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10-22-2015-Ordinance-Certificates of Obligation Series 2015-09/08/2015CITY OF SANGER, TEXAS $5,870,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2015 INDEX OF CONTENTS CERTIFICATE PROCEEDINGS AND DOCUMENTS 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 Purchase Agreement 4 Preliminary Official Statement 5 Official Statement 6 Paying Agent/Registrar Agreement 7 CERTIFICATES 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 OPINIONS 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 70197923_1 BOND INSURANCE DOCUMENTS Municipal Bond Insurance Policy 16 Disclosure, No Default and Tax Certificate 17 Opinion of Counsel to Insurer 18 MISCELLANEOUS Rating Agency Letter 19 Specimen Certificate 20 Bond Review Board Questionnaire 21 Closing Memorandum 22 70197923_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 September 8, 2015, at the regular meeting place thereof, within the City, and the roll was called of the duly constituted officers and members of the City Council, to wit. Thomas Muir Russell Martin Gary Bilyeu William Boutwell Allen Chick David Clark Mayor Councilman Mayor Pro Tem Councilman Councilman Councilman and all of such persons were present, except Russell Martin and Gary Bilyeu, 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 IN A PRINCIPAL AMOUNT NOT TO EXCEED $6,250,000, 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: 3 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 as required 70197935 2 by law; 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. SIGNED AND SEALED this September 8, 2015. City Secretary CITY OF SANGER, TEXAS Mayor CITY OF SANGER, TEXAS 2 70197935_2 RESOLUTION RESOLUTION AUTHORIZING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION IN A PRINCIPAL AMOUNT NOT TO EXCEED $6,250,000, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO THE STATE OF TEXAS § COUNTIES 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 (1) to pay contractual obligations to be incurred for the (i) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, and (2) for the payment of contractual obligations 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 $6,250,000 styled "City of Sanger, Texas Certificates of Obligation, Series 2015" (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 %J 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 to be before the 30th day before the date tentatively set for the passage of the ordinance authorizing the issuance of the Certificates. 70197935_2 Section 3. Engagement of Professionals. This City Council hereby approves the engagement of McGuireWoods 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 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 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 55 t, as amended. [Remainder° of Page Intentionally Left Blank] 70197935_2 PASSED AND APPROVED this 8th day of September, 2015. Mayor City of Sanger, Texas ATTEST; 4{ ✓ City Secretary City of Sanger, Texas 70197935_2 NOTICE OF INTENTION TO ISSUE CERTIFICATES NOTICE IS HEREBY GIVEN that the City Council of the City of Sanger, Texas (the "City") will meet at its regular meeting place at City Hall, Sanger, Texas at 7:00 p.m. on the 19th day of October, 2015, 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 ad valorem taxation and a limited (in an amount not to exceed $10,000) subordinate pledge of certain revenues of the water and sewer system of the City, in the maximum aggregate principal amount of $6,250,000, 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) to pay all or any part of the contractual obligations to be incurred For contractual obligations to be incurred for the (i) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. City Secretary City of Sanger, Texas 70197935_2 PUBLISHER'S AFFIDAVIT THI' STATE OF TEXAS COt !NTY OF DENTON ri 5 Bruyniie �c� , being duly sworn on his/her oath states that he/she is the s v, e ss MGv�c�q� f of the "Denton Record Chronicle" a newspaper of general circulation in Denton Coup y (the "Newspaper") and further state as follows. This Affidavit is given pursuant to Section 2051.044 of the Texas Local Government Code. 2. The Newspaper devotes not less than 25% of its total column line inch to general interest items. 3. The Newspaper is published at least once a week. 4. The Newspaper is entered as second class postal matter in Denton County, its county of publication. 5. The Newspaper has been published regularly and continuously for at least twelve months before the publishing of a notice entitled "Notice of Intention to Issue Certificates." 6. The attached Legal Notice appeared in the Newspaper in a conspicuous form and place on September 14, 2015 and on September 21, 2015. Subscribed and sworn before me this L{ day of November, 2015. TIII: STATE OF TEXAS § COUNTY OF DENTON § //••�� "CRIB INSTRUMENT was acknowledged before me on November � , 2015, by �," �,, JULIE K. N%I1�IVi0f�lD C?;� >t��,: IUotaryPublic �� St1Yc of lc gas ° P,AV (onirn. n q)ire s 1-5-2 _�... . Notary Public4S�t� of Texas 7U19'.,i3�i i September 14, 2015 .3C Monday, September 21, 2015 LEGAL NOTICES LEGAL NOTICES LEGAL NOTICES ® NOTICE OF INTENT TO regulations at 24 CFR Part 58; (0) September11 Will b 2015 accepted u tit REQUEST RELEASE the grant recipient or other ® rAw OF FUNDS participants in the project have CST, Information on the eBid committed funds or, ncurred costs System is available.on our Dale of Notice: Monday, not authorized By 24 CFR Part 58 websile at www nisdlx.om • • ° • September 14, 2015 before approval of a release of (Departments, Purchasing) or you City of Denton funds by HUD; or (d) another may call 817-215 0092. E. Hickory, Suite B Federal agency acting pursuant Denton, Texas 76205 to 40 CFR Part 1504 has Northwest ISO (eserVes the right (940) 349 7726 submitted a written finding that • to reject any or all proposals and WE BUY the project is unsatisfactory from to waive irregularities or On or about September 22, 2015 the standpoint of environmental informalities as may be deemed 0 the City of Denton will submit a quality. Objections must be in the District's interest. DANO request to the U.S. Department of prepared and submitted in Housing and Urban Development accordance wild the required DRC 9f7 & 9/14115 P ® for the release of the 2015 and procedures (24 QFR Part 58, NOTICE TO CREDITORS 2014 Community Development Sec. 58,76) and shall be Block Grant under Title I of the addressed to Regional Notice is hereby given that on CALL T®®AYi Housing and Community Environmental Officer, September 4, 2015, PAULA C. Developrent Act of 1974, as Department of Housing and FLOWERDAY qualified to serve amended; and the 2015 HOME Urban DevelopPment, 801 Cherry as Dependent Administrator of Inv6slmenI Partnership Grant Street, Unit #45, Ste. 2500, Fort the Estate of Roger Allan �0 N,� PNA funds under Title II of the Worth, Texas 76102. Potential Etheredge, Deceased, in Docket Cranston -Gonzalez National objectors should contact HUD to No PR-2015-00135, which is louses for sale 720 Affordable Housing Act of 1990, verify the actual last day of the pending in the Probate Court of as amended, to undertake the objection period. Denton County, Texas.. BARBARA RUSSELL, following projects known as: REACTORS Barbara L. Ross Real Estate Brokerage Home Improvement Program: Community Development 940m566.2730 The program provides assistance Administrator ° to low and moderate income Certifying Officer louses w/acreage 730 homeowners with major repairs, DRC 9114115 through rehabilitation or 23 ACRE RANCH OVERLOOK• reconstruction within targeted ING LAKE RAY ROBERTS ON neighborhoods. Funds are CO RD 231, VALLEY VIEW. available m low interest loan and 3/2/2'+SUITE & BARN $39909991 grant combinailons. Homes that 940.36B•2O43, OR 214.957.3642 are not suitable are demolished for rehabilitation N reconstructed. This program is a th tiered project because the Sang specific addresses for m rehabilitation or reconstruction at are unknown at the time of the T environmental review. The. 0 z = review was conducted on a broad a scope and two board plans were P 267 CR 108, Wh(tesboro, TX prepared for the program and s 82-Ac, Lake, 2,621 sl, Barn, includes a plan for housing d Residential Deer/ Wildlife, MLS rehabilitation and one for housing t #13097053 W&W 940.383.2712 reconstruction. The following c environmental issues will be f investment 740 reviewed on an address by limit address basis: special flood property hazard areas, locations requiring 3 Duplexes flood insurance purchase, historic 1 BR,1 Bath each side properties or archeological Near TWU resources, noise hazards, 214-564-4051 thermal and explosive hazards, and ensuring that properties are i Investor Special Great Rental free of toxic chemicals and Property. Block from lake radioactive materials. It is 406 Spring Park,Shady Shores estimated that 7 housing units will $37.5K w�wr.lexand.com be rehabilitated or reconstructed during the 2015 program year. mobile/ 760 The total program funding is $553,843 and includes $282,677 manufactured homes in 2015 CDBG funds and 2002 80xl6, 3bdrm, 2 bath, $271,166 in 2015 HOME funds. HIGH END REMODELED, Minor Repair Program: The ALL CUSTOM MOBILE HOME. program provides assistance to $26,000, Frank 940.391-3770 • low and moderate income . homeowners with minor repairs real estate services7$0 within the city limits. Program. serves low-income homeowners by providing a grant of up to $5,000 for minor repairs. Repair cannot be covered by homeowner's insurance. This project is a Ilered project because the specific addresses for repairs are unknown. The review was High Energy Texas flair the ollowing enviironmentonducted on a broad al and VEAL "j FAm issues will be reviewed on an address by address basis: special flood hazard areas, "Cami's sold over $9 million in locations requiring the purchase homes so far this year and of flood insurance, historic she can sell yours tool properties or archeological We buy homes." resources, and ensuring that 940.391.1614 properties are free of toxic "Top Producing Agent" chemicals and radioactive materials. Total program funding includes $85,000 and includes $20,000 in 2015 CDBG funds and $65,000 in 2014 reallocated a„nrlo A„ ucemararl do hmrsino meet and pass such dean from Into EXHIBIT A NOTICE OF INTENTION TO ISSUE CERTIFICATES All persons having claims against this estate which is currently being administered are required to present them within the time and m the manner prescribed by law. All persons having'claims should address them to: Paula C. Flowerday Dependent Administrator of the OTICE IS HEREBY GIVEN that PO Ble ox f Roger Allan Etheredge e Gity Council of the City of pilot Po62 int, Texas 76258 er, Texas (the "Cilyl will at its regular meeting place City Hall, Sanger, Texas at 00 p.m. on the 19th day of ciober, 2015, which is the time place tentatively set for the of an ordinance and other action as may be necessary to authorize he issuance of the City's ettificales of obligation, payable ad valorem taxation and a ed (in an amount not to exceed $10,000) subordinate pledge of certain revenues of the water and sewer system of the City, in the maximum aggregate principal amount of $6,250,000, bearing interest at any rate or rates not to exceed the maximum rate now or hereafter authorized by law, as shall be determined within the discrellon 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) to pay all or any part of the contractual obligations to be incurred for conlraclual obligations to be incurred for the (i) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lilt stations and we lines, (III) conslruciior Of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of in facilities, and (2) for IN payment of contractual obligations for professional services pursuant io Subchapter C of Chapter 271, Texas Local Government Code, as amended Issued September 10, 2015. Ilk �aula C.,Flowerday Dependent Administrator Este of Roger Allan Etheredge Texas Bar No. 04453550 PO Box 762 Pilot Point, Texas 76258 P: 9404231.7843 F: 940.757.0207 DRC 9I14l15 NOTICE TO CREDITOfi5 Notice is hereby given That on duly 8, 2015, PAULA C. FLOWERDAY qualllied fo serve as Temporary Administrator of the Estate of LOUIS L. SIMPSON, Deceased, in Docket No, PR- 2014-00343, Which is pending in the'Probate Court of Denton County, Texas. All persons having claims against IN estate which is currently being administered are required to present them within the time and in the manner prescribed by law. All persons having claims should address them to: Paula C. Flowerday Temporary Administrator of the. Estate of Louis L. Simpson PO Box 762 Pilot Point, Texas 76258 Issued September 10, 2015. Paula C. Flow,erday Temporary Administrator of the Estate of Louis L. Simpson Texas Bar No. 04453550 PO Box 762 Pilot Point, Texas 76258 P:940231,7843 F: 940,757,0207 City Secretary I DRC 9114/15 City of Sanger, Texas DRC 9114 & 9121/15 NOTICE TO VENDORS Pursuant to Chapter 59, Texas Properly Code, Storage Depot will hold a public auction of property being sold to salisty landlord's hen. Sale will be held on September 23, 20www15 of 3pm et C31'I1. e Space i Denton hd New loom ntan 4409 "E heroin rair Is it il- efer- nina r, reli• fat or in- pref tint• ugly es• tithe yin river- �ual 1K + • .+.- • . :.. .. ca11940 387 7777 � DRC 9I14 & 9121/15 ORDINANCE NQ. 589.15 AN ORDINANCE AMENDING ORDINANCE NO, 361.05, THE LEGAL NOTICES COMPREHENSIVE ZONING OR- DINANCE OF THE TOWN OF Access legal notices at BARTONVILLE, AS AMENDED, www.dentonrc.com BY CHANGING THE ZONING DESIGNATION OF APPROXI• EXHIBIT A MATELY 10,002 ACRES, BEING NOTICE OF INTENTION TO GENERALLY DESCRIBED AS A ISSUE CERTIFICATES 10.002 ACRE TRACT OF LAND BEING ALL THAT CERTAIN NOTICE IS HEREBY GIVEN That LOT, REPPERT ADDITION, the Cily Council of the City of BLOCK A, LOT 1•R2, LOCATED Sanger, Texas (the "City") will WITHIN THE LIMITS OF THE meet at Its regular meeting place TOWN OF BARTONVILLE, DEN* al Cily Hall, Sanger, Texas at TON COUNTY, TEXAS, BEING 7:00 p.m. on the 191h day of MORE PARTICULARLY DE• October, 2015, which is the time SCRIBED IN EXHIBIT "A" AT• and place tentatively set for the TACHED HERETO, FROM A passage of an ordinance and ZONING DESIGNATION OF such other action as may be "AG" AGRICULTURE TO A deemed necessary to authorize ZONING DESIGNATION OF the is of the City's "RE-5" SINGLE FAMILY REST• certificates of obligation, payable DENTIAL 5 ACRE LOT MINI* from ad valorem taxation and a MUMS, AND BY AMENDING limited (in an amount not to THE OFFICIAL ZONING MAP exceed $10,000) subordinate TO REFLECT SUCH CHANGE; pledge of certain revenues of the AND BY FURTHER AMENDING water and sewer system of the THE LAND USE MAP OF THE City, in the maximum aggregate BARTONVILLE COMPREHEN- principal amount of $6,250,000, SIVE MASTER PLAN TO RE - bearing interest at any rate or FLECT A CHANGE IN ZONING rates not to exceed the maximum FOR THE 10,002 ACRE TRACT (norest rate now or hereafter DESCRIBED HEREIN FROM "A- authorized by law, as shall be GRICULTURAL" TO "SINGLE determined within the discrelion FAMILY RESIDENTIAL 5 ACRE of the City Council at the time of LOTS'; PROVIDING THAT issuance and maturing over a THIS ORDINANCE SHALL BE period of years not to exceed CUMULATIVE OF ALL ORDI- forty (40) years from the date NANCES; PROVIDING FOR thereof, for the purpose of SAVINGS; PROVIDING FOR evidencing the indebtedness of SEVERABILITY; PROVIDING the City (1) to pay all or any part FOR ENGROSSMENT AND EN• of the contractual obligalions to ROLLMENT; PROVIDING FOR be incurred for contractual PUBLICATION IN THE OFF[* obligations to be incurred for the CIAL NEWSPAPER; AND NAM- (i)rehabllitalion, reconstruction, ING AN EFFECTIVE DATE, addition and expansion of the waste water treatment plant; (ii) rehabllitalion and consWclion of wasie.vater lift stations and wastewater lines, (III) conslruclion of water lines and associated equipment and facilities; (iv) lenabfalien, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. EFFECTIVE DATE: Upon its passage and publication ADOPTED: SEPTEMBER 15, 2015 APPROVED: BILL SCHERER, MAYOR ATTEST: TAMMY DIXON, TOWN SECRETARY DRC 9(20, 9121/2015 ORDINANCE 590.15 City Secretary I ADOPTING THE FISCAL YEAR City of Sanger, Texas 2015.2016 BUDGET DRC 9/14 CITY OF KRUM, TEXAS ORDINANCE N0.2015.09.01 4N ORDINANCE OF THE CITY JF KflUM, TEXAS AMENDING fHE CODE OF ORDINANCES )F THE CITY OF KRUM, HAPTER 12: TRAFFIC AND /EHICLES, ARTICLE 12.03: )PER OF VEHICLES, )IVISION 2. SPEED LIMITS, iECTION 12.03.31: SCHOOL ONES; CHAPTER 12: TRAFFIC \ND VEHICLES, ARTICLE 12,03: AN ORDINANCE APPROVING AND ADOPTING A BUDGET FOR THE FISCAL YEAR 2015• 2016; APPROPRIATING AMOUNTS TO THE INDIVIDUAL LINE ITEMS OF THE GENERAL FUND, STREET IMPROVEMENT FUND, WASTEWATER FUND, AND CAPITAL IMPROVEMENT FUND IN ACCORDANCE WITH SAID BUDGET; PROVIDING THAT THIS ORDINANCE SHALL BE CUMULATIVE OF ALL ORDI- NANCES; PROVIDING A SEVERABILITY CLAUSE; PRO- VIDING A SAVINGS CLAUSE; non.nn+.+n r^n Ad Copy: 314 E. Hickory P.O. Box 369 Denton, TX 76202 940-387-3811 Publication(s): Denton Record -Chronicle PROOF OF PUBLICATION Being duly sworn (s)he Is the Publisher/authorized designee of Denton Record -Chronicle, In City of Dentontsurrounding areas in Denton County; Newspaper of general circulation which has been continuously and regularly published for a period of not less than one year preceding the date of the attached notice, and that the said notice was published In said newspaper Denton Record -Chronicle on the following dates below: AND/OR ' Said notice was published in neighborsgo: Carrollton/CoppelllFarmers Branch/Flower Moundllrving/Lewisville, a neighborhood newspaper that began on May 7, 2005 as Southern Denton County Neighbors (published under Lewisville/Flower Mound/ Highland Village NeighborsGo; NeighborsGo Lewisville/Flower Mound) on the following dates below: 09/14, 09/21/2015 Subscribed and sworn to bef re me this G"� day of 1,� by fit`-1S" (printed name of Designee) Witness my hand and official seal: (signature of notary public) Notary Public, Denton County, Texas o�PP�a< BRENDA GARZA r Notary Public a y Statt: of Texas My Contra. Expires 10-24.2018 BANGER CITY OF P O BOX 1729 BANGER, TX 76266 EXHISITA NOT[CE OF INTENTION TO fSSUE CERTIFICATES NOTICE IS HEREBY GIVEN that the City Coundl of the City of Sanger, Texas (the'01 4) will (at Its regular meeting placa al City Hall, Sanger, Texas at 7:00 p.m, on the 19th day of October, 2015, 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 certiWas of obligation, payable from ad valorem taxation and a limbed (in an amount not to exceed $10,000) subordinate pledge of certain revenues of the water and sewer system of the City, in the maximum aggreggaate princ[pei amount of $6,250,U00, 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 tine 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 ma Glty (1) to pay all or any pan of the contractual obligations to be incurred for contractual obligations to be incurred for the O rehabilitation, reconstruction, addlIon and expansion of the waste water treatment plant; (ID rehabilitation and construction of wastewater lift stations and wastewater lines, ([u) construction of water lines and associated equipment and facilities; (N) rehabtilitation, reconstruction and construction of streets and drainage; and M rehabilitation of municipal facilities, and (2) for the paynxmt of contractual obiigalions for professional servces pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. City Secretary Lily of Sanger, Texas 15 DRC 9/14 & 9121/ Ad Number: 0001456918-01 Price: $80.30 CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS COUNTIES 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 October 19, 2015, at the regular meeting place thereof, within the City, and the roll was called of the duly constituted officers and members of the City Council, to wit. Thomas Muir Russell Martin Gary Bilyeu William Boutwell Allen Chick David Clark Mayor Councilman Mayor Pro Tem. Councilman Councilman Councilman 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 )BLIGATION; SERIES 2015; 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; AND DECLARING AN EMERGENCY (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 2. That a true, full and cor7ect copy of the Ordinance adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the 70433173 4 Ordinance 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 Ordinance; 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 Ordinance 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 purposes that such meeting was open to the public as required by law; 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. SIGNED AND SEALED this October 19, 2015. City Secretary CITY OF SANGER, TEXAS Mayor CITY OF SANGER, TEXAS S-1 70433173_I ORDINANCE AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 20154 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 l.l: 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 all or any part of the contractual obligations to be incurred for the (1) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, 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 2015 (the "Certificates") to the effect that the City Council was tentatively scheduled to meet at 7*00 p.m. on October 19, 2015 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 pledge senior to the pledge of the Net Revenues to the payment of the Certificates. 70433173 4 (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 October 19, 2015, 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 Attorrey General of the State of Texas. "Bond Insurance Policy" shall mean the financial guaranty insurance policy issued by the Bond Insurer insuring the payment when due of the principal and interest on the Certificates as provided therein. "Bond Insurer" shall mean Assured Guaranty Municipal Corp., New York, New York. "Certificate" or "Certificates" shall mean any or all of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015, 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 PA 70433173_4 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. "Interest Payment Date," when used in connection with any Certificate, shall mean May 15, 2016, and each May 15 and November of such Certificate. "Issuance Date" shall mean the date on for by the Underwriter. hereto. 15 thereafter until maturity or earlier redemption whIV h the Certificates are delivered to and paid "Ordinance" shall mean this Ordinance and all amendments hereof and supplements "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 BOKF, NA, and its successors in that capacity. "Record Date" shall mean the close of business on the fifteenth 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. 3 70433173 4 ARTICLE III TERMS OF THE CERTIFICATES Section 3.10 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 FIVE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS ($5,870,000) 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 2015," and shall be dated November 1, 2015. 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 15, 2016, and each May 15 and November 15 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 November 15 in each of the years 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 Year of Principal Interest Number Maturi Amount Rate R-1 2016 $10000 2.000% R-2 2017 115,000 2.000 R-3 2018 1155000 2.000 R4 2019 110,000 3.000 R-5 2020 18000 3.000 R-6 2021 2955000 3.000 R-7 2022 285,000 3.000 C! 70433173 4 R-8 2023 2905000 3.000 R-9 2024 3005000 3.000 R40 2025 310,000 3.000 R-11 2026 320,000 3.250 R42 2027 3305000 3.500 R43 2028 340,000 3.500 R44 2029 3555000 3.750 R45 2030 370,000 3.750 R46 2031 3805000 3.750 R47 2035 1,6755000 3.750 Section 3.4: Redemption Prior to Maturity. (a) The Certificates maturing on and after November 15, 2026 are subject to redemption prior to maturity, at the option of the City, in whole or in part, on November 15, 2025, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b) The Certificates maturing on November 15 in the year 2035 (the "Term Certificates") 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 Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption. Mandatory Principal Redemption Dates Amounts Term Certificates Maturing November 15, 2032 $395,000 November 15, 2035 November 15, 2033 410,000 November 15, 2034 425,000 November 15, 2035* 445,000 *stated maturity The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before October 1 of each year in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed and which have not been made the basis for a previous reduction. (c) 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. E 70433173 4 (d) 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, sealed, 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. The approving legal opinion of McGuireWoods 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 tially 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 G� 70433173 4 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 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 fll 70433173_4 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 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 S sy tem. 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 70433173_4 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: (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. 0 70433173_4 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 malting 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, Statement of Insurance 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 70433173_4 NUMBER tR- REGISTERED UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS DENOMINATION COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2015 'INTEREST DELIVERY 'MATURITY RATE DATE DATE 'CUSIP % November 12, 2015 , 20_ DATED DATE: November 1, 2015 REGISTERED OWNER: PRINCIPAL AMOUNT: AND NO/100 DOLLARS 3THE 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 BOKF, NA, 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 15, 2016, and each May 15 and November 15 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 1 Initial Certificate of Obligation shall be numbered T-1 z Omitted from the Initial Certificate. s 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 November 15 of each of the years 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 BOKF, NA, 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, fiom the date of delivery." 11 70433173_4 Owner of record as of the close of business on the fifteenth 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 $5,870,000 issued pursuant to an ordinance adopted by the City Council of the City on October 19, 2015 (the "Ordinance") for the purpose of providing all or part of the funds (1) to pay all or any part of the contractual obligations to be incurred for contractual obligations to be incurred for the (1) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage, and (v) rehabilitation of municipal facilities, 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 (1) is registered by the Comptroller A 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 November 15, 2026, in whole or in part, on November 15, 2025, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE CERTIFICATES MATURING ON NOVEMBER 15 in the year 2035 (the "Term Certificates") 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 Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Mandatory Principal Redemption Dates Amounts Term Certificates Maturing November 15, 203Z $395,000 November 15, 2035 November 15, 2033 4105000 November 15, 2034 425,000 November 15, 2035* 445,000 *stated maturity The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before October 1 of each year in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed and which have not been made the basis for a previous reduction. 12 70433173 4 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 pant, 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 70433173_4 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 laws 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, 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 its corporate seal to be impressed or placed in facsimile hereon and 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 (SEAL) COUNTERSIGNED: City Secretary 14 70433173_4 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 BOKF, NA By: Authorized Signature Date of Authentication: 15 70433173_4 STATEMENT OF INSURANCE Assured Guaranty Municipal Corp. ("AGM"), New York, New York, has delivered its municipal bond insurance policy (the "Policy") with respect to the scheduled payments due of principal of and interest on this Certificate to BOKF, NA, Austin, Texas, or its successor, as paying agent/registrar for the Certificates (the "Paying Agent"). Said Policy is on file and available for inspection at the principal office of the Paying Agent and a copy thereof may be obtained from AGM or the Paying Agent. All payments required to be made under the Policy shall be made in accordance with the provisions thereof. The owner of this Certificate acknowledges and consents to the subrogation rights of AGM as more fully set forth in the Policy. 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. NOTICE: Signature must be guaranteed by a member firm of the New Yorlc 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. 70433173_4 ARTICLE V SECURITY FOR THE CERTIFICATES Section 5.1: Pledge and Levy of Taxes and Revenues. (a) To provide for the payment A 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 2015 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 2015 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 Citys 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 2015 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 Certificates of Obligation, Series 2015 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 70433173 4 Section 5.3: Further Proceedinjzs. 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. BOKF, NA, 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 and affix the City's seal. 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 PayingAgent/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. 70433173 4 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: Pang 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 Pang A eng is/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; Insurance. The Certificates are hereby sold and shall be delivered to Oppenheimer & Co. for a price of $6,202,564.33 (representing the par value thereof, plus a net original issue premium of $379,221.35 on the Certificates, and less an underwriting discount of $46,657.02), 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. The City hereby acknowledges that the sale of the Certificates pursuant to the Purchase Agreement is contingent upon the issuance of a policy of municipal bond insurance from the Bond Insurer insuring the timely payment of principal of and interest on the Certificates. The terms and conditions of the Bond Insurance Policy, as set forth in Exhibit E hereto, are incorporated herein for all purposes for so long as such policy remains in effect. The purchase of such a policy and the payment of the premium therefor is hereby approved and the Mayor and other appropriate City officials are hereby authorized and directed to execute such documents and certificates and to do any and all things necessary or desirable to obtain such insurance and 19 70433173 4 the printing on the Certificates of an appropriate legend or statement regarding such insurance, as provided by the Bond Insurer, is hereby approved. 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 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 15c242 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: A_pplication of Proceeds of Certificates. Proceeds from the sale of the Certificates shall, promptly upon receipt by the City, be applied as follows: (1) $169,221.35 of the premium shall be applied to pay expenses arising in connection with the issuance of the Certificates; and (2) The proceeds (including remaining proceeds) shall be applied, together with other funds of the City, to provide funds to pay contractual obligations to be incurred for the purposes set forth in Section 3.1 of this Ordinance. 20 70433173 4 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. "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 70433173_4 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 Pam. 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 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. 22 70433173 4 (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 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 23 70433173_4 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 (1) enabling the City to exploit the difference between tax-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 70433173_4 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 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 with in full in one or more documents or may be included by specific reference to documents (1) 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; 70433173_4 (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) Bond 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 (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 this Section 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 BOND OR ANY OTHER PERSON, IN CONTRACT OR 70433173_4 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 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. 27 70433173_4 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 refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (ill ) 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 (1), (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 aContract -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 (1) extend the time or times of payment of the principal of and 70433173_4 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 Holiday. 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 (1) 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 fifteenth 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 Aber 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. 29 70433173_4 PASSED AND APPROVED on first reading this October 19, 2M. CITY OF SANGER, TEXAS Mayor ATTEST City `�,qgtAOV r�;,J S°'-'yyTT--.. a. Pa ti Oaf'A�, yj Agent/Registrar Agreement ExR?b1,l3eri ' ,iminary Official Statement Exhibit C - Purchase Agreement Exhibit D - Description of Annual Financial Information S-1 70433173_1 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Tab No. 8 70433173_4 PRELIMINARY OFFICIAL STATEMENT See Tab No. 6 70433173_4 EXHIBIT C PURCHASE AGREEMENT CY�1� 7 70433173_4 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 10, 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. 70433173 4 EXHIBIT E INSURANCE PROVISIONS 70433173_4 In the event the Insurer is unable to fulfill Its contractual obligation under this policy or contract or application or certificate or evidence of coverage, the policyholder or certificateholder is not protected by an Insurance guaranty fund or other solvency protection arrangement. ASSURED TUARANTY"' MUNICIPAL ISSUER: City of Sanger, Texas (Denton County) BONDS: $5,870,000 in aggregate principal amount of Combination Tax and Revenue Certificates of Obligation, Series 2015 MUNICIPAL BOND INSURANCE POLICY Policy No.: 217201-N Effective Date: November 12, 2015 Premium: $19,836.70 ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent he "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Que far Payment or the Business Day next fallowing the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the fallowing terms shall have the meanings specified for ail purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. 217201-1\1 United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy, This Policy sets forth in full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto, Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer. A subsidiary of Assured Guaran#y Municipal Holdings Inc. 31 West 52nd Street, New York, N.Y. 10019 Form 500NY (5/90) ASSURE GUARANTY MUNICIPAL CORP. By Authorized Officer (212) 974-0100 NOTICE OF CLAIM AND CERTIFICATE Assured Guaranty Municipal Corp. 31 West 52nd Street New York, NY 10019 The •undersigned, a duly authorized officer of [FULL NAME OF TRUSTEE or PAYING AGENT] (the "Trustee/Paying Agent"), hereby certifies to Assured Guaranty Municipal Corp. ("AGM"), with reference to Municipal Bond Insurance Policy No. 217201-N dated November 12, 2015 (the "Policy") issued by AGM in respect of the City of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds"), that: (i) The Trustee/Paying Agent is the Trustee/Paying Agent under the document authorizing the Issuance of the Bonds (the "Indenture") for the Holders. (ii) The sum of all amounts on deposit (or scheduled to be on deposit) (n the [RELEVANT ACCOUNTS] and available for distribution to the Holders pursuant to the Indenture will be $ (the "Shortfall") less than the aggregate amount of principal and interest Due for Payment on ("Scheduled Payments"). (fiij The Trustee/Paying Agent is making a claim under the Policy for the Shortfall to be applied to the payment of Scheduled Payments. (iv) The Trustee/Paying Agent agrees that, following .receipt of funds from AGM, it shall (a) hold such amounts in trust and apply the same directly to the payment of Scheduled Payments on the Bonds when due; (b) not apply such funds for any other purpose; (c) not commingle such funds with other funds held by the Trustee/Paying Agent and (d) maintain an accurate record of such payments with respect to each Bond and the corresponding claim on the Policy and proceeds thereof, and, if the Bond is required to be [SURRENDERED/PRESENTED] for such payment, shall stamp on each such Bond the legend $"[insert applicable amount] paid by AGM and the balance hereof has been canceled and reissued" and then shall deliver such Bond to AGM. (v) The Trustee/Paying Agent, on behalf of the Holders, hereby assigns to AGM the rights of the Holders with respect to the Bonds to the extent of any payments under the Policy, including, without limitation, any amounts due to the Holders in respect of securities law violations arising from the offer and sale of the Bonds. The foregoing assignment is in addition to, and not in limitation of, rights of subrogation otherwise available to AGM in respect of such payments. Payments to AGM in respect of the foregoing assignment shall in all cases be subject to and subordinate to the rights of the Holders to receive all Scheduled Payments in respect of the Bonds. The Trustee/Paying Agent shall take such action and deliver such instruments as may be reasonably requested or required by AGM to effectuate the purpose or provisions of this clause (v). (vi) The Trustee/Paying Agent, on its behalf and on behalf of the Holders, hereby appoints AGM as agent and attorneydn-fact for the Trustee/Paying Agent and each such Holder in any legal proceeding with respect to the Bonds. The Trustee/Paying Agent hereby agrees that, so long as AGM shall not be in default in its payment obligations under the Policy, AGM may at any time during the continuation of any proceeding by or against the Issuer under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim in connection with an Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment made with respect to the Bonds (a "Preference Claim"), (B) the direction of any appeal of any order relating to any Preference Claim at the expense of AGM but subject to reimbursement as provided in the Indenture and (C) the posting.of any surety, supersedes or performance bond pending any such appeal. In addition, the Trustee/Paying Agent hereby agrees that AGM shall be subrogated to, and the Trustee/Paying Agent on its behalf and on behalf of each Holder, hereby delegates and assigns, to the fullest extent permitted by law, the rights of the Trustee/Paying Agent and each Holder in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. (vii) Payment should be made by wire transfer directed to (SPECIFY INSURANCE ACCOUNT]. Unless the context otherwise requires, capitalized terms used in this Notice of Claim and Certificate and not defined herein shall have the meanings provided in the Policy. IN WITNESS WHEREOF, the Trustee/Paying Agent has executed and delivered this Notice of Claim and Certificate as of the day of For AGM or Fiscal Agent Use Only Wire transfer sent on By Confirmation Number Title 2- CITY OF SANGER, TEXAS (Denton County, Texas) $5,870,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2015 PURCHASE AGREEMENT October 19, 2015 Honorable Mayor and City Council City of Sanger, Texas 502 Elm Street Sanger, Texas 76266 Ladies and Gentlemen: The undersigned, Oppenheimer & Co. (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 (the "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 October 19, 2015, and, if not so accepted, will be subject to withdrawal by the Underwriters upon notice as described in Section 9 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 Certificate Ordinance (as defined herein) or in the Official Statement (as defined herein). 1. Purchase and Sale of the Certif<cates. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriters hereby agree, jointly and severally, 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 $5,870,000 Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"). Inasmuch as this purchase and sale represents a negotiated transaction, the Issuer acknowledges and agrees that: (i) the transaction contemplated by this Agreement is an arm's length, commercial transaction between the Issuer and the Underwriters in which the Underwriters are acting solely as a principal and are not acting as a municipal advisor, financial advisor or fiduciary to the Issuer; (ii) the Underwriters have not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the 58876858,A discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriters have provided other services or is currently providing other services to the Issuer on other matters); (iii) the Underwriters are not acting as fiduciaries of the Issuer, but rather are acting solely in their capacity as underwriters for their own accounts, (iv) the only obligations the Underwriters have to the Issuer with respect to the transaction contemplated hereby are those expressly set forth in this Agreement; (v) the Issuer has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate; (vi) the Underwriters have financial and other interests that differ from those of the Issuer (vii) and the Underwriters have provided to the Issuer prior disclosures under Rule G-17 of the Municipal Securities Rulemaking Board (the "MSRB"), which have been received by the Issuer. The Representative has been duly authorized to execute this Agreement and to act hereunder on behalf of itself and the other Underwriters. The principal amount of the Certificates to be issued, the dated date therefor, the maturities, redemption provisions and interest rates at which the Certificates will bear interest are set forth in Schedule II hereto. The Certificates shall be as described in, and shall be issued and secured under and pursuant to the provisions of, the ordinance (the "Certificate Ordinance") adopted by the City Council of the Issuer (the "City Council") on October 19, 2015. The purchase price for the Certificates shall be $6,202,564.33 (representing the par amount of the Certificates, plus an original issue premium of $379,221.35 on the Certificates, and less an underwriting discount of $46,657.02). 2. Public Offering. The Underwriters agree to make a bona fide public offering of all of the Certificates 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 also reserve the right to: (i) over -allot or effect transactions that stabilize or maintain the market price of the Certificates at levels above those that might otherwise prevail in the open market and (ii) discontinue such stabilizing, if commenced, at any time without notice, provided, however that no such actions shall affect the certification of the original issue price of the Certificates as provided below. On or before Closing, the Underwriters shall execute an issue price certificate prepared by McGuireWoods LLP ("Bond Counsel") verifying the initial offering prices to the public at which the Underwriters sold or reasonably expected to sell a substantial amount of each stated maturity of the Certificates to the public. After the initial public offering, the Underwriters may offer and sell Certificates to certain dealers (including dealers depositing Certificates into investment trusts) and others at prices lower than the public offering price stated on the inside cover of the Official Statement. 3. The Ofticial Statement. (a) The Issuer previously has delivered copies of the Preliminary Official Statement dated October 15, 2015 (the "Preliminary Official Statement") to the Underwriters in a "designated electronic format," as defined in MSRB Rule &32 ("Rule 3-32"). The Issuer will prepare a final Official Statement relating to the Certificates, 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 58676658.4 "Rule"), kill) 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 Certificates, 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 Representative reasonably deems necessary to satisfy the obligation of the Underwriters 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 Certificates. The Issuer hereby represents and warrants that the Preliminary Official 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 Certificates for completion, all as permitted to be excluded by Section (b)(1) of the Rule. (c) The Issuer represents that the governing body of the Issuer has reviewed and approved the information in the Official Statement and hereby authorizes the Official Statement to be used by the Underwriters in connection with the public offering and sale of the Certificates. 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 Certificates. 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 Underwriters (1) 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. 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 Underwriters are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (the earlier of (1) ninety (90) days from the "end of the underwriting period" (as defined in the Rule) and (n) 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 Certificates), 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 58876858.4 3 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), 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, certificates, instruments and other documents as the Representative may reasonably deem necessary to evidence the 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 &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 3(d) above) with (1) 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 (1) above). Unless otherwise notified in writing by the Representative, 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 Certificates. 4. Representations ,Warranties ,and Covenants of the Issuer. The Issuer hereby represents and warrants to and covenants with the Underwriters that; (a) The Issuer is a home rule city duly created, organized and existing under the laws of the State of Texas (the "State") and the Issuer's Horne Rule Charter, 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 Subchapter 58876658.4 4 C of Chapter 271, Texas Local Government Code, as amended (the "Act"), the Issuer's Home Rule Charter, and the Certificate Ordinance (1) to enter into, execute and deliver this Agreement and the Certificate Ordinance (which contains the Continuing Disclosure Undertaking described in Section 6(1)(3)), and all documents required hereunder and thereunder to be executed and delivered by the Issuer (this Agreement and the Certificate Ordinance are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Certificates 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 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 (1) the adoption of the Certificate Ordinance and the issuance and sale of the Certificates, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Certificates 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 oBering of the Certificates 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 order 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 Certificates, when issued, delivered and paid for, in accordance with the Certificate Ordinance and this Agreement, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Certificate 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 Certificates as aforesaid, the Certificate Ordinance will provide, for the benefit of the holders of the Certificates, the legally valid and binding pledge and lien it purports to create as set forth in the Certificate Ordinance, being the pledge to levy, assess and collect an annual ad valorem tax, without legal limitation as to rate or amount, upon all taxable property within the boundaries of the Issuer, sufficient to pay the principal of and interest on the Certificates when due; 58876858.4 5 (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 or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, 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 Certificates, the Issuer Documents and the adoption of the Certificate 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, 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 Certificates or under the terms of any such law, regulation or instrument, except as provided by the Certificates and the Certificate Ordinance; (e) Except for the approval of the Certificates by the Attorney General of the State of Texas 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 Certificates 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 Certificates; (f) The Certificates and the Certificate Ordinance conform to the descriptions thereof contained in the Official Statement under the captions "THE CERTIFICATES" and "GENERAL INFORMATION REGARDING THE CERTIFICATES"; the proceeds of the sale of the Certificates will be applied generally as described in the Official Statement under the caption "THE CERTIFICATES — Sources and Uses of Funds"; and the Continuing Disclosure Undertaking contained in the Certificate Ordinance conforms to the description thereof contained in the Official Statement under the caption "CONTINUING DISCLOSURE OF INFORMATION (g) Except as 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; 58876858.4 6 (h) Except as 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 Certificates or the levy and collection of taxes and revenues pledged to the payment of principal of and interest on the Certificates pursuant to the Certificate Ordinance or in any way contesting or affecting the validity or enforceability of the Certificates, the Issuer Documents, or contesting the exclusion from gross income of interest on the Certificates 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 Certificates, the adoption of the Certificate 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 Certificates or the Issuer Documents; (i) As of the date thereof, the Preliminary Official Statement did 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; provided, however, that for all purposes of this Agreement including, without limitation, for purposes of subparagraphs (i), 0) and (k) of this Section, 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, or its book -entry - only system. AN During the period beginning when the Official Statement is delivered to the Underwriter's pursuant to paragraph (a) of Section 3 of this Agreement, and (unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 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 3 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; 58876858,4 (1) The Issuer has the legal authority to apply and will apply, or cause to be applied, the proceeds from the sale of the Certificates as provided in and subject to all of the terms and provisions of the Certificate Ordinance and will not to take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Certificates; (m) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriters as the Representative may reasonably request (1) to (1) qualify the Certificates 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 Representative may designate and (ii) determine the eligibility of the Certificates 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 Certificates (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 Representative immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Certificates 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 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 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 bonds, notes 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 Certificates, 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 by the Representative in writing, has delivered to the Representative 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 Certificates true, correct, complete, and legible copies of all correspondence or other communications relating, directly or indirectly, thereto; sas�6asa.a 8 (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, 5. Closln . (a) At 10:00 a.m. Central Standard Time, on November 12, 2015, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Representative (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Certificates to the Underwriters, 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 Certificates, 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 BOKF, NA, Austin, Texas (the "Paying Agent/Registrar"). Payment for the Certificates as aforesaid shall be made at the offices of the Paying Agent/Registrar or such other place as shall have been mutually agreed upon by the Issuer and the Representative. (b) Delivery of the Certificates in definitive form, utilizing the book entry, shall be made through DTC, or at the office of the Paying Agent/ Registrar acting on behalf of DTC. The Certificates shall be delivered in definitive fully registered form, bearing CUSIP numbers without coupons, with one Certificate for each maturity of the Certificates, registered in the name of Cede & Co., all as provided in the Certificate Ordinance, and shall be made available at the offices of the DTC (or if Certificates 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 Representative at least one (1) business day before the date of the Closing for the purposes of inspection. 6. ClosinP 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 Certificates 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 58876858.4 9 satisfactory to the Representative unless waived in writing by the Representative on behalf of 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 Certificates shall be in full force and effect 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 Representative; and (ii) the net proceeds of the sale of the Certificates and any funds to be provided by the Issuer shall be deposited and applied as described in the Official Statement and in the Certificate 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 its opinion referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Certificates 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 Underwriters; (e) At or prior to the Closing, the Certificate Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Paying Agent/Registrar shall have duly authenticated the definitive Certificates; (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 judgment of the Representative, is material and adverse and that makes it, in the judgment of the Representative, impracticable to market the Certificates 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 Representative; 5$8�6858,4 10 (1) At or prior to the Closing, the Underwriters shall have received copies 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 Representative in (1) a "designated electronic format" that meets the requirements of Rule G-32 and (ii) a printed format; (2) The Certificate 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 Representative; (3) The undertaking of the Issuer which satisfies the requirements of Section (b)(5)(1) of the Rule (the "Continuing Disclosure Undertaking"); (4) The approving opinion of Bond Counsel with respect to the Certificates, 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 Certificate Ordinance has been duly adopted and is in full force and effect, (B) 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 and the Certificates under the 1933 Act or to qualify the Certificate Ordinance under the Trust Indenture Act; and (C) Bond Counsel has reviewed the statements and information contained in the Official Statement under the captions and sub -captions THE CERTIFICATES" (except the subcaption "Sources and Uses of Funds"), "GENERAL INFORMATION REGARDING THE CERTIFICATES," "REGISTRATION, TRANSFER AND EXCHANGE," "TAX RATE LIMITATIONS," "LEGAL MATTERS," "TAX MATTERS," "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES," "QUALIFIED TAX- EXEMPT OBLIGATIONS," "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 Certificates and the Certificate Ordinance contained under such captions fairly summarizes the procedures and documents referred to therein and is correct as to matters of law; sas�bsss.a 58876858.4 (6) An opinion, dated the date of the Closing and addressed to the Underwriters, of counsel for the Underwriters, to the effect that: (A) the Certificates are exempted securities that do not require registration under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the Certificates to register any securities under the 1933 Act and the Certificate Ordinance need not be qualified under the Trust Indenture Act; and (B) based upon their participation in the preparation of the Official Statement as counsel for the Underwriters and their participation at conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement, the information regarding DTC and its book -entry system, as to which no view need be expressed); (7) A certificate, dated the date of Closing, of an appropriate official of the Issuer to the effect that (1) all official action of the Issuer relating to the Certificates, the Issuer Documents and the Official Statement have been duly adopted 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) 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 Certificates, the Issuer Documents or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and collecting taxes or revenues, including payments on the Certificates, pursuant to the Certificate Ordinance, and other income or the levy or collection of the taxes or revenues pledged or to be pledged to pay the principal of and interest on the Certificates, 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 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 i�a 58876858,4 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, 2014, the latest date as of which audited financial information is available; (8) A certificate of the Issuer 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 Certificates will be used in a manner that would cause the Certificates to be "arbitrage bonds" 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 of Texas and the registration certificate of the Comptroller of Public Accounts of the State of Texas in respect of the Certificates; (10} A copy of a policy of bond insurance issued by Assured Guaranty Municipal Corp. (the "Insurer") covering the Certificates. (ll) An opinion of counsel to the Insurer, dated as of the date of Closing, with respect to the policy of bond insurance which guarantees payment of the principal of and interest on the Certificates in form and substance satisfactory to the Representative. (12) Any other certificates and opinions required by the Certificate Ordinance for the issuance thereunder of the Certificates; (13) Evidence satisfactory to the Representative that the Certificates have been rated "A2" by Moody's Investors Service, and that all such ratings are in effect as of the date of Closing; and (14) 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. 13 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 satisfactory to the Underwriters. 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 Certificates contained in this Agreement, or if the obligations of the Underwriters to purchase, to accept delivery of and to pay for the Certificates 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 4 and 8 hereof shall continue in full force and effect. 7. Termination. The Underwriters shall have the right to cancel their obligation to purchase the Certificates if, between the date of this Agreement and the Closing, the market price or marketability of the Certificates 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 order, 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 Certificates, of the interest on the Certificates 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, or any other similar action or event shall have occurred which, in the reasonable judgment of the Representative, materially adversely affect the market for the Certificates or the market price generally of obligations of the general character of the Certificates; (b) Legislation introduced in or 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 Certificates, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Certificate Ordinance 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 Certificates, 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; 58876858.4 14 (c) Any state blue sky or securities commission or other governmental agency or body in any state in which more than 15% of the Certificates have been offered and sold shall have withheld registration, exemption or clearance of the offering of the Certificates 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; (d) A general suspension of trading in securities on the New York Stock Exchange, the establishment of minimum prices on such exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so or a material disruption in securities settlement, payment or clearance services in the United States shall have occurred; (e) The New York Stock Exchange or other national securities exchange or any governmental authority shall impose, as to the Certificates or as to obligations of the general character of the Certificates, 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 of, the Underwriters, (f) 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 to pay principal of and interest on the Certificates; (g) Any event occurring, or information becoming known which, in the reasonable judgment of the Representative, makes untrue in any material respect any material 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; (h) There shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer, except for changes which the Official Statement discloses are expected to occur; (i) There shall have occurred (whether or not foreseeable) any (a) new material outbreak of hostilities (including, without limitation, an act of terrorism) or (b) new material other national or international calamity or crisis including, but not limited to, an escalation of hostilities that existed prior to the date hereof, or (c) material financial crisis or adverse change in the financial or economic conditions affecting the United States government or the securities markets in the United States; 58876858,4 (j) Any fact or event shall exist or have existed that, in the Representative's reasonable judgment, requires or has required an amendment of or supplement to the Official Statement; (k) There shall have occurred or notice shall have been given of any downgrading, or any credit watch or credit review shall have been issued or other notice shall have been given of any intended or potential downgrading, in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Certificates); and (1) The purchase of and payment for the Certificates by the Underwriters, or the resale of the Certificates 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 is not caused by the intentional acts, or failure to act, of any Underwriter; or (m) A decision by a court of the United States shall be rendered, or a stop order, release, regulation or no -action letter by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Certificates, including the underlying obligations as described in this Agreement or the Official Statement, or any document relating to the issuance, offering or sale of the Certificates, is or would be in violation of any provision of the federal securities laws at the Closing date, including 1933 Act, the Securities Exchange Act of 1934 and the Trust Indenture Act. (n) There occurs or notice is given of any downgrade in the credit rating accorded to the obligations insured by the Insurer, or any credit watch or credit review is issued or other notice given of any intended or potential downgrade of such rating, from a rating agency that at the date of this Agreement has published a rating for the Insurer. With respect to the condition described in subparagraphs (e) and (1) above, the Underwriters are 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 Underwriters to invoke its termination rights thereunder. 8. Expenses. (a) The Underwriters shall be under no obligation to pay, and the Issuer shall pay all 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 Certificates, Preliminary Official Statement, Official Statement and any amendment or supplement thereto, (ii) the fees and disbursements of Bond Counsel and other counsel retained by the Issuer, if any; (iii) the fees and disbursements of the Financial Advisor to the Issuer, if any; (iv) the fees and disbursements of the Paying Agent/Registrar; (v) the fees and disbursements of engineers, accountants, and other experts, consultants or advisers retained by the Issuer, if any; and (vi) all fees and expenses in connection with obtaining bond ratings and credit enhancement fees or premiums. The Issuer shall also pay for any 58876858,4 16 expenses (included in the expense component of the Underwriters' discount) mutually agreed by the Issuer and the Representative to be reasonably considered expenses of the Issuer and are incurred by the Underwriters which are incidental to implementing this Agreement and the issuance of the Certificates. The Issuer shall pay for any expenses (included in the expense component of the Underwriters' discount) incurred by the Underwriters on behalf of the Issuer in connection with the marketing, issuance and delivery of the Certificates. (b) The Issuer acknowledges that the Representative will pay from the underwriters' expense allocation of the underwriting discount the applicable per bond assessment charged by the Municipal Advisory Council of Texas, a non-profit corporation whose purpose is to collect, maintain and distribute information relating to issuing entities of municipal securities and of which the Representative is a member. (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 Certificates; and (iii) all other expenses incurred by them in connection with the public offering of the Certificates, 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 Underwriters' discount. 9. Notices. Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing at City of Sanger, Texas, 502 Elm Street, 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 Oppenheimer & Co., 13455 Noel Road, Suite 1200, 2 Galleria Tower, Dallas, Texas 75240, Attention: Dan Roseveare. 10. 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 Underwriters) 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 (1) any investigations made by or on behalf of any of the Underwriters; (ii) delivery of and payment for the Certificates pursuant to this Agreement; and (iii) any termination of this Agreement. 11. 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. 12. Choice of Law. This Agreement shall be governed by and construed in accordance with the law of the State. 13. 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 58876858.4 17 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. 14. Business Day. For purposes of this Agreement, "business day" means any day on which the New York Stock Exchange is open for trading. 15. 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. 16. 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. 17. No PersonaC Liability. Neither the Mayor, 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 Underwriters 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. 18. 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 Certificates. [signature page follows) 58876858.4 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Representative. This Agreement shall become a binding agreement between the Issuer and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, OPPENHEIMER & Co., as Representative of the Underwriters Name: Daniel Roseveare Title: Managing Director Date: APPROVED AND ACCEPTED as of the date hereof: CITY OF BANGER, TEXAS Name: Title: Date and Time of Acceptance Schedule I -List of Underwriters Schedule II -Schedule of Terms 58876858.2 Execution Page to Purchase Agreement for City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 If the Issuer agrees with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Representative. This Agreement shall become a binding agreement between the Issuer and the Underwriters when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, OPPENHEIMER & CO., as Representative of the Underwriters Name: Title:_ Date: APPROVED AND ACCEPTED as of the date hereof: CITY OF BANGER, TEXAS Name: *17h w;na S Title: /i%A•�/o✓ Date hand T,i'me of Acceptance Schedule I -List of Underwriters Schedule II -Schedule of Terms 58876858,4 Execution Page to Purchase Agreement for City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Oppenheimer & Co. 13455 Noel Rd., Suite 1200 2 Galleria Tower Dallas, Texas 75240 William Blair &Company 9910 IH 10 West, Suite 800 )Mee 8056 San Antonio, Texas 78230 Schedule I List of Underwriters I-1 (b) (c) SCHEDULE II $5,870,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Interest Accrues From: Delivery Date Initial Maturity Principal Interest Reoffering November 15P) Amount Rate Yield0'1 2016 $100,000 2.000% 0.650% 2017 $1152000 2,000% 16000% 2018 $115,000 1000% 1,150% 2019 $110,000 3.000% 1.300% 2020 $180,000 3.000% 14500% 2021 $295,000 3.000% 14700% 2022 $285,000 3.000% 1.900% 2023 $290,000 3,000% 2.050% 2024 $300,000 3.000% 1100% 2025 $310,000 3,000% 2.200% 2026 $320,000 1250% 2.300% 2027 $330,000 3.500% 2.450% 2028 $3409000 1500% 26550% 2029 $355,000 3.750% 2.650% 2030 $370,000 3.750% 2.750% 2031 $3800000 3.750% 2.850% $1,675,000 3.750%Term Certificates due November 15, 2035, Yield 3.300%�°Itblt`1 The Issuer reserves the right, at its option, to redeem the Certificates having stated maturities on and after November I5, 2026, in whole or in part, in principal amounts of $5,000 or any integral mul►iple thereof, on November I5, 2025, or any date thereafter, at the par value thereof plus accrued interest from the most recent interest payment date to the date of redemption. The initial reoffering prices or yields of the Certificates arc furnished by the Underwriters and represent the initial offering prices or yields to the public, which may be changed by the Underwriters at any time. Yield shown is to maturity or the first optional redemption date, November 15, 2025, whichever produces a lower yield. The Term Certificates are subject to mandatory sinking fund redemption on the dates and in the amounts set forth below: Term Certificate Maturity November 115, 2035 Mandntory Redemption Dntes November I5, 2032 November 15, 2033 November I5, 2034 November 15, 2035 (maturity) Principal Amounts $395,000 $410,000 $425,000 $4451000 58876858.4 PRELIMINARY OFi4ICIAL STATEMENT Dated: October 15, 2015 NEW ISSUE: Boolc-Entry-Only Rating; Moody's "AT' (See "RATINGS" herein) In the opinion of on Counsel, interest on the Certificates is excludable from gross income for federal income tax purposes under- existing law, subject to the matters described under "TAX MATTERS" herein, and is not includable in the alternative minimum taxable income of individuals. See "TAX MATTERS" for a discussion of the opinion of Bond Counsel, including the alternative minimum tax consequences for corporations. THE CERTIFICATES WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. Dated Date: November 1, 2015 $6,250,000" CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 Due: November 15, as shown on inside cover Interest on the $6,250,000* City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), will accrue from their delivery date to the underwriters listed below (the "Underwriters") and will be payable May 15 and November 15 of each year, commencing on May 15, 2016. The Certificates will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal of the Certificates 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 BOKF, NA, Austin, Texas. The Certificates 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 Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. Proceeds from the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) the rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. The Certificates maturing on and after November 15, 2026, are subject to optional redemption in whole or in part on November 15, 2025, or on any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest as more fully described herein. See "THE CERTIFICATES — Optional Redemption" herein, The Certificates will constitute direct obligations of the City of Sanger, Texas (the "City"), payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed by law, and from a limited subordinate pledge not to exceed $10,000) of surplus net revenues of the City's water and sewer system as provided in the ordinance authorizing the Certificates. See Principal Amounts, Maturities, Interest Rates, and Prices on the Inside Cover Page The Certificates are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and McGuireid�oods LLP, Bond Counsel, Houston, Texas. Certain legal matters will be passed upon for the Underwriters by their counsel, Norton Rose Fulbright US LLP, Houston, Texas. The Certificates are expected to be available for delivery to the Underwriters through DTC on or about November 12, 2015. OPPENHEIMER & CO. WILLIAM BLAIR * Preliminary, subject to change. MATURITY SCHEDULE $6,250,000* Combination Tax and Revenue Certificates of Obligation, Series 2015 Maturity Principal Interest Initial (November 15) °1 Amount Rate Yield/Price(b) CUSIPW 2016 $ % % 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 * Preliminary, subject to change. (a) The Certificates maturing on and after November 15, 2026, are subject to optional redemption, in whole or in part, on November 15, 2025, 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. (See "THE CERTIFICATES — Optional Redemption"), (b) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (c) 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. CITY OF SANGER, TEXAS CITY COUNCIL Thomas Muir Mayor Russell Martin Councilmember, Place 1 Gary Bilyeu Councilmember, Place 2 William Boutwell Councilmember, Place 3 Allen Chick Councilmember, Place 4 David Clark Councilmember, Place 5 ADMINISTRATIVE OFFICERS Mike Brice City Manager Tami Taber City Secretary Robert L. Dillard III, Esq. City Attorney Nichols Jackson Dillard Hagar & Smith Dallas, Texas CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS McGuireWoods LLP, Houston, Texas BrooksCardiel, PLLC, The Woodlands, Texas Government Capital Securities Corporation, Southlake, Texas For additional information regarding the City, please contact: Mike Brice City Manager City of Sanger, Texas P.O• Box 1729 Sanger, Texas 76266 (940)458-7930 ibrice@saiigeilexas.org Bond Counsel Independent Auditor Financial Advisor Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817)722-0239 teliristensen@govcapsecurities.com USE OF INFORMATION IN OFFICIAL STATEMENT For purposes of compliance with Rule ISc2-12 of the United States Securities and Exchange Commission, this document constitutes an Official Statement of the City with respect to the Certificates that has been deemed "final " by the City as of its date except for the omission of no more than the information permitted by Rule 15c242. This document, when further supplemented by adding information specking the interest rates and certain other information relating to the Certificates, shall constitute a "final official statement" of the City with respect to the Certificates, as such term is defined in Rule 15c242. 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 unkni ful 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 CERTIFICATES ARE EXEMPTED FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTION IN WHICH THESE SECURITIES HAVE BEEN REGISTERED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AIRY OVER -ALLOT OR EFFECT TRANSACTIONS i47HICH STABILIZE THE MARKET PRICE OF THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERIVISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, AIRY BE DISCONTINUED AT ANY TIME. The agreements of the City and others related to the Certificates 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 Certificates is to be construed as constituting an agreement with the purchasers of the Certificates. 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, its responsibilities to investors under the federal securities lmvs as applied to the facts and circumstances of this transaction, but the Undeiii1riters 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. ii SUMMARY STATEMENT..............................................iv SELECTED FINANCIAL INFORMATION ..................... v INTRODUCTORY STATEMENT....................................1 THE CERTIFICATES........................................................1 Purpose..................................................................1 Authorization......................................................... I Security for the Certificates...................................1 Optional Redemption.............................................2 Notice of Redemption............................................2 Sources and Uses of Funds....................................2 GENERAL INFORMATION REGARDING THE CERTIFICATES........................................................... 2 General Description...............................................2 Legality.................................................................. 3 Defeasance.............................................................3 Amendments to the Ordinance...............................4 OWNERSHIP.....................................................................4 OWNER'S REMEDIES.....................................................4 BOOK -ENTRY -ONLY SYSTEM ..................................... 5 REGISTRATION, TRANSFER AND EXCHANGE,.,......? Paying AgentlRegistrar..........................................7 Future Registration................................................7 Record Date for Interest Payment ..........................7 Limitation on Transfer of Certificates ...................8 Replacement of Certificates ................................... 8 TAX INFORMATION.......................................................8 Summary of Certain Provisions of the Property Tax Code............................................8 Effective Tax Rate and Rollback Tax Rate.......... I I Property Assessment and Tax Payment...............11 Penalties and Interest...........................................11 City Application of Property Tax Code ...............12 Municipal Sales Tax............................................12 TAX RATE LIMITATIONS.,.... 0944 0001 Ole 13 RETIREMENT PLAN ..................................................... 13 INVESTMENT POLICIES .............................................. 13 Accounting Principles Generally Accepted in the United States.............................................13 Legal Investments................................................13 Investment Policies..............................................14 Additional Provisions...........................................15 Current Investments.............................................15 RATINGS........................................................................ 15 PENDING LITIGATION ................................................. 16 LEGAL MATTERS......................................................... 16 TAX MATTERS,,,,.,,,,, 6460#604 666006*0 6440 Gee 6061 ease 04*1 0090060 P p 4 0 p 0 a 0 & 4 16 TaxExemption.....................................................16 Proposed Tax Legislation....................................17 TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES ...... 17 Discount Certificates. 4 9*90 go 0 assess 17 Premium Certificates...........................................18 QUALIFIED TAX-EXEMPT OBLIGATIONS.....,.... 60004 19 LEGAL INVESTMENTS IN TEXAS ............................s 19 REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE ..................................................... 20 CONTINUING DISCLOSURE OF INFORMATION..... 20 Annual Reports....................................................20 Material Event Notices........................................20 Limitations and Amendments..............................21 Compliance with Prior Undertakings ...................21 FINANCIAL ADVISOR, a a 6 a a 4 a a I * 0 a 6 a 0 6 0 a a 0 6 of 0 4 . 6 0 0 9 9 4 4 0 a 4 0 0 p 0 4 0 0 9 0 9 p 0 0 21 UNDERWRITING........................................................... 22 CONCLUDING STATEMENT ....................................... 22 Financial Information Regarding the City of Sanger, Texas General Information Regarding the City of Sanger, Texas Form of Opinion of Bond Counsel Audited Financial Statements for the Fiscal Year Ended September 30, 2014 Appendix A Appendix B Appendix C Appendix D iii SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the schedules and appendices hereto. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement including the Appendices hereto. The Issuer The City of Sanger, Texas (the "City"), is located in Denton County, Texas. For information regarding the City, see Appendices A and B. The Certificates $6,250,000` Combination Tax and Revenue Certificates of Obligation, Series 2015, dated November 1, 2015, maturing on the dates and in the amounts set forth on the inside front cover of this Official Statement. Interest on the Certificates will accrue from their date of delivery and will be paid semiannually on May 15 and November 15, commencing May 15, 2016, until maturity or prior redemption. Purpose of Certificates Proceeds from the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) the rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization and Security The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, Chapter 1502, Texas Government Code, and an ordinance to be enacted by the City Council of the City (the "City Council") on October 19, 2015. The Certificates are payable from ad valorem taxes to be levied, within the limits prescribed by law, on all taxable property within the City and a limited subordinate pledge of surplus net revenues derived from the City's water and sewer system, not to exceed $10,000, as provided in the ordinance authorizing the Certificates. Optional Redemption The Certificates maturing on and after November 15, 2026, are subject to optional redemption in whole or in part on November 15, 2025, or on any date thereafter at a price of par plus accrued interest as more fully described herein. See "THE CERTIFICATES — Optional Redemption" herein. Tax Matters In the opinion of Bond Counsel, interest on the Certificates is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "TAX MATTERS" herein, and is not includable in the alternative minimum taxable income of individuals. See "TAX MATTERS" for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City will designate the Certificates as qualified tax-exempt obligations. See "QUALIFIED TAX-EXEMPT OBLIGATIONS" herein. Ratings The Certificates are rated "AT' by Moody's Investor's Service, Inc. ("Moody's"). An explanation of the significance of such rating may be obtained from Moody's. See "RATINGS" herein. Book -Entry -Only System The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York, pursuant to the book -entry only system described herein. Beneficial ownership of the Certificates may be acquired in principal denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of, premium if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the DTC Participants (as defined herein) for subsequent remittance to the owners of the beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. Payment Record The City has never defaulted on the payment of its bonded indebtedness. ` Preliminary, subject to change. IV SELECTED FINANCIAL INFORMATION (Unaudited) 2015 Certified Taxable Assessed Valuation ............................ $533,911,551 (a) ..................... ........ (100% of Market Value as of January 1, 2015) City Debt: Outstanding Tax Supported Debt (as of August 31, 2015)............................. $13,190,000 cb) Plus: The Certificates., Fees Ole so 664*62 ego 0400 so Ole Sees Soles eve Sees Sees 6,250,000 Total Tax Supported Debt,,,,, See 00841 toosse*04992 ego 944*644 Sees of sesootle see Otte Ole eel 9*1 so $195440,000 EstimatedOverlapping Debt.......................................................................... Direct and Estimated Overlapping Debt............................................................ Debt Service Fund Balance (as of Sept. 30, 2014)..................... of 2015 Assessed Valuation Debt Ratios: Direct Tax Supported Debt. . 3.64% Direct Tax Supported and Estimated Overlapping Debt. 6 6 0 a a a to 6.60% 2015 Per Capita 7 415 $2,622 $4,754 $15,808,592 $35,248,952 $372,961 2015 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation $0.498751 Debt Service ............... . else ...... ,...................................................... 0s 180749 Total.. .......................................... .............................................. $0.679500 Estimated Annual Debt Service Requirements .......................................... . .......... Average....................................................................................... $1,003,443 Maximum(2017)............................................................................ $2,105,122 Tax Collections CurrentYear.................................................................................. 99.80% Total Collections............................................................................. 99.68% * 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. (b) Includes self-supporting debt. OFFICIAL STATEMENT RELATING TO $61250,000" CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 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 $6,250,000* Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"). The Certificates will be authorized to be issued, sold and delivered by an ordinance enacted by the City's governing body (the "City Council"), and such ordinance is referred to herein as the "Ordinance." Capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Ordinance, except as otherwise indicated herein. 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 and the City's home rule charter (the "City Charter"), which was initially approved by the electorate of the City on November 2, 1999. 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. THE CERTIFICATES Purpose Proceeds from the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) the rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, as amended, Chapter 1502, Texas Government Code, as amended, and the Ordinance, as authorized by the City Charter. Security for the Certificates 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, and by a limited subordinate pledge of surplus net revenues derived from the City's water and sewer system (the "System"), not to exceed $10,000, as provided in Lite Ordinance. `Preliminary, subject to change. 1 Optional Redemption The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after November 15, 2026, in whole or in part, in integral multiples of $5,000, on November 15, 2025 or any date thereafter, 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 Certificates 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 Certificates, or portions thereof, within each maturity to be redeemed. Notice of Redemption Not less than 30 days prior to a redemption date for the Certificates, the City shall cause a notice of redemption to b e sent by United States mail, first class, postage prepaid, to each registered owner of a Certificate 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 Certificates, interest shall cease to accrue after the date fixed for redemption whether or not the Certificates 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 CERTIFICATES HAVING BEEN PROVIDED, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount of Certificates Net Original Issue Discount Total Sources of Funds Uses Deposit to Construction Fund Costs of Issuance Underwriters' Discount Total Uses of Funds General Description 0 0 GENERAL INFORMATION REGARDING THE CERTIFICATES The Certificates will be dated November 1, 2015 (the "Dated Date"), and will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Certificates will bear interest from the date of delivery to the underwriters listed on the cover page hereof (the "Underwriters"), and interest will be paid semiannually on each May 15 and November 15, commencing May 15, 2016. Interest will accrue on the Certificates on the basis of a 360-day year consisting of twelve 30-day months. The Certificates 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." 2 Principal of the Certificates will be payable to the registered owners (the "Owners") at maturity or prior redemption upon presentation and surrender of such Certificates at the principal corporate office of the paying agent/registrar (the "Paying Agent/Registrar"), initially BOKF, NA, Austin, Texas. Interest on the Certificates 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 a Certificate 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 Certificates will mature on the dates, in the amounts and bear interest at the rates as set forth on inside cover page of -this Official Statement, Legality The Certificates are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and McGuireWoods LLP, Houston, Texas, Bond Counsel. (See "LEGAL MATTERS" and Appendix C — "Form of Opinion of Bond Counsel"). Defeasance The Ordinance provides that the City may defease the Certificates and discharge its obligation to the holders of any or all of the Certificates 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 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 Board 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 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 Certificates shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Certificates have been made as described above, all rights of the City to initiate proceedings to call the Certificates for redemption or take any other action amending the terms of the Certificates are extinguished; provided, however, that the right to call the Certificates for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption; (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorize. 3 Amendments to the Ordinance In the Ordinance, the City has reserved the right to amend such Ordinance without the consent of any holder of the Certificates in any manner not detrimental to the interests of the holders of the Certificates, including the curing of any ambiguity, defect or omission therein. The Ordinance further provides that the holders of the Certificates aggregating in principal amount 51% of the outstanding Certificates 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 Certificates no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates, (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates; or (v) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. 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 principal and interest, and for all other purposes, whether or not such Certificate 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 Certificate in accordance with the Ordinance will be valid and effectual and will discharge the liability of the City and the Paying AgenvRegistrar upon such Certificate to the extent of the sums paid. OWNER'S REMEDIES The Ordinance does not provide for the appointment of a trustee to represent the interests of the Certificateholders upon any failure of the City to perform in accordance with the terms of the Ordinance or upon any other condition 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 Ordinance. Furthermore, the Ordinance does not establish specific events of default with respect to the Certificates and, under State law, there is no right to the acceleration of maturity of the Certificates upon the failure of the City to observe any covenant under the Ordinance. A registered owner of Certificates could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Certificates; however, such judgment could not be satisfied by execution against any property Athe 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 levy, assess, and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as it becomes due or perform other material terms and covenants contained in the Ordinance. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Certificates are valid and binding obligations for all purposes according to their terms. 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 Certificateholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Certificates are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code, BOOK -ENTRY -ONLY SYSTEM This section describes how ownership of the Certificates is to be transferred arzd how the principal of, premium, if any, and interest on the Certificates are to be paid to and credited by The Depository Trust Company ("DTC'), New York, New York while the Certificates are registered in its nominee name. The information in this section concerning DTC and the Book -Envy 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 responsibilityfor the accuracy or completeness thereof. The City cannot and does not give any asswance that (1) DTC will distribute payments of debt service on the Certificates, or redemption or other notices, to DTC Participants, (2) DTC Participants or others ivill distribute debt service payments paid to DTC or its nominee (as the registered owner of the Certificates), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the 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 Certificates. The Certificates will be issued as fully registered Certificates 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 Certificates, 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 certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC 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 Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("Beneficial Owner") is in turn to be recorded on the Direct 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 Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. E To facilitate subsequent transfers, all Certificates 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 Certificates 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 Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The 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 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates 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 Certificates 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 Certificates 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 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest, and redemption payments on the Certificates 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 )TC) 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 Certificates 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, Certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor Securities depository). In that event, physical certificates will be printed and delivered. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Certificates are in the Book -Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry Only System and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. 0 The information in this section concerning DTC and DI'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 BOKF, NA, Austin, Texas has been named to serve as initial Paying Agent/Registrar for the Certificates. In the Ordinance, 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 Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Certificates by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In the event the Book -Entry Only System should be discontinued, interest on the Certificates 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 Certificates 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 Certificates 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 Certificates, principal, interest, and redemption payments on the Certificates 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 Certificates will be delivered to the Owners and thereafter the Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such 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. Certificates may be assigned by the execution of an assignment form on the Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Certificate will be delivered by the Paying Agent/Registrar in lieu of the Certificate 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 Certificates issued in an exchange or transfer of Certificates will be delivered to the registered Owner or assignee of the Owner after the receipt of the Certificates 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 Certificates 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 Certificate or Certificates 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 Certificates. Record Date for Interest Payment The record date ("Record Date") for the interest payable on any interest payment date is the last business day of the month next preceding such interest payment date, as specified in the Ordinance. In the event of a nonpayment of 7 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 fi•om 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 a Certificate 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 Certificates Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Certificate, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate. Replacement of Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount as the Certificate so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Certificate, such new Certificate will be delivered only upon surrender and cancellation of such mutilated Certificate. In the case of any Certificate issued in lieu of and in substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfactory to them that such Certificate 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 Certificate must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. TAX INFORMATION Summary of Certain Provisions of the Property Tax Code The appraisal of property within the City is the responsibility of the Denton Central Appraisal District (the "Appraisal District"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under Title I of the Texas Tax Code (referred to herein as the "Property Tax Code") to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining the market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law requires the appraised value of a residence homestead to be based solely on the property's value as a residence 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 residence homestead for a tax year to an amount not to exceed the lesser of (1) the property's market value in the most recent tax year in which the market value was determined by the appraisal office, or (2) the sum of (a) 10% of the property's appraised value in the preceding tax year, plus (b) the property's appraised value the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board, whose members are appointed by the Board of Directors of the Appraisal District, The Appraisal District is required to review the value of property within the Appraisal District at least once every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Under Article VIII of the Texas Constitution ("Article VIII") and State law, the governing body of a county, municipality or junior college district may provide for a freeze on total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older above the amount of tax imposed in the E:l year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, the total amount of taxes imposed on such homestead cannot be increased except for improvements (excluding maintenance, repairs or improvements required to comply with governmental requirements) and such freeze is transferable to a different residence homestead. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual's spouse. If improvements (other than repairs or improvements required to comply with governmental requirements) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. Reference is made to the Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII and State law also provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b of Article VIII, and State law, the governing body of a political subdivision, at its option, may grant an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to less than $3,000 of the market value. The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (ii) the surviving spouse was at least 55 years of age at the time of the death of the individual's spouse and (iii) the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse. In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of $5,000. In the case of residence homestead exemptions granted under Section 1-b of Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children. In addition, veterans who are 100% disabled (being a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100% disability compensation due to a service -connected disability and a rating of 100% disabled or of individual unemployability) are entitled to an exemption from taxation of the total appraised value of the veteran's residential homestead. Additionally, effective January 1, 2012, subject to certain conditions, the surviving spouse of a disabled veteran who is entitled to an exemption for the full value of the veteran's residence homestead is also entitled to an exemption from taxation of the total appraised value of the same property to which the disabled veteran's exemption applied. E Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-&I), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property appraised for property, taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and I-d-L Non -business personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non -business property are exempt from ad valorem taxation. Section 1 j of Article VIII authorizes an ad valorem tax exemption for "freeport property", Freeport property is defined as goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property, provided official action to tax the same was taken before April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section Iwn of the Texas Constitution provides for the exemption from taxation of "goods4n-transit." "Goods -in -transit" is defined by Section 11,253 of the Tax Code as personal property acquired or imported into Texas and transported to another location in the State or outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out -board motor, heavy equipment and manufactured housing inventory. Section 11,253 of the Tax Code permits local governmental entities, on a local option basis, to take official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax "goods -in -transit" during the following tax year. A taxpayer may only receive either the freeport exemption or the "goods 4n-transit" exemption for items of personal property. A city or a county may utilize tax increment financing ("TIP), pursuant to the Tax Increment Financing Act, Texas Tax Code, Chapter 311, to encourage development and redevelopment within a designated reinvestment zone. Taxes collected from increases in valuation above the base value (the "captured appraised value") by each taxing unit that levies ad valorem taxes on real property in the reinvestment zone may be used to pay costs of infrastructure or other public improvements in the reinvestment zone and to supplement or act as a catalyst for private development in the defined area of the reinvestment zone, The tax increment base value for a taxing unit is the total appraised value of all real property taxable by the taxing unit and located in the reinvestment zone as of January I of the year in which the city created the reinvestment zone, Each taxing unit can choose to dedicate all, any portion or none of its taxes collected from the captured appraised value to the costs of improvements in the reinvestment zone. The amount of a taxing unit's tax increment for a year is the amount of property taxes levied by the taxing unit for that year on the captured appraised value of real property taxable by the taxing unit and located in the reinvestment zone, multiplied by the taxing unit's percentage level of participation. The City also may enter into tax abatement agreements to encourage economic development. Under an abatement agreement, a property owner agrees to construct certain improvements on its property. The City in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the abatement agreement. The abatement agreement could last for a period of up to 10 years, The City has adopted a tax abatement policy with respect to certain areas within the City, The City is also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City, In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes; provided, however, that no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City, The City may contract with the federal government, the State, another political subdivision, a nonprofit organization or any other entity, including private entities, for the administration of such a program. See Appendix A — Tables 1, 3 and 4 for information relating to the City's taxable assessed valuation, property tax rates and cdllections and tax rate distribution. f[I Effective Tax Rate and Rollback Tax Rate Before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City, the City Council must adopt a tax rate per $100 taxable value for the current year. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings have been held on the proposed tax rate following notice of such public hearings (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Property Assessment and Tax Payment Property within the City is assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years of age and over and taxpayers qualifying for the disabled person exemption are allowed to pay taxes on their residential homestead in four installments with the first installment due on February 1 of each year and the final installment due on August 1. Penalties and Interest Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Month Penalty February Interest Total After July, the penalty remains at 12%, and interest accrues at a rate of one percent (1%) for each month or portion of a month the tax remains unpaid. A delinquent tax continues to accrue interest as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest 11 penalty is to compensate the taxing unit for revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% may be added to the total tax penalty and interest charge. A taxpayer who is 65 years of age or older or is disabled may defer the collection of delinquent property taxes on his or her residence homestead and prevent the fling of a lawsuit to collect delinquent taxes until the 181st day after the taxpayer no longer owns and occupies the property as a residence homestead. However, taxes and interest continue to accrue against the property, and the delinquent taxes incur a penalty of 8% per annum with no additional penalties or interest assessed. The lien securing such taxes and interest remains in existence during the deferral or abatement period. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the fling of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. City Application of 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 only 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") exemption but at this time has no Article VIII, Section 1 j property. Municipal Sales Tax The City has adopted the provisions of V.A.T.C.S. Tax Code § 321.001 et seq., which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City. The proceeds of such tax are credited to the General Fund and are not pledged to payment of the Certificates. Collections and enforcements are effected through the offices of the State Comptroller of Public Accounts, who monthly remits the proceeds of the tax, after deduction of a 2% service fee, to the City. The Tax Code provides certain cities and counties the option of assessing a maximum one-half percent (1/2%) sales 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 tax is approved and levied, the ad valorem property tax levy must be reduced by the estimated amount of the sales tax revenues to be generated in the current year. Subject to the approval of a majority of the voters in a local option election, state law also provides certain cities the option of assessing a sales and use tax for a variety of other purposes, including economic and industrial development, municipal street maintenance and repair, and sports and community venues. State law limits the maximum aggregate sales and use tax rate in any area to 8'/a%. Accordingly, the collection of local sales and use taxes in the area of the City (including sales and use taxes levied by the City) is limited to no more than 2% (when combined with the State sales and use tax rate of 6'/4%). In addition to the one percent (1%) local sales and use tax referred to above, at an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 4A, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. At an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/20/q) sales and use tax for economic development purposes in accordance with Section 413, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the 12 additional sales and use tax began in December, 1998. The City has not held an election regarding an additional sales tax for the purpose of reducing its ad valorem taxes. TAX RATE LIMITATIONS Article XI, Section 5, of Lite State Constitution is applicable to the City and imposes a limitation on ad valorem taxes which can be imposed by the City of $2.50 per $100 taxable assessed valuation. The Attorney General of Texas follows a policy, with respect to Home Rule Cities which have such a $2.50 limitation, of approving ad valorem tax bonds only to the extent that all of such city's ad valorem tax debt can be serviced by a debt service tax rate of $1.50 at 90% collection. RETIREMENT PLAN The City participates in the Texas Municipal Retirement System which is a joint contributory retirement plan covering all full-time employees. There are no benefits guaranteed other than to the extent provided by employee and employer contributions, plus earnings, accumulated in the individual accounts of employees. The contribution rate for employees is 6% of their annual covered salary. The City is required to contribute at an actuarially determined rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 25-year amortization period. Contributions by the City for the year ended September 30, 2014 totaled $210,2016 For additional information regarding the City's Pension Plans, see Appendix D - "Audited Financial Statements for the Fiscal Year Ended September 30, 2014, Note V — Other Information — Pension Plans". 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, 2014"). Legal Investments Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, 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) certificates of deposit (i) meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by or through an institution that either has its main office or a branch in Texas, and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits or, (ii) where (a) the funds are invested by the City through (I) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the City; (iii) 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; (iv) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by 13 the United States or an instrumentality of the United States, and (v) the City appoints the depository institution selected under (ii) above, an entity as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker -dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 156-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit issued for the account of the City; (8) fully collateralized repurchase agreements that have a defined termination date, are secured by a combination of cash and obligations described in clause (1) 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; (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency; (10) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (11) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and (12) now mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described below. A political subdivision such as the City may enter into securities lending programs if (i) the securities loaned under the program are 1009/o collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (10) through (12) 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 of Texas; 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. 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 and the maximum average dollar -weighted maturity allowed 14 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 Texas 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, the City's 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 must submit an investment report to the Board of Trustees detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, and 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 strategies and (b) Texas law. No person may invest City funds without express written authority from the City Council. Additional Provisions Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers with personal business relationships or family relationships with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and the City, (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) in conjunction with its annual financial audit, perform a compliance audit of the management controls on investments and adherence to the City's investment policy, (5) 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, (6) restrict the investment in non -money market mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, (7) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements and (8) provide specific investment training for the Treasurer, the chief financial officer (if not the Treasurer) and the investment officer. Current Investments As of September 30, 2014, 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. Type of Investment Certificates of Deposit RATINGS Amount The Certificates are rated "A2" by Moody's Inventor's Service, Inc. ("Moody's"). The ratings reflect only the view of such organization at the time such ratings were given and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by Moody's, if in the judgment of Moody's, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. i�� 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 Certificates, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Certificates 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 Certificates 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 Certificates, and the opinion 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 Certificates. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Certificates are contingent on the sale and delivery of the Certificates. The applicable legal opinion will be printed on or attached to the definitive Certificates. Bond Counsel has reviewed the statements and information appearing in the Official Statement under the captions "THE CERTIFICATES" (except the subcaption "Sources and Uses of Funds"), "GENERAL INFORMATION REGARDING THE CERTIFICATES," "REGISTRATION, TRANSFER AND EXCHANGE," "TAX RATE LIMITATIONS," "LEGAL MATTERS," "TAX MATTERS," "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES," "QUALIFIED TAX EXEMPT OBLIGATIONS," "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 ]aw. 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 or completeness 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 or completeness of any of the information contained herein. TAX MATTERS Tax Exemption In the opinion of McGuireWoods LLP, Houston, Texas, Bond Counsel, interest on the Certificates is (1) excludable from gross income of the owners thereof for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and (2) is not includable in the alternative minimum taxable income of individuals or, except as described below, corporations. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Certificates. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinance and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Certificate proceeds and any facilities financed therewith, the source of repayment of the Certificates, the investment of Certificate proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Certificate proceeds and certain other amounts be paid periodically to the United States and that the City file an information report with the Internal Revenue Service (the "Service"). If the City should fail to comply with the covenants in the Ordinance, or if its representations relating to the Certificates that are contained in the Ordinance should be determined to be inaccurate or incomplete, interest on the Certificates could become taxable from the date of delivery of the Certificates, regardless of the date on which the event causing such taxability occurs. Interest on the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above, Bond Counsel will express no opinion as to any federal, state or• local tax consequences resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Certificates. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the City as the "taxpayer," and the owners of the Certificates may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Certificates, the City may have different or conflicting interests from the owners of the Certificates. Public awareness of any future audit of the Certificates could adversely affect the value and liquidity of the Certificates during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the year. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. Such prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. Proposed Tax Legislation Fax legislation, administrative actions taken by tax authorities, and court decisions may cause interest on the Certificates to be subject, directly or indirectly, to federal income taxation or state income taxation, or otherwise prevent the beneficial owners of the Certificates from realizing the full current benefit of the tax status of such interest. For example, future legislation to resolve certain federal budgetary issues may significantly reduce the benefit of, or otherwise affect, the exclusion of gross income for federal income tax purposes of interest on all state and local obligations, including the Certificates. In addition, such legislation or actions (whether currently proposed, proposed in the future or enacted) could affect the market price or marketability of the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and its impact on their individual situations, as to which Bond Counsel express no opinion TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES Discount Certificates Some of the Certificates may be offered at an initial offering price which is less than the stated redemption price at maturity of such Certificates. If a substantial amount of any maturity of the Certificates is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of 17 wholesalers or underwriters) at such initial offering price, each of the Certificates of that maturity (the "Discount Certificate") will be considered to have "original issue discount" for federal income tax purposes equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Certificate and (b) the initial offering price to the public of such Discount Certificate. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on a Discount Certificate and such initial owner will be entitled to exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Certificate continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Certificates under the caption "TAX EXEMPTION" generally applies to original issue discount deemed to be earned on a Discount Certificate while held by an owner who has purchased such Certificate at the initial offering price in the initial public offering of the Certificates and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Certificate prior to its stated maturity, however, any amount realized by such initial owner in excess of the basis of such Discount Certificate in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Certificate continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Certificate will be treated for federal income tax purposes as interest on a Certificate, such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to be earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Certificates must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Certificate may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Discount Certificate. See "TAX EXEMPTION" for a discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to collateral federal tax consequences for certain other owners. The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect ergights or obligations of the owner of a Discount Certificate or of the City. The portion of the principal of a Discount Certificate representing original issue discount is payable upon the maturity or earlier redemption of such Certificate to the registered owner of the Discount Certificate at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Certificate is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Certificates by an owner that did not purchase such Certificates in the initial public offering and at the initial offering price may be determined according to rules which differ from those described above. All prospective purchasers of Discount Certificates should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Certificates. Premium Certificates Some of the Certificates may be offered at an initial offering price which exceeds the stated redemption price payable at the maturity of such Certificates. If a substantial amount of any maturity of the Certificates is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, each of the Certificates of such maturity ("Premium Certificate") will be considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis for federal income tax purposes of a Premium Certificate in the hands of an initial purchaser who purchases such Certificate in the initial offering must be reduced each year and upon the sale or other m taxable disposition of the Certificate by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Certificate by the initial purchaser. Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Certificate which is amortizable each year or shorter period in the event of a sale or disposition of a Premium Certificate) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Certificate based on the initial purchaser's original basis in such Certificate. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Certificates that are not purchased in the initial offering or which are purchased at an amount representing a price other than the initial offering prices for the Certificates of the same maturity may be determined according to rules which differ from those described above. Moreover, all prospective purchasers of Certificates should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Certificates. QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265(a) of the Code provides, in general, that interest expense incurred to acquire or carry tax-exempt obligations is not deductible from the gross income of the holder. For certain holders that are "financial institutions" within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, 1986, Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than certain private activity bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may only designate an issue as an issue of "qualified tax-exempt obligations" where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year 2015. The City will designate the Certificates as "qualified tax-exempt obligations." Further, the City will represent that it has or will take such action necessary for the Certificates to constitute "qualified tax-exempt obligations." Notwithstanding the designation of the Certificates as "qualified tax-exempt obligations," financial institutions acquiring the Certificates will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Certificates. LEGAL INVESTMENTS IN TEXAS Under the Texas Public Security Procedures Act (Texas Government Code, Chapter 1201), the Certificates (1) are negotiable instruments, (2) are investment securities to which Chapter 8 of the Texas Uniform Commercial Code applies, and (3) are legal and authorized investments for (A) an insurance company, (B) a fiduciary or trustee, or (C) a sinking fund of a municipality or other political subdivision or public agency of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the State, its agencies, and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Certificates may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such Certificates 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 Certificates 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 Certificates for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Certificates for such purposes. The City has made no review of laws in other states to determine whether the Certificates are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE No registration statement relating to the Certificates 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 Certificates have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been registered or qualified under the securities acts of any other jurisdiction. The City assumes no responsibility for registration or qualification of the Certificates under the securities laws of any other jurisdiction in which the Certificates may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration and qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdictions. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to 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 Im10) 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- (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 B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by 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 Certificates: (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 Certificates, or other material events affecting the tax status of the Certificates; (7) modifications to rights of holders of the Certificates, if material; (8) Certificate calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates, 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 20 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 (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. (Neither the Certificates nor the Ordinance 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". 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 Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of the Certificates 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 Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Certificates in the primary offering of the Certificates. 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 Certificates in the primary offering of the Certificates. Compliance with Prior Undertalungs The annual Financial Report for the year ending September 30, 2010, due to be filed on March 31, 2011, was filed on February 3, 2012, and the annual audited financial statements for the year ending September 30, 2011, due to be filed on March 31, 2012, was filed on June 8, 2012. Since that time, the City has implemented procedures to ensure timely filing in the future. Otherwise, during the last five years, the City has not failed to comply in any material respect with any continuing disclosure agreement made by it in accordance with the Rule. 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 Certificates. The fee of the Financial Advisor for services with respect to the Certificates is contingent upon the issuance and sale of the Certificates. 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. UNDERWRITING Oppenheimer & Co. Inc. and William Blair &Company, 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 Underwriters' 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. 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 Certificates. CITY OF BANGER, TEXAS Mayor, City of Sanger, Texas ATTEST: City Secretary, City of Sanger, Texas APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION 2015 Total Value of Taxable Property Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions Disabled and Deceased Veterans' Exemptions Productivity Value Loss Homestead 10% Cap Adjustment Abatement Freeport Other 2015 Net Taxable Assessed Valuation (100% of Actual)�a� $ 10,918,422 1,191,071 29,948,451 1f 161420 0 12,943,610 11,488,748 TABLE 1 $533,911,551 68,106,722 $465,804,829 t°� See "TAX INFORMATION -City Application of the Property Tax Code" in the Official Statement for a description of the City's taxation procedures. Source: Denton County Appraisal District PRINCIPAL TAXPAYERS Name Walmart Stores East, L,P. Intercapital Sanger Trails Stonewood Resorts, LLC MacCamp LTD Sam's East, Inc. Springer Family Rentals LLC Sam's Cross Dock Latham Zane Springer, John D S&T Rentals, LLC Total Type of Business Distribution Real Estate Real Estate RV Sales and Service Distribution Real Estate Distribution Real Estate Real Estate Real Estate * Based on 2014 Net Taxable Assessed Valuation of $465,804,829. TABLE 2 of Total 2014 Net Taxable 2014 Assessed Assessed Valuation Valuation* $104,504,825 22.44% 102171,686 2.18% 3,306JM 0.7l% 3,223,088 0,69% 3,063,092 0.66% 2,949,700 0.63% 2,265,000 0.49% 2,066,399 0.44% 2,1003410 0.45% L953A98 0.42% $135034868 29.11% Soan•ce: Texas Comptroller of Public Accounts and Denton Central Appraisal District A-1 PROPERTY TAX RATES AND COLLECTIONS°� TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total(b)Ended 2002 $2263882,983 0.565470 97.03% 99.39% 9-30-03 2003 28%937,097 0.565470 97.38% 99.71% 9-30-04 2004 3125537,172 0.570830 97.40% 99.70% 9-30-05 2005 3385298,363 0.590460 98.16% 99.70% 9-30-06 2006 3535244,529 0.599600 97.36% 99.74% 9-30-07 2007 3725374,916 06620000 98.13% 99.68% 9-30-08 2008 383,5115572 0.620000 97.72% 99.43% 9-30-09 2009 3631053,298 0.620000 97.78% 98.99% 9-3040 2010 365,706,678 0.633049 97.70% 97.70% 9-3041 2011 358,015,773 0.633049 98.69% 98.71% 9-3042 2012 389,390,028 0.633049 99.20% 101.00% 9-3043 2013 415,503,377 06665000 99.80% 99.68% 9-3044 2014 433,8585191 0.679500 In progress 9-3045 (°) See "TAX INFORMATION - 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 County Appraisal District, and the City's 2014 Annual Financial Statements. 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 201445 201344 201243 201142 201041 Maintenance & Operations $0.418751 $0.409405 $0.446044 $0.446044 $0.439418 Dedicated for Street Maintenance 0.080000 00080000 I & S Fund 0.180749 09175595 0.187005 0.187005 0.193631 TOTAL $0.679500 $0,665000 $0.633049 $0,633049 $09633049 Source: City A-2 WATER RATES" TABLE 5 Existing Rates Residential (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 30,000 19.72 3.41 per thousand gallons 3.75 per thousand gallons 4.60 per thousand gallons 5.92 per thousand gallons Commercial (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 30,000 $24.97 3.96 per thousand gallons 4.29 per thousand gallons 4.68 per thousand gallons 5.78 per thousand gallons PRINCIPAL WATER CUSTOMERS 2013-14' TABLE 6 (For the hvelve months ending September 30, 2014) Name of Customer SISD High School Stonewood Resorts, LLC Walmart Distribution Center Stonewood Resorts, LLC Chisum Trail/Integra Peak Mgt Elk River SISD Sanger Middle School IChoscrow Sadeghian Karl Klement Properties Average Monthly Total 2,074,200 Average Monthly Bill $3,176 3,474 2,040 1,167 1,122 572 614 527 641 $13,333 ` The City's pledge of revenues from the water and sewer system for payment of the Certificates is limited to $10,000, and the City does not anticipate that it would ever use such revenues to make payment on the Certificates, A-3 SEWER RATES` Existing Rates Residential (Effective January 1, 2015) Minimum (first 1,000 gallons) $ 22.77 Per 1,000 gallons over first 1,000 gallons 3.16 Per 1,000 gallons in excess of 10,000 gallons 3.51 Maximum per month 60.00 Commercial (Effective January 1, 2015) 3/a inch meter $ 33.52 1 inch meter 36,69 1'/2 inch meter 4135 2 inch meter 50.77 3 inch meter 62.62 4 inch meter 116.21 6 inch meter 154.45 8 inch meter 203.84 Per 1,000 gallons over first 1,000 gallons Per 1,000 gallons in excess of 10,000 gallons 3.51 Multi -Family Dwellings The amount due for multi -family dwellings shall be the residential rate multiplied by the number of occupied dwelling units. TABLE 7 PRINCIPAL SEWER CUSTOMERS"` TABLE 8 (For the hilelve months ending September 30, 2014) Name of Customer Average Monthly Bill Stonewood Resorts LLC $ 3,202 SISD Sanger High School 1,844 Walmart Distribution Center 1,221 Stonewood Resorts, LLC 1,125 Chisum Trail/Integra Peak Mgmt 1,100 SISD Butterfield Elementary 865 Karl Klement Properties 687 Ohio Garden RV Inc 502 Elk River 436 SISD Sanger Middle School 416 Total 11 398 The City's pledge of revenues from the water and sewer system for payment of the Certificates is limited to $10,000, and the City does not anticipate that it would ever use such revenues to make payment on the Certificates. FOAM I ELECTRIC RATES` TABLE 9 Existing Rates (Effective November 15, 2010) Large Residential Commercial Industrial Facility Charge (minimum per $ 10000 $ 16.00 $ 35,00 month) Energy Charge (per KWH) $ 0.1175 $ 0,12 $ 0.105 ERCOT Pass -through per month $4.00 $4,00 $4900 PRINCIPAL ELECTRIC CUSTOMERS 2013-2014` TABLE 10 (For the tivelve months ending September 30, 2014) Name of Customer Average Monthly Total 1,576,434 171.507 ` None of the City's revenues from its electric system is pledged to the payment of the Certificates, and the City will not use such revenues to make payment on the Certificates. A-5 PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Fiscal Year 0-Sep 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Existing Debt Service $1,796,942.50 1,718,572.50 1,704,532.50 1,708,317.50 1,715,222.50 1,6515145.00 724,986.25 730,2%00 724,295.00 721,705.00 725,557.50 458,045.00 3215400.00 325,000.00 322,250.00 324,000900 325,000.00 320,250.00 TOTAL $16,317,481.25 Principal* $175,000.00 180,000.00 180,000.00 185,000.00 190,000.00 195,000.00 2003000,00 205,000.00 210,000.00 215,000.00 2255000.00 230,000.00 2355000.00 2455000.00 250,000.00 260,000.00 270,000.00 280,000.00 290,000.00 305,000.00 315,000.00 330,000.00 345,000.00 3%000.00 375,000.00 $6,250,000.00 Interest* $109,020.00 211,550.00 208,000.00 204,400.00 200,7%00 197,000.00 192,662.50 187,725.00 182,150.00 175,925.00 16%550.00 162,950.00 156,125.00 149,150.00 141,950.00 134,525.00 126,875.00 117,575.00 106,575.00 95,175.00 83,275.00 70,875.00 57,975.00 43,612.50 27,300.00 9,375.00 $3,522,045.00 Total Debt Service* $1,905,962.50 2,105,122.5 0 2,092,532.50 2,092,717.50 2,100,972.50 2,038,145.00 1,1125648.75 1,117,985.00 1,111,445.00 1,107,630.00 1,110,107.50 845,995.00 707,525.00 709,150.00 709,200.00 708,525.00 711,875.00 707,825.00 386,575.00 385,175.00 388,275M 385,875.00 387,975.00 388,612.50 387,300.00 384,375.00 $26,089,526.25 * Preliminary, subject to change. Interest esti»7ated at market rates for pzaposes of illustration. I� . APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF SANGER9 TEXAS General The City of Sanger 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 2010 U.S. Census, the City's 2010 population was 6,916. U.S. Census estimates indicate an estimated population of 7,415 as of September 30, 2014. 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 of Sanger 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 2010 U.S. Census, the County's 2010 population was 662,614. B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL McGuireWoods LLP )PMorgan Chase Tower 600 Travis Street Suite 7500 Houston, TX 77002-2906 Phone: 713.571.9191 Fax: 713.571.9652 www.mcguirewoods.com MCGUIREV\%DS November 11, 2015 We have acted as Bond Counsel in connection with the issuance by City of Sanger, Texas he "Issuer") of its Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), dated November 1, 2015, in the aggregate principal amount of $ The Certificates are issuable in fully registered form only, bear interest, are subject to redemption prior to maturity and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the Issuer authorizing their issuance. We have acted as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the Issuer; certain certifications and representations and other material facts within the knowledge and control of the Issuer, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R-1 of this issue. We have not been requested to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the Issuer or the disclosure thereof in connection with the sale of the Certificates. Capitalized terms used herein and not otherwise defined have the meaning assigned in the Ordinance. Based on such examination, it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the Issuer enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with law; and Atlanta � Austin � Baltimore � Brussels � Charlotte � Charlottesville � Chicago � Dallas � Houston � Jacksonville � London Los Angeles � New York � Norfolk (Pittsburgh � Raleigh � Richmond � Tysons Corner � Washington, D.C. � Wilmington November 11, 2015 Page 2 (2) The Certificates are payable, both as to principal and interest, from the receipts of an annual ad valorem tax levied, within the limits prescribed by law, upon taxable property located within the Issuer, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates, and a pledge of subordinate Net Revenues not to exceed $10,000a Also based on our examination as described above, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates, including any accrued "original issue discount" properly allocable to the holders of the Certificates, is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended ("Code"), and is not a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. For purposes of the alternative minimum tax imposed on corporations under Section 56 of the Code, interest on the Certificates is included in computing adjusted current earnings. The "original issue discount" on any Certificate is the excess of its stated redemption price at maturity over the initial offering price to the public at which price a substantial amount of the Certificates of the same maturity was sold. The "public" does not include bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. We express no opinion regarding other federal tax consequences arising with respect to the Certificates. In providing the opinion set forth in the foregoing paragraph, we are assuming continuing compliance with the Covenants (as hereinafter defined) by the Issuer. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied after the issuance of the Certificates in order for interest on the Certificates to be and remain excludable from gross income for purposes of federal income taxation. These requirements include, by way of example and not limitation, restrictions on the use, expenditure and investment of the proceeds of the Certificates and the use of the property financed by the Certificates, limitations on the source of the payment of and the security for the Certificates, and the obligation to rebate certain excess earnings on the gross proceeds of the Certificates to the United States Treasury. The Ordinance and the Issuer's tax certificate for the Certificates (the "Tax Certificate") contain covenants (the "Covenants") under which the Issuer has agreed to comply with such requirements. The failure by the Issuer to comply with the Covenants could cause interest on the Certificates to become includable in gross income for federal income tax purposes retroactively to their date of issue. In the event of noncompliance with the Covenants, the available enforcement remedies may be limited by applicable provisions of law and, therefore, may not be adequate to prevent interest on the Certificates from becoming includable in gross income for federal income tax purposes. We have no responsibility to monitor compliance with the Covenants after the date of issue of the Certificates. Certain requirements and procedures contained, incorporated or referred to in the Ordinance and Tax Certificate, including the Covenants, may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our November 11, 2015 Page 3 opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. APPENDIX D AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 305 201'4 ANNUAL FINANCIAL REPORT City of Sanger, Texas For the Year Ended September 30, 2014 (This page intentionally left blank.) City of Sanger, Texas TABLE OF CONTENTS September 30, 2014 FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 7 Basic Financial Statements Government -Wide Financial Statements Statement of Net Position 19 Statement of Activities 20 Fund Financial Statements Governmental Funds: Balance Sheet 22 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds 23 Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds 24 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25 Proprietary Funds: Statement of Net Position 26 Statement of Revenues, Expenses, and Changes in Fund Net Position 27 Statement of Cash Flows 28 Notes to Financial Statements 31 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual -General Fund 59 Schedule of Funding Progress -Texas Municipal Retirement System 61 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS Combining Balance Sheet -Nonmajor Governmental Funds 62 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 63 Combining Statement of Revenues, Expenses, and Changes 0n Fund Net Position - Proprietary Funds — by Department 64 (This page intentionally left blank,) PLL BROOKSCABDUDL, -- Certified Public Accountants 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, 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, 2014, 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. Auditof�'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 1095 Evergreen Circle � Suite 200 � The Woodlands, TX 97330 � Tel: 281.907.8788 � Fax: 888.875.0587 � www.BrooksCardiel.com 1 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. 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, each major fund, and the aggregate remaining fund information of the City as of September 30, 2014, 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 and schedules of funding progress 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. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 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 and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other 2 records used to prepare the basic financial statements. Such information has been subjected to the 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 and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. C,....,all 4, `L� SrooksCardiel, PLLC Certified Public Accountants The Woodlands, Texas February 26, 2015 K3 (This page intentionally left blank.) MANAGEMENT'S DISCUSSION AND ANALYSIS 5 (This page intentionally left blank,) G� City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS (MD&A) September 30, 2014 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, 2014. Financial Highlights • The City's total combined net position is $26,300,291 at September 30, 2014. Of this, $7,524,908 (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 $4,090,197, an increase of $139,442. • As of the end of the year, the unassigned fund balance of the general fund was $1,100,802 or 20% of total general fund expenditures. • The City had an overall increase in net position of $1,995,064, which is primarily due to strong general and utility revenues. 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 untended to furnish additional detail to support the basic fmancial statements themselves. Government The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to aprivate-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 underlyirng 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 DISCUSSIONAND ANALYSIS, Continued September 30, 2014 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 (lalown as the primary government), but also the legally separate Sanger Industrial Development Corporation ("4A fund") and the Sanger Texas Development Corporation ("4B fund"), for which the City is financially accountable. Both corporations, although legally separate, function for all practical purposes as a department of the City and therefore have been included as an integral part of the primary government. 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 five 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 DISCUSSIONAND ANALYSIS, Continued September 30, 2014 expenditures, and changes in fund balances for the general and capital projects funds which 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 general fund budget. Proprietary Funds The City maintaitls one type of proprietary fund which is considered an enterprise fund. Enterprise funds are used to report the same functions presented as business -type activities in the government - wide financial statements. The City uses enterprise funds to account for its water distribution, wastewater collection/treatment, water and wastewater construction operations and electric services. The proprietary fund financial statements provide separate information for the water distribution, wastewater collection/treatment fund, and electric funds. The basic proprietary fund financial statements can be found in the basic financial statements of this report. 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 includes a budgetary comparison schedule for the general fund and schedule of funding progress for Texas Municipal Retirement System. 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 exceed liabilities by $26,300,291 as of September 30, 2014, in the primary government. The largest portion of the City's net position, $15,816,158, 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. 0 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 An additional portion of the City's net position, $2,959,225, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $7,524,908 is unrestricted and may be used to meet the government's ongoing obligations to its citizens and creditors. Statement of Net Position: The following table reflects the condensed Statement of Net Position: Governmental Activities Current and 2014 ss-Type Busine Activities Governmental Total Activities other assets $ 4,717,408 $ 11,671,252 $ 16,388,660 Capital assets, net 15,020,169 12,430,202 27,450,371 Total Assets 19,737,577 24,101,454 43,839,031 Deferred Outflows of Resources 25,919 58,344 84,263 Other liabilities 515,587 11245,675 11761,262 Long-term liabilities 71406,622 8,455,119 15,861,741 Total Liabilities 71922,209 91700,794 17,623,003 2013 Business -Type Activities Total $ 4,584,966 $ 11,606,584 $ 16,191,550 14,290,588 12,214,647 26,505,235 18,875,554 23,821,231 42,696,785 29,831 67,151 96,982 537,988 7,671,899 8,209,887 Net Position: Net investment :in capital assets 71753,708 81062,450 15,816,158 71296,541 Restricted 21959,225 - 21959,225 21875,890 Unrestricted 11128,354 61396,554 71524,908 523,067 Total Net Position $ 11,841,287 $ 14,459,004 $ 26,300,291 $ 10,695,498 1,214,889 91063,764 10,278,653 7,230,125 61379,604 $ 13,609,729 $ 1,752,877 16,735,663 8,540 18,48 14,526,666 2,875,890 6,9021671 24,3051227 F�17 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 Statement of Activities: The following table provides a summary of the City's changes ir1 net position: Revenues Program revenues: Charges for services Grants and contributions General revenues: Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Total Revenues For the Year Ended September 30, 2014 Total Governmental Business -Type Primary Activities Activities Government $ 1,572,344 $ 10,565,602 $ 364,763 260,250 2,816,275 1,361,774 229,018 4,316 255,348 6,603,838 For the Year Ended September 30, 2013 Governmental Business -Type Activities Activities 12,137,946 $ 1,564,364 $ 10,553,808 $ 625,013 219,727 - 2,816,275 2,495,024 - 11361,774 11265,031 - 229,018 1671494 - 14,047 18,363 41013 15,630 31,240 286,588 168,618 10, 871,139 17,474,977 Expenses General government 11523,127 11523,127 Public safety 21396,415 21396,415 Public works 11235,621 11235,621 Culture and recreation 714,581 714,581 Interest and fiscal charges 287,657 341,421 629,078 Water, sewer, & electric 81981,091 81981,091 Total Expenses 61157,401 91322,512 15,479,913 Change in Net Position Before Transfers 446,437 11548,627 11995,064 Transfers 699,352 (699,352) - Total 699,352 (699,352) Change in Net Position 1,1451789 849,275 11995,064 Beginning Net Position 10,695,498 13,609,729 24,305,227 51884,271 10,569,438 1,483,872 2,260,904 1,351/685 6811730 3081171 6,086,362 (202,091) 911,278 709,187 9,986,311 Total Primary Government 12,118,172 2191727 2,495,024 11265,031 167,494 19,643 168,618 16,453,709 11483,872 21260,904 1,351,685 - 681,730 177,384 485,555 81933,392 81933,392 91110,776 15,197,138 11458,662 11256,571 (911,278) (911,278) 547,384 11256,571 13,062,345 23,048,656 Ending Net Position $ 11,841,287 $ 14,459,004 $ 26,300,291 $ 10,695,498 $ 13,609,729 $ 24,305,227 11 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 Graphic presentations of selected data from the summary tables are displayed below to assist in the analysis of the City's activities. Governmental Activities -Revenues Propert��taxes AgO4 Grants a contributions ro% Charges for services 24W/o Sales takes �I o/ Franchise and local taxes 3% utnerrevenues 4 /0 For the year ended September 30, 2014, revenues from governmental activities totaled $6,603,838. Property tax, sales tax and charges for services are the City's largest revenue sources. Property tax increased by $321,251 or 13% due to higher property values and an increase in the property tax rate. Sales tax increased $96,743 or 8% due to an overall increase in the economy and spending within the City limits. Grants and contributions increased by $145,036 due to grant revenue received from Denton County for the repair and construction of McReynolds road. All other revenues remained relatively stable when compared to the previous year. This graph shows the governmental function expenses of the City: Governmental Activities -Expenses Public safety 39 General government 25°!° Public works �0°l0 Culture and recreation 11% ......nd fiscal charges 5% 12 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 For the year ended September 30, 2014, expenses for governmental activities totaled $6,157,401. This represents an increase of $71,039 or 1% from the prior year. The City's largest functional expense is public safety of $2,396,415 which includes police, fire and EMS services plus depreciation of related capital assets. All 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, 2014, charges for services by business -type activities totaled $1015651602. This is an increase of $11,794, or less than 1%, from the previous year. Grants increased by $260,250 due to a CDBG grant project for sanitary sewer improvements. Business -Type Activities -Revenues and Expenses ❑ Expenses ® charges for Sen>ices �`fiav ye Total expenses increased $211,736 due primarily to an increase in interest expense on bonds and long- term debt. All other expenses remained relatively consistent. 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 requi firements. 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. As of the end of the year the general fund reflected a total fund balance of $1,236,078. Of this, $7,513 is restricted for municipal court, $24,648 is restricted for tourism and $72,945 is restricted for library improvements. Unassigned fund balance totaled $1,100,802 as of year end. 13 City Ot Sanger, Texas MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued September 30, 2014 There was an increase in governmental fund balance of $139,442 over the prior year. The increase was primarily related to the increase in property and sales tax previously discussed. The City also had a combination of higher than budgeted revenues and an overall positive budget variance for the year. 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 $148,320 in the general fund. This is a combination of a positive a revenue variance of $93,985, a positive expenditure variance of $91,025, and a negative variance of $36,690 in other financing sources and uses. CAPITAL ASSETS As of the end of the year, the City's governmental activities funds had invested $15,020,169 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 $12,430,202 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following; • Construction additions to a splash park totaling of $538,973 • McReynolds road construction in the amount of $310,300 • Freese sidewalk repair and improvements of $230,479 • Machinery and equipment additions for the streets department $530,573 • Jones &Willow Trunl< Line construction of $496,063 • International Digger Truck addition for the electric department of $190,309 More detailed information about the City's capital assets is presented in note IV. C to the financial statements. LONG-TERM DEBT At the end of the current year, the City had total bonds outstanding of $14,010,000, notes payable of $479,210 and capital leases of $779,105. During the year, the City had principal payments on bonds, notes payable and capital leases of $1,503,041. During the year, the City entered into new capital lease agreements totaling $625,309. More detailed information about the City's long-term liabilities is presented in note IV. D to the financial statements. 14 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 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 budgeting for growth in the upcoming year. 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. (This page intentionally left blank.) �� FINANCIAL STATEMENTS 17 (This page intentionally left blank.) City of Sanger, Texas STATEMENT OF NET POSITION September 30, 2014 Primary Government Governmental Business -Type Activities Activities Total Assets Cash and cash equivalents $ 11379,603 $ 1,657,137 $ 31036,740 Investments 410,369 410,852 821,221 Restricted cash 11676,914 71044,030 81720,944 Restricted investments 480,916 579,429 11060,345 Receivables, net 769,606 11550,473 21320,079 Inventory - 429,331 429,331 Capital assets: Non -depreciable 1,323,422 11135,765 21459,187 Net depreciable capital assets 13,696,747 11,294,437 24,991,184 15,020,169 12,430,202 27,450,371 Total Assets 19,737,577 24,101,454 43,839,031 Deferred Outflows of Resources Deferred charge on refunding 25,919 58,344 84,263 Total Deferred Outflows of Resources 25,919 58,344 84,263 Liabilities Accounts payable and accrued liabilities 418,431 840,147 11258,578 Unearned revenue 34,920 - 34,920 Deferred rental revenue 91034 - 91034 Accrued interest payable 53,202 54,034 107,236 Customer deposits - 351,494 351,494 Noncurrent liabilities: Due within one year 880,780 852,856 11733,636 Due in more than one year 61525,842 71602,263 14,128,105 71406,622 8,455,119 15,861,741 Total Liabilities 71922,209 91700,794 17,623,003 Net Position Net investment in capital assets 71753,708 81062,450 15,816,158 Restricted for: Debt service 372,961 - 372,961 Capital projects 550,117 - 550,117 Economic development 11931,041 - 11931,041 Other purposes 105,106 - 105,106 Unrestricted 11128,354 61396,554 71524,908 Total Net Position $ 11,841,287 $ 14,459,004 $ 26,3001291 See Notes to Financial Statements. 19 City of Sanger, Texas STATEMENT OF ACTIVITIES For the Year Ended September 30, 2014 Functions/Programs ............_....... . Primary Government Governmental Activities General government Public safety Public works Culture and recreation Interest and fiscal charges Total Governmental Activities Business -Type Activities Water Sewer Electric Fleet services Utility administration Total Business -Type Activities Total Primary Government See Notes to Financial Statements. Expenses $ 1,523,127 21396,415 1,235,621 714,581 287,657 61157,401 927,386 669,601 6,581,113 101,102 11043,310 91322,512 Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ 856,457 $ 61634 715,887 76,338 11572,344 82,972 11374,672 - 11253,143 - 71937,787 - 10,565,602 - $ 15,479,913 $ 12,137,946 $ 82,972 281,791 281,791 260,250 260,250 542,041 General Revenues: Taxes Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Gain on sale of assets Insurance recoveries Transfers Total General Revenues and Transfers Change in Net Position Begmning Net Position Ending Net Position 20 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -Type Activities Activities Total (11322,399) - (11322,399) (1,235,621) - (11235,621) (714,581) - (714,581) (287,657) - (287,657) (41220,294) - (41220,294) 447,286 447,286 843,792 843,792 11356,674 11356,674 (101,102) (101,102) (11043,310) (11043,310) 11503,340 11503,340 (41220,294) 11503,340 (21716,954) 21816,275 - 21816,275 11361,774 - 11361,774 229,018 - 229,018 41316 14,047 18,363 114,695 31,240 145,935 21,862 - 21,862 118,791 - 118,791 699,352 (699,352) - 51366,083 (654,065) 41712,018 11145,789 849,275 11995,064 10,695,498 13,609,729 24,305,227 $ 11,841,287 $ 14,459,004 $ 26,300,291 21 City of Sanger, Texas BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2014 Total Capital Nonmajor Governmental General Projects Governmental Funds Assets Cash and cash equivalents $ 789,668 $ 419,901 $ 170,034 $ 11379,603 Investments 410,369 - - 410,369 Restricted cash 35,071 - 11641,843 11676,914 Restricted investments 112,731 - 368,185 480,916 Receivables, net 459,377 166,342 143,887 769,606 Due from other funds - - 212,500 212,500 Total Assets $ 11807,216 $ 586,243 $ 2,536,449 $ 4,929,908 Liabilities Accounts payable and accrued liabilities $ 382,287 $ 36,126 $ 18 $ 418,431 Due to other funds - - 212,500 212,500 Unearned revenue 34,920 - - 34,920 Total Liabilities 417,207 36,126 212,518 665,851 Deferred Inflows of Resources Unavailable revenue Property taxes 43,237 - 19,929 63,166 EMS revenue 110,694 - - 110,694 Total Deferred Inflows of Resources 153,931 - 19,929 173,860 Fund Balances Restricted for: Municipal court 71513 - - 71513 Tourism 24,648 - - 24,648 Library 72,945 - - 72,945 Debt service - - 372,961 372,961 Capital projects - 550,117 - 550,117 Economic development - - 1/931,041 1,931,041 Committed for: Employee benefits 30,170 - - 30,170 Unassigned reported in: General fund 1,100,802 - - 1,1001802 Total Fund Balances 1,236,078 550,117 21304,002 41090,197 Total Liabilities and Fund Balances $ 11763,979 $ 586,243 $ 21516,520 $ 41692,882 See Notes to Financial Statements. 22 City of Sanger, Texas RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS September 3u, 2014 Fund Balances -Total Governmental Funds 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 Capital assets -net depreciable Other long-term assets are not available to pay for current -period expenditures and, therefore, are deferred in the governmental funds. Property tax receivable EMS receivable Deferred outflows of resources, represent a consumption of net position that applies to a future period(s) and is not recognized as an outflow of resources (expense) expenditure) until then. Deferred charge on refunding Escalating payments for rent income are recorded when received as current financial resources in the fund financial statements whereas they are deferred and recorded ratably over the life of the lease in the government -wide financial statements. Some liabilities, including bonds payable and deferred charges, are not reported as liabilities in the governmental funds. Accrued interest Bond premium Non -current liabilities due in one year Non -current liabilities due in more than one year See Notes to Financial Statements. Net Position of Governmental Activities $ 4,090,197 1,323,422 13,6961747 63,166 110,694 25,919 (9,034) (53,202) (76,025) (880,780) (6,4491817) 11,8411287 23 City of Sanger, Texas STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For the Year Ended September 30, 2014 Revenues Property tax Sales tax Franchise and local taxes License and permits Charges for services Fire and rescue Contributions and donations Intergovernmental Fines and forfeitures Investment income Other revenue General 2,072,522 682,502 229,018 85,887 770f570 535,916 6,634 76,338 178,884 2,681 5,528 Total Revenues 4,646,480 Expenditures Current: General government Police department Municipal court Fire and EMS Parks and recreation Public works Debt service: Principal Interest Capital outlay Total Expenditures Excess of Revenues Over (Under) Expenditures Other Financine Sources (Uses) Transfers in Transfers (out) Capital lease Proceeds from sale of capital assets Insurance recoveries Total Other Financing Sources (Uses) Net Change in Fund Balances Beginning fund balances Ending Fund Balances See Notes to Financial Statements.. Capital Projects Nonmaj or Governmental Total Governmental Funds $ - $ 745,007 $ 2,817,529 679,272 11361,774 229,018 85,887 770,570 535,916 6,634 281,791 - 358,129 11087 179,971 250 11385 41316 93,680 99,208 282,041 11520,431 61448,952 1,219,171 - 1,153 1,370,481 - - 224,283 - - 802,456 - - 444,774 - - 627,055 - - 99,019 - 612,606 7,977 - 284,762 675,757 1/225,392 - 5,470,973 1/225/392 898/521 (824,493) 836,752 (437,100) 4351000 21,862 1291162 985,676 161,183 1,074,895 (943,351) 437,100 437,100 (506,251) 1,056,368 $ 1,236,078 $ 550,117 621,910 212,500 (349,900) (137,400) 484,510 1,819,492 2,304,002 1,220,324 1,3701461 224,283 8021456 444,774 627,055 711,625 292,739 1,9011149 7,594,886 (1,145,934) 1,486,352 (787,000) 4351000 21,862 1291162 1,285,376 139,442 31950,755 $ 4,090,197 24 City of Sanger, Texas RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2014 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances -total governmental funds 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 xeported as depreciation expense. Capital outlay Capital disposals, net Depreciation expense Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property tax receivable EMS receivable Governmental funds recognize escalating rental income as received. However, in the statement of activities, the rent is deferred and recognized ratably over the term of the lease agreement. 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 Accrued interest The issuance of long-term debt (e.g., b(nds, 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. Amortization of deferred charges on refunding Amortization of premium Debt issued Principal payments See Notes to Fuzancial Statements. Change in Net Position of Governmental Activities $ 139,442 1,901,757 (10,371) (1,1611805) (20,427) 19,173 15,487 (3,912) 7,826 (435,000) 711,625 $ 11145,789 25 City of Sanger, Texas STATEMENT OF NET POSITION PROPRIETARY FUND September 30, 2014 Water, Sewer & Electric Assets Current Assets Cash and cash equivalents $ 11657,137 Investments 410,852 Restricted cash 71044,030 Restricted investments 579,429 Receivables, net 11550,473 Inventory 429,331 Total Current Assets 11,671,252 Noncurrent Assets Capital assets; Non -depreciable 1,135,765 Net depreciable capital assets 11,294,437 Total Noncurrent Assets 12,430,202 Total Assets 24,101,454 Deferred Outflows of Resources Deferred charge on refunding 58,344 Total Deferred Outflows of Resources 58,344 Liabilities Current Liabilities Accounts payable and accrued liabilities 840,147 Accrued interest 54,034 Customer deposits 351,494 Compensated absences -current 71,544 Bonds and capital leases payable -current 781,312 Total Current Liabilities 21098,531 Noncurrent Liabilities Compensated absences 7,949 Bonds and capital leases payable 7,594,314 Total Liabilities 9,700,794 Net Position Net investment in capital assets 8,062,450 Unrestricted 61396,554 Total Net Position $ 14,459,004 See Notes to Financial Statements. City of Sanger, Texas STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND For the Year Ended September 30, 2014 Water, Sewer & Electric Operating Revenues Charges for services $ 10,336,161 Connection fees 50,491 Tap fees 178,950 Other revenue 31,240 Total Operating Revenues 10,5961842 Operating Expenses Salaries and wages 11577,363 Contracted services 197,793 Utilities 317,835 Materials and supplies 105,904 Water and electric purchases 51500,970 Repairs and maintenance 406,955 Depreciation 874,271 Total Operating Expenses 8,981,091 Operating Income 1,615,751 Nonoperatine Revenues (Expenses Intergovernmental 260,250 Investment income 14,047 Interest expense (341,421) Total Nonoperating Revenues (Expenses) (67,124) Income Before Transfers 11548,627 Transfers (out) (699,352) Change in Net Position 849,275 Beginning net position 13,609,729 See Notes to Financial Statements. Ending Net Position $ 14,459,004 27 City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARYFUND (Page 1 of 2) For the Year Ended September 30, 2014 Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Payments to employees Net Cash Provided by Operating Activities Cash Flows from Capital and Related Financing Activities Capital purchases Capital grant Principal paid on debt Interest paid on debt Net Cash (Used) by Capital and Related Financing Activities Cash Flows from Investing; Activities Proceeds from sales and maturities of investments Interest on investments Net Cash Provided by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Beginning cash and cash equivalents Ending Cash and Cash Equivalents See Notes to Financial Statements. Water, Sewer & Electric $ 10,531,006 (61535,623) (11548,514) 21446,869 (899,517) 260,250 (791,416) (332,049) (11762,732) 584,938 14,047 598,985 583,770 8,117,397 $ 81701,167 City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 2 o f 21 For the Year Ended September 30, 2014 Water, Sewer & Electric Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income $ 1,615,751 Adjustments to reconcile operating income to net cash provided: Depreciation 874,271 Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts receivable (83,474) Inventory 17,638 Increase (Decrease) in: Accounts payable and accrued liabilities (61166) Customer deposits 13,891 Compensated absences 14,958 Net Cash Provided by Operating Activities $ 2/446/869 Schedule of Non -Cash Capital and Related Financing Activities Capital lease $ 190,309 See Notes to Financial Statements. 29 (This page intentionally left blank.) 30 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS September 30, 2014 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 1886 and operates under aCouncil- Manager form of government. The City provides: general government, public safety, public works, culture and recreation, water and sewer operations 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 City's 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 City's 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 City's 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 overrid ng elements associated with prescribed criteria considered in determining that the City's 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. 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 entity's financial statements to be misleading or incomplete. 31 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Blended Component Units Sanger Industrial Development Corporation (4A) The Sanger Texas Industrial Development Corporation ("4A fund") 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. Sanger Texas Development Corporation (4B) The Sanger Texas Development Corporation ("4B fund") 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 413 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. 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 colurnn 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 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, including its blended component units. 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. 32 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 goveriunent, public safety, parks and recreation and public works. Capital Projects Fund The capital projects fund is used to account for funds received and expended for the construction and renovation of thoroughfares, arterial streets and drainage improvements in the City and construction, renovation, expansion and major improvement of various City facilities, acquisition of land and other large nonrecurring projects. 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. 33 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. 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 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 inncluded 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. 1n fund financial statements these amounts are reported at gross amounts as transfers is/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 usnng 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. 34 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 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 goveriunental 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, uuluding 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 net, 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 a�zd External Investment Pools, the City reports all investments at fair value, except for "money market investments" and "2a74ike 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 35 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. 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. 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. 3. 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. 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. 36 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 4. 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 first-in/first-out method. Certain payments to vendors reflect costs applicable to future accounting periods (prepaid expenditures) are recognized as expenditures when utilized. 5. 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. 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. Estimated Asset Description 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 540 years 6. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position �n�ill 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 periods) and so will aiot be recognized as an outflow of resources (expense/ expenditure) until then. An example is a deferred charge on refunding reported in the government -wide 37 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. 7. Net Position Flow Assumption Sometimes the goverrunent 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 flow assumption must be made about the order in which the resources are considered to be applied. 8. 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. 9. 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). City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 -malting 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 subsequent 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. 10. 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 City's policy to liquidate compensated absences with future revenues rather than with currently available expendable resources. Accordingly, the City's governmental funds recognize accrued compensated absences when it is paid. 11. 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 39 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 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. 12. 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. 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. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 AtuZual 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 budgeted item without Council approval. Appropriations lapse at the end of the year. Several supplemental budget appropriations were made during the year. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments As of September 30, 2014, the primary government had the following investments: Investment Type Fair Value Certificates of deposit $ 1,881,566 Averae Maturity 0.41 Portfolio weighted average maturity 0.41 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. GPI City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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, 2014, 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 Sales tax Franchise & local taxes EMS Accounts Other Allowance General $ 76,788 103,535 35,780 316,269 97,366 74,826 (245,187) $ 459,377 Capital Projects 166,342 $ 166,342 Nonmajor Water, Sewer Governmental &Electric Total $ 31,831 $ - $ 108,619 123,201 - 226,736 35,780 316,269 11500,809 11598,175 156,759 397,927 (11,145) (107,095) (363,427) $ 143,887 $ 11550,473 $ 2,320,079 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 C. Capital Assets A summary of changes in governmental activities capital assets for the year end was as follows: Capital assets, not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets, being depreciated: Infrastructure Buildings and improvements Machinery and equipment Total capital assets being depreciated Less accumulated depreciation Infrastructure Buildings and improvements Machinery and equipment Total accumulated depreciation Net capital assets being depreciated Total Capital Assets Beginning Balances Increases $ 906,307 $ 42,771 11225,392 949,078 11225,392 10,919,425 43,800 71074,483 37,598 21510,199 594,967 20,504,107 676,365 41509,453 553,897 11040,663 317,800 11612,481 290,108 71162,597 11161,805 13,341,510 (485,440) $ 14,290,588 $ 739,952 Decreases/ Reclassifications (851,048) (851,048) 851,048 (67,184) (290,189) 493,675 (58,384) (288,618) (347,002) 840,677 Ending Balances $ 906,307 417,115 11323,422 11,814,273 71044,897 21814,977 21,674,147 5,063,350 1,300,099 11613,971 71977,400 13,696,747 $ (10,371) $ 15,020,169 Depreciation was charged to governmental functions as follows: General government Public safety Streets and sanitation Fire and rescue Culture and recreation Total Governmental Activities Depreciation Expense 0 74,818 95,050 603,318 116,452 272,167 $ 1,161,805 43 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 A summary of changes in business -type activities capital assets for the year end was as follows: Beginning Balances Capital assets, not being depreciated: Land $ 323,164 Construction in progress 132,305 Total capital assets not being depreciated 455,469 Capital assets, being depreciated: Infrastructure 22,458,123 Buildings and improvements 860,133 Machinery and equipment 11664,835 Total capital assets being depreciated 241983,091 Less accumulated depreciation Infrastructure 11,663,158 Buildings and improvements 269,043 Machinery and equipment 1,291,712 Total accumulated depreciation 13,223,913 Increases 763,214 763,214 58,100 13,524 254,988 326,612 695,765 55,227 123,279 874,271 Decreases/ Reclassifications (82,918) (82,918) 28,448 (8,412) (231,337) (211,301) (54,470) (81412) (231,337) (294,219) Net capital assets being depreciated 11,759,178 (547,659) 82,918 Total Capital Assets $ 12,214,647 $ 215,555 $ - Depreciation was charged to business -type activities as follows: Water $ 280,161 Sewer 237,716 Electric 338,542 Other 17,852 Total Business -type Activities Depreciation Expense $ 874,271 D. Long-term Debt Ending Balances $ 323,164 812,601 11135,765 22,544,671 865,245 11688,486 25,098,402 12,304,453 315,858 11183,654 13,803,965 11,294,437 $ 12,430,202 The following is a summary of changes in the City's total governmental long-term liabilities for the year ended, In general, the City uses the debt service fund to liquidate governmental long4erm liabilities. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Governmental Activities: Bonds, notes and other payables: General Obligation Bonds Certificates of Obligation Less deferred amounts: For issuance premiums Other liabilities: Notes payable Capital leases payable Compensated absences Total Governmental Activities Beginning Balance Additions Reductions $ 11331,000 $ - $ (176,000) 51407,800 - (399,000) 83,851 - (71826) 61822,651 - (582,826) 516,816 2371364 95,068 $ 7,671,899 Long-term liabilities due in more than one year Business -Type Activities: General Obligation Bonds Certificates of Obligation Less deferred amounts: For issuance premiums Other liabilities: Capital leases payable Compensated absences Total Business -Type Activities 435,000 1031202 $ 538,202 (37, 606) (99,019) (84,028) $ (803,479) 6,787,200 - (411,000) 346,162 - (22,496) 81827,362 - (657,496) 171,867 190,309 (156,416) 64,535 76,134 (61,176) $ 91063,764 $ 266,443 $ (875,088) Long-term liabilities due in more than one year Amounts Ending Due within Balance One Year $ 11155,000 $ 182/600 51008,800 412/700 76,025 - 61239,825 595,300 479,210 40,093 573,345 142,569 114,242 102,818 $ 7/406,622 $ 880,780 $ 61525,842 $ 11470,000 $ 232/400 61376,200 432,300 323,666 - 81169,866 664,700 205,760 116,612 79,493 71,544 $ 8,455,119 $ 852,856 $ 7,602,263 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. 45 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Long-term debt at year end was comprised of the following debt issues: Business - Governmental Type Activities Activities Total General Obligation Bonds; $3,495,000 General Obligation Refunding Bond, Series 2012, due in installments through 2021, interest at 2% to 3% $ 11155,000 $ 11470,000 $ 21625,000 Total General Obligation Bonds $ 11155,000 $ 11470,000 $ 21625,000 Certificates of Obligation: $6,500,000 Certificates of Obligation, Series 2006, due in annual installments through 2021, interest at 4% to 5% $ 1,6161900 $ 1,898,100 $ 31515,000 $1,750,000 Certificates of Obligation, Series 2007, due in annual installments through 2027, interest at 4.4% 443,700 861,300 11305,000 $3,200,000 Certificates of Obligation, Series 2009, due in annual installments through 2026, interest at 3% to 4.75% 2,455,000 - 21455,000 $4,260,000 Certificates of Obligation, Series 2013, due in annual installments through 2033, interest at 2% to 3.7% 493,200 3,616,800 41110,000 Total Certificates of Obligation $ 5,008,800 $ 61376,200 $ 11,385,000 Less deferred amounts: Issuance premium $ 76,025 $ 323,666 $ 399,691 Total Deferred Amounts $ 76,025 $ 323,666 $ 399,691 Notes Payable: $660,000 Notes payable to a financial institution, due in monthly installments of $5,106 through June 2024, including interest at 4.6% $ 479,210 $ - $ 479,210 Total Notes Payable $ 479,210 $ - $ 479,210 Capital Leases Payable: $807,573 Capital lease payable to financial institution, due in annual installments of $104,454 through 2015, interest at 1.77% $ - $ 70,492 $ 70,492 $340,119 Capital lease payable to financial institution, due in annual installments of $106,996 through 2016, interest at 3.3% 138,345 - 138,345 $190,309 Capital lease payable to financial institution, due in annual installments of $50,235 through 2017, interest at 2.89% - 135,268 135,268 $435,000 Capital lease payable to financial institution, due in annual installments of $51,535 through 2024, interest at 3.346% 435,000 - 435,000 Total Capital Leases Payable $ 573,345 $ 205,760 $ 779,105 Compensated Absences Total Long-term Liabilities 114,242 $ 7,406,622 79,493 $ 8,455,119 193,735 $ 15,861,741 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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, 2015 2016 2017 2018 2019 2020 2021 Governmental Activities Business -Type Activities Principal Interest Principal Interest 43 $ 182,600 184,800 154,000 156,200 162,800 169,400 145,200 $ 11155,000 31,614 $ 27,962 22,418 17,798 13,112 8,228 3,993 232,400 235,200 196,000 198,800 207,200 215,600 184,800 $ 125,125 $ 1,470,000 Combination Tax and Revenue Certificates of Obligations Year ending September 30, Governmental Activities Principal Interest 2015 $ 412,700 210,315 194,926 1761803 1591199 140,888 1211729 1011706 791919 68,258 55,768 42,686 28,194 13,024 9,768 8,400 6,870 5,280 3,600 1,830 $ 40,236 35,588 28,532 22,652 16,688 10,472 5,082 $ 159,250 Business -Type Activities Principal Interest $ 432,300 $ 258,053 446,400 243,467 467,600 225,820 480,100 209,883 494,200 192,630 515,400 174,794 533,900 155,364 236,500 135,067 248,600 127,002 253,000 118,527 260,700 109,019 276,100 97,363 288,200 85,021 211,200 71,632 224,400 61,600 233,200 50,380 246,400 38,720 259,600 26,400 268,400 13,420 $ 1,4291162 $ 61376,200 $ 21394,161 ��J City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. Capital Lease Year ending September 30, 2015 2016 2017 2018 Governmental Activities Principal 142 $ ,569 $ 74,090 39,606 40,931 2019 42,301 2020 43,716 2021 45,179 2022 46,690 2023 48,252 2024 50,011 $ 573,345 Interest 15,962 $ 14,392 11,930 10,604 9,235 7,819 6,357 4,845 3,283 1,668 $ 86,095 Business -Type Activities Principal 116,612 47,452 41,696 $ 205,760 Interest 9 $ ,088 2,783 1,411 The City has entered into capital lease agreements. The leased property under capital leases is classified as machinery and equipment with a total capitalized cost of approximately $1,773,001 as of year end. Note Payable Year ending September 30, 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Governmental Activities Principal Interest $ 40,093 $ 21,174 41,977 19,290 43,949 17,318 46,014 15,253 48,176 13,091 50,439 52,809 55,290 57,887 42,576 $ 479,210 10,828 458 8, 5,977 3,380 4,063 $ 118,832 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 E. Conduit Debt The City issued notes payable totaling $230,461,407 for the purpose of assisting with financing needed by not -for -profit organizations to promote their cause. Final maturities on notes payable range from March 2017 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 Uy the borrowers. Accordingly, the bonds are not reported as liabilities in the City's financial statements. F. Deferred Charge on Refunding A deferred charge resulting from the issuance of the 2012 general obligation refunding bonds has been recorded as a deferred outflow of resources and is being amortized to interest expense over the term of the refunded debt. Current year balances for governmental and busmessAtype activities totaled $25,919 and $58,344, respectively. Current year amortization expense for governmental and businessAtype activities totaled $3,912 and $8,807, respectively. G. Interfund Transactions The compositions of interfund balances as of year end were as follows: Funds _ Debt Service: 4B Fund $ 4B Fund Debt Service Due from 212,500 $ $ 212,500 $ Due to 212,500 212,500 Amounts recorded as "due to/from" are considered to be temporary loans and will be repaid during the following year. C� City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Transfer out: General Nonmajor Governmental Water, Sewer & Electric General 137,400 699,352 $ 836,752 Transfer In Capital Projects $ 437,100 $ 437,100 Nonmajor Governmental 212,500 $ 212,500 Total $ 437,100 349,900 699,352 $ 11486,352 Amounts transferred between funds relate to amounts collected, various capital expenditures, annual funding, and debt payments. H. Fund Equity The City records restricted net position on amounts with externally imposed restrictions (e.g., through debt covenants or by grantors) or restrictions imposed by law through constitutional provisions or enabling legislation. Total restricted net position for the primary government was $2,959,225. Of which, $32,161 is restricted by enabling legislation. 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 2,617 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 premiums, The City has not significantly reduced insurance f the payment of 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. 50 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 C. Construction cornmitmen ta The government has active construction projects as of September 30, 2014. 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 Sewer Line 15" Chapman to Belz West Side I35 WL Ext-Chapman to Belz Sewer Line 18" South of Utility Sewer Line 15" Utility to Lois Sewer Line 12" Lois to View WL Lois to View McReynolds Road New Sewer Plant Server Consolidation Jones & Willow Truck Line - CDBG Jones & Willow Truck Line - CDBG Remaining Vendor Commitment Pacheco Koch Pacheco Koch Pacheco Koch Pacheco Koch Pacheco Koch Pacheco Koch Total Water/WW Lines Pacheco Koch Alan Plummer Austin Lane Teague Nall & Perkins Gr mtworks Total CDBG 1,694 34,668 32,278 19,780 23,416 128,478 127,619 867,777 26,063 9,637 2,950 1,034,046 Total $ 1,162,523 51 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 D. Rental Income On Marchthe City entered into a non -cancelable lease agreement with a corporation of which a city council member is a principal member of management. The leased property is owned by the 4A Fund and has a cost $1,083,797 with accumulated depreciation of $176,425 as of September 30, 2014. The lease provides for a base rent and an adjustment each year related to excess operating expenses (if any) incurred annually. During the year ended September 30, 2014, the City received $78,667 in rental revenue. Minimum future rentals on non -cancelable tenant operating leases at September 30, 2014 are $45,889. This represents the total rentals for the 2015 fiscal year, which is the final year of the lease agreement. E. 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. F. Pension Plans 1. Texas Municipal Retirement Systems Plan Description The City provides pension benefits for all of its eligible employees through a non- traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (RS), an agent multiple -employer publi TMc employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. TMRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contributions, benefits and actuarial methods and assumptions used by the System. This report may be obtained by writing to TMRS, P.O. Box 52 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 149153, Austin, TX 78714-9153 or by calling 800-924-8677; in addition, the report is available on TMRS' website at www.TMRS.com. The plan provisions are adopted by the governing body of the City, wn the options available in the state statutes governing TMRS. Plan provisions for the City were as follows: Employee deposit rate Matching ratio (city to employee) Years required for vesting Service retirement eligibility (expressed as age / years of service) Updated service credit Annuity increase (to retirees) Contributions Plan Year 2013 6.0% 2to1 60/5, 0/20 100%Repeating Transfers 0% of CPI Plan Year 2014 6.0% 2to1 5 60/5, 0/20 100% Repeating Transfers 0% of CPI Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the City make contributions monthly. Since the City needs to kt1ow its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation/ (asset) are as follows: Three -Year Contribution Information Annual Pension Cost (ARC) Actual Contributions Made Percentage of APC Contributed Net Pension Obligation/Asset NPO at the End of Period 2014 2013 2012 $ 210,201 $ 196,672 $ 191,163 $ 210,201 $ 196,672 $ 191,163 100% 100% 100% 53 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 The required contribution rates for fiscal year 2014 were determined as part of the December 31, 2011 and 2012 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2013, also follows: Valuation Date 12/31/2011 Actuarial Cost Method Projected Unit Credit Amortization Method Level Percent of Payroll GASB 25 Equivalent Single 21.8 years; closed Amortization Period period Amortization Period for new 25 years Gains/Losses Asset Valuation Method 10-year Smoothed Market Actuarial Assumptions; Investment Rate of Return Projected Salary Increases * Varies by age and service * Includes Inflation at 3.00% Cost -of -Living Adjustments 0.0% 12/31/2012 Projected Unit Credit Level Percent of Payroll 21.1 years; closed period 25 years 10-year Smoothed Market Varies by age and service 3.00% 0.0% 12/31/2013 Entry Age Normal Level Percent of Payroll 30 years; closed period 25 years 10-year Smoothed Market Varies by age and service 3.00% 0.0% The funded status as of December 31, 2013, the most recent actuarial valuation date, is as follows: Actuarial Valuation Date 12/31/2013 Actuarial Value of Assets $ 5,783,587 Actuarial Accrued Liability $ 61740,172 Percentage Funded 85.8% Annual Covered Payroll $ 2,928,323 Unfunded Actuarial Accrued Liability$ (956,585) (UAAL) % of Covered Payroll (32.7)% Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation, and reflect along -term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 value of assets. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. Supplemental Death Benefits Plan 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 all ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides alump-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. The City's retiree contribution rates to the TMIZS SDBF for the years ended 2013, 2012 and 2011 are as follows. Plan/ Calendar Year 2012 2013 2014 Annual Required Contribution (Rate) 0.01% 0.01% 0.01% Actual Contribution Made (Rate) 0.01 % 0.01 % 0.01 % Percentage of ARC Contributed 100.0% 100.0% 100.0% The City's contributions to the TMRS SDBF for the years ended 2014, 2013 and 2012 were $306, $293 and $263, respectively, which equaled the required contributions each year. 55 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 G. Restatement The City has restated beginning net position within governmental activities, business -type activities, and water/sewer/electric funds due to a change in the amortization of bond discounts and premiums, The restatement of beginning net position is as follows: Governmental Activities Prior year ending net position as reported $ 10,725,976 Change in bond discount and premium amortization (30,478) Restated beginning net position $ 10,695,498 Prior year ending net position as reported Change in bond discount and premium amortization Restated beginning net position H. Subsequent Events Business -Type Water, Sewer & Activities Electric $ 13,641,820 $ 13,641,820 (32,091) $ (32,091) There were no material subsequent events through February 26, 2015, the date the financial statements were issued, 56 REQUIRED S UPPLEMENTARY INFORMATION ��� (This page intentionally left blank.) City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES INFUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND For the Year Ended September 30, 2014 Revenues Property tax Sales tax Franchise and local taxes License and permits Charges for services Fire and rescue Contributions and donations Intergovernmental Fines and forfeitures Investment income Other revenue 0 Original Budget 2 ,085,500 653,000 184,600 107f900 808,000 460,000 36,000 1651000 2,500 Final Budget 2,085,500 6531000 1841600 1071900 8081000 4601000 851995 1651000 2,500 Total Revenues 4,502,500 4,552,495 Expenditures Current: General government Police department Municipal court Fire and EMS Parks and recreation Public works Debt service: Principal Interest Capital outlay Total Expenditures Revenues Over (Under) Expenditures Other Financing Sources (Uses) Transfers in Transfers (out) Capital lease Proceeds from sale of capital assets Insurance recoveries Total Other Financing Sources Net Change in Fund Balance Beginning fund balance Ending Fund Balance Variance with Final Budget Positive Actual (Negative) $ 21072,522 $ (12,978) 682,502 29,502 229,018 44,418 85,887 (22,013) 770,570 (37,430) 535,916 75,916 61634 61634 76,338 (91657) 178,884 13,884 2,681 181 51528 51528 41646,480 93,985 11236,719 11223,948 11219,171 41777 11307, 651 11375,173 113 70, 481 41692 213,384 224,693 224,283 410 841,652 814,810 802,456 12,354 575,383 493,974 444,774 49,200 912,421 631,766 627,055 41711 99,020 99,020 99,019 1 71980 71980 71977 3 161,650 690,634 675,757 14,877 51355,860 51561,998 51470,973 91,025 (853,360) (1,009,503) (824,493) 185,010 873,400 873,400 $ 20,040 $ Notes to Required Supplementary Information 873,400 (387,100) 4351000 1011066 1,0221366 836,752 (437,100) 4351000 21,862 1291162 985,676 12,863 161,183 1,074,895 $ 11236,078 (36,648) (50,000) 86 21,2 28,096 (36,690) $ 148,320 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). 59 (This page intentionally left blank.) City of Sanger, Texas SCHEDULE OF FUNDING PROGRESS - TEXAS MUNICIPAL RETIREMENT SYSTEM The City's annual covered payroll and pension costs are actuarially valued on a calendar year basis. Because the City makes all the annually required contributions, no net pension obligation (NPO) exists. The information presented below represents the City's Schedule of Funding Progress. Actuarial Valuation Date Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Unfunded Actuarial Accrued Liability Annual Covered Payroll Unfunded Actuarial Accrued Liability (UAAL) % of Covered Payroll Net Pension Obligation (NPO) at the Beginning of Period Annual Req. Contrib. (ARC) Contributions Made 12/31/2013 12/31/2012 12/31/2011 $ 51783,587 $ 51179,812 $ 41691,607 $ 61740,172 $ 51465,145 $ 5,1221534 85.8% 94.8% 91.6% $ 956,585 $ 285,333 $ 430,927 $ 21928,323 $ 21626,335 $ 21662,684 32.7% 10.9% 16.2% $ 210,201 $ 196,672 $ 191,163 $ 210,201 $ 196,672 $ 191,163 NPO at the End of Period $ - 61 City of Sanger, Texas COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2014 Total Nonmaj or Debt Service 4A Fund 4B Fund Governmental Assets Cash and cash equivalents $ 103,024 $ 52,367 $ 14,643 $ 170,034 Restricted cash 56,680 11028,976 556,187 11641,843 Restricted investments - 93,765 274,420 368,185 Receivables, net 20,686 71,434 51,767 143,887 Due from other funds 212,500 - - 212,500 Total Assets $ 392,890 $ 1,246,542 $ 897,017 $ 21536,449 Liabilities Accounts payable and accrued liabilities $ - $ 18 $ - $ 18 Due to other funds - - 212,500 212,500 Total Liabilities - 18 212,500 212,518 Deferred Inflows of Resources Unavailable revenue Property taxes 19,929 - - 19,929 Total Deferred Inflows of Resources 19,929 - - 19,929 Fund Balances Restricted for: Debt service 372,961 - - 372,961 Economic development - 11246,524 684,517 11931,041 Total Fund Balances 372,961 11246,524 684,517 21304,002 Total Liabilities and Fund Balances $ 392,890 $ 11246,542 $ 897,017 $ 21536,449 62 City of Sanger, Texas COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2014 Revenues Property tax Sales tax Fines and forfeitures Investment income Other revenue Total Revenues Expenditures Current: General government Debt service: Principal Interest Total Expenditures Excess of Revenues Over (Under) Expenditures Other Financing Sources (Uses) Transfers in Transfers (out) Total Other Financing Sources (Uses) Net Change in Fund Balances Beginning fund balances Ending Fund Balances Debt Service 4A Fund $ 745,007 $ - 339,636 1,087 113 - 13 88,667 745,133 429,390 1,135 18 575,000 37,606 261,101 23,661 837,236 61,285 (92,103) 368,105 212,500 - (107,000) (15,200) 105,500 (15,200) 13,397 352,905 359,564 893,619 $ 372,961 $ 11246,524 $ 4B Fund 339,636 1,272 5,000 345,908 345,908 (227,700) (227,700) 1181208 566,309 684,517 Total Nonmaj or Governmental $ 745,007 679,272 1,087 1,385 93,680 11520,431 1,153 612,606 284,762 898,521 621,910 212,500 (349,900) (137,400) 484,510 11819,492 $ 21304,002 63 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, 2014 Water Sewer Electric Fleet Services Operating Revenues Charges for services $ 11294,722 $ 11154,143 $ 71887,296 $ - Connection fees - - 50,491 - Tap fees 79,950 99,000 - - Otherrevenue - - - - Total Operating Revenues 1,374,672 11253,143 71937,787 - Operating Expenses Salaries and wages 286,529 145,542 529,171 74,420 Contracted services 12,669 28,739 43,178 41121 Utilities 126,025 163,590 91386 71796 Materials and supplies 22,705 15,254 40,892 61930 Water and electric purchases 53,243 - 51447,727 - Repairs and maintenance 146,054 78,760 172,217 61623 Depreciation 280,161 237,716 338,542 11212 Total Operating Expenses 927,386 6691601 61581,113 101,102 Operating Income 447,286 583,542 11356,674 (101,102) Nonoperating Revenues (Expenses) Intergovernmental - 260,250 - - Investment income - - - - Interest expense - - - - Nonoperating Revenues (Expenses) - 260,250 - - Income Before Transfers 447,286 843,792 11356,674 (101,102) Transfers (out) - - (393,352) - Change in Net Position $ 447,286 $ 843,792 $ 963,322 $ (101,102) Administration Total $ - $ 10,336,161 50,491 178,950 31,240 31,240 31,240 10,596,842 541,701 11577,363 109,086 197,793 11,038 317,835 20,123 105,904 51500,970 31301 406,955 16,640 874,271 701,889 81981,091 (670,649) 1,6151751 260f250 14,047 14,047 (341,421) (341,421) (327,374) (67,124) (998,023) 1,548,627 (306,000) (699,352) $ (11304,023) $ 849,275 65 (This page intentionally left blank.) OFFICIAL STATEMENT Dated: October 19, 2015 NEW ISSUE: Book -Entry -Only Ratings: S&P Insured "AA" (stable outlook) Moody's: Insured "AT' (stable outlook) Moody's: Underlying "A2" (See "RATINGS" herein) In the opinion of Bond Counsel, interest on the Certificates is excludable from gross Income for federal income tax purposes under existing lain, subject to the matters described under "TAX MATTERS" herein, and is not includable in the alternative ntinlnnun loxable income of individuals. See "TAX MA7T'ERS" fot• a discussion of the opinion of Bond Counsel, including the alternative ntinlmton tax consequences for corporations. THE CERTIFICATES WILL BE DESIGNATED AS "OUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. Dated Date: November 1, 2015 $5,870,000 CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 Due: November 15, as shown on inside cover Interest on the $5,870,000 City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), will accrue from their delivery date to the underwriters listed below (the "Underwriters") and will be payable May 15 and November 15 of each year, commencing on May 15, 2016. The Certificates will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal of the Certificates 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 BOKF, NA, Austin, Texas. The Certificates 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 Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. ASSURED GU LImno MUNICIPAL The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by ASSURED GUARANTY MUNICIPAL CORP. Proceeds from the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) the rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. The Certificates maturing on and after November 15, 2026, are subject to optional redemption in whole or in part on November 15, 2025, or on any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest as more fully described herein. Additionally, the Certificates maturing on November 15, 2035 are subject to mandatory sinking fund redemption prior to maturity as described herein. See "THE CERTIFICATES — Optional Redemption" and "—Mandatory Redemption" herein. The Certificates will constitute direct obligations of the City of Sanger, Texas (the "City"), payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed bylaw, and from a limited subordinate pledge (not to exceed $10,000) of surplus net revenues of the City water and sewer system as provided in the ordinance authorizing the Certificates. See Principal Amounts, Maturities, Interest Rates, and Prices on the Inside Cover Page The Certifrcates are offered when, as and if issued, subject to the approval of legality by the Attot•ney General of the State of Texas and �YlcGtrire �I<oods LLP, Bond Counsel, Houston, Texas. Certain /ega! matters will be passed upon for• the Underrvritet•s by their counsel, Norton Rose Fulbright US LLP, Houston, Texas. The Certificates are expected to be available fw deliver} to the Underwriters through DTC on or about November 12, 2015. OPPENHEIMER & CO. WILLIAM BLAIR MATURITY SCHEDULE $5,870,000 Combination Tax and Revenue Certificates of Obligation, Sel ies 2015 Maturity (November 15) �n> 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 $49195,000 Serial Certificates Principal Amount $1005000 $115,000 $115,000 $110,000 $180,000 $2955000 $285,000 $2905000 $300,000 $310,000 $3205000 $3305000 $340,000 $355,000 $370,000 $380,000 Interest Rate 2.000% 2.000% 2.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.000% 3.250% 3.500% 3.500% 3.750% 3.750% 3.750% Initial Id/Price(b) 0.650% 1.000% 1.150% 1.300% 1.500% 1.700% 1.900% 2.050% 2.100% 2.200% 2.300% 2.450% 2.550% 2.650% 2.750% 2.850% CUSIPt`� 800876 ES9 800876 ET7 800876 EU4 800876 EV2 800876 EWO 800876 EX8 800876 EY6 800876 ED 800876 FA7 800876 FB5 800876 FC3 800876 FD1 800876 FE9 800876 FF6 800876 FG4 800876 FH2 $1,G75,000 3.750%Term Certificates due November 15, 2035, Yield 3.300%CUSIP No. 80087G rICSt°)lW(`)(d) (a) The Certificates maturing on and after November I5, 2026, are subject to optional redemption, in whole or in part, on November 15, 2025, 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. (See "THE CERTIFICATES - Optional Redemption"). (b) The initial yields and prices are established by, and are the sole responsibility of the Underwriters and may subsequently be changed. (c) 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. (d) Subject to mandatory redemption in the years and in the amounts set forth hereunder under the caption "THE CERTIFICATES - Mandatory Redemption". CITY OF SANDER, TEXAS CITY COUNCIL Thomas Muir Mayor Russell Martin Councilmember, Place 1 Gary Bilyeu Councilmember, Place 2 William Boutwell Councilmember•, Place 3 Allen Chick Councilmember, Place 4 David Clark Councilmember, Place 5 ADMINISTRATIVE OFFICERS Mike Brice City Manager• Tami Taber City Secretary Robert L. Dillard III, Esq. City Attorney Nichols Jackson Dillard Hagar & Smith Dallas, Texas CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS McGuireWoods LLP, Houston, Texas BrooksCardiel, PLLC, The Woodlands, Texas Government Capital Securities Corporation, Southlake, Texas For additional information regarding the City, please contact; Mike Brice City Manager City of Sanger, Texas P.O. Box 1729 Sanger, Texas 76266 (940)458-7930 mbrice@sangertexas.org Bond Counsel Independent Auditor Financial Advisor Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817) 72M239 tchristensen@govcapsecurities.com govcapsecurities.com i USL 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 unlau ful 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 CERTIFICATES ARE EXEMPTED FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE CERTIFICATES IN ACCORDANCE YVITH 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 YT'HICH STABILIZE THE MARKET PRICE OF THE CERTIFICATES 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 Certificates 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 Certificates is to be construed as constituting an agreement with the purchasers of the Certificates. 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 inchision in this Official Statement. The Undempriters 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 Imas 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 Undeiwiditers 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-Enby-Only System. Assured Guaranty Municipal Corp. ("A GAP) makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, AGAI has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrorn, other than with respect to the accuracy of the information regarding AGM supplied by AGAI and presented under the heading "Bond Insurance " and "Appendix E - Specimen Municipal Bond Insurance Policy". ii TABLE OF CONTENTS BOND INSURANCE........................................................ iv SUMMARY STATEMENT......ease ease ............. boosted .... Diseases vi SELECTED FINANCIAL INFORMATION ..................viii INTRODUCTORY STATEMENT....................................1 THE CERTIFICATES........................................................1 Purpose..................................................................1 Authorization......................................................... I Security for the Certificates...................................1 Optional Redemption.............................................2 Mandatory Redemption.........................................2 Notice of Redemption............................................2 Sources and Uses of Funds....................................3 GENERAL INFORMATION REGARDING THE CERTIFICATES.. P444 mesa sees 66664644 boom & 3 General Description ............................................... 3 Legality.........•....•.........•......•..................................3 Defeasance.............................................................4 Amendments to the Ordinance...............................4 OWNERSHIP..................................................................... 4 OWNER'S REMEDIES.....................................................5 BOOK -ENTRY -ONLY SYSTEM ..................................... 5 REGISTRATION, TRANSFER AND EXCHANGE.........7 Paying Agent/Registrar..........................................7 Future Registration...............•....,..,..,,..,,.........,......8 Record Date for Interest Payment .......................... 8 Limitation on Transfer of Certificates ...................8 Replacement of Certificates ................................... 8 TAX INFORMATION......................................................0 9 Summary of Certain Provisions of the Property Tax Code, . & 0 0 0 0 & 0 0 8 0 0 & a 0 0 0 0 0 9 0 0 0 9 0 4 9 9 9 9 0 1 1 0 0 8 0 0 4 8 1 0 9 9 Effective Tax Rate and Rollback Tax Rate, .........11 Property Assessment and Tax Payment............... 12 Penalties and Interest...........................................12 City Application of Property Tax Code ...............12 Municipal Sales Tax............................................13 TAX RATE LIMITATIONS.. @Moe ease llama * P 0 4 4 4 1 0 0 0 4 P 0 0 P 4 a 9 9 4 a 0 9 9 0 4 a P 9 13 RETIREMENT PLAN ..................................................... 13 INVESTMENT POLICIES, . 4 0 0 a P 0 0 0 P B a * 9 a a * 9 a a a 0 a 0 6 a a a a 0 0 a a 9 9 9 9 0 6 a a a 0 a a 14 Accounting Principles Generally Accepted in the United States.............................................14 Legal Investments................................................14 Investment Policies. 0 1 0 0 0 0 0 9 4 0 9 4 0 0 4 4 9 9 4 9 0 4 4 4 q q 0 q 0 0 0 0 a 0 0 6 0 0 a a 0 15 Additional Provisions...........................................15 Current Investments.............................................16 RATINGS........................................................................ 16 PENDING LITIGATION.......... assesses Good sees assesses 6666046664 so its 16 LEGAL MATTERS......................................................... 16 TAX MATTERS.............................................................. 17 TaxExemption.....................................................17 Proposed Tax Legislation....................................18 TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES ...... 18 Discount Certificates............................................18 Premium Certificates...........................................19 QUALIFIED TAX-EXEMPT OBLIGATIONS.. 19 LEGAL INVESTMENTS IN TEXAS ............................. 20 REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE......................ease sees *too ................lee 20 CONTINUING DISCLOSURE OF INFORMATION..... 20 Annual Reports ...................................................# 20 Material Event Notices........................................21 Limitations and Amendments..............................21 Compliance with Prior Undertakings ...................22 FINANCIAL ADVISOR...... 004#00a44440 @moo pass Dome 22 UNDERWRITING .............................. asses, ....,.................. 22 CONCLUDING STATEMENT,..... Dow@ 966s4pppdadd 6600 assesses bases 22 Financial Information Regarding the City of Sanger, Texas General Information Regarding the City of Sanger, Texas Form of Opinion of Bond Counsel Audited Financial Statements for the Fiscal Year Ended September 30, 2014 Specimen Municipal Bond Insurance Policy Appendix A Appendix B Appendix C Appendix D Appendix E iii BONDINSURANCE BOND INSURANCE POLICY Concurrently with the issuance of the Certificates, Assured Guaranty Municipal Corp. ("AGM") will issue its Municipal Bond Insurance Policy for the Certificates (the "Policy"). The Policy guarantees the scheduled payment of principal of and interest on the Certificates when due as set forth in the form of the Policy included as an exhibit to this Official Statement, The Policy is not covered by any insurance security or guaranty fund established under New Yo►•k, California, Connecticut or Florida insurance law. ASSURED GUARANTY MUNICIPAL CORP. AGM is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda -based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol "AGO". AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM. AGM's financial strength is rated "AA" (stable outlook) by Standard and Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P"), "AA+" (stable outlook) by Kroll Bond Rating Agency, Inc. ("KBRA") and "A2" (stable outlook) by Moody's Investors Service, Inc. ("Moody's"), Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM's long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of Certificates insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn. C11141•etit Firlasicial Stref7gth Ratings On June 29, 2015, S&P issued a credit rating report in which it affirmed AGM's financial strength rating of "AA" (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take. On November 13, 2014, KBRA assigned an insurance financial strength rating of "AA+" (stable outlook) to AGM. AGM can give no assurance as to any fiu•ther ratings action that KBRA may take. On July 2, 2014, Moody's issued a rating action report stating that it had affirmed AGM's insurance financial strength rating of "A2" (stable outlook). On February 18, 2015, Moody's published a credit opinion under its new financial guarantor ratings methodology maintaining its existing rating and outlook on AGM. AGM can give no assurance as to any further ratings action that Moody's may take. For more information regarding AGM's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-IC for the fiscal year ended December 31, 2014. Capitalization ofAGA�I At June 30, 2015, AGM's policyholders' surplus and contingency reserve were approximately $3,729 million and its net unearned premium reserve was approximately $1,670 million. Such amounts represent the combined surplus, contingency reserve and net unearned premium reserve of AGM, AGM's wholly owned subsidiary Assured Guaranty (Europe) Ltd. and 60.7% of AGM's indirect subsidiary Municipal Assurance Corp.; each amount of surplus, contingency iv reserve and net unearned premium reserve for each company was determined in accordance with statutory accounting principles. Incorporation of Certain Documents by Reference Portions of the following documents filed by AGL with the Securities and Exchange Commission (the "SEC") that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof: (i) the Annual Report on Form 10-IC for the fiscal year ended December 31, 2014 (filed by AGL with the SEC on February 26, 2015); (ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 (filed by AGL with the SEC on May 8, 2015); and (iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (filed by AGL with the SEC on August 6, 2015). All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof "furnished" under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Certificates shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC's website at http://www.sec.gov, at AGL's website at http://www,assured guaranty .com, or will be provided upon request to Assured Guaranty Municipal Corp.: 31 West 52°d Street, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL's website shall be deemed to be part of or incorporated in this Official Statement. Any information regarding AGM included herein under the caption "BOND INSURANCE —Assured Guaranty Municipal Corp." or included in a document incorporated by reference herein (collectively, the "AGM Information") shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded. Miscellaneous Alfatters AGM or one of its affiliates may purchase a po►•tion of the Certificates or any uninsured Certificates offered under this Official Statement and such purchases may constitute a significant proportion of the Certificates offered. AGM or such affiliate may hold such Certificates or uninsured Certificates for investment or may sell or otherwise dispose of such Certificates or uninsured Certificates at any time or from time to time. AGM makes no representation regarding the Certificates or the advisability of investing in the Certificates. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading "BOND INSURANCE". v SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the schedules and appendices hereto. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement including the Appendices hereto. The Issuer The City of Sanger, Texas (the ty"), is located in Denton County, Texas. For information regarding the City, see Appendices A and B. The Certificates $5,870,000 Combination Tax and Revenue Certificates of Obligation, Series 2015, dated November 1, 2015, maturing on the dates and in the amounts set forth on the inside front cover of this Official Statement. Interest on the Certificates will accrue from their date of delivery and will be paid semiannually on May 15 and November 15, commencing May 15, 2016, until maturity or prior redemption. Purpose of Certificates Proceeds from the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) tine rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization and Security The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, Chapter 1502, Texas Government Code, and an ordinance enacted by the City Council of the City (the "City Council") on October 19, 2015. The Certificates are payable from ad valorem taxes to be levied, within the limits prescribed by law, on all taxable property within the City and a limited subordinate pledge of surplus net revenues derived from the City's water and sewer system, not to exceed $10,000, as provided in the ordinance authorizing the Certificates. Optional Redemption The Certificates maturing on and after November 15, 2026, are subject to optional redemption in whole or in part on November 15, 2025, or on any date thereafter at a price of par plus accrued interest as more frilly described herein. See "THE CERTIFICATES — Optional Redemption" herein. iandatory Redemption The Certificates maturing on November 15, 2035 (the "Term Certificates") are subject to mandatory sinking fund redemption prior to maturity as described herein. (See "THE CERTIFICATES — Mandatory Redemption"). Tax Matters In the opinion of Bond Counsel, interest on the Certificates is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "TAX MATTERS" herein, and is not includable in the alternative minimum taxable income of individuals. See "TAX MATTERS" for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City will designate the Certificates as qualified tax-exempt obligations. See "QUALIFIED TAX-EXEMPT OBLIGATIONS" herein. Ratings Standard & Poor's Rating Services ("S&P") and Moody's Investor's Service, Inc. ("Moody's") will assign municipal bond ratings of "AA" (stable outlook) and "A2" (stable outlook), respectively, based upon the Municipal Bond Insurance Policy issued by Assured Guaranty Municipal Corp. The Certificates have also been assigned an underlying ratings of "AT' by Moody's. An explanation of the significance of such ratings may be obtained S&P and Moody's, respectively. See "RATINGS" herein. Book -Entry -Only System The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York, pursuant to the book -entry only system described herein. Beneficial ownership of the Certificates may be acquired in principal denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of, premium if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the DTC Participants (as vi defined herein) for subsequent remittance to the owners of the beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. Payment Record The City has never defaulted on the payment of its bonded indebtedness. vii SELECTED FINANCIAL INFORMATION (Unaudited) 2015 Certified Taxable Assessed Valuation........................................................0 (100% of Market Value as of January 1, 2015) City Debt: Outstanding Tax Supported Debt (as of August 31, 2015)............................. Plus: The Certificates, . 6 0 4 P 0 4 0 0 * t a 9 0 0 * 0 0 * 0 1 6 a 6 A . # 0 4 0 0 9 8 0 0 0 & 0 0 a 0 & Total Tax Supported Debt, . 0 P 0 4 4 0 a * * t 0 0 0 0 * 9 * a 6 * 0 . 6 a 6 0 9 0 P 4 P 0 0 0 0 0 Estimated Overlapping Debt........................................................................... Direct and Estimated Overlapping Debt............................................................. Debt Service Fund Balance (as of Sept. 30, 2014).................................................. of 2015 Assessed Valuation Debt Ratios: 2015 Per Capita 7 415 Direct Direct Tax Supported and Estimated Overlapping Debt, 6.53% $45702 2015 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation DebtService................................................................................. Total.......................................................................................... Estimated Annual Debt Service Requirements..................................................... Average...................................................................................... . Maximum(2021)............................................................................ Tax Collections CurrentYeai•.................................................................................. TotalCollections............................................................................. $533,911,551 (a) $13,190,000 t�> 5,870,000 $1 %060,000 $15,808,592 $34,868,592 $372,961 $0.498751 0.180749 $0.679500 $1,180,700 $2,016,345 99.80% 99.68% (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. (b) Includes self-supporting debt. viii OFFICIAL STATEMENT RELATING TO $5,870,000 CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 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 $5,870,000 Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"). The Certificates will be authorized to be issued, sold and delivered by an ordinance enacted by the City's governing body (the "City Council"), and such ordinance is referred to herein as the "Ordinance." Capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Ordinance, except as otherwise indicated herein. 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 and the City's home rule charter (the "City Charter"), which was initially approved by the electorate of the City on November 2, 1999. For information regarding the City, see Appendices A and B of this Official Statement. A11 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 fiom 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. THE CERTIFICATES Purpose Proceeds fi•om the sale of the Certificates will be used to pay contractual obligations to be incurred for (1) the rehabilitation, reconstruction, addition and expansion of the waste water treatment plant, (2) the rehabilitation and construction of wastewater lift stations and wastewater lines, (3) the construction of water lines and associated equipment and facilities; (4) the rehabilitation, reconstruction and construction of streets and drainage, (5) the rehabilitation of municipal facilities, and (6) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, as amended, Chapter 1502, Texas Government Code, as amended, and the Ordinance, as authorized by the City Charter. Secw•ity for the Certificates 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, and by a limited subordinate pledge of surplus net revenues derived from the City's water and sewer system (the "System"), not to exceed $10,000, as provided in the Ordinance. 1 Optional Redemption The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after November 15, 2026, in whole or in pail, in integral multiples of $5,000, on November 15, 2025 or any date thereafter, 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 Certificates 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 Certificates, or portions thereof, within each maturity to be redeemed. Mandatory Redemption The Certificates maturing on November 15, 2035 (the "Term Certificates") are subject to mandatory sinking fund redemption prior to maturity at random, in part by lot or other customary method selected by the Paying Agent/Registrar, at par plus accrued interest to the redemption date, in amounts sufficient to redeem the Term Certificates on November 15 in each of the years and the amounts set forth below: $1,675,000 Term Certificates Maturing November 15, 2035 Mandat orRedemption Date Principal Amount 2032 $395,000 2033 $410,000 2034 $425,000 2035 (stated maturity) $4455000 The pat•ticular Term Certificates to be redeemed shall be selected by the Paying Agent/Registrar by lot or other customary random selection method, on or before October 1 of each year in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed on or before October 1 of such year and which have not been made the basis for a previous reduction. Notice of Redemption Not less than 30 days prior• to a redemption date for the Certificates, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of a Certificate 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 Certificates, interest shall cease to accrue after the date fixed for redemption whether or not the Certificates 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 CERTIFICATES HAVING BEEN PROVIDED, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. 2 Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount of Certificates $5,870,000.00 Original Issue Premium 379.221.35 Total Sources of Funds 6.249.221.35 Uses Deposit to Construction Fund $6,080,000.00 Costs of Issuance 97,870.00 Underwriters' Discount 465657.02 Bond Insurance 19,836.70 Deposit to Debt Service Fund 44857.63 Total Uses of Funds 60249,221.35 GENERAL INFORMATION REGARDING THE CERTIFICATES General Description The Certificates will be dated November 1, 2015 (the "Dated Date"), and will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Certificates will bear interest from the date of delivery to the underwriters listed on the cover page hereof (the "Underwriters"), and interest will be paid semiannually on each May 15 and November 15, commencing May 15, 2016. Interest will accrue on the Certificates on the basis of a 360-day year consisting of twelve 30-day months. The Certificates 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 Certificates will be payable to the registered owners (the "Owners") at maturity or prior redemption upon presentation and surrender of such Certificates at the principal corporate office of the paying agent/regishar the "Paying Agent/Registrar" ), initially BOKF, NA, Austin, Texas. Interest on the Certificates 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 a Certificate 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 Certificates will mature on the dates, in the amounts and bear interest at the rates as set forth on inside cover page of this Official Statement. Legality The Certificates are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and McGriireWoods LLP, Houston, Texas, Bond Counsel. (See "LEGAL MATTERS" and Appendix C — "Form of Opinion of Bond Counsel"). ft3 Defeasance The Ordinance provides that the City may defease the Certificates and discharge its obligation to the holders of any or all of the Certificates 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 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 Board 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 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 Cet•tificates shall no longer be t•egat•ded to be outstanding ot• unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Certificates have been made as described above, all rights of the City to initiate proceedings to call the Certificates for redemption or take any other action amending the terms of the Certificates are extinguished; provided, however, that the right to call the Certificates for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption; (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorize. Amendments to the Ordinance In the Ordinance, the City has reserved the right to amend such Ordinance without the consent of any holder of the Certificates in any manner not detrimental to the interests of the holders of the Certificates, including the curing of any ambiguity, defect or omission therein. The Ordinance further provides that the holders of the Certificates aggregating in principal amount 5 1 % of the outstanding Certificates 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 Certificates no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates; (v) give any preference to any Certificate over any other Certificate, or (vi) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. 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 principal and interest, and for all other purposes, whether or not such Certificate is overdue, and neither the City to, the Paying Agent/Registrar will be bound by any notice or knowledge to the contrary. it All payments made to the person deemed to be the owner of any Certificate in accordance with the Ordinance will be valid and effectual and will discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid, OWNER'S REMEDIES The Ordinance does not provide for the appointment of a trustee to represent the interests of the Certificateholders upon any failure of the City to perform in accordance with the terms of the Ordinance or upon any other condition 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 Ordinance. Furthermore, the Ordinance does not establish specific events of default with respect to the Certificates and, under State law, there is no right to the acceleration of maturity of the Certificates upon the failure of the City to observe any covenant under the Ordinance. A registered owner of Certificates could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Certificates; 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 levy, assess, and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as it becomes due or perform other material terms and covenants contained in the Ordinance. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Certificates are valid and binding obligations for all purposes according to their terms. 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 Certificateholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or• state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Certificates are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. BOOK -ENTRY -ONLY SYSTEM This section describes hotiv otivnership of the Certificates is to be transferred and hotiv the principal of, premium, if any, and interest on the Certificates ar•e to be paid to and credited by The Depository Ti-trst Co»rpany ("DTC'), New York, New York, while the Certificates are registered in its nominee name. The information in this section concerning DTC and the BookEntry Only System has been provided by DTC for• use in disclosure documents such as this Official Statement, The City, the Financial Advisor, and the Under•wr•iters 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 Cer•t fcates, or redemption or• other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or• its nominee (as the registered owner of the Certificates), or• redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC ar•e on file lvith 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 Certificates. The Certificates will be issued as fully registered Certificates 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 Certificates, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC, the world's largest securities depository, is alimited-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 certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"), DTCC 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 Ile with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Pw•chases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("Beneficial Owner") is in turn to be recorded on the Direct 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 Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates 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 Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The 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 Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates 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 Certificates 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. 6 Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates 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 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, interest, and redemption payments on the Certificates 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 fi•om 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, is 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 Certificates 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, Certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor Securities depository). In that event, physical certificates will be printed and delivered. Use of Certain Terms in Other Sections of dais Official Statement In reading this Official Statement it should be understood that while the Certificates are in the Book -Entry Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry Only System and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. 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 BOKF, NA, Austin, Texas has been named to serve as initial Paying Agent/Registrar for the Certificates. In the Ordinance, 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 Certificates. Upon any change in the Paying Agent/Registrar for the Certificates, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Certificates by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In the event the Book -Entry Only System should be discontinued, interest on the Certificates 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 7 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 Certificates 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 Certificates 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 Certificates, principal, interest, and redemption payments on the Certificates 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 Certificates will be delivered to the Owners and thereafter the Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such 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. Certificates may be assigned by the execution of an assignment form on the Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Certificate will be delivered by the Paying Agent/Registrar in lieu of the Certificate 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 Certificates issued in an exchange or transfer of Certificates will be delivered to the registered Owner or assignee of the Owner after the receipt of the Certificates 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 Certificates 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 Certificate or Certificates 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 Certificates. Record Date for Interest Payment The record date ("Record Date") for the interest payable on any interest payment date is the last business day of the month next preceding such interest payment date, as specified in the Ordinance. 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 a Certificate 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 Certificates Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Certificate, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate. Replacement of Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount as the Certificate so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Certificate, such new Certificate will be delivered only upon surrender and cancellation of such mutilated Certificate. In the case of any E:? Certificate issued in lieu of and in substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfactory to them that such Certificate 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 Certificate must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. TAX INFORMATION Summary of Certain Provisions of the Property Tax Code The appraisal of property within the City is the responsibility of the Denton Central Appraisal District (the "Appraisal District"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under Title I of the Texas Tax Code (referred to herein as the "Property Tax Code") to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining the market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law requires the appraised value of a residence homestead to be based solely on the property's value as a residence 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 residence homestead for a tax year to an amount not to exceed the lesser of (1) the property's market value in the most recent tax year in which the market value was determined by the appraisal office, or (2) the sum of (a) 10% of the property's appraised value in the preceding tax year, plus (b) the property's appraised value the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board, whose members are appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least once every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Under Article VIII of the Texas Constitution ("Article VIII") and State law, the governing body of a county, municipality or junior college district may provide for a freeze on total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older above the amount of tax imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, the total amount of taxes imposed on such homestead cannot be increased except for improvements (excluding maintenance, repairs or improvements required to comply with governmental requirements) and such freeze is transferable to a different residence homestead. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual's spouse. If improvements (other than repairs or improvements required to comply with governmental requirements) are made to the property, the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. Reference is made to the Property Tax Code, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII and State law also provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b of Article VIII, and State law, the governing body of a political subdivision, at its option, may grant an exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to less than $3,000 of the market value. The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (it) the surviving spouse was at least 55 years of age at the time of the death of the individual's spouse and (iii) the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse. In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of $5,000. In the case of residence homestead exemptions granted under Section 1-b of Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children. In addition, veterans who are 100% disabled (being a disabled veteran who receives fi•om the United States Department of Veterans Affairs or its successor 100% disability compensation due to a service -connected disability and a rating of 100% disabled or of individual unemployability) are entitled to an exemption from taxation of the total appraised value of the veteran's residential homestead. Additionally, effective January 1, 2012, subject to certain conditions, the surviving spouse of a disabled veteran who is entitled to an exemption for the full value of the veteran's residence homestead is also entitled to an exemption from taxation of the total appraised value of the same property to which the disabled veteran's exemption applied. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Non -business personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non -business property are exempt from ad valorem taxation. Section 1 j of Article VIII authorizes an ad valorem tax exemption for "fieeport property". Freeport property is defined as goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property, provided official action to tax the same was taken before April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides for the exemption from taxation of "goods -in -transit." "Goods -in -transit" is defined by Section 11.253 of the Tax Code as personal property acquired or imported into Texas and transported to another location in the State or outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out -board motor, heavy equipment and manufactured housing inventory. Section 11.253 of the Tax Code permits local governmental entities, on a local option basis, to take official action by January 1 of the year preceding a tax year, after holding a public hearing, to tax "goods -in -transit" during the following tax year. A taxpayer may only receive either the freeport exemption or the "goods -in -transit" exemption for items of personal property. 10 A city or a county may utilize tax increment financing ("TIF"), pursuant to the Tax Increment Financing Act, Texas Tax Code, Chapter 311, to encourage development and redevelopment within a designated reinvestment zone. Taxes collected from increases in valuation above the base value (the "captured appraised value") by each taxing unit that levies ad valorem taxes on real property in the reinvestment zone may be used to pay costs of infrastructure or other public improvements in the reinvestment zone and to supplement or act as a catalyst for private development in the defined area of the reinvestment zone. The tax increment base value for a taxing unit is the total appraised value of all real property taxable by the taxing unit and located in the reinvestment zone as of January I of the year in which the city created the reinvestment zone. Each taxing unit can choose to dedicate all, any portion or none of its taxes collected from the captured appraised value to the costs of improvements in the reinvestment zone. The amount of a taxing unit's tax increment for a year is the amount of property taxes levied by the taxing unit for that year on the captured appraised value of real property taxable by the taxing unit and located in the reinvestment zone, multiplied by the taxing unit's percentage level of participation. The City also may enter into tax abatement agreements to encourage economic development. Under an abatement agreement, a property owner agrees to construct certain improvements on its property. The City in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the abatement agreement. The abatement agreement could last for a period of up to 10 years. The City has adopted a tax abatement policy with respect to certain areas within the City. The City is also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City. In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes; provided, however, that no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City. The City may contract with the federal government, the State, another political subdivision, a nonprofit organization o►• any other entity, including private entities, for the administration of such a program. See Appendix A — Tables 1, 3 and 4 for information relating to the City's taxable assessed valuation, property tax rates and collections and tax rate distribution. Effective Tax Rate and Rollback Tax Rate Before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City, the City Council must adopt a tax rate per $100 taxable value for the current year. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings have been held on the proposed tax rate following notice of such public hearings (including the requirement that notice be posted on the City's website if the City owns, operates or controls an inte►•net website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. ll Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Property Assessment and Tax Payment Property wn the City is assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an average daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years of age and over and taxpayers qualifying for the disabled person exemption are allowed to pay taxes on their residential homestead in four installments with the first installment due on February 1 of each year and the final installment due on August If Penalties and Interest Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Month ive Interest Total 1% 7% 2 9 3 11 4 13 5 15 6 18 After July, the penalty remains at 12%, and interest accrues at a rate of one percent (1%) for each month or portion oI a month the tax remains unpaid. A delinquent tax continues to accrue interest as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest penalty is to compensate the taxing unit for• revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% may be added to the total tax penalty and interest charge. A taxpayer who is 65 years of age or older or is disabled may defer the collection of delinquent property taxes on his or her residence homestead and prevent the filing of a lawsuit to collect delinquent taxes until the 181st day after the taxpayer no longer owns and occupies the property as a residence homestead. However, taxes and interest continue to accrue against the property, and the delinquent taxes incur a penalty of 8% per annum with no additional penalties or interest assessed. The lien securing such taxes and interest remains in existence during the deferral or abatement period. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes fi•om attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. City Application of 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 only business personal property. The County Tax Collector• collects pr•oper•ty taxes for• the City. The County does not permit split payments and does not allow discounts. 12 The City grants the Article VIII, Section 1 j ("freeport property") exemption but at this time has no Article VIII, Section 1 j property. Municipal Sales Tax The City has adopted the provisions of V.A.T.C.S. Tax Code § 321.001 et seq., which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City. The proceeds of such tax are credited to the General Fund and are not pledged to payment of the Certificates. Collections and enforcements are effected through the offices of the State Comptroller of Public Accounts, who monthly remits the proceeds of the tax, after deduction of a 2% service fee, to the City. The Tax Code provides certain cities and counties the option of assessing a maximum one-half percent (1/2%) sales 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 tax is approved and levied, the ad valorem property tax levy must be reduced by the estimated amount of the sales tax revenues to be generated in the current year. Subject to the approval of a majority of the voters in a local option election, state law also provides certain cities the option of assessing a sales and use tax for a variety of other purposes, including economic and industrial development, municipal street maintenance and repair, and sports and community venues. State law limits the maximum aggregate sales and use tax rate in any area to 8%4%. Accordingly, the collection of local sales and use taxes in the area of the City (including sales and use taxes levied by the City) is limited to no more than 2% (when combined with the State sales and use tax rate of 6%4%). In addition to the one percent (1%) local sales and use tax referred to above, at an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 4A, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. At an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 413, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. The City has not held an election regarding an additional sales tax for the purpose of reducing its ad valorem taxes. TAX RATE LIMITATIONS Article XI, Section 5, of the State Constitution is applicable to the City and imposes a limitation on ad valorem taxes which can be imposed by the City of $2.50 per $100 taxable assessed valuation. The Attorney General of Texas follows a policy, with respect to Home Rule Cities which have such a $2.50 limitation, of approving ad valorem tax bonds only to the extent that all of such city's ad valorem tax debt can be serviced by a debt service tax rate of $1.50 at 90% collection. RETIREMENT PLAN The City participates in the Texas Municipal Retirement System which is a joint contributory retirement plan covering all full-time employees. There are no benefits guaranteed other than to the extent provided by employee and employer contributions, plus earnings, accumulated in the individual accounts of employees. The contribution rate for employees is 6% of their annual covered salary. The City is required to contribute at an actuarially determined rate. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his/her retirement becomes effective. The prior service contribution rate amortizes the unfunded actuarial liability over the remainder of the plan's 25-year amortization period. Contributions by the City for the year ended September 30, 2014 totaled $210,201. For additional information regarding the City's Pension Plans, see Appendix D - "Audited Financial Statements for the Fiscal Year Ended September 30, 2014, Note V —Other Information —Pension Plans". 13 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, 2014" ). Legal Investments Under Texas law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, including letters of credit; (2) direct obligations of the State of Texas or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State of Texas or the United States or• their respective agencies and instrumentalities, 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) certificates of deposit (i) meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by or through an institution that either has its main office or a branch in Texas, and are guaranteed or insured by the Federal Deposit Insurance Corporation or• the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits or, (ii) where (a) the funds are invested by the City through (1) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the City; (iii) 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; (iv) 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 (v) the City appoints the depository institution selected under (ii) above, an entity as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker -dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.156-3) as custodian for the City with respect to the certificates of deposit issued for the account of the City; (8) fully collateralized repurchase agreements that have a defined termination date, are secured by a combination of cash and obligations described in clause (1) 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; (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency; (10) commercial paper with a stated maturity of 270 days or less that is rated at least A-1 or• P4 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (11) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and (12) no- load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. In addition, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described below. A political subdivision such as the City may enter into securities lending programs if (i) the securities loaned under the program are 100% collateralized, aloan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (10) through (12) 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 tinder the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. 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 AAAtn 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 r•epr•esents 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 foil City funds, the maximum allowable stated maturity of any individual investment and 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 Texas 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, the City's 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 foil 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 must submit an investment report to the Board of Trustees detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, and 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 strategies and (b) Texas law: No person may invest City funds without express written authority from the City Council. Additional Provisions Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers with personal business relationships or family relationships with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and the City, (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the 15 City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) in conjunction with its annual financial audit, perform a compliance audit of the management controls on investments and adherence to the City's investment policy, (5) 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, (6) restrict the investment in non -money market mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, (7) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements and (8) provide specific investment training for the Treasurer, the chief financial officer (if not the Treasurer) and the investment officer. Current Investments As of September 30, 2014, 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. Type of Investment Amount Certificates of Deposit $1,881,566 Total $1,8815566 RATINGS Standard & Poor's Ratings Services ("S&P") and Moody's Investor's Service, Inc. ("Moody's") will assign municipal bond ratings of "AA" (stable outlook) and "A2" (stable outlook), respectively, based upon the Municipal Bond Insurance Policy issued by Assured Guaranty Municipal Corp. Moody's has also assigned an underlying rating of "AT' to the Certificates. The ratings reflect only the view of such organizations at the time such ratings were given and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by S&P or Moody's, if in the judgment of S&P or Moody's, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. PENDING LITIGATION There is no material litigation currently pending against the City. LEGAL MATTERS The City will fin•nish a complete transcript of proceedings incident to the authorization and issuance of the Certificates, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Certificates 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 Certificates 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 Certificates, and the opinion 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 Certificates. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Certificates are contingent on the sale and delivery of the Certificates. The applicable legal opinion will be printed on or attached to the definitive Certificates. Bond Counsel has reviewed the statements and information appearing in the Official Statement under the captions "THE CERTIFICATES" (except the subcaption "Sources and Uses of Funds"), "GENERAL INFORMATION REGARDING THE CERTIFICATES"REGISTRATION, TRANSFER AND EXCHANGE," "TAX RATE LIMITATIONS," "LEGAL MATTERS," "TAX MATTERS," "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES," "QUALIFIED TAX EXEMPT OBLIGATIONS," "LEGAL INVESTMENTS IN TEXAS," "REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE" and 16 "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 or have they conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy or completeness 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 or completeness of any of the information contained herein. TAX MATTERS Tax Exemption In the opinion of McGuireWoods LLP, Houston, Texas, Bond Counsel, interest on the Certificates is (1) excludable I rom gross income of the owners thereof for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), and (2) is not includable in the alternative minimum taxable income of individuals or, except as described below, corporations. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Certificates. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinance and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Certificate proceeds and any facilities financed therewith, the source of repayment of the Certificates, the investment of Certificate proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Certificate proceeds and certain other amounts be paid periodically to the United States and that the City file an information report with the Internal Revenue Service (the "Service"). If the City should fail to comply with the covenants in the Ordinance, or if its representations relating to the Certificates that are contained in the Ordinance should be determined to be inaccurate or incomplete, interest on the Certificates could become taxable from the date of delivery of the Certificates, regardless of the date on which the event causing such taxability occurs. Interest on the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Certificates. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the City as the "taxpayer," and the owners of the Certificates may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Certificates, the City may have different or conflicting interests from the owners of the Certificates. Public awareness of any future audit of the Certificates could adversely affect the value and liquidity of the Certificates during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the year. 17 Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. Such prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. Proposed Tax Legislation Tax legislation, administrative actions taken by tax authorities, and court decisions may cause interest on the Certificates to be subject, directly or indirectly, to federal income taxation or state income taxation, or otherwise prevent the beneficial owners of the Certificates from realizing the full current benefit of the tax status of such interest. For example, future legislation to resolve certain federal budgetary issues may significantly reduce the benefit of, or otherwise affect, the exclusion of gross income for federal income tax purposes of interest on all state and local obligations, including the Certificates. In addition, such legislation or actions (whether currently proposed, proposed in the future or enacted) could affect the market price or marketability of the Certificates. Prospective purchasers of the Certificates should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, and its impact on their individual situations, as to which Bond Counsel express no opinion TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES Discount Certificates Some of the Cet•tificates may be offered at an initial offering price which is less than the stated redemption price at maturity of such Certificates. If a substantial amount of any maturity of the Certificates is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, each of the Certificates of that maturity (the "Discount Certificate") will be considered to have "original issue discount' for federal income tax purposes equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Certificate and (b) the initial offering price to the public of such Discount Certificate. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on a Discount Certificate and such initial owner will be entitled to exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Certificate continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Certificates under the caption "TAX EXEMPTION" generally applies to original issue discount deemed to be earned on a Discount Certificate while held by an owner who has purchased such Certificate at the initial offering price in the initial public offering of the Certificates and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Certificate prior to its stated maturity, however, any amount realized by such initial owne►• in excess of the basis of such Discount Certificate in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Certificate continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Certificate will be treated for federal income tax purposes as interest on a Certificate, such original issue discount must be taken into account for ce►•tain federal income tax purposes as it is deemed to be earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Certificates must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Certificate may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Discount Certificate. See "TAX EXEMPTION" for a discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to collateral federal tax consequences for certain other owners, The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect the rights or obligations of the owner of a Discount Certificate or of the City. The portion of the principal of a Discount Certificate representing original issue discount is payable upon the maturity or earlier redemption of such Certificate to the registered owner of the Discount Certificate at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Certificate is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Certificates by an owner that did not purchase such Certificates in the initial public offering and at the initial oHering price may be determined according to rules which differ fi•om those described above. All prospective purchasers of Discount Certificates should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Certificates, Premium Certificates Some of the Certificates may be offered at an initial offering price which exceeds the stated redemption price payable at the maturity of such Certificates. If a substantial amount of any maturity of the Certificates is sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or entities acting in the capacity of wholesalers or underwriters) at such initial offering price, each of the Certificates of such maturity ("Premium Certificate") will be considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis for federal income tax purposes of a Premium Certificate in the hands of an initial purchaser who purchases such Certificate in the initial offering must be reduced each year and upon the sale or other taxable disposition of the Certificate by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Certificate by the initial purchaser. Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Certificate which is amortizable each year or shorter period in the event of a sale or disposition of a Premium Certificate) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Certificate based on the initial purchaser's original basis in such Certificate. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Certificates that are not purchased in the initial offering or which are purchased at an amount representing a price other than the initial offering prices for the Certificates of the same maturity may be determined according to rules which differ fi•om those described above. Moreover, all prospective purchasers of Certificates should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Certificates, QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265(a) of the Code provides, in general, that interest expense incurred to acquire or carry tax-exempt obligations is not deductible from the gross income of the holder. For certain holders that are "financial institutions" within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than certain private activity bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may only designate an issue as an issue of "qualified tax-exempt obligations" where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year 2015. 10 The City has designated the Certificates as "qualified tax-exempt obligations," Further, the City will represent that it has or will take such action necessary for the Certificates to constitute "qualified tax-exempt obligations." Notwithstanding the designation of the Certificates as "qualified tax-exempt obligations," financial institutions acquiring the Certificates will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Certificates. LEGAL INVESTMENTS IN TEXAS Under the Texas Public Security Procedures Act (Texas Government Code, Chapter 1201), the Certificates (1) are negotiable instruments, (2) are investment securities to which Chapter 8 of the Texas Uniform Commercial Code applies, and (3) are legal and authorized investments for (A) an insurance company, (B) a fiduciary or trustee, or (C) a sinking fund of a municipality or other political subdivision or public agency of the State of Texas. The Certificates are eligible to secure deposits of any public funds of the State, its agencies, and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (Texas Government Code, Chapter 2256), the Certificates may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such Certificates 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 Certificates 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 Certificates for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Certificates for such purposes. The City has made no review of laws in other states to determine whether the Certificates are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE No registration statement relating to the Certificates 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 Certificates have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been registered or qualified under the securities acts of any other jurisdiction. The City assumes no responsibility for registration or qualification of the Certificates under the securities laws of any other jurisdiction in which the Certificates may be offered, sold, or otherwise transferred. This disclaimer of responsibility for registration and qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions in such other jurisdictions. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to 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 to Financial Information Regarding the City of Sanger. Texas (Tables 140) and in Appendix D. The City will update and provide this information within six months after the end of each fiscal year. �lI The City may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c242 (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 B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by 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 Certificates; (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 Certificates, or other material events affecting the tax status of the Certificates; (7) modifications to rights of holders of the Certificates, if material; (8) Certificate calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates, 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; and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material. (Neither the Certificates nor the Ordinance 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". 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 Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders and beneficial owners of the Certificates 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 Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. 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 fiom lawfully purchasing or selling Certificates in the primary offering of the Certificates. If the City amends its agreement, it must include with the next financial information and 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 Certificates in the primary offering of the Certificates. Compliance with Prior Undertakings The annual Financial Repot't for the year ending September 30, 2010, due to be filed on March 31, 2011, was filed on February 3, 2012, and the annual audited financial statements for the year ending September 30, 2011, due to be filed on March 31, 2012, was filed on June 8, 2012. Since that time, the City has implemented procedures to ensure timely filing in the future. Otherwise, during the last five years, the City has not failed to comply in any material respect with any continuing disclosure agreement made by it in accordance with the Rule. In its role as Financial Advisor, Government Capital Securities Corporation has relied on the City for certain information concerning the City and the Certificates. The fee of the Financial Advisor for services with respect to the Certificates is contingent upon the issuance and sale of the Certificates. 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. UNDERWRITING Oppenheimer & Co. Inc, and William Blair &Company, the Underwriters, have agreed to purchase the Certificates from the City for $6,202,564.33 (being the principal amount of the Certificates, plus a premium of $379,221.35, less an Underwriters' discount of $46,657.02). 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. 22 CONCLUDING STATEMENT The information set forth herein has been obtained from the City's ►ecords, 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 Certificates. ATTEST: /s/ Tami Taber City Secreta►y, City of Sanger, Texas CITY OF BANGER, TEXAS /s/ Thomas Muir Mayor, City of Sanger, Texas 23 APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION 2015 Total Value of Taxable Property Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions $ 10,918,422 Disabled and Deceased Veterans' Exemptions 1,191,071 Productivity Value Loss 295948,451 Homestead 10% Cap Adjustment 136165420 Abatement 0 Freeport 125943,610 Other 11,488,748 2015 Net Taxable Assessed Valuation (100% of Actual)��� TABLE 1 $533,911,551 68,106,722 $465,804,829 t°� See "TAX INFOR�IIATION -City Application of the Property Tax Code " in the Offrcial Statement for• a description of the City's taxation procedures. Sowoce: Denton County Appraisal District PRINCIPAL TAXPAYERS Name Walmart Stores East, L.P. Intercapital Sanger Trails Stonewood Resorts, LLC MacCamp LTD Sam's East, Inc. Springer Family Rentals LLC Sam's Cross Dock Latham Zane Springer, John D S&T Rentals, LLC Total Tvne of Business Distribution Real Estate Real Estate RV Sales and Service Distribution Real Estate Distribution Real Estate Real Estate Real Estate * Based on 2014 Net Taxable Assessed Valuation of $465,804,829. TABLE 2 of Total 2014 Net Taxable 2014 Assessed Assessed Valuation Valuation* $104,504,825 22.44% 105171,686 2.18% 35306,170 0.71% 3,223,088 0.69% 35063,092 0.66% 2,94%700 0.63% 2,265,000 0.49% 2,0669399 0.44% 21100,410 0.45% 1,953A98 0.42% $1354603.868 2911°° Source: Texas Comptroller• of Public Accounts and Denton Central Appraisal District A-1 PROPERTY TAX RATES AND COLLECTIONS°� TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total(b) Ended 2002 $2265882,983 0.565470 97.03% 99.39% 9-30-03 2003 28%9371097 09565470 97.38% 99.71% 9-30-04 2004 312,537,172 0.570830 97.40% 99.70% 9-30-05 2005 33852985363 0.590460 98.16% 99.70% 9-30-06 2006 353,2445529 0.599600 97.36% 99.74% 9-30-07 2007 372,374,916 0.620000 98.13% 99.68% 9-30-08 2008 383,511,572 09620000 97.72% 99.43% 9-30-09 2009 3635053,298 06620000 97.78% 98.99% 9-3040 2010 365,706,678 0.633049 97.70% 97.70% 9-30-11 2011 358,015,773 0.633049 98.69% 98.71% 9-3042 2012 38%3905028 0.633049 99.20% 101900% 9-3043 2013 415,5035377 0.665000 99.80% 99.68% 9-3044 2014 4335858,191 0.679500 In progress 9-30-15 See "TAX INFORAIMON - The City Application of the Property Tax Code" in the Official Statement.for a description of the City's taxation procedures. (G> Excludes interest and penalties. Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Denton County Appraisal District, and the City's 2014 Annual Financial Statements. 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 201445 201344 201243 201142 201041 Maintenance & Operations $09418751 $0.409405 $0.446044 $0.446044 $0.439418 Dedicated for Sheet Maintenance 0.080000 09080000 I & S Fund 0.180749 0.175595 09187005 0.187005 04193631 TOTAL $06679500 $0.665000 $0.633049 $0.633049 $0.633049 Source: City A-2 WATER RATES' TABLE 5 Existing Rates Residential (Effective January 19 2015) Minimum per unit served for 0 - 1,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 30,000 $19.72 3.41 per thousand gallons 3.75 per thousand gallons 4.60 per thousand gallons 5.92 per thousand gallons Commercial (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons $24.97 PRINCIPAL WATER CUSTOMERS 2013-14' TABLE 6 (For the twelve months ending September 30, 2014) Name of Customer SISD High School Stonewood Resorts, LLC Walmart Distribution Center Stonewood Resorts, LLC Misum Trail/Integra Peak Mgt Elk River SISD Sanger Middle School Khoscrow Sadeghian Karl Klement Properties Monthly t The City's pledge of revenues from the water and sewer system for payment of the Certificates is limited to $10,000, and the City does not anticipate that it would ever use such revenues to make payment on the Certificates. A-3 SEWER RATES' TABLE 7 Existing Rates Residential (Effective January 1, 2015) Minimum (first 1,000 gallons) $ 22.77 Per 1,000 gallons over first 1,000 gallons 3.16 Per 1,000 gallons in excess of 10,000 gallons 3.51 Maximum per month 60.00 Commercial (Effective January 1, 2015) 3/4 inch meter $ 33.52 1 inch meter 36.69 1 Much meter 41.75 2 inch meter 50.77 3 inch meter 62.62 4 inch meter 116.21 6 inch meter 154.45 8 inch meter 203.84 Per 1,000 gallons over first 1,000 gallons Per 1,000 gallons in excess of 10,000 gallons 3.51 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, 2014) Name of Customer Averaee Monthly Bill Stonewood Resorts LLC $ 3,202 SISD Sanger High School 1,844 Walmart Distribution Center 15221 Stonewood Resorts, LLC 1,125 Chisum Trail/Integra Peak Mgmt LIN SISD Butterfield Elementary 865 Karl Klement Properties 687 Ohio Garden RV Inc 502 Elk River 436 SISD Sanger Middle School 416 Total 11 3 8 The City's pledge of revenues from the water and sewer system for payment of the Certificates is limited to $10,000, and the City does not anticipate that it would ever use such revenues to make payment on the Certificates. A-4 ELECTRIC RATES Existing Rates (Effective November 15, 2010) Large Residential Commercial Industrial Facility Charge (minimum per $ 10.00 $ 16.00 $ 35.00 month) Energy Charge (per KWH) $ 0.1175 $ 0.12 $ 0,105 ERCOT Pass -through per month $4.00 $4.00 $4.00 TABLE 9 PRINCIPAL ELECTRIC CUSTOMERS 2013-2014" TABLE 10 (For the hvelve months ending September 30, 2014) Name of Customer Walmart Distribution Center Super Save Wagon Master RV Park McCamp LTD Sams/Walmart Stores East McDonalds Latham Stairs & Millworks Jack in the Box North Texas Plastics Sportsman Average Monthly Consumption in Kilowatt Hours Averaize Monthly Bill 1,1325600 $118,940 90,813 105894 70,350 7,993 62,950 71195 55,466 6,674 425813 55087 33,513 45040 30,583 35715 29,153 3,575 28,193 34394 it Total 1,576,434 171.507 None of the City's revenues from its electric system is pledged to the payment of the Certificates, and the City will not use such revenues to make payment on the Certificates. A-5 PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Fiscal .Year 30-Sept 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Existing Debt Service $1,796,942.50 1,7185572.50 15704,532.50 15708,31T50 137155222.50 1,6515145.00 724,986.25 730,260.00 724,295.00 721,705.00 725,557.50 458,045.00 321,400.00 325,000.00 3225250900 324,000.0O 3259000.00 320,250.00 TOTAL $16,317,481.25 Principal $ 100,000.00 115,000.00 1159000900 110,000.00 180,000.00 295,000.00 285,000.00 2905000.00 300,000.0O 310,000.00 320,000.00 330,000.00 340,000800 355,000.00 370,000.00 380,000.00 395,000.00 410,000.00 425,000.00 445,000.00 $55870,000.00 Interest $ 100,548.33 196,800.00 194,650.00 192,350.00 18%550.00 1855200900 178,075.00 169,375.00 160,750.00 151,900.00 142,750.00 132,900.00 121,925.00 110,200.00 97,593.75 84,000.00 69,93T50 555406925 405312.50 24,656.25 8,343.75 $2,6075223.33 Total Debt Service $ 198975490.83 2,0153372.50 2,014,182.50 2,015,667.50 250145772.50 25016,345.00 19198,061.25 1,184,635.00 131755045.00 1,1733605.00 1,178,307.50 9105945900 773,325.00 7755200400 774,843.75 778,000.00 774,93 T50 770,656.25 450,312.50 449,656.25 453,343.75 $245794,704.58 I:� �� Dh i ;� GENERAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS General The City of Sanger is a residential community located on Interstate Highway 35 northeast of the Dallas4on 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 2010 U.S. Census, the City's 2010 population was 6,916. U.S. Census estimates indicate an estimated population of 7,415 as of September 30, 2014. 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 of Sanger 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 2010 U.S. Census, the County's 2010 population was 662,614. Ill APPENDIX C FORM OF OPINION OF BOND COUNSEL McGuireWoods LLP JPMorgan Chase Tower 600 Travis Street Suite 7500 Houston, TX 77002-2906 Phone: 713.571.9191 Fax: 713.571.9652 www, mcgu i rewood s.com MCGUIREVVWDS November 12, 2015 We have acted as Bond Counsel in connection with the issuance by City of Sanger, Texas the "Issuer") of its Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), dated November 1, 2015, in the aggregate principal amount of $5,870,000. The Certificates are issuable in fully registered form only, bear interest, are subject to redemption prior to maturity and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the Issuer authorizing their issuance. We have acted as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the Issuer; certain certifications and representations and other material facts within the knowledge and control of the Issuer, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R-1 of this issue. We have not been requested to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the Issuer or the disclosure thereof in connection with the sale of the Certificates. Capitalized terms used herein and not otherwise defined have the meaning assigned in the Ordinance. Based on such examination, it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the Issuer enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with law; and Atlanta (Austin � Baltimore � Brussels � Charlotte � Charlottesville � Chicago � Dallas � Houston (Jacksonville � London Los Angeles � New York � Norfolk (Pittsburgh � Raleigh � Richmond � Tysons Corner � Washington, D.C. (Wilmington 71064169_1 November 12, 2015 Page 2 (2) The Certificates are payable, both as to principal and interest, from the receipts of an annual ad valorem tax levied, within the limits prescribed by law, upon taxable property located within the Issuer, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates, and a pledge of subordinate Net Revenues not to exceed $10,0000 Also based on our examination as described above, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates, including any accrued "original issue discount" properly allocable to the holders of the Certificates, is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended ("Code"), and is not a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. For purposes of the alternative minimum tax imposed on corporations under Section 56 of the Code, interest on the Certificates is included in computing adjusted current earnings. The "original issue discount" on any Certificate is the excess of its stated redemption price at maturity over the initial offering price to the public at which price a substantial amount of the Certificates of the same maturity was sold. The "public" does not include bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. We express no opinion regarding other federal tax consequences arising with respect to the Certificates. In providing the opinion set forth in the foregoing paragraph, we are assuming continuing compliance with the Covenants (as hereinafter defined) by the Issuer. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied after the issuance of the Certificates in order for interest on the Certificates to be and remain excludable from gross income for purposes of federal income taxation. These requirements include, by way of example and not limitation, restrictions on the use, expenditure and investment of the proceeds of the Certificates and the use of the property financed by the Certificates, limitations on the source of the payment of and the security for the Certificates, and the obligation to rebate certain excess earnings on the gross proceeds of the Certificates to the United States Treasury. The Ordinance and the Issuer's tax certificate for the Certificates (the "Tax Certificate") contain covenants (the "Covenants") under which the Issuer has agreed to comply with such requirements. The failure by the Issuer to comply with the Covenants could cause interest on the Certificates to become includable in gross income for federal income tax purposes retroactively to their date of issue. In the event of noncompliance with the Covenants, the available enforcement remedies may be limited by applicable provisions of law and, therefore, may not be adequate to prevent interest on the Certificates from becoming includable in gross income for federal income tax purposes. We have no responsibility to monitor compliance with the Covenants after the date of issue of the Certificates. Certain requirements and procedures contained, incorporated or referred to in the Ordinance and Tax Certificate, including the Covenants, may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Our opinions are based on existing law, which is subject to change. Such opinions are fiu•ther based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our 71064169_1 November 12, 2015 Page 3 opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. 71064t69_I APPENDIX D AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 309 2014 ANNUAL FINANCIAL REPORT City of Sanger, Texas For the Year Ended September 30, 2014 (This page intentionally left Ulank.) City of Sanger, Texas TABLE OF CONTENTS September 30, 2014 FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 7 Basic Financial Statements Government -Wide Financial Statements Statement of Net Position 19 Statement of Activities 20 Fund Financial Statements Governmental Funds: Balance Sheet 22 Reconciliation of the Balance Sheet to the Statement of Net Position - Governmental Funds 23 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 24 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25 Proprietary Funds: Statement of Net Position 26 Statement of Revenues, Expenses, and Changes in Fund Net Position 27 Statement of Cash Flows 28 Notes to Financial Statements 31 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes 61 Fund Balances - Budget and Achtal -General Fund 59 Schedule of Funding Progress -Texas Municipal Retirement System 61 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS Combiiliilg Balance Sheet -Nonmajor Governmental Funds 62 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 63 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds — by Department 64 (This page intentionally left blank.) BRoOKSCARDIEL, PLLC -- Certified Public Accountants 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, 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, 2014, 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 1095 Evergreen Circle � Suite 200 � The Woodlands, TX 77380 (Tel: 281.907.8788 � Fax: 888.875.0587 � www.BrooksCardiel.coin 1 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinio�is In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the businessAype activities, each major fund, and the aggregate remaining hind information of the City as of September 30, 2014, 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 and schedules of funding progress 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. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Ocher biformatio�i 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 and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other 2 records used to prepare the basic financial statements. Such information has been subjected to the 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 and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. BrooksCardiel, PLLC Certified Public Accountants The Woodlands, Texas February 26, 2015 3 (This page intentionally left blank.) MANAGEMENT'S DISCUSSION AND ANALYSIS �� (This page intentionally left blank.) .� City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS (MD&A) September 30, 2014 As management of the City of Sanger, Texas (the "City"), we offer readers of Lite City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2014. Financial Highlights • The City's total combined net position is $26,300,291 at September 30, 2014. Of this, $7,524,908 (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 $4,090,197, an increase of $139,442, • As of the end of the year, the unassigned fund balance of the general fund was $1,100,802 or 20% of total general fund expenditures. • The City had an overall increase in net position of $1,995,064, which is primarily due to strong general and utility revenues. 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 governrnerr.t-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to aprivate-sector busitess. 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 tuning of related cash flows. Thus, revenues and expenses 7 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 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 (governfnental 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 goveruunent-wide financial statements include not only the City itself (known as the primnr� governinen.t), but also the legally separate Sanger Industrial Development Corporation ("4A fund") and the Sanger Texas Development Corporation ("4B fund"), for which the City is financially accountable. Both corporations, although legally separate, function for all practical purposes as a department of the City and therefore have been included as an integral part of the primary government. 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 Lite 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 fiends 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 five 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 DISCUSSIONAND ANALYSIS, Continued September 30, 2014 expenditures, and changes in fund balances for the general and capital projects funds which 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 general fund budget. Proprietary Funds The City maintains one type of proprietary fund which is considered an enterprise fund. Enterprise funds are used to report the same functions presented as business -type activities in the government - wide financial statements. The City uses enterprise funds to account for its water distribution, wastewater collection/treatment, water and wastewater construction operations and electric services. The proprietary fund financial statements provide separate information for the water distribution, wastewater collection/treatment fund, and electric funds. The basic proprietary fund financial statements can be found in the basic financial statements of this report. 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 includes a budgetary comparison schedule for the general fund and schedule of funding progress for Texas Municipal Retirement System. 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 exceed liabilities by $26,300,291 as of September 30, 2014, in the primary government. The largest portion of the City's net position, $15,816,158, 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. 0 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 An additional portion of Lite City's net position, $2,959,225, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $7,524,908 is unrestricted and may be used to meet the government's ongoing obligations to its citizens and creditors. Statement of Net Position: The following table reflects the condensed Statement of Net Position: 2014 Governmental Business -Type Activities Activities Total Current and other assets $ 41717,408 $ 11,671,252 $ 16,3881660 Capital assets, net 15,020,169 12,430,202 27,450,371 Total Assets 19,737,577 24,101,454 43,839,031 Deferred Outflows of Resources 25,919 58,344 84,263 Other liabilities 515,587 11245,675 11761,262 Long-term liabilities 71406,622 81455,119 15,861,741 Total Liabilities 71922,209 91700,794 17,623,003 Net Position: Net investment :in capital assets 71753,708 8,062,450 15,816,158 Restricted 21959,225 - 21959,225 Unrestricted 11128,354 61396,554 71524,908 Total Net Position $ 11,841,287 $ 14,459,004 $ 26,300,291 Governmental Activities Activities $ 4,584,966 14,290,588 18,875,554 2013 Tun Activities $ 11,606,584 12,214,647 23,821,231 29,831 67,151 537,988 1,214,889 71671,899 91063,764 81209,887 10,278,653 7,296,541 2,875,890 5231067 $ 10,695,498 $ 7,230,125 6,3791604 13,6091729 Total $ 16,191,550 261505,235 42,696,785 96,982 11752,877 16,735,663 18,488,540 14,526,666 2,875,890 6,902,671 $ 24,305,227 M[17 7,296,541 2,875,890 5231067 $ 10,695,498 $ 7,230,125 6,3791604 13,6091729 Total $ 16,191,550 261505,235 42,696,785 96,982 11752,877 16,735,663 18,488,540 14,526,666 2,875,890 6,902,671 $ 24,305,227 M[17 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 Statement of Activities: The following table provides a summary of the City's changes in net position: Revenues Program revenues: Charges for services Grants and contributions General revenues: Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Total Revenues For the Year Ended September 30, 2014 Total Governmental Business -Type Primary Activities Activities Government $ 1,572,344 $ 10,565,602 $ 364,763 260,250 2,816,275 1,361,774 229,018 4,316 255,348 6,603,838 14,047 31,240 10,871,139 For the Year Ended September 30, 2013 Governmental Business -Type Total 12,137,946 $ 1,564,364 $ 10,553,808 $ 12,118,172 625,013 219,727 - 219,727 2,816,275 2,495,024 - 2,495,024 1,361,774 11265,031 11265,031 229,018 167,494 167,494 18,363 41013 15,630 19,643 286,588 168,618 - 168,618 17,474,977 51884,271 10,569,438 16,453,709 Expenses General government 11523,127 11523,127 11483,872 11483,872 Public safety 2/396,415 21396,415 21260,904 21260,904 Public works 11235,621 - 11235,621 11351,685 - 11351,685 Culture and recreation 714,581 714,581 681,730 - 681,730 Interest and fiscal charges 287,657 341,421 629,078 308,171 177,384 485,555 Water, sewer, & electric 81981,091 81981,091 81933,392 81933,392 Total Expenses 61157,401 91322,512 15,479,913 61086,362 91110,776 15,197,138 Change in Net Position Before Transfers 446,437 11548,627 1,995,064 (202,091) 1,458,662 11256,571 Transfers 699,352 (699,352) 911,278 (911,278) Total 699,352 (699,352) 911,278 (911,278) Change in Net Position 11145,789 849,275 11995,064 709,187 547,384 11256,571 Beginning Net Position 10,695,498 13,609,729 24,305,227 91986,311 13,062,345 23,048,656 Ending Net Position $ 111841,287 $ 14,459,004 $ 26,300,291 $ 10,695,498 $ 13,609,729 $ 24,305,227 11 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 Graphic presentations of selected data from the summary tables are displayed below to assist in the analysis of the City's activities. Governmental Activities -Revenues Property taxes &R% Grants a contributions s°r Charges for services 24°!0 Sales taxes �1% Franchise and local taxes 3% vuler revenues 44a For the year ended September 30, 2014, revenues from governmental activities totaled $6,603,838. Property tax, sales tax and charges for services are the City's largest revenue sources. Property tax increased by $321,251 or 13% due to higher property values and an increase in the property tax rate. Sales tax increased $96,743 or 8% due to an overall increase in the economy and spending within the City limits. Grants and contributions increased by $145,036 due to grant revenue received from Denton County for the repair and construction of McReynolds road. All other revenues remained relatively stable when compared to the previous year. This graph shows the governmental function expenses of the City: Governmental Activities -Expenses Public safety 39 General goveirunent 25% Public works 7ggo Culture and recreation 11°0 fiscal charges 500 12 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 For the year ended September 30, 2014, expenses for governmental activities totaled $6,157,401. This represents an increase of $71,039 or 1% from the prior year. The City's largest functional expense is public safety of $2,396,415 which includes police, fire and EMS services plus depreciation of related capital assets. All 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, 2014, charges for services by business -type activities totaled $10,565,602. This is an increase of $11,794, or less than 1%, from the previous year. Grants increased by $260,250 due to a CDBG grant project for sanitary sewer improvements. Business -Type Activities -Revenues and Expenses i ®Expenses ■ Charges for Services Total expenses increased $211,736 due primarily to an increase in interest expense on bonds and long- term debt. All other expenses remained relatively consistent. 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 iinflows, 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. As of the end of the year the general fund reflected a total fund balance of $1,236,078. Of this, $7,513 is restricted for municipal court, $24,648 is restricted for tourism and $72,945 is restricted for library improvements. Unassigned fund balance totaled $1,100,802 as of year end. 13 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 There was an increase in governmental fund balance of $139,442 over the prior year. The increase was primarily related to the increase in property and sales tax previously discussed. The City also had a combination of higher than budgeted revenues and an overall positive budget variance for the year. 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 $148,320 in the general fund. This is a combination of a positive a revenue variance of $93,985, a positive expenditure variance of $91,025, and a negative variance of $36,690 in other financing sources and uses. CAPITAL ASSETS As of the end of the year, the City's governmental activities funds had invested $15,020,169 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 $12,430,202 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following: • Construction additions to a splash park totaling of $538,973 • McReynolds road construction in the amount of $310,300 • Freese sidewalk repair and improvements of $230,479 • Machinery and equipment additions for the streets department $530,573 • Jones &Willow Trunk Line construction of $496,063 • International Digger Truck addition for the electric department of $190,309 More detailed information about the City's capital assets is presented in note IV. C to the financial statements. LONG-TERM DEBT At the end of the current year, the City had total bonds outstanding of $14,010,000, notes payable of $479,210 and capital leases of $779,105. During the year, the City had principal payments on bonds, notes payable and capital leases of $1,503,041. During the year, the City entered into new capital lease agreements totaling $625,309. More detailed information about the City's long-term liabilities is presented in note IV. D to the financial statements. 14 City of Sanger, Texas MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued September 30, 2014 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 budgeting for growth in the upcoming year. 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. 15 (This page intentionally left blank.) 16 FINANCIAL STATEMENTS 1� (This page intentionally left blank,) City of Sanger, Texas STATEMENT OF NET POSITION September 30, 2014 Primary Government Governmental Business -Type Activities Activities Total Assets Cash and cash equivalents $ 11379,603 $ 11657,137 $ 31036,740 Investments 410,369 410,852 821,221 Restricted cash 11676,914 71044,030 81720,944 Restricted investments 480,916 579,429 11060,345 Receivables, net 769,606 11550,473 21320,079 Inventory - 429,331 429,331 Capital assets: Non -depreciable 11323,422 11135,765 21459,187 Net depreciable capital assets 13,696,747 111294,437 24,991,184 15,020,169 12,430,202 27,450,371 Total Assets 19,737,577 24,101,454 43,839,031 Deferred Outflows of Resources Deferred charge on refunding 25,919 58,344 84,263 Total Deferred Outflows of Resources 25,919 58,344 84,263 Liabilities Accounts payable and accrued liabilities 418,431 840,147 11258,578 Unearned revenue 34,920 - 34,920 Deferred rental revenue 91034 - 9,034 Accrued interest payable 53,202 54,034 107,236 Customer deposits - 351,494 351,494 Noncurrent liabilities: Due within one year 880,780 852,856 11733,636 Due in more than one year 61525,842 71602,263 14,128,105 71406,622 81455,119 15,861,741 Total Liabilities 71922,209 91700,794 17,623,003 Net Position Net investment in capital assets 71753,708 81062,450 15,816,158 Restricted for: Debt service 372,961 - 372,961 Capital projects 550,117 - 550,117 Economic development 11931,041 - 11931,041 Other purposes 105,106 - 105,106 Unrestricted 1,1281354 61396,554 71524,908 Total Net Position $ 11,841,287 $ 14,459,004 $ 26,300,291 See Notes to Financial Statements, 19 City of Sanger, Texas STATEMENT OF ACTIVITIES For the Year Ended September 30, 2014 Functions/I'rograrns Primary Government Governmental Activitiesm General governent Public safety Public works Culture and recreation Interest and fiscal charges Total Governmental Activities Business -Type Activities Water Sewer Electric Fleet services Utility administration Total Business -Type Activities Total Primary Government See Notes to Financial Statements. Expenses $ 1,523,127 21396,415 11235,621 714,581 287,657 6,157,401 927,386 669,601 6,581,113 101,102 1,043,310 9,322,512 $ 15,479,913 Charges for Services Program Revenues in Operatg Grants and Contributions Capital Grants and Contributions 715,887 76,338 281,791 1,572,344 82,972 281,791 1,374,672 - - 1,253,143 - 260,250 7,937,787 - - 10,565,602 - $ 12,137,946 $ 82,972 260,250 542,041 General Revenues: Taxes Property taxes Sales taxes Franchise and local taxes Investment income Other revenues Gain on sale of assets Insurance recoveries Transfers Total General Revenues and Transfers Change in Net Position Beginning Net Position Ending Net Position Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities Business-T ype Activities Total (11322,399) - (11235,621) - (714,581) - (287,657) - (660,036) (1,322,399) (1,235,621) (714,581) (287,657) (41220,294) - (4,220,294) 447,286 447,286 843,792 843,792 11356,674 11356,674 (101,102) (101,102) (11043,310) (1,043,310) 11503,340 11503,340 (41220,294) 11503,340 (21716,954) 2,816,275 - 2,816,275 1,361,774 - 1,361,774 229,018 - 229,018 41316 14,047 18,363 114/695 31,240 145/935 21,862 - 21,862 118/791 - 118,791 699/352 (699,352) - 5,366,083 1,145,789 10,695,498 (654,065) 849,275 131609,729 41712,018 1,995,064 24,305,227 $ 11,841,287 $ 1414591004 $ 26,300,291 21 Assets Cash and cash equivalents Investments Restricted cash Restricted investments Receivables, net Due from other funds City of Sanger, Texas BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2014 Capital General Projects $ 789,668 $ 419,901 410,369 - 35,071 - 112,731 - 459,377 166,342 Total Assets $ 1,8071216 Liabilities Accounts payable and accrued liabilities Due to other funds Unearned revenue Total Liabilities Deferred Inflows of Resources Unavailable revenue Property taxes EMS revenue Total Deferred Inflows of Resources $ 382,287 34,920 417,207 Fund Balances Restricted for: Municipal court Tourism Library Debt service Capital projects Economic development Committed for: Employee benefits Unassigned reported in: General fund Total Fund Balances Total Liabilities and Fund Balances $ See Notes to Financial Statements. Nonmaj or Governmental 0 $ 586,243 $ $ 36,126 36,126 43,237 - 110, 694 - 153,931 - 7,513 24,648 72,945 30,170 1,100,802 1,236,078 1,763,979 $ 22 5501117 550,117 586,243 170 ,034 1,6411843 3681185 1431887 2121500 449 2,536, $ 18 212,500 212,518 19,929 372,961 1,9311041 2,304,002 $ 2,516,520 Total Governmental Funds $ 1,379,603 410,369 1,676,914 480,916 769,606 212,500 $ 418,431 212,500 34,920 665,851 63,166 110,694 173,860 7,513 24,648 721945 3721961 5501117 1,9311041 30,170 11100,802 41090,197 $ 41692,882 City of Sanger, Texas RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS September 30, 2014 Fund Balances -Total Governmental Funds 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 Capital assets -net depreciable Other long-term assets are not available to pay for current -period expenditures and, therefore, are deferred in the governmental funds. Property tax receivable EMS receivable Deferred outflows of resources, represent a consumption of net position that applies to a future period(s) and is not recognized as an outflow of resources (expense/ expenditure) until then. Deferred charge on refunding Escalating payments for rent income are recorded when received as current financial resources in the fund financial statements whereas they are deferred and recorded ratably over the life of the lease in the government -wide financial statements. Some liabilities, including bonds payable and deferred charges, are not reported as liabilities in the governmental funds. Accrued interest Bond premium Non -current liabilities due in one year Non -current liabilities due in more than one year Net Position of Governmental Activities See Notes to Financial Statements. $ 4,090,197 1,323,422 13,6961747 63,166 110,694 25,919 (9,034) (53,202) (76,025) (880/780) (6,449,817) $ 11,841,287 23 City of Sanger, Texas STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS For the Year Ended September 30, 2014 General Revenues Property tax $ 21072,522 Sales tax 682,502 Franchise and local taxes 229,018 License and permits 85,887 Charges for services 770,570 Fire and rescue 535,916 Contributions and donations 61634 Intergovernmental 76,338 Fines and forfeitures 178,884 Investment income 21681 Other revenue 51528 Total Revenues 41646,480 Expenditures Current: General government 11219,171 Police department 11370,481 Municipal court 224,283 Fire and EMS 802,456 Parks and recreation 444,774 Public works 627,055 Debt service: Principal 99,019 Interest 71977 Capital outlay 675,757 Total Expenditures 51470,973 Excess of Revenues Over (Under) Expenditures (824,493) Other Financing Sources (Uses) Transfers in 836,752 Transfers (out) (437,100) Capital lease 435,000 Proceeds from sale of capital assets 21,862 Insurance recoveries 129,162 Total Other Financing Sources (Uses) 985,676 Net Change in Fund Balances 161,183 Beginning fund balances 11074,895 Ending Fund Balances $ 11236,078 See Notes to Financial Statements, Capital Projects Nonmaj or Governmental Total Governmental Funds 745,007 $ 679,272 281,791 - 1,087 250 1,385 93,680 282,041 11520,431 1,2251392 1,225,392 (943,351) 437,100 437,100 (506,251) 1,056,368 $ 550,117 612,606 284,762 898,521 621,910 212,500 (349,900) (137,400) 484,510 1,819,492 $ 2,304,002 $ 2,817,529 1,3611774 2291018 85,887 770,570 535,916 6,634 3581129 1791971 4,316 99,208 6,448,952 1,220,324 1,370,481 224,283 8021456 444,774 627,055 711,625 292,739 1/901,149 7/594/886 (1,145,934) 1,486,352 (787,000) 4351000 21,862 1291162 1,285,376 139,442 3,950,755 4,090,197 City of Sanger, Texas RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2014 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances -total governmental funds Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated usehil lives and reported as depreciation expense. Capital outlay Capital disposals, net Depreciation expense Revenues in the statement of activities that do not provide current financial resources are not reported as revenues it the funds. Property tax receivable EMS receivable Govermnental funds recognize escalating rental income as received. However, in the statement of activities, the rent is deferred and recognized ratably over the term of the lease agreement. 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 Accrued interest 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. Amortization of deferred charges on refunding Amortization of premium Debt issued Principal payments See Notes to Financial Statements. Change in Net Position of Governmental Activities $ 139,442 1,901,757 (101371) (1,1611805) (20,427) 19,173 15,487 (19,174) 1,168 (3,912) 7,826 (435,000) 711,625 $ 11145,789 25 City of Sanger, Texas STATEMENT OF NET POSITION PROPRIETARY FUND September 30, 2014 Water, Sewer & Electric Assets Current Assets Cash and cash equivalents $ 1,657,137 Investments 410,852 Restricted cash 7/044,030 Restricted investments 579,429 Receivables, net 11550,473 Inventory 429,331 Total Current Assets 11,671,252 Noncurrent Assets Capital assets: Non -depreciable 11135,765 Net depreciable capital assets 11,294,437 Total Noncurrent Assets 12,430,202 Total Assets 24,101,454 Deferred Outflows of Resources Deferred charge on refunding 58,344 Total Deferred Outflows of Resources 58,344 Liabilities Current Liabilities Accounts payable and accrued liabilities 840,147 Accrued interest 54,034 Customer deposits 3511494 Compensated absences -current 71,544 Bonds and capital leases payable -current 781,312 Total Current Liabilities 21098,531 Noncurrent Liabilities Compensated absences 7,949 Bonds and capital leases payable 71594,314 Total Liabilities 91700,794 Net Position Net investment in capital assets 81062,450 Unrestricted 61396,554 Total Net Position $ 14,459,004 See Notes to Financial Statements. 26 City of Sanger, Texas STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND For the Year Ended September 30, 2014 Operating Revenues Charges for services Connection fees Tap fees Other revenue Operating Expenses Salaries and wages Contracted services Utilities Materials and supplies Water and electric purchases Repairs and maintenance Depreciation Nonoperating Revenues (Expenses) Intergovm imental Investment income Interest expense Transfers (out) Total Operating Revenues Total Operating Expenses Operating Income Total Nonoperating Revenues (Expenses) Begiruung net position See Notes to Financial Statements. Income Before Transfers Change in Net Position Ending Net Position Water, Sewer & Electric $ 10,336,161 50,491 178,950 31,240 10,596,842 1,577,363 1971793 3171835 1051904 5,5001970 4061955 874,271 81981,091 1,615,751 260,250 14,047 (341,421) (67,124) 11548,627 (699,352) 849,275 13,609,729 $ 14,459,004 27 City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIEIARYFUND (Page 1 of 2) For the Year Ended September 30, 2014 Water, Sewer & Electric Cash Flows from Operating Activities Receipts from customers $ 10,531,006 Payments to suppliers and employees (6,5351623) Payments to employees (11548,514) Net Cash Provided by Operating Activities 21446,869 Cash Flows from Capital and Related Financing Activities Capital purchases (899,517) Capital grant 260,250 Principal paid on debt (791,416) Interest paid on debt (332,049) Net Cash (Used) by Capital and Related Financing Activities (11762,732) Cash Flows from Investing Activities Proceeds from sales and maturities of investments 584,938 Interest on investments 14,047 Net Cash Provided by Investing Activities 598,985 Net Increase (Decrease) in Cash and Cash Equivalents 583,770 Beginning cash and cash equivalents 81117,397 Ending Cash and Cash Equivalents $ 8,701,167 See Notes to Financial Statements. City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 2 o f 2) For the Year Ended September 30, 2014 Water, Sewer & Electric Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income $ 1,615,751 Adjustments to reconcile operating income to net cash provided: Depreciation 874,271 Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts receivable (83,474) Inventory 17,638 Increase (Decrease) in: Accounts payable and accrued liabilities (61166) Customer deposits 13,891 Compensated absences 14,958 Net Cash Provided by Operating Activities $ 21446,869 Schedule of Non -Cash Capital and Related Financing Activities Capital lease $ 190,309 See Notes to Financial Statements. 29 (This page intentionally left blank.) 30 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS September 30, 2014 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of Governrnent-Wide Financial Staternents 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 biisiness-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 1886 and operates under aCouncil- Manager form of government. The City provides: general government, public safety, public works, culture and recreation, water and sewer operations 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 City's 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 City's 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 City's 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 ill determining that the City's 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. 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 entity's financial statements to be misleading or incomplete. 31 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Blended Component Units Sanger Industrial Development Corporation (4A� The Sanger Texas Industrial Development Corporation ("4A fund") 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. Sanger Texas Development Corporation (4B) The Sanger Texas Development Corporation ("4B fund") 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. C. Basis of Presentation Government -Wide and Fund Financial Statements While separate government -wide and fund financial statements are presented, they are nterrelated. 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 interftund activity has been eliminated from the government - wide financial statements. Exceptions to this general mule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the 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, including its blended component units. Separate statements for each frond 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 nonrnajor funds. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. 32 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 funds received and expended for the construction and renovation of thoroughfares, arterial streets and drainage improvements in the City and construction, renovation, expansion and major improvement of various City facilities, acquisition of land and other large nonrecurring projects. 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. 33 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. 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 preparation of the goverrunent-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 ainounts 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 ci.n4rent 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 resot.crces ntensure�nent focus and the accrual 6nsis of nccournting. 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. 34 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Grants and similar items are recognized as revenue as soon as all eligibility requirements unposed by the provider have been met. The governmental fund financial statements are reported using the current fitt"I Utl resources trteasurenient focus and the anodified accrttal 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 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 m 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 net, 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 PositionlFund 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 Investtents 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 RR City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. 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. 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. 3. 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. 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. 36 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 4. Inventories and Prepaid Items The costs of governmental fund type inventories are recorded as expenditures when Lite related liability is incurred, (i.e., the purchase method). The inventories are valued at the lower of cost or market using the first-in/first-out method. Certain payments to vendors reflect costs applicable to future accounting periods (prepaid expenditures) are recognized as expenditures when utilized. 5. 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. 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. Estimated Asset Description 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 540 years 6. 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 outflozvs of resources, represents a consumption of net position that applies to a future periods) 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 37 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 statement of net position. A deferred charge on refunding results from Lite 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, inavailable 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. 7. 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 m the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. 8. 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. 9. 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). City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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 ul the assigned fund balance classification are itltended 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 subsequent 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. 10. 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 City's policy to liquidate compensated absences with future revenues rather than with currently available expendable resources. Accordingly, the City's govenunental funds recognize accrued compensated absences when it is paid. 11. Long -Term Obligations In the government -wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable goverrunental 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 39 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 expenditures. In Lite 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 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. 12. 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. 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 firnd balance -total governmental fluids and net position -governmental activities as reported in the vide statement 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. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 S. 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 budgeted item without Council approval. Appropriations lapse at the end of the year. Several supplemental budget appropriations were made during the year. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments As of September 30, 2014, the primary governrrtent had the following investments: Investment Type Fair Value Certificates of deposit $ 1,881,566 Total fair value $ 11881,566 Maturity Average (Years) Portfolio weighted average maturity 0.41 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. 41 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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, 2014, 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 Sales tax Franchise & local taxes EMS Accounts Other Allowance General $ 76,788 103,535 35,780 316,269 97,366 74,826 (245,187) $ 459,377 Capital Projects Nonmajor Governmental $ 31,831 $ - 123,201 166,342 $ 166,342 (11,145) WaterSewer , & Electric 11500,809 156,759 (107,095) $ 11550,473 Total $ 108,619 226,736 35,780 316,269 11598,175 397,927 (363,427) $ 21320,079 42 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 C. Capital Assets A summary of changes in governmental activities capital assets for the year end was as follows: Capital assets, not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets, being depreciated: Infrastructure Buildings and improvements Machinery and equipment Total capital assets being depreciated Less accumulated depreciation Infrastructure Buildings and improvements Machinery and equipment Total accumulated depreciation Net capital assets being depreciated Total Capital Assets Beginning Balances $ 906,307 42,771 949,078 10,919,425 7,074,483 2,510,199 20,504,107 4,509,453 1,040,663 1,612,481 7,162,597 13,341,510 $ 14,290,588 Increases 11225,392 11225,392 43,800 37,598 594,967 676,365 553,897 317,800 290,108 11161,805 (485,440) $ 739,952 Decreases/ Ending Reclassifications Balances Depreciation was charged to governmental functions as follows: General government Public safety Streets and sanitation Fire and rescue Culture and recreation Total Governmental Activities Depreciation Expense (851,048) (851,048) 851,048 (67,184) (290,189) 493,675 (58,384) (288,618) (347,002) $ 906,307 417,115 11323,422 11,814,273 71044,897 21814,977 21,674,147 5,063,350 1,300,079 11613,971 71977,400 13,696,747 $ 15,020,169 74,818 95,050 603,318 116,452 272,167 $ 1,161,805 CSC_' City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September ou, 2014 A summary of changes in business -type activities capital assets for the year end was as follows: Capital assets, not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets, being depreciated: Infrastructure Buildings and improvements Machinery and equipment Total capital assets being depreciated Less accumulated depreciation Infrastructure Buildings and improvements Machinery and equipment Total accumulated depreciation Net capital assets being depreciated Total Capital Assets Beginning Balances $ 323,164 455,469 22,458,123 860,133 11664,835 24,983,091 11,663,158 269,043 1,291,712 13,223,913 11,759,178 $ 12,214,647 Increases 763,214 763,214 58,100 13,524 254,988 326,612 695,765 55,227 123,279 874,271 (547,659) $ 215,555 Decreases/ Reclassifications Depreciation was charged to business -type activities as follows: Water (82,918) (82,918) 28,448 (8,412) (231,337) (211,301) (54,470) (81412) (231,337) (294,219) $ 280,161 Sewer 237,716 Electric 338,542 Other 17,852 Total Business -type Activities Depreciation Expense $ 874,271 D. Long-term Debt Ending Balances $ 323,164 812,601 11135,765 22,544,671 865,245 1,688,486 25,098,402 12,304,453 315,858 11183,654 13,803,965 11,294,437 $ 12,430,202 The following is a summary of changes in the City's total governmental long-term liabilities for the year ended, Itl general, the City uses the debt service fund to liquidate governmental long-term liabilities, City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Governmental Activities: Bonds, notes and other payaUles: General Obligation Bonds Certificates of Obligation Less deferred amounts: For issuance premiums Other liabilities: Notes payable Capital leases payable Compensated absences Total Governmental Activities Beginning Balance $ 1,3311000 51407,800 83,851 61822,651 516,816 2371364 95,068 $ 7,6711899 Long-term liabilities due in more than one year Business -Type Activities: General Obligation Bonds Certificates of Obligation Less deferred amounts: For issuance premiums Other liabilities: Capital leases payable Compensated absences Total Business -Type Activities $ 1,694,000 6,787,200 346,162 8,827,362 171,867 64,535 $ 91063,764 Long-term liabilities due in more than one year Additions 435,000 103,202 $ 538,202 190,309 76,134 $ 266,443 Reductions (399,000) (582,826) (37,606) (99,019) (84,028) $ (803,479) (411,000) (22,496) (657,496) (156,416 ) (61,176) $ (875,088) Amounts Ending Due within Balance One Year $ 1,155,000 51008,800 76,025 6,239,825 479,210 573,345 114,242 $ 71406,622 $ 6,525,842 $ 1,470,000 6,376,200 323,666 8,169,866 205,760 79,493 $ 81455,119 $ 71602,263 $ 182,600 412,700 595,300 40,093 142,569 102,818 $ 880,780 $ 232,400 432,300 664,700 116,612 $ 71,544 852,856 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. 45 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September ou, 2014 Long-term debt at year end was comprised of the following debt issues: Business - General Obligation Bonds: $3,495,000 General Obligation Refunding Bond, Series 2012, due in installments through 2021, interest at 2% to 3% Total General Obligation Bonds Certificates of Obligation: $6,500,000 Certificates of Obligation, Series 2006, due in annual installments through 2021, interest at 4% to 5% $1,750,000 Certificates of Obligation, Series 2007, due in annual installments through 2027, interest at 4.4% $3,200,000 Certificates of Obligation, Series 2009, due in annual installments through 2026, interest at 3% to 4.75% $4,260,000 Certificates of Obligation, Series 2013, due in annual installments through 2033, interest at 2% to 3.7% Less deferred amounts: Issuance premium Total Certificates of Obligation Total Deferred Amounts Notes Payable: $660,000 Notes payable to a financial institution, due in monthly installments of $5,106 through June 2024, including interest at 4.6% Total Notes Payable Capital Leases Payable: $807,573 Capital lease payable to financial institution, due in annual installments of $104,454 through 2015, interest at 1.77% $340,119 Capital lease payable to financial institution, due in annual installments of $106,996 through 2016, interest at 3.3% $190,309 Capital lease payable to financial institution, due in annual installments of $50,235 through 2017, interest at 2.89% $435,000 Capital lease payable to financial institution, due in annual installments of $51,535 through 2024, interest at 3.346% Compensated Absences Total Capital Leases Payable Total Long-term Liabilities Governmental Type Activities Activities $ 1,155,000 $ 11155,000 $ 1,616,900 443,700 2,455,000 493,200 $ 51008,800 $ 76,025 $ 76,025 $ 479,210 $ 479,210 138,345 435,000 $ 573,345 114,242 $ 7,406,622 $ 1,470,000 $ 11470,000 $ 1,898,100 861,300 Total $ 2,625,000 $ 21625,000 $ 3,515,000 1,305,000 2,455,000 3,616,800 4,110,000 $ 6,376,200 $ 11,385,000 $ 323,666 $ 323,666 $ 70,492 135,268 $ 205,760 7%493 $ 81455,119 $ 399,691 $ 399,691 $ 479,210 $ 479,210 $ 70,492 138,345 135,268 435,000 $ 779,105 193,735 $ 15,861,741 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 The annual requirements to amortize governmental and business -type activities debt issues outstanding at year ending were as follows: General Obligation Bonds Year ending Governmental Activities September 30, Principal Interest 2015 $ 182,600 $ 31,614 2016 184,800 27,962 2017 154,000 22,418 2018 156,200 17,798 2019 162,800 2020 169,400 2021 145,200 $ 11155,000 13112 , 8,228 3,993 $ 125,125 Business -Type Activities Principal Interest $ 232,400 $ 40,236 235,200 35,588 196,000 28,532 198,800 22,652 207,200 16,688 215,600 10,472 184,800 51082 $ 11470,000 $ 159,250 Combination Tax and Revenue Certificates of Obligations Year ending September 30, 2015 2016 2017 2018 2019 Governmental Activities Principal Interest $ 412,700 $ 210,315 428,600 194,926 447,400 176,803 459,900 159,199 480,800 140,888 2020 499,600 121,729 2021 521,100 101,706 2022 273/500 79,919 2023 286,400 68,258 2024 297/000 55,768 2025 309/300 42,686 2026 323/900 28,194 2027 71,800 13,024 2028 28,800 9,768 2029 30,600 8,400 2030 31,800 61870 2031 33,600 5,280 2032 35,400 31600 2033 36,600 11830 $ 5/008/800 $ 1,429,162 $ 200 6,376, Business -Type Activities Principal Interest $ 432,300 $ 258,053 446,400 243,467 467,600 225,820 480,100 209,883 494,200 192,630 515,400 174,794 533,900 155,364 236,500 135,067 248,600 127,002 253,000 118,527 260,700 109,019 276,100 97,363 288,200 85,021 211,200 71,632 224,400 61,600 233,200 50,380 246,400 38,720 259,600 26,400 268,400 13,420 $ 21394,161 47 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 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. Capital Lease Year ending Governmental Activities September 30, Principal Interest 2015 $ 2016 2017 2018 2019 2020 2021 2022 2023 2024 142,569 74,090 39,606 40,931 42,301 43,716 45,179 46,690 48,252 50,011 $ 573,345 $ 15,962 14,392 11930 , 10,604 9,235 7,819 6,357 4,845 3,283 1,668 $ 86,095 Business -Type Activities Principal Interest $ 116,612 $ 91088 47,452 21783 41,696 11411 $ 205,760 $ 13,282 The City has entered into capital lease agreements. The leased property under capital leases is classified as machinery and equipment with a total capitalized cost of approximately $1,773,001 as of year end. Note Payable Year ending Governmental Activities September 30, Principal Interest 2015 $ 40,093 $ 21,174 290 19, 17,318 15,253 13,091 10,828 8,458 5,977 3,380 4,063 $ 118,832 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 E. Conduit Debt The City issued notes payable totaling $230,461,407 for the purpose of assisting with financing needed by not4or-profit organizations to promote their cause. Final maturities on notes payable range from March 2017 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. F. Deferred Charge on Refunding A deferred charge resulting from the issuance of the 2012 general obligation refunding bonds has been recorded as a deferred outflow of resources and is being amortized to interest expense over the term of the refunded debt. Current year balances for governmental and business -type activities totaled $25,919 and $58,344, respectively. Current year amortization expense for governmental and business -type activities totaled $3,912 and $8,807, respectively. G. Interfund Transactions The compositions of interfund balances as of year end were as follows: Funds Debt Service: 4B Fund 4B Fund Debt Service Due from $ 212,500 $ 212,500 212,500 $ 212,500 Amounts recorded as "due to/from" are considered to be temporary loans and will be repaid during the following year. City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 Transfer out: General Nonmajor Governmental Water, Sewer & Electric Transfer In Nonmajor General Capital Projects Governmental WEEN $ - $ 437,100 $ - 137,400 $ 437,100 , $ 212,500 Total $ Amounts transferred between funds relate to amounts collected, various capital expenditures, annual funding, and debt payments. H. Fund Equity The City records restricted net position on amounts with externally imposed restrictions (e.g., through debt covenants or by grantors) or restrictions imposed by law through constitutional provisions or enabling legislation. Total restricted net position for the primary government was $2,959,225. Of which, $32,161 is restricted by enabling legislation. 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 2,617 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. 50 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 C. Construction commitments The goveriunent has active construction projects as %J September 30, 2014. 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 Sewer Line 15" Chapman to Belz West Side I35 WL Ext-Chapman to Belz Sewer Line 18" South of Utility Sewer Line 15" Utility to Lois Sewer Line 12" Lois to View WL Lois to View McReynolds Road New Sewer Plant Server Consolidation Jones & Willow Truck Line - CDBG Jones & Willow Truck Line - CDBG Remaining Vendor Commitment Pacheco Koch $ 16,642 Pacheco Koch 1,694 Pacheco Koch 34,668 Pacheco Koch 32,278 Pacheco Koch 19,780 Pacheco Koch 23,416 Total Water/WW Lines 128,478 Pacheco Koch 127,619 Alan Plummer 867,777 Austin Lane 26,063 Teague Nall & Perkins 91637 Grantworks 21950 Total CDBG 11034,046 Total $ 1,162,523 51 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 D, Rental Income On March 1, 2012, the City entered into a non -cancelable lease agreement with a corporation of which a city council member is a principal member of management. The leased property is owned by the 4A Fund and has a cost $1,083,797 with accumulated depreciation of $176,425 as of September 30, 2014. The lease provides for a base rent and an adjustment each year related to excess operating expenses (if any) incurred annually. During the year ended September 30, 2014, the City received $78,667 in rental revenue. Minimum future rentals on non -cancelable tenant operating leases at September 30, 2014 are $45,889. This represents the total rentals for the 2015 fiscal year, which is the final year of the lease agreement. E. 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. F. Pension Plans 1. Texas Municipal Retirement Systems Plan Description The City provides pension benefits for all of its eligible employees through a non- traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple -employer public employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. TMRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contributions, benefits and actuarial methods and assumptions used by the System. This report may be obtained by writing to TMRS, P.O. Box City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 149153, Austin, TX 78714-9153 or by calling 800-924-8677; in addition, the report is available on TMRS' website at waa w.TMRS.co n. 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: Employee deposit rate Matching ratio (city to employee) Years required for vesting Service retirement eligibility (expressed as age / years of service) Updated service credit Amluity increase (to retirees) Contributions Plan Year 2013 6.0% 2to1 5 60/5, 0/20 100%Repeating Transfers 0% of CPI Plan Year 2014 6.0% 2to1 60/5, 0/20 100%Repeating Transfers 0% of CPI Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS Plan at an achiarially determined rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation/ (asset) are as follows: Three -Year Contribution Information Annual Pension Cost (ARC) Actual Contributions Made Percentage of APC Contributed Net Pension Obligation/Asset NPO at the End of Period 2014 2013 2012 10,201 $ 210,201 $ 196,672 $ 191,163 $ 2$ 196,672 $ 1911163 100% 100% 100% 53 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 The required contribution rates for fiscal year 2014 were determined as part of the December 31, 2011 and 2012 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2013, also follows: Valuation Date 12/31/2011 Actuarial Cost Method Projected Unit Credit Amortization Method Level Percent of Payroll GASB 25 Equivalent Single 21.8 years; closed Amortization Period period Amortization Period for new 25 years Gains/Losses Asset Valuation Method 10-year Smoothed Market Actuarial Assumptions: Investment Rate of Return Projected Salary Increases * Varies by age and service * Includes Inflation at 3.00% Cost -of -Living Adjustments 0.0% 12/31/2012 Projected Unit Credit Level Percent of Payroll 21.1 years; closed period 25 years 10-year Smoothed Market Varies by age and service 3.00% 0.0% 12/31/2013 Entry Age Normal Level Percent of Payroll 30 years; closed period 25 years 10-year Smoothed Market Varies by age and service 3.00% 0.0% The funded status as of December 31, 2013, the most recent actuarial valuation date, is as follows: Actuarial Valuation Date 12/31/2013 Actuarial Value of Assets $ 5,783,587 Actuarial Accrued Liability $ 61740,172 Percentage Funded 85.8% Annual Covered Payroll $ 2,928,323 Unfunded Actuarial Accrued Liability$ (956,585) (UAAL) % of Covered Payroll (32.7)% Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided Linder the terms of the substantive plan in effect at the time of each valuation, and reflect along -term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial 54 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 value of assets. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multi -year trend nformation about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. Supplemental Death Benefits Plan The City also participates u1 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 alump-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 $7,500.6 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. The City's retiree contribution rates to the TMRS SDBF for the years ended 2013, 2012 and 2011 are as follows: Plan/ Calendar Year 2012 2013 2014 Annual Required Contribution (Rate) 0.01 0.01% 0.01 % Actual Contribution Made (Rate) 0.01 % 0.01% 0.01% Percentage of ARC Contributed 100.0% 100.0% 100.0% The City's contributions to the TMRS SDBF for the years ended 2014, 2013 and 2012 were $306, $293 and $263, respectively, which equaled the required contributions each year. 55 City of Sanger, Texas NOTES TO FINANCIAL STATEMENTS, Continued September 30, 2014 G. Restatement The City has restated beginning net position wn governmental activities, business -type activities, and water/sewer/electric funds due to a change in the amortization of bond discounts and premiums. The restatement of beginning net position is as follows: Prior year ending net position as reported Change in bond discount and premium amortization Restated beginning net position Prior year ending net position as reported Change in bond discount and premium amortization Restated beginning net position H. Subsequent Events Governmental ivities Act $ 10,725,976 (30,478) $ 10,695,498 Business -Type Activities Water, Sewer & Electric $ 13,641,820 $ 13,641,820 (32,091) $ 13,609,729 (32,091) $ 13,60%729 There were no material subsequent events through February 26, 2015, the date the financial statements were issued. 56 REQUIRED S UPPLEMENTARY INFORMATION 57 (This page intentionally left blank.) 6101 City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND For the Year Ended September 30, 2014 Revenues Property tax Sales tax Franchise and local taxes License and permits Charges for services Fire and rescue Contributions and donations Intergovernmental Fines and forfeitures Investment income Other revenue Original Budget 2,085,500 653,000 184,600 107,900 808,000 460,000 36,000 165,000 2,500 Total Revenues 4,502,500 Expenditures Current: General government Police department Municipal court Fire and EMS Parks and recreation Public works Debt service: Principal Interest Capital outlay Total Expenditures Revenues Over (Under) Expenditures Other Financine Sources (Uses) Transfers in Transfers (out) Capital lease Proceeds from sale of capital assets Insurance recoveries Total Other Financing Sources Net Change in Fund Balance Beginning fund balance Ending Fund Balance Final Budget 2,085,500 6531000 1841600 1071900 8081000 4601000 85,995 165,000 2,500 4,552,495 Actual 2,072,522 6821502 2291018 85,887 770,570 5351916 6,634 76,338 1781884 2,681 5,528 4,646,480 Variance with Final Budget Positive (Negative) 0 (12,978) 29,502 44,418 (22,013) (37,430) 75,916 6,634 (9,657) 13,884 181 5,528 93,985 1,236,719 11223,948 11219,171 41777 1,307,651 11375,173 11370,481 41692 213,384 224,693 224,283 410 841,652 814,810 802,456 12,354 575,383 493,974 444,774 49,200 912,421 631,766 627,055 41711 99,020 7,980 1611650 5,355,860 (853,360) 99,020 7,980 6901634 5,561,998 99,019 7,977 675,757 5,470,973 (1,009,503) (824,493) 873,400 873,400 - (387,100) 435,000 101,066 $ 873,400 20,040 Notes to Required Supplementary Information 1,022,366 $ 12,863 836,752 (437,100) 435,000 21,862 129,162 985,676 161,183 1,074,895 $ 1,236,078 1 3 14,877 91,025 185,010 (36,648) (50,000) 21,862 28,096 (36,690) $ 148,320 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). l.'Y: (This page intentionally left blank.) City of Sanger, Texas SCHEDULE OF FUNDING PROGRESS - TEXAS MUNICIPAL RETIREMENT SYSTEM The City's annual covered payroll and pension costs are actuarially valued on a calendar year basis. Because the City makes all the annually required contributions, no net pension obligation (NPO) exists. The information presented below represents the City's Schedule of Funding Progress. Actuarial Valuation Date Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Unfunded Actuarial Accrued Liability Annual Covered Payroll Unfunded Actuarial Accrued Liability (UAAL) % of Covered Payroll Net Pension Obligation (NPO) at the Beginning of Period Annual Req. Contrib. (ARC) Contributions Made NPO at the End of Period 12/31/2013 $ 51783,587 $ 61740,172 85.8% $ 956,585 $ 21928,323 32.7% $ 210,201 $ 210,201 12/31/2012 12/31/2011 $ 51179,812 $ 41691,607 $ 5,465,145 $ 51122,534 94.8% 91.6% $ 285,333 $ 430,927 $ 21626,335 $ 2,662,684 10.9% 16.2% $ 196,672 $ 196,672 61 City of Sanger, Texas COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2014 Debt Service 4A Fund Assets Cash and cash equivalents $ 103,024 $ 52,367 Restricted cash 56,680 11028,976 Restricted investments - 93,765 Receivables, net 20,686 71,434 Due from other funds 212,500 - Total Assets $ 392,890 $ 11246,542 Liabilities Accounts payable and accrued liabilities $ - $ 18 Due to other funds - - Total Liabilities - 18 Deferred Inflows of Resources Unavailable revenue Property taxes 19,929 - Total Deferred Inflows of Resources 19,929 - Fund Balances Restricted for: Debt service 372,961 - Economic development - 1,246,524 Total Fund Balances 372,961 11246,524 0 0 4B Fund 14,643 $ 170,034 556,187 11641,843 274,420 368,185 51,767 143,887 212,500 Total Nonmaj or Governmental 897 ,017 $ 2,536,449 $ - $ 18 212,500 212,500 212,500 212,518 Total Liabilities and Fund Balances $ 392,890 $ 1,246,542 $ 19,929 19,929 372,961 684,517 1,931,041 684,517 21304,002 897,017 $ 21536,449 r:� City of Sanger, Texas COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended September 30, 2014 Debt Service Revenues Property tax $ 745,007 $ Sales tax - Fines and forfeitures - Investment income 113 Other revenue 13 Total Revenues 745,133 Expenditures Current: General government 11135 Debt service: Principal 575,000 Interest 261,101 Total Expenditures 837,236 Excess of Revenues Over (Under) Expenditures (92,103) 339,636 1,087 88,667 429,390 37,606 23,661 61,285 368,105 Total Nonmaj or 4B Fund Governmental 339,636 1,272 5,000 345,908 345,908 $ 745,007 679,272 1,087 1,385 93,680 1,520,431 1,153 612,606 284,762 898,521 621,910 Other Financing Sources (Uses) Transfers in 212,500 - - 212,500 Transfers (out) (107,000) (15,200) (227,700) (349,900) Total Other Financing Sources (Uses) 105,500 Net Change in Fund Balances 13,397 Beginning fund balances 359,564 Ending Fund Balances $ 372,961 $ (15,200) (227,700) 352,905 118,208 893,619 1,246,524 566,309 (137,400) 484,510 1,819,492 $ 684,517 $ 2,304,002 63 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, 2014 Operating Revenues Charges for services Connection fees Tap fees Other revenue Total Operating Revenues Operating Expenses Salaries and wages Contracted services Utilities Materials and supplies Water and electric purchases Repairs and maintenance Depreciation Total Operating Expenses Operating Income Nonoperating Revenues (Expenses) Intergoverrunental Investment income Interest expense Nonoperating Revenues (Expenses) Income Before Transfers Transfers (out) Change in Net Position Water Sewer Electric Fleet Services $ 11294,722 $ 11154,143 $ 71887,296 $ - 50,491 - 79,950 99,000 - - 11374,672 11253,143 71937,787 - 286,529 145,542 529,171 74,420 12,669 28,739 43,178 41121 126,025 163,590 91386 71796 22,705 15,254 40,892 61930 53,243 - 51447,727 - 146,054 78,760 172,217 61623 280,161 237,716 338,542 11212 927,386 669,601 61581,113 101,102 447,286 583,542 11356,674 (101,102) 260,250 - - 260,250 - - 447,286 843,792 11356,674 (101,102) (393,352) - $ 447,286 $ 843,792 $ 963,322 $ (101,102) Administration 31,240 31,240 541,701 109,086 11,038 20,123 3,301 16,640 701,889 (670,649) Total $ 10,336,161 50,491 178,950 31,240 10,596,842 1,577,363 197,793 317,835 105,904 5,500,970 406,955 874,271 8,981,091 1,615,751 - 260,250 14,047 14,047 (341,421) (341/421) (327/374) (67/124) (998,023) 1,548,627 (306,000) (699,352) $ (1,304,023) $ 849,275 65 (This page intentionally left blank.) APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY MUNICIPAL BOND INSURANCE POLICY ISSUER: BONDS: $ in aggregate principal amount of • • .. i 10 •.- - . - a• he terms of ••licy (which includes each endorsement - - • : • • . • . . - •�,r. • . . the Issuer. h •'All. .. i • tea• _�.• • •. - • : . .. VV � � • • 11 d •n of •' Policy. r • 1 a • '• -• • • • •' • • '• "Bw t principal or interest I •--recovered from such Owner Page 2 of 2 Policy No. -N United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer r any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. <r •gent or - of • deposit or - to be deposii.-i ig i • ORION• Policy, To the fullestextent permitted by . 1 1 . 1 -law, Aa e- • • g `• - - Ly • • • • • - • ,Ei 1 -Y • e•.• • - - RAW NCE CURITY FUND SPECIFIED IN ARTICLE 76 MUNICIPAL CORP. has caused this Policy to be ASSURED GUARANTY MUNICIPAL CORP. Authorized Officer A subsidiary ofAssured Guaranty Municipal Holdings Inc. 31 West 52nd Street, New York, N.Y. 10019 (212) 974-0100 Form 500NY (5/90) PAYING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of October 19, 2015 (together with any amendments or supplements hereto, the "Agreement") is entered into by and between the CITY OF SANGER, TEXAS (the "Issuer"), and BOKF, NA, Austin, Texas, as paying agent/registrar (together with any successor in such capacity, the "Bank"). WITNESSETH0 WHEREAS, the Issuer has duly authorized and provided for the issuance of its City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates") in the aggregate principal amount of $5,870,000 to be issued as fully registered certificates; WHEREAS, all things necessary to make the Certificates the valid obligations of the Issuer, in accordance with their terms, will be done upon the issuance and delivery thereof; WHEREAS, the Issuer 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 Issuer 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: APPOINTMENT OF BANK AS PAYING AGENT AND REGISTRAR Section 1.01. Appointment. The Issuer 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. The Issuer hereby appoints the Bank as Registrar with respect to the Certificates. The Bank hereby accepts its appointment, and agrees to act as Paying Agent and Registrar with respect to the Certificates. 70433180_1 Section 1.02, Compensation. In consideration of the deposits of funds required to be made with the Banlc by the Issuer 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 BOKF, NA, 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 "City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015" authorized by the Ordinance. "Issuer" means the City of Sanger, Texas. "Ordinance" means the ordinance of the Issuer approved by its City Council on October 19, 2015 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, associations, 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. 70433180_1 ARTICLE THREE DUTIES OF THE BANK Section 3.01. Initial Delivery of the Certificates. The Certificates will be initially registered "].I delivered by the Bank to the purchaser designated by the Issuer 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 Pang A eg_nt. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer 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 Re isg tsar. 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 Issuer 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 bonds. 3 70433180_1 Section 3.05. Reports, Upon request of the Issuer, the Bank will provide the Issuer 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 Issuer. The Issuer 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 Issuer, 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 Issuer immediately so that the Issuer may contest the subpoena, court order or other request if it so chooses. Section 3.06. Canceled Certificates. All Certificates sui7•endered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly canceled by it and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already canceled, shall be promptly canceled by the Bank. The Issuer may at any time deliver to the Bank for cancellation any Certificates previously authenticated and delivered which the Issuer 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 and evidence of such destruction shall be furnished to the Issuer. 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 Issuer. (b) The Bank shall not be liable to the Issuer 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 Issuer as prepared by the Issuer's financial advisor or other agent. The Bank may act on a 70433180_1 facsimile transmission of the closing memorandum to be followed by an original of the closing memorandum signed by the financial advisor or the Issuer. Section 3.08, Money Held by Banlc. Money held by the Bank hereunder shall be held in trust for the benefit of the Registered Owners of the Certificates. 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 Issuer. 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 Issuer upon receipt of a written request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with the foregoing provision. ARTICLE FOUR MISCELLANEOUS PROVISIONS Section 4.01. May Own Certificates. The Banlc, 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. Assianment. This Agreement may not be assigned by either party without the prior written consent of the other. 5 70433180_1 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 Issuer or the Bank shall be mailed or delivered to the Issuer 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 Issuer 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 Issuer. 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. 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 Banlc 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 Issuer or the Banlc 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 Issuer or its designee all funds, Certificates and all books and records pertaining to the Banlc's role as Paying Agent and Registrar with respect to the Certificates, including, but not limited to, the books of registration. 0 70433180_1 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. F 70433180_1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF SANGER, TEXAS Mayor ADDRESS: 201 Bolivar Street Sanger, Texas 76266 ATTEST: By. Title, ADDRESS: 100 Congress Avenue Suite 250 Austin, Texas 78701 Attn: Corporate Trust Dept, ATTEST: By: Title: (SEAL) 70433180_1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF SANGER, TEXAS Mayor ADDRESS: 201 Bolivar Street Sanger, Texas 76266 ATTEST: City Secretary (SEAL) BOKF, Y' Title: )nSF A C;/�Y I Ara �rc V . �-- ADDRESS: 100 Congress Avenue Suite 250 Austin, Texas 78701 Attn: Corporate Trust Dept. ATTEST: Title: �Tf s1Officer ti (SEAL) 70433180_1 EXHIBIT A Fee Schedule 70433180_I • cn Services provided by BOKF, NA $5,8/0,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 PAYING AGENT/REGISTRAR Schedule of Fees Acceptance Fee: $ o Annual Administration Fee: $500.00 (Billed Semi -Annually @ $250.00 w/Debt Service) For ordinary administration services by Paying Agent /Registrar —includes daily routine account management and processing in accordance with the agreement. Float credit received by the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's compensation. Call or Redemption of Bonds At Cost Cost includes distribution to holders of record, redemption processing and notification through EMMA. Any and all publication expenses including Bond Buyer, Regional and Financial Periodicals for the call notice will be billed to the Issuer at cost. Charges for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in the amounts commensurate with the service provided. Counsel fees, if ever retained as a result of a default, or other extraordinary occurrences on behalf of the bondholders or Bank of Texas, will be billed at cost. Services not included in this Fee Schedule, but deemed necessary or desirable by you, maybe subject to additional charges. Our proposal is subject in all aspects to review and acceptance of the final financing documents which sets forth our duties and responsibilities. Jose Gaytan BOICFinancial Vice President Corporate T5•ust Services Tei0 512.Sig.2oo2 too Congress Avenue Fax: 512.813.2020 Suite 250 JGautan(&bokrcom Austin TX 8 of 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 $5,870,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015, dated November 1, 2015 (the "Certificates"), now in the process of issuance, as follows: (1) The City is a duly incorporated Home Rule City, having more than 5,000 inhabitants, operating and existing under the Constitution and laws of the State of Texas and the duly adopted Home Rule Charter of the City, which Charter has not been changed since the approval by the Attorney General of the State of Texas of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2013, dated June 15, 2013, which were the last obligations issued by or on behalf of the City. (2) The Certificates are being issued to provide funds (1) to pay all or any part of the contractual obligations to be incurred for the (i) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (11) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities, (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, and (2) for the payment of contractual obligations for professional services pursuant to Subchapter C of Chapter 271, Texas Local Government Code, as amended. (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 2015, 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 $465,804,829. (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 Russell Martin Gary Bilyeu William Boutwell Allen Chicle David Clark Mayor Councilman Mayor Pro Tem Councilman Councilman Councilman (5) Tami Taber has been the duly appointed and qualified City Secretary of the City. 70433183_3 (6) Save and except for the pledge of the Net Revenues of the System to the payment of the Cer tifrcates and the City's Combination Tax and Revenue Certificates of Obligation, Series 2006, Combination Tax and Revenue Certificates of Obligation, Series 2007, Combination Tax and Revenue Certificates of Obligation, Series 2009 and the City's Combination Tax and Revenue Certificates of Obligation, Series 2013, the Net Revenues of the System have not been pledged in any other manner or for any other purpose, and the pledge of the Net Revenues of the System to the Certificates evidences the only lien, encumbrance, or indebtedness of the System or against Net Revenues of the 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, frill 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 $24,794,704.58. (8) The following is a h•ue, full and current schedule of System revenues, remaining after the payment of all operation and maintenance expenses thereof ("Net Revenues"), for the last three fiscal years: 2012 $9575983 Fiscal Year Ended September 30, 2013 $1,418,842 2014 $2,422,898 (9) The current monthly rates and charges for services provided by the System are as follows; Water Rates Existnrg Rates Residential (Effective Jauuary 1, 2015) Mirurnum per unit served for 0 - 1,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 30,000 $19.72 3.41 pes thousand gallons 3.75 per thousand gallons 4.60 per thousand gallons 5.92 per thousand gallons Commercial (Effective January 1, 2015) Mirurnurn per runt served for 0 - 1,000 gallons Next. 4,000 gallons Next 10,000 gallons Next.15,000 gallons Over 301,000 3.96 per $24.97 thousand gallons 4.29 per thousand gallons 4.68 per thousand gallons 5.78 per thousand gallons 70433183_3 2 Sewer Rates Rates Ivl mmum (first 1,000 gallons) $ 22.77 Per 1,000 gallons over first 1,000 gallons 3016 Per 1,000 gallons in excess of 10,000 gallons 3.51 Maximum per month 60.00 Commercial (Effecti�e January 1, 2015) 3/., inch meter $ 33.52 1 inch meter 36.69 1% inch meter 41.75 2 inch ureter 50.77 3 inch meter 62.62 4 inch ureter 116.21 6 inch meter 154A5 8 inch meter 203.84 Per 1,000 gallons over first 1,000 gallonns 3.16 Per 1,000 gallons in excess of 10,000 gallons 3.51 Multi -Family Dweilings The amount due for multi -family dwellings shall be the residential rate multiplied by the munber of occupied dwelling units. (11) 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 System. 3 70433183_3 SIGNED AND SEALED this October 19, 2015. City Secretary ti1Att tkA p�`rje ( Cupp SEAL) I�::a's : " , C! CITY OF SANGER, TEXAS Mayor 70433183_I Exhibit A Debt Service Schedule for the Certificates 70433183_3 Oct 19, 2015 1:01 pm Prepared by Oppenheimer & Co. Page 6 BOND DEBT SERVICE City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Final Numbers Period Annual Ending Principal Interest Debt Service Debt Service 05/15/2016 100,548.33 1005548.33 09/30/2016 100,548.33 11/15/2016 1005000 98,900.00 1985900A0 05/15/2017 97,900.00 975900A0 09/30/2017 296,800.00 11/15/2017 115,000 97,900A0 2121900A0 05/15/2018 965750.00 963750.00 09/30/2018 30%650.00 11/15/2018 1159000 96,750.00 211,7%00 05/15/2019 955600.00 95,600.00 09/30/2019 307,3%00 11/15/2019 110,000 95,600.00 205,600.00 05/15/2020 939950M 935950.00 09/30/2020 2993550.00 11/15/2020 180,000 93,950.00 273,950.00 05/15/2021 915250M 91,250.00 09/30/2021 365,200.00 11/15/2021 295,000 91,250A0 3865250.00 05/15/2022 86,825.00 865825.00 09/30/2022 473,075.00 11/15/2022 285,000 865825,00 371,825.00 05/15/2023 82,550.00 82,5%00 09/30/2023 454,375.00 11/15/2023 2905000 82,550.00 3723550A0 05/15/2024 783200400 78,200400 09/30/2024 450,7%00 11/15/2024 300,000 78,200A0 378,200.00 05/15/2025 733700.00 73,700.00 09/30/2025 451,900400 11/15/2025 3105000 739700M 3835700600 05/15/2026 6%050.00 695050600 09/30/2026 452,750.00 11/15/2026 320,000 695050.00 389,0%00 05/15/2027 63,850.00 639850A0 09/30/2027 452,900.00 11/15/2027 3305000 635850.00 393,8%00 05/15/2028 58,075A0 58,075.00 09/30/2028 451,925A0 11/15/2028 3405000 58,075A0 3985075.00 05/15/2029 52,125.00 525125600 09/30/2029 450,200.00 11/15/2029 355,000 529125.00 407,125M 05/15/2030 45146835 455468*75 09/30/2030 452559335 11/15/2030 370,000 45346835 415,46835 05/15/2031 383531625 38,531.25 09/30/2031 4543000M 11/15/2031 380,000 385531.25 418,531.25 05/15/2032 315406.25 31,406.25 09/30/2032 449,937.50 11/15/2032 395,000 313406425 426,406.25 05/15/2033 243000,00 245000600 09/30/2033 4505406.25 11/15/2033 4105000 24,000A0 4345000.00 Oct 19, 2015 1:01 pm Prepared by Oppenheimer & Co. Page 7 BOND DEBT SERVICE City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Final Numbers Period Annual Ending Principal Interest Debt Service Debt Service OS/15/2034 16,312.50 16,312.50 09/30/2034 450,312.50 11/15/2034 425,000 16,312.50 4413312.50 05/15/2035 85343.75 8,343.75 09/30/2035 44%656.25 11/15/2035 445,000 8,343.75 453,343.75 09/30/2036 453,343.75 5,870,000 2,607,223.33 8,477,223.33 8,477,223.33 Exhibit B Debt Service Schedule for All of the Oty's Outstanding Tax Supported Debt 70433183_3 Oct 19, 2015 l:Ol pm Prepared by Oppenheimer & Co, Page 8 AGGREGATE DEBT SERVICE City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Final Numbers Period Ending Combination Tax and Revenue Certificates of Obligation, Series 2015 Series 2006 Series 2007 Series 2009 Series 2012 Series 2013 Aggregate Debt Service 09/30/2016 100,548*33 588,947.50 134,120 2685375,00 483,550 321,950 1,897,490,83 09/30/2017 29600,00 5909947,50 135,600 267,425.00 400,950 3231650 29015,372.50 09/30/2018 30%650,00 586,547,50 131,860 265,425,00 395,450 325,250 2,0141182,50 09/30/2019 307,350,00 586,297,50 133,120 2685225,00 399,800 320,875 2,015,667,50 09/30/2020 299,550,00 5905237,50 134,160 265,625,00 403,700 321$00 290149772,50 09/30/2021 365,200.00 588,165.00 134,980 267,825,00 339,075 321,100 21016,345A0 09/30/2022 473,075.00 135$80 2689856,25 3203550 1,198,061.25 09/30/2023 454,375,00 1352960 2692450*00 324,850 1,184,635,00 09/30/2024 450,750*00 131,120 2699325,00 3239850 11175,045*00 09/30/2025 451,900.00 131,280 268,750,00 3212675 1,173,605.00 09/30/2026 452,750,00 1369220 267,112,50 322,225 1,178,307,50 09/30/2027 452,900,00 135,720 322,325 910,945,00 09/30/2028 451,925,00 321,400 773,325,00 09/30/2029 450,200M 325,000 775,200.00 09/30/2030 452,593,75 322,250 774,843,75 09/30/2031 454,000,00 324,000 778,000,00 09/30/2032 449,937650 32500 774,937,50 09/30/2033 450,406*25 320,250 770,656.25 09/30/2034 450,312.50 4509312,50 09/30/2035 44906.25 44%656,25 09/30/2036 453,343.75 453$43,75 8,477,223.33 3,531,142.50 1160%720 21946,393,75 2,422,525 5,807,700 24,794,704,58 SIGNATURE IDENTIFICATION AND NO -LITIGATION CERTIFICATE THE 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 of obligation, to wit: CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015, dated November 1, 2015, and aggregating $5,870,000 (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 each of 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 October 19, 2015 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 the seal that has been impressed, or placed in facsimile, upon each of the Certificates is the legally adopted, proper and only official seal of the City, such official seal being impressed upon this certificate. 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 October 19, 2015 remain true and cormect as of this date. 70433195_I WITNESS OUR HANDS AND THE SEAL OF THE CITY this NaV1_ J,20150 SIGNATURES TITLE OF OFFICE Mayor, City of Sanger, Texas City Secretary, City of Sanger, Texas (�3 Y SEAL) t� d r 1j�13�, t�,tsaE�"a Before me, on this day personally appeared the foregoing individuals, known to me to be the persons whose names were subscribed in my presence to the foregoing instrument. Given under my hand and seal of office this October `�, 2015. %aecem Pee I z p zu I a 70433195_l $5,870,000 City of Sanger Combination Tax and Revenue Certificates of Obligation Series 2015 TAX CERTIFICATE The undersigned Mayor of the City %J Sanger (the "City"),apolitical subdivision and home rule city of the State of Texas located in Denton County, Texas, in connection with the issuance of the City's $5,870,000 Combination Tax and Revenue Certificates of Obligation Series 2015 (the "Bonds"), DOES HEREBY CERTIFY, pursuant to Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and Section 1.148-2(b)(2) of the Treasury Regulations promulgated thereunder, as follows: Recitals The Bonds are issued pursuant to the provisions of Chapter 271, Subchapter C, Texas Local Government Code, as amended, Chapter 1502, Texas Government Code, as amended, an ordinance enacted by the City Council of the City on October 19, 2015 (the "Ordinance"); and The City has determined to issue the Bonds as of the date hereof (the "Issue Date") to Finance (a) the rehabilitation, reconstruction, addition and expansion of the waste water treatment ant, (b) the rehabilitation and construction of wastewater li plant, ft stations and wastewater lines, (c) the construction of water lines and associated equipment and facilities; (d) the rehabilitation, reconstruction and construction of streets and drainage, (e) the rehabilitation of municipal facilities (collectively, the "Project"), (f) to pay the premium for a municipal bond insurance policy (the "Bond Insurance Policy") being issued by Assured Guaranty Municipal Corp. ("Assured"), and (g) to pay certain costs of issuance of the Bonds ("Issuance Costs"); and Under the Code, the Treasury Regulations (including Final, temporary and proposed regulations) promulgated thereunder and the rulings with respect thereto, the interest paid and to be paid on state or local governmental bonds will be excludable from gross income for federal income tax purposes if the City complies with certain limitations and requirements imposed on the use and operation of the facilities deemed Financed or refinanced with the Bonds and on the use and investment of proceeds, if any, of the Bonds and certain other moneys relating to the Bonds; and The City has determined to deliver this Tax Certificate, inclusive of exhibits (this "Tax Certificate"), to set forth certain facts and estimates that foirn the basis for the City's reasonable expectations as to the use and investment of proceeds of the Bonds and of certain other moneys relating to the Bonds and to set forth certain terms and conditions relating thereto, in order to assure that interest on the Bonds will be excludable from gross income for federal income tax )ur poses. 72163491_1 PART A. IN GENERAL Section 1. Reliance on Tax Certificate. (a) The undersigned is executing this Tax Certificate with the understanding and acknowledgement that McGuireWoods LLP (referred to herein as "Bond Counsel') will rely on the certifications, covenants and representations made in this Tax Certificate in rendering its opinion that interest on the Bonds is excludable from gross income for federal income tax purposes. Section 2. Deliverer of Bonds. The Bonds are being delivered on the date hereof (the "Issue Date") to Oppenheimer & Co. (the "Underwriter") in exchange for the purchase price of $6,202,564,33, which represents the par amount of $5,870,000, plus an original offering premium of $379,221.35, less underwriter's discount of $46,657.02. The proceeds from the sale of the Bonds total $6,249,221.35, representing the par amount of $5,870,000 plus the reoffering premium of $379,221.35 (the "Sale Proceeds"). Section 3. Issuance of the Bonds• Terms of the Bonds. The Bonds are being issued on the Issue Date. Interest on the Bonds is payable on each May 15 and November 15, commencing on May 15, 2016. Principal on the Bonds will be payable on November 15. Section 4. Security for the Bonds. The Bonds are direct obligations of the City, payable from ad valorem taxes to be levied, within the limits prescribed by law, on all taxable property within the City and a limited subordinate pledge of surplus net revenues derived from the City's water and sewer system, not to exceed $10,000, as provided in the ordinance authorizing the Bonds. Section 5. Purpose of Financing. The Bonds are being issued pursuant to the Act and the Ordinance to (i) finance the Project, and (ii) pay Issuance Costs, The City will use the proceeds of the Bonds solely for the above -described purposes, unless an opinion of Bond Counsel is received with respect to permitted uses of proceeds for other than the above -described purposes. Section 6. Definitions; Capitalized Terms. All capitalized terms used in this Tax Certificate and not specifically defined herein shall have the meanings given such terms in the Ordinance. PART B. USE OF BOND PROCEEDS AND THE PROJECT. Section 1. Governmental Use of Proceeds. No more than ten percent (10%) of the Sale Proceeds shall be Used (as defined below) in any activity that constitutes "Private Use". Use of the Project is treated as direct use of the Sale Proceeds. The term "Private Use" means any activity that constitutes a trade or business that is carried on by persons or entities other than state or local governmental entities ("Non -Exempt Persons") on a basis other than as a member of the general public ("General Public Use"). Any activity carried on by a person other than a natural person is treated as a trade or business. Use of the Project by a Non -Exempt Person constitutes General Public Use only if the property is intended to be available and is in fact reasonably available for use on the same basis by natural persons not engaged in a trade or business. 2 72163491_1 Section 2. No Private Payments or Private Security. No more than ten percent (10%) of the principal of or interest on the Bonds, under the terms thereof or any underlying arrangement, has been, or, throughout the stated term of the Bonds, will be, directly or indirectly, (a) secured by any interest in (I) property used for a Private Use or (II) payments in respect of such property or (b) derived from payments in respect of property used or to be used for a Private Use, whether or not such property is a part of the Project. Section 3. Definition of Use. "Use" may be either actual or beneficial use by a person or entity of the proceeds of the Bonds or the Project. In most cases, Use arises only if a person or entity has special legal entitlements to use the Project under an arrangement with the City. In general, these special legal entitlements would be deemed to arise as a result of ownership of the Project, actual or beneficial use of the Project pursuant to a lease, management or service contract, research contract or incentive payment contract; or certain other arrangements such as a take -or -pay or other output -type contracts. Section 4. Ownership. Ownership of the Project by allon-Exempt Person shall constitute Private Use. For purposes of this Tax Certificate, ownership of the Project refers to ownership for federal income tax purposes. All of the Project will be owned by a state or local governmental unit throughout the stated term of the Bonds. Section 5. Leases. A lease of the Project to allon-Exempt Person shall generally constitute Private Use. For purposes of this Section, any arrangement that is properly characterized as a lease for federal income tax purposes is treated as a lease. Consequently, an arrangement that is referred to as a management, service or research contract may nevertheless be treated as a lease, and in determining whether a management or service contract with a Non - Exempt Person is properly characterized as a lease, it is necessary to consider all of the facts and circumstances, including the following factors: (a) the degree of control over the Project that is exercised by the Non -Exempt Person; and (b) whether the Non -Exempt Person bears risk of loss of the Project. Section 6. Management or Service Contract. The determination of whether Use by a Non -Exempt Person pursuant to a management or service contract constitutes Private Use for purposes of this Tax Certificate shall be made on the basis of applying Revenue Procedure 97-13, as modified by Revenue Procedure 2001-39 and Notice 2014-67. Section 7. Research Contracts. Unless the research is of the type described in the next sentence, use of the Project for any research sponsored by allon-Exempt Person may constitute Private Use. However, Private Use will not result from Non -Exempt Person -sponsored research if it is Basic Research (as defined below) and (1) the use of the resulting technology by the sponsor is permitted only on the same terms as use by any non -sponsoring unrelated party, and the price paid is determined at the time the technology is available for use, or (ii) the research is performed under an arrangement whereby (A) a single sponsor agrees, or multiple sponsors agree, to fund governmentally performed Basic Research; (B) the City determines the research to be performed and the manner in which it is to be performed (for example, selection of the 3 72163491_I personnel to perform the research); (C) title to any patent or other product incidentally resulting from the research lies exclusively with the City, and (D) the sponsor or sponsors are entitled to no more than a nonexclusive, royalty -free license to use the product of any such research. In applying the foregoing requirements to federally sponsored research under clause (ii) of the preceding sentence, the rights of the federal government and its agencies mandated by the Patent and Trademark Law Amendments Act of 1980, as amended, 35 U.S.C. §200, et. seq. (2006) (the Bayh-Dole Act) will not cause a research agreement to fail to meet such requirements, provided that the requirements described in clauses (B) and (C) of this paragraph are met, and the license granted to any party other than the City to use the product of the research is no more than a nonexclusive, royalty -free license. 'Basic Research" means any original investigation for the advancement of scientific knowledge not having a specific commercial objective (for example, product testing supporting the trade or business of a specific corporation is not treated as Basic Research), Section 8. Other Actual Use. Any other arrangement that conveys special legal entitlements for beneficial use of the Proceeds of the Bonds or the Project comparable to the special legal entitlements described in Sections 4 through 7 above results in Use. For example, an arrangement that conveys priority rights to the use or capacity of a facility generally results in Use. Section 9. Special Rule for Facilities Not Used by the General Public. In the case of the Project that is not available for General Public Use, Private Use may be established solely on the basis of a special economic benefit to one or more Non -Exempt Persons, even if those Non - Exempt Persons have no special legal entitlements to use of such the Project. In determining whether special economic benefit gives rise to Private Use it is necessary to consider all of the facts and circumstances, including one or more of the following factors: (a) Whether the Project is functionally related or physically proximate to other property used in the trade or business of a Non -Exempt Person; (b) Whether only a small number of Non -Exempt Persons receive the special economic benefit; and (c) Whether the cost of the Project is treated as depreciable by any Non -Exempt Person. Section 10. Limitation on Sale or Disposition of the Project. Unless an opinion of Bond Counsel is obtained, the City will not sell or otherwise dispose of any portion of the Project so long as any of the Bonds remains outstanding. Section 11. Capital Expenditures. All of the Sale Proceeds will spent on expenditures that are capital expenditures for federal income tax purposes. No Sale Proceeds will be spent on working capital expenditures. Section 12. Allocations. To the extent permitted under the Treasury Regulations, the City hereby allocates Sale Proceeds to those portions of the Project that do not result in Private Use, provided that the City reserves the authority to change any such allocation of the Sale FAI 72163491_1 Proceeds for the entire period permitted under Sections 1.141-6 and 1.148-6 and other applicable Treasury Regulations, Section 1. Application of Sale Proceeds of the Bonds. On the basis %J the facts, estimates and circumstances in existence on the date hereof, the City reasonably expects the following with respect to the use of the Sale Proceeds of the Bonds: (a) $6,080,000 will be deposited into a construction fund (the "Construction Fund") and used to pay the costs of the Project, (b) $102,727.63 will be used to pay Issuance Costs, other than Underwriter's Discount; (c) $46,657.02 will be used to pay Underwriter's Discount; and (d) $19,836.70 will be used to pay the premium on the Bond Insurance Policy. Section 2. Funds and Accounts. The following funds and accounts will be maintained in connection with the Bonds: (a) Construction Fund. The amounts on deposit in the construction fund will be used to pay costs of the Project. (b) Debt Service Fund. The Debt Service Fund established by the Ordinance will be used primarily to achieve a proper matching of the revenues of the City and debt service on the Bonds within each Bond Year (as defined in Section 1(b) of Part D of this Tax Certificate). Amounts deposited in the Debt Service Fund will be depleted at least once each Bond Year except for a reasonable carryover amount, if any, not to exceed the greater of (i) the earnings on the Interest and Sinking Fund for the immediately preceding Bond Year, or (n) one -twelfth (1/12) of the debt service payable on the Bonds for the immediately preceding Bond Year. To the extent that the Debt Service Fund functions as described in the preceding sentence, it is a "bona fide debt service fund"; and (c) No Funds as Security. Other than those amounts described above, there are no funds or accounts established by the City or the Ordinance that are reasonably expected to be used directly or indirectly to pay debt service on the Bonds or that are pledged (including negative pledges) as collateral for the Bonds and for which there is reasonable assurance that amounts on deposit therein will be available to pay debt service on the Bonds if the City encounters financial difficulties. Section 3. Investment of Proceeds. The amounts described in this Tax Certificate will be invested as follows: (a) Construction Fund. Within six months, the City will incur a substantial binding obligation to a third party to expend at least 5% of the Sale Proceeds and investment proceeds earned thereon. Within three years, the City will spend at least 85% 5 72163491_I of the Sale Proceeds on the Project. Expenditure of the Sale Proceeds will proceed with due diligence. Sale Proceeds may be invested at an unrestricted yield for a period not to exceed three years from the date hereof and, thereafter, shall be invested at a yield not in excess of the yield on the Bonds plus 0.125%. Investment earnings on obligations acquired with such proceeds may be invested at an unrestricted yield for a period not exceeding three years from the date hereof or one year from the receipt thereof, whichever period ends later and, thereafter, shall be invested at a yield not in excess of the yield on the Bonds plus 0.125%; (b) Debt Service Fund. Amounts deposited in the Interest and Sinking Fund may be invested at an unrestricted yield for a period not to exceed thirteen (13) months from the date of deposit of such amounts to such funds and thereafter shall be invested at a yield not in excess of the yield of the Bonds plus one -one thousandth of one percentage point (0.001 %). Earnings on such amounts that are retained in such funds may be invested at an unrestricted yield for a period not to exceed one year from the date of receipt of the amount earned and, thereafter, shall be invested at a yield not in excess of the yield of the Bonds plus one -one thousandth of one percentage point (0.001%); (c) Replacement Proceeds. Replacement proceeds (as such term is defined in Section 1.1484(c) of the Treasury Regulations) may be invested at an unrestricted yield I or a period of thirty (30) days beginning on the date that the amounts are first treated as replacement proceeds and, thereafter, shall be invested at a yield not in excess of the yield of the Bonds plus one thousandth of one percentage point (0.001%). Section 4. Yield. For purposes of this Tax Certificate, the term "yield" means that discount rate which, when used in computing the present value as of the Issue Date of all unconditionally payable payments of principal and interest on an obligation and all of the payments for a "qualified guarantee" and a "qualified hedge", if any, that are attributable to the Bonds, produces an amount equal to the present value, using the same discount rate, of the issue price of the Bonds. (a) Fixed Yield. As set forth in Exhibit A hereto, U.S. Capital Advisors, as financial advisor to the City in connection with the issuance of the Bonds (the "Financial Advisor"), has computed the yield on the Bonds to be 2.674918%. (b) Issue Price. For purposes of calculating yield, the "issue price" of the Bonds (as defined in Section 148 of the Code) is equal to the initial offering price to the public (excluding bond houses, brokers and other intermediaries) at which a substantial amount (e.g., at least 10%) of each maturity of the Bonds was sold. Thus, the issue price of the Bonds is equal to $6,249,221.35 representing the par amount plus original issue premium of $379,221.35, as shown in the Issue Price Certificate attached hereto as Exhibit B. (c) Callable Premium Bonds. None of the Bonds subject to optional redemption (i) is subject to optional redemption within five years after the date hereof or (ii) bears interest at increasing interest rates (i.e., a stepped coupon bond). Based on the representations of the Financial Advisor as set forth in Exhibit A hereto, the serial Bonds G 72163491_1 stated to mature on November 15 of the years 2026 through 2031 and the term Bonds stated to mature on November 15, 2035 were sold at a price in excess of 100% of the principal amount thereof and are subject to optional redemption (the "Callable Premium Bonds"). The Callable Premium Bonds are fixed yield bonds subject to optional early redemption as described in Treasury Regulations Section 1.1484(b)(3). The Financial Advisor has represented in Exhibit A hereto that the issue price of each of the Callable Premium Bonds exceeds the stated redemption price at maturity of such Callable Premium Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity and the number of complete years to November 15, 2025, which is the first optional redemption date for such Callable Premium Bonds. Accordingly, the yield on the Bonds is computed by treating each of the Callable Premium Bonds as retired at the stated redemption price on the optional redemption date that produces the lowest overall yield on the Bonds. (d) Qualified Guarantee. For purposes of computing the yield on the Bonds, the premium for the Bond Insurance Policy is treated as additional interest on the Bonds, and must be allocated to computation periods in a manner that properly reflects the proportionate credit risk for which the provider thereof is being compensated. The Financial Advisor has advised the Issuer and Bond Counsel in its certificate attached hereto as Exhibit A that the present value of the premium for the Bond Insurance Policy is less than the present value of the interest reasonably expected to be saved as a result of obtaining the Bond Insurance Policy. The Financial Advisor has further advised the Issuer and Bond Counsel in such certificate that, to the best of its knowledge, the premium paid under the Bond Insurance Policy was determined in arm's length negotiations and does not exceed a reasonable charge for the transfer of credit risk. Assured has represented to the Issuer and Bond Counsel in its certificate attached hereto as Exhibit C that the premium paid to it for the Bond Insurance Policy does not include any payment for any direct or indirect services other than the transfer of credit risk. No portion of the premium for the Bond Insurance Policy is refundable upon the redemption of the Bonds prior to their stated maturity or mandatory redemption dates. (e) Qualified Hedge. Payments made or received under a qualified hedge (as defined in Treasury Regulations Section 1.148-4(h)) are taken into account in determining the yield on an issue. As of the date hereof, the City has not taken the steps necessary to cause any hedge with respect to the Bonds to be a qualified hedge. (f) Single Issue. All of the Bonds have been sold at substantially the same time, have been sold pursuant to the same plan of financing, and are reasonably expected to be paid from substantially the same source of funds, determined without regard to guarantees from unrelated parties. No other governmental obligations have been, or will be, sold within 15 days of the Bonds, pursuant to the same plan of financing and are reasonably expected to be paid from substantially the same source of funds, determined without regard to guarantees from unrelated parties. Accordingly, the City has been advised by Bond Counsel that the Bonds are treated as a single issue of obligations for purposes of the computation of yield and for purposes of Sections 103 and 141-150 of the Code.. 7 72163491_] Section 5. Yield Reduction Patents. Notwithstanding the provisions of Section 4 above that require the City to invest proceeds derived from the sale of the Bonds and investment earnings thereon at a yield not in excess of the yield on the Bonds, the yield on certain Nonpurpose Investments (as defined in Section 2 of Part D below) acquired with proceeds of the Bonds will not be considered to be higher than the applicable yield limitation described in Section 4 above if the City timely makes or causes to be made "yield reduction payments" to the United States Treasury at the time and in the amounts described in Section 1.148-5(c) of the Treasury Regulations, The City covenants to consult with Bond Counsel prior to making any yield reduction payments. Section 6. Universal Cap. Notwithstanding any restrictions on the investment of the amounts set forth above, proceeds, if any, of the Bonds and other amounts treated as proceeds, if any, of the Bonds are allocated and remain allocated to the Bonds, and are thereby subject to the restrictions contained in this Tax Certificate, only to the extent that the value of such proceeds does not exceed the value of the outstanding obligations of the Bonds. This Section does not apply to bona fide debt service funds or reasonably required reserve funds, if any. Section 7. No Replacement Proceeds. (a) No portion of the Bonds will be used as a substitute for other funds that have been, or are expected to be, used to finance the costs of the Project and that have been or will be used to acquire directly or indirectly securities or obligations or other investment property producing a yield in excess of the yield with respect to the Bonds. (b) Economic Life of the Project. In accordance with Section 1.148-1(c) of the Treasury Regulations regarding the safe harbor against the creation of "replacement proceeds," as of the date hereof, the weighted average maturity of the Bonds of 12,5036 years does not exceed 120% of the remaining average reasonably expected economic life of the Project. The weighted average maturity is provided in Exhibit A. Section 8. Mn Artifice or Device. The City has not engaged and will not engage in a transaction or series of transactions enabling it to exploit I between tax-exempt and taxable interest rates to gain a material financial advantage and which increases the burden on the market for tax-exempt obligations, including selling obligations that would not otherwise be necessary or issuing obligations sooner or allowing them to remain outstanding longer than would otherwise be necessary. Section 9. Tax Covenant. The City hereby covenants that whether or not any of the Bonds remain outstanding, money on deposit in any fund or account maintained in connection with the Bonds, whether or not such money was derived from the proceeds of the sale of the Bonds or from any other sources, will not be used in a manner that would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and the applicable regulations thereunder. The City hereby covenants that it will not take any action which will, or fail to take any action which failure will, cause the interest on the Bonds to become includable in the gross income of the owners of the Bonds for federal income tax purposes pursuant to the provisions of 72163491_1 the Code and the Treasury Regulations promulgated thereunder in effect on the date of this Tax Certificate. PART D. REBATE REQUIREMENTS Section 1. In General. (a) The City recognizes that Section 148(f) of the Code, which sets forth the Rebate Requirement (defined below), requires that an amount equal to the sum of (i) the excess of the aggregate amount earned on all Nonpurpose Investments (defined in Section 2 below) over the amount that would have been earned if such Nonpurpose Investments had a yield equal to the yield with respect to the Bonds, plus (ii) any income attributable to the excess described in (i), be paid to the United States Treasury. Accordingly, the City covenants herein to comply with the applicable yield restrictions and limitations and guidelines set forth in this Tax Certificate to effectuate compliance with the Rebate Requirement, as set forth in Section 148(f) of the Code and the Treasury Regulations (the "Rebate Requirement"). (b) For purposes of this Tax Certificate (including determining the Rebate Requirement), the term "Bond Year" shall mean each one-year (or shorter) period selected by the City. The first and last Bond Years may be short periods. If no day is selected by the City before the earlier of the final maturity date of the Bonds or the date that is five years after the date hereof, each Bond Year shall end on each anniversary of the date hereof and on the final maturity date. Section 2. Nonpurpose Investments. (a) The rules contained in this Part D shall apply to the investment of Gross Proceeds (as defined below) in any security, obligation, annuity contract or any other investment -type property (as such term is defined in Section 1.1484(b) of the Treasury Regulations) that is not acquired to carry out the governmental purpose of the Bonds ("Nonpurpose Investments"). Section 3. Gross Proceeds. For purposes of this Tax Certificate, the term "Gross Proceeds" means: (a) proceeds derived from the sale of the Bonds, if any; (b) amounts that are reasonably expected to be or are in fact used to pay debt service with respect to the Bonds; (c) amounts pledged as security for the payment of debt service with respect to the Bonds, if any; (d) amounts treated as "transferred proceeds" of the Bonds, within the meaning of Section 1.148-1(b) of the Treasury Regulations, if any; (e) amounts treated as "replacement proceeds" of the Bonds, within the meaning of Section 1.148-1(c) of the Treasury Regulations, if any; and (f) investment earnings on amounts described in (a)-(e) above. 0 72163491_1 Section 4. Fair Market Price. For purposes of this Tax Certificate, the purchase price and disposition price of a Nonpurpose Investment will be the fair market value of the investment (the "Fair Market Price"). An investment that is not of a type traded on an established market, within the meaning of Section 1273 of the Code, is rebuttably presumed to be acquired or disposed of at a price that is not equal to its Fair Market Price. Accordingly, a premium may not be paid to adjust the yield on an investment, a lower interest rate than is usually paid may not adjust the yield on an investment and no transaction may result in a smaller profit or larger loss than would have resulted if the transaction had been at arm's4ength and had the yield with respect to the Bonds not been relevant to either party. In determining payments and receipts on Nonpurpose Investments, qualified administrative costs are taken into account. Qualified administrative costs are reasonable, direct administrative costs, other than carrying costs, such as separately stated brokerage or selling commissions, but not legal and accounting fees, recordkeeping, custody, and similar costs. General overhead costs and similar indirect costs of the City such as employee salaries and office expenses and costs associated with computing the Rebate Requirement are not qualified administrative costs. In general, administrative costs are not reasonable unless they are comparable to administrative costs that would be charged for the same investment or a reasonably comparable investment if acquired with a source of funds other than gross proceeds of tax-exempt bonds. The City agrees to maintain or cause to be maintained records for each such obligation sufficient to establish that the purchase price and the disposition price of each Nonpurpose Investment is the Fair Market Price, Section 5. Record Keeping. With respect to all Nonpurpose Investments acquired in any fund or account the City shall record or cause to be recorded the following information: (1) purchase date, (ii) purchase price, (iii) information establishing that the purchase price is the Fair Market Price as of such date (e.g., the published quoted bid by a dealer in such an investment on the date of purchase), (iv) any accrued interest paid, (v) face amount, (vi) coupon rate, (vii) periodicity of interest payments, (viii) disposition price, (ix) any accrued interest received, and (x) disposition date. To the extent any investment becomes a Nonpurpose Investment by becoming Gross Proceeds after it was originally purchased or ceases to be a Nonpurpose Investment by ceasing to be Gross Proceeds before it is sold or matures, it shall be treated as if it were acquired or disposed of, respectively, at its Fair Market Price at the time it becomes a Nonpurpose Investment or ceases to be a Nonpurpose Investment, as the case may be. Section 6. Bona Fide Debt Service Fund Exception. With respect to issues that are not private activity bonds and that have an average maturity of greater than five (5) years and a fixed rate of interest, amounts earned on moneys in a bona fide debt service fund shall not be taken into account for a Bond Year for purposes of complying with the Rebate Requirement. For purposes of complying with the Rebate Requirement with respect to issues other than as described in the preceding sentence, amounts earned on moneys in a bona fide debt service fund shall not be taken into account for a Bond Year if the gross earnings thereon are less than $100,000, an issue with an average annual debt service not in excess of $2,500,000 may be treated as satisfying this $100,000 limitation, Section 7. Expenditure Exceptions, The Rebate Requirement will be considered satisfied if the requirements of certain expenditure exceptions are met, as more fully described in Section 10 72163491_1 148 of the Code and the regulations thereunder. One of those exceptions is the Two -Year Exception, which is described below. (a) Two - Year Exception. With respect to the "available construction proceeds," as defined below, of the Bonds, the Two -Year Exception will be treated as having been satisfied if the requirements of paragraphs (1) and (ii) are satisfied. (i) 75% Test. The City reasonably expects as of the issue date of the Bonds that at least seventy-five percent (75%) of the "available construction proceeds" of the Bonds will be allocated to construction expenditures (including reconstruction and rehabilitation) with respect to property that is owned by a governmental unit. (ii) At least ten percent (10%) of the available construction proceeds of the Bonds have been allocated to expenditures for the governmental purposes of the Bonds within the six-month period beginning on the date of issuance of the Bonds, at least forty-five percent (45%) of the available construction proceeds of the Bonds have been allocated to expenditures for the governmental purposes of the Bonds within the one-year period beginning on the date of issuance of the Bonds, at least seventy-five percent (75%) of the available construction proceeds of the Bonds have been allocated to expenditures for the governmental purposes of the Bonds within the eighteen -month period beginning on the date of issuance of the Bonds, and all of the available construction proceeds of the Bonds have been allocated to expenditures for the governmental purposes of the Bonds within the two-year period beginning on the date of issuance of the Bonds. (iii) Reasonable Retaina�e. For purposes of subsection (a)(ii), all of the available construction proceeds of the Bonds shall be treated as expended, for the governmental purposes of the Bonds within two years from the date of issuance of the Bonds if all of such proceeds are expended for the governmental purposes of the Bonds within three years from the date of issuance of the Bonds and such amounts would have been expended for such purposes within two years from the date of issuance of the Bonds but for an amount that is retained for reasonable business purposes relating to property financed with the proceeds of the Bonds and that amount retained does not exceed five percent (5%) of the available construction proceeds of the Bonds as of the end of the 4th spending period referred to in subsection (a)(ii). Reasonable retainage may include, for example, an amount retained to ensure compliance with the terms of a construction contract in circumstances in which the amount retained is not yet payable, or in which the City reasonably determines that a dispute exists regarding either completion of construction or payment. See also subsection (b) below. (iv) Available Construction Proceeds. For purposes of subsection (a), the term "available construction proceeds" means an amount equal to the issue price of the Bonds, (A) increased by earnings on the issue price, earnings on any reasonably required reserve or replacement fund not funded with proceeds derived from the sale of the Bonds, and investment earnings on the foregoing and (B) 11 72163491_1 reduced by the amounts of the issue price deposited in any reasonably required reserve or replacement fund, applied to pay Issuance Costs and the pre -issuance accrued interest, if any. The term "available construction proceeds," however, shall not include payments on any obligation acquired to carry out the governmental purpose of the issue or the investment earnings thereon. (b) De Minimis Exception. Any failure to satisfy the final spending requirement of the Two -Year Exception is disregarded if the City exercises due diligence to complete the Project and the amount of the failure does not exceed the lesser of three percent (3%) of the issue price of the Bonds or $250,000. Section 8. Engagement of Experts. The City covenants that it will engage a firm of certified public accountants or a firm nationally recognized in the calculation of rebate, to perform the calculations necessary to comply with the Rebate Requirement applicable to any of the Gross Proceeds of the Bonds that do not qualify for a spending or other exception to the Rebate Requirement. Section 9. Survival of Defeasance. Notwithstanding anything in this Tax Certificate to the contrary, the Rebate Requirement shall survive the defeasance or payment in full of the Bonds. PART E. OTHER MATTERS Section 1. No Pooled Financing_Bonds. No portion of the proceeds of the Bonds will be used, directly or indirectly, to make or finance loans to two (2) or more ultimate borrowers. Section 2. No Hedge Bonds. Not less than eighty-five percent (85%) of the spendable proceeds of the Bonds will be used to carry out the governmental purpose of the Bonds within the three-year period beginning on the Issue Date. Additionally, not more than fifty percent (50%) of the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for four years or more. Section 3. Mn Federal Guarantee. The City will not directly or indirectly use or permit the use of any proceeds, if any, of the Bonds or any other funds of the City, or take or omit to take any action, that would cause the Bonds to be considered "federally guaranteed" within the meaning of Section 149(b) of the Code. The City has not entered into, nor will the City enter into, any (1) long-term service contracts with any federal governmental agency, (ii) service contracts with any federal governmental agency under terms that are materially different from the terms of any contracts with any persons other than federal government agencies, and (iii) leases of property to any federal government agency, that would cause the Bonds to be considered "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 4. City Reliance on Other Parties. The expectations of the City concerning the Bonds and certain matters set forth herein are based in whole or in part upon representations of certain third parties, as set forth in this Tax Certificate and contained in exhibits hereto. The City places a good faith reliance upon such representations on the basis of the reputable business 12 72163491_1 practices of such third parties. The City is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of such representations or computations. Section D. Information Reporting, The City certifies that the information required by Section 149(e) of the Code and set forth on Internal Revenue Service Form 8038-G relating to the Bonds and attached as Exhibit D hereto reflects its reasonable expectations with respect to the Bonds and the proceeds thereof as of the date of this Tax Certificate. Form 8038-G shall be filed at the Internal Revenue Service Center, Ogden, Utah 84201 no later than the fifteenth (15th) day of the second (2nd) calendar month following the close of the calendar year quarter ending December 31, 2015. Section 6. Amendment. Notwithstanding any 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 based on a written opinion of Bond Counsel approving such amendment. Section 7. Recordkeeping_ and Retention. (a) The City agrees to maintain and/or retain the following records (or to cause them to be maintained and/or retained) (collectively, the "Material Records"). (1) the bound transcripts of proceedings for the Bonds; (ii) documentation evidencing the expenditure and allocation of the Sale Proceeds and investment proceeds and any other Gross Proceeds of the Bonds; (iii) documentation evidencing Private Use, if any, and non -Private Use of the Proj ect; (iv) documentation evidencing all sources of payment or security for the Bonds; (v) all calculations of the arbitrage rebate liability and yield reduction payments for the Bonds and copies of any Forms 8038-T filed with the IRS; and (vi) documentation pertaining to all Nonpurpose Investments as specified in Section 5 of Part D above. (b) The City agrees to keep the Material Records in a manner that ensures their complete access to the Internal Revenue Service. This may be accomplished through the maintenance of hard copies or by maintenance of the Material Records in an electronic format if the requirements of Rev. Proc. 97-22 (or any successor thereto) are satisfied. (c) The City agrees to keep the Material Records until the third anniversary of the later of the final redemption date of the Bonds or the final redemption date of any bonds issued to refund the Bonds. Section 8. Reimbursement. No Sale Proceeds of the Bonds are expected to be applied to reimburse the City for costs of the Project incurred and paid by the City prior to the date hereof. 13 72163491_I Section 9. Additional Post -Issuance Compliance Matters (a) Remedial Actions. In the event an action takes place (or is anticipated to take place) that will cause the Project not to be used for qualified uses under Section 141 of the Code, the City will consult with Bond Counsel as soon as practicable about taking remedial action as described in Treas. Reg. Section 1.14142. As advised by Bond Counsel, the City will take all actions necessary to ensure that the "nonqualified bonds" as defined in Treas. Reg. Section 1.14142) are properly remediated in accordance with the requirements of the Treasury Regulations. The City is familiar with the Internal Revenue Service's Voluntary Compliance Agreement Program pursuant to which issuers of tax-exempt debt may voluntarily resolve violations of the Code and applicable Treasury Regulations on behalf of their bondholders or themselves through closing agreements with the Internal Revenue Service. (b) Private Use Monitoring. The City will actively monitor the requirements of the Code and the Treasury Regulations as set forth in Part B of this Tax Certificate and confirm that such requirements are met no less than once per annum. The responsibility for such monitoring will be maintained by the chief financial officer. (c) Use of Proceeds Monitoring. The City will actively monitor the requirements of the Code and the Treasury Regulations related to the allocation and accounting of proceeds to capital projects and will maintain a list that specifies the allocation of proceeds of the Bonds to Project costs. The responsibility for such monitoring will be maintained by the chief financial officer. (d) Arbitrage Monitoring. The City will actively monitor the requirements of the Code and the Treasury Regulations related to arbitrage limitations, including yield restriction, rebate requirements and the investment of Gross Proceeds. The responsibility for such monitoring will be maintained by the chief financial officer. Section 10. Qualified Tax -Exempt Obli atin The City designates the Bonds as "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code. In connection therewith, the City represents that the reasonably anticipated amount of obligations which will be issued by or on behalf of the City during calendar year 2015, including the Bonds will not exceed $10,000,000. For purposes of this Section, the term "obligation" does not include "private activity bonds" within the meaning of Section 141 of the Code, other than "qualified 501(c)(3) bonds" within the meaning of Section 145 of the Code, and does not include certain refunding obligations as more fully described in Section 265(b)(3)(C)(ii). Section 11. Allocation. The City reserves the right to use any reasonable, consistently applied accounting method to account for the Gross Proceeds, investments and expenditures allocable to the Bonds, in particular to account for the allocation of the Sale Proceeds of the Bonds to expenditures for the qualified purposes and to expenditures for the purposes for which the City used funding other than tax-exempt bonds. The City will make consistent allocations with respect to the Gross Proceeds, investments and expenditures of the Bonds for purposes of Section 141 of the Code (relating to the private activity bond tests) and Section 148 of the Code (relating to the arbitrage yield restriction and rebate requirements). The City will at all times 72163491_1 maintain books and records sufficient to establish the accounting method chosen for the Bonds and to account in writing in such books and records for the allocation of the Proceeds of the Bonds to each expenditure by the date not later than 18 months after the later of (1) the expenditure is paid or (ii) the date the respective financed project component is placed in service; provided, however, that such accounting must be made in any event by the date 60 days after the fifth anniversary of date hereof or the date 60 days after the retirement of the Bonds if earlier. 15 721G3491_1 CITY OF SANGER, TEXAS Mayor Exhibit A Exhibit B Exhibit C Exhibit D List of Exhibits Certificate of Financial Advisor Issue Price Cettificate Certificate of Bond Insurer Form 8038-G 72163491_1 Exhibit A Certificate of Financial Advisor 72163491_1 CERTIFICATE OF THE FINANCIAL ADVISOR $5,870,000 City of Sanger Combination Tax and Revenue Certificates of Obligation Series 2015 (the "Bonds") This Certificate is furnished by Government Capital Securities Corporation, as financial advisor (the "Financial Advisor") to the City of Sanger (the "District") in connection with the issuance of the Bonds. Capitalized terms used and not defined herein are as defined in the Tax Certificate to which this certification is attached. The undersigned, on behalf the Financial Advisor, represents and certifies that: 1. The weighted average maturity of the Bonds (determined in accordance with Section 147(b) of the Internal Revenue Code of 1986, as amended) equals 12.5036 years. 2. The Yield on the Bonds is 2.6749% based upon a settlement date of November 12, 2015. For purposes of this paragraph, the "Yield" on the Bonds was computed by applying a semi-annual compounding interval and a 30 days per month/360 days per annum financial convention. The Yield on the Bonds is the discount rate that, when used in computing the present value as of the date hereof of all unconditionally payable payments of principal and interest, produces an amount equal to the aggregate Issue Price of the Bonds (assumed to be $6,249,221.35). 3. All of the serial Bonds stated to mature on November 15 of the years 2026 through 2031 and the term Bonds stated to mature on November 15, 2035 were sold at a price in excess of 100% of the principal amount thereof and are subject to optional redemption (the "Callable Premium Bonds"). The issue price of each of the Callable Premium Bonds exceeds the stated redemption price at maturity of such Callable Premium Bonds by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity and the number of complete years to November 15, 2025, which is the first optional redemption date for the Callable Premium Bonds. Accordingly, as advised by Bond Counsel, the Yield has been computed by treating each of the Callable Premium Bonds as retired at the stated redemption price on the optional redemption date that produces the lowest overall yield on the Bonds. 4. The present value of the premium for the Bond Insurance Policy (the "Bond Insurance Premium"), issued on the date hereof by Assured to secure payment of the principal and interest on the Bonds, is reasonably expected to be less than the present value of the interest reasonably expected to be saved as result of obtaining the Bond Insurance Policy to secure the Bonds. Based on the undersigned's experience in similar financings, the Bond Insurance Premium does not exceed a reasonable, arm's length charge for the transfer of credit risk. 72166619_l 5. We understand that the foregoing information will be relied upon by the District with respect to certain of the representations set forth in the Tax Certificate and by McGuireWoods LLP, Bond Counsel, in connection with rendering its opinion to the Issuer that the interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws; in particular the regulations under the Internal Revenue Code of 1986, or the application of any laws to these facts. 72166619_1 Dated as of November 12, 2015 GOVERNMENT CAPITAL SE By: v 19 v A lk� L7 Ted Christensen, President Signature Page to Certificate of the Financial Advisor) 72166619_l Exhibit B Issue Price Certificate 72163491_1 $5,870,000 City of Sanger Combination Tax and Revenue Certificates of Obligation Series 2015 ISSUE PRICE CERTIFICATE Oppenheimer & Co. (the "Underwriter"), as the underwriter (the "Underwriter"), is delivering this Certificate in connection with the sale and issuance by the City of Sanger (the "City") of its $5,870,000 Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds") issued November 12, 2015, and certifies and represents the following, based upon information available to us. 1. As of October 19, the date on which the sale took place (the "Sale Date"), the Underwriter reasonably expected to offer all of the Bonds to the general public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of Underwriter or wholesalers) (the "Public") in a bona fide public offering, and based on our assessment of the then prevailing market conditions, the Underwriter reasonably expected that the first prices at which at least 10% of each maturity would be sold by the Underwriter to the Public were the prices not higher than, or, in the case of obligations sold on a yield basis, at yields not lower than, those listed for each maturity in the official statement (the "Initial Offering Prices"). 2. As of the date of this certificate, all of the Bonds have actually been offered to the Public in a bona fide public offering at prices not higher than, or, in the case of obligations sold on a yield basis, at yields not lower than, the Initial Offering Prices, 3. Except for the Bonds due to mature on November 15 in the years 2018 and 2019 (the "Excepted Maturities"), the first prices at which at least 10% of each maturity of the Bonds with a different interest rate was sold to the public were not higher than, or, in the case of obligations sold on a yield basis, at yields not lower than, the Initial Public Offering Prices, 4. The Excepted Maturities were offered to the public at their Initial Offering Prices using the same marketing efforts as used in marketing all other maturities of the Bonds on the Sale Date. Despite such efforts and due to prevailing market conditions, the Underwriter was unable to obtain offers and sales for at least 10% of such maturities at their Initial Offering Price, 5. The Underwriter had no reason to believe that any of the Initial Public Offering Prices of the Bonds exceeded the expected fair market value of the Bonds as of the Sale Date. 6. Capitalized terms that are not defined shall have the meaning given to them in the Tax Certificate to which this Certificate is attached as Exhibit B. 72167981_I We understand that the foregoing information will be relied upon by the City with respect to certain of the representations set forth in the Tax Certificate and by McGuireWoods LLP, as Bond Counsel, in connection with rendering its opinion to the City that the interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes. The undersigned is certifying only as to facts in existence on the date hereof. Nothing herein represents the undersigned's interpretation of any laws, in particular the regulations under the Internal Revenue Code of 1986, or the application of any laws to these facts. The certifications contained herein are not necessarily based on personal knowledge, but may instead be based on either inquiry deemed adequate by the undersigned or institutional knowledge (or both) regarding the matters set forth herein. Although certain information furnished in this Certificate has been derived from other purchasers, bond houses and brokers and cannot be independently verified by us, we have no reason to believe it to be untrue in any material respect. Except as expressly set forth above, the certifications set forth herein may not be relied upon or used by any third party or for any other purpose. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -2- 72167981_] C7 Name: Daniel Roseveare Title: Managing Director Dated: November 12, 2015 [SignatuNe Page to Issz�e Price Certif cateJ -3- 72167981_1 Exhibit C Certificate of on Insurer 72163491_1 DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF ASSURED GUARANTY MUNICIPAL CORP, The undersigned hereby certifies on behalf of Assured Guaranty Municipal Corp. ("AGM"), in connection with the issuance by AGM of Its Policy No. 217201-N (the "Policy") in respect of the $6,870,000 in aggregate principal amount of City of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds") that: (i) the information set forth under the caption "BOND INSURANCE —ASSURED GUARANTY MUNICIPAL CORP," in the official statement dated October 19, 2015, relating to the Bonds (the "Official Statement") is true and correct, (ii) AGM is not currently in default nor has AGM ever been in default under any policy or obligation guaranteeing the payment of principal of or interest on an obligation, (iii) the Policy is an unconditional and recourse obligation of AGM (enforceable by or on behalf of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds in the event of Nonpayment by the Issuer (as set forth in the Policy), (iv) the insurance premium of $19,836.70 (the "Premium") is a charge for the transfer of credit risk and was determined in arm 's length negotiations and is required to be paid to AGM as a condition to the issuance of the Policy, (v) no portion of such Premium represents an indirect payment of costs of issuance, including rating agency fees, other than fees paid by AGM to maintain its ratings, which, together with all other overhead expenses of AGM, are taken into account in the formulation of its rate structure, or for the provision of additional services by us, nor the direct or indirect payment for a cost, risk or other element that is not customarily borne by insurers of tax-exompt bonds (in transactions in which the guarantor has no involvement other than as a guarantor), (vi) AGM is not providing any services in connection with the Bonds other than providing the Policy, and except for the Premium, AGM will not use any portion of the Bond proceeds; provided, however, that AGM or its affiliates may independently provide a guaranteed investment contract for the investment of all or a portion of the proceeds of the Bonds, (vii) except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by AGM, (vlii) AGM does not expect that a claim will be made on the Policy, (ix) the Issuer is not entitled to a refund of the premium for the Policy in the event a Bond is retired before the final maturity date, and (x) for Bonds which are secured by a debt service reserve fund, AGM would not have issued the Policy unless the authorizing or security agreement for the Bonds provided for a debt service reserve fund funded and maintained in an amount at least equal to, as of any particular date of computation, the reserve requirement as set forth in such agreement. AGM makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(f) of the Incame Tax Regulations. ASSURED GUARANTY MUNICIPAL CORP. By; Dated; November 12, 2015 Authorized Officer Exhibit D Form 8038-G 72163491_1 FUMM 8038=G Information Return for Tax=Exempt Governmental Obligations Form (Rev. September 2011) ► Under Internal Revenue Code section 149(e) OMB No. 1545-0720 ► See separate instructions. Department of the Treasury Caution: If the issue price is under $100,000, use Form 8038-GC, Internal Revenue Service Reporting Authority If Amended Return, check here ► ❑ 1 Issuer's name 2 Issuer's employer identification number (EIN) City of Sanger Texas 76- 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) 201 Bolivar Street 3 6 City, town, or post office, state, and ZIP code 7 Date of issue Sanger Texas 76266 November 12, 2015 8 Name of Issue 9 CUSIP number City of Sanger Texas Certificates of Obligation, Series 2015 800876 Name and title of officer or other employee of the issuer whom the IRS may call for more Information (see 10b Telephone number of officer or other instructions) employee shown on 10a Michael Brice, City Manager 940,4583930 Type of Issue (enter the issue price). See the instructions and attach schedule, 11 ,12 ,13. 14 111 5 16 ' 17, 18' Education . Health and hospital Transportation Public safety . Environment (including sewage bonds) Housing Utilities Other, Describe ► rehab/reconstruction of waste water treatment plant, lift stations, water lines, etc. 11 12 13 14 15 16 17 18 6,249,221 35 19 If obligations are TANS or RANs, check only box 19a ► ❑ If obligations are BANS, check only box 19b Poo El` 20 If obligations are in the form of a lease or installment sale, check box ► ❑ • . 3 Description of Obligations, Complete for the entire issue for which this form is being filed, 11 (a) Final maturity date (b) Issue price (c) Stated redemption price at maturity (d) Weig hted average maturity (e) Yield 21 11/15/2035 6,249,221.35 5,870,000.00 115036 years 2,6749 % Uses of Proceeds of Bond Issue (including underwriters' discount) 22 23 . 24 25 26 27 28 29 30 Proceeds used for accrued interest Issue price of entire issue (enter amount from line 21, column (b)) Proceeds used for bond issuance costs (including underwriters' discount) . 24 Proceeds used for credit enhancement 25 Proceeds allocated to reasonably required reserve or replacement fund 26 Proceeds used to currently refund prior issues 27 Proceeds used to advance refund prior issues 28 Total (add lines 24 through 28) Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount 144,527 19,836 0 0 0 here) 02 70 22 0 00 23 61249,221 35 29 164,363 72 30 1 61084,8571 63 Description of Refunded Bonds. Complete this part only for retunding bonds. 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . ► years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . ► years 33 Enter the last date on which the refunded bonds will be called (MM/DD/YYYY) ► 34 Enter the date(s) the refunded bonds were issued ► (MM/DDNYYY) For Paperwork Reduction Act Notice, see separate instructions: Cat. No. 63773S Form 8038-G (Rev. 9-2011) Form 8038-G (Rev. 9-2011) Page 2 FOMM Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) 35 0 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC) (see instructions) 36a 0 b Enter the final maturity date of the GIC ► c Enter the name of the GIC provider► 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans to other governmental units . . . . , , . . . . , . . . , . . . . , . 37 0 38a If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑ and enter the following information: b Enter the date of the master pool obligation ► c Enter the EIN of the issuer of the master pool obligation ► d Enter the name of the issuer of the master pool obligation ► 39 If the issuer has designated the issue under section 265(b)(3)(13)(1)(III) (small issuer exception), check box ► ❑ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box . . . . . . ► ❑ 41a If the issuer has identified a hedge, check here ► ❑ and enter the following information: b Name of hedge provider ► c Type of hedge ► d Term of hedge ► 42 If the issuer has superintegrated the hedge, check box . ► ❑ 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations (see instructions), check box . . . . . . . ► ❑ 44 If the issuer has established written procedures to monitor the requirements of section 148, check box . . . , . ► ❑ 45a If some portion of the proceeds was used to reimburse expenditures, check here ► ❑ and enter the amount of reimbursement . . , . , , . . . ► b Enter the date the official intent was adopted ► Signature and Consent Paid Preparer Use Only Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete. I further declare that I consent to the IRS's disclosure of the Issuer's return information, as necessary to process this return, to the person that I hav thorized above. Signature of (ssuer's authorized representative it/Type preparer's name Preparer's s(gnature Hoanq T. Vu ► McGuireWoods LLP ► 600 Travis, Suite 7500, Houston, Texas 77002 Michael Brice, City Manager Check ❑ if self-employed Firm's EIN ► Phone no. 713.353.6670 Form 803&G (Rev. 9-2011) CLOSING CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § In accordance with Section 6(1)(7) of the Purchase Agreement entered into by the Underwriter referred to therein and the City of Sanger, Texas (the "Issuer") in connection with the sale of the Issuer's Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), I, the undersigned, Mayor of the Issuer, acting in my official capacity, hereby certify as follows: 1. All official action of the Issuer relating to the Certificates, the Issuer Documents and the Official Statement have been duly adopted by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; 2. The representations and warranties of the Issuer contained in the Purchase 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. 3. Except as disclosed in the Official Statement, no litigation or proceeding against the Issuer 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 Certificates or the Issuer Documents or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and collecting taxes or revenues, including payments on the Certificates, pursuant to the Certificate Ordinance, and other income or the levy or collection of the taxes or revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof. 4. 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 the light of the circumstances under which they were made, not misleading. 5. There has not been any material adverse change in the financial condition of the Issuer since September 30, 2014, the latest date as of which audited financial information is available 70433200_1 EXECUTED as of No tA^lb; [A 20150 CITY OF SANGER, TEXAS Mayor 70433200_1 2 McGuireWoods LLP 600 Travis Street Suite 7500 Houston, TX 77002-2906 Tel 713.571.9191 Fax 713.571.9652 www.rncguirewoocls.com IVICGUIREWUUDS November 12, 2015 We have acted as Bond Counsel in connection with the issuance by City of Sanger, Texas (the "Issuer") of its Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Certificates"), dated November 1, 2015, in the aggregate principal amount of $5,870,000. The Certificates are issuable in fully registered form only, bear interest, are subject to redemption prior to maturity and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the Issuer authorizing their issuance. We have acted as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the Issuer; certain certifications and representations and other material facts within the knowledge and control of the Issuer, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R4 of this issue. We have not been requested to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the Issuer or the disclosure thereof in connection with the sale of the Certificates. Capitalized terms used herein and not otherwise defined have the meaning assigned in the Ordinance. Based on such examination, it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authol•ity for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the Issuer enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with law; and Atlanta (Austin � Baltimore � Brussels � Charlotte � Charlottesville (Chicago � Dallas � Houston � Jacksonville � London Los Angeles � New York � Norfolk � Pittsburgh (Raleigh � Richmond � Tysons Corner � Washington, D.C. � Wilmington 71064169_1 November 12, 2015 Page 2 (2) The Certificates are payable, both as to principal and interest, from the receipts of an annual ad valorem tax levied, within the limits prescribed by law, upon taxable property located within the Issuer, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates, and a pledge of subordinate Net Revenues not to exceed $10,000. Also based on our examination as described above, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates, including any accrued "original issue discount" properly allocable to the holders of the Certificates, is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended ("Code"), and is not a specific item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. For purposes of the alternative minimum tax imposed on corporations under Section 56 of the Code, interest on the Certificates is included in computing adjusted current earnings. The "original issue discount" on any Certificate is the excess of its stated redemption price at maturity over the initial offering price to the public at which price a substantial amount of the Certificates of the same maturity was sold. The "public" does not include bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. We express no opinion regarding other federal tax consequences arising with respect to the Certificates. In providing the opinion set forth in the foregoing paragraph, we are assuming continuing compliance with the Covenants (as hereinafter defined) by the Issuer. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied after the issuance of the Certificates in order for interest on the Certificates to be and remain excludable from gross income for purposes of federal income taxation. These requirements include, by way of example and not limitation, restrictions on the use, expenditure and investment of the proceeds of the Certificates and the use of the property financed by the Certificates, limitations on the source of the payment of and the security for the Certificates, and the obligation to rebate certain excess earnings on the gross proceeds of the Certificates to the United States Treasury, The Ordinance and the Issuer's tax certificate for the Certificates (the "Tax Certificate") contain covenants (the "Covenants") under which the Issuer has agreed to comply with such requirements. The failure by the Issuer to comply with the Covenants could cause interest on the Certificates to become includable in gross income for federal income tax purposes retroactively to their date of issue. In the event of noncompliance with the Covenants, the available enforcement remedies may be limited by applicable provisions of law and, therefore, may not be adequate to prevent interest on the Certificates from becoming includable in gross income for federal income tax purposes. We have no responsibility to monitor compliance with the Covenants after the date of issue of the Certificates. Certain requirements and procedures contained, incorporated or referred to in the Ordinance and Tax Certificate, including the Covenants, may be changed and certain actions may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such documents. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our November 12, 2015 Page 3 opinions are not a guarantee of result and are not binding on the Internal Revenue Service, rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. CJ / McGuireWoods LLP 600 Travis Street Suite 7500 Houston, TX 77002-2906 Tel 713.571.9191 Fax 713.571.9652 www. mcgu i rewoocis. com McGUIREWOODS November 12, 2015 Oppenheimer & Co., Inc. William Blair & Company c/o Oppenheimer & Co., Inc. 13455 Noel Road, Suite 1200 2 Galleria Tower Dallas, Texas 75240 Re: $5,870,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Ladies and Gentlemen: This opinion is being rendered pursuant to Section 6(1)(5) of the Purchase Agreement, dated October 19, 2015 (the "Purchase Agreement"), between Oppenheimer & Co., Inc., on behalf of the Underwriters named in the Purchase Agreement (the "Underwriters") and the City of Sanger, Texas (the "City") relating to the issuance, sale, and delivery by the City to the Underwriters of the referenced bonds (the "Certificates"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the ordinance authorizing issuance of the Bonds (the "Ordinance"). We have acted as Bond Counsel in connection with the issuance and sale of the Bonds. Based upon our review of the documents described in our other opinion dated as of even date herewith, our discussions with you and others, our review of the documents, certificates, opinions and other instruments delivered at the closing of the sale of the Bonds on the date hereof and such other materials as we deem relevant, we are of the opinion that: 1. the Certificate 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 and the Certificates under the 1933 Act or to qualify the Certificate Ordinance under the Trust Indenture Act; and 3. Bond Counsel has reviewed the statements and information contained in the Official Statement under the captions and sub -captions "THE CERTIFICATES" (except the subcaption "Sources and Uses of Funds"), "GENERAL INFORMATION REGARDING THE CERTIFICATES," "REGISTRATION, TRANSFER AND EXCHANGE," "TAX RATE LIMITATIONS," "LEGAL MATTERS," "TAX MATTERS," "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES," "QUALIFIED TAX- EXEMPT OBLIGATIONS," "LEGAL INVESTMENTS IN TEXAS," "REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE" and "CONTINUING DISCLOSURE OF INFORMATION" (except the Atlanta I Austin � Baltimore (Brussels I Charlotte I Charlottesville I Chicago I Dallas I Houston I Jacksonville I London Los Angeles I New York I Norfolk I Pittsburgh I Raleigh I Richmond I Tysons Corner I Washington, D.C. I Wilmington 72502288_1 November 12, 2015 Page 2 subcaption "Compliance With Prior Undertakings") and Bond Counsel is of the opinion that the information relating to the Certificates and the Certificate Ordinance contained under such captions fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. This opinion is given only to the parties to whom it is addressed in connection with the sale of the Certificates and may not be relied upon by any other party without the prior written consent of the undersigned. Reference is made hereby to our Bond Counsel opinion of even date herewith relating to the Certificates. Please be advised that such opinion may be relied upon by you as if it were addressed to you. Yours very truly, �asoaass_i KEN PIAXTON ATTORNEY GENERAL OF TEXAS November 10, 2015 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 2015 (the "Certificate"), in the principal amount of $5,870,000, for approval. The Certificate is dated November 1, 2015, numbered T4, and was authorized by an Ordinance of the Issuer passed on October 19, 2015 (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 is 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 )rdinance): (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 annual ad valorem tax levied, within the limits prescribed by law, against all taxable property in the Issuer and are further payable from a pledge of the Net Revenues, in an amount not to exceed $10,000, as provided in the Ordinance. ,Therefore, the Certificate is approved. , 3 �.1 l kAttorney General of the State of Texas �. r' Sr IL 4 1n ,'ky .�. Teo �5Ilk 97�6 Bo`ci)� I�0 21 15; D, 1 c MAkt � , 'IlLf el• ,p 4� * Seeo'atta�he�is�S� �ttiPAuthorization Post Office Box 12548, Austin, Texas 78711-2548 (512) 463-2100 ® www.texasattorneygeneral.gov OFFICE OF THE ATTORNEY GENERAL § OF THE STATE OF TEXAS § I, KEN PAXTON, Attorney General for the State of Texas, do hereby authorize the employees of the Public Finance Division of the Office of the Attorney General to affix a digital image of my signature, in my capacity as Attorney General, to the opinions issued by this office approving the issuance of public securities by the various public agencies, non-profit corporations, district, entities, bodies politic or corporate, or political subdivisions of this State as required by law, the opinions approving those contracts designated by the Legislature as requiring the approval of the Attorney General, and the obligations, proceedings and credit agreements required by law to be approved by the Attorney General. The authorized digital image of my signature is attached as Exhibit A and is hereby adopted as my own for the purposes set forth herein. This supersedes any prior signature authorizations for the same purpose. The authority granted herein is to be exercised on those occasions when I am unavailable to personally sign said opinions, and upon the condition that the opinions to which the digital image signature is affixed have been approved by an authorized Assistant Attorney General following the completion of the Public Finance Division's review of the transcripts of proceedings to which the opinions relate. Given under my hand and seal of office at Austin, Texas, this the day of January, 2015. OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Popkoff, Lj Bond Clerk LXj Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 10th day of November 2015, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: City of Sanger, Texas Combination Tax and Revenue Certificate of Obligation Series 2015, numbered T=1,, dated November 1, 2015, and that in signing the certificate of registration I used the following signature:, , , IN WITNESS WHER I have C this certificate this the 10th day of November 2015. I, Glenn Hegar, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and that the bonds/certificates described in this certificate have been duly registered in the office of the Texas, this the 10th day of November GLENN HEGAR Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, GLENN HEGAR, Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: r� Series 2015 liaation numbered T-1, of the denomination of $ 5,870,000, dated November 1, 2015, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 10th day of November 2015, under Registration Number 86060. Given under my hand and seal of office, at Austin, Texas, the 10th day of GLENN HEGAR Comptroller of Public Accounts of the State of Texas November 12, 2015 Norton Rose Fulbright US LLP 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 United States Tel +1 713 651 5151 Fax +1 713 651 5246 nortonrosefulbright.com Oppenheimer & Co., Inc., as Syndicate Representative 13455 Noel Road, Suite 1200 2 Galleria Tower Dallas, Texas 75240 Re: City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2015 Ladies and Gentlemen: We have represented Oppenheimer & Co., Inc., as representative of a syndicate of underwriters (collectively, the "Underwrite"), in the purchase of an aggregate principal amount of $5,870,000 City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2015 the "Certificates"), issued by the City of Sanger, Texas (the "City'), pursuant to a Purchase Agreement dated October 19, 2015, between the City and the Underwriter. All capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Purchase Agreement. With regard to the above, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the ordinance of the City Council of the City dated October 19, 2015 the "Certificate Ordinance"), authorizing the issuance of the Certificates, (ii) the Purchase Agreement, and (iii) the Official Statement of the City dated October 19, 2015 (the "Official Statement'). We have also discussed the Official Statement with representatives of the City and others and have reviewed certain records of the City. In our examination and reviews, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the accuracy of statements contained in such documents. Based upon the foregoing, and subject to the following qualifications, assumptions, exclusions, and limitations, we are of the opinion that the offer and sale of the Certificates to the public are exempt from registration under the Securities Act of 1933, as amended, and, in connection therewith, the Certificate Ordinance need not be qualified under the Trust Indenture Act of 1939, as amended. Although we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, we advise you that, in the course of our review and discussions with respect to the Official Statement and our review of the other materials described above, nothing has come to our attention that leads us to believe that the Official Statement (except for any financial, forecast, technical and statistical statements and data included in the Official Statement, the information regarding The Depository Trust Company and its book -entry system, as to which no view need be expressed) Norton Rose Fulbright US LLP is a limited liability partnership registered under the laws of Texas. 58945545.1 Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of No, Rose Fulbright Vereen, a Swiss veering. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. Details of each entity, with certain regulatory information, are available at nortonrosefulbright.com. Oppenheimer & Co., Inc., as Syndicate Representative November 12, 2015 Page 2 contains any untrue statement of any material fact or omits to state any information or fact required to be stated therein or any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The foregoing opinion is limited in all respects to the federal securities laws of the United States of America. We express no opinion concerning any other laws. This opinion may be relied upon by the addressee hereof and by other persons to whom written permission to rely hereon is granted by us. JOVW4 V2� �'wP,2YCs ULr 58945545.1 In the event the Insurer is evidence of coverage, the protection arrangement, unable to fulfill Its contractual obligation under this policy or contract or application or certificate or policyholder or certificatohoider Is not protected by an insurance guaranty fund or other solvency ASSURED GUARANTY MUNICIPAL ISSUER: City of Sanger, Texas (Denton County) BONDS: $5,870,000 in aggregate principal amount of Combination Tax and Revenue Certificates of Obligation, Series 2015 MUNICIPAL BOND INSURANCE POLICY Policy No.; 217201-N Effective Date; November 12, 2015 Premium: $19,836.70 ASSURED GUARANTY MUNICIPAL CORP. ("AGM"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the "Trustee") or paying agent (the "Paying Agent") (as set forth in the documentation providing for the issuance of and securing the Bonds) for the Bonds, for the benefit of the Owners or, at the election of AGM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the Business Day next following the Business Day on which AGM shall have received Notice of Nonpayment, AGM will disburse to or for the benefit of each Owner of a Bond the face amount of principal of and interest on the Bond that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by AGM, in a form reasonably satisfactory to it, of (a) evidence of the Owner's right to receive payment of the principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner's rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in AGM. A Notice of Nonpayment will be deemed received on a given Business Day if It is received prior to 1,00 p.m. (New York time) on such Business Day, otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by AGM is incomplete, it shall be deemed not to have been received by AGM for purposes of the preceding sentence and AGM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, who may submit an amended Notice of Nonpayment. Upon disbursement in respect of a Bond, AGM shall become the owner of the Bond, any appurtenant coupon to the Bond or right to receipt of payment of principal of or interest on the Bond and shall be fully subrogated to the rights of the Owner, including the Owner's right to receive payments under the Bond, to the extent of any payment by AGM hereunder. Payment by AGM to the Trustee or Paying Agent for the benefit of the Owners shall, to the extent thereof, discharge the obligation of AGM under this Policy. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer's Fiscal Agent are authorized or required by law or executive order to remain closed. "Due for Payment" means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity unless AGM shall elect, in Its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. "Nonpayment" means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment" shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the Page 2 of 2 Policy No. 217201-N Untied States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or telecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Trustee or the Paying Agent to AGM which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment. "Owner" means, In respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that "Owner" shall not include the Issuer or any person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds. AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent") for purposes of this Policy by giving written notice to the Trustee and the Paying Agent specifying the name and notice address of the Insurer's Fiscal Agent. From and after the date of receipt of such notice by the Trustee and the Paying Agent, (a) copies of all notices required to be delivered to AGM pursuant to this Policy shall be simultaneously delivered to the Insurer's Fiscal Agent and to AGM and shall not be deemed received until received by both and (b) all payments required to be made by AGM under this Policy may be made directly by AGM or by the Insurer's Fiscal Agent on behalf of AGM. The Insurer's Fiscal Agent is the agent of AGM only and the Insurer's Fiscal Agent shall in no event be liable to any Owner for any act of the Insurer's Fiscal Agent or any failure of AGM to deposit or cause to be deposited sufficient funds to make payments due under this Policy. To the fullest extent permitted by applicable law, AGM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to AGM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy sets forth In full the undertaking of AGM, and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, (a) any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity and (b) this Policy may not be canceled or revoked. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. In witness whereof, ASSURED GUARANTY MUNICIPAL CORP. has caused this Policy to be executed on its behalf by its Authorized Officer. A subsidiary of Assured Guaranty Municipal Holdings Inc. 31 West 52nd Street, New Yorl<, N.Y. 10019 Form 500NY (5/90) ASSURER GUARANTY MUNICIPAL CORP. Authorized Officer (212) 974-0100 NOTICE OF CLAIM AND CERYIFICATE Assured Guaranty Municipal Corp. 31 West 52nd Street New York, NY 10019 The undersigned, a duly authorized officer of [FULL NAME OF TRUSTEE or PAYING AGENT] (the "Trustee/Paying Agent"), hereby certifies to Assured Guaranty Municipal Corp. ("AGM"), with reference to Municipal Bond Insurance Policy No. 217201-N dated November 12, 2015 (the "Policy") issued by AGM in respect of the City of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds"), that: (i) The Trustee/Paying Agent is the Trustee/Paying Agent under the document authorizing the issuance of the Bonds (the "Indenture") for the Holders. (ii) The sum of all amounts on deposit (or scheduled to be on deposit) in the [RELEVANT ACCOUNTS] and available for distribution to the Holders pursuant to the Indenture wIII be $ (the "Shortfall") less than the aggregate amount of principal and interest Due for Payment on ("Scheduled Payments"). (ifi) The Trustee/Paying Agent is making a claim under the Policy for the Shortfall io be applied to the payment of Scheduled Payments. (iv) The Trustee/Paying Agent agrees that, following receipt of funds from AGM, it shall (a) hold such amounts in trust and apply the same directly to the payment of Scheduled Payments on the Bonds when due, (b) not apply such funds for any other purpose, (c) not commingle such funds with other funds held by the Trustee/Paying Agent and (d) maintain an accurate record of such payments with respect to each Bond and the corresponding claim on the Policy and proceeds thereof, and, if the Bond is required to be [SURRENDERED/PRESENTED] for such payment, shall stamp on each such Bond the legend $"[insert applicable amount] paid by AGM and the balance hereof has been canceled and reissued" and then shall deliver such Bond to AGM. (v) The Trustee/Paying Agent, on behalf of the Holders, hereby assigns to AGM the rights of the Holders with respect to the Bonds to the extent of any payments under the Policy, including, without limitation, any amounts due to the Holders In respect of securities law violations arising from the offer and sale of the Bonds. The foregoing assignment is in addition to, and not In limitation of, rights of subrogation otherwise available to AGM in respect of such payments. Payments to AGM in respect of the foregoing assignment shall in all cases be subject to and subordinate to the rights of the Holders to receive all Scheduled Payments in respect of the Bonds. Tlie Trustee/Paying Agent shall take such action and deliver such instruments as may be reasonably requested or required by AGM to effectuate the purpose or provisions of this clause (v). (vy The Trustee/Paying Agent, on its behalf and on behalf of the Holders, hereby appoints AGM as agent and attorney -in -fact for the Trustee/Paying Agent and each such Holder in any legal proceeding with respect to the Bonds. The Trustee/Paying Agent hereby agrees that, so long as AGM shall not be in default in its payment obligations under the Policy, AGM may at any time during the continuation of any proceeding by or against the Issuer under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim in connection with an Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment made with respect to the Bonds (a "Preference Claim"), (B) the direction of any appeal of any order relating to any Preference Claim at the expense of AGM but subject to reimbursement as provided in the Indenture and (C) the posting of any surety, supersedes or performance bond pending any such appeal, In addition, the Trustee/Paying Agent hereby agrees that AGM shall be subrogated to, and the Trustee/Paying Agent on its behalf and on behalf of each Holder, hereby delegates and assigns, to the fullest extent permitted by law, the rights of the Trustee/Paying Agent and each Holder in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order Issued in connection with any such Insolvency Proceeding. (vii) Payment should be made by wire transfer directed to [SPECIFY INSURANCE ACCOUNT]. Unless the context otherwise requires, capitalized terms used in this Notice of Claim and Certificate and not defined herein shall have the meanings provided in the Policy. IN WITNESS WHEREOF, the Trustee/Paying Agent has executed and delivered this Notice of Claim and Certificate as of the day of For AGM or Fiscal Agent Use Only Wire transfer sent on _ Confirmation Number Title -2- DISCLOSURE, NO DEFAULT AND TAX CERTIFICATE OF ASSURED GUARANTY MUNICIPAL CORP. The undersigned hereby certifies on behalf of Assured Guaranty Municipal Corp. ("AGM"), in connection with the issuance by AGM of its Policy No. 217201-N (the "Policy") in respect of the $5,870,000 in aggregate principal amount of City of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds") that: informaiion set forth under the caption "BOND INSURANCE —ASSURED GUARANTY MUNICIPAL CORP." in tho official statement dated October 19, 2015, relating to the Bonds (the "Official Statement") is true and correct, (ii) AGM is not currently in default nor has AGM ever been in default under any policy or obligation guaranteeing the payment of principal of or Interest on an obligation, (iii) the Policy is an unconditional and recourse obligation of AGM (enforceable by or on behalf of the holders of the Bonds) to pay the scheduled principal of and interest on the Bonds in the event of Nonpayment by the Issuer (as set forth in the Policy), (iv) the insurance premium of $19,836.70 (the "Premium") is a charge for the transfer of credit risk and was determined in arm's length negotiations and is required to be paid to AGM as a condition to the issuance of the Policy, (v) no portion of such Premium represents an indirect payment of costs of issuance, including rating agency fees, other than fees paid by AGM to maintain its ratings, which, together with all other overhead expenses of AGM, are taken into account in the formulation of its rate structure, or for the provision of additional services by us, nor the direct or indirect payment for a cost, risk or other element that is not customarily borne by insurers of tax-exempt bonds (in transactions In which the guarantor has no involvement other than as a guarantor), (vi) AGM is not providing any services in connection with the Bonds other than providing the Policy, and except for the Premium, AGM will not use any portion of the Bond proceeds; provided, however, that AGM or its affiliates may independently provide a guaranteed investment contract for the investment of all or a portion of the proceeds of the Bonds, (vii) except for payments under the Policy in the case of Nonpayment by the Issuer, there is no obligation to pay any amount of principal or interest on the Bonds by AGM, (viii) AGM does not expect that a claim will be made on the Policy, (ix) the Issuer is not entitled to a refund of the premium for the Policy in the event a Bond is retired before the final maturity date, and (x) for Bonds which are secured by a debt service reserve fund, AGM would not have issued the Policy unless the authorizing or security agreement for the Bonds provided for a debt service reserve fund funded and maintained in an amount at least equal to, as of any particular date of computation, the reserve requirement as set forth in such agreement. AGM makes no representation as to the nature of the interest to be paid on the Bonds or the treatment of the Policy under Section 1.148-4(f) of the Income Tax Regulations. ASSURED GUARANTY MUNICIPAL CORP. By: Dated: November 12, 2015 Authorized Officer AsSURED jUARANTY MUNICIPAL November 12, 2015 City of Sanger. Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2015 Ladies and Gentlemen; I am Counsel of Assured Guaranty Municipal Corp., a New York stock insurance company ("AGM"). You have requested my opinion in such capacity as to the matters set forth below in connection with the issuance by AGM of Its above -referenced policy (the "Policy"), In that regard, and for purposes of this opinion, I have examined such corporate records, documents and proceedings as I have deemed necessary and appropriate. Based upon the foregoing, I am of the opinion that: 1. AGM is a stock insurance company duly organized and validly existing under the laws of the State of New York and authorized to transact financial guaranty insurance business therein, 2. The Policy has been duly authorized, executed and delivered by AGM. 3. The Policy constitutes the valid and binding obligation of AGM, enforceable in accordance with its terms, subject, as to the enforcement of remedies, to bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other similar laws affecting the enforceability of creditors' rights generally applicable in the event of the bankruptcy or insolvency of AGM and to the application of general principles of equity. In addition, please be advised that I have reviewed the description of the Policy under the caption "BOND INSURANCE —BOND INSURANCE POLICY" in the official statement relating to the above referenced Bonds dated October 19, 2015 (the "Official Statement"). There has not come to my attention any information which would cause me to believe that the description of the Policy referred to above, as of the date of the Official Statement or as of the date of this opinion, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Please be advised that I express no opinion with respect to any information contained in, or omitted from, the caption "BOND INSURANCE — ASSURED GUARANTY MUNICIPAL CORP.". I am a member of the Bar of the State of New York, and do not express any opinion as to any IayG other than the laws of the Stato of New Yorl<. �--� � City of Sanger, Texas (Denton County), PO BOX 1729, Sanger, Texas 76266. Oppenheimer, 13455 Noel Road, Suite 1200, 2 Gaileria Tower, Dallas, Texas 75240, Assured Guaranty PAunicipal Corp. Nncv \'orlc, NY iO(7I(t �EIY. 721e'6f1t7 ;3�Oi •. New Issuen, o•assigns• City of Sanger's,$6.3M Combination Tax ., v Revenue CO, Series 2015 Global Credit Research - 01 Oct 2015 Affirms A2 in $12.8M outstanding parity debt BANGER (CITY OF) TX Cities (including Towns, Villages and Townships) TX Moody's Rating ISSUE RATING Combination Tax and Revenue Certificates of Obligation, Series 2015 A2 Sale Amount Expected Sale Date Rating Description Moody's Outlook NOO $6,250,000 10/06/15 General Obligation Limited Tax NEW YORK, October 01, 2015--Moody's Investors Service has assigned an A2 to the City of Banger's TX $6.3 million Combination Tax and Revenue Certificates of Obligation, Series 2015. At the same time Moody's affirms the A2 rating on $12.8 million of outstanding general obligation limited tax debt. Post sale, the city will have $19.1 million outstanding. SUMMARY RATING RATIONALE The A2 reflects a growing yet modestly sized tax base favorably located near the Dallas /Fort Worth metro area, strengthening reserve levels, and a slightly elevated debt burden. The rating further reflects an above average principal amortization and below average socioeconomic indicators. OUTLOOK Moody's generally does not assign outlooks to local government credits with this amount of debt outstanding. WHAT COULD MAKE THE RATING GO UP -Trend of significant tax base expansion Substantive improvement in socioeconomic indicators -Strengthening of reserves in line with rated peers WHAT COULD MAKE THE RATING GO DOWN -Protracted tax base declines -Declines in reserves and / or liquidity STRENGTHS -Trend of growing reserve levels -Continued growth in tax base expected -Favorable location 40 miles no, of Dallas CHALLENGES -Modestly sized tax base -Moderate taxpayer concentration RECENT DEVELOPMENTS Recent developments are incorporated in the Detailed Rating Rationale. DETAILED RATING RATIONALE ECONOMY AND TAX BASE: MODESTLY -SIZED TAX BASE NORTH OF DFW Located in Denton County (Aaa stable outlook), 40 miles north of Dallas (Aa1 Stable outlook) on Interstate 35, the city is primarily a residential community. The city returned to tax base growth after experiencing two slight full valuation declines in fiscal 2010 and 2012 associated with the broader economic downturn. The five year average annual growth through fiscal 2016 was 5.0% reaching a full valuation of $466 million. Fiscal 2016 assessed values increased a notable 7.4%, and credited to reappraisals and new development. Management reports ongoing residential development and anticipates a total of 100 new homes to be complete in fiscal 2015, with development expected to continue into fiscal 2016. The city's top ten taxpayers are moderately concentrated at 29.3% of fiscal 2014 full values. Wal-Mart Stores, Inc. (Aa2 stable outlook) is the largest taxpayer comprising 22.6% of the tax base. The city's socioeconomic profile is below average with the American Community Survey 2012 per capita income equal to 67.6% of the US and the median family income equal to 93.2% of the US. However, the unemployment rate for Denton County is favorable at 3.6% as of July 2015 versus the 5.6% for the US. While the city's tax base is modestly -sized, ongoing new development and its favorable location near the Dallas/Fort Worth Metroplex is expected to drive growth in the tax base and will be monitored in future reviews. FINANCIAL OPERATIONS AND RESERVES; ADEQUATE RESERVES; GROWTH EXPECTED Following a slight operating deficit and draw on reserves in fiscal 2012, the city posted General Fund surpluses in fiscal 2013 and 2014, strengthening reserves above the city's targeted fund balance policy of $1.0 million. Management attributes increasing sales taxes, ad valorem taxes, and conservative budgeting practices helped drive the recent surpluses. Fiscal 2013 ended with a $301,000 surplus, which increased the total General Fund balance to $1.1 million, or a healthy 20.5% of revenues. The trend continued in fiscal 2014 with another surplus bolstering reserves to $1.2 million, or 21.9% of revenues. A significant amount of fiscal 2014 General Fund operations were supported by transfers from the city's enterprise funds (14.9%). The enterprise funds (water, sewer, electricity) have historically reported stable operations. At fiscal year-end 2014, enterprise cash stood at $2.1 million (20.8% of operating revenues) and an unrestricted position of $6.4 million (60% of revenues). Management expects to end fiscal 2015 with a surplus growing the General Fund balance of $1.5 million, or 26% of fiscal 2015 budgeted revenues. The city maintains revenue raising flexibility with ad valorem tax rates, totaling $6.80/$1000, well below the $25/$1000 maximum allowed. Moody's expects the trend of surplus operations to continue into fiscal 2016 as evidenced by ongoing development, increasing sales tax revenues, and conservative budgeting. Liquidity Liquidity maintained in the city's General Fund at fiscal year-end 2014 was a healthy $1.3 million (23.2% of revenues). The city's liquidity position is expected to increase in line with the expected surplus in fiscal 2015. DEBT BURDEN; ELEVATED DEBT BURDEN; FUTURE ISSUANCE EXPECTED Inclusive of the current sale, the city's direct debt burden is above average at 2.7% and 6.0% overall, both expressed as percentages of fiscal 2016 assessed value. The burdens are net of $7.2 million 100% supported by the city's utility funds. Without this self-supporting status, the city's debt burden would be an elevated 4.3% of fiscal 2016 assessed value. Management plans to issue additional debt to supplement the current offering for continued water plant expansion. Additional debt issuances absent of taxable value growth would increase the city's already above -average debt burden, which may place downward pressure on the rating. Debt Structure Principal amortization of general obligation supported debt outstanding is above average with 93.4% retired within ten years. Including the current issuance all debt matures in fiscal 2033 with declining principal and interest payments. Debt -Related Derivatives All the city's debt is fixed rate, and the city is not party to any interest rate swaps or other derivative agreements. Pensions and OPEB The city has a manageable employee pension burden, based on unfunded liabilities for its share of the Texas Municipal Retirement System (TMRS), an agent multiple -employer plan administered by the state. Moody's fiscal 2014 adjusted net pension liability (ANPL) for the city, under our methodology for adjusting reported pension data, is $2.8 million, or 0.44 times operating revenues. The three year average of the city's ANPL to Operating Revenues is 0.4 times, while the three-year average of ANPL to full value is a manageable 0.57%. Moody's ANPL reflects certain adjustments we make to improve comparability of reported pension liabilities. The adjustments are not intended to replace the city's reported liability information, but to improve comparability with other rated entities, For more information on Moody's insights on employee pensions and the related credit impact on companies, government, and other entities across the globe, please visit Moody's on Pensions at www.moodys.com/pensions. MANAGEMENT AND GOVERNANCE Texas cities have an institutional framework score of "Aa" or strong. Cities rely on moderately stable property taxes (30% - 40%) as well as economically sensitive sales taxes (25% -35%) for their operating revenues, however cities maintain ample flexibility under the state mandated cap to raise property taxes. Expenditures are largely predictable and cities do have great flexibility in reducing expenditures given no union presence. KEY STATISTICS -Full value, 2016: $466 million -Full value per capita, 2016: $62,819 -Median family income: 93.2% of U.S. -Available fund balance, FY 2014: 23.2% of operating revenues 5-year change in fund balance: 14.8% of operating revenues Net cash, FY 2014: 20.8% of operating revenues 5-year change in net cash: 10% of operating revenues -Institutional framework: Aa 5-year average of operating revenues / expenditures: 1.03x Net direct debt burden % of full value: 2.72% Net direct debt burden /operating revenues: 2.Ox -3-year average Moody's adjusted net pension liability % of full value: 0.57% 3-year average Moody's adjusted net pension liability / operating revenues: 0.4x OBLIGOR PROFILE The city of Sanger is a residential community located on IH-35 in Denton County approximately 40 miles northeast of the Dallas -Ft. Worth metro area. The 2010 population was 6,916. LEGAL SECURITY The certificates are payable from ad valorem taxes which may be levied without limitation as to rate or amount upon all taxable property, within the city and by a limited subordinate pledge of surplus revenues derived from the city's water and sewer system, not to exceed $1,000, USE OF PROCEEDS Proceeds from the current offering will finance phase one of the rehabilitation, reconstruction, addition and expansion of the water and waste water treatment plan. PRINCIPAL METHODOLOGY The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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McGRAW HILL FINANCIAL October 205 2015 Assured Guaranty Municipal Corp. 31 West 52nd Street New York, NY 10019 Attention: Mr. Richard Bauerfeld, Chief Surveillance Officer 55 Water Street, 38th Floor New York, NY 10041.0003 tel 212 4384074 reference no.: 1415346 Re: $5,870,000 City of Sanger, Texas (Denton County), Combined Tax and Revenue Certificates of Obligation, Series 2015, dated: November 01, 2015, due: November 15, 2016- 2031 and 2035, (POLICY#217201-N) Dear Mr. Bauerfeld: Standard & Poor's Ratings Services ("Ratings Services") has assigned an insured rating of "AA" on the above obligations, based on the policy provided by your company. We may adjust the underlying rating and the capital charge as a result of changes in the financial position of the issuer or performance of the collateral, or of amendments to the documents governing the issue, as applicable. With respect to the letter, please notify us of any changes or amendments over the term of the debt. 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Sincerely yours, Standard & Poor's Ratings Services kl enclosure PF Ratings U.S. (7/18/14) MCGRAW HILT FINANCIAL Standard & POor'S Ratings Services Terms and Conditions Applicable To Public Finance Credit Ratings General. The credit ratings and other views of Standard & Poor's Ratings Services ("Ratings Services") are statements of opinion and not statements of fact. Credit ratings and other views of Ratings Services are not recommendations to purchase, hold, or sell any securities and do not comment on market price, marketability, investor preference or suitability of any security. While Ratings Services bases its credit ratings and other views on information provided by issuers and their agents and advisors, and other information from sources it believes to be reliable, Ratings Services does not perform an audit, and undertakes no duty of due diligence or independent verification, of any information it receives. 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RATINGS SERVICES GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, Ratings Services, its affiliates or third party providers, or any of their officers, directors, shareholders, employees or agents shall not be liable to any person for any inaccuracies, errors, or omissions, in each case regardless of cause, actions, damages (consequential, special, indirect, incidental, punitive, compensatory, exemplary or otherwise), claims, liabilities, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in any way arising out of or relating to a credit rating or the related analytic services even if advised of the possibility of such damages or other amounts. No Third Party Beneficiaries. Nothing in any credit rating engagement, or a credit rating when issued, is intended or should be construed as creating any rights on behalf of any third parties, including, without limitation, any recipient of a credit rating. No person is intended as a third party beneficiary of any credit rating engagement or of a credit rating when issued. PF Ratings O.S. (02/16/13) t V K October 21, 2015 Assured Guaranty Municipal Corp. 31 West 52nd Street New York, NY 10019 To Whom I# May Concern: Moody's Investors Service, Inc. 7 World Trade Center at 250 Greenwich Street NewYork, NY 10007 +142124553,0300 tel +1.212,553,4820 fax www.moodys.com Moody's Investors Service has assigned the rating of A2 to the $5,870,000.00 City of Sanger, Texas (Denton County), Combination Tax and Revenue Certificates of Obligation, Series 2015, dated November 12, 2015 which sold through negotiation on October 20, 2015, insured by Assured Guaranty Municipal Corp. (Policy No.217201-1\1), The rating is the highest of (i) the guarantor's financial strength rating, (ii) any published underlying rating on the security, or (iii) any published enhanced rating based on a state credit enhancement program. Credit ratings issued by Moody's Investors Service, Inc. and its affiliates ("Moody's") are Moody's current opinions of the relative future credit risk of enes, credit commitments, or debt or debt -like securities and are not statements of current or historical fact. Moody's credit ratings address credit risk only and do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. This letter uses capitalized terms and rating symbols that are defined or referenced either in Moody's Definitions and Symbols Guide or MIS Professional Code of Conduct as of the date of this letter, both published on www.moodys.com. The Credit Ratings will be publicly disseminated by Moody's through normal print and electronic media as well as in response to verbal requests to Moody's Rating Desk. Moody's related research and analyses will also be published on www.moodys.com and may be further distributed as otherwise agreed in writing with us. Moody's Credit Ratings or any corresponding outlook, if assigned, will be subject to revision, suspension or withdrawal, or may be placed on review, by Moody's at any time, without notice, in the sole discretion of Moody's. For the most current Credit Rating, please visit www,moodys.com. Moody's has not consented and will not consent to being named as an expert under applicable securities laws, such as section 7 of the Securities Act of 1933. The assignment of a rating does not create a fiduciary relationship between Moody's and you or between Moody's and other recipients of a Credit Rating. Moody's Credit Ratings are not and do not provide investment advice or recommendations to purchase, sell or hold particular securities. Moody's issues Credit Ratings with the expectation and understanding that each investor will make its own evaluation of each security that is under consideration for purchase, sale or holding. Moody's adopts all necessary measures so that the information it uses in assigning a Credit Rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third -party sources. However, Moody's is not an auditor and cannot in every instance independently validate or verify information received in the rating process. Moody's expects and is relying upon you possessing all legal rights and required consents to disclose the information to Moody's, and that such information is not subject to any restrictions that would prevent use by Moody's for its ratings process. In assigning the Credit Ratings, Moody's has relied upon the truth, accuracy, and completeness of the information supplied by you or on your behalf to Moody's. Moody's expects that you will, and is relying upon you to, on an ongoing basis, promptly provide Moody's with all information necessary in order for Moody's to accurately and timely monitor the Credit Ratings, including current financial and statistical information. Under no circumstances shall Moody's have any liability (whether in contract, tort or otherwise) to any person or entity for any loss, injury or damage or cost caused by, resulting from, or relating to, in whole or in part, directly or indirectly, any action or error (negligent or otherwise) on the part of, or other circumstance or contingency within or outside the control of, Moody's or any of its or its affiliates, directors, officers, employees or agents in connection with the Credit Ratings. ALL INFORMATION, INCLUDING THE CREDIT RATING, ANY FEEDBACK OR OTHER COMMUNICATION RELATING THERETO IS PROVIDED "AS IS" WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND. MOODY'S MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH INFORMATION. Any non-public information discussed with or revealed to you must be kept confidential and only disclosed either (i) to your legal counsel acting in their capacity as such; (ii) to your other authorized agents acting in their capacity as such with a need to know that have entered into non -disclosure agreements with Moody's in the form provided by Moody's and (iii) as required by applicable law or regulation. You agree to cause your employees, affiliates, agents and advisors to keep non-public information confidential. If there is a conflict between the terms of this rating letter and any related Moody's rating application, the terms of the executed rating application will govern and supercede this rating letter. Should you have any questions regarding the above, please do not hesitate to contact Daniel Hellige at (212) 553-3682. Sincerely yours, r0FleVMK67 SP I 4NOW44tu e. / AIV 9 Moody's Investors Service, Inc. UNITED STATES OF AMERICA STATE OF TEXAS NUMBER DENOMINATION R4 $1001000 REGISTERED REGISTERED CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION INTEREST RATE 2.000% DATED DATE: SERIES 2015 DELIVERY DATE November 12, 2015 REGISTERED OWNER; PRINCIPAL AMOUNT MATURITY DATE November 15, 2016 NOVEMBER 1, 2015 CEDE & CO. CUSIP ONE HUNDRED THOUSAND AND NO/100 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 BOKF, NA, 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 15, 2016, and each May 15 and November 15 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 fifteenth 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, Page 1 of 7 72513711.1 THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the "Certificates") in the aggregate principal amount of $5,870,000 issued pursuant to an ordinance adopted by the City Council of the City on October 19, 2015 (the "Ordinance") for the purpose of providing all or part of the funds (t) to pay all or any part of the contractual obligations to be incurred for the (i) rehabilitation, reconstruction, addition and expansion of the waste water treatment plant; (ii) rehabilitation and construction of wastewater lift stations and wastewater lines, (iii) construction of water lines and associated equipment and facilities; (iv) rehabilitation, reconstruction and construction of streets and drainage; and (v) rehabilitation of municipal facilities, 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 A 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 November 15, 2026, in whole or in part, on November 15, 2025, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE CERTIFICATES MATURING ON NOVEMBER 15 in the year 2035 (the "Term Certificates") 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 Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Mandatory Principal Redemption Dates Amounts Term Certificates Maturing November 15, 2032 $395,000 November 15, 2035 November 15, 2033 41000 November 15, 2034 425,000 November 15, 2035* 445,000 *stated maturity The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before October 1 of each year in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed 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 Page 2 of 7 72513711.1 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 sunrender 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 Page 3 of 7 72513711,1 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, 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 pant 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 its corporate seal to be impressed or placed in facsimile hereon and 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 4 of 7 72513711,1 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: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 72513711,1 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. Page 7 of 7 OFFICE OF THE ATTORNEY GENERAL PUBLIC FINANCE DIVISION Additional Transcript Requirements Pursuant to Texas Government Code §1202.008 Please submit excel copy of this form to brblgs tt brb.state.tx.us The following information is to be inc a ed 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, A. Please provide the following information 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): 1. a. Name of the Governmental Enti Ci of San er, Texas b. Name of Bond Issue: Certificates of Obligation, Series 2015 C. Type of Issuer: List Component/Related Entity/Other 2. a. Total Par Amount: $5,870,000.00 b. New Money Par: $5,870,000.00 c. Refunding Par: N/A d. Dollar Amount of Bond Premium, if any: $3791221.35 e. Cash Premium (Competitive Sales, usually found in the Initial Purchasers Section), if any: N/A f. Dollar Amount of Bond Original Issue Discount, if an : N/A g. If available, please email the DF2 file to brblgs@brb,state,tx.us. N/A 3. Dated Date: 11/1/2015 4. Date Interest Accrues from: 11/12/2015 5. Closing Date (expected delivery date, on or about): 11/12/2015 6. First Interest Payment Date: 5/15/2016 7. Maturity Dates, Maturity Amounts, Coupon Rates, Prices or Yields (If no reoffering yield RO indicated, please provide yield separately.): See attached Exhibit A 8. Call Provisions, including Premiums, if any: See attached Exhibit B 9. Mandatory Sinking Fund Redemption Dates: See attached Exhibit B 10. Debt -Service Schedule (Principal and Interest, and Annual Totals, with the Fiscal Year identified): See attached Exhibit A 11. Do the bonds have a specific designation as qualified tax-exempt obligations? Yes 12. Derivative Products (Swaps, Interest Rate Management Agreements, etc.) - List any derivatives associated with financing: N/A 13. Pledge: tax ad valorem, sales, other), revenue, combination: Combination Tax/Rev 14. Credit Enhancement(including PSF guarantee): Bond Insurance - Assurance Guaranty Municipal Updated June 2014 15. Ratings: Assigned to the issue/ Underlying: Assigned to this issue Underl in Mood 's A2 A2 S&P AA Fitch N/A Other N/A Not Rated N/A B. AdditionalInforrnation 16. Type of Sale: (Competitive, Ne otiated, Private Placement, Ottlef2 Negotiated If other please explain 17. Date of Sale: 10/19/2015 18. Net effective interest rate pursuant to Government Code Chapter 1204.005: 2.67% 19, Governmental Purchaser - please name purchaser i.e. Texas Water Development Board): N/A 20, Refunded Obligations - If applicable, include a schedule of obligations refunded by year, principal amount, and coupon. N/A 21. Gross Cash and Present Value Savings/Loss - If a refunding bond issue, please provide final schedule of gross cash and present value savings or loss. N/A N/A 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. N/A 23. If voter approved - Provide bond election date(s), original amount(s) authorized and current amounts of principal and premium charged against voted authority. N/A 24. Authorized but Unissued - For issues that require the use of voted bond authorization, list allauthorized but unissued voted authority available, if any. N/A 25. Upcoming Called Bond Election: Please provide an attached schedule which shows date of election, purpose and amount by proposition. 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 a e s : See attached Exhibit A 27. Commercial Paper Authorized - List all commercial paper programs, the amounts authorized and the amounts currently outstanding. N/A 28. Population - Provide the most current available population data: 6,066 Source: Texas MAC 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: N/A 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)? N/A Updated June 2014 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 Service Bond Rating: Firm One -Time Fee Annual Fees (r) Mood 's 65500,00 Standard & Poor's 65500,00 Fitch Other: Other Costs of Issuance: ('-) Financial Advisor Government Capital Securities Corporation $633500 Bond Counsel McGuireWoods LLP $15,000 Co Bond Counsel Issuer Counsel Bank Counsel Disclosure Counsel Paying Agent BOKF, NA 500.00 Trustee Remarketing Fees Liquidity Fees Accountant/CPA Printing Attorney General's Fee $53870.00 Issuer Fees Escrow Agent Escrow Verification Fees Misc. Costs of Issuance: (3) Total Costs of Issuance: 97,870.00 - Credit Facility Bond Insurance 19,836.70 Underwriting Spread: Takedown 283587.50 Management Fee 5,870.00 Underwriter Counsel Norton Rose Fulbri ht US LLP 7,500.00 Spread Expenses 41699,52 Total Underwriting Spread: (4) 46,657.02 - Did Underwriter Pay Rating Fee? es or No No Did Underwriter Pay Bond Insurance Fee? es or No No Did Underwriter Pay Underwriter Counsel's Fee? es or No No (1) Refers to any recurring costs of an issuance including fees for paying agent, remarketing agent, credit provider and other similar services (maybe expressed as a formula as appropriate). (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. (4) Include all marketing and selling costs including structuring (management) fee, takedown, underwriting risk fee and expenses. Updated June 2014 UW Participants Firm Senior Managing Underwriter Oppenheimer & Co. Other Underwriters William Blair & Company Person Com Ietin Form: Name: Hoang Vu Firm: McGuireWoods LL P Telephone: 713.353.6670 F-mail: hvu@mcRuirewoods.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.state.tx,us/lgs/lgs.eispx Updated June 2014 EXHIBIT A resod � u Ending Principal Inttmtt debt Senice Debt 5eteice 05d15=12016 100.548.33 I00„548.33 K10'201.6 1004548 33 11,IM12016 I00,000 98,000.00 193g000.00 05.^1> ?017 977900,00 97mOOM M9 30<2017 296,800.00 I1115�"2017 1157000 974900,00 212,900.00 0535e`2019 96,350.00 964750.00 09/30^018 309„650..00 1115s?018 1157000 96<750.00 211,750.00 05150MP K600.00 95,600.00 09 30'2019 307,350M 11152019 II0,000 95,600.00 205,600.0o 0515.r2020 93,950.00 93,0%00 00130 "2020 2994550.00 111 r020 1807000 93,950,00 2734950,00 OS/M2021 91,250,00 M250.00 09 30`2,021 365,204.00 11°15 2 02 1 205,000 91 2•0.00 3S&250M 05=f15:2022 Bd,E2>.00 86,825.00 09.$30'2022 473,075,00 1 IM2,032 285,000 8d,825.00 371,825.00 05115?2023 82,550.00 82,550.00 09 "30"2023 454,375.00 11t1521023 200,000 827550.00 372h550,00 OS:'IS`2024 78;200.00 78„20ti,00 09:30 024 450,750.00 I1,'15?024 MOO 78,200400 378,200.00 05:11542025 73„700.00 73,700,00 N�,' W2025 451900.00 111SP20�5 MOW 73,700.00 383,700.00 osiM2026 d9,050.00 69,050,00 09:r30'2026 452,750.00 11 I Sid?6 320,0.0 69,050.00 389,050.00 0515=1027 63,850.00 d3,850,00 09.30121027 452 900.00 1115+2027 330,000 63„850.00 393,850,00 05i"15:20.'.8 58,075.00 58,075.00 09 3O+`2028 452925,00 11r,15 2102a 340wOOO $8,075400 aMv075,00 O5'15 2029 52,125.00 52,125,00 09, 30 020 450.200.00 1115(2029 355,000 32,12,5.00 407,12S.00 05,"M2030 45,468.75 45469,71 09,301°2030 452,593..75 1l<IS`2030 370,000 451468,75 415,468.75 05151031 38,53I.25 38,531.25 opf,302031 4544000.00 11115 1031s80,000 38,531,25 418,531.25 0515-e2032 31,406,25 31,406,25 09 30"032 449,937,50 21r15`2034, 395,000 31 406:23 426,40d.2S 051I5=2033 4,000.00 24,000.00 09, W2033 450,4046.25 11,115Q033 410,00+0 N4 000.00 434,0 .00 `2034 16„312.50 1dv312.50 09tt 30f'203 4 430 31 .40 I II M' 2034 425,000 16,31 .50 441,312.50 05152035 8,343,75 8;343.75 0930'2035 4 49,d5d.25 ll)`W2035 445,000 81343,75 453Y343.75 09,1430.2036 453.343.75 5,870, 2,607,223.33 8,477,223.33 SJ77;223-33 Exhibit B THE CrTY FISERVES IKE RiGiil as MOPtIOT1410t 4110r10 Me's IIMUIi . �ertificates maturinzwon a d &fmNovembef l f, 2 26. in hole of in pam, on Nlovembef 1 , ii?S, or any date thereafter. at par plus a a rued interest to the date fixed for redemption THE GERTTFi�ATE s 3SATL'R�z�s E71�''�«*3�'E��ER 1 f in the year'.'.�i� f the "T CellificateO are subject to mandatory sinking fund redemption in the followVVInza unts (iubje*..t to seduction as hereinafter provided), on the following dates, in exb case at a tedernptionprice equal to the principal amount of she Certificatei or the portions thereof so r,2 led for redemption plus accrued interest to the date faxed for redemption: OXACWria4mDiu* A � • � rr. The particular T �ertsfaE;.ates to be retie � shailbe 1e:3 bythe Restras b}lofs o� cuitornary random selection method, on or before October 1 of each year in which Term �ertl are to bemandatorily redeemed . The principal smount of Term t` nificates to be datortly redeemed in each year shall be reduced by the principal amount of such Term ificitei that have b optionallyr ed s and which have not b e the basis for a prey ions reduction_ �ERIiF'tOATEtwI+S.A V FEF.F�EE:LVPr1F�'i`onlyinie_ rnult�al?sof'l«fkN3 If a Certificate subij.kn ia tedmption isinaden ' ad lasger that zz,00Q,a portion ofsuc �efii be redeemed. big Onlyin in Aral MAIltip s ofSa.fl01n selettin�pottions of eflificates for tee empiion, each Certificate shall be trued as representing that number of estificatei of $S,fl omfinati , ti h is obtained bydiv din the i i sl amount of such ifacate by S S,000 , upon iurrendes of any Certificate for redemption in part, the paying AgenvRelistcr. in accordance with the provisions of the Otdinance, shsll authenticate and deliver in exchange tbefefcir a Certificate of C cates of lad e maturity and ingest rate in an a repte principal amount eVal to the unr emedportion of the Certificate to surrendered NI C?iIOE 4F AN SUCH RfiOENCP'ii0N. identifying the Certificates, o portions shereof to ire re ed, i le tbyil'rrasi �tatea rnsil, first clasi, poita prepaid„ to the Re ssteted Ors r ri thereofat tiaeir re• i as sho n on dse books of to stfation kept by the ,ayinjAgent'Regism tot less t 1aifty(3 d1rSbefore tl)edate fixed fsuchtedemption. 'm the date fbad for redempti , the provision shall be with the Paying Agent tReZstme for the payer of the redemptioripfict of tbeCtrtificafei called for redenption If su:h notice ofted pti ugiv n,andifdueprovu' ion for suchpiym+..x is .all asplavidedabovs.ti* �ertiflcates u ich are So be so redeemed thefebyauxamadca lly shall be redeemed prior to their scheduledmanxities, they ihjil not bau interest after the date faxed for redemption,, and they shall not be regarded is boutsz=dingexceptforthepurpoteofbeiaagpa **xit The fiInd ISO prat ided for such payment PPENHEIMEI� November 10, 2015 ISSUER City of Sanger Mike Brice — City Manager Clayton Gray — Finance Director PO Box 1729 Sanger, TX 76266 Phone: (940) 458-7930 mbrice@sangertexas.org FINANCIAL ADVISOR Government Capital Securities Corporation Ted Christensen / Wendy Dolan 559 Silicon Drive, Suite 102 Southlake, TX 76092 Phone: (817) 722-0239 tchristensen@govcapsecurities.com BOND COUNSEL McGuire Wood LLP Hoang Vu / Todd Brewer 600 Travis Street, Suite 7500 Houston, Texas 77002 Phone: (713) 353-6670 hoangvu@andrewskurth.com BOND UNDERWRITER Oppenheimer & Co., Inc. Daniel Roseveare / Robert Bruning 13455 Noel Rd., Suite 1200 2 Galleria Tower Dallas, Texas 75240 Phone: (972) 450-3823 robert.bruning@opco.com UNDERWRITER'S COUNSEL Fulbright & Jaworski L.L.P. 13 A McKinney Suite 5100 Houston, Texas 77010-3095 Marcus Deitz Phone: (713)651-5649 mdeitz@fulbright.com PAYING AGENT BOK Financial Jose A. Gaytan, Jr. 100 Congress Avenue, Ste.250 Austin, Texas 78701 Phone: (512) 813-2002 Vtan@bankoftexas.com Re: Closing Instructions with respect to the City of Sanger, Texas, $5,870,000 Combination Tax and Revenue Certificates of Obligation, Series 2015 (the "Bonds"). Payment for the above referenced Bonds is scheduled to occur at 10:00 A.M. CST on Thursday, November 12, 2015 (the "Closing Date"), and payment therefore is to occur at the offices of BOK Financial, the paying agent/registrar ("BOKF"). Principal Amount of Bonds PLUS: Premium Deposit to Construction Fund PLUS: Costs of Issuance (plus rounding amount) PLUS: Bond Insurance PLUS: Underwriter's Discount $5,870,000.00 379.221.35 $ 6,080,000.00 102,727.63 19,836.70 46,657.02 CONFIRMATION OF PURCHASE PRICE Principal Amount of Bonds $5,870,000.00 PLUS: Premium 379,221.35 LESS: Underwriter's Discount 46,657.02 1 FPENHEIMEI� (A) Prior to 10:00 A.M. on the Closing Date, Oppenheimer & Co. (the "Underwriter") shall wire in immediately available funds $6,202,564.33 (consisting of the par amount of the Bonds of $5,870,000.00 plus original issue premium of $379,221.35 and less underwriter's discount of $46,657,02). Instructions for wiring funds to BOKF are as follows: BOKF, NA ABA:103900036 Acct. No. 600024642 Acct Name: Wealth Management Account Re: City of Sanger Series 2015 Attn, Jose Gaytan 512-279-7850 (B) BOKF is instructed to disburse the funds, no later than 1:00 P.M., described above as follows: (1) Deposit to Construction Fund: To: City of Sanger Account Name: First United Bank Address: PO Box 1250, Sanger, TX 76266-1250 Routing Number: Account No.: $6,080,000.00 Attn: Tamala Walls 580-634-6374 (2) Wire transfer costs of issuance funds to: To: Wells Fargo Bank Texas, NA ABA: Account Name: Government Capital Securities Corporation Account No.: 102,227.63 (3) Wire transfer costs of Bond Insurance To: The Bank of New York ABA: Account Name: Assured Guaranty Municipal Corp. Account No.: Ref: Policy# Attn: Erika Paredes 212-893-2706 (4) Paying Agent Fees 19,836.70 Government Capital Securities Corporation is instructed and requested to make a full and complete accounting to the District of all costs and expenses paid with such amount and remit the balance, if any, to the City after payment of such issuance costs and expenses. Your cooperation regarding the wiring, receipt and disbursement of funds in accordance with this letter is greatly appreciated. Should you have any further questions, please advise me at (972) 450-3823. Very truly yours, DanielC.Roseveare Managing Director Oppenheimer & Co. Robert Bruning Associate Oppenheimer & Co.