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04-08-21-Ordinance-Issuing Combination Tax and Revenue Certificates Bond Series 2021A-04/19/2021
ORD 04-08-21 ORDINANCE AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING' THE SALE THEREOFAUTHORIZING THE. PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER: ARTICLE I FINDINGS AND DETERMINATIONS Section 1.1: Findings and Determinations. The City Council hereby officially finds and determines that: (a) The City of Sanger, Texas (the "City"), acting through its City Council, is authorized pursuant to and in accordance with the provisions of Texas Local Government Code, Chapter 271, Subchapter C, as amended (the "Act"), to issue certificates -of obligation to provide all or part of the funds (1) to pay contractual obligations to be incurred (i) for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (ii) street and drainage improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. ' (b) The City Council authorized the publication of a notice of intention to issue Combination Tax and Revenue Certificates of Obligation, Series 2021A (the "Certificates") to the effect that the City Council was tentatively scheduled to meet at 7:00 p.m. on April 19, 2021 at its regular meeting place to adopt an ordinance authorizing the issuance of the Certificates to be payable from (i) an ad valorem tax levied, within the limits prescribed by law, on the taxable property located within the City, and (ii) the surplus revenues to be derived from the City's water and sewer system (the "System") after the payment -of all operation and maintenance expenses thereof (the "Net Revenues") in an amount not to exceed $10,000, provided that the pledge of Net Revenues is -and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledg.p senior to the pledge of the Net Revenues to the payment of the Certificates. 4141-4558-2381.1 (c) Such notice was published at the times and in the manner required by the Act. (d) No petition signed by at least five percent (5%) of the qualified voters of the. City has been filed with or presented to any official of the City protesting the issuance of such Certificates on or before April 19, 2021, or the date of passage of this Ordinance. (e) The City has determined that it is in the best interests of the City and that it is otherwise desirable to issue the Certificates to provide all or part of the funds to pay contractual obligations to be incurred for the purposes authorized by the Act. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1: Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise: "Act" shall mean Texas Local Government Code, Chapter 271, Subchapter C, as amended. "Attorney General" shall mean the Attorney General of the State of Texas. "Certificate" or "Certificates" shall mean any or all of the City of Sanger, Texas Combination Tax- and Revenue Certificates of Obligation, Series 2021A, authorized by this Ordinance. "City" shall mean the City of Sanger, Texas and, .where appropriate, it's City Council. "City Council" shall mean the governing body of the City. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Comptroller" shall mean the Comptroller of Public Accounts of the State of Texas. "DTC" shall mean The Depository Trust Company, New York, New York, or any successor securities depository. "DTC Participant" shall mean brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Fiscal Year" shall mean the City's then designated fiscal year, which currently is the twelve-month period beginning on the first day of October of a calendar year and ending on the last day of September of the next succeeding calendar year and each such period may be designated with the number of the calendar year in which such period ends. 4141-4558-2381.1 "Interest Payment Date," when used in connection with any Certificate, shall mean May 1, 2022, and each May 1 and November 1 thereafter until maturity or earlier redemption of such Certificate. "Issuance Date" shall mean the date on which the Certificates are delivered to and paid for by the Underwriter. "Ordinance" shall mean this Ordinance and all amendments hereof and supplements hereto. "Outstanding," when used with reference to the Certificates, shall mean, as of a particular date, all Certificates theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Certificates canceled by or on behalf of the City at or before such date; (b) any Certificates defeased pursuant to the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable law; and (c) any Certificates in lieu of or in substitution for which a replacement Certificate shall have been delivered pursuant to this Ordinance. "Paying Agent/Registrar" shall mean UMB Bank, N.A., and its successors in that capacity. "Record Date" shall mean the last business day of the calendar month immediately preceding the applicable Interest Payment Date. "Register" shall mean the registration books .for the Certificates kept by the Paying Agent/Registrar in which are maintained the names and addresses of, and the principal amounts registered to, each Registered Owner of Certificates. "Registered Owner" shall mean the person or entity in whose name any Certificate is registered in the Register. "Underwriter" shall mean the entity or entities specified in Section 7.1 hereof. Section 2.2: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance have beep inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof.. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Certificates and the validity of the levy of ad valorem taxes to pay the principal of and interest on the Certificates. ARTICLE III TERMS OF THE CERTIFICATES Section 3.1: Amount Purpose and Authorization. (a) The Certificates shall be issued in fully registered form, without coupons, under and pursuant to the authority of the Act in the total authorized aggregate principal amount of 4141-4558-2381.1 DOLLARS ($ ) for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the purposes described in paragraph 1.1(a) hereof. Section 3.2: Designation Date and Interest Payment Dates. The Certificates shall be designated as the "City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A," and shall be dated May 1, 2021. The Certificates shall bear interest at the rates set forth in Section 3.3 below, from the date of delivery calculated on the basis of a 360-day year of twelve 30-day months, payable on May 1, 2022, and each May 1 and November 1 thereafter until maturity or earlier redemption. If interest on any Certificate is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Paying Agent/Registrar shall establish a new record date for the payment of sach interest, to be known as a Special Record Date. The Paying Agent/Registrar shall establish a Special Record Date when fields to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen (15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Registered Owner as of the close of business on the day prior to mailing of such notice. Section 3.3, Numbers Denomination Interest Rates and Maturities. The Certificates shall be. initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged -as set out in this Ordinance. The Certificates shall rkiature on the dates and in the amounts set out in . such schedule. Certificates delivered in transfer of or in exchange for other Certificates shall be numbered in order of their authentication by the Paying Agent/Registrar, shall be in the denomination of $5,000 or integral multiples thereof and shall mature on the same date and bear interest at the same rate as the. Certificate or Certificates. in lieu of which they are delivered. Certificate Maturity Principal Interest Number 5/1 Amount Rate R-1 2022 R-2 2023 R-3 2024 R-4 2025 R-5 -2026 R-6 2027 R-7 2028 R-8 2029 R-9 2030 R-10 2031 R-11 2032 R-12 2033 R-13 2034 R-14 2035 R-15 2036 R-16 2037 1H 4141-4558-2381.1 R-17 2038 R-18 2039 R-19 2040 R-20 2041 R-21 2042 R-22 2043 R-23 2044 R-24 2045 R-25 2046 Section 3.4: Redemption Prior to Maturity. (a) The Certificates maturing on and after May 1, 20 are subject to. redemption prior to maturity, at the option of the City, in whole or in part, on May 1, 20, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b) Certificates may be redeemed in part only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon presentation and surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. (c) Notice of any redemption, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the Register, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the purpose of being paid with the funds so provided for such payment. Section 3.5: Manner of Payment Characteristics Execution and Authentication: The Paying Agent/Registrar is hereby appointed the paying agent for the Certificates. The Certificates shall be payable, shall have the characteristics and shall be executed, registered and authenticated, all as provided and in the manner indicated in the FORM OF CERTIFICATES set forth in Article IV of this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the Certificates shall cease to be such officer before the authentication of the Certificates or before the delivery of the Certificates, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 5 4141-4558-2381.1 The approving legal opinion of Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel, may be printed on the back of the Certificates over the certification of the City Secretary, which may be executed in facsimile. CUSIP numbers also may be printed on the Certificates, but errors or omissions in the printing of either the opinion or the numbers shall have no effect on the validity of the Certificates. Section 3.6: Authentication. Except for the Certificates to be initially issued, which need not be authenticated by the Registrar, only, such Certificates ' as shall bear thereon a certificate of authentication, substantially in the form provided in Article IV of this Ordinance, manually executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Certificate so authenticated was delivered by the Paying Agent/Registrar hereunder. Section 3.7: Ownership. The City, the Paying Agent/Registrar and any .other person may treat the person in whose name any Certificate is registered as the absolute owner of such .Certificate for the purpose of making and receiving payment of the principal thereof and interest thereon and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Certificate in accordance with this Section shall be valid*and effective and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.8: Registration Transfer and Exchange. The Paying Agent/Registrar is hereby appointed the registrar for the Certificates. So long as any Certificate remains Outstanding, the Paying .Agent/Registrar shall keep the. Register at the City Administrator's office in which, subject to such reasonable regulations as it may ' prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Certificates in accordance with the terms of this Ordinance. Each Certificate shall be transferable only upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Certificate for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such presentation, a new. Certificate or .Certificates, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity *and aggregate principal amount and bearing interest at the same rate as the Certificate or Certificates so presented and surrendered. All Certificates shall be exchangeable upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates, maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Certificate or Certificates presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Certificates in accordance with' the provisions of this Section. Each Certificate delivered by the Paying Agent/Registrar in accordance 'with this Section shall be entitled to the I 4141-4558-2381.1 benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such Certificate is delivered. All Certificates issued in transfer or exchange shall be delivered to the Registered Owners thereof at the principal corporate trust office of the Paying Agent/Registrar or sent by United States mail, first class, postage prepaid. The City or the Paying Agent/Registrar may require the Registered Owner. of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Certificate. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the City. The Paying Agent/Registrar shall not be required to transfer or exchange any Certificate called for redemption in whole or in part during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that this restriction shall not apply to the transfer or exchange by the Registered Owner of the unredeemed portion of a Certificate called for redemption in part. Section 3.9: Book -Entry Only System. The definitive Certificates shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof. Upon initial issuance, the ownership. of each such Certificate shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 3.11 hereof, all of the Outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the Owner at the close of business on the Record Date, the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. With respect to Certificates registered- in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have -no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Certificates, (b) the delivery to any DTC Participant or any other person, other than a Certificateholder, as shown on the Register, of any notice with respect to the Certificates, including any notice of redemption or (c) the payment to any DTC Participant or any other person, other than a Certificateholder as shown in the Register, of any amount with respect to principal of Certificates, premium, if any, or interest on the Certificates. Except as provided in Section 3.10 of this Ordinance, the City and- the Paying Agent/Registrar shall be entitled to treat and consider- the person in whose name each Certificate is registered in the Register as the absolute owner of such Certificate for the purpose of payment of principal of, premium, if any, and interest on Certificates, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying i 7 4141-4558-2381.1 Agent/Registrar shall pay all principal of Certificates, premium, if any, and interest on the Certificates only to or. upon the order of the respective. owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Certificates to the extent of the sum or sums so paid. No person other than an owner shall receive a Certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Section 3.10: Payments and Notices to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, as long as any Certificates are registered in the name of Cede & Co., as. nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Certificates, and. all notices with respect to such Certificates shall be made and given, respectively, in the manner provided in the representation letter of the City to DTC. Section 3.11: Successor Securities Depository' Transfer Outside Book -Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the City or. the Paying Agent/Registrar shall (a) appoint 'a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (b) notify DTC of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Certificateholders transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. Section 3.12: Replacement Certificates. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Certificate, the Paying Agent/Registrar shall authenticate and -deliver in exchange therefor a replacement Certificate, of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Registered Owner of such Certificate to pay 'a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar and the City. If any Certificate is lost, apparently destroyed or wrongfully taken, the City, pursuant to the applicable. laws of the State of Texas and ordinances of the City, and in the absence of notice or knowledge that such Certificate has been acquired by a bona fide purchaser, shall execute, and the Paying Agent/Registrar shall authenticate and deliver, a replacement Certificate of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner thereof shall have; 4141-4558-2381.1 (a) furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Certificate; (b) furnished such security or indemnify as may be required by the Paying Agent/Registrar and the City to save and hold them harmless; (c) paid all expenses and charges in -connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and (d) . met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Certificate, a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Certificate from the person to ' whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Certificate, authorize the Paying Agent/Registrar to pay such Certificate. Each replacement Certificate delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such replacement Certificate is delivered. Section 3.13: Cancellation. All Certificates paid or redeemed in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Certificates. ARTICLE IV FORM OF CERTIFICATES The Certificates, including the Form of Comptroller's Registration Certificate, Form of Paying Agent/Registrar Authentication Certificate and Form of Assignment, shall be in substantially the following forms, with such omissions, insertions and variations as may be necessary or desirable, and not prohibited by this Ordinance: 0 4141-4558-2381.1 NUMBER 1R-— REGISTERED UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS DENOMINATION REGISTERED COMBINATION TAX AND REVENUE CERTIFICATE OF.OBLIGATION SERIES 2021A 2INTEREST DELIVERY 2MATURITY RATE DATE DATE 2CUSIP % May 7, 2021 May 1, 20_ DATED DATE:- May 1, 2021 REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS 'THE CITY OF SANGER, TEXAS, a municipal corporation of the State of Texas (the "City"), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender -of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the "Paying Agent/Registrar"), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above,' calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on May 1, 2022, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner l Initial Certificate of Obligation shall be numbered T-1 2 Omitted from the Initial Certificate. 3 The first sentence of the Initial Certificate shall read as follows: "THE CITY OF SANGER, TEXAS, a municipal corporation. of the State of Texas (the "City"), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on each of the dates until maturity or earlier redemption of this Certificate and in the principal amounts set forth in the following schedule: [Insert information regarding years of maturity, principal amounts and interest rates from Section 3.3 of the Ordinance], upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the "Paying. Agent/Registrar"), payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery." 10 4141-4558-2381.1 of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the "Certificates") in the aggregate principal amount of $ issued pursuant to an ordinance adopted by the City Council of the City on April 19, 2021 (the "Ordinance") for the purpose of providing all or part of the funds (1) to' pay contractual obligations to be incurred (i) for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to, redeem, prior to their maiurity, Certificates maturing on and after May 1, 20_, in whole or in part, on May 1,-20_, or any date thereafter, at par plus accrued interest to the date fixed for redemption. CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. 11 4141-4558-2381.1 THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied -by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and. things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual. ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the surplus revenues to be derived from the City's water and *sewer system, after the payment of all operation and maintenance expenses thereof (the "Net Revenues."), in an amount not to exceed $10,000; ate pledged to the payment of the principal of and interest on the Certificates, provided that the pledge -of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by -a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge. of Net Revenues securing the Certificates. 1.2 . 4141-4558-2381.1 REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. IN WITNESS WHEREOF, the City has caused this Certificate to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. CITY OF SANGER, TEXAS Mayor COUNTERSIGNED: City Secretary FORM OF COMPTROLLER' S REGISTRATION CERTIFICATE The following form of Comptroller's Registration Certificate shall be attached or affixed to each of the Certificates initially delivered: THE STATE OF TEXAS REGISTER NO. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this certificate has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this Comptroller of Public Accounts of the State of Texas [SEAL] 13 4141-4558-2381.1 FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE The following form of authentication certificate shall`be printed on the face of each of the Certificates other than those initially delivered: AUTHENTICATION CERTIFICATE This Certificate is one of the Certificates described in and delivered pursuant to the within -mentioned Ordinance; and, except for the Certificates initially delivered, this Certificate has been issued in exchange for or replacement of a Certificate, Certificates, or a portion of a Certificate or Certificates of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. UMB BANK, N.A. Authorized Signature Date of Authentication: FORM OF ASSIGNMENT The following form of assignment shall be printed on the back of each of the Certificates: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer such bond on the books kept for registration thereof, with fall power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. Registered Owner NOTICE: The signature above must correspond to the name of the Registered Owner as'shown on the face of this bond in every particular, without any alteration, enlargement or change whatsoever. ILA' 4141-4558-2381.1 ARTICLE V SECURITY FOR THE CERTIFICATES Section 5.1: Pledge and Levy of Taxes and Revenues. (a) To provide for the payment of principal of and interest on the Certificates, there is hereby levied, within the limits prescribed by law, for the current year and each succeeding year thereafter, while the Certificates or any part of the principal thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all taxable property within the City sufficient to pay the interest on the Certificates and to create and provide a sinking fund of not less than 2% of the principal amount of the Certificates or not less 'than the principal payable out 'of such tax, whichever is greater, with full allowance being made for tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied to the payment of principal of and interest on the Certificates by deposit to the Combination Tax and Revenue. Certificates of Obligation, Series 2021A Debt Service Fund and to no other purpose. (b) The City hereby declares its purpose and intent to provide and levy a tax legally sufficient to pay the principal of and interest on the Certificates, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax. As long as any Certificates remain outstanding, all moneys on deposit in, or credited to, the Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund shall be secured by a pledge of security, as provided by law for cities in the State of Texas. (c) In addition, pursuant to the authority of Chapter 1502, Texas Government Code, as amended, the City also hereby pledges the surplus revenues to be derived from the City's water and sewer system , after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $10,000, to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. Section 5.2: Debt Service Fund. The Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund is hereby created as a special fund solely for the benefit of the Certificates. The City shall establish and maintain such fund at an official City depository and shall keep such fund separate and apart from all other funds and accounts of the City. Any amount on deposit in the Combination Tax and Revenue Certificates of Obligation, Series '2021A Debt Service Fund shall be maintained by the City in trust for the Registered Owners of the Certificates. Such amount, plus any other amounts deposited by the City into such fund and any and all investment earnings on amounts on deposit in such fund, shall be used only to pay the principal of, premium, if any, and interest on the Certificates. 15 4141-4558-2381.1 Section 5.3: Further Proceedings. After the Certificates to be initially issued have been executed, it shall be the duty of the Mayor to deliver the Certificates to be initially issued and all pertinent records and proceedings to the Attorney General for examination and approval. After the Certificates to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller for registration. Upon registration of the Certificates to be initially issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's registration certificate prescribed herein to be affixed or attached to the Certificates to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. ARTICLE VI CONCERNING THE PAYING AGENT/REGISTRAR Section 6.1: Acceptance. UMB BANK, N.A., Austin, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Certificates pursuant to the terms and provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form attached hereto as Exhibit A, the terms and provisions of which are hereby approved, and the Mayor is. hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 6.2: Trust Funds. All money transferred to the Paying Agent/Registrar in its capacity as* Paying Agent/Registrar for the Certificates under this Ordinance (except any sums representing Paying Agent/Registrar's fees) shall be held in trust for the benefit of the City, shall be the property of the City and shall be disbursed in accordance with this Ordinance. Section 6.3: Certificates Presented. Subject to the provisions of Section 6.4, all matured Certificates presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Certificates shall be canceled as provided herein. Section 6.4: Unclaimed Funds Held by the Paving Agent/Registrar. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Certificates remaining unclaimed by the Registered Owner thereof after the expiration of three years from the date such fiends have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar .in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. 16 4141-4558-2381.1 The Paying Agent/Registrar shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with this Section. Section 6.5: Paving Agent/Registrar May Own Certificates. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent/Registrar. Section 6.6: Successor Paving Agents/Registrars. The City covenants that at all times while any Certificates are Outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent/Registrar for the Certificates. The City reserves the right to change the Paying Agent/Registrar for the Certificates on not less than sixty (60) days' written notice to the Paying Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the .Certificates. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail, first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE VII PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF CERTIFICATES Section 7.1: Sale of Certificates-, Execution of Purchase Agreement. The Certificates are hereby sold and shall be delivered to Raymond James & Associates, Inc. for a price of $ (representing the par value thereof, plus a net original issue premium of $ on the Certificates, and less an underwriting discount of $ ), in accordance with the terms of and conditions in the Purchase Agreement. The Purchase Agreement, substantially in the form attached hereto as Exhibit C, is hereby approved. * The Mayor and other appropriate officials of the City are hereby authorized arid directed to execute the Purchase Agreement on behalf of the City, and the Mayor and all other appropriate officials, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Certificates. It is hereby found and determined that the terms of the sale of the Certificates contained in the Purchase Agreement are the most advantageous terms reasonably obtainable by the City at this time. Section 7.2: Approval Registration and Delivery. The Mayor is hereby authorized to have control and custody of the Certificates and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor and other officers and employees of the City are hereby authorized and directed to make such certifications and to execute such instruments as may be necessary to accomplish the delivery of the Certificates and to assure the investigation, examination and approval thereof by the Attorney General and the registration of the initial Certificates by the Comptroller. Upon registration of the Certificates, the Comptroller (or the Comptroller's certificates clerk or an assistant certificates clerk lawfully designated in writing to 17 4141-4558-2381.1 act for the Comptroller) shall manually sign the Comptroller's Registration Certificates prescribed herein to be attached or affixed to each Certificates initially delivered and the seal of the Comptroller shall be impressed or printed or lithographed thereon. Section 7.3: . Offering Documents, Ratings. The City hereby approves the form and contents of the Preliminary Official Statement and the final Official Statement, dated as of the date hereof, relating to the Certificates, and any addenda, supplemelit or amendment thereto, and ratifies and approves the distribution of such Preliminary Official Statement substantially in the form attached hereto as Exhibit B and Official Statement in the offer and sale of the Certificates and in the reoffering of the Certificates by the Underwriter, with such changes therein or additions thereto as the officials executing same may deem advisable, such determination to be conclusively evidenced by their execution thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby authorized and directed to attest, the final Official Statement. It is further hereby officially found, determined and declared that the statements and representations contained in the Preliminary Official Statement and final Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council, and that, as of the date thereof, the Preliminary Official Statement was an official statement of the City with respect to the Certificates that was deemed "final" by an authorized official of the City except for the omission of no more than the information permitted by subsection (b)(1) of Rule 15c2-12 of the Securities and Exchange Commission. Further, the City Council hereby ratifies, authorizes and approves the actions of the Mayor, -the City's financial advisor and other consultants in seeking a rating on the Certificates from Moody's Investors Service, Inc. and such actions are hereby ratified and confirmed. Section 7.4: Application of Proceeds of Certificates. Proceeds from the sale of the Certificates shall, promptly upon receipt by the City, be applied as follows: (1) $ of shall be applied to pay expenses arising in connection with the issuance of the Certificates; (2) $ of shall be applied to"pay cost of the project, and (3) Any remaining proceeds shall be deposited into the Debt Service Fund. Section 7.5: Covenants to Maintain Tax Exempt Status. (a) Definitions. When used in this Section, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, enacted on or before the Issue Date. "Computation Date" has the meaning stated in section 1.148-1(b) of the Regulations. "Gross Proceeds" has the meaning stated in section 1.148-1(b) of the Regulations. 18 4141-4558-2381.1 "Investment" has the meaning stated in section 1.148-1(b) of the Regulations., "Issue Date" for the Certificates or other obligations of the City is the respective date on which such obligations of the City are delivered against payment therefor. "Net Sale Proceeds" has the meaning stated in section 1.148-1(b) of the Regulations. "Nonpurpose Investment" has the meaning stated in section 1.148-1(b) of the Regulations. "Proceeds" has the meaning stated in section 1.148-1(b) of the Regulations. "Rebate Amount" has the meaning stated in section 1.148-3 of the Regulations. "Regulations" means the temporary or final Income Tax Regulations applicable to the Certificates issued pursuant to sections 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 141 through 150 of the Code and applicable to the Certificates. "Yield of (1) any. Investment shall be computed in accordance with section 148-5 of the Regulations, and (2)' the Certificates shall be computed in accordance with section 1.148-4 of the Regulations. (b) Not to Cause Interest to Become Taxable. - The City shall not use, permit the use of or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) 'in.a manner which, if made or omitted, respectively, would cause the interest on any Certificates to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City shall have received a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. (c) No Private Use or Private Payments: Except as permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall, at all times prior to the last stated maturity of the Certificates, (1) exclusively own, operate, and possess all property the acquisition, construction, or improvement of which is to be financed directly or indirectly with Gross Proceeds of the Certificates and not use or permit the use of such- Gross lq 4141-4558-2381.1 Proceeds or any property acquired, constructed, or improved with such Gross Proceeds in any activity carried on by any person or entity other than a state or local government, unless such use is solely as a member of the general public, or (2) not directly or indirectly impose or accept any charge or other payment for use of Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with such Gross Proceeds other than taxes of general application and interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (d) No Private Loan. Except to the extent permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, Gross Proceeds are considered to be "loaned" to a person or entity if (1) property acquired, constructed or improved with Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes, (2) capacity in or service from such property is committed to such person or entity under a take -or -pay, output, or similar contract or arrangement, or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or such property -are otherwise transferred in a transaction which is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the final stated maturity or final payment of the Certificates, directly or indirectly invest Gross Proceeds of such Certificates in any Investment (or use such Gross Proceeds to replace money so invested), if as a result of such investment the Yield of all Investments allocated to such Gross Proceeds whether then held or previously disposed of, exceeds the Yield on the Certificates. (f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the regulations and rulings thereunder. (g) Information Report. The City shall timely file with the Secretary of the Treasury the information required by section 149(e) of the Code with respect to the Certificates on such forms and in such place as such Secretary may prescribe. (h) - Payment of Rebate Amount. Except to the extent otherwise provided in section 148(f) of the Code and the regulations and rulings thereunder, the City shall: (1) account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds' (and. receipts, expenditures and investments thereof) and shall retain 20 4141-4558-2381.1 all records of such accounting for at least six years after the final Computation Date. The City may, however, to the extent permitted by law, commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of such Gross Proceeds and the obligations acquired therewith, (2) calculate the Rebate Amount with respect to the Certificates, not less frequently than each Computation Date, in accordance with rules set forth in section 148(f) of the Code, section 1.148-3 of the Regulations, and the rulings thereunder and shall maintain a copy of such calculations for at least six years after the final Computation Date, (3) as additional consideration for the purchase of the Certificates by the initial purchaser thereof and the loan of the money represented thereby, and in order to induce such purchase by measures designed to ensure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, pay to the United States the amount described in paragraph (2) above at the times, in the installments, to the place, in the manner and accompanied by such forms or other information as is or may be required by section 148(f) of the Code and the regulations and rulings thereunder, and (4) exercise reasonable diligence to assure that no errors are made in the calculations required by paragraph (2) and, if such error is made, to discover and promptly to correct such error within a reasonable amount of time thereafter, including payment to the United States of any interest and any penalty required by the Regulations. (i) . Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the final stated maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (h) of this Section because such transaction results in a smaller. profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Certificates not been relevant to either party. (j) Not Hedge Bonds. The City will not invest more than 50 percent of the Proceeds of the Certificates in'Nonpurpose Investments having a guaranteed yield for four years or more. On the Issue Date of the Certificates, the City will reasonably expect that at least 85 percent of the Net Sale Proceeds will be used to carry out the governmental purpose of such series within three years after such Issue Date. (k) The City will not issue or use the Certificates as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Certificates are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax- 21 4141-4558-2381.1 exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1),. Proper officers of the City charged with the responsibility for issuing the Certificates are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the date of issuance of the Certificates and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the date of issuance of the Certificates, the City will take such actions as .are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m) The City hereby designates the Certificates as "qualified tax-exempt obligations" as defined in section 265(b)(3) . of the Code. In furtherance of such designation, the City represents, covenants and warrants the following: (a) that during the calendar year in which the Certificates are issued, the City (including any subordinate entities) has not designated nor will designate obligations that when aggregated with the Certificates, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; and (b) that the City reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Certificates are issued, by the City (or any subordinate entities) will not exceed $10,000,000. (n) The covenants and representations made or required by this Section are for the benefit of the Certificate holders and any subsequent Certificate holder, and may be relied upon by the Certificate holders and any subsequent Certificate holder and bond counsel to. the City. (o) In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations . contained in such opinion will not cause interest on the Certificates to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City's representations and obligations under the covenants and provisions of this Section 7.5 all survive the defeasance and - discharge of the Certificates for as long as such matters are relevant to the exclusion of interest on the Certificates from the gross income of the owners for federal income tax purposes. Section 7.6: Related Matters. In order that the City shall satisfy in a timely manner all of its obligations under this Ordinance, the Mayor, -the Mayor, City Secretary and all other appropriate officers, agents, representatives and employees of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the issuance and delivery of the Certificates, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, notices, and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of this Ordinance. 22 4141-4558-2381.1 ARTICLE VIII CONTINUING DISCLOSURE UNDERTAKING Section 8.1: Continuing Disclosure Undertaking. The City shall provide annually to the MSRB, within six (6) months after the end of each fiscal year and in an electronic format prescribed by the MSRB and available via the Electronic Municipal Market Access ("EMMA") system at www.emma.msrb.org, financial information and operating data with respect to the City of the general type described in the Official Statement, being the information described in Exhibit D attached hereto. Any financial statements so to be provided shall be (a) prepared in accordance with generally accepted accounting principles for governmental units as prescribed by the Government Accounting Standards Board from time to time, as such principles may be changed from time to time to comply with state or federal law or regulation and (b) audited; if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to the MSRB and shall provide to the MSRB audited financial statements, when and if the same become available. If the City changes its Fiscal Year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Article. The financial information and operating data to be provided pursuant to this Article may be set forth in full in one or more documents or may be included by specific reference to documents (i) available to the public on the MSRB's internet web site or (ii) filed with the SEC. Section 8.2: Material Event Notices. The City shall notify the MSRB'in an electronic format prescribed by the MSRB, in a timely manner (not in excess of ten (10) days after the occurrence of the event), of any of the following events with respect to the Certificates: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the. tax status of the Certificates, or other material events affecting the tax- status of the Certificates; (vii) Modifications to rights of holders of the Certificates, if material; (viii) Certificate calls, if material, and tender offers; (ix) Defeasances; 23 4141-4558-2381.1 (x) Release, substitution, or sale of property securing repayment of the Certificates, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the City; (xiii) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary .course of business; the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall notify the MSRB in an electronic format prescribed by 'the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1 of this Ordinance by the time required by such Section. Section 8.3: Identifying Information. All documents provided to the MSRB shall be accompanied by identifying information, as prescribed by the MSRB. Section 8.4: Limitations Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by this Article of any Bond calls and defeasance that cause the City to be no longer such an "obligated person." The provisions of this Article are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, principal statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results,, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except expressly provided herein. The City does not make any representation or warranty concerning such information -or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON,.1N CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. 24 4141-4558-2381.1 No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intepded or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities law. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell the Certificates in the primary offering of the Certificates 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 (2) either (a) the Registered Owners of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or '(b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Registered Owners and beneficial owners ' of the Certificates. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in any case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. Section 8.5: Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. ARTICLE IX MISCELLANEOUS Section 9.1: Defeasance. Subject to Section 10.8 hereof, the City may defease the provisions of this Ordinance and discharge its obligations to the Registered Owners of any or all of the Certificates to pay the principal of and interest thereon in any manner permitted by law, 25 4141-4558-2381.1 including by depositing with the Paying Agent/Registrar or with the Comptroller of Public Accounts of the State of Texas either: (a) cash in an amount equal to the principal amount of such Certificates plus interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direet noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) non' callable 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 issuer 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; or (iii) noricallable 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 issuer 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, which, in the case of (i), (ii) or (iii), may be in book -entry form, and the principal of. and, interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an -amount which, together with other moneys, if any., held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provideA, however, that if any of the Certificates are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided -in this Ordinance. Upon such deposit, such Certificates shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to the City. Section 9.2: Ordinance a Contract - Amendments. This Ordinance shall constitute a contract with the Registered Owners from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51 % of the principal amount of the Certificates then Outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Registered Owners of Outstanding Certificates, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Certificates, 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 or interest on the Certificates, (ii) give any preference to any Certificate over any other Certificate, or (iii) reduce the aggregate principal amount of Certificates required to be held by Registered Owners for consent to any such amendment, addition, or rescission. . 26 4141-4558-2381.1 Section 9.3:. Legal Holidays. In any case where the date interest accrues and becomes payable on the Certificates or principal of the Certificates matures or the date fixed for redemption of any Certificates or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of. interest or principal need not be made on such date, or the Record Date shall not occur on such date, but payment may be made or the Record Date shall occur on the next succeeding day which is not in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close with the same force and effect as if (i) made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment or (ii) the Record Date had occurred on the last business day of that calendar month. Section 9.4: No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Certificates or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificates. Section 9.5: Further Proceedings. The Mayor, Mayor Pro-Tem, City Secretary and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. Section 9.6: Seyerability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph,- clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.7: Open Meeting. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 9.8: Repealer. All orders; resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.9: Effective Date.. This Ordinance shall be in force and effect from and after its passage on the date shown below. 27 4141-4558-2381.1 PASSED AND APPROVED on first reading this April 19, 2021. CITY OF. SANGER, TEXAS Mayor Exhibit A - Paying Agent/Registrar Agreement Exhibit B - Preliminary Official Statement Exhibit C - Purchase Agreement Exhibit D - Description of Annual Financial Information 4141-4558-2381.1 " E r ER• is R cYc161Fort Worth-Odvid'i ` x 4: g� �roa�du�ra�y GalnesW 10 rr t...:: ,fitr•. WIW mYe IW,Illlcrtlon required for A11 copper, "a' C, rlumlpom r R, ® gat'N ApVE:RTI I �T�FOR.BID,�. n t�$ .� 1 Amon�i ii�s �fdt of p. a OroaT� �Q6 , 0 "Su6d�NT 1c,i,Tr QF� Qrd�i��n7co �. 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C�RENT GHQ r and .to fitiake an aWetd Jitiy m J ;`;'�� with ISW, deemed) ;th�if`lnttf`thoity. ` 4126-2654-2123.1 CITY OF SANGER, TEXAS $18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A * * * Resolution Authorizing Publication of Notice 1 of Intention to Issue Certificates Affidavit of Publication of Notice of Intent 2 Ordinance Authorizing Issuance of the Certificates 3 Preliminary Official Statement 4 Official Statement and Addendum to Official Statement 5 Purchase Agreement and Addendum to Purchase Agreement 6 Paying Agent/Registrar Agreement 7 General Certificate 8 Signature Identification and No-Litigation Certificate 9 Tax Exemption Certificate, Certificate of Underwriter and Form 8038G 10 Closing Certificate Required by Purchase Agreement 11 Opinion of Bond Counsel 12 Supplemental Opinion of Bond Counsel 13 Opinion of Attorney General of Texas with Certificate of Comptroller of Public Accounts 14 Opinion of Underwriter’s Counsel 15 Ratings Letters 16 Specimen Certificate 17 Bond Review Board Questionnaire 18 Closing Memorandum 19 4125-4265-6043.1 CERTIFICATE FOR RESOLUTION THE STATE OF TEXAS § COUNTY OF DENTON § THE CITY OF SANGER § We, the undersigned officers of the City of Sanger, Texas (the “City”), hereby certify as follows: 1.The City Council of the City convened in a regular meeting on March 1, 2021 at the regular meeting place thereof, within the City, and via teleconference and video conference in compliance with an advisory issued by the Office of the Governor and the roll was called of the duly constituted officers and members of the City Council, to wit: Thomas Muir Mayor Gary Bilyeu Mayor Pro Tem Marissa Barrett Councilmember, Place 1 Dennis Dillon Councilmember, Place 3 Allen Chick Councilmember, Place 4 David Clark Councilmember, Place 5 and all of such persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written RESOLUTION AUTHORIZING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION, SERIES 2021A IN A PRINCIPAL AMOUNT NOT TO EXCEED $20,000,000.00 AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO (the “Resolution”) was duly introduced for the consideration of the City Council and read in full. It was then duly moved and seconded that such Resolution be adopted; and, after due discussion, the motion, carrying with it the adoption of the Resolution, prevailed and carried by the following vote: AYES: 5 NAYS: 0 ABSTENTIONS: 0 2.That a true, full and correct copy of the Resolution adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the Resolution has been duly recorded in the City Council’s minutes of such meeting; that the above and foregoing paragraph is a true, full and correct excerpt from the City Council’s minutes of such meeting pertaining to the adoption of the Resolution; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of the City Council as indicated therein; that each of the officers and members of the City Council was duly and sufficiently notified officially and personally, in advance, of the date, hour, place and subject of the aforesaid meeting, and that the Resolution would be introduced and considered for adoption at such meeting, and each of such officers and members consented, in advance, to the holding of such meeting for such purpose; that such meeting was open to the public in compliance with the advisory issued by the Office of the Governor; and that public notice of the date, hour, place and subject of such meeting was given as required by the Open Meetings Law, Chapter 551, Texas Government Code. 4125-4265-6043.1 RESOLUTION AUTHORIZING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION, SERIES 2021A IN A PRINCIPAL AMOUNT NOT TO EXCEED $20,000,000 AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO THE STATE OF TEXAS § COUNTY OF DENTON § THE CITY OF SANGER § WHEREAS, the City Council (the “City Council”) of the City of Sanger, Texas (the “City”), is authorized to issue certificates of obligation to pay contractual obligations to be incurred (1) for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended; WHEREAS, the City Council has determined that it is in the best interests of the City and otherwise desirable to issue certificates of obligation in a principal amount not to exceed $20,000,000.00 styled “City of Sanger, Texas Certificates of Obligation, Series 2021A” (the “Certificates”); WHEREAS, in connection with the Certificates, the City Council intends to publish notice of intent to issue the Certificates (the “Notice”) in a newspaper of general circulation in the City; and WHEREAS, the City Council has been presented with and has examined the proposed form of Notice and finds that the form and substance thereof are satisfactory, and that the recitals and findings contained therein are true, correct and complete. BE IT THEREFORE RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS: Section 1. Preamble. The facts and recitations contained in the preamble of this Resolution are hereby found and declared to be true and correct. Section 2. Authorization of Notice. The City Secretary is hereby authorized and directed to execute and deliver the Notice set forth in Exhibit A hereto and to publish such Notice on behalf of the City once a week for two (2) consecutive weeks in a newspaper which is of general circulation in the City, the date of the first publication of the Notice to be at least forty-six (46) days before the date tentatively set in the Notice for the passage of the ordinance authorizing the issuance of the Certificates. In addition, the Notice shall be posted continuously on the City’s website for at least forty-five (45) days before the date tentatively set in the Notice for the passage of the ordinance authorizing the issuance of the Certificates. Section 3. Designation of Self-Supporting Securities. For the purposes of the Notice, the City hereby designates as self-supporting those public securities listed in the attached 4125-4265-6043.1 Exhibit B, the debt service on which the City currently pays from sources other than ad valorem tax collections. The City plans to continue to pay these public securities based on this practice; however, there is no guarantee this practice will continue in future years. Section 3. Engagement of Professionals. This City Council hereby approves the engagement of Orrick, Herrington & Sutcliffe LLP, as bond counsel (“Bond Counsel”) in connection with the issuance of the Certificates. Section 4. Authorization of Other Matters Relating Thereto. The Mayor, City Secretary and other officers and agents of the City are hereby authorized and directed to do any and all things necessary or desirable to carry out the provisions of this Resolution. Section 5. Effective Date. This Resolution shall take effect immediately upon passage. Section 6. Public Meeting. It is officially found, determined and declared that the meeting at which this Resolution is adopted was open to the public in compliance with the advisory issued by the Office of the Governor and public notice of the time, place and subject matter of the public business to be considered at such meeting, including this Resolution, was given all as required by the Texas Government Code, Chapter 551, as amended. [Remainder of Page Intentionally Left Blank] 4125-4265-6043.1 EXHIBIT A NOTICE OF INTENTION TO ISSUE CERTIFICATES NOTICE IS HEREBY GIVEN that the City Council of the City of Sanger, Texas (the “City”) will hold a meeting at its regular meeting place at the Historic Church Building, 402 N. 7th Street, Sanger, Texas (or if the City is still subject to a stay-at-home order via teleconference and video conference in compliance with an advisory issued by the Office of the Governor) at 7:00 p.m. on the 19th day of April, 2021, which is the time and place tentatively set for the passage of an ordinance and such other action as may be deemed necessary to authorize the issuance of the City’s certificates of obligation, payable from an annual ad valorem taxation, as well as a limited (in an amount not to exceed $1,000) pledge of certain revenues of the water and sewer system, in the maximum aggregate principal amount of $20,000,000.00, bearing interest at any rate or rates not to exceed the maximum interest rate now or hereafter authorized by law, as shall be determined within the discretion of the City Council at the time of issuance and maturing over a period of years not to exceed forty (40) years from the date thereof, for the purpose of evidencing the indebtedness of the City (1) for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. The estimated combined principal and interest required to pay the Certificates on time and in full is $28,386,038.75. Such estimate is provided for illustrative purposes only and is based on an assumed interest rate of 2.22%. Market conditions affecting interest rates vary based on a number of factors beyond the control of the City, and the City cannot and does not guarantee a particular interest rate associated with the Certificates. As of the date of this notice, the aggregate principal amount of public securities of the City secured by and payable from ad valorem taxes (excluding public securities secured by an ad valorem tax but designated by the City as self-supporting) is $2,368,500.00 and based on the City’s expectations, as of the date of this notice the combined principal and interest required to pay all of the outstanding tax-supported debt obligations of the City secured by and payable from ad valorem taxes (excluding public securities secured by an ad valorem tax but designated by the City as self-supporting) on time and in full is $2,729,358.00. City Secretary City of Sanger, Texas 4125-4265-6043.1 EXHIBIT B SELF-SUPPORTING DEBT Principal Amount Designated as Self Supporting Series Designation $ 524,700 Certificates of Obligation, Series 2007 184,800 General Obligation Refunding Bonds, Series 2012 2,710,400 Certificates of Obligation, Series 2013 5,430,000 Certificates of Obligation, Series 2015 291,600 General Obligation Refunding Bonds, Series 2016 9,240,000 Certificates of Obligation, Series 2017 0 General Obligation Refunding Bonds, Series 2019 $18,381,500 Total Principal Amount Designated as Self-Supporting 4141-4558-2381.3 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § We, the undersigned officers of the City of Sanger, Texas (the “City”), hereby certify as follows: 1.The City Council of the City convened in a regular meeting on May 3, 2021, at the regular meeting place thereof, within the City, and via teleconference and video conference in compliance with an advisory issued by the Office of the Governor and the roll was called of the duly constituted officers and members of the City Council, to wit: Thomas Muir Mayor Gary Bilyeu Mayor Pro Tem Marissa Barrett Councilmember, Place 1 Dennis Dillon Councilmember, Place 3 Allen Chick Councilmember, Place 4 David Clark Councilmember, Place 5 and all of such persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO (the “Ordinance”) was duly introduced for the consideration of the City Council and read in full. It was then duly moved and seconded that the Ordinance be adopted on first reading; and, after due discussion, such motion, carrying with it the adoption of the Ordinance, prevailed and carried by the following vote: AYES: 5 NAYS: 0 ABSTENTIONS: 0 4141-4558-2381.3 ORDINANCE AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER: ARTICLE I FINDINGS AND DETERMINATIONS Section 1.1:Findings and Determinations. The City Council hereby officially finds and determines that: (a)The City of Sanger, Texas (the “City”), acting through its City Council, is authorized pursuant to and in accordance with the provisions of Texas Local Government Code, Chapter 271, Subchapter C, as amended (the “Act”), to issue certificates of obligation to provide all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. (b)The City Council authorized the publication of a notice of intention to issue Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) to the effect that the City Council was tentatively scheduled to meet at 7:00 p.m. on April 19, 2021 at its regular meeting place to adopt an ordinance authorizing the issuance of the Certificates to be payable from (i) an ad valorem tax levied, within the limits prescribed by law, on the taxable property located within the City, and (ii) the surplus revenues to be derived from the City’s water and sewer system (the “System”) after the payment of all operation and maintenance expenses thereof (the “Net Revenues”) in an amount not to exceed $1,000, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. 2 4141-4558-2381.3 (c)Such notice was published at the times and in the manner required by the Act. (d)No petition signed by at least five percent (5%) of the qualified voters of the City has been filed with or presented to any official of the City protesting the issuance of such Certificates on or before May 3, 2021, or the date of passage of this Ordinance. (e)The City has determined that it is in the best interests of the City and that it is otherwise desirable to issue the Certificates to provide all or part of the funds to pay contractual obligations to be incurred for the purposes authorized by the Act. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1:Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise: “Act” shall mean Texas Local Government Code, Chapter 271, Subchapter C, as amended. “Attorney General” shall mean the Attorney General of the State of Texas. “Certificate” or “Certificates” shall mean any or all of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A, authorized by this Ordinance. “City” shall mean the City of Sanger, Texas and, where appropriate, its City Council. “City Council” shall mean the governing body of the City. “Code” shall mean the Internal Revenue Code of 1986, as amended. “Comptroller” shall mean the Comptroller of Public Accounts of the State of Texas. “DTC” shall mean The Depository Trust Company, New York, New York, or any successor securities depository. “DTC Participant” shall mean brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. “Fiscal Year” shall mean the City’s then designated fiscal year, which currently is the twelve-month period beginning on the first day of October of a calendar year and ending on the last day of September of the next succeeding calendar year and each such period may be designated with the number of the calendar year in which such period ends. 3 4141-4558-2381.3 “Interest Payment Date,” when used in connection with any Certificate, shall mean November 1, 2021, and each May 1 and November 1 thereafter until maturity or earlier redemption of such Certificate. “Issuance Date” shall mean the date on which the Certificates are delivered to and paid for by the Underwriter. “Ordinance” shall mean this Ordinance and all amendments hereof and supplements hereto. “Outstanding,” when used with reference to the Certificates, shall mean, as of a particular date, all Certificates theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Certificates canceled by or on behalf of the City at or before such date; (b) any Certificates defeased pursuant to the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable law; and (c) any Certificates in lieu of or in substitution for which a replacement Certificate shall have been delivered pursuant to this Ordinance. “Paying Agent/Registrar” shall mean UMB Bank, N.A., and its successors in that capacity. “Record Date” shall mean the last business day of the calendar month immediately preceding the applicable Interest Payment Date. “Register” shall mean the registration books for the Certificates kept by the Paying Agent/Registrar in which are maintained the names and addresses of, and the principal amounts registered to, each Registered Owner of Certificates. “Registered Owner” shall mean the person or entity in whose name any Certificate is registered in the Register. “Underwriter” shall mean the entity or entities specified in Section 7.1 hereof. Section 2.2: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Certificates and the validity of the levy of ad valorem taxes to pay the principal of and interest on the Certificates. ARTICLE III TERMS OF THE CERTIFICATES Section 3.1:Amount, Purpose and Authorization. (a) The Certificates shall be issued in fully registered form, without coupons, under and pursuant to the authority of the Act in the total authorized aggregate principal amount of EIGHTEEN MILLION SIX HUNDRED 4 4141-4558-2381.3 FIFTEEN THOUSAND DOLLARS ($18,615,000) for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the purposes described in paragraph 1.1(a) hereof. Section 3.2:Designation, Date and Interest Payment Dates. The Certificates shall be designated as the “City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A,” and shall be dated May 1, 2021. The Certificates shall bear interest at the rates set forth in Section 3.3 below, from the date of delivery calculated on the basis of a 360-day year of twelve 30-day months, payable on November 1, 2021, and each May 1 and November 1 thereafter until maturity or earlier redemption. If interest on any Certificate is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Paying Agent/Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Paying Agent/Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen (15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Registered Owner as of the close of business on the day prior to mailing of such notice. Section 3.3:Numbers, Denomination, Interest Rates and Maturities. The Certificates shall be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following schedule and may be transferred and exchanged as set out in this Ordinance. The Certificates shall mature on the dates and in the amounts set out in such schedule. Certificates delivered in transfer of or in exchange for other Certificates shall be numbered in order of their authentication by the Paying Agent/Registrar, shall be in the denomination of $5,000 or integral multiples thereof and shall mature on the same date and bear interest at the same rate as the Certificate or Certificates in lieu of which they are delivered. Certificate Number Maturity (5/1) Principal Amount Interest Rate R-1 2022 $ 55,000 3.000% R-2 2023 295,000 3.000 R-3 2024 320,000 3.000 R-4 2025 345,000 2.000 R-5 2026 395,000 2.000 R-6 2027 140,000 2.000 R-7 2028 135,000 3.000 R-8 2029 160,000 3.000 R-9 2030 160,000 3.000 R-10 2031 185,000 3.000 R-11 2032 260,000 4.000 R-12 2033 290,000 4.000 R-13 2034 290,000 4.000 R-14 2035 320,000 4.000 R-15 2036 370,000 3.000 5 4141-4558-2381.3 R-16 2037 395,000 3.000 R-17 2038 1,620,000 3.000 R-18 2039 1,665,000 3.000 R-19 2040 1,715,000 3.000 R-20 2041 1,765,000 3.000 ************ R-21 2046 7,735,000 3.000 Section 3.4:Redemption Prior to Maturity. (a) The Certificates maturing on and after May 1, 2032 are subject to redemption prior to maturity, at the option of the City, in whole or in part, on May 1, 2031, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b)Certificates may be redeemed in part only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon presentation and surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. (c)Notice of any redemption, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the Register, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the purpose of being paid with the funds so provided for such payment. Section 3.5:Manner of Payment, Characteristics, Execution and Authentication. The Paying Agent/Registrar is hereby appointed the paying agent for the Certificates. The Certificates shall be payable, shall have the characteristics and shall be executed, registered and authenticated, all as provided and in the manner indicated in the FORM OF CERTIFICATES set forth in Article IV of this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the Certificates shall cease to be such officer before the authentication of the Certificates or before the delivery of the Certificates, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. 6 4141-4558-2381.3 The approving legal opinion of Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel, may be printed on the back of the Certificates over the certification of the City Secretary, which may be executed in facsimile. CUSIP numbers also may be printed on the Certificates, but errors or omissions in the printing of either the opinion or the numbers shall have no effect on the validity of the Certificates. Section 3.6:Authentication. Except for the Certificates to be initially issued, which need not be authenticated by the Registrar, only such Certificates as shall bear thereon a certificate of authentication, substantially in the form provided in Article IV of this Ordinance, manually executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Certificate so authenticated was delivered by the Paying Agent/Registrar hereunder. Section 3.7:Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment of the principal thereof and interest thereon and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Certificate in accordance with this Section shall be valid and effective and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.8:Registration, Transfer and Exchange. The Paying Agent/Registrar is hereby appointed the registrar for the Certificates. So long as any Certificate remains Outstanding, the Paying Agent/Registrar shall keep the Register at the City Administrator’s office in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Certificates in accordance with the terms of this Ordinance. Each Certificate shall be transferable only upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Certificate for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such presentation, a new Certificate or Certificates, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount and bearing interest at the same rate as the Certificate or Certificates so presented and surrendered. All Certificates shall be exchangeable upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates, maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Certificate or Certificates presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Certificates in accordance with the provisions of this Section. Each Certificate delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the 7 4141-4558-2381.3 benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such Certificate is delivered. All Certificates issued in transfer or exchange shall be delivered to the Registered Owners thereof at the principal corporate trust office of the Paying Agent/Registrar or sent by United States mail, first class, postage prepaid. The City or the Paying Agent/Registrar may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Certificate. Any fee or charge of the Paying Agent/Registrar for such transfer or exchange shall be paid by the City. The Paying Agent/Registrar shall not be required to transfer or exchange any Certificate called for redemption in whole or in part during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that this restriction shall not apply to the transfer or exchange by the Registered Owner of the unredeemed portion of a Certificate called for redemption in part. Section 3.9:Book-Entry Only System. The definitive Certificates shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof. Upon initial issuance, the ownership of each such Certificate shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 3.11 hereof, all of the Outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the Owner at the close of business on the Record Date, the word “Cede & Co.” in this Ordinance shall refer to such new nominee of DTC. With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Certificates, (b) the delivery to any DTC Participant or any other person, other than a Certificateholder, as shown on the Register, of any notice with respect to the Certificates, including any notice of redemption or (c) the payment to any DTC Participant or any other person, other than a Certificateholder as shown in the Register, of any amount with respect to principal of Certificates, premium, if any, or interest on the Certificates. Except as provided in Section 3.10 of this Ordinance, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Register as the absolute owner of such Certificate for the purpose of payment of principal of, premium, if any, and interest on Certificates, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying 8 4141-4558-2381.3 Agent/Registrar shall pay all principal of Certificates, premium, if any, and interest on the Certificates only to or upon the order of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City’s obligations with respect to payment of principal of, premium, if any, and interest on the Certificates to the extent of the sum or sums so paid. No person other than an owner shall receive a Certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Section 3.10:Payments and Notices to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, as long as any Certificates are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Certificates, and all notices with respect to such Certificates shall be made and given, respectively, in the manner provided in the representation letter of the City to DTC. Section 3.11:Successor Securities Depository; Transfer Outside Book-Entry Only System. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the City or the Paying Agent/Registrar shall (a) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (b) notify DTC of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Certificateholders transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. Section 3.12:Replacement Certificates. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Certificate, of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Registered Owner of such Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar and the City. If any Certificate is lost, apparently destroyed or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and ordinances of the City, and in the absence of notice or knowledge that such Certificate has been acquired by a bona fide purchaser, shall execute, and the Paying Agent/Registrar shall authenticate and deliver, a replacement Certificate of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner thereof shall have: 9 4141-4558-2381.3 (a)furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Certificate; (b)furnished such security or indemnity as may be required by the Paying Agent/Registrar and the City to save and hold them harmless; (c)paid all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and (d)met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Certificate, a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Certificate from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Certificate, authorize the Paying Agent/Registrar to pay such Certificate. Each replacement Certificate delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such replacement Certificate is delivered. Section 3.13:Cancellation. All Certificates paid or redeemed in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Certificates. ARTICLE IV FORM OF CERTIFICATES The Certificates, including the Form of Comptroller’s Registration Certificate, Form of Paying Agent/Registrar Authentication Certificate and Form of Assignment, shall be in substantially the following forms, with such omissions, insertions and variations as may be necessary or desirable, and not prohibited by this Ordinance: 10 4141-4558-2381.3 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION 1R-__ $_____________ REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A 2INTEREST RATE DELIVERY DATE 2MATURITY DATE 2CUSIP _________%May 7, 2021 May 1, 20__ DATED DATE: May 1, 2021 REGISTERED OWNER: ______________________ PRINCIPAL AMOUNT: ______________________ DOLLARS 3THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner 1 Initial Certificate of Obligation shall be numbered T-1 2 Omitted from the Initial Certificate. 3 The first sentence of the Initial Certificate shall read as follows: “THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on each of the dates until maturity or earlier redemption of this Certificate and in the principal amounts set forth in the following schedule: [Insert information regarding years of maturity, principal amounts and interest rates from Section 3.3 of the Ordinance], upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery.” 11 4141-4558-2381.3 of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates maturing on and after May 1, 2032, in whole or in part, on May 1, 2031, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE BONDS MATURING on May 1 in the year 2046 (the “Term Bonds”) are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Bonds or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: TERM BONDS MATURING May 1, 2046 Mandatory Redemption Dates Principal Amounts May 1, 2042 $ 1,820,000 May 1, 2043 1,875,000 May 1, 2044 1,930,000 May 1, 2045 1,990,000 May 1, 2046*120,000 *Final Maturity The particular Term Bonds to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before March 15 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before March 15 of such year and which have not been made the basis for a previous reduction. 12 4141-4558-2381.3 CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. 13 4141-4558-2381.3 IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the surplus revenues to be derived from the City’s water and sewer system, after the payment of all operation and maintenance expenses thereof (the “Net Revenues”), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. IN WITNESS WHEREOF, the City has caused this Certificate to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. CITY OF SANGER, TEXAS Mayor COUNTERSIGNED: City Secretary * * * 14 4141-4558-2381.3 FORM OF COMPTROLLER’S REGISTRATION CERTIFICATE The following form of Comptroller’s Registration Certificate shall be attached or affixed to each of the Certificates initially delivered: THE STATE OF TEXAS REGISTER NO. _________ OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this certificate has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this _______________. Comptroller of Public Accounts of the State of Texas [SEAL] * * * FORM OF PAYING AGENT/REGISTRAR’S AUTHENTICATION CERTIFICATE The following form of authentication certificate shall be printed on the face of each of the Certificates other than those initially delivered: AUTHENTICATION CERTIFICATE This Certificate is one of the Certificates described in and delivered pursuant to the within-mentioned Ordinance; and, except for the Certificates initially delivered, this Certificate has been issued in exchange for or replacement of a Certificate, Certificates, or a portion of a Certificate or Certificates of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. UMB BANK, N.A. By: Authorized Signature Date of Authentication: * * * 15 4141-4558-2381.3 FORM OF ASSIGNMENT The following form of assignment shall be printed on the back of each of the Certificates: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto ______________________________________________________________________________ (Please print or type name, address, and zip code of Transferee) ______________________________________________________________________________ (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints _______________________________________ attorney to transfer such bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: Registered Owner NOTICE: The signature above must correspond to the name of the Registered Owner as shown on the face of this bond in NOTICE: Signature must be guaranteed by a every particular, without any alteration, member firm of the New York Stock Exchange enlargement or change whatsoever. or a commercial bank or trust company. * * * * 16 4141-4558-2381.3 ARTICLE V SECURITY FOR THE CERTIFICATES Section 5.1:Pledge and Levy of Taxes and Revenues. (a) To provide for the payment of principal of and interest on the Certificates, there is hereby levied, within the limits prescribed by law, for the current year and each succeeding year thereafter, while the Certificates or any part of the principal thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all taxable property within the City sufficient to pay the interest on the Certificates and to create and provide a sinking fund of not less than 2% of the principal amount of the Certificates or not less than the principal payable out of such tax, whichever is greater, with full allowance being made for tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied to the payment of principal of and interest on the Certificates by deposit to the Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund and to no other purpose. (b)The City hereby declares its purpose and intent to provide and levy a tax legally sufficient to pay the principal of and interest on the Certificates, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax. As long as any Certificates remain outstanding, all moneys on deposit in, or credited to, the Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund shall be secured by a pledge of security, as provided by law for cities in the State of Texas. (c)In addition, pursuant to the authority of Chapter 1502, Texas Government Code, as amended, the City also hereby pledges the surplus revenues to be derived from the City’s water and sewer system , after the payment of all operation and maintenance expenses thereof (the “Net Revenues”), in an amount not to exceed $1,000, to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. Section 5.2:Debt Service Fund. The Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund is hereby created as a special fund solely for the benefit of the Certificates. The City shall establish and maintain such fund at an official City depository and shall keep such fund separate and apart from all other funds and accounts of the City. Any amount on deposit in the Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund shall be maintained by the City in trust for the Registered Owners of the Certificates. Such amount, plus any other amounts deposited by the City into such fund and any and all investment earnings on amounts on deposit in such fund, shall be used only to pay the principal of, premium, if any, and interest on the Certificates. 17 4141-4558-2381.3 Section 5.3:Further Proceedings. After the Certificates to be initially issued have been executed, it shall be the duty of the Mayor to deliver the Certificates to be initially issued and all pertinent records and proceedings to the Attorney General for examination and approval. After the Certificates to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller for registration. Upon registration of the Certificates to be initially issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller’s registration certificate prescribed herein to be affixed or attached to the Certificates to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. ARTICLE VI CONCERNING THE PAYING AGENT/REGISTRAR Section 6.1:Acceptance. UMB BANK, N.A., Austin, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Certificates pursuant to the terms and provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form attached hereto as Exhibit A, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 6.2:Trust Funds. All money transferred to the Paying Agent/Registrar in its capacity as Paying Agent/Registrar for the Certificates under this Ordinance (except any sums representing Paying Agent/Registrar’s fees) shall be held in trust for the benefit of the City, shall be the property of the City and shall be disbursed in accordance with this Ordinance. Section 6.3:Certificates Presented. Subject to the provisions of Section 6.4, all matured Certificates presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Certificates shall be canceled as provided herein. Section 6.4:Unclaimed Funds Held by the Paying Agent/Registrar. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Certificates remaining unclaimed by the Registered Owner thereof after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) to the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. 18 4141-4558-2381.3 The Paying Agent/Registrar shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with this Section. Section 6.5:Paying Agent/Registrar May Own Certificates. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent/Registrar. Section 6.6:Successor Paying Agents/Registrars. The City covenants that at all times while any Certificates are Outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent/Registrar for the Certificates. The City reserves the right to change the Paying Agent/Registrar for the Certificates on not less than sixty (60) days’ written notice to the Paying Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Certificates. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail, first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar. Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE VII PROVISIONS CONCERNING SALE AND APPLICATION OF PROCEEDS OF CERTIFICATES Section 7.1:Sale of Certificates; Execution of Purchase Agreement. The Certificates are hereby sold and shall be delivered to Raymond James & Associates, Inc. for a price of $20,432,153.64 (representing the par value thereof, plus a net original issue premium of $1,943,647.85 on the Certificates, and less an underwriting discount of $126,494.21), in accordance with the terms of and conditions in the Purchase Agreement. The Purchase Agreement, substantially in the form attached hereto as Exhibit C, is hereby approved. The Mayor and other appropriate officials of the City are hereby authorized and directed to execute the Purchase Agreement on behalf of the City, and the Mayor and all other appropriate officials, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Certificates. It is hereby found and determined that the terms of the sale of the Certificates contained in the Purchase Agreement are the most advantageous terms reasonably obtainable by the City at this time. Section 7.2:Approval, Registration and Delivery. The Mayor is hereby authorized to have control and custody of the Certificates and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor and other officers and employees of the City are hereby authorized and directed to make such certifications and to execute such instruments as may be necessary to accomplish the delivery of the Certificates and to assure the investigation, examination and approval thereof by the Attorney General and the registration of the initial Certificates by the Comptroller. Upon registration of the Certificates, the Comptroller (or the Comptroller’s certificates clerk or an assistant certificates clerk lawfully designated in writing to 19 4141-4558-2381.3 act for the Comptroller) shall manually sign the Comptroller’s Registration Certificates prescribed herein to be attached or affixed to each Certificates initially delivered and the seal of the Comptroller shall be impressed or printed or lithographed thereon. Section 7.3:Offering Documents; Ratings. The City hereby approves the form and contents of the Preliminary Official Statement and the final Official Statement, dated as of the date hereof, relating to the Certificates, and any addenda, supplement or amendment thereto, and ratifies and approves the distribution of such Preliminary Official Statement substantially in the form attached hereto as Exhibit B and Official Statement in the offer and sale of the Certificates and in the reoffering of the Certificates by the Underwriter, with such changes therein or additions thereto as the officials executing same may deem advisable, such determination to be conclusively evidenced by their execution thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby authorized and directed to attest, the final Official Statement. It is further hereby officially found, determined and declared that the statements and representations contained in the Preliminary Official Statement and final Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council, and that, as of the date thereof, the Preliminary Official Statement was an official statement of the City with respect to the Certificates that was deemed “final” by an authorized official of the City except for the omission of no more than the information permitted by subsection (b)(1) of Rule 15c2-12 of the Securities and Exchange Commission. Further, the City Council hereby ratifies, authorizes and approves the actions of the Mayor, the City’s financial advisor and other consultants in seeking a rating on the Certificates from Moody’s Investors Service, Inc. and such actions are hereby ratified and confirmed. Section 7.4:Application of Proceeds of Certificates. Proceeds from the sale of the Certificates shall, promptly upon receipt by the City, be applied as follows: (1)$161,250.00 of shall be applied to pay expenses arising in connection with the issuance of the Certificates; (2)$19,999,632.81 of shall be applied to pay cost of the project, and (3)Any remaining proceeds shall be deposited into the Debt Service Fund. Section 7.5:Covenants to Maintain Tax Exempt Status. (a)Definitions. When used in this Section, the following terms have the following meanings: “Code” means the Internal Revenue Code of 1986, as amended by all legislation, if any, enacted on or before the Issue Date. “Computation Date” has the meaning stated in section 1.148-1(b) of the Regulations. “Gross Proceeds” has the meaning stated in section 1.148-1(b) of the Regulations. 20 4141-4558-2381.3 “Investment” has the meaning stated in section 1.148-1(b) of the Regulations. “Issue Date” for the Certificates or other obligations of the City is the respective date on which such obligations of the City are delivered against payment therefor. “Net Sale Proceeds” has the meaning stated in section 1.148-1(b) of the Regulations. “Nonpurpose Investment” has the meaning stated in section 1.148-1(b) of the Regulations. “Proceeds” has the meaning stated in section 1.148-1(b) of the Regulations. “Rebate Amount” has the meaning stated in section 1.148-3 of the Regulations. “Regulations” means the temporary or final Income Tax Regulations applicable to the Certificates issued pursuant to sections 141 through 150 of the Code. Any reference to a section of the Regulations shall also refer to any successor provision to such section hereafter promulgated by the Internal Revenue Service pursuant to sections 141 through 150 of the Code and applicable to the Certificates. “Yield of” (1) any Investment shall be computed in accordance with section 1.148-5 of the Regulations, and (2) the Certificates shall be computed in accordance with section 1.148-4 of the Regulations. (b)Not to Cause Interest to Become Taxable. The City shall not use, permit the use of or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which, if made or omitted, respectively, would cause the interest on any Certificates to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City shall have received a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Certificate, the City shall comply with each of the specific covenants in this Section. (c)No Private Use or Private Payments. Except as permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall, at all times prior to the last stated maturity of the Certificates, (1)exclusively own, operate, and possess all property the acquisition, construction, or improvement of which is to be financed directly or indirectly with Gross Proceeds of the Certificates and not use or permit the use of such Gross 21 4141-4558-2381.3 Proceeds or any property acquired, constructed, or improved with such Gross Proceeds in any activity carried on by any person or entity other than a state or local government, unless such use is solely as a member of the general public, or (2)not directly or indirectly impose or accept any charge or other payment for use of Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with such Gross Proceeds other than taxes of general application and interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (d)No Private Loan. Except to the extent permitted by section 141 of the Code and the regulations and rulings thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, Gross Proceeds are considered to be “loaned” to a person or entity if (1) property acquired, constructed or improved with Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes, (2) capacity in or service from such property is committed to such person or entity under a take-or-pay, output, or similar contract or arrangement, or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or such property are otherwise transferred in a transaction which is the economic equivalent of a loan. (e)Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the final stated maturity or final payment of the Certificates, directly or indirectly invest Gross Proceeds of such Certificates in any Investment (or use such Gross Proceeds to replace money so invested), if as a result of such investment the Yield of all Investments allocated to such Gross Proceeds whether then held or previously disposed of, exceeds the Yield on the Certificates. (f)Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Certificates to be federally guaranteed within the meaning of section 149(b) of the Code and the regulations and rulings thereunder. (g)Information Report. The City shall timely file with the Secretary of the Treasury the information required by section 149(e) of the Code with respect to the Certificates on such forms and in such place as such Secretary may prescribe. (h)Payment of Rebate Amount. Except to the extent otherwise provided in section 148(f) of the Code and the regulations and rulings thereunder, the City shall: (1)account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain 22 4141-4558-2381.3 all records of such accounting for at least six years after the final Computation Date. The City may, however, to the extent permitted by law, commingle Gross Proceeds of the Certificates with other money of the City, provided that the City separately accounts for each receipt and expenditure of such Gross Proceeds and the obligations acquired therewith, (2)calculate the Rebate Amount with respect to the Certificates, not less frequently than each Computation Date, in accordance with rules set forth in section 148(f) of the Code, section 1.148-3 of the Regulations, and the rulings thereunder and shall maintain a copy of such calculations for at least six years after the final Computation Date, (3)as additional consideration for the purchase of the Certificates by the initial purchaser thereof and the loan of the money represented thereby, and in order to induce such purchase by measures designed to ensure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, pay to the United States the amount described in paragraph (2) above at the times, in the installments, to the place, in the manner and accompanied by such forms or other information as is or may be required by section 148(f) of the Code and the regulations and rulings thereunder, and (4)exercise reasonable diligence to assure that no errors are made in the calculations required by paragraph (2) and, if such error is made, to discover and promptly to correct such error within a reasonable amount of time thereafter, including payment to the United States of any interest and any penalty required by the Regulations. (i)Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the final stated maturity or final payment of the Certificates, enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm’s length and had the Yield of the Certificates not been relevant to either party. (j)Not Hedge Bonds. The City will not invest more than 50 percent of the Proceeds of the Certificates in Nonpurpose Investments having a guaranteed yield for four years or more. On the Issue Date of the Certificates, the City will reasonably expect that at least 85 percent of the Net Sale Proceeds will be used to carry out the governmental purpose of such series within three years after such Issue Date. (k)The City will not issue or use the Certificates as part of an “abusive arbitrage device” (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Certificates are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax- 23 4141-4558-2381.3 exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (l)Proper officers of the City charged with the responsibility for issuing the Certificates are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the date of issuance of the Certificates and stating whether there are facts, estimates or circumstances that would materially change the City’s expectations. On or after the date of issuance of the Certificates, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. (m)The covenants and representations made or required by this Section are for the benefit of the Certificate holders and any subsequent Certificate holder, and may be relied upon by the Certificate holders and any subsequent Certificate holder and bond counsel to the City. (n)In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Certificates to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City’s representations and obligations under the covenants and provisions of this Section 7.5 all survive the defeasance and discharge of the Certificates for as long as such matters are relevant to the exclusion of interest on the Certificates from the gross income of the owners for federal income tax purposes. Section 7.6:Related Matters. In order that the City shall satisfy in a timely manner all of its obligations under this Ordinance, the Mayor, the Mayor, City Secretary and all other appropriate officers, agents, representatives and employees of the City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the issuance and delivery of the Certificates, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, notices, and other documents as may be reasonably necessary to satisfy the City’s obligations under this Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of this Ordinance. ARTICLE VIII CONTINUING DISCLOSURE UNDERTAKING Section 8.1:Continuing Disclosure Undertaking. The City shall provide annually to the MSRB, within six (6) months after the end of each fiscal year and in an electronic format prescribed by the MSRB and available via the Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org, financial information and operating data with respect to the City of the general type described in the Official Statement, being the information described in Exhibit D attached hereto. Any financial statements so to be provided shall be (a) prepared in accordance with generally accepted accounting principles for governmental units as prescribed 24 4141-4558-2381.3 by the Government Accounting Standards Board from time to time, as such principles may be changed from time to time to comply with state or federal law or regulation and (b) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not available at the time the financial information and operating data must be provided, then the City shall provide unaudited financial statements for the applicable fiscal year to the MSRB and shall provide to the MSRB audited financial statements, when and if the same become available. If the City changes its Fiscal Year, it will notify the MSRB of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Article. The financial information and operating data to be provided pursuant to this Article may be set forth in full in one or more documents or may be included by specific reference to documents (i) available to the public on the MSRB’s internet web site or (ii) filed with the SEC. Section 8.2:Material Event Notices. The City shall notify the MSRB in an electronic format prescribed by the MSRB, in a timely manner (not in excess of ten (10) days after the occurrence of the event), of any of the following events with respect to the Certificates: (i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Certificates, or other material events affecting the tax status of the Certificates; (vii) Modifications to rights of holders of the Certificates, if material; (viii) Certificate calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the Certificates, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the City; (xiii) The consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and 25 4141-4558-2381.3 (xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material. The City shall notify the MSRB in an electronic format prescribed by the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1 of this Ordinance by the time required by such Section. Section 8.3:Identifying Information. All documents provided to the MSRB shall be accompanied by identifying information, as prescribed by the MSRB. Section 8.4:Limitations, Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an “obligated person” with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by this Article of any Bond calls and defeasance that cause the City to be no longer such an “obligated person.” The provisions of this Article are for the sole benefit of the Holders and beneficial owners of the Certificates, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, principal statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City’s financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under this Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities law. The provisions of this Section may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or 26 4141-4558-2381.3 sell the Certificates in the primary offering of the Certificates 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 (2) either (a) the Registered Owners of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the Outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the Registered Owners and beneficial owners of the Certificates. If the City so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with this Section an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this Section if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Section in its discretion in any other manner or circumstance, but in any case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. Section 8.5:Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: “MSRB” means the Municipal Securities Rulemaking Board. “Rule” means SEC Rule 15c2-12, as amended from time to time. “SEC” means the United States Securities and Exchange Commission. ARTICLE IX MISCELLANEOUS Section 9.1:Defeasance. Subject to Section 10.8 hereof, the City may defease the provisions of this Ordinance and discharge its obligations to the Registered Owners of any or all of the Certificates to pay the principal of and interest thereon in any manner permitted by law, including by depositing with the Paying Agent/Registrar or with the Comptroller of Public Accounts of the State of Texas either: (a) cash in an amount equal to the principal amount of such Certificates plus interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of 27 4141-4558-2381.3 refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the issuer 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, which, in the case of (i), (ii) or (iii), may be in book-entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Certificates are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Certificates shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to the City. Section 9.2:Ordinance a Contract - Amendments. This Ordinance shall constitute a contract with the Registered Owners from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51% of the principal amount of the Certificates then Outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Registered Owners of Outstanding Certificates, no such amendment, addition, or rescission shall (i) extend the time or times of payment of the principal of and interest on the Certificates, 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 or interest on the Certificates, (ii) give any preference to any Certificate over any other Certificate, or (iii) reduce the aggregate principal amount of Certificates required to be held by Registered Owners for consent to any such amendment, addition, or rescission. Section 9.3:Legal Holidays. In any case where the date interest accrues and becomes payable on the Certificates or principal of the Certificates matures or the date fixed for redemption of any Certificates or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal need not be made on such date, or the Record Date shall not occur on such date, but payment may be made or the Record Date shall occur on the next succeeding day which is not in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close with the same force and effect as if (i) made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment or (ii) the Record Date had occurred on the last business day of that calendar month. 28 4141-4558-2381.3 Section 9.4:No Recourse Against City Officials. No recourse shall be had for the payment of principal of or interest on any Certificates or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificates. Section 9.5:Further Proceedings. The Mayor, Mayor Pro-Tem, City Secretary and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. Section 9.6:Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.7:Open Meeting. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 9.8:Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.9:Effective Date. This Ordinance shall be in force and effect from and after its passage on the date shown below. 4141-4558-2381.3 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Tab No. 7 4141-4558-2381.3 EXHIBIT B PRELIMINARY OFFICIAL STATEMENT See Tab No. 4 4141-4558-2381.3 EXHIBIT C PURCHASE AGREEMENT See Tab No. 6 4141-4558-2381.3 EXHIBIT D DESCRIPTION OF ANNUAL FINANCIAL INFORMATION The following information is referred in Article VIII of this Ordinance. Annual Financial Statements and Operating Data The financial information and operating data with respect to the City to be provided annually in accordance with such Article are as specified (and included in the Appendix or under the headings of the Official Statement referred to) below: (1) The financial statements of the City, portions of which are appended to the Official Statement as Appendix D, but for the most recently concluded fiscal year. (2) The information included under Tables 1 through 11, inclusive of Appendix A of the Official Statement. Accounting Principles The accounting principles referred to in such Article are generally those described in Appendix D to the Official Statement as such principles may be changed from time to time to comply with state law or regulation. PRELIMINARY OFFICIAL STATEMENT Dated: April 15, 2021 NEW ISSUES: Book-Entry-Only S&P Rating AA” (See “RATINGS” herein) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Certificates (as defined below) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the Certificates is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Certificates. (see “TAX MATTERS – The Certificates” herein). Interest on the Bonds (as defined below) is not excludable for federal income tax purposes. (see “TAX MATTERS – The Bonds” herein). CITY OF SANGER, TEXAS (Denton County, Texas) $19,995,000* COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2021A $2,855,000* GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B Dated Date: May 1, 2021 Due: August 1 and May 1, as shown on pages ii and iii PAYMENT TERMS… Interest on the $19,995,000* City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and the $2,855,000* City of Sanger Texas General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds” and collectively with the Certificates, the “Obligations”), will accrue from their delivery date to the underwriters listed below (the “Underwriters”). Interest on the Bonds will be payable February 1 and August 1 of each year, commencing on August 1, 2021 and interest on the Certificates will be payable November 1 and May 1 of each year, commencing on November 1, 2021. The Obligations will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal of the Obligations will be payable to the registered owner (the “Owner”) at maturity or prior redemption upon presentation at the principal corporate office of the paying agent/registrar (the “Paying Agent/Registrar”), initially UMB Bank, N.A., Austin, Texas. The Obligations will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will be responsible for distributing the principal and interest payments to the participating members of DTC and the participating members will be responsible for distributing the payment to the owners of beneficial interests in the Obligations. See “BOOK-ENTRY-ONLY SYSTEM” herein. PURPOSE… Proceeds from the sale of the Obligations will be used as described herein under “PLAN OF FINANCE – Purpose of Certificates”, and “PLAN OF FINANCE – Purpose of the Bonds.” AUTHORITY FOR ISSUANCE;SECURITY…The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas (the “State”), particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance to be adopted by the City Council on April 19, 2021 (the “Certificate Ordinance”). (See “THE OBLIGATIONS – Authority for Issuance”). The Certificates are direct obligations of the City of Sanger, Texas (the “City”), payable as to principal and interest from a combination of (1) an ad valorem tax levied annually, within the limits prescribed by law, against all taxable property in the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City’s water and sewer system as provided in the Certificate Ordinance. (See “THE OBLIGATIONS – Security for the Obligations”). The Bonds are being issued pursuant to the Constitution and general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council on March 1, 2021 (the “Bond Ordinance”) and a pricing certificate executed by a designated pricing officer (the “Pricing Certificate”). (See “THE OBLIGATIONS – Authority for Issuance”). The Bonds will constitute direct obligations of the City, payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed by law as provided in the Bond Ordinance. (See “THE OBLIGATIONS – Security for the Obligations”). See Principal Amounts, Maturities, Interest Rates, and Prices on pages ii and iii SEPARATE ISSUES…The Certificates and the Bonds are being offered by the City concurrently under a common Official Statement. The Certificates and the Bonds are separate and distinct securities offerings being issued and sold independently except for this common Official Statement, and while the Certificates and the Bonds share common attributes, each issue is separate from, and is not contingent on the issuance of the other, and should be reviewed and analyzed independently, including its terms for repayment, the security for its payment, the rights of holders, the tax status of its interest, and various other features. LEGALITY…The Obligations are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and Orrick, Herrington & Sutcliffe LLP, Bond Counsel, Houston, Texas. Certain legal matters will be passed upon for the Underwriters by its counsel, Naman Howell Smith & Lee, PLLC, Austin, Texas. DELIVERY…The Obligations are expected to be available for delivery to the Underwriters through DTC on or about May 7, 2021*. RAYMOND JAMES SAMCO CAPITAL OPPENHEIMER &CO *Preliminary, subject to changeThis Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. ii CITY OF SANGER, TEXAS $19,995,000* COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A MATURITY SCHEDULE* Maturity (05/1) Principal Amount Interest Rate Initial Yield/Price(a)CUSIP(b) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 REDEMPTION…The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after May 1, 20__, in whole or in part on May 1, 20__, or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. Certain of the Certificates may be subject to mandatory sinking fund redemption in the event the Underwriters elect to aggregate two or more maturities as term Certificates. (See “THE OBLIGATIONS – Optional Redemption” and “THE OBLIGATIONS – Mandatory Redemption”). ____________________________ * Preliminary, subject to change (a) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by Standard and Poor’s Financial Services LLC on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Certificates. Neither the City, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. iii CITY OF SANGER, TEXAS $2,855,000* GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B MATURITY SCHEDULE* Maturity (08/1) Principal Amount Interest Rate Initial Yield/Price(a)CUSIP(b) 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 REDEMPTION…The City reserves the right, at its option, to redeem the Bonds having stated maturities on and after August 1, 20__, in whole or in part on August 1, 20__, or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. Certain of the Bonds may be subject to mandatory sinking fund redemption in the event the Underwriters elect to aggregate two or more maturities as term Bonds. (See “THE OBLIGATIONS – Optional Redemption” and “THE OBLIGATIONS – Mandatory Redemption”). ____________________________ * Preliminary, subject to change (a) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by Standard and Poor’s Financial Services LLC on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Bonds. Neither the City, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. iv CITY OF SANGER, TEXAS CITY COUNCIL Mayor Thomas Muir Mayor Pro-Tem Gary Bilyeu Councilmember Place 1 Marissa Barrett Councilmember Place 3 Dennis Dillon Councilmember Place 4 Allen Chick Councilmember Place 5 David Clark ADMINISTRATIVE OFFICERS Jeriana Stanton Interim City Manager Clayton Gray Finance Director Hugh Coleman City Attorney CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Orrick, Herrington & Sutcliffe LLP, Houston, Texas Bond Counsel Brooks Watson & Co., Houston, Texas Independent Auditor Government Capital Securities Corporation, Southlake, Texas Financial Advisor For additional information regarding the City, please contact: Jeriana Stanton Interim City Manager City of Sanger 502 Elm St. Sanger, Texas 76266 (940) 458-7930 jstanton@sangertexas.org Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817) 722-0220 tchristensen@govcapsecurities.com v USE OF INFORMATION IN OFFICIAL STATEMENT For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as amended (the “Rule”), and in effect on the date of the Preliminary Official Statement, this document constitutes an “Official Statement” of the City with respect to the Obligations that has been deemed “final” by the City as of this date except for the omissions of no more than the information permitted by the Rule. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of the Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See “CONTINUING DISCLOSURE OF INFORMATION” for a description of the City’s undertaking to provide certain information on a continuing basis. THE OBLIGATIONS ARE EXEMPTED FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The agreements of the City and others related to the Obligations are contained solely in the contracts described herein. Neither this Official Statement nor any other statement made in connection with the offer or sale of the Obligations is to be construed as constituting an agreement with the purchasers of the Obligations. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL SCHEDULES AND APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information set forth in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Neither the City, the Financial Advisor nor the Underwriters make any representation as to the accuracy, completeness or adequacy of the information contained in this Official Statement regarding The Depository Trust Company or its Book-Entry-Only System. vi TABLE OF CONTENTS SELECTED FINANCIAL INFORMATION ..................vii INTRODUCTORY STATEMENT ................................... 1 plan of finance ................................................................. 1 Purpose of the Certificates ............................................ 1 Purpose of the Bonds ................................................... 1 THE OBLIGATIONS ...................................................... 1 Authorization ............................................................... 1 Security for the Obligations .......................................... 2 Optional Redemption ................................................... 2 Mandatory Redemption ................................................ 2 Notice of Redemption .................................................. 2 Refunded Obligations ................................................... 3 Sources and Uses of Funds ........................................... 3 GENERAL INFORMATION REGARDING THE Obligations ................................................................ 4 General Description ..................................................... 4 Legality ....................................................................... 4 Defeasance .................................................................. 4 Amendments to the Ordinance ...................................... 5 OWNERSHIP .................................................................. 5 OWNER’S REMEDIES ................................................... 6 BOOK-ENTRY-ONLY SYSTEM .................................... 6 REGISTRATION, TRANSFER AND EXCHANGE ......... 8 Paying Agent/Registrar ................................................ 8 Future Registration....................................................... 8 Record Date for Interest Payment ................................. 9 Limitation on Transfer of Obligations ........................... 9 Replacement of Obligations.......................................... 9 AD VALOREM PROPERTY TAXATION ...................... 9 Valuation of Taxable Property ...................................... 9 State Mandated Homestead Exemptions...................... 10 Local Option Homestead Exemptions ......................... 10 Local Option Freeze for the Elderly and Disabled ....... 10 Personal Property ....................................................... 11 Freeport Exemptions .................................................. 11 Other Exempt Property ............................................... 11 Tax Increment Financing Zones .................................. 11 Tax Abatement Agreements ....................................... 11 Public Hearing and Maintenance and Operation Tax Rate Limitations ............................................ 12 Debt Tax Rate Limitations.......................................... 13 City’s Rights in the Event of Tax Delinquencies ......... 13 Issuer and Taxpayer Remedies.................................... 14 City Application of the Property Tax Code.................. 14 RETIREMENT PLAN ................................................... 14 INVESTMENT POLICIES ............................................ 14 Accounting Principles Generally Accepted in the United States ........................................................ 14 Legal Investments ...................................................... 14 Investment Policies .................................................... 16 Additional Provisions ................................................. 17 Current Investments ................................................... 17 INFECTIOUS DISEASE OUTBREAK – COVID-19 ..... 17 RATINGS ..................................................................... 18 PENDING LITIGATION ............................................... 18 LEGAL MATTERS ....................................................... 18 TAX MATTERS ........................................................... 19 The Certificates .......................................................... 19 The Bonds ................................................................. 20 LEGAL INVESTMENTS IN TEXAS ............................ 23 REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE ................................................... 23 CONTINUING DISCLOSURE OF INFORMATION ..... 23 Annual Reports .......................................................... 24 Material Event Notices ............................................... 24 Limitations and Amendments ..................................... 25 Compliance with Prior Undertakings .......................... 25 VERIFICATION OF ARITHMETICAL COMPUTATIONS................................................... 25 OTHER INFORMATION .............................................. 26 Financial Advisor ....................................................... 26 Audited Financial Statements ..................................... 26 Underwriting ............................................................. 26 Forward-Looking Statements ...................................... 26 Concluding Statement ................................................ 27 Summary of Refunded Obligations Schedule I Financial Information Regarding the City of Sanger, Texas Appendix A General Information Regarding the City of Sanger, Texas Appendix B Form of Opinions of Bond Counsel Appendix C Audited Financial Statements for the Fiscal Year Ended September 30, 2020 Appendix D vii SELECTED FINANCIAL INFORMATION (Unaudited) 2020-2021 Certified Taxable Assessed Valuation………………………………………………... $792,348,389 (a) City Debt: Outstanding Tax Supported Debt (as of Sept. 30, 2020)………………….….$20,750,000 Plus: The Certificates……………………………………………………………...$19,995,000* Plus: The Bonds $2,855,000* Less: The Refunded Obligations $2,505,000* Total Tax Supported Debt………………………………………………………….$41,095,000* Debt Service Fund Balance (as of Sept. 30,2020)…………………………………………..$476,286 % of 2020-21 Assessed Valuation 2020 Per Capita (8,235) Debt Ratios: Direct Tax Supported Debt…………….5.19%*$4,990* 2020-21 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation $0.605456 Debt Service ………………………………………………………………………$0.073644 Total ………………………………………………………………………………$0.679100 Estimated Annual Debt Service Requirements…………………………………………….. Average……………………………………………………………………………$2,293,110* Maximum (2026)………………………………………………………………….$2,577,232* Tax Collections Tax Year 2019 (fiscal year ending Sept 30,2020)100.18% Total Collections…………………………………………………………………..100.18% _______________________ *Preliminary, subject to change. (a)Provided by the Denton Central Appraisal District (the “Appraisal District”) and net of exemptions. Such value is further subject to changes as additions, corrections and deletions are made to the tax roll. 1 OFFICIAL STATEMENT RELATING TO CITY OF SANGER, TEXAS (Denton County, Texas) $19,995,000* COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A $2,855,000* GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B INTRODUCTORY STATEMENT This Official Statement, which includes the cover page, the schedules and the appendices hereto, provides certain information regarding the issuance by the City of Sanger, Texas (the “City”) of its $19,995,000* Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and its $2,855,000* General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds”). The Certificates and the Bonds are collectively referred to herein as the “Obligations.” The City is a political subdivision of the State of Texas (the “State”) and a municipal corporation organized and existing under the laws of the State. For information regarding the City, see Appendices A and B of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue to be repeated in the future. PLAN OF FINANCE Purpose of the Certificates Proceeds from the sale of the Certificates will be used for the following purposes: (i) expansion and improvements to the City’s water and sewer system (the “System”); (ii) system renovations and line relocations to the City’s electric utility system; (iii) city-wide street repairs and improvements; and (iv) professional services related thereto. Purpose of the Bonds Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds. THE OBLIGATIONS Authorization The Certificates are being issued pursuant to the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance adopted by the City Council (the “Council”) of the City (the “Certificate Ordinance”). The Bonds are issued pursuant to the general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance (the “Bond Ordinance”) adopted by the Council authorizing the issuance of the Bonds. As permitted by the Provisions of Chapter 1207, the Council, in the Bond Ordinance, delegated the authority to certain City Officials (each a “Pricing Officer”) to execute approval of a pricing certificate establishing the pricing terms for the bonds (the “Pricing Certificate”). Upon execution of the Pricing Certificate the Pricing Certificate and the Bond Ordinance shall be collectively referred to herein as the Bond Ordinance. *Preliminary, subject to change. 2 The Certificate Ordinance and the Bond Ordinance each may be referred to individually herein as an “Ordinance” or collectively as the “Ordinances.” Security for the Obligations The Certificates are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City, as well as a limited (in an amount not to exceed $1,000) pledge of surplus revenues of the City’s water and sewer system as provided in the Certificate Ordinance. The Bonds are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City as provided in the Bond Ordinance. Optional Redemption The City reserves the right, at its option, to redeem Bonds having stated maturities on and after August 1, 20__, in whole or in part, in integral multiples of $5,000, on August 1, 20__ or any date thereafter, and Certificates having stated maturities on or after May 1, 20__, in whole or in part, in integral multiples of $5,000, on May 1, 20__, such redemption date or dates to be fixed by the City, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. If less than all of the Obligations are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar (as defined herein) to select by lot the Obligations, or portions thereof, within each maturity to be redeemed. Mandatory Redemption Certain of the Certificates and Bonds may be subject to mandatory sinking fund redemption in the event the Underwriters elect to aggregate two or more consecutive maturities as term Certificates and term Bonds, respectively. Notice of Redemption Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of an Obligation 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. If notice is so given and sufficient funds are provided for the payment of the redemption price of the Obligations, interest shall cease to accrue after the date fixed for redemption whether or not the Obligations have been submitted for payment. 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, AND THE FUNDS NECESSARY TO REDEEM SUCH OBLIGATIONS HAVING BEEN PROVIDED, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. The Paying Agent/Registrar and the City, so long as a Book-Entry Only System is used for the Obligations, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Obligations only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Obligations called for redemption or any other action premised on any such notice. Redemption of portions of the Obligations by the City will reduce the outstanding principal amount of such Obligations held by DTC. In such event, DTC may implement, through its Book-Entry Only System, a redemption of such Obligations held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Obligations from the beneficial owners. Any such selection of Obligations to be redeemed will not be governed by the Ordinance and will not be conducted by the City or the Paying Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants, or the persons for whom DTC participants act as nominees, with respect to the payments on the Obligations or the providing of notice to DTC participants, indirect participants, or beneficial owners 3 of the selection of portions of the Obligations for redemption (see “THE OBLIGATIONS – Book-Entry Only System”). Refunded Obligations The Bond Ordinance provides that from a portion of the proceeds of the sale of the Bonds, the City will deposit with UMB Bank, N.A., Austin, Texas (the “Escrow Agent”), pursuant to an escrow agreement (the “Escrow Agreement”) between the City and Escrow Agent, an amount which when added to the investment earnings thereon, will be sufficient to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by the Escrow Agent in an escrow account (the “Escrow Fund”) and used to purchase a portfolio of securities authorized by Section 1207.062, Texas Government Code, which authorized securities include direct noncallable obligations of the United States and noncallable obligations of an agency or instrumentality of the United States rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent and guaranteed by the full faith and credit of the United States of America (the “Federal Securities”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. BLX Group LLC, will verify at the time of delivery of the Bonds to the Underwriters that 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 Obligations on their respective scheduled redemption date and maturity dates. Such maturing principal of and interest on the Federal Securities will not be available to pay the debt service on the Bonds (see “VERIFICATION OF ARITHMETICAL COMPUTATIONS”). By the deposit of the Federal Securities and cash, if any, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Obligations pursuant to the terms of Chapter 1207, Texas Government Code, and the Order authorizing the issuance of the Refunded Obligations. As a result of such deposit and in reliance upon the report of BLX Group LLC, firm banking arrangements will have been made for the discharge and final payment of the Refunded Obligations, and such Refunded Obligations will be deemed to be fully paid and no longer outstanding except for the purpose of being paid from funds provided therefor, in the Escrow Agreement. In the Escrow Agreement, the City covenants to make timely deposits with the Escrow Agent from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason the cash balances on deposit or scheduled to be on deposit in the Escrow Fund are insufficient to make such payment. Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount $______________ Premium ______________ Total Sources of Funds $______________ Uses Deposit to Project Fund $______________ Costs of Issuance ______________ Underwriter’s Discount _______________ Total Uses of Funds $______________ 4 The proceeds from the sale of the Bonds will be applied approximately as follows: Sources Principal Amount $______________ Premium ______________ Issuer Contribution ______________ Total Sources of Funds $______________ Uses Deposit to Escrow Fund $______________ Costs of Issuance ______________ Underwriter’s Discount _______________ Total Uses of Funds $______________ GENERAL INFORMATION REGARDING THE OBLIGATIONS General Description The Obligations will be dated May 1, 2021 (the “Dated Date”), and will be issued in fully registered form in principal denominations of $5,000 or any integral multiple thereof. The Obligations will bear interest from the date of delivery to the underwriters listed on pages ii and iii hereof (the “Underwriters”), and interest on the Bonds will be paid semiannually on each February 1 and August 1, commencing August 1, 2021 and on the Certificates on each November 1 and May 1, commencing November 1, 2021. Interest will accrue on the Obligations on the basis of a 360-day year consisting of twelve 30-day months. The Obligations will be issued as book-entry only securities pursuant to arrangements made with The Depository Trust Company, New York, New York. See “BOOK-ENTRY- ONLY SYSTEM.” Principal of the Obligations will be payable to the registered owners (the “Owners”) at maturity or prior redemption upon presentation and surrender of such Obligations at the principal corporate office of the paying agent/registrar (the “Paying Agent/Registrar”), initially UMB Bank, N.A., Austin, Texas. Interest on the Obligations will be payable by check dated as of the interest payment date and mailed by the Paying Agent/Registrar to Owners as shown on the records of the Paying Agent/Registrar on the Record Date (see “REGISTRATION, TRANSFER AND EXCHANGE – Record Date for Interest Payment” herein), or by such other customary banking arrangement, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. If the date for the payment of the principal of or interest on an Obligation shall be a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. The Obligations will mature on the dates, in the amounts and bear interest at the rates as set forth on pages ii and iii of this Official Statement. Legality The Obligations are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel. (See “LEGAL MATTERS” and Appendix C – “Form of Opinions of Bond Counsel”). Defeasance The Ordinances provide that the City may defease the Obligations and discharge its obligation to the holders of any or all of the Obligations to pay the principal of and interest thereon in any manner now or hereafter permitted by law, including by depositing with the Registrar or with the Comptroller of the State of Texas either: (a) cash in an 5 amount equal to the principal amount of and interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the Board approves the proceedings authorizing the issuance of refunding Obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the Board approves the proceedings authorizing the issuance of refunding Obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent, which, in the case of (i), (ii), or (iii), may be in book entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Obligations are to be redeemed prior to their respective dates of maturity, provision shall be made for the giving of notice of redemption as provided in the Ordinance. Any surplus amount not required to accomplish such defeasance shall be returned to the City. Upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorize. Amendments to the Ordinance In the Ordinances, the City has reserved the right to amend such Ordinance without the consent of any holder of the Obligations in any manner not detrimental to the interests of the holders of the Obligations, including the curing of any ambiguity, defect or omission therein. The Ordinances further provide that the holders of the Obligations aggregating in principal amount 51% of the outstanding Obligations shall have the right from time to time to approve any amendment not described above to the Ordinance; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Obligations no amendment may be made for the purpose of: (i) extend the time or times of payment of the principal of and interest on the Obligations, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Obligations, (ii) give any preference to any Obligation over any other Obligation, or (iii) reduce the aggregate principal amount of Obligations required to be held by Registered Owners for consent to any such amendment, addition, or rescission. Reference is made to the Ordinances for further provisions relating to the amendment thereof. OWNERSHIP The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Obligation is registered as the absolute owner of such Obligation for the purpose of making and receiving payment of principal and interest, and for all other purposes, whether or not such Obligation is overdue, and neither the City nor the Paying Agent/Registrar will be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the owner of any Obligation in accordance with the Ordinances will be valid and effectual and will discharge the liability of the City and the Paying Agent/Registrar upon such Obligation to the extent of the sums paid. 6 OWNER’S REMEDIES The Ordinances do not provide for the appointment of a trustee to represent the interests of the Obligation holders upon any failure of the City to perform in accordance with the terms of the Ordinances or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinances. Furthermore, the Ordinances do not establish specific events of default with respect to the Obligations and, under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the Ordinances. A registered owner of Obligations could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Obligations or failure of the City to observe any covenant; however, such judgment could not be satisfied by execution against any property of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner’s only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to make such payment or observe and perform such covenants, obligations or conditions. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (“Chapter 9”). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligation holders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company (“DTC”), New York, New York, while the Obligations 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, the Financial Advisor, and the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully registered Obligations 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 the Obligations, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world’s largest securities 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct 7 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 Obligations. 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 is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a Standard & Poor’s rating of “AA+”. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligation (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Obligations are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Obligations representing their ownership interests in Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest, and redemption payments on the Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar, on the 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, the Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest, and 8 redemption payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Obligations at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Obligations 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, physical Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry Only System and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. The information in this section concerning DTC and DTC’s book-entry-only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar UMB Bank, N.A., Austin, Texas has been named to serve as initial Paying Agent/Registrar for the Obligations. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. If the City replaces the Paying Agent/Registrar, such Paying Agent/Registrar shall, promptly upon the appointment of a successor, deliver the Paying Agent/Registrar’s records to the successor Paying Agent/Registrar, and the successor Paying Agent/Registrar shall act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the City shall be a commercial bank; a trust company organized under applicable law; or other entity duly qualified and legally authorized to serve and perform the duties of the Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligations by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In the event the Book-Entry Only System should be discontinued, interest on the Obligations will be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (hereinafter defined), and such interest will be paid (i) by check sent United States mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying Agent/Registrar or (ii) by such other method, acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner. Principal and redemption payments of the Obligations will be paid to the registered owner at the stated maturity or earlier redemption upon presentation to the designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal or interest on the Obligations is a Saturday, Sunday, a legal holiday, or a day when banking institutions in the city where the designated payment/transfer office of the Paying Agent/Registrar is located are authorized to close, then the date for such payment will be the next succeeding day which is not such a day, and payment on such date will have the same force and effect as if made on the date payment was due. So long as Cede & Co. is the registered owner of the Obligations, principal, interest, and redemption payments on the Obligations will be made as described in “BOOK-ENTRY ONLY SYSTEM” above. Future Registration In the event the book-entry only system should be discontinued, printed Obligations will be delivered to the Owners and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the 9 execution of an assignment form on the Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Obligation will be delivered by the Paying Agent/Registrar in lieu of the Obligation 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 at the Owner’s request, risk and expense. New Obligations issued in an exchange or transfer of Obligations will be delivered to the registered Owner or assignee of the Owner after the receipt of the Obligations to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be of like kind and in authorized denominations and for a like aggregate principal amount as the Obligation or Obligations surrendered for exchange or transfer. See “BOOK-ENTRY-ONLY SYSTEM” for a description of the system to be utilized initially in the settlement and transfer of the Obligations. Record Date for Interest Payment The record date (“Record Date”) for the interest payable on any interest payment date is the close of the 15th day of the month next preceding such interest payment date, as specified in the Ordinances. In the event of a nonpayment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (the “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 (the “Special Payment Date” which shall be 15 days after the Special Record Date) shall be sent at least 5 days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of an Obligation appearing on the 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. Limitation on Transfer of Obligations Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Obligation, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. Replacement of Obligations If any Obligation is mutilated, destroyed, stolen or lost, a new Obligation in the same principal amount as the Obligation so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Obligation, such new Obligation will be delivered only upon surrender and cancellation of such mutilated Obligation. In the case of any Obligation issued in lieu of and in substitution for an Obligation which has been destroyed, stolen or lost, such new Obligation will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfactory to them that such Obligation has been destroyed, stolen or lost and proof of the ownership thereof and (b) upon furnishing the City and the Paying Agent/Registrar with indemnity satisfactory to them. The person requesting the authentication and delivery of a new Obligation must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. AD VALOREM PROPERTY TAXATION The following is a summary of certain provisions of State law as it relates to ad valorem taxation and is not intended to be complete. Reference is made to Title I of the Texas Tax Code, as amended (the “Property Tax Code”), for identification of property subject to ad valorem taxation, property exempt or which may be exempted from ad valorem taxation if claimed, the appraisal of property for ad valorem tax purposes, and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Valuation of Taxable Property The Property Tax Code provides for countywide appraisal and equalization of taxable property values and establishes in each county of the State an appraisal district and an appraisal review board (“Appraisal Review 10 Board”) responsible for appraising property for all taxing units within the county. The appraisal of property within the City is the responsibility of the Denton County Appraisal District (the “Appraisal District”). Except as described below, the Appraisal District is required to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, the Appraisal District is required to consider the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and use the method the chief appraiser of the Appraisal District considers most appropriate. The Property Tax Code requires appraisal districts to reappraise all property in its jurisdiction at least once every three years. A taxing unit may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the taxing unit by petition filed with the Appraisal Review Board. State law requires the appraised value of an owner’s principal residence (“homestead” or “homesteads”) to be based solely on the property’s value as a homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a homestead to the lesser of (1) the market value of the property or (2) 110% of the appraised value of the property for the preceding tax year plus the market value of all new improvements to the property (the “10% Homestead Cap”). The 10% increase is cumulative, meaning the maximum increase is 10% times the number of years since the property was last appraised. See Table 1 for the reduction in taxable valuation attributable to the 10% Homestead Cap. State law provides that eligible owners of both agricultural land and open-space land, including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity (“Productivity Value”). The same land may not be qualified as both agricultural and open-space land. See Table 1 for the reduction in taxable valuation attributable to valuation by Productivity Value. The appraisal values set by the Appraisal District are subject to review and change by the Appraisal Review Board. The appraisal rolls, as approved by the Appraisal Review Board, are used by taxing units, such as the City, in establishing their tax rolls and tax rates. See “AD VALOREM PROPERTY TAXATION – Issuer and Taxpayer Remedies.” State Mandated Homestead Exemptions State law grants, with respect to each taxing unit in the State, various exemptions for disabled veterans and their families, surviving spouses of members of the armed services killed in action and surviving spouses of first responders killed or fatally wounded in the line of duty. See Table 1 for the reduction in taxable valuation attributable to state-mandated homestead exemptions. Local Option Homestead Exemptions The governing body of a taxing unit, including a city, county, school district, or special district, at its option may grant: (1) an exemption of up to 20% of the market value of all homesteads (but not less than $5,000) and (2) an additional exemption of the market value of the homesteads of persons 65 years of age or older and the disabled. Each taxing unit decides if it will offer the local option homestead exemptions and at what percentage or dollar amount, as applicable. See Table 1 for the reduction in taxable valuation, if any, attributable to local option homestead exemptions. Local Option Freeze for the Elderly and Disabled The governing body of a county, municipality or junior college district may, at its option, provide for a freeze on the total amount of ad valorem taxes levied on the homesteads of persons 65 years of age or older or of disabled persons above the amount of tax imposed in the year such residence qualified for such exemption. Also, upon voter initiative, an election may be held to determine by majority vote whether to establish such a freeze on ad valorem taxes. Once the freeze is established, the total amount of taxes imposed on such homesteads cannot be increased except for certain improvements, and such freeze cannot be repealed or rescinded. See Table 1 for the reduction in taxable valuation attributable to the freeze on taxes for the elderly and disabled. 11 Personal Property Tangible personal property (furniture, machinery, supplies, inventories, etc.) used in the “production of income” is taxed based on the property’s market value. Taxable personal property includes income-producing equipment and inventory. Intangibles such as goodwill, accounts receivable, and proprietary processes are not taxable. Tangible personal property not held or used for production of income, such as household goods, automobiles or light trucks, and boats, is exempt from ad valorem taxation unless the governing body of a taxing unit elects to tax such property. Freeport Exemptions Certain goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication (“Freeport Property”) are exempt from ad valorem taxation unless a taxing unit took official action to tax Freeport Property before April 1, 1990 and has not subsequently taken official action to exempt Freeport Property. Decisions to continue to tax Freeport Property may be reversed in the future; decisions to exempt Freeport Property are not subject to reversal. Certain goods, principally inventory, that are stored for the purposes of assembling, storing, manufacturing, processing or fabricating the goods in a location that is not owned by the owner of the goods and are transferred from that location to another location within 175 days (“Goods-in-Transit”), are exempt from ad valorem taxation unless a taxing unit takes official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax Goods-in-Transit beginning the following tax year. Goods-in-Transit and Freeport Property do not include oil, natural gas or petroleum products, and Goods-in-Transit does not include special inventories such as motor vehicles or boats in a dealer’s retail inventory. A taxpayer may receive only one of the Goods-in-Transit or Freeport Property exemptions for items of personal property. See Table 1 for the reduction in taxable valuation, if any, attributable to Goods-in-Transit or Freeport Property exemptions. Other Exempt Property Other major categories of exempt property include property owned by the State or its political subdivisions if used for public purposes, property exempt by federal law, property used for pollution control, farm products owned by producers, property of nonprofit corporations used for scientific research or educational activities benefitting a college or university, designated historic sites, solar and wind-powered energy devices, and certain classes of intangible personal property. Tax Increment Financing Zones A city or county, by petition of the landowners or by action of its governing body, may create one or more tax increment financing zones (“TIRZ”) within its boundaries, and other overlapping taxing units may agree to contribute taxes levied against the “Incremental Value” in the TIRZ to finance or pay for project costs, as defined in Chapter 311, Texas Government Code, general located within the TIRZ. At the time of the creation of the TIRZ, a “base value” for the real property in the TIRZ is established and the difference between any increase in the assessed valuation of taxable real property in the TIRZ in excess of the base value is known as the “Incremental Value”, and during the existence of the TIRZ, all or a portion of the taxes levied by each participating taxing unit against the Incremental Value in the TIRZ are restricted to paying project and financing costs within the TIRZ and are not available for the payment of other obligations of such taxing units. See “AD VALOREM PROPERTY TAXATION” City Application of Property Tax Code” for descriptions of any TIRZ created in the City. Tax Abatement Agreements Taxing units may also enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The taxing unit, in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. See “AD VALOREM PROPERTY TAXATION – City Application of Property Tax Code” for descriptions of any of the City’s tax abatement agreements. See Table 1 for the reduction in taxable valuation, if any, attributable to tax abatement agreements. For a discussion of how the various exemptions described above are applied by the City, see “AD VALOREM PROPERTY TAXATION – City Application of Property Tax Code” herein. 12 Public Hearing and Maintenance and Operation Tax Rate Limitations The following terms as used in this section have the meanings provided below: “adjusted” means lost values are not included in the calculation of the prior year’s taxes and new values are not included in the current year’s taxable values. “de minimis rate” means the maintenance and operations tax rate that will produce the prior year’s total maintenance and operations tax levy (adjusted) from the current year’s values (adjusted), plus the rate that produces an additional $500,000 in tax revenue when applied to the current year’s taxable value, plus the debt service tax rate. “no-new-revenue tax rate” means the combined maintenance and operations tax rate and debt service tax rate that will produce the prior year’s total tax levy (adjusted) from the current year’s total taxable values (adjusted). “special taxing unit” means a city for which the maintenance and operations tax rate proposed for the current tax year is 2.5 cents or less per $100 of taxable value. “unused increment rate” means the cumulative difference between a city’s voter-approval tax rate and its actual tax rate for each of the tax years 2020 through 2022, which may be applied to a city’s tax rate in tax years 2021 through 2023 without impacting the voter-approval tax rate. “voter-approval tax rate” means the maintenance and operations tax rate that will produce the prior year’s total maintenance and operations tax levy (adjusted) from the current year’s values (adjusted) multiplied by 1.035, plus the debt service tax rate, plus the “unused increment rate”. The City’s tax rate consists of two components: (1) a rate for funding of maintenance and operations expenditures in the current year (the “maintenance and operations tax rate”), and (2) a rate for funding debt service in the current year (the “debt service tax rate”). Under State law, the assessor for the City must submit an appraisal roll showing the total appraised, assessed, and taxable values of all property in the City to the City Council by August 1 or as soon as practicable thereafter. A city must annually calculate its “voter-approval tax rate” and “no-new-revenue tax rate” (as such terms are defined above) in accordance with forms prescribed by the State Comptroller and provide notice of such rates to each owner of taxable property within the city and the county tax assessor-collector for each county in which all or part of the city is located. A city must adopt a tax rate before the later of September 30 or the 60th day after receipt of the certified appraisal roll, except that a tax rate that exceeds the voter-approval tax rate must be adopted not later than the 71st day before the next occurring November uniform election date. If a city fails to timely adopt a tax rate, the tax rate is statutorily set as the lower of the no-new-revenue tax rate for the current tax year or the tax rate adopted by the city for the preceding tax year. As described below, the Property Tax Code provides that if a city adopts a tax rate that exceeds its voter-approval tax rate or, in certain cases, its “de minimis rate”, an election must be held to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. A city may not adopt a tax rate that exceeds the lower of the voter-approval tax rate or the no-new-revenue tax rate until each appraisal district in which such city participates has delivered notice to each taxpayer of the estimated total amount of property taxes owed and the city has held a public hearing on the proposed tax increase. For cities with a population of 30,000 or more as of the most recent federal decennial census, if the adopted tax rate for any tax year exceeds the voter-approval tax rate, that city must conduct an election on the next occurring November uniform election date to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. For cities with a population less than 30,000 as of the most recent federal decennial census, if the adopted tax rate for any tax year exceeds the greater of (i) the voter-approval tax rate or (ii) the de minimis rate, the city must 13 conduct an election on the next occurring November uniform election date to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. However, for any tax year during which a city has a population of less than 30,000 as of the most recent federal decennial census and does not qualify as a special taxing unit, if a city’s adopted tax rate is equal to or less than the de minimis rate but greater than both (a) the no-new-revenue tax rate, multiplied by 1.08, plus the debt service tax rate or (b) the city’s voter-approval tax rate, then a valid petition signed by at least three percent of the registered voters in the city would require that an election be held to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. Any city located at least partly within an area declared a disaster area by the Governor of the State or the President of the United States during the current year may calculate its “voter-approval tax rate” using a 1.08 multiplier, instead of 1.035, until the earlier of (i) the second tax year in which such city’s total taxable appraised value exceeds the taxable appraised value on January 1 of the year the disaster occurred, or (ii) the third tax year after the tax year in which the disaster occurred. State law provides cities and counties in the State the option of assessing a maximum oneဨhalf percent (1/2%) sales and use tax on retail sales of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional sales and use tax for ad valorem tax reduction is approved and levied, the no-new-revenue tax rate and voter-approval tax rate must be reduced by the amount of the estimated sales tax revenues to be generated in the current tax year. The calculations of the no-new-revenue tax rate and voter-approval tax rate do not limit or impact the City’s ability to set a debt service tax rate in each year sufficient to pay debt service on all of the City’s tax- supported debt obligations, including the Obligations. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Debt Tax Rate Limitations All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax- supported debt within the limits prescribed by law. Article XI, Section 4, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $1.50 per $100 of Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all debt service on ad valorem tax-supported debt, as calculated at the time of issuance. City’s Rights in the Event of Tax Delinquencies Taxes levied by the City are a personal obligation of the owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all State and local taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State and each local taxing unit, including the City, having power to tax the property. Personal property, under certain circumstances, is subject to seizure and sale for the payment of delinquent taxes. At any time after taxes on property become delinquent, the City may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the City must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem property within two (2) years after the purchaser’s deed issued at the foreclosure sale is filed in the county records) or by bankruptcy proceedings which restrict the collection of taxpayer debts. Federal bankruptcy law provides that an automatic stay of actions by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases, post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. 14 Issuer and Taxpayer Remedies Under certain circumstances, the City and its taxpayers may appeal the determinations of the Appraisal District by timely initiating a protest with the Appraisal Review Board. Additionally, taxing units such as the City may bring suit against the Appraisal District to compel compliance with the Property Tax Code. Owners of certain property with a taxable value of at least $50 million and situated in a county with a population of one million or more as of the most recent federal decennial census may additionally protest the determinations of appraisal district directly to a three-member special panel of the appraisal review board, selected by a State district judge, consisting of highly qualified professionals in the field of property tax appraisal. The Property Tax Code sets forth notice and hearing procedures for certain tax rate increases by the City and provides for taxpayer referenda that could result in the repeal of certain tax increases (See “– Public Hearing and Maintenance and Operation Tax Rate Limitations”.) The Property Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll. City Application of the Property Tax Code The City grants an exemption of $30,000 of the market value of the residence homestead for persons 65 years of age or older and an exemption of $20,000 of the market value of the residence homestead for persons that are disabled. See Appendix A – Table 1 for a listing of the total amount of these exemptions. The City does not grant an additional exemption for residence homesteads. The City taxes business personal property. The County Tax Collector collects property taxes for the City. The County does not permit split payments and does not allow discounts. The City grants the Article VIII, Section 1-j (“freeport property”) and does have Article VIII, Section 1-j property. The City has adopted an abatement policy and has two outstanding abatement agreements which were executed in 2018. Both projects are ongoing and abatements will begin upon successful completion. Each agreement provides for the abatement of a percentage of real and personal property taxes for a period of seven years after completion of the respective projects. RETIREMENT PLAN The City provides pension benefits for all of its eligible employees through a non-traditional, joint contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System, an agent multi-employer public employee retirement system. For a discussion of the Retirement Plan, see Appendix D “Audited Financial Statements for the Fiscal Year Ended September 30, 2020.” INVESTMENT POLICIES Accounting Principles Generally Accepted in the United States The City policy is to adhere to accounting principles generally accepted in the United States (see Appendix D “Audited Financial Statements for the Fiscal Year Ended September 30, 2020”). Legal Investments Under State law, the City is authorized to invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, including the Federal Home Loan Banks; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which are unconditionally guaranteed or 15 insured by, or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (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) interest-bearing banking deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation or its successor, or the National Credit Union Share Insurance Fund or its successor; (8) interest-bearing banking deposits other than those described by clause (7) if (A) the funds invested in the banking deposits are invested through: (i) a broker with a main office or branch office in this State that the City selects from a list the governing body of the City or designated investment committee of the City adopts as required by Section 2256.025, Texas Government Code; or (ii) a depository institution with a main office or branch office in the State that the City selects; (B) the broker or depository institution selected as described by (A) above arranges for the deposit of the funds in the banking deposits in one or more federally insured depository institutions, regardless of where located, for the City’s account; (C) the full amount of the principal and accrued interest of the banking deposits is insured by the United States or an instrumentality of the United States; and (D) the City appoints as the City’s custodian of the banking deposits issued for the City’s account: (i) the depository institution selected as described by (A) above; (ii) an entity described by Section 2257.041(d), Texas Government Code; or (iii) a clearing broker dealer registered with the SEC and operating under SEC Rule 15c3-3; (9) (i) certificates of deposit or share certificates meeting the requirements of Chapter 2256, Texas Government Code (the “Public Funds Investment Act”), that are issued by an institution that has its main office or a branch office in the State and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or their respective successors, and are secured as to principal by obligations described in clauses (1) through (8) or in any other manner and provided for by law for District deposits, or (ii) certificates of deposits where (a) the funds are invested by the City through (A) a broker that has its main office or a branch office in the State and is selected from a list adopted by the City as required by law, or (B) a depository institution that has its main office or branch office in the State that is selected by the City, (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City, (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d), Texas Government Code, or a clearing broker-dealer registered with the SEC and operating pursuant to SEC Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit; (10) fully collateralized repurchase agreements as defined in the Public Funds Investment Act, that have a defined termination date, are secured by a combination of cash and obligations described in clauses (1) or (13) in this paragraph or corporate bonds as described below, require the securities being purchased by the City or cash held by the City to be pledged to the City, held in the City’s name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City, and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (11) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (8) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than “A” or its equivalent or (c) cash invested in obligations described in clauses (1) through (8) above, clauses (13) through (15) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less; (12) certain bankers’ acceptances with stated maturity of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated not less than “A-1” or “P-1” or the equivalent by at least one nationally recognized credit rating agency; (13) commercial paper with a stated maturity of 365 days or less that is rated not less than “A-1” or “P-1” or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a United States or state bank; (14) no-load money market mutual funds registered with and regulated by the SEC that provide the City with a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of 1940 and that comply with federal SEC Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.); and (15) no-load mutual funds registered with the SEC that have an average weighted 16 maturity of less than two years, and have either (a) a duration of one year or more and invest exclusively in obligations described in under this heading, or (b) a duration of less than one year and the investment portfolio is limited to investment grade securities, excluding asset-backed securities. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities, other than the prohibited obligations described below, in an amount at least equal to the amount of bond proceeds invested under such contract. A political subdivision such as the City may enter into securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (8) above, other than the prohibited obligations described below, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (8) above, clauses (13) through (15) above, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service if the governing body of the City authorizes such investment in the particular pool by order, ordinance, or resolution and the investment pool complies with the requirements of Section 2256.016, Texas Government Code. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, ordinance, or resolution. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment, the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted “Investment Strategy Statement” that specifically addresses each fund’s 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 17 derived.” At least quarterly the City’s investment officers 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 City Council. Additional Provisions Under State law, the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt a written instrument by rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and recording any changes made to either its investment policy or investment strategy; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in no-load 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; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. Current Investments As of September 30, 2020, the City’s investment portfolio was invested in the following categories. As of such date, the market value of such investments was approximately 100% of their book value. INFECTIOUS DISEASE OUTBREAK – COVID-19 The outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus, has been characterized as a pandemic (the “Pandemic”) by the World Health Organization and is currently affecting many parts of the world, including the United States and Texas. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of COVID-19 in the United States a national emergency. Subsequently, the President’s Coronavirus Guidelines for America and the United States Centers for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-19 in the United States. On March 13, 2020, the Governor of Texas (the “Governor”) declared a state of disaster for all counties in Texas in response to the Pandemic, which disaster declaration was extended in both April and May. Pursuant to Chapter 418 of the Texas Government Code, the Governor has broad authority to respond to disasters, including suspending any regulatory statute Type of Investment Amount Certificates of Deposit $1,271,560 Total $1,271,560 18 prescribing the procedures for conducting state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping with the disaster, and issuing executive orders that have the force and effect of law. The Governor has issued a series of executive orders relating to COVID-19 preparedness and mitigation. These include, for example, the issuance on March 2, 2021 of Executive Order GA-34, which, among other things, removed any COVID-19 related operating limits for any business or other establishment and ended the State-wide mask mandate, effective March 10, 2021. The Governor’s order also maintains, in providing or obtaining services, every person (including individuals, businesses, and other legal entities) should use good-faith efforts and available resources to follow the minimum standard health protocols. Executive Order GA-34 remains in place until amended, rescinded, or superseded by the Governor. Additional information regarding executive orders issued by the Governor is accessible on the website of the Governor at https://gov.texas.gov/. Neither the information on (nor accessed through) such website of the Governor is incorporated by reference, either expressly or by implication, into this Official Statement. The pandemic has negatively affected travel, commerce and financial markets globally, and is widely expected to continue negatively affecting economic growth and financial markets worldwide. These negative impacts may reduce or negatively affect property values within the City. The Obligations are secured by an ad valorem tax (within the limits prescribed by law), and a reduction in property values may require an increase in the ad valorem tax rate required to pay the Obligations as well as the City’s operations and maintenance expenses. See “AD VALOREM PROPERTY TAXATION – Public Hearing and Maintenance and Operations Tax Rate Limitations” and “Debt Tax Rate Limitations.” The City continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the potential impact of the Pandemic upon the City. While the potential impact of the Pandemic on the City cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the City’s operations and financial condition. RATINGS S&P Global Ratings, (“S&P”) has assigned a rating of “AA” to the Obligations. An explanation of the significance of such ratings may be obtained from S&P. The rating reflects only the view of S&P and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Obligations. Neither the Underwriters nor the City have undertaken any responsibility to bring to the attention of the holders of the Obligations any proposed revision or withdrawal of the rating of the Obligations or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such ratings could have an adverse effect on the market price of the Obligations. PENDING LITIGATION There is no material litigation currently pending against the City. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Obligations, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Obligations are valid and binding obligations of the City, and based upon examination of such transcripts of proceedings, the approving legal opinions of Bond Counsel to the effect that (i) the Obligations issued in compliance with the provisions of the Ordinance are valid and legally binding obligations of the City and (ii) the interest on the Certificates is exempt from federal income taxation under existing statutes, published rulings, regulations, and court decisions (see “TAX MATTERS”). Bond Counsel has not been engaged to investigate the financial resources of the City or its ability to provide for payment of the Obligations, and the opinions of Bond Counsel will make no statement as to such matters, or any other information that may have been relied on by anyone in making the decision to purchase the Obligations. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations are contingent on the sale and delivery of the Obligations. The applicable legal opinions will be printed on or attached to the definitive Obligations. Bond Counsel has reviewed the statements and information appearing in the Official Statement under the captions “THE OBLIGATIONS” (except the subcaption “Sources and Uses of Funds”), “GENERAL INFORMATION REGARDING THE OBLIGATIONS,” “REGISTRATION, TRANSFER AND EXCHANGE,” “AD VALOREM 19 PROPERTY TAXATION – Public Hearing and Maintenance and Operation Tax Rate Limitations,” “LEGAL MATTERS,” “TAX MATTERS,” “LEGAL INVESTMENTS IN TEXAS,” “REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE” and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. Bond Counsel has not independently verified any of the factual information contained in this Official Statement nor have they conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy, completeness, or fairness of this Official Statement. No person is entitled to rely upon such firm’s limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy, completeness, or fairness of any of the information contained herein. TAX MATTERS The Certificates In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Certificates is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C hereto. To the extent the issue price of any maturity of the Certificates is less than the amount to be paid at maturity of such Certificates (excluding amounts stated to be interest and payable at least annually over the term of such Certificates), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Certificates which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Certificates is the first price at which a substantial amount of such maturity of the Certificates is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Certificates accrues daily over the term to maturity of such Certificates on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Certificates to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Certificates. Beneficial Owners of the Certificates should consult their own tax advisors with respect to the tax consequences of ownership of Certificates with original issue discount, including the treatment of Beneficial Owners who do not purchase such Certificates in the original offering to the public at the first price at which a substantial amount of such Certificates is sold to the public. Certificates purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Certificates”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of Certificates, like the Premium Certificates, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Certificate, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Certificates should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Certificates. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Certificates will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Certificates being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Certificates. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Certificates 20 may adversely affect the value of, or the tax status of interest on, the Certificates. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Certificates is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Certificates may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Certificates to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Certificates for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the City, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The City has covenanted, however, to comply with the requirements of the Code. Bond Counsel’s engagement with respect to the Certificates ends with the issuance of the Certificates, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the Beneficial Owners regarding the tax- exempt status of the Certificates in the event of an audit examination by the IRS. Under current procedures, parties other than the City and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt Certificates is difficult, obtaining an independent review of IRS positions with which the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Certificates for audit, or the course or result of such audit, or an audit of Certificates presenting similar tax issues may affect the market price for, or the marketability of, the Certificates, and may cause the City or the Beneficial Owners to incur significant expense. The Bonds Interest on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Bonds. The proposed form of opinion of Bond Counsel is contained in Appendix C hereto. The following discussion summarizes certain U.S. federal tax considerations generally applicable to holders of the Bonds that acquire their Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose “functional currency” is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the Bonds under state, local or non-U.S. tax laws. In addition, this summary generally is 21 limited to U.S. tax considerations applicable to investors that acquire their Bonds pursuant to this offering for the issue price that is applicable to such Bonds (i.e., the price at which a substantial amount of the Bonds are sold to the public) and who will hold their Bonds as “capital assets” within the meaning of Section 1221 of the Code. As used herein, “U.S. Holder” means a beneficial owner of a Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means a beneficial owner of a Bond (other than a partnership) that is not a U.S. Holder. If a partnership holds Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding Bonds, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the Bonds (including their status as U.S. Holders or Non-U.S. Holders). Notwithstanding the rules described below, it should be noted that certain taxpayers that are required to prepare certified financial statements or file financial statements with certain regulatory or governmental agencies may be required to recognize income, gain and loss with respect to the Bonds at the time that such income, gain or loss is recognized on such financial statements instead of under the rules described below (in the case of original issue discount, such requirements are only effective for tax years beginning after December 31, 2018). Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Bonds in light of their particular circumstances. U.S. Holders Interest. Interest on the Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes. To the extent that the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds) by more than a de minimis amount, the difference may constitute original issue discount (“OID”). U.S. Holders of Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods. Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Taxable Bond. Sale or Other Taxable Disposition of the Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition of a Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Taxable Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the Bond (generally, the purchase price paid by the U.S. Holder for the Taxable Bond, decreased by any amortized premium and increased by the amount of any OID previously included in income by such U.S. Holder with respect to such Taxable Bond). Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the Bonds exceeds one year. The deductibility of capital losses is subject to limitations. 22 Defeasance of the Bonds. If the District defeases any Taxable Bond, the Bond may be deemed to be retired for U.S. federal income tax purposes as a result of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and (ii) the holder’s adjusted tax basis in the Taxable Bond. Information Reporting and Backup Withholding. Payments on the Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the Bonds may be subject to backup withholding at the current rate of 24% with respect to “reportable payments,” which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS. Non-U.S. Holders Interest. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “Foreign Account Tax Compliance Act,” payments of principal of, and interest on, any Bond to a Non-U.S. Holder, other than (1) a controlled foreign corporation, a such term is defined in the Code, which is related to the District through stock ownership and (2) a bank which acquires such Bond in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, will not be subject to any U.S. federal withholding tax provided that the beneficial owner of the Bond provides a certification completed in compliance with applicable statutory and regulatory requirements, which requirements are discussed below under the heading “Information Reporting and Backup Withholding,” or an exemption is otherwise established. Disposition of the Bonds. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “FATCA,” any gain realized by a Non-U.S. Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the District or a deemed retirement due to defeasance of the Taxable Bond) or other disposition of a Bond generally will not be subject to U.S. federal income tax, unless (i) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition and certain other conditions are met. U.S. Federal Estate Tax. A Bond that is held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual’s death, provided that, at the time of such individual’s death, payments of interest with respect to such Bond would not have been effectively connected with the conduct by such individual of a trade or business within the United States. Information Reporting and Backup Withholding. Subject to the discussion below under the heading “FATCA,” under current U.S. Treasury Regulations, payments of principal and interest on any Bonds to a holder that is not a United States person will not be subject to any backup withholding tax requirements if the beneficial owner of the Bond or a financial institution holding the Bond on behalf of the beneficial owner in the ordinary course of its trade or business provides an appropriate certification to the payor and the payor does not have actual knowledge that the certification is false. If a beneficial owner provides the certification, the certification must give the name and address of such owner, state that such owner is not a United States person, or, in the case of an individual, that such owner is neither a citizen nor a resident of the United States, and the owner must sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%. Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury 23 to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Under current guidance, failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest on the Bonds. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current guidance, will apply to certain “passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury Regulations defining the term “foreign passthru payments.” Prospective investors should consult their own tax advisors regarding FATCA and its effect on them. The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of Bonds in light of the holder’s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Bonds, including the application and effect of state, local, non-U.S., and other tax laws. LEGAL INVESTMENTS IN TEXAS Under the Texas Public Security Procedures Act (Texas Government Code, Chapter 1201), the Obligations (1) are negotiable instruments, (2) are investment securities to which Chapter 8 of the Texas Uniform Commercial Code applies, and (3) are legal and authorized investments for (A) an insurance company, (B) a fiduciary or trustee, or (C) a sinking fund of a municipality or other political subdivision or public agency of the State of Texas. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Obligations may have to be assigned a rating of “A” or its equivalent as to investment quality by a national rating agency before such Obligations are eligible investments for sinking funds and other public funds. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with at least $1 million of capital and savings and loan associations. The City has made no investigation of other laws, rules, regulations, or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE No registration statement relating to the Obligations has been filed with the United States Securities and Exchange Commission under the federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been registered or qualified under the securities acts of any other jurisdiction. The City assumes no responsibility for registration or qualification of the Obligations under the securities laws of any other jurisdiction in which the Obligations may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration and qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdictions. CONTINUING DISCLOSURE OF INFORMATION In the Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to the Municipal Securities 24 Rulemaking Board (“MSRB”). This information will be available free of charge from the MSRB via Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org. Annual Reports The City will provide certain updated financial information and operating data to the MSRB annually in an electronic format as prescribed by the MSRB. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included this Official Statement in Appendix A - Financial Information Regarding the City of Sanger, Texas (Tables 1-11) and in Appendix D. The City will update and provide this information within six months after the end of each fiscal year. 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 “Rule”). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX D 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 the last day of March in each year following the end of its fiscal year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. Material Event Notices The City will also provide timely notices of certain events to the MSRB (not in excess of ten (10) days after the occurrence of the event). The City will provide notice of any of the following events with respect to the Obligations: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations; (7) modifications to rights of holders of the Obligations, if material; (8) Obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the District, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties. (Neither the Obligations nor the Ordinances make any provision for debt service reserves, liquidity enhancement, or credit 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”. For these purposes, any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. 25 For the events listed in clause (15) and (16) above, the term “financial obligation” means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) a guarantee of either (A) or (B). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. All documents provided to the MSRB shall be accompanied by identifying information, as prescribed by the MSRB. Limitations and Amendments The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell the Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of the Obligations may seek a writ of mandamus to compel the City to comply with its agreement. This continuing disclosure agreement may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell Obligations in the primary offering of the Obligations in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal of the outstanding Obligations consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City amends its agreement, it must include with the next financial information and opening 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 type of information and data provided. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. Compliance with Prior Undertakings The City has complied in all material respects with its continuing disclosure agreements pursuant to the Rule during the past 5 years. . VERIFICATION OF ARITHMETICAL COMPUTATIONS BLX Group LLC will deliver to the District, on or before the settlement date of the Bonds, its verification report indicating that it has verified the mathematical accuracy of the mathematical computations of the adequacy of the cash and the maturing principal of and interest on the Federal Securities, to pay, when due, the maturing principal of, interest on and related call premium requirements, if any, of the Refunded Obligations. BLX Group LLC relied on the accuracy, completeness and reliability of all information provided to it by, and on all decisions and approvals of, the District. In addition, BLX Group LLC has relied on any information provided to it by the City’s retained advisors, consultants or legal counsel. 26 OTHER INFORMATION Financial Advisor In its role as Financial Advisor, Government Capital Securities Corporation has relied on the City for certain information concerning the City and the Obligations. The fee of the Financial Advisor for services with respect to the Obligations is contingent upon the issuance and sale of the Obligations. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information in this Official Statement. The Financial Advisor 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. Audited Financial Statements Brooks Watson & Co., the City’s independent auditor, has not reviewed, commented on, or approved, and is not associated with, this Official Statement. The report of Brooks Watson & Co. relating to City’s financial statements for the fiscal year ended September 30, 2020 is included in this Official Statement in APPENDIX D; however, Brooks Watson & Co. has not performed any procedures on such financial statements since the date of such report, and has not performed any procedures on any other financial information of the City, including without limitation any of the information contained in this Official Statement. Underwriting The Underwriters have agreed to purchase the Certificates from the City for $_____________ (being the principal amount of the Certificates, plus a net premium of $________________, less an Underwriter’s discount of $__________). The Underwriters have agreed to purchase the Bonds from the City for $_____________ (being the principal amount of the Bonds, plus a net premium of $________________, less an Underwriter’s discount of $__________). The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information set forth in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Forward-Looking Statements The statements contained in this Official Statement and in any other information provided by the City that are not purely historical are forward-looking statements, 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 obligations 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 included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. 27 Concluding Statement The information set forth herein has been obtained from the City’s records, audited financial statements and other sources which are considered to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will ever be realized. All of the summaries of the statutes, documents and the Ordinance contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and the Ordinance. These summaries do not purport to be complete statements of such provisions and reference is made to such summarized documents for further information. Reference is made to official documents in all respects. The City has reviewed and approved the Official Statement and said instrument has been authorized for use and distribution by the Underwriters for the purpose of offering the Obligations. Mayor, City of Sanger, Texas ATTEST: Secretary, City of Sanger, Texas I-1 SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS* Series to be Refunded Maturity Date Interest Rate Par Amount Call Date Call Price Comb Tax & Rev Cert. of Oblig, Series 2013 Serial 08/01/2024 3.500%205,000 08/01/2023 100.000 Term 26 08/01/2026 4.500%430,000 08/01/2023 100.000 Term 28 08/01/2028 4.750%470,000 08/01/2023 100.000 Term 30 08/01/2030 5.000%520,000 08/01/2023 100.000 Term 33 08/01/2033 5.000%880,000 08/01/2023 100.000 2,505,000 ________________________ *Preliminary, subject to change. APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION TABLE 1 2020 Total Value of Taxable Property $879,065,909 Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions $14,998,947 Disabled and Deceased Veterans’Exemptions 4,906,028 Productivity Value Loss 35,073,959 Homestead 10% Cap Adjustment 6,820,937 Abatement 0 Freeport 7,771,944 Other 17,145,705 86,717,520 2020 Net Taxable Assessed Valuation (100% of Actual) $792,348,389 ________________ (a) See “AD VALOREM PROPERTY TAXATION - City Application of the Property Tax Code” in the Official Statement for a description of the City’s taxation procedures. Source: The Denton Central Appraisal District PRINCIPAL TAXPAYERS TABLE 2 Name Type of Business 2020 Net Taxable Assessed Valuation % of Total 2020 Assessed Valuation* 1.Wal-Mart Stores East, LP Distribution $58,302,401 7.36% 2. Wal-Mart Stores East, LP Distribution 34,585,114 4.36% 3. Trails of Sanger Apartments LLC Real Estate 28,213,566 3.56% 4.Ramar Land Corporation.Real Estate 12,073,155 1.52% 5. MacCamp LTD RV Sales & Service 6,393,741 0.81% 6.Sanger Lodging LLC Hotel/Motes 5,900,000 0.74% 7. Paccar Financial Financial/Banking 5,388,838 0.68% 8. LGI Homes-Texas LLC Construction 4,550,142 0.57% 9.Williamsburg Construction Services Construction 4,414,581 0.56% 10.Springer Properties LLC Real Estate 3,933,510 0.50% Total $163,755,048 20.67% * Based on 2020-21 Net Taxable Assessed Valuation of $792,348,389. ________________ Source: Denton Central Appraisal District A-2 PROPERTY TAX RATES AND COLLECTIONS TABLE 3 Fiscal Tax Net Taxable Tax Collection %Year Year Assessed Valuation(a)Rate Current Total(a)Ended 2016 $525,934,493 0.679500 99.23%99.73%9-30-17 2017 578,538,702 0.679100 99.22%99.77%9-30-18 2018 579,523,041 0.679100 99.30%99.59%9-30-19 2019 644,778,693 0.679100 100.18%100.18%9-30-20 2020 792,348,389 0.679100 (In Process)9-30-21 ________________ (a) See “AD VALOREM PROPERTY TAXATION - The City Application of the Property Tax Code” in the Official Statement for a description of the City’s taxation procedures. (b) Excludes interest and penalties. Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Denton Central Appraisal District, and the City. Note: Assessed Valuations may change during the year due to various supplements and protests, and valuations on a later date or in other tables of this Official Statement may not match those shown on this table. TAX RATE DISTRIBUTION TABLE 4 2020-21 2019-20 2018-19 2017-18 2016-17 Maintenance & Operations $0.605456 $0.591577 $0.571004 $0.563531 $0.513353 Dedicated for Street Maintenance 0 0 0 0 0 I & S Fund 0.073644 0.087523 0.108096 0.115569 0.166147 TOTAL $0.679100 $0.679100 $0.679100 $0.679100 $0.679500 ________________ Source: The City A-3 WATER RATES TABLE 5 Existing Rates Residential (Effective May 21, 2018) Minimum per unit served for 0 -1,000 gallons $24.32 Next 4,000 gallons 4.32 per thousand gallons Next 10,000 gallons 4.75 per thousand gallons Next 15,000 gallons 5.93 per thousand gallons Over 30,000 8.59 per thousand gallons Commercial (Effective May 21, 2018) Minimum per unit served for 0 -1,000 gallons $31.68 Next 4,000 gallons 5.02 per thousand gallons Next 10,000 gallons 5.44 per thousand gallons Next 15,000 gallons 6.15 per thousand gallons Over 30,000 7.59 per thousand gallons PRINCIPAL WATER CUSTOMERS TABLE 6 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Consumption in Gallons Average Monthly Bill ($) Stonewood Resorts LLC 657,500 5,282 Willowwood Detention Pond 450,000 2,115 Walmart Distribution Center 268,100 1,840 Stonewood Resorts LLC 267,500 2,074 Overleaf Washeo, LLC 198,900 1,456 SISD Sanger Middle School 155,000 1,152 TEK-CO Properties 134,600 875 R&L Carriers 100,200 1,163 Chisum Trail Apartments 87,900 1,202 Karl Klement Properties 85,300 851 Total 2,405,000 18,010 ___________________ Source: The City A-4 SEWER RATES TABLE 7 Existing Rates Residential (Effective May 21, 2018) Minimum (first 1,000 gallons)$29.75 Per 1,000 gallons over first 1,000 gallons 4.22 Per 1,000 gallons in excess of 10,000 gallons 4.69 Maximum per month 70.00 Commercial (Effective May 21, 2018) ¾inch meter $43.79 1 inch meter 47.92 1½inch meter 54.52 2 inch meter 66.32 3 inch meter 81.78 4 inch meter 151.78 6 inch meter 201.74 8 inch meter 266.25 Per 1,000 gallons over first 1,000 gallons 4.22 Per 1,000 gallons in excess of 10,000 gallons 4.69 Multi-Family Dwellings The amount due for multi-family dwellings shall be the residential rate multiplied by the number of occupied dwelling units. PRINCIPAL SEWER CUSTOMERS TABLE 8 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Bill ($) Stonewood Resorts LLC 5,867 Stonewood Resorts LLC 2,287 Chisum Trail Apartments 1,140 Walmart Distribution Center 1,298 Ohio Garden RV Inc.1,012 Karl Klement Properties 975 SISD Sanger Middle School 975 Tek-Co Properties 787 Trails of Sanger Apartments LLC 715 Sportsman 697 Total 16,033 _________________ Source: The City A-5 ELECTRIC RATES*TABLE 9 Existing Rates (Effective April 18, 2017) Residential Commercial Large Industrial Facility Charge (minimum per month) $ 10.00 $ 16.00 $ 35.00 Energy Charge (per KWH)$0.1175 $ 0.12 $0.105 ERCOT Pass-through per month $ 4.00 $ 4.00 $ 4.00 PRINCIPAL ELECTRIC CUSTOMERS*TABLE 10 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Consumption in Kilowatt Hours Average Monthly Bill ($) Walmart Distribution Center 889,400 93,657 MacCamp LTD 100,250 12,506 Super Save 80,740 9,735 R&L Carriers 61,460 7,455 Baru Enterprises, LLC 42,800 5,052 Sams-Walmart Stores East LP 42,191 5,065 Latham Stairs & Millworks 34,846 4,219 SISD Chisholm Trail Elementary 30,553 3,787 North Texas Plastics 29,426 3,576 Chicken Express 28,710 3,504 Total 1,340,376 148,556 ___________________ Source: The City *None of the City’s revenue from its electric system is pledged to the payment of the Obligations. A-6 PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Series 2021A Certificates*Series 2021B Rfd Bonds* Fiscal Year 30- Sept Existing Debt Service($)(1)Principal($)Interest($)Total($)Principal($)Interest($)Total($) Total Debt Service Requirements ($)* 2021 2,329,166.00 12,828.62 12,828.62 2,341,994.62 2022 1,563,990.00 40,000.00 607,896.67 647,896.67 $55,000.00 41,234.86 96,234.86 2,308,121.53 2023 1,564,020.00 280,000.00 617,000.00 897,000.00 55,000.00 41,057.20 96,057.20 2,557,077.20 2024 1,357,755.00 305,000.00 608,600.00 913,600.00 260,000.00 40,846.56 300,846.56 2,572,201.56 2025 1,305,080.00 335,000.00 596,400.00 931,400.00 260,000.00 39,530.96 299,530.96 2,536,010.96 2026 1,306,870.00 385,000.00 583,000.00 968,000.00 265,000.00 37,362.56 302,362.56 2,577,232.56 2027 1,327,020.00 140,000.00 567,600.00 707,600.00 265,000.00 34,648.96 299,648.96 2,334,268.96 2028 1,329,725.00 140,000.00 562,000.00 702,000.00 270,000.00 31,172.16 301,172.16 2,332,897.16 2029 1,321,200.00 165,000.00 556,400.00 721,400.00 275,000.00 27,359.76 302,359.76 2,344,959.76 2030 1,326,194.00 170,000.00 549,800.00 719,800.00 280,000.00 22,583.00 302,583.00 2,348,577.00 2031 1,324,200.00 195,000.00 543,000.00 738,000.00 285,000.00 17,439.40 302,439.40 2,364,639.40 2032 1,320,937.00 270,000.00 535,200.00 805,200.00 290,000.00 11,918.96 301,918.96 2,428,055.96 2033 1,326,206.00 295,000.00 527,100.00 822,100.00 295,000.00 6,156.66 301,156.66 2,449,462.66 2034 1,649,713.00 295,000.00 518,250.00 813,250.00 2,462,963.00 2035 1,648,656.00 320,000.00 509,400.00 829,400.00 2,478,056.00 2036 1,650,344.00 370,000.00 499,800.00 869,800.00 2,520,144.00 2037 1,648,400.00 395,000.00 488,700.00 883,700.00 2,532,100.00 2038 1,775,000.00 476,850.00 2,251,850.00 2,251,850.00 2039 1,825,000.00 423,600.00 2,248,600.00 2,248,600.00 2040 1,880,000.00 368,850.00 2,248,850.00 2,248,850.00 2041 1,935,000.00 312,450.00 2,247,450.00 2,247,450.00 2042 1,995,000.00 254,400.00 2,249,400.00 2,249,400.00 2043 2,055,000.00 194,550.00 2,249,550.00 2,249,550.00 2044 2,115,000.00 132,900.00 2,247,900.00 2,247,900.00 2045 2,180,000.00 69,450.00 2,249,450.00 2,249,450.00 2046 135,000.00 4,050.00 139,050.00 139,050.00 25,299,476.00 19,995,000.00 11,107,246.00 31,102,246.67 2,855,000.00 364,139.66 3,219,139.66 59,620,862.33 ___________________________________ *Preliminary, subject to change. (1)Excludes the Refunded Obligations. Preliminary, subject to change [Remainder of page intentionally left blank] APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS B-1 General The City of Sanger, Texas (the “City”) is a residential community located on Interstate Highway 35 northeast of the Dallas-Fort Worth industrial area. The City’s close proximity to both Dallas and Fort Worth has been a significant factor in the City’s growth. According to the 2020 U.S. Census, the City’s 2020 population was 8,235. The area continues to see a large influx of new residents each year and this trend is expected to continue for the foreseeable future. In addition to the City’s close proximity to Interstate Highway 35, the City also provides ready access to both rail transportation and developable industrial land. The City offers access to several financial institutes, churches of various denominations and a wide variety of retail outlets. The public school system offers a low student to teacher ratio and the City currently has three daycare centers. The City is also located within minutes of Lake Ray Roberts, which provides a variety of sporting and outdoor activities. The local economy is gaining strength and the City has recently seen increases in both construction and sales tax. Education The City is served by the Sanger Independent School District. The District covers approximately 42 square miles in Denton County and serves the City and its surrounding rural areas. The District is comprised of one early childhood center for grades pre-kindergarten through kindergarten, one elementary school for grades first through third, one intermediate school for grades fourth through sixth, one junior high school for grades seventh through eighth, and one high school for grades ninth through twelfth. All campuses offer enriched curricula with special programs for gifted/talented students as well as students achieving below grade level and are equipped with computers and cafeteria service. Denton County Denton County is located in north central Texas, encompassing 911 square miles, and was created in 1846 from Fannin County. The County is the third largest county of the nine counties comprising the Dallas-Fort Worth Consolidated Metropolitan Statistical Area. The County is traversed by Interstate Highway 35, US Highways 77, 377 and 380 and State Highways 114 and 121. The economy is diversified by manufacturing, state supported institutions and agriculture. According to the 2020 U.S. Census, the County’s 2020 population was 833,822. . APPENDIX C FORM OF OPINIONS OF BOND COUNSEL 4130-8939-5499.1 May ___, 2021 City of Sanger, Texas Certificates of Obligation, Series 2021A (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $_________ aggregate principal amount of Obligations designated as “City of Sanger, Texas Certificates of Obligation, Series 2021A” (the “Obligations”). The Obligations are authorized by an ordinance adopted by the City Council of the City (the “City Council”) on April 19, 2021 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, the tax certificate of the City dated the date hereof (the “Tax Certificate”), certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Obligations has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Obligations to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Obligations, the Ordinance and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the City of Sanger, Texas May ___, 2021 Page 2 4130-8939-5499.1 exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against issuers in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non- legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Obligations and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Obligations constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Obligations. 3. The Obligations are also secured by a limited (in an amount not to exceed $1,000) subordinate pledge of revenues of the waterworks and sanitary sewer system of the City. 4. Interest on the Obligations is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Obligations is not a specific preference item for purposes of the federal alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Obligations. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP 4150-6779-9340.1 May ___, 2021 City of Sanger, Texas General Obligation Refunding Bonds, Taxable Series 2021B (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $__________ aggregate principal amount of bonds designated as “City of Sanger, Texas General Obligation Refunding Bonds, Taxable Series 2021B” (the “Bonds”). The Bonds are authorized by an ordinance adopted by the City Council (the “City Council”) on April 19, 2021 “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the original delivery of the Bonds on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the original delivery of the Bonds on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance. We call attention to the fact that the rights and obligations under the Bonds and the Ordinance and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against issuers in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. May ___, 2021 Page 2 4150-6779-9340.1 Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP APPENDIX D AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED SEPTEMBER 30, 2020 ANNUAL FINANCIAL REPORT of the City of Sanger, Texas For the Year Ended September 30, 2020 (This page intentionally left blank.) City of Sanger, Texas TABLE OF CONTENTS September 30, 2020 FINANCIAL SECTION Independent Auditor’s Report 1 Management’s Discussion and Analysis 7 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 18 Statement of Activities 22 Fund Financial Statements Governmental Funds: Balance Sheet 24 Reconciliation of the Balance Sheet to the Statement of Net Position- Governmental Funds 27 Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 31 Proprietary Funds: Statement of Net Position 32 Statement of Revenues, Expenses, and Changes in Fund Net Position 34 Statement of Cash Flows 35 Notes to Financial Statements 37 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual -General Fund 76 Schedule of Changes in Net Pension Liability and Related Ratios 78 Schedule of Employer Contributions to Pension Plan 80 Schedule of Changes in OPEB Liability and Related Ratios 82 COMBINING AND INDIVIDUAL FUND FINANCIAL SCHEDULES Combining Schedule of Revenues, Expenses, and Changes in Fund Net Position -Proprietary Funds –by Department 84 (This page intentionally left blank.) 1 14950 Heathrow Forest Pkwy | Suite 530 | Houston, TX 77032 |Tel: 281.907.8788 |Fax: 888.875.0587 | www.BrooksWatsonCo.com INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and Members of the City Council City of Sanger, Texas: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities,the discretely presented component units,each major fund, and the aggregate remaining fund information of the City of Sanger, Texas (the “City”) as of and for the year ended September 30, 2020 , and the related notes to the financial statement s, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of int ernal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial state ments 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the asses sment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activit ies, the business -type activities,the discretely presented component units,each major fund, and the aggregate remaining fund information of the City as of September 30, 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of changes in net pension liability and related ratios, schedule of employer contributions to pension plan, schedule of changes in other postemployment benefits liability and related ratios, and general fund budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the infor mation because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Sanger, Texas’s basic financial state ments. The combining schedule by department for the proprietary fund is presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining schedule by department for the proprietary fund is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the 3 auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themse lves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements are fairly stated, in all material respects, in relation to the basic financi al statements as a whole. BrooksWatson & Co. Certified Public Accountants , PLLC Houston, Texas January 13, 2021 (This page intentionally left blank.) 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 5 (This page intentionally left blank.) 6 City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) September 30, 2020 7 As management of the City of Sanger, Texas (the “City”), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2020. Financial Highlights The City's total combined net position is $48,647,871 at September 30,2020.Of this, $20,451,882 (unrestricted net position) may be used to meet the City’s ongoing obligations to its citizens and creditors. At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $11,006,202, an increase of $2,463,524. As of the end of the year, the unassigned fund balance of the general fund was $7,341,262 or 108%of total general fund expenditures. The City had an overall increase in net position of $4,259,084, which is due to revenues exceeding expenses for both governmental and business-type activities. Overview of the Financial Statements The discussion and analysis provided here are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements consist of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-Wide Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets, liabilities, and deferred inflows/outflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other non-financial factors, such as the City’s property tax base and the condition of the City’s infrastructure, need to be considered in order to assess the overall health of the City. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 8 are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business- type activities). The governmental activities of the City include general government, public safety, public works, and culture and recreation. The business-type activities of the City include water, sewer and electric operations. The government-wide financial statements include not only the City itself (known as the primary government), but also the legally separate Sanger Industrial Development Corporation (“4A”) and the Sanger Texas Development Corporation (“4B”), for which the City is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. FUND FINANCIAL STATEMENTS Funds may be considered as operating companies of the parent corporation,which is the City of Sanger. They are usually segregated for specific activities or objectives. The City of Sanger uses fund accounting to ensure and demonstrate compliance with finance-related legal reporting requirements. The two categories of City funds are governmental and proprietary. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources,as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating the City’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Sanger maintains three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 9 expenditures, and changes in fund balances for the general,debt service, and capital projects funds. The general and capital projects funds are considered to be major funds. The City of Sanger adopts an annual appropriated budget for all funds. A budgetary comparison schedule has been provided to demonstrate compliance with the general fund budget. Proprietary Funds The City maintains two different types of proprietary funds. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses a proprietary fund to account for its public utilities. All activities associated with providing such services are accounted for in these funds, including administration, operation, maintenance, debt service, capital improvements, meter maintenance, billing and collection. The City's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for administrative support services to other funds of the City. Component Units The City maintains the accounting and financial statements for two component units. The 4A and the 4B are both discretely presented component units displayed on the government-wide financial statements. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes are the last section of the basic financial statements. Other Information In addition to the basic financial statements, MD&A, and accompanying notes, this report also presents certain Required Supplementary Information (RSI). The RSI that GASB Statement No. 34 requires is a budgetary comparison schedule for the general fund and schedules for the City’s Defined Pension Plan. RSI can be found after the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted previously, net position may serve over time as a useful indicator of the City’s financial position. For the City of Sanger, assets exceeded liabilities by $48,647,871 as of September 30, 2020,in the primary government. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 10 The largest portion of the City’s net position, $26,569,343,reflects its investments in capital assets (e.g., land, city hall, police station, streets, and drainage systems, as well as the public works facilities),less any de bt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently,these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position, $1,626,646, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $20,451,884 is unrestricted and may be used to meet the government’s ongoing obligations to its citizens and creditors. Current assets of governmental activities as of September 30, 2020 and September 30, 2019 were $12,106,859 and $9,264,673, respectively. The increase of $2,842,186 was primarily due to an increase in cash on hand as a result of revenues exceeding expenses in the current year. Current assets of business-type activities as of September 30, 2020 and September 30, 2019 were $13,631,238 and $14,744,586, respectively. The decrease of $1,113,348 was primarily attributable to funds being spent on capital asset improvements throughout the year and principal payments made on outstanding debt. Capital assets of business-type activities as of September 30, 2020 and September 30, 2019 were $30,002,614 and $29,272,520, respectively. The increase of $730,094 was a primarily a result of the continued sewer plant expansion. Total long-term liabilities as of September 30, 2020 and September 30, 2019 were $21,862,434 and $24,097,027, respectively. The decrease of $2,234,593 was primarily due to principal payments made during the year. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 11 Statement of Net Position: The following table reflects the condensed Statement of Net Position: Current and other assets $12,106,859 $13,167,174 $25,274,033 $9,264,673 $14,744,586 $24,009,259 Capital assets, net 19,063,124 30,002,614 49,065,738 18,949,169 29,272,520 48,221,689 Total Assets 31,169,983 43,169,788 74,339,771 28,213,842 44,017,106 72,230,948 of Resources 373,255 118,518 491,773 596,634 197,169 793,803 Other liabilities 1,745,717 2,715,443 4,461,160 1,348,191 3,182,639 4,530,830 Long-term liabilities 2,956,102 18,906,332 21,862,434 4,082,353 20,014,674 24,097,027 Total Liabilities 4,701,819 21,621,775 26,323,594 5,430,544 23,197,313 28,627,857 of Resources 249,483 74,660 324,143 6,237 1,870 8,107 Net Position: Net investment in capital assets 16,338,660 10,230,683 26,569,343 15,502,386 10,572,724 26,075,110 Restricted 1,626,646 - 1,626,646 2,894,827 - 2,894,827 Unrestricted 8,626,630 11,825,252 20,451,882 4,976,482 10,442,368 15,418,850 Total Net Position $26,591,936 $22,055,935 $48,647,871 $23,373,695 $21,015,092 $44,388,787 Deferred Outflows Deferred Inflows 2019 Governmental Business-Type Activities Governmental Business-Type ActivitiesActivities TotalTotal 2020 Activities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 12 Statement of Activities: The following table provides a summary of the City’s changes in net position: Revenues Program revenues: Charges for services $2,180,918 $12,400,421 $14,581,339 $2,035,376 $12,594,574 $14,629,950 Grants and contributions 703,800 - 703,800 770,917 - 770,917 General revenues: Property taxes 4,784,777 - 4,784,777 4,480,452 - 4,480,452 Sales taxes 1,104,525 - 1,104,525 914,748 - 914,748 Franchise and local taxes 291,554 - 291,554 283,573 - 283,573 Investment income 20,786 389,530 410,316 11,916 169,808 181,724 Other revenues 543,453 - 543,453 399,167 - 399,167 Total Revenues 9,629,813 12,789,951 22,419,764 8,896,149 12,764,382 21,660,531 Expenses General government 2,404,017 - 2,404,017 2,186,197 - 2,186,197 Public safety 2,764,359 - 2,764,359 2,759,901 - 2,759,901 Public works 1,549,551 - 1,549,551 1,070,180 - 1,070,180 Culture and recreation 746,573 - 746,573 719,658 - 719,658 Interest and fiscal charges 80,876 642,843 723,719 181,723 681,277 863,000 Water, sewer, & electric - 9,972,461 9,972,461 - 9,898,650 9,898,650 Total Expenses 7,545,376 10,615,304 18,160,680 6,917,659 10,579,927 17,497,586 Change in Net Position Before Transfers 2,084,437 2,174,647 4,259,084 1,978,490 2,184,455 4,162,945 Transfers 1,133,804 (1,133,804) - 681,175 (681,175)- Total 1,133,804 (1,133,804) - 681,175 (681,175)- Change in Net Position 3,218,241 1,040,843 4,259,084 2,659,665 1,503,280 4,162,945 Beginning Net Position 23,373,695 21,015,092 44,388,787 20,714,030 19,511,812 40,225,842 Ending Net Position $26,591,936 $22,055,935 $48,647,871 $23,373,695 $21,015,092 $44,388,787 Activities Activities Business-Type Primary Total Primary Governmental ActivitiesGovernment Governmental For the Year Ended September 30, 2020 Business-Type Government For the Year Ended September 30, 2019 Total Activities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 13 Graphic presentations of selected data from the summary tables are displayed below to assist in the analysis of the City’s activities. For the year ended September 30, 2020, revenues from governmental activities totaled $9,629,813. Property tax, charges for services, and sales taxes are the City’s largest revenue sources. Property tax increased by $304,325 or 7%due to rising property values. Sales taxes increased by $189,777 or 21%due to growth in the local economy.Charges for services increased $145,542 or 7%primarily due to increases in building permit revenue collected in the current year.Grants and contributions decreased by $67,117 or 9%due to nonrecurring funds received from an interlocal agreement with Denton County for street construction in the prior year.Other revenues increased by $144,286 primarily due to roadway impact fees received in the current year. All other revenues remained relatively stable when compared to the previous year. This graph shows the governmental function expenses of the City: For the year ended September 30, 2020, expenses for governmental activities totaled $7,545,376. This represents an increase of $627,717 from the prior year. The City’s largest functional expense is public City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 14 safety of $2,764,359,which primarily includes costs for the police department, animal control, fire department, and EMS services.Public safety expenses remained consistent with the prior year.General government expenses increased by $217,820 or 10%primarily due to increases in contract services and administrative expenses paid to the City’s internal service fund.Public works expenses increased by $479,371 or 45%primarily due to increased personnel costs and asset depreciation expenses. Interest and fiscal charges decreased by $100,847 or 55% primarily due to nonrecurring bond issuance costs recognized in the prior year. All other expenditures remained relatively consistent with the previous year. Business-type activities are shown comparing operating costs to revenues generated by related services. For the year ended September 30, 2020, charges for services by business-type activities totaled $12,400,421. This is a decrease of $194,153 or 2%from the previous year, which is considered minimal. Total expenses increased slightly by $35,377 or < 1%compared to the prior year, which is considered consistent with the prior year. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related legal requirements. Governmental Funds -The focus of the City’s governmental funds is to provide information of near- term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular,unreserved fund balance may serve as a useful measure of the City’s net resources available for spending at the end of the year. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 15 As of the end of the year the general fund reflected a total fund balance of $8,532,848. Of this, $11,469 is restricted for municipal court, $59,175 is restricted for tourism, $98,393 is restricted for library improvements, $81,934 for public safety, $11,087 is restricted for parks, and $882,093 is restricted for roadway impact fees.In addition, $41,226 is committed for employee benefits. Unassigned fund balance totaled $7,341,262 as of yearend.The general fund increased by $2,095,070 primarily as a result of planned expenditures exceeding current year actual expenditures and an overall increase in the anticipated net change in fund balance. The capital projects fund reflected an ending balance of $1,997,068, an increase of $368,349.This increase is attributed to greater transfers in compared to capital outlay expenditures in the current year. There was an increase in governmental fund balance of $2,463,525 over the prior year. The increase was primarily due to revenues and other financing sources exceeding current year expenditures. Proprietary Funds -The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. GENERAL FUND BUDGETARY HIGHLIGHTS There was a total positive budget variance of $2,095,070 in the general fund. This is a combination of a positive revenue variance of $1,178,038 a positive expenditure variance of $832,179,and a positive variance of $84,853 in other financing sources and uses.The most significant revenue variances were for sales taxes, franchise and local taxes, licenses and permits, and other revenues. CAPITAL ASSETS As of the end of the year, the City’s governmental activities funds had invested $19,063,124 in a variety of capital assets and infrastructure, net of accumulated depreciation. Depreciation is included with the governmental capital assets as required by GASB Statement No. 34. The City’s business-type activities funds had invested $30,002,614 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following: Investments in the 2019-2020 street rehabilitation program for $702,720. Willow Street improvements for $67,618. Wastewater pipeline improvements and utility line relocation totaling $234,960. Well #6 rehabilitation investments totaling $157,535. Investments in Bolivar Street wastewater rehabilitation project for $392,236. Sewer plant expansion for $705,037. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 16 Purchase of two Chevy Tahoes for $107,084. Purchase two new vehicles for the fire and EMS department totaling $218,470. More detailed information about the City’s capital assets is presented in note IV. D to the financial statements. LONG-TERM DEBT At the end of the current ye ar, the City had total bonds (including premiums)and capital leases outstanding of $22,184,167. The City made principal payments on bonds and capital leases of $1,538,772. More detailed information about the City’s long-term liabilities is presented in note IV. E to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The Mayor and City Council are committed to maintaining and improving the overall wellbeing of the City of Sanger and improving services provided to their public citizens. The City is considering the impact of the COVID-19 pandemic on anticipated tax revenues and expenditures for the year ending September 30, 2021. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the City of Sanger’s finances for all those with an interest in the City’s finances. Questions concerning this report or requests for additional financial information should be directed to the City Manager at the City of Sanger City Hall at 502 Elm Street, Sanger, Texas 76266. FINANCIAL STATEMENTS 17 Current assets: Cash and cash equivalents $10,933,418 $8,032,637 $18,966,055 Restricted cash - 2,540,582 2,540,582 Investments 546,175 725,385 1,271,560 Receivables, net 565,088 1,322,782 1,887,870 Inventory - 473,150 473,150 Due from component unit 134,816 - 134,816 Internal balances (72,638) 72,638 - 12,106,859 13,167,174 25,274,033 Deposit for capital assets - 464,064 464,064 Capital assets: Non-depreciable 1,044,933 14,675,601 15,720,534 Net depreciable capital assets 18,018,191 15,327,013 33,345,204 19,063,124 30,466,678 49,529,802 31,169,983 43,633,852 74,803,835 Deferred Outflows of Resources Deferred charge on refunding 4,787 8,252 13,039 Pension outflows 353,421 105,772 459,193 OPEB outflows 15,047 4,494 19,541 Total Deferred Outflows of Resources 373,255 118,518 491,773 See Notes to Financial Statements. Business-Type City of Sanger, Texas STATEMENT OF NET POSITION (Page 1 of 2) September 30, 2020 Activities Activities Primary Government Assets Governmental Total Assets Total Current Assets Total 18 $1,530,519 $1,232,766 - - 95,660 283,601 96,174 96,174 - - - - - - 1,722,353 1,612,541 - - - - 689,654 - 689,654 - 2,412,007 1,612,541 - - - - - - - - Component Units Sanger Industrial Dev. Corp. (4A)Dev. Corp. (4B) Sanger Texas 19 Liabilities Current liabilities: Accounts payable and accrued liabilities $848,178 $991,742 $1,839,920 Accrued interest payable 15,663 234,956 250,619 Customer deposits - 508,333 508,333 Due to primary government - - - Compensated absences - current 186,897 95,212 282,109 Long term debt due within one year 694,979 885,200 1,580,179 1,745,717 2,715,443 4,461,160 Noncurrent liabilities: Debt due in more than one year 1,990,844 18,613,144 20,603,988 Compensated absences - noncurrent 20,766 10,579 31,345 OPEB liability 101,790 30,406 132,196 Net pension liability 842,702 252,203 1,094,905 2,956,102 18,906,332 21,862,434 4,701,819 21,621,775 26,323,594 Deferred Inflows of Resources OPEB inflows 7,822 2,336 10,158 Pension inflows 241,661 72,324 313,985 249,483 74,660 324,143 Net investment in capital assets 16,338,660 10,230,683 26,569,343 Restricted for: Debt service 476,286 - 476,286 Parks 11,087 - 11,087 Economic development - - - Roadway impact fees 882,093 - 882,093 Other purposes 257,180 - 257,180 Unrestricted 8,626,630 11,825,252 20,451,882 $26,591,936 $22,055,935 $48,647,871 See Notes to Financial Statements. City of Sanger, Texas Total Current Liabilities Governmental Activities Primary Government Net Position Total Net Position Total Liabilities Total Total Deferred Inflows of Resources September 30, 2020 Activities Business-Type STATEMENT OF NET POSITION (Page 2 of 2) 20 $6,655 $10,001 - - - - 67,408 67,408 - - - - 74,063 77,409 - - - - - - - - - - 74,063 77,409 - - - - - - 689,654 - - - - - 1,648,290 1,535,132 - - - - - - $2,337,944 $1,535,132 Sanger Texas Component Units Dev. Corp. (4A)Dev. Corp. (4B) Sanger Industrial 21 Capital Grants and Contributions Primary Government Governmental Activities General government $2,404,017 $1,460,219 $443,906 $- Public safety 2,764,359 720,699 40,052 - Public works 1,549,551 - - 7,292 Culture and recreation 746,573 - 50 - Interest and fiscal charges 80,876 - 212,500 - 7,545,376 2,180,918 696,508 7,292 Business-Type Activities Water 1,626,068 2,399,719 - - Sewer 1,129,388 2,465,102 - - Electric 7,202,676 7,394,565 - - Fleet services 66 - - - Utility administration 657,106 141,035 - - Total Business-Type Activities 10,615,304 12,400,421 - - Total Primary Government $18,160,680 $14,581,339 $696,508 7,292 Component Units Sanger Ind. Dev. Corp. (4A)174,864 - - - Sanger Texas Dev. Corp. (4B)249,678 - - - $424,542 $- $- $- General Revenues: Taxes Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Insurance recoveries Transfers Change in Net Position Beginning Net Position Ending Net Position See Notes to Financial Statements. Expenses Contributions Total Governmental Activities Functions/Programs Services Total General Revenues and Transfers City of Sanger, Texas STATEMENT OF ACTIVITIES Operating For the Year Ended September 30, 2020 Program Revenues Charges for Grants and 22 $(499,892) $- $(499,892) $- $- (2,003,608) - (2,003,608) - - (1,542,259) - (1,542,259) - - (746,523) - (746,523) - - 131,624 - 131,624 - - (4,660,658) - (4,660,658) - - - 773,651 773,651 - - - 1,335,714 1,335,714 - - - 191,889 191,889 - - - (66) (66) - - - (516,071) (516,071) - - - 1,785,117 1,785,117 - - (4,660,658) 1,785,117 (2,875,541) - - (174,864)- - (249,678) (174,864) (249,678) 4,784,777 - 4,784,777 - - 1,104,525 - 1,104,525 549,145 549,145 291,554 - 291,554 - - 20,786 389,530 410,316 3,289 5,178 468,123 - 468,123 30,000 - 75,330 - 75,330 - - 1,133,804 (1,133,804) - - - 7,878,899 (744,274)7,134,625 582,434 554,323 3,218,241 1,040,843 4,259,084 407,570 304,645 23,373,695 21,015,092 44,388,787 1,930,374 1,230,487 $26,591,936 $22,055,935 $48,647,871 $2,337,944 $1,535,132 Component Units Net (Expense) Revenue and Changes in Net Position Activities Primary Government Governmental Dev. Corp. (4A)Dev. Corp. (4B)Total Business-Type Activities Sanger Industrial Sanger Texas 23 Cash and cash equivalents $8,267,203 $1,997,068 $475,812 Investments 546,175 - - Receivables, net 551,479 - 13,609 Due from component unit 134,816 - - $9,499,673 $1,997,068 $489,421 Liabilities Accounts payable and accrued liabilities $727,393 $- $- Due to other funds 72,638 - - 800,031 - - Deferred Inflows of Resources Unavailable revenue Property taxes 49,826 - 13,135 EMS revenue 116,968 - - Total Deferred Inflows of Resources 166,794 - 13,135 Restricted for: Municipal court 11,469 - - Tourism 59,175 - - Library 104,602 - - Public safety 81,934 - - Debt service - - 476,286 Capital projects - - - Parks 11,087 - - Roadway impact fees 882,093 - - Committed for: Capital projects - 1,997,068 - Employee benefits 41,226 - - Unassigned reported in: General fund 7,341,262 - - 8,532,848 1,997,068 476,286 $9,499,673 $1,997,068 $489,421 See Notes to Financial Statements. General Nonmajor Debt Projects Fund Total Fund Balances Total Assets Fund Balances City of Sanger, Texas BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2020 Total Liabilities, Deferred Inflows, and Fund Balances Assets Service Total Liabilities Capital 24 $10,740,083 546,175 565,088 134,816 $11,986,162 $727,393 72,638 800,031 62,961 116,968 179,929 11,469 59,175 104,602 81,934 476,286 - 11,087 882,093 1,997,068 41,226 7,341,262 11,006,202 $11,986,162 Funds Total Governmental 25 (This page intentionally left blank.) 26 Fund Balances - Total Governmental Funds $11,006,202 Adjustments for the Statement of Net Position: Capital assets used in governmental activities are not current financial resources and, therefore, not reported in the governmental funds. Capital assets - non-depreciable 1,044,933 Capital assets - net depreciable 17,900,574 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the governmental funds. Property tax receivable 62,961 EMS receivable 116,968 Deferred outflows (inflows) of resources, represent a consumption (acquisition) of net position that applies to a future period(s) and is not recognized as an outflow (inflow) of resources (expense/ expenditure) (revenue) until then. Deferred charge on refunding 4,787 Pension contributions 146,798 OPEB contributions 357 Pension outflows 107,731 Pension inflows (174,041) OPEB outflows 10,391 OPEB inflows (5,587) Internal service funds are used by management to charge the cost of internal services to individual funds. The assets and liabilities of the internal service funds Net position - governmental activities (74,254) Some liabilities, including bonds payable and deferred charges, are not reported as liabilities in the governmental funds. Accrued interest (15,663) Compensated absences (174,788) Bond premium (128,072) Net pension liability (606,903) OPEB liability (72,707) Non-current liabilities due in one year (694,979) Non-current liabilities due in more than one year (1,862,772) $26,591,936 See Notes to Financial Statements. City of Sanger, Texas RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS September 30, 2020 Net Position of Governmental Activities 27 Revenues Property tax $4,153,342 $- $614,820 Sales tax 1,104,525 - - Franchise and local taxes 291,554 - - License and permits 451,839 - - Charges for services 1,008,380 - - Fire and rescue 648,038 - - Contributions and donations 2,600 - - Intergovernmental 481,408 7,292 212,500 Fines and forfeitures 72,661 - - Investment income 19,798 - 988 Other revenue 458,600 - - 8,692,745 7,292 828,308 Expenditures Current: General government 2,154,048 - 1,250 Police department 1,424,522 - - Municipal court 174,044 - - Fire and EMS 1,332,950 - - Parks and recreation 468,306 - - Public works 999,827 - - Debt service: Principal 43,772 - 664,800 Interest 7,763 - 110,618 Capital outlay 163,953 737,625 - 6,769,185 737,625 776,668 Excess of Revenues Over (Under) Expenditures 1,923,560 (730,333) 51,640 Other Financing Sources (Uses) Transfers in 761,657 1,098,682 - Transfers (out)(675,000) - (51,535) Proceeds from sale of capital assets 9,523 - - Insurance recoveries 75,330 - - 171,510 1,098,682 (51,535) 2,095,070 368,349 105 Beginning fund balances 6,437,778 1,628,719 476,181 $8,532,848 $1,997,068 $476,286 See Notes to Financial Statements. General Total Revenues ServiceProjects Fund City of Sanger, Texas STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE Nonmajor Debt GOVERNMENTAL FUNDS For the Year Ended September 30, 2020 Capital Ending Fund Balances Total Other Financing Sources (Uses) Total Expenditures Net Change in Fund Balances 28 $4,768,162 1,104,525 291,554 451,839 1,008,380 648,038 2,600 701,200 72,661 20,786 458,600 9,528,345 2,155,298 1,424,522 174,044 1,332,950 468,306 999,827 708,572 118,381 901,578 8,283,478 1,244,867 1,860,339 (726,535) 9,523 75,330 1,218,657 2,463,524 8,542,678 $11,006,202 Total Funds Governmental 29 (This page intentionally left blank.) 30 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances - total governmental funds $2,463,524 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay 1,305,826 Depreciation expense (1,263,448) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. EMS receivable 16,615 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences 4,286 Accrued interest 4,013 Pension expense (29,446) OPEB expense (4,778) The issuance of long-term debt (e.g., bonds, leases, certificates of obligation) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when they are first issued; whereas, these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Deferred charges on refunding (7,250) Principal payments 708,572 Amortization of bond premium 40,742 Internal service funds are used by management to charge the cost of internal services to individual funds. The City reports the net gain (loss) of internal service funds within governmental activities.(20,415) $3,218,241 See Notes to Financial Statements. Change in Net Position of Governmental Activities For the Year Ended September 30, 2020 City of Sanger, Texas RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 31 Current Assets Cash and cash equivalents $8,032,637 $193,335 Restricted cash 2,540,582 - Investments 725,385 - Receivables, net 1,322,782 - Inventory 473,150 - Due from other funds 72,638 - 13,167,174 193,335 Noncurrent Assets Deposit for capital assets 464,064 - Capital assets: Non-depreciable 14,675,601 - Net depreciable capital assets 15,327,013 117,617 30,466,678 117,617 43,633,852 310,952 Deferred charge on refunding 8,252 - Pension outflows 105,772 98,892 OPEB outflows 4,494 4,299 Total Deferred Outflows of Resources 118,518 103,191 City of Sanger, Texas STATEMENT OF NET POSITION (Page 1 of 2) PROPRIETARY FUND September 30, 2020 Activities Governmental Water, Sewer Assets Service Deferred Outflows of Resources Internal & Electric Total Current Assets Total Noncurrent Assets Total Assets 32 Current Liabilities Accounts payable and accrued liabilities 991,742 120,785 Accrued interest 234,956 - Customer deposits 508,333 - Compensated absences - current 95,212 29,588 Bonds and capital leases payable - current 885,200 - 2,715,443 150,373 Noncurrent Liabilities Compensated absences - noncurrent 10,579 3,287 Net pension liability 252,203 235,799 OPEB liability 30,406 29,083 Bonds and capital leases payable - noncurrent 18,613,144 - 21,621,775 418,542 OPEB inflows 2,336 2,235 Pension inflows 72,324 67,620 74,660 69,855 Net investment in capital assets 10,230,683 117,617 Unrestricted 11,825,252 (191,871) $22,055,935 $(74,254) See Notes to Financial Statements. Governmental Activities Water, Sewer Internal & Electric Service Deferred Inflows of Resources City of Sanger, Texas STATEMENT OF NET POSITION (Page 2 of 2) Total Net Position Net Position Liabilities Total Liabilities Total Current Liabilities Total Deferred Inflows of Resources PROPRIETARY FUND September 30, 2020 33 Operating Revenues Charges for services $11,159,866 $2,089,244 Connection fees 70,720 - Tap fees 1,028,800 - Other revenue 141,035 - 12,400,421 2,089,244 Operating Expenses Salaries and wages 2,143,514 1,306,439 Contracted services 563,298 494,537 Utilities 351,885 96,545 Materials and supplies 139,347 90,025 Water and electric purchases 5,208,867 - Repairs and maintenance 538,674 111,044 Depreciation 1,026,876 10,290 9,972,461 2,108,880 2,427,960 (19,636) Nonoperating Revenues (Expenses) Investment income 389,530 - Interest expense (642,843) (779) (253,313)(779) 2,174,647 (20,415) Transfers (out)(1,133,804)- 1,040,843 (20,415) 21,015,092 (53,839) $22,055,935 $(74,254) See Notes to Financial Statements. Ending Net Position Total Operating Revenues Total Operating Expenses Change in Net Position Operating Income (Loss) Total Nonoperating Revenues (Expenses) Income (Loss) Before Transfers Beginning net position Internal Service Governmental Activities City of Sanger, Texas STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND For the Year Ended September 30, 2020 Water, Sewer & Electric 34 Cash Flows from Operating Activities Receipts from customers $12,710,868 $- Receipts from interfund charges for administrative services - 2,089,244 Payments to suppliers (7,377,183) (767,900) Payments to employees (2,149,731) (1,267,279) Receipts from other funds 18,622 - 3,202,576 54,065 Cash Flows from Noncapital Financing Activities Operating transfers (out)(1,133,804) - (1,133,804) - Cash Flows from Capital and Related Financing Activities Capital purchases (1,756,970) (81,867) Deposit payment for capital assets purchase (464,064) - Principal paid on debt (830,200) - Interest paid on debt (744,658) (779) (3,795,892) (82,646) Cash Flows from Investing Activities Purchases of investments, net (2,859) - Interest on investments 389,530 - 386,671 - (1,340,449) (28,581) 11,913,668 221,916 $10,573,219 $193,335 See Notes to Financial Statements. City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 1 of 2) For the Year Ended September 30, 2020 Net Cash Provided by (Used) by Operating Activities & Electric Water, Sewer Net Cash Provided by Investing Activities Net Cash Provided by (Used) by Noncapital Financing Activities Net Cash (Used) by Capital and Related Financing Activities Ending Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Governmental Activities Internal Service Beginning cash and cash equivalents 35 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income / (Loss)$2,427,960 $(19,636) Adjustments to reconcile operating income / (loss) to net cash provided / (used): Depreciation 1,026,876 10,290 Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts receivable 244,200 - Inventory (23,000) - Due from/to other funds 18,622 - Deferred outflows of resources - pension contributions 56,739 47,841 Deferred outflows of resources - OPEB contributions 71 62 Other deferred outflows of resources - pensions 13,610 1,744 Deferred inflows of resources - pensions 72,324 67,620 Other deferred outflows of resources - OPEB (4,494) (4,299) Deferred inflows of resources - OPEB 466 633 Increase (Decrease) in: Accounts payable and accrued liabilities (552,112) 24,251 Compensated absences (27,086) (1,050) Customer deposits 66,247 - Net pension liability (124,723) (82,015) OPEB liability 6,876 8,624 $3,202,576 $54,065 See Notes to Financial Statements. Internal City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 2 of 2) For the Year Ended September 30, 2020 Net Cash Provided (Used) by Operating Activities Service& Electric Water, Sewer Governmental Activities 36 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS September 30, 2020 37 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of Government‐Wide Financial Statements The government‐wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. Governmental activities, which normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are reported separately from business‐type activities, which rely to a significant extent on fees and charges to external customers for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. B. Reporting Entity The City of Sanger, Texas (the “City”) was incorporated in 1886 and operates under a Council‐Manager form of government. The City provides: general government, public safety, public works, culture and recreation, water, sewer, and electricity operations. The City is an independent political subdivision of the State of Texas governed by an elected council and a mayor and is considered a primary government. As required by generally accepted accounting principles, these basic financial statements have been prepared based on considerations regarding the potential for inclusion of other entities, organizations, or functions as part of the Cityʹs financial reporting entity. The Sanger Industrial Development Corporation (“4A fund”) and the Sanger Texas Development Corporation (“4B fund”), although legally separate, are considered part of the reporting entity. No other entities have been included in the Cityʹs reporting entity. Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not considered a part of any other governmental or other type of reporting entity. Considerations regarding the potential for inclusion of other entities, organizations or functions in the Cityʹs financial reporting entity are based on criteria prescribed by generally accepted accounting principles. These same criteria are evaluated in considering whether the City is a part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered in determining that the Cityʹs financial reporting entity status is that of a primary government are that it has a separately elected governing body; it is legally separate; and is fiscally independent of other state and local governments. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 38 Additionally, prescribed criteria under generally accepted accounting principles include considerations pertaining to organizations for which the primary government is financially accountable, and considerations pertaining to organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entityʹs financial statements to be misleading or incomplete. Discretely Presented Component Units Sanger Industrial Development Corporation (4A) The Sanger Texas Industrial Development Corporation (“4A”) is governed by a board of five directors, all of whom are appointed by the City Council of the City of Sanger and any of whom can be removed from office by the City Council at its will. The 4A fund was incorporated in the state of Texas as a non‐profit industrial development corporation under Section 4A of the Development Corporation Act of 1979. The purpose of the 4A fund is to promote economic development within the City of Sanger. Discrete presentation is appropriate because the District’s Board is not substantially the same as the City. Sanger Texas Development Corporation (4B) The Sanger Texas Development Corporation (“4B”) is governed by a board of seven directors, all of whom are appointed by the City Council at its will. The 4B fund was incorporated in the state of Texas as a nonprofit industrial development corporation under Section 4B of the Development Corporation Act of 1979. The purpose of the 4B fund is to promote economic and community development within the City of Sanger. Discrete presentation is appropriate because the District’s Board is not substantially the same as the City. C. Basis of Presentation Government‐Wide and Fund Financial Statements While separate government‐wide and fund financial statements are presented, they are interrelated. The governmental activities column incorporates data from governmental funds while business‐type activities incorporate data from the government’s enterprise funds. Separate financial statements are provided for governmental funds and the proprietary funds. As a general rule, the effect of interfund activity has been eliminated from the government‐wide financial statements. Exceptions to this general rule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 39 interfund services provided and other charges between the government’s water and transit functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. The fund financial statements provide information about the government’s funds. Separate statements for each fund category—governmental and proprietary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. The government reports the following major governmental funds: Governmental Funds Governmental funds are those funds through which most governmental functions are typically financed. General Fund The general fund is used to account for all financial transactions not properly includable in other funds. The principal sources of revenues include local property taxes, sales and franchise taxes, licenses and permits, fines and forfeitures, and charges for services. Expenditures include general government, public safety, parks and recreation and public works. Capital Projects Fund The capital projects fund is used to account for capital asset activities for governmental fund types. The government reports the following nonmajor governmental fund: Debt Service Fund The debt service fund is used to account for debt service activities for governmental fund types. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 40 Proprietary Fund Types Proprietary funds are used to account for activities that are similar to those often found in the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating to the government’s business activities are accounted for through proprietary funds. The measurement focus is on determination of net income, financial position, and cash flows. Proprietary funds distinguish operating revenues and expenses from non‐operating items. Operating revenues include charges for services. Operating expenses include costs of materials, contracts, personnel, and depreciation. All revenues and expenses not meeting this definition are reported as non‐operating revenues and expenses. Proprietary fund types follow GAAP prescribed by the Governmental Accounting Standards Board (GASB) and all financial Accounting Standards Board’s standards issued prior to November 30, 1989. Subsequent to this date, the City accounts for its enterprise funds as presented by GASB. The proprietary fund types used by the City include enterprise funds. The government reports the following major enterprise fund: Water, Sewer, & Electric Fund This fund is used to account for the provision of water, sewer and electric services to the residents of the City. Activities of the fund include administration, operations and maintenance of the water production and distribution system, water collection and treatment systems, and electric services. The fund also accounts for the accumulation of resources for and the payment of long‐term debt. All costs are financed through charges to utility customers. Additionally, the government reports the following fund type: Internal Service Fund Revenues and expenses related to services provided to organizations inside the City on a cost reimbursement basis are accounted for in an internal service fund. The Cityʹs internal service fund was set up to provide administrative support services to other funds of the City. During the course of operations the government has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 41 preparation of the government‐wide financial statements. Balances between the funds included in governmental activities (i.e., the governmental and internal service funds) are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business‐type activities (i.e., the enterprise funds) are eliminated so that only the net amount is included as internal balances in the business‐type activities column. Further, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements, certain eliminations are made in the preparation of the government‐wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Similarly, balances between the funds included in business‐type activities are eliminated so that only the net amount is included as transfers in the business‐type activities column. D. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The government‐wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 42 expenditures, as well as expenditures related to compensated absences, and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long‐ term debt and acquisitions under capital leases are reported as other financing sources. Property taxes, sales taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Entitlements are recorded as revenues when all eligibility requirements are met, including any time requirements, and the amount is received during the period or within the availability period for this revenue source (within 60 days of year end). Expenditure‐driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements have been met, and the amount is received during the period or within the availability period for this revenue source (within 60 days of year end). All other revenue items are considered to be measurable and available only when cash is received by the government. E. Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position/Fund Balance 1. Deposits and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits and short term investments with original maturities of three months or less from the date of acquisition. For the purpose of the statement of cash flows, the proprietary fund types consider temporary investments with maturity of three months or less when purchased to be cash equivalents. In accordance with GASB Statement No. 31, Accounting and Reporting for Certain Investments and External Investment Pools, the City reports all investments at fair value, except for “money market investments” and “2a7‐like pools.” Money market investments, which are short‐term highly liquid debt instruments that may include U.S. Treasury and agency obligations, are reported at amortized costs. Investment positions in external investment pools that are operated in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940, such as TexPool, are reported using the pools’ share price. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 43 The City has adopted a written investment policy regarding the investment of its funds as defined in the Public Funds Investment Act, Chapter 2256, of the Texas Governmental Code. In summary, the City is authorized to invest in the following: Direct obligations of the U.S. Government Fully collateralized certificates of deposit and money market accounts Statewide investment pools 2. Fair Value The City has applied Governmental Accounting Standards Board (“GASB”) Statement No. 72, Fair Value Measurement and Application. GASB Statement No. 72 provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements. 3. Receivables and Interfund Transactions Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either “interfund receivables/payables” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non‐current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds” in the fund financial statements. If the transactions are between the primary government and its component unit, these receivables and payables are classified as “due to/from component unit/primary government.” Any residual balances outstanding between the governmental activities and business‐type activities are reported in the government‐wide financial statements as “internal balances.” Advances between funds are offset by a fund balance reserve account in the applicable governmental fund to indicate they are not available for appropriation and are not expendable available financial resources. All trade receivables are shown net of any allowance for uncollectible amounts. 4. Property Taxes Property taxes are levied by October 1 on the assessed value listed as of the prior January 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 44 Penalties are calculated after February 1 up to the date collected by the government at the rate of 6% for the first month and increased 1% per month up to a total of 12%. Interest is calculated after February 1 at the rate of 1% per month up to the date collected by the government. Under state law, property taxes levied on real property constitute a lien on the real property which cannot be forgiven without specific approval of the State Legislature. The lien expires at the end of twenty years. Taxes levied on personal property can be deemed uncollectible by the City. 5. Inventories and Prepaid Items The costs of governmental fund type inventories are recorded as expenditures when the related liability is incurred, (i.e., the purchase method). The inventories are valued at the lower of cost or market using the average cost method. Certain payments to vendors reflect costs applicable to future accounting periods (prepaid expenditures) are recognized as expenditures when utilized. 6. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business‐type activities columns in the government‐wide financial statements. Capital assets are defined by the government, as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest costs incurred in connection with construction of enterprise fund capital assets are capitalized when the effects of capitalization materially impact the financial statements. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 45 Property, plant, and equipment of the primary government, as well as the component units, are depreciated using the straight‐line method over the following estimated useful years. Asset Description Estimated Useful Life Vehicles 5‐10 years Furniture and equipment 5 to 10 years Infrastructure 10‐30 years Water and sewer system 10‐30 years Buildings and improvements 5‐40 years 7. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. An example is a deferred charge on refunding reported in the government‐wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of item, which arises only under a modified accrual basis of accounting, which qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: property taxes and EMS revenues. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 8. Net Position Flow Assumption Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government‐wide and proprietary fund financial statements, a City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 46 flow assumption must be made about the order in which the resources are considered to be applied. 9. Fund Balance Flow Assumptions Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. 10. Fund Balance Policies Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The government itself can establish limitations on the use of resources through either a commitment (committed fund balance) or an assignment (assigned fund balance). The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the government’s highest level of decision‐making authority. The governing council is the highest level of decision‐making authority for the government that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as committed. The governing body (council) has by resolution authorized the City Manager to assign fund balance. The Council may also assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subseq uent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 47 11. Compensated Absences The liability for compensated absences reported in the government‐wide and proprietary fund statements consist of unpaid, accumulated vacation balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. Vested or accumulated vacation leave and compensated leave of government‐wide and proprietary funds are recognized as an expense and liability of those funds as the benefits accrue to employees. It is the Cityʹs policy to liquidate compensated absences with future revenues rather than with currently available expendable resources. Accordingly, the Cityʹs governmental funds recognize accrued compensated absences when it is paid. 12. Long‐Term Obligations In the government‐wide financial statements, long‐term debt and other long‐term obligations are reported as liabilities in the applicable governmental activities statement of net position. The long‐term debt consists primarily of bonds payable and accrued compensated absences. Long‐term debt for governmental funds is not reported as liabilities in the fund financial statements until due. The debt proceeds are reported as other financing sources, net of the applicable premium or discount and payments of principal and interest reported as expenditures. In the governmental fund types, issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. However, claims and judgments paid from governmental funds are reported as a liability in the fund financial statements only for the portion expected to be financed from expendable available financial resources. Long‐term debt and other obligations, financed by proprietary funds, are reported as liabilities in the appropriate funds. For proprietary fund types, bond premiums, and discounts are deferred and amortized over the life of the bonds using the effective interest method, if material. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs are expensed as incurred in accordance with GASB statement no. 65. Assets acquired under the terms of capital leases are recorded as liabilities and capitalized in the government‐wide financial statements at the present value of net minimum lease payments at inception of the lease. In the year of acquisition, capital City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 48 lease transactions are recorded as other financing sources and as capital outlay expenditures in the general fund. Lease payments representing both principal and interest are recorded as expenditures in the general fund upon payment with an appropriate reduction of principal recorded in the government‐wide financial statements. 13. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 14. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS’s Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 15. Other Postemployment Benefits (“OPEB”) The City has implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement applies to the individual employers (TMRS cities) in the TMRS Supplemental Death Benefits (SDB) plan, with retiree coverage. The TMRS SDBF covers both active and retiree benefits with no segregation of assets, and therefore doesn’t meet the definition of a trust under GASB No. 75 (i.e., no assets are accumulated for OPEB) and as such the SDBF is considered to be an unfunded OPEB plan. For purposes of reporting under GASB 75, the retiree portion of the SDBF is not considered a cost sharing plan and is instead considered a single employer, defined benefit OPEB plan. The death benefit for active employees provides a lump‐sum payment approximately equal to the employee’s annual salary, calculated based on the employee’s actual earnings on which TMRS deposits are made, for the 12‐month City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 49 period preceding the month of death. The death benefit amount for retirees is $7,500. GASB No. 75 requires the liability of employers and nonemployer contributing entities to employees for defined benefit OPEB (net OPEB liability) to be measured as the portion of the present value of projected benefit payments to be provided to current active and inactive employees that is attributed to those employees’ past periods of service (total OPEB liability), less the amount of the OPEB plan’s fiduciary net position. II. RECONCILIATION OF GOVERNMENT‐WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government‐wide statement of net position. The governmental fund balance sheet includes reconciliation between fund balance‐ total governmental funds and net position‐governmental activities as reported in the government‐wide statement of net position. One element of that reconciliation explains that long‐term liabilities, including bonds, are not due and payable in the current period and, therefore, are not reported in the funds. B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government‐wide statement of activities. The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental states that, “the issuance of long‐term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of the principal of long‐term debt consumes the current financial resources of governmental funds. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.” III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental and enterprise funds. The appropriated budget is prepared by fund, function, and department. The legal level of control is the fund level. No funds can be transferred or added to a City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 50 budgeted item without Council approval. Appropriations lapse at the end of the year. Budget amendments were only re‐classes at the function level and below and there was no increase in budgeted revenues or expenses by function from amendments. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments As of September 30, 2020, the primary government had the following investments: Investment Type Certificates of deposit $ 1,271,560 0.48 Total fair value $ 1,271,560 Portfolio weighted average maturity 0.48 Average Maturity Carrying Value (Years) As of September 30, 2020, the 4A Component Unit had the following investments: Investment Type Certificates of deposit $95,660 0.50 Total fair value $95,660 Portfolio weighted average maturity 0.50 Average Maturity Carrying Value (Years) As of September 30, 2020, the 4B Component Unit had the following investments: Investment Type Certificates of deposit $ 283,601 0.47 Total fair value $ 283,601 Portfolio weighted average maturity 0.47 Average Maturity Carrying Value (Years) Interest rate risk – In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average of maturity not to exceed five years; structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations; monitoring credit ratings of portfolio position to assure compliance with rating requirements imposed by the Public Funds Investment Act; and invest operating funds primarily in short‐term securities or similar government investment pools. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 51 Credit risk – The City’s investment policy limits investments to obligations of the United States, State of Texas, or their agencies and instrumentalities with an investment quality rating of not less than “A” or its equivalent, by a nationally recognized investment rating firm. Other obligations must be unconditionally guaranteed (either express or implied) by the full faith and credit of the United States Government or the issuing U.S. agency and investment pools with an investment quality not less than AAA or AAA‐m, or equivalent, by at least one nationally recognized rating service. Custodial credit risk – deposits In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. State statutes require that all deposits in financial institutions be insured or fully collateralized by U.S. government obligations or its agencies and instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a market value of not less than the principal amount of the deposits. As of September 30, 2020, the market values of pledged securities and FDIC exceeded bank balances. Custodial credit risk – investments For an investment, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy requires that it will seek to safekeeping securities at financial institutions, avoiding physical possession. Further, all trades, where applicable, are executed by delivery versus payment to ensure that securities are deposited in the City’s safekeeping account prior to the release of funds. B. Receivables The following comprise receivable balances of the primary government at year end: Property taxes $ 80,125 $ 17,888 $‐ $ 98,013 Sales tax 192,348 ‐ ‐ 192,348 Franchise & local taxes 44,065 ‐ ‐ 44,065 EMS 380,079 ‐ ‐ 380,079 Accounts 103,560 ‐ 1,427,262 1,530,822 Other 3,923 ‐ ‐ 3,923 Allowance (252,621) (4,279) (104,480) (361,380) $ 551,479 $ 13,609 $ 1,322,782 $ 1,887,870 General Service Debt Total& Electric Water, Sewer City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 52 The following comprise receivable balances of the component units at year end: Sales tax $ 96,174 $ 96,174 $ 192,348 $ 96,174 $ 96,174 $ 192,348 Total4A4B C. Inventory The following comprise the inventory balances of the primary government at year end: Inventory type Electric Department $ 407,370 Water Department 65,780 Total $ 473,150 Cost City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 53 D. Capital Assets A summary of changes in governmental activities capital assets for the year end was as follows: Capital assets, not being depreciated: Land $ 1,044,933 $‐ $‐ $ 1,044,933 Construction in progress 6,795,480 31,853 (6,827,333) ‐ 7,840,413 31,853 (6,827,333) 1,044,933 Capital assets, being depreciated: Infrastructure 12,424,210 820,200 6,799,971 20,044,381 Buildings and improvements 6,827,454 32,526 ‐ 6,859,980 Machinery and equipment 4,159,126 503,114 (6,141) 4,656,099 23,410,790 1,355,840 6,793,830 31,560,460 Less accumulated depreciation Infrastructure 6,796,994 655,920 ‐ 7,452,914 Buildings and improvements 2,567,852 294,224 ‐ 2,862,076 Machinery and equipment 2,937,188 323,594 (33,503) 3,227,279 Total accumulated depreciation 12,302,034 1,273,738 (33,503) 13,542,269 Net capital assets being depreciated 11,108,756 82,102 6,827,333 18,018,191 $ 18,949,169 $ 113,955 $‐ $ 19,063,124 Beginning Disposals /Ending Balances Increases Total Capital Assets Total capital assets not being depreciated Total capital assets being depreciated BalancesReclassifications Depreciation was charged to governmental functions as follows: General government $ 80,165 Public safety 112,094 Public works 692,573 Culture and recreation 284,841 Fire and rescue 93,775 Internal service 10,290 $ 1,273,738 Total Governmental Activities Depreciation Expense City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 54 A summary of changes in business‐type activities capital assets for the year end was as follows: Capital assets, not being depreciated: Land $ 496,867 $‐ $‐ $ 496,867 Construction in progress 13,377,210 939,997 (138,473) 14,178,734 Total capital assets not being depreciated 13,874,077 939,997 (138,473) 14,675,601 Capital assets, being depreciated: Infrastructure 30,279,289 808,910 138,473 31,226,672 Buildings and improvements 865,245 ‐ ‐ 865,245 Machinery and equipment 2,318,516 8,063 (87,703) 2,238,876 Total capital assets being depreciated 33,463,050 816,973 50,770 34,330,793 Less accumulated depreciation Infrastructure 15,805,833 859,734 ‐ 16,665,567 Buildings and improvements 575,015 51,855 ‐ 626,870 Machinery and equipment 1,683,759 115,287 (87,703) 1,711,343 Total accumulated depreciation 18,064,607 1,026,876 (87,703) 19,003,780 Net capital assets being depreciated 15,398,443 (209,903) 138,473 15,327,013 $ 29,272,520 $730,094 $‐ $ 30,002,614 Total Capital Assets Beginning Disposals /Ending Balances Increases Reclassifications Balances Depreciation was charged to business‐type activities as follows: Water $ 377,795 Sewer 403,758 Electric 230,994 Other 14,329 $ 1,026,876 Total Business‐type Activities Depreciation Expense City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 55 A summary of changes in component unit (4A Component Unit) capital assets for the year end was as follows: Capital assets, being depreciated: Buildings and improvements $ 1,080,797 $‐ $‐ $ 1,080,797 Furniture and fixtures 40,950 ‐ ‐ 40,950 Total capital assets being depreciated 1,121,747 ‐ ‐ 1,121,747 Less accumulated depreciation Buildings and improvements 368,096 37,973 ‐ 406,069 Furniture and fixtures 21,661 4,363 ‐ 26,024 Total accumulated depreciation 389,757 42,336 ‐ 432,093 Net capital assets being depreciated 731,990 (42,336) ‐ 689,654 $ 731,990 $ (42,336) $‐ $689,654 Total Capital Assets Beginning Retirements/Ending Balances Additions Reclassifications Balances The 4A Component Unit recognized depreciation expense of $42,336 during the year ended September 30, 2020. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 56 E. Long‐term Debt The following is a summary of changes in the City’s total governmental long‐term liabilities for the year ended. The City uses the debt service fund to liquidate governmental activities debts. Governmental Activities: Bonds, notes and other payables: General Obligation Bonds $ 804,500 $‐ $ (410,900) $ 393,600 $ 393,600 Certificates of Obligation 2,228,800 ‐ (253,900) 1,974,900 256,200 Less deferred amounts: For issuance premiums 168,814 ‐ (40,742) 128,072 ‐ 3,202,114 ‐ (705,542) 2,496,572 649,800 Other liabilities: Capital leases payable 233,023 ‐ (43,772) 189,251 45,179 $ 3,435,137 $‐ $ (749,314) $ 2,685,823 $ 694,979 Long‐term liabilities due in more than one year $1,990,844 Business‐Type Activities: General Obligation Bonds $ 975,500 $‐ $ (499,100) $ 476,400 $ 476,400 Certificates of Obligation 18,236,200 ‐ (331,100) 17,905,100 408,800 Less deferred amounts: For issuance premiums 1,219,430 ‐ (102,586) 1,116,844 ‐ 20,431,130 ‐ (932,786) 19,498,344 885,200 $ 20,431,130 $‐ $ (932,786) $ 19,498,344 $ 885,200 Long‐term liabilities due in more than one year $ 18,613,144 Amounts Beginning Amortization/ Ending Due within Balance Additions Payments Balance Total Business‐Type Activities One Year Total Governmental Activities City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 57 Long‐term debt at year end was comprised of the following debt issues: General Obligation Bonds: $3,495,000 General Obligation Refunding Bond, Series 2012, due in installments through 2021, interest at 2% to 3%$ 145,200 $ 184,800 $ 330,000 $2,535,000 General Obligation Refunding Bond, Series 2016, due in installments through 2021, interest at 2% to 4%248,400 291,600 540,000 $ 393,600 $ 476,400 $ 870,000 Certificates of Obligation: $1,750,000 Certificates of Obligation, Series 2007, due in annual installments through 2027, interest at 4.4%$ 270,300 $ 524,700 $ 795,000 $4,260,000 Certificates of Obligation, Series 2013, due in annual installments through 2033, interest at 2% to 3.7%369,600 2,710,400 3,080,000 $5,870,000 Certificates of Obligation, Series 2015, due in annual installments through 2035, interest at 3.4% to 5.5%‐ 5,430,000 5,430,000 $9,240,000 Certificates of Obligation, Series 2017, due in annual installments through 2035, interest at 3% to 4%‐ 9,240,000 9,240,000 $1,535,000 Certificates of Obligation, Series 2019, due in annual installments through 2026, interest at 3% to 4.75%1,335,000 ‐ 1,335,000 $ 1,974,900 $ 17,905,100 $ 19,880,000 Plus deferred amounts: Issuance premium $ 128,072 $ 1,116,844 $ 1,244,916 $ 128,072 $ 1,116,844 $ 1,244,916 Capital Leases Payable: $435,000 Capital lease payable to financial institution, due in annual installments of $51,535 through 2024, interest at 3.346%$ 189,251 $‐ $ 189,251 $ 189,251 $‐ $ 189,251 $ 2,685,823 $ 19,498,344 $ 22,184,167 Total Long‐term Liabilities Total Business ‐ Total General Obligation Bonds Total Certificates of Obligation Governmental Type Activities Activities Total Deferred Amounts Total Capital Leases Payable Long‐term liabilities applicable to the City’s governmental activities are not due and payable in the current period and accordingly, are not reported as fund liabilities in the governmental funds. Interest on long‐term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 58 The annual requirements to amortize governmental and business‐type activities debt issues outstanding at year ending were as follows: General Obligation Bonds Year ending September 30, 2021 $ 393,600 $ 13,929 $ 476,400 $ 16,746 $ 393,600 $ 13,929 $ 476,400 $ 16,746 Principal Interest Principal Interest Governmental Activities Business‐Type Activities Combination Tax and Revenue Certificates of Obligations Year ending September 30, 2021 $ 256,200 $ 76,725 $ 408,800 $ 694,655 2022 268,500 66,563 616,500 679,742 2023 281,400 55,908 633,600 660,427 2024 287,000 44,743 658,000 640,327 2025 299,300 33,236 675,700 618,519 2026 313,900 20,982 701,100 593,113 2027 71,800 13,024 998,200 566,321 2028 28,800 9,768 1,086,200 526,357 2029 30,600 8,400 1,124,400 482,800 2030 31,800 6,870 1,173,200 436,574 2031 33,600 5,280 1,221,400 387,920 2032 35,400 3,600 1,269,600 337,338 2033 36,600 1,830 1,323,400 284,626 2034 ‐ ‐ 1,420,000 229,713 2035 ‐ ‐ 1,475,000 173,656 2036 ‐ ‐ 1,535,000 115,344 2037 ‐ ‐ 1,585,000 63,400 $1,974,900 $ 346,929 $ 17,905,100 $ 7,490,831 Principal Interest Principal Interest Governmental Activities Business‐Type Activities General obligation bonds are direct obligations of the City for which its full faith and credit are pledged. Repayment of general obligation bonds are from taxes levied on all taxable property located within the City. The City is not obligated in any manner for special assessment debt. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 59 Capital Leases Year ending September 30, 2021 $ 45,179 $ 6,357 2022 46,690 4,845 2023 48,252 3,283 2024 49,130 1,668 $ 189,251 $ 16,153 Governmental Activities Principal Interest The City has entered into capital lease agreements. The leased property under capital leases is classified as machinery and equipment with a total carrying value as of yearend for governmental activities of $316,165. This property serves as collateral for the leases. In the event the City were to default on the agreements the lessor has the right to take possession of the property. F. Other Long‐term Liabilities The following is a summary of changes in the City’s other long‐term liabilities for the year ended. In general, the City uses the general fund to liquidate governmental activities compensated absences. Governmental Activities: Compensated Absences $ 179,074 $‐ $ (4,286) $ 174,788 $ 157,309 Compensated Absences in internal service funds 33,925 ‐ (1,050) 32,875 29,588 Total Governmental Activities $ 212,999 $‐ $ (5,336) $ 207,663 $ 186,897 Long‐term Liabilities Due in More than One Year $ 20,766 Business‐Type Activities: Compensated Absences $ 132,877 $‐ $ (27,086) $ 105,791 $95,212 Total Business‐Type Activities $ 132,877 $‐ $ (27,086) $105,791 $95,212 Long‐term Liabilities Due in More than One Year $ 10,579 Amounts Due Within One Year Beginning Balance Additions Reductions Ending Balance G. Conduit Debt Before the current year, the City issued notes payable totaling $230,461,407 for the purpose of assisting with financing needed by not‐for‐profit organizations to City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 60 promote their cause. The final maturities on notes payable range from March 2019 through December 2041. The notes are secured by various assets of the borrower. The City has no liability for the notes payable in the event of default by the borrowers. Accordingly, the bonds are not reported as liabilities in the City’s financial statements. H. Deferred Charge on Refunding Deferred charges resulting from the issuance of the 2012 and 2016 general obligation refunding bonds have been recorded as a deferred outflow of resources and are being amortized to interest expense over the terms of the respective refunded debts. Current year balances for governmental and business‐type activities totaled $4,787 and $8,252, respectively. Current year amortization expense for governmental and business‐type activities totaled $7,250 and $12,725, respectively. I. Interfund Transactions Amounts transferred between funds relate to amounts collected, various capital expenditures, annual funding, and debt payments. Transfer out: General $‐ $ 675,000 $ 675,000 Debt Service 51,535 ‐ 51,535 Water, sewer, & electric 710,122 423,682 1,133,804 $ 761,657 $ 1,098,682 $ 1,860,339 General Total Capital Projects Transfer In The internal service fund provides administrative services to the general and water, sewer, & electric funds. Below is a summary of the amounts paid from these funds to the internal service fund for the year ended September 30, 2020: Paid by: General $ 626,773 Enterprise 1,462,471 $ 2,089,244 Internal Service Received by: City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 61 The compositions of interfund due to/from balances as of the year ended September 30, 2020 were as follows: Payable fund: General $ 72,638 $ 72,638 Enterprise Receivable fund: Interfund balances resulted from the timing difference between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. All balances are expected to be paid in the subsequent year. J. Fund Equity The City records fund balance restrictions on the fund level to indicate that a portion of the fund balance is legally restricted for a specific future use or to indicate that a portion of the fund balance is not available for expenditures. The following is a list of fund balances restricted/committed by the City: Municipal court $ 11,469 *$‐ Tourism 59,175 *‐ Library 104,602 **‐ Public safety 81,934 *‐ Debt service 476,286 ‐ Capital projects ‐ 1,997,068 Parks 11,087 ‐ Streets 882,093 ‐ Employee benefits ‐ 41,226 $ 1,626,646 $ 2,038,294 * Restricted by enabling legislation ** Restricted by donor Restricted Committed City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 62 V. OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets, errors and omissions; and natural disasters for which the City participates along with 2,800 other entities in the Texas Municipal League’s Intergovernmental Risk Pools. The Pool purchases commercial insurance at group rates for participants in the Pool. The City has no additional risk or responsibility to the Pool outside of the payment of insurance premiums. The City has not significantly reduced insurance coverage or had settlements which exceeded coverage amounts for the past three years. B. Contingent Liabilities Amounts received or receivable from granting agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amounts of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Liabilities are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payouts, and other economic and social factors. The State of Texas’ environmental agency (TCEQ) is pursuing an enforcement action against the City of Sanger to address wastewater compliance issues related to the City of Sanger’s discharge permit. Sanger has provided TCEQ with counterproposal language that seeks credit for the City’s proactive response to previous wastewater compliance issues, and TCEQ is expected to respond in the coming months to bring the enforcement matter to a close. The City anticipates resolution of the enforcement action without significant burden in light of the City’s ongoing commitment to compliance efforts and its substantial investments to date to improve and maintain the City’s wastewater infrastructure. The estimated range of potential liability to the City for related TCEQ penalties is between $0 to $64,500. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 63 C. Construction commitments The government has active construction projects as of September 30, 2020. The projects include street construction and improvements, sewer plant and the construction of additional water lines and repairs. At year end the government’s commitments with contractors are as follows: Project McReynolds Road Reconstruction Pacheco Koch, LLC $ 4,675 McReynolds Road Reconstruction HRM Land Acquisition 397 5,072 Server Consolidation Austin Lane Technology 4,750 2019‐2020 Street Rehabilitation Reynolds Asphalt 126,156 2019‐2020 Street Rehabilitation Martinez Brothers 21,917 148,073 FM 455 Relocation of Utilities Dannenbaum Engineering 9,927 Acker GST Rehabilitation Maguire Iron 84,397 Cowling GST Rehabilitation Maguire Iron 69,668 New Sewer Plant Alan Plummer Associates 28,145 New Sewer Plant Felix Construction 218,239 New Sewer Plant Anixter Inc.285 246,669 Sewer 455/Lois D&S Engineering 4,630 Sewer 455/Lois Dickerson Construction 4,100 8,730 Railroad Lift Station Perkins Engineering 9,332 Railroad Lift Station Alan Plummer Associates 135,850 145,182 $ 722,468 Remaining CommitmentVendor Total Project Total Project Total Project Total Project Total Project Total City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 64 D. Arbitrage The Tax Reform Act of 1986 instituted certain arbitrage consisting of complex regulations with respect to issuance of tax‐exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of tax‐exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service at least every five years for applicable bond issues. Accordingly, there is the risk that if such calculations are not performed correctly, a substantial liability to the City could result. The City does anticipate that it will have an arbitrage liability and performs annual calculations to estimate this potential liability. The City will also engage an arbitrage consultant to perform the calculations in accordance with Internal Revenue Service’s rules and regulations if indicated. E. Defined Benefit Pension Plans 1. Plan Description The City of Sanger, Texas participates as one of 888 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple‐employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six‐member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS’s defined benefit pension plan is a tax‐qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. 2. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing TMRS. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 65 At retirement, the benefit is calculated as if the sum of the employee’s contributions, with interest, and the city‐financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member’s deposits and interest. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. Plan provisions for the City were as follows: Plan Year 2019 Plan Year 2018 Employee deposit rate 6.0% 6.0% Matching ratio (city to employee) 2 to 1 2 to 1 Years required for vesting 5 5 Service retirement eligibility (expressed as age / years of service) 60/5, 0/20 60/5, 0/20 Updated service credit 100% Repeating Transfers 100% Repeating Transfers Annuity increase (to retirees) 0% of CPI 0% of CPI Employees covered by benefit terms At the December 31, 2019 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 22 Inactive employees entitled to but not yet receiving benefits 27 Active employees 66 Total 115 3. Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 66 determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City of Sanger were required to contribute 6% of their annual gross earnings during the fiscal year. The contribution rates for the City of Sanger were 7.91% and 8.16% in calendar years 2019 and 2020, respectively. The City’s contributions to TMRS for the year ended September 30, 2020, were $341,109, and were equal to the required contributions. 4. Net Pension Liability The City’s Net Pension Liability (NPL) was measured as of December 31, 2019, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The Total Pension Liability in the December 31, 2019 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.0% per year Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation Salary increases are based on a service‐related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender‐distinct 2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees is used with a 4‐year set‐forward for males and a 3‐year set‐ forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 67 The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four‐year period from December 31, 2014 to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The post‐retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income in order to satisfy the short‐term and long‐term funding needs of TMRS. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income in order to satisfy the short‐term and long‐term funding needs of TMRS. The long‐term expected rate of return on pension plan investments was determined using a building‐block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long‐term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2020 are summarized in the following table: Asset Class Target Allocation Long‐Term Expected Real Rate of Return (Arithmetic) Global Equity 30.0% 5.30% Core Fixed Income 10.0% 1.25% Non‐Core Fixed Income 20.0% 4.14% Real Return 10.0% 3.85% Real Estate 10.0% 4.00% Absolute Return 10.0% 3.48% Private Equity 10.0% 7.75% Total 100.0% Discount Rate: The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 68 that assumption, the pension plan’s Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long‐term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. Changes in the Net Pension Liability: Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (a) – (b) Balance at 12/31/18 $ 10,447,793 $ 8,820,203 $ 1,627,590 Changes for the year: Service Cost 498,768 ‐ 498,768 Interest (on the Total Pension Liab.) 709,455 ‐ 709,455 Difference between expected and actual experience 89,057 ‐ 89,057 Changes of assumptions 92,583 ‐ 92,583 Contributions – employer ‐ 321,275 (321,275) Contributions – employee ‐ 243,698 (243,698) Net investment income ‐ 1,365,511 (1,365,511) Benefit payments, including refunds of emp. contributions (373,476) (373,476) ‐ Administrative expense ‐ (7,705) 7,705 Other changes ‐ (231) 231 Net changes 1,016,387 1,549,072 (532,685) Balance at 12/31/19 $ 11,464,180 $ 10,369,275 $ 1,094,905 Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the City, calculated using the discount rate of 6.75%, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1‐percentage‐point lower (5.75%) or 1‐ percentage‐point higher (7.75%) than the current rate: 1% Decrease Current Single Rate 1% Increase 5.75% Assumption 6.75% 7.75% $2,842,849 $1,094,905 $(338,960) City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 69 Pension Plan Fiduciary Net Position: Detailed information about the pension plan’s Fiduciary Net Position is available in a separately‐issued TMRS financial report. That report may be obtained on the internet at www.tmrs.com. 5. Pension Expense and Deferred Outflows and Inflows of Resources Related to Pensions For the year ended September 30, 2020, the City recognized pension expense of $423,988. At September 30, 2020, the City reported deferred outflows and deferred inflows of resources related to pensions from the following sources: Difference between projected and investment earnings $‐ $ (313,985) Changes in actuarial assumptions 85,742 ‐ Differences between expected and actual economic experience 108,615 ‐ Contributions subsequent to the measurement date 264,836 ‐ Total $459,193 $(313,985) Deferred Outflows of Resources Deferred (Inflows) of Resources The City reported $264,836 as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability for the year ending September 30, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31: 2020 $ (47,142) 2021 (46,477) 2022 67,892 2023 (111,578) 2024 17,677 Thereafter ‐ $ (119,628) City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 70 F. Postemployment Benefits Other Than Pensions The City also participates in the cost sharing multiple‐employer defined benefit group‐term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group‐term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump‐sum payment approximately equal to the employee’s annual salary (calculated based on the employee’s actual earnings, for the 12‐month period preceding the month of death); retired employees are insured for $7,500; this coverage is an “other postemployment benefit,” or OPEB. The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one‐year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre‐fund retiree term life insurance during employees’ entire careers. Employees covered by benefit terms At the December 31, 2019 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 13 Inactive employees entitled to but not yet receiving benefits 7 Active employees 66 Total 86 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 71 The City’s retiree contribution rates to the TMRS SDBF for the years ended 2020, 2019 and 2018 are as follows: Plan/ Calendar Year Annual Required Contribution (Rate) Actual Contribution Made (Rate) Percentage of ARC Contributed 2018 0.01% 0.01% 100.0% 2019 0.01% 0.01% 100.0% 2020 0.02% 0.02% 100.0% The City’s contributions to the TMRS SDBF for the years ended 2020, 2019, and 2018 were $746, $406 and $371, respectively, which equaled the required contributions each year. Total OPEB Liability The City’s Postemployment Benefits Other Than Pensions Liability (OPEB) was measured as of December 31, 2019, and the Total OPEB Liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The Total OPEB Liability in the December 31, 2019 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.5% to 10.5%, including inflation per year Discount rate 2.75% Retirees’ share of benefit‐related costs $0 Administrative expenses All administrative expenses are paid through the Pension Trust and accounted for under reporting requirements under GASB Statement No. 68 Salary increases were based on a service‐related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender‐distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment, with male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 72 a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender‐distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3‐year set‐forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. Discount Rate: The discount rate used to measure the Total OPEB Liability was 2.75%. The discount rate was based on the Fidelity Index’s “20‐Year Municipal GO AA Index” rate as of December 31, 2019. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, calculated using the discount rate of 2.75%, as well as what the City’s total OPEB liability (asset) would be if it were calculated using a discount rate that is 1‐percentage‐point lower (1.75%) or 1‐percentage‐point higher (3.75%) than the current rate: $161,706 $132,196 $ 108,958 1% Decrease (1.75%) Current Single Rate Assumption 2.75% 1% Increase (3.75%) City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 73 Changes in the Total OPEB Liability: Total OPEB Liability Balance at 12/31/18 $ 102,299 Changes for the year: Service Cost 8,529 Interest 3,938 Change in benefit terms ‐ Difference between expected and actual experience (3,932) Changes of assumptions 22,174 Benefit payments (812) Net changes 29,897 Balance at 12/31/19 $ 132,196 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2020, the City recognized OPEB expense of $13,843. At September 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to the OPEB liability from the following sources: Differences between expected and actual economic experience $ ‐ (10,158) Changes in assumptions 18,893 ‐ Contributions subsequent to measurement date 648 ‐ Total $ 19,541 $ (10,158) Deferred Outflows of Resources Deferred Inflows of Resources The City reported $648 as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date that will be recognized as a reduction of the OPEB liability for the year ending September 30, 2021. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2020 74 Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in pension expense as follows: Year ended December 31: 2020 $ 1,376 2021 1,376 2022 1,376 2023 1,376 2024 590 Thereafter 2,641 $ 8,735 G. Subsequent Events There were no material subsequent events through January 13, 2021, the date the financial statements were available to be issued. REQUIRED SUPPLEMENTARY INFORMATION 75 Revenues Property tax $4,065,250 $4,065,250 $4,153,342 $88,092 Sales tax 905,800 905,800 1,104,525 198,725 Franchise and local taxes 253,100 253,100 291,554 38,454 License and permits 343,070 343,070 451,839 108,769 Charges for services 1,046,132 1,046,132 1,008,380 (37,752) Fire and rescue 724,329 724,329 648,038 (76,291) Contributions and donations - - 2,600 2,600 Intergovernmental - - 481,408 481,408 Fines and forfeitures 95,526 95,526 72,661 (22,865) Investment income 4,000 4,000 19,798 15,798 Other revenue 77,500 77,500 458,600 381,100 7,514,707 7,514,707 8,692,745 1,178,038 Expenditures Current: General government 2,009,667 2,009,667 2,154,048 (144,381) Police department 1,622,005 1,618,145 1,424,522 193,623 Municipal court 197,494 197,494 174,044 23,450 Fire and EMS 1,574,356 1,574,356 1,332,950 241,406 Parks and recreation 519,192 519,192 468,306 50,886 Public works 1,082,115 1,085,975 999,827 86,148 Debt service: Principal 43,716 43,716 43,772 (56) Interest 7,819 7,819 7,763 56 Capital outlay 545,000 545,000 163,953 381,047 7,601,364 7,601,364 6,769,185 832,179 Revenues Over (Under) Expenditures $(86,657) $(86,657) $1,923,560 $2,010,217 Total Revenues Variance with City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 1 of 2) For the Year Ended September 30, 2020 Original Budget Final Budget Total Expenditures Actual Final Budget 76 Transfers in $761,657 $761,657 $761,657 $- Transfers (out)(675,000) (675,000) (675,000) - Proceeds from sale of capital assets - - 9,523 9,523 Insurance recoveries - - 75,330 75,330 86,657 86,657 171,510 84,853 Net Change in Fund Balance $- $- 2,095,070 $2,095,070 Beginning fund balance 6,437,778 $8,532,848 Notes to Required Supplementary Information 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Variance with Actual Final Budget IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 2 of 2) For the Year Ended September 30, 2020 Final Budget Original Budget Ending Fund Balance Total Other Financing Sources (Uses) Other Financing Sources (Uses) City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES 77 Total pension liability Service cost $498,768 $462,521 $438,324 $408,943 Interest (on the Total Pension Liability)709,455 648,013 590,632 545,333 Changes in benefit terms - - - - Differences between expected and actual experience 89,057 93,857 38,794 (78,516) Changes of assumptions 92,583 - - - Benefit payments, including refunds of participant contributions (373,476) (251,071) (208,451) (230,245) Net change in total pension liability 1,016,387 953,320 859,299 645,515 Total pension liability - beginning 10,447,793 9,494,473 8,635,174 7,989,659 Total pension liability - ending (a)$11,464,180 $10,447,793 $9,494,473 $8,635,174 Plan fiduciary net position Contributions - employer $321,275 $294,606 $276,169 $240,177 Contributions - members 243,698 226,912 217,171 202,113 Net investment income 1,365,511 (264,466) 1,040,205 461,955 Benefit payments, including refunds of participant contributions (373,476) (251,071) (208,451) (230,245) Administrative expenses (7,705) (5,106) (5,387) (5,214) Other (231) (267) (273) (281) Net change in plan fiduciary net position 1,549,072 608 1,319,434 668,505 Plan fiduciary net position - beginning 8,820,203 8,819,595 7,500,161 6,831,656 Plan fiduciary net position - ending (b)$10,369,275 $8,820,203 $8,819,595 $7,500,161 Fund's net pension liability - ending (a) - (b)$1,094,905 $1,627,590 $674,878 $1,135,013 90.45% 84.42% 92.89% 86.86% Covered payroll $4,061,633 $3,781,589 $3,619,524 $3,368,554 26.96% 43.04% 18.65% 33.69% Notes to schedule: SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS City of Sanger, Texas Plan fiduciary net position as a percentage of the total pension liability Fund's net position as a percentage of covered payroll 2018 201620172019 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Years ended December 31, 78 1 $369,950 $340,004 521,853 476,571 - - (89,808) 47,610 47,847 - (260,514) (204,026) 589,328 660,159 7,400,331 6,740,172 $7,989,659 $7,400,331 $231,097 $211,283 195,568 187,821 9,831 350,203 (260,514) (204,026) (5,988) (3,656) (296) (301) 169,698 541,324 6,661,957 6,120,633 $6,831,655 $6,661,957 $1,158,004 $738,374 85.51%90.02% $3,259,471 $3,130,346 35.53%23.59% 2015 2014 79 9/30/2020 9/30/2019 9/30/2018 9/30/2017 $341,109 $320,019 $287,348 $266,753 $341,109 $320,019 $287,348 $266,753 Contribution deficiency (excess)$- $- $- $- Annual covered payroll $4,209,793 $4,060,365 $3,706,912 $3,549,724 8.10%7.88%7.75%7.51% Valuation Date: Notes Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 25 years Asset Valuation Method 10 Year smoothed market; 12% soft corridor Inflation 2.5% Salary Increases 3.5% to 11.5% including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2019 valuation pursuant to an experience study of the period 2014 - 2018 Mortality Other Information: Notes There were no benefit changes during the year. SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN City of Sanger, Texas Post-retirement: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Pre- retirement: PUB(10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates are projected on a fully generational basis with scale UMP. NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Years Ended: Contributions in relation to the actuarially determined contribution Employer contributions as a percentage of covered payroll Actuarially determined employer contributions 80 9/30/2016 9/30/2015 1 $247,432 $225,111 $247,432 $225,111 $- $- $3,475,512 $3,130,346 7.12%7.19% 81 1 Total OPEB liability Service cost $8,529 $9,076 $7,601 Interest (on the Total OPEB Liability)3,938 3,691 3,432 Changes in benefit terms - - - Differences between expected and actual experience (3,932) (9,264) - Changes of assumptions 22,174 (7,993) 9,310 Benefit payments, including refunds of participant contributions (812) (377) (363) Net changes 29,897 (4,867) 19,980 Total OPEB liability - beginning 102,299 107,166 87,186 Total OPEB liability - ending $132,196 $102,299 $107,166 2 Covered payroll $4,061,633 $3,781,859 $3,619,524 3.25%2.70%2.96% Notes to schedule: 1 2 This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Total OPEB Liability as a percentage of covered Years ended December 31, No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement No. 75 to pay related benefits. 2019 PENSION (OPEB) LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM 20172018 City of Sanger, Texas SCHEDULE OF CHANGES IN POSTEMPLOYMENT BENEFITS OTHER THAN 82 OTHER SUPPLEMENTARY INFORMATION 83 Operating Revenues Charges for services $1,962,169 $1,873,852 $7,323,845 $- Connection fees - - 70,720 - Tap fees 437,550 591,250 - - Other revenue - - - - 2,399,719 2,465,102 7,394,565 - Operating Expenses Salaries and wages 703,183 297,376 1,142,955 - Contracted services 52,617 40,129 470,552 - Utilities 154,678 194,263 2,944 - Materials and supplies 30,338 45,286 63,723 - Water and electric purchases 103,882 - 5,104,985 - Repairs and maintenance 203,575 148,576 186,523 - Depreciation 377,795 403,758 230,994 66 1,626,068 1,129,388 7,202,676 66 773,651 1,335,714 191,889 (66) Nonoperating Revenues (Expenses) Investment income - - - - Interest expense - - - - - - - - Income (Loss) Before Transfers 773,651 1,335,714 191,889 (66) Transfers (out)- - 1,651 - $773,651 $1,335,714 $193,540 $(66) Sewer Electric Fleet Services City of Sanger, Texas COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS - BY DEPARTMENT For the Year Ended September 30, 2020 Water Total Operating Revenues Total Operating Expenses Operating Income (Loss) Total Nonoperating Revenues (Expenses) Change in Net Position 84 $- $11,159,866 - 70,720 - 1,028,800 141,035 141,035 141,035 12,400,421 - 2,143,514 - 563,298 - 351,885 - 139,347 - 5,208,867 - 538,674 14,263 1,026,876 14,263 9,972,461 126,772 2,427,960 389,530 389,530 (642,843) (642,843) (253,313) (253,313) (126,541) 2,174,647 (1,135,455) (1,133,804) $(1,261,996) $1,040,843 Administration Total 85 (This page intentionally left blank.) 86 OFFICIAL STATEMENT Dated: April 19, 2021 NEW ISSUES: Book-Entry-Only S&P Rating AA” (See “RATINGS” herein) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Certificates (as defined below) is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the Certificates is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Certificates. (see “TAX MATTERS – The Certificates” herein). Interest on the Bonds (as defined below) is not excludable for federal income tax purposes. (see “TAX MATTERS – The Bonds” herein). CITY OF SANGER, TEXAS (Denton County, Texas) $20,000,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2021A $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B Dated Date: May 1, 2021 Due: August 1 and May 1, as shown on pages ii and iii PAYMENT TERMS… Interest on the $20,000,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and the $2,830,000 City of Sanger Texas General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds” and collectively with the Certificates, the “Obligations”), will accrue from their delivery date to the underwriters listed below (the “Underwriters”). Interest on the Bonds will be payable February 1 and August 1 of each year, commencing on August 1, 2021 and interest on the Certificates will be payable November 1 and May 1 of each year, commencing on November 1, 2021. The Obligations will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal of the Obligations will be payable to the registered owner (the “Owner”) at maturity or prior redemption upon presentation at the principal corporate office of the paying agent/registrar (the “Paying Agent/Registrar”), initially UMB Bank, N.A., Austin, Texas. The Obligations will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York (“DTC”). DTC will be responsible for distributing the principal and interest payments to the participating members of DTC and the participating members will be responsible for distributing the payment to the owners of beneficial interests in the Obligations. See “BOOK-ENTRY-ONLY SYSTEM” herein. PURPOSE… Proceeds from the sale of the Obligations will be used as described herein under “PLAN OF FINANCE – Purpose of Certificates”, and “PLAN OF FINANCE – Purpose of the Bonds.” AUTHORITY FOR ISSUANCE;SECURITY… The Certificates are being issued pursuant to the Constitution and general laws of the State of Texas (the “State”), particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance to be adopted by the City Council on April 19, 2021 (the “Certificate Ordinance”). (See “THE OBLIGATIONS – Authority for Issuance”). The Certificates are direct obligations of the City of Sanger, Texas (the “City”), payable as to principal and interest from a combination of (1) an ad valorem tax levied annually, within the limits prescribed by law, against all taxable property in the City, and (ii) a limited pledge (not to exceed $1,000) of surplus net revenues of the City’s water and sewer system as provided in the Certificate Ordinance. (See “THE OBLIGATIONS – Security for the Obligations”). The Bonds are being issued pursuant to the Constitution and general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council on April 19, 2021 (the “Bond Ordinance”) (See “THE OBLIGATIONS – Authority for Issuance”). The Bonds will constitute direct obligations of the City, payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed by law as provided in the Bond Ordinance. (See “THE OBLIGATIONS – Security for the Obligations”). See Principal Amounts, Maturities, Interest Rates, and Prices on pages ii and iii SEPARATE ISSUES…The Certificates and the Bonds are being offered by the City concurrently under a common Official Statement. The Certificates and the Bonds are separate and distinct securities offerings being issued and sold independently except for this common Official Statement, and while the Certificates and the Bonds share common attributes, each issue is separate from, and is not contingent on the issuance of the other, and should be reviewed and analyzed independently, including its terms for repayment, the security for its payment, the rights of holders, the tax status of its interest, and various other features. LEGALITY…The Obligations are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and Orrick, Herrington & Sutcliffe LLP, Bond Counsel, Houston, Texas. Certain legal matters will be passed upon for the Underwriters by its counsel, Naman Howell Smith & Lee, PLLC, Austin, Texas. DELIVERY…The Obligations are expected to be available for delivery to the Underwriters through DTC on or about May 7, 2021. RAYMONDJAMES SAMCO CAPITAL OPPENHEIMER& CO ii CITY OF SANGER, TEXAS $20,000,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A CUSIP NO.(b) Prefix 800876 $11,535,000 Serial Certificates Maturity (05/1) Principal Amount Interest Rate Initial Yield(a)Price CUSIP Suffix(b) 2022 $ 55,000 3.000% 0.140% 102.809 GS7 2023 295,000 3.000% 0.200% 105.539 GT5 2024 320,000 3.000% 0.290% 108.044 GU2 2025 345,000 2.000% 0.420% 106.234 GV0 2026 395,000 2.000% 0.560% 107.066 GW8 2027 140,000 2.000% 0.720% 107.482 GX6 2028 135,000 3.000% 0.880% 114.328 GY4 2029 160,000 3.000% 1.030% 115.060 GZ1 2030 160,000 3.000% 1.160% 115.654 HA5 2031 185,000 3.000% 1.260% 116.274 HB3 2032 260,000 4.000% 1.360% 124.566 HC1 2033 290,000 4.000% 1.450% 123.620 HD9 2034 290,000 4.000% 1.540% 122.683 HE7 2035 320,000 4.000% 1.570% 122.372 HF4 2036 370,000 3.000% 1.760% 111.307 HG2 2037 395,000 3.000% 1.800% 110.920 HH0 2038 1,775,000 3.000% 1.790% 111.016 HJ6 2039 1,825,000 3.000% 1.830% 110.631 HK3 2040 1,880,000 3.000% 1.850% 110.438 HL1 2041 1,940,000 3.000% 1.890% 110.055 HM9 $8,465,000 Term Certificates $8,465,000 3.000% Term Certificates due May 1, 2046, Priced to Yield 2.030%, CUSIP Suffix No. HN7 (a)(b) REDEMPTION…The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after May 1, 2032, in whole or in part on May 1, 2031, or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. Additionally, the Certificates maturing on May 1 in the year 2046 (the “Term Certificates”) are subject to mandatory sinking fund redemption prior to maturity. (See “THE OBLIGATIONS – Optional Redemption” and “THE OBLIGATIONS – Mandatory Redemption”). ____________________________ (a) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by Standard and Poor’s Financial Services LLC on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Certificates. Neither the City, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. iii CITY OF SANGER, TEXAS $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B CUSIP NO.(b) Prefix 800876 $2,830,000 Serial Bonds Maturity (08/1) Principal Amount Interest Rate Initial Yield(a)Price CUSIP Suffix(b) 2022 $ 55,000 0.250% 0.250% 100.000 HP2 2023 55,000 0.350% 0.350% 100.000 HQ0 2024 260,000 0.570% 0.570% 100.000 HR8 2025 255,000 0.870% 0.870% 100.000 HS6 2026 260,000 1.120% 1.120% 100.000 HT4 2027 265,000 1.420% 1.420% 100.000 HU1 2028 265,000 1.570% 1.570% 100.000 HV9 2029 275,000 1.830% 1.830% 100.000 HW7 2030 275,000 1.930% 1.930% 100.000 HX5 2031 285,000 1.980% 1.980% 100.000 HY3 2032 290,000 2.100% 2.100% 100.000 HZ0 2033 290,000 2.130% 2.130% 100.000 JA3 REDEMPTION…The City reserves the right, at its option, to redeem the Bonds having stated maturities on and after August 1, 2032, in whole or in part on August 1, 2031, or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. (See “THE OBLIGATIONS – Optional Redemption”). ____________________________ (a) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by Standard and Poor’s Financial Services LLC on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Bonds. Neither the City, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. iv CITY OF SANGER, TEXAS CITY COUNCIL Mayor Thomas Muir Mayor Pro-Tem Gary Bilyeu Councilmember Place 1 Marissa Barrett Councilmember Place 3 Dennis Dillon Councilmember Place 4 Allen Chick Councilmember Place 5 David Clark ADMINISTRATIVE OFFICERS Jeriana Stanton Interim City Manager Clayton Gray Finance Director Hugh Coleman City Attorney CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Orrick, Herrington & Sutcliffe LLP, Houston, Texas Bond Counsel Brooks Watson & Co., Houston, Texas Independent Auditor Government Capital Securities Corporation, Southlake, Texas Financial Advisor For additional information regarding the City, please contact: Jeriana Stanton Interim City Manager City of Sanger 502 Elm St. Sanger, Texas 76266 (940) 458-7930 jstanton@sangertexas.org Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817) 722-0220 tchristensen@govcapsecurities.com v USE OF INFORMATION IN OFFICIAL STATEMENT This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. See “CONTINUING DISCLOSURE OF INFORMATION” for a description of the City’s undertaking to provide certain information on a continuing basis. THE OBLIGATIONS ARE EXEMPTED FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE OBLIGATIONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE OBLIGATIONS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The agreements of the City and others related to the Obligations are contained solely in the contracts described herein. Neither this Official Statement nor any other statement made in connection with the offer or sale of the Obligations is to be construed as constituting an agreement with the purchasers of the Obligations. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL SCHEDULES AND APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information set forth in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Neither the City, the Financial Advisor nor the Underwriters make any representation as to the accuracy, completeness or adequacy of the information contained in this Official Statement regarding The Depository Trust Company or its Book-Entry-Only System. vi TABLE OF CONTENTS SELECTED FINANCIAL INFORMATION ..................vii INTRODUCTORY STATEMENT ................................... 1 plan of finance ................................................................. 1 Purpose of the Certificates ............................................ 1 Purpose of the Bonds ................................................... 1 THE OBLIGATIONS ...................................................... 1 Authorization ............................................................... 1 Security for the Obligations .......................................... 2 Optional Redemption ................................................... 2 Mandatory Redemption ................................................ 2 Notice of Redemption .................................................. 2 Refunded Obligations ................................................... 3 Sources and Uses of Funds ........................................... 4 GENERAL INFORMATION REGARDING THE Obligations ................................................................ 4 General Description ..................................................... 4 Legality ....................................................................... 5 Defeasance .................................................................. 5 Amendments to the Ordinance ...................................... 5 OWNERSHIP .................................................................. 6 OWNER’S REMEDIES ................................................... 6 BOOK-ENTRY-ONLY SYSTEM .................................... 6 REGISTRATION, TRANSFER AND EXCHANGE ......... 8 Paying Agent/Registrar ................................................ 8 Future Registration....................................................... 9 Record Date for Interest Payment ................................. 9 Limitation on Transfer of Obligations ........................... 9 Replacement of Obligations.......................................... 9 AD VALOREM PROPERTY TAXATION .................... 10 Valuation of Taxable Property .................................... 10 State Mandated Homestead Exemptions...................... 10 Local Option Homestead Exemptions ......................... 11 Local Option Freeze for the Elderly and Disabled ....... 11 Personal Property ....................................................... 11 Freeport Exemptions .................................................. 11 Other Exempt Property ............................................... 11 Tax Increment Financing Zones .................................. 11 Tax Abatement Agreements ....................................... 12 Public Hearing and Maintenance and Operation Tax Rate Limitations ............................................ 12 Debt Tax Rate Limitations.......................................... 13 City’s Rights in the Event of Tax Delinquencies ......... 14 Issuer and Taxpayer Remedies.................................... 14 City Application of the Property Tax Code.................. 14 RETIREMENT PLAN ................................................... 15 INVESTMENT POLICIES ............................................ 15 Accounting Principles Generally Accepted in the United States ........................................................ 15 Legal Investments ...................................................... 15 Investment Policies .................................................... 17 Additional Provisions ................................................. 17 Current Investments ................................................... 17 INFECTIOUS DISEASE OUTBREAK – COVID-19 ..... 18 RATINGS ..................................................................... 18 PENDING LITIGATION ............................................... 19 LEGAL MATTERS ....................................................... 19 TAX MATTERS ........................................................... 19 The Certificates .......................................................... 19 The Bonds ................................................................. 21 LEGAL INVESTMENTS IN TEXAS ............................ 23 REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE ................................................... 24 CONTINUING DISCLOSURE OF INFORMATION ..... 24 Annual Reports .......................................................... 24 Material Event Notices ............................................... 24 Limitations and Amendments ..................................... 25 Compliance with Prior Undertakings .......................... 26 VERIFICATION OF ARITHMETICAL COMPUTATIONS................................................... 26 OTHER INFORMATION .............................................. 26 Financial Advisor ....................................................... 26 Audited Financial Statements ..................................... 26 Underwriting ............................................................. 26 Forward-Looking Statements ...................................... 27 Concluding Statement ................................................ 27 Summary of Refunded Obligations Schedule I Financial Information Regarding the City of Sanger, Texas Appendix A General Information Regarding the City of Sanger, Texas Appendix B Form of Opinions of Bond Counsel Appendix C Audited Financial Statements for the Fiscal Year Ended September 30, 2020 Appendix D vii SELECTED FINANCIAL INFORMATION (Unaudited) 2020-2021 Certified Taxable Assessed Valuation………………………………………………... $792,348,389 (a) City Debt: Outstanding Tax Supported Debt (as of Sept. 30, 2020)………………….…. $20,750,000 Plus: The Certificates……………………………………………………………... $20,000,000 Plus: The Bonds $2,830,000 Less: The Refunded Obligations $2,505,000 Total Tax Supported Debt…………………………………………………………. $41,075,000 Debt Service Fund Balance (as of Sept. 30, 2020)………………………………………….. $476,286 % of 2020-21 Assessed Valuation 2020 Per Capita (8,235) Debt Ratios: Direct Tax Supported Debt……………. 5.18% $4,988 2020-21 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation $0.605456 Debt Service ……………………………………………………………………… $0.073644 Total ……………………………………………………………………………… $0.679100 Estimated Annual Debt Service Requirements…………………………………………….. Average…………………………………………………………………………… $ 2,291,954 Maximum (2026)…………………………………………………………………. $ 2,576,755 Tax Collections Tax Year 2019 (fiscal year ending Sept 30, 2020) 100.18% Total Collections………………………………………………………………….. 100.18% _______________________ (a) Provided by the Denton Central Appraisal District (the “Appraisal District”) and net of exemptions. Such value is further subject to changes as additions, corrections and deletions are made to the tax roll. 1 OFFICIAL STATEMENT RELATING TO CITY OF SANGER, TEXAS (Denton County, Texas) $20,000,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B INTRODUCTORY STATEMENT This Official Statement, which includes the cover page, the schedules and the appendices hereto, provides certain information regarding the issuance by the City of Sanger, Texas (the “City”) of its $20,000,000 Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and its $2,830,000 General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds”). The Certificates and the Bonds are collectively referred to herein as the “Obligations.” The City is a political subdivision of the State of Texas (the “State”) and a municipal corporation organized and existing under the laws of the State. For information regarding the City, see Appendices A and B of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue to be repeated in the future. PLAN OF FINANCE Purpose of the Certificates Proceeds from the sale of the Certificates will be used for the following purposes: (i) expansion and improvements to the City’s water and sewer system (the “System”); (ii) system renovations and line relocations to the City’s electric utility system; (iii) city-wide street repairs and improvements; and (iv) professional services related thereto. Purpose of the Bonds Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds. THE OBLIGATIONS Authorization The Certificates are being issued pursuant to the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance adopted by the City Council (the “Council”) of the City (the “Certificate Ordinance”). The Bonds are issued pursuant to the general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance (the “Bond Ordinance”) adopted by the Council authorizing the issuance of the Bonds. The Certificate Ordinance and the Bond Ordinance each may be referred to individually herein as an “Ordinance” or collectively as the “Ordinances.” 2 Security for the Obligations The Certificates are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City, as well as a limited (in an amount not to exceed $1,000) pledge of surplus revenues of the City’s water and sewer system as provided in the Certificate Ordinance. The Bonds are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City as provided in the Bond Ordinance. Optional Redemption The City reserves the right, at its option, to redeem Bonds having stated maturities on and after August 1, 2032, in whole or in part, in integral multiples of $5,000, on August 1, 2031 or any date thereafter, and Certificates having stated maturities on or after May 1, 2032, in whole or in part, in integral multiples of $5,000, on May 1, 2031, such redemption date or dates to be fixed by the City, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. If less than all of the Obligations are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar (as defined herein) to select by lot the Obligations, or portions thereof, within each maturity to be redeemed. Mandatory Redemption The Certificate maturing on May 1, 2046 (the “Term Certificate”) is subject to mandatory sinking fund redemption prior to maturity in part by lot at a redemption price equal to 100% of the principal amount redeemed plus accrued interest to the redemption date in the years and in the principal amounts specified in the sinking fund redemption schedule set forth below: Term Certificate Stated to Mature May 1, 2046 Mandatory Redemption Date (5/1) Principal Amount ($) 2042 $1,995,000 2043 2,055,000 2044 2,115,000 2045 2,180,000 2046*120,000 *Maturity Notice of Redemption Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of an Obligation 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. If notice is so given and sufficient funds are provided for the payment of the redemption price of the Obligations, interest shall cease to accrue after the date fixed for redemption whether or not the Obligations have been submitted for payment. 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, AND THE FUNDS NECESSARY TO REDEEM SUCH OBLIGATIONS HAVING BEEN PROVIDED, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY OBLIGATION OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH OBLIGATION OR PORTION THEREOF SHALL CEASE TO ACCRUE. The Paying Agent/Registrar and the City, so long as a Book-Entry Only System is used for the Obligations, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Obligations only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Obligations called for 3 redemption or any other action premised on any such notice. Redemption of portions of the Obligations by the City will reduce the outstanding principal amount of such Obligations held by DTC. In such event, DTC may implement, through its Book-Entry Only System, a redemption of such Obligations held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Obligations from the beneficial owners. Any such selection of Obligations to be redeemed will not be governed by the Ordinance and will not be conducted by the City or the Paying Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any responsibility to DTC participants, indirect participants, or the persons for whom DTC participants act as nominees, with respect to the payments on the Obligations or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of portions of the Obligations for redemption (see “THE OBLIGATIONS – Book-Entry Only System”). Refunded Obligations The Bond Ordinance provides that from a portion of the proceeds of the sale of the Bonds, the City will deposit with UMB Bank, N.A., Austin, Texas (the “Escrow Agent”), pursuant to an escrow agreement (the “Escrow Agreement”) between the City and Escrow Agent, an amount which when added to the investment earnings thereon, will be sufficient to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by the Escrow Agent in an escrow account (the “Escrow Fund”) and used to purchase a portfolio of securities authorized by Section 1207.062, Texas Government Code, which authorized securities include direct noncallable obligations of the United States and noncallable obligations of an agency or instrumentality of the United States rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent and guaranteed by the full faith and credit of the United States of America (the “Federal Securities”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of principal of and interest on the Refunded Obligations. BLX Group LLC, will verify at the time of delivery of the Bonds to the Underwriters that 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 Obligations on their respective scheduled redemption date and maturity dates. Such maturing principal of and interest on the Federal Securities will not be available to pay the debt service on the Bonds (see “VERIFICATION OF ARITHMETICAL COMPUTATIONS”). By the deposit of the Federal Securities and cash, if any, with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Obligations pursuant to the terms of Chapter 1207, Texas Government Code, and the Order authorizing the issuance of the Refunded Obligations. As a result of such deposit and in reliance upon the report of BLX Group LLC, firm banking arrangements will have been made for the discharge and final payment of the Refunded Obligations, and such Refunded Obligations will be deemed to be fully paid and no longer outstanding except for the purpose of being paid from funds provided therefor, in the Escrow Agreement. In the Escrow Agreement, the City covenants to make timely deposits with the Escrow Agent from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason the cash balances on deposit or scheduled to be on deposit in the Escrow Fund are insufficient to make such payment. 4 Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount $20,000,000.00 Premium 2,076,234.70 Total Sources of Funds $22,076,243.70 Uses Deposit to Project Fund $21,766,179.59 Costs of Issuance 175,000.00 Underwriter’s Discount 135,064.11 Total Uses of Funds $22,076,243.70 The proceeds from the sale of the Bonds will be applied approximately as follows: Sources Principal Amount $2,830,000.00 Issuer Contribution 31,693.33 Total Sources of Funds $2,861,693.33 Uses Deposit to Escrow Fund $2,791,629.94 Costs of Issuance 43,080.00 Underwriter’s Discount 23,961.86 Deposit to Interest & Sinking Fund 3,021.53 Total Uses of Funds $2,861,693.33 GENERAL INFORMATION REGARDING THE OBLIGATIONS General Description The Obligations will be dated May 1, 2021 (the “Dated Date”), and will be issued in fully registered form in principal denominations of $5,000 or any integral multiple thereof. The Obligations will bear interest from the date of delivery to the underwriters listed on pages ii and iii hereof (the “Underwriters”), and interest on the Bonds will be paid semiannually on each February 1 and August 1, commencing August 1, 2021 and on the Certificates on each November 1 and May 1, commencing November 1, 2021. Interest will accrue on the Obligations on the basis of a 360-day year consisting of twelve 30-day months. The Obligations will be issued as book-entry only securities pursuant to arrangements made with The Depository Trust Company, New York, New York. See “BOOK-ENTRY- ONLY SYSTEM.” Principal of the Obligations will be payable to the registered owners (the “Owners”) at maturity or prior redemption upon presentation and surrender of such Obligations at the principal corporate office of the paying agent/registrar (the “Paying Agent/Registrar”), initially UMB Bank, N.A., Austin, Texas. Interest on the Obligations will be payable by check dated as of the interest payment date and mailed by the Paying Agent/Registrar to Owners as shown on the records of the Paying Agent/Registrar on the Record Date (see “REGISTRATION, TRANSFER AND EXCHANGE – Record Date for Interest Payment” herein), or by such other customary banking arrangement, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. If the date for the payment of the principal of or interest on an Obligation shall be a Saturday, Sunday, legal holiday, or a day on 5 which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. The Obligations will mature on the dates, in the amounts and bear interest at the rates as set forth on pages ii and iii of this Official Statement. Legality The Obligations are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel. (See “LEGAL MATTERS” and Appendix C – “Form of Opinions of Bond Counsel”). Defeasance The Ordinances provide that the City may defease the Obligations and discharge its obligation to the holders of any or all of the Obligations to pay the principal of and interest thereon in any manner now or hereafter permitted by law, including by depositing with the Registrar or with the Comptroller of the State of Texas either: (a) cash in an amount equal to the principal amount of and interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the Board approves the proceedings authorizing the issuance of refunding Obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the Board approves the proceedings authorizing the issuance of refunding Obligations, are rated as to investment quality by a nationally recognized investment rating firm not less than “AAA” or its equivalent, which, in the case of (i), (ii), or (iii), may be in book entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Obligations are to be redeemed prior to their respective dates of maturity, provision shall be made for the giving of notice of redemption as provided in the Ordinance. Any surplus amount not required to accomplish such defeasance shall be returned to the City. Upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption or take any other action amending the terms of the Obligations are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorize. Amendments to the Ordinance In the Ordinances, the City has reserved the right to amend such Ordinance without the consent of any holder of the Obligations in any manner not detrimental to the interests of the holders of the Obligations, including the curing of any ambiguity, defect or omission therein. The Ordinances further provide that the holders of the Obligations aggregating in principal amount 51% of the outstanding Obligations shall have the right from time to time to approve any amendment not described above to the Ordinance; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Obligations no amendment may be made for the purpose of: (i) extend the time or times of 6 payment of the principal of and interest on the Obligations, reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Obligations, (ii) give any preference to any Obligation over any other Obligation, or (iii) reduce the aggregate principal amount of Obligations required to be held by Registered Owners for consent to any such amendment, addition, or rescission. Reference is made to the Ordinances for further provisions relating to the amendment thereof. OWNERSHIP The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Obligation is registered as the absolute owner of such Obligation for the purpose of making and receiving payment of principal and interest, and for all other purposes, whether or not such Obligation is overdue, and neither the City nor the Paying Agent/Registrar will be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the owner of any Obligation in accordance with the Ordinances will be valid and effectual and will discharge the liability of the City and the Paying Agent/Registrar upon such Obligation to the extent of the sums paid. OWNER’S REMEDIES The Ordinances do not provide for the appointment of a trustee to represent the interests of the Obligation holders upon any failure of the City to perform in accordance with the terms of the Ordinances or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinances. Furthermore, the Ordinances do not establish specific events of default with respect to the Obligations and, under State law, there is no right to the acceleration of maturity of the Obligations upon the failure of the City to observe any covenant under the Ordinances. A registered owner of Obligations could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Obligations or failure of the City to observe any covenant; however, such judgment could not be satisfied by execution against any property of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner’s only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to make such payment or observe and perform such covenants, obligations or conditions. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code (“Chapter 9”). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Obligation holders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by The Depository Trust Company (“DTC”), New York, New York, while the Obligations 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, the Financial Advisor, and the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the 7 manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully registered Obligations 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 the Obligations, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world’s largest securities 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 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 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 Obligations. 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 is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. 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 a Standard & Poor’s rating of “AA+”. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC’s records. The ownership interest of each actual purchaser of each Obligation (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Obligations are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Obligations representing their ownership interests in Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. 8 Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest, and redemption payments on the Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar, on the 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, the Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest, and redemption payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Obligations at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Obligations 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, physical Obligations will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book-Entry Only System and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. The information in this section concerning DTC and DTC’s book-entry-only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar UMB Bank, N.A., Austin, Texas has been named to serve as initial Paying Agent/Registrar for the Obligations. In the Ordinances, the City retains the right to replace the Paying Agent/Registrar. If the City replaces the Paying Agent/Registrar, such Paying Agent/Registrar shall, promptly upon the appointment of a successor, deliver the Paying Agent/Registrar’s records to the successor Paying Agent/Registrar, and the successor Paying Agent/Registrar shall act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the City shall be a commercial bank; a trust company organized under applicable law; or other entity duly qualified and legally authorized to serve and perform the duties of the Paying Agent/Registrar for the Obligations. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Obligations by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In the event the Book-Entry Only System should be discontinued, interest on the Obligations will be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (hereinafter defined), and such interest will be paid (i) by check sent United States mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying 9 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 and redemption payments of the Obligations will be paid to the registered owner at the stated maturity or earlier redemption upon presentation to the designated payment/transfer office of the Paying Agent/Registrar. If the date for the payment of the principal or interest on the Obligations is a Saturday, Sunday, a legal holiday, or a day when banking institutions in the city where the designated payment/transfer office of the Paying Agent/Registrar is located are authorized to close, then the date for such payment will be the next succeeding day which is not such a day, and payment on such date will have the same force and effect as if made on the date payment was due. So long as Cede & Co. is the registered owner of the Obligations, principal, interest, and redemption payments on the Obligations will be made as described in “BOOK-ENTRY ONLY SYSTEM” above. Future Registration In the event the book-entry only system should be discontinued, printed Obligations will be delivered to the Owners and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Obligation will be delivered by the Paying Agent/Registrar in lieu of the Obligation 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 at the Owner’s request, risk and expense. New Obligations issued in an exchange or transfer of Obligations will be delivered to the registered Owner or assignee of the Owner after the receipt of the Obligations to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be of like kind and in authorized denominations and for a like aggregate principal amount as the Obligation or Obligations surrendered for exchange or transfer. See “BOOK-ENTRY-ONLY SYSTEM” for a description of the system to be utilized initially in the settlement and transfer of the Obligations. Record Date for Interest Payment The record date (“Record Date”) for the interest payable on any interest payment date is the close of the 15th day of the month next preceding such interest payment date, as specified in the Ordinances. In the event of a nonpayment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (the “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 (the “Special Payment Date” which shall be 15 days after the Special Record Date) shall be sent at least 5 days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of an Obligation appearing on the 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. Limitation on Transfer of Obligations Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Obligation, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of an Obligation. Replacement of Obligations If any Obligation is mutilated, destroyed, stolen or lost, a new Obligation in the same principal amount as the Obligation so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Obligation, such new Obligation will be delivered only upon surrender and cancellation of such mutilated Obligation. In the case of any Obligation issued in lieu of and in substitution for an Obligation which has been destroyed, stolen or lost, such new Obligation will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfactory 10 to them that such Obligation has been destroyed, stolen or lost and proof of the ownership thereof and (b) upon furnishing the City and the Paying Agent/Registrar with indemnity satisfactory to them. The person requesting the authentication and delivery of a new Obligation must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. AD VALOREM PROPERTY TAXATION The following is a summary of certain provisions of State law as it relates to ad valorem taxation and is not intended to be complete. Reference is made to Title I of the Texas Tax Code, as amended (the “Property Tax Code”), for identification of property subject to ad valorem taxation, property exempt or which may be exempted from ad valorem taxation if claimed, the appraisal of property for ad valorem tax purposes, and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Valuation of Taxable Property The Property Tax Code provides for countywide appraisal and equalization of taxable property values and establishes in each county of the State an appraisal district and an appraisal review board (“Appraisal Review Board”) responsible for appraising property for all taxing units within the county. The appraisal of property within the City is the responsibility of the Denton County Appraisal District (the “Appraisal District”). Except as described below, the Appraisal District is required to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, the Appraisal District is required to consider the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and use the method the chief appraiser of the Appraisal District considers most appropriate. The Property Tax Code requires appraisal districts to reappraise all property in its jurisdiction at least once every three years. A taxing unit may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the taxing unit by petition filed with the Appraisal Review Board. State law requires the appraised value of an owner’s principal residence (“homestead” or “homesteads”) to be based solely on the property’s value as a homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a homestead to the lesser of (1) the market value of the property or (2) 110% of the appraised value of the property for the preceding tax year plus the market value of all new improvements to the property (the “10% Homestead Cap”). The 10% increase is cumulative, meaning the maximum increase is 10% times the number of years since the property was last appraised. See Table 1 for the reduction in taxable valuation attributable to the 10% Homestead Cap. State law provides that eligible owners of both agricultural land and open-space land, including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity (“Productivity Value”). The same land may not be qualified as both agricultural and open-space land. See Table 1 for the reduction in taxable valuation attributable to valuation by Productivity Value. The appraisal values set by the Appraisal District are subject to review and change by the Appraisal Review Board. The appraisal rolls, as approved by the Appraisal Review Board, are used by taxing units, such as the City, in establishing their tax rolls and tax rates. See “AD VALOREM PROPERTY TAXATION – Issuer and Taxpayer Remedies.” State Mandated Homestead Exemptions State law grants, with respect to each taxing unit in the State, various exemptions for disabled veterans and their families, surviving spouses of members of the armed services killed in action and surviving spouses of first responders killed or fatally wounded in the line of duty. See Table 1 for the reduction in taxable valuation attributable to state-mandated homestead exemptions. 11 Local Option Homestead Exemptions The governing body of a taxing unit, including a city, county, school district, or special district, at its option may grant: (1) an exemption of up to 20% of the market value of all homesteads (but not less than $5,000) and (2) an additional exemption of the market value of the homesteads of persons 65 years of age or older and the disabled. Each taxing unit decides if it will offer the local option homestead exemptions and at what percentage or dollar amount, as applicable. See Table 1 for the reduction in taxable valuation, if any, attributable to local option homestead exemptions. Local Option Freeze for the Elderly and Disabled The governing body of a county, municipality or junior college district may, at its option, provide for a freeze on the total amount of ad valorem taxes levied on the homesteads of persons 65 years of age or older or of disabled persons above the amount of tax imposed in the year such residence qualified for such exemption. Also, upon voter initiative, an election may be held to determine by majority vote whether to establish such a freeze on ad valorem taxes. Once the freeze is established, the total amount of taxes imposed on such homesteads cannot be increased except for certain improvements, and such freeze cannot be repealed or rescinded. See Table 1 for the reduction in taxable valuation attributable to the freeze on taxes for the elderly and disabled. Personal Property Tangible personal property (furniture, machinery, supplies, inventories, etc.) used in the “production of income” is taxed based on the property’s market value. Taxable personal property includes income-producing equipment and inventory. Intangibles such as goodwill, accounts receivable, and proprietary processes are not taxable. Tangible personal property not held or used for production of income, such as household goods, automobiles or light trucks, and boats, is exempt from ad valorem taxation unless the governing body of a taxing unit elects to tax such property. Freeport Exemptions Certain goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication (“Freeport Property”) are exempt from ad valorem taxation unless a taxing unit took official action to tax Freeport Property before April 1, 1990 and has not subsequently taken official action to exempt Freeport Property. Decisions to continue to tax Freeport Property may be reversed in the future; decisions to exempt Freeport Property are not subject to reversal. Certain goods, principally inventory, that are stored for the purposes of assembling, storing, manufacturing, processing or fabricating the goods in a location that is not owned by the owner of the goods and are transferred from that location to another location within 175 days (“Goods-in-Transit”), are exempt from ad valorem taxation unless a taxing unit takes official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax Goods-in-Transit beginning the following tax year. Goods-in-Transit and Freeport Property do not include oil, natural gas or petroleum products, and Goods-in-Transit does not include special inventories such as motor vehicles or boats in a dealer’s retail inventory. A taxpayer may receive only one of the Goods-in-Transit or Freeport Property exemptions for items of personal property. See Table 1 for the reduction in taxable valuation, if any, attributable to Goods-in-Transit or Freeport Property exemptions. Other Exempt Property Other major categories of exempt property include property owned by the State or its political subdivisions if used for public purposes, property exempt by federal law, property used for pollution control, farm products owned by producers, property of nonprofit corporations used for scientific research or educational activities benefitting a college or university, designated historic sites, solar and wind-powered energy devices, and certain classes of intangible personal property. Tax Increment Financing Zones A city or county, by petition of the landowners or by action of its governing body, may create one or more tax increment financing zones (“TIRZ”) within its boundaries, and other overlapping taxing units may agree to contribute taxes levied against the “Incremental Value” in the TIRZ to finance or pay for project costs, as defined in Chapter 311, Texas Government Code, general located within the TIRZ. At the time of the creation of the TIRZ, a 12 “base value” for the real property in the TIRZ is established and the difference between any increase in the assessed valuation of taxable real property in the TIRZ in excess of the base value is known as the “Incremental Value”, and during the existence of the TIRZ, all or a portion of the taxes levied by each participating taxing unit against the Incremental Value in the TIRZ are restricted to paying project and financing costs within the TIRZ and are not available for the payment of other obligations of such taxing units. See “AD VALOREM PROPERTY TAXATION” City Application of Property Tax Code” for descriptions of any TIRZ created in the City. Tax Abatement Agreements Taxing units may also enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The taxing unit, in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. See “AD VALOREM PROPERTY TAXATION – City Application of Property Tax Code” for descriptions of any of the City’s tax abatement agreements. See Table 1 for the reduction in taxable valuation, if any, attributable to tax abatement agreements. For a discussion of how the various exemptions described above are applied by the City, see “AD VALOREM PROPERTY TAXATION – City Application of Property Tax Code” herein. Public Hearing and Maintenance and Operation Tax Rate Limitations The following terms as used in this section have the meanings provided below: “adjusted” means lost values are not included in the calculation of the prior year’s taxes and new values are not included in the current year’s taxable values. “de minimis rate” means the maintenance and operations tax rate that will produce the prior year’s total maintenance and operations tax levy (adjusted) from the current year’s values (adjusted), plus the rate that produces an additional $500,000 in tax revenue when applied to the current year’s taxable value, plus the debt service tax rate. “no-new-revenue tax rate” means the combined maintenance and operations tax rate and debt service tax rate that will produce the prior year’s total tax levy (adjusted) from the current year’s total taxable values (adjusted). “special taxing unit” means a city for which the maintenance and operations tax rate proposed for the current tax year is 2.5 cents or less per $100 of taxable value. “unused increment rate” means the cumulative difference between a city’s voter-approval tax rate and its actual tax rate for each of the tax years 2020 through 2022, which may be applied to a city’s tax rate in tax years 2021 through 2023 without impacting the voter-approval tax rate. “voter-approval tax rate” means the maintenance and operations tax rate that will produce the prior year’s total maintenance and operations tax levy (adjusted) from the current year’s values (adjusted) multiplied by 1.035, plus the debt service tax rate, plus the “unused increment rate”. The City’s tax rate consists of two components: (1) a rate for funding of maintenance and operations expenditures in the current year (the “maintenance and operations tax rate”), and (2) a rate for funding debt service in the current year (the “debt service tax rate”). Under State law, the assessor for the City must submit an appraisal roll showing the total appraised, assessed, and taxable values of all property in the City to the City Council by August 1 or as soon as practicable thereafter. A city must annually calculate its “voter-approval tax rate” and “no-new-revenue tax rate” (as such terms are defined above) in accordance with forms prescribed by the State Comptroller and provide notice of such rates to each owner of taxable property within the city and the county tax assessor-collector for each county in which all or part of the city is located. A city must adopt a tax rate before the later of September 30 or the 60th day after receipt of the certified appraisal roll, except that a tax rate that exceeds the voter-approval tax rate must be adopted not later 13 than the 71st day before the next occurring November uniform election date. If a city fails to timely adopt a tax rate, the tax rate is statutorily set as the lower of the no-new-revenue tax rate for the current tax year or the tax rate adopted by the city for the preceding tax year. As described below, the Property Tax Code provides that if a city adopts a tax rate that exceeds its voter-approval tax rate or, in certain cases, its “de minimis rate”, an election must be held to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. A city may not adopt a tax rate that exceeds the lower of the voter-approval tax rate or the no-new-revenue tax rate until each appraisal district in which such city participates has delivered notice to each taxpayer of the estimated total amount of property taxes owed and the city has held a public hearing on the proposed tax increase. For cities with a population of 30,000 or more as of the most recent federal decennial census, if the adopted tax rate for any tax year exceeds the voter-approval tax rate, that city must conduct an election on the next occurring November uniform election date to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. For cities with a population less than 30,000 as of the most recent federal decennial census, if the adopted tax rate for any tax year exceeds the greater of (i) the voter-approval tax rate or (ii) the de minimis rate, the city must conduct an election on the next occurring November uniform election date to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. However, for any tax year during which a city has a population of less than 30,000 as of the most recent federal decennial census and does not qualify as a special taxing unit, if a city’s adopted tax rate is equal to or less than the de minimis rate but greater than both (a) the no-new-revenue tax rate, multiplied by 1.08, plus the debt service tax rate or (b) the city’s voter-approval tax rate, then a valid petition signed by at least three percent of the registered voters in the city would require that an election be held to determine whether or not to reduce the adopted tax rate to the voter-approval tax rate. Any city located at least partly within an area declared a disaster area by the Governor of the State or the President of the United States during the current year may calculate its “voter-approval tax rate” using a 1.08 multiplier, instead of 1.035, until the earlier of (i) the second tax year in which such city’s total taxable appraised value exceeds the taxable appraised value on January 1 of the year the disaster occurred, or (ii) the third tax year after the tax year in which the disaster occurred. State law provides cities and counties in the State the option of assessing a maximum onehalf percent (1/2%) sales and use tax on retail sales of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional sales and use tax for ad valorem tax reduction is approved and levied, the no-new-revenue tax rate and voter-approval tax rate must be reduced by the amount of the estimated sales tax revenues to be generated in the current tax year. The calculations of the no-new-revenue tax rate and voter-approval tax rate do not limit or impact the City’s ability to set a debt service tax rate in each year sufficient to pay debt service on all of the City’s tax- supported debt obligations, including the Obligations. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Debt Tax Rate Limitations All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax- supported debt within the limits prescribed by law. Article XI, Section 4, of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $1.50 per $100 of Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the $2.50 maximum tax rate for all debt service on ad valorem tax-supported debt, as calculated at the time of issuance. 14 City’s Rights in the Event of Tax Delinquencies Taxes levied by the City are a personal obligation of the owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all State and local taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State and each local taxing unit, including the City, having power to tax the property. Personal property, under certain circumstances, is subject to seizure and sale for the payment of delinquent taxes. At any time after taxes on property become delinquent, the City may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the City must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem property within two (2) years after the purchaser’s deed issued at the foreclosure sale is filed in the county records) or by bankruptcy proceedings which restrict the collection of taxpayer debts. Federal bankruptcy law provides that an automatic stay of actions by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases, post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. Issuer and Taxpayer Remedies Under certain circumstances, the City and its taxpayers may appeal the determinations of the Appraisal District by timely initiating a protest with the Appraisal Review Board. Additionally, taxing units such as the City may bring suit against the Appraisal District to compel compliance with the Property Tax Code. Owners of certain property with a taxable value of at least $50 million and situated in a county with a population of one million or more as of the most recent federal decennial census may additionally protest the determinations of appraisal district directly to a three-member special panel of the appraisal review board, selected by a State district judge, consisting of highly qualified professionals in the field of property tax appraisal. The Property Tax Code sets forth notice and hearing procedures for certain tax rate increases by the City and provides for taxpayer referenda that could result in the repeal of certain tax increases (See “– Public Hearing and Maintenance and Operation Tax Rate Limitations”.) The Property Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal roll. City Application of the Property Tax Code The City grants an exemption of $30,000 of the market value of the residence homestead for persons 65 years of age or older and an exemption of $20,000 of the market value of the residence homestead for persons that are disabled. See Appendix A – Table 1 for a listing of the total amount of these exemptions. The City does not grant an additional exemption for residence homesteads. The City taxes business personal property. The County Tax Collector collects property taxes for the City. The County does not permit split payments and does not allow discounts. The City grants the Article VIII, Section 1-j (“freeport property”) and does have Article VIII, Section 1-j property. The City has adopted an abatement policy and has two outstanding abatement agreements which were executed in 2018. Both projects are ongoing and abatements will begin upon successful completion. Each agreement provides for the abatement of a percentage of real and personal property taxes for a period of seven years after completion of the respective projects. 15 RETIREMENT PLAN The City provides pension benefits for all of its eligible employees through a non-traditional, joint contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System, an agent multi-employer public employee retirement system. For a discussion of the Retirement Plan, see Appendix D “Audited Financial Statements for the Fiscal Year Ended September 30, 2020.” INVESTMENT POLICIES Accounting Principles Generally Accepted in the United States The City policy is to adhere to accounting principles generally accepted in the United States (see Appendix D “Audited Financial Statements for the Fiscal Year Ended September 30, 2020”). Legal Investments Under State law, the City is authorized to invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, including the Federal Home Loan Banks; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (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) interest-bearing banking deposits that are guaranteed or insured by the Federal Deposit Insurance Corporation or its successor, or the National Credit Union Share Insurance Fund or its successor; (8) interest-bearing banking deposits other than those described by clause (7) if (A) the funds invested in the banking deposits are invested through: (i) a broker with a main office or branch office in this State that the City selects from a list the governing body of the City or designated investment committee of the City adopts as required by Section 2256.025, Texas Government Code; or (ii) a depository institution with a main office or branch office in the State that the City selects; (B) the broker or depository institution selected as described by (A) above arranges for the deposit of the funds in the banking deposits in one or more federally insured depository institutions, regardless of where located, for the City’s account; (C) the full amount of the principal and accrued interest of the banking deposits is insured by the United States or an instrumentality of the United States; and (D) the City appoints as the City’s custodian of the banking deposits issued for the City’s account: (i) the depository institution selected as described by (A) above; (ii) an entity described by Section 2257.041(d), Texas Government Code; or (iii) a clearing broker dealer registered with the SEC and operating under SEC Rule 15c3-3; (9) (i) certificates of deposit or share certificates meeting the requirements of Chapter 2256, Texas Government Code (the “Public Funds Investment Act”), that are issued by an institution that has its main office or a branch office in the State and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or their respective successors, and are secured as to principal by obligations described in clauses (1) through (8) or in any other manner and provided for by law for District deposits, or (ii) certificates of deposits where (a) the funds are invested by the City through (A) a broker that has its main office or a branch office in the State and is selected from a list adopted by the City as required by law, or (B) a depository institution that has its main office or branch office in the State that is selected by the City, (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City, (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d), Texas Government Code, or a clearing broker-dealer registered with the SEC and operating pursuant to SEC Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit; (10) fully collateralized repurchase agreements as defined in the Public Funds Investment Act, that have a defined termination date, are secured by a combination of cash and obligations described in clauses (1) or (13) in this paragraph or corporate bonds as described below, require the securities being purchased by the City or cash held by the City to be pledged to the City, held in the City’s name, and deposited at the time the investment is made with the City or with a third party 16 selected and approved by the City, and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (11) securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (8) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than “A” or its equivalent or (c) cash invested in obligations described in clauses (1) through (8) above, clauses (13) through (15) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less; (12) certain bankers’ acceptances with stated maturity of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated not less than “A-1” or “P-1” or the equivalent by at least one nationally recognized credit rating agency; (13) commercial paper with a stated maturity of 365 days or less that is rated not less than “A-1” or “P-1” or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a United States or state bank; (14) no-load money market mutual funds registered with and regulated by the SEC that provide the City with a prospectus and other information required by the Securities Exchange Act of 1934 or the Investment Company Act of 1940 and that comply with federal SEC Rule 2a-7 (17 C.F.R. Section 270.2a-7), promulgated under the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.); and (15) no-load mutual funds registered with the SEC that have an average weighted maturity of less than two years, and have either (a) a duration of one year or more and invest exclusively in obligations described in under this heading, or (b) a duration of less than one year and the investment portfolio is limited to investment grade securities, excluding asset-backed securities. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities, other than the prohibited obligations described below, in an amount at least equal to the amount of bond proceeds invested under such contract. A political subdivision such as the City may enter into securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (8) above, other than the prohibited obligations described below, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (8) above, clauses (13) through (15) above, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City’s name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service if the governing body of the City authorizes such investment in the particular pool by order, ordinance, or resolution and the investment pool complies with the requirements of Section 2256.016, Texas Government Code. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City may also contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, ordinance, or resolution. 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. 17 Investment Policies Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment, the maximum average dollar-weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted “Investment Strategy Statement” that specifically addresses each fund’s 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 City’s investment officers 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 City Council. Additional Provisions Under State law, the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt a written instrument by rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and recording any changes made to either its investment policy or investment strategy; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in no-load 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; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. Current Investments As of September 30, 2020, the City’s investment portfolio was invested in the following categories. As of such date, the market value of such investments was approximately 100% of their book value. 18 INFECTIOUS DISEASE OUTBREAK – COVID-19 The outbreak of COVID-19, a respiratory disease caused by a new strain of coronavirus, has been characterized as a pandemic (the “Pandemic”) by the World Health Organization and is currently affecting many parts of the world, including the United States and Texas. On January 31, 2020, the Secretary of the United States Health and Human Services Department declared a public health emergency for the United States and on March 13, 2020, the President of the United States declared the outbreak of COVID-19 in the United States a national emergency. Subsequently, the President’s Coronavirus Guidelines for America and the United States Centers for Disease Control and Prevention called upon Americans to take actions to slow the spread of COVID-19 in the United States. On March 13, 2020, the Governor of Texas (the “Governor”) declared a state of disaster for all counties in Texas in response to the Pandemic, which disaster declaration was extended in both April and May. Pursuant to Chapter 418 of the Texas Government Code, the Governor has broad authority to respond to disasters, including suspending any regulatory statute prescribing the procedures for conducting state business or any order or rule of a state agency that would in any way prevent, hinder, or delay necessary action in coping with the disaster, and issuing executive orders that have the force and effect of law. The Governor has issued a series of executive orders relating to COVID-19 preparedness and mitigation. These include, for example, the issuance on March 2, 2021 of Executive Order GA-34, which, among other things, removed any COVID-19 related operating limits for any business or other establishment and ended the State-wide mask mandate, effective March 10, 2021. The Governor’s order also maintains, in providing or obtaining services, every person (including individuals, businesses, and other legal entities) should use good-faith efforts and available resources to follow the minimum standard health protocols. Executive Order GA-34 remains in place until amended, rescinded, or superseded by the Governor. Additional information regarding executive orders issued by the Governor is accessible on the website of the Governor at https://gov.texas.gov/. Neither the information on (nor accessed through) such website of the Governor is incorporated by reference, either expressly or by implication, into this Official Statement. The pandemic has negatively affected travel, commerce and financial markets globally, and is widely expected to continue negatively affecting economic growth and financial markets worldwide. These negative impacts may reduce or negatively affect property values within the City. The Obligations are secured by an ad valorem tax (within the limits prescribed by law), and a reduction in property values may require an increase in the ad valorem tax rate required to pay the Obligations as well as the City’s operations and maintenance expenses. See “AD VALOREM PROPERTY TAXATION – Public Hearing and Maintenance and Operations Tax Rate Limitations” and “Debt Tax Rate Limitations.” The City continues to monitor the spread of COVID-19 and is working with local, state, and national agencies to address the potential impact of the Pandemic upon the City. While the potential impact of the Pandemic on the City cannot be quantified at this time, the continued outbreak of COVID-19 could have an adverse effect on the City’s operations and financial condition. RATINGS S&P Global Ratings, (“S&P”) has assigned a rating of “AA” to the Obligations. An explanation of the significance of such ratings may be obtained from S&P. The rating reflects only the view of S&P and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Obligations. Neither the Underwriters nor the City have undertaken any responsibility to bring to the attention of the holders of the Obligations any proposed revision or withdrawal of the rating of the Obligations or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such ratings could have an adverse effect on the market price of the Obligations. Type of Investment Amount Certificates of Deposit $1,271,560 Total $1,271,560 19 PENDING LITIGATION There is no material litigation currently pending against the City. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Obligations, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Obligations are valid and binding obligations of the City, and based upon examination of such transcripts of proceedings, the approving legal opinions of Bond Counsel to the effect that (i) the Obligations issued in compliance with the provisions of the Ordinances are valid and legally binding obligations of the City and (ii) the interest on the Certificates is exempt from federal income taxation under existing statutes, published rulings, regulations, and court decisions (see “TAX MATTERS”). Bond Counsel has not been engaged to investigate the financial resources of the City or its ability to provide for payment of the Obligations, and the opinions of Bond Counsel will make no statement as to such matters, or any other information that may have been relied on by anyone in making the decision to purchase the Obligations. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations are contingent on the sale and delivery of the Obligations. The applicable legal opinions will be printed on or attached to the definitive Obligations. Bond Counsel has reviewed the statements and information appearing in this Official Statement under the captions “THE OBLIGATIONS” (except the subcaption “Sources and Uses of Funds”), “GENERAL INFORMATION REGARDING THE OBLIGATIONS,” “REGISTRATION, TRANSFER AND EXCHANGE,” “AD VALOREM PROPERTY TAXATION – Public Hearing and Maintenance and Operation Tax Rate Limitations,” “LEGAL MATTERS,” “TAX MATTERS,” “LEGAL INVESTMENTS IN TEXAS,” “REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE” and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. Bond Counsel has not independently verified any of the factual information contained in this Official Statement nor have they conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy, completeness, or fairness of this Official Statement. No person is entitled to rely upon such firm’s limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy, completeness, or fairness of any of the information contained herein. TAX MATTERS The Certificates In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Certificates is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix C hereto. To the extent the issue price of any maturity of the Certificates is less than the amount to be paid at maturity of such Certificates (excluding amounts stated to be interest and payable at least annually over the term of such Certificates), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Certificates which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Certificates is the first price at which a substantial amount of such maturity of the Certificates is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Certificates accrues daily over the term to maturity of such Certificates on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Certificates to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Certificates. Beneficial Owners of the Certificates should consult their own tax advisors with respect to the tax consequences of ownership of Certificates with original issue discount, including the treatment of Beneficial 20 Owners who do not purchase such Certificates in the original offering to the public at the first price at which a substantial amount of such Certificates is sold to the public. Certificates purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Certificates”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of Certificates, like the Premium Certificates, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Certificate, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Certificates should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Certificates. The District has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Certificates will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Certificates being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Certificates. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Certificates may adversely affect the value of, or the tax status of interest on, the Certificates. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Certificates is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Certificates may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Certificates to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Certificates for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the City, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The City has covenanted, however, to comply with the requirements of the Code. Bond Counsel’s engagement with respect to the Certificates ends with the issuance of the Certificates, and, unless separately engaged, Bond Counsel is not obligated to defend the City or the Beneficial Owners regarding the tax- exempt status of the Certificates in the event of an audit examination by the IRS. Under current procedures, parties other than the City and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt Certificates is difficult, obtaining an independent review of IRS positions with which the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Certificates for audit, or the course or result of such audit, or an audit of Certificates presenting similar tax issues may affect the market price for, or the marketability of, the Certificates, and may cause the City or the Beneficial Owners to incur significant expense. 21 The Bonds Interest on the Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the Bonds. The proposed form of opinion of Bond Counsel is contained in Appendix C hereto. The following discussion summarizes certain U.S. federal tax considerations generally applicable to holders of the Bonds that acquire their Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose “functional currency” is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the Bonds under state, local or non-U.S. tax laws. In addition, this summary generally is limited to U.S. tax considerations applicable to investors that acquire their Bonds pursuant to this offering for the issue price that is applicable to such Bonds (i.e., the price at which a substantial amount of the Bonds are sold to the public) and who will hold their Bonds as “capital assets” within the meaning of Section 1221 of the Code. As used herein, “U.S. Holder” means a beneficial owner of a Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means a beneficial owner of a Bond (other than a partnership) that is not a U.S. Holder. If a partnership holds Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding Bonds, and partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the Bonds (including their status as U.S. Holders or Non-U.S. Holders). Notwithstanding the rules described below, it should be noted that certain taxpayers that are required to prepare certified financial statements or file financial statements with certain regulatory or governmental agencies may be required to recognize income, gain and loss with respect to the Bonds at the time that such income, gain or loss is recognized on such financial statements instead of under the rules described below (in the case of original issue discount, such requirements are only effective for tax years beginning after December 31, 2018). Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the Bonds in light of their particular circumstances. U.S. Holders Interest. Interest on the Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes. To the extent that the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds) by more than a de minimis amount, the difference may constitute original issue discount (“OID”). U.S. Holders of Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a 22 constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods. Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Taxable Bond. Sale or Other Taxable Disposition of the Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition of a Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Taxable Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the Bond (generally, the purchase price paid by the U.S. Holder for the Taxable Bond, decreased by any amortized premium and increased by the amount of any OID previously included in income by such U.S. Holder with respect to such Taxable Bond). Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the Bonds exceeds one year. The deductibility of capital losses is subject to limitations. Defeasance of the Bonds. If the District defeases any Taxable Bond, the Bond may be deemed to be retired for U.S. federal income tax purposes as a result of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such) and (ii) the holder’s adjusted tax basis in the Taxable Bond. Information Reporting and Backup Withholding. Payments on the Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the Bonds may be subject to backup withholding at the current rate of 24% with respect to “reportable payments,” which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS. Non-U.S. Holders Interest. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “Foreign Account Tax Compliance Act,” payments of principal of, and interest on, any Bond to a Non-U.S. Holder, other than (1) a controlled foreign corporation, a such term is defined in the Code, which is related to the District through stock ownership and (2) a bank which acquires such Bond in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, will not be subject to any U.S. federal withholding tax provided that the beneficial owner of the Bond provides a certification completed in compliance with applicable statutory and regulatory requirements, which requirements are discussed below under the heading “Information Reporting and Backup Withholding,” or an exemption is otherwise established. Disposition of the Bonds. Subject to the discussions below under the headings “Information Reporting and Backup Withholding” and “FATCA,” any gain realized by a Non-U.S. Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the District or a deemed retirement due to defeasance of the Taxable Bond) or other disposition of a Bond generally will not be subject to U.S. federal income tax, unless (i) such gain is 23 effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an offer by the District) or other disposition and certain other conditions are met. U.S. Federal Estate Tax. A Bond that is held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual’s death, provided that, at the time of such individual’s death, payments of interest with respect to such Bond would not have been effectively connected with the conduct by such individual of a trade or business within the United States. Information Reporting and Backup Withholding. Subject to the discussion below under the heading “FATCA,” under current U.S. Treasury Regulations, payments of principal and interest on any Bonds to a holder that is not a United States person will not be subject to any backup withholding tax requirements if the beneficial owner of the Bond or a financial institution holding the Bond on behalf of the beneficial owner in the ordinary course of its trade or business provides an appropriate certification to the payor and the payor does not have actual knowledge that the certification is false. If a beneficial owner provides the certification, the certification must give the name and address of such owner, state that such owner is not a United States person, or, in the case of an individual, that such owner is neither a citizen nor a resident of the United States, and the owner must sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%. Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Under current guidance, failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest on the Bonds. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current guidance, will apply to certain “passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury Regulations defining the term “foreign passthru payments.” Prospective investors should consult their own tax advisors regarding FATCA and its effect on them. The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of Bonds in light of the holder’s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of Bonds, including the application and effect of state, local, non-U.S., and other tax laws. LEGAL INVESTMENTS IN TEXAS Under the Texas Public Security Procedures Act (Texas Government Code, Chapter 1201), the Obligations (1) are negotiable instruments, (2) are investment securities to which Chapter 8 of the Texas Uniform Commercial Code applies, and (3) are legal and authorized investments for (A) an insurance company, (B) a fiduciary or trustee, or (C) a sinking fund of a municipality or other political subdivision or public agency of the State of Texas. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Obligations may have to be assigned a rating of “A” or its equivalent as to investment quality by a national rating agency before such Obligations are eligible investments for sinking funds and other public funds. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with at least $1 million of capital and savings and loan associations. The City has made no investigation of other laws, rules, regulations, or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes 24 or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE No registration statement relating to the Obligations has been filed with the United States Securities and Exchange Commission under the federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been registered or qualified under the securities acts of any other jurisdiction. The City assumes no responsibility for registration or qualification of the Obligations under the securities laws of any other jurisdiction in which the Obligations may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration and qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdictions. CONTINUING DISCLOSURE OF INFORMATION In the Ordinances, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (“MSRB”). This information will be available free of charge from the MSRB via Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org. Annual Reports The City will provide certain updated financial information and operating data to the MSRB annually in an electronic format as prescribed by the MSRB. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included this Official Statement in Appendix A - Financial Information Regarding the City of Sanger, Texas (Tables 1-11) and in Appendix D. The City will update and provide this information within six months after the end of each fiscal year. 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 “Rule”). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX D 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 the last day of March in each year following the end of its fiscal year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. Material Event Notices The City will also provide timely notices of certain events to the MSRB (not in excess of ten (10) days after the occurrence of the event). The City will provide notice of any of the following events with respect to the Obligations: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (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, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations; (7) modifications to rights of holders of the Obligations, if material; (8) Obligation calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if 25 material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; (14) appointment of a successor or additional trustee or the change of name of a trustee, if material; (15) incurrence of a financial obligation of the District, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material; and (16) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties. (Neither the Obligations nor the Ordinances make any provision for debt service reserves, liquidity enhancement, or credit 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”. For these purposes, any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. For the events listed in clause (15) and (16) above, the term “financial obligation” means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (c) a guarantee of either (A) or (B). The term “financial obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. All documents provided to the MSRB shall be accompanied by identifying information, as prescribed by the MSRB. Limitations and Amendments The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell the Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of the Obligations may seek a writ of mandamus to compel the City to comply with its agreement. This continuing disclosure agreement may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell Obligations in the primary offering of the Obligations in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal of the outstanding Obligations consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City amends its agreement, it must include with the next financial information and opening 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 type of information and data provided. The City may also amend or repeal the provisions of this continuing disclosure 26 agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations in the primary offering of the Obligations. Compliance with Prior Undertakings The City has complied in all material respects with its continuing disclosure agreements pursuant to the Rule during the past 5 years. . VERIFICATION OF ARITHMETICAL COMPUTATIONS BLX Group LLC will deliver to the District, on or before the settlement date of the Bonds, its verification report indicating that it has verified the mathematical accuracy of the mathematical computations of the adequacy of the cash and the maturing principal of and interest on the Federal Securities, to pay, when due, the maturing principal of, interest on and related call premium requirements, if any, of the Refunded Obligations. BLX Group LLC relied on the accuracy, completeness and reliability of all information provided to it by, and on all decisions and approvals of, the District. In addition, BLX Group LLC has relied on any information provided to it by the City’s retained advisors, consultants or legal counsel. OTHER INFORMATION Financial Advisor In its role as Financial Advisor, Government Capital Securities Corporation has relied on the City for certain information concerning the City and the Obligations. The fee of the Financial Advisor for services with respect to the Obligations is contingent upon the issuance and sale of the Obligations. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information in this Official Statement. The Financial Advisor 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. Audited Financial Statements Brooks Watson & Co., the City’s independent auditor, has not reviewed, commented on, or approved, and is not associated with, this Official Statement. The report of Brooks Watson & Co. relating to City’s financial statements for the fiscal year ended September 30, 2020 is included in this Official Statement in APPENDIX D; however, Brooks Watson & Co. has not performed any procedures on such financial statements since the date of such report, and has not performed any procedures on any other financial information of the City, including without limitation any of the information contained in this Official Statement. Underwriting The Underwriters have agreed to purchase the Certificates from the City for $21,941,179.59 (being the principal amount of the Certificates, plus a premium of $2,076,243.70, less an Underwriter’s discount of $135,064.11). The Underwriters have agreed to purchase the Bonds from the City for $2,806,038.14 (being the principal amount of the Bonds, less an Underwriter’s discount of $23,961.86). The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information set forth in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. 27 Forward-Looking Statements The statements contained in this Official Statement and in any other information provided by the City that are not purely historical are forward-looking statements, including statements regarding the City’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligations 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 included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. Concluding Statement The information set forth herein has been obtained from the City’s records, audited financial statements and other sources which are considered to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will ever be realized. All of the summaries of the statutes, documents and the Ordinance contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and the Ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such summarized documents for further information. Reference is made to official documents in all respects. The City has reviewed and approved this Official Statement and said instrument has been authorized for use and distribution by the Underwriters for the purpose of offering the Obligations. /s/ Thomas Muir Mayor, City of Sanger, Texas ATTEST: /s/ Christy Dyer Deputy Secretary, City of Sanger, Texas I-1 SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS Series to be Refunded Maturity Date Interest Rate Par Amount Call Date Call Price Comb Tax & Rev Cert. of Oblig, Series 2013 Serial 08/01/2024 3.500% 205,000 08/01/2023 100.000 Term 26 08/01/2026 4.500% 430,000 08/01/2023 100.000 Term 28 08/01/2028 4.750% 470,000 08/01/2023 100.000 Term 30 08/01/2030 5.000% 520,000 08/01/2023 100.000 Term 33 08/01/2033 5.000% 880,000 08/01/2023 100.000 2,505,000 APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION TABLE 1 2020 Total Value of Taxable Property $879,065,909 Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions $14,998,947 Disabled and Deceased Veterans’ Exemptions 4,906,028 Productivity Value Loss 35,073,959 Homestead 10% Cap Adjustment 6,820,937 Abatement 0 Freeport 7,771,944 Other 17,145,705 86,717,520 2020 Net Taxable Assessed Valuation (100% of Actual) $792,348,389 ________________ (a) See “AD VALOREM PROPERTY TAXATION - City Application of the Property Tax Code” in the Official Statement for a description of the City’s taxation procedures. Source: The Denton Central Appraisal District PRINCIPAL TAXPAYERS TABLE 2 Name Type of Business 2020 Net Taxable Assessed Valuation % of Total 2020 Assessed Valuation* 1. Wal-Mart Stores East, LP Distribution $58,302,401 7.36% 2. Wal-Mart Stores East, LP Distribution 34,585,114 4.36% 3. Trails of Sanger Apartments LLC Real Estate 28,213,566 3.56% 4. Ramar Land Corporation. Real Estate 12,073,155 1.52% 5. MacCamp LTD RV Sales & Service 6,393,741 0.81% 6. Sanger Lodging LLC Hotel/Motes 5,900,000 0.74% 7. Paccar Financial Financial/Banking 5,388,838 0.68% 8. LGI Homes-Texas LLC Construction 4,550,142 0.57% 9. Williamsburg Construction Services Construction 4,414,581 0.56% 10. Springer Properties LLC Real Estate 3,933,510 0.50% Total $163,755,048 20.67% * Based on 2020-21 Net Taxable Assessed Valuation of $792,348,389. ________________ Source: Denton Central Appraisal District A-2 PROPERTY TAX RATES AND COLLECTIONS TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation(a)Rate Current Total(a)Ended 2016 $525,934,493 0.679500 99.23% 99.73% 9-30-17 2017 578,538,702 0.679100 99.22% 99.77% 9-30-18 2018 579,523,041 0.679100 99.30% 99.59% 9-30-19 2019 644,778,693 0.679100 100.18% 100.18% 9-30-20 2020 792,348,389 0.679100 (In Process) 9-30-21 ________________ (a) See “AD VALOREM PROPERTY TAXATION - The City Application of the Property Tax Code” in the Official Statement for a description of the City’s taxation procedures. (b) Excludes interest and penalties. Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Denton Central Appraisal District, and the City. Note: Assessed Valuations may change during the year due to various supplements and protests, and valuations on a later date or in other tables of this Official Statement may not match those shown on this table. TAX RATE DISTRIBUTION TABLE 4 2020-21 2019-20 2018-19 2017-18 2016-17 Maintenance & Operations $0.605456 $0.591577 $0.571004 $0.563531 $0.513353 Dedicated for Street Maintenance 0 0 0 0 0 I & S Fund 0.073644 0.087523 0.108096 0.115569 0.166147 TOTAL $0.679100 $0.679100 $0.679100 $0.679100 $0.679500 ________________ Source: The City A-3 WATER RATES TABLE 5 Existing Rates Residential (Effective May 21, 2018) Minimum per unit served for 0 - 1,000 gallons $24.32 Next 4,000 gallons 4.32 per thousand gallons Next 10,000 gallons 4.75 per thousand gallons Next 15,000 gallons 5.93 per thousand gallons Over 30,000 8.59 per thousand gallons Commercial (Effective May 21, 2018) Minimum per unit served for 0 - 1,000 gallons $31.68 Next 4,000 gallons 5.02 per thousand gallons Next 10,000 gallons 5.44 per thousand gallons Next 15,000 gallons 6.15 per thousand gallons Over 30,000 7.59 per thousand gallons PRINCIPAL WATER CUSTOMERS TABLE 6 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Consumption in Gallons Average Monthly Bill ($) Stonewood Resorts LLC 657,500 5,282 Willowwood Detention Pond 450,000 2,115 Walmart Distribution Center 268,100 1,840 Stonewood Resorts LLC 267,500 2,074 Overleaf Washeo, LLC 198,900 1,456 SISD Sanger Middle School 155,000 1,152 TEK-CO Properties 134,600 875 R&L Carriers 100,200 1,163 Chisum Trail Apartments 87,900 1,202 Karl Klement Properties 85,300 851 Total 2,405,000 18,010 ___________________ Source: The City A-4 SEWER RATES TABLE 7 Existing Rates Residential (Effective May 21, 2018) Minimum (first 1,000 gallons) $29.75 Per 1,000 gallons over first 1,000 gallons 4.22 Per 1,000 gallons in excess of 10,000 gallons 4.69 Maximum per month 70.00 Commercial (Effective May 21, 2018) ¾ inch meter $43.79 1 inch meter 47.92 1½ inch meter 54.52 2 inch meter 66.32 3 inch meter 81.78 4 inch meter 151.78 6 inch meter 201.74 8 inch meter 266.25 Per 1,000 gallons over first 1,000 gallons 4.22 Per 1,000 gallons in excess of 10,000 gallons 4.69 Multi-Family Dwellings The amount due for multi-family dwellings shall be the residential rate multiplied by the number of occupied dwelling units. PRINCIPAL SEWER CUSTOMERS TABLE 8 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Bill ($) Stonewood Resorts LLC 5,867 Stonewood Resorts LLC 2,287 Chisum Trail Apartments 1,140 Walmart Distribution Center 1,298 Ohio Garden RV Inc. 1,012 Karl Klement Properties 975 SISD Sanger Middle School 975 Tek-Co Properties 787 Trails of Sanger Apartments LLC 715 Sportsman 697 Total 16,033 _________________ Source: The City A-5 ELECTRIC RATES*TABLE 9 Existing Rates (Effective April 18, 2017) Residential Commercial Large Industrial Facility Charge (minimum per month) $ 10.00 $ 16.00 $ 35.00 Energy Charge (per KWH) $ 0.1175 $ 0.12 $ 0.105 ERCOT Pass-through per month $ 4.00 $ 4.00 $ 4.00 PRINCIPAL ELECTRIC CUSTOMERS*TABLE 10 (For the twelve months ending September 30, 2020) Name of Customer Average Monthly Consumption in Kilowatt Hours Average Monthly Bill ($) Walmart Distribution Center 889,400 93,657 MacCamp LTD 100,250 12,506 Super Save 80,740 9,735 R&L Carriers 61,460 7,455 Baru Enterprises, LLC 42,800 5,052 Sams-Walmart Stores East LP 42,191 5,065 Latham Stairs & Millworks 34,846 4,219 SISD Chisholm Trail Elementary 30,553 3,787 North Texas Plastics 29,426 3,576 Chicken Express 28,710 3,504 Total 1,340,376 148,556 ___________________ Source: The City *None of the City’s revenue from its electric system is pledged to the payment of the Obligations. A-6 PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Series 2021A Certificates Series 2021B Rfd Bonds Fiscal Year 30- Sept Existing Debt Service($)(1)Principal($) Interest($) Total($) Principal($) Interest($) Total($) Total Debt Service Requirements ($) 2021 2,329,166.00 10,060.40 10,060.40 2,339,226.40 2022 1,563,990.00 55,000.00 592,753.33 647,753.33 55,000.00 43,116.00 98,116.00 2,309,859.33 2023 1,564,020.00 295,000.00 601,150.00 896,150.00 55,000.00 42,978.50 97,978.50 2,558,148.50 2024 1,357,755.00 320,000.00 592,300.00 912,300.00 260,000.00 42,786.00 302,786.00 2,572,841.00 2025 1,305,080.00 345,000.00 582,700.00 927,700.00 255,000.00 41,304.00 296,304.00 2,529,084.00 2026 1,306,870.00 395,000.00 575,800.00 970,800.00 260,000.00 39,085.50 299,085.50 2,576,755.50 2027 1,327,020.00 140,000.00 567,900.00 707,900.00 265,000.00 36,173.50 301,173.50 2,336,093.50 2028 1,329,725.00 135,000.00 565,100.00 700,100.00 265,000.00 32,410.50 297,410.50 2,327,235.50 2029 1,321,200.00 160,000.00 561,050.00 721,050.00 275,000.00 28,250.00 303,250.00 2,345,500.00 2030 1,326,194.00 160,000.00 556,250.00 716,250.00 275,000.00 23,217.50 298,217.50 2,340,661.50 2031 1,324,200.00 185,000.00 551,450.00 736,450.00 285,000.00 17,910.00 302,910.00 2,363,560.00 2032 1,320,937.00 260,000.00 545,900.00 805,900.00 290,000.00 12,267.00 302,267.00 2,429,104.00 2033 1,326,206.00 290,000.00 535,500.00 825,500.00 290,000.00 6,177.00 296,177.00 2,447,883.00 2034 1,649,713.00 290,000.00 523,900.00 813,900.00 2,463,613.00 2035 1,648,656.00 320,000.00 512,300.00 832,300.00 2,480,956.00 2036 1,650,344.00 370,000.00 499,500.00 869,500.00 2,519,844.00 2037 1,648,400.00 395,000.00 488,400.00 883,400.00 2,531,800.00 2038 1,775,000.00 476,550.00 2,251,550.00 2,251,550.00 2039 1,825,000.00 423,300.00 2,248,300.00 2,248,300.00 2040 1,880,000.00 368,550.00 2,248,550.00 2,248,550.00 2041 1,940,000.00 312,150.00 2,252,150.00 2,252,150.00 2042 1,995,000.00 253,950.00 2,248,950.00 2,248,950.00 2043 2,055,000.00 194,100.00 2,249,100.00 2,249,100.00 2044 2,115,000.00 132,450.00 2,247,450.00 2,247,450.00 2045 2,180,000.00 69,000.00 2,249,000.00 2,249,000.00 2046 120,000.00 3,600.00 123,600.00 123,600.00 25,299,476.00 20,000,000.00 11,085,603.33 31,085,603.33 2,830,000.00 375,735.90 3,205,735.90 59,590,815.23 ___________________________________ (1)Excludes the Refunded Obligations. [Remainder of page intentionally left blank] APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS B-1 General The City of Sanger, Texas (the “City”) is a residential community located on Interstate Highway 35 northeast of the Dallas-Fort Worth industrial area. The City’s close proximity to both Dallas and Fort Worth has been a significant factor in the City’s growth. According to the 2020 U.S. Census, the City’s 2020 population was 8,235. The area continues to see a large influx of new residents each year and this trend is expected to continue for the foreseeable future. In addition to the City’s close proximity to Interstate Highway 35, the City also provides ready access to both rail transportation and developable industrial land. The City offers access to several financial institutes, churches of various denominations and a wide variety of retail outlets. The public school system offers a low student to teacher ratio and the City currently has three daycare centers. The City is also located within minutes of Lake Ray Roberts, which provides a variety of sporting and outdoor activities. The local economy is gaining strength and the City has recently seen increases in both construction and sales tax. Education The City is served by the Sanger Independent School District. The District covers approximately 42 square miles in Denton County and serves the City and its surrounding rural areas. The District is comprised of one early childhood center for grades pre-kindergarten through kindergarten, one elementary school for grades first through third, one intermediate school for grades fourth through sixth, one junior high school for grades seventh through eighth, and one high school for grades ninth through twelfth. All campuses offer enriched curricula with special programs for gifted/talented students as well as students achieving below grade level and are equipped with computers and cafeteria service. Denton County Denton County is located in north central Texas, encompassing 911 square miles, and was created in 1846 from Fannin County. The County is the third largest county of the nine counties comprising the Dallas-Fort Worth Consolidated Metropolitan Statistical Area. The County is traversed by Interstate Highway 35, US Highways 77, 377 and 380 and State Highways 114 and 121. The economy is diversified by manufacturing, state supported institutions and agriculture. According to the 2020 U.S. Census, the County’s 2020 population was 833,822. . APPENDIX C FORM OF OPINIONS OF BOND COUNSEL 4130-8939-5499.1 May ___, 2021 City of Sanger, Texas Certificates of Obligation, Series 2021A (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $_________ aggregate principal amount of Obligations designated as “City of Sanger, Texas Certificates of Obligation, Series 2021A” (the “Obligations”). The Obligations are authorized by an ordinance adopted by the City Council of the City (the “City Council”) on April 19, 2021 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, the tax certificate of the City dated the date hereof (the “Tax Certificate”), certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Obligations has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Obligations to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Obligations, the Ordinance and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the City of Sanger, Texas May ___, 2021 Page 2 4130-8939-5499.1 exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against issuers in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non- legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Obligations and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Obligations constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Obligations. 3. The Obligations are also secured by a limited (in an amount not to exceed $1,000) subordinate pledge of revenues of the waterworks and sanitary sewer system of the City. 4. Interest on the Obligations is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Obligations is not a specific preference item for purposes of the federal alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Obligations. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP 4150-6779-9340.1 May ___, 2021 City of Sanger, Texas General Obligation Refunding Bonds, Taxable Series 2021B (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $__________ aggregate principal amount of bonds designated as “City of Sanger, Texas General Obligation Refunding Bonds, Taxable Series 2021B” (the “Bonds”). The Bonds are authorized by an ordinance adopted by the City Council (the “City Council”) on April 19, 2021 “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the original delivery of the Bonds on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the original delivery of the Bonds on the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance. We call attention to the fact that the rights and obligations under the Bonds and the Ordinance and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against issuers in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. May ___, 2021 Page 2 4150-6779-9340.1 Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Bonds. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP APPENDIX D AUDITED FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED SEPTEMBER 30, 2020 ANNUAL FINANCIAL REPORT of the City of Sanger, Texas For the Year Ended September 30, 2020 (This page intentionally left blank.) City of Sanger, Texas TABLE OF CONTENTS September 30, 2020 FINANCIAL SECTION Independent Auditor’s Report 1 Management’s Discussion and Analysis 7 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 18 Statement of Activities 22 Fund Financial Statements Governmental Funds: Balance Sheet 24 Reconciliation of the Balance Sheet to the Statement of Net Position- Governmental Funds 27 Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 31 Proprietary Funds: Statement of Net Position 32 Statement of Revenues, Expenses, and Changes in Fund Net Position 34 Statement of Cash Flows 35 Notes to Financial Statements 37 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual - General Fund 76 Schedule of Changes in Net Pension Liability and Related Ratios 78 Schedule of Employer Contributions to Pension Plan 80 Schedule of Changes in OPEB Liability and Related Ratios 82 COMBINING AND INDIVIDUAL FUND FINANCIAL SCHEDULES Combining Schedule of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds – by Department 84 (This page intentionally left blank.) 1 14950 Heathrow Forest Pkwy | Suite 530 | Houston, TX 77032 | Tel: 281.907.8788 | Fax: 888.875.0587 | www.BrooksWatsonCo.com INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and Members of the City Council City of Sanger, Texas: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Sanger, Texas (the “City”) as of and for the year ended September 30, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements The City’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City as of September 30, 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of changes in net pension liability and related ratios, schedule of employer contributions to pension plan, schedule of changes in other postemployment benefits liability and related ratios, and general fund budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Sanger, Texas’s basic financial statements. The combining schedule by department for the proprietary fund is presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining schedule by department for the proprietary fund is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the 3 auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. BrooksWatson & Co. Certified Public Accountants, PLLC Houston, Texas January 13, 2021 (This page intentionally left blank.) 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 5 (This page intentionally left blank.) 6 City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) September 30, 2020 7 As management of the City of Sanger, Texas (the “City”), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2020. Financial Highlights The City's total combined net position is $48,647,871 at September 30, 2020. Of this, $20,451,882 (unrestricted net position) may be used to meet the City’s ongoing obligations to its citizens and creditors. At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $11,006,202, an increase of $2,463,524. As of the end of the year, the unassigned fund balance of the general fund was $7,341,262 or 108% of total general fund expenditures. The City had an overall increase in net position of $4,259,084, which is due to revenues exceeding expenses for both governmental and business-type activities. Overview of the Financial Statements The discussion and analysis provided here are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements consist of three components: 1) government- wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-Wide Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets, liabilities, and deferred inflows/outflows with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other non-financial factors, such as the City’s property tax base and the condition of the City’s infrastructure, need to be considered in order to assess the overall health of the City. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 8 are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business- type activities). The governmental activities of the City include general government, public safety, public works, and culture and recreation. The business-type activities of the City include water, sewer and electric operations. The government-wide financial statements include not only the City itself (known as the primary government), but also the legally separate Sanger Industrial Development Corporation (“4A”) and the Sanger Texas Development Corporation (“4B”), for which the City is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. FUND FINANCIAL STATEMENTS Funds may be considered as operating companies of the parent corporation, which is the City of Sanger. They are usually segregated for specific activities or objectives. The City of Sanger uses fund accounting to ensure and demonstrate compliance with finance-related legal reporting requirements. The two categories of City funds are governmental and proprietary. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources,as well as on balances of spendable resources available at the end of the year. Such information may be useful in evaluating the City’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Sanger maintains three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 9 expenditures, and changes in fund balances for the general, debt service, and capital projects funds. The general and capital projects funds are considered to be major funds. The City of Sanger adopts an annual appropriated budget for all funds. A budgetary comparison schedule has been provided to demonstrate compliance with the general fund budget. Proprietary Funds The City maintains two different types of proprietary funds. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses a proprietary fund to account for its public utilities. All activities associated with providing such services are accounted for in these funds, including administration, operation, maintenance, debt service, capital improvements, meter maintenance, billing and collection. The City's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for administrative support services to other funds of the City. Component Units The City maintains the accounting and financial statements for two component units. The 4A and the 4B are both discretely presented component units displayed on the government-wide financial statements. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes are the last section of the basic financial statements. Other Information In addition to the basic financial statements, MD&A, and accompanying notes, this report also presents certain Required Supplementary Information (RSI). The RSI that GASB Statement No. 34 requires is a budgetary comparison schedule for the general fund and schedules for the City’s Defined Pension Plan. RSI can be found after the basic financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted previously, net position may serve over time as a useful indicator of the City’s financial position. For the City of Sanger, assets exceeded liabilities by $48,647,871 as of September 30, 2020, in the primary government. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 10 The largest portion of the City’s net position, $26,569,343, reflects its investments in capital assets (e.g., land, city hall, police station, streets, and drainage systems, as well as the public works facilities), less any debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position, $1,626,646, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $20,451,884 is unrestricted and may be used to meet the government’s ongoing obligations to its citizens and creditors. Current assets of governmental activities as of September 30, 2020 and September 30, 2019 were $12,106,859 and $9,264,673, respectively. The increase of $2,842,186 was primarily due to an increase in cash on hand as a result of revenues exceeding expenses in the current year. Current assets of business-type activities as of September 30, 2020 and September 30, 2019 were $13,631,238 and $14,744,586, respectively. The decrease of $1,113,348 was primarily attributable to funds being spent on capital asset improvements throughout the year and principal payments made on outstanding debt. Capital assets of business-type activities as of September 30, 2020 and September 30, 2019 were $30,002,614 and $29,272,520, respectively. The increase of $730,094 was a primarily a result of the continued sewer plant expansion. Total long-term liabilities as of September 30, 2020 and September 30, 2019 were $21,862,434 and $24,097,027, respectively. The decrease of $2,234,593 was primarily due to principal payments made during the year. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 11 Statement of Net Position: The following table reflects the condensed Statement of Net Position: Current and other assets $12,106,859 $ 13,167,174 $ 25,274,033 $ 9,264,673 $ 14,744,586 $ 24,009,259 Capital assets, net 19,063,124 30,002,614 49,065,738 18,949,169 29,272,520 48,221,689 Total Assets 31,169,983 43,169,788 74,339,771 28,213,842 44,017,106 72,230,948 of Resources 373,255 118,518 491,773 596,634 197,169 793,803 Other liabilities 1,745,717 2,715,443 4,461,160 1,348,191 3,182,639 4,530,830 Long-term liabilities 2,956,102 18,906,332 21,862,434 4,082,353 20,014,674 24,097,027 Total Liabilities 4,701,819 21,621,775 26,323,594 5,430,544 23,197,313 28,627,857 of Resources 249,483 74,660 324,143 6,237 1,870 8,107 Net Position: Net investment in capital assets 16,338,660 10,230,683 26,569,343 15,502,386 10,572,724 26,075,110 Restricted 1,626,646 - 1,626,646 2,894,827 - 2,894,827 Unrestricted 8,626,630 11,825,252 20,451,882 4,976,482 10,442,368 15,418,850 Total Net Position $ 26,591,936 $ 22,055,935 $ 48,647,871 $ 23,373,695 $ 21,015,092 $ 44,388,787 Deferred Outflows Deferred Inflows 2019 Governmental Business-Type Activities Governmental Business-Type ActivitiesActivities TotalTotal 2020 Activities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 12 Statement of Activities: The following table provides a summary of the City’s changes in net position: Revenues Program revenues: Charges for services $ 2,180,918 $ 12,400,421 $ 14,581,339 $ 2,035,376 $ 12,594,574 $ 14,629,950 Grants and contributions 703,800 - 703,800 770,917 - 770,917 General revenues: Property taxes 4,784,777 - 4,784,777 4,480,452 - 4,480,452 Sales taxes 1,104,525 - 1,104,525 914,748 - 914,748 Franchise and local taxes 291,554 - 291,554 283,573 - 283,573 Investment income 20,786 389,530 410,316 11,916 169,808 181,724 Other revenues 543,453 - 543,453 399,167 - 399,167 Total Revenues 9,629,813 12,789,951 22,419,764 8,896,149 12,764,382 21,660,531 Expenses General government 2,404,017 - 2,404,017 2,186,197 - 2,186,197 Public safety 2,764,359 - 2,764,359 2,759,901 - 2,759,901 Public works 1,549,551 - 1,549,551 1,070,180 - 1,070,180 Culture and recreation 746,573 - 746,573 719,658 - 719,658 Interest and fiscal charges 80,876 642,843 723,719 181,723 681,277 863,000 Water, sewer, & electric - 9,972,461 9,972,461 - 9,898,650 9,898,650 Total Expenses 7,545,376 10,615,304 18,160,680 6,917,659 10,579,927 17,497,586 Change in Net Position Before Transfers 2,084,437 2,174,647 4,259,084 1,978,490 2,184,455 4,162,945 Transfers 1,133,804 (1,133,804) - 681,175 (681,175) - Total 1,133,804 (1,133,804) - 681,175 (681,175) - Change in Net Position 3,218,241 1,040,843 4,259,084 2,659,665 1,503,280 4,162,945 Beginning Net Position 23,373,695 21,015,092 44,388,787 20,714,030 19,511,812 40,225,842 Ending Net Position $ 26,591,936 $ 22,055,935 $ 48,647,871 $ 23,373,695 $ 21,015,092 $ 44,388,787 Activities Activities Business-Type Primary Total Primary Governmental ActivitiesGovernment Governmental For the Year Ended September 30, 2020 Business-Type Government For the Year Ended September 30, 2019 Total Activities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 13 Graphic presentations of selected data from the summary tables are displayed below to assist in the analysis of the City’s activities. For the year ended September 30, 2020, revenues from governmental activities totaled $9,629,813. Property tax, charges for services, and sales taxes are the City’s largest revenue sources. Property tax increased by $304,325 or 7% due to rising property values. Sales taxes increased by $189,777 or 21% due to growth in the local economy. Charges for services increased $145,542 or 7% primarily due to increases in building permit revenue collected in the current year. Grants and contributions decreased by $67,117 or 9% due to nonrecurring funds received from an interlocal agreement with Denton County for street construction in the prior year. Other revenues increased by $144,286 primarily due to roadway impact fees received in the current year. All other revenues remained relatively stable when compared to the previous year. This graph shows the governmental function expenses of the City: For the year ended September 30, 2020, expenses for governmental activities totaled $7,545,376. This represents an increase of $627,717 from the prior year. The City’s largest functional expense is public City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 14 safety of $2,764,359, which primarily includes costs for the police department, animal control, fire department, and EMS services. Public safety expenses remained consistent with the prior year. General government expenses increased by $217,820 or 10% primarily due to increases in contract services and administrative expenses paid to the City’s internal service fund. Public works expenses increased by $479,371 or 45% primarily due to increased personnel costs and asset depreciation expenses. Interest and fiscal charges decreased by $100,847 or 55% primarily due to nonrecurring bond issuance costs recognized in the prior year. All other expenditures remained relatively consistent with the previous year. Business-type activities are shown comparing operating costs to revenues generated by related services. For the year ended September 30, 2020, charges for services by business-type activities totaled $12,400,421. This is a decrease of $194,153 or 2% from the previous year, which is considered minimal. Total expenses increased slightly by $35,377 or < 1% compared to the prior year, which is considered consistent with the prior year. FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related legal requirements. Governmental Funds - The focus of the City’s governmental funds is to provide information of near- term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of the City’s net resources available for spending at the end of the year. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 15 As of the end of the year the general fund reflected a total fund balance of $8,532,848. Of this, $11,469 is restricted for municipal court, $59,175 is restricted for tourism, $98,393 is restricted for library improvements, $81,934 for public safety, $11,087 is restricted for parks, and $882,093 is restricted for roadway impact fees. In addition, $41,226 is committed for employee benefits. Unassigned fund balance totaled $7,341,262 as of yearend. The general fund increased by $2,095,070 primarily as a result of planned expenditures exceeding current year actual expenditures and an overall increase in the anticipated net change in fund balance. The capital projects fund reflected an ending balance of $1,997,068, an increase of $368,349. This increase is attributed to greater transfers in compared to capital outlay expenditures in the current year. There was an increase in governmental fund balance of $2,463,525 over the prior year. The increase was primarily due to revenues and other financing sources exceeding current year expenditures. Proprietary Funds - The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. GENERAL FUND BUDGETARY HIGHLIGHTS There was a total positive budget variance of $2,095,070 in the general fund. This is a combination of a positive revenue variance of $1,178,038 a positive expenditure variance of $832,179, and a positive variance of $84,853 in other financing sources and uses. The most significant revenue variances were for sales taxes, franchise and local taxes, licenses and permits, and other revenues. CAPITAL ASSETS As of the end of the year, the City’s governmental activities funds had invested $19,063,124 in a variety of capital assets and infrastructure, net of accumulated depreciation. Depreciation is included with the governmental capital assets as required by GASB Statement No. 34. The City’s business-type activities funds had invested $30,002,614 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following: Investments in the 2019-2020 street rehabilitation program for $702,720. Willow Street improvements for $67,618. Wastewater pipeline improvements and utility line relocation totaling $234,960. Well #6 rehabilitation investments totaling $157,535. Investments in Bolivar Street wastewater rehabilitation project for $392,236. Sewer plant expansion for $705,037. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2020 16 Purchase of two Chevy Tahoes for $107,084. Purchase two new vehicles for the fire and EMS department totaling $218,470. More detailed information about the City’s capital assets is presented in note IV. D to the financial statements. LONG-TERM DEBT At the end of the current year, the City had total bonds (including premiums) and capital leases outstanding of $22,184,167. The City made principal payments on bonds and capital leases of $1,538,772. More detailed information about the City’s long-term liabilities is presented in note IV. E to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The Mayor and City Council are committed to maintaining and improving the overall wellbeing of the City of Sanger and improving services provided to their public citizens. The City is considering the impact of the COVID-19 pandemic on anticipated tax revenues and expenditures for the year ending September 30, 2021. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the City of Sanger’s finances for all those with an interest in the City’s finances. Questions concerning this report or requests for additional financial information should be directed to the City Manager at the City of Sanger City Hall at 502 Elm Street, Sanger, Texas 76266. FINANCIAL STATEMENTS 17 Current assets: Cash and cash equivalents $10,933,418 $ 8,032,637 $ 18,966,055 Restricted cash - 2,540,582 2,540,582 Investments 546,175 725,385 1,271,560 Receivables, net 565,088 1,322,782 1,887,870 Inventory - 473,150 473,150 Due from component unit 134,816 - 134,816 Internal balances (72,638) 72,638 - 12,106,859 13,167,174 25,274,033 Deposit for capital assets - 464,064 464,064 Capital assets: Non-depreciable 1,044,933 14,675,601 15,720,534 Net depreciable capital assets 18,018,191 15,327,013 33,345,204 19,063,124 30,466,678 49,529,802 31,169,983 43,633,852 74,803,835 Deferred Outflows of Resources Deferred charge on refunding 4,787 8,252 13,039 Pension outflows 353,421 105,772 459,193 OPEB outflows 15,047 4,494 19,541 Total Deferred Outflows of Resources 373,255 118,518 491,773 See Notes to Financial Statements. Business-Type City of Sanger, Texas STATEMENT OF NET POSITION (Page 1 of 2) September 30, 2020 Activities Activities Primary Government Assets Governmental Total Assets Total Current Assets Total 18 $ 1,530,519 $ 1,232,766 - - 95,660 283,601 96,174 96,174 - - - - - - 1,722,353 1,612,541 - - - - 689,654 - 689,654 - 2,412,007 1,612,541 - - - - - - - - Component Units Sanger Industrial Dev. Corp. (4A) Dev. Corp. (4B) Sanger Texas 19 Liabilities Current liabilities: Accounts payable and accrued liabilities $ 848,178 $ 991,742 $ 1,839,920 Accrued interest payable 15,663 234,956 250,619 Customer deposits - 508,333 508,333 Due to primary government - - - Compensated absences - current 186,897 95,212 282,109 Long term debt due within one year 694,979 885,200 1,580,179 1,745,717 2,715,443 4,461,160 Noncurrent liabilities: Debt due in more than one year 1,990,844 18,613,144 20,603,988 Compensated absences - noncurrent 20,766 10,579 31,345 OPEB liability 101,790 30,406 132,196 Net pension liability 842,702 252,203 1,094,905 2,956,102 18,906,332 21,862,434 4,701,819 21,621,775 26,323,594 Deferred Inflows of Resources OPEB inflows 7,822 2,336 10,158 Pension inflows 241,661 72,324 313,985 249,483 74,660 324,143 Net investment in capital assets 16,338,660 10,230,683 26,569,343 Restricted for: Debt service 476,286 - 476,286 Parks 11,087 - 11,087 Economic development - - - Roadway impact fees 882,093 - 882,093 Other purposes 257,180 - 257,180 Unrestricted 8,626,630 11,825,252 20,451,882 $ 26,591,936 $ 22,055,935 $ 48,647,871 See Notes to Financial Statements. City of Sanger, Texas Total Current Liabilities Governmental Activities Primary Government Net Position Total Net Position Total Liabilities Total Total Deferred Inflows of Resources September 30, 2020 Activities Business-Type STATEMENT OF NET POSITION (Page 2 of 2) 20 $ 6,655 $ 10,001 - - - - 67,408 67,408 - - - - 74,063 77,409 - - - - - - - - - - 74,063 77,409 - - - - - - 689,654 - - - - - 1,648,290 1,535,132 - - - - - - $ 2,337,944 $ 1,535,132 Sanger Texas Component Units Dev. Corp. (4A) Dev. Corp. (4B) Sanger Industrial 21 Capital Grants and Contributions Primary Government Governmental Activities General government $ 2,404,017 $ 1,460,219 $ 443,906 $ - Public safety 2,764,359 720,699 40,052 - Public works 1,549,551 - - 7,292 Culture and recreation 746,573 - 50 - Interest and fiscal charges 80,876 - 212,500 - 7,545,376 2,180,918 696,508 7,292 Business-Type Activities Water 1,626,068 2,399,719 - - Sewer 1,129,388 2,465,102 - - Electric 7,202,676 7,394,565 - - Fleet services 66 - - - Utility administration 657,106 141,035 - - Total Business-Type Activities 10,615,304 12,400,421 - - Total Primary Government $ 18,160,680 $ 14,581,339 $ 696,508 7,292 Component Units Sanger Ind. Dev. Corp. (4A) 174,864 - - - Sanger Texas Dev. Corp. (4B) 249,678 - - - $ 424,542 $ - $ - $ - General Revenues: Taxes Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Insurance recoveries Transfers Change in Net Position Beginning Net Position Ending Net Position See Notes to Financial Statements. Expenses Contributions Total Governmental Activities Functions/Programs Services Total General Revenues and Transfers City of Sanger, Texas STATEMENT OF ACTIVITIES Operating For the Year Ended September 30, 2020 Program Revenues Charges for Grants and 22 $ (499,892) $ - $ (499,892) $ - $ - (2,003,608) - (2,003,608) - - (1,542,259) - (1,542,259) - - (746,523) - (746,523) - - 131,624 - 131,624 - - (4,660,658) - (4,660,658) - - - 773,651 773,651 - - - 1,335,714 1,335,714 - - - 191,889 191,889 - - - (66) (66) - - - (516,071) (516,071) - - - 1,785,117 1,785,117 - - (4,660,658) 1,785,117 (2,875,541) - - (174,864) - - (249,678) (174,864) (249,678) 4,784,777 - 4,784,777 - - 1,104,525 - 1,104,525 549,145 549,145 291,554 - 291,554 - - 20,786 389,530 410,316 3,289 5,178 468,123 - 468,123 30,000 - 75,330 - 75,330 - - 1,133,804 (1,133,804) - - - 7,878,899 (744,274) 7,134,625 582,434 554,323 3,218,241 1,040,843 4,259,084 407,570 304,645 23,373,695 21,015,092 44,388,787 1,930,374 1,230,487 $ 26,591,936 $ 22,055,935 $ 48,647,871 $ 2,337,944 $ 1,535,132 Component Units Net (Expense) Revenue and Changes in Net Position Activities Primary Government Governmental Dev. Corp. (4A) Dev. Corp. (4B)Total Business-Type Activities Sanger Industrial Sanger Texas 23 Cash and cash equivalents $ 8,267,203 $ 1,997,068 $ 475,812 Investments 546,175 - - Receivables, net 551,479 - 13,609 Due from component unit 134,816 - - $ 9,499,673 $ 1,997,068 $ 489,421 Liabilities Accounts payable and accrued liabilities $ 727,393 $ - $ - Due to other funds 72,638 - - 800,031 - - Deferred Inflows of Resources Unavailable revenue Property taxes 49,826 - 13,135 EMS revenue 116,968 - - Total Deferred Inflows of Resources 166,794 - 13,135 Restricted for: Municipal court 11,469 - - Tourism 59,175 - - Library 104,602 - - Public safety 81,934 - - Debt service - - 476,286 Capital projects - - - Parks 11,087 - - Roadway impact fees 882,093 - - Committed for: Capital projects - 1,997,068 - Employee benefits 41,226 - - Unassigned reported in: General fund 7,341,262 - - 8,532,848 1,997,068 476,286 $ 9,499,673 $ 1,997,068 $ 489,421 See Notes to Financial Statements. General Nonmajor Debt Projects Fund Total Fund Balances Total Assets Fund Balances City of Sanger, Texas BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2020 Total Liabilities, Deferred Inflows, and Fund Balances Assets Service Total Liabilities Capital 24 $ 10,740,083 546,175 565,088 134,816 $ 11,986,162 $ 727,393 72,638 800,031 62,961 116,968 179,929 11,469 59,175 104,602 81,934 476,286 - 11,087 882,093 1,997,068 41,226 7,341,262 11,006,202 $ 11,986,162 Funds Total Governmental 25 (This page intentionally left blank.) 26 Fund Balances - Total Governmental Funds $ 11,006,202 Adjustments for the Statement of Net Position: Capital assets used in governmental activities are not current financial resources and, therefore, not reported in the governmental funds. Capital assets - non-depreciable 1,044,933 Capital assets - net depreciable 17,900,574 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the governmental funds. Property tax receivable 62,961 EMS receivable 116,968 Deferred outflows (inflows) of resources, represent a consumption (acquisition) of net position that applies to a future period(s) and is not recognized as an outflow (inflow) of resources (expense/ expenditure) (revenue) until then. Deferred charge on refunding 4,787 Pension contributions 146,798 OPEB contributions 357 Pension outflows 107,731 Pension inflows (174,041) OPEB outflows 10,391 OPEB inflows (5,587) Internal service funds are used by management to charge the cost of internal services to individual funds. The assets and liabilities of the internal service funds Net position - governmental activities (74,254) Some liabilities, including bonds payable and deferred charges, are not reported as liabilities in the governmental funds. Accrued interest (15,663) Compensated absences (174,788) Bond premium (128,072) Net pension liability (606,903) OPEB liability (72,707) Non-current liabilities due in one year (694,979) Non-current liabilities due in more than one year (1,862,772) $ 26,591,936 See Notes to Financial Statements. City of Sanger, Texas RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS September 30, 2020 Net Position of Governmental Activities 27 Revenues Property tax $ 4,153,342 $ - $ 614,820 Sales tax 1,104,525 - - Franchise and local taxes 291,554 - - License and permits 451,839 - - Charges for services 1,008,380 - - Fire and rescue 648,038 - - Contributions and donations 2,600 - - Intergovernmental 481,408 7,292 212,500 Fines and forfeitures 72,661 - - Investment income 19,798 - 988 Other revenue 458,600 - - 8,692,745 7,292 828,308 Expenditures Current: General government 2,154,048 - 1,250 Police department 1,424,522 - - Municipal court 174,044 - - Fire and EMS 1,332,950 - - Parks and recreation 468,306 - - Public works 999,827 - - Debt service: Principal 43,772 - 664,800 Interest 7,763 - 110,618 Capital outlay 163,953 737,625 - 6,769,185 737,625 776,668 Excess of Revenues Over (Under) Expenditures 1,923,560 (730,333) 51,640 Other Financing Sources (Uses) Transfers in 761,657 1,098,682 - Transfers (out)(675,000) - (51,535) Proceeds from sale of capital assets 9,523 - - Insurance recoveries 75,330 - - 171,510 1,098,682 (51,535) 2,095,070 368,349 105 Beginning fund balances 6,437,778 1,628,719 476,181 $ 8,532,848 $ 1,997,068 $ 476,286 See Notes to Financial Statements. General Total Revenues ServiceProjects Fund City of Sanger, Texas STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE Nonmajor Debt GOVERNMENTAL FUNDS For the Year Ended September 30, 2020 Capital Ending Fund Balances Total Other Financing Sources (Uses) Total Expenditures Net Change in Fund Balances 28 $ 4,768,162 1,104,525 291,554 451,839 1,008,380 648,038 2,600 701,200 72,661 20,786 458,600 9,528,345 2,155,298 1,424,522 174,044 1,332,950 468,306 999,827 708,572 118,381 901,578 8,283,478 1,244,867 1,860,339 (726,535) 9,523 75,330 1,218,657 2,463,524 8,542,678 $ 11,006,202 Total Funds Governmental 29 (This page intentionally left blank.) 30 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances - total governmental funds $ 2,463,524 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay 1,305,826 Depreciation expense (1,263,448) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. EMS receivable 16,615 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences 4,286 Accrued interest 4,013 Pension expense (29,446) OPEB expense (4,778) The issuance of long-term debt (e.g., bonds, leases, certificates of obligation) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when they are first issued; whereas, these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Deferred charges on refunding (7,250) Principal payments 708,572 Amortization of bond premium 40,742 Internal service funds are used by management to charge the cost of internal services to individual funds. The City reports the net gain (loss) of internal service funds within governmental activities.(20,415) $ 3,218,241 See Notes to Financial Statements. Change in Net Position of Governmental Activities For the Year Ended September 30, 2020 City of Sanger, Texas RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 31 Current Assets Cash and cash equivalents $ 8,032,637 $ 193,335 Restricted cash 2,540,582 - Investments 725,385 - Receivables, net 1,322,782 - Inventory 473,150 - Due from other funds 72,638 - 13,167,174 193,335 Noncurrent Assets Deposit for capital assets 464,064 - Capital assets: Non-depreciable 14,675,601 - Net depreciable capital assets 15,327,013 117,617 30,466,678 117,617 43,633,852 310,952 Deferred charge on refunding 8,252 - Pension outflows 105,772 98,892 OPEB outflows 4,494 4,299 Total Deferred Outflows of Resources 118,518 103,191 City of Sanger, Texas STATEMENT OF NET POSITION (Page 1 of 2) PROPRIETARY FUND September 30, 2020 Activities Governmental Water, Sewer Assets Service Deferred Outflows of Resources Internal & Electric Total Current Assets Total Noncurrent Assets Total Assets 32 Current Liabilities Accounts payable and accrued liabilities 991,742 120,785 Accrued interest 234,956 - Customer deposits 508,333 - Compensated absences - current 95,212 29,588 Bonds and capital leases payable - current 885,200 - 2,715,443 150,373 Noncurrent Liabilities Compensated absences - noncurrent 10,579 3,287 Net pension liability 252,203 235,799 OPEB liability 30,406 29,083 Bonds and capital leases payable - noncurrent 18,613,144 - 21,621,775 418,542 OPEB inflows 2,336 2,235 Pension inflows 72,324 67,620 74,660 69,855 Net investment in capital assets 10,230,683 117,617 Unrestricted 11,825,252 (191,871) $ 22,055,935 $ (74,254) See Notes to Financial Statements. Governmental Activities Water, Sewer Internal & Electric Service Deferred Inflows of Resources City of Sanger, Texas STATEMENT OF NET POSITION (Page 2 of 2) Total Net Position Net Position Liabilities Total Liabilities Total Current Liabilities Total Deferred Inflows of Resources PROPRIETARY FUND September 30, 2020 33 Operating Revenues Charges for services $11,159,866 $ 2,089,244 Connection fees 70,720 - Tap fees 1,028,800 - Other revenue 141,035 - 12,400,421 2,089,244 Operating Expenses Salaries and wages 2,143,514 1,306,439 Contracted services 563,298 494,537 Utilities 351,885 96,545 Materials and supplies 139,347 90,025 Water and electric purchases 5,208,867 - Repairs and maintenance 538,674 111,044 Depreciation 1,026,876 10,290 9,972,461 2,108,880 2,427,960 (19,636) Nonoperating Revenues (Expenses) Investment income 389,530 - Interest expense (642,843) (779) (253,313) (779) 2,174,647 (20,415) Transfers (out)(1,133,804) - 1,040,843 (20,415) 21,015,092 (53,839) $ 22,055,935 $ (74,254) See Notes to Financial Statements. Ending Net Position Total Operating Revenues Total Operating Expenses Change in Net Position Operating Income (Loss) Total Nonoperating Revenues (Expenses) Income (Loss) Before Transfers Beginning net position Internal Service Governmental Activities City of Sanger, Texas STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND For the Year Ended September 30, 2020 Water, Sewer & Electric 34 Cash Flows from Operating Activities Receipts from customers $ 12,710,868 $ - Receipts from interfund charges for administrative services - 2,089,244 Payments to suppliers (7,377,183) (767,900) Payments to employees (2,149,731) (1,267,279) Receipts from other funds 18,622 - 3,202,576 54,065 Cash Flows from Noncapital Financing Activities Operating transfers (out) (1,133,804) - (1,133,804) - Cash Flows from Capital and Related Financing Activities Capital purchases (1,756,970) (81,867) Deposit payment for capital assets purchase (464,064) - Principal paid on debt (830,200) - Interest paid on debt (744,658) (779) (3,795,892) (82,646) Cash Flows from Investing Activities Purchases of investments, net (2,859) - Interest on investments 389,530 - 386,671 - (1,340,449) (28,581) 11,913,668 221,916 $ 10,573,219 $ 193,335 See Notes to Financial Statements. City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 1 of 2) For the Year Ended September 30, 2020 Net Cash Provided by (Used) by Operating Activities & Electric Water, Sewer Net Cash Provided by Investing Activities Net Cash Provided by (Used) by Noncapital Financing Activities Net Cash (Used) by Capital and Related Financing Activities Ending Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Governmental Activities Internal Service Beginning cash and cash equivalents 35 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income / (Loss) $ 2,427,960 $ (19,636) Adjustments to reconcile operating income / (loss) to net cash provided / (used): Depreciation 1,026,876 10,290 Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts receivable 244,200 - Inventory (23,000) - Due from/to other funds 18,622 - Deferred outflows of resources - pension contributions 56,739 47,841 Deferred outflows of resources - OPEB contributions 71 62 Other deferred outflows of resources - pensions 13,610 1,744 Deferred inflows of resources - pensions 72,324 67,620 Other deferred outflows of resources - OPEB (4,494) (4,299) Deferred inflows of resources - OPEB 466 633 Increase (Decrease) in: Accounts payable and accrued liabilities (552,112) 24,251 Compensated absences (27,086) (1,050) Customer deposits 66,247 - Net pension liability (124,723) (82,015) OPEB liability 6,876 8,624 $ 3,202,576 $ 54,065 See Notes to Financial Statements. Internal City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 2 of 2) For the Year Ended September 30, 2020 Net Cash Provided (Used) by Operating Activities Service& Electric Water, Sewer Governmental Activities 36 CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTSȱ Septemberȱ30,ȱ2020ȱ 37ȱ I.ȱȱSUMMARYȱOFȱSIGNIFICANTȱACCOUNTINGȱPOLICIESȱ ȱ A.DescriptionȱofȱGovernmentȬWideȱFinancialȱStatementsȱ ȱ Theȱ governmentȬwideȱ financialȱ statementsȱ (i.e.,ȱ theȱ statementȱ ofȱ netȱ positionȱ andȱ theȱ statementȱofȱactivities)ȱreportȱ informationȱonȱ allȱofȱtheȱnonfiduciaryȱactivitiesȱofȱ theȱ primaryȱ governmentȱ andȱ itsȱ componentȱ units.ȱ Governmentalȱ activities,ȱ whichȱ normallyȱ areȱ supportedȱ byȱ taxes,ȱ intergovernmentalȱ revenues,ȱ andȱ otherȱ nonexchangeȱ transactions,ȱ areȱ reportedȱ separatelyȱ fromȱ businessȬtypeȱ activities,ȱ whichȱ relyȱ toȱ aȱ significantȱ extentȱ onȱ feesȱ andȱ chargesȱ toȱ externalȱ customersȱ forȱ support.ȱLikewise,ȱtheȱprimaryȱgovernmentȱisȱreportedȱseparatelyȱfromȱcertainȱlegallyȱ separateȱ componentȱ unitsȱ forȱ whichȱ theȱ primaryȱ governmentȱ isȱ financiallyȱ accountable.ȱ ȱ B.ReportingȱEntityȱ ȱ TheȱCityȱ ofȱ Sanger,ȱ Texasȱ (theȱ“City”)ȱ wasȱincorporatedȱ inȱ1886ȱandȱ operatesȱ underȱ aȱ CouncilȬManagerȱ formȱ ofȱ government.ȱ Theȱ Cityȱ provides:ȱ generalȱ government,ȱ publicȱ safety,ȱ publicȱ works,ȱ cultureȱ andȱ recreation,ȱ water,ȱ sewer,ȱ andȱ electricityȱ operations.ȱȱ ȱ Theȱ Cityȱ isȱ anȱ independentȱ politicalȱ subdivisionȱ ofȱ theȱ Stateȱ ofȱ Texasȱ governedȱ byȱ anȱ electedȱ councilȱ andȱ aȱ mayorȱ andȱ isȱ consideredȱ aȱ primaryȱ government.ȱȱAsȱ requiredȱ byȱ generallyȱ acceptedȱ accountingȱ principles,ȱ theseȱ basicȱ financialȱ statementsȱ haveȱ beenȱ preparedȱ basedȱ onȱ considerationsȱ regardingȱ theȱ potentialȱ forȱ inclusionȱ ofȱ otherȱ entities,ȱ organizations,ȱ orȱ functionsȱ asȱ partȱ ofȱ theȱ Cityȇsȱ financialȱ reportingȱ entity.ȱȱTheȱ Sangerȱ Industrialȱ Developmentȱ Corporationȱ (“4Aȱ fund”)ȱ andȱ theȱ Sangerȱ Texasȱ Developmentȱ Corporationȱ (“4Bȱ fund”),ȱ althoughȱ legallyȱ separate,ȱ areȱ consideredȱ partȱ ofȱ theȱ reportingȱ entity.ȱȱNoȱ otherȱ entitiesȱ haveȱ beenȱ includedȱinȱ theȱ Cityȇsȱ reportingȱ entity.ȱ Additionally,ȱ asȱ theȱ Cityȱ isȱ consideredȱ aȱ primaryȱ governmentȱ forȱ financialȱ reportingȱ purposes,ȱ itsȱ activitiesȱ areȱ notȱ consideredȱ aȱ partȱ ofȱanyȱotherȱgovernmentalȱorȱotherȱtypeȱofȱreportingȱentity.ȱ ȱ Considerationsȱ regardingȱ theȱ potentialȱ forȱ inclusionȱ ofȱ otherȱ entities,ȱ organizationsȱ orȱ functionsȱ inȱ theȱ Cityȇsȱ financialȱ reportingȱ entityȱ areȱ basedȱ onȱ criteriaȱ prescribedȱ byȱ generallyȱ acceptedȱ accountingȱ principles.ȱȱTheseȱ sameȱ criteriaȱ areȱ evaluatedȱ inȱ consideringȱ whetherȱ theȱ Cityȱ isȱ aȱ partȱ ofȱ anyȱ otherȱ governmentalȱ orȱ otherȱ typeȱ ofȱ reportingȱ entity.ȱȱTheȱ overridingȱ elementsȱ associatedȱ withȱ prescribedȱ criteriaȱ consideredȱinȱdeterminingȱthatȱtheȱCityȇsȱfinancialȱreportingȱentityȱstatusȱisȱthatȱofȱaȱ primaryȱgovernmentȱareȱthatȱitȱhasȱ aȱseparatelyȱelectedȱgoverningȱbody;ȱitȱisȱlegallyȱ separate;ȱ andȱ isȱ fiscallyȱ independentȱ ofȱ otherȱ stateȱ andȱ localȱ governments.ȱȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 38ȱ Additionally,ȱ prescribedȱ criteriaȱ underȱ generallyȱ acceptedȱ accountingȱ principlesȱ includeȱ considerationsȱ pertainingȱ toȱ organizationsȱ forȱ whichȱ theȱ primaryȱ governmentȱ isȱ financiallyȱ accountable,ȱ andȱ considerationsȱ pertainingȱ toȱ organizationsȱ forȱ whichȱ theȱ natureȱ andȱ significanceȱ ofȱ theirȱ relationshipȱ withȱ theȱ primaryȱ governmentȱ areȱ suchȱ thatȱ exclusionȱ wouldȱ causeȱ theȱ reportingȱ entityȇsȱ financialȱstatementsȱtoȱbeȱmisleadingȱorȱincomplete.ȱ ȱ DiscretelyȱPresentedȱComponentȱUnitsȱ ȱ SangerȱIndustrialȱDevelopmentȱCorporationȱ(4A)ȱȱ ȱ Theȱ Sangerȱ Texasȱ Industrialȱ Developmentȱ Corporationȱ (“4A”)ȱ isȱ governedȱ byȱ aȱ boardȱofȱfiveȱ directors,ȱ allȱ ofȱwhomȱareȱappointedȱbyȱ theȱCityȱ CouncilȱofȱtheȱCityȱofȱ SangerȱandȱanyȱofȱwhomȱcanȱbeȱremovedȱfromȱofficeȱbyȱtheȱCityȱCouncilȱatȱitsȱwill.ȱ Theȱ 4Aȱ fundȱ wasȱ incorporatedȱ inȱ theȱ stateȱ ofȱ Texasȱ asȱ aȱ nonȬprofitȱ industrialȱ developmentȱ corporationȱ underȱ Sectionȱ 4Aȱ ofȱ theȱ Developmentȱ Corporationȱ Actȱ ofȱ 1979.ȱ Theȱ purposeȱ ofȱ theȱ 4Aȱ fundȱ isȱ toȱ promoteȱ economicȱ developmentȱ withinȱ theȱ Cityȱ ofȱ Sanger.ȱ Discreteȱ presentationȱ isȱ appropriateȱ becauseȱ theȱ District’sȱ Boardȱ isȱ notȱsubstantiallyȱtheȱsameȱasȱtheȱCity.ȱ ȱ SangerȱTexasȱDevelopmentȱCorporationȱ(4B)ȱ ȱ Theȱ SangerȱTexasȱDevelopmentȱCorporationȱ(“4B”)ȱisȱgovernedȱbyȱaȱboardȱofȱsevenȱ directors,ȱallȱofȱwhomȱareȱappointedȱbyȱtheȱCityȱCouncilȱatȱitsȱwill.ȱTheȱ4Bȱfundȱwasȱ incorporatedȱinȱtheȱstateȱofȱTexasȱasȱaȱnonprofitȱindustrialȱdevelopmentȱcorporationȱ underȱ Sectionȱ 4Bȱ ofȱ theȱ Developmentȱ Corporationȱ Actȱ ofȱ 1979.ȱ Theȱ purposeȱ ofȱ theȱ 4Bȱ fundȱ isȱ toȱ promoteȱ economicȱ andȱ communityȱ developmentȱ withinȱ theȱ Cityȱ ofȱ Sanger.ȱ Discreteȱ presentationȱ isȱ appropriateȱ becauseȱ theȱ District’sȱ Boardȱ isȱ notȱ substantiallyȱtheȱsameȱasȱtheȱCity.ȱ ȱ C.BasisȱofȱPresentationȱGovernmentȬWideȱandȱFundȱFinancialȱStatementsȱ ȱ Whileȱseparateȱ governmentȬwideȱ andȱ fundȱ financialȱ statementsȱ areȱ presented,ȱtheyȱ areȱ interrelated.ȱ Theȱ governmentalȱ activitiesȱ columnȱ incorporatesȱ dataȱ fromȱ governmentalȱ fundsȱ whileȱ businessȬtypeȱ activitiesȱ incorporateȱ dataȱ fromȱ theȱ government’sȱ enterpriseȱ funds.ȱ Separateȱ financialȱ statementsȱ areȱ providedȱ forȱ governmentalȱfundsȱandȱtheȱproprietaryȱfunds.ȱ ȱ Asȱ aȱ generalȱ rule,ȱ theȱ effectȱ ofȱ interfundȱ activityȱ hasȱ beenȱ eliminatedȱ fromȱ theȱ governmentȬwideȱfinancialȱstatements.ȱExceptionsȱtoȱthisȱgeneralȱruleȱareȱpaymentsȱ inȱ lieuȱ ofȱ taxesȱ whereȱ theȱ amountsȱ areȱ reasonablyȱ equivalentȱ inȱ valueȱ toȱ theȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 39ȱ interfundȱservicesȱprovidedȱandȱotherȱchargesȱbetweenȱtheȱgovernment’sȱwaterȱandȱ transitȱ functionsȱ andȱ variousȱ otherȱ functionsȱ ofȱ theȱ government.ȱ Eliminationȱ ofȱ theseȱ chargesȱ wouldȱ distortȱ theȱ directȱ costsȱ andȱ programȱ revenuesȱ reportedȱ forȱ theȱ variousȱfunctionsȱconcerned.ȱ ȱ Theȱ fundȱ financialȱ statementsȱ provideȱ informationȱ aboutȱ theȱ government’sȱ funds.ȱ Separateȱ statementsȱ forȱ eachȱ fundȱ category—governmentalȱ andȱ proprietaryȱ areȱ presented.ȱTheȱemphasisȱofȱfundȱfinancialȱstatementsȱisȱonȱmajorȱgovernmentalȱandȱ enterpriseȱfunds,ȱ eachȱ displayedȱ inȱ aȱ separateȱ column.ȱ Allȱremainingȱgovernmentalȱ andȱ enterpriseȱ fundsȱ areȱ aggregatedȱ andȱ reportedȱ asȱ nonmajorȱ funds.ȱ Majorȱ individualȱ governmentalȱ andȱ enterpriseȱ fundsȱ areȱ reportedȱ asȱ separateȱ columnsȱ inȱ theȱfundȱfinancialȱstatements.ȱȱ ȱ Theȱgovernmentȱreportsȱtheȱfollowingȱmajorȱgovernmentalȱfunds:ȱ ȱ GovernmentalȱFundsȱȱ ȱ Governmentalȱ fundsȱ areȱ thoseȱ fundsȱ throughȱ whichȱ mostȱ governmentalȱ functionsȱ areȱtypicallyȱfinanced.ȱ ȱ GeneralȱFundȱȱ ȱ Theȱ generalȱ fundȱ isȱ usedȱ toȱ accountȱ forȱ allȱ financialȱ transactionsȱ notȱ properlyȱ includableȱ inȱ otherȱ funds.ȱȱTheȱ principalȱ sourcesȱ ofȱ revenuesȱ includeȱ localȱ propertyȱ taxes,ȱ salesȱ andȱ franchiseȱ taxes,ȱ licensesȱ andȱ permits,ȱ finesȱ andȱ forfeitures,ȱ andȱ chargesȱ forȱ services.ȱȱExpendituresȱ includeȱ generalȱ government,ȱ publicȱsafety,ȱparksȱandȱrecreationȱandȱpublicȱworks.ȱȱ ȱ CapitalȱProjectsȱFundȱȱ ȱ Theȱ capitalȱ projectsȱ fundȱ isȱ usedȱ toȱ accountȱ forȱ capitalȱ assetȱ activitiesȱ forȱ governmentalȱfundȱtypes.ȱ ȱ Theȱgovernmentȱreportsȱtheȱfollowingȱnonmajorȱgovernmentalȱfund:ȱ ȱ DebtȱServiceȱFundȱȱ ȱ Theȱ debtȱ serviceȱ fundȱ isȱ usedȱ toȱ accountȱ forȱ debtȱ serviceȱ activitiesȱ forȱ governmentalȱfundȱtypes.ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 40ȱ ProprietaryȱFundȱTypesȱȱ ȱ Proprietaryȱ fundsȱ areȱ usedȱ toȱ accountȱ forȱ activitiesȱ thatȱ areȱ similarȱ toȱ thoseȱ oftenȱ foundȱ inȱ theȱ privateȱ sector.ȱȱAllȱ assets,ȱ liabilities,ȱ equities,ȱ revenues,ȱ expenses,ȱ andȱ transfersȱ relatingȱ toȱ theȱ government’sȱ businessȱ activitiesȱ areȱ accountedȱ forȱ throughȱ proprietaryȱ funds.ȱȱTheȱ measurementȱ focusȱ isȱ onȱ determinationȱ ofȱ netȱ income,ȱ financialȱ position,ȱ andȱ cashȱ flows.ȱȱProprietaryȱ fundsȱ distinguishȱ operatingȱ revenuesȱ andȱ expensesȱ fromȱ nonȬoperatingȱ items.ȱȱOperatingȱ revenuesȱ includeȱ chargesȱ forȱ services.ȱȱOperatingȱ expensesȱ includeȱ costsȱ ofȱ materials,ȱ contracts,ȱ personnel,ȱ andȱ depreciation.ȱȱAllȱ revenuesȱandȱexpensesȱ notȱ meetingȱ thisȱdefinitionȱ areȱ reportedȱ asȱ nonȬoperatingȱ revenuesȱ andȱ expenses.ȱȱProprietaryȱ fundȱ typesȱ followȱGAAPȱprescribedȱbyȱtheȱGovernmentalȱAccountingȱStandardsȱBoardȱ(GASB)ȱ andȱallȱfinancialȱAccountingȱStandardsȱBoard’sȱstandardsȱissuedȱpriorȱtoȱNovemberȱ 30,ȱ 1989.ȱȱSubsequentȱ toȱ thisȱ date,ȱ theȱ Cityȱ accountsȱ forȱ itsȱ enterpriseȱ fundsȱ asȱ presentedȱbyȱ GASB.ȱ Theȱ proprietaryȱfundȱ typesȱusedȱbyȱ theȱ Cityȱ includeȱenterpriseȱ funds.ȱ ȱ Theȱgovernmentȱreportsȱtheȱfollowingȱmajorȱenterpriseȱfund:ȱ ȱ Water,ȱSewer,ȱ&ȱElectricȱFundȱȱ ȱ Thisȱ fundȱ isȱ usedȱ toȱ accountȱ forȱ theȱ provisionȱ ofȱ water,ȱ sewerȱ andȱ electricȱ servicesȱtoȱtheȱresidentsȱofȱtheȱCity.ȱActivitiesȱofȱtheȱfundȱincludeȱadministration,ȱ operationsȱ andȱ maintenanceȱ ofȱ theȱ waterȱ productionȱ andȱ distributionȱ system,ȱ waterȱ collectionȱ andȱ treatmentȱ systems,ȱ andȱ electricȱ services.ȱ Theȱ fundȱ alsoȱ accountsȱ forȱ theȱ accumulationȱ ofȱ resourcesȱ forȱ andȱ theȱ paymentȱ ofȱ longȬtermȱ debt.ȱAllȱcostsȱareȱfinancedȱthroughȱchargesȱtoȱutilityȱcustomers.ȱ ȱ Additionally,ȱtheȱgovernmentȱreportsȱtheȱfollowingȱfundȱtype:ȱ ȱ InternalȱServiceȱFundȱ ȱ Revenuesȱ andȱ expensesȱ relatedȱ toȱ servicesȱ providedȱ toȱ organizationsȱ insideȱ theȱ Cityȱonȱaȱ costȱ reimbursementȱ basisȱ areȱ accountedȱ forȱ inȱ anȱ internalȱserviceȱfund.ȱ Theȱ Cityȇsȱ internalȱ serviceȱ fundȱ wasȱ setȱ upȱ toȱ provideȱ administrativeȱ supportȱ servicesȱtoȱotherȱfundsȱofȱtheȱCity.ȱ ȱ Duringȱ theȱ courseȱ ofȱ operationsȱ theȱ governmentȱ hasȱ activityȱ betweenȱ fundsȱ forȱ variousȱ purposes.ȱ Anyȱ residualȱ balancesȱ outstandingȱ atȱ yearȱ endȱ areȱ reportedȱ asȱ dueȱ from/toȱ otherȱ fundsȱ andȱ advancesȱ to/fromȱ otherȱ funds.ȱ Whileȱ theseȱ balancesȱ areȱ reportedȱ inȱ fundȱ financialȱ statements,ȱ certainȱ eliminationsȱ areȱ madeȱ inȱ theȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 41ȱ preparationȱ ofȱ theȱ governmentȬwideȱ financialȱ statements.ȱ Balancesȱ betweenȱ theȱ fundsȱ includedȱ inȱ governmentalȱ activitiesȱ (i.e.,ȱ theȱ governmentalȱ andȱ internalȱ serviceȱ funds)ȱ areȱ eliminatedȱ soȱ thatȱ onlyȱ theȱ netȱ amountȱ isȱ includedȱ asȱ internalȱ balancesȱ inȱ theȱ governmentalȱ activitiesȱ column.ȱ Similarly,ȱ balancesȱ betweenȱ theȱ fundsȱ includedȱ inȱ businessȬtypeȱ activitiesȱ (i.e.,ȱ theȱ enterpriseȱ funds)ȱ areȱ eliminatedȱ soȱ thatȱ onlyȱ theȱ netȱ amountȱ isȱ includedȱ asȱ internalȱ balancesȱ inȱ theȱ businessȬtypeȱ activitiesȱcolumn.ȱ ȱ Further,ȱ certainȱ activityȱ occursȱ duringȱ theȱ yearȱ involvingȱ transfersȱ ofȱ resourcesȱ betweenȱ funds.ȱ Inȱ fundȱ financialȱ statementsȱ theseȱ amountsȱ areȱ reportedȱ atȱ grossȱ amountsȱ asȱ transfersȱ in/out.ȱ Whileȱ reportedȱ inȱ fundȱ financialȱ statements,ȱ certainȱ eliminationsȱ areȱ madeȱ inȱ theȱ preparationȱ ofȱ theȱ governmentȬwideȱ financialȱ statements.ȱ Transfersȱ betweenȱ theȱ fundsȱ includedȱ inȱ governmentalȱ activitiesȱ areȱ eliminatedȱ soȱ thatȱ onlyȱ theȱ netȱ amountȱ isȱincludedȱasȱ transfersȱ inȱ theȱ governmentalȱ activitiesȱ column.ȱ Similarly,ȱ balancesȱ betweenȱ theȱ fundsȱ includedȱ inȱ businessȬtypeȱ activitiesȱ areȱ eliminatedȱ soȱ thatȱ onlyȱ theȱ netȱ amountȱ isȱ includedȱ asȱ transfersȱ inȱ theȱ businessȬtypeȱactivitiesȱcolumn.ȱ ȱ D.MeasurementȱFocusȱandȱBasisȱofȱAccountingȱȱ ȱ Theȱ accountingȱ andȱ financialȱ reportingȱ treatmentȱ isȱ determinedȱ byȱ theȱ applicableȱ measurementȱ focusȱ andȱ basisȱ ofȱ accounting.ȱ Measurementȱ focusȱ indicatesȱ theȱ typeȱ ofȱ resourcesȱ beingȱ measuredȱ suchȱ asȱ currentȱ financialȱ resourcesȱ orȱ economicȱ resources.ȱ Theȱbasisȱofȱaccountingȱindicatesȱtheȱtimingȱofȱtransactionsȱorȱeventsȱforȱrecognitionȱ inȱtheȱfinancialȱstatements.ȱ ȱ Theȱ governmentȬwideȱ financialȱ statementsȱ areȱ reportedȱusingȱ theȱeconomicȱresourcesȱ measurementȱ focusȱ andȱ theȱ accrualȱ basisȱ ofȱ accounting.ȱ Revenuesȱ areȱ recordedȱ whenȱ earnedȱ andȱ expensesȱ areȱ recordedȱ whenȱ aȱ liabilityȱ isȱ incurred,ȱ regardlessȱ ofȱ theȱ timingȱ ofȱ relatedȱ cashȱ flows.ȱ Propertyȱ taxesȱ areȱ recognizedȱ asȱ revenuesȱ inȱ theȱ yearȱ forȱ whichȱ theyȱ areȱ levied.ȱ Grantsȱ andȱ similarȱ itemsȱ areȱ recognizedȱ asȱ revenueȱ asȱ soonȱasȱallȱeligibilityȱrequirementsȱimposedȱbyȱtheȱproviderȱhaveȱbeenȱmet.ȱ ȱ Theȱ governmentalȱ fundȱ financialȱ statementsȱ areȱ reportedȱ usingȱ theȱ currentȱ financialȱ resourcesȱ measurementȱ focusȱ andȱ theȱ modifiedȱ accrualȱ basisȱ ofȱ accounting.ȱ Revenuesȱ areȱ recognizedȱ asȱ soonȱ asȱ theyȱ areȱ bothȱ measurableȱ andȱ available.ȱ Revenuesȱ areȱ consideredȱ toȱ beȱ availableȱ whenȱ theyȱ areȱ collectibleȱ withinȱ theȱ currentȱ periodȱ orȱ soonȱ enoughȱ thereafterȱ toȱ payȱ liabilitiesȱ ofȱ theȱ currentȱ period.ȱ Forȱ thisȱ purpose,ȱ theȱ governmentȱ considersȱ revenuesȱ toȱ beȱ availableȱ ifȱ theyȱ areȱ collectedȱ withinȱ 60ȱ daysȱ ofȱ theȱ endȱ ofȱ theȱ currentȱ fiscalȱ period.ȱ Expendituresȱ generallyȱ areȱ recordedȱ whenȱ aȱ liabilityȱ isȱ incurred,ȱ asȱ underȱ accrualȱ accounting.ȱ However,ȱ debtȱ serviceȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 42ȱ expenditures,ȱ asȱ wellȱ asȱ expendituresȱ relatedȱ toȱ compensatedȱ absences,ȱ andȱ claimsȱ andȱ judgments,ȱ areȱ recordedȱ onlyȱ whenȱ paymentȱ isȱ due.ȱ Generalȱ capitalȱ assetȱ acquisitionsȱ areȱ reportedȱ asȱ expendituresȱ inȱ governmentalȱ funds.ȱ Issuanceȱ ofȱ longȬ termȱ debtȱ andȱ acquisitionsȱ underȱ capitalȱ leasesȱ areȱ reportedȱ asȱ otherȱ financingȱ sources.ȱ ȱ Propertyȱ taxes,ȱsalesȱtaxes,ȱfranchiseȱ taxes,ȱlicenses,ȱ andȱinterestȱassociatedȱwithȱtheȱ currentȱfiscalȱperiodȱareȱallȱconsideredȱtoȱbeȱsusceptibleȱtoȱaccrualȱandȱsoȱhaveȱbeenȱ recognizedȱ asȱ revenuesȱ ofȱ theȱ currentȱ fiscalȱ period.ȱ Entitlementsȱ areȱ recordedȱ asȱ revenuesȱ whenȱ allȱ eligibilityȱ requirementsȱ areȱ met,ȱ includingȱ anyȱ timeȱ requirements,ȱ andȱ theȱ amountȱ isȱ receivedȱ duringȱ theȱ periodȱ orȱ withinȱ theȱ availabilityȱ periodȱ forȱ thisȱ revenueȱ sourceȱ (withinȱ 60ȱ daysȱ ofȱ yearȱ end).ȱ ExpenditureȬdrivenȱ grantsȱ areȱ recognizedȱ asȱ revenueȱ whenȱ theȱ qualifyingȱ expendituresȱ haveȱ beenȱ incurredȱ andȱ allȱ otherȱ eligibilityȱ requirementsȱ haveȱ beenȱ met,ȱ andȱ theȱ amountȱ isȱ receivedȱ duringȱ theȱ periodȱ orȱ withinȱ theȱ availabilityȱ periodȱ forȱ thisȱ revenueȱ sourceȱ (withinȱ 60ȱ daysȱ ofȱ yearȱ end).ȱ Allȱ otherȱ revenueȱ itemsȱ areȱ consideredȱ toȱ beȱ measurableȱ andȱ availableȱ onlyȱ whenȱ cashȱ isȱ receivedȱ byȱ theȱ government.ȱ ȱ E.Assets,ȱ Liabilities,ȱ Deferredȱ Outflows/Inflowsȱ ofȱ Resourcesȱ andȱ Netȱ Position/FundȱBalanceȱ ȱ 1.DepositsȱandȱInvestmentsȱ ȱ Theȱ City’sȱ cashȱ andȱ cashȱ equivalentsȱ areȱ consideredȱ toȱ beȱ cashȱ onȱ hand,ȱ demandȱ depositsȱandȱshortȱtermȱinvestmentsȱwithȱoriginalȱmaturitiesȱofȱthreeȱmonthsȱorȱlessȱ fromȱ theȱ dateȱ ofȱ acquisition.ȱȱForȱ theȱ purposeȱ ofȱ theȱ statementȱ ofȱ cashȱ flows,ȱ theȱ proprietaryȱ fundȱ typesȱ considerȱ temporaryȱ investmentsȱ withȱ maturityȱ ofȱ threeȱ monthsȱorȱlessȱwhenȱpurchasedȱtoȱbeȱcashȱequivalents.ȱ ȱ Inȱ accordanceȱ withȱ GASBȱ Statementȱ No.ȱ 31,ȱ Accountingȱ andȱ Reportingȱ forȱ Certainȱ Investmentsȱ andȱ Externalȱ Investmentȱ Pools,ȱ theȱ Cityȱ reportsȱ allȱ investmentsȱ atȱ fairȱ value,ȱexceptȱforȱ“moneyȱmarketȱinvestments”ȱandȱ“2a7Ȭlikeȱpools.”ȱȱMoneyȱmarketȱ investments,ȱ whichȱ areȱ shortȬtermȱ highlyȱ liquidȱ debtȱ instrumentsȱ thatȱ mayȱ includeȱ U.S.ȱ Treasuryȱ andȱ agencyȱ obligations,ȱ areȱ reportedȱ atȱ amortizedȱ costs.ȱȱInvestmentȱ positionsȱinȱexternalȱinvestmentȱpoolsȱthatȱareȱoperatedȱinȱaȱmannerȱconsistentȱwithȱ theȱ SEC’sȱ Ruleȱ 2a7ȱ ofȱ theȱ Investmentȱ Companyȱ Actȱ ofȱ 1940,ȱ suchȱ asȱ TexPool,ȱ areȱ reportedȱusingȱtheȱpools’ȱshareȱprice.ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 43ȱ Theȱ Cityȱ hasȱ adoptedȱ aȱ writtenȱ investmentȱ policyȱ regardingȱ theȱ investmentȱ ofȱ itsȱ fundsȱ asȱ definedȱ inȱ theȱ Publicȱ Fundsȱ Investmentȱ Act,ȱ Chapterȱ 2256,ȱ ofȱ theȱ Texasȱ GovernmentalȱCode.ȱȱInȱsummary,ȱtheȱCityȱisȱauthorizedȱtoȱinvestȱinȱtheȱfollowing:ȱ ȱ DirectȱobligationsȱofȱtheȱU.S.ȱGovernmentȱ Fullyȱcollateralizedȱcertificatesȱofȱdepositȱandȱmoneyȱmarketȱaccountsȱ Statewideȱinvestmentȱpoolsȱ ȱ 2.FairȱValueȱ ȱ Theȱ Cityȱ hasȱ appliedȱ Governmentalȱ Accountingȱ Standardsȱ Boardȱ (“GASB”)ȱ Statementȱ No.ȱ 72,ȱ Fairȱ Valueȱ Measurementȱ andȱ Application.ȱ GASBȱ Statementȱ No.ȱ 72ȱ providesȱ guidanceȱ forȱ determiningȱ aȱ fairȱ valueȱ measurementȱ forȱ reportingȱ purposesȱ andȱ applyingȱ fairȱ valueȱ toȱ certainȱ investmentsȱ andȱ disclosuresȱ relatedȱ toȱ allȱfairȱvalueȱmeasurements.ȱ ȱ 3.ReceivablesȱandȱInterfundȱTransactionsȱ ȱ Transactionsȱ betweenȱ fundsȱ thatȱ areȱ representativeȱ ofȱ lending/borrowingȱ arrangementsȱ outstandingȱ atȱ theȱ endȱ ofȱ theȱ yearȱareȱ referredȱ toȱasȱ eitherȱ“interfundȱ receivables/payables”ȱ (i.e.,ȱ theȱ currentȱ portionȱ ofȱ interfundȱ loans)ȱ orȱ “advancesȱ to/fromȱ otherȱ funds”ȱ (i.e.,ȱ theȱ nonȬcurrentȱ portionȱ ofȱ interfundȱ loans).ȱȱAllȱ otherȱ outstandingȱ balancesȱ betweenȱ fundsȱ areȱ reportedȱ asȱ “dueȱ to/fromȱ otherȱ funds”ȱ inȱ theȱ fundȱ financialȱ statements.ȱȱIfȱ theȱ transactionsȱ areȱ betweenȱ theȱ primaryȱ governmentȱandȱitsȱcomponentȱunit,ȱtheseȱreceivablesȱandȱpayablesȱareȱclassifiedȱasȱ “dueȱ to/fromȱ componentȱ unit/primaryȱ government.”ȱȱAnyȱ residualȱ balancesȱ outstandingȱ betweenȱ theȱ governmentalȱ activitiesȱ andȱ businessȬtypeȱ activitiesȱ areȱ reportedȱinȱtheȱgovernmentȬwideȱfinancialȱstatementsȱasȱ“internalȱbalances.”ȱ ȱ Advancesȱ betweenȱ fundsȱ areȱ offsetȱ byȱ aȱ fundȱ balanceȱ reserveȱ accountȱ inȱ theȱ applicableȱ governmentalȱ fundȱ toȱ indicateȱ theyȱ areȱ notȱ availableȱ forȱ appropriationȱ andȱareȱnotȱexpendableȱavailableȱfinancialȱresources.ȱ ȱ Allȱtradeȱreceivablesȱareȱshownȱnetȱofȱanyȱallowanceȱforȱuncollectibleȱamounts.ȱ ȱ 4.PropertyȱTaxesȱ ȱ Propertyȱ taxesȱ areȱ leviedȱ byȱ Octoberȱ 1ȱ onȱ theȱ assessedȱ valueȱ listedȱ asȱ ofȱ theȱ priorȱ Januaryȱ 1ȱ forȱ allȱ realȱ andȱ businessȱ personalȱ propertyȱ inȱ conformityȱ withȱ Subtitleȱ E,ȱ TexasȱPropertyȱTaxȱCode.ȱTaxesȱareȱdueȱonȱreceiptȱofȱtheȱtaxȱbillȱandȱareȱdelinquentȱ ifȱ notȱ paidȱ beforeȱ Februaryȱ 1ȱ ofȱ theȱ yearȱ followingȱ theȱ yearȱ inȱ whichȱ imposed.ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 44ȱ Penaltiesȱ areȱ calculatedȱafterȱFebruaryȱ1ȱ upȱtoȱtheȱ dateȱcollectedȱbyȱ theȱgovernmentȱ atȱ theȱ rateȱ ofȱ 6%ȱ forȱ theȱ firstȱ monthȱ andȱ increasedȱ 1%ȱ perȱ monthȱ upȱ toȱ aȱ totalȱ ofȱ 12%.ȱ Interestȱ isȱ calculatedȱ afterȱ Februaryȱ 1ȱ atȱ theȱ rateȱ ofȱ 1%ȱ perȱ monthȱ upȱ toȱ theȱ dateȱ collectedȱ byȱ theȱ government.ȱ Underȱ stateȱ law,ȱ propertyȱ taxesȱ leviedȱ onȱ realȱ propertyȱ constituteȱ aȱ lienȱ onȱ theȱ realȱ propertyȱ whichȱ cannotȱ beȱ forgivenȱ withoutȱ specificȱ approvalȱ ofȱ theȱ Stateȱ Legislature.ȱ Theȱ lienȱ expiresȱ atȱ theȱ endȱ ofȱ twentyȱ years.ȱTaxesȱleviedȱonȱpersonalȱpropertyȱcanȱbeȱdeemedȱuncollectibleȱbyȱtheȱCity.ȱ ȱ 5.InventoriesȱandȱPrepaidȱItemsȱ ȱ Theȱcostsȱofȱgovernmentalȱfundȱtypeȱinventoriesȱareȱrecordedȱasȱexpendituresȱwhenȱ theȱ relatedȱ liabilityȱ isȱ incurred,ȱ (i.e.,ȱ theȱ purchaseȱ method).ȱȱTheȱ inventoriesȱ areȱ valuedȱ atȱ theȱ lowerȱ ofȱ costȱ orȱ marketȱ usingȱ theȱ averageȱ costȱ method.ȱ Certainȱ paymentsȱ toȱ vendorsȱ reflectȱ costsȱ applicableȱ toȱ futureȱ accountingȱ periodsȱ (prepaidȱ expenditures)ȱareȱrecognizedȱasȱexpendituresȱwhenȱutilized.ȱȱ ȱ 6.CapitalȱAssetsȱ ȱ Capitalȱ assets,ȱ whichȱ includeȱ property,ȱ plant,ȱ equipment,ȱ andȱ infrastructureȱ assetsȱ (e.g.,ȱ roads,ȱ bridges,ȱ sidewalks,ȱ andȱ similarȱ items)ȱ areȱ reportedȱ inȱ theȱ applicableȱ governmentalȱ orȱ businessȬtypeȱ activitiesȱ columnsȱ inȱ theȱ governmentȬwideȱ financialȱ statements.ȱȱCapitalȱ assetsȱ areȱ definedȱ byȱ theȱ government,ȱ asȱ assetsȱ withȱ anȱ initialȱ individualȱ costȱ ofȱ moreȱ thanȱ $5,000ȱ andȱ anȱ estimatedȱ usefulȱ lifeȱ inȱ excessȱ ofȱ oneȱ year.ȱȱSuchȱ assetsȱ areȱ recordedȱ atȱ historicalȱ costȱ orȱ estimatedȱ historicalȱ costȱ ifȱ purchasedȱ orȱ constructed.ȱȱDonatedȱ capitalȱ assetsȱ areȱ recordedȱ atȱ estimatedȱ fairȱ marketȱ valueȱ atȱ theȱ dateȱ ofȱ donation.ȱȱMajorȱ outlaysȱ forȱ capitalȱ assetsȱ andȱ improvementsȱareȱcapitalizedȱasȱprojectsȱareȱconstructed.ȱ ȱ Interestȱ costsȱ incurredȱ inȱ connectionȱ withȱ constructionȱ ofȱ enterpriseȱ fundȱ capitalȱ assetsȱ areȱ capitalizedȱ whenȱ theȱ effectsȱ ofȱ capitalizationȱ materiallyȱ impactȱ theȱ financialȱstatements.ȱ ȱ Theȱ costsȱ ofȱ normalȱ maintenanceȱ andȱ repairsȱ thatȱ doȱ notȱ addȱ toȱ theȱ valueȱ ofȱ theȱ assetȱorȱmateriallyȱextendȱassets’ȱlivesȱareȱnotȱcapitalized.ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 45ȱ Property,ȱ plant,ȱ andȱ equipmentȱ ofȱ theȱ primaryȱ government,ȱ asȱ wellȱ asȱ theȱ componentȱ units,ȱ areȱ depreciatedȱ usingȱ theȱ straightȬlineȱ methodȱ overȱ theȱ followingȱ estimatedȱusefulȱyears.ȱȱ ȱȱ AssetȱDescriptionȱ ȱ Estimatedȱȱ UsefulȱLifeȱ Vehiclesȱȱ5Ȭ10ȱyearsȱ Furnitureȱandȱequipmentȱȱ5ȱtoȱ10ȱyearsȱ Infrastructureȱȱ10Ȭ30ȱyearsȱ Waterȱandȱsewerȱsystemȱȱ10Ȭ30ȱyearsȱ Buildingsȱandȱimprovementsȱȱ5Ȭ40ȱyearsȱ ȱȱȱ 7.DeferredȱOutflows/InflowsȱofȱResourcesȱ ȱ Inȱ additionȱ toȱ assets,ȱ theȱ statementȱ ofȱ financialȱ positionȱ willȱ sometimesȱ reportȱ aȱ separateȱ sectionȱ forȱ deferredȱ outflowsȱ ofȱ resources.ȱ Thisȱ separateȱ financialȱ statementȱ element,ȱ deferredȱ outflowsȱ ofȱ resources,ȱ representsȱ aȱ consumptionȱ ofȱ netȱ positionȱ thatȱ appliesȱ toȱ aȱ futureȱ period(s)ȱ andȱ soȱ willȱ notȱ beȱ recognizedȱ asȱ anȱ outflowȱ ofȱ resourcesȱ (expense/ȱ expenditure)ȱ untilȱ then.ȱ Anȱ exampleȱ isȱ aȱ deferredȱ chargeȱ onȱ refundingȱ reportedȱ inȱ theȱ governmentȬwideȱ statementȱ ofȱ netȱ position.ȱ Aȱ deferredȱ chargeȱ onȱ refundingȱ resultsȱ fromȱ theȱ differenceȱ inȱ theȱ carryingȱ valueȱ ofȱ refundedȱ debtȱ andȱ itsȱ reacquisitionȱ price.ȱ Thisȱ amountȱ isȱ deferredȱ andȱ amortizedȱ overȱtheȱshorterȱofȱtheȱlifeȱofȱtheȱrefundedȱorȱrefundingȱdebt.ȱ ȱ Inȱ additionȱ toȱ liabilities,ȱ theȱ statementȱ ofȱ financialȱ positionȱ willȱ sometimesȱ reportȱ aȱ separateȱ sectionȱ forȱ deferredȱ inflowsȱ ofȱ resources.ȱ Thisȱ separateȱ financialȱ statementȱ element,ȱ deferredȱ inflowsȱ ofȱ resources,ȱ representsȱ anȱ acquisitionȱ ofȱ netȱ positionȱ thatȱ appliesȱ toȱ aȱ futureȱ period(s)ȱ andȱ soȱwillȱ notȱ beȱrecognizedȱasȱ anȱ inflowȱ ofȱ resourcesȱ (revenue)ȱ untilȱ thatȱ time.ȱ Theȱ governmentȱ hasȱ onlyȱ oneȱ typeȱ ofȱ item,ȱ whichȱ arisesȱ onlyȱ underȱ aȱ modifiedȱ accrualȱ basisȱ ofȱ accounting,ȱ whichȱ qualifiesȱ forȱ reportingȱ inȱ thisȱ category.ȱ Accordingly,ȱ theȱ item,ȱ unavailableȱ revenue,ȱ isȱ reportedȱ onlyȱ inȱ theȱ governmentalȱ fundsȱ balanceȱ sheet.ȱ Theȱ governmentalȱ fundsȱ reportȱ unavailableȱ revenuesȱ fromȱ twoȱ sources:ȱ propertyȱ taxesȱ andȱ EMSȱ revenues.ȱ Theseȱ amountsȱ areȱ deferredȱ andȱ recognizedȱ asȱ anȱ inflowȱ ofȱ resourcesȱ inȱ theȱ periodȱ thatȱ theȱ amountsȱ becomeȱavailable.ȱ ȱ 8.NetȱPositionȱFlowȱAssumptionȱ ȱ Sometimesȱ theȱ governmentȱ willȱ fundȱ outlaysȱ forȱ aȱ particularȱ purposeȱ fromȱ bothȱ restrictedȱ (e.g.,ȱ restrictedȱ bondȱ orȱ grantȱ proceeds)ȱ andȱ unrestrictedȱ resources.ȱ Inȱ orderȱtoȱcalculateȱtheȱamountsȱtoȱreportȱasȱrestrictedȱ–ȱnetȱpositionȱandȱunrestrictedȱ –ȱ netȱ positionȱ inȱ theȱ governmentȬwideȱ andȱ proprietaryȱ fundȱ financialȱ statements,ȱ aȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 46ȱ flowȱ assumptionȱ mustȱ beȱ madeȱ aboutȱ theȱ orderȱ inȱ whichȱ theȱ resourcesȱ areȱ consideredȱtoȱbeȱapplied.ȱ ȱ 9.FundȱBalanceȱFlowȱAssumptionsȱ ȱ Sometimesȱ theȱ governmentȱ willȱ fundȱ outlaysȱ forȱ aȱ particularȱ purposeȱ fromȱ bothȱ restrictedȱ andȱ unrestrictedȱ resourcesȱ (theȱ totalȱ ofȱ committed,ȱ assigned,ȱ andȱ unassignedȱ fundȱ balance).ȱ Inȱ orderȱ toȱ calculateȱ theȱ amountsȱ toȱ reportȱ asȱ restricted,ȱ committed,ȱ assigned,ȱ andȱ unassignedȱ fundȱ balanceȱ inȱ theȱ governmentalȱ fundȱ financialȱ statementsȱ aȱ flowȱ assumptionȱ mustȱ beȱ madeȱ aboutȱ theȱ orderȱ inȱ whichȱ theȱ resourcesȱ areȱ consideredȱ toȱ beȱ applied.ȱ Itȱ isȱ theȱ government’sȱ policyȱ toȱ considerȱ restrictedȱ fundȱ balanceȱ toȱ haveȱ beenȱ depletedȱ beforeȱ usingȱ anyȱ ofȱ theȱ componentsȱ ofȱ unrestrictedȱ fundȱ balance.ȱ Further,ȱ whenȱ theȱ componentsȱ ofȱ unrestrictedȱ fundȱ balanceȱcanȱbeȱusedȱforȱtheȱ sameȱpurpose,ȱcommittedȱfundȱbalanceȱisȱdepletedȱfirst,ȱ followedȱbyȱassignedȱfundȱbalance.ȱUnassignedȱfundȱbalanceȱisȱappliedȱlast.ȱ ȱ 10.FundȱBalanceȱPoliciesȱ ȱ Fundȱ balanceȱ ofȱ governmentalȱ fundsȱ isȱ reportedȱ inȱ variousȱ categoriesȱ basedȱ onȱ theȱ natureȱ ofȱ anyȱ limitationsȱ requiringȱ theȱ useȱ ofȱ resourcesȱ forȱ specificȱ purposes.ȱ Theȱ governmentȱ itselfȱ canȱ establishȱ limitationsȱ onȱ theȱ useȱ ofȱ resourcesȱ throughȱ eitherȱ aȱ commitmentȱ(committedȱfundȱbalance)ȱorȱanȱassignmentȱ(assignedȱfundȱbalance).ȱ ȱ Theȱ committedȱ fundȱ balanceȱ classificationȱ includesȱ amountsȱ thatȱ canȱ beȱ usedȱ onlyȱ forȱtheȱspecificȱpurposesȱdeterminedȱbyȱaȱformalȱactionȱofȱtheȱgovernment’sȱhighestȱ levelȱ ofȱ decisionȬmakingȱ authority.ȱ Theȱ governingȱ councilȱ isȱ theȱ highestȱ levelȱ ofȱ decisionȬmakingȱ authorityȱ forȱ theȱ governmentȱ thatȱ can,ȱ byȱ adoptionȱ ofȱ anȱ ordinanceȱ priorȱ toȱ theȱ endȱ ofȱ theȱ fiscalȱ year,ȱ commitȱ fundȱ balance.ȱ Onceȱ adopted,ȱ theȱ limitationȱ imposedȱ byȱ theȱ ordinanceȱ remainsȱ inȱ placeȱ untilȱ aȱ similarȱ actionȱ isȱ takenȱ(theȱadoptionȱofȱanotherȱordinance)ȱtoȱremoveȱorȱreviseȱtheȱlimitation.ȱ ȱ Amountsȱ inȱ theȱ assignedȱ fundȱ balanceȱ classificationȱ areȱ intendedȱ toȱ beȱ usedȱ byȱ theȱ governmentȱ forȱ specificȱ purposesȱ butȱ doȱ notȱ meetȱ theȱ criteriaȱ toȱ beȱ classifiedȱ asȱ committed.ȱ Theȱ governingȱ bodyȱ (council)ȱ hasȱ byȱ resolutionȱ authorizedȱ theȱ Cityȱ Managerȱ toȱ assignȱ fundȱ balance.ȱ Theȱ Councilȱ mayȱ alsoȱ assignȱ fundȱ balanceȱ asȱ itȱ doesȱ whenȱ appropriatingȱ fundȱ balanceȱ toȱ coverȱ aȱ gapȱ betweenȱ estimatedȱ revenueȱ andȱ appropriationsȱ inȱ theȱ subseq uentȱ year’sȱ appropriatedȱ budget.ȱ Unlikeȱ commitments,ȱ assignmentsȱ generallyȱ onlyȱ existȱ temporarily.ȱ Inȱ otherȱ words,ȱ anȱ additionalȱ actionȱ doesȱ notȱ normallyȱ haveȱ toȱ beȱ takenȱ forȱ theȱ removalȱ ofȱ anȱ assignment.ȱ Conversely,ȱ asȱ discussedȱ above,ȱ anȱ additionalȱ actionȱ isȱ essentialȱ toȱ eitherȱremoveȱorȱreviseȱaȱcommitment.ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 47ȱ 11.CompensatedȱAbsencesȱ ȱ Theȱ liabilityȱ forȱ compensatedȱ absencesȱ reportedȱ inȱ theȱ governmentȬwideȱ andȱ proprietaryȱ fundȱ statementsȱ consistȱ ofȱ unpaid,ȱ accumulatedȱ vacationȱ balances.ȱ Theȱ liabilityȱ hasȱ beenȱ calculatedȱ usingȱ theȱ vestingȱ method,ȱ inȱ whichȱ leaveȱ amountsȱ forȱ bothȱ employeesȱ whoȱ currentlyȱ areȱ eligibleȱ toȱ receiveȱ terminationȱ paymentsȱ andȱ otherȱ employeesȱ whoȱ areȱ expectedȱ toȱ becomeȱ eligibleȱ inȱ theȱ futureȱ toȱ receiveȱ suchȱ paymentsȱ uponȱ terminationȱ areȱ included.ȱ Vestedȱ orȱ accumulatedȱ vacationȱ leaveȱ andȱ compensatedȱ leaveȱ ofȱ governmentȬwideȱ andȱ proprietaryȱ fundsȱ areȱ recognizedȱ asȱanȱexpenseȱandȱliabilityȱofȱthoseȱfundsȱasȱtheȱbenefitsȱaccrueȱtoȱemployees.ȱ ȱ ItȱisȱtheȱCityȇsȱpolicyȱtoȱliquidateȱcompensatedȱabsencesȱwithȱfutureȱrevenuesȱratherȱ thanȱ withȱ currentlyȱ availableȱ expendableȱ resources.ȱ Accordingly,ȱ theȱ Cityȇsȱ governmentalȱfundsȱrecognizeȱaccruedȱcompensatedȱabsencesȱwhenȱitȱisȱpaid.ȱ ȱ 12.LongȬTermȱObligationsȱ ȱ Inȱ theȱ governmentȬwideȱ financialȱ statements,ȱ longȬtermȱ debtȱ andȱ otherȱ longȬtermȱ obligationsȱ areȱ reportedȱ asȱ liabilitiesȱ inȱ theȱ applicableȱ governmentalȱ activitiesȱ statementȱ ofȱ netȱ position.ȱ Theȱ longȬtermȱ debtȱ consistsȱ primarilyȱ ofȱ bondsȱ payableȱ andȱaccruedȱcompensatedȱabsences.ȱ ȱ LongȬtermȱ debtȱ forȱ governmentalȱ fundsȱ isȱ notȱ reportedȱ asȱ liabilitiesȱ inȱ theȱ fundȱ financialȱ statementsȱ untilȱ due.ȱ Theȱ debtȱ proceedsȱ areȱ reportedȱ asȱ otherȱ financingȱ sources,ȱ netȱ ofȱ theȱ applicableȱ premiumȱ orȱ discountȱ andȱ paymentsȱ ofȱ principalȱ andȱ interestȱ reportedȱ asȱ expenditures.ȱȱInȱ theȱ governmentalȱ fundȱ types,ȱ issuanceȱ costs,ȱ evenȱ ifȱ withheldȱ fromȱ theȱ actualȱ netȱ proceedsȱ received,ȱ areȱ reportedȱ asȱ debtȱ serviceȱ expenditures.ȱȱHowever,ȱ claimsȱ andȱ judgmentsȱ paidȱ fromȱ governmentalȱ fundsȱ areȱ reportedȱ asȱ aȱ liabilityȱ inȱ theȱ fundȱ financialȱ statementsȱ onlyȱ forȱ theȱ portionȱ expectedȱ toȱbeȱfinancedȱfromȱexpendableȱavailableȱfinancialȱresources.ȱ ȱ LongȬtermȱ debtȱ andȱ otherȱ obligations,ȱ financedȱ byȱ proprietaryȱ funds,ȱ areȱ reportedȱ asȱ liabilitiesȱ inȱ theȱ appropriateȱ funds.ȱȱForȱ proprietaryȱ fundȱ types,ȱ bondȱ premiums,ȱ andȱ discountsȱ areȱ deferredȱ andȱ amortizedȱ overȱ theȱ lifeȱ ofȱ theȱ bondsȱ usingȱ theȱ effectiveȱ interestȱ method,ȱ ifȱ material.ȱȱBondsȱ payableȱ areȱ reportedȱ netȱ ofȱ theȱ applicableȱ bondȱ premiumȱ orȱ discount.ȱȱIssuanceȱ costsȱ areȱ expensedȱ asȱ incurredȱ inȱ accordanceȱwithȱGASBȱstatementȱno.ȱ65.ȱ ȱ Assetsȱ acquiredȱ underȱ theȱ termsȱ ofȱ capitalȱ leasesȱ areȱ recordedȱ asȱ liabilitiesȱ andȱ capitalizedȱ inȱ theȱ governmentȬwideȱ financialȱ statementsȱ atȱ theȱ presentȱ valueȱ ofȱ netȱ minimumȱleaseȱpaymentsȱatȱinceptionȱofȱtheȱlease.ȱȱInȱtheȱyearȱofȱacquisition,ȱcapitalȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 48ȱ leaseȱ transactionsȱ areȱ recordedȱ asȱ otherȱ financingȱ sourcesȱ andȱ asȱ capitalȱ outlayȱ expendituresȱ inȱ theȱ generalȱ fund.ȱȱLeaseȱ paymentsȱ representingȱ bothȱ principalȱ andȱ interestȱ areȱ recordedȱ asȱ expendituresȱ inȱ theȱ generalȱ fundȱ uponȱ paymentȱ withȱ anȱ appropriateȱ reductionȱ ofȱ principalȱ recordedȱ inȱ theȱ governmentȬwideȱ financialȱ statements.ȱ ȱ 13.Estimatesȱ ȱ Theȱ preparationȱ ofȱ financialȱ statements,ȱ inȱ conformityȱ withȱ generallyȱ acceptedȱ accountingȱ principles,ȱ requiresȱ managementȱ toȱ makeȱ estimatesȱ andȱ assumptionsȱ thatȱaffectȱtheȱreportedȱamountsȱofȱassetsȱandȱliabilitiesȱandȱdisclosureȱofȱcontingentȱ assetsȱ andȱ liabilitiesȱ atȱ theȱ dateȱ ofȱ theȱ financialȱ statementsȱ andȱ theȱ reportedȱ amountsȱ ofȱ revenuesȱ andȱ expenditures/expensesȱ duringȱ theȱ reportingȱ period.ȱȱ Actualȱresultsȱcouldȱdifferȱfromȱthoseȱestimates.ȱ ȱ 14.Pensionsȱ ȱ Forȱ purposesȱ ofȱ measuringȱ theȱ netȱ pensionȱ liability,ȱ deferredȱ outflowsȱ ofȱ resourcesȱ andȱ deferredȱ inflowsȱ ofȱ resourcesȱ relatedȱ toȱ pensions,ȱ andȱ pensionȱ expense,ȱ informationȱ aboutȱ theȱ Fiduciaryȱ Netȱ Positionȱ ofȱ theȱ Texasȱ Municipalȱ Retirementȱ Systemȱ (TMRS)ȱ andȱ additionsȱ to/deductionsȱ fromȱ TMRS’sȱ Fiduciaryȱ Netȱ Positionȱ haveȱ beenȱ determinedȱ onȱ theȱ sameȱ basisȱ asȱ theyȱ areȱ reportedȱ byȱ TMRS.ȱ Forȱ thisȱ purpose,ȱ planȱ contributionsȱ areȱ recognizedȱ inȱ theȱ periodȱ thatȱ compensationȱ isȱ reportedȱ forȱ theȱ employee,ȱ whichȱ isȱ whenȱ contributionsȱ areȱ legallyȱ due.ȱ Benefitȱ paymentsȱ andȱ refundsȱ areȱ recognizedȱ whenȱ dueȱ andȱ payableȱ inȱ accordanceȱ withȱ theȱbenefitȱterms.ȱInvestmentsȱareȱreportedȱatȱfairȱvalue.ȱ ȱ 15.OtherȱPostemploymentȱBenefitsȱ(“OPEB”)ȱ ȱ Theȱ Cityȱ hasȱ implementedȱ GASBȱ Statementȱ No.ȱ 75,ȱ Accountingȱ andȱ Financialȱ Reportingȱ forȱ Postemploymentȱ Benefitsȱ Otherȱ Thanȱ Pensions.ȱ Thisȱ statementȱ appliesȱtoȱtheȱindividualȱemployersȱ(TMRSȱcities)ȱinȱtheȱ TMRSȱSupplementalȱDeathȱ Benefitsȱ (SDB)ȱ plan,ȱ withȱ retireeȱ coverage.ȱ Theȱ TMRSȱ SDBFȱ coversȱ bothȱ activeȱ andȱ retireeȱ benefitsȱ withȱ noȱ segregationȱ ofȱ assets,ȱ andȱ thereforeȱ doesn’tȱ meetȱ theȱ definitionȱ ofȱ aȱ trustȱ underȱ GASBȱ No.ȱ 75ȱ (i.e.,ȱ noȱ assetsȱ areȱ accumulatedȱ forȱ OPEB)ȱ andȱ asȱ suchȱ theȱ SDBFȱ isȱ consideredȱ toȱ beȱ anȱ unfundedȱ OPEBȱ plan.ȱ Forȱ purposesȱ ofȱ reportingȱ underȱ GASBȱ 75,ȱ theȱ retireeȱ portionȱ ofȱ theȱ SDBFȱ isȱ notȱ consideredȱ aȱ costȱ sharingȱ planȱ andȱ isȱ insteadȱ consideredȱ aȱ singleȱ employer,ȱ definedȱ benefitȱ OPEBȱ plan.ȱ Theȱ deathȱ benefitȱ forȱ activeȱ employeesȱ providesȱ aȱ lumpȬsumȱ paymentȱ approximatelyȱ equalȱ toȱ theȱ employee’sȱ annualȱ salary,ȱ calculatedȱ basedȱ onȱ theȱ employee’sȱ actualȱ earningsȱ onȱ whichȱ TMRSȱ depositsȱ areȱ made,ȱ forȱ theȱ 12Ȭmonthȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 49ȱ periodȱ precedingȱ theȱ monthȱ ofȱ death.ȱ Theȱ deathȱ benefitȱ amountȱ forȱ retireesȱ isȱ $7,500.ȱ GASBȱNo.ȱ 75ȱ requiresȱ theȱ liabilityȱ ofȱ employersȱ andȱ nonemployerȱ contributingȱ entitiesȱ toȱ employeesȱ forȱ definedȱ benefitȱ OPEBȱ (netȱ OPEBȱ liability)ȱ toȱ beȱ measuredȱ asȱtheȱportionȱ ofȱ theȱ presentȱ valueȱofȱ projectedȱ benefitȱpaymentsȱtoȱbeȱ providedȱ toȱ currentȱ activeȱ andȱ inactiveȱ employeesȱ thatȱ isȱ attributedȱ toȱ thoseȱ employees’ȱ pastȱ periodsȱ ofȱ serviceȱ (totalȱ OPEBȱ liability),ȱ lessȱ theȱ amountȱ ofȱ theȱ OPEBȱplan’sȱfiduciaryȱnetȱposition.ȱ ȱ II.ȱRECONCILIATIONȱOFȱGOVERNMENTȬWIDEȱANDȱFUNDȱFINANCIALȱ STATEMENTSȱ ȱ A.Explanationȱ ofȱ certainȱ differencesȱ betweenȱ theȱ governmentalȱ fundȱ balanceȱ sheetȱ andȱtheȱgovernmentȬwideȱstatementȱofȱnetȱposition.ȱ ȱ Theȱ governmentalȱ fundȱ balanceȱ sheetȱ includesȱ reconciliationȱ betweenȱ fundȱ balanceȬ totalȱ governmentalȱ fundsȱ andȱ netȱ positionȬgovernmentalȱ activitiesȱ asȱ reportedȱ inȱ theȱ governmentȬwideȱ statementȱ ofȱ netȱ position.ȱ Oneȱ elementȱ ofȱ thatȱ reconciliationȱ explainsȱ thatȱ longȬtermȱ liabilities,ȱ includingȱ bonds,ȱ areȱ notȱ dueȱ andȱ payableȱ inȱ theȱ currentȱperiodȱand,ȱtherefore,ȱareȱnotȱreportedȱinȱtheȱfunds.ȱ ȱ B.Explanationȱ ofȱ certainȱ differencesȱ betweenȱ theȱ governmentalȱ fundȱ statementȱ ofȱ revenues,ȱ expenditures,ȱ andȱ changesȱ inȱ fundȱ balancesȱ andȱ theȱ governmentȬwideȱ statementȱofȱactivities.ȱ ȱ Theȱ governmentalȱ fundȱ statementȱ ofȱ revenues,ȱ expenditures,ȱ andȱ changesȱ inȱ fundȱ balancesȱ includesȱ aȱ reconciliationȱ betweenȱ netȱ changesȱ inȱ fundȱ balancesȱ –ȱ totalȱ governmentalȱ fundsȱ andȱ changesȱ inȱ netȱ positionȱ ofȱ governmentalȱ statesȱ that,ȱ “theȱ issuanceȱ ofȱ longȬtermȱ debtȱ (e.g.,ȱ bonds)ȱ providesȱ currentȱ financialȱ resourcesȱ toȱ governmentalȱ funds,ȱ whileȱ theȱ repaymentȱ ofȱ theȱ principalȱ ofȱ longȬtermȱ debtȱ consumesȱ theȱ currentȱ financialȱ resourcesȱ ofȱ governmentalȱ funds.ȱȱAlso,ȱ governmentalȱ fundsȱ reportȱ theȱ effectȱ ofȱ premiums,ȱ discounts,ȱ andȱ similarȱ itemsȱ whenȱ debtȱ isȱ firstȱ issued,ȱ whereasȱ theseȱ amountsȱ areȱ deferredȱandȱamortizedȱinȱ theȱ statementȱofȱactivities.”ȱȱȱ ȱ III.ȱȱSTEWARDSHIP,ȱCOMPLIANCE,ȱANDȱACCOUNTABILITYȱ ȱ Annualȱ budgetsȱ areȱ adoptedȱ onȱ aȱ basisȱ consistentȱ withȱ generallyȱ acceptedȱ accountingȱprinciplesȱforȱallȱgovernmentalȱandȱenterpriseȱfunds.ȱȱ ȱ Theȱ appropriatedȱ budgetȱ isȱ preparedȱ byȱ fund,ȱ function,ȱ andȱ department.ȱ Theȱ legalȱ levelȱ ofȱ controlȱ isȱ theȱ fundȱ level.ȱ Noȱ fundsȱ canȱ beȱ transferredȱ orȱ addedȱ toȱ aȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 50ȱ budgetedȱ itemȱ withoutȱ Councilȱ approval.ȱȱAppropriationsȱ lapseȱ atȱ theȱ endȱ ofȱ theȱ year.ȱ Budgetȱ amendmentsȱ wereȱ onlyȱ reȬclassesȱ atȱ theȱ functionȱ levelȱ andȱ belowȱ andȱ thereȱ wasȱ noȱ increaseȱ inȱ budgetedȱ revenuesȱ orȱ expensesȱ byȱ functionȱ fromȱ amendments.ȱȱ ȱ IV.ȱȱDETAILEDȱNOTESȱONȱALLȱFUNDSȱȱ ȱ A.DepositsȱandȱInvestmentsȱ ȱ AsȱofȱSeptemberȱ30,ȱ2020,ȱtheȱprimaryȱgovernmentȱhadȱtheȱfollowingȱinvestments:ȱ ȱ InvestmentȱType Certificatesȱofȱdeposit $ 1,271,560 0.48 Totalȱfairȱvalue $ 1,271,560 Portfolioȱweightedȱaverageȱmaturity 0.48 AverageȱMaturity CarryingȱValue ȱ(Years) ȱ AsȱofȱSeptemberȱ30,ȱ2020,ȱtheȱ4AȱComponentȱUnitȱhadȱtheȱfollowingȱinvestments:ȱ ȱ InvestmentȱType Certificatesȱofȱdeposit $ 95,660 0.50 Totalȱfairȱvalue $ 95,660 Portfolioȱweightedȱaverageȱmaturity 0.50 AverageȱMaturity CarryingȱValue ȱ(Years) ȱ ȱ AsȱofȱSeptemberȱ30,ȱ2020,ȱtheȱ4BȱComponentȱUnitȱhadȱtheȱfollowingȱinvestments:ȱ ȱ InvestmentȱType Certificatesȱofȱdeposit $ 283,601 0.47 Totalȱfairȱvalue $ 283,601 Portfolioȱweightedȱaverageȱmaturity 0.47 AverageȱMaturity CarryingȱValue ȱ(Years) ȱ ȱ Interestȱ rateȱ riskȱ –ȱ Inȱ accordanceȱ withȱ itsȱ investmentȱ policy,ȱ theȱ Cityȱ managesȱ itsȱ exposureȱ toȱ declinesȱ inȱ fairȱ valuesȱ byȱlimitingȱ theȱ weightedȱ averageȱ ofȱ maturityȱ notȱ toȱexceedȱfiveȱyears;ȱstructuringȱtheȱinvestmentȱportfolioȱsoȱthatȱsecuritiesȱmatureȱtoȱ meetȱ cashȱ requirementsȱ forȱ ongoingȱ operations;ȱ monitoringȱ creditȱ ratingsȱ ofȱ portfolioȱ positionȱ toȱ assureȱ complianceȱ withȱ ratingȱ requirementsȱ imposedȱ byȱ theȱ Publicȱ Fundsȱ Investmentȱ Act;ȱȱandȱ investȱ operatingȱ fundsȱ primarilyȱ inȱ shortȬtermȱ securitiesȱorȱsimilarȱgovernmentȱinvestmentȱpools.ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 51ȱ Creditȱ riskȱ –ȱ Theȱ City’sȱ investmentȱ policyȱ limitsȱ investmentsȱ toȱ obligationsȱ ofȱ theȱ Unitedȱ States,ȱ Stateȱ ofȱ Texas,ȱ orȱ theirȱ agenciesȱ andȱ instrumentalitiesȱ withȱ anȱ investmentȱ qualityȱ ratingȱ ofȱ notȱ lessȱ thanȱ “A”ȱ orȱ itsȱ equivalent,ȱ byȱ aȱ nationallyȱ recognizedȱ investmentȱ ratingȱ firm.ȱ Otherȱ obligationsȱ mustȱ beȱ unconditionallyȱ guaranteedȱ (eitherȱ expressȱ orȱ implied)ȱ byȱ theȱ fullȱ faithȱ andȱ creditȱ ofȱ theȱ Unitedȱ Statesȱ Governmentȱ orȱ theȱ issuingȱ U.S.ȱ agencyȱ andȱ investmentȱ poolsȱ withȱ anȱ investmentȱ qualityȱ notȱ lessȱ thanȱ AAAȱ orȱ AAAȬm,ȱ orȱ equivalent,ȱ byȱ atȱ leastȱ oneȱ nationallyȱrecognizedȱratingȱservice.ȱȱ ȱ Custodialȱ creditȱ riskȱ –ȱ depositsȱ Inȱ theȱ caseȱ ofȱ deposits,ȱ thisȱ isȱ theȱ riskȱ thatȱ inȱ theȱ eventȱ ofȱaȱbankȱfailure,ȱtheȱCity’sȱdepositsȱmayȱnotȱbeȱreturnedȱtoȱit.ȱȱStateȱstatutesȱrequireȱ thatȱ allȱ depositsȱ inȱ financialȱ institutionsȱ beȱ insuredȱ orȱ fullyȱ collateralizedȱ byȱ U.S.ȱ governmentȱobligationsȱorȱitsȱagenciesȱandȱinstrumentalitiesȱorȱdirectȱobligationsȱofȱ Texasȱ orȱitsȱagenciesȱandȱinstrumentalitiesȱ thatȱhaveȱ aȱmarketȱvalueȱofȱnotȱlessȱthanȱ theȱprincipalȱamountȱofȱtheȱdeposits.ȱAsȱofȱSeptemberȱ30,ȱ2020,ȱtheȱmarketȱvaluesȱofȱ pledgedȱsecuritiesȱandȱFDICȱexceededȱbankȱbalances.ȱȱ ȱ Custodialȱcreditȱ riskȱ–ȱ investmentsȱȱForȱanȱ investment,ȱthisȱisȱtheȱ riskȱthat,ȱinȱtheȱeventȱ ofȱtheȱ failureȱ ofȱ theȱcounterparty,ȱtheȱ Cityȱ willȱnotȱ beȱableȱtoȱrecoverȱ theȱvalueȱofȱ itsȱ investmentsȱ orȱ collateralȱ securitiesȱ thatȱ areȱ inȱ theȱ possessionȱ ofȱ anȱ outsideȱ party.ȱȱ Theȱ City’sȱ investmentȱ policyȱ requiresȱ thatȱ itȱ willȱ seekȱ toȱ safekeepingȱ securitiesȱ atȱ financialȱ institutions,ȱ avoidingȱ physicalȱ possession.ȱȱFurther,ȱ allȱ trades,ȱ whereȱ applicable,ȱ areȱ executedȱ byȱ deliveryȱ versusȱ paymentȱ toȱ ensureȱ thatȱ securitiesȱ areȱ depositedȱinȱtheȱCity’sȱsafekeepingȱaccountȱpriorȱtoȱtheȱreleaseȱofȱfunds.ȱȱȱ ȱ B.ȱReceivablesȱ ȱȱ Theȱfollowingȱcompriseȱreceivableȱbalancesȱofȱtheȱprimaryȱgovernmentȱatȱyearȱend:ȱ ȱ Propertyȱtaxes $ 80,125 $ 17,888 $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 98,013ȱȱȱȱȱȱȱȱ Salesȱtax 192,348ȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 192,348ȱȱȱȱȱȱ Franchiseȱ&ȱlocalȱtaxes 44,065 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 44,065ȱȱȱȱȱȱȱȱ EMS 380,079 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 380,079ȱȱȱȱȱȱ Accounts 103,560 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,427,262 1,530,822ȱȱȱ Other 3,923 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 3,923ȱȱȱȱȱȱȱȱȱȱ Allowance (252,621)ȱȱȱ (4,279)ȱȱȱȱȱ (104,480)ȱȱȱȱ (361,380)ȱȱȱȱȱ $ 551,479ȱȱȱȱȱ $ 13,609ȱȱȱȱȱ $ 1,322,782ȱȱ $ 1,887,870ȱȱȱ General Service Debt Total&ȱElectric Water,ȱSewer ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 52ȱ Theȱfollowingȱcompriseȱreceivableȱbalancesȱofȱtheȱcomponentȱunitsȱatȱyearȱend:ȱ ȱ Salesȱtax $ 96,174ȱȱȱȱ $ 96,174ȱȱȱȱȱȱȱȱ $ 192,348ȱȱȱȱȱȱ $ 96,174ȱȱȱȱ $ 96,174ȱȱȱȱȱȱȱȱ $ 192,348ȱȱȱȱȱȱ Total4A 4B ȱ ȱ C.Inventoryȱ ȱ Theȱfollowingȱcompriseȱtheȱinventoryȱbalancesȱofȱtheȱprimaryȱgovernmentȱatȱyearȱ end:ȱ ȱ Inventoryȱtype ElectricȱDepartment $ 407,370 WaterȱDepartment 65,780 Total $ 473,150 Cost ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 53ȱ D.CapitalȱAssetsȱ ȱ Aȱ summaryȱ ofȱ changesȱ inȱ governmentalȱ activitiesȱ capitalȱ assetsȱ forȱ theȱ yearȱ endȱ wasȱasȱfollows:ȱ ȱ Capitalȱassets,ȱnotȱbeingȱdepreciated: Land $ 1,044,933ȱȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 1,044,933ȱȱȱȱȱȱȱ Constructionȱinȱprogress 6,795,480ȱȱȱȱȱȱȱȱȱȱȱȱȱ 31,853ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (6,827,333)ȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 7,840,413 31,853 (6,827,333)ȱȱȱȱȱȱȱȱ 1,044,933 Capitalȱassets,ȱbeingȱdepreciated: Infrastructure 12,424,210ȱȱȱȱȱȱȱȱȱȱȱ 820,200ȱȱȱȱȱȱȱȱȱȱȱȱ 6,799,971ȱȱȱȱȱȱȱȱȱȱ 20,044,381ȱȱȱȱȱ Buildingsȱandȱimprovements 6,827,454ȱȱȱȱȱȱȱȱȱȱȱȱȱ 32,526ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 6,859,980ȱȱȱȱȱȱȱ Machineryȱandȱequipment 4,159,126ȱȱȱȱȱȱȱȱȱȱȱȱȱ 503,114ȱȱȱȱȱȱȱȱȱȱȱȱ (6,141)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 4,656,099ȱȱȱȱȱȱȱ 23,410,790 1,355,840 6,793,830 31,560,460 Lessȱaccumulatedȱdepreciation Infrastructure 6,796,994ȱȱȱȱȱȱȱȱȱȱȱȱȱ 655,920ȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 7,452,914ȱȱȱȱȱȱȱ Buildingsȱandȱimprovements 2,567,852ȱȱȱȱȱȱȱȱȱȱȱȱȱ 294,224ȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2,862,076ȱȱȱȱȱȱȱ Machineryȱandȱequipment 2,937,188ȱȱȱȱȱȱȱȱȱȱȱȱȱ 323,594ȱȱȱȱȱȱȱȱȱȱȱȱ (33,503)ȱȱȱȱȱȱȱȱȱȱȱȱȱ 3,227,279ȱȱȱȱȱȱȱ Totalȱaccumulatedȱdepreciation 12,302,034 1,273,738 (33,503)ȱȱȱȱȱȱȱȱȱȱȱȱȱ 13,542,269 Netȱcapitalȱassetsȱbeingȱdepreciated 11,108,756ȱȱȱȱȱȱȱȱȱȱȱ 82,102ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 6,827,333ȱȱȱȱȱȱȱȱȱȱ 18,018,191ȱȱȱȱȱ $ 18,949,169ȱȱȱȱȱȱȱȱȱȱȱ $ 113,955ȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 19,063,124ȱȱȱȱȱ Beginning Disposalsȱ/ Ending Balances Increases TotalȱCapitalȱAssets Totalȱcapitalȱassetsȱnotȱbeingȱdepreciated Totalȱcapitalȱassetsȱbeingȱdepreciated BalancesReclassifications ȱ Depreciationȱwasȱchargedȱtoȱgovernmentalȱfunctionsȱasȱfollows:ȱ ȱ Generalȱgovernment $ 80,165ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Publicȱsafety 112,094ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Publicȱworks 692,573ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Cultureȱandȱrecreation 284,841ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Fireȱandȱrescue 93,775ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Internalȱservice 10,290ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 1,273,738ȱȱȱȱȱȱȱȱȱȱȱTotalȱGovernmentalȱActivitiesȱDepreciationȱExpense ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 54ȱ Aȱ summaryȱ ofȱ changesȱ inȱ businessȬtypeȱ activitiesȱ capitalȱ assetsȱ forȱ theȱ yearȱ endȱ wasȱasȱfollows:ȱ ȱ Capitalȱassets,ȱnotȱbeingȱdepreciated: Land $ 496,867ȱȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 496,867ȱȱȱȱȱȱȱȱȱȱȱȱ Constructionȱinȱprogress 13,377,210ȱȱȱȱȱȱȱȱ 939,997ȱȱȱȱȱȱȱȱȱȱȱȱ (138,473)ȱȱȱȱȱȱȱȱȱȱȱȱ 14,178,734ȱȱȱȱȱȱȱ Totalȱcapitalȱassetsȱnotȱbeingȱdepreciated 13,874,077ȱȱȱȱȱȱȱȱ 939,997ȱȱȱȱȱȱȱȱȱȱȱȱ (138,473)ȱȱȱȱȱȱȱȱȱȱȱȱ 14,675,601ȱȱȱȱȱȱȱ Capitalȱassets,ȱbeingȱdepreciated: Infrastructure 30,279,289ȱȱȱȱȱȱȱȱ 808,910ȱȱȱȱȱȱȱȱȱȱȱȱ 138,473ȱȱȱȱȱȱȱȱȱȱȱȱȱ 31,226,672ȱȱȱȱȱȱȱ Buildingsȱandȱimprovements 865,245ȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 865,245ȱȱȱȱȱȱȱȱȱȱȱȱ Machineryȱandȱequipment 2,318,516ȱȱȱȱȱȱȱȱȱȱ 8,063ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (87,703)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2,238,876ȱȱȱȱȱȱȱȱȱ Totalȱcapitalȱassetsȱbeingȱdepreciated 33,463,050ȱȱȱȱȱȱȱȱ 816,973ȱȱȱȱȱȱȱȱȱȱȱȱ 50,770ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 34,330,793ȱȱȱȱȱȱȱ Lessȱaccumulatedȱdepreciation Infrastructure 15,805,833ȱȱȱȱȱȱȱȱ 859,734ȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 16,665,567ȱȱȱȱȱȱȱ Buildingsȱandȱimprovements 575,015ȱȱȱȱȱȱȱȱȱȱȱȱȱ 51,855ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 626,870ȱȱȱȱȱȱȱȱȱȱȱȱ Machineryȱandȱequipment 1,683,759ȱȱȱȱȱȱȱȱȱȱ 115,287ȱȱȱȱȱȱȱȱȱȱȱȱ (87,703)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,711,343ȱȱȱȱȱȱȱȱȱ Totalȱaccumulatedȱdepreciation 18,064,607ȱȱȱȱȱȱȱȱ 1,026,876ȱȱȱȱȱȱȱȱȱ (87,703)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 19,003,780ȱȱȱȱȱȱȱ Netȱcapitalȱassetsȱbeingȱdepreciated 15,398,443ȱȱȱȱȱȱȱȱ (209,903)ȱȱȱȱȱȱȱȱȱȱȱ 138,473ȱȱȱȱȱȱȱȱȱȱȱȱȱ 15,327,013ȱȱȱȱȱȱȱ $ 29,272,520ȱȱȱȱȱȱȱȱ $ 730,094ȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 30,002,614ȱȱȱȱȱȱȱTotalȱCapitalȱAssets Beginning Disposalsȱ/Ending Balances Increases Reclassifications Balances ȱ DepreciationȱwasȱchargedȱtoȱbusinessȬtypeȱactivitiesȱasȱfollows:ȱ ȱ Water $ 377,795 Sewer 403,758 Electric 230,994 Other 14,329 $ 1,026,876ȱȱȱȱȱȱȱȱȱȱȱTotalȱBusinessȬtypeȱActivitiesȱDepreciationȱExpense ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 55ȱ Aȱ summaryȱ ofȱ changesȱ inȱ componentȱ unitȱ (4Aȱ Componentȱ Unit)ȱ capitalȱ assetsȱ forȱ theȱyearȱendȱwasȱasȱfollows:ȱ ȱ Capitalȱassets,ȱbeingȱdepreciated: Buildingsȱandȱimprovements $ 1,080,797ȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 1,080,797ȱȱȱ Furnitureȱandȱfixtures 40,950ȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 40,950ȱȱȱȱȱȱȱȱ Totalȱcapitalȱassetsȱbeingȱdepreciated 1,121,747ȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,121,747ȱȱȱ Lessȱaccumulatedȱdepreciation Buildingsȱandȱimprovements 368,096ȱȱȱȱȱȱ 37,973ȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 406,069ȱȱȱȱȱȱ Furnitureȱandȱfixtures 21,661ȱȱȱȱȱȱȱȱ 4,363ȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 26,024ȱȱȱȱȱȱȱȱ Totalȱaccumulatedȱdepreciation 389,757ȱȱȱȱȱȱ 42,336ȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 432,093ȱȱȱȱȱȱ Netȱcapitalȱassetsȱbeingȱdepreciated 731,990ȱȱȱȱȱȱ (42,336)ȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 689,654ȱȱȱȱȱȱ $ 731,990ȱȱȱȱȱȱ $ (42,336)ȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 689,654ȱȱȱȱȱȱTotalȱCapitalȱAssets Beginning Retirements/Ending Balances Additions Reclassifications Balances ȱ Theȱ4AȱComponentȱUnitȱrecognizedȱdepreciationȱexpenseȱofȱ$42,336ȱduringȱtheȱ yearȱendedȱSeptemberȱ30,ȱ2020.ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 56ȱ E.ȱȱLongȬtermȱDebtȱ ȱ Theȱ followingȱ isȱ aȱ summaryȱ ofȱ changesȱ inȱ theȱ City’sȱ totalȱ governmentalȱ longȬtermȱ liabilitiesȱ forȱ theȱ yearȱ ended.ȱ Theȱ Cityȱ usesȱ theȱ debtȱ serviceȱ fundȱ toȱ liquidateȱ governmentalȱactivitiesȱdebts.ȱ ȱ GovernmentalȱActivities: Bonds,ȱnotesȱandȱother payables: GeneralȱObligationȱBonds $ 804,500ȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (410,900)ȱȱȱȱȱ $ 393,600ȱȱȱȱȱȱȱȱȱ $ 393,600ȱȱȱ CertificatesȱofȱObligation 2,228,800ȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (253,900)ȱȱȱȱȱ 1,974,900ȱȱȱȱȱȱ 256,200ȱȱȱ Lessȱdeferredȱamounts: Forȱissuanceȱpremiums 168,814ȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (40,742)ȱȱȱȱȱȱȱ 128,072ȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 3,202,114ȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (705,542)ȱȱȱȱȱ 2,496,572ȱȱȱȱȱȱ 649,800ȱȱȱ Otherȱliabilities: Capitalȱleasesȱpayable 233,023ȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (43,772)ȱȱȱȱȱȱȱȱȱ 189,251ȱȱȱȱȱȱȱȱȱ 45,179ȱȱȱȱȱȱȱ $ 3,435,137ȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (749,314)ȱȱȱȱȱȱȱ $ 2,685,823ȱȱȱȱȱȱ $ 694,979ȱȱȱȱȱ LongȬtermȱliabilitiesȱdueȱinȱmoreȱthanȱoneȱyear $ 1,990,844ȱȱȱȱȱȱ BusinessȬTypeȱActivities: GeneralȱObligationȱBonds $ 975,500ȱȱȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (499,100)ȱȱȱȱȱ $ 476,400ȱȱȱȱȱȱȱȱȱ $ 476,400ȱȱȱ CertificatesȱofȱObligation 18,236,200ȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (331,100)ȱȱȱȱȱ 17,905,100ȱȱȱȱ 408,800ȱȱȱ Lessȱdeferredȱamounts: Forȱissuanceȱpremiums 1,219,430ȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (102,586)ȱȱȱȱȱ 1,116,844ȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 20,431,130ȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (932,786)ȱȱȱȱȱ 19,498,344ȱȱȱȱ 885,200ȱȱȱ $ 20,431,130ȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (932,786)ȱȱȱȱȱȱȱ $ 19,498,344ȱȱȱȱ $ 885,200ȱȱȱȱȱ LongȬtermȱliabilitiesȱdueȱinȱmoreȱthanȱoneȱyear $ 18,613,144ȱȱȱȱ Amounts Beginning Amortization/ Ending Dueȱwithin Balance Additions Payments Balance TotalȱBusinessȬTypeȱ Activities OneȱYear TotalȱGovernmentalȱ Activities ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 57ȱ LongȬtermȱdebtȱatȱyearȱendȱwasȱcomprisedȱofȱtheȱfollowingȱdebtȱissues:ȱȱ ȱ GeneralȱObligationȱBonds: $3,495,000ȱGeneralȱObligationȱRefundingȱBond,ȱSeriesȱ2012,ȱdueȱinȱȱ installmentsȱthroughȱ2021,ȱinterestȱatȱ2%ȱtoȱ3% $ 145,200ȱȱȱȱȱ $ 184,800ȱȱȱȱȱȱȱȱȱ $ 330,000ȱȱȱȱȱȱȱ $2,535,000ȱGeneralȱObligationȱRefundingȱBond,ȱSeriesȱ2016,ȱdueȱinȱȱ installmentsȱthroughȱ2021,ȱinterestȱatȱ2%ȱtoȱ4% 248,400ȱȱȱȱȱ 291,600ȱȱȱȱȱȱȱȱȱ 540,000ȱȱȱȱȱȱȱ $ 393,600ȱȱȱȱȱ $ 476,400ȱȱȱȱȱȱȱȱȱ $ 870,000ȱȱȱȱȱȱȱ CertificatesȱofȱObligation: $1,750,000ȱCertificatesȱofȱObligation,ȱSeriesȱ2007,ȱ dueȱinȱannualȱinstallmentsȱthroughȱ2027,ȱinterestȱatȱ4.4% $ 270,300ȱȱȱȱȱ $ 524,700ȱȱȱȱȱȱȱȱȱ $ 795,000ȱȱȱȱȱȱȱ $4,260,000ȱCertificatesȱofȱObligation,ȱSeriesȱ2013,ȱ dueȱinȱannualȱinstallmentsȱthroughȱ2033,ȱinterestȱatȱ2%ȱtoȱ3.7% 369,600ȱȱȱȱȱ 2,710,400ȱȱȱȱȱȱ 3,080,000ȱȱȱȱ $5,870,000ȱCertificatesȱofȱObligation,ȱSeriesȱ2015,ȱ dueȱinȱannualȱinstallmentsȱthroughȱ2035,ȱinterestȱatȱ3.4%ȱtoȱ5.5%Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 5,430,000ȱȱȱȱȱȱ 5,430,000ȱȱȱȱ $9,240,000ȱCertificatesȱofȱObligation,ȱSeriesȱ2017,ȱ dueȱinȱannualȱinstallmentsȱthroughȱ2035,ȱinterestȱatȱ3%ȱtoȱ4%Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 9,240,000ȱȱȱȱȱȱ 9,240,000ȱȱȱȱ $1,535,000ȱCertificatesȱofȱObligation,ȱSeriesȱ2019,ȱ dueȱinȱannualȱinstallmentsȱthroughȱ2026,ȱinterestȱatȱ3%ȱtoȱ4.75% 1,335,000ȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,335,000ȱȱȱȱ $ 1,974,900ȱȱ $ 17,905,100ȱȱȱȱ $ 19,880,000ȱȱ Plusȱdeferredȱamounts: Issuanceȱpremium $ 128,072ȱȱȱȱȱ $ 1,116,844ȱȱȱȱȱȱ $ 1,244,916ȱȱȱȱ $ 128,072ȱȱȱȱȱ $ 1,116,844ȱȱȱȱȱȱ $ 1,244,916ȱȱȱȱ CapitalȱLeasesȱPayable: $435,000ȱCapitalȱleaseȱpayableȱtoȱfinancialȱinstitution,ȱdueȱinȱannual installmentsȱofȱ$51,535ȱthroughȱ2024,ȱinterestȱatȱ3.346% $ 189,251ȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 189,251ȱȱȱȱȱȱȱ $ 189,251ȱȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 189,251ȱȱȱȱȱȱȱȱȱ $ 2,685,823ȱȱ $ 19,498,344ȱȱȱȱ $ 22,184,167ȱȱTotalȱLongȬtermȱLiabilities Total BusinessȱȬ TotalȱGeneralȱObligationȱBonds TotalȱCertificatesȱofȱObligation Governmental Type Activities Activities TotalȱDeferredȱAmounts TotalȱCapitalȱLeasesȱPayableȱ ȱ LongȬtermȱ liabilitiesȱ applicableȱ toȱ theȱ City’sȱ governmentalȱ activitiesȱ areȱ notȱ dueȱ andȱ payableȱ inȱ theȱ currentȱ periodȱ andȱ accordingly,ȱ areȱ notȱ reportedȱ asȱ fundȱ liabilitiesȱ inȱ theȱ governmentalȱ funds.ȱȱInterestȱ onȱ longȬtermȱ debtȱ isȱ notȱ accruedȱ inȱ governmentalȱfunds,ȱbutȱratherȱisȱrecognizedȱasȱanȱexpenditureȱwhenȱdue.ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 58ȱ Theȱ annualȱ requirementsȱ toȱ amortizeȱ governmentalȱ andȱ businessȬtypeȱ activitiesȱ debtȱissuesȱoutstandingȱatȱyearȱendingȱwereȱasȱfollows:ȱ ȱ GeneralȱObligationȱBondsȱ ȱ Yearȱending Septemberȱ30, 2021 $ 393,600ȱȱȱȱȱȱȱȱȱȱȱȱ $ 13,929ȱȱȱȱȱȱȱȱȱȱȱȱ $ 476,400ȱȱȱȱȱȱȱȱȱȱ $ 16,746ȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 393,600ȱȱȱȱȱȱȱȱȱȱȱȱ $ 13,929ȱȱȱȱȱȱȱȱȱȱȱȱ $ 476,400ȱȱȱȱȱȱȱȱȱȱ $ 16,746ȱȱȱȱȱȱȱȱȱȱȱȱȱ Principal Interest Principal Interest GovernmentalȱActivities BusinessȬTypeȱActivities ȱ ȱ CombinationȱTaxȱandȱRevenueȱCertificatesȱofȱObligationsȱ ȱ Yearȱending Septemberȱ30, 2021 $ 256,200ȱȱȱȱȱȱȱȱȱȱȱȱ $ 76,725ȱȱȱȱȱȱȱȱȱȱȱȱ $ 408,800ȱȱȱȱȱȱȱȱȱȱ $ 694,655ȱȱȱȱȱȱȱȱȱȱȱȱ 2022 268,500ȱȱȱȱȱȱȱȱȱȱȱȱ 66,563ȱȱȱȱȱȱȱȱȱȱȱȱ 616,500ȱȱȱȱȱȱȱȱȱȱ 679,742ȱȱȱȱȱȱȱȱȱȱȱȱ 2023 281,400ȱȱȱȱȱȱȱȱȱȱȱȱ 55,908ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 633,600ȱȱȱȱȱȱȱȱȱȱȱȱ 660,427ȱȱȱȱȱȱȱȱȱȱȱȱ 2024 287,000ȱȱȱȱȱȱȱȱȱȱȱȱ 44,743ȱȱȱȱȱȱȱȱȱȱȱȱ 658,000ȱȱȱȱȱȱȱȱȱȱ 640,327ȱȱȱȱȱȱȱȱȱȱȱȱ 2025 299,300ȱȱȱȱȱȱȱȱȱȱȱȱ 33,236ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 675,700ȱȱȱȱȱȱȱȱȱȱȱȱ 618,519ȱȱȱȱȱȱȱȱȱȱȱȱ 2026 313,900ȱȱȱȱȱȱȱȱȱȱȱȱ 20,982ȱȱȱȱȱȱȱȱȱȱȱȱ 701,100ȱȱȱȱȱȱȱȱȱȱ 593,113ȱȱȱȱȱȱȱȱȱȱȱȱ 2027 71,800ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 13,024ȱȱȱȱȱȱȱȱȱȱȱȱ 998,200ȱȱȱȱȱȱȱȱȱȱ 566,321ȱȱȱȱȱȱȱȱȱȱȱȱ 2028 28,800ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 9,768ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,086,200ȱȱȱȱȱȱȱ 526,357ȱȱȱȱȱȱȱȱȱȱȱȱ 2029 30,600ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 8,400ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,124,400ȱȱȱȱȱȱȱ 482,800ȱȱȱȱȱȱȱȱȱȱȱȱ 2030 31,800ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 6,870ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,173,200ȱȱȱȱȱȱȱ 436,574ȱȱȱȱȱȱȱȱȱȱȱȱ 2031 33,600ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 5,280ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,221,400ȱȱȱȱȱȱȱ 387,920ȱȱȱȱȱȱȱȱȱȱȱȱ 2032 35,400ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 3,600ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,269,600ȱȱȱȱȱȱȱ 337,338ȱȱȱȱȱȱȱȱȱȱȱȱ 2033 36,600ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,830ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,323,400ȱȱȱȱȱȱȱ 284,626ȱȱȱȱȱȱȱȱȱȱȱȱ 2034 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,420,000ȱȱȱȱȱȱȱ 229,713ȱȱȱȱȱȱȱȱȱȱȱȱ 2035 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,475,000ȱȱȱȱȱȱȱ 173,656ȱȱȱȱȱȱȱȱȱȱȱȱ 2036 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,535,000ȱȱȱȱȱȱȱ 115,344ȱȱȱȱȱȱȱȱȱȱȱȱ 2037 Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,585,000ȱȱȱȱȱȱȱȱȱ 63,400ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $1,974,900ȱȱȱȱȱȱȱȱȱ $ 346,929ȱȱȱȱȱȱȱȱȱȱ $ 17,905,100ȱȱȱȱȱ $ 7,490,831ȱȱȱȱȱȱȱȱȱ Principal Interest Principal Interest GovernmentalȱActivities BusinessȬTypeȱActivities ȱ Generalȱ obligationȱ bondsȱ areȱ directȱ obligationsȱ ofȱ theȱ Cityȱ forȱ whichȱ itsȱ fullȱ faithȱ andȱ creditȱ areȱ pledged.ȱ Repaymentȱ ofȱ generalȱ obligationȱ bondsȱ areȱ fromȱ taxesȱ leviedȱ onȱ allȱ taxableȱ propertyȱ locatedȱ withinȱ theȱ City.ȱ Theȱ Cityȱ isȱ notȱ obligatedȱ inȱ anyȱmannerȱforȱspecialȱassessmentȱdebt.ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 59ȱ CapitalȱLeasesȱ ȱ Yearȱending Septemberȱ30, 2021 $ 45,179ȱȱȱȱȱȱȱȱȱȱȱȱ $ 6,357ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2022 46,690ȱȱȱȱȱȱȱȱȱȱȱȱ 4,845ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2023 48,252ȱȱȱȱȱȱȱȱȱȱȱȱ 3,283ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2024 49,130ȱȱȱȱȱȱȱȱȱȱȱȱ 1,668ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 189,251ȱȱȱȱȱȱȱȱȱȱ $ 16,153ȱȱȱȱȱȱȱȱȱȱȱȱ GovernmentalȱActivities Principal Interest ȱ ȱ Theȱ Cityȱ hasȱ enteredȱ intoȱ capitalȱ leaseȱ agreements.ȱ Theȱ leasedȱ propertyȱ underȱ capitalȱ leasesȱ isȱ classifiedȱ asȱ machineryȱ andȱ equipmentȱ withȱ aȱ totalȱ carryingȱ valueȱ asȱ ofȱ yearendȱ forȱ governmentalȱ activitiesȱ ofȱ $316,165.ȱ Thisȱ propertyȱ servesȱ asȱ collateralȱforȱtheȱleases.ȱInȱtheȱeventȱtheȱCityȱwereȱtoȱdefaultȱonȱtheȱagreementsȱtheȱ lessorȱhasȱtheȱrightȱtoȱtakeȱpossessionȱofȱtheȱproperty.ȱ ȱ F.ȱȱȱOtherȱLongȬtermȱLiabilitiesȱ ȱ Theȱ followingȱ isȱ aȱ summaryȱ ofȱ changesȱ inȱ theȱ City’sȱ otherȱ longȬtermȱ liabilitiesȱ forȱ theȱ yearȱ ended.ȱ Inȱ general,ȱ theȱ Cityȱ usesȱ theȱ generalȱ fundȱ toȱ liquidateȱ governmentalȱactivitiesȱcompensatedȱabsences.ȱȱ ȱ GovernmentalȱActivities: CompensatedȱAbsences $ 179,074ȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (4,286)ȱȱȱȱȱȱȱȱ $ 174,788ȱȱȱȱȱȱȱȱȱ $ 157,309ȱȱȱȱȱȱ CompensatedȱAbsencesȱinȱinternalȱserviceȱfunds 33,925ȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ (1,050)ȱȱȱȱȱȱȱȱ 32,875ȱȱȱȱȱȱȱȱȱȱȱ 29,588ȱȱȱȱȱȱȱȱ TotalȱGovernmentalȱActivities $ 212,999ȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (5,336)ȱȱȱȱȱȱȱȱ $ 207,663ȱȱȱȱȱȱȱȱȱ $ 186,897ȱȱȱȱȱȱ LongȬtermȱLiabilitiesȱDueȱinȱMoreȱthanȱOneȱYear $ 20,766ȱȱȱȱȱȱȱȱȱȱȱ BusinessȬTypeȱActivities: CompensatedȱAbsences $ 132,877ȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (27,086)ȱȱȱȱȱȱ $ 105,791ȱȱȱȱȱȱȱȱȱ $ 95,212ȱȱȱȱȱȱȱȱ TotalȱBusinessȬTypeȱActivities $ 132,877ȱȱȱȱȱȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (27,086)ȱȱȱȱȱȱ $105,791ȱȱȱȱȱȱȱȱȱ $ 95,212ȱȱȱȱȱȱȱȱ LongȬtermȱLiabilitiesȱDueȱinȱMoreȱthanȱOneȱYear $ 10,579ȱȱȱȱȱȱȱȱȱȱȱ Amounts DueȱWithin OneȱYear Beginning Balance Additions Reductions Ending Balance ȱ G.ConduitȱDebtȱ ȱ Beforeȱ theȱ currentȱ year,ȱ theȱ Cityȱ issuedȱ notesȱ payableȱ totalingȱ $230,461,407ȱ forȱ theȱ purposeȱ ofȱ assistingȱ withȱ financingȱ neededȱ byȱ notȬforȬprofitȱ organizationsȱ toȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 60ȱ promoteȱ theirȱ cause.ȱ Theȱ finalȱ maturitiesȱ onȱ notesȱ payableȱ rangeȱ fromȱ Marchȱ 2019ȱ throughȱ Decemberȱ 2041.ȱ Theȱ notesȱ areȱ securedȱ byȱ variousȱ assetsȱ ofȱ theȱ borrower.ȱ Theȱ Cityȱ hasȱ noȱ liabilityȱ forȱ theȱ notesȱ payableȱ inȱ theȱ eventȱ ofȱ defaultȱ byȱ theȱ borrowers.ȱ Accordingly,ȱ theȱ bondsȱ areȱ notȱ reportedȱ asȱ liabilitiesȱ inȱ theȱ City’sȱ financialȱstatements.ȱ ȱ H.DeferredȱChargeȱonȱRefundingȱ ȱ Deferredȱ chargesȱ resultingȱ fromȱ theȱ issuanceȱ ofȱ theȱ 2012ȱ andȱ 2016ȱ generalȱ obligationȱ refundingȱ bondsȱ haveȱ beenȱ recordedȱ asȱ aȱ deferredȱ outflowȱ ofȱ resourcesȱ andȱ areȱ beingȱ amortizedȱ toȱ interestȱ expenseȱ overȱ theȱ termsȱ ofȱ theȱ respectiveȱ refundedȱ debts.ȱ Currentȱ yearȱ balancesȱ forȱ governmentalȱ andȱ businessȬtypeȱ activitiesȱtotaledȱ$4,787ȱandȱ $8,252,ȱrespectively.ȱ Currentȱyearȱamortizationȱexpenseȱ forȱ governmentalȱ andȱ businessȬtypeȱ activitiesȱ totaledȱ $7,250ȱ andȱ $12,725,ȱ respectively.ȱ ȱ I.InterfundȱTransactionsȱȱ ȱ Amountsȱ transferredȱ betweenȱ fundsȱ relateȱ toȱ amountsȱ collected,ȱ variousȱ capitalȱ expenditures,ȱannualȱfunding,ȱandȱdebtȱpayments.ȱ ȱ Transferȱout: Generalȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 675,000ȱȱȱȱ $ 675,000ȱȱȱȱȱȱ DebtȱService 51,535ȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 51,535ȱȱȱȱȱȱȱȱ Water,ȱsewer,ȱ&ȱelectric 710,122ȱȱȱȱȱ 423,682ȱȱȱȱ 1,133,804ȱȱȱ $ 761,657ȱȱȱȱȱ $ 1,098,682ȱ $ 1,860,339ȱȱȱ General Total ȱCapitalȱ Projectsȱ TransferȱIn ȱ Theȱ internalȱ serviceȱfundȱprovidesȱadministrativeȱservicesȱtoȱtheȱgeneralȱandȱwater,ȱ sewer,ȱ &ȱ electricȱ funds.ȱ Belowȱ isȱ aȱ summaryȱ ofȱ theȱ amountsȱ paidȱ fromȱ theseȱ fundsȱ toȱtheȱinternalȱserviceȱfundȱforȱtheȱyearȱendedȱSeptemberȱ30,ȱ2020:ȱ ȱ Paidȱby: Generalȱ $ 626,773ȱȱȱȱȱȱȱȱȱȱ Enterprise 1,462,471ȱȱȱȱȱȱȱ $ 2,089,244ȱȱȱȱȱȱȱ InternalȱServiceȱ Receivedȱby: ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 61ȱ Theȱcompositionsȱofȱinterfundȱdueȱto/fromȱbalancesȱasȱofȱtheȱyearȱendedȱSeptemberȱ 30,ȱ2020ȱwereȱasȱfollows:ȱȱȱ ȱ Payableȱfund: Generalȱ $ 72,638ȱȱȱȱȱȱȱȱȱȱȱȱ $ 72,638ȱȱȱȱȱȱȱȱȱȱȱȱ ȱEnterpriseȱ Receivableȱfund: ȱ ȱȱ Interfundȱ balancesȱ resultedȱ fromȱ theȱ timingȱ differenceȱ betweenȱ theȱ datesȱ thatȱ (1)ȱ interfundȱ goodsȱ andȱ servicesȱ areȱ providedȱ orȱ reimbursableȱ expendituresȱ occur,ȱ (2)ȱ transactionsȱ areȱ recordedȱ inȱ theȱ accountingȱ system,ȱ andȱ (3)ȱ paymentsȱ betweenȱ fundsȱareȱmade.ȱAllȱbalancesȱareȱexpectedȱtoȱbeȱpaidȱinȱtheȱsubsequentȱyear.ȱ ȱ J.FundȱEquityȱȱ ȱ Theȱ Cityȱ recordsȱ fundȱ balanceȱ restrictionsȱ onȱ theȱ fundȱ levelȱ toȱ indicateȱ thatȱ aȱ portionȱ ofȱ theȱ fundȱ balanceȱ isȱ legallyȱ restrictedȱ forȱ aȱ specificȱ futureȱ useȱ orȱ toȱ indicateȱthatȱaȱportionȱofȱtheȱfundȱbalanceȱisȱnotȱavailableȱforȱexpenditures.ȱȱ ȱ Theȱfollowingȱisȱaȱlistȱofȱfundȱbalancesȱrestricted/committedȱbyȱtheȱCity:ȱ ȱ Municipalȱcourt $ 11,469ȱȱȱȱȱȱȱȱȱȱȱȱ *$Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Tourism 59,175ȱȱȱȱȱȱȱȱȱȱȱȱ *Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Library 104,602ȱȱȱȱȱȱȱȱȱȱ **Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Publicȱsafety 81,934ȱȱȱȱȱȱȱȱȱȱȱȱ *Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Debtȱservice 476,286ȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Capitalȱprojects Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 1,997,068ȱȱȱȱȱȱȱ Parksȱ 11,087ȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Streets 882,093ȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Employeeȱbenefits Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 41,226ȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 1,626,646ȱȱȱȱȱȱȱ $ 2,038,294ȱȱȱȱȱȱȱ *ȱRestrictedȱbyȱenablingȱlegislation **ȱRestrictedȱbyȱdonor Restricted Committed ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 62ȱ V.ȱȱOTHERȱINFORMATIONȱ ȱ A.RiskȱManagementȱ ȱ Theȱ Cityȱ isȱ exposedȱ toȱ variousȱ risksȱ ofȱ lossȱ relatedȱ toȱ torts;ȱ theftȱ of,ȱ damageȱ toȱ andȱ destructionȱ ofȱ assets,ȱ errorsȱ andȱ omissions;ȱ andȱ naturalȱ disastersȱ forȱ whichȱ theȱ Cityȱ participatesȱ alongȱ withȱ 2,800ȱ otherȱ entitiesȱ inȱ theȱ Texasȱ Municipalȱ League’sȱ Intergovernmentalȱ Riskȱ Pools.ȱȱTheȱ Poolȱ purchasesȱ commercialȱ insuranceȱ atȱ groupȱ ratesȱforȱparticipantsȱinȱtheȱPool.ȱȱTheȱCityȱhasȱnoȱadditionalȱriskȱorȱresponsibilityȱtoȱ theȱ Poolȱ outsideȱ ofȱ theȱ paymentȱ ofȱ insuranceȱ premiums.ȱȱTheȱ Cityȱ hasȱ notȱ significantlyȱ reducedȱ insuranceȱ coverageȱ orȱ hadȱ settlementsȱ whichȱ exceededȱ coverageȱamountsȱforȱtheȱpastȱthreeȱyears.ȱ ȱ B.ContingentȱLiabilitiesȱ ȱ Amountsȱ receivedȱ orȱ receivableȱ fromȱ grantingȱ agenciesȱ areȱ subjectȱ toȱ auditȱ andȱ adjustmentȱ byȱ grantorȱ agencies,ȱ principallyȱ theȱ federalȱ government.ȱȱAnyȱ disallowedȱ claims,ȱincludingȱamountsȱalreadyȱcollected,ȱmayȱconstituteȱaȱliabilityȱofȱ theȱapplicableȱfunds.ȱȱTheȱamountsȱofȱexpendituresȱwhichȱmayȱbeȱdisallowedȱbyȱtheȱ grantorȱ cannotȱ beȱ determinedȱ atȱ thisȱ timeȱ althoughȱ theȱ Cityȱ expectsȱ suchȱ amounts,ȱ ifȱany,ȱtoȱbeȱimmaterial.ȱ ȱ Liabilitiesȱ areȱ reportedȱwhenȱ itȱisȱprobableȱthatȱaȱ lossȱ hasȱ occurred,ȱandȱtheȱamountȱ ofȱ theȱ lossȱ canȱ beȱ reasonablyȱ estimated.ȱȱLiabilitiesȱ includeȱ anȱ amountȱ forȱ claimsȱ thatȱhaveȱbeenȱincurredȱbutȱnotȱreported.ȱClaimȱliabilitiesȱareȱcalculatedȱconsideringȱ theȱ effectsȱ ofȱ inflation,ȱ recentȱ claimȱ settlementȱ trends,ȱ includingȱ frequencyȱ andȱ amountȱofȱpayouts,ȱandȱotherȱeconomicȱandȱsocialȱfactors.ȱ ȱ Theȱ Stateȱ ofȱ Texas’ȱ environmentalȱ agencyȱ (TCEQ)ȱ isȱ pursuingȱ anȱ enforcementȱ actionȱagainstȱtheȱCityȱofȱSangerȱtoȱaddressȱwastewaterȱcomplianceȱissuesȱrelatedȱtoȱ theȱ Cityȱ ofȱ Sanger’sȱ dischargeȱ permit.ȱ Sangerȱ hasȱ providedȱ TCEQȱ withȱ counterproposalȱ languageȱ thatȱ seeksȱ creditȱ forȱ theȱ City’sȱ proactiveȱ responseȱ toȱ previousȱ wastewaterȱ complianceȱ issues,ȱ andȱ TCEQȱ isȱ expectedȱ toȱ respondȱ inȱ theȱ comingȱ monthsȱ toȱ bringȱ theȱ enforcementȱ matterȱ toȱ aȱ close.ȱ Theȱ Cityȱ anticipatesȱ resolutionȱofȱtheȱenforcementȱactionȱwithoutȱsignificantȱburdenȱinȱlightȱofȱtheȱCity’sȱ ongoingȱ commitmentȱ toȱ complianceȱ effortsȱ andȱ itsȱ substantialȱ investmentsȱ toȱ dateȱ toȱ improveȱ andȱ maintainȱ theȱ City’sȱ wastewaterȱ infrastructure.ȱ Theȱ estimatedȱ rangeȱ ofȱpotentialȱliabilityȱtoȱtheȱCityȱforȱrelatedȱTCEQȱpenaltiesȱisȱbetweenȱ$0ȱtoȱ$64,500.ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 63ȱ C.Constructionȱcommitmentsȱ ȱ Theȱ governmentȱ hasȱ activeȱ constructionȱ projectsȱ asȱ ofȱ Septemberȱ 30,ȱ 2020.ȱ Theȱ projectsȱ includeȱ streetȱ constructionȱ andȱ improvements,ȱ sewerȱ plantȱ andȱ theȱ constructionȱofȱadditionalȱwaterȱlinesȱandȱrepairs.ȱȱ ȱ Atȱyearȱendȱtheȱgovernment’sȱcommitmentsȱwithȱcontractorsȱareȱasȱfollows:ȱ ȱ Project McReynoldsȱRoadȱReconstruction PachecoȱKoch,ȱLLC $ 4,675ȱȱȱȱȱȱȱȱȱȱȱȱ McReynoldsȱRoadȱReconstruction HRMȱLandȱAcquisition 397ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 5,072ȱȱȱȱȱȱȱȱȱȱȱȱ ServerȱConsolidation AustinȱLaneȱTechnology 4,750ȱȱȱȱȱȱȱȱȱȱȱȱ 2019Ȭ2020ȱStreetȱRehabilitation ReynoldsȱAsphalt 126,156ȱȱȱȱȱȱȱȱ 2019Ȭ2020ȱStreetȱRehabilitation MartinezȱBrothers 21,917ȱȱȱȱȱȱȱȱȱȱ 148,073ȱȱȱȱȱȱȱȱ FMȱ455ȱRelocationȱofȱUtilities DannenbaumȱEngineering 9,927ȱȱȱȱȱȱȱȱȱȱȱȱ AckerȱGSTȱRehabilitation MaguireȱIron 84,397ȱȱȱȱȱȱȱȱȱȱ CowlingȱGSTȱRehabilitation MaguireȱIron 69,668ȱȱȱȱȱȱȱȱȱȱ NewȱSewerȱPlant AlanȱPlummerȱAssociates 28,145ȱȱȱȱȱȱȱȱȱȱ NewȱSewerȱPlant FelixȱConstruction 218,239ȱȱȱȱȱȱȱȱ NewȱSewerȱPlant AnixterȱInc. 285ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 246,669 Sewerȱ455/Lois D&SȱEngineering 4,630ȱȱȱȱȱȱȱȱȱȱȱȱ Sewerȱ455/Lois DickersonȱConstruction 4,100ȱȱȱȱȱȱȱȱȱȱȱȱ 8,730 RailroadȱLiftȱStation PerkinsȱEngineering 9,332ȱȱȱȱȱȱȱȱȱȱȱȱ RailroadȱLiftȱStation AlanȱPlummerȱAssociates 135,850ȱȱȱȱȱȱȱȱ 145,182 $ 722,468 Remainingȱ CommitmentVendor Total ProjectȱTotal ProjectȱTotal ProjectȱTotal ProjectȱTotal ProjectȱTotal ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 64ȱ D.Arbitrageȱȱ ȱ Theȱ Taxȱ Reformȱ Actȱ ofȱ 1986ȱ institutedȱ certainȱ arbitrageȱ consistingȱ ofȱ complexȱ regulationsȱ withȱ respectȱ toȱ issuanceȱ ofȱ taxȬexemptȱ bondsȱ afterȱ Augustȱ 31,ȱ 1986.ȱȱ Arbitrageȱ regulationsȱ dealȱ withȱ theȱ investmentȱ ofȱ taxȬexemptȱ bondȱ proceedsȱ atȱ anȱ interestȱ yieldȱ greaterȱ thanȱ theȱ interestȱ yieldȱ paidȱ toȱ bondholders.ȱȱGenerally,ȱ allȱ interestȱ paidȱ toȱ bondholdersȱ canȱ beȱ retroactivelyȱ renderedȱ taxableȱ ifȱ applicableȱ rebatesȱ areȱ notȱ reportedȱandȱ paidȱ toȱ theȱ Internalȱ RevenueȱServiceȱatȱleastȱeveryȱfiveȱ yearsȱ forȱ applicableȱ bondȱ issues.ȱȱAccordingly,ȱ thereȱ isȱ theȱ riskȱ thatȱ ifȱ suchȱ calculationsȱ areȱ notȱ performedȱ correctly,ȱ aȱ substantialȱ liabilityȱ toȱ theȱ Cityȱ couldȱ result.ȱȱTheȱ Cityȱ doesȱ anticipateȱ thatȱ itȱ willȱ haveȱ anȱ arbitrageȱ liabilityȱ andȱ performsȱ annualȱ calculationsȱ toȱ estimateȱ thisȱ potentialȱ liability.ȱ Theȱ Cityȱ willȱ alsoȱ engageȱ anȱ arbitrageȱ consultantȱ toȱ performȱ theȱ calculationsȱ inȱ accordanceȱ withȱ Internalȱ RevenueȱService’sȱrulesȱandȱregulationsȱifȱindicated.ȱ ȱ E.DefinedȱBenefitȱPensionȱPlansȱ ȱ 1.ȱȱȱPlanȱDescriptionȱ ȱ TheȱCityȱofȱSanger,ȱTexasȱparticipatesȱasȱoneȱofȱ888ȱplansȱinȱtheȱnontraditional,ȱjointȱ contributory,ȱ hybridȱ definedȱ benefitȱ pensionȱ planȱ administeredȱ byȱ theȱ Texasȱ Municipalȱ Retirementȱ Systemȱ (TMRS).ȱ TMRSȱ isȱ anȱ agencyȱ createdȱ byȱ theȱ Stateȱ ofȱ Texasȱandȱadministeredȱinȱaccordanceȱ withȱ theȱ TMRSȱ Act,ȱ SubtitleȱG,ȱTitleȱ8,ȱ Texasȱ Governmentȱ Codeȱ (theȱ TMRSȱ Act)ȱ asȱ anȱ agentȱ multipleȬemployerȱ retirementȱ systemȱ forȱ municipalȱ employeesȱ inȱ theȱ Stateȱ ofȱ Texas.ȱ Theȱ TMRSȱ Actȱ placesȱ theȱ generalȱ administrationȱ andȱ managementȱ ofȱtheȱ Systemȱ withȱ aȱ sixȬmemberȱBoardȱofȱ Trustees.ȱ Althoughȱ theȱ Governor,ȱ withȱ theȱ adviceȱ andȱ consentȱ ofȱ theȱ Senate,ȱ appointsȱ theȱ Board,ȱ TMRSȱ isȱ notȱ fiscallyȱ dependentȱ onȱ theȱ Stateȱ ofȱ Texas.ȱ TMRS’sȱ definedȱ benefitȱ pensionȱ planȱ isȱ aȱ taxȬqualifiedȱ planȱ underȱ Sectionȱ 401ȱ (a)ȱ ofȱ theȱ Internalȱ Revenueȱ Code.ȱ TMRSȱ issuesȱ aȱ publiclyȱ availableȱ comprehensiveȱ annualȱ financialȱreportȱ(CAFR)ȱthatȱcanȱbeȱobtainedȱatȱwww.tmrs.com.ȱ ȱ AllȱeligibleȱemployeesȱofȱtheȱcityȱareȱrequiredȱtoȱparticipateȱinȱTMRS.ȱ ȱ 2.ȱȱBenefitsȱProvidedȱ ȱ TMRSȱ providesȱ retirement,ȱ disability,ȱ andȱ deathȱ benefits.ȱ Benefitȱ provisionsȱ areȱ adoptedȱ byȱ theȱ governingȱ bodyȱ ofȱ theȱ city,ȱ withinȱ theȱ optionsȱ availableȱ inȱ theȱ stateȱ statutesȱgoverningȱTMRS.ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 65ȱ Atȱretirement,ȱtheȱbenefitȱisȱcalculatedȱasȱifȱtheȱsumȱofȱtheȱemployee’sȱcontributions,ȱ withȱ interest,ȱ andȱ theȱ cityȬfinancedȱ monetaryȱ creditsȱ withȱ interestȱ wereȱ usedȱ toȱ purchaseȱanȱannuity.ȱMembersȱmayȱchooseȱtoȱreceiveȱtheirȱretirementȱbenefitȱinȱoneȱ ofȱ sevenȱ paymentsȱ options.ȱ Membersȱ mayȱ alsoȱ chooseȱ toȱ receiveȱ aȱ portionȱ ofȱ theirȱ benefitȱ asȱ aȱ Partialȱ Lumpȱ Sumȱ Distributionȱ inȱ anȱ amountȱ equalȱ toȱ 12,ȱ 24,ȱ orȱ 36ȱ monthlyȱ payments,ȱ whichȱ cannotȱ exceedȱ 75%ȱ ofȱ theȱ member’sȱ depositsȱ andȱ interest.ȱ ȱ Theȱ planȱ provisionsȱ areȱ adoptedȱ byȱ theȱ governingȱ bodyȱ ofȱ theȱ City,ȱ withinȱ theȱ optionsȱavailableȱinȱtheȱstateȱstatutesȱgoverningȱTMRS.ȱȱ ȱ PlanȱprovisionsȱforȱtheȱCityȱwereȱasȱfollows:ȱ ȱ ȱ PlanȱYearȱ2019ȱ PlanȱYearȱ2018ȱ Employeeȱdepositȱrateȱ 6.0%ȱ 6.0%ȱ Matchingȱratioȱ(cityȱtoȱ employee)ȱ 2ȱtoȱ1ȱ 2ȱtoȱ1ȱ Yearsȱrequiredȱforȱvestingȱ 5ȱ 5ȱ Serviceȱretirementȱeligibilityȱ (expressedȱasȱageȱ/ȱyearsȱofȱ service)ȱ 60/5,ȱ0/20ȱ 60/5,ȱ0/20ȱ Updatedȱserviceȱcreditȱ 100%ȱRepeatingȱTransfersȱ 100%ȱRepeatingȱTransfersȱ Annuityȱincreaseȱ(toȱretirees)ȱ 0%ȱofȱCPIȱȱ 0%ȱofȱCPIȱȱ ȱ Employeesȱcoveredȱbyȱbenefitȱtermsȱ ȱ Atȱ theȱ Decemberȱ 31,ȱ 2019ȱ valuationȱ andȱ measurementȱ date,ȱ theȱ followingȱ employeesȱwereȱcoveredȱbyȱtheȱbenefitȱterms:ȱ ȱ Inactiveȱemployeesȱorȱbeneficiariesȱcurrentlyȱreceivingȱbenefitsȱ 22ȱ Inactiveȱemployeesȱentitledȱtoȱbutȱnotȱyetȱreceivingȱbenefitsȱ 27ȱ Activeȱemployeesȱ 66ȱ Totalȱ 115ȱ ȱ ȱ 3.ȱȱContributionsȱ ȱ TheȱcontributionȱratesȱforȱemployeesȱinȱTMRSȱareȱeitherȱ5%,ȱ6%,ȱorȱ7%ȱofȱemployeeȱ grossȱ earnings,ȱ andȱ theȱ cityȱ matchingȱ percentagesȱ areȱ eitherȱ 100%,ȱ 150%,ȱ orȱ 200%,ȱ bothȱ asȱ adoptedȱ byȱ theȱ governingȱ bodyȱ ofȱ theȱ City.ȱ Underȱ theȱ stateȱ lawȱ governingȱ TMRS,ȱ theȱ contributionȱ rateȱ forȱ eachȱ cityȱ isȱ determinedȱ annuallyȱ byȱ theȱ actuary,ȱ usingȱ theȱ Entryȱ Ageȱ Normalȱ (EAN)ȱ actuarialȱ costȱ method.ȱ Theȱ actuariallyȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 66ȱ determinedȱ rateȱ isȱ theȱ estimatedȱ amountȱ necessaryȱ toȱ financeȱ theȱ costȱ ofȱ benefitsȱ earnedȱ byȱ employeesȱ duringȱ theȱ year,ȱ withȱ anȱ additionalȱ amountȱ toȱ financeȱ anyȱ unfundedȱaccruedȱliability.ȱ ȱ Employeesȱ forȱ theȱ Cityȱ ofȱ Sangerȱ wereȱ requiredȱ toȱ contributeȱ 6%ȱ ofȱ theirȱ annualȱ grossȱ earningsȱ duringȱ theȱ fiscalȱ year.ȱ Theȱ contributionȱ ratesȱ forȱ theȱ Cityȱ ofȱ Sangerȱ wereȱ 7.91%ȱ andȱ 8.16%ȱ inȱ calendarȱ yearsȱ 2019ȱ andȱ 2020,ȱ respectively.ȱ Theȱ City’sȱ contributionsȱ toȱ TMRSȱ forȱ theȱ yearȱ endedȱ Septemberȱ 30,ȱ 2020,ȱ wereȱ $341,109,ȱ andȱ wereȱequalȱtoȱtheȱrequiredȱcontributions.ȱ ȱ ȱ 4.ȱȱNetȱPensionȱLiabilityȱ ȱ Theȱ City’sȱ Netȱ Pensionȱ Liabilityȱ (NPL)ȱ wasȱ measuredȱasȱ ofȱ Decemberȱ31,ȱ 2019,ȱ andȱ theȱ Totalȱ Pensionȱ Liabilityȱ (TPL)ȱ usedȱ toȱ calculateȱ theȱ Netȱ Pensionȱ Liabilityȱ wasȱ determinedȱbyȱanȱactuarialȱvaluationȱasȱofȱthatȱdate.ȱ ȱ Actuarialȱassumptions:ȱ ȱ Theȱ Totalȱ Pensionȱ Liabilityȱ inȱ theȱ Decemberȱ 31,ȱ 2019ȱ actuarialȱ valuationȱ wasȱ determinedȱusingȱtheȱfollowingȱactuarialȱassumptions:ȱ ȱ Inflationȱȱȱȱȱȱȱȱȱ2.5%ȱperȱyearȱ Overallȱpayrollȱgrowthȱȱ ȱ ȱ 3.0%ȱperȱyearȱ InvestmentȱRateȱofȱReturnȱȱ ȱ 6.75%,ȱnetȱofȱpensionȱplanȱinvestmentȱexpense,ȱȱȱ includingȱinflationȱ ȱȱȱȱȱ Salaryȱ increasesȱ areȱ basedȱ onȱ aȱ serviceȬrelatedȱ table.ȱ Mortalityȱ ratesȱ forȱ activeȱ membersȱ areȱ basedȱ onȱ theȱ PUB(10)ȱ mortalityȱ tablesȱ withȱ theȱ Publicȱ Safetyȱ tableȱ usedȱforȱmalesȱandȱtheȱGeneralȱEmployeeȱtableȱusedȱforȱfemales.ȱMortalityȱratesȱforȱ healthyȱ retireesȱ andȱ beneficiariesȱ areȱ basedȱ onȱ theȱ GenderȬdistinctȱ 2019ȱ Municipalȱ Retireesȱ ofȱ Texasȱ mortalityȱ tables.ȱ Theȱ ratesȱ forȱ actives,ȱ healthyȱ retireesȱ andȱ beneficiariesȱareȱprojectedȱonȱaȱ fullyȱgenerationalȱbasisȱbyȱScaleȱUMPȱtoȱaccountȱforȱ futureȱ mortalityȱ improvements.ȱ Forȱ disabledȱ annuitants,ȱ theȱ sameȱ mortalityȱ tablesȱ forȱ healthyȱ retireesȱ isȱ usedȱ withȱ aȱ 4Ȭyearȱ setȬforwardȱ forȱ malesȱ andȱ aȱ 3Ȭyearȱ setȬ forwardȱ forȱ females.ȱ Inȱ addition,ȱ aȱ 3.5%ȱ andȱ 3.0%ȱ minimumȱ mortalityȱ rateȱ isȱ applied,ȱ forȱ malesȱ andȱ femalesȱ respectively,ȱ toȱ reflectȱ theȱ impairmentȱ forȱ youngerȱ membersȱwhoȱbecomeȱdisabled.ȱTheȱratesȱareȱprojectedȱonȱaȱfullyȱgenerationalȱbasisȱ byȱScaleȱUMPȱtoȱaccountȱforȱfutureȱmortalityȱimprovementsȱsubjectȱtoȱtheȱfloor.ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 67ȱ Theȱ actuarialȱ assumptionsȱ wereȱ developedȱ primarilyȱ fromȱ theȱ actuarialȱ investigationȱ ofȱ theȱ experienceȱ ofȱ TMRSȱ overȱ theȱ fourȬyearȱ periodȱ fromȱ Decemberȱ 31,ȱ 2014ȱ toȱ Decemberȱ 31,ȱ 2018.ȱ Theyȱ wereȱ adoptedȱ inȱ 2019ȱ andȱ firstȱ usedȱ inȱ theȱ Decemberȱ 31,ȱ 2019ȱ actuarialȱ valuation.ȱ Theȱ postȬretirementȱ mortalityȱ assumptionȱ forȱ Annuityȱ Purchaseȱ Ratesȱ (APRs)ȱ isȱ basedȱ onȱ theȱ Mortalityȱ Experienceȱ Investigationȱ Studyȱ coveringȱ 2009ȱ throughȱ 2011ȱ andȱ datedȱ Decemberȱ 31,ȱ 2013.ȱ Planȱ assetsȱ areȱ managedȱ onȱ aȱ totalȱ returnȱ basisȱ withȱ anȱ emphasisȱ onȱ bothȱ capitalȱ appreciationȱ asȱ wellȱ asȱ theȱ productionȱ ofȱ incomeȱ inȱ orderȱ toȱ satisfyȱ theȱ shortȬtermȱ andȱ longȬtermȱ fundingȱ needsȱ ofȱ TMRS.ȱ Planȱ assetsȱ areȱ managedȱ onȱ aȱ totalȱ returnȱ basisȱ withȱ anȱ emphasisȱ onȱ bothȱ capitalȱ appreciationȱ asȱ wellȱ asȱ theȱ productionȱ ofȱ incomeȱinȱorderȱtoȱsatisfyȱtheȱshortȬtermȱandȱlongȬtermȱfundingȱneedsȱofȱTMRS.ȱȱ ȱ TheȱlongȬtermȱexpectedȱrateȱofȱreturnȱonȱpensionȱplanȱinvestmentsȱwasȱdeterminedȱ usingȱaȱbuildingȬblockȱmethodȱinȱwhichȱbestȱestimateȱrangesȱofȱexpectedȱfutureȱrealȱ ratesȱ ofȱ returnȱ (expectedȱ returns,ȱ netȱ ofȱ pensionȱ planȱ investmentȱ expenseȱ andȱ inflation)ȱ areȱ developedȱ forȱ eachȱ majorȱ assetȱ class.ȱ Theseȱ rangesȱ areȱ combinedȱ toȱ produceȱtheȱlongȬtermȱexpectedȱrateȱofȱreturnȱbyȱweightingȱtheȱexpectedȱfutureȱrealȱ ratesȱ ofȱ returnȱ byȱ theȱ targetȱ assetȱ allocationȱ percentageȱ andȱ byȱ addingȱ expectedȱ inflation.ȱ Inȱ determiningȱ theirȱ bestȱ estimateȱ ofȱ aȱ recommendedȱ investmentȱ returnȱ assumptionȱ underȱ theȱ variousȱ alternativeȱ assetȱ allocationȱ portfolios,ȱ GRSȱ focusedȱ onȱ theȱ areaȱ betweenȱ (1)ȱ arithmeticȱ meanȱ (aggressive)ȱ withoutȱ anȱ adjustmentȱ forȱ timeȱ (conservative)ȱ andȱ (2)ȱ theȱ geometricȱ meanȱ (conservative)ȱ withȱ anȱ adjustmentȱ forȱ timeȱ (aggressive).ȱ Theȱ targetȱ allocationȱ andȱ bestȱ estimatesȱ ofȱ realȱ ratesȱ ofȱ returnȱ forȱeachȱmajorȱassetȱclassȱinȱfiscalȱyearȱ2020ȱareȱsummarizedȱinȱtheȱfollowingȱtable:ȱ ȱ AssetȱClassȱ TargetȱAllocationȱ LongȬTermȱ Expectedȱ Realȱ RateȱofȱReturnȱ(Arithmetic)ȱ GlobalȱEquityȱ 30.0%ȱ 5.30%ȱ CoreȱFixedȱIncomeȱ 10.0%ȱ 1.25%ȱ NonȬCoreȱFixedȱIncomeȱ 20.0%ȱ 4.14%ȱ RealȱReturnȱ 10.0%ȱ 3.85%ȱ RealȱEstateȱ 10.0%ȱ 4.00%ȱ AbsoluteȱReturnȱ 10.0%ȱ 3.48%ȱ PrivateȱEquityȱ 10.0%ȱ 7.75%ȱ ȱȱȱTotalȱ 100.0%ȱȱ ȱ DiscountȱRate:ȱ ȱ Theȱ discountȱ rateȱ usedȱ toȱ measureȱ theȱ Totalȱ Pensionȱ Liabilityȱ wasȱ 6.75%.ȱ Theȱ projectionȱofȱcashȱflowsȱusedȱtoȱdetermineȱtheȱdiscountȱrateȱassumedȱthatȱemployeeȱ andȱ employerȱ contributionsȱ willȱ beȱ madeȱ atȱ theȱ ratesȱ specifiedȱ inȱ statute.ȱ Basedȱ onȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 68ȱ thatȱ assumption,ȱ theȱ pensionȱ plan’sȱ Fiduciaryȱ Netȱ Positionȱ wasȱ projectedȱ toȱ beȱ availableȱ toȱ makeȱ allȱ projectedȱ futureȱ benefitȱ paymentsȱ ofȱ currentȱ activeȱ andȱ inactiveȱ employees.ȱ Therefore,ȱ theȱ longȬtermȱ expectedȱ rateȱ ofȱ returnȱ onȱ pensionȱ planȱ investmentsȱ wasȱ appliedȱ toȱ allȱ periodsȱ ofȱ projectedȱ benefitȱ paymentsȱ toȱ determineȱtheȱTotalȱPensionȱLiability.ȱ ȱ ChangesȱinȱtheȱNetȱPensionȱLiability:ȱ ȱ TotalȱPensionȱ Liabilityȱ(a) PlanȱFiduciaryȱNetȱ Positionȱ(b) NetȱPensionȱ Liabilityȱ(a)ȱ–ȱ(b) Balanceȱatȱ12/31/18 $ȱȱȱȱȱȱȱȱȱȱȱȱ10,447,793ȱ $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ8,820,203ȱ $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ1,627,590ȱ Changesȱforȱtheȱyear: ȱȱȱServiceȱCost ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ498,768ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ498,768ȱ ȱȱȱInterestȱ(onȱtheȱTotalȱPensionȱLiab.)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ709,455ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ709,455ȱ ȱȱȱDifferenceȱbetweenȱexpectedȱandȱȱȱȱȱ ȱȱȱactualȱexperience ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ89,057ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ89,057ȱ ȱȱȱChangesȱofȱassumptions ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ92,583ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ92,583ȱ ȱȱȱContributionsȱ–ȱemployer ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ321,275ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(321,275) ȱȱȱContributionsȱ–ȱemployee ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ243,698ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(243,698) ȱȱȱNetȱinvestmentȱincome ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ1,365,511ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(1,365,511) ȱȱȱBenefitȱpayments,ȱincludingȱ ȱȱȱrefundsȱofȱemp.ȱcontributions ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(373,476)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(373,476)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱAdministrativeȱexpense ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(7,705)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ7,705ȱ ȱȱȱOtherȱchanges ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(231)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ231ȱ ȱȱȱȱȱNetȱchanges ȱȱȱȱȱȱȱȱȱȱȱȱȱȱ1,016,387ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ1,549,072ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(532,685) Balanceȱatȱ12/31/19 $ȱȱȱȱȱȱȱȱȱȱȱȱ11,464,180ȱ $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ10,369,275ȱ $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ1,094,905ȱ ȱ Sensitivityȱofȱtheȱnetȱpensionȱliabilityȱtoȱchangesȱinȱtheȱdiscountȱrateȱ ȱ Theȱ followingȱ presentsȱ theȱ netȱ pensionȱ liabilityȱ ofȱ theȱ City,ȱ calculatedȱ usingȱ theȱ discountȱ rateȱ ofȱ6.75%,ȱ asȱ wellȱ asȱ whatȱ theȱ City’sȱ netȱ pensionȱ liabilityȱ wouldȱbeȱ ifȱitȱ wereȱ calculatedȱ usingȱ aȱ discountȱ rateȱ thatȱ isȱ 1ȬpercentageȬpointȱ lowerȱ (5.75%)ȱ orȱ 1Ȭ percentageȬpointȱhigherȱ(7.75%)ȱthanȱtheȱcurrentȱrate:ȱ ȱ 1%ȱDecrease CurrentȱSingleȱRate 1%ȱIncrease 5.75%ȱ Assumptionȱ6.75%ȱ 7.75%ȱ $ 2,842,849ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 1,094,905ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (338,960)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 69ȱ PensionȱPlanȱFiduciaryȱNetȱPosition:ȱ ȱ Detailedȱinformationȱaboutȱtheȱ pensionȱplan’sȱ Fiduciaryȱ NetȱPositionȱ isȱavailableȱ inȱ aȱ separatelyȬissuedȱ TMRSȱ financialȱ report.ȱ Thatȱ reportȱ mayȱ beȱ obtainedȱ onȱ theȱ internetȱatȱwww.tmrs.com.ȱ ȱ 5.ȱȱPensionȱ Expenseȱ andȱ Deferredȱ Outflowsȱ andȱ Inflowsȱ ofȱ Resourcesȱ Relatedȱ toȱ Pensionsȱ ȱ Forȱ theȱ yearȱ endedȱ Septemberȱ 30,ȱ 2020,ȱ theȱ Cityȱ recognizedȱ pensionȱ expenseȱ ofȱ $423,988.ȱ ȱ Atȱ Septemberȱ 30,ȱ2020,ȱ theȱ Cityȱ reportedȱdeferredȱ outflowsȱ andȱ deferredȱinflowsȱ ofȱ resourcesȱrelatedȱtoȱpensionsȱfromȱtheȱfollowingȱsources:ȱ Differenceȱbetweenȱprojectedȱandȱ investmentȱearningsȱ $Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (313,985)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Changesȱinȱactuarialȱassumptions 85,742ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Differencesȱbetweenȱexpectedȱandȱactualȱ economicȱexperience 108,615ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Contributionsȱsubsequentȱtoȱtheȱ measurementȱdate 264,836ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱȱȱTotal $ 459,193ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (313,985)ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ DeferredȱOutflows ofȱResources Deferredȱ (Inflows)ȱofȱResources TheȱCityȱreportedȱ$264,836ȱasȱdeferredȱoutflowsȱofȱresourcesȱrelatedȱtoȱpensionsȱ resultingȱfromȱcontributionsȱsubsequentȱtoȱtheȱmeasurementȱdateȱthatȱwillȱbeȱ recognizedȱasȱaȱreductionȱofȱtheȱnetȱpensionȱliabilityȱforȱtheȱyearȱendingȱSeptemberȱ 30,ȱ2021.ȱȱ ȱ Otherȱamountsȱreportedȱasȱdeferredȱoutflowsȱandȱinflowsȱofȱresourcesȱrelatedȱtoȱ pensionsȱwillȱbeȱrecognizedȱinȱpensionȱexpenseȱasȱfollows:ȱ YearȱendedȱDecemberȱ31: 2020 $ (47,142)ȱȱȱȱȱȱȱȱȱȱȱȱȱ 2021 (46,477)ȱȱȱȱȱȱȱȱȱȱȱȱȱ 2022 67,892ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2023 (111,578)ȱȱȱȱȱȱȱȱȱȱȱ 2024 17,677ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Thereafter Ȭȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ (119,628)ȱȱȱȱȱȱȱȱȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 70ȱ F.PostemploymentȱBenefitsȱOtherȱThanȱPensionsȱ ȱ Theȱ Cityȱ alsoȱ participatesȱ inȱ theȱ costȱ sharingȱ multipleȬemployerȱ definedȱ benefitȱ groupȬtermȱ lifeȱ insuranceȱ planȱoperatedȱ byȱtheȱTexasȱMunicipalȱRetirementȱSystemȱ (TMRS)ȱ knownȱ asȱ theȱ Supplementalȱ Deathȱ Benefitsȱ Fundȱ (SDBF).ȱ Theȱ Cityȱ elected,ȱ byȱ ordinance,ȱ toȱ provideȱ groupȬtermȱ lifeȱ insuranceȱ coverageȱ toȱ bothȱ currentȱ andȱ retiredȱ employees.ȱ Theȱ Cityȱ mayȱ terminateȱ coverageȱ underȱ andȱ discontinueȱ participationȱinȱ theȱ SDBFȱ byȱ adoptingȱ anȱ ordinanceȱ beforeȱNovemberȱ 1ȱ ofȱ anyȱyearȱ toȱbeȱeffectiveȱtheȱfollowingȱJanuaryȱ1.ȱȱ ȱ Theȱ deathȱ benefitȱ forȱ activeȱ employeesȱ providesȱ aȱ lumpȬsumȱ paymentȱ approximatelyȱ equalȱ toȱ theȱ employee’sȱ annualȱ salaryȱ (calculatedȱ basedȱ onȱ theȱ employee’sȱactualȱearnings,ȱforȱtheȱ12Ȭmonthȱperiodȱprecedingȱtheȱmonthȱofȱdeath);ȱ retiredȱ employeesȱ areȱ insuredȱ forȱ $7,500;ȱ thisȱ coverageȱ isȱ anȱ “otherȱ postemploymentȱbenefit,”ȱorȱOPEB.ȱ ȱ Theȱ Cityȱ contributesȱ toȱ theȱ SDBFȱ atȱ aȱ contractuallyȱ requiredȱ rateȱ asȱ determinedȱ byȱ anȱ annualȱ actuarialȱ valuation.ȱ Theȱ rateȱ isȱ equalȱ toȱ theȱ costȱ ofȱ providingȱ oneȬyearȱ termȱ lifeȱ insurance.ȱ Theȱ fundingȱ policyȱ forȱ theȱ SDBFȱ programȱ isȱ toȱ assureȱ thatȱ adequateȱ resourcesȱ areȱ availableȱ toȱ meetȱ allȱ deathȱ benefitȱ paymentsȱ forȱ theȱ upcomingȱ year;ȱ theȱ intentȱ isȱ notȱ toȱ preȬfundȱ retireeȱ termȱ lifeȱ insuranceȱ duringȱ employees’ȱentireȱcareers.ȱȱ ȱ Employeesȱcoveredȱbyȱbenefitȱtermsȱ ȱ Atȱ theȱ Decemberȱ 31,ȱ 2019ȱ valuationȱ andȱ measurementȱ date,ȱ theȱ followingȱ employeesȱwereȱcoveredȱbyȱtheȱbenefitȱterms:ȱ ȱ Inactiveȱemployeesȱorȱbeneficiariesȱcurrentlyȱreceivingȱbenefitsȱȱ13ȱ Inactiveȱemployeesȱentitledȱtoȱbutȱnotȱyetȱreceivingȱbenefitsȱȱ7ȱ Activeȱemployeesȱ 66ȱ Totalȱ 86ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 71ȱ Theȱ City’sȱ retireeȱ contributionȱ ratesȱ toȱ theȱ TMRSȱ SDBFȱ forȱ theȱ yearsȱ endedȱ 2020,ȱ 2019ȱandȱ2018ȱareȱasȱfollows:ȱ ȱ Plan/ȱ CalendarȱYearȱ Annualȱ Requiredȱ Contributionȱ (Rate)ȱ Actualȱ Contributionȱ Madeȱ (Rate)ȱ Percentageȱofȱ ARCȱ Contributedȱ 2018ȱ 0.01%ȱ 0.01%ȱ 100.0%ȱ 2019ȱ 0.01%ȱ 0.01%ȱ 100.0%ȱ 2020ȱ 0.02%ȱ 0.02%ȱ 100.0%ȱ ȱ TheȱCity’sȱcontributionsȱtoȱtheȱTMRSȱSDBFȱforȱtheȱyearsȱendedȱ2020,ȱ2019,ȱandȱ2018ȱ wereȱ $746,ȱ $406ȱ andȱ $371,ȱ respectively,ȱ whichȱ equaledȱ theȱ requiredȱ contributionsȱ eachȱyear.ȱ ȱ TotalȱOPEBȱLiabilityȱ ȱ Theȱ City’sȱ Postemploymentȱ Benefitsȱ Otherȱ Thanȱ Pensionsȱ Liabilityȱ (OPEB)ȱ wasȱ measuredȱasȱofȱDecemberȱ31,ȱ2019,ȱandȱtheȱTotalȱOPEBȱLiabilityȱwasȱdeterminedȱbyȱ anȱactuarialȱvaluationȱasȱofȱthatȱdate.ȱ ȱ Actuarialȱassumptions:ȱ ȱ Theȱ Totalȱ OPEBȱ Liabilityȱ inȱ theȱ Decemberȱ 31,ȱ 2019ȱ actuarialȱ valuationȱ wasȱ determinedȱusingȱtheȱfollowingȱactuarialȱassumptions:ȱ ȱ Inflationȱȱȱȱȱȱȱȱȱȱȱȱȱ2.5%ȱperȱyearȱ Overallȱpayrollȱgrowthȱȱ 3.5%ȱ toȱ 10.5%,ȱ includingȱ inflationȱ perȱ yearȱ Discountȱrateȱȱȱȱȱȱȱȱȱȱȱȱ2.75%ȱ Retirees’ȱshareȱofȱbenefitȬrelatedȱcostsȱȱ ȱ $0ȱ Administrativeȱexpensesȱ Allȱ administrativeȱ expensesȱ areȱ paidȱ throughȱ theȱ Pensionȱ Trustȱ andȱ accountedȱ forȱ underȱ reportingȱ requirementsȱ underȱ GASBȱ Statementȱ No.ȱ68ȱ ȱ Salaryȱ increasesȱ wereȱ basedȱ onȱ aȱ serviceȬrelatedȱ table.ȱ Mortalityȱ ratesȱ forȱ activeȱ members,ȱ retirees,ȱ andȱ beneciaries ȱ wereȱ basedȱ onȱ theȱ genderȬdistinctȱ RP2000ȱ Combinedȱ Healthyȱ Mortalityȱ Tablesȱ withȱ Blueȱ Collarȱ Adjustment,ȱ withȱ maleȱ ratesȱ multipliedȱbyȱ109%ȱandȱfemaleȱratesȱmultipliedȱbyȱ 103%.ȱTheȱratesȱareȱprojectedȱonȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 72ȱ aȱfullyȱ generationalȱ basisȱbyȱ scaleȱBBȱtoȱaccountȱforȱfutureȱmortalityȱimprovements.ȱ Forȱ disabledȱ annuitants,ȱ theȱ genderȬdistinctȱ RP2000ȱ Combinedȱ Healthyȱ Mortalityȱ Tablesȱ withȱ Blueȱ Collarȱ Adjustmentȱ areȱ usedȱ withȱ malesȱ ratesȱ multipliedȱ byȱ 109%ȱ andȱ femaleȱ ratesȱ multipliedȱ byȱ 103%ȱ withȱ aȱ 3Ȭyearȱ setȬforwardȱ forȱ bothȱ malesȱ andȱ females.ȱ Inȱ addition,ȱ aȱ 3%ȱ minimumȱ mortalityȱ rateȱ isȱ appliedȱ toȱ reect ȱ theȱ impairmentȱ forȱ youngerȱ membersȱ whoȱbecomeȱdisabled.ȱ Theȱ ratesȱareȱprojectedȱ onȱ aȱ fullyȱ generationalȱ basisȱ byȱ scaleȱ BBȱ toȱ accountȱ forȱ futureȱ mortalityȱ improvementsȱ subjectȱtoȱtheȱ3%ȱoor.ȱ ȱ DiscountȱRate:ȱ ȱ Theȱ discountȱ rateȱ usedȱ toȱ measureȱ theȱ Totalȱ OPEBȱ Liabilityȱ wasȱ 2.75%.ȱ Theȱ discountȱ rateȱ wasȱ basedȱ onȱ theȱ Fidelityȱ Index’sȱ “20ȬYearȱ Municipalȱ GOȱ AAȱ Index”ȱ rateȱasȱofȱDecemberȱ31,ȱ2019.ȱ ȱ SensitivityȱofȱtheȱTotalȱOPEBȱLiabilityȱtoȱChangesȱinȱtheȱDiscountȱRateȱ ȱ Theȱ followingȱ presentsȱ theȱ totalȱ OPEBȱ liabilityȱ ofȱ theȱ City,ȱ calculatedȱ usingȱ theȱ discountȱ rateȱ ofȱ 2.75%,ȱ asȱ wellȱ asȱ whatȱ theȱ City’sȱ totalȱ OPEBȱ liabilityȱ (asset)ȱ wouldȱ beȱ ifȱ itȱ wereȱ calculatedȱ usingȱ aȱ discountȱ rateȱ thatȱ isȱ 1ȬpercentageȬpointȱ lowerȱ (1.75%)ȱorȱ1ȬpercentageȬpointȱhigherȱ(3.75%)ȱthanȱtheȱcurrentȱrate:ȱ ȱ $ 161,706ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 132,196ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 108,958ȱȱȱȱȱȱȱȱȱȱȱ 1%ȱDecrease (1.75%) CurrentȱSingleȱRate Assumptionȱ2.75%ȱ 1%ȱIncrease (3.75%) ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ ȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 73ȱ ChangesȱinȱtheȱTotalȱOPEBȱLiability:ȱ ȱ TotalȱOPEBȱ Liability Balanceȱatȱ12/31/18 $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ102,299ȱ Changesȱforȱtheȱyear: ȱȱȱServiceȱCost ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ8,529ȱ ȱȱȱInterest ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ3,938ȱ ȱȱȱChangeȱinȱbenefitȱterms ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱDifferenceȱbetweenȱexpectedȱandȱȱȱȱȱ ȱȱȱactualȱexperience ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(3,932) ȱȱȱChangesȱofȱassumptions ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ22,174ȱ ȱȱȱBenefitȱpayments ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(812) ȱȱȱȱȱNetȱchanges ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ29,897ȱ Balanceȱatȱ12/31/19 $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ132,196ȱ ȱ ȱ OPEBȱExpenseȱandȱDeferredȱOutflowsȱofȱResourcesȱandȱDeferredȱInflowsȱofȱȱ ResourcesȱRelatedȱtoȱOPEBȱ ȱ Forȱ theȱ yearȱ endedȱ Septemberȱ 30,ȱ 2020,ȱ theȱ Cityȱ recognizedȱ OPEBȱ expenseȱ ofȱ $13,843.ȱ ȱ Atȱ Septemberȱ 30,ȱ 2020,ȱ theȱ Cityȱ reportedȱ deferredȱ outflowsȱ ofȱ resourcesȱ andȱ deferredȱ inflowsȱ ofȱ resourcesȱ relatedȱ toȱ theȱ OPEBȱ liabilityȱ fromȱ theȱ followingȱ sources:ȱ ȱ Differencesȱbetweenȱexpectedȱand ȱȱactualȱeconomicȱexperience $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(10,158) Changesȱinȱassumptions ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ18,893ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ Contributionsȱsubsequentȱto measurementȱdate ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ648ȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȬȱȱȱ Total $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ19,541ȱ $ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ(10,158) DeferredȱOutflows ofȱResources DeferredȱInflows ofȱResources ȱ ȱ Theȱ Cityȱ reportedȱ $648ȱ asȱ deferredȱ outflowsȱ ofȱ resourcesȱ relatedȱ toȱ pensionsȱ resultingȱ fromȱ contributionsȱ subsequentȱ toȱ theȱ measurementȱ dateȱ thatȱ willȱ beȱ recognizedȱ asȱ aȱ reductionȱ ofȱ theȱ OPEBȱ liabilityȱ forȱ theȱ yearȱ endingȱ Septemberȱ 30,ȱ 2021.ȱȱ CityȱofȱSanger,ȱTexasȱ NOTESȱTOȱFINANCIALȱSTATEMENTS,ȱContinuedȱ Septemberȱ30,ȱ2020ȱ 74ȱ Otherȱ amountsȱ reportedȱ asȱ deferredȱ outflowsȱ andȱ inflowsȱ ofȱ resourcesȱ relatedȱ toȱ OPEBȱwillȱbeȱrecognizedȱinȱpensionȱexpenseȱasȱfollows:ȱ ȱ YearȱendedȱDecemberȱ31: 2020 $ 1,376ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2021 1,376ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2022 1,376ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2023 1,376ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ 2024 590ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ Thereafter 2,641ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $ 8,735ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ ȱ G.SubsequentȱEventsȱ ȱ Thereȱ wereȱ noȱ materialȱ subsequentȱ eventsȱ throughȱ Januaryȱ 1ř,ȱ 2021,ȱ theȱ datȱ theȱ financialȱstatementsȱwereȱavailableȱtoȱbeȱissued.ȱ ȱ ȱ ȱ ȱ REQUIRED SUPPLEMENTARY INFORMATION 75 Revenues Property tax $4,065,250 $ 4,065,250 $ 4,153,342 $ 88,092 Sales tax 905,800 905,800 1,104,525 198,725 Franchise and local taxes 253,100 253,100 291,554 38,454 License and permits 343,070 343,070 451,839 108,769 Charges for services 1,046,132 1,046,132 1,008,380 (37,752) Fire and rescue 724,329 724,329 648,038 (76,291) Contributions and donations - - 2,600 2,600 Intergovernmental - - 481,408 481,408 Fines and forfeitures 95,526 95,526 72,661 (22,865) Investment income 4,000 4,000 19,798 15,798 Other revenue 77,500 77,500 458,600 381,100 7,514,707 7,514,707 8,692,745 1,178,038 Expenditures Current: General government 2,009,667 2,009,667 2,154,048 (144,381) Police department 1,622,005 1,618,145 1,424,522 193,623 Municipal court 197,494 197,494 174,044 23,450 Fire and EMS 1,574,356 1,574,356 1,332,950 241,406 Parks and recreation 519,192 519,192 468,306 50,886 Public works 1,082,115 1,085,975 999,827 86,148 Debt service: Principal 43,716 43,716 43,772 (56) Interest 7,819 7,819 7,763 56 Capital outlay 545,000 545,000 163,953 381,047 7,601,364 7,601,364 6,769,185 832,179 Revenues Over (Under) Expenditures $ (86,657) $ (86,657) $ 1,923,560 $ 2,010,217 Total Revenues Variance with City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 1 of 2) For the Year Ended September 30, 2020 Original Budget Final Budget Total Expenditures Actual Final Budget 76 Transfers in $ 761,657 $ 761,657 $ 761,657 $ - Transfers (out)(675,000) (675,000) (675,000) - Proceeds from sale of capital assets - - 9,523 9,523 Insurance recoveries - - 75,330 75,330 86,657 86,657 171,510 84,853 Net Change in Fund Balance $- $ - 2,095,070 $ 2,095,070 Beginning fund balance 6,437,778 $ 8,532,848 Notes to Required Supplementary Information 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Variance with Actual Final Budget IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 2 of 2) For the Year Ended September 30, 2020 Final Budget Original Budget Ending Fund Balance Total Other Financing Sources (Uses) Other Financing Sources (Uses) City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES 77 Total pension liability Service cost $ 498,768 $ 462,521 $ 438,324 $ 408,943 Interest (on the Total Pension Liability) 709,455 648,013 590,632 545,333 Changes in benefit terms - - - - Differences between expected and actual experience 89,057 93,857 38,794 (78,516) Changes of assumptions 92,583 - - - Benefit payments, including refunds of participant contributions (373,476) (251,071) (208,451) (230,245) Net change in total pension liability 1,016,387 953,320 859,299 645,515 Total pension liability - beginning 10,447,793 9,494,473 8,635,174 7,989,659 Total pension liability - ending (a)$ 11,464,180 $ 10,447,793 $ 9,494,473 $ 8,635,174 Plan fiduciary net position Contributions - employer $ 321,275 $ 294,606 $ 276,169 $ 240,177 Contributions - members 243,698 226,912 217,171 202,113 Net investment income 1,365,511 (264,466) 1,040,205 461,955 Benefit payments, including refunds of participant contributions (373,476) (251,071) (208,451) (230,245) Administrative expenses (7,705) (5,106) (5,387) (5,214) Other (231) (267) (273) (281) Net change in plan fiduciary net position 1,549,072 608 1,319,434 668,505 Plan fiduciary net position - beginning 8,820,203 8,819,595 7,500,161 6,831,656 Plan fiduciary net position - ending (b)$ 10,369,275 $ 8,820,203 $ 8,819,595 $ 7,500,161 Fund's net pension liability - ending (a) - (b)$ 1,094,905 $ 1,627,590 $ 674,878 $ 1,135,013 90.45% 84.42% 92.89% 86.86% Covered payroll $ 4,061,633 $ 3,781,589 $ 3,619,524 $ 3,368,554 26.96% 43.04% 18.65% 33.69% Notes to schedule: SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS City of Sanger, Texas Plan fiduciary net position as a percentage of the total pension liability Fund's net position as a percentage of covered payroll 2018 201620172019 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Years ended December 31, 78 1 $ 369,950 $ 340,004 521,853 476,571 - - (89,808) 47,610 47,847 - (260,514) (204,026) 589,328 660,159 7,400,331 6,740,172 $ 7,989,659 $ 7,400,331 $ 231,097 $ 211,283 195,568 187,821 9,831 350,203 (260,514) (204,026) (5,988) (3,656) (296) (301) 169,698 541,324 6,661,957 6,120,633 $ 6,831,655 $ 6,661,957 $ 1,158,004 $ 738,374 85.51% 90.02% $ 3,259,471 $ 3,130,346 35.53% 23.59% 2015 2014 79 9/30/2020 9/30/2019 9/30/2018 9/30/2017 $ 341,109 $ 320,019 $ 287,348 $ 266,753 $ 341,109 $ 320,019 $ 287,348 $ 266,753 Contribution deficiency (excess) $ - $ - $ - $ - Annual covered payroll $ 4,209,793 $ 4,060,365 $ 3,706,912 $ 3,549,724 8.10% 7.88% 7.75% 7.51% Valuation Date: Notes Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 25 years Asset Valuation Method 10 Year smoothed market; 12% soft corridor Inflation 2.5% Salary Increases 3.5% to 11.5% including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2019 valuation pursuant to an experience study of the period 2014 - 2018 Mortality Other Information: Notes There were no benefit changes during the year. SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN City of Sanger, Texas Post-retirement: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Pre- retirement: PUB(10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates are projected on a fully generational basis with scale UMP. NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Years Ended: Contributions in relation to the actuarially determined contribution Employer contributions as a percentage of covered payroll Actuarially determined employer contributions 80 9/30/2016 9/30/2015 1 $ 247,432 $ 225,111 $ 247,432 $ 225,111 $- $ - $ 3,475,512 $ 3,130,346 7.12% 7.19% 81 1 Total OPEB liability Service cost $ 8,529 $ 9,076 $ 7,601 Interest (on the Total OPEB Liability) 3,938 3,691 3,432 Changes in benefit terms - - - Differences between expected and actual experience (3,932) (9,264) - Changes of assumptions 22,174 (7,993) 9,310 Benefit payments, including refunds of participant contributions (812) (377) (363) Net changes 29,897 (4,867) 19,980 Total OPEB liability - beginning 102,299 107,166 87,186 Total OPEB liability - ending $ 132,196 $ 102,299 $ 107,166 2 Covered payroll $ 4,061,633 $ 3,781,859 $ 3,619,524 3.25% 2.70% 2.96% Notes to schedule: 1 2 This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. Total OPEB Liability as a percentage of covered Years ended December 31, No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement No. 75 to pay related benefits. 2019 PENSION (OPEB) LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM 20172018 City of Sanger, Texas SCHEDULE OF CHANGES IN POSTEMPLOYMENT BENEFITS OTHER THAN 82 OTHER SUPPLEMENTARY INFORMATION 83 Operating Revenues Charges for services $ 1,962,169 $ 1,873,852 $ 7,323,845 $ - Connection fees - - 70,720 - Tap fees 437,550 591,250 - - Other revenue - - - - 2,399,719 2,465,102 7,394,565 - Operating Expenses Salaries and wages 703,183 297,376 1,142,955 - Contracted services 52,617 40,129 470,552 - Utilities 154,678 194,263 2,944 - Materials and supplies 30,338 45,286 63,723 - Water and electric purchases 103,882 - 5,104,985 - Repairs and maintenance 203,575 148,576 186,523 - Depreciation 377,795 403,758 230,994 66 1,626,068 1,129,388 7,202,676 66 773,651 1,335,714 191,889 (66) Nonoperating Revenues (Expenses) Investment income - - - - Interest expense - - - - - - - - Income (Loss) Before Transfers 773,651 1,335,714 191,889 (66) Transfers (out) - - 1,651 - $ 773,651 $ 1,335,714 $ 193,540 $ (66) Sewer Electric Fleet Services City of Sanger, Texas COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS - BY DEPARTMENT For the Year Ended September 30, 2020 Water Total Operating Revenues Total Operating Expenses Operating Income (Loss) Total Nonoperating Revenues (Expenses) Change in Net Position 84 $- $ 11,159,866 - 70,720 - 1,028,800 141,035 141,035 141,035 12,400,421 - 2,143,514 - 563,298 - 351,885 - 139,347 - 5,208,867 - 538,674 14,263 1,026,876 14,263 9,972,461 126,772 2,427,960 389,530 389,530 (642,843) (642,843) (253,313) (253,313) (126,541) 2,174,647 (1,135,455) (1,133,804) $ (1,261,996) $ 1,040,843 Administration Total 85 (This page intentionally left blank.) 86 Addendum dated May 3, 2021 To the Official Statement dated April 19, 2021 (the “Official Statement”) Relating to the offering and sale of CITY OF SANGER, TEXAS (Denton County, Texas $18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2021A $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B The title of the Issue on the Cover Page is hereby amended and restated as follows: CITY OF SANGER, TEXAS (Denton County, Texas $18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2021A $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B The first sentence of the Section entitled Payment Terms on the Cover Page is hereby amended and restated as follows: PAYMENT TERMS… Interest on the $18,615,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and the $2,830,000 City of Sanger Texas General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds” and collectively with the Certificates, the “Obligations”), will accrue from their delivery date to the underwriters listed below (the “Underwriters”). [Remainder of page intentionally left blank] Page ii is hereby amended and restated as follows: CITY OF SANGER, TEXAS $18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A CUSIP NO.(b) Prefix 800876 $10,880,000 Serial Certificates Maturity (05/1) Principal Amount Interest Rate Initial Yield(a)Price CUSIP Suffix(b) 2022 $ 55,000 3.000% 0.140% 102.809 GS7 2023 295,000 3.000% 0.200% 105.539 GT5 2024 320,000 3.000% 0.290% 108.044 GU2 2025 345,000 2.000% 0.420% 106.234 GV0 2026 395,000 2.000% 0.560% 107.066 GW8 2027 140,000 2.000% 0.720% 107.482 GX6 2028 135,000 3.000% 0.880% 114.328 GY4 2029 160,000 3.000% 1.030% 115.060 GZ1 2030 160,000 3.000% 1.160% 115.654 HA5 2031 185,000 3.000% 1.260% 116.274 HB3 2032 260,000 4.000% 1.360% 124.566 HC1 2033 290,000 4.000% 1.450% 123.620 HD9 2034 290,000 4.000% 1.540% 122.683 HE7 2035 320,000 4.000% 1.570% 122.372 HF4 2036 370,000 3.000% 1.760% 111.307 HG2 2037 395,000 3.000% 1.800% 110.920 HH0 2038 1,620,000 3.000% 1.790% 111.016 HJ6 2039 1,665,000 3.000% 1.830% 110.631 HK3 2040 1,715,000 3.000% 1.850% 110.438 HL1 2041 1,765,000 3.000% 1.890% 110.055 HM9 $7,735,000 Term Certificates $7,735,000 3.000% Term Certificates due May 1, 2046, Priced to Yield 2.030%, CUSIP Suffix No. HN7 (a)(b) REDEMPTION…The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after May 1, 2032, in whole or in part on May 1, 2031, or any date thereafter at the par value thereof plus accrued interest to the date fixed for redemption. Additionally, the Certificates maturing on May 1 in the year 2046 (the “Term Certificates”) are subject to mandatory sinking fund redemption prior to maturity. (See “THE OBLIGATIONS – Optional Redemption” and “THE OBLIGATIONS – Mandatory Redemption”). _______________________________ (a) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by Standard and Poor’s Financial Services LLC on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Certificates. Neither the City, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. [Remainder of page left intentionally blank] Page vii is hereby amended and restated as follows: SELECTED FINANCIAL INFORMATION (Unaudited) 2020-2021 Certified Taxable Assessed Valuation………………………………………………... $792,348,389 (a) City Debt: Outstanding Tax Supported Debt (as of Sept. 30, 2020)………………….…. $20,750,000 Plus: The Certificates……………………………………………………………... $18,615,000 Plus: The Bonds $2,830,000 Less: The Refunded Obligations $2,505,000 Total Tax Supported Debt…………………………………………………………. $39,690,000 Debt Service Fund Balance (as of Sept. 30, 2020)………………………………………….. $476,286 % of 2020-21 Assessed Valuation 2020 Per Capita (8,235) Debt Ratios: Direct Tax Supported Debt……………. 5.01% $4,820 2020-21 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation $0.605456 Debt Service ……………………………………………………………………… $0.073644 Total ……………………………………………………………………………… $0.679100 Estimated Annual Debt Service Requirements…………………………………………….. Average……………………………………………………………………… $ 2,205,712 Maximum (2026)…………………………………………………………………. $ 2,535,205 Tax Collections Tax Year 2019 (fiscal year ending Sept 30, 2020)100.18% Total Collections………………………………………………………………….. 100.18% ___________________________ (a) Provided by the Denton Central Appraisal District (the “Appraisal District”) and net of exemptions. Such value is further subject to changes as additions, corrections and deletions are made to the tax roll. [Remainder of page left intentionally blank] The title of the Issue on Page 1 is hereby amended and restated as follows: CITY OF SANGER, TEXAS (Denton County, Texas $18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2021A $2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B The first paragraph in the section entitled INTRODUCTORY STATEMENT on page 1 is hereby amended and restated as follows: This Official Statement, which includes the cover page, the schedules and the appendices hereto, provides certain information regarding the issuance by the City of Sanger, Texas (the “City”) of its $18,615,000 Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) and its $2,830,000 General Obligation Refunding Bonds, Taxable Series 2021B (the “Bonds”). The Certificates and the Bonds are collectively referred to herein as the “Obligations.” The table in the section entitled THE OBLIGATIONS, Mandatory Redemption on page 2 is hereby amended and restated as follows: Term Certificate Stated to Mature May 1, 2046 Mandatory Redemption Date (5/1) Principal Amount ($) 2042 $1,820,000 2043 1,875,000 2044 1,930,000 2045 1,990,000 2046*120,000 The first table in the section entitled THE OBLIGATIONS, Sources and Uses of Funds on page 4 is hereby amended and restated as follows: Sources Principal Amount $18,615,000.00 Premium 1,943,647.85 Total Sources of Funds $20,558,647.85 Uses Deposit to Project Fund $19,999,632.81 Costs of Issuance 161,250.00 Underwriter’s Discount 126,494.21 Deposit to Interest & Sinking Fund 271,270.83 Total Uses of Funds $20,558,647.85 The first paragraph of the section entitled OTHER INFORMATION, Underwriting on page 26 is hereby amended and restated as follows: The Underwriters have agreed to purchase the Certificates from the City for $20,432153.64 (being the principal amount of the Certificates, plus a premium of $1,943,647.85, less an Underwriter’s discount of $126,494.21). [Remainder of page intentionally left blank] Table 11 of Appendix A is hereby amended and restated as follows: PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Series 2021A Certificates Series 2021B Rfd Bonds Fiscal Year 30- Sept Existing Debt Service($)(1)Principal($) Interest($) Total($) Principal($) Interest($) Total($) Total Debt Service Requirements ($) 2021 2,329,166.00 10,060.40 10,060.40 2,339,226.40 2022 1,563,990.00 55,000.00 551,895.83 606,895.83 55,000.00 43,116.00 98,116.00 2,269,001.83 2023 1,564,020.00 295,000.00 559,600.00 854,600.00 55,000.00 42,978.50 97,978.50 2,516,598.50 2024 1,357,755.00 320,000.00 550,750.00 870,750.00 260,000.00 42,786.00 302,786.00 2,531,291.00 2025 1,305,080.00 345,000.00 541,150.00 886,150.00 255,000.00 41,304.00 296,304.00 2,487,534.00 2026 1,306,870.00 395,000.00 534,250.00 929,250.00 260,000.00 39,085.50 299,085.50 2,535,205.50 2027 1,327,020.00 140,000.00 526,350.00 666,350.00 265,000.00 36,173.50 301,173.50 2,294,543.50 2028 1,329,725.00 135,000.00 523,550.00 658,550.00 265,000.00 32,410.50 297,410.50 2,285,685.50 2029 1,321,200.00 160,000.00 519,500.00 679,500.00 275,000.00 28,250.00 303,250.00 2,303,950.00 2030 1,326,194.00 160,000.00 514,700.00 674,700.00 275,000.00 23,217.50 298,217.50 2,299,111.50 2031 1,324,200.00 185,000.00 509,900.00 694,900.00 285,000.00 17,910.00 302,910.00 2,322,010.00 2032 1,320,937.00 260,000.00 504,350.00 764,350.00 290,000.00 12,267.00 302,267.00 2,387,554.00 2033 1,326,206.00 290,000.00 493,950.00 783,950.00 290,000.00 6,177.00 296,177.00 2,406,333.00 2034 1,649,713.00 290,000.00 482,350.00 772,350.00 2,422,063.00 2035 1,648,656.00 320,000.00 470,750.00 790,750.00 2,439,406.00 2036 1,650,344.00 370,000.00 457,950.00 827,950.00 2,478,294.00 2037 1,648,400.00 395,000.00 446,850.00 841,850.00 2,490,250.00 2038 1,620,000.00 435,000.00 2,055,000.00 2,055,000.00 2039 1,665,000.00 386,400.00 2,051,400.00 2,051,400.00 2040 1,715,000.00 336,450.00 2,051,450.00 2,051,450.00 2041 1,765,000.00 285,000.00 2,050,000.00 2,050,000.00 2042 1,820,000.00 232,050.00 2,052,050.00 2,052,050.00 2043 1,875,000.00 177,450.00 2,052,450.00 2,052,450.00 2044 1,930,000.00 121,200.00 2,051,200.00 2,051,200.00 2045 1,990,000.00 63,300.00 2,053,300.00 2,053,300.00 2046 120,000.00 3,600.00 123,600.00 123,600.00 25,299,476.00 18,615,000 10,228,295.83 31,085,603.33 2,830,000.00 375,735.90 3,205,735.90 59,590,815.23 ___________________________________ (1)Excludes the Refunded Obligations. 6LS312302.DOC 1 Purchase Agreement CITY OF SANGER, TEXAS (Denton County, Texas) $20,000,000 COMBINATION TAX AND REVENUE, CERTIFICATES OF OBLIGATION SERIES 2021A ____________________________________ PURCHASE AGREEMENT ____________________________________ April 19, 2021 Honorable Mayor and Members of the City Council City of Sanger Texas 502 Elm Street. Sanger, Texas 76266 Ladies and Gentlemen: The undersigned, Raymond James & Associates, Inc. (the “Representative”), acting on its own behalf and on behalf of the other underwriters listed on Schedule I hereto (collectively, the “Underwriters”), and not acting as fiduciary or agent for the City of Sanger, Texas (the “Issuer”), offers to enter into the following agreement (this “Agreement”) with the Issuer which, upon the Issuer’s written acceptance of this offer, will be binding upon the Issuer and upon the Underwriters. This offer is made subject to the Issuer’s written acceptance hereof on or before 10:00 p.m., Central Standard Time, on April 19, 2021, and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice as described in Section 8 hereof delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance (as defined herein) or in the Official Statement (as defined herein). 1.Purchase and Sale of the Obligations. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all, but not less than all, of the Issuer’s $20,000,000 Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Obligations”). The Issuer acknowledges and agrees that (i) the primary role of the Underwriters is to purchase securities for resale to investors in an arm’s length transaction between the Issuer and the Underwriters; (ii) the Underwriters have financial and other interests that differ from those of the Issuer; (iii) the Underwriters are not acting as a municipal advisor, financial advisor or fiduciary to the Issuer and has not assumed any advisory or fiduciary responsibility to Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and procedures 6LS312302.DOC 2 Purchase Agreement leading thereto (irrespective of whether the Underwriters have provided or are currently providing other services to the Issuer on other matters); (iv) the only obligations the Underwriters have to the Issuer with respect to the transaction contemplated hereby expressly are set forth in this Agreement; and (v) the Issuer has consulted its own financial, municipal, legal, accounting, tax and/or other advisors, as applicable, to the extent it deems appropriate. The Issuer hereby acknowledges that the Underwriters have provided to the Issuer prior disclosures regarding their role as underwriters and under Rule G-17 of the Municipal Securities Rulemaking Board (the “MSRB”), which have been received by the Issuer. The Issuer has a municipal advisor in this transaction that has legal fiduciary duties to the Issuer. The principal amount of the Obligations to be issued, the dated date therefor, the maturities, redemption provisions and interest per annum are set forth in Schedule II hereto. The Obligations shall be as described in, and shall be issued and secured under and pursuant to the provisions of the ordinance adopted by the City Council of the Issuer (the “City Council”) on April 19, 2021 (the “Ordinance”). The purchase price for the Obligations shall be $21,941,179.59 (representing the par amount of the Obligations, plus an original issue premium of $2,076,243.70 on the Obligations, and less an underwriting discount of $135,064.11), plus no accrued interest. The Obligations are being issued pursuant to the Constitution and the general laws of the State of Texas (the “State”), including particularly Chapter 271, Subchapter C, Texas Local Government Code, as amended (the “Act”), Chapter 1502, Texas Government Code, as amended and in accordance with the provisions of the Ordinance. The Obligations are being issued for the following purposes: (i) expansion and improvements to the Issuer’s water and sewer system (the “System”); (ii) system renovations and line relocations to the Issuer’s electric utility system; (iii) street repairs and improvements; and (iv) paying the costs of issuing the Obligations. Except to the extent the Underwriters are exempt under Section 2252.908(c)(4) of the Texas Government Code, submitted herewith are completed and notarized Form (s) 1295 generated by the Texas Ethics Commission’s (the “TEC”) electronic filing application in accordance with the provisions of Section 2252.908 of the Texas Government Code and the rules promulgated by the TEC (a “Form 1295”) for the Underwriters which are not exempt under Section 2252.908(c)(4) of the Texas Government Code in connection with the Underwriters’ entry into this Agreement. The Issuer hereby confirms receipt of a Form 1295 from the non- exempt Underwriters subject to Section 2252.908 and agrees to acknowledge such forms with the TEC through its electronic filing application. The Underwriters and the Issuer understand and agree that, with the exception of information identifying the Issuer and the contract identification number, neither the Issuer nor its consultants are responsible for the information contained in the Forms 1295 and neither the Issuer nor its consultants have verified such information. The Underwriters represent that, to the extent this Agreement constitutes a contract for goods or services within the meaning of Section 2271.002 of the Texas Government Code, as amended, solely for purposes of compliance with Chapter 2271 of the Texas Government Code, and subject to applicable federal law, the Underwriters, or any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Underwriters, are companies which (i) do not boycott Israel or (ii) will not boycott Israel through the term of this Agreement. 6LS312302.DOC 3 Purchase Agreement The terms “boycott Israel” and “company” as used in this paragraph have the meanings assigned to the terms in Section 808.001 of the Texas Government Code, as amended. The Underwriters hereby represent that neither the Underwriters nor their parent companies, wholly- or majority-owned subsidiaries, and other affiliates, if any, is a company identified on a list prepared and maintained by the Texas Comptroller of Public Accounts under Section 2252.153 or Section 2270.0201, Texas Government Code, and posted on any of the following pages of such officer’s internet websites: https://comptroller.texas.gov/purchasing/docs/sudan-list.pdf, https://comptroller.texas.gov/purchasing/docs/iran-list.pdf, https://comptroller.texas.gov/purchasing/docs/fto-list.pdf. The foregoing representation is made solely to comply with Section 2252.152, Texas Government Code, and to the extent such Section does not contravene applicable Federal law and excludes the Underwriters and each of their parent companies, wholly- or majority-owned subsidiaries, and other affiliates, if any, that the United States government has affirmatively declared to be excluded from its federal sanctions regime relating to Sudan or Iran or any federal sanctions regime relating to a foreign terrorist organization. The Underwriters understand “affiliate” to mean any entity that controls, is controlled by, or is under common control with the respective Underwriter and exists to make a profit. 2.Public Offering. The Underwriters agree to make a bona fide public offering of all of the Obligations at prices not to exceed the public offering prices (or yields not less than the reoffering yields) set forth on the inside cover of the Official Statement and may subsequently change such offering prices or yields without any requirement of prior notice. The Underwriters may offer and sell Obligations to certain dealers (including dealers depositing Obligations into investment trusts) and others at prices lower than the public offering prices stated on page ii of the Official Statement; provided that, in the event any of the Obligations are sold to the public at a price of other than the par amount thereof, on or before the Closing, the Representative shall execute and deliver to Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”) an Issue Price Certificate for the Obligations prepared by Bond Counsel. 3.Establishment of Issue Price. a.The Underwriters agree to assist the Issuer in establishing the issue price of the Obligations and the Representative shall execute and deliver to the Issuer at Closing an “issue price certificate” or similar certificate, with the supporting pricing wire(s) or equivalent communications, in a form substantially similar to the certificate attached hereto as Exhibit A with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriters, the Issuer and Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Obligations. b.The Issuer will treat the first price at which 10% of each maturity of the Obligations (the “10% test”) is sold to the public as the issue price of that 6LS312302.DOC 4 Purchase Agreement maturity (if different interest rates apply within a maturity, each separate CUSIP number within that maturity will be subject to the 10% test). At or promptly after the execution of this Agreement, the Underwriters shall report to the Issuer the price or prices at which the Underwriters have sold to the public each separate CUSIP Number within a maturity of Obligations. If at that time the 10% test has not been satisfied as to any maturity of the Obligations, the Underwriters agree to promptly, but no more than three business days, report to the Issuer the prices at which Obligations of that maturity have been sold by the Underwriters to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until the 10% test has been satisfied as to the Obligations of that maturity or until all Obligations of that maturity have been sold to the public. c.The Underwriters have offered the Obligations to the public on or before the date of this Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Schedule I attached hereto, except as otherwise set forth therein. Schedule I also sets forth, as of the date of this Agreement, the maturities, if any, of the Obligations for which the 10% test has not been satisfied and for which the Issuer and the Underwriters agree that the restrictions set forth in the next sentence shall apply, which will allow the Issuer to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Obligations, the Underwriters will neither offer nor sell unsold Obligations of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following: (1)the close of the fifth (5th) business day after the sale date; or (2)the date on which the Underwriters have sold at least 10% of that maturity of the Obligations to the public at a price that is no higher than the initial offering price to the public. The Representative shall promptly advise the Issuer when the Underwriters have sold 10% of that maturity of the Obligations to the public at a price that is no higher than the initial offering price to the public, if that occurs prior to the close of the fifth (5th) business day after the sale date. The Issuer acknowledges that, in making the representation set forth in this subsection, the Underwriters will rely on (i) the agreement of each Underwriter to comply with the hold-the-offering-price rule and the related pricing wire(s), (ii) in the event a selling group has been created in connection with the initial sale of the Obligations to the public, the agreement of each dealer who is a member of the selling group to comply with the hold-the-offering-price rule, as set forth in a selling group agreement and the related pricing wire(s), and (iii) in the event that an Underwriter is a party to a retail distribution agreement that was employed in connection with the initial sale of the Obligations to the public, the agreement of each broker-dealer that is a party to such agreement to comply 6LS312302.DOC 5 Purchase Agreement with the hold-the-offering-price rule, as set forth in the retail distribution agreement and the related pricing wire(s). The Issuer further acknowledges that each Underwriter shall be solely liable for its failure to comply with its agreement regarding the hold-the- offering-price rule and that no Underwriter shall be liable for the failure of any other Underwriter, or of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a retail distribution agreement, to comply with its corresponding agreement regarding the hold-the-offering-price rule as applicable to the Obligations. d.The Underwriters confirm that: (1)any agreement among underwriters, any selling group agreement and each retail distribution agreement (to which the Underwriters are a party) relating to the initial sale of the Obligations to the public, together with the related pricing wire(s), contains or will contain language obligating each Underwriter, each dealer who is a member of the selling group, and each broker-dealer that is a party to such retail distribution agreement, as applicable, to (A) report the prices at which it sells to the public the unsold Obligations of each maturity allotted to it until it is notified by the Representative that either the 10% test has been satisfied as to the Obligations of that maturity or all Obligations of that maturity have been sold to the public and (B) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriters and as set forth in the related pricing wire(s), and (2)any agreement among underwriters relating to the initial sale of the Obligations to the public, together with the related pricing wire(s), contains or will contain language obligating each Underwriter that is a party to a retail distribution agreement to be employed in connection with the initial sale of the Obligations to the public to require each broker- dealer that is a party to such retail distribution agreement to (A) report the prices at which it sells to the public the unsold Obligations of each maturity allotted to it until it is notified by the Underwriter that either the 10% test has been satisfied as to the Obligations of that maturity or all Obligations of that maturity have been sold to the public and (B) comply with the hold-the-offering-price rule, if applicable, in each case if and for so long as directed by the Underwriters and as set forth in the related pricing wire(s). e.The Underwriters acknowledge that sales of any Obligations to any person that is a related party to an Underwriter shall not constitute sales to the public for purposes of this section. Further, for purposes of this section: (1) “public” means any person other than an underwriter or a related party, (2)“underwriter” means (A) any person that agrees pursuant to a written contract with the Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Obligations 6LS312302.DOC 6 Purchase Agreement to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Obligations to the public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Obligations to the public), (3)a purchaser of any of the Obligations is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other), and (4)“sale date” means the date of execution of this Agreement by all parties. 4.The Official Statement. (a)The Issuer previously has delivered, or caused to be delivered, copies of the Preliminary Official Statement dated April 15, 2021 (the “Preliminary Official Statement”) to the Underwriters in a “designated electronic format,” as defined in MSRB Rule G-32 (“Rule G-32”). The Issuer will prepare, or cause to be prepared, a final Official Statement relating to the Obligations, which will be (i) dated the date of this Agreement, (ii) complete within the meaning of the United States Securities and Exchange Commission’s Rule 15c2-12, as amended (the “Rule”), (iii) substantially in the form of the most recent version of the Preliminary Official Statement provided to the Underwriters before the execution hereof and (iv) in both a “designated electronic format” consistent with the requirements of Rule G-32 and in a printed format. Such final Official Statement, including the cover page thereto, all exhibits, schedules, appendices, maps, charts, pictures, diagrams, reports, and statements included or incorporated therein or attached thereto, and all amendments and supplements thereto that may be authorized for use with respect to the Obligations, is herein referred to as the “Official Statement.” Until the Official Statement has been prepared and is available for distribution, the Issuer shall provide to the Underwriters sufficient quantities (which may be in electronic form) of the Preliminary Official Statement as the Underwriter deems necessary to satisfy the obligation of the Underwriter under the Rule with respect to distribution to each potential customer, upon request, of a copy of the Preliminary Official Statement. (b)The Preliminary Official Statement has been prepared by the Issuer for use by the Underwriters in connection with the public offering, sale and distribution of the Obligations. The Issuer hereby represents and warrants that the Preliminary Official 6LS312302.DOC 7 Purchase Agreement Statement has been “deemed final” by the Issuer as of its date for purposes of the Rule, except for the omission of such information which is dependent upon the final pricing of the Obligations for completion, all as permitted to be excluded by Section (b)(1) of the Rule. (c)The Issuer ratifies and consents to the use by the Underwriters prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Obligations. The Issuer shall provide, or cause to be provided, to the Underwriters as soon as practicable after the date of the Issuer’s acceptance of this Agreement (but, in any event, not later than within seven business days after the Issuer’s acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer) copies of the Official Statement which is complete as of the date of its delivery to the Underwriter (i) in a “designated electronic format” consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Underwriter shall request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the MSRB. The Issuer hereby confirms that it does not object to the distribution of the Preliminary Official Statement or the Official Statement in electronic form. (d)If, after the date of this Agreement to and including the date the Underwriter is no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of (i) ninety (90) days from the “end of the underwriting period” (as defined in the Rule) and (ii) the time when the Official Statement is available to any person from the MSRB, but in no case less than twenty-five (25) days after the “end of the underwriting period” for the Obligations), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Representative (and for the purposes of this clause provide the Representative with such information as it may from time to time request), and if, in the reasonable opinion of the Representative such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer’s own expense (in a form and manner approved by the Representative, and which approval will not be unreasonably withheld), copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law; provided, however, that for all purposes of this Agreement and any representation, warranty or covenant made herein, or any certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of The Depository Trust Company, New York, New York (“DTC”), or its book-entry-only system. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, Obligations, instruments and other documents as the Representative may reasonably deem necessary to evidence the 6LS312302.DOC 8 Purchase Agreement truth and accuracy of such supplement or amendment to the Official Statement. The Issuer shall provide any such amendment or supplement, or cause any such amendment or supplement to be provided, (i) in a “designated electronic format” consistent with the requirements of Rule G-32 and (ii) in a printed format in such quantity as the Representative shall request in order for the Underwriters to comply with Section (b)(4) of the Rule and the rules of the MSRB. (e)The Representative hereby agrees to timely file, or cause to be filed, the Official Statement (and any amendment or supplement to the Official Statement prepared in accordance with Section 4(d) above) with (i) the MSRB or its designee (including the MSRB’s Electronic Municipal Market Access System) or (ii) other repositories approved from time to time by the United States Securities and Exchange Commission (in addition to the filing referred to in clause (i) above). Unless otherwise notified in writing by the Underwriter, the Issuer can assume that the “end of the underwriting period” for purposes of the Rule is the date of the Closing. (f)To the knowledge and belief of the Issuer, the Official Statement contains information, including financial information or operating data, concerning every entity, enterprise, fund, account, or person that is material to an evaluation of the offering of the Obligations. 5.Representations, Warranties , and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriter that: (a)The Issuer is a political subdivision of the State of Texas (the “State”) and a municipal corporation organized and existing under the laws of the State, and has full legal right, power and authority, and at the date of the Closing will have full legal right, power and authority, under the laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, (the “Act) and the Ordinance (i) to enter into, execute and deliver this Agreement, the Obligations and the Continuing Disclosure Undertaking, as defined in Section 7(i)(3) hereof, and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement, the Escrow Agreement, the Ordinance, the Continuing Disclosure Undertaking and the other documents referred to in this clause are hereinafter referred to as the “Issuer Documents”), (ii) to sell, issue and deliver the Obligations to the Underwriters as provided herein, and (iii) to carry out and consummate the transactions described by the Issuer Documents and the Official Statement; and, the Issuer has complied, and will at the Closing be in compliance in all material respects, with the terms of the Act and the Issuer Documents as they pertain to such transactions. (b)By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for (i) the adoption of the Ordinance and the issuance and sale of the Obligations on the terms set forth herein, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Obligations and the Issuer Documents, (iii) the approval, distribution and use of the Preliminary Official Statement and the Official Statement for use by the Underwriters in connection with the public 6LS312302.DOC 9 Purchase Agreement offering of the Obligations and (iv) the consummation by it of all other transactions contemplated by the Official Statement, and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in the Ordinance to carry out, give effect to, and consummate the transactions contemplated herein and in the Official Statement. (c)This Agreement constitutes a legal, valid and binding obligation of the Issuer, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium, sovereign immunity of political subdivisions and other similar laws and principles of equity relating to or affecting the enforcement of creditors’ rights; the other Issuer Documents, when duly executed and delivered, will constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to sovereign immunity of political subdivisions, bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors’ rights; the Obligations, when issued, delivered and paid for, in accordance with the Ordinance and this Agreement, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to sovereign immunity of political subdivisions, bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors’ rights; upon the issuance, authentication and delivery of the Obligations as aforesaid, the Ordinance will provide, for the benefit of the holders of the Obligations, the legally valid and binding pledge of ad valorem taxes and lien it purports to create as set forth in the Ordinance, being the pledge to levy, assess and collect an annual ad valorem tax, within the legal limits of the law, upon all taxable property within the boundaries of the Issuer, sufficient to pay the principal of and interest on the Obligations when due. (d)The Issuer is not in breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State or the United States relating to the issuance of the Obligations or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, ordinance, agreement or other instrument to which the Issuer is a party or to which the Issuer is or any of its property or assets are otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice, or both, would constitute a default or event of default by the Issuer in any material respect under any of the foregoing; and the execution and delivery of the Obligations, the Issuer Documents and the adoption of the Ordinance and compliance with the provisions on the Issuer’s part contained therein, will not conflict with or constitute a material breach of or default in any material respect under any constitutional provision, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, ordinance, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Obligations or under the terms of any such law, regulation or instrument, except as provided by the Obligations and the Ordinance. 6LS312302.DOC 10 Purchase Agreement (e)Except for the approval of the Obligations by the Attorney General of the State and the registration thereof by the Comptroller of Public Accounts of the State, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially adversely affect the due performance by the Issuer of its obligations under the Issuer Documents and the Obligations have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Obligations. (f)The Obligations and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption “THE OBLIGATIONS”; the proceeds of the sale of the Obligations will be applied generally as described in the Official Statement under the caption “THE OBLIGATIONS - Sources and Uses of Funds”; and the Continuing Disclosure Undertaking conforms to the description thereof contained in the Official Statement under the caption “CONTINUING DISCLOSURE OF INFORMATION.” (g)Except as may otherwise be disclosed in the Official Statement under the caption “CONTINUING DISCLOSURE OF INFORMATION – Compliance with Prior Undertakings”, during the last five years the Issuer has complied in all material respects with its previous continuing disclosure undertakings made by it in accordance with the Rule. (h)Except as may be otherwise disclosed in the Official Statement, there is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Obligations or the levy and collection of taxes pledged to the payment of principal of and interest on the Obligations pursuant to the Ordinance, or in any way contesting or affecting the validity or enforceability of the Obligations or the Issuer Documents, or contesting the exclusion from gross income of interest on the Obligations for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of the Obligations, the adoption of the Ordinance or the execution and delivery of the Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Obligations or the Issuer Documents. (i)As of the date thereof and as the date hereof, the Preliminary Official Statement did not and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 6LS312302.DOC 11 Purchase Agreement provided, however, that for all purposes of this Agreement including, without limitation, for purposes of subparagraphs (i), (j) and (k), and any certificate delivered by the Issuer in accordance herewith, the Issuer makes no representations with respect to the descriptions in the Preliminary Official Statement or the Official Statement of DTC and its book-entry-only system or of the Bond Insurer. (j)During the period beginning when the Official Statement is delivered to the Underwriter pursuant to paragraph (a) of Section 4 of this Agreement and (unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 4 of this Agreement) at all times subsequent thereto during the period up to and including the twenty-fifth (25th) day subsequent to the “end of the underwriting period,” the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k)If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 4 of this Agreement, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including the twenty-fifth (25th) day subsequent to the “end of the underwriting period,” the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which made, not misleading. (l)The Issuer has the legal authority to apply and will apply, or cause to be applied, the proceeds from the sale of the Obligations as provided in and subject to all of the terms and provisions of the Ordinance. (m)The Issuer, at the sole expense of the Underwriters, will furnish such information and execute such instruments and take such action as the Underwriter may reasonably request (1) to (i) qualify the Obligations for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriters may designate and (ii) determine the eligibility of the Obligations for investment under the laws of such states and other jurisdictions and (2) to continue such qualifications in effect so long as required for the distribution of the Obligations (provided, however, that the Issuer will not be required to qualify as a foreign corporation or to file any consents to service of process under the laws of any jurisdiction) and will advise the Underwriters immediately of written receipt by the Issuer of any notification with respect to the suspension of the qualification of the Obligations for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose. (n)The financial statements of, and other financial information regarding, the Issuer in the Official Statement fairly present the financial position and results of the Issuer as of the dates and for the periods therein set forth. The financial statements of the Issuer have been prepared in accordance with generally accepted accounting principles consistently applied, and except as noted in the Official Statement, the other historical 6LS312302.DOC 12 Purchase Agreement financial information set forth in the Official Statement has been presented on a basis consistent with that of the Issuer’s audited financial statements included in the Official Statement. Prior to the Closing, the Issuer will not take any action within or under its control that will cause any adverse change of a material nature in such financial position, results of operations or condition, financial or otherwise, of the Issuer. (o)Except as may otherwise be disclosed in the Official Statement, the Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer. (p)Prior to the Closing the Issuer will not offer or issue any Obligations or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Obligations, except as may be incurred in the ordinary course of business, without the prior approval of the Representative, which approval shall not be unreasonably withheld. (q)The Issuer, to the extent heretofore requested in writing by the Underwriter, has delivered to the Underwriters true, correct, complete, and legible copies of all information, applications, reports, or other documents of any nature whatsoever submitted to any rating agency for the purpose of obtaining a rating for the Obligations true, correct, complete, and legible copies of all correspondence or other communications relating, directly or indirectly, thereto. (r)Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions described in this Agreement, shall be deemed a representation and warranty by the Issuer to the Underwriters as to the statements made therein. (s)The Issuer covenants that between the date hereof and the date of Closing, it will take no actions which will cause the representations and warranties made in this Section to be untrue in any material respect as of the date of Closing. By delivering the Official Statement to the Underwriters, the Issuer shall be deemed to have reaffirmed, with respect to such Official Statement, the representations, warranties and covenants set forth above with respect to the Preliminary Official Statement. 6.Closing. (a)At 10:00 a.m. Central Standard Time, on May 7, 2021, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter (the “Closing”), the Issuer will, subject to the terms and conditions hereof, deliver the Obligations to the Underwriter, duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriters will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Obligations, as set forth in Section 1 of this Agreement in immediately available funds by wire transfer to the account of the Issuer as indicated by UMB Bank, N.A., Austin, Texas (the “Paying Agent/Registrar”). Payment for the Obligations as aforesaid shall be made at the offices 6LS312302.DOC 13 Purchase Agreement of the Paying Agent/Registrar or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. (b)Delivery of the Obligations in definitive form, utilizing the book entry system, shall be made through DTC, or at the office of the Paying Agent/Registrar acting on behalf of DTC. The Obligations shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Bond for each maturity of the Obligations, registered in the name of Cede & Co., all as provided in the Ordinance, and shall be made available at the offices of the DTC (or if Obligations are to be held in safekeeping for the DTC by the Paying Agent/Registrar pursuant to DTC’s FAST System, at the office of the Paying Agent/Registrar) to the Underwriter at least one (1) business day before the date of the Closing for the purposes of inspection. 7.Closing Conditions. The Underwriters have entered into this Agreement in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriters’ obligations under this Agreement to purchase, to accept delivery of and to pay for the Obligations shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriters, Bond Counsel, and counsel to the Underwriters: (a)The representations and warranties of the Issuer contained herein shall be true, complete and correct in all material respects on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b)The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c)At the time of the Closing, (i) the Issuer Documents and the Obligations shall be in full force and effect in the form heretofore approved by the Underwriter and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; and (ii) the net proceeds of the sale of the Obligations and any funds to be provided by the Issuer shall be deposited and applied as described in the Official Statement and in the Ordinance and (iii) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel to deliver the opinions referred to hereafter; (d)At the time of the Closing, all official action of the Issuer relating to the Obligations and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented, except as may have been agreed to by the Underwriter; 6LS312302.DOC 14 Purchase Agreement (e)At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered the definitive Obligations; (f)At the time of the Closing, there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set forth in the Official Statement that in the reasonable judgment of the Representative, is material and adverse and that makes it, in the reasonable judgment of the Representative, impracticable to market the Obligations on the terms and in the manner described in the Official Statement; (g)The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (h)All steps to be taken and all instruments and other documents to be executed, and all other legal matters in connection with the transactions described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriters; (i)At or prior to the Closing, the Underwriters shall have received one copy of each of the following documents: (1)The Official Statement, and each supplement or amendment thereto, if any, as may have been agreed to by the Underwriter in (i) a “designated electronic format” that meets the requirements of Rule G-32 and (ii) a printed format; (2)The Ordinance, having been duly adopted by the Issuer and certified as being in full force and effect, with such supplements or amendments as may have been agreed to by the Underwriter and the Pricing Certificate duly executed by the Pricing Officer; (3)The undertaking of the Issuer which satisfies the requirements of Section (d)(2) of the Rule (the “Continuing Disclosure Undertaking”); (4)The approving opinion of Bond Counsel with respect to the Obligations, in substantially the form attached to the Official Statement; (5)A supplemental opinion of Bond Counsel addressed to the Issuer and the Underwriter, substantially to the effect that: (A)the Ordinance has been duly adopted and is in full force and effect; (B)the Obligations are exempted securities under section 3(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), and it is not necessary, in connection with the offering and sale of 6LS312302.DOC 15 Purchase Agreement the Obligations to register the Obligations under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (C)Bond Counsel has not verified and is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Official Statement, but has reviewed the statements and information contained in the Official Statement under the captions and subcaptions “THE OBLIGATIONS” (except the subcaption “Sources and Uses of Funds”), “GENERAL INFORMATION REGARDING THE OBLIGATIONS,” “REGISTRATION, TRANSFER AND EXCHANGE,” “AD VALOREM PROPERTY TAXATION – Public Hearing and Maintenance and Operation Tax Rate Limitations,” “LEGAL MATTERS,” “TAX MATTERS,” “LEGAL INVESTMENTS IN TEXAS,” “REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE” and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) and Bond Counsel is of the opinion that the information relating to the Obligations and legal matters contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinance. (6)An opinion of Naman Howell Smith & Lee, PLLC, counsel to the Underwriter, dated the date of the Closing, in substantially the form attached hereto as Exhibit B. (7)A certificate, dated the date of Closing, signed by an authorized official of the Issuer acceptable to the Representative to the effect that (i) all official action of the Issuer relating to the Obligations, the Issuer Documents and the Official Statement have been duly taken by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; (ii) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (iii) except to the extent disclosed in the Official Statement, no litigation or proceeding against it is pending or, to his or her knowledge, threatened in any court or administrative body, nor is there a basis for litigation, which would (a) contest the right of the officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Obligations or the Issuer Documents, or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and collecting taxes other income or levying and collecting the taxes and System revenues pledged or to be pledged to pay the principal of and interest on the Obligations, or the pledge thereof; (iv) to the best of his or her knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the 6LS312302.DOC 16 Purchase Agreement circumstances under which made, not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2020, the latest date as of which audited financial information is available; (8)A certificate of the Issuer, dated the date of closing, in form and substance satisfactory to Bond Counsel and counsel to the Underwriters (a) setting forth the facts, estimates and circumstances in existence on the date of the Closing, which establish that it is not expected that the proceeds of the Obligations will be used in a manner that would cause the Obligations to be “arbitrage Obligations” within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the “Code”), and any applicable regulations (whether final, temporary or proposed), issued pursuant to the Code, and (b) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such certificate; (9)The approving opinion of the Attorney General of the State and the registration certificate of the Comptroller of Public Accounts of the State in respect of the Obligations; (10)Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Obligations; (11)Evidence satisfactory to the Representative that the Obligations have been rated “AA” by S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”) and that such ratings are in effect as of the date of Closing; and (12)Such additional legal opinions, certificates, instruments and other documents as the Representative or counsel to the Underwriters may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the Issuer’s representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance reasonably satisfactory to the Underwriter. 6LS312302.DOC 17 Purchase Agreement If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Obligations contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Obligations shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriters nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriters set forth in Sections 3 and 5 hereof shall continue in full force and effect. 8.Termination. The Underwriters shall have the right to cancel their obligation to purchase the Obligations if, between the date of this Agreement and the Closing, the market price or marketability of the Obligations shall be materially adversely affected, in the sole judgment of the Representative reasonably exercised, by the occurrence of any of the following: (a)Legislation shall be enacted by or introduced in the Congress or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an Ordinance, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Obligations, of the interest on the Obligations as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions described herein, which materially adversely affects the market price for the Obligations, or the market price generally of obligations of the general character of the Obligations (b)Legislation enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Obligations, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Order is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the issuance, offering, or sale of obligations of the general character of the Obligations, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (c)a stop order, ruling, regulation or official statement by the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Obligations, including any or all 6LS312302.DOC 18 Purchase Agreement underlying arrangements, as described herein or by the Official Statement or otherwise, is or would be in violation of any provisions of the federal securities laws, including the Securities Exchange Act of 1934, as amended and as then in effect or the Trust Indenture Act of 1939, as amended and as then in effect; (d)any state blue sky or securities commission or other governmental agency or body in which more than 15% of the Obligations have been offered and sold shall have withheld registration, exemption or clearance of the offering of the Obligations as described herein, or issued a stop order or similar ruling relating thereto; provided that such withholding or stop order is not due to the malfeasance, misfeasance or nonfeasance of the Underwriters; (e)payment for and delivery of any of the Obligations is rendered impracticable or inadvisable because (i) there shall be in force a general suspension of trading in securities on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as would materially adversely affect the market for or market price of any of the Obligations; (ii) a general banking moratorium shall have been declared by federal, State of New York, or State officials authorized to do so, or a material disruption in commercial banking or securities settlement or clearance services shall have occurred; or (iii) there shall have occurred, since the date hereof, any outbreak or escalation of hostilities involving the United States (including, without limitation, an act of terrorism), declaration by the United States, of a national emergency or war or other calamity or crisis or any change in the financial or economic conditions in the United States the effect of which is to cause a material disruption in commercial banking or securities settlement or clearance services or to materially adversely affect the market for or market price of any of the Obligations; (f)the New York Stock Exchange or other national securities exchange or any governmental authority shall impose, as to the Obligations or as to obligations of the general character of the Obligations, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter, which change is subsequent to the date hereof and is not due to the malfeasance, misfeasance or nonfeasance of the Underwriters; (g)any amendment to the federal or Texas Constitution or action by any federal or Texas court, legislative body, regulatory body, or other authority materially adversely affecting the tax status of the Issuer, its property, income, securities (or interest thereon), or the validity or enforceability of the assessments or the levy of taxes or the collection of the System revenues to pay principal of and interest on the Obligations; (h)any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and, in either 6LS312302.DOC 19 Purchase Agreement such event, the Issuer refuses to permit the Official Statement to be supplemented to supply such statement or information, or the effect of the Official Statement as so supplemented is to materially adversely affect the market price or marketability of the Obligations or the ability of the Underwriter to enforce contracts for sale of the Obligations; (i)there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer that will materially adversely affect the market for the Obligations or the ability of the Underwriter to enforce contracts for the sale of the Obligations, except for changes which the Official Statement discloses are expected to occur; (j)any fact or event shall exist or have existed that, in the Underwriters’ reasonable judgment, requires or has required an amendment of or supplement to the Official Statement; (k)there shall have occurred any downgrading or published negative credit watch or similar published information from any rating agency that at the date of this Agreement has published a rating (or has been asked to furnish a rating on the Obligations) on any of the Issuer’s debt obligations that are secured in a like manner as the Obligations, which action reflects a change or possible change, in the ratings accorded any such obligations of the Issuer (including the ratings to be accorded the Obligations); and (l)the purchase of and payment for the Obligations by the Underwriters, or the resale of the Obligations by the Underwriters, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission; provided, however, that such prohibition occurs after the date of this Agreement and is not caused by the action, or failure to act, of the Underwriters. With respect to the condition described in subparagraphs (f) and (l) above, the Underwriter is not aware of any current, pending or proposed law or government inquiry or investigation as of the date of execution of this Agreement which would permit the Underwriter to invoke its termination rights thereunder. 9.Expenses. (a)The Underwriters shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer’s obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Obligations; (ii) the fees and disbursements of Bond Counsel and the Issuer’s Financial Advisor; (iii) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer; (iv) the fees for bond ratings; (v) the costs of preparing, printing and mailing the Preliminary Official Statement and the Official Statement; (vi) the fees and expenses of the Paying Agent/Registrar; (vii) advertising expenses (except any advertising expenses of the Underwriter as set forth below); (viii) the out-of-pocket, miscellaneous and closing expenses, including the cost of travel, of the 6LS312302.DOC 20 Purchase Agreement officers and officials of the Issuer; (ix) the Attorney General’s review fee; and (ix) any other expenses mutually agreed to by the Issuer and the Underwriters to be reasonably considered expenses of the Issuer which are incident to the transactions described herein. (b)The Issuer acknowledges that the Underwriters will pay from the Underwrites’ expense allocation of the underwriting discount the applicable per bond assessment charged by the Municipal Advisory Council of Texas (“MAC”), a non-profit corporation whose purpose is to collect, maintain and distribute information relating to issuing entities of municipal securities. (c)Except as provided for above, the Underwriters shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering of the Obligations; and (iii) all other expenses incurred by them in connection with the public offering of the Obligations, including the fees and disbursements of counsel retained by the Underwriters. Certain payments may be in the form of inclusion of such expenses in the expense component of the Underwriter’s discount. 10.Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing or via facsimile at the City of Sanger, Texas, 502 Elm St., Sanger, Texas 76266, Attention: City Manager; and, any notice or other communication to be given to the Underwriters under this Agreement may be given by delivering the same in writing to Raymond James & Associates, Inc., 5956 Sherry Lane, Suite 1900, Dallas, Texas 75225, Attn: Jim Buie, Managing Director. 11.Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriters (including successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer’s representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Obligations pursuant to this Agreement; and (iii) any termination of this Agreement. 12.Effectiveness. This Agreement shall become effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 13.Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State of Texas. 14.Severability. If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provisions of any Constitution, statute, rule of public policy, or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 6LS312302.DOC 21 Purchase Agreement 15.Business Day. For purposes of this Agreement, “business day” means any day on which the New York Stock Exchange is open for trading. 16.Section Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 17.Counterparts. This Agreement may be executed in several counterparts each of which shall be regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document) and all of which shall constitute one and the same document. 18.No Personal Liability. Neither the City Council nor any officer, agent, or employee of the Issuer, shall be charged personally by the Underwriters with any liability, or be held liable to the Underwrites under any term or provision of this Agreement, or because of execution or attempted execution, or because of any breach or attempted or alleged breach, of this Agreement. 19.Entire Agreement. This Agreement represents the entire agreement between the Issuer and the Underwriters with respect to the preparation of the Preliminary Official Statement and the Official Statement, the conduct of the offering, and the purchase and sale of the Obligations. [signature page follows] Schedule II SCHEDULE I List of Underwriters Raymond James & Associates, Inc. 5956 Sherry Lane, Suite 1900 Dallas, Texas 75225 Samco Capital 1700 Pacific Avenue, Suite 1200 Dallas, Texas 75201 Oppenheimer & Co. 13455 Noel Rd., Suite 1200 2 Galleria Tower Dallas, Texas 75240 Schedule II SCHEDULE II 20,000,000 City of Sanger Texas, Combination Tax & Revenue Certificates of Obligation, Series 2021A Interest Accrues from Date of Delivery GENERAL RULE (10% TEST) MATURITIES $10,580,000 SERIAL CERTIFICATES Maturity Date(5/1)(a) Principal Amount Initial Interest Rate Initial Yield(b)Price(b) *************** 2023 $295,000 3.000%0.200%105.539 2024 320,000 3.000%0.290%108.044 2025 345,000 2.000%0.420%106.234 2026 395,000 2.000%0.560%107.066 2027 140,000 2.000%0.720%107.482 *************** *************** *************** *************** *************** 2033 290,000 4.000%1.450%123.620 2034 290,000 4.000%1.540%122.683 2035 320,000 4.000%1.570%122.372 2036 370,000 3.000%1.760%111.307 2037 395,000 3.000%1.800%110.920 2038 1,775,000 3.000%1.790%111.016 2039 1,825,000 3.000%1.830%110.631 2040 1,880,000 3.000%1.850%110.438 2041 1,940,000 3.000%1.890%110.055 $8,465,000.00 TERM CERTIFICATES $8,465,000 3.000% Term Certificates due May 1, 2046, Yield 2.030%, Price 108.725(a)(b)(c) __________________ (a) The Certificates maturing on and after May 1, 2032, are subject to optional redemption, in whole or in part, on May 1, 2031, or any date thereafter, at a price equal to the par value thereof, plus accrued interest from the most recent interest payment date to the date or redemption. (b) The initial reoffering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. (c) The Term Certificates are subject to mandatory sinking fund redemption at the par value thereof plus accrued interest to the date fixed for redemption on the dates and in the amounts set forth below: Term Certificate Maturity Date Mandatory Redemption Date Principal Amount May 1, 2046 May 1, 2042 $1,955,000 May 1, 2043 2,055,000 May 1, 2044 2,115,000 May 1, 2045 2,180,000 May 1, 2046 (maturity)120,000 Schedule II HOLD-THE-OFFERING-PRICE MATURITIES $955,000 SERIAL CERTIFICATES ______________ (a) The Certificates maturing on and after May 1, 2032, are subject to optional redemption, in whole or in part, on May 1, 2031, or any date thereafter, at a price equal to the par value thereof, plus accrued interest from the most recent interest payment date to the date or redemption. (b) The initial reoffering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. Maturity Date (5/1)(a) Principal Amount Initial Interest Rate Initial Yield(b)Price(b) 2022 $55,000 3.000%0.140%102.809 2028 135,000 3.000%0.880%114.328 2029 160,000 3.000%1.030%115.060 2030 160,000 3.000%1.160%115.654 2031 185,000 3.000%1.260%116.274 2032 260,000 4.000%1.360%124.566 6LS312302.DOC Exhibit A-1 EXHIBIT A CERTIFICATE REGARDING ISSUE PRICE The undersigned, on behalf of Raymond James & Associates, Inc. as representative of the underwriters set forth on Schedule II of the Bond Purchase Agreement, as defined below (collectively the “Underwriters”) hereby certifies with respect to the sale of the City of Sanger, ,Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”), as follows: 1.The undersigned is a duly authorized representative of the Underwriters. The Underwriters purchased the Certificates from the City of Sanger, Texas (the “Issuer”), pursuant to that Purchase Agreement, dated April 19, 2021, and entered into by the Issuer and the Underwriters. In this capacity, I am familiar with the facts stated herein and am duly authorized to execute and deliver this certificate on behalf of the Underwriters. 2.The Underwriters have made a bona fide offering to the public of all the Certificates of each maturity at the respective initial offering prices (the “Initial Offering Prices”) set forth in the pricing wire attached hereto as Schedule I. The Initial Offering Prices are the first prices at which at least 10% of the Certificates of each maturity was sold to the public, except for the Certificates maturing in the years 2022 and 2028 through 2032 (the “Undersold Maturities”). 3.As of the date hereof, other than the undersold maturities, the first price or yield at which at least 10% of each Maturity of the Certificates was sold by the Underwriter to the Public was the respective Initial Offering Price set forth on Schedule I hereto. Attached hereto as Schedule II is also a copy of the final pricing wire for each Undersold Maturity or an equivalent communication. With respect to the Undersold Maturities, as agreed to in writing by the Underwriters in the Purchase Agreement, the Underwriters have not offered or sold any of the Undersold Maturities to any person at a price higher than or a yield lower than the respective Initial Offering Price for a period of time starting on the Sale Date and ending on the earlier of (a) the date on which 10% of the respective Undersold Maturity was sold at one or more prices no higher than or yields no lower than the Initial Offering Price by the Underwriters or (b) the close of the fifth business day following the Sale Date. 4.The sum of the Initial Offering Prices is $21,941,179.59. The Certificates were issued without pre-issuance accrued interest. , 5.For purposes of this Certificate, the following definitions apply. “Maturity” means Certificates with the same credit and payment terms. Certificates with different maturity dates, or Certificates with the same maturity date but different stated interest rates, are treated as separate maturities. “Public” means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter. “Related Party” means any entity if an Underwriter and such entity are subject, directly or indirectly, to (i) at least 50% common ownership of the voting power or the total value of their 6LS312302.DOC Exhibit A-2 stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other). “Underwriter” means (i) any person that agrees pursuant to a written contract with the issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Certificates to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the Public). The ISSUER may rely on the statements made herein in connection with making certain representations set forth in the Federal Tax Certificate to which this Certificate is attached and in its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, regarding the exclusion from gross income interest on the Certificates. Further, Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel, may also rely on this Certificate of Underwriter for purposes of its opinion that interest on the Certificates is excludable from gross income for federal income tax purposes and the preparation of the Internal Revenue Service Form 8038-G. EXECUTED and DELIVERED as of the ___ day of ____________, 2021. RAYMOND JAMES & ASSOCIATES, INC. By:______________________________________ Name:____________________________________ Title:_____________________________________ 6LS312302.DOC Exhibit B-1 EXHIBIT B OPINION OF COUNSEL TO THE UNDERWRITERS __________________, 2021 Raymond James & Associates, Inc. 5956 Sherry Lane, Suite 1900 Dallas, Texas 75225 Samco Capital 1700 Pacific Avenue, Suite 1200 Dallas, Texas 75201 Oppenheimer & Co. 13455 Noel Rd., Suite 1200 2 Galleria Tower Dallas, Texas 75240 Re: $___________ City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (the “Obligations”). Ladies and Gentlemen: We have acted as counsel for you, the underwriters (the “Underwriters”) in connection with your purchase from the City of Sanger, Texas (the “Issuer”) of its Combination Tax & Revenue Certificates of Obligation, Series 2021A, in the aggregate principal amount of $___________ (the “Obligations”), pursuant to the Purchase Agreement dated April 19, 2021 (the “Purchase Agreement”) between you and the Issuer. Capitalized terms used herein and not otherwise defined shall have the respective meanings given such terms in the Purchase Agreement. In our capacity as your counsel, we have reviewed the ordinance of the City Council of the Issuer, dated April 19, 2021 for the Obligations (the “Ordinance”), the official statement of the Issuer dated April 19, 2021 (the “Official Statement”), the Purchase Agreement, certificates of the Issuer and others, the opinions referred to in Section 6(j) of the Purchase Agreement, and such other records and documents, and we have made such investigations of law, as we deemed appropriate as a basis for the opinions and conclusions hereinafter expressed. We do not assume any responsibility for any electronic version of the Official Statement and assume that any such version is identical in all respects to the printed version. In arriving at the opinions and conclusions hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, without independent assessment or inquiry, the validity, accuracy and sufficiency of the records, documents, certificates and opinions referred to above, including the accuracy of all factual 6LS312302.DOC Exhibit B-2 matters represented and legal conclusions contained therein, including (without limitation) any representations and legal conclusions regarding the valid existence of the Issuer and the due authorization, issuance, delivery, validity and enforceability of the Ordinance and the Obligations and the exclusion of interest thereon from gross income for federal income tax purposes, and the legality, validity and enforceability of any laws, documents and instruments that may be related to the authorization, issuance, payment or security of the Obligations. We have assumed that all records, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine. Based solely on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions and conclusions: 1.The Obligations are exempted securities that do not require registration under the Securities Act of 1933, as amended (the “1933 Act”) and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act. 2.We are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as your counsel, to assist you in part of your responsibility with respect to the Official Statement, we participated in conferences with your underwriters and representatives of the Issuer, Orrick, Herrington & Sutcliffe LLP, as bond counsel, and others, during which the contents of the Official Statement and related matters were discussed. Based on our participation in the above-referenced conferences (which did not extend beyond the date of the Official Statement), and in reliance thereon, on oral and written statements and representations of the Issuer and others and on the records, documents certificates, opinions and matters herein mentioned, we advise you as a matter of fact and not opinion that, during the course of our representation of you on this matter, no facts came to the attention of the attorneys in our firm rendering legal services to you in connection with the Official Statement which caused us to believe that the Official Statement as of its date and as of the date hereof (except for any CUSIP numbers, financial, accounting, statistical or economic or demographic data or forecasts, numbers, charts, tables, estimates, projections, assumptions or expressions of opinion, any information about verification, feasibility, valuation, appraisals, real estate or environmental matters, Appendices, or any information about book-entry, DTC, ratings, rating agencies, tax exemption, the Underwriter, or underwriting, included or referred to therein or omitted therefrom, which we expressly exclude from the scope of this paragraph and as to which we express no opinion or view) contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. No responsibility is undertaken or view expressed with respect to any other disclosure document, materials or activity, or as to any information from another document or source referred to by or incorporated by reference in the Official Statement. We are furnishing this letter to you pursuant to paragraph 6(j)(8) of the Purchase 6LS312302.DOC Exhibit B-3 Agreement solely for your benefit as the Underwriter in connection with the original issuance of the Obligations on the date hereof. We disclaim any obligation to update this letter. This letter is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not be, relied upon by owners of Obligations or any other party to whom it is not specifically addressed. Respectfully yours, NAMAN HOWELL SMITH & LEE, PLLC 06B - Addendum to Bond Purchase Agreement - Sanger CO 2021A Addendum to the Bond Purchase Agreement dated April 19, 2020 (the “Bond Purchase Agreement”) relating to the primary offering and sale of $18,615,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A The first and fourth paragraphs of Section 1 are hereby amended and restated as follows: 1.Purchase and Sale of the Obligations. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriters, all, but not less than all, of the Issuer’s $18,615,000 Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Obligations”). The purchase price for the Obligations shall be $20,432,153.64 (representing the par amount of the Obligations, plus an original issue premium of $1,943,647.85 on the Obligations, and less an underwriting discount of $126,494.21), plus no accrued interest. [Remainder of page intentionally left blank] 06B - Addendum to Bond Purchase Agreement - Sanger CO 2021A Schedule II is hereby amended and restated as follows: SCHEDULE II $18,615,000 City of Sanger Texas, Combination Tax & Revenue Certificates of Obligation, Series 2021A Interest Accrues from Date of Delivery GENERAL RULE (10% TEST) MATURITIES $9,925,000 SERIAL CERTIFICATES Maturity Date(5/1)(a) Principal Amount Initial Interest Rate Initial Yield(b) Price(b) *************** 2023 $295,000 3.000%0.200%105.539 2024 320,000 3.000%0.290%108.044 2025 345,000 2.000%0.420%106.234 2026 395,000 2.000%0.560%107.066 2027 140,000 2.000%0.720%107.482 *************** *************** *************** *************** *************** 2033 290,000 4.000%1.450%123.620 2034 290,000 4.000%1.540%122.683 2035 320,000 4.000%1.570%122.372 2036 370,000 3.000%1.760%111.307 2037 395,000 3.000%1.800%110.920 2038 1,620,000 3.000%1.790%111.016 2039 1,665,000 3.000%1.830%110.631 2040 1,715,000 3.000%1.850%110.438 2041 1,765,000 3.000%1.890%110.055 $7,735,000.00 TERM CERTIFICATES $7,735,000 3.000% Term Certificates due May 1, 2046, Yield 2.030%, Price 108.725(a)(b)(c) __________________ (a) The Certificates maturing on and after May 1, 2032, are subject to optional redemption, in whole or in part, on May 1, 2031, or any date thereafter, at a price equal to the par value thereof, plus accrued interest from the most recent interest payment date to the date or redemption. (b) The initial reoffering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. (c) The Term Certificates are subject to mandatory sinking fund redemption at the par value thereof plus accrued interest to the date fixed for redemption on the dates and in the amounts set forth below: Term Certificate Maturity Date Mandatory Redemption Date Principal Amount May 1, 2046 May 1, 2042 $1,820,000 May 1, 2043 1,875,000 May 1, 2044 1,930,000 May 1, 2045 1,990,000 May 1, 2046 (maturity)120,000 06B - Addendum to Bond Purchase Agreement - Sanger CO 2021A HOLD-THE-OFFERING-PRICE MATURITIES $955,000 SERIAL CERTIFICATES ______________ (a) The Certificates maturing on and after May 1, 2032, are subject to optional redemption, in whole or in part, on May 1, 2031, or any date thereafter, at a price equal to the par value thereof, plus accrued interest from the most recent interest payment date to the date or redemption. (b) The initial reoffering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. [Remainder of page intentionally left blank] Maturity Date (5/1)(a) Principal Amount Initial Interest Rate Initial Yield(b)Price(b) 2022 $ 55,000 3.000%0.140%102.809 2028 135,000 3.000%0.880%114.328 2029 160,000 3.000%1.030%115.060 2030 160,000 3.000%1.160%115.654 2031 185,000 3.000%1.260%116.274 2032 260,000 4.000%1.360%124.566 6M26110.DOC IN WITNESS WHEREOF, the undersigned have set their hands as of the date set forth above. RAYMOND JAMES & ASSOCIATES, INC., as Representative of the Underwriters By: _____________________________________ Name: Jeff Philyaw _______________________ Title: Director __________________________ 4133-2427-6523.2 PAYING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT (this “Agreement”) is entered into as of May 3, 2021, by and between the CITY OF SANGER, TEXAS (the “City”) and UMB BANK, N.A., Austin, Texas, as paying agent/registrar (together with any successor in such capacity, the “Bank”). RECITALS OF THE CITY WHEREAS, the City has duly authorized and provided for the issuance of its City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”) in the aggregate principal amount of $18,615,000 to be issued as fully registered certificates; WHEREAS, all things necessary to make the Certificates the valid obligations of the City, in accordance with their terms, will be done upon the issuance and delivery thereof; WHEREAS, the City and the Bank wish to provide the terms under which the Bank will act as Paying Agent to pay the principal of, redemption premium, if any, and interest on the Certificates, in accordance with the terms thereof, and under which the Bank will act as Registrar for the Certificates; and WHEREAS, the City and the Bank have duly authorized the execution and delivery of this Agreement; and all things necessary to make this Agreement the valid agreement of the parties, in accordance with its terms, have been done. NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The City hereby appoints the Bank to act as Paying Agent with respect to the Certificates, to pay to the Registered Owners of the Certificates, in accordance with the terms and provisions of this Agreement and the ordinance authorizing the issuance of the Certificates (the “Ordinance”), the principal of, redemption premium, if any, and interest on all or any of the Certificates. In addition, the City hereby appoints the Bank as Registrar with respect to the Certificates, and the Bank hereby accepts its appointment, and agrees to act as Paying Agent and Registrar with respect to the Certificates. 24133-2427-6523.2 Section 1.02. Compensation. In consideration of the deposits of funds required to be made with the Bank by the City pursuant to the provisions of the Ordinance, the Bank shall be paid the fees set forth in the Bank’s fee schedule attached as Exhibit A hereto and agrees to abide by and accept the terms hereof and of the Ordinance relating to the duties of the Paying Agent/Registrar. ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: “Bank” means UMB BANK, N.A., Austin, Texas, a commercial bank which is a national bank duly organized and existing under the laws of the United States of America. “Certificate” or “Certificates” means any one or all of the “$18,615,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A” authorized by the Ordinance. “City” means the City of Sanger, Texas. “Ordinance” means the ordinance of the City approved by its City Council on May 3, 2021 pursuant to which the Certificates are issued. “Paying Agent” means the Bank when it is performing the function of paying agent. “Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government or any entity whatsoever. “Registrar” means the Bank when it is performing the function of registrar. “Registered Owner” means the Person in whose name any Certificate is registered in the books of registration maintained by the Bank under this Agreement. All other capitalized terms shall have the meanings assigned to them in the Ordinance. 34133-2427-6523.1 ARTICLE THREE DUTIES OF THE BANK Section 3.01. Initial Delivery of the Certificates. The Certificates will be initially registered and delivered to the purchaser designated by the City as set forth in the Ordinance. If such purchaser delivers a written request to the Bank not later than five business days prior to the date of initial delivery, the Bank will, on the date of initial delivery, exchange the Certificates initially delivered for Certificates of authorized denominations, registered in accordance with the instructions in such request and the Ordinance. Section 3.02. Duties of Paying Agent. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the City, timely pay on behalf of the City the principal of and interest on each Certificate in accordance with the provisions of the Ordinance. If the issue is to be Depository Trust Company (DTC) eligible, the Paying Agent will comply with all eligibility requirements as outlined and agreed upon in the eligibility questionnaire. Section 3.03. Duties of Registrar. The Bank shall provide for the proper registration of the Certificates and the timely exchange, replacement and registration of transfer of the Certificates in accordance with the provisions of the Ordinance. Any changes to Registered Owners for such exchange, replacement and registration shall be made by the Bank only in accordance with the Ordinance. The Bank will maintain the books of registration in accordance with the Bank’s general practices and procedures in effect from time to time; provided, however, that the Bank agrees to maintain books of registration for the Certificates at the City Secretary’s office in City of Sanger, Texas, which books of registration may be a copy of the register which shall be kept current by the Bank. Section 3.04. Unauthenticated Certificates. The City shall provide an adequate inventory of unauthenticated Certificates to facilitate transfers. The Bank covenants that it will maintain such unauthenticated Certificates in safekeeping and will use reasonable care in maintaining such Certificates in safekeeping, which shall be not less than the care it maintains for debt securities of other government entities or corporations for which it serves as registrar, or which it maintains for its own securities. 44133-2427-6523.1 Section 3.05. Reports. Upon request of the City, the Bank will provide the City reports which will describe in reasonable detail all transactions pertaining to the Certificates and the books of registration for the period of time specified by the City. The City may also inspect and make copies of the information in the books of registration and such other documents related to the Certificates and in the Bank’s possession at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the content of the books of registration to any person other than to, or at the written request of, an authorized officer or employee of the City, except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of a subpoena, court order or other lawful request, the Bank will notify the City immediately so that the City may contest the subpoena, court order or other request if it so chooses. Section 3.06. Canceled Certificates. All Certificates surrendered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly canceled by it and, if surrendered to the City, shall be delivered to the Bank and, if not already canceled, shall be promptly canceled by the Bank. The City may at any time deliver to the Bank for cancellation any Certificates previously authenticated and delivered which the City may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Bank. All canceled Certificates held by the Bank shall be destroyed before the expiration of one year after the date of its payment or before the expiration of three months after the date the Registrar files with the City a list identifying the Certificates to be destroyed. Section 3.07. Reliance on Documents, Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank by the City. (b) The Bank shall not be liable to the City for actions taken under this Agreement as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed by law, with regard to its duties hereunder. (c) This Agreement is not intended to require the Bank to expend its own funds for performance of any of its duties hereunder. (d) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys. (e) The Bank is also authorized to transfer funds relating to the closing and initial delivery of the securities in the manner disclosed in the closing memorandum approved by the City as prepared by the City’s financial advisor or other agent. The Bank may act on a facsimile 54133-2427-6523.1 transmission of the closing memorandum to be followed by an original of the closing memorandum signed by the financial advisor or the City. Section 3.08. Money Held by Bank. Money held by the Bank hereunder shall be held in trust for the benefit of the Registered Owners of the Certificates, with such money in the account that exceed the deposit insurance available to the City, provided by the Federal Deposit Insurance Corporation, to be fully collateralized with securities or obligations that are eligible under the laws of the State of Texas to secure and be pledged as collateral for trust accounts until the principal and interest on such Certificates have been presented for payment and paid to the Owner thereof. The Bank shall be under no obligation to pay interest on any money received by it hereunder. All money deposited with the Bank hereunder shall be secured in the manner and to the fullest extent required by law for the security of funds of the City. Any money deposited with the Bank for the payment of the principal of or interest on any Certificates and remaining unclaimed by the Registered Owner after the expiration of three years from the date such funds have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. To the extent such provisions of the Property Code do not apply to the funds, such funds shall be paid by the Bank to the City upon receipt of a written request therefor from the City. The Bank shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with the foregoing provision. Section 3.9. Indemnification. To the extent permitted by law, the City agrees to indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on its part, arising out of or in connection with its acceptance or administration of its duties hereunder, including the cost and expense against any claim or liability in connection with the exercise or performance of any of its powers or duties under this Agreement. Section 3.10. Interpleader. The City and the Bank agree that the Bank may seek adjudication of any adverse claim, demand, or controversy over its person as well as funds on deposit, in either a Federal or State District Court located in the Denton County in the State of Texas where either the Bank maintains an office or the administrative offices of the City is located, and agree that service of process by certified or registered mail, return receipt requested, to the address referred to iin this Agreement shall constitute adequate service. The City and the Bank further agree that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction located in the State of Texas to determine the rights of any Person claiming any interest herein. 64133-2427-6523.1 ARTICLE FOUR MISCELLANEOUS PROVISIONS Section 4.01. May Own Certificates. The Bank, in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent and Registrar for the Certificates. Section 4.02. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section 4.03. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 4.04. Notices. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the City or the Bank shall be mailed or delivered to the City or the Bank, respectively, at the addresses shown herein, or such other address as may have been given by one party to the other by 15 days’ written notice. Section 4.05. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 4.06. Successors and Assigns. All covenants and agreements herein by the City and the Bank shall bind their successors and assigns, whether so expressed or not. This Agreement shall not be assigned by the Bank without the prior written consent of the City. Section 4.07. Severability. If any provision of this Agreement shall be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. 74133-2427-6523.1 Section 4.08. Benefits of Agreement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim hereunder. Section 4.09. Ordinance Governs Conflicts. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists between this Agreement and the Ordinance, the Ordinance shall govern. The Bank agrees to be bound by the terms of the Ordinance with respect to the Certificates. Section 4.10. Term and Termination. This Agreement shall be effective from and after its date and may be terminated for any reason by the City or the Bank at any time upon 60 days’ written notice; provided, however, that no such termination shall be effective until a successor has been appointed and has accepted the duties of the Bank hereunder. In the event of early termination, regardless of circumstances, the Bank shall deliver to the City or its designee all funds, Certificates and all books and records pertaining to the Bank’s role as Paying Agent and Registrar with respect to the Certificates, including, but not limited to, the books of registration. Section 4.10. Unclaimed Funds. Subject to the applicable unclaimed property laws of the State of Texas, any funds deposited with the Bank for the payment of the principal, premium (if any) or interest on any Certificate and remaining unclaimed shall be delivered to such governmental office or agency at a time and in a manner required or permitted by applicable law. Section 4.11. Governing Law. This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Texas. Section 4.13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Section 4.12. No Boycott Israel. To the extent this Agreement is a contract for goods or services within the meaning of Section 2271.002 of the Texas Government Code, as amended, the Bank hereby verifies that the Bank does not boycott Israel and will not boycott Israel through the term of this Agreement. For purposes of this verification, “boycott Israel” means refusing to deal with, terminating business activities with, or otherwise taking any action that is intended to penalize, inflict economic harm 84133-2427-6523.1 on, or limit commercial relations specifically with Israel, or with a person or entity doing business in Israel or in an Israeli-controlled territory, but does not include an action made for ordinary business purposes. The Bank is a company as defined in Section 808.001(2) of the Texas Government Code, which means a for profit sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, or limited liability company, including a wholly owned subsidiary, majority-owned subsidiary, parent company, or affiliate of those entities or business associations that exists to make a profit. Section 4.135. Compliance with Subchapter F of Chapter 2252 of the Texas Government Code. he Bank hereby verify and warrant that at the time of execution and delivery of this Agreement neither the Bank nor any wholly owned subsidiary, majority-owned subsidiary, parent company or affiliate of the Bank (i) engage in business with Iran, Sudan or any foreign terrorist organization as described in Chapters 806 or 807 of the Texas Government Code, or Subchapter F of Chapter 2252 of the Texas Government Code, or (ii) is a company listed by the Texas Comptroller under Sections 806.051, 807.051 or 2252.153 of the Texas Government Code. The term “foreign terrorist organization” as used in this subsection (b) has the meaning assigned to such term in section 2252.151 of the Texas Government Code. 94133-2427-6523.1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF SANGER, TEXAS By: Mayor ADDRESS: 502 Elm Street Sanger, Texas 76266 ATTEST: ___________________________________ City Secretary UMB BANK, N.A. By: Name: Title: ADDRESS: 6034 W. Courtyard Drive, Suite 370 Austin, Texas 77830 Attn: Corporate Trust Dept. 4133-2427-6523.1 EXHIBIT A PAYING AGENT/REGISTRAR FEES See Attached City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A Fees for services are as follows: Acceptance Fee: WAIVED A one-time fee payable at closing to cover the review of governing documents, communication with financing team, set-up of account records and customary duties and responsibilities relating to the closing. Annual Paying Agent/Registrar Fee: $500.00 Annual fee to cover the duties and responsibilities of the Paying Agent/Registrar related to the administration of the transaction including the maintenance of account records on various systems, the monitoring of required compliance items, payment of debt services and all routine duties as contemplated by the governing documents. • First year annual fee is payable in advance on the closing date and annually thereafter until termination. • A $300 fee will be billed for Optional Redemptions at the time of service. Extraordinary Services/ Miscellaneous Fees: The fees, charges and expenses specified herein are for the typical and customary services as Bond Registrar and Paying Agent. UMB may also charge for typical out-of-pocket expenses and other expenses connected with paying agent and registrar services for bond issues of similar size and type such as: postage, supplies, bond redemptions, courier, wire transfer and long distance telephone. Fees for additional or extraordinary services not now part of the customary services provided, such as special services during defaults, additional government reporting requirements, or document amendments will be charged at the then current rates for such services. Extraordinary expenses, such as legal fees and travel expenses, shall be invoiced to the client based upon the actual out of pocket cost to the Agent/Trustee. UMB reserves the right to renegotiate its current fee schedule to correspond with changing economic conditions, inflation, and changing requirements relating to the day to day service delivery. Final acceptance of the appointment is subject to approval of authorized officers of UMB Bank, N.A. and full review and execution of all documentation related hereto. Fees paid in advance are not subject to proration. Execution of the governing documents constitutes agreement to the fee schedule noted above. 4142-6380-0619.5 GENERAL CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § We, the undersigned officers of the City of Sanger, Texas (the “City”), do hereby make and execute this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the City’s $18,615,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A, dated as of May 1, 2021 (the “Certificates”), now in the process of issuance, as follows: (1) The City is a duly incorporated Home Rule City, operating and existing under the Constitution and laws of the State of Texas and the City’s home rule charter, which charter has not been changed or amended since the passage of the ordinance authorizing the issuance of the City’s last obligations issues by the City which were the City of Sanger General Obligation Refunding Bonds, Series 2019, dated July 1, 2019. According to the U.S. Census, the City’s 2010 population was 6,916. The City’s estimated 2020 population is 8,944. (2) The Certificates are being issued to provide for (1) water and sewer expansion and improvements, electric utility system renovations and line relocations and city wide street improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. All of the purposes to be financed with the proceeds of the Certificates will be owned and operated by the City (3) The currently effective ad valorem tax appraisal roll of the City (the “Tax Roll”) is the Tax Roll prepared and approved during the calendar year 2020, being the most recently approved Tax Roll of the City; the taxable property in the City has been appraised, assessed and valued as required and provided by the Texas Constitution and Property Tax Code (collectively, “Texas law”); the Tax Roll for the year has been submitted to the City Council of the City as required by Texas law, and has been approved and recorded by the City Council; and according to the Tax Roll for the year, the net aggregate taxable value of taxable property in the City (after deducting the amount of all applicable exemptions required or authorized under Texas law), upon which the annual ad valorem tax of the City has been or will be imposed or levied, is $792,348,389. (4) The following individuals were the duly elected and qualified Mayor and City Council of the City holding the offices opposite their names: Thomas Muir Mayor Gary Bilyeu Mayor Pro Tem Marissa Barrett Councilmember, Place 1 Dennis Dillon Councilmember, Place 3 Allen Chick Councilmember, Place 4 David Clark Councilmember, Place 5 24142-6380-0619.5 (5) Jeriana Staton is the duly appointed and qualified Deputy City Secretary of the City. (6) The Net Revenues of the water and sewer system have not been pledged in any other manner or for any other purpose, and the pledge of the Net Revenues of the water and sewer system to the Certificates evidences the only lien, encumbrance, or indebtedness of the water and sewer system or against Net Revenues of the water and sewer system. (7) Attached to this certificate as Exhibit A is a true, full and correct debt service schedule for the Certificates. Attached as Exhibit B is a true, full and correct debt service schedule for all of the City’s outstanding tax supported debt, including the Certificates. The principal amount of the City’s total outstanding tax supported debt, including the Certificates, is $45,299,476 (8) The following is a true, full and current schedule of water and sewer system revenues, remaining after the payment of all operation and maintenance expenses thereof (“Net Revenues”), for the last three fiscal years: Fiscal Year Ending: 9/30/20 09/30/19 9/30/18 Net Revenues $2,174,647 $2,184,455 $2,523,757 (9) The current rates and charges for services provided by the water and sewer system are set forth in Exhibit C. (10) The City is not in default as to any covenant, condition or obligation on any prior bonds or other obligations payable from the Net Revenues of the water and sewer system. (11) The purposes for which the Certificates are being issued have not failed in a bond election within the past three years pursuant to Section 271.047(d) of the Texas Local Government Code. (12) The City has never defaulted or nonappropriated under any of its payment or performance obligations or covenants under any of its bonds, notes, or other obligations of indebtedness for which its revenues or general credit are pledged. (13) The City complied with the Internet website posting requirements of Section 271.049(a)(2), Texas Local Government Code by posting the published Notice of Intention on March 2, 2021 continuously on the City’s website for at least 45 days before the date tentatively set for the passage of the Ordinance. Attached hereto as Exhibit D is a screenshot of the Notice of Intention to Issue Certificates posted on the City’s website. (14) The Notice of Intention to Issue Certificates published by the City set the date for the City’s meeting to pass an ordinance approving issuance of the Certificates as May 3, 2021 at 7:00 p.m. (15) The City has appropriated from current funds on hand an amount of money sufficient to pay the debt service payments scheduled to come due on the Certificates in 2021. 34142-6380-0619.5 (16) With respect to the contracts executed in connection with the authorization and issuance of the Certificates, all disclosure filings and acknowledgments required by Section 2252.908, Texas Government Code, and the rules of the Texas Ethics Commission related to said provisions, have been or will be made. 4142-6380-0619.5 4142-6380-0619.1 EXHIBIT B DEBT SERVICE SCHEDULE FOR THE CITY’S OUTSTANDING TAX SUPPORTED DEBT (See Attached) 4142-6380-0619.4 EXHIBIT C SYSTEM RATES 4142-6380-0619.1 EXHIBIT D POSTING ON CITY’S WEBSITE OF NOTICE OF INTENTION TO ISSUE CERTIFICATES SIGNATURE IDENTIFICATION AND NO-LITIGATION CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § We, the undersigned officers of the City of Sanger, Texas (the “City”), certify that we officially signed, by our manual or facsimile signatures, on behalf of the City, the following described certificates, to wit: CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A, dated as of May 1, 2021, and aggregating $18,615,000 (the “Certificates”). That the Certificates have been duly and officially executed by the undersigned with their manual or facsimile signatures in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on the Certificates, whether in manual or facsimile form, as the case may be, as their own signatures. That on the date of such signing and on the date hereof, we were and are the duly chosen, qualified and acting officers authorized to execute the Certificates, and holding the official titles set forth below opposite such signatures. We further certify that no litigation is pending or, to our knowledge, threatened in any court in any way affecting the existence or boundaries of the City or the titles of its officers to their respective positions or their authority to act on the City’s behalf or to restrain or enjoin the issuance or delivery of the Certificates, or the levy, collection or application of the ad valorem taxes or revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way contesting or affecting the validity of the Certificates, the ordinance adopted on May 3, 2021, authorizing the issuance, sale and delivery of the Certificates (the “Ordinance”), or contesting the powers of the City or the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement. We further certify that no petition or other request has been filed with or presented to any official of the City requesting that any of the proceedings authorizing the Certificates be submitted to a referendum or other election. We further certify that the information and data contained in the General Certificate dated May 3, 2021 remain true and correct as of this date. 5th 1 4149-5312-0557.1 43875-8 TAX CERTIFICATE CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A This Tax Certificate is executed and delivered by the City of Sanger, Texas (the “City”) in connection with the issuance of its Combination Tax and Revenue Certificates of Obligation, Series 2021A, in the aggregate principal amount of $18,615,000 (the “Certificates”). The Certificates are issued pursuant to an ordinance (the “Ordinance”). Pursuant to the Ordinance, and in part pursuant to Treasury Regulations Section 1.148-2(b)(2), the City certifies, covenants, warrants and represents as follows: ARTICLE I IN GENERAL Section 1.1 Authorized Officer; Expectations. The undersigned is an authorized representative of the City acting for and on behalf of the City in executing this Tax Certificate. To the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change the expectations as set forth herein, and said expectations are reasonable. Section 1.2 Delivery of the Certificates. On the date hereof, the City is delivering the Certificates to Raymond James & Associates, Inc., on its own behalf and on behalf of other members of the underwriting group (collectively, the “Underwriters”), in exchange for receipt of good funds. Section 1.3 Purpose of Tax Certificate. The City is delivering this Tax Certificate to Orrick, Herrington & Sutcliffe LLP, as bond counsel (“Bond Counsel”), with the understanding that Bond Counsel will rely, in part, upon this Tax Certificate in rendering its opinion that interest on the Certificates is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Section 1.4 Single Issue. All Certificates were sold to the Underwriters on April 19, 2021 (the “Sale Date”), pursuant to the same plan of financing, and are expected to be paid out of substantially the same source of funds. The City also sold its General Obligation Refunding Bonds, Taxable Series 2021B (the “Taxable Bonds”) on the Sale Date. However, the Taxable Bonds are taxable, and Bond Counsel has advised that the Taxable Bonds and the Certificates will not be treated as a single issue. Except as provided herein, no other governmental obligations which are expected to be paid out of substantially the same source of funds as the Certificates have been or will be sold within the 31-day period beginning 15 days before the Sale Date pursuant to the same plan of financing as the Certificates. Section 1.5 Definitions. Capitalized terms not otherwise defined in this Tax Certificate or the Ordinance shall have the meanings set forth in Appendix A. Section 1.6 Reliance. With respect to certain matters contained in this Tax Certificate, the City specifically relies upon certifications of the Underwriters set forth in the certificate 2 4149-5312-0557.1 43875-8 attached hereto as Exhibit A and on the certifications set forth in the other exhibits attached hereto, if any. The City is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representation made in this Tax Certificate or in any exhibit hereto. To the extent any statement herein is, or represents, a conclusion of law, rather than a statement of fact or a covenant, the City makes such statement in reliance on the advice of Bond Counsel. ARTICLE II PURPOSE OF THE CERTIFICATES Section 2.1 Purpose of Financing. The City is issuing the Certificates to (a) finance contractual obligations to be incurred (1) for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for street and drainage improvements (the “Project”); (b) pay for professional services related to the Project (the “Project”); and (c) pay the costs incurred in connection with the execution and delivery of the Certificates. Section 2.2 Allowable Expenditures. For federal tax purposes, the City will only allocate Gross Proceeds of the Certificates to pay, or reimburse disbursements by the City, that are (a) capital expenditures of the Project, (b) costs of issuing the Certificates, (c) interest on the Certificates through the later of three years after the Closing Date or one year after the Project is placed in service, (d) initial operating expenses directly associated with the Project (in aggregate amount not exceeding 5% of the Sale Proceeds), or (e) other miscellaneous expenditures described in Treasury Regulations Section 1.148-6(d)(3)(ii). Section 2.3 Reimbursement of Prior Expenditures. The City hereby covenants, certifies and warrants that no disbursement to be paid or reimbursed from Gross Proceeds shall have been previously paid or reimbursed from the proceeds of any other obligation, whether issued by the City or any other party. Absent an Opinion of Counsel, the City will only allocate Gross Proceeds to (a) Preliminary Expenditures, (b) capital expenditures reimbursed in respect of payments made by the City on or after 60 days prior to the date the City made a declaration of intent to reimburse for costs of the Project, (c) costs of issuing the Certificates, or (d) other payments described in (a) through (c) above that are made by the City on or after the Closing Date. In connection with all expenditures of Gross Proceeds described in (b), the City will make the reimbursement allocation by the later of 18 months after (A) the date on which the Project is placed in service, but in no event later than three years after the date such reimbursed cost was paid, or (B) the date such reimbursed cost was paid. Section 2.4 No Overissuance. Taking into account anticipated investment earnings, Sale Proceeds do not exceed the amount necessary to pay costs of the Project and costs of executing and delivering the Certificates. Section 2.5 No Loans. Absent an Opinion of Counsel, the City has not and will not use any Proceeds, directly or indirectly, to make or finance one or more loans to any entity. Section 2.6 No Abusive Arbitrage Device. The Certificates are being issued for the purposes described in Section 2.1 above. The Certificates are not and will not be part of a 3 4149-5312-0557.1 43875-8 transaction or series of transactions that (a) enables the City or any related person to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage and (b) overburdens the market for tax-exempt obligations in any manner, including, without limitation, by selling certificates that would not otherwise be sold, or selling more certificates, or issuing certificates sooner, or allowing certificates to remain outstanding longer, than otherwise would be necessary. ARTICLE III SOURCE AND DISBURSEMENT OF PROCEEDS Section 3.1 Determination of the Sale Proceeds and Net Sale Proceeds of the Certificates. The amount of Sale Proceeds and Net Sale Proceeds of the Certificates is calculated as follows: Par Amount of Bonds $18,615,000.00 Original Issue Premium 1,943,647.85 Sale Proceeds $20,558,647.85 (Minor Portion) (100,000.00) Net Sale Proceeds $20,458,647.85 Section 3.2 Use of Sale Proceeds. The Sale Proceeds will be deposited and allocated as follows: Uses of Sale Proceeds: Project Construction Fund $19,999,632.81 Underwriters’ Discount 126,494.21 Other Costs of Issuance 161,250.00 Debt Service Fund 271,270.83 TOTAL $20,558,647.85 Section 3.3 No Pre-Accrued Interest. Interest on the Certificates begins to accrue on Closing Date; therefore, the Certificates are being issued without pre-issuance accrued interest. Section 3.4 Investment Proceeds. Investment Proceeds earned on Proceeds held in the funds and accounts established in connection with the Certificates shall be retained in each such fund or account. Investment Proceeds of the Certificates may be used to pay costs of the Projects. Excess Investment Proceeds of the Certificates may be used as set forth in Section 3.5 below. Section 3.5 Excess Proceeds. (a) Unexpected Excess Sale Proceeds and Investment Proceeds. Unexpected excess Sale Proceeds and Investment Proceeds may be used to pay additional capital costs as authorized in the Ordinance or may be deposited into the City’s Combination Tax and Revenue Certificates of Obligation, Series 2021A Debt Service Fund (the “Debt Service Fund”) to pay principal and interest on the Certificates. 4 4149-5312-0557.1 43875-8 Section 3.6 Allocation of Certificates Proceeds. (a) The City will allocate Sale Proceeds to expenditures no later than 18 months after the date of the expenditure or 18 months after the date the facility to which the expenditure relates is completed and actually operating at substantially the level for which it was designed, but in all events not later than 60 days after the fifth Certificate Year (or 60 days after none of the Certificates are outstanding, if earlier). (b) The City will allocate amounts that are not proceeds of a tax-exempt borrowing (such as the Certificates) to portions of the Project expected to have private business use (if any) using a reasonable and consistently applied accounting method, including allocating such amounts to discrete portions of the Project (for example, based on actual costs, total space, or fair market value), or on the basis of an undivided portion allocation, or other reasonable method. ARTICLE IV ACQUISITION/CONSTRUCTION SCHEDULE FOR THE PROJECT Section 4.1 Commencement of the Project. The City has entered into, or will have entered into by November 7, 2021, a contract or otherwise incurred a substantial binding obligation with one or more unrelated parties toward commencement of the Project involving an expenditure equal to at least 5% of the Net Sale Proceeds of the Certificates. Section 4.2 Prosecution of the Project. The City expects the work on the Project and the expenditure of the Net Sale Proceeds of the Certificates to proceed with due diligence from the Closing Date to the date of completion of the Project. Section 4.3 Completion of the Project. The City expects that at least 85% of the Net Sale Proceeds of the Certificates will be spent on costs of the Project by May 7, 2024. ARTICLE V RESTRICTIONS ON USE OF THE PROJECT Section 5.1 Limitation on Private Activity. Absent an Opinion of Counsel, the City will not allow more than the lesser of $15 million or 10% of the Proceeds, or of the Project, to be used directly or indirectly by any Nongovernmental Person in any trade or business, other than as a member of the general public. For purposes of this Section 5.1, a Nongovernmental Person will be treated as “using” Proceeds to the extent the Nongovernmental Person, directly or indirectly, (a) borrows Proceeds, (b) uses the Project (e.g., as owner, lessee, service provider, operator or manager), (c) acquires the output (or throughput) of the Project, unless pursuant to a short- term use exception, or (d) acquires or uses technology developed at the Project, if any. 5 4149-5312-0557.1 43875-8 Section 5.2 Lower Limit for Unrelated and Disproportionate Uses. For purposes of Section 5.1, “10%” is reduced to “5%” for nongovernmental use of any facilities financed from Proceeds that are unrelated or disproportionate to the governmental purposes of the Certificates. Section 5.3 Management Contracts. In furtherance of the foregoing, the City represents, warrants and covenants that City and any related party (within the meaning of Section 1.150-1(b) of the Treasury Regulations) will not enter into any agreement (a “Management Contract”) with any person or organization (a “Service Provider”) who is not a Qualified User with respect to the facilities that have been or will be financed or refinanced with the Proceeds of the Certificates, that provides for such Service Provider to manage, operate or provide services with respect to any portion of the Project unless an Opinion of Counsel is received or unless the guidelines set forth in Revenue Procedure 2017-13 (the “Guidelines”) and summarized in Appendix B, are satisfied. Section 5.4 Research Contracts. So long as any of the Bonds remain outstanding, the City shall not allow the use of any portion of the Project by nongovernmental persons (including the United States) pursuant to any research arrangement, unless it complies with Revenue Procedure 2007-47 and Revenue Procedure 97-14 (to the extent not modified or superseded by Revenue Procedure 2007-47). Section 5.5 Limitation on Private Security and Private Payments. In addition, the City will not allow the payment of the lesser of $15,000,000 or more than 10% of the principal, or the interest of the Certificates, directly or indirectly, to be (a) secured by any interest in property to be used in the trade or business of any Nongovernmental Persons (other than in the roles as a member of the general public) or by payments in respect of such property; or (b) derived from payments in respect of property, or borrowed money, used or to be used in the trade or business of any Nongovernmental Persons (other than in their roles as members of the general public). Section 5.6 No Private Loan. Absent an Opinion of Counsel, the City will not loan more than 5% of the Certificate proceeds to one or more Nongovernmental Persons other than in their roles as members of the general public and will not loan more than 5% of the Bond proceeds to any Nongovernmental Persons. Section 5.7 No Change in Use. The City expects to use all Proceeds and all facilities that are financed from Proceeds to be used for the purposes set forth in this ARTICLE V for the entire stated term to maturity of the Certificates. Absent an Opinion of Counsel, the City in fact will use all Proceeds and each facility financed from Proceeds as set forth in this ARTICLE V. Section 5.8 No Expected Sale. The City does not expect that the Project or any part thereof financed in whole or in part by the Certificates will be sold or otherwise disposed of before May 1, 2046, the last scheduled maturity date of the Certificates. Absent an Opinion of Counsel, the City will not sell or otherwise dispose of the Project or any portion thereof financed in whole or part by the Certificates. 6 4149-5312-0557.1 43875-8 ARTICLE VI PAYMENT OF THE CERTIFICATES Section 6.1 Source of Payment. The Certificates are payable from the proceeds of taxes levied against all the taxable property located within the City and a limited pledge (not to exceed $1,000) of the City’s Net Revenues from the System. Those funds that are expected to pay principal of or interest on the Certificates will be deposited in the Debt Service Fund and used within 13 months of their deposit in that fund for payment of principal of or interest on the Certificates. Section 6.2 Debt Service Fund. The Debt Service Fund will be used primarily to achieve a proper matching of revenues of the City and debt service on the Certificates within each Certificate Year. It is expected that the money in the Debt Service Fund will be depleted at least once a year (on each May 1), except for a reasonable carryover amount not expected to exceed the greater of one year’s earnings on that fund or 1/12 of the annual debt service on the Certificates. Section 6.3 No Other Replacement Proceeds. Neither the City nor any related person will use any Gross Proceeds directly or indirectly to replace funds of the City or any related person, including funds which are or will be used directly or indirectly to acquire Investment Property reasonably expected to produce a yield that is materially higher than the yield on the Certificates. The weighted average maturity of the Certificates is calculated by the Financial Advisor to the City to be 18.085 years. See Exhibit B attached hereto. Based on such information, the City does not expect the weighted average maturity of the Certificates to exceed 120% of the expected weighted average economic useful life of the Project. ARTICLE VII YIELD ON THE CERTIFICATES Section 7.1 Yield on the Certificates. The aggregate issue price of the Certificates is $20,558,647.85, based on representations of the Underwriters set forth in Exhibit A hereto, regarding the amount of Sale Proceeds, including the prices at which the Certificates were offered to the ultimate purchaser(s). The Financial Advisor to the City has calculated the Yield on the Certificates to be 1.825385%. See the pricing numbers attached hereto as Exhibit D. Such yield has been calculated pursuant to Section 148(h) of the Code and Treasury Regulations Sections 1.148-4 and 1.148-5 for purposes of this Tax Certificate. Thus, yield on the Certificates or yield on Investment Property generally means that discount rate which, when used in computing the present value of all unconditionally payable payments representing principal adjusted, as required, for any substantial discounts, interest and costs of qualified guarantees, produces an amount equal to the issue price of the Certificates or the purchase price of the Investment Property, as appropriate. Section 7.2 No Qualified Guarantee. On the Closing Date, there are no qualified guarantees that have been obtained in connection with the Certificates. Section 7.3 No Qualified Hedges. No contract has been, and (absent an Opinion of Counsel) no contract will be entered into to modify the City’s risk of interest rate changes with 7 4149-5312-0557.1 43875-8 respect to the Certificates (e.g., an interest rate swap, an interest rate cap, a futures contract, a forward contract, or an option). ARTICLE VIII RESTRICTIONS ON INVESTING THE PROCEEDS OF THE CERTIFICATES IN HIGHER YIELDING INVESTMENTS Section 8.1 Investment of Project Construction Fund. Sale Proceeds deposited into the project construction fund (the “Project Construction Fund”) and Investment Proceeds earned on such funds may be invested without regard to yield through May 7, 2024. See Appendix D for additional information regarding the valuation of certain investments held in the Project Construction Fund. Section 8.2 Investment of Sale Proceeds Used to Pay Costs of Issuance. Sale Proceeds held for the payment of costs of issuing the Certificates may be invested without regard to yield through May 7, 2024. Section 8.3 Investment of Investment Proceeds. Investment Proceeds for which no other temporary period is available may be invested without regard to yield for a temporary period of one year from the date of receipt of such proceeds. Section 8.4 Investment of Debt Service Fund. To the extent the provisions of Section 6.2 are satisfied, the City has been advised by Bond Counsel that amounts in the Bona Fide Debt Service Funds will be invested without regard to yield. Section 8.5 Yield Restriction. Absent an Opinion of Counsel, if (a) the total amount of Sale Proceeds held to be used to pay costs of issuing the Certificates still unspent 13 months from the Closing Date, plus (b) all Investment Proceeds remaining unspent after a one-year period beginning on the date of receipt of such Investment Proceeds, plus (c) any amounts held in the Bona Fide Debt Service Funds that remain unexpended after 13 months from the date of accumulation therein, plus (d) any Proceeds held in the Project Construction Fund that remain unexpended after three years from the date hereof, the City covenants that the excess will be invested either (i) in Investment Property with a yield not exceeding the Yield on the Certificates, (ii) in assets that are not treated as Investment Property (e.g., Tax-Exempt Bonds), or (iii) in assets that satisfy the requirements for qualified yield reduction payments set forth in Treasury Regulations Section 1.148-5(c), subject to the limitation set forth in Section 1.148-10(b)(1)(ii). Section 8.6 Yield Reduction Payments. Bond Counsel has advised the City that, for purposes of determining the yield on the Investment Property, any amount paid to the United States in accordance with Treasury Regulations Section 1.148-5(c) (subject to the limitation set forth in Section 1.148-10(b)(1)(ii)) is treated as a payment for such Investment Property that reduces the yield on such Investment Property. Bond Counsel has further advised that Treasury Regulations Section 1.148-5(c) provides, inter alia, that (a) yield reduction payments are generally to be made at the same time and in the same manner as rebate payments are required to be paid or at such other time or in such other manner as the Commissioner of Internal Revenue may provide; and (b) yield reduction payments may be made with respect to Nonpurpose Investments allocable to 8 4149-5312-0557.1 43875-8 Proceeds that qualified to be invested without restriction for a temporary period of three years as described in Section 8.1 or for a temporary period of one year as described in Section 8.2. ARTICLE IX COMPLIANCE WITH THE REBATE REQUIREMENT Section 9.1 Undertakings. Pursuant to the Ordinance, the City has covenanted to comply with certain requirements of the Code. The City acknowledges that the United States Department of the Treasury has issued regulations with respect to certain of these undertakings, including the proper method for computing whether any rebate amount is due the federal government under Section 148(f) of the Code. (Treasury Regulations Sections 1.148-1 through 1.148-11, 1.150-1 and 1.150-2.) The City further acknowledges that the United States Department of the Treasury may yet issue additional regulations with respect to certain other of these undertakings. The City covenants that it will undertake to determine what is required with respect to the rebate provisions contained in Section 148(f) of the Code and said regulations from time to time and will comply with any requirements that may apply to the Certificates. Except to the extent inconsistent with any requirements of the Code or future regulations, the City will undertake the methodology described in this Tax Certificate. Section 9.2 Recordkeeping. In order to facilitate the calculation of the Rebate Requirement, the City shall maintain or cause to be maintained detailed records with respect to each Nonpurpose Investment attributable to Gross Proceeds, including: (a) purchase date, (b) purchase price, (c) information establishing fair market value on the date such investment became a Nonpurpose Investment, (d) any accrued interest paid, (e) face amount, (f) coupon rate, (g) periodicity of interest payments, (h) disposition price, (i) any accrued interest received, and (j) disposition date. Section 9.3 Investments and Dispositions. The City will not acquire any Investment Property with Gross Proceeds for an amount (including transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations) in excess of the fair market value of such Investment Property. The City will not sell or otherwise dispose of any Investment Property for an amount (including transaction costs, except as otherwise provided in Section 1.148-5(e) of the Treasury Regulations) less than the fair market value of the Investment Property. The City will determine the fair market value of investments in accordance with the rules set forth in Appendix D. Section 9.4 Segregation of Proceeds. In order to perform the calculations required by the Code, the City covenants to track separately all Gross Proceeds and cause to be established separate accounts or subaccounts to account fully for all Gross Proceeds. Section 9.5 Rebate Requirement Calculation and Payment. (a) The City will prepare or cause to be prepared a calculation of the Rebate Requirement consistent with the rules described in this Section 9.5. The City will complete the calculation of the Rebate Requirement within 60 days after the close of the fifth Certificate Year and after the first date on which there are no outstanding Certificates. 9 4149-5312-0557.1 43875-8 (b) Bond Counsel has advised the City that, for purposes of calculating the Rebate Requirement, (i) the aggregate amount earned with respect to a Nonpurpose Investment shall be determined by assuming that the Nonpurpose Investment was acquired for an amount equal to its fair market value (determined as provided in Section 1.148-5(d)(6) of the Treasury Regulations, as applicable) at the time it becomes a Nonpurpose Investment, and (ii) the aggregate amount earned with respect to any Nonpurpose Investment shall include any unrealized gain or loss with respect to the Nonpurpose Investment (based on the assumed purchase price at fair market value and adjusted to take into account amounts received with respect to the Nonpurpose Investment and earned original issue discount or premium) on the first date when there are no outstanding Certificates or when the investment ceases to be a Nonpurpose Investment. (c) The City shall pay to the United States Department of the Treasury not later than 60 days after the end of the fifth Certificate Year and each succeeding fifth Certificate Year, an amount equal to 90% and, not later than 60 days after the first date when there are no outstanding Certificates, an amount equal to 100% of the Rebate Requirement (determined as of the end of the immediately preceding Certificate Year), all as set forth in Section 1.148-3 of the Treasury Regulations. (d) Each payment required to be made pursuant hereto shall be filed with the Internal Revenue Service Center, Ogden, Utah 84201, on or before the date such payment is due, and shall be accompanied by Form 8038-T. The City shall retain records of the calculations required by this Section 9.5 until three years after the retirement of the last of the Certificates. Section 9.6 Exceptions from Rebate Requirement. Notwithstanding the foregoing provisions relating to the Rebate Requirement, the City shall not be required to calculate or pay the Rebate Requirement to the extent the Gross Proceeds of the Certificates are held or expended in a manner that satisfies one of the exceptions to the Rebate Requirement described below and the Proceeds are exempt from the Rebate Requirement under the particular exception. (a) Bona Fide Debt Service Funds Exception. The Bona Fide Debt Service Funds will be exempted from the Rebate Requirement to the extent that the provisions of Section 6.2 hereof are satisfied for any Certificate Year. (b) Exceptions for Project Fund and Costs of Issuance. Gross Proceeds of the Certificates used to pay costs of the Project and costs of issuance of the Certificates will be exempted to the extent that they meet one of the spending exceptions to rebate describe in Appendix C. With respect to the Two-Year Expenditure Rule described in Appendix C, the City makes the following elections: (i) For purposes of determining whether the Certificates constitute a construction issue (as defined in Section 148(f)(4)(C)(iv) of the Code), the City elects to make such determinations based on actual facts instead of the City’s reasonable expectations. (ii) For purposes of determining the amount of future earnings earned on Available Construction Proceeds as of the end of the first three spending periods as described in Appendix C, the City elects to make such determinations based on actual facts instead of the City’s reasonable expectations. 10 4149-5312-0557.1 43875-8 Section 9.7 Filing Requirements. The City will file or cause to be filed such reports or other documents with the Internal Revenue Service as are required by the Code. Section 9.8 Retention of Firm. The City has assumed full responsibility for the rebate calculation requirement and payment. The City acknowledge that Orrick, Herrington & Sutcliffe LLP shall have no responsibility for any arbitrage rebate calculations, reporting requirements or payments that may be required to be made with respect to the Certificates. ARTICLE X CERTIFICATES MEET OTHER REQUIREMENTS FOR TAX EXEMPTION Section 10.1 Registered Form. The Certificates are being issued in registered form. Section 10.2 No Federal Guarantee. The City will not directly or indirectly use or permit the use of any Proceeds or any other funds of the City or any related party or take or omit to take any action that would cause the Certificates to be obligations that are “federally guaranteed” within the meaning of Section 149(b) of the Code. In furtherance of this covenant, the City will not allow the payment of principal or interest with respect to the Certificates to be guaranteed (directly or indirectly) in whole or in part by the United States or any agency or instrumentality thereof. Except as provided in the next sentence, the City will not use 5% or more of the Proceeds to make or finance loans the payment of principal or interest with respect to which is guaranteed in whole or in part by the United States or any agency or instrumentality thereof, nor will it invest 5% or more of the Proceeds in federally insured deposits or accounts. The preceding sentence shall not apply to: (a) investments in the Project Construction Fund and investments allocable to Proceeds for the payment of the costs of issuing the Certificates during the temporary period described in Section 8.1 of this Tax Certificate; (b) investments in the Bona Fide Debt Service Funds; (c) investments in obligations issued by the United States Department of Treasury. Section 10.3 Information Reporting. The City will cause a properly completed and executed IRS Form 8038-G to be filed with respect to the Certificates no later than August 15, 2021. Section 10.4 No Hedge Bonds. The City reasonably expects that more than 85% of Net Sale Proceeds will be expended for the governmental purposes of the Certificates before May 7, 2024. In addition, the City will not invest more than 50% of Proceeds in Nonpurpose Investments that have a substantially guaranteed yield for four years or more. The payment of legal and underwriting costs associated with issuance of the Certificates is not contingent, and the City will cause at least 95% of all legal and underwriting costs associated with issuance of the Certificates to be paid no later than 180 days after the Closing Date. 11 4149-5312-0557.1 43875-8 ARTICLE XI OTHER MATTERS Section 11.1 Retention of Records. The City covenants to maintain all records relating to the requirements of the Code and the representations, certifications and covenants set forth in this Tax Certificate until the date four years after the last outstanding Certificate has been retired. If any of the Certificates are refunded or prepaid by other tax-exempt obligations (the “Refunding Obligations”), the City covenants to maintain all records required to be retained by this Section 11.1 until the later of the date four years after the last outstanding Certificates have been retired or the date four years after the last Refunding Obligations have been retired. The records that must be retained include, but are not limited to: (a) basic records and documents relating to the Certificates (including the Ordinance, this Tax Certificate and the opinion of Bond Counsel); (b) documentation evidencing the expenditure of Proceeds; (c) documentation evidencing the use of the Project by public and private sources (i.e., copies of management contracts, research agreements, leases, etc.); (d) documentation evidencing all sources of payment or security for the Certificates; and (e) documentation pertaining to any investment of Proceeds (including the purchase and sale of securities, SLGS subscriptions, yield calculations for each class of investments, actual investment income received from the investment of proceeds, guaranteed investment contracts, and rebate calculations). Section 11.2 Amendments. Notwithstanding any other provision of this Tax Certificate, the City may amend this Tax Certificate and thereby alter any actions allowed or required by this Tax Certificate if such amendment is signed by an authorized officer and is supported by an opinion of counsel to the effect that such action (or inaction) will not adversely affect the exclusion of interest on the Certificates from gross income for purposes of federal income taxation. [Rest of Page Intentionally Left Blank] S-1 4149-5312-0557.1 43875-8 Section 11.3 Survival of Defeasance. Notwithstanding any provision in this Tax Certificate or the Ordinance to the contrary, the obligation to remit the Rebate Requirement, if any, to the United States Department of the Treasury and to comply with all other requirements contained in this Tax Certificate shall survive defeasance of the Certificates. Dated: May 7, 2021 Appendix A-1 4149-5312-0557.1 43875-8 APPENDIX A DEFINITIONS Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Ordinance. Unless the context otherwise requires, the following capitalized terms have the following meanings: “Adjusted Gross Proceeds” means Gross Proceeds, adjusted as set forth in Treasury Regulations Section 1.148-7(c)(3). Thus, Adjusted Gross Proceeds generally means Gross Proceeds, less Gross Proceeds held in the Bona Fide Debt Service Funds. “Available Construction Proceeds” means all Sale Proceeds (reduced by costs of issuing the Certificates financed from such Sale Proceeds) of the Certificates, plus all Investment Proceeds earned or reasonably expected to be earned thereon, before the earlier of two years after the Closing Date or substantial completion of Project construction. “Bona Fide Debt Service Funds” means the Debt Service Fund and those accounts, if any, identified in Section 6.2 of this Tax Certificate. “Certificate Year” means the period beginning on the Closing Date and ending on May 7, 2022 (or on an earlier date selected by the City in accordance with Treasury Regulations Section 1.148-1(b)), and each successive one-year period thereafter. The last Certificate Year will end on the last day on which any Certificate is outstanding for Federal tax purposes. “Closing Date” means the date of this Tax Certificate. “Code” means the Internal Revenue Code of 1986 (including amendments thereto). “Financial Advisor” means Government Capital Securities Corporation. “Governmental Unit” means any State, or political subdivision of a State, but excludes the United States and its agencies or instrumentalities. “Gross Proceeds” has the meaning used in Section 1.148-1(b) of the Treasury Regulations, and generally means all proceeds derived from or relating to the Certificates, including Sale Proceeds, Investment Proceeds, and other amounts expected to be used to pay debt service on the Certificates. “Investment Proceeds” means earnings received from investing and reinvesting Sale Proceeds and from investing and reinvesting such earnings. “Investment Property” means any security or obligation, any annuity contract, or any other investment-type property, but does not include any Tax-Exempt Bond unless such obligation is a “specified private activity bond” within the meaning of Section 57(a)(5)(C) of the Code. “Minor Portion” has the meaning used in Section 148(e) of the Code, which permits arbitrage of the lesser of $100,000 or 5% of the Sale Proceeds. Appendix A-2 4149-5312-0557.1 43875-8 “Net Sale Proceeds” has the meaning set forth in Section 3.1 of this Tax Certificate. “Nongovernmental Person” means any person or entity other than a Governmental Unit. “Nonpurpose Investment” means any Investment Property in which Gross Proceeds are invested. “Opinion of Counsel” means a written opinion of nationally recognized bond counsel, delivered to the City, to the effect that interest on the Certificates will not be included in gross income for federal income tax purposes. “Preliminary Expenditures” means architectural, engineering, surveying, soil testing, costs of issuing the Certificates, and similar costs paid with respect to the Project in an aggregate amount not exceeding 20% of the amount of Sale Proceeds allocated to each separate item or asset that comprises the Project. Preliminary Expenditures do not include land acquisition, site preparation or similar costs incident to the commencement of construction. “Proceeds” means, collectively, Sale Proceeds and Investment Proceeds. “Qualified User” means any state or local governmental unit as defined in Section 1.103-1 of the Treasury Regulations and any instrumentality thereof. The term “Qualified User” does not include the United States or any agency or instrumentality thereof. “Rebate Requirement” means the amount of rebatable arbitrage computed as of the last day of any Certificate Year pursuant to Section 1.148-3 of the Treasury Regulations. “Sale Proceeds” has the meaning set forth in Section 3.1 of this Tax Certificate “Spendable Proceeds” means, with respect to the Certificates, the net amount received as a result of the sale of such issue, minus (i) the amount of proceeds used to fund a reasonably required reserve fund, if any, and (ii) $100,000. “Tax-Exempt Bond” means any obligation the interest on which is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code or Section 103 of the Internal Revenue Code of 1954, as amended (the “1954 Code”), and Title XIII of the Tax Reform Act of 1986, as amended, as well as stock in a regulated investment company to the extent at least 95% of income to the stockholder is treated as interest that is excludable from gross income under Section 103 of the Code. “Yield” means that discount rate described in Section 7.1 of this Tax Certificate. Appendix B-1 4149-5312-0557.1 43875-8 APPENDIX B MANAGEMENT CONTRACT GUIDELINES A Management Contract that relates to the use or operation of the Project by one or more Service Providers, will satisfy the Guidelines if the requirements of each of the following subsections is satisfied: (a) Fees-General Requirements. The payments to the Service Provider under the Management Contract must be reasonable compensation for the services provided. (b) No Net Profits Arrangements. The Management Contract must not provide to the Service Provider a share of net profits from the operation of the Project. Compensation to the Service Provider will not be treated as providing a share of net profits if no element of the compensation takes into account, or is contingent upon, either the Project’s net profits or both the Project’s revenues and expenses for any fiscal period. For this purpose, the elements of the compensation are the eligibility for, the amount of, and the timing of the payment of the compensation. Further, solely for purposes of determining whether the amount of the compensation meets the requirements of this paragraph (b), any reimbursements of actual and direct expenses paid by the Service Provider to Unrelated Parties are disregarded as compensation. Incentive compensation will not be treated as providing a share of net profits if the eligibility for the incentive compensation is determined by the Service Provider’s performance in meeting one or more standards that measure quality of services, performance, or productivity, and the amount and the timing of the payment of the compensation meet the requirements of this paragraph (b). (c) No Bearing of Net Losses. The Management Contract must not, in substance, impose upon the Service Provider the burden of bearing any share of net losses from the operation of the Project. However, an arrangement will not be treated as requiring the Service Provider to bear a share of net losses if: (A) the determination of the amount of the Service Provider’s compensation and the amount of any expenses to be paid by the Service Provider (and not reimbursed), separately and collectively, do not take into account either the Project’s net losses or both the Project’s revenues and expenses for any fiscal period, and (B) the timing of the payment of compensation is not contingent upon the Project’s net losses. For example, a Service Provider whose compensation is reduced by a stated dollar amount (or one of multiple stated dollar amounts) for failure to keep the Project’s expenses below a specified target (or one of multiple specified targets) will not be treated as bearing a share of net losses as a result of this reduction. (i) Certain Types of Compensation not Treated as Requiring a Service Provider to Bear a Share of Net Loss. Regardless of whether the Service Provider pays expenses with respect to the operation of the Project without reimbursement by the City, compensation for services will not be treated as requiring the Service Provider to bear a share of net losses if the compensation is: (i) solely based on a Capitation Fee, a Periodic Fixed Fee or a Per-Unit fee, or (ii) incentive compensation as described in paragraph (b) of this Tax Certificate or (iii) any combination of clause (i) or (ii) of this subparagraph (c)(1). (ii) Deferred Compensation not Treated as Contingent on Net Losses. Deferral of compensation to the Service Provider due to insufficient net cash flows from the operation of Appendix B-2 4149-5312-0557.1 43875-8 the Project will not be treated as contingent upon net losses if the contract including the following requirements that (1) The compensation is payable at least annually (2) The Qualified User is subject to reasonable consequences for late payment, such as reasonable interest charges or late payment fees. (3) The Qualified User will pay the deferred compensation (with interest or late payment fees) no later than the end of five years after the original due date of the payment (d) Contract Term. The term of the Management Contract, including renewal options, is not longer than the lesser of 30 years or 80% of the reasonably expected useful life of the financed property. (e) Control of Project. The Management Contract requires the Qualified User to approve: (i) The annual budget of the Project; (ii) Capital expenditures with respect to the Project (for this purpose, a Qualified User may show approval of capital expenditures for the Project by approving an annual budget for capital expenditures described by functional purpose and specific maximum amounts); (iii) Each disposition of property that is part of the Project; (iv) Rates charged for use of the Project (for this purpose, a Qualified User may show approval of rates charged for use of the managed property be either expressly approving such rates (or the methodology for setting such rates) or by including in the Service Contract a requirement that the Service Provider charge rates that are reasonable and customary as specifically determined by an independent third party); and (v) The general nature and type of use of the Project (for example, the type of services). (vi) The Qualified User bears the risk of loss upon damage or destruction of the Project (for example, upon force majeure). A Qualified User does not fail to meet this risk of loss requirement as a result of insuring against risk of loss through a third party or imposing upon the Service Provider a penalty for failure to operate the Project in accordance with the standards set forth in the Service Contract. (vii) The Service Provider must agree that it is not entitled to and will not take any tax position that is inconsistent with being a Service Provider to the Qualified User with respect to the Project. Appendix B-3 4149-5312-0557.1 43875-8 (f) Prohibited Relationships. The Service Provider may not have a role or relationship with the Qualified User that, in effect, substantially limits the ability of the Qualified User to exercise its rights, including cancellation rights, under the Service Contract. Accordingly: (i) Not more than 20% of the voting power of the governing body of the Qualified User in the aggregate may be vested in the Service Provider and its directors, officers, shareholders, partners, members and employees. (ii) The governing body of the Qualified User does not include the chief executive officer of the Service Provider or the chairperson (or equivalent executive) of the Service Provider’s governing body. (iii) The chief executive officer of the Service Provider is not the chief executive officer of the Qualified User or any related person (with the meaning of Section 1.150-1(b) of the Treasury Regulations) to the Qualified User. (iv) For purposes of this subparagraph (iv), the phrase Service Provider includes Related Persons and the phrase “chief executive officer” includes a person with equivalent management responsibilities. Appendix C-1 4149-5312-0557.1 43875-8 APPENDIX C EXCEPTIONS TO REBATE Notwithstanding the provisions relating to the Rebate Requirement for each issue of the Certificates set forth in the Tax Certificate, the City shall not be required to calculate or pay the Rebate Requirement to the extent the Gross Proceeds of such issue of the Certificates are expended in a manner that satisfies one of the exceptions to the Rebate Requirement described in this Appendix C and the Proceeds are exempt from the Rebate Requirement under the particular exception. ARTICLE I SPENDING EXCEPTIONS TO REBATE Section 1.1 Two-Year Expenditure Rule. The City shall not be required to calculate the Rebate Requirement with respect to Available Construction Proceeds if the requirements of Section 148(f)(4)(C) of the Code (the “Two-Year Expenditure Rule”) are satisfied. The Rebate Requirement must be calculated and paid with respect to Proceeds that do not constitute Available Construction Proceeds and that do not satisfy any other available rebate exception. (a) Eligibility. The City will be eligible for the Two-Year Expenditure Rule only if the following requirements are met: (a) the issue of Certificates are not private activity bonds (as such term is defined in Section 141(a) of the Code), or are qualified Section 501(c)(3) bonds (as defined in Section 145 of the Code) or private activity bonds the Proceeds of which will be used to finance property owned by a governmental unit or an entity described in Section 501(c)(3) of the Code; (b) the City reasonably expects that at least 75% of the Available Construction Proceeds of the issue of Certificates will be used for construction expenditures (including the costs of reconstruction and rehabilitation of the facilities financed with the Proceeds of the issue of Certificates, but excluding the costs of acquisition of such facilities) with respect to property owned by a governmental unit or an entity described in Section 501(c)(3) of the Code; and (c) the spend-down schedule referred to in Section 1.1(b) is satisfied. (b) Spend-Down Schedule. The City must spend the Available Construction Proceeds of the issue of Certificates for the construction expenditures in accordance with the following amounts and time periods beginning on the Closing Date of each issue of the Certificates: (a) at least 10%of such Available Construction Proceeds within six months, (b) at least 45% of such Available Construction Proceeds within twelve months, (c) at least 75% of such Available Construction Proceeds within eighteen months, and (d) 100% of such Available Construction Proceeds within twenty-four months. For purposes of determining compliance with the spending requirements as of the end of each of the first three spending periods described above, Available Construction Proceeds shall include the amount of future earnings that the City reasonably expects to earn as of the Closing Date of each issue of the Certificates. The City will not fail to satisfy the spending requirement for the fourth spending period if the City holds unspent Available Construction Proceeds for a period not exceeding three (3) years from the Closing Date of each issue of the Certificates as “reasonable retainage” required or permitted by construction contracts with respect to the construction projects. For example, a reasonable retainage may include a retention to ensure or promote compliance with a construction contract in circumstances Appendix C-2 4149-5312-0557.1 43875-8 in which the retained amount is not yet payable, or in which the City reasonably determines that a dispute exists regarding completion or payment. If the above described spending requirements are satisfied and the Proceeds used to finance Costs of Issuance are expended by the end of the fourth spending period, Proceeds allocable to financing the Costs of Issuance shall be treated as having satisfied the Rebate Requirement. Section 1.2 Eighteen-Month Expenditure Rule. The City shall not be required to calculate the Rebate Requirement with respect to Eligible Gross Proceeds if the requirements of Treasury Regulation Section 1.148-7(d) (the “Eighteen-Month Expenditure Rule”) are satisfied. (a) Eligibility. The City will be eligible for the Eighteen-Month Expenditure Rule only if the following requirements are met: (a) the Eligible Gross Proceeds are expended for the governmental purposes of the issue in accordance with the spend-down schedule referred to in Section 1.2(b), and (b) all of the Eligible Gross Proceeds qualify for an initial three (3) year temporary period (as described in Treasury Regulation Section 1.148-2(e)(2)). (b) Spend-Down Schedule. The City must spend the Eligible Gross Proceeds for the governmental purposes of the issue in accordance with the following amounts and time periods beginning on the Closing Date of each issue of the Certificates: (a) at least 15% of such Eligible Gross Proceeds within six months, (b) at least 60% of such Eligible Gross Proceeds within twelve months, and (c) 100% of such Eligible Gross Proceeds within Eighteen-Months. For purposes of determining compliance with the first and second spending periods described above, the amount of Investment Proceeds included in Eligible Gross Proceeds is determined based on the City’s reasonable expectations based as of the Closing Date of each issue of the Certificates. The City will not fail to satisfy the spending requirement for the third spending period if the City holds Eligible Gross Proceeds for a period not to exceed thirty (30) months from the Closing Date of each issue of the Certificates as “reasonable retainage” required or permitted to be retained for reasonable business purposes relating to the property financed with the Proceeds. The Eighteen- Month Exception Rule is not available for any portion of the issue of Certificates that is treated as meeting the Two-Year Expenditure Rule described in Section 1.1. Section 1.3 De Minimis Rule For Purposes of the Two-Year Expenditure Rule and Eighteen-Month Expenditure Rule. Any failure to satisfy the final spending requirements of the Eighteen-Month Expenditure Rule or the Two-Year Expenditure Rule is disregarded if the City exercises due diligence to complete the projects for which the issue of Certificates were issued and the amount of the failure does not exceed the lesser of 3% of the issue price of the issue of Certificates or $250,000. Section 1.4 Six-Month Expenditure Rule. Pursuant to Section 148(f)(4)(B) of the Code (the “Six-Month Expenditure Rule”), if on or before the date six (6) months after the Closing Date of each issue of the Certificates the Eligible Gross Proceeds of such issue of Certificates are expended for the purposes for which such Certificates are issued no rebate calculations and no rebate payment will need to be made with respect to Eligible Gross Proceeds of the issue of Certificates. Section 1.5 Expenditures for Governmental Purposes of the Issue. For purposes of the Two-Year Expenditure Rule, the Eighteen-Month Expenditure Rule and the Six-Month Appendix C-3 4149-5312-0557.1 43875-8 Expenditure Rule, the payment of interest on the issue of Certificates (but not principal) shall constitute an expenditure of Proceeds of the issue of Certificates. Appendix D-1 4149-5312-0557.1 43875-8 APPENDIX D FAIR MARKET VALUE OF INVESTMENT PROPERTY In general, the fair market value of any Investment Property is the price at which a willing buyer would pay to a willing seller to acquire the Investment Property, with no amounts paid to artificially reduce or increase the yield on such Investment Property. Other methods may be used, however, to establish fair market value provided, however, that such methods comply with the requirements of Section 1.148-5 of the Treasury Regulations. (a) If Investment Property is acquired pursuant to an arm’s-length transaction without regard to any amount paid to reduce the yield on the Investment Property, the fair market value of the Investment Property shall be the amount paid for the Investment Property (without increase for transaction costs, except as otherwise provided in Section 1.148-5(e)(2) of the Treasury Regulations). (1) If Investment Property is sold or otherwise disposed of in an arm’s-length transaction without regard to any reduction in the disposition price to reduce the Rebate Requirement, the fair market value of the Investment Property shall be the amount realized from the sale or other disposition of the Investment Property (without reduction for transaction costs, except as otherwise provided in Section 1.148-5(e)(2) of the Treasury Regulations). (2) If a United States Treasury obligation is acquired directly from or disposed of directly to the United States Department of the Treasury (as in the case of United States Treasury Securities - State and Local Government Series obligations), such acquisition or disposition shall be treated as establishing a market for the obligation and as establishing the fair market value of the obligation. (b) Investment Contracts. The purchase price of any Investment Property acquired pursuant to an investment contract (within the meaning of Section 1.148-1(b) of the Treasury Regulations) shall be determined as provided in Section 1.148-5 of the Treasury Regulations. No investment contract shall be acquired with Gross Proceeds unless the requirements of this paragraph are satisfied. With respect to any investment contract, the City will obtain from any provider of the investment contract, broker thereof or other party, such information, certification or representation as will enable the City to determine that these requirements are satisfied. (1) General Rule. Pursuant to Section 1.148-5 of the Treasury Regulations, the purchase price of an investment contract will be considered to be fair market value if: (i) the City makes (or has made on its behalf) a bona fide written solicitation for the investment contract, timely forwarded to potential providers, the solicitation specifies all the material terms of the investment contract (i.e., all the terms that could directly or indirectly affect the yield or the cost of the investment), the solicitation has a legitimate business purpose (i.e., a purpose other than to increase the purchase price or reduce the yield) for every term of the bid specification and the terms of the solicitation take into account the issuer’s reasonably expected deposit and drawdown schedule for the amounts to be received; Appendix D-2 4149-5312-0557.1 43875-8 (ii) all bidders have an equal opportunity to bid so that, for example, no bidder is given the opportunity to review other bids (a last look) before bidding; (iii) the City solicits bids from at least three (3) investment contract providers with established industry reputations as competitive providers of investment contracts; (iv) the City includes in the bid specifications a statement to potential bidders that by submitting a bid, the provider is making certain representations that the bid is bona fide, and specifically that (A) the bidder did not consult with any other potential provider about its bid, (B) the bid was determined without regard to any other formal or informal agreement that the potential provider had with the issuer or any other person, and (C) the bid was not submitted solely as a courtesy to the issuer or any other person for purposes of satisfying the requirements of Section 1.148-5 of the Treasury Regulations; (v) the City receives at least three (3) bids from providers that did not have a material financial interest in the issue (the following investment contract providers are considered to have a material financial interest in the issue: (A) a lead underwriter in a negotiated underwriting, but only until 15 days after the Closing Date of the issue, (B) an entity acting as a financial advisor with respect to the purchase of the investment contract at the time the bid specifications were forwarded to potential providers; and (C) any related party to a provider that is disqualified for one of the two preceding reasons); (vi) at least one (1) of the bids received by the City that meets the requirements of the preceding paragraph is from an investment contract provider with an established industry reputation as a competitive provider of investment contracts; (vii) if an agent for the City conducts the bidding process, the agent does not bid; (viii) the winning bid is the highest yielding bona fide bid (determined net of any broker’s fees); and (ix) the provider of the investment contract certifies as to all administrative costs to be paid on behalf of the City, including any fees paid as broker commissions in connection with the investment contract. (2) Brokers’ Compensation. For purposes of computing the yield on any investment contract acquired through a broker, any compensation received by such broker, whether payable by or on behalf of the obligor or obligee of such investment contract may be taken into account in determining the cost of the investment contract to the extent that the amount of the fee the City treats as a “qualified administrative cost” (within the meaning of Section 1.148- 5(e)(2)(iii) of the Treasury Regulations): (i) is, in the Opinion of Bond Counsel, “reasonable” (within the meaning of Section 1.148-5(e)(2)(i) of the Treasury Regulations), or (ii) does not exceed the lesser of: (a) $42,000 and (b) 0.2% of the amount of Gross Proceeds of the issue of Certificates that the City reasonably expects, as of date the investment contract is acquired, to be deposited in the investment contract over the term of the investment contract (i.e., the “computational base” within the meaning of Section 1.148-5(e)(2)(iii)(B)(2)(i) of the Treasury Appendix D-3 4149-5312-0557.1 43875-8 Regulations) or, if more, $4,000; and with respect to the issue of Certificates, the City does not treat as qualified administrative costs more than $118,000 in brokers’ commissions or similar fees with respect to all investment contracts and investments for yield restricted defeasance escrows purchased with Gross Proceeds of the issue of Certificates. The dollar amounts specified in this paragraph are subject to the cost-of-living adjustment provided in Section 1.148-5(e)(2)(iii)(B) of the Treasury Regulations. (c) Certificates of Deposit. The fair market value of a certificate of deposit that has a fixed interest rate, a fixed principal payment schedule, and a substantial penalty for early withdrawal shall be determined as provided in this paragraph. The fair market value of a certificate of deposit that does not have the foregoing attributes may be determined by reference to the bona fide bid price quoted by a dealer who maintains an active secondary market in such certificate of deposit. The purchase price of a certificate of deposit will be considered to be fair market value if: (1) the yield on the certificate of deposit is not less than the yield on reasonably comparable direct obligations of the United States; and (2) the yield on the certificate of deposit is not less than the highest published yield of the provider thereof that is currently available on comparable certificates of deposit offered to the public. Exhibit A-1 4149-5312-0557.1 43875-8 EXHIBIT A CERTIFICATE OF UNDERWRITERS The undersigned hereby certifies with respect to the sale of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”), as follows: 1. The undersigned is a duly authorized representative of Raymond James & Associates, Inc., which acted as the lead underwriter (the “Representative”) of the underwriting group (the “Underwriting Group”) that purchased the Certificates from the City of Sanger, Texas (the “Issuer”), pursuant to that Purchase Agreement, dated April 19, 2021, and entered into by the Issuer and the Representative on behalf of the Underwriting Group. In this capacity, I am familiar with the facts stated herein and am duly authorized to execute and deliver this certificate on behalf of the Underwriting Group. 2. The Underwriting Group has made a bona fide offering to the public of all the Certificates of each maturity at the respective initial offering prices (the “Initial Offering Prices”) set forth in the pricing wire attached hereto as Schedule I. The Initial Offering Prices are the first prices at which at least 10% of the Certificates of each maturity was sold to the public, except for the Bonds maturing in the years 2022 and 2028 through 2032 (inclusive) (the “Undersold Maturities”). 3. As of the date hereof, other than the Undersold Maturities, the first price or yield at which at least 10% of each Maturity of the Certificates was sold by the Underwriting Group to the Public was the respective Initial Offering as set forth on Schedule I hereto. Attached hereto as Schedule I is also a copy of the final pricing wire for each Undersold Maturity or an equivalent communication. With respect to the Undersold Maturities, as agreed to in writing by the Representative in the Purchase Agreement between the Issuer and the Representative, dated April 19, 2021, the Underwriting Group has not offered or sold any of the Undersold Maturities to any person at a price higher than or a yield lower than the respective Initial Offering Price for a period of time starting on the Sale Date and ending on the earlier of (a) the date on which 10% of the respective Undersold Maturity was sold at one or more prices no higher than or yields no lower than the Initial Offering Price by the Underwriting Group or (b) the close of the fifth business day following the Sale Date. 4. The sum of the Initial Offering Prices is $20,558,647.85. The Certificates were issued without pre-issuance accrued interest. 5. For purposes of this Certificate, the following definitions apply. “Maturity” means Certificates with the same credit and payment terms. Certificates with different maturity dates, or Certificates with the same maturity date but different stated interest rates, are treated as separate maturities. Exhibit A-2 4149-5312-0557.1 43875-8 “Public” means any person (including an individual, trust, estate, partnership, association, company, or corporation) other than an Underwriter or a Related Party to an Underwriter. “Related Party” means any entity if an Underwriter and such entity are subject, directly or indirectly, to (i) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (ii) more than 50% common ownership of their capital interests or profit interests, if both entities are partnerships (including direct ownership by one partnership of another), or (iii) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other). “Underwriter” means (i) any person that agrees pursuant to a written contract with the issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Certificates to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (i) of this paragraph to participate in the initial sale of the Certificates to the Public (including a member of a selling group or a party to a retail distribution agreement participating in the initial sale of the Certificates to the Public). [Rest of Page Intentionally Left Blank] Exhibit A-4 4149-5312-0557.1 43875-8 SCHEDULE I PRICING WIRE [See attached.] 1 Hill, Lyndsey From:Chad Runnels <Chad.Runnels@RaymondJames.com> Sent:Wednesday, May 5, 2021 1:13 PM To:Hill, Lyndsey; Nick Papan; Elizabeth Rice; Jeff Philyaw; Jim Buie; Luke Mattson Cc:vnickels@namanhowell.com; aclark@namanhowell.com; League, Barbara; Chang, Cathleen Subject:RE: Certificate of Underwriters - City of Sanger, Texas Combo Tax and Rev Certificates of Obligation, Series 2021 This message originated from outside your organization Yes, please use the signature on file. Final pricing wire below. RE: $ 21,445,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B POS URL: http://digiprospect.us/files/1234 $ 18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A MOODY'S: S&P: AA (Stable) FITCH: KROLL: DATED:05/01/2021 FIRST COUPON:11/01/2021 INTEREST ACCRUES:05/07/2021 DUE: 05/01 INITIAL TRADE DATE: 04/20/2021 @ 11:15AM Eastern ADD'L TAKEDOWN MATURITY AMOUNT COUPON PRICE ( Pts ) CUSIP 05/01/2022 55M 3.00% 0.14 3/8 800876GS7 (Approx. $ Price 102.809) 05/01/2023 295M 3.00% 0.20 3/8 800876GT5 (Approx. $ Price 105.539) 05/01/2024 320M 3.00% 0.29 3/8 800876GU2 (Approx. $ Price 108.044) 05/01/2025 345M 2.00% 0.42 3/8 800876GV0 (Approx. $ Price 106.234) 05/01/2026 395M 2.00% 0.56 3/8 800876GW8 (Approx. $ Price 107.066) 05/01/2027 140M 2.00% 0.72 1/2 800876GX6 (Approx. $ Price 107.482) 05/01/2028 135M 3.00% 0.88 1/2 800876GY4 (Approx. $ Price 114.328) 2 05/01/2029 160M 3.00% 1.03 1/2 800876GZ1 (Approx. $ Price 115.060) 05/01/2030 160M 3.00% 1.16 1/2 800876HA5 (Approx. $ Price 115.654) 05/01/2031 185M 3.00% 1.26 1/2 800876HB3 (Approx. $ Price 116.274) 05/01/2032 260M 4.00% 1.36 1/2 800876HC1 (Approx. $ Price PTC 05/01/2031 124.566 Approx. YTM 1.558) 05/01/2033 290M 4.00% 1.45 1/2 800876HD9 (Approx. $ Price PTC 05/01/2031 123.620 Approx. YTM 1.800) 05/01/2034 290M 4.00% 1.54 1/2 800876HE7 (Approx. $ Price PTC 05/01/2031 122.683 Approx. YTM 2.007) 05/01/2035 320M 4.00% 1.57 1/2 800876HF4 (Approx. $ Price PTC 05/01/2031 122.372 Approx. YTM 2.140) 05/01/2036 370M 3.00% 1.76 1/2 800876HG2 (Approx. $ Price PTC 05/01/2031 111.307 Approx. YTM 2.115) 05/01/2037 395M 3.00% 1.80 1/2 800876HH0 (Approx. $ Price PTC 05/01/2031 110.920 Approx. YTM 2.187) 05/01/2038 1,620M 3.00% 1.79 1/2 800876HJ6 (Approx. $ Price PTC 05/01/2031 111.016 Approx. YTM 2.218) 05/01/2039 1,665M 3.00% 1.83 1/2 800876HK3 (Approx. $ Price PTC 05/01/2031 110.631 Approx. YTM 2.276) 05/01/2040 1,715M 3.00% 1.85 1/2 800876HL1 (Approx. $ Price PTC 05/01/2031 110.438 Approx. YTM 2.317) 05/01/2041 1,765M 3.00% 1.89 1/2 800876HM9 (Approx. $ Price PTC 05/01/2031 110.055 Approx. YTM 2.366) 05/01/2046 7,735M 3.00% 2.03 1/2 800876HN7 (Approx. $ Price PTC 05/01/2031 108.725 Approx. YTM 2.527) --------------------------------------- CALL FEATURES: Optional call in 05/01/2031 @ 100.00 --------------------------------------- Sinking Fund Schedule 2046 Term Bond 05/01/2042 1,820M 05/01/2043 1,875M 05/01/2044 1,930M 05/01/2045 1,990M 05/01/2046 120M $ 2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B 3 *********************** ATTENTION ********************** THE BONDS ARE TAXABLE MUNICIPAL SECURITIES AND THIS OFFERING IS SUBJECT TO REGULATION BY THE MUNICIPAL SECURITIES RULEMAKING BOARD. ALL ACTIVITY UNDERTAKEN WITH RESPECT TO THIS OFFERING MUST BE SUPERVISED BY A MUNICIPAL SECURITIES PRINCIPAL. MOODY'S: S&P: AA (Stable) FITCH: KROLL: DATED:05/01/2021 FIRST COUPON:08/01/2021 INTEREST ACCRUES:05/07/2021 DUE: 08/01 INITIAL TRADE DATE: 04/20/2021 @ 11:15AM Eastern ALL BONDS ARE PRICED AT PAR. ADD'L TAKEDOWN MATURITY AMOUNT COUPON ( Pts ) CUSIP 08/01/2022 55M 0.25% 3/8 800876HP2 08/01/2023 55M 0.35% 3/8 800876HQ0 08/01/2024 260M 0.57% 3/8 800876HR8 08/01/2025 255M 0.87% 3/8 800876HS6 08/01/2026 260M 1.12% 3/8 800876HT4 08/01/2027 265M 1.42% 3/8 800876HU1 08/01/2028 265M 1.57% 1/2 800876HV9 08/01/2029 275M 1.83% 1/2 800876HW7 08/01/2030 275M 1.93% 1/2 800876HX5 08/01/2031 285M 1.98% 1/2 800876HY3 08/01/2032 290M 2.10% 1/2 800876HZ0 08/01/2033 290M 2.13% 1/2 800876JA3 --------------------------------------- CALL FEATURES: Optional call in 08/01/2031 @ 100.00 --------------------------------------- PRIORITY OF ORDERS AS FOLLOWS: 1. Group Net (Except if an investor is affiliated with a syndicate member and that syndicate member may not be compensated for the investor's order, the investor will not be required to designate to that syndicate member) 2. Member PRIORITY POLICY: The Senior Manager requests the identification of all priority orders at the time the orders are entered. The compliance addendum MSRB Rule G-11 will apply. The Award is final for Monday, April 19, 2021 at 9:12PM Eastern . Delivery is firm for Friday, May 7, 2021. This issue is book entry only. This issue is clearing through DTC. $ 18,615,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2021A Award: 04/19/2021 Award Time: 9:12PM Eastern Delivery: 05/07/2021 (Firm) Initial trade: 04/20/2021 Date of Execution: 04/20/2021 Time of Execution: 11:15AM Eastern -------------------------------------------------------------------------------- $ 2,830,000 GENERAL OBLIGATION REFUNDING BONDS, TAXABLE SERIES 2021B Award: 04/19/2021 Award Time: 9:12PM Eastern Delivery: 05/07/2021 (Firm) Initial trade: 04/20/2021 Date of Execution: 04/20/2021 Time of Execution: 11:15AM Eastern Raymond James & Associates, Inc. Oppenheimer & Co. SAMCO Capital Markets By: Raymond James & Associates, Inc. Dallas, TX Exhibit B-1 4149-5312-0557.1 43875-8 EXHIBIT B CERTIFICATE OF FINANCIAL ADVISOR The undersigned hereby certifies with respect to the sale by the City of Sanger, Texas (the “City”) of its Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”), as follows: 1. The undersigned is a duly authorized representative of Government Capital Securities Corporation, the financial advisor (the “Financial Advisor”) to the City in connection with the sale and delivery of the Certificates. In this capacity, the undersigned is familiar with the facts stated herein. 2. The term “yield” shall have the meaning ascribed to it in Section 148(h) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. In the case of the Certificates, the term “yield” means that interest rate which when used as a discount factor in computing the present value as of the date hereof of all scheduled payments of principal of and interest on the Certificates produces an amount equal to the issue price of the Certificates, plus pre-issuance accrued interest. No underwriters’ discount, issuance costs, or costs of carrying or repaying the Certificates has been taken into account for purposes of computing the yield on the Certificates. For purposes hereof, yield shall be calculated on the basis of a 360-day year with interest compounded semi-annually. The yield on the Certificates, calculated in this manner and based on an amount equal to $20,558,647.85, which represents the issue price of the Certificates as set forth in the Certificate of Underwriters, attached as Exhibit A, is 1.825385 percent. 3. The weighted average maturity of the Certificates is 18.085 years. The weighted average maturity is the sum of the products of the issue price of each group of identical Certificates and the number of years to maturity (determined separately for each group of identical Certificates and taking into account mandatory redemptions), divided by the aggregate sale proceeds of the Certificates. [SIGNATURE PAGE FOLLOWS] Exhibit B-2 4149-5312-0557.1 43875-8 The Financial Advisor hereby authorizes the City to rely on the statements made herein in connection with making the representations set forth in the Federal Tax Certificate to which this Certificate is attached and in connection with compliance by the City with the provisions of the Code regarding the exclusion from gross income of the interest on the Certificates. Further, we hereby authorize Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel to the City, to rely on the statements made herein in connection with its opinion that interest on the Certificates is excludable from gross income for federal income tax purposes and the preparation of Internal Revenue Service Form 8038-G. EXECUTED and DELIVERED as of and on May 7, 2021. GOVERNMENT CAPITAL SECURITIES CORPORATION By: Ted Christensen, President Exhibit C-1 4149-5312-0557.1 43875-8 EXHIBIT C IRS FORM 8038-G [See attached.] Form 8038-G (Rev. September 2018) Department of the Treasury Internal Revenue Service Information Return for Tax-Exempt Governmental Bonds "Under Internal Revenue Code section 149(e) "See separate instructions. Caution: If the issue price is under $100,000, use Form 8038-GC. "Go to www.irs.gov/F8038G for instructions and the latest information. OMB No. 1545-0720 Part I Reporting Authority If Amended Return, check here " 1 Issuer’s name 2 Issuer’s employer identification number (EIN) 3a Name of person (other than issuer) with whom the IRS may communicate about this return (see instructions)3b Telephone number of other person shown on 3a 4 Number and street (or P.O. box if mail is not delivered to street address)Room/suite 5 Report number (For IRS Use Only) 3 6 City, town, or post office, state, and ZIP code 7 Date of issue 8 Name of issue 9 CUSIP number 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information (see instructions) 10b Telephone number of officer or other employee shown on 10a Part II Type of Issue (enter the issue price). See the instructions and attach schedule. 11 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 12 Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . . .12 13 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 14 Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 15 Environment (including sewage bonds) . . . . . . . . . . . . . . . . . . . .15 16 Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 17 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 18 Other. Describe "18 19 a If bonds are TANs or RANs, check only box 19a . . . . . . . . . . . . . . . " b If bonds are BANs, check only box 19b . . . . . . . . . . . . . . . . . . " 20 If bonds are in the form of a lease or installment sale, check box . . . . . . . . . " Part III Description of Bonds. Complete for the entire issue for which this form is being filed. 21 (a) Final maturity date (b) Issue price (c) Stated redemption price at maturity (d) Weighted average maturity (e) Yield $ $ years % Part IV Uses of Proceeds of Bond Issue (including underwriters’ discount) 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . .22 23 Issue price of entire issue (enter amount from line 21, column (b)) . . . . . . . . . . .23 24 Proceeds used for bond issuance costs (including underwriters’ discount) 24 25 Proceeds used for credit enhancement . . . . . . . . . . . .25 26 Proceeds allocated to reasonably required reserve or replacement fund .26 27 Proceeds used to refund prior tax-exempt bonds. Complete Part V . . .27 28 Proceeds used to refund prior taxable bonds. Complete Part V . . . .28 29 Total (add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . . . .29 30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here) . . .30 Part V Description of Refunded Bonds. Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the tax-exempt bonds to be refunded . . . "years 32 Enter the remaining weighted average maturity of the taxable bonds to be refunded . . . . "years 33 Enter the last date on which the refunded tax-exempt bonds will be called (MM/DD/YYYY) . ." 34 Enter the date(s) the refunded bonds were issued " (MM/DD/YYYY) For Paperwork Reduction Act Notice, see separate instructions.Cat. No. 63773S Form 8038-G (Rev. 9-2018) City of Sanger, Texas 502 Elm Street Sanger, Texas 76266 05/07/2021 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A Jeriana Stanton, Interim City Manager 940.458.7930 0 00 0 00 0 00 0 00 0 00 0 00 0 00 water and sewer system, electric utility, street and drainage capital improvements 20,558,647 85 05/01/2046 20,558,647.85 18,615,000.00 18.085 1.8253 0 00 20,558,647 85 287,744 21 0 00 0 00 0 00 05/07/2021 Exhibit D-1 4149-5312-0557.1 43875-8 EXHIBIT D PRICING NUMBERS [See attached.] City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Sources & Uses Dated 05/07/2021 | Delivered 05/07/2021 Sources Of Funds Par Amount of Bonds $18,615,000.00 Reoffering Premium 1,943,647.85 Total Sources $20,558,647.85 Uses Of Funds Deposit to Project Fund 19,999,632.81 Deposit to Bond Fund 271,270.83 Costs of Issuance 161,250.00 Total Underwriter's Discount (0.680%)126,494.21 Total Uses $20,558,647.85 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 1 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 05/07/2021 ----- 11/01/2021 --271,270.83 271,270.83 - 05/01/2022 55,000.00 3.000%280,625.00 335,625.00 - 09/30/2022 ----606,895.83 11/01/2022 --279,800.00 279,800.00 - 05/01/2023 295,000.00 3.000%279,800.00 574,800.00 - 09/30/2023 ----854,600.00 11/01/2023 --275,375.00 275,375.00 - 05/01/2024 320,000.00 3.000%275,375.00 595,375.00 - 09/30/2024 ----870,750.00 11/01/2024 --270,575.00 270,575.00 - 05/01/2025 345,000.00 2.000%270,575.00 615,575.00 - 09/30/2025 ----886,150.00 11/01/2025 --267,125.00 267,125.00 - 05/01/2026 395,000.00 2.000%267,125.00 662,125.00 - 09/30/2026 ----929,250.00 11/01/2026 --263,175.00 263,175.00 - 05/01/2027 140,000.00 2.000%263,175.00 403,175.00 - 09/30/2027 ----666,350.00 11/01/2027 --261,775.00 261,775.00 - 05/01/2028 135,000.00 3.000%261,775.00 396,775.00 - 09/30/2028 ----658,550.00 11/01/2028 --259,750.00 259,750.00 - 05/01/2029 160,000.00 3.000%259,750.00 419,750.00 - 09/30/2029 ----679,500.00 11/01/2029 --257,350.00 257,350.00 - 05/01/2030 160,000.00 3.000%257,350.00 417,350.00 - 09/30/2030 ----674,700.00 11/01/2030 --254,950.00 254,950.00 - 05/01/2031 185,000.00 3.000%254,950.00 439,950.00 - 09/30/2031 ----694,900.00 11/01/2031 --252,175.00 252,175.00 - 05/01/2032 260,000.00 4.000%252,175.00 512,175.00 - 09/30/2032 ----764,350.00 11/01/2032 --246,975.00 246,975.00 - 05/01/2033 290,000.00 4.000%246,975.00 536,975.00 - 09/30/2033 ----783,950.00 11/01/2033 --241,175.00 241,175.00 - 05/01/2034 290,000.00 4.000%241,175.00 531,175.00 - 09/30/2034 ----772,350.00 11/01/2034 --235,375.00 235,375.00 - 05/01/2035 320,000.00 4.000%235,375.00 555,375.00 - 09/30/2035 ----790,750.00 11/01/2035 --228,975.00 228,975.00 - 05/01/2036 370,000.00 3.000%228,975.00 598,975.00 - 09/30/2036 ----827,950.00 11/01/2036 --223,425.00 223,425.00 - 05/01/2037 395,000.00 3.000%223,425.00 618,425.00 - 09/30/2037 ----841,850.00 11/01/2037 --217,500.00 217,500.00 - 05/01/2038 1,620,000.00 3.000%217,500.00 1,837,500.00 - 09/30/2038 ----2,055,000.00 11/01/2038 --193,200.00 193,200.00 - 05/01/2039 1,665,000.00 3.000%193,200.00 1,858,200.00 - 09/30/2039 ----2,051,400.00 11/01/2039 --168,225.00 168,225.00 - 05/01/2040 1,715,000.00 3.000%168,225.00 1,883,225.00 - 09/30/2040 ----2,051,450.00 11/01/2040 --142,500.00 142,500.00 - 05/01/2041 1,765,000.00 3.000%142,500.00 1,907,500.00 - 09/30/2041 ----2,050,000.00 11/01/2041 --116,025.00 116,025.00 - 05/01/2042 1,820,000.00 3.000%116,025.00 1,936,025.00 - 09/30/2042 ----2,052,050.00 11/01/2042 --88,725.00 88,725.00 - 05/01/2043 1,875,000.00 3.000%88,725.00 1,963,725.00 - 09/30/2043 ----2,052,450.00 11/01/2043 --60,600.00 60,600.00 - 05/01/2044 1,930,000.00 3.000%60,600.00 1,990,600.00 - 09/30/2044 ----2,051,200.00 11/01/2044 --31,650.00 31,650.00 - 05/01/2045 1,990,000.00 3.000%31,650.00 2,021,650.00 - 09/30/2045 ----2,053,300.00 11/01/2045 --1,800.00 1,800.00 - 05/01/2046 120,000.00 3.000%1,800.00 121,800.00 - 09/30/2046 ----123,600.00 Total $18,615,000.00 -$10,228,295.83 $28,843,295.83 - Yield Statistics Bond Year Dollars $337,479.75 Average Life 18.129 Years Average Coupon 3.0307880% Net Interest Cost (NIC)2.4923398% True Interest Cost (TIC)2.3553559% Bond Yield for Arbitrage Purposes 1.8253850% All Inclusive Cost (AIC)2.4121963% IRS Form 8038 Net Interest Cost 2.2282078% Weighted Average Maturity 18.085 Years 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 2 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Net Debt Service Schedule Date Principal Coupon Interest Total P+I CIF Net New D/S 09/30/2021 ------ 09/30/2022 55,000.00 3.000%551,895.83 606,895.83 (271,270.83)335,625.00 09/30/2023 295,000.00 3.000%559,600.00 854,600.00 -854,600.00 09/30/2024 320,000.00 3.000%550,750.00 870,750.00 -870,750.00 09/30/2025 345,000.00 2.000%541,150.00 886,150.00 -886,150.00 09/30/2026 395,000.00 2.000%534,250.00 929,250.00 -929,250.00 09/30/2027 140,000.00 2.000%526,350.00 666,350.00 -666,350.00 09/30/2028 135,000.00 3.000%523,550.00 658,550.00 -658,550.00 09/30/2029 160,000.00 3.000%519,500.00 679,500.00 -679,500.00 09/30/2030 160,000.00 3.000%514,700.00 674,700.00 -674,700.00 09/30/2031 185,000.00 3.000%509,900.00 694,900.00 -694,900.00 09/30/2032 260,000.00 4.000%504,350.00 764,350.00 -764,350.00 09/30/2033 290,000.00 4.000%493,950.00 783,950.00 -783,950.00 09/30/2034 290,000.00 4.000%482,350.00 772,350.00 -772,350.00 09/30/2035 320,000.00 4.000%470,750.00 790,750.00 -790,750.00 09/30/2036 370,000.00 3.000%457,950.00 827,950.00 -827,950.00 09/30/2037 395,000.00 3.000%446,850.00 841,850.00 -841,850.00 09/30/2038 1,620,000.00 3.000%435,000.00 2,055,000.00 -2,055,000.00 09/30/2039 1,665,000.00 3.000%386,400.00 2,051,400.00 -2,051,400.00 09/30/2040 1,715,000.00 3.000%336,450.00 2,051,450.00 -2,051,450.00 09/30/2041 1,765,000.00 3.000%285,000.00 2,050,000.00 -2,050,000.00 09/30/2042 1,820,000.00 3.000%232,050.00 2,052,050.00 -2,052,050.00 09/30/2043 1,875,000.00 3.000%177,450.00 2,052,450.00 -2,052,450.00 09/30/2044 1,930,000.00 3.000%121,200.00 2,051,200.00 -2,051,200.00 09/30/2045 1,990,000.00 3.000%63,300.00 2,053,300.00 -2,053,300.00 09/30/2046 120,000.00 3.000%3,600.00 123,600.00 -123,600.00 Total $18,615,000.00 -$10,228,295.83 $28,843,295.83 (271,270.83)$28,572,025.00 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 3 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Pricing Summary Maturity Type of Bond Coupon Yield Maturity Value Price YTM Call Date Call Price Dollar Price 05/01/2022 Serial Coupon 3.000%0.140%55,000.00 102.809% ---56,544.95 05/01/2023 Serial Coupon 3.000%0.200%295,000.00 105.539% ---311,340.05 05/01/2024 Serial Coupon 3.000%0.290%320,000.00 108.044% ---345,740.80 05/01/2025 Serial Coupon 2.000%0.420%345,000.00 106.234% ---366,507.30 05/01/2026 Serial Coupon 2.000%0.560%395,000.00 107.066% ---422,910.70 05/01/2027 Serial Coupon 2.000%0.720%140,000.00 107.482% ---150,474.80 05/01/2028 Serial Coupon 3.000%0.880%135,000.00 114.328% ---154,342.80 05/01/2029 Serial Coupon 3.000%1.030%160,000.00 115.060% ---184,096.00 05/01/2030 Serial Coupon 3.000%1.160%160,000.00 115.654% ---185,046.40 05/01/2031 Serial Coupon 3.000%1.260%185,000.00 116.274% ---215,106.90 05/01/2032 Serial Coupon 4.000%1.360%260,000.00 124.566%c 1.558%05/01/2031 100.000%323,871.60 05/01/2033 Serial Coupon 4.000%1.450%290,000.00 123.620%c 1.800%05/01/2031 100.000%358,498.00 05/01/2034 Serial Coupon 4.000%1.540%290,000.00 122.683%c 2.007%05/01/2031 100.000%355,780.70 05/01/2035 Serial Coupon 4.000%1.570%320,000.00 122.372%c 2.140%05/01/2031 100.000%391,590.40 05/01/2036 Serial Coupon 3.000%1.760%370,000.00 111.307%c 2.115%05/01/2031 100.000%411,835.90 05/01/2037 Serial Coupon 3.000%1.800%395,000.00 110.920%c 2.187%05/01/2031 100.000%438,134.00 05/01/2038 Serial Coupon 3.000%1.790%1,620,000.00 111.016%c 2.218%05/01/2031 100.000%1,798,459.20 05/01/2039 Serial Coupon 3.000%1.830%1,665,000.00 110.631%c 2.276%05/01/2031 100.000%1,842,006.15 05/01/2040 Serial Coupon 3.000%1.850%1,715,000.00 110.438%c 2.317%05/01/2031 100.000%1,894,011.70 05/01/2041 Serial Coupon 3.000%1.890%1,765,000.00 110.055%c 2.366%05/01/2031 100.000%1,942,470.75 05/01/2046 Term 1 Coupon 3.000%2.030%7,735,000.00 108.725%c 2.527%05/01/2031 100.000%8,409,878.75 Total ---$18,615,000.00 -----$20,558,647.85 Bid Information Par Amount of Bonds $18,615,000.00 Reoffering Premium or (Discount)1,943,647.85 Gross Production $20,558,647.85 Total Underwriter's Discount (0.680%)$(126,494.21) Bid (109.762%)20,432,153.64 Total Purchase Price $20,432,153.64 Bond Year Dollars $337,479.75 Average Life 18.129 Years Average Coupon 3.0307880% Net Interest Cost (NIC)2.4923398% True Interest Cost (TIC)2.3553559% 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 4 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Proof of D/S for Arbitrage Purposes Date Principal Interest Total 05/07/2021 --- 11/01/2021 -271,270.83 271,270.83 05/01/2022 55,000.00 280,625.00 335,625.00 11/01/2022 -279,800.00 279,800.00 05/01/2023 295,000.00 279,800.00 574,800.00 11/01/2023 -275,375.00 275,375.00 05/01/2024 320,000.00 275,375.00 595,375.00 11/01/2024 -270,575.00 270,575.00 05/01/2025 345,000.00 270,575.00 615,575.00 11/01/2025 -267,125.00 267,125.00 05/01/2026 395,000.00 267,125.00 662,125.00 11/01/2026 -263,175.00 263,175.00 05/01/2027 140,000.00 263,175.00 403,175.00 11/01/2027 -261,775.00 261,775.00 05/01/2028 135,000.00 261,775.00 396,775.00 11/01/2028 -259,750.00 259,750.00 05/01/2029 160,000.00 259,750.00 419,750.00 11/01/2029 -257,350.00 257,350.00 05/01/2030 160,000.00 257,350.00 417,350.00 11/01/2030 -254,950.00 254,950.00 05/01/2031 16,610,000.00 254,950.00 16,864,950.00 Total $18,615,000.00 $5,331,645.83 $23,946,645.83 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 5 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Proof of Bond Yield @ 1.8253850% Date Cashflow PV Factor Present Value Cumulative PV 05/07/2021 -1.0000000x -- 11/01/2021 271,270.83 0.9912558x 268,898.78 268,898.78 05/01/2022 335,625.00 0.9822905x 329,681.25 598,580.02 11/01/2022 279,800.00 0.9734063x 272,359.08 870,939.10 05/01/2023 574,800.00 0.9646024x 554,453.48 1,425,392.58 11/01/2023 275,375.00 0.9558782x 263,224.96 1,688,617.54 05/01/2024 595,375.00 0.9472329x 563,958.77 2,252,576.31 11/01/2024 270,575.00 0.9386657x 253,979.48 2,506,555.79 05/01/2025 615,575.00 0.9301761x 572,593.15 3,079,148.95 11/01/2025 267,125.00 0.9217632x 246,226.00 3,325,374.95 05/01/2026 662,125.00 0.9134265x 604,802.49 3,930,177.44 11/01/2026 263,175.00 0.9051651x 238,216.82 4,168,394.27 05/01/2027 403,175.00 0.8969784x 361,639.28 4,530,033.54 11/01/2027 261,775.00 0.8888658x 232,682.85 4,762,716.39 05/01/2028 396,775.00 0.8808266x 349,489.97 5,112,206.36 11/01/2028 259,750.00 0.8728601x 226,725.40 5,338,931.76 05/01/2029 419,750.00 0.8649656x 363,069.30 5,702,001.06 11/01/2029 257,350.00 0.8571425x 220,585.62 5,922,586.68 05/01/2030 417,350.00 0.8493902x 354,492.99 6,277,079.68 11/01/2030 254,950.00 0.8417080x 214,593.45 6,491,673.13 05/01/2031 16,864,950.00 0.8340953x 14,066,974.72 20,558,647.85 Total $23,946,645.83 -$20,558,647.85 - Derivation Of Target Amount Par Amount of Bonds $18,615,000.00 Reoffering Premium or (Discount)1,943,647.85 Original Issue Proceeds $20,558,647.85 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 6 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Derivation Of Form 8038 Yield Statistics Maturity Issuance Value Coupon Price Issuance Price Exponent Bond Years 05/01/2022 55,000.00 3.000%102.809%56,544.95 0.9833333x 55,602.53 05/01/2023 295,000.00 3.000%105.539%311,340.05 1.9833333x 617,491.10 05/01/2024 320,000.00 3.000%108.044%345,740.80 2.9833333x 1,031,460.05 05/01/2025 345,000.00 2.000%106.234%366,507.30 3.9833333x 1,459,920.75 05/01/2026 395,000.00 2.000%107.066%422,910.70 4.9833333x 2,107,504.99 05/01/2027 140,000.00 2.000%107.482%150,474.80 5.9833333x 900,340.89 05/01/2028 135,000.00 3.000%114.328%154,342.80 6.9833333x 1,077,827.22 05/01/2029 160,000.00 3.000%115.060%184,096.00 7.9833333x 1,469,699.73 05/01/2030 160,000.00 3.000%115.654%185,046.40 8.9833333x 1,662,333.49 05/01/2031 185,000.00 3.000%116.274%215,106.90 9.9833333x 2,147,483.89 05/01/2032 260,000.00 4.000%124.566%323,871.60 10.9833333x 3,557,189.74 05/01/2033 290,000.00 4.000%123.620%358,498.00 11.9833333x 4,296,001.03 05/01/2034 290,000.00 4.000%122.683%355,780.70 12.9833333x 4,619,219.42 05/01/2035 320,000.00 4.000%122.372%391,590.40 13.9833333x 5,475,739.09 05/01/2036 370,000.00 3.000%111.307%411,835.90 14.9833333x 6,170,674.57 05/01/2037 395,000.00 3.000%110.920%438,134.00 15.9833333x 7,002,841.77 05/01/2038 1,620,000.00 3.000%111.016%1,798,459.20 16.9833333x 30,543,832.08 05/01/2039 1,665,000.00 3.000%110.631%1,842,006.15 17.9833333x 33,125,410.60 05/01/2040 1,715,000.00 3.000%110.438%1,894,011.70 18.9833333x 35,954,655.44 05/01/2041 1,765,000.00 3.000%110.055%1,942,470.75 19.9833333x 38,817,040.49 05/01/2042 1,820,000.00 3.000%108.725%1,978,795.00 20.9833333x 41,521,715.08 05/01/2043 1,875,000.00 3.000%108.725%2,038,593.75 21.9833333x 44,815,085.94 05/01/2044 1,930,000.00 3.000%108.725%2,098,392.50 22.9833333x 48,228,054.29 05/01/2045 1,990,000.00 3.000%108.725%2,163,627.50 23.9833333x 51,890,999.54 05/01/2046 120,000.00 3.000%108.725%130,470.00 24.9833333x 3,259,575.50 Total $18,615,000.00 --$20,558,647.85 -$371,807,699.22 Description of Bonds Final Maturity Date 5/01/2046 Issue price of entire issue 20,558,647.85 Stated Redemption at Maturity 18,615,000.00 Weighted Average Maturity = Bond Years/Issue Price 18.085 Years Bond Yield for Arbitrage Purposes 1.8253850% Uses of Proceeds of Issue Proceeds used for accrued interest - Proceeds used for bond issuance costs (including underwriters' discount) 287,744.21 Proceeds used for credit enhancement - Proceeds allocated to reasonably required reserve or replacement fund - 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 7 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Detail Costs Of Issuance Dated 05/07/2021 | Delivered 05/07/2021 COSTS OF ISSUANCE DETAIL Financial Advisor $115,000.00 Bond Counsel $15,000.00 Texas AG Fee $9,500.00 Rating Agency Fee $20,250.00 Paying Agent $500.00 Miscellaneous $1,000.00 TOTAL $161,250.00 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 8 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Summary Of Underwriter's Discount Maturity Concession + Takedown = Total Issuance Value Total Takedown 05/01/2022 -0.375%0.375%55,000.00 206.25 05/01/2023 -0.375%0.375%295,000.00 1,106.25 05/01/2024 -0.375%0.375%320,000.00 1,200.00 05/01/2025 -0.375%0.375%345,000.00 1,293.75 05/01/2026 -0.375%0.375%395,000.00 1,481.25 05/01/2027 -0.500%0.500%140,000.00 700.00 05/01/2028 -0.500%0.500%135,000.00 675.00 05/01/2029 -0.500%0.500%160,000.00 800.00 05/01/2030 -0.500%0.500%160,000.00 800.00 05/01/2031 -0.500%0.500%185,000.00 925.00 05/01/2032 -0.500%0.500%260,000.00 1,300.00 05/01/2033 -0.500%0.500%290,000.00 1,450.00 05/01/2034 -0.500%0.500%290,000.00 1,450.00 05/01/2035 -0.500%0.500%320,000.00 1,600.00 05/01/2036 -0.500%0.500%370,000.00 1,850.00 05/01/2037 -0.500%0.500%395,000.00 1,975.00 05/01/2038 -0.500%0.500%1,620,000.00 8,100.00 05/01/2039 -0.500%0.500%1,665,000.00 8,325.00 05/01/2040 -0.500%0.500%1,715,000.00 8,575.00 05/01/2041 -0.500%0.500%1,765,000.00 8,825.00 05/01/2046 -0.500%0.500%7,735,000.00 38,675.00 Total ---$18,615,000.00 $91,312.50 Underwriting & Issuance Expenses Total Management Fees (0.100%)$18,615.00 Total Average Takedown (0.491%)$91,312.50 Total Underwriters Expenses (0.089%)$16,566.71 TOTAL UNDERWRITING SPREAD (0.680%)$126,494.21 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 9 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (REVISED FINAL $20mm Max Net Proceeds) Detail Of Underwriter's Discount Dated 05/07/2021 | Delivered 05/07/2021 UNDERWRITER'S EXPENSES DETAIL Underwriter's Counsel (0.048%)$9,000.00 Texas MAC (0.012%)$2,261.50 DTC (0.004%)$800.00 CUSIP (0.004%)$743.00 Printing (0.008%)$1,500.00 I-Deal (IPREO) (0.006%)$1,150.41 IPREO Wire Charge (0.001%)$150.00 IPREO Order Monitor (0.003%)$558.45 IPREO Sales Tax (0.001%)$153.35 Miscellaneous (0.001%)$250.00 TOTAL $16,566.71 2021A New COs REVISED FIN | SINGLE PURPOSE | 4/30/2021 | 3:46 PM Raymond James Public Finance Page 10 PUBLIC FINANCEDISCLAIMER The information contained herein is solely intended to facilitate discussion of potentially applicable financing applications and is not intended to be a specific buy/sell recommendation,nor is it an official confirmation of terms. Any terms discussed herein are preliminary until confirmed in a definitive written agreement.While we believe that the outlined financial structure or marketing strategy is the best approach under the current market conditions,the market conditions at the time any proposed transaction is structured or sold may be different,which may require a different approach. The analysis or information presented herein is based upon hypothetical projections and/or past performance that have certain limitations.No representation is made that it is accurate or complete or that any results indicated will be achieved.In no way is past performance indicative of future results.Changes to any prices,levels,or assumptions contained herein may have a material impact on results.Any estimates or assumptions contained herein represent our best judgment as of the date indicated and are subject to change without notice.Examples are merely representative and are not meant to be all-inclusive. Raymond James shall have no liability,contingent or otherwise,to the recipient hereof or to any third party,or any responsibility whatsoever,for the accuracy,correctness,timeliness,reliability or completeness of the data or formulae provided herein or for the performance of or any other aspect of the materials,structures and strategies presented herein.This Presentation is provided to you for the purpose of your consideration of the engagement of Raymond James as an underwriter and not as your financial advisor or Municipal Advisor (as defined in Section 15B of the Exchange Act of 1934,as amended),and we expressly disclaim any intention to act as your fiduciary in connection with the subject matter of this Presentation.The information provided is not intended to be and should not be construed as a recommendation or “advice”within the meaning of Section 15B of the above-referenced Act.Any portion of this Presentation which provides information on municipal financial products or the issuance of municipal securities is only given to provide you with factual information or to demonstrate our experience with respect to municipal markets and products.Municipal Securities Rulemaking Board (“MSRB”)Rule G-17 requires that we make the following disclosure to you at the earliest stages of our relationship,as underwriter,with respect to an issue of municipal securities:the underwriter’s primary role is to purchase securities with a view to distribution in an arm’s- length commercial transaction with the issuer and it has financial and other interests that differ from those of the issuer. Raymond James does not provide accounting,tax or legal advice;however,you should be aware that any proposed transaction could have accounting,tax,legal or other implications that should be discussed with your advisors and/or legal counsel. Raymond James and affiliates,and officers,directors and employees thereof,including individuals who may be involved in the preparation or presentation of this material,may from time to time have positions in,and buy or sell, the securities,derivatives (including options)or other financial products of entities mentioned herein.In addition, Raymond James or affiliates thereof may have served as an underwriter or placement agent with respect to a public or private offering of securities by one or more of the entities referenced herein. This Presentation is not a binding commitment,obligation,or undertaking of Raymond James.No obligation or liability with respect to any issuance or purchase of any Bonds or other securities described herein shall exist,nor shall any representations be deemed made,nor any reliance on any communications regarding the subject matter hereof be reasonable or justified unless and until (1)all necessary Raymond James,rating agency or other third party approvals,as applicable,shall have been obtained,including,without limitation,any required Raymond James senior management and credit committee approvals,(2)all of the terms and conditions of the documents pertaining to the subject transaction are agreed to by the parties thereto as evidenced by the execution and delivery of all such documents by all such parties,and (3)all conditions hereafter established by Raymond James for closing of the transaction have been satisfied in our sole discretion.Until execution and delivery of all such definitive agreements, all parties shall have the absolute right to amend this Presentation and/or terminate all negotiations for any reason without liability therefor.Thomson Reuters Municipal Market Data (“MMD”)is a proprietary yield curve which provides the offer-side of AAA rated state general obligation bonds as determined by the MMD analyst team.Raymond James &Associates,Inc.,member New York Stock Exchange/SIPC. 4154-7878-1229.1 CLOSING CERTIFICATE OF THE ISSUER I, the undersigned authorized representative of the City of Sanger, Texas (the “Issuer”), acting solely in my official capacity, hereby certify as follows in connection with the issuance of $18,615,000 City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Bonds”). This certificate is being provided pursuant to Section 7(i)(7) of that certain Purchase Agreement dated April 19, 2021 between the Issuer and the Underwriter (the “Agreement”). Capitalized terms used herein without definition are defined in the Purchase Agreement: (i) the representations and warranties of the Issuer contained in the Agreement are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation or proceeding against it is pending or, to my knowledge, threatened in any court or administrative body, nor to my knowledge is there a basis for litigation, which would (a) contest the right of the officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and collecting taxes and other income or levying and collecting the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) all official action of the Issuer relating to the Bonds, the Issuer Documents and the Official Statement have been duly taken by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; (iv) to the best of my knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which made, not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2020, the latest date as of which audited financial information is available. [Signature Page Follows] 4130-8939-5499.1 Orrick, Herrington & Sutcliffe LLP 609 Main Street 40th Floor Houston, TX 77002=3106 +1 713 658-6400 orrick.com May 7, 2021 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $20,000,000 aggregate principal amount of Obligations designated as “City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A” (the “Obligations”). The Obligations are authorized by an ordinance adopted by the City Council of the City (the “City Council”) on May 3, 2021 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, the tax certificate of the City dated the date hereof (the “Tax Certificate”), certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Obligations has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Obligations to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Obligations, the Ordinance and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against issuers in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of May 7, 2021 Page 2 4130-8939-5499.1 forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Obligations and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1.The Obligations constitute the valid and binding obligations of the City. 2.The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Obligations. 3.The Obligations are also secured by a limited (in an amount not to exceed $1,000) subordinate pledge of revenues of the waterworks and sanitary sewer system of the City. 4.Interest on the Obligations is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Obligations is not a specific preference item for purposes of the federal alternative minimum tax. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Obligations. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP 4128-3482-1933.1 Orrick, Herrington & Sutcliffe LLP 609 Main Street 40th Floor Houston, TX 77002=3106 +1 713 658-6400 orrick.com May 7, 2021 Raymond James & Associates, Inc. Oppenheimer & Co., Inc. SAMCO Capital Markets, Inc. City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (Supplemental Opinion) Ladies and Gentlemen: This letter is addressed to you, as the underwriter (the “Underwriter”), pursuant to Section 6(i)(7) of the Purchase Agreement, dated April 19, 2021 (the “Purchase Agreement”), between you and the City of Sanger, Texas (the “Issuer”), providing for the purchase of $2,830,000 principal amount of City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2021A (the “Certificates”). The Certificates are being issued pursuant to an ordinance adopted by the City Council of the Issuer on May 3, 2021 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance or, if not defined in the Ordinance, in the Purchase Agreement. We have delivered our final legal opinion (the “Opinion”) as bond counsel to the Issuer concerning the validity of the Certificates and certain other matters, dated the date hereof and addressed to the Issuer. You may rely on such opinion as though the same was addressed to you. In connection with our role as bond counsel, we have reviewed the Purchase Agreement and the Ordinance dated the date hereof, certificates of the Issuer and others, and such other documents, opinions and matters to the extent we deemed necessary to provide the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the original delivery of the Certificates on the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the original delivery of the Certificates on the date hereof. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the third paragraph hereof. We have further assumed compliance with all covenants and agreements contained in such documents. In addition, we call attention to the fact that the rights and obligations under the Certificates, the Ordinance and the Purchase Agreement and their enforceability may be subject to bankruptcy, insolvency, reorganization, receivership, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute or having the effect of a penalty) right of set-off, arbitration, choice of law, choice of forum, May 7, 2021 Page 2 4128-3482-1933.1 choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Finally, we undertake no responsibility for the accuracy, except as expressly set forth in numbered paragraph 3 below, completeness or fairness of the Official Statement dated April 19, 2021 (the “Official Statement”) or other offering material relating to the Certificates and express no view or opinion relating thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Ordinance has been duly adopted and is in full force and effect. 2. The Certificates are exempted securities under section 3(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”), and it is not necessary, in connection with the offering and sale of the Certificates to register the Certificates under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act. 3. We have not verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Official Statement, but have reviewed the statements and information contained in the Official Statement under the captions and sub-captions “THE OBLIGATIONS” (except the subcaption “Sources and Uses of Funds”), “GENERAL INFORMATION REGARDING THE OBLIGATIONS,” “REGISTRATION, TRANSFER AND EXCHANGE,” “AD VALOREM PROPERTY TAXATION – Public Hearing and Maintenance and Operation Tax Rate Limitations,” “LEGAL MATTERS,” “TAX MATTERS,” “LEGAL INVESTMENTS IN TEXAS,” “REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE” and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”), and we are of the opinion that the information relating to the Certificates and legal matters contained under such captions, and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Certificates, such information conforms to the Ordinance. This letter is furnished by us as bond counsel to the Issuer. No attorney-client relationship has existed or exists between our firm and you in connection with the Certificates or by virtue of this letter. Our engagement with respect to the Certificates has concluded with their issuance. We disclaim any obligation to update this letter. This letter is delivered to you as Underwriter of the Certificates, is solely for your benefit as such Underwriter and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners of Certificates or by any other party to whom it is not specifically addressed. Faithfully yours, ORRICK, HERRINGTON & SUTCLIFFE LLP May 5, 2021 THIS IS TO CERTIFY that the City of Sanger, Texas (the "Issuer"), has submitted the City of Sanger, Texas Combination Tax and Revenue Certificate of Obligation, Series 2021A (the "Certificate"), in the principal amount of $18,615,000, for approval. The Certificate is dated May 1, 2021, numbered T-1, and was authorized by an Ordinance of the Issuer passed on May 3, 2021 (the "Ordinance"). The Office of the Attorney General has examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. We express no opinion relating to the official statement or any other offering material relating to the Certificate. Based on our examination, we are of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the Ordinance): (1) The Certificate has been issued in accordance with law and is a valid and binding obligation of the Issuer. (2) The Certificate is payable from the proceeds of an ad valorem tax levied, within the limits prescribed by law, against all taxable property within the Issuer, and is further payable from and secured by a pledge of Net Revenues of the Issuer’s System, in an amount not to exceed $1,000, as provided in the Ordinance. Therefore, the Certificate is approved. No. 69716 Book No. 2021-B JCH *See attached Signature Authorization Pos t O f fic e Box 12548, Austin , Texa s 7 8 7 1 1 - 2 5 4 8 • ( 5 1 2 ) 4 6 3 - 2 1 0 0 • www.texasatto r neygeneral.go v 6M51943.DOC May 7, 2021 Raymond James & Associates, Inc. 5956 Sherry Lane, Suite 1900 Dallas, Texas 75225 Samco Capital 1700 Pacific Avenue, Suite 1200 Dallas, Texas 75201 Oppenheimer & Co. 13455 Noel Rd., Suite 1200 2 Galleria Tower Dallas, Texas 75240 Re: $18,615,000 City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation, Series 2021A (the “Obligations”). Ladies and Gentlemen: We have acted as counsel for you, the underwriters (the “Underwriters”) in connection with your purchase from the City of Sanger, Texas (the “Issuer”) of its Combination Tax & Revenue Certificates of Obligation, Series 2021A, in the aggregate principal amount of $18,615,000 (the “Obligations”), pursuant to the Purchase Agreement dated April 19, 2021 (the “Purchase Agreement”) between you and the Issuer. Capitalized terms used herein and not otherwise defined shall have the respective meanings given such terms in the Purchase Agreement. In our capacity as your counsel, we have reviewed the ordinance of the City Council of the Issuer, dated April 19, 2021 for the Obligations (the “Ordinance”), the official statement of the Issuer dated April 19, 2021 (the “Official Statement”), the Purchase Agreement, certificates of the Issuer and others, the opinions referred to in Section 6(j) of the Purchase Agreement, and such other records and documents, and we have made such investigations of law, as we deemed appropriate as a basis for the opinions and conclusions hereinafter expressed. We do not assume any responsibility for any electronic version of the Official Statement and assume that any such version is identical in all respects to the printed version. 8310 N. Capital of Texas Highway, Suite 490 Austin, Texas 78731 (512) 479-0300 Fax (512) 474-1901 ____________________ Offices in: · Austin · Fort Worth · San Antonio · Waco ____________________ www.namanhowell.com Raymond James & Associates, Inc.2 May 7, 2021 SAMCO Capital Oppenheimer & Co. {00831317.DOC / } Established 1917 In arriving at the opinions and conclusions hereinafter expressed, we are not expressing any opinion or view on, and with your permission are assuming and relying on, without independent assessment or inquiry, the validity, accuracy and sufficiency of the records, documents, certificates and opinions referred to above, including the accuracy of all factual matters represented and legal conclusions contained therein, including (without limitation) any representations and legal conclusions regarding the valid existence of the Issuer and the due authorization, issuance, delivery, validity and enforceability of the Ordinance and the Obligations and the exclusion of interest thereon from gross income for federal income tax purposes, and the legality, validity and enforceability of any laws, documents and instruments that may be related to the authorization, issuance, payment or security of the Obligations. We have assumed that all records, documents, certificates and opinions that we have reviewed, and the signatures thereto, are genuine. Based solely on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions and conclusions: 1.The Obligations are exempted securities that do not require registration under the Securities Act of 1933, as amended (the “1933 Act”) and the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act. 2.We are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. In our capacity as your counsel, to assist you in part of your responsibility with respect to the Official Statement, we participated in conferences with your underwriters and representatives of the Issuer, Orrick, Herrington & Sutcliffe LLP, as bond counsel, and others, during which the contents of the Official Statement and related matters were discussed. Based on our participation in the above-referenced conferences (which did not extend beyond the date of the Official Statement), and in reliance thereon, on oral and written statements and representations of the Issuer and others and on the records, documents certificates, opinions and matters herein mentioned, we advise you as a matter of fact and not opinion that, during the course of our representation of you on this matter, no facts came to the attention of the attorneys in our firm rendering legal services to you in connection with the Official Statement which caused us to believe that the Official Statement as of its date and as of the date hereof (except for any CUSIP numbers, financial, accounting, statistical or economic or demographic data or forecasts, numbers, charts, tables, estimates, projections, assumptions or expressions of opinion, any information about verification, feasibility, valuation, appraisals, real estate or environmental matters, Appendices, or any information about book-entry, DTC, ratings, rating agencies, tax exemption, the Underwriter, or underwriting, included or referred to therein or omitted therefrom, which we expressly exclude from the scope of this paragraph and as to which we express no opinion or view) contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Raymond James & Associates, Inc.3 May 7, 2021 SAMCO Capital Oppenheimer & Co. {00831317.DOC / } Established 1917 No responsibility is undertaken or view expressed with respect to any other disclosure document, materials or activity, or as to any information from another document or source referred to by or incorporated by reference in the Official Statement. We are furnishing this letter to you pursuant to paragraph 7(i)(6) of the Purchase Agreement solely for your benefit as the Underwriter in connection with the original issuance of the Obligations on the date hereof. We disclaim any obligation to update this letter. This letter is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not be, relied upon by owners of Obligations or any other party to whom it is not specifically addressed. Respectfully yours, NAMAN HOWELL SMITH & LEE, PLLC 11511 Luna Road Suite 500 Farmers Branch, TX 75234 tel (214) 871-1400 reference no.: 1652317 April 5, 2021 City of Sanger 502 Elm Street Sanger, TX 76266 Attention: Mr. Clayton Gray, Interim City Manager Re:US$16,230,000 City of Sanger, Texas, (Denton County, Texas), Combination Tax and Revenue Certificates Of Obligation, Series 2021A, dated: May 01, 2021, due: August 01, 2044 Dear Mr. Gray: Pursuant to your request for an S&P Global Ratings rating on the above-referenced entity, S&P Global Ratings has assigned a rating of "AA" . S&P Global Ratings views the outlook for this rating as stable. A copy of the rationale supporting the rating is enclosed. This letter constitutes S&P Global Ratings' permission for you to disseminate the above-assigned ratings to interested parties in accordance with applicable laws and regulations. However, permission for such dissemination (other than to professional advisors bound by appropriate confidentiality arrangements or to allow the Issuer to comply with its regulatory obligations) will become effective only after we have released the ratings on standardandpoors.com. Any dissemination on any Website by you or your agents shall include the full analysis for the rating, including any updates, where applicable. Any such dissemination shall not be done in a manner that would serve as a substitute for any products and services containing S&P Global Ratings' intellectual property for which a fee is charged. To maintain the rating, S&P Global Ratings must receive all relevant financial and other information, including notice of material changes to financial and other information provided to us and in relevant documents, as soon as such information is available. 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PF Ratings U.S. (4/28/16)Page | 4 Summary: Sanger, Texas; General Obligation Primary Credit Analyst: Jim Tchou, New York + 1 (212) 438 3821; jim.tchou@spglobal.com Secondary Contact: Amahad K Brown, Farmers Branch + 1 (214) 765 5876; amahad.brown@spglobal.com Table Of Contents Rating Action Stable Outlook Credit Opinion Related Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 5, 2021 1 Summary: Sanger, Texas; General Obligation Credit Profile US$16.23 mil combination tax and rev certs of oblig ser 2021A dtd 05/01/2021 due 08/01/2044 Long Term Rating AA/Stable New US$2.855 mil GO rfdg bnds ser 2021B dtd 05/01/2021 due 08/01/2033 Long Term Rating AA/Stable New Sanger GO Long Term Rating AA/Stable Affirmed Rating Action S&P Global Ratings assigned its 'AA' rating and stable outlook to Sanger, Texas' roughly $16.23 million series 2021A combination tax and revenue certificates of obligation and roughly $2.855 million series 2021B general obligation (GO) refunding bonds and affirmed its 'AA' rating, with a stable outlook, on the city's existing GO debt. An ad valorem property tax, within limits prescribed by law, on all taxable property within the city secures the GO bonds. An ad valorem-tax pledge and limited surplus net revenue of the city's water-and-sewer system, not to exceed $1,000, secure the certificates. However, we rate the certificates based on the city's ad valorem-tax pledge. The maximum allowable rate in Texas is $2.50 per $100 of assessed value (AV) for all purposes with the portion dedicated to debt service limited to $1.50 per $100 of AV. The city's levy is well below the maximum at 67.91 cents, 7.3644 cents of which management dedicates to debt service. Based on the application of our criteria, titled "Issue Credit Ratings Linked To U.S. Public Finance Obligors' Creditworthiness," published Nov. 20, 2019, on RatingsDirect, we do not differentiate between the city's limited-tax GO debt and general creditworthiness. We posit that Sanger's ability to meet debt service and continue to operate has a strong link to its general creditworthiness and that there are no significant resource-fungibility limitations. Officials will use series 2021A certificate proceeds to expand and improve the water-and-sewer system, renovate the electric-utility system, and make citywide street improvements and series 2021B bond proceeds to refinance portions of series 2013 certificates for debt-service savings. Credit overview The more than 10-square-mile Sanger, just west of Lake Ray Roberts, is less than 50 miles north of Fort Worth and directly north of Denton. Interstate 35 runs through the heart of Sanger and provides residents with access to employment opportunities throughout the Dallas Metroplex, which has supported strong residential growth recently. Despite economic risks posed by COVID-19, active residential and commercial development is ongoing, providing WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 5, 2021 2 near-term operating-revenue stability. In our opinion, finances are very strong, evidenced by sizable reserves established by policy and maintained over several years. We note that despite the winter storm in February 2021 and the presence of a municipal-owned electric utility, Sanger officials do not expect the storm to affect finances materially. The rating also reflects our opinion of the city's: • Strong economy, with access to a broad and diverse metropolitan statistical area (MSA); • Very strong financial management, with strong financial policies and practices under our Financial Management Assessment (FMA) methodology; • Strong budgetary performance, with operating surpluses in the general fund and at the total governmental-fund level in fiscal 2020; • Very strong budgetary flexibility, with available fund balance in fiscal 2020 at 109% of operating expenditures; • Very strong liquidity, with total government available cash at 2.3x total governmental-fund expenditures and 22.9x governmental debt service, and access to external liquidity we consider strong; • Very weak debt-and-contingent-liability position, with debt service carrying charges at 10% of expenditures and net direct debt that is 200.9% of total governmental-fund revenue; and • Strong institutional framework score. The stable outlook reflects S&P Global Ratings' opinion finances will likely remain stable during the next few fiscal years, supported by ongoing local economic growth due to its location. Environmental, social, and governance (ESG) factors The rating incorporates our view regarding health-and-safety risks due to COVID-19. Absent short-term implications of COVID-19, we consider social risks in-line with the sector standard. We have analyzed Sanger's environmental and governance risks relative to its economy, management, financial measures, and debt-and-liability profile and have determined all are on par with our view of the sector standard. Stable Outlook Downside scenario We could lower the rating if budgetary performance were to experience sustained imbalance, leading to significantly deteriorated reserves. Upside scenario We could raise the rating if ongoing economic expansion were to improve income and property values to levels we consider in-line with higher-rated peers or if management were to maintain reserves consistently at levels higher that 75% of expenditures during a sustained period. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 5, 2021 3 Summary: Sanger, Texas; General Obligation Credit Opinion Strong economy We consider Sanger's economy strong. The city, with a population estimate of 9,304, is in Denton County in the Dallas-Fort Worth-Arlington MSA, which we consider broad and diverse. Projected per capita effective buying income is 100% of the national level and per capita market value is $85,162. Overall, market value has grown by 22.9% during the past year to $792.3 million in fiscal 2021. County unemployment was 3% in 2019, pre-COVID-19. Following unemployment of 12.8% in April 2020, unemployment decreased to about 5.8% in January 2021 and averaged roughly 6.6% in 2020 due to COVID-19. The primarily residential city has experienced strong retail and commercial growth with more land available for development. Due to commercial and residential expansion, property value has increased at elevated rates. Net taxable AV has increased by 50% during the past five years and 23% in fiscal 2021, the most recent year. Ongoing economic development includes several new phases of existing developments underway or residential lots released for construction. Commercial development typically follows residential development, and the city experiences some commercial growth. Sanger should see more commercial growth as the population increases. Overall, we expect continued economic growth in conjunction with the expansion of I-35 improving access to the Dallas Metropolitan area. Very strong management We revised our view of the city's financial management to very strong from strong with strong financial policies and practices under our FMA methodology, indicating financial practices are strong, well embedded, and likely sustainable. The revision reflects our understanding Sanger uses long-term financial projections that forecast major general fund revenue and expenditure items four years beyond the budget year. Forecast assumptions also include varying growth projections, not just straight-line projections. Highlights include management's: • Revenue and expenditure assumptions based, in part, on three years of historical trends, coupled with information from outside sources to assist with forecasting; • Monthly budget-to-actual reports to the city council; • Use of a five-year capital-improvement plan with estimated costs and identified funding sources; • Formal investment-management policy that follows state guidelines with monthly performance reports to the council; • Formal debt-management policy; and • Formal fund-balance policy of maintaining a minimum 25% of annual operating expenditures. Strong budgetary performance Sanger's budgetary performance is strong, in our opinion. The city had general fund operating surpluses at 40% of WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 5, 2021 4 Summary: Sanger, Texas; General Obligation expenditures and 23.6% across all governmental funds in fiscal 2020. Our assessment accounts for the fact that we expect budgetary results could deteriorate somewhat from fiscal 2020 results during the next few years. We have adjusted our ratios for, what we view as, recurring transfers into and from the general fund. Officials partially attribute fiscal 2020 performance to property tax revenue coming in 7% higher due to growing property values and sales-tax revenue coming in 21% higher due to local economic growth. Charges for services also increased by 7% due primarily to higher building permit revenue in fiscal 2020. In fiscal 2020, property taxes generated 48% of general fund revenue, followed by sales taxes at 13% and charges for services at 12%. The operationally balanced fiscal 2021 budget indicates reserves will likely remain stable. Officials indicate the budget is trending accordingly, and they conservatively expect to end fiscal 2021 with breakeven operations. Officials expect to adopt a balanced fiscal 2022 budget, and they forecast reserves will remain relatively stable. Very strong budgetary flexibility Sanger's budgetary flexibility is very strong, in our view, with available fund balance in fiscal 2020 at 109% of operating expenditures, or $7.3 million. We expect available fund balance will likely remain more than 30% of expenditures for the current and next fiscal years, which we view as a positive credit factor. We expect budgetary flexibility will likely remain, what we consider, very strong during the next two fiscal years, supported by Sanger's good history of maintaining available reserves well above its formal minimum 25%-of-expenditures reserve policy. While reserves increased in fiscal 2020, we think management could use reserves in excess of its policy for one-time items once COVID-19 is over; there, however, are currently no definitive plans to draw on reserves materially. Very strong liquidity In our opinion, Sanger's liquidity is very strong, with total government available cash at 2.3x total governmental-fund expenditures and 22.9x governmental debt service in fiscal 2020. In our view, the city has strong access to external liquidity if necessary. In our opinion, Sanger's access to the debt market during the past 20 years and issuance of mainly tax-backed bonds demonstrate its strong access to external liquidity. The city has historically had, what we consider, very strong cash. In addition, we do not imagine Sanger's cash will likely deteriorate during the next two fiscal years. All investments comply with state guidelines. As of Sept. 30, 2020, investments, which we do not consider aggressive, were primarily in certificates of deposit and money-market accounts. Sanger privately placed the series 2007 certificates, which have only $795,000 outstanding. We understand privately placed documents are standard and do not present liquidity risk. Due to this private placement's relatively small size and standard bond provisions, we do not consider the certificates a contingent-liability risk. Very weak debt-and-contingent-liability profile In our view, Sanger's debt-and-contingent-liability profile is very weak. Total governmental-fund debt service is 10% of total governmental-fund expenditures, and net direct debt is 200.9% of total governmental-fund revenue. Following the series 2021A and 2021B issuances, the city will have about $37.3 million in direct debt outstanding, WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 5, 2021 5 Summary: Sanger, Texas; General Obligation $18.2 million of which is self-supported with utility revenue. Overall net debt is about 4.1% of market value. We understand officials do not currently plan to issue additional debt during the next two years. Pension and other-postemployment-benefit (OPEB) highlights • We do not view pension and OPEB liabilities as an immediate credit pressure for Sanger because we consider required contributions manageable compared with total governmental expenditures. • If required material contributions were to increase unexpectedly during the next few fiscal years, we do not think this will likely have an effect on fiscal stability due to reserves, including utility funds, officials could use for contingencies, if needed. As of Dec. 31, 2019, the latest measurement date, Sanger participates in the state-administered Texas Municipal Retirement System (TMRS), which was 90.5% funded, with a net pension liability equal to $1 million. Sanger's combined required pension and actual OPEB contribution totaled 4.1% of total governmental-fund expenditures in fiscal 2020. The city made its full annual required pension contribution in fiscal 2020. Sanger's required pension contribution is its actuarially determined contribution, calculated at the state level based on an actuary study; the city has historically funded annual required costs in full. Actuarial assumptions include a 6.75% discount, which we view as somewhat aggressive, representing market risk and resulting in contribution volatility if TMRS fails to meet assumed investment targets. In addition, contributions are likely to grow due to level-payroll funding rather than level-dollar contributions, which would result in consistent payments. Sanger also participates in the cost-sharing, multiple-employer, defined-benefit, group-term, TMRS-operated, life-insurance coverage known as the supplemental-death-benefits fund; the city could terminate this coverage and discontinue participation by adopting an ordinance before Nov. 1 of any year, effective the following Jan. 1. Retiree death benefits are an OPEB. Death benefits are a fixed $7,500. Strong institutional framework The institutional framework score for Texas municipalities is strong. Related Research • S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013 • Alternative Financing: Disclosure Is Critical To Credit Analysis In Public Finance, Feb. 18, 2014 • Criteria Guidance: Assessing U.S. Public Finance Pension And Other Postemployment Obligations For GO Debt, Local Government GO Ratings, And State Ratings, Oct. 7, 2019 • Through The ESG Lens 2.0: A Deeper Dive Into U.S. Public Finance Credit Factors, April 28, 2020 • 2020 Update Of Institutional Framework For U.S. Local Governments Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. 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Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-1 $55,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2022 800876 GS7 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FIFTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-2 $295,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2023 800876 GT5 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: TWO HUNDRED NINETY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-3 $320,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2024 800876 GU2 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED TWENTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-4 $345,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 2.000%May 7, 2021 May 1, 2025 800876 GV0 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED FORTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-5 $395,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 2.000%May 7, 2021 May 1, 2026 800876 GW8 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED NINETY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-6 $140,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 2.000%May 7, 2021 May 1, 2027 800876 GX6 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE HUNDRED FORTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-7 $135,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2028 800876 GY4 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE HUNDRED THIRTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-8 $160,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2029 800876 GZ1 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE HUNDRED SIXTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-9 $160,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2030 800876 HA5 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE HUNDRED SIXTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-10 $185,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2031 800876 HB3 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE HUNDRED EIGHTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-11 $260,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 4.000%May 7, 2021 May 1, 2032 800876 HC1 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: TWO HUNDRED SIXTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-12 $290,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 4.000%May 7, 2021 May 1, 2033 800876 HD9 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: TWO HUNDRED NINETY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-13 $290,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 4.000%May 7, 2021 May 1, 2034 800876 HE7 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: TWO HUNDRED NINETY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-14 $320,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 4.000%May 7, 2021 May 1, 2035 800876 HF4 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED TWENTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-15 $370,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2036 800876 HG2 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED SEVENTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-16 $395,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2037 800876 HH0 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: THREE HUNDRED NINETY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-17 $1,620,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2038 800876 HJ6 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE MILLION SIX HUNDRED TWENTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-18 $1,665,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2039 800876 HK3 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE MILLION SIX HUNDRED SIXTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-19 $1,715,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2040 800876 HL1 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE MILLION SEVEN HUNDRED FIFTEEN THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-20 $1,765,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2041 800876 HM9 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: ONE MILLION SEVEN HUNDRED SIXTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 1 of 6 4151-9523-1533.1 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R-21 $7,735,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A INTEREST RATE DELIVERY DATE MATURITY DATE CUSIP 3.000%May 7, 2021 May 1, 2046 800876 HN7 DATED DATE: May 1, 2021 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: SEVEN MILLION SEVEN HUNDRED THIRTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric Page 2 of 6 4151-9523-1533.1 utility system renovations and line relocations, and city wide street repairs and improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates maturing on and after May 1, 2032, in whole or in part, on May 1, 2031, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE BONDS MATURING on May 1 in the year 2046 (the “Term Bonds”) are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Bonds or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: TERM BONDS MATURING May 1, 2046 Mandatory Redemption Dates Principal Amounts May 1, 2042 $ 1,820,000 May 1, 2043 1,875,000 May 1, 2044 1,930,000 May 1, 2045 1,990,000 May 1, 2046*120,000 *Final Maturity The particular Term Bonds to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before March 15 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before March 15 of such year and which have not been made the basis for a previous reduction. CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. Page 3 of 6 4151-9523-1533.1 NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. Page 4 of 6 4151-9523-1533.1 IT IS FURTHER DECLARED AND REPRESENTED that the surplus revenues to be derived from the City’s water and sewer system, after the payment of all operation and maintenance expenses thereof (the “Net Revenues”), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. IN WITNESS WHEREOF, the City has caused this Certificate to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. CITY OF SANGER, TEXAS Mayor COUNTERSIGNED: City Secretary * * * Page 5 of 6 4151-9523-1533.1 AUTHENTICATION CERTIFICATE This Certificate is one of the Certificates described in and delivered pursuant to the within-mentioned Ordinance; and, except for the Certificates initially delivered, this Certificate has been issued in exchange for or replacement of a Certificate, Certificates, or a portion of a Certificate or Certificates of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. UMB BANK, N.A. By: Authorized Signature Date of Authentication: * * *: Page 6 of 6 4151-9523-1533.1 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto ______________________________________________________________________________ (Please print or type name, address, and zip code of Transferee) ______________________________________________________________________________ (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints _______________________________________ attorney to transfer such bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: Registered Owner NOTICE: The signature above must correspond to the name of the Registered Owner as shown on the face of this bond in NOTICE: Signature must be guaranteed by a every particular, without any alteration, member firm of the New York Stock Exchange enlargement or change whatsoever. or a commercial bank or trust company. * * * d. Dollar Amount of Bond Premium, if any: f. Dollar Amount of Bond Original Issue Discount, if any: See Exhibit A attached Yes N/A See Exhibit B attached N/A Ad Valorem Taxes and Water and Sewer Revenue e. Issuer Contact Name and Title:Jeriana Stanton, Interim City Manager 11/1/2021 See Exhibit A attached 5/7/20214. Date Interest Accrues from: 3. Dated Date: 7. Maturity Dates, Maturity Amounts, Coupon Rates, Prices or Yields (If no reoffering yield (NRO) indicated, please provide yield separately.): h. Issuer Email:jstanton@sangertexas.org 940.458.7930 502 Elm Street, Sanger, Texas 76266 9. Mandatory Sinking Fund Redemption Dates: 8. Call Provisions, including Premiums, if any: 11. Do the bonds have a specific designation as qualified tax-exempt obligations? 10. Debt-Service Schedule (Principal and Interest, and Annual Totals, with the Fiscal Year identified): See Exhibit B attached 12. Derivative Products (Swaps, Interest Rate Management Agreements, etc.) - List any derivatives associated with financing: 14. Credit Enhancement (including PSF guarantee): 13. Pledge: tax (ad valorem, other), revenue, sales tax revenue, combination tax & rev: 30-Sep g. Issuer Phone: d. Issuer Fiscal Year End Date: f. Issuer Address: 6. First Interest Payment Date: List Conduit/Component/Related Entity/Other N/A 2. a. Total Par Amount: b. New Money Par: c. Refunding Par: g. If available, please email the DF2 file to brblgs@brb.state.tx.us. $18,615,000.00 $18,615,000.00 e. Cash Premium (Competitive Sales, usually found in the Initial Purchasers Section), if any: 5/7/2021 $0.00 $1,943,647.85 $0.00 $0.00 5/1/2021 5. Closing Date (expected delivery date, on or about): OFFICE OF THE ATTORNEY GENERAL PUBLIC FINANCE DIVISION Additional Transcript Requirements Pursuant to Texas Government Code §1202.008 The following information is to be included in the transcript submitted to the Office of the Attorney General to obtain Attorney General approval of the issuance of bonds or other obligations. This information has been designated by the Bond Review Board as that to be collected pursuant to Texas Government Code §1202.008. If space is limited, please provide a specific cross- reference to the page in the Final Official Statement. Please submit excel copy of this form to brblgs@brb.texas.gov A. Please provide the following information for each bond series as well as an additional copy of the Final Official Statement. (Provide the requested information on this worksheet. The Bond Review Board does not receive the full transcript): b. Name of Bond Issue: c. Type of Issuer: (Governmental Entity, Conduit, Component or Related Entity) Combination Tax and Revenue Certificates of Obligation, Series 2021A City of Sanger, Texas1. a. Name of the Governmental Entity: Governmental Entity Updated August 2016 15. Ratings: Assigned to the issue/Underlying: Rating Assigned to this Issue/ Rating Outlook Underlying Rating/ Rating Outlook Moody's S&P AA Fitch Other Not Rated B. Additional Information 8,235 / 2020 Source: OS N/A N/A 27. Commercial Paper Authorized - List all commercial paper programs, the amounts authorized and the amounts currently outstanding. 30. If the issuer is an ISD, is any portion of the debt exempt from Texas Education Agency Code 45.0031 (50-cent Debt test)? 29. Federal Program - If the debt is being issued under any direct special government program; name the program and the amount of authority being used: 28. Population - Provide the most current available population data: N/A N/A 26. CABs and CIBs – If not provided in the OS, please provide the per annum bond interest rates by maturity as shown in the bond order document. If provided in the OS, list the page(s): N/A N/A 21. Cash and Present Value Savings/Loss - If a refunding bond issue, please provide final schedule of cash and present value savings or loss. 20. Refunded Obligations - If applicable, include a schedule of obligations refunded by year, principal amount, and coupon. 19. Governmental Purchaser - please name purchaser (i.e. Texas Water Development Board): 18. Net effective interest rate pursuant to Government Code Chapter 1204.005: N/A N/A 5/3/2021 2.49% N/A N/A N/A Negotiated 25. Upcoming Called Bond Election: Please provide an attached schedule which shows date of election, purpose and amount by proposition. 24. Authorized but Unissued - For issues that require the use of voted bond authorization, list all authorized but unissued voted authority available, if any. 23. If voter approved - Provide bond election date(s), original amount(s) authorized and current amounts of principal and premium charged against voted authority. 22. Cash Defeasances - List all issues and maturities that have been cash defeased since the last issue of public securities approved by the Attorney General. 17. Date of Sale: 16. Type of Sale: (Negotiated, Competitive, Private Placement, Other) If other please explain Updated August 2016 Service Firm One-Time Fee Annual Fees (1) Bond Rating:Moody's Standard & Poor's $20,250.00 Fitch Other: Other Costs of Issuance: (2) Financial Advisor Government Capital Securities Corporation $115,000.00 Bond Counsel Orrick, Herrington & Sutcliffe LLP $15,000.00 Co Bond Counsel Issuer Counsel Bank Counsel Disclosure Counsel Paying Agent UMB Bank, N.A.$500.00 Trustee Remarketing Fees Liquidity Fees Accountant/CPA Printing POS/OS Posting Attorney General's Fee $9,500.00 Issuer Fees Escrow Agent Escrow Verification Fees Travel TCEQ Fee Bond Application Fee TWDB Fee Private Placement Fee Contingency Misc. Costs of Issuance: (3) including MAC Texas Fee $1,000.00 Total Costs of Issuance:$161,250.00 Credit Facility Bond Insurance Underwriting Spread: Takedown $91,312.50 Management Fee $18,615.00 Underwriter Counsel $9,000.00 Spread Expenses MAC $2,261.50; DTC $800; CUSIP $743; Printing $1,500; I-Deal $1,150.41; IPREO Wire Charges $150; IPREO Order Monitor $558.45; IPREO Sales Tax $153.35; Miscellaneous $250 $7,566.71 Total Underwriting Spread:(4)$126,494.21 (2) Include all fees and expenses paid or reimbursed by the issuer. (3) Provide all other costs of issuance and identify the service provider and associated fees. No (4) Include all marketing and selling costs including structuring (management) fee, takedown, underwriting risk fee and expenses. 31. Costs of Issuance - Provide the information below: (If final costs are materially different, please submit changes directly to the Texas Bond Review Board, 512-463-1741 or fax 512-475-4802) (1) Refers to any recurring costs of an issuance including fees for paying agent, remarketing agent, credit provider and other similar services (may be expressed as a formula as appropriate). Did Underwriter Pay Bond Insurance Fee? Yes or No Did Underwriter Pay Underwriter Counsel’s Fee? Yes or No No No Did Underwriter Pay Rating Fee? Yes or No Updated August 2016 UW Participants Firm Senior Managing Underwriter Raymond James & Associates, Inc. Other Underwriters SAMCO Capital Markets, Inc. Oppenheimer & Co., Inc. Person Completing Form: Name:Hoang Vu Firm:Orrick, Herrington & Sutcliffe LLP Telephone:713.658.6400 E-mail:hvu@orrick.com The information presented on this form is used by the Texas Bond Review Board for compiling outstanding debt information and related costs of issuance for governmental issuers in Texas. For more information please see http://www.brb.texas.gov/local_debt.aspx Updated August 2016 Exhibit A EXHIBIT B MEMORANDUM To: Working Group Members – City of Sanger From: Ted Christensen, Government Capital Securities Corporation Re: Certificates of Obligation, Series 2021 and GO Refunding Bonds, Taxable Series 2021B Date: May 7, 2021 (Funding Date) The closing of the above referenced transactions is scheduled for Friday, May 7, 2021. We anticipate that the closings will occur prior to 10:00am (CDT). Funds will be wired from the City of Sanger (“The Issuer”) and Raymond James (“The Underwriter”) to UMB Bank (“UMB” or the “Paying Agent”). UMB Bank will then disburse funds pursuant to the directions below. Certificates of Obligation, Series 2021 PAYMENT AND TRANSFER OF AVAILABLE FUNDS From Underwriter: To UMB Bank as Paying Agent: $20,432,153.64 Bank Name: UMB Bank, N.A. ABA Number: BNF Name: Trust Operations BNF A/C: OBI Field: City of Sanger (Certificates of Obligation, Series 2021) BBI Field: Attn: Anne‐Marie Hansen 512‐582‐5850 Total Wires to Paying Agent $20,432,153.64 DISBURSEMENTS The proceeds available will be treated as follows: 1. UMB Bank will retain $500.00 for Services as Paying Agent. 2. UMB Bank will wire $20,270,903.64 to the City of Sanger representing the deposit to the Project Fund ($19,999,632.81) and Bond Fund ($271,270.83). Wire instructions for the City of Sanger are as follows: Bank Name: First United Bank 1403 W Chapman Dr, Sanger, TX 76266 Judy Kindiger, (940) 302‐6040 ABA #: FINALv2 3. The Paying Agent will wire transfer $160,750.00 to pay certain cost of issuance expenses related to the sale of the CO to Government Capital Securities Corporation as follows: Bank Name: Wells Fargo Bank Texas, NA ABA#: Acct Name: Governmental Capital Securities Corporation Total Disbursements from Paying Agent $20,432,153.64 General Obligation Refunding Bonds, Taxable Series 2021B PAYMENT AND TRANSFER OF AVAILABLE FUNDS From Underwriter: To UMB Bank as Paying/Escrow Agent: $2,806,038.14 Bank Name: UMB Bank, N.A. ABA Number: BNF Name: Trust Operations BNF A/C: OBI Field: City of Sanger (General Obligation Refunding Bonds, Taxable Series 2021B) BBI Field: Attn: Anne‐Marie Hansen 512‐582‐5850 From Issuer: To UMB Bank as Paying/Escrow Agent: $31,693.33 Bank Name: UMB Bank, N.A. ABA Number: BNF Name: Trust Operations BNF A/C: OBI Field: City of Sanger (General Obligation Refunding Bonds, Taxable Series 2021B) BBI Field: Attn: Anne‐Marie Hansen 512‐582‐5850 Total Wires to Paying/Escrow Agent $2,837,731.47 DISBURSEMENTS The proceeds available will be treated as follows: 1. UMB Bank will retain $2,000.00 for Services as Escrow/Paying Agent. 2. UMB Bank will deposit $2,791,629.94 into the “Escrow Fund” as defined in the Escrow Agreement between the Issuer and the Escrow Agent, to be applied in accordance with the terms of the Escrow Agreement for the defeasance of the “Refunded Obligations”. 3. The Paying Agent will wire transfer $44,101.53 to pay certain cost of issuance expenses related to the sale of the Refunding Bonds to Government Capital Securities Corporation as follows: Bank Name: Wells Fargo Bank Texas, NA ABA#: Acct Name: Governmental Capital Securities Corporation Total Disbursements from Paying Agent $2,837,731.47 Upon approval of Bond Counsel and confirmation of wire transfer receipts as outlined above, representatives from UMB Bank and the Underwriter will call DTC (212) 855‐3752 to release the CO Series 2021 and the Taxable Series 2021B Refunding Bonds. UMB shall inform all parties that the transaction is closed. Regards, Ted Christensen (817) 722‐0239 4145-7405-7261.3 UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION T-1 $18,615,000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2021A DELIVERY DATE: May 7, 2021 DATED DATE: May 1, 2021 REGISTERED OWNER: RAYMOND JAMES & ASSSOCIATES, INC. PRINCIPAL AMOUNT: EIGHTEEN MILLION SIX HUNDRED FIFTEEN THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on each of the dates until maturity or earlier redemption of this Certificate and in the principal amounts set forth in the following schedule: Maturity (5/1) Principal Amount Interest Rate 2022 $ 55,000 3.000% 2023 295,000 3.000 2024 320,000 3.000 2025 345,000 2.000 2026 395,000 2.000 2027 140,000 2.000 2028 135,000 3.000 2029 160,000 3.000 2030 160,000 3.000 2031 185,000 3.000 2032 260,000 4.000 2033 290,000 4.000 2034 290,000 4.000 2035 320,000 4.000 2036 370,000 3.000 2037 395,000 3.000 2038 1,620,000 3.000 2039 1,665,000 3.000 2040 1,715,000 3.000 -2- 4145-7405-7261.3 2041 1,765,000 3.000 ********* 2046 7,735,000 3.000 upon presentation and surrender of this Certificate at the principal corporate trust office of UMB BANK, N.A., Austin, Texas, or its successor (the “Paying Agent/Registrar”), payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the date of delivery. Interest on this Certificate is payable on November 1, 2021, and each November 1 and May 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the “Certificates”) in the aggregate principal amount of $18,615,000 issued pursuant to an ordinance adopted by the City Council of the City on May 3, 2021 (the “Ordinance”) for the purpose of providing all or part of the funds (1) to pay contractual obligations to be incurred for water and sewer system expansion and improvements, electric utility system renovations and line relocations, and city wide street repairs and improvements and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates maturing on and after May 1, 2032, in whole or in part, on May 1, 2031, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE BONDS MATURING on May 1 in the year 2046 (the “Term Bonds”) are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Bonds or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: -3- 4145-7405-7261.3 TERM BONDS MATURING May 1, 2046 Mandatory Redemption Dates Principal Amounts May 1, 2042 $ 1,820,000 May 1, 2043 1,875,000 May 1, 2044 1,930,000 May 1, 2045 1,990,000 May 1, 2046*120,000 *Final Maturity The particular Term Bonds to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before March 15 of each year in which Term Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before March 15 of such year and which have not been made the basis for a previous reduction. CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. -4- 4145-7405-7261.3 THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the surplus revenues to be derived from the City’s water and sewer system, after the payment of all operation and maintenance expenses thereof (the “Net Revenues”), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. -7- 4145-7405-7261.2 ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto ______________________________________________________________________________ (Please print or type name, address, and zip code of Transferee) ______________________________________________________________________________ (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints _______________________________________ attorney to transfer such bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: Registered Owner NOTICE: The signature above must correspond to the name of the Registered Owner as shown on the face of this bond in NOTICE: Signature must be guaranteed by a every particular, without any alteration, member firm of the New York Stock Exchange enlargement or change whatsoever. or a commercial bank or trust company. * * * *