consent of the registered owners of the Bonds affected, no such amendment, addition or rescission may (1) extend the
time or times of payment of the principal of, premium, if any, and interest thereon, reduce the principal amount thereof, the
redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of, premium,
if any, or interest thereon, (2) give any preference to any Bond over any other Bond or (3) reduce the aggregate principal amount
of Bonds required to be held by Holders for consent to any such amendment, addition, or rescission.
DEFEASANCE ...The Ordinance provides that the City may discharge its obligations to the registered owners of any or all of the
Bonds to pay principal, interest and redemption price thereon in any manner permitted by law. Under current Texas law, such
discharge may be accomplished either (i) by depositing with the Comptroller of Public Accounts of the State of Texas a sum of
money equal to the principal of, premium, if any, and all interest to accrue on the Bonds to maturity or redemption or (ii) by
depositing with an authorized escrow agent amounts sufficient to provide for the payment and/or redemption of the Bonds;
provided that such deposits may be invested and reinvested only in (a) direct non -callable obligations of the United States of
America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of
an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the
agency or instrumentality and that, on the date the governing body of the City adopts or approves the proceedings authorizing
the issuance of refunding bonds, are rated as to investment quality by a nationally recognized 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 bonds, are rated as to investment quality by a nationally recognized investment
rating firm not less than AAA or its equivalent. The foregoing obligations may be in book entry form, and shall mature and/or bear
interest payable at such times and in such amounts as will be sufficient to provide for the scheduled payment and/or redemption
of the Bonds. If any of such Bonds are to be redeemed prior to their date of maturity, provision must have been made for giving
notice of redemption as provided in the Ordinance.
Under current state law, after such deposit as described above, such Bonds shall no longer be regarded as outstanding or unpaid
obligations payable from or secured by the pledge of the Net Revenues of the System or secured by the Ordinance. After firm
banking and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as described
above, all rights of the City to initiate proceedings to call the Bonds for redemption or take any other action amending the terms
of the Bonds are extinguished; provided, however, that the right to call the Bonds for redemption is not extinguished if the City:
(i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for
redemption; (ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the
firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that
it authorizes.
Boots -ENTRY -ONLY S YsTEm ... This section describes how ownership of the Bonds is to be transferred and how the principal of,
premium, if any, and interest on the Bonds are to be paid to and credited by The Depository Trust Company ("DTC"), New
York, New York, while the Bonds, as applicable, are registered in its nominee name. The information in this section concerning
DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official
Statement, The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or
completeness thereof.
The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or
redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to
DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they
will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules
applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in
dealing with DTC Participants are on file with DTC.
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities registered in the name
of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC.
One fully -registered Security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of
such maturity, and will be deposited with DTC.
DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement
among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -
entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
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, LSCC, 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 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the
Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of
..t 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 Bonds 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit
of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners.
The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions,
tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Bonds may wish to
ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In
the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of
notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds 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 Bonds unless authorized by a
Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to 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 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 Bonds at any time by giving reasonable notice to
the City or Paying AgentlRegistrar. Under such circumstances, in the event that a successor depository is not obtained, Bond
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, Bond certificates will be printed and delivered.
Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be
understood that while the Bonds are in the Book -Entry -Only System, references in other sections of this Official Statement to
registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights
of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that
are to be given to registered owners under the Ordinance will be given only to DTC.
Information concerning DTC and the Book -Entry -Only System has been obtained from DTC and is not guaranteed as to accuracy
or completeness by, and is not to be construed as a representation by the City or the Purchaser.
Effect of Termination of Book -Entry Only System. In the event the Book -Entry -Only System with respect to the Bonds is
discontinued by DTC, or the use of the Book -Entry -Only System with respect to the Bonds is discontinued by the City, printed
securities certificates will be issued to the respective holders of the Bonds, as the case may be, and the respective Bonds will be
subject to transfer, exchange and registration provisions as set forth in the Ordinance, summarized under "The Bonds - Transfer,
Exchange and Registration" below.
PAYING AGENT/REGtSTPAR ... The initial Paying Agent/Registrar is Bank One, National Association, Austin, Texas. In the
Ordinance, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying
AgentRegistrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or
trust company organized under the laws of the State of Texas or other entity duly qualified and legally authorized to serve as and
perform the duties and services of Paying AgentfRegistrar for the Bonds. Upon any change in the Paying Agent/Registrar for the
Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United
States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar.
Interest on the Bonds shall be paid to the registered owners appearing on the registration books of the Paying AgentRegistrar at
the close of business on the Record Date (defined below), and such interest shall be paid 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 Bonds will be paid to the registered owner at their stated maturity or earlier redemption upon
presentation to designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal of
or interest on the Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the
designated paymen`transfer office of the Paying Agent/ Registrar is located are authorized to close, then the date for such
payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect
as if made on the date payment was due.
TRANSFER, EXCHANGE AND REGISTRATION ... In the event the Book -Entry -Only System should be discontinued, printed
certificates will be delivered to the registered owners and thereafter the Bonds may be transferred and exchanged on the
registration books of the Paying Agent/Registrar only upon presentation and surrender of the printed certificate to the Paying
AgentiRegistrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any
tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be
assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and assignment
acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being
transferred or exchanged, at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage
prepaid, to the new registered owner or his designee. To the extent possible, new Bonds issued in an exchange or transfer of
Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the
receipt of the Bonds to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered
owner or his duty authorized agent, in form satisfactory to the Paying Agent`Registrar. New Bonds registered and delivered in an
exchange or transfer shall be in any integral multiple of 55,000 for any one maturity and for a like aggregate designated amount as
the Bonds surrendered for exchange or transfer. See 'Book -Entry -Only System" herein for a description of the system to be
utilized initially in regard to ownership and transferability of the Bonds. Neither the City nor the Paying Agent,Registrar shall be
required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for
redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the
uncalled balance of a Bond.
RECORD DATE FOR INTEREST PAYMENT... The record date ('Record Date") for the interest payable on the Bonds on any interest
payment date means the close of business on the 15`h calendar day of the preceding month.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such
interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment
of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the
past due interest ('Special Payment Date", which shall be 15 days after the Special Record Date) shall be sent at least five
business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of
a Bond appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next
preceding the date of mailing of such notice.
12
BONDHOLDERS' REviD[ES ... Except for the remedy of mandamus to enforce the City's covenants and obligations under the
Ordinance, the Ordinance does not establish other remedies or specifically enumerate the events of default with respect to the
Bonds. The Ordinance does not provide for a trustee to enforce the covenants and obligations of the City. In no event will
registered owners have the right to have the maturity of the Bonds accelerated as a remedy. The enforcement of the remedy of
mandamus may be difficult and time consuming. No assurance can be given that a mandamus or other legal action to enforce a
default under the Ordinance would be successful. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9
of the U.S. Bankruptcy Code. Although Chapter 9 provides for the recognition of a security interest represented by a specifically
pledged source of revenues, such provision is subject to judicial construction. Chapter 9 also includes an automatic stay provision
that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of
an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from
creditors, the ability to enforce any remedies under the Ordinance would be subject to the approval of the Bankruptcy Court
(which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy
Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before. The
opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified
with respect to the customary rights of debtors relative to their creditors.
13
THESYSTEM
WATERWORKS AND S EWER SYSTEM[ ... The Waterworks System and Sewer System is a department of the City and is divided
into two service areas within the City. The North service area is served by water and wastewater treatment plants owned and
operated by the City. The South service area is provided services by the Trinity River Authority (the "TRA") pursuant to
service -area contracts.
In 1990, the City instituted a capital recovery fee to be paid by builders of new construction within the City limits. The fee
charged is on a per unit basis for residences and on a per acre basis for industrial/commercial construction and is designed to help
defray costs of extensions and growth of the water and sewer system brought about by new construction. State law and the
ordinance authorizing the capital recovery fee stipulate that the capital recovery fee may be used for debt service if bond proceeds
are used for projects pursuant to which the capital recovery fee is imposed.
WATERWORKS SYSTEM ... The City owns and operates a water treatment plant to provide treated water to the North service
area. Complete water treatment, including fluoridation, is provided by the conventional filtration plant. The plant was expanded
from 2 MGD treatment capacity to 4.0 MGD capacity during the summer of 1981 and from 4 MGD to 8 MGD in 1990.
A surface water supply for the treatment plant is provided by nearby Lake Grapevine, a U.S. Corps of Engineers lake completed
in 1952. The lake provides 435,500 acre-feet of storage for flood control, rapid and sedimentation purposes. The City is entitled
to 3.26 MGD for water supply purposes. This 3.26 MGD yield is considered to be a "safe yield," i.e., water available under
severe drought conditions.
The South service area is supplied treated water by TRA pursuant to a 35 -year contract which became effective in November,
1981. TRA supplied water to Bedford and Euless and the contract called for an extension of that system to include a supply
point for Grapevine, North Richland Hills and Colleyville. The contract commits the TRA to supply water to meet the needs of
the service area.
The City has agreed to pay TRA its net cost of operation and maintenance and debt service requirements. The City will pay its
obligations to TRA out of moneys received from the operation of its Water and Sewer System. This obligation is an operation
and maintenance expense of the City which is senior to its Water and Sewer System Revenue debt.
The above described expenses shall be known as the "annual requirement". The City's proportionate share of the "annual
requirement" is determined as follows:
The City's proportionate share of the annual requirement shall be a percentage obtained
by dividing the City's estimated annual treated water requirement for the upcoming year
by the total estimated volume to be treated and used by all contracting parties for the
same year. The City is then billed monthly according to its actual annual usage with
provisions for adjustment.
The present cost to the City for the treated water is S 1.72 per 1,000 gallons.
TRA obtains its water from the Tarrant County Water Control District No. I (the "District") which also supplies several area
cities including Fort Worth and Arlington. The District obtains its surface water from lakes located north of Fort Worth on the
Trinity River and from Cedar Creek Lake located southeast of Dallas in Henderson and Kaufman Counties. In 1989, the District
completed a lake in Navarro and Freestone Counties which is approximately twice the size of the Cedar Creek reservoir. The
District estimates that the new lake will supply water for its customers through the year 2030.
The City distribution system ranges in size from 30" to 6" for transmission mains and is variously steel cylinder,
asbestos/cement, cast iron and PVC C-900, down to 3/4" copper lines for single-family home connections. The City has 2 million
gallons in elevated storage capacity and 3.65 million gallons capacity in ground storage.
TABLE 1 - WATER USAGE (GALLONS)
Peak
Average
Fiscal
YPAT
Day
TL%=
Day
TTCA"
Total
TTCA OP
1997
14,390,000
6,560,000
2,396,778,000
1998
19,112,000
6,971,000
2,551,321,000
1999
19,435,000
9,219,000
3,364,937,000
2000
20,300,000
9,749,000
3,558,482,000
2001
19.591,000
9,249,000
3,060,023,000
14
NVATER RATE STUDY ... The City accepted an independent water and sewer study from consultants in November of 1988. As a
result of the study, the City adopted a new water and sewer rate ordinance effective January 1, 1989, and revised those rates on
October 1, 1990, September 1, 1992, October 1, 1993, October 1, 1995, and October 1, 2000, The City also adopted a policy of
annual rate reviews.
TABLE 3 - MONTHLY WATER RATES ( FFECTRT I0-1-01)
General Water Consumption
First 2,000 gallons $9.75 (Minimum)
Over 2,000 eallons 52.74, M gallons
Temporary ... For a water meter installed for construction or other temporary purposes on a fire hydrant: Two dollars and
fifty-seven cents (52.74) per one thousand (1,000) gallons and a minimum charge of fifty-five dollars and thirty-nine cents
(559.13).
Minimum Charge ... In any case, the following monthly minimum charges shall be made upon customers of the water system.
TABLE 2 -TEN LARGEST WATER CUSTOMERS(GALLONS)
Minimum
Rile of Meter
Minimum
CTallnnc
Monthly
C'haraes
3/4" or Less
2,000
S 9.75
V,
Fiscal
28.89
1 %:"
21,000
Year Ended
2"
34,000
97.29
9/30/2001
% of Total
211.67
Cnctnmer
s WaterT15nag
WatP�or
6"
Grapevine Colleyville Independent School District
57,923,000
1.89%
239,000
Grapevine Mills
41,351,000
1.35%
To be agreed upon
YCP D/FW Operator, Inc.
40,584,000
1.33%
Fire Sprinkler Connections
City of Grapevine
26,137,000
0.85%
Embassy Suite - Grapevine
25,401,000
0.83%
Flagship Properties Corp.
24,362,000
0.80%
Trailwood Mobile Home Park
21,106,000
0.69%
Mareina Del Rey Apartments
20,557,000
0.67%
Ambassador Apartments
20,436,000
0.67%
TM Co. Oaks Inv. Ltd.
in n
X65"/
297,862,000
9.73%
Source: City Water Department.
NVATER RATE STUDY ... The City accepted an independent water and sewer study from consultants in November of 1988. As a
result of the study, the City adopted a new water and sewer rate ordinance effective January 1, 1989, and revised those rates on
October 1, 1990, September 1, 1992, October 1, 1993, October 1, 1995, and October 1, 2000, The City also adopted a policy of
annual rate reviews.
TABLE 3 - MONTHLY WATER RATES ( FFECTRT I0-1-01)
General Water Consumption
First 2,000 gallons $9.75 (Minimum)
Over 2,000 eallons 52.74, M gallons
Temporary ... For a water meter installed for construction or other temporary purposes on a fire hydrant: Two dollars and
fifty-seven cents (52.74) per one thousand (1,000) gallons and a minimum charge of fifty-five dollars and thirty-nine cents
(559.13).
Minimum Charge ... In any case, the following monthly minimum charges shall be made upon customers of the water system.
15
Minimum
Rile of Meter
Minimum
CTallnnc
Monthly
C'haraes
3/4" or Less
2,000
S 9.75
V,
9,000
28.89
1 %:"
21,000
61.73
2"
34,000
97.29
3"
78,000
211.67
4"
100,000
277,85
6"
134,000
370.87
8"
239,000
658.13
Larger than 8"
To be agreed upon
by contract.
Fire Sprinkler Connections
- $30.42
15
WASTEWATER SYSTEM... The City serves the North service area with its own activated sludge process treatment plant which has
a hydraulic capacity of 3.75 MGD. This plant presently serves that portion of the City north of the Cotton Belt Railroad,
approximately 50 percent of the City geographically. In 1985, increased effluent standards of the Texas Natural Resource
Conservation Commission resulted in a reduction of capacity of the plant to 1.5 MGD. In 1986 additional tertiary treatment
expanded the capacity of the plant to 1.75 MGD and the City completed an expansion of the plant to 3.75 MGD in 1987.
The City entered into a contract with TRA to provide sewage treatment for the southern section of the City on November 29,
1973. The contract will remain in force for a period of 50 years from that date and thereafter until any bonds, or any bonds
issued to refund same, have been paid in full.
TRA has extended their system in the southern section of the City to allow flow through a 33 to 39 inch transmission main.
The City has agreed to pay TRA its net cost of operation and maintenance and debt service requirements. The City will pay its
obligations to TRA from moneys to be received from the operation of its Waterworks and Sewer System, and such payments to
TRA by contract are maintenance and operation expenses of the System. Maintenance and operation expenses of the System
have a claim on the revenues of the System prior to the claim securing the payment of debt service on revenue obligations of the
System.
The above described expense shall be known as the "annual requirement". The City's proportionate share of the "annual
requirement" is determined as follows:
The City's proportionate share of the annual requirement shall be a percentage obtained by dividing the City's
estimated annual contributing flow to the System by the total estimated annual contributing flow to the
System by all contracting parties.
The City's annual payment shall be made to TRA in twelve (12) equal monthly installments with provision
for adjustment.
The City's cost under the contract is presently S 1.289 per 1,000 gallons flow to TRA.
TABLE 4- MONTHLY SEWER RATES (EFFECTIVE 10-1-01)
Residential Service Commercial Service
First 2,000 gallons 57.80 (Minimum) First 2,000 gallons 511.52 (Minimum)
Next 13,000 gallons S3.26(M gallons Over 2,000 eallons S 3.26iM eallons
The monthly volume charge for residential customers will be based on the individual customer's average monthly water use during
the previous winter quarter months of December, January and February, but in no event shall the volume used to compute this
monthly charge exceed 15,000 gallons. The volumes used to compute these charges are based on the amount of water used by the
residential customer as measured by a meter. Where no previous winter quarter average is available from the records, the volume
to be used for this monthly volume charge shall be the lower of 10,000 gallons or actual consumption.
Sewer customers residing within city limits not connected to water system pay a monthly charge of 528.93.
APPLICATION AND COST DEPOSIT FOR WATER, WASTEWATER AND REFUSE SERVICE.. . Any person desiring to obtain water,
wastewater and refuse service shall make application to the water department and, prior to the granting of such service, shall
deposit with the City, in the form of cash deposit or cash bond, a sum of money equal to the rates shown on the following table:
Single-family residential, minimum
S 50.00
Multi -family (apartments), minimum per 2" tap
40.00
Commercial, minimum
40.00
Industrial, minimum
230.00
314" Construction Meter
125.00
2" Construction Meter
750.00
16
DEBT INFORMATION
TABLE S - WATERWORKS ANDS EWERS YSTENI REVENUE DEBTS ERVICE REQUIREMENTS
Fiscal
Year
Ended
9/30
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
20[2
2013
2014
2015
2016
2017
2018
2019
2020
2021
utstandine Debt I 1 1
Principal
Interest
Total
$ 1,634,060
$ 2,666,243
$ 4,300,303
1,304,030
2,284,745
3,588,775
1,332,766
2,251,123
3,583,889
1,371,836
2,211,488
3,583,324
1,412,824
2,168,817
3,581,641
1,285,000
897,671
2,182,671
1,130,000
835,381
1,965,381
1,185,000
783,736
1,968,736
1,250,000
729,544
1,979,544
1,320,000
671,511
1,991,511
1,385,000
608,878
1,993,878
1,465,000
542,708
2,007,708
1,540,000
471,497
2,011,497
1,620,000
395,164
2,015,164
1,710,000
314,483
2,024,483
1,560,000
228,906
1,788,906
980,000
150,125
1,130,125
1,030,000
101,125
1,131,125
480,000
49,625
529,625
inn OM
75 675
575 675
S 25.49C 51fi
5 18.188.194
S 43.881910
Total
Outstanding
Debt
$ 4,300,303
4,258,523
4,257,121
4,257,436
4,254,239
2,856,519
2,868,264
2,875,779
2,882,751
2,298,341
2,300,833
7,314,133
2,316,582
2,318,069
2,024,483
1,788,906
1,130,125
1,131,125
529,625
575 61i
S 51 488 '80
% of
Principal
Retired
28.39%
57.76%
85.63%
100.00%
(1) Excludes the Refunded Bonds.
(2) Average life of the issue - 6.380 years. Interest on the Bonds has been calculated at the average rate of 3.78% for purposes
of illustration.
AUTHORIZED BUT UNISSUED REVENUE BONDS ... The City has no voted but unissued revenue bonds, and pursuant to State law is
not required to approve its revenue bonds through election.
ANTICIPATED ISSUANCE OF REVENUE BONDS ... The City does not anticipate the issuance of additional revenue bonds within the
next six months.
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".)
17
The Bonds (2)
Principal
Interest
Total
$ 460,000
$ 209,748
S 669,748
480,000
193,233
673,233
490,000
184,113
674,113
500,000
172,598
672,598
515,000
158,848
673,848
760,000
142,883
902,883
790,000
117,043
907,043
815,000
88,208
903,208
250,000
56,830
306,830
260,000
46,955
306,955
270,000
36,425
306,425
280,000
25,085
305,085
290,000
12,905
302,905
Total
Outstanding
Debt
$ 4,300,303
4,258,523
4,257,121
4,257,436
4,254,239
2,856,519
2,868,264
2,875,779
2,882,751
2,298,341
2,300,833
7,314,133
2,316,582
2,318,069
2,024,483
1,788,906
1,130,125
1,131,125
529,625
575 61i
S 51 488 '80
% of
Principal
Retired
28.39%
57.76%
85.63%
100.00%
(1) Excludes the Refunded Bonds.
(2) Average life of the issue - 6.380 years. Interest on the Bonds has been calculated at the average rate of 3.78% for purposes
of illustration.
AUTHORIZED BUT UNISSUED REVENUE BONDS ... The City has no voted but unissued revenue bonds, and pursuant to State law is
not required to approve its revenue bonds through election.
ANTICIPATED ISSUANCE OF REVENUE BONDS ... The City does not anticipate the issuance of additional revenue bonds within the
next six months.
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".)
17
FINANCIAL INFORMATION
TABLE 6 - CONDENSED STATEMENTOF OPERATIONS
Revenues:
7001
Fiscal
7000
Year Ended Setember
1999
30.
199R
1947
Water Sales
S
9,091,354
$ 9,177,385
S 7,188,523
$ 6,859,541
S 5,402,793
Wastewater Sales
5,083,277
5,133,839
4,027,597
3,784,759
3,579,118
Other Revenue
1.631,032
588.754
533.828
887.709
374.950
Total Revenues
S
15,805,663
$ 14,899,978
$ 11,749,948
$ 11,532,009
$ 9,356,861
Operating Expenses:
Water Fund
S
7,906,159
S 7,401,225
S 5,990,519
S 5,684,197
S 4,422,965
Wastewater Fund
7 741 160
7 538 568
7 275497
7 136 076
1 990 750
Total Operating Expenses
`;
10 647 319
9919793
S R 766 001
R 7,9?0 773
8 6 411 ')15
Net Revenue from Operations
S
5,158,344
S 4,960,185
$ 3,483,947
S 3,711,786
S 2,943,646
Investment Income
1,277,173
1,360,288
998,242
1,089,553
589,372
Caoital Recovery Transfer t l
956.256
980.501
787.208
517.623
499.135
Other Gains (Losses)
177 397
9R 746
Net Available for Debt ServiceQ
7 I5 9.1 Fn
`S 7.300.974
S 5 ?F9 397
`t 5.417?08
`S 4.0 t?.15 i
Average Annual Debt
S
2,600,665
S 2,379,978
S 2,434,441
$ 2,123,920
S 2,163,972
Average Annual Debt Coverage
2.89x
3.07x
2.16x
2.55x
1.86x
Average Annual Debt Coverage
without Capital Recovery
2.52x
2.66x
1.84x
2.31x
1.63x
Water Customers
12,951
12,744
12,433
12,034
11,760
Wastewater Customers
11,924
12,501
12,327
12,128
10,827
(1) Transfer of internal water and sewer capital recovery fees to contributed capital.
TABLE 7- COVERAGE ANDFuNDBALANCES t11
Averaae Annual PrincinaI and Interest Requirements. 2002-2022 ............. . ............... $ 2,574,439
Coveraae of Averaae Requirements by 9/30/01 Net Available ................................ 2.92 times
Maximum Principal and Interest Requirements, 2004. . . .................................... $ 4,300,303
Coveraae of Maximum Requirements by 9/30/01 Net Available .............................. 1.75 times
Waterworks and Sewer System Revenue Bonds Outstanding as of 8/1/02 ....................... $31,655,516
Interest and Sinking Fund, 6/30/02 ..................................................... $ 2,081,095
Reserve Fund. 6/30/02............................................................... $ 280,238
(1) Projected, and includes the Bonds being offered herein. Excludes the Refunded Bonds.
18
CAPITAL RECOVERY FEES... The City currently collects water and sewer capital recovery fees from newly developed areas in
order to help pay for necessary future plant and system improvements to provide water and sewer services to these areas. To
@ satisfy the changes in the State law regarding the formulation and adoption of impact fees in Texas municipalities, an Impact Fee
Study (the "Study") was completed in 1990 and 1998. The Study, which was approved by City Council, determined that impact
fees could be used to pay bond interest costs for the expansion of water and wastewater plants and/or construction projects on a
pay as you go basis. The Study identified approximately 57,130,000 of scheduled interest payments over the next 20 years
which can be directly attributed to plant expansion. As a result of this plan, approximately $4,412,942 of capital recovery fees
recorded as contributions in prior years has been transferred to operations since 1993. As of June 30, 2002, the City had a capital
recovery cash and investments balance of $5,248,000.
TABLE S -VALUE OF THE SYSTEM
Value after Depreciation $ 65,490,903 S 58,581,940 S 57,000,346 S 51,119.279 S 47,180,395
TABLE 9 -CITY'S EQUITY IN SYSTEM
Resources
701
Fismi
(1�
Year Ended 4entemh
19291998
r 30
1997
Land and Improvements
$ 550,882
$ 72,527
S 413,085
S 413,085
$ 413,085
Buildings
64,562,350
62,488,939
61,128,126
59,590,995
57,212,626
Machinery and Equipment
667,604
871,099
890,008
924,721
1,015,779
Construction in Progress
16 ?13 716
10 6ii 777
R 748,379
3 165 831
514 ?7R
Add: Net Restricted Assets
$ 81,994,052
$ 74,088,337
S 71,179,547
S 64,094,632
S 59,155,768
Plus: Water Storage Rights
334,661
351,750
368,838
385,927
403,016
Deferred Charges
670 669
51 3 9R9
587 793
559 753
SU 195
S 82,999,382
S 74,954,076
S 72,131,178
S 65,040,312
S 60,141,969
Less: Accumulated Depreciation
317 508 479)
16177, 116),
(15.130 937)
H3� 9710"331X17
gh1174)
Value after Depreciation $ 65,490,903 S 58,581,940 S 57,000,346 S 51,119.279 S 47,180,395
TABLE 9 -CITY'S EQUITY IN SYSTEM
Resources
7M1
Fienal Year
IIIM
Fnded Centemher
i999
30
ig9R
IQQ7
Net System Value
S 82,999,382
S 74,954,076
S 74,954,076
S 65,040,312
S 60,141,969
Less Depreciation
___L7 -,Q& 9
1 F 377 1 Jr,
1 r, 377 1,16
11 Q7 1 (lit
17 9F 1 571
S 65,490,903
S 58,581,940
S 58,581,940
S 51,119,279
S 47,180,395
Add: Net Working Capital
7,782,794
7,040,554
4,673,283
4,624,892
7,161,633
Add: Net Restricted Assets
13 935 857
1 1 R95 757
11 094 949
9384607
7.737 945
Total
$ 87,209,554
S 77,508,251
S 74,340,071
S 65,128,778
S 62,079,873
Qbkgatiens
Revenue Bond Debt & Other Liabilities
Less: I&S Fund and Reserve Fund
Net Revenue Bond Debt
City's Equity in System
Percentage of Equitv in Svstem
S 29,756,456 S 24,645,516 S 26,037,560 S 20,967,560 S 22,882,560
7 95R.63? ? 7?0 934 7.873.543 7 417 555 7.479 035
S 32,715,088 S 27,366,350 S 28,911,103 $ 18,550,005 S 20,404,525
$ 54,494,466 $ 50,141,901 S 45,428,968 S 46,578,773 S 41,675,348
62.49% 64.69% 61.11%
19
71.52% 67.13%
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 full 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.
INVESTMENTS
The City invests its investable funds in investments authorized by Texas law in accordance with investment policies approved by
the City Council Both state law and the City's investment policies are subject to change.
Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2)
direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued
by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or
instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or
insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and
instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to
investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issued, assumed,
or guaranteed by the State of Israel, (7) certificates of deposit issued by a state or national bank, a savings bank or a state or
federal credit union, in each case domiciled in the State of Texas, that are (i) guaranteed or insured by the Federal Deposit
Insurance Corporation or its successor or the National Credit Union Share Insurance Fund or its successor or (ii) secured by
obligations that are described in clauses (1) through (6) above, including mortgage backed securities directly issued by a federal
agency or instrumentality that have a market value of not less than the principal amount of the certificates or (iii) in any other
manner and amount provided by law for deposits of the City, (8) fully collateralized repurchase agreements that have a defined
termination date, are fully secured by obligations described in clause (1) above and are placed through a primary government
securities dealer or a financial institution doing business in the State of Texas, (9) bankers' acceptances with the remaining term of
270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P -I or the equivalent by
at least one nationally recognized credit rating agency, (10) commercial paper that is rated at least A-1 or P -I or the equivalent by
either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully
secured by an irrevocable letter of credit issued by a United States or state bank, (I I) 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 S 1 for each share, (12) no-load mutual funds
registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invests
exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one
nationally recognized investment 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% 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 (13) for bond proceeds, guaranteed investment contracts
that have a defined termination date, are secured by obligations of the United States or its agencies and instrumentalities in an
amount at least equal to the amount invested under the contract, and are pledged to the City and deposited with the City or with a
third party selected and approved by the City.
941
The City may invest in such obligations directly or through government investment pools that invest solely in such obligations
provided that the pools are rated no lower than AAA or AAA -m or an equivalent by at least one nationally recognized rating
service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on
the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations
whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest;
(3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage
obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
LvvESTMENT POLICIES ... Under Texas Iaw, 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.
ADDITIONAL PROVISIONS... Under Texas law the City is additionally required to: (1) annually review its adopted policies and
w.w a 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 in the aggregate to no more than 15% of the City's monthly average fund
balance, excluding bond proceeds and reserves and other funds held for debt service; and (8) require local government investment
pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements.
TABLE 10-CURRENTLtitiESTNIENTS
As of June 30, 2002, the City's investable funds were invested in the following categories:
Book Market
Description Percent Vnhle Value
Treasury Notes/Bonds/CD;EQ 10.62% $ 10,675,592 $ 10,695,796
Investment Pools R9 3R% R9 R34 R4(1 89 RR4 ?43
100.00% $ 100,510,432 $ 100,580,039
21
SELECTED PROVISIONS OFTHEBOND ORDINANCE
The following summary is qualified in all respects by reference to the Ordinance which sets forth all terms and conditions
pursuant to which the Bonds are issued.
DEFINITIONS
Unless otherwise expressly provided or unless the context clearly requires otherwise, in this Summary of Certain Provisions of
the Ordinance the following terms shall have the meanings specified below:
"Additional Bonds" means the additional revenue bonds authorized to be issued on a parity with the Bonds and the Previously
Issued Bonds in accordance with the terms of the Ordinance.
"Fiscal Year" or "Year" means the fiscal year used by the City in connection with the operation of the System.
"Fund" means any fund established pursuant to the Ordinance or any ordinance authorizing the issuance of the Previously Issued
Bonds and any Additional Bonds.
"Interest and Sinking Fund" means the "City of Grapevine, Texas, Waterworks and Sewer System Revenue Bonds Interest and
Sinking Fund," previously established and confirmed under the Ordinance.
"Net Revenues" means all income, revenues, and receipts of every nature derived from and received by virtue of the operation of
the System (including interest income and earnings received from the investment of moneys in the special funds created or
confirmed by the Ordinance or ordinances authorizing the issuance of Additional Bonds) after deducting, paying, and making
provision for the payment of current expenses of maintenance and operation thereof, including all salaries, labor, materials, repairs
and extensions necessary to render efficient service; provided, however, that only such expenses for repairs and extensions as in
the judgment of the City Council, reasonably and fairly exercised, are necessary to keep the System in operation and to render
adequate service to the City and the inhabitants thereof, or such as might be necessary to meet some physical accident or
condition which would otherwise impair any obligations payable from the Net Revenues of the System, shall be deducted in
determining "Net Revenues." Contractual payments for the purchase of water or the treatment of sewage shall be a maintenance
and operating expense of the System to the extent provided in the contract therefor and as may be authorized by law.
Depreciation shall never be considered as an expense of operation and maintenance.
"Owner" means the person who is the registered owner of a Bond or Bonds as shown in the Register.
"Parity Bond" or "Parity Bonds" means the Previously Issued Bonds, the Bonds and any Additional Bonds at any time
outstanding.
"Previously Issued Bonds" means the City's Waterworks and Sewer System Revenue Refunding Bonds, Series 1985, dated
September 1, 1985, the City's Waterworks and Sewer System Revenue Refunding Bonds, Series 1992, dated August 1, 1992, the
City's Waterworks and Sewer System Revenue Bonds, Series 1995, dated July 15, 1995, the City's Waterworks and Sewer
System Revenue Bonds, Series 1996, dated October 1, 1996, the City's Waterworks and Sewer System Refunding Revenue
Bonds, Series 1997, dated August 1, 1997, the City's Waterworks and Sewer System Revenue Bonds, Series 1999, dated March
1, 1999, and the City's Waterworks and Sewer System Revenue Bonds, Series 2001, dated March 15, 2001.
"Prior Ordinances" means the ordinances that authorized the issuance of the Previously Issued Bonds.
"Reserve Fund" means the "City of Grapevine, Texas, Waterworks and Sewer System Revenue Bonds Reserve Fund," previously
established and confirmed in the Ordinance.
"Reserve Fund Requirement" means the amount which is equal to the average annual principal and interest requirements on the
Parity Bonds at any time outstanding.
"Revenue Fund" means the "City of Grapevine, Texas, Waterworks and Sewer System Revenue Fund," previously established
and confirmed in the Ordinance.
"System" means the City's existing combined waterworks and sewer system, including all properties (real, personnel or mixed
and tangible or intangible) owned, operated and maintained by, and vested in, the City for the supply, treatment and distribution
of treated water for domestic, commercial, industrial and other uses and the collection and treatment of water -carried waste,
together with all future additions, extensions, replacements, s thereto.
22
SECURITY FOR THE BONDS
The Bonds are issued as Additional Bonds on a parity with the Previously Issued Bonds and any Additional Bonds, The Bonds,
r together with the outstanding Parity Bonds, are payable from and secured by a first lien on the Net Revenues of the System. The
City covenants and agrees that all of the Net Revenues of the System with the exception of those in excess of the amounts
required to establish and maintain the funds as provided in the Ordinance are irrevocably pledged to the payment of the Bonds,
the outstanding Previously Issued Bonds and any Additional Bonds, together with the interest thereon. The Parity Bonds are
special obligations of the City payable solely from the Net Revenues, and the Owners thereof shall never have the right to
demand payment thereof out of any other funds raised or to be raised by taxation.
FUNDS AND ACCOUNTS
Special Funds. The City covenants in the Ordinance that all revenues derived from the operation of the System shall be kept
separate from other funds of the City. The Ordinance confirms the establishment of the Revenue Fund, the Interest and Sinking
Fund and the Reserve Fund, each to be maintained at a depository bank of the City so long as any of the Parity Bonds are
outstanding and unpaid.
Flow of Funds. All gross revenues of every nature received from the operation and ownership of the System shall be deposited
from day to day as collected into the Revenue Fund, and the reasonable, necessary, and proper expenses of operation and
maintenance of the System shall be paid from the Revenue Fund. The revenues of the System not actually required to pay said
expenses shall be deposited to the other Funds in the order of priority and in the amounts set forth below:
(a) There shall be deposited into the Interest and Sinking Fund, on the first day of each month, such amounts, in equal
monthly installments, as will be sufficient to pay the principal of and interest on the Parity Bonds when due, less any
amounts already on deposit therein for such purpose derived from the proceeds of the Bonds or from any other lawfully
available source. Money on deposit in the Interest and Sinking Fund shall be used to pay the principal of and interest on
the Parity Bonds as such principal matures and such interest becomes due.
(b) So long as the moneys on deposit in the Reserve Fund are equal to the Reserve Fund Requirement, no deposits need
to be made to the credit of the Reserve Fund. Should the Reserve Fund at any time contain less than the Reserve Fund
Requirement, then, subject and subordinate to making the required deposits to the Interest and Sinking Fund, the City
shall transfer from the Net Revenues in the Revenue Fund to the Reserve Fund, on the first day of each month, a sum
equal to not less than 1/60th of the total amount then required to be maintained therein until the Reserve Fund is restored
to the Reserve Fund Requirement. The money on deposit in the Reserve Fund may be used to pay the principal of and
interest on the Bonds at any time there are not sufficient funds on deposit in the Interest and Sinking Fund for such
purpose. The City may, at its option, withdraw all surplus in the Reserve Fund over the Reserve Fund Requirement and
deposit the same in the Revenue Fund.
Upon issuance of the Bonds, deposits, if any, being made to the Reserve Fund shall be increased to accumulate, within 60 months
from the date of the Bonds, an amount equal to the Reserve Fund Requirement.
Deficiencies in Funds. If in any month the City shall fail to pay into any Fund the full amounts required, amounts equivalent to
such deficiencies shall be set apart and paid into said Fund from the first available and unallocated Net Revenues of the System
for the following month or months. Such payments shall be in addition to the amounts otherwise required to be paid into said
Fund during such month or months. To the extent necessary, the City shall increase the rates and charges for services of the
System to make up for any such deficiencies.
Excess Revenues. The Net Revenues of the System, in excess of those necessary to maintain the Funds as required by the
Ordinance, or as may be required in connection with the issuance of Additional Bonds, may be used for any lawful purpose.
Security and Investment of Funds. Moneys on deposit in the Funds shall be secured in the manner and to the extent required by
the laws of the State of Texas. Money in any Fund may, at the option of the City, be placed in time deposits or certificates of
deposit secured by obligations of the type hereinafter described, or may be invested, including investments held in book -entry
form, in direct obligations of the United States of America, obligations guaranteed or insured by the United States of America,
which, in the opinion of the Attorney General of the United States, are secured by its full faith and credit or represent its general
obligations, or invested in indirect obligations of the United States of America, including, but not limited to, evidences of
indebtedness issued, insured or guaranteed by such governmental agencies as the Federal Land Banks, Federal Intermediate Credit
Banks, Banks for Cooperatives, Federal Home Loan Banks, Government National Mortgage Association, United States Postal
Service, Farmers Home Administration, Federal Home Loan Mortgage Association, Small Business Administration, Federal
Housing Association, or Participation Certificates in the Federal Assets Financing Trust; provided that all such deposits and
investments are authorized under applicable law and shall be made in such manner as will permit money required to be expended
from a fund to be available at the proper time or times for the purposes thereof. Such investments shall be valued each year in
terms of current market value as of the last day of the City's fiscal year. Earnings and losses derived from investments held in the
Interest and Sinking Fund immediately shall be credited to such Fund. Earnings derived from investments held in the Reserve
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Fund shall be credited to the Revenue Fund. All such investments shall be sold promptly, when necessary, to prevent any default
in connection with the Parity Bonds.
ADDITIONAL PARITY BONDS
The City may issue Additional Bonds if the following conditions are met:
(a) no default exists in connection with any of the covenants or requirements of the Ordinance or ordinances authorizing
the issuance of all then outstanding Parity Bonds;
(b) the Interest and Sinking Fund and the Reserve Fund each contain the amount then required to be on deposit therein;
(c) a Certified Public Accountant certifies to the effect that, in his opinion, the Net Earnings of the System either for the
last complete fiscal year of the City, or for any twelve consecutive calendar month period ending not more than ninety
days prior to the passage of the ordinance authorizing the issuance of such Additional Bonds, were at least 1-1/4 times the
average annual principal and interest requirements for all Parity Bonds to be outstanding after the issuance of the
Additional Bonds; the term "Net Earnings," as used in this subparagraph (c), shall mean the Net Revenues of the System
excluding and not deducting any charges or disbursements which under standard accounting practice should be charged to
capital expenditures;
(d) The Additional Bonds are scheduled to mature only on September I or March 1, and the interest thereon is scheduled
to be paid on September 1 and March 1; and
(e) The ordinance authorizing the issuance of such Additional Bonds provides that the aggregate amount to be
accumulated in the Reserve Fund shall be increased to an amount equal to the average annual principal and interest
requirements of all Parity Bonds to be outstanding after the issuance of said Additional Bonds. Such additional amount
shall be so accumulated within sixty months from the date of the Additional Bonds.
REPRESENTATIONS AND COVENANTS
Pavment of Bonds and Additional Bonds. While any of the Parity Bonds are outstanding, the City shall make available to the
Paying AgentiRegistrar, out of the Interest and Sinking Fund and, if necessary, the Reserve Fund, money sufficient to pay the
principal and interest on the Parity Bonds as will mature or as will accrue, as applicable, on each September 1 and March 1,
respectively.
Rates. The City covenants that it will at all times charge and collect for services rendered by the System rates sufficient to pay all
operating, maintenance, replacement expenses, and any other costs deductible in determining Net Revenues and to pay the
interest on and the principal of the Parity Bonds, and to establish and maintain the Funds, and that, if the System should become
legally liable for any other indebtedness, the City will fix and maintain rates and collect charges for the services of the System
sufficient to discharge such indebtedness.
Maintenance and Operation; Insurance. While any of the Parity Bonds are outstanding, the City covenants and agrees to maintain
the System in good condition and operate it in an efficient manner and at reasonable expense and to maintain insurance on the
System, for the benefit of the holder or holders of the Parity Bonds, of a kind and in an amount which usually would be carried by
private companies engaged in a similar type of business. Nothing in the Ordinance shall be construed as requiring the City to
expend any money which is derived from sources other than the System but nothing shall be construed as preventing the City
from doing so.
Records: Accounts; Accounting Reports. The City shall keep proper books of records and accounts, separate from all other
records and accounts of the City, in which complete and correct entries shall be made of all transactions relating to the System,
and shall have said books audited once each fiscal year by a Certified Public Accountant. The City agrees to operate the System
and keep its books of records and accounts pertaining thereto on the basis of its current fiscal year; provided, however, that the
City Council may change such fiscal year by ordinance duly passed, if such change is deemed necessary by the City Council.
Within ninety days after the close of each fiscal year the City will furnish, without cost, to any holder of any outstanding Parity
Bonds who may so request, a signed or certified copy of a report by a Certified Public Accountant, covering the next preceding
fiscal year, showing the following information: (i) a detailed statement of all gross revenues of the System and all expenses of
operation and maintenance thereof for such fiscal year;(ii) balance sheet as of the end of such fiscal year; (iii) an accountant's
comment regarding the manner in which the City has complied with the requirements of the Ordinance and his recommendation, if
any, for any changes or improvements in the operation of the System; (iv) a list of insurance policies in force at the end of such
fiscal year, showing, as to each policy, the risk covered, the amount of the policy, the name of the insurer, and the expiration date;
(v) the number of properties connected with the System, and the gross revenues of the System for such fiscal year; (vi) the
number of unmetered customers of the System at the end of such fiscal year; (vii) the number of gallons of water through the
master meter, the number of gallons of water billed, an estimate of the number of gallons of water used for flushing mains and for
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fires, and the number of unaccounted gallons of water; and (viii) the total annual billings of the System, and the average monthly
bills per customer.
Any holder or holders of any Parity Bonds shall have the right at all reasonable times to inspect the System and all records,
accounts and data of the City relating thereto.
Further Covenants. The City further covenants that:
(a) it has the lawful power to pledge the Net Revenues to the payment of the Bonds and has lawfully exercised said
power under the Constitution and laws of the State of Texas; that the Parity Bonds shall be ratably secured under such
pledge in such manner that one Parity Bond shall have no preference over any other Parity Bond of said issues;
(b) other than for the payment of the Previously Issued Bonds and the Bonds, Net Revenues of the System are not in
any manner now pledged to the payment of any debt or obligation of the City or of the System except for any debt or
obligation which has a pledge of the Net Revenues subject and subordinate to the pledge of the Net Revenues associated
withthe Parity Bonds;
(c) so long as any Parity Bonds or any interest thereon are outstanding, the City will not sell or encumber the physical
properties of the System or any substantial part thereof; provided, however, this covenant shall not be construed to
prohibit the sale of such machinery or other properties or equipment which has become obsolete or otherwise unsuited to
the efficient operation of the System;
(d) no free service of the System shall be allowed, and should the City or any of its agencies or instrumentalities make
use of the services and facilities of the System, payment of the reasonable value thereof shall be made by the City out of
funds from sources other than the revenues and income of the System;
(e) that it will comply with all of the terms and conditions of any and all franchises, permits and authorizations
applicable to or necessary with respect to the System, and which have been obtained from any governmental agency; and
the City has or will obtain and keep in full force and effect all franchises, permits, authorizations and other requirements
applicable to or necessary with respect to the acquisition, construction, equipment, operation and maintenance of the
System;
(f) that it will not grant any franchise or permit the acquisition, construction or operation of any competing facilities
which might be used as a substitute for the System's facilities, and, to the extent that it legally may, the City will prohibit
any such competing facilities; and
(g) no impact fees assessed pursuant to Chapter 395, Texas Local Government Code, as amended, shall be used or
expended in connection with an improvement or expansion of the System that is not identified in a capital improvements
plan adopted in accordance with said Chapter.
Amendments. The City acknowledges that the covenants and obligations of the City contained in the Ordinance are a material
inducement to the purchase of the Bonds. The Ordinance shall constitute a contract with the Owners of the Bonds from time to
time, shall be binding on the City, and shall not be amended or repealed by the City so long as any Bond remains outstanding,
except as permitted in the Ordinance. The City may, without the consent of or notice to any Owners of Bonds, from time to
time and at any time, amend the Ordinance in any manner not detrimental to the interests of the Owners of any Bonds, including
the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the written
consent of Owners of Bonds owning a majority in aggregate principal amount of the Bonds then outstanding and affected thereby,
amend, add to or rescind any of the provisions of this Ordinance; provided that, without the consent of all Owners of outstanding
Bonds, no such amendment, addition or rescission shall (i) extend the time or times of payment of the principal of, premium, if
any, and interest on the Bonds, reduce the principal amount thereof, the redemption price therefor or the rate of interest thereon,
or in any other way modify the terms of payment of the principal of, premium, if any, or interest on the Bonds, (ii) give any
preference to any Bond over any other Bond, or (iii) reduce the aggregate principal amount of Bonds required for consent to any
such amendment, addition or rescission.
Provisions Concerning Federal Income Tax Exclusion. The City intends that the interest on the Bonds shall be excludable from
gross income for purposes of federal income taxation pursuant to sections 103 and 141 through 150 of the Internal Revenue Code
of 1986, as amended (the "Code"), and applicable Income Tax Regulations (the "Regulations"). The City covenants and agrees
25
not to take any action, or knowingly omit to take any action within its control, that if taken or omitted, respectively, would cause
the interest on the Bonds to be includable in gross income, as defined in section 61 of the Code, of the holders thereof for
purposes of federal income taxation. The City covenants and agrees to comply with each requirement set forth in the Ordinance
relating to the tax exempt status of the Bonds; provided, however, that the City shall not be required to comply with any
particular requirement of the Ordinance if the City has received an opinion of nationally recognized bond counsel ("Counsel's
Opinion") that such noncompliance will not adversely affect the exclusion from gross income for federal income tax purposes of
interest on the Bonds or if the City has received a Counsel's Opinion to the effect that compliance with some other requirement
set forth in the Ordinance will satisfy the applicable requirements of the Code, in which case compliance with such other
requirement specified in such Counsel's Opinion shall constitute compliance with the corresponding requirement specified in the
Ordinance.
DEFAULT AND REMEDIES
Remedies in Event of Default. ... In addition to all the rights and remedies provided by the laws of the State of Texas, the City
covenants and agrees that in the event the City (i) defaults in payments to be made to the Interest and Sinking Fund and Reserve
Fund as required by this Ordinance or (ii) defaults in the observance or performance of any other of the covenants, conditions or
obligations set forth in this Ordinance, the Owner of any Parity Bond shall be entitled to a writ of mandamus issued by a court of
proper jurisdiction compelling and requiring the City Council and other officers of the City to observe and perform any covenant,
condition or obligation prescribed in this Ordinance.
No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power, or shall be
construed to be a waiver of any such default or acquiescence therein, and every such right and power may be exercised from time
to time and as often as may be deemed expedient. The specific remedies herein provided shall be cumulative of all other existing
remedies and the specification of such remedies shall not be deemed to be exclusive. Notwithstanding any other provision of the
Ordinance, the right to accelerate the debt evidenced by the Bonds shalt not be available as a remedy under this Ordinance.
DISCHARGE
The Bonds may be defeased, discharged or refunded in any manner permitted by applicable law
(Remainder of Page Intentionally Left Blank)
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TAX MATTERS
TAX E.xENn r[ov ... In the opinion of Vinson & Elkins L.L.P., Bond Counsel, (i) interest on the Bonds is excludable from gross
r income for federal income tax purposes under existing law and (ii) the Bonds are not "private activity bonds" under the Internal
Revenue Code of 1986, as amended (the "Code"), and interest on the Bonds 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 Bonds, 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 Ordinance that it will comply with these requirements.
Bond Counsel's opinion will assume continuing compliance with the covenants of the Ordinance pertaining to those sections of
the Code which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and, in addition,
will rely on representations by the City, the City's Financial Advisor and the Underwriter with respect to matters solely within
the knowledge of the City, the City's Financial Advisor and the Underwriter, respectively, which Bond Counsel has not
independently verified. Bond Counsel will further rely on the report of Grant Thornton LLP, certified public accountants,
regarding the mathematical accuracy of certain computations. If the City should fail to comply with the covenants in the
Ordinance or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds could
become taxable from the date of delivery or report the Bonds, 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 Bonds, is included in a corporation's "adjusted current
earnings," ownership of the Bonds 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
Bonds, received or accrued during the year.
Except as stated above, and as stated below in "Tax Accounting Treatment of Original Issue Discount Bonds", 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 Bonds.
Prospective purchasers of the Bonds 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 Bonds. 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 Bonds. 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 may not have a right to participate in such audit.
TAx ACCOUNTING TREATMENT OF ORIGINAL ISSUE DISCOUNT BONDS... The initial public offering price for certain of the Bonds
may be less than the principal amount thereof (the "Original Issue Discount Bonds"). 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 Bond, and (ii) the initial
offering price to the public of such Original Issue Discount Bond constitutes original issue discount with respect to such Original
27
Issue Discount Bond in the hands of any owner who has purchased such Original Issue Discount Bond in the initial public
offering of the Bonds; 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 Bond equal to that portion of the amount of such original issue discount allocable to the
period that such Original Issue Discount Bond continues to be owned by such owner.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount Bond prior to stated maturity,
however, the amount realized by such owner in excess of the basis of such Original Issue Discount Bond in the hands of such
owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue
Discount Bond was held by such initial owner) is includable in gross income. (Because original issue discount is treated as
interest for federal income tax purposes, the discussion regarding interest on the Bonds under the caption "Tax Exemption"
generally applies, except as otherwise provided below, to original issue discount on an Original Issue Discount Bond held by an
owner who purchased such Bond at the initial offeringprice in the initial public offering of the Bonds, 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 Underwriter, that (a)
the Underwriter has purchased the Bonds for contemporaneous sale to the public and (b) all of the Original Issue Discount Bonds
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 Bonds 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 Bond is accrued daily to the stated maturity
thereof (in amounts calculated as described below for each six-month period ending on the date before the semi-annual anniversary
dates of the date of the Bonds and ratably within each such six-month period) and the accrued amount is added to an initial
owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such
owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to
(a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated
maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the
accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond.
The federal income tax consequences of the purchase, ownership, and redemption, sale or other disposition of Original Issue
Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules
which differ from those described above. All owners of Original Issue Discount Bonds should consult their own tax advisors with
respect to the determination for federal, state, and local income tax purposes of interest accrued upon redemption, sale or other
disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the
purchase, ownership, redemption, sale or other disposition of such Original Issue Discount Bonds. Public awareness of any
future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit regardless
of the outcome of the audit.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds.
The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the
agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely
notice of specified material events, to certain information vendors. This information will be available to securities brokers and
others who subscribe to receive the information from the vendors.
A.NYliAL REPORTS ... The City will provide certain updated financial information and operating data to certain information
vendors annually. The information to be updated includes all quantitative financial information and operating data with respect to
the City of the general type included in this Official Statement under Tables numbered 1 through 10 and in Appendix 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").
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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
is 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
audited such financial statements become available. Any such financial statements will be prepared in accordance with the
accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from
time to time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year,
unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each NRMSIR and the SID of the change.
The Municipal Advisory Council of Texas 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, if such event is material to a decision to
purchase or sell Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled
draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial
difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting
the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10)
release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. (Neither the Bonds nor the
Ordinance make any provision for liquidity enhancement.) In addition, the City will provide timely notice of any failure by the
City to provide information, data, or financial statements in accordance with its agreement described above under "Annual
Reports." The City will provide each notice described in this paragraph to the SID and to 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 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.
U.N[ITATIONS AND A.,vIENDNtENTS ... The City has agreed to update information and to provide notices of material events only as
described above. The City has not agreed to provide other information that may be relevant or material to a complete
presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided,
except as described above. The City makes no representation or warranty concerning such information or concerning its
usefulness to a decision to invest in or sell Bonds at any future date. The City disclaims any contractual or tort liability for
damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant
to its agreement, although holders of Bonds may seek a writ of mandamus to compel the City to comply with its agreement.
The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a
change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the
agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described herein in
compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as
well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding
Bonds consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel)
determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The
City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable
provisions of the SEC Rule 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 in the primary offering of the Bonds. If the City so amends the agreement, it has agreed to include
with the next financial information and operating data provided in accordance with its agreement described above under "Annual
Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of
financial information and operating data so provided.
COMPLIANCE WITH PRIOR UNDERTAKINGS . . . The City has complied in all material respects with all continuing disclosure
agreements made by it in accordance with SEC Rule 15c2-12.
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OTHER LNFORVMATION
RATINGS
The presently outstanding revenue debt of the City is rated "A3" 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. Applications for contract ratings on this issue have been made to Moody's and S&P. An explanation of the
significance of such ratings may be obtained from the company furnishing the rating. The ratings reflects only the respective
views of such organizations and the City makes no representation as to the appropriateness of the ratings. There is no assurance
that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by
either or both of such rating companies, if in the judgment of either or both companies, circumstances so warrant. Any such
downward revision or withdrawal of such ratings, or either of them, may have an adverse effect on the market price of the Bonds.
LITIGATION
It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material
adverse financial impact upon the City or its operations.
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE
The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the
exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in
reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any
jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in
which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for
qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the
availability of any exemption from securities registration provisions.
LEGAL LNYESTNIENTS AND ELIGIBILITY TO S ECU RE PUBLIC FUNDS IN TECAs
Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are
negotiable instruments governed by Chapter 3, Texas Business and Commerce Code, and are legal and authorized investments for
insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public
agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions or public
agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Bonds
be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency. See "OTHER INFORiMATION
- Ratings" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard,
the Bonds are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and
savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its
political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has
been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states.
LEGAL NLATTERS
The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the
approving legal opinion of the Attorney General of the State of Texas to the effect that the Initial Bond is a valid and binding
obligation 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 issued in compliance with the provisions of the Ordinance are valid and legally binding
special obligations of the City and the interest on such Bonds is excludable from gross income for federal income tax purposes
under existing law and the Bonds 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 in the Official Statement under the captions "Plan of Financing" (except for the subcaption "Sources and Uses of
Funds," "The Bonds" (except for the subcaption "Book -Entry -Only System"), "Tax Matters" and "Continuing Disclosure of
Information" (except 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 the 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 are contingent on the
sale and delivery of the Bonds. The legal opinion will accompany the Bonds deposited with DTC or will be printed on the Bonds
in the event of the discontinuance of the Book -Entry -Only System. Certain legal matters will be passed upon for the Underwriter
by Fulbright & Jaworski L.L.P., Dallas, Texas, Counsel to the Underwriter.
30
AUTHENTICITY OF FINANCIAL DATA AND OTHER LYFORN ATION
014 The financial data and other information contained herein have been obtained from City records, audited financial statements and
other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein
will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made
subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete
statements of such provisions and reference is made to such documents for further information. Reference is made to original
documents in all respects.
FINANCIAL ADVISOR
First Southwest Company is employed as Financial Advisor to the City in connection with the issuance of the Bonds. The
Financial Advisor's fee for services rendered with respect to the sale of the Bonds is contingent upon the issuance and delivery of
the Bonds. First Southwest Company, in its capacity as Financial Advisor, has not verified and does not assume any
responsibility for the information, covenants and representations contained in any of the legal documents with respect to the
federal income tax status of the Bonds, or the possible impact of any present, pending or future actions taken by any legislative or
judicial bodies.
The Financial Advisor to the City has provided the following sentence for inclusion in this 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.
VERIFICATION OF ARITH�NIETICALAYDiinkTHENIATICALCOMPUTATIONS
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 Federal Securities and 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 verified 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 Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the City, at an underwriting discount of S
. The Underwriter will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be
offered to the public may be offered and sold to certain dealers (including the Underwriter and other dealers depositing Bonds into
investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may be changed,
from time to time, by the Underwriter.
FORWARD LOOKING S TATEMENTS
The statements contained in this Official Statement, and in any other information provided by the City, that are not purely
historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies
regarding the future. Readers should not place undue reliance on forward-looking statements. All forward looking statements
included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no
obligation to update any such forward-looking statements. It is important to note that the City's actual results could differ
materially from those in such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to
various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions
and estimates and possible changes or developments in social, economic, business, industry, market, legal and regulatory
circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business
partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the
foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future
business decisions, all of which are difficult or impossible to predict accurately and 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 would prove to be accurate.
31
MISCELLANEOUS
The financial data and other information contained herein have been obtained from the City's records, audited financial statements
and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained
herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are
made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be
complete statements of such provisions and reference is made to such documents for further information. Reference is made to
original documents in all respects.
The Ordinance authorizing the issuance of the Bonds will also approve the form and content of this Official Statement, and any
addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Bonds by the Underwriter.
ATTEST:
Isr"
LINDA HUFF
City Secretary
City of Grapevine, Texas
32
/sl
WILLIAM D. TATE
Mayor
City of Grapevine, Texas
Schedule I
SCHEDULE OF REFUNDED BONDS
Waterworks and Sewer System Revenue Refunding Bonds, Series 1992
The 2003- 2010 maturities will be redeemed prior to original maturity on November 7, 2002 at par.
Waterworks and Server System Revenue Bonds, Series 1995
Principal
Original
Original
Interest
Amount
Dated Date
Maturity
Rate
Outstanding
8/1/1992
9`1/2003
5.400%
S 375,000
9/l/2004
5.500%
400,000
9/1/2005
5.600%
420,000
9/1/2006
5.750%
445,000
9/1/2007
5.750%
470,000
9/1/2008
5.750%
500,000
9/1/2009
6.000%
530,000
9/1/2010
6.000%
565,000
The 2003- 2010 maturities will be redeemed prior to original maturity on November 7, 2002 at par.
Waterworks and Server System Revenue Bonds, Series 1995
The 2008 - 2015 maturities will be redeemed prior to original maturity on September 1, 2005 at par.
33
Principal
Original
Original
Interest
Amount
Dated Date
Maturity
Outstanding
7/15/1995
9/1/2008
5.400%
S 225,000
9/1/2009
5.500%
240,000
9/1/2010
5.500%
250,000
9/1/2011
5.600%
265,000
9/1/2012
5.625%
280,000
9/1/2013
5.625%
295,000
9/1/2014
5.625%
310,000
9/1/2015
5.625%
325,000
The 2008 - 2015 maturities will be redeemed prior to original maturity on September 1, 2005 at par.
33
APPENDIX A
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 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
1970
Population
7,023
Source
U.S. Census
Year
1991
Population
30,300
Source
City Estimate
1980
11,801
U.S. Census
1992
31,400
City Estimate
1981
15,245
Grapevine Community Profile
1993
31,902
City Estimate
1982
16,183
Grapevine Community Profile
1994
32,727
City Estimate
1983
18,121
Grapevine Community Profile
1995
33,211
City Estimate
1984
19,405
Grapevine Community Profile
1996
34,950
City Estimate
1985
22,002
Grapevine Community Profile
1997
36,000
City Estimate
1986
24,493
Grapevine Community Profile
1998
37,946
City Estimate
1987
25,853
Grapevine Community Profile
1999
39,190
City Estimate
1988
27,132
City Estimate
2000
42,059
U.S. Census
1989
27,257
City Estimate
2001
42,443
City Estimate
1990
29,202
U.S. Census
2002
44,390
City Estimate
ECONOMICS... The proximity of the Dallas/Fort Worth International Airport ("DFW") greatly influences both industrial and
u„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 5330,000 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
September
Annual
Annual
Annual
Annual
Annual
29.01_
2000.
1999
1998
1997
1996
Labor Force
22,567
21,757
21,309
20,796
20,096
19,790
Employed
22,032
21,393
20,956
20,430
19,705
19,377
Unemployed
535
364
353
366
391
413
Percent of Unemvloved
2.37%
1.67%
1.66%
1.76%
1.95%
2.09%
A-1
I�LAJOR F-NiPLOVERS
( mmpan;4
Dallas/Fort Worth International Airport
Grapevine/Colleyville Independent School District
United Parcel Service
GTE Directory Corporation
Baylor Medical Center
Hyatt Regency Hotel
City of Grapevine
D/FW Hilton Hotel
Super Shuttle
SimuFlite Training International
Embassy Suites
Trencor
Source: City of Grapevine, Department of Development Services.
Estimated
Number of
Airport
33,000
School District
1,656
Parcel Service
1,218
Yellow Pages Directory
1,200
Health Services
874
Hotel
815
City Government
434
Hotel
380
Airport Shuttle Service
320
Pilot Training
260
Hotel
250
Heavy Equioment Manufacturina
180
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 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.
BuILD►NG PERMITS... The number and value of building permits issued by the City are:
Fiscal
('nmmerrial
Permits
Residential
P rmitc
Total
Year
Number
Number
Number
Ended
of
Dollar
of
Dollar
of
Dollar
9/30
Permits
VAhle
Pp=itc
Value
Permits
Value.
1997
39
S 105,827,449
182
S 40,113,663
221
S 145,941,112
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, ajogging 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.
TRA-woRTAT[oN... 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 and 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/TraiIways 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.
IS
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 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 school
4 Middle schools
11 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 are as follows:
Cn11Pgell fniverci :
I nratinn
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
APPENDIX B
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.
I H1E CB i �T{ Or' t".7RHYPE VIII IE, I E /A
FISCAL YEAR ENDED SEPTEMBER 30, 2001
10,
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
CITY OF GRAPEVINE, TEXAS
HOME RULE, COUNCIL-MANAGER FORM OF GOVERNMENT
Ted R. Ware
Shane Wilbanks
Sharron Spencer
William D. Tate
MAYOR
CITY COUNCIL
Nelson
Roger0
CITY MANAGER
Bruno Rumbelow
ASSISTANT CITY MANAGER
William A. Gaither
DIRECTOR OF ADMINISTRATIVE SERVICES
Prepared by:
Administrative Services Department
Darlene Freed
Clydene Johnson
Roy Stewart
CITY OF GRAPEVINE, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Exhibit
Page
INTRODUCTORY SECTION
Title Page
Table of Contents
i -iii
Transmittal Letter
I -VII
Certificate of Achievement
VIII
Organizational Chart
IX
Principal Officials
X
FINANCIAL SECTION
Independent Auditors' Report
1
General Purpose Financial Statements:
Combined Balance Sheet - All Fund Types and Account Groups and Discretely
Presented Component Units
1
3-6
Combined Statement of Revenues, Expenditures and Changes in Fund Balances -
All Governmental Fund Types, Expendable Trust Fund and Discretely Presented
Component Units
2
7-8
,x
Combined Statement of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - General, Budgeted Special Revenue and Debt Service Funds
3
9-10
Combined Statement of Revenues, Expenses and Changes in Retained Earnings -
All Proprietary Fund Types
4 -
11
Combined Statement of Cash Flows - All Proprietary Fund Types
S
12
Notes to the Financial Statements
13-35
Statement/
Schedule
Page
Combining, Individual Fund and Account Group Financial Statements and Schedules:
Governmental Fund Types:
General Fund:
36
Combining Balance Sheet
A-1
37
Combining Statement of Revenues, Expenditures and Changes in
Fund Balance - Budget and Actual
A-2
38-39
Special Revenue Funds:
39
Combining Balance Sheet
B-1
40
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
B-2
41
Statement of Revenues, Expenditures and Changes in Fund Balances -
Budget and Actual - Hotel Occupancy Tax Fund
B-3
43
i
CITY OF GRAPEVINE, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 34, 2001
TABLE OF CONTENTS
Statement/
Schedule Page
Debt Service Funds:
44
Combining Balance Sheet
C-1
45
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances
C-2
46
Combining Statement of Revenues, Expenditures and
Changes in Fund Balance - Budget and Actual
C-3
47
Capital Projects Funds:
48
Combining Balance Sheet
D-1
49-50
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
D-2
51-52
Proprietary Fund Types:
Enterprise Funds:
53
Combining Balance Sheet
E-1
54-55
Combining Statement of Revenues, Expenses and Changes in Retained Earnings
E-2
56-57
Combining Statement of Cash Flows
E-3
58
Internal Service Funds:
59
Combining Balance Sheet
F-1
60
Combining Statement of Revenues, Expenses and Changes in Retained Earnings
F-2
61
Combining Statement of Cash Flows
F-3
62
Fiduciary Fund Types:
Trust and Agency Funds:
63
Balance Sheet
G-1
64
Statement of Revenues, Expenditures and Changes in Fund Balance -
Expendable Trust Fund
G-2
65
Statement of Changes in Assets and Liabilities - Agency Fund
G-3
66
General Fixed Assets Account Group:
67
Schedule of General Fixed Assets - By Sources
H-1
68
Schedule of General Fixed Assets - By Function and Activity
H-2
69-70
Schedule of Changes in General Fixed Assets - By Function and Activity
H-3
71
ii
CITY OF GRAPEVINE, TEXAS
i
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
Table
Page
STATISTICAL SECTION (Unaudited)'
General Governmental Expenditures by Function - Last Ten Fiscal Years
1
72
General Governmental Revenues by Source - Last Ten Fiscal Years
2
73-74
General Governmental Tax Revenues by Source - Last Ten Fiscal Years
3
75
Property Tax Levies and Collections - Last Ten Fiscal Years
4
76
Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years
5
77
Property Tax Rates - Direct and Overlapping Governments (per $100
of assessed value) - Last Ten Fiscal Years
6
78
Computation of Legal Debt Margin
7
79
Ratio of Net General Bonded Debt to Assessed Value and Net
Bonded Debt Per Capita - Last Ten Fiscal Years
8
80
Computation of Direct and Overlapping Debt
9
81
Ratio of Annual Debt Service Expenditures for General Bonded Debt to
Total General Expenditures - Last Ten Fiscal Years
10
82
Revenue Bond Coverage Water and Sewer Bonds - Last Ten Fiscal Years
1 i
83
Demographic Statistics - Last Ten Fiscal Years
12
84
Property Value and Construction - Last Ten Fiscal Years
13
85
Principal Taxpayers
14
86
Miscellaneous Statistics
15
87
February 15, 2002
Citizens of Grapevine, Honorable Mayor,
Members of City Council, and City Manager
City of Grapevine
Grapevine, Texas:
Submitted herewith is the Comprehensive Annual Financial Report of the City of Grapevine, Texas
for the fiscal
year ended September 30, 2001. The City's Administrative Services Department issued
this report. Responsibility for both the accuracy of iiia preSellted data aid the completeness and fairness
of the presentation, including all disclosures, rests with the City. In preparing this report our efforts were
concentrated in various areas, attempting to conform to the principles and standards of public financial
reporting as recommended by the Government Finance Officers Association and the Governmental
Accounting Standards Board (GASB). Our intention is to continue to comply with the guidelines as
promulgated by the GASB. In our opinion, this report is in compliance with all guidelines and restatement
publications and is qualified to be judged in conformance.
This comprehensive annual financial report is presented in three sections: introductory, financial
and statistical. The introductory section includes this transmittal letter, the City's organizational chart,
and a list of principal officials. The financial section contains the general-purpose financial statements and
the combining and individual fund and account group financial statements and schedules, as well as the
Independent Auditor's report on the general purpose financial statements and schedules. Finally, the
statistical section presents a variety of demographic information and financial indices, generally for the
past ten fiscal years.
This report includes all of the funds and account groups of the City in addition to all activities for
which the City Council is financially accountable. The City provides the full range of municipal services
contemplated by statute or charter including public safety (police and fire), sanitation, health, culture,
recreation, public improvements, planning and zoning, and general administrative services.
Elementary and Secondary education services within the City are provided by the Grapevine-
Colleyville Independent School District. The City Council is not financially accountable for the District
and, accordingly, financial data for the District is not included in the general-purpose financial statements
in this report.
The Grapevine-Colleyville School District Tax Office collects property taxes for the City, in
cooperation with the City of Coileyville as a separate entity.
ECONOMIC CONDITION AND OUTLOOK
The City of Grapevine, located in the heart of the Dallas/Fort Worth metroplex, had a 12%
increase in sales tax revenues for fiscal year 2001, a $1,707,573 increase over fiscal year 2000. A five-
year history of sales tax revenues for the City of Grapevine shows a compound growth rate of 24%.
Property tax collections were up $1,161,596, an increase of 6%. For fiscal year 2001 the City issued
permits for new commercial development and single family residential building permits for a total
construction value of $376,739,667. The value of commercial permits in FY 2001 totaled over $364
million. Property values that totaled $4.37 billion have increased an average of 10.0% over the last five
years.
The City of Grapevine established TIF Zone #2 on December 8, 1998. The new TIF zone will be
used for the development of public improvements at the new Opryland Hotel in the amount of $27.5
million and the Zone will be using January 1, 1999 as the base year. The proposed development will be
in excess of $300 million and construction and opening should be open in late 2004.
MAJOR INITIATIVES
On November 20, 2001, the City approved a resolution to issue equipment notes not to exceed
$1,300,000.
On December 12, 2001, the Industrial Development Corporation Board approved a resolution
expressing interest to issue tax-exempt bonds in the amount of $6,500,000. The funds will be loaned to
Aero DFW. The bonds are corporate obligations of the company and are not secured by any funds or
revenues of either the industrial Development Corporation or the City. The cost to the City wiii be
minimal.
FINANCIAL INFORMATION
One of the objectives of the City's financial accounting system is to provide adequate internal
controls. Internal controls are designed to provide reasonable, but not absolute, assurance regarding the
safeguarding of assets against loss from unauthorized use or disposition and the reliability of financial
records for preparing financial statements and maintaining accountability for assets. The concept of
reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be
derived, and the evaluation of costs and benefits requires estimates and judgement by management. We
believe that the City's internal controls adequately safeguard assets and provide reasonable assurance of
proper recording of financial transactions.
The various funds and account groups presented in this financial report were created under the
authority of the charter of the City of Grapevine, Texas, as amended up to and including September 30,
2001, and, additionally, by the authority of the State of Texas as outlined in Vernon's Annotated Civil
Statutes. A description of the funds used by the City and their purpose and the basis of accounting for
transactions can be found in Note 1 of the Notes to General Purpose Financial Statements.
Budgetary Controls
Budgetary control is accomplished by the adoption of an annual operating budget for the General Fund,
Special Revenue Funds and Debt Service Fund. Detailed control is maintained at the line item level by
encumbering available funds at the time a purchase order is written. Encumbrances do not lapse at fiscal
year end. The City Manager is authorized to transfer budgeted amounts between departments within any
fund; however, any revisions that alter the total expenditures of any fund must be approved by the City
Council.
I�
General Governmental Functions
Revenues derived from general governmental functions and Fiduciary Fund type (General, Special
Revenue, Debt Service Funds, Capital Projects and Expendable Trust Fund) in fiscal year 2000-2001
totaled $64,590,773. This was an increase of $8,879,672 (16%) over 1999-2000. The increases were
due to expansion in the level of service in the Special Revenue Fund and increased revenues from ad
valorem taxes. Interest income increased $1,177,071 due to new bond issues during the last quarter of
fiscal year 2000. Intergovernmental revenues increased $4,307,552 due to the City's purchase of the
Palace Theater from the Heritage Foundation.
The following table presents a summary of Governmental Fund types and Expendable Trust Fund
revenues for the current fiscal year (as shown in Exhibit 2) and the amount and percentage of increases
and decreases in relation to prior year revenues:
Current tax collections were 98.8 percent of the tax levy, a change from last year's collection rate
of 99.4 percent. Current and delinquent tax collections amounted to 99,1 percent of the tax levy, The
outstanding delinquent tax balance increased from 2.7 percent of the tax levy in 2000 to 2.8 percent of
the tax levy in 2001.
Allocation of the property tax levy for 2001 and the preceding two years are as follows (amounts
per $100 of assessed value):
Purpose
FY 2001
FY 2000
Increase
Increase
$.1896
$.2020
Percent
(Decrease)
(Decrease)
Revenues
Amount
of Total
from FY00
from FY00
Taxes
$44,685,142
70%
$3,172,405
8 %
Licenses and Permits
1,146,428
2%
(348,000)
(23)%
Intergovernmental
4,538,110
7%
4,307,552
19%
Charges for services
7,274,012
11%
781,034
11 %
Fines and Forfeitures
2,149,638
3%
(210,390)
(9)%
Interest & Misc.
4,797,443
7%
1,177,071
32%
Total Revenues
$64.590,773
100%
$8,879,672
16%
Current tax collections were 98.8 percent of the tax levy, a change from last year's collection rate
of 99.4 percent. Current and delinquent tax collections amounted to 99,1 percent of the tax levy, The
outstanding delinquent tax balance increased from 2.7 percent of the tax levy in 2000 to 2.8 percent of
the tax levy in 2001.
Allocation of the property tax levy for 2001 and the preceding two years are as follows (amounts
per $100 of assessed value):
Purpose
FY 2001
FY 2000
FY1999
General Fund
$.1896
$.2020
$.2187
General Obligation Debt
.1854
.1780
.1663
Total Tax Rate
$L3750.3800
5.3850
FY 2001
FY 2000
FY1999
Property Value
$4,355,784,534
$4,177,920,179
$3,994,671,130
The current and prior year's tax rates are well under the maximum tax rate of $2.50 per $100.00
valuation limit permitted by the Texas Constitution. The City does not anticipate reaching this legal debt
limit anytime in the foreseeable future.
0
The following table reflects the number of building permits issued and the total value by
classification for the past three years,
FY 2000-1999
Value
(000) Number
5 56,041 211
84,742 56
5140,783 267
FY 1999-1998
Value
(000) Number
$21,027 185
59,920 32
580,947 217
Single family residence starts, included in residential above, in the City of Grapevine totaled 89
units in fiscal year 2000-2001. Total residential and commercial construction permit value was
$364,294,642 for the year. Construction in Grapevine generated $1,146,428, in permit revenues for
municipal operations, a 23% decrease from 2000.
Tax revenues were up by $3,172,405 over FY 2000 due to continued increases in franchise fees,
property tax, sales taxes and hotel tax revenues.
Fines and Forfeitures were down by $210,390 in fiscal year 2001 over 2000, a 9% decrease
The following schedule presents a summary of Governmental Fund types and Expendable Trust
Fund expenditures for the fiscal year ended September 30, 2001 (as shown in Exhibit 2) and the
percentages of increases and decreases in relation to prior year amounts.
FY 2001-2000
Value
Classification
(000) Number
Residential
$ 12,445 89
Commercial
364,295 53
Totals
$ 376,740 142
FY 2000-1999
Value
(000) Number
5 56,041 211
84,742 56
5140,783 267
FY 1999-1998
Value
(000) Number
$21,027 185
59,920 32
580,947 217
Single family residence starts, included in residential above, in the City of Grapevine totaled 89
units in fiscal year 2000-2001. Total residential and commercial construction permit value was
$364,294,642 for the year. Construction in Grapevine generated $1,146,428, in permit revenues for
municipal operations, a 23% decrease from 2000.
Tax revenues were up by $3,172,405 over FY 2000 due to continued increases in franchise fees,
property tax, sales taxes and hotel tax revenues.
Fines and Forfeitures were down by $210,390 in fiscal year 2001 over 2000, a 9% decrease
The following schedule presents a summary of Governmental Fund types and Expendable Trust
Fund expenditures for the fiscal year ended September 30, 2001 (as shown in Exhibit 2) and the
percentages of increases and decreases in relation to prior year amounts.
Interest & Fiscal
Charges 7,815,282 9% 1,390,941 22%
Total Expenditures 580,309.378 100% 518,356.018 30%
General Governmental and Expendable Trust Fund expenditures increased by $18,356,018.
Cultural and recreational expenditures increased $1,735,749 due to increased activity for development of
the trail system. Capital Outlays increased $6,528,415 due to the purchase of the Palace Theater.
Principal payments increased $5,557,848 and Interest & Fiscal charges increased $1,390,941 due to
new bond payments on the TIF #2 Bonds. Public Safety expenditures increased $2,236,117 due to
increases in salaries and wages for operations.
9
Increase
Increase
Percent
(Decrease)
(Decrease)
Expenditures
Amount
of Total
from FY2000
from FY2000
General Government
6,180,556
12%
5 497,319
9%
Public Safety
17,640,884
21%
2,236,117
15%
Culture & Recreation
13,717,180
17%
1,735,749
14%
Public Works
6,067,277
7%
409,629
7%
Capital Outlay
19,973,199
23%
6,528,415
49%
Debt Service:
Principal
8,915,000
11%
5,557,848
165%
Interest & Fiscal
Charges 7,815,282 9% 1,390,941 22%
Total Expenditures 580,309.378 100% 518,356.018 30%
General Governmental and Expendable Trust Fund expenditures increased by $18,356,018.
Cultural and recreational expenditures increased $1,735,749 due to increased activity for development of
the trail system. Capital Outlays increased $6,528,415 due to the purchase of the Palace Theater.
Principal payments increased $5,557,848 and Interest & Fiscal charges increased $1,390,941 due to
new bond payments on the TIF #2 Bonds. Public Safety expenditures increased $2,236,117 due to
increases in salaries and wages for operations.
9
General Fund Balance. The ending fund balance for fiscal year 2000-2001, decreased by
$73,981 from $7,732,646 to $7,658,665. Expenditures, which include the purchase of the Palace
Theater in the amount of $ 4,357,000, exceeded revenues by $3,510,725, planned operating transfers
for capital projects and debt retirement totaled $1,295,979. The ending fund balance provides 70 days
of operations based on FY 01 expenditures. This exceeds the fund balance guidelines of 60 days as
established by the City Council in 1991.
Enterprise Operations. The customer base of the City's Water and Sewer Enterprise Fund
continued to grow during fiscal year 2000-2001 as the number of water customers increased to 12,951
up 207 customers from the prior year's total of 12,744. The amount of water usage totaled
3,060,023,000 gallons, a 14% decrease from the amount used in fiscal year 1999-2000. Operating
revenues increased $905,685 over FY2000 levels due to increases in water and sewer rates as of
October 1, 2000. Operating expenses increased $675,898 mainly due to higher cost of water
purchased.
In February 2002 the city approved a $2.7 million contract for construction of a 2.0 million -
gallon water tower. The current water and sewer rates are as of 9/30/01:
Water Rates
Residential and Commercial Service (Monthly)
First 2,0000 gallons minimum
additional 1,000 gallons
Sewer Rates
Residential Service (Monthly)
First 2,000 gallons minimum
Each additional 1,000 gallons
New Rate
$9.15
2.57
New Rate
$7.31
3.05
Residential customers are billed upon the lower of actual consumption or a three month winter
average based upon December, January and February aggregate consumption with a maximum of 15,000
gallons.
Commercial Service (Monthly)
First 2,000 gallons minimum
Each additional 1,000
New Rate
$10.79
3.05
During fiscal year 2000-2001, the Lake Enterprise Fund realized a net loss from golf course
operations of $362,349. Total rounds of golf decreased by 3,293 in 2001 with 71,562 rounds in 2001
74,855 in 2000 due to course remodeling and expansion.
V
Debt Administration. General obligation bonds (gross bonded debt) outstanding as of
September 30, 2001 totaled $75,600,000, which is directly tax supported. The ratio of net bonded debt
to assessed valuation and the amount of bonded debt per capita are useful indicators of the City's debt
position to municipal management, citizens and investors. These data for the City at the end of fiscal
year 2000-2001 were as follows:
Net direct bonded debt $68,268,532
Ratio of debt to assessed value (100°% of market) 1.56%
Net bonded debt per capita $1,537
The ratio of debt service expenses to total general expenditures is 25.9% in FY2001 and 17.4%
in FY 2000.
The bond ratings for the City of Grapevine are as follows:
Type of Bond Moody's Standard & Poor's
General Obligation Bonds Al A+
Revenue Bonds Baal A
Cash Management. The City of Grapevine has designated the Texas Bank of Grapevine as the
City depository. The City invests in Certificates of Deposit, TexPool, Logic, Treasury Bills and Agency
Discount Notes. The investment program of the City resulted in interest revenue of $5,422,479 for all
lands for the fiscalycar ended September '00, 2001 . 'In_.nei eSt in%Gme ii%i eaScv over One million dollars.
" a 28% increase. Interest income increased due to new bonds issues during the last quarter of fiscal year
2000, the proceeds of which were invested until needed.
The City's investment policy is to minimize credit and market risks while maintaining a
competitive yield on its portfolio. The City's investment strategies include using cash flow analysis to
purchase securities which can be held to maturity. This practice lessens the impact which rising interest
rates have on the portfolio's valuation changes. All Certificates of Deposit are fully collateralized and the
collateral is held by a trustee bank in the City's name and are classified in the lowest risk category.
Investments in the deferred compensation plan are held by the third party plan administrator.
Risk Management. Manages and directs the Self Insurance Retention Plan (SIR); procures
insurance protection for City assets; directs safetylloss control; conducts risk inspections and safety
training; administers claims including litigation and subrogation; directs the City Self Insured Major
Medical Health Plan for all employees and dependents; reviews contractual agreements for compliance;
writes all insurance specifications for third party contracts and coordinates all litigation and legal services
with insurance carriers and City Attorney.
BLENDED COMPONENT UNITS AND DISCRETELY PRESENTED COMPONENT UNITS
The City of Grapevine has the following component units: Industrial Development Corporation;
Heritage Foundation; and, Tax Reinvestment Zones Numbers One and Two that are operated with City of
Grapevine staff and resources.
The Grapevine Industrial Development Corporation (the "Corporation") is a Texas non-profit
corporation. The City of Grapevine appoints all directors of the Corporation and may remove any director
at any time, with or without cause. In the event of dissolution of the Corporation, title to all funds of the
Corporation inure to the City of Grapevine.
The Heritage Foundation (the " Foundation") is a Texas non-profit corporation governed by a
seven member board of directors appointed by City Council, which includes a City Council member and
the Director of the City's Convention and Visitor's Bureau.
Grapevine Tax Increment Financing District Reinvestment Zones Number One and Two (the "
TIFS') were formed to finance and make public improvements, under the authority of the Tax Increment
Financing Act. The TIFS are governed by two separate nine -member board of directors; of which, five
members are appointed by the City Council. Other members are appointed by member taxing
jurisdictions. Financial statements of the TIFS are available from the City of Grapevine.
OTHER INFORMATION
Independent Audit. The City Charter requires an annual audit of the books of accounts, financial
records and transactions of all administrative departments of the City by independent certified public
accountants selected and engaged by the City Council. The Independent Auditors' report on the general
purpose financial statements and combining and individual fund statements and schedules is included in
the financial section of this report.
Boards. The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its
comprehensive annual financial report for the fiscal year ended September 30, 2000. This was the
fifteenth consecutive year the City has received this prestigious award. In order to be awarded a
Certificate of Achievement, the City published an easily readable and efficiently organized comprehensive
annual financial report. This report satisfied both generally accepted accounting principles and applicable
legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program's
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
For the fourteenth consecutive year, the City also received the GFOA's Award for Distinguished
Budget Presentation for its annual appropriated budget for the fiscal year ended September 30, 2000. In
order to qualify for the Distinguished Budget Presentation Award, the City's budget document was
judged to be proficient in several categories including policy documentation, financial planning and
organization.
Acknowledgements. The preparation of this report could not be accomplished on a timely basis
without the efficient and dedicated endeavors of the entire staff of the Administrative Services
Department. We would like to express our sincere appreciation to all employees who contributed to the
preparation. Additionally, we would also like to thank the Mayor, City Council, and the City Manager for
their support in planning and conducting the financial operations of the City in a responsible and
progressive manner.
Respectfully submitted,
William A. Gaither
Director of Administrative Services
WAG/cjc
®1
INSERT GFOA CERTIFICATE
EMO
TTV(ZT;u'r,SEI nRti A\770 TIOCHAR
0
-:BERT LIST OF PR-;CI�°��; �:TY JFFI�IAT_ S
X
ri 1 ' .
INDEPENDENT AUDITORS' REPORT
The Honorable Mayor and Members of the City Council
of the City of Grapevine, Texas:
We have audited the accompanying general purpose financial statements of the City of Grapevine, Texas
("City"), as of and for the year ended September 30, 2001, as listed in the table of contents. These general
purpose financial statements are the responsibility of the City's management. Our responsibility is to
express an opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all material
respects, the financial position of the City as of September 30, 2001, and the results of its operations and the
cash flows of its proprietary fund types for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the general purpose financial statements, the City changed its policy for
capitalization of fixed assets as of lune 25, 2001.
As discussed in Note 10, beginning in fiscal year 2001, the City implemented Government Accounting
Standards Board Statement No. 33 and recorded capital contributions to proprietary funds as revenue rather
than as additions to contributed capital.
Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements
taken as a whole. The combining and individual fund and account group financial statements and schedules
listed in the foregoing table of contents are presented for purposes of additional analysis and are not a
required part of the general purpose financial statements. This additional information is the responsibility of
the City's management. Such additional information has been subjected to the auditing procedures applied
in our audit of the general purpose financial statements and, in our opinion, is fairly presented in all material
respects when considered in relation to the general purpose financial statements taken as a whole.
� 7-i--4� L t. f
January 4, 2002
-1-
GENERAL PURPOSE FINANCIAL STATEMENTS
-2-
CITY OF GRAPEVINE TEXAS
COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS AND
DISCRETELY PRESENTED COMPONENT UNITS
SEPTEMBER 30, 2001 WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2000
ASSETS AND OTHER DEBITS
Cash and investments
Receivables (net of uncollectible
amounts of $147,769):
Accounts
Pledges
Taxes
Accrued interest
Due from other funds
Due from primary government
Due from component unit
Due from other governments
Inventories, at cost
Prepaid items
Restricted assets:
Cash and investments
Property, plant and equipment (net of
accumulated depreciation, where
applicable)
Water storage rights (net of accumulated
amortization)
Deferred charges (net of accumulated
amortization)
Amount available in Debt Service Fund
Amount to be provided for retirement of
general long-term debt
TOTAL ASSETS AND OTHER DEBITS
Governmental Fund Types
Proprietary Fund Types
Special Debt Capital
Internal
General Revenue Service Proiects
Enterprise Service
$ 5,660,291 $7,622,896 $7,381,370 $46,131,673
$ 8,501,481 $ 5,085,364
795,137 540,987 2,322,513 189,740
350,583 222,181
9,213 5,461 10,935 5,097 21,966 18,836
918,533
3,046,237 123,747
3,199 734 279,637
134,907 43,253 2I0,539
21,112,199 1,805,479
70,673,889 7,864,321
334,661
707,313
S10,918,100 $ 8,336,344 57,614,486 $ 46,136,770 $103,674,756 $15,453,916
The accompanying notes are an integral part of these financial statements,
-3-
EXHIB IT I
(Continued)
Fiduciary
Fund Types
Account Groups
Totals
Component
Totals
Trust
General
General
(Memorandum Only)
Unit/
(Memorandum Only)
and Agency
Fxed
Long -Term
Primary Government
Heritage
Reporting Entity
Fund
Assets
Debt
2001
2000
Foundation
2001
2000
$145,416
$ 80,528,491
$ 81,736,479
$ 201,269
$ 80,729,760
$ 84,791,180
3,848,377
3,955,980
3,848,377
4,252,732
684,282
684,282
568,812
572,764
436,623
572,764
436,623
39
71,547
185,581
71,547
185,581
918,533
190,377
918,533
190,377
113,019
3,800,000
3,800,000
3,169,984
3,015,962
3,169,984
3,015,962
283,570
254,466
283,570
254,466
388,699
134,812
1,236
389,935
136,048
22,917,678
18,592,459
22,917,678
18,592,459
$ 51,655,676
130,193,886
113,846,032
1,546,416
131,740,302
117,914,056
334,661
351,750
334,661
351,750
707,313
552,742
707,313
552,742
$ 7,331,468
7,331,468
7,367,380
7,331,468
7,367,380
137,986,102
137,986,102
129,772,860
220,925
138,207,027
133,817,326
$145,455
$ 51,655,676
$145,317,570
5 389,253,073
$ 364,193,503
$2,654,128
S 391,907.201
$ 376,340,513
M!
CITY OF GRAPEVINE, TEXAS
COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS AND
DISCRETELY PRESENTED COMPONENT UNITS
SEPTEMBER 30, 2001 WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2000
Governmental Fund Types Proprietary Fund Types
Special Debt Capital Internal
LIABILITIES General Revenue Service Proiects Enterprise Service
Accounts payable $ 1,057,574 $1,040,386 $ 2,352 S 1,510,888 S 1,159,335 $ 261,382
Contracts and retainage payable 279,872
Developer deposits 1,493,297
Accrued and other liabilities
931,975
Accrued bond interest payable
65,307
Due to other funds
Due to IDC
Due to primary government
Current portion of notes payable
19,943
Payable from restricted assets:
902,548
Accounts payable
Retainage payable
Accrued bond interest payable
222,120
Revenue bonds payable
Certificates of obligation
Customer deposits
General obligation bonds payable
Certificates of obligation, net of current portion
Notes payable
Compensated absences
Revenue bonds payable, net of current portion
Deferred revenues
1,269,886
TOTAL LIABILITIES
3,259,435
EQUITY AND OTHER CREDITS
9,254,782
Investment in general fixed assets
Contributed capital
Retained earnings:
Reserved for revenue bond reserve fund
Unreserved
Fund balances:
Reserved for encumbrances
150,707
Reserved for inventory
3,199
Reserved for child safety
24,398
Reserved for prepaid items
134,907
Reserved for debt service
Reserved for trust assets
Reserved for capital projects
Unreserved - Designated for
ratemaking expenditures
205,038
Unreserved - Undesignated
7,140,416
Total equity and other credits 7,658,665
TOTAL LIABILITIES, EQUITY AND
101,132
345,610
539,872
65,307
32,822
742,533
176,000
19,943
902,548
50,648
222,254
222,120
1,819,060
1,177,547
702,492
7,029,390
35,101,456
41,370 215,359 104,054
1,925,421 283,018 3,388,111
40,507,697
9,254,782
31,606,601 2,497,832
2,958,632
28,601,826 3,701,302
2,250
43,253
7,331,468
42,748,659
6,365,420
6,410,923 7,331,468 42,748,659 63,167,059 6,199,134
OTHER CREDITS 510,918,100 $8,336,344 $7,614,486 $46,136,770 $103,674,756 $15,453,916
The accompanying notes are an integral part of these financial statements.
-5-
EXHIBIT 1
(Concluded)
Fiduciary
Fund Trees
Account Groups
Totals
Component
Totals
Trust
General
General
Memorandum Only)
Unit/
Memorandum Only)
and Agency
Fixed
Long -Term
Primary Government
Heritage
Reporting Entity
Fund
Assets
Debt
2001
2000
Foundation
2001
2000
$ 275
$ 5,032,192
$ 6,048,319
$ 232,247
$ 5,264,439
$ 6,261,300
279,872
428,388
279,872
428,388
1,493,297
1,094,619
1,493,297
1,094,619
1,918,589
1,462,072
17,315
1,935,904
1,713,236
98,129
370,825
98,129
370,825
918,533
190,377
918,533
190,377
118,981
118,981
113,019
118,981
113,019
-
3,800,000
19,943
1,155,000
19,943
1,155,000
953,196
131,543
953,196
131,543
222,254
175,559
222,254
175,559
222,120
108,849
222,120
108,849
1,819,060
1,567,044
1,819,060
1,567,044
1,177,547
1,177, 547
702,492
691,488
702,492
691,488
$ 75,600,000
75,600,000
72,680,000
75,600,000
72,680,000
67,458,120
74,487,510
58,600,000
74,487,510
58,600,000
737,500
737,500
10,327,500
220,925
958,425
10,571,966
1,521,950
1,521,950
1,387,740
1,521,950
1,387,740
35,101 456
30,175,516
35,101,456
30,175,516
1,630,669
4,949,463
400.848
2,031,517
5,518,275
119,256
145,317,570
204,055,290
191,657,321
871,335
204,926,625
196,734,741
$51,655,676
51,655,676
44,717,864
1,546,416
53,202,092
48,785,888
34,104,433
34,809,837
34,104,433
34,809,837
2,958,632
2,720,834
2,958,632
2,720,834
32,303,128
27,429,648
32,303,128
27,429,648
152,957
66,409
152,957
95,342
3,199
1,168
3,199
1,168
24,398
61,036
24,398
61,036
178,160
15,000
178,160
16,236
7,331,468
7,367,380
7,331,468
7,367,380
26,199
26,199
24,412
26,199
24,442
42,748,659
43,322,268
42,748,659
43,322,268
205,038
205,038
205,038
205,038
13,505,836
11,795,258
236,377
13,742,213
14,766,652
26,199
51,655,676
185,197,783
172,536,182
1,782,793
186,980,576
179,605,769
$145,455
851,655,676
$145,317,570
$389,253,073
$364,193,503
$2,654,128
$391,907,201
$376,340,513
M
CITY OF GRAPEVINE TEXAS
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
ALL GOVERNMENTAL FUND TYPES, EXPENDABLE TRUST FUND AND
DISCRETELY PRESENTED COMPONENT UNITS
YEAR ENDED SEPTEMBER 30, 2001 WITH COMPARATIVE TOTALS
FOR YEAR ENDED SEPTEMBER 30, 2000
REVENUES:
Taxes
Licenses and permits
Intergovernmental
Charges for services
Fines and forfeits
Interest and miscellaneous
Total revenues
EXPENDITURES:
Current:
General government
Public safety
Culture and recreation
Public works
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Intergovernmental payment
Total expenditures
Excess (deficiency) of revenues over expenditures
OTHER FINANCING SOURCES (USES):
Proceeds from certificates of obligations
Proceeds from general obligation bonds
Property acquisition
Proceeds from bank note
Proceeds from sale of fixed assets
Operating transfers in
Operating transfers out
Total other financing sources (uses)
Excess (deficiency) of revenues and other
sources over expenditures and other uses
Fund balances at beginning of year
Residual equity transfer
Fund balances at end of year
Governmental Fund Tvues
6,177,804
Special
Debt
Capital
General
Revenue
Service
Proiects
$ 29,239,672
$ 3,970,383
$11,475,087
1,146,428
4,381,910
156,200
14,057,776
2,984,179
4,289,833
8,915,000
2,149,638
7,815,282
876,507
359,333
447,077
$ 3,095,545
40,778,334
8,775,749
11,922,164
3,095,545
6,177,804
2,752
17,640,884
5,737,648
7,962,308
6,067,277
4,332,723
1,582,700
14,057,776
8,915,000
7,815,282
39,956,336
9,545,008
16,733,034
14,057,776
821,998
(769,259)
(4,810,870)
(10,962,231)
4,246,532
4,385,000
1,261,588
7,000,000
143,400
400,000
178,000
389,958
2,545,061
(1,295,979)
(1,928,135)
(288,905)
(895,979)
2,639,797
4,774,958
10,517,744
(73,981) 1,870,538
7,732,646 4,411,263
129,122
$ 7,658,665 $ 6,410,923
The accompanying notes are an integral part of these financial statements.
-7-
(35,912) (444,487)
7,367,380 43,322,268
(129,122)
$ 7,331,468 $ 42,748,659
EXHIBIT 2
Fiduciary
Totals
Component
Totals
Fund Type
(Memorandum Only)
Units/
(Memorandum Onlv)
Expendable
Primary
Government
Heritage
Reporting
Entity
Trust
2001
2000
Foundation
2001
2000
5,657,648
$ 44,685,142
$ 41,512,737
5,657,648
S 44,685,142
$ 41,512,737
11,408,458
1,146,428
1,494,428
13,444,784
1,146,428
1,494,428
3,357,152
4,538,110
230,558
3,357,152
4,538,110
230,558
6,424,341
7,274,012
6,492,978
$ 865,298
8,139,310
7,064,552
3,800,000
2,149,638
2,360,028
3,800,000
2,149,638
2,360,028
$ 18,981
4,797,443
3,620,372
95,001
4,892,444
3,726,498
18,981
64,590,773
55,711,101
960,299
65,551,072
56,388,801
6,180,556
5,683,237
6,180,556
5,683,237
17,640,884
15,404,767
17,640,884
15,404,767
17,224
13,717,180
11,674,133
521,465
14,238,645
11,981,431
6,067,277
5,657,648
6,067,277
5,657,648
19,973,199
11,408,458
3,361,903
23,335,102
13,444,784
8,915,000
3,357,152
8,915,000
3,357,152
7,815,282
6,424,341
7,815,282
6,424,341
3,800,000
3,800,000
17,224
80,309,378
63,409,736
3,883,368
84,192,746
65,753,360
1,757
(15,718,605)
(7,698,635)
(2,923,069)
(18,641,674)
(9,364,559)
9,893,120
31,584,768
9,893,120
31,584,768
7,000,000
7,665,001
7,000,000
7,665,001
3,800,000
7,600,000
143,400
143,400
3,513,019
2,636,254
157,883
3,670,902
2,636,254
(3,513,019)
(2,780,754)
(3,513,019)
(2,780,754)
-
17,036,520
42,905,269
157,883
17,194,403
46,705,269
1,757
1,317,915
35,206,634
(2,765,186)
(1,447,271)
37,340,710
24,442
62,857,999
27,651,365
3,001,563
65,859,562
28,518,852
526,199
3 64,175,914
$62,857,999
$ 236,377
$ 64,412,291
$65,859,562
h1,
CITY OF GRAPEVINE, TEXAS
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -
BUDGET AND ACTUAL - GENERAL, BUDGETED SPECIAL REVENUE AND DEBT SERVICE FUNDS
YEAR ENDED SEPTEMBER 30, 2001
REVENUES:
Taxes
Licenses and permits
Intergovernmental
Charges for services
Fines and forfeits
Interest and miscellaneous
Total revenues
EXPENDITURES:
Current:
General government
Public safety
Culture and recreation
Public works
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues over expenditures
OTHER FINANCING SOURCES (USES):
Proceeds from issuance of debt
Operating transfers in
Operating transfers out
Total other financing sources (uses)
Excess (deficiency) of revenues and other
sources over expenditures and other uses
Fund balances at beginning of year
Fund balances at end of year
General Fund
Variance
Favorable
Budget Actual (Unfavorable)
$ 29,096,418
1,419,274
4,480,762
2,980,522
2,119,200
781,575
40, 877,751
6,228,574
17,743,241
5,754446
6,087,815
4,332,723
$ 29,239,672
1,146,428
4,381,910
2,984,179
2,149,638
876,507
40,778,334
6,177,804
17,640,884
5,737,648
6,067,277
4,332,723
$ 143,254
(272,846)
(98,852)
3,657
30,438
94,932
(99,417)
50,770
102,357
16,798
20,538
40,146,799
39,956,336
190,463
730,952
821,998
91,046
400,000
400,000
(1,295,979)
(1,295,979)
-
(1,295,979)
(895,979)
400,000
$ (565,027)
(73,981)
$ 491,046
7,732,646
$ 7,658,665
The accompanying notes are an integral part of these financial statements.
Budgeted Special Revenue Fund
Budgeted Debt Service Fund
4,356,346
4,354,538 1,808
Variance
12,234,538 1,808
(4,706,501)
Variance
Favorable
Favorable
Budget
Actual
(Unfavorable)
Budget
Actual
(Unfavorable)
$ 3,946,000
$ 3,970,383
$ 24,383
$ 7,399,845
$ 7,433,176
$33,331
764,167
2,760,850
1,996,683
35,000
60,596
25,596
130,000
183,465
53,465
4,745,167
6,791,829
2,046,662
7,529,845
7,616,641
86,796
7,006,013 6,980,630 25,383
7,006,013 6,980,630 25,383
(2,260,846) (188,801) 2,072,045
(1,057,958) (1,057,958) -
(1,057,958) (1,057,958) -
$ (3,318,804) (1,246,759) $ 2,072,045
1,574,402
$ 327,643
7,880,000
7,880,000 -
4,356,346
4,354,538 1,808
12,236,346
12,234,538 1,808
(4,706,501)
(4,617,897) 88,604
4,385,000 4,385,000
389,958 389,958
4,774,958 4,774,958
$ 68,457 157,061
1,612,591
$ 1,769,652
-10-
$ 88,604
The accompanying notes are an integral part of these financial statements.
-11-
CITY OF GRAPEVINE TEXAS
EXHIBIT 4
�
COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS
-
ALL PROPRIETARY FUND TYPES
YEAR ENDED SEPTEMBER 30, 2001 WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2000
Totals
Internal
(Memorandum Only)
Enterprise
Service
2001
2000
OPERATING REVENUES:
Charges for services
$17,896,014
$8,581,987
$26,478,001
$23,337,586
Total operating revenues
17,896,014
8,581,987
26,478,001
23,337,586
OPERATING EXPENSES:
Personnel services
3,422,495
681,602
4,104,097
3,584,526
Insurance premiums
1,443,311
1,443,311
1,145,070
Claims expense
2,576,292
2,576,292
2,272,076
Maintenance, materials and supplies
5,881,510
507,070
6,388,580
5,698,088
Depreciation and amortization
1,637,990
1,640,726
3,278,716
3,208,591
Sundry charges
3,379,260
2,020,453
52399,713
3,782,383
Total operating expenses
14,321,255
8,869,454
23,190,709
19,690,734
Operating income (loss)
3,574,759
(287,467)
3,287,292
3,646,852
NON-OPERATING REVENUES (EXPENSES):
Interest on investments
1,384,094
451,761
1,835,855
1,988,092
Interest and fiscal agent charges
(2,873,587)
(14,356)
(2,887,943)
(1,616,793)
Other - net
127,459
17,810
145,269
(265,598)
Total non-operating revenues (expenses)
(1,362,034)
455,215
(906,819)
105,701
Income before contributions and
operating transfers
2,212,725
167,748
2,380,473
3,752,553
Contributions
2,262,486
25,351
2,287,837
Operating transfer in
18,705
18,705
170,000
Operating transfer out
(18,705)
(18,705)
(25,500)
Net income before cumulative effect of
change in accounting policy
4,475,211
193,099
4,668,310
3,897,053
Cumulative effect of change in
accounting policy
(70,906)
(191,546)
(262,452)
Net income
4,404,305
1,553
4,405,858
3,897,053
Add depreciation on contributed assets
705,420
705,420
698,826
Retained earnings at beginning of year
26,450,733
3,699,749
30,150,482
25,852,308
Residual equity transfer in
39,890
Residual equity transfer out
(337,595)
Retained earnings at end of year
$ 31,560,458
$$ 3,7�
$ 35,261,760
$ 30,150,482
The accompanying notes are an integral part of these financial statements.
-11-
CITY OF GRAPEVINE TEXAS
COMBINED STATEMENT OF CASH FLOWS
ALL PROPRIETARY FUND TYPES
YEAR ENDED SEPTEMBER 30, 2001 WITH COMPARATIVE TOTALS FOR SEPTEMBER 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating income (loss)
Adjustments to reconcile operating income to net cash
provided by (used in) operating activities:
Depreciation and amortization
(Increase) decrease in receivables
Decrease in water storage rights
(Increase) decrease in inventories
Increase (decrease) in accounts payable and accrued liabilities
Increase in retainage payable related to capital recovery fees
Increase (decrease) in due to other funds
Increase in customer deposits received
(Increase) decrease in deferred charges
Increase in prepaid expenses
(Gain)/loss on disposal of capital assets
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES -
Interest received on investments
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVI'T'IES:
Revenue bond proceeds
Principal paid on revenue bonds
Interest and related fees paid on long-term debt
Acquisition and construction of capital assets
Sale of capital assets
Net cash used in capital and related financing activities
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES:
Operating transfers out
Operating transfers in
Residual equity transfer
Net cash provided by (used in) noncapital financing activities
Net increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS - END OF YEAR
NONCASH ITEMS - Contributed capital received
EXHIBIT 5
Totals
Internal (Memorandum Only)
Enterprise Service 2001 2000
$ 3,574,759 $ (287,467) $ 3,287,292 $ 3,646,852
1,637,990
1,640,726
3,278,716
3,208,592
622,889
(148,225)
474,664
(696,770)
17,089
17,089
17,089
791
(27,864)
(27,073)
(45,369)
1,049,506
279,919
1,329,425
286,523
46,695
46,695
(247,173)
4
101,000
101,004
75,004
11,005
11,005
10,426
(154,571)
(154,571)
70,913
(87,635)
(87,635)
(44,223)
(20,100)
(20,100)
1,812
6,786,057
1,470,454
8,256,511
6,283,676
11428,543
263,684
1,692,227
1.736,289
6,745,000
2,371,880
9,116,880
5,635,000
(1,250,000)
(1,155,000)
(2,405,000)
(3,115,000)
(2,873,587)
(2,873,587)
(1,675,953)
(6,084,615)
(4,447,615)
(10,532,230)
(5,569,253)
2,875
(3,463,202)
(3,230,735)
(6,693,937)
(4,722,331)
(18,705)
(18,705)
(25,500)
18,705
18,705
170,000
-
(297,705)
-
-
-
(153,205)
4,751,398
(1,496,597)
3,254,801
3,144,429
24,862,282
8,387,440
33,249,722
30,105,293
$ 29,613,680
$ 6,890,843
$ 36,504,523
$ 33,249,722
$ 2,262,486
$ 25,351
$ 2,287,837
$ 2,141,946
The accompanying notes are an integral part of these financial statements.
CITY OF GRAPEVINE TEXAS
NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Grapevine ("City") is a municipal corporation incorporated under Article XI of the Texas
Constitution (Home Rule Amendment). The City operates under a Council -Manager form of
government and provides such services as are authorized by its charter to advance the welfare, health,
safety and convenience of its citizens.
a. Reporting Entity
The City of Grapevine's general purpose financial statements include the separate governmental
entities that are controlled by or are dependent on the City. The determination to include separate
governmental entities is based on the criteria of Governmental Accounting Standards Board
(GASB) Statement 14. GASB Statement 14 defines the reporting entity as the primary
government and those component units for which the primary government is financially
accountable. To be financially accountable, a voting majority of the component unit's board must
be appointed by the primary government, and either (a) the primary government must be able to
impose its will, or (b) the primary government may potentially benefit financially or be financially
responsible for the component unit.
Blended component units, although legally separate entities, are, in substance, part of the
government's operations and so data from these units are combined with data of the primary
government. Discretely presented component units, on the other hand, are reported in a separate
column in the combined financial statements to emphasize it is legally separate from the
government.
Based on these criteria, the financial information of the following entities has been blended or
discretely presented within the financial statements. Individual financial statements are not
available for the discretely presented component entities.
Blended Component Unit
Grapevine Tax Increment Financing District Reinvestment Zone Number One and Two (the
`7IFS") were formed to finance and make public improvements, under the authority of the Tax
Increment Financing Act. The TIFS are governed by two separate nine member board of directors,
of which five members are appointed by the City Council. The chairman of the board is also
designated by the City Council. Financial statements of the TIFS are available from the City.
Discretely Presented Component Unit
Grapevine Heritage Foundation (the "Foundation") is a Texas non-profit corporation governed by
a seven member board of directors appointed by City Council, which includes a City Council
member and the Director of the City's Convention and Visitor's Bureau. The Foundation's
operating budget is subject to the approval of the City Manager. The City is financially
accountable for the Foundation.
-13-
CITY OF GRAPEVINE TEXAS
NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
The accounting and reporting policies of the City relating to the funds and account groups
included in the accompanying financial statements conform to generally accepted accounting
principles applicable to state and local governments. The following represents the more
significant accounting and reporting policies and practices used by the City.
b. Basis of Presentation - Fund Accounting
The accounts of the City are organized on the basis of funds or account groups, each of which is
considered to be a separate accounting entity. The operations of each fund are accounted for by
providing a separate set of self -balancing accounts which comprise its assets, liabilities, retained
earnings/fund balances, revenues and expenses/expenditures. The various funds are summarized
by type in the financial statements. The following fund types and account groups are used by the
City.
GOVERNMENTAL FUND TYPES
Governmental Fund Types are those through which most governmental functions of the City are
financed. The acquisition, use and balances of the City's expendable financial resources and the
related liabilities (except those accounted for in Proprietary and Fiduciary Funds) are accounted
for through Governmental Fund Types. The following are the City's governmental fund types.
General Fund - The General Fund is the general operating fund of the City. It is used to account
for all financial resources except those required to be accounted for in another fund.
Special Revenue Funds - The Special Revenue Funds are used to account for the proceeds of
specific revenue sources (other than expendable trust or major capital projects) that are legally
restricted to expenditures for specified purposes.
Debt Service Fund - The Debt Service Fund is used to account for the accumulation of resources
for, and the payment of, general long-term debt principal, interest and related costs.
Capital Project Funds - Capital Project Funds are used to account for financial resources to be
used for the acquisition or construction of major capital facilities (other than those financed by the
proprietary fund types). Financing is provided primarily by the sale of general obligation bonds.
PROPRIETARY FUND TYPES
Enterprise Funds - Enterprise Funds are used to account for operations (a) that are financed and
operated in a manner similar to private business enterprises - where the intent of the governing
body is that the costs (expenses, including depreciation) of providing goods or services to the
general public on a continuing basis be financed or recovered primarily through user charges; or
(b) where the governing body has decided that periodic determination of revenues earned,
expenses incurred and/or net income is appropriate for capital maintenance, public policy,
management control, accountability or other purposes.
Internal Service Funds - The Internal Service Funds are used to account for the financing of goods
or services provided by one department or agency to other departments or agencies of the
governmental unit, or to other governmental units, on a cost -reimbursement basis.
-14-
,q{ CITY OF GRAPEVINE TEXAS
NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
FIDUCIARY FUND TYPES
Trust and Agency Funds - Fiduciary funds are used to account for assets held by the City in a
trustee capacity or as an agent. The Agency Fund is custodial in nature and does not involve
measurement of results of operations. The City's Trust Fund consists of an Expendable Trust
Fund which is accounted for and reported in a manner similar to governmental funds, i.e., the
measurement focus is upon determination of changes in financial position, rather than upon net
income determination.
ACCOUNT GROUPS
Account groups are used to establish accounting control and accountability for the City's general
fixed assets and general long-term debt. The following are the City's account groups:
General Fixed Assets Account Group - This account group is established to account for all fixed
assets of the City, other than those accounted for in the proprietary fund types.
General Long -Term Debt Account Group - This account group is established to account for all
long-term debt of the City except that accounted for in the proprietary fund types.
C. Measurement Focus/Basis of Accounting
Measurement focus refers to what is being measured; basis of accounting refers to when revenues
and expenditures are recognized in the accounts and reported in the financial statements. Basis of
accounting relates to the timing of the measurement made, regardless of the measurement focus
applied.
The Governmental Fund Types and the Expendable Trust Fund use a financial resources
measurement focus and are accounted for using the modified accrual basis of accounting. The
Agency Fund is also accounted for using the modified accrual basis of accounting. Under the
modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., both
measurable and available. Measurable means the amount of the transaction can be determined and
available means collectible within the current period or soon enough thereafter to be used to pay
liabilities of the current period. Expenditures represent a decrease in net financial resources and,
other than interest on general long-term debt, are recorded when the fund liability is incurred, if
measurable. Interest on general long-term debt is recorded when due.
In applying the susceptible to accrual concept to intergovernmental revenue the legal and
contractual requirements of the numerous individual programs are used as guidance. Generally,
monies must be expended on a specific purpose or project before any amounts will be paid to the
City; therefore, revenues are recognized based upon the expenditures recorded.
Property, sales and occupancy taxes are recognized as revenue as earned, when measurable and
available. Licenses and permits, franchise taxes, charges for services, fines and miscellaneous
revenues (except earnings on investments) are recorded as revenues when received in cash because
they are generally not measurable until actually received. Investment earnings are recorded as
earned since they are measurable and available.
-15-
CITY OF GRAPEVINE TEXAS
NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
The Proprietary Fund Types are accounted for on a cost of services or "capital maintenance"
measurement focus, using the accrual basis of accounting. Under the accrual basis of accounting,
revenues are recognized when earned and expenses are recognized when incurred.
The City has elected to apply Financial Accounting Standards Board pronouncements issued only
before November 30, 1989 for its proprietary funds.
d. Budgetary Data
The City follows these procedures in establishing budgetary data reflected in the financial
statements:
(1) Prior to August 1, the City Manager submits to the City Council a proposed operating budget
for the fiscal year commencing the following October 1. The operating budget includes
proposed expenditures and the means of financing them.
(2) Public hearings are conducted to obtain taxpayer comments.
(3) Prior to September 15, the budget is legally enacted through passage of an ordinance.
(4) The City Manager is authorized to transfer budgeted amounts between departments within
any fund; however, any revisions that alter the total expenditures of any fund must be
approved by the City Council, after public hearings. Total expenditures may not exceed
appropriations at the individual fund level.
(5) Budgets are legally adopted for the General Fund, Occupancy Tax Fund (a special revenue
fund) and the Debt Service Fund and Enterprise Funds. Budgetary control is maintained at
the fund level.
(6) Budgets for the General, Occupancy Tax Special Revenue and Debt Service Funds are
adopted on a basis consistent with generally accepted accounting principles. Budget amounts
are as amended by the City Council and adjusted for transfers of budgeted amounts between
departments within any fund, authorized by the City Manager. Amendments made during the
year were not significant. Budget appropriations lapse at the end of each fiscal year.
(7) Budgetary data for the Capital Projects Funds and certain special revenue funds have not
been presented in the accompanying general purpose financial statements, as such funds are
budgeted over the life of the respective project and not on an annual basis. Accordingly,
formal budgetary integration of these funds is not employed and comparison of actual results
of operations to budgetary data for such funds is not presented.
e. Transactions Between Funds
The General Fund charges the Water and Sewer Enterprise Fund, the Golf Enterprise Fund, the
Capital Lease Fund and the Occupancy Tax Fund an administrative fee (fee in lieu of taxes). The
fee is calculated based upon predetermined percentages of certain revenue accounts. The fee is
recorded as charges for services by the General Fund and is included in sundry charges by the
Enterprise Funds and other operations by the Occupancy Tax Fund.
-16-
CITY OF GRAPEVINE 'TEXAS
.�" NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
The Internal Service Funds record revenues for charges for services from the General Fund, Water
and Sewer Enterprise Fund, the Golf Enterprise Fund and the Occupancy Tax Fund. The
respective funds record the related charges as expenditures or expenses.
f. Encumbrances
Encumbrance accounting, under which purchase orders, contracts and other commitments for the
expenditure of funds are recorded in order to reserve that portion of the applicable appropriation,
is employed in the governmental funds. Encumbrances lapse at year-end and are reported as
reservations of fund balances because they do not constitute expenditures or liabilities since the
commitments will be honored during the subsequent year.
g. Cash and Investments
Cash consists of demand deposits (principally interest-bearing accounts) and certificates of deposit
which are carried at cost.
Investments are stated at fair value, in accordance with GASB Statement 31. Fair value is the
amount at which a financial instrument could be exchanged in a current transaction between
willing parties. The City considers quoted market prices at September 30, 2000 to be the fair
value of investments.
For purposes of the statement of cash flows, the Proprietary Fund Types consider all highly liquid
investments (including restricted assets) with a maturity of three months or less when purchased to
be cash equivalents.
h. Inventories
Inventories are valued at cost on a first -in, first -out basis.
Inventories in the General Fund are recorded using the consumption method (i.e., recorded as an
expenditure when used).
i. Property, Plant and Equipment -.Enterprise Funds
Property, plant and equipment owned by the Enterprise Funds are stated at cost or at estimated fair
market value at the date purchased or contributed.
Depreciation has been provided on a straight-line basis over the estimated useful lives of the
assets. The estimated useful lives are as follows:
Buildings
Water and sewer system
Improvements other than buildings
Machinery and equipment
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20 - 50 years
33 - 50 years
20 - 40 years
4 - 10 years
CITY OF GRAPEVINE TEXAS
NOTES TO THE FINANCIAL STATEMENTS
FISCAL YEAR ENDED SEPTEMBER 30, 2001
Deferred Chargees - Water and Sewer Enterprise Fund
Deferred charges consist of expenses incurred in connection with the issue of certain outstanding
revenue bonds. Such charges are amortized on a straight-line basis over the lives of the respective
bonds.
k. General Fixed Assets
General fixed assets have been acquired for general governmental purposes. Assets purchased are
recorded as expenditures in the Governmental Fund Types and capitalized at cost in the General
Fixed Assets Account Group. In the case of gifts or contributions, such assets are recorded in the
General Fixed Assets Account Group at estimated fair market value at the time received.
Generally, infrastructure assets consisting of certain improvements other than buildings, including
roads, bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting systems,
have not been capitalized. Such assets normally are immovable and of value only to the City;
therefore, the purpose of stewardship for these items is satisfied without recording these assets.
No depreciation has been provided on general fixed assets.
Constructed assets financed with externally restricted proceeds of tax-exempt debt includes
capitalized interest only to the extent that interest cost exceeds interest earned on related interest-
bearing investments acquired with proceeds of the related tax-exempt borrowing.
As of June 25, 2001, the City changed its policy for capitalization of fixed assets to $5,000. This
resulted in a reduction in general fixed assets of $1,982,000 for the year ended September 30,
2001.
1. Vacation and Sick Pay
City employees are granted vacation and sick pay in varying amounts up to a specified maximum.
In the event of termination, employees are reimbursed for accumulated vacation days up to the
maximum limit. No reimbursement is made for accumulated sick leave on termination of
employment. The long-term portion of accrued vacation pay is recorded in the General Long -
Term Debt Account Group. The City does not accrue sick pay, but records such expense when
paid.
m. Reserves
Retained earnings have been reserved for the excess of restricted assets over related liabilities to
the extent such restricted assets were accumulated from revenues; i.e., restricted assets which were
obtained in total or in part from the proceeds of bond sales do not require a reservation of retained
earnings.
n. Water Storage Rights
Water storage rights represent rights in the Federal Reservoir at Lake Grapevine purchased
through a long-term contract with the federal government (Note 5) and are recorded at cost, with
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APPENDIX C
FORM OF BOND COUNSEL'S OPINION
m
VINSON & ELIQNS L.L.P.
3700 TRVtiL\1ELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TES.4S "3201-2975
Vhnson&Ukins- TELEPHONE (214) 220-7700
ATTORNEYS AT L:VY FAN {21 d) 220-7716
. I elaia.com
[Closing Date]
CITY OF GRAPEVINE, TEXAS
WATERWORKS AND SEWER SYSTEM REVENUE REFUNDING BONDS
SERIES 2002
WE HAVE represented the City of Grapevine, Texas (the "Issuer"), as its bond counsel
in connection with an issue of bonds (the "Bonds") described as follows:
CITY OF GRAPEVINE, TEXAS WATERWORKS AND SEWER SYSTEM
REVENUE REFUNDING BONDS, SERIES 2002, dated August 15, 2002, in the
total authorized principal amount of $
The Bonds mature, bear interest, are subject to redemption prior to maturity and may be
transferred and exchanged as set out in the Bonds and in the ordinance adopted by the City
Council of the Issuer authorizing their issuance (the "Ordinance").
WE HAVE represented the Issuer as bond counsel for the sole purpose of rendering an
opinion with respect to the legality and validity of the Bonds under the Constitution and laws of
the State of Texas and with respect to the exclusion of interest on the Bonds from gross income
for federal income tax purposes. We have not investigated or verified original proceedings,
records, data or other material, but have relied solely upon the transcript of proceedings
described in the following paragraph. We have not assumed any responsibility with respect to
the financial condition or capabilities of the Issuer or the disclosure thereof in connection with
the sale of the Bonds. Our role in connection with the Issuer's Official Statement prepared for
use in connection with the sale of the Bonds has been limited as described therein.
IN OUR CAPACITY as bond counsel, we have participated in the preparation of and
have examined a transcript of certified proceedings pertaining to the Bonds, on which we have
relied in giving our opinion. The transcript contains certified copies of certain proceedings of the
Issuer; an escrow agreement (the "Escrow Agreement") between the Issuer and Bank One,
National Association, as escrow agent (the "Escrow Agent"); a report (the "Report") of Grant
Thornton LLP, Certified Public Accountants (the "Verification Agent"), verifying the sufficiency
of the deposits made with the Escrow Agent for defeasance of the bonds being refunded (the
"Refunded Bonds") and the mathematical accuracy of certain computations of the yield on the
Bonds and obligations acquired with the proceeds of the Bonds; customary certificates of
officers, agents and representatives of the Issuer, and other public officials, and other certified
showings relating to the authorization and issuance of the Bonds. We have also examined
executed Bond No. 1 of this issue.
AUSTIN - BEIJING DALLAS - HOUSTON • LONDON MOSCOW NEW YORK • SINGAPORE WASHINGTON, D.C.
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2002
BASED ON SUCH EXAMINATION, IT IS OUR OPINION THAT:
(1) The transcript of certified proceedings evidences complete legal
authority for the issuance of the Bonds in full compliance with the Constitution
and laws of the State of Texas presently effective and, therefore, the Bonds
constitute valid and legally binding special obligations of the Issuer;
(2) The Bonds are payable from and secured by a lien on and pledge
of the Net Revenues of the Issuer's waterworks and sewer system, as defined and
described in the Ordinance; and
(3) Firm banking and financial arrangements have been made for the
discharge and final payment of the Refunded Bonds pursuant to the Escrow
Agreement, and therefore, the Refunded Bonds are deemed to be fully paid and
no longer outstanding except for the purpose of being paid from the funds
provided therefor in such Escrow Agreement
THE RIGHTS OF THE OWNERS of the Bonds are subject to the applicable provisions
of the federal bankruptcy laws and any other similar laws affecting the rights of creditors of
political subdivisions generally, and may be limited by general principles of equity which permit
the exercise of judicial discretion.
IT IS OUR FURTHER OPINION THAT:
(1) Interest on the Bonds is excludable from gross income for federal
income tax purposes under existing law.
(2) The difference between the amount payable at maturity of each
Bond maturing in each of the years through , inclusive (the
"Original Issue Discount Bonds"), and the "issue price" within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code"), of such Bonds is
excludable from gross income for federal income tax purposes as original issue
discount under existing law.
(3) The Bonds are not "private activity bonds" within the meaning of
the Code and interest on the Bonds is not subject to the alternative minimum tax
on individuals and corporations, except that interest on the Bonds will be included
in the "adjusted current earnings" of a corporation (other than an S corporation,
regulated investment company, REIT, REMIC or FASIT) for purposes of
computing its alternative minimum tax liability.
In providing such opinions, we have relied on representations of the Issuer, the Issuer's
Financial Advisor and the Underwriter with respect to matters solely within the knowledge of the
Issuer, the Issuer's Financial Advisor and the Underwriter, respectively, which we have not
independently verified, and have assumed continuing compliance with the covenants in the
Ordinance pertaining to those sections of the Code that affect the exclusion from gross income of
628853_1.DOC
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, 2002
interest on the Bonds for federal income tax purposes. We have further relied on the Report of
the Verification Agent regarding the mathematical accuracy of certain computations. If such
representations or the Report are determined to be inaccurate or incomplete or the Issuer fails to
comply with the foregoing provisions of the Ordinance, interest on the Bonds could become
includable in gross income from the date of original delivery, regardless of the date on which the
event causing such inclusion occurs.
Purchasers of Original Issue Discount Bonds in the initial public offering are directed to
the discussion entitled "Tax Accounting Treatment of Original Issue Discount Bonds" set forth
in "Tax Matters" of the Official Statement prepared for use in connection with the sale of the
Bonds for purposes of determining the portion of the original issue discount described in
paragraph 2 above which is allocable to the period such Bonds are held by a holder. The federal
income tax consequences of the purchase, ownership, and redemption, sale or other disposition
of Original Issue Discount Bonds which are not purchased in the initial public offering at the
initial offering price may be determined according to rules which differ from those described
above and in the Official Statement.
Except as stated above, we express no opinion as to any federal, state or local tax
consequences resulting from the receipt or accrual of interest on, or acquisition, ownership or
disposition of, the Bonds.
Owners of the Bonds should be aware that the ownership of tax-exempt obligations may
result in collateral federal income tax consequences to financial institutions, life insurance and
property and casualty insurance companies, certain S corporations with Subchapter C earnings
and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers
who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt
obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations and
individuals otherwise qualifying for the earned income credit. In addition, certain foreign
corporations doing business in the United States may be subject to the "branch profits tax" on
their effectively -connected earnings and profits (including tax-exempt interest such as interest on
the Bonds).
The opinions set forth above are based on existing law, which is subject to change. Such
opinions are further based on our knowledge of facts as of the date hereof. We assume no duty
to update or supplement these opinions to reflect any facts or circumstances that may hereafter
come to our attention or to reflect any changes in any law that may hereafter occur or become
effective. Moreover, our opinions are not a guarantee of result and are not binding on the
Internal Revenue Service (the "Service"); rather, such opinions represent our legal judgment
based upon our review of existing law and in reliance upon the representations and covenants
referenced above that we deem relevant to such opinions. The Service has an ongoing audit
program to determine compliance with rules that relate to whether interest on state or local
obligations is includable in gross income for federal income tax purposes. No assurance can be
given whether or not the Service will commence an audit of the Bonds. If an audit is
commenced, in accordance with its current published procedures the Service is likely to treat the
Issuer as the taxpayer. We observe that the Issuer has covenanted in the Ordinance not to take
628853 LDDC
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any action, or omit to take any action within its control, that if taken or omitted, respectively,
may result in the treatment of interest on the Bonds as includable in gross income for federal
income tax purposes.
628853_1.DOC