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05-09-16-Ordinance-Authorizing Issuance of 2.535M General Obligation Refunding Bonds-05/16/2016
CITY OF SANGER, TEXAS General Obligation Refunding Bonds Series 2016 OHSUSA:764957725.1 CITY OF SANGER, TEXAS $2,535,000 GENERAL OBLIGATION REFUNDING BONDS SERIES 2016 INDEX OF DOCUMENTS BOND PROCEEDINGS AND DOCUMENTS Ordinance Authorizing Issuance of the Bonds (with Certificate) 1 Pricing Officer’s Certificate 2 Bond Purchase Agreement 3 Preliminary Official Statement 4 Official Statement 5 Paying Agent/Registrar Agreement 6 Escrow Agreement 7 Incumbency Certificate of Escrow Agent 8 Verification Report 9 CERTIFICATES General Certificate 10 Signature Authorization and No-Litigation Certificate 11 Federal Tax Certificate and Form 8038-G 12 Issuer’s Closing Certificate 13 OPINIONS Opinion of Bond Counsel 14 Supplemental Opinion of Bond Counsel 15 Opinion of Underwriter’s Counsel 16 Opinion of Attorney General of Texas with Certificate of 17 Comptroller of Public Accounts 2OHSUSA:764957725.1 MISCELLANEOUS Ordinance Authorizing Issuance of Combination Tax and Revenue Certificates of Obligation, Series 2006 18 Bond Review Board Questionnaire 19 Initial Bond 20 Notice of Redemption 21 AG/Comptroller Letter 22 Paying Agent/Registrar’s Receipt 23 Escrow Agent Receipt 24 Ratings Letters 25 Specimen Bond 26 Closing Memorandum 27 PRELIMINARY OFFICIAL STATEMENT DATED MAY 16, 2016 Ratings: Moody’s: “A1” NEW ISSUE - BOOK-ENTRY-ONLY (See “OTHER INFORMATION - RATINGS” herein) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal ind ividual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating co rporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. See “TAX MATTERS. ”THE CITY HAS DESIGNATED THE BONDS AS “QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS” $2,615,000* CITY OF SANGER, TEXAS (Denton County) GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 Interest to accrue from Date of Delivery Due: September 1, as shown on the inside cover PAYMENT TERMS . . . Interest on the $2,615,000* City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”) will accrue from the Date of Delivery (as defined below) to the initial purchasers thereof, will be payable March 1 and September 1 of each year commencing September 1, 2016, and will be calculated on the basis of a 360 -day year consisting of twelve 30-day months. The Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”), pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “THE BONDS - BOOK-ENTRY-ONLY SYSTEM”). The initial Paying Agent/Registrar is BOKF, N.A., Austin, Texas (see “THE BONDS - PAYING AGENT/REGISTRAR”). AUTHORITY FOR ISSUANCE . . . The Bonds are issued pursuant to the constitution and general laws of the State of Texas (the “State”), including Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council of the City of Sanger, Texas (the “City”) authorizing the issuance of the Bonds and a pricing certificate executed pursuant thereto (collectively, the “Ordinance”) (see “THE BONDS - AUTHORITY FOR ISSUANCE OF THE BONDS”). PURPOSE . . . Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds (see “PL AN OF FINANCING - SOURCES AND USES OF FUNDS”). SECURITY AND SOURCE OF PAYMENT. . . The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxab le property within the City, as provided in the Ordinance (see “THE BONDS - SECURITY AND SOURCE OF PAYMENT”). OPTIONAL REDEMPTION . . . The City reserves the right, at its option, to redeem Bonds having stated maturities on and after September 1, 20__, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on September 1, 20__, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see “THE BONDS - OPTIONAL REDEMPTION). See Maturity Schedule on the inside cover LEGALITY . . . The Bonds are offered for delivery when, as and if issued and received by the underwriters listed below (the “Underwriters”) and subject to the approving opinion of the Attorney General of Texas and the opinio n of Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel (see APPENDIX D, “FORM OF BOND COUNSEL OPINION”). Certain legal matters will be passed upon for the Underwriters by Powell & Leon, LLP, Austin, Texas, Counsel for the Underwriters. DELIVERY . . . It is expected that the Bonds will be available for delivery through the facilities of DTC on June 3, 2016 (“Date of Delivery”). OPPENHEIMER & CO. *Preliminary, subject to change. Th i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t a n d t h e i n f o r m a t i o n c o n t a i n e d h e r e i n a r e s u b j e c t t o c o m p l e t i o n o r a m e n d m e n t . T h e s e s e c u r i ti e s m a y n o t b e s o l d n o r m a y o f f e r s t o b u y b e a c c e p t e d p r i o r t o t h e t i m e th e O f f i c i a l S t a t e m e n t i s d e l i v e r e d i n f i n a l f o r m . U n d e r n o c i r c u m s t a n c e s s h a l l t h i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t c o n s t i t u t e a n o f f e r t o s e l l o r t h e s o l i c i t a t i o n o f a n o f f e r t o b u y no r s h a l l t h e r e b e a n y sa l e o f t h e s e s e c u r i t i e s i n a n y j u r i s d i c t i o n i n w h i c h s u c h o f f e r , s o l i c i t a t i o n o r s a l e w o u l d b e u n l a w f u l p r i or t o r e g i s t r a t i o n o r q u a l i f i c a t i o n u n d e r t h e s e c u r i t i e s l a w s o f a n y s u c h j u r i s d i c t i o n . ii MATURITY SCHEDULE $2,615,000* CITY OF SANGER, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, INITIAL YIELDS AND CUSIPS Base CUSIP Number: Stated Maturity (September 1)(1) Principal Amount Interest Rate (%) Initial Yield (%)(2) CUSIP Suffix(3) 2017 2018 $ 2019 2020 2021 (Interest to accrue from the Date of Delivery) ___________________________ * Preliminary, subject to change. (1) The Bonds maturing on or after September 1, 20___ are subject to redemption, in whole or from time to time in part at the option of the City, on September 1, 20___ or any date thereafter at a redemption price of par plus accrued interest to the date of redemption. (See “THE BONDS — Redemption Provisions”). (2) The initial yields are established by and are the sole responsibility of the Underwriters, and may be subsequently changed. The yields shown are priced to maturity. (3) CUSIP numbers have been assigned to this issue and are included solely for the convenience of the owners of the Bonds. “CUSIP” is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Capital IQ on behalf o f American Bankers Association. This data is not intended to create a database and does not serve in anyway as a substitute for the CUSIP services. Neither the City, the Financial Advisor, nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein. iii CITY OF SANGER, TEXAS CITY COUNCIL Thomas Muir Mayor Lee Allison 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 Dillard III, Esq. City Attorney Nichols Jackson Dillard Hager & Smith Dallas, Texas CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Orrick, Herrington & Sutcliff LLP, Houston, Texas Bond Counsel BrooksCardiel, PLLC, The Woodlands, Texas Independent Auditor Government Capital Securities Corporation, Southlake, Texas Financial Advisor 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 Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817) 722-0239 tchristensen@govcapsecurities.com iv For purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, as amended and in effect on the date hereof, this document constitutes an Official Statement of the City with respect to the Bonds that has been “deemed final” by the City as of its date except for the omission of no more than the information permitted by Rule 15c2-12. No dealer, broker, salesman or other person has been authorized by the City or the Underwriters to give any information, or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriters. This Official Statement does not constitute an offer to sell Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor or the Underwriters. Any information and expressions o f opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any cir cumstances, create any implication that there has been no change in the affairs of the City or other matters described. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MAR KET PRICES OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NONE OF THE CITY, ITS FINANCIAL ADVISOR, OR THE UNDERWRITERS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY ONLY SYSTEM. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. The agreements of the City and others related to the Bonds 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 Bonds is to be construed as constituting an agreement with the purchasers of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL 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 in this Official Statement in accordance with, and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. iv TABLE OF CONTENTS MATURITY SCHEDULE.................................................. ii OFFICIAL STATEMENT SUMMARY ............................ v Selected Financial Information ..................................... vii INTRODUCTION .............................................................. 1 Description of the City ................................................... 1 PLAN OF FINANCING ..................................................... 1 Purpose ........................................................................... 1 Refunded Obligations ..................................................... 1 Sources and Uses of Funds ............................................. 2 THE BONDS ...................................................................... 2 Description of the Bonds ................................................ 2 Authority for Issuance of the Bonds ............................... 2 Security and Source of Payment ..................................... 2 Optional Redemption ..................................................... 3 Notice of Redemption .................................................... 3 Book-Entry-Only System ............................................... 3 Paying Agent/Registrar .................................................. 5 Transfer, Exchange And Registration............................. 5 Record Date For Interest Payment .................................. 6 Defeasance ..................................................................... 6 Remedies Of Holders Of The Bonds .............................. 6 TAX INFORMATION ....................................................... 6 Ad Valorem Tax Law ..................................................... 6 Effective Tax Rate And Rollback Tax Rate ................... 9 Property Assessment And Tax Payment ......................... 9 Penalties And Interest ..................................................... 9 City Application of Tax Code ...................................... 10 Municipal Sales Tax ..................................................... 10 Tax Rate Limitations .................................................... 10 RETIREMENT PLAN ...................................................... 11 INVESTMENT Policies ................................................... 11 Accounting Principles Generally Accepted in the United States ................................................................ 11 Legal Investments ........................................................ 11 Investment Policies ...................................................... 12 Additional Provisions ................................................... 13 Current Investments ..................................................... 13 RATINGS ......................................................................... 13 TAX MATTERS .............................................................. 14 CONTINUING DISCLOSURE OF INFORMATION ..... 15 Annual Reports ............................................................. 15 Event Notices ............................................................... 16 Limitations And Amendments...................................... 16 Compliance With Prior Undertakings .......................... 17 OTHER INFORMATION ................................................ 17 Ratings ......................................................................... 17 Litigation ...................................................................... 17 Registration And Qualification Of Bonds For Sale ...... 17 Legal Investments And Eligibility To Secure Public Funds In Texas ............................................................. 17 Legal Matters ............................................................... 18 Authenticity Of Financial Data And Other Information ................................................................... 18 Financial Advisor ......................................................... 18 Audited Financial Statements ....................................... 19 Verification Of Arithmetical And Mathematical Computations ............................................................... 19 Underwriting ................................................................ 19 Forward-Looking Statements ....................................... 19 SCHEDULE I - SCHEDULE OF REFUNDED OBLIGATIONS APPENDICES FINANCIAL INFORMATION FOR THE CITY ..............A GENERAL INFORMATION REGARDING THE CITY .................................................................................. B AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 ............. C FORM OF BOND COUNSEL OPINION ..........................D v OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or inco rporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the en tire Official Statement. THE CITY The City of Sanger, Texas (the “City”) is a political subdivision and municipal corporation of the State of Texas, located in Denton County, Texas (see “INTRODUCTION - DESCRIPTION OF CITY” and “APPENDIX B - GENERAL INFORMATION REGARDING THE CITY”). THE BONDS The $2,615,000* City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”) are issued as serial bonds maturing on September 1, 2017 through September 1, 2021, inclusive (see “THE BONDS - DESCRIPTION OF THE BONDS”). PAYMENT OF INTEREST Interest on the Bonds accrues from the date of delivery to the initial purchasers thereof (the “Date of Delivery”), and is payable September 1, 2016, and each March 1 and September 1 thereafter until maturit y or prior redemption (see “THE BONDS - DESCRIPTION OF THE BONDS”). AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are issued pursuant to the general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council of the City authorizing the issuance of the Bonds and a pricing certificate executed pursuant thereto (collectively, the “Ordinance”) (see “THE BONDS - AUTHORITY FOR ISSUANCE OF THE BONDS”). SECURITY FOR THE BONDS The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, as provided in the Ordinance (see “THE BONDS - SECURITY AND SOURCE OF PAYMENT”). REDEMPTION The City reserves the right, at its option, to redeem Bonds having stated maturities on and after September 1, 20__, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on September 1, 20__, or any date thereafter, at the p ar value thereof plus accrued interest to the date of redemption (see “THE BONDS - NO OPTIONAL REDEMPTION”). TAX EXEMPTION In the opinion of Bond Counsel, under existing law, interest on the Bonds is excludable from gross income for federal income tax purposes and the Bonds are not “private activity bonds.” See “TAX MATTERS” for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. QUALIFIED TAX EXEMPT OBLIGATIONS The City has designated the Bonds as “qualified tax-exempt obligations”. (See “TAX MATTERS – PURCHASE OF TAX-EXEMPT OBLIGATIONS BY FINANCIAL INSTITUTIONS” herein.) USE OF PROCEEDS Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds (see “PLAN OF FINANCING - SOURCES AND USES OF FUNDS”). RATINGS The Bonds are rated “A1” 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). *Preliminary; subject to change vi BOOK-ENTRY-ONLY SYSTEM The definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”) pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “THE BONDS - BOOK- ENTRY-ONLY SYSTEM”). PAYMENT RECORD The City has never defaulted on the payment of its bonded indebtedness. (Remainder of Page Intentionally Left Blank) vii SELECTED FINANCIAL INFORMATION 2016 Net Taxable Assessed Valuation…………………………………………… $562,285,185.00 (a) City Debt: Outstanding Tax Supported Debt (as of February 29, 2016)………………… $21,735,062.08 (b) Plus: The Bonds…………………………………………………………….... 2,867,781.60 Total Tax Supported Debt………………………………………………………………………….... $24,602,843.68 * Estimated Overlapping Debt………………………………………………………………................................... $15,480,769.00 Direct and Estimated Overlapping Debt………………………………………………… $34,100,769.00 Debt Service Fund Balance (as of Sept. 30, 2015)……………………………………… $385,186.00 % of 2016 Assessed Valuation* Per Capita (7,601)*(c) Debt Ratios: Direct Tax Supported Debt……………. 4.00% $2,036.68 Direct Tax Supported and Estimated Overlapping Debt………….. 6.00% $4,486.35 2015-16 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation……………………………………………………… $0.433353 Dedicated for Street Maintance…...……………………………………………… 0.080000 I & S Fund ……………………………………………………………………….. 0.166147 Total ……………………………………………………………………………… $0.679500 Estimated Annual Debt Service Requirements Average…………………………………………………………………………… $546,822.76 * Maximum (2017)…………………………………………………………………. $569,337.00 * Tax Collections Current Year……………………………………………………………………. _____% Total Collections………………………………………………………………….. _____% _______________________ * Preliminary, subject to change. (a) Provided by the Denton County 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. Does not include Refunded Obligations. (c) July 1, 2014 U.S. Census Estimate 1 PRELIMINARY OFFICIAL STATEMENT RELATING TO $2,615,000* CITY OF SANGER, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 INTRODUCTION This Official Statement, which includes the cover pages, Schedule I, and Appendices hereto, provides certain information regarding the issuance of $2,615,000* City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”). Capitalized terms used in this Official Statement have the same meanings assigned to such terms in the ordinance of the City Council of the City of Sanger, Texas (the “City”), authorizing the issuance of the Bonds and the pricing certificate executed pursuant thereto (collectively, the “Ordinance”) except as otherwise indicated herein. There follows in this Official Statement descriptions of the Bonds and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City’s Financial Advisor, Government Capital Securities Corporation, Southlake, Texas. DESCRIPTION OF THE CITY 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. The City is a residential community located on Interstate Highway 35 northeast of the Dallas-Fort Worth industrial area. According to the 2010 U.S. Census, the City’s 2010 population was 6,916. U.S. Census estimates indicate an estimated population of 7601 as of July 1, 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. For information regarding the City, see App endices A and B of this Official Statement. PLAN OF FINANCING PURPOSE Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds (see “SOURCES AND USES OF FUNDS”). REFUNDED OBLIGATIONS The principal and interest due on the Refunded Obligations are to be paid on the scheduled interest payment dates and the redemption date of the Refunded Obligations, from funds to be deposited pursuant to a certain escrow agreement (the “Escrow Agreement”) between the City and BOKF, N.A., Austin, Texas (the “Escrow Agent”). The Ordinance provides that from the proceeds of the sale of the Bonds received f rom the Underwriters, together with other lawfully available funds of the City, if any, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by t he Escrow Agent in a special escrow account (the “Escrow Fund”) and used to purchase direct obligations of the United States of America (the “Federal Securities”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. For more information regarding the Refunded Obligations, see “SCHEDULE I - Refunded Obligations.” *Preliminary, subject to change. 2 Grant Thornton LLP will verify at the time of delivery of the Bonds to the Financial Advisor and the Under writers thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Obligations. Such maturing principal of and interest on the Federal Securities will not be available to pay the debt service on the Bonds. See “OTHER INFORMATION - VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS”. By the deposit of the Federal Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, the City will have made firm banking arrangements and effected the defeasance of the Refunded Obligations in accordance with the law. It is the opinion of Bond Counsel that as a result of such defeasance and in reliance upon the report of Grant Thornton LLP, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the Escrow Agent and such Refunded Obligations will not be deemed as being outstanding obligations of the City. SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds will be applied approximately as follows: Sources of Funds Principal Amount $2,615,000.00(1) Net Premium Total $ Uses of Funds Refunding Escrow Deposit $ Costs of Issuance(2) Deposit to Debt Service fund Total $ _____________ (1) Preliminary subject to change (2) Includes Underwriter’s Discount. THE BONDS DESCRIPTION OF THE BONDS Interest on the Bonds will accrue from the Date of Delivery, and the Bonds mature on September 1 in each of the years and in the amounts shown on the inside cover page hereof. Interest on the Bonds will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on March 1 and September 1, commencing September 1, 2016. The Bonds will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company, New York, New York (“DTC”) pursuant to the Book -Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar, initially BOK F, N.A., Austin, Texas, to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “BOOK-ENTRY-ONLY SYSTEM”). AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, including particularly Chapter 1207, Texas Government Code, as amended, and the Ordinance. SECURITY AND SOURCE OF PAYMENT The Bonds are direct obligations of the City, payable from a continuing, direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property in the City. See “TAX INFORMATION.” 3 OPTIONAL REDEMPTION The City reserves the right, at its option, to redeem Bonds having stated maturities on and after September 1, 20__, in whole or in part in principal amounts of $5,000 or any int egral multiple thereof, on September 1, 20__, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Bonds of any maturity are to be redeemed, the Paying Agent/Registrar (or DTC while the B onds are in Book-Entry-Only form) shall determine by lot the Bonds, or portions thereof, within such maturity to be redeemed. If a Bond (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Bond (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE OF REDEMPTION Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE BONDS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE TO ACCRUE. The City reserves the right to give notice of its election or direction to redeem Bonds conditioned upon the occurrence of subsequent events. Such notice may state (i) that the redemption is conditioned upon the deposit of moneys and/or authorized securities, in an amount equal to the amount necessary to effect the redemption, with the Paying Agent/Registrar, or such other entity as may be authorized by law, no later than the redemption date or (ii) that the City retains the right to rescind such notice at any time prior to the scheduled redemption date if the City delivers a certificate of the City to the Paying Agent/Registrar instructing the Paying Agent/Registrar to rescind the redemption notice, and such notice and redemption shall be of no effect if such moneys and/or authorized securities are not so deposited or if the notice is rescinded. The Paying Agent/Registrar shall give prompt notice of any such rescission of a conditional notice of redemption to the affected owners. Any Bonds subject to conditional redemption where redemption has been rescinded shall remain outstanding. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by The Depository Trust Company (“DTC”), New York, New York, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribut e debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. The Depository Trust Company (“DTC”) New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 4 security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest depository, is a limited -purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “cleari ng 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 City (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing City and Fixed Income Clearing City, all of which are registered clearing agencies. DTC 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 companies 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 The Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of 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 transactio n. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remai n 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 the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the register and request that copies of the notices be provided directly to them. Redemption notices for the Bonds shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s 5 consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or t he Paying Agent/Registrar of each series, 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 ca se with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar of each series, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or Paying Agent/Registrar of each series, 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. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT . . . In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given t o registered owners under the Ordinance will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor, or the Underwriters. EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY SYSTEM . . . In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, printed certificates will be issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under “THE BONDS - TRANSFER, EXCHANGE AND REGISTRATION” below. Discontinuance by the City of DTC’s Book-Entry-Only system may require consent of participants under DTC operations and arrangements. PAYING AGENT/REGISTRAR The initial Paying Agent/Registrar is BOKF, N.A., Austin, Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a commercial bank or trust company organized under the laws of the State, or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. TRANSFER, EXCHANGE AND REGISTRATION In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such transfer or exchange shall be without expense o r service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by the execution of an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being transferred or exchanged, at the principal payment office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. New Bonds registered and delivered in an exchange or transfer shall be in any integral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer. 6 See “BOOK-ENTRY-ONLY SYSTEM” herein for a description of the system to be utilized initially in regard to ownership and transferability of the Bonds. RECORD DATE FOR INTEREST PAYMENT The record date (“Record Date”) for the interest payable on the Bonds on any interest payment date means the close of business on the last business day of the month next preceding such interest payment date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a “Special Record Date”) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from t he City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (“Special Payment Date,” which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of Bonds appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice . DEFEASANCE The City reserves the right to defease the Bonds in any manner now or hereafter allowed by law. REMEDIES OF HOLDERS OF THE BONDS The Ordinance does not provide for the appointment of a trustee to represent the interests of the holders of the Bonds 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 Bonds and, under Stat e law, there is no right to the acceleration of maturity of the Bonds upon the failure of the City to observe any covenant under the Ordinance. A registered owner of the Bonds could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Bond; however, such judgment could not be satisfied by execu tion 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 Bonds as it becomes due or perform other material terms and covenants contained in the Ordinance. 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 Bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the B ankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualif ied with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. TAX INFORMATION AD VALOREM TAX LAW The appraisal of property within the City is the responsibility of the Denton County Appraisal District (the “Appraisal District”). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal 7 District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisa l Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to Title I of the Texas Tax Code (the “Property Tax Code”), fo r identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution (“Article VIII”) and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, 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. Additionally, the governing body of a political subdivision may grant an exemption of up to 20% of the market value of all residence homesteads, with a minimum exemption of $5,000. Pursuant to a constitutional amendment approved by the voters on November 3, 2015 and Senate Bill 1 passed by the 84th Legislature, cities may not reduce the amount of or repeal an optional homestead exemption granted for the 2 014 tax year (fiscal year 2015) for a period running through December 31, 2019. 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 exe mption 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 the case of residence homestead exemptions granted under Section 1-b, 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 impa ir the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. A disabled veteran (and their surviving spouse) who receives from the United State s Department of Veterans Affairs or its successor a rating of 100% disabled is entitled to an exemption from taxation of the total appraised value of the resident’s homestead. The surviving spouse of a 100% disabled veteran who died prior to the effective date of the homestead exemption is entitled to exemption, but only if the surviving spouse has not remarried since the death of the disabled veteran. A partially disabled veteran or the surviving spouses of a partially disabled veteran is entitled to an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equal to the partially disabled veteran’s disability rating if the residence homestead was donated by a charitable organization. Also, the surviving spou se of a member of the armed forces who was killed in action is, subject to certain conditions, entitled to an exemption of the total appraised value of the 8 surviving spouse’s residence homestead, and subject to certain conditions, an exemption up to the sa me amount may be transferred to a subsequent residence homestead of the surviving spouse. 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. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for “freeport property” to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. 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 a provision of the Tax Code, which is effective for tax years 2008 and thereafter, 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. The Tax Code provision 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 beginning the following tax year. A taxpayer may receive only one of the freeport exemptions or the goods-in-transit exemptions for items of personal property. The City may create tax increment financing zones, under which the tax values on property in the zone are “frozen” at the value of the property at the time of creation of the zone. Tax revenues collected on values above the “frozen” value must be deposited in a tax increment fund for the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn exempts from taxation all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a peri od of up to 10 years. Cities are also authorized, pursuant to Chapter 380, Texas Local Government Code (“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 grant of public funds for economic development purposes; however, no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City. Under Article VIII and State law, the governing body of a county, municipality or junior college district, may freeze the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residen ce 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 th e 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 t o 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. The City can make no representations or predictions concerning the impact such tax limitation would have on the City’s tax rate, financial condition or ability to make debt service payments. 9 EFFECTIVE TAX RATE AND ROLLBACK TAX RATE By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council will be required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City. 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 effect ive 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.” Effective 2005, 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 generally 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 of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Month Cumulative Penalty Cumulative Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 10 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney’s collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City’s lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF 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. The City has adopted a tax abatement policy but at this time has no tax abatement agreement in place. 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 Bonds. 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 8¼%. 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 n o more than 2% (when combined with the State sales and use tax rate of 6¼%). 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 City Charter provides that the maximum tax rate is limited only by the maximum limit as may be imposed pursuant to the State Constitution, currently $2.50 per $100 taxable assessed valuation. The Attorney General of Texas follows a policy, with respect 11 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 gross earnings during the fiscal year. 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, 2015 totaled $225,752. For additional information regarding the City’s Pension Plans, see Appendix C - “Audited Financial Statements for the Fiscal Year Ended September 30, 2015, Note F – Defined Benefit 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 C “Audited Financial Statements for the Fiscal Year Ended September 30, 2015”). LEGAL INVESTMENTS Under State 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 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 unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than “A” or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) (i) that are issued by or through an institution that has its main office or a branch office in the State, and are guaranteed or insured by the Federal Deposit Insurance Corp oration 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 t he City through (I) a broker that has its main office or a branch office in the State and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main office or a branch office in the State that is selected by the City; (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, 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 240.15c3-3) 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 12 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 United States 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 asse t value of $1 for each share; and (12) no -load mutual funds registered with the United States 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, 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 obligation s 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 ord er 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 u nderlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. INVESTMENT POLICIES Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment, the maximum average dollar -weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired w ith public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted “Investment Strategy Statement” that specifically addresses each fund’s investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. 13 Under Texas law, City investments must be made “with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable sa fety of capital and the probable income to be derived.” At least quarterly the City’s investment officers shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from City Council. ADDITIONAL PROVISIONS Under State law, the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt a written instrument by rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and recording any changes made to either its investment policy or investment strategy; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City an d the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investmen t standards), and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the treasurer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the City’s monthly average fund balance, excluding bond proceeds and reserves and other funds held for de bt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that ar e authorized to engage in investment transactions with the City. CURRENT INVESTMENTS As of September 30, 2015, 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 Cash and Certificates of Deposit $1,606,671 Total $1,606,671 RATINGS The Bonds are rated “A1” by Moody’s Investor’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 ti me 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. 14 TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D hereto. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight -line interpolations between compo unding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Issuer has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opin ion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receip t of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Ben eficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in 15 recent years have proposed legislation that would limit the exclusion from gross income of interest on the Bonds to some extent for high-income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, co vers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furt hermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Issuer, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Issuer has covenanted, however, to comply with the requirements of the Code. Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Issuer or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Issuer and their appointed counsel, including the Beneficial Owners, would hav e little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the I ssuer legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Issuer or the Beneficial Owners to incur significant expense. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (“MSRB”). Information will be available free of charge via the 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 via EMMA. The information to be updated includes all quantitative financial information and operating data of the general type included in APPENDIX A - Financial Information for the City in Tables 1 through 11, and in APPENDIX C. 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 other publicly available documents, as permitted by the United Stated Securities and Exchange Commission (“SEC”) Rule 15c2 -12 (the “Rule”). The updated information will include audited financial statements if the City commissions an audit and the audit is completed by the required time. If audited financial statements are not available by the required time, the City will provide such financial statements on an unaudited basis within the required time and audited financial statements when they become available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX C 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, the City must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. 16 EVENT NOTICES The City will also provide the following to the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of any of the following events with respect to the Bonds: (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 (I RS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, 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 successor or additional paying agent/registrar or the change of name of a paying agent/registrar, if material. In addition, the City will provide to the MSRB, in a timely manner, notice of any failure by the City to provide the required annual financial information described above under “Annual Reports” in accordance with this section. For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceed ing under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials o r officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. LIMITATIONS AND AMENDMENTS The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds 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 disclosur e agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the initial primary offering in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggre gate principal amount of the outstanding Bonds consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and bene ficial owners of the Bonds. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the 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 Bonds in the primary offering of the Bonds. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under “Annual Reports” an explanation, in narrative 17 form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS The annual audited financial statement for the year ending September 30, 2011, due to be filed on March 31, 2012, was filed on May 17, 2012. Since that time, the City has implemented procedures, including hiring a third party as dissemination agent, to ensure timely and complete filing in the future. OTHER INFORMATION RATINGS The Bonds and the presently outstanding tax-supported debt of the City are rated “A1” by Moody’s Investor’s Service, Inc. (“Moody’s”), without regard to credit enhancement. An explanation of the significance of such ratings may be obtained from Moody’s. The rating reflects only the view of Moody’s and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Moody’s, if in the judgment of Moody’s, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. Neither the Underwriters nor the City has undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed revision o r withdrawal of the rating of the Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such ratings could have an adverse effect on the market price of the Bonds. LITIGATION The City is a defendant in various lawsuits and is aware of pending claims arising in the ordinary course of its municipal and enterprise activities. Although the outcome of these cases has not presently been determined, it is the opinion of the City that resolution of these matters will not have a material adverse effect on the financial condition of the City or restrain the City from issuance of the Bonds. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of the Bonds has not been registered under the Federal Securities Act of 1933, a s amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Bonds be assigned a rating of “A” or its equivalent as to investment quality by a national rating agency. See “OTHER INFORMATION - RATINGS” herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at capital of o ne million dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. 18 LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the approving legal opinion of the Attorney General of the State of Texas to the effect that the Bonds are valid and binding obligations of the City, and based upon examination of such transcript of procee dings, the approving legal opinion of Bond Counsel in substantially the form attached hereto as APPENDIX D. Bond Counsel has reviewed the statements and information appearing in the Official Statement under the captions “THE BONDS” (except the subcaptions “Book-Entry-Only System” and “Remedies Of Holders Of The Bonds”) and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) and Bond Counsel is of the opinion that the statements and information contained therei n accurately reflect the provisions of the Ordinance; further, Bond Counsel has reviewed the statements and information contained in the Official Statement under the captions “TAX MATTERS,” “OTHER INFORMATION - Registration And Qualification Of Bonds For Sale,” “OTHER INFORMATION - Legal Investments And Eligibility To Secure Public Funds In Texas,” and “OTHER INFORMATION - Legal Matters” (except for the last sentence of the first paragraph) and Bond Counsel is of the opinion that the statements and informat ion contained therein accurately describe the laws and legal issues contained therein. 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 o f the City for the purpose of passing upon the accuracy, completeness or fairness of this Official Statement. No person is entitled to rely upon such firm’s limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy, completeness or fairness of any of the information contained herein. The legal fees to be paid to Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent upon the sale and delivery of t he Bonds. Certain matters will be passed upon for the Underwriters by Powell & Leon, LLP, Austin, Texas, Counsel for the Underwriters, whose fee is contingent upon the sale and delivery of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expressi on of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FINANCIAL ADVISOR In its role as Financial Advisor, Government Capital Securities Corporation has relied on the City for certain information concerning the City and the Bonds. The fee of the Financial Advisor for services with respect to the Bonds is contingent upon the issuance and sale of the Bonds. The Financial Ad visor 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 feder al 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. 19 AUDITED FINANCIAL STATEMENTS Brooks Cardiel, PLLC, the City’s independent auditor, has not reviewed, commented on, or approved, and is not associated with, this Official Statement. The report of Brooks Cardiel, PLLC relating to City’s financial statements for the fiscal year ended September 30, 201 5 is included in this Official Statement in APPENDIX C; however, Brooks Cardiel, PLLC has not performed any procedures on such financial statements since the date of such report, and has not performed any procedures on any other financial information of the City, including without limitatio n any of the information contained in this Official Statement. VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by Government Capital Securities Corporation on behalf of the City relating to (a) computation of forecasted receipts of principal and interest on the Federal Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Bond s and the restricted Federal Securities were verified by Grant Thornton LLP, certified public accountants. Such computations were based solely on assumptions and information supplied by Government Capital Securities Corporation on behalf of the City. Grant Thornton LLP has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. UNDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City at a price of $_______ (representing the principal amount of the Bonds, plus a premium in the amount of $________, less an underwriting discount of $_______). The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certain dealers (including the Underwriters and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have provided the following sentence for inclusion in the Official Statement. The Underwriters have reviewed the information in this Official Statement in acceptance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. FORWARD-LOOKING STATEMENTS The statements contained in this Official Statement and in any other information provided by the City that are not purely historical are forward-looking statements, including statements regarding the City’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligations to update any such forward -looking statements. It is important to note that the City’s actual results could differ materially from those in such forward -looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and ar e inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward -looking statements included in this Official Statement will prove to be accurate. Schedule I - 1 SCHEDULE I - SCHEDULE OF REFUNDED OBLIGATIONS Bond Maturity Date Interest Rate Par Amount Call Date Call Price Series 2006 GO Bonds (adv), 2006: SERIAL 09/01/2017 4.000% 485,000.00 09/01/2016 100.000 09/01/2021 4.100% 565,000.00 09/01/2016 100.000 TERM20 09/01/2018 4.050% 500,000.00 09/01/2016 100.000 09/01/2019 4.050% 520,000.00 09/01/2016 100.000 09/01/2020 4.050% 545,000.00 09/01/2016 100.000 2,615,000.00 APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS ASSESSED VALUATION TABLE 1 2015 Total Value of Taxable Property $533,911,551 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 29,948,451 Homestead 10% Cap Adjustment 1,616,420 Abatement 0 Freeport 12,943,610 Other 11,488,748 68,106,722 2015 Net Taxable Assessed Valuation (100% of Actual)(a) $465,804,829 ________________ (a) 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 TABLE 2 Name Type of Business 2015 Net Taxable Assessed Valuation % of Total 2015 Assessed Valuation* Walmart Stores East, L.P. Distribution $68,768,049 14.76% Walmart Stores East, L.P. Distribution 29,025,317 6.23% Intercapital Sanger Trails, LLC Real Estate 11,355,173 2.44% Sam’s East, Inc. Distribution 6,475,804 1.39% Altec Capital Services LLC Financial Services 3,822,250 0.82% Maccamp Ltd. RV Sales and Service 3,040,820 0.65% Springer Family Rentals, LLC Real Estate 2,506,485 0.54% Stonewood Resorts, LLC Real Estate 2,119,135 0.45% Sam’s Cross Dock Distribution 2,040,574 0.44% S&T Rentals, LLC Real Estate 1,985,619 0.43% Total $131,139,226 28.15% * Based on 2015 Net Taxable Assessed Valuation of $465,804,829. ________________ Source: Texas Comptroller of Public Accounts and Denton Central Appraisal District PROPERTY TAX RATES AND COLLECTIONS(a) TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total(b) Ended 2002 $226,882,983 0.565470 97.03% 99.39% 9-30-03 2003 289,937,097 0.565470 97.38% 99.71% 9-30-04 2004 312,537,172 0.570830 97.40% 99.70% 9-30-05 2005 338,298,363 0.590460 98.16% 99.70% 9-30-06 2006 353,244,529 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 0.620000 97.72% 99.43% 9-30-09 2009 363,053,298 0.620000 97.78% 98.99% 9-30-10 2010 365,706,678 0.633049 97.70% 97.70% 9-30-11 2011 358,015,773 0.633049 98.69% 98.71% 9-30-12 2012 389,390,028 0.633049 99.20% 101.00% 9-30-13 2013 415,503,377 0.665000 99.80% 101.92% 9-30-14 2014 435,573,587 0.679500 99.27% 99.27% 9-30-15 2015 465,804,829 0.679500 In progress 9-30-16 ________________ (a) 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 2015 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 2015-16 2014-15 2013-14 2012-13 2011-12 Maintenance & Operations $0.433353 $0.418751 $0.409405 $0.446174 $0.445994 Dedicated for Street Maintenance 0.080000 0.080000 0.080000 0.186875 0.187055 I & S Fund 0.166147 0.180749 0.175595 0.186875 0.187055 TOTAL $0.679500 $0.679500 $0.665000 $0.633049 $0.633049 ________________ Source: City WATER RATES TABLE 5 Existing Rates Residential (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons $19.72 Next 4,000 gallons 3.41 per thousand gallons Next 10,000 gallons 3.75 per thousand gallons Next 15,000 gallons 4.60 per thousand gallons Over 30,000 5.92 per thousand gallons Commercial (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons $24.97 Next 4,000 gallons 3.96 per thousand gallons Next 10,000 gallons 4.29 per thousand gallons Next 15,000 gallons 4.68 per thousand gallons Over 30,000 5.78 per thousand gallons PRINCIPAL WATER CUSTOMERS 2014-15 TABLE 6 (For the twelve months ending September 30, 2015) Name of Customer Average Monthly Consumption in Gallons Average Monthly Bill Sanger High School 553,600 $3,165 Stonewood Resorts, LLC 527,700 3,256 Walmart 337,200 1,881 Butterfield Elementary 227,900 1,261 Stonewood Resorts, LLC 138,300 1,076 Chisum Trail/Integra Peak Mgt 115,900 1,044 Sanger Middle School 107,800 595 Elk River 114,300 547 Khosrow Sadeghian 103,400 506 Karl Klement Properties 76,600 645 Total 2,410,900 $12,335 None of the City’s revenues from its water system is pledged to the payment of the Bonds, and the City will not use such revenues to make payment on the Bonds. 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) ¾ inch meter $ 33.52 1 inch meter 36.69 1½ inch 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 3.16 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, 2015) Name of Customer Average Monthly Bill Stonewood Resorts LLC $ 3,462 Sanger High School 2,211 Walmart Distribution Center 1,252 Chisum Trail/Integra Peak Mgt 1,159 Stonewood Resorts, LLC 1,106 Butterfield Elementary 976 Karl Klement Properties 701 Elk River 455 Sanger Middle School 438 Khosrow Sadeghian 235 Total $9,522 ELECTRIC RATES TABLE 9 None of the City’s revenues from its sewer system is pledged to the payment of the Bonds, and the City will not use such revenues to make payment on the Bonds. Existing Rates (Effective November 15, 2010) Residential Commercial Large Industrial Facility Charge (minimum per month) $10.00 $ 16.00 $ 35.00 Energy Charge (per KWH) $ 0.1175 $ 0.12 $ 0.105 ERCOT Pass-through per month $ 4.00 $ 4.00 $ 4.00 PRINCIPAL ELECTRIC CUSTOMERS 2014-2015 TABLE 10 (For the twelve months ending September 30, 2015 ) Name of Customer Average Monthly Consumption in Kilowatt Hours Average Monthly Bill Walmart Distribution Center 1,132,600 $118,961 Super Save 90,813 10,917 Waggon Master RV Park 70,350 8,462 MacCamp 62,950 7,574 Sam’s – Walmart Stores East LP 55,467 6,676 McDonalds 42,813 5,157 Latham Stairs Millwork Inc. 33,513 4,041 Jack in the Box 30,583 3,690 North Texas Plastics 29,153 3,518 Sportsman 28,193 3,403 Total 1,576,435 $172,399 None of the City’s revenues from its electric system is pledged to the payment of the Bonds, and the City will not use such revenues to make payment on the Bonds. Appendix A - 1 PRO FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Fiscal Year 30-Sept Total Outstanding Debt Servicea Less Refunded Obligations Debt Service Series 2016 Refunding Bonds Principal* Series 2016 Refunding Bonds Interest* Total Debt Service* 2016 $ 1,833,017.08 $ 52,973.75 $ 15,000 $ 18,244.60 $ 1,813,287.93 2017 2,015,372.50 590,947.50 495,000 74,337.00 1,993,762.00 2018 2,014,182.50 586,547.50 505,000 63,150.00 1,995,785.00 2019 2,015,667.50 586,297.50 515,000 48,000.00 1,992,370.00 2020 2,014,772.50 590,237.50 535,000 32,550.00 1,992,085.00 2021 2,016,345.00 588,165.00 550,000 16,500.00 1,994,680.00 2022 1,198,061.25 - - - 1,198,061.25 2023 1,184,635.00 - - - 1,184,635.00 2024 1,175,045.00 - - - 1,175,045.00 2025 1,173,605.00 - - - 1,173,605.00 2026 1,178,307.50 - - - 1,178,307.50 2027 910,945.00 - - - 910,945.00 2028 773,325.00 - - - 773,325.00 2029 775,200.00 - - - 775,200.00 2030 774,843.75 - - - 774,843.75 2031 778,000.00 - - - 778,000.00 2032 774,937.50 - - - 774,937.50 2033 770,656.25 - - - 770,656.25 2034 450,312.50 - - - 450,312.50 2035 449,656.25 - - - 449,656.25 2036 453,343.75 - - - 453,343.75 TOTAL $24,730,230.83 $2,995,168.75 $2,615,000 $252,781.60 $24,602,843.68 ______________ * Preliminary, subject to change. Interest estimated at market rates for purposes of illustration a Does not include Series 2016 Refunding Bonds 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 7,601 as of July 1, 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 an elementary school, an early childhood center for grades kindergarten through second grade, an intermediate school for grades third through fifth, a sixth grade campus, a middle school serving grades seventh and eighth, and a high school. 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. APPENDIX B GENERAL INFORMATION REGARDING THE CITY APPENDIX C AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 ______, 2016 City of Sanger, Texas General Obligation Refunding Bonds, Series 2016 (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $___________ aggregate principal amount of bonds designated as “City of Sanger, Texas General Obligation Refunding Bonds, Series 2016” (the “Bonds”). The Bonds are authorized by an ordinance adopted by the City Council (the “City Council”) on May 16, 2016 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, the tax certificate of the City dated the date hereof (the “Tax Certificate”), certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Ordinance and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against cities in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. APPENDIX D FORM OF BOND COUNSEL OPINION City of Sanger, Texas _________, 2016 Page 2 Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Bonds. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. Faithfully yours, OFFICIAL STATEMENT DATED MAY 19, 2016 Ratings: Moody’s: “A1” NEW ISSUE - BOOK-ENTRY-ONLY (See “OTHER INFORMATION - RATINGS” herein) In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal individual or co rporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating co rporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. See “TAX MATTERS. ”THE CITY HAS DESIGNATED THE BONDS AS “QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS” $2,535,000 CITY OF SANGER, TEXAS (Denton County) GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 Interest to accrue from Date of Delivery Due: September 1, as shown on the inside cover PAYMENT TERMS . . . Interest on the $2,535,000 City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”) will accrue from the Date of Delivery (as defined below) to the initial purchasers thereof, will be payable March 1 and September 1 of each year commencing September 1, 2 016, and will be calculated on the basis of a 360 -day year consisting of twelve 30-day months. The Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”), pursuant to the Book-Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “THE BONDS - BOOK-ENTRY-ONLY SYSTEM”). The initial Paying Agent/Registrar is BOKF, N.A., Austin, Texas (see “THE BONDS - PAYING AGENT/REGISTRAR”). AUTHORITY FOR ISSUANCE . . . The Bonds are issued pursuant to the constitution and general laws of the State of Texas (the “State”), including Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council of the City of Sanger, Texas (the “City”) authorizing the issuance of the Bond s and a pricing certificate executed pursuant thereto (collectively, the “Ordinance”) (see “THE B ONDS - AUTHORITY FOR ISSUANCE OF THE BONDS”). PURPOSE . . . Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associ ated with the issuance of the Bonds (see “PLAN OF FINANCING - SOURCES AND USES OF FUNDS”). SECURITY AND SOURCE OF PAYMENT. . . The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, as provided in the Ordinance (see “THE BONDS - SECURITY AND SOURCE OF PAYMENT”). OPTIONAL REDEMPTION . . . The Bonds are not subject to redemption prior to maturity. See Maturity Schedule on the inside cover LEGALITY . . . The Bonds are offered for delivery when, as and if issued and received by the underwriters listed below (the “Underwriters”) and subject to the approving opinion of the Attorney General of Texas and the opinion of Orrick, Herrington & Sutcliffe LLP, Houston, Texas, Bond Counsel (see APPENDIX D, “FORM OF BOND COUNSEL OPINION”). Certain legal matters will be passed upon for the Underwriters by Powell & Leon, LLP, Austin, Texas, Counsel for the Underwrit ers. DELIVERY . . . It is expected that the Bonds will be available for delivery through the facilities of DTC on June 13, 2016 (“Date of Delivery”). OPPENHEIMER & CO. ii MATURITY SCHEDULE $2,535,000 CITY OF SANGER, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, INITIAL YIELDS AND CUSIPS Base CUSIP Number: 800876 Stated Maturity (September 1) Principal Amount Interest Rate (%) Initial Yield (%)(a) CUSIP No. (b) 2016 $ 15,000 2.000% 0.800 % FS8 2017 475,000 2.000 0.850 FM1 2018 480,000 4.000 1.000 FN9 2019 500,000 4.000 1.150 FP4 2020 525,000 4.000 1.250 FQ2 2021 540,000 4.000 1.350 FR0 (Interest to accrue from the Date of Delivery) ___________________________ (a) The initial yields are established by and are the sole responsibility of the Underwriters, and may be subsequently changed. The yields shown are priced to maturity. (b) CUSIP numbers have been assigned to this issue by the CUSIP Global Services managed by S&P Capital IQ on behalf of the American Bankers Association and are included solely for the convenience of the purchasers of the Bonds. Neither the District, the Financial Advisor, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. iii CITY OF SANGER, TEXAS CITY COUNCIL Thomas Muir Mayor Lee Allison 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 Dillard III, Esq. City Attorney Nichols Jackson Dillard Hager & Smith Dallas, Texas CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Orrick, Herrington & Sutcliff LLP, Houston, Texas Bond Counsel BrooksCardiel, PLLC, The Woodlands, Texas Independent Auditor Government Capital Securities Corporation, Southlake, Texas Financial Advisor 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 Ted Christensen Government Capital Securities Corporation 559 Silicon Drive, Suite 102 Southlake, TX 76092 (817) 722-0239 tchristensen@govcapsecurities.com iv No dealer, broker, salesman or other person has been authorized by the City or the Underwriters to give any information, or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriters. This Official Statement does not constitute an offer to sell Bonds in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Certain information set forth herein has been obtained from the City and other sources which are bel ieved to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor or the Underwriters. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. The information and expressions of opinion contained herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. NONE OF THE CITY, ITS FINANCIAL ADVISOR, OR THE UNDERWRITERS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OF FICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY ONLY SYSTEM. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. The agreements of the City and others related to the Bonds 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 Bonds is to be construed as constituting an agreement with the purchasers of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL 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 in this Official Statement in accordance with, and as part of its responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. v TABLE OF CONTENTS MATURITY SCHEDULE.................................................. ii OFFICIAL STATEMENT SUMMARY ............................ v Selected Financial Information ...................................... vi INTRODUCTION .............................................................. 1 Description of the City ................................................... 1 PLAN OF FINANCING ..................................................... 1 Purpose ........................................................................... 1 Refunded Obligations ..................................................... 1 Sources and Uses of Funds ............................................. 2 THE BONDS ...................................................................... 2 Description of the Bonds ................................................ 2 Authority for Issuance of the Bonds ............................... 2 Security and Source of Payment ..................................... 2 Book-Entry-Only System ............................................... 3 Paying Agent/Registrar .................................................. 5 Transfer, Exchange And Registration............................. 5 Record Date For Interest Payment .................................. 5 Defeasance ..................................................................... 5 Remedies Of Holders Of The Bonds .............................. 5 TAX INFORMATION ....................................................... 6 Ad Valorem Tax Law ..................................................... 6 Effective Tax Rate And Rollback Tax Rate ................... 8 Property Assessment And Tax Payment ......................... 9 Penalties And Interest ..................................................... 9 City Application of Tax Code ........................................ 9 Municipal Sales Tax ....................................................... 9 Tax Rate Limitations .................................................... 10 RETIREMENT PLAN ...................................................... 10 INVESTMENT Policies ................................................... 10 Accounting Principles Generally Accepted in the United States ................................................................ 10 Legal Investments ........................................................ 10 Investment Policies ...................................................... 12 Additional Provisions ................................................... 12 Current Investments ..................................................... 13 RATINGS ......................................................................... 13 TAX MATTERS .............................................................. 13 CONTINUING DISCLOSURE OF INFORMATION ..... 14 Annual Reports ............................................................. 15 Event Notices ............................................................... 15 Limitations And Amendments...................................... 15 Compliance With Prior Undertakings .......................... 16 OTHER INFORMATION ................................................ 16 Ratings ......................................................................... 16 Litigation ...................................................................... 16 Registration And Qualification Of Bonds For Sale ...... 16 Legal Investments And Eligibility To Secure Public Funds In Texas ............................................................. 17 Legal Matters ............................................................... 17 Authenticity Of Financial Data And Other Information ................................................................... 17 Financial Advisor ......................................................... 18 Audited Financial Statements ....................................... 18 Verification Of Arithmetical And Mathematical Computations ............................................................... 18 Underwriting ................................................................ 18 Forward-Looking Statements ....................................... 18 SCHEDULE I - SCHEDULE OF REFUNDED OBLIGATIONS APPENDICES FINANCIAL INFORMATION FOR THE CITY ..............A GENERAL INFORMATION REGARDING THE CITY .................................................................................. B AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 ............. C FORM OF BOND COUNSEL OPINION ..........................D vi OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this summary from this Official Statement or to otherwise use it without the entire Official Statement. THE CITY The City of Sanger, Texas (the “City”) is a political subdivision and municipal corporation of the State of Texas, located in Denton County, Texas (see “INTRODUCTION - DESCRIPTION OF CITY” and “APPENDIX B - GENERAL INFORMATION REGARDING THE CITY”). THE BONDS The $2,535,000 City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”) are issued as serial bonds maturing on September 1, 2016 through September 1, 2021, inclusive (see “THE BONDS - DESCRIPTION OF THE BONDS”). PAYMENT OF INTEREST Interest on the Bonds accrues from the date of delivery to the initial purchasers thereof (the “Date of Delivery”), and is payable September 1, 2016, and each March 1 and September 1 thereafter until maturity or prior redemption (see “THE BONDS - DESCRIPTION OF THE BONDS”). AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are issued pursuant to the general laws of the State, including particularly Chapter 1207, Texas Government Code, as amended, and an ordinance adopted by the City Council of the City authorizing the issuance of the Bonds and a pricing certificate executed pursuant thereto (collectively, the “Ordinance”) (see “THE BONDS - AUTHORITY FOR ISSUANCE OF THE BONDS”). SECURITY FOR THE BONDS The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing ad valorem tax, within the limits prescribed by law, on all taxable property within the City, as provided in the Ordinance (see “THE BONDS - SECURITY AND SOURCE OF PAYMENT”). TAX EXEMPTION In the opinion of Bond Counsel, under existing law, interest on the Bonds is excludable from gross income for federal income tax purposes and the Bonds are not “private activity bonds.” See “TAX MATTERS” for a discussion of the opinion of Bond Counsel, including a description of alternative minimum tax consequences for corporations. QUALIFIED TAX EXEMPT OBLIGATIONS The City has designated the Bonds as “qualified tax -exempt obligations”. (See “TAX MATTERS – PURCHASE OF TAX-EXEMPT OBLIGATIONS BY FINANCIAL INSTITUTIONS” herein.) USE OF PROCEEDS Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with the issuance of the Bonds (see “PLAN OF FINANCING - SOURCES AND USES OF FUNDS”). RATINGS The Bonds are rated “A1” 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 definitive Bonds will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company (“DTC”) pursuant to the Book -Entry-Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “THE BONDS - BOOK- ENTRY-ONLY SYSTEM”). PAYMENT RECORD The City has never defaulted on the payment of its bonded indebtedness. vii SELECTED FINANCIAL INFORMATION 2016 Net Taxable Assessed Valuation…………………………………………… $562,285,185.00 (a) City Debt: Outstanding Tax Supported Debt (as of February 29, 2016)………………… $18,620,000.00 (b) Plus: The Bonds…………………………………………………………….... 2,535,000.00 Total Tax Supported Debt………………………………………………………………………….... $21,155,000.00 Estimated Overlapping Debt………………………………………………………………................................... $15,436,276.00 Direct and Estimated Overlapping Debt………………………………………………… $36,591,276.00 Debt Service Fund Balance (as of Sept. 30, 2015)……………………………………… $385,186.00 % of 2016 Assessed Valuation Per Capita (7,601)(c) Debt Ratios: Direct Tax Supported Debt……………. 4.00% $2,783.19 Direct Tax Supported and Estimated Overlapping Debt………….. 7.00% $4,814.01 2015-16 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation……………………………………………………… $0.433353 Dedicated for Street Maintance…...……………………………………………… 0.080000 I & S Fund ……………………………………………………………………….. 0.166147 Total ……………………………………………………………………………… $0.679500 Estimated Annual Debt Service Requirements Average…………………………………………………………………………… $1,170,943.27 Maximum (2022)…………………………………………………………………. $1,198,061.25 _______________________ (a) Provided by the Denton County 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. Does not include Refunded Obligations. (c) July 1, 2014 U.S. Census Estimate 1 OFFICIAL STATEMENT RELATING TO $2,535,000 CITY OF SANGER, TEXAS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2016 INTRODUCTION This Official Statement, which includes the cover pages, Schedule I, and Appendices hereto, provides certain information regarding the issuance of $2,535,000 City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”). Capitalized terms used in this Official Statement have the same meanings assigne d to such terms in the ordinance of the City Council of the City of Sanger, Texas (the “City”), authorizing the issuance of the Bonds and the pricing certificate executed pursuant thereto (collectively, the “Ordinance”) except as otherwise indicated herein. There follows in this Official Statement descriptions of the Bonds and certain information regarding the City and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies of such documents may be obtained from the City’s Financial Advisor, Government Capital Securities Corporation, Southlake, Texas. DESCRIPTION OF THE CITY 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. The City is a residential community located on Interstate Highway 35 northeast of the Dallas-Fort Worth industrial area. According to the 2010 U.S. Census, the City’s 2010 population was 6,916. U.S. Census estimates indicate an estimated population of 7601 as of July 1, 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. For information regarding the City, see Appendices A and B of this Official Statement. PLAN OF FINANCING PURPOSE Proceeds from the sale of the Bonds will be used to refund certain obligations of the City described in Schedule I (the “Refunded Obligations”) for debt service savings and to pay the costs associated with t he issuance of the Bonds (see “SOURCES AND USES OF FUNDS”). REFUNDED OBLIGATIONS The principal and interest due on the Refunded Obligations are to be paid on the scheduled interest payment dates and the redemption date of the Refunded Obligations, from funds to be deposited pursuant to a certain escrow agreement (the “Escrow Agreement”) between the City and BOKF, N.A., Austin, Texas (the “Escrow Agent”). The Ordinance provides that from the proceeds of the sale of the Bonds received from the Underwriters, t ogether with other lawfully available funds of the City, if any, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations. Such funds will be held by the Escrow Agent in a special escrow account (the “Escrow Fund”) and used to purchase direct obligations of the United States of America (the “Federal Securities”). Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. For more information regarding the Refunded Obligations, see “SCHEDULE I - Refunded Obligations.” 2 Grant Thornton LLP will verify at the time of delivery of the Bonds to the Financial Advisor and the Underwriters thereof the mathematical accuracy of the schedules that demonstrate the Federal Securities will mature and pay interest in such amounts which, together with uninvested funds, if any, in the Escrow Fund, will be sufficient to pay, when due, the principal of and interest o n the Refunded Obligations. Such maturing principal of and interest on the Federal Securities will not be available to pay the debt service on the Bonds. See “OTHER INFORMATION - VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS”. By the deposit of the Federal Securities and cash with the Escrow Agent pursuant to the Escrow Agreement, the City will have made firm banking arrangements and effected the defeasance of the Refunded Obligations in accordance with the law. It is the opinion of Bond Counse l that as a result of such defeasance and in reliance upon the report of Grant Thornton LLP, the Refunded Obligations will be outstanding only for the purpose of receiving payments from the Federal Securities and any cash held for such purpose by the Escro w Agent and such Refunded Obligations will not be deemed as being outstanding obligations of the City. SOURCES AND USES OF FUNDS The proceeds from the sale of the Bonds will be applied approximately as follows: Sources of Funds Principal Amount $2,535,000.00 Premium 213,925.85 Total $2,748,925.85 Uses of Funds Refunding Escrow Deposit $2,666,395.83 Costs of Issuance(1) 82,530.02 Total $2,748,925.85 _____________ (1) Includes Underwriter’s Discount. THE BONDS DESCRIPTION OF THE BONDS Interest on the Bonds will accrue from the Date of Delivery, and the Bonds mature on September 1 in each of the years and in the amounts shown on the inside cover page hereof. Interest on the Bonds will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on March 1 and September 1, commencing September 1, 2016. The Bonds will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company, New York, New York (“DTC”) pursuant to the Book -Entry-Only System described herein. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Bonds will be payable by the Paying Agent/Registrar, initially BOK F, N.A., Austin, Texas, to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds (see “BOOK-ENTRY-ONLY SYSTEM”). AUTHORITY FOR ISSUANCE OF THE BONDS The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas, including particularly Chapter 1207, Texas Government Code, as amended, and the Ordinance. SECURITY AND SOURCE OF PAYMENT The Bonds are direct obligations of the City, payable from a continuing, direct annual ad valorem tax levied, within the limits prescribed by law, on all taxable property in the City. See “TAX INFORMATI ON.” 3 BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Bonds is to be transferred and how the principal of, premium, if any, and interest on the Bonds are to be paid to and credited by The Depository Trust Company (“DTC”), New York, New York, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DT C Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants ar e on file with DTC. The Depository Trust Company (“DTC”) New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world’s largest depository, is a limited -purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 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 City (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing City and Fixed Income Clearing City, all of which are registered clearing agencies. DTC 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 companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s ratin g 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 The Bonds under the DTC system must be made by or through Direct Partici pants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not rece ive 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC a re registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, 4 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 the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the register and request that cop ies of the notices be provided directly to them. Redemption notices for the Bonds shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Particip ant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar of each series, 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 nor its nominee, the Paying Agent/Registrar of each series, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized rep resentative of DTC) is the responsibility of the City or Paying Agent/Registrar of each series, 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. USE OF CERTAIN TERMS IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT . . . In reading this Official Statement it should be understood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book-Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor, or the Underwriters. EFFECT OF TERMINATION OF BOOK-ENTRY-ONLY SYSTEM . . . In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, printed certificates will be issued to the holders and the Bonds will be subject to transfer, exchange and registration provisions as set forth in the Ordinance and summarized under “THE BONDS - TRANSFER, EXCHANGE AND REGISTRATION” below. Discontinuance by the City of DTC’s Book-Entry-Only system may require consent of participants under DTC operations and arrangements. 5 PAYING AGENT/REGISTRAR The initial Paying Agent/Registrar is BOKF, N.A., Austin, Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Bonds are duly paid and any successor Paying Agent/Registrar shall be a commer cial bank or trust company organized under the laws of the State, or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar for the Bonds. Upon any change in the Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of the Bonds by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Registrar. TRANSFER, EXCHANGE AND REGISTRATION In the event the Book-Entry-Only System should be discontinued, the Bonds may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Bonds may be assigned by t he execution of an assignment form on the respective Bonds or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Bonds will be delivered by the Paying Agent/Registrar, in lieu of the Bonds being transferred or exchanged, at the principal payment office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. New Bonds registered and delivered in an exchange or transfer shall be in any in tegral multiple of $5,000 for any one maturity and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer. See “BOOK-ENTRY-ONLY SYSTEM” herein for a description of the system to be utilized initially in regard to ownership and transferability of the Bonds. RECORD DATE FOR INTEREST PAYMENT The record date (“Record Date”) for the interest payable on the Bonds on any interest payment date means the close of business on the last business day of the month next preceding such interest payment date. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a “Special Record Date”) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (“Special Payment Date,” which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each Holder of Bonds appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. DEFEASANCE The City reserves the right to defease the Bonds in any manner now or hereafter allowed by law. REMEDIES OF HOLDERS OF THE BONDS The Ordinance does not provide for the appointment of a trustee to represent the interests of the holders of the Bonds 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 Bonds and, under Stat e law, there is no right to the acceleration of maturity of the Bonds upon the failure of the City to observe any covenant under the Ordinance. A registered owner of the Bonds could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Bond; 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 Bonds as it becomes due or perform other material terms and covenants contained in the O rdinance. However, the 6 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 specif ically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. TAX INFORMATION AD VALOREM TAX LAW The appraisal of property within the City is the responsibility of the Denton County Appraisal District (the “Appraisal District”). Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The value placed upon property within the Appraisal District is subject to review by an Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal Di strict at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to Title I of the Texas Tax Code (the “Property Tax Code”), for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution (“Article VIII”) and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, 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. Additionally, the governing body of a political subdivision may grant an exemption of up to 2 0% of the market value of all residence homesteads, with a minimum exemption of $5,000. Pursuant to a constitutional amendment approved by the voters on November 3, 2015 and Senate Bill 1 passed by the 84th Legislature, cities may not reduce the amount of or repeal an optional homestead exemption granted for the 2014 tax year (fiscal year 2015) for a period running through December 31, 2019. 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 7 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 the case of residence homestead exemptions granted under Section 1 -b, 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 a maximum of $12,000. A disabled veteran (and their surviving spouse) who receives from the United States Department of Veterans Affairs or its successor a rating of 100% disabled is entitled to an exemption from taxation of the total appraised value of the resident’s homestead. The surviving spouse of a 100% disabled veteran who died prior to the effective date of the homestead exemption is entitled to exemption, but only if the surviving spouse has not remarried since the death of the disabled veteran. A partially disabled veteran or the surviving s pouses of a partially disabled veteran is entitled to an exemption from taxation of a percentage of the appraised value of their residence homestead in an amount equal to the partially disabled veteran’s disability rating if the residence homestead was donated by a charitable organization. Also, the surviving spouse of a member of the armed forces who was killed in action is, subject to certain conditions, entitled to an exemption of the total appraised value of the surviving spouse’s residence homestead, and subject to certain conditions, an exemption up to the same amount may be transferred to a subsequent residence homestead of the surviving spouse. 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. Nonbusiness personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusines s property are exempt from ad valorem taxation. Article VIII, Section 1-j, provides for “freeport property” to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, s torage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. 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 a provision of the Tax Code, which is effective for tax years 2008 and thereafter, as personal property acquired or imported into Texas and transported to another location in the State o r 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. The Tax Code provision 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 beginning the following tax year. A taxpayer may receive only one of the freeport exemptions or the goods-in-transit exemptions for items of personal property. The City may create tax increment financing zones, under which the tax values on property in the zone are “frozen” at the value of the property at the time of creation of the zone. Tax revenues collected on values above the “frozen” value must be deposited in a tax increment fund for the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn exempts from taxation all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. 8 Cities are also authorized, pursuant to Chapter 380, Texas Local Government Code (“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 grant of public funds for economic development purposes; however, no obligations secured by ad valorem ta xes may be issued for such purposes unless approved by voters of the City. Under Article VIII and State law, the governing body of a county, municipality or junior college district, may freeze the total amount of ad valorem taxes levied on the residence ho mestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municip ality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residence homestead. 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 ta xes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. The City can make no representations or predictions concerning the impact such tax limitation would have on the Ci ty’s tax rate, financial condition or ability to make debt service payments. EFFECTIVE TAX RATE AND ROLLBACK TAX RATE By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The City Council will be required to adopt the annual tax rate for the City before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City. 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.” Effective 2005, 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. 9 PROPERTY ASSESSMENT AND TAX PAYMENT Property within the City is generally 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 of the daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and the final installment due on August 1. PENALTIES AND INTEREST Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Month Cumulative Penalty Cumulative Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 After July, penalty remains at 12%, and interest increases at the rate of 1% each month. In addition, if an account is delinquent in July, a 15% attorney’s collection fee is added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City’s l ien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by o rder of the bankruptcy court. CITY APPLICATION OF 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 homestea d 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. The City has adopted a tax abatement policy but at this time has no tax abatement agreement in place. 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 Bonds. Collections and enforcements are effected through the 10 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 8¼%. 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 6¼%). 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 City Chart er provides that the maximum tax rate is limited only by the maximum limit as may be imposed pursuant to the State Constitution, currently $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 gross earnings during the fiscal year. 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 Ci ty 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, 2015 totaled $225,752. For additional information regarding the City’s Pension Plans, see Appendix C - “Audited Financial Statements for the Fiscal Year Ended September 30, 2015, Note F – Defined Benefit 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 C “Audited Financial Statements for the Fiscal Year Ended September 30, 2015”). LEGAL INVESTMENTS Under State 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 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 unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political 11 subdivisions of any state rated as to investment quality by a nationally recognized in vestment rating firm not less than “A” or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Te xas Government Code) (i) that are issued by or through an institution that has its main office or a branch office in the State, and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or 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 br anch office in the State 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 that is selected by the City; (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City; (c) the full amount of the principal and accrued interest of eac h of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, an entity as described by Section 2257.041(d) of the Texas Governmen t 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 240.15c3-3) 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 Cit y 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 de aler, 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 le ast “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 United States 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 United States 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, 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 in vestment 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 obligation s provided that the pools are rated no lower than “AAA” or “AAAm” or an equ ivalent 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. 12 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 polic ies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that include a list of authorized investments for City funds, the maximum allowable stated maturity of any individual investment, the maximum average dollar -weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the Public Funds Investment Act. All City funds must be invested consistent with a formally adopted “Investment Strategy Statement” that specifically addresses each fund’s investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of inve stment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made “with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person’s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived.” At least quarterly the City’s investment officers shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from City Council. ADDITIONAL PROVISIONS Under State law, the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt a written instrument by rule, order, ordinance or resolution statin g that it has reviewed its investment policy and investment strategies and recording any changes made to either its investment policy or investment strategy; (3) require any investment officers with personal business relationships or relatives with firms s eeking to sell securities to the City to disclose the relationship and file a statement with the Texas Ethics Commission and City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City’s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City’s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City’s investment policy; (6) provide specific investment training for the treas urer, chief financial officer and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (8 ) restrict the investment in no-load mutual funds in the aggregate to no more than 15% of the City’s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. 13 CURRENT INVESTMENTS As of September 30, 2015, 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 Cash and Certificates of Deposit $1,606,671 Total $1,606,671 RATINGS The Bonds are rated “A1” by Moody’s Investor’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 ti me 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. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix D hereto. To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the Bonds which is excluded from gross income for federal income tax purposes. For this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity of the Bonds is sold to the public (excluding bond hous es, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight -line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to the public at the first price at which a substantial amount of such Bonds is sold to the public. Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premi um properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. 14 The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The Issuer has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross in come for federal income tax purposes, possibly from the date of original issuance of the Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the Bonds is excluded fro m gross income for federal income tax purposes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in recent years have proposed legislation that would limit the exclusio n from gross income of interest on the Bonds to some extent for high-income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market pri ce for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for fed eral income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Issuer, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Issuer has covenanted, however, to comply with the requirements of the Code. Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Issuer or the Beneficial Owners regarding the tax -exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedur es, parties other than the Issuer and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examin ation of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Issuer legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the Bonds, and may cause the Issuer or the Beneficial Owners to incur significant expense. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of specified material events, to the Municipal Securities Rulemaking Board (“MSRB”). Information will be available free of charge via the Electronic Municipal Market Access (“EMMA”) system at www.emma.msrb.org. 15 ANNUAL REPORTS The City will provide certain updated financial information and operating data to the MSRB annually via EMMA. The information to be updated includes all quantitative financial information and operating data of the general type included in APPENDIX A - Financial Information for the City in Tables 1 through 11, and in APPENDIX C. 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 other publicly available documents, as permitted by the United Stated Securities and Exchange Commission (“SEC”) Rule 15c2 -12 (the “Rule”). The updated information will include audited financial statements if the City commissions an audit and the audit is completed by the required time. If audited financial statements are not available by the required time, the City will provide such financial statements on an unaudited basis within the required time and audited financial statements when they become available. Any such financial statements will be prepared in accordance with the accounting principles described in APPENDIX C 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, the City must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. EVENT NOTICES The City will also provide the following to the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of any of the following events with respect to the Bonds: (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 Bonds, or other material events affecting the tax s tatus of the Bonds; (7) modifications to rights of holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds, 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 successor or additio nal paying agent/registrar or the change of name of a paying agent/registrar, if material. In addition, the City will provide to the MSRB, in a timely manner, notice of any failure by the City to provide the required annual financial information described above under “Annual Reports” in accordance with this section. For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or sim ilar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. LIMITATIONS AND AMENDMENTS The City has agreed to update information and to pr ovide 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 a ny information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The City disclaims any contractua l or tort 16 liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Bonds may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the initial primary offering in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the outstanding Bonds consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the a pplicable provisions 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 Bonds in the primary offering of the Bonds. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under “Annual Reports” an exp lanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. COMPLIANCE WITH PRIOR UNDERTAKINGS The annual audited financial statement for the year ending September 30, 2011, due to be filed on March 31, 2012, was filed on May 17, 2012. Since that time, the City has implemented procedures, including hiring a third party as dissemination agent, to ensure timely and complete filing in the future. OTHER INFORMATION RATINGS The Bonds and the presently outstanding tax-supported debt of the City are rated “A1” by Moody’s Investor’s Service, Inc. (“Moody’s”), without regard to credit enhancement. An explanation of the significance of such ratings may be obtained from Moody’s. The rating reflects only the view of Moody’s and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by Moody’s, if in the judgment of Moody’s, circumstances so warrant. Any such downward revision or withdrawal of such rat ing may have an adverse effect on the market price of the Bonds. Neither the Underwriters nor the City has undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the rating of the Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such ratings could have an adverse effect on the market price of the Bonds. LITIGATION The City is a defendant in various lawsuits and is aware of pending claims arising in the ordinary course of its municipal and enterprise activities. Although the outcome of these cases has not presently been determined, it is the opinion of the City that resolution of these matters will not have a material adverse effect on the financial condition of the City or restrain the City from issuance of the Bonds. REGISTRATION AND QUALIFICATION OF BONDS FOR SALE The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold, assigned, pledged, hypothecated or otherwise 17 transferred. This disclaimer of responsibility for qualification for sale o r other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Bonds be assigned a rating of “A” or its equivalent as to investment quality by a national rating agency. See “OTHER INFORMATION - RATINGS” herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust companies with at capital of one million dollars or more, and savings and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds, including the approving legal opinion of the Attorney General of the State of Texas to the effect that the Bonds are valid and binding obligations of the City, and based upon examination of such transcript of proceedings, the approving legal opinion of Bond Counsel in substantially the form attached hereto as APPENDIX D. Bond Counsel has reviewed the statements and information appearing in the Official Statement under the captions “THE BONDS” (except the subcaptions “Book-Entry-Only System” and “Remedies Of Holders Of The Bonds”) and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) and Bond Counsel is of the opinion that the statements and information contained therein accurately reflect the provisions of the Ordinance; further, Bond Counsel has reviewed the statements and information contained in the Official Statement under the captions “TAX MATTERS,” “OTHER INFORMATION - Registration And Qualification Of Bonds For Sale,” “OTHER INFORMATION - Legal Investments And Eligibility To Secure Public Funds In Texas,” and “OTHER INFORMATION - Legal Matters” (except for the last sentence of the first paragraph) and Bond Counsel is of the opinion that the statements and information contained therein accurately describe the laws and legal issues contained therein. Bond Counsel has not independently verified any of the factual information contained in this Official Statement nor have they conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy, completeness or fairness of this Official Statement. No person is entitled to rely upon such firm’s limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy, completene ss or fairness of any of the information contained herein. The legal fees to be paid to Bond Counsel for services rendered in connection with the issuance of the Bonds is contingent upon the sale and delivery of the Bonds. Certain matters will be passed up on for the Underwriters by Powell & Leon, LLP, Austin, Texas, Counsel for the Underwriters, whose fee is contingent upon the sale and delivery of the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and 18 resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FINANCIAL ADVISOR In its role as Financial Advisor, Government Capital Securities Corporation has relied on the City for certain information concerning the City and the Bonds. The fee of the Financial Advisor for services with respect to the Bonds is contingent upon the issuance and sale of the Bonds. 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 Off icial Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. AUDITED FINANCIAL STATEMENTS Brooks Cardiel, PLLC, the City’s independent auditor, has not reviewed, commented on, or appr oved, and is not associated with, this Official Statement. The report of Brooks Cardiel, PLLC relating to City’s financial statements for the fiscal year ended September 30, 201 5 is included in this Official Statement in APPENDIX C; however, Brooks Cardiel, PLLC has not performed any procedures on such financial statements since the date of such report, and has not performed any procedures on any other financial information of the City, including without limitation any of the information contained in this Official Statement. VERIFICATION OF ARITHMETICAL AND MATHEMATICAL COMPUTATIONS The arithmetical accuracy of certain computations included in the schedules provided by Government Capital Securities Corporation on behalf of the City relating to (a) computat ion of forecasted receipts of principal and interest on the Federal Securities and the forecasted payments of principal and interest to redeem the Refunded Obligations and (b) computation of the yields of the Bonds and the restricted Federal Securities wer e verified by Grant Thornton LLP, certified public accountants. Such computations were based solely on assumptions and information supplied by Government Capital Securities Corporation on behalf of the City. Grant Thornton LLP has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information on which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. UNDERWRITING The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City at a price of $2,726,073.09 (representing the principal amount of the Bond s, plus a premium in the amount of $213,925.85, less an underwriting discount of $22,852.76). The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds to be offered to the public may be offered and sold to certa in dealers (including the Underwriters and other dealers depositing Bonds into investment trusts) at prices lower than the public offering prices of such Bonds, and such public offering prices may be changed, from time to time, by the Underwriters. The Underwriters have provided the following sentence for inclusion in the Official Statement. The Underwriters have reviewed the information in this Official Statement in acceptance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. FORWARD-LOOKING STATEMENTS The statements contained in this Official Statement and in any ot her information provided by the City that are not purely historical are forward-looking statements, including statements regarding the City’s expectations, hopes, 19 intentions, or strategies regarding the future. Readers should not place undue reliance on fo rward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligations to update any such forward -looking statements. It is important to note that the City’s actual results could differ materially from those in such forward -looking statements. The forward-looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the fore going involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the C ity. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward -looking statements included in this Official Statement will prove to be accurate. Schedule I - 1 SCHEDULE I - SCHEDULE OF REFUNDED OBLIGATIONS Bond Maturity Date Interest Rate Par Amount Call Date Call Price Series 2006 GO Bonds (adv), 2006: SERIAL 09/01/2017 4.000% 485,000.00 09/01/2016 100.000 09/01/2021 4.100% 565,000.00 09/01/2016 100.000 TERM20 09/01/2018 4.050% 500,000.00 09/01/2016 100.000 09/01/2019 4.050% 520,000.00 09/01/2016 100.000 09/01/2020 4.050% 545,000.00 09/01/2016 100.000 2,615,000.00 APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS ASSESSED VALUATION TABLE 1 2015 Total Value of Taxable Property $533,911,551 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 29,948,451 Homestead 10% Cap Adjustment 1,616,420 Abatement 0 Freeport 12,943,610 Other 11,488,748 68,106,722 2015 Net Taxable Assessed Valuation (100% of Actual)(a) $465,804,829 ________________ (a) 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 TABLE 2 Name Type of Business 2015 Net Taxable Assessed Valuation % of Total 2015 Assessed Valuation* Walmart Stores East, L.P. Distribution $68,768,049 14.76% Walmart Stores East, L.P. Distribution 29,025,317 6.23% Intercapital Sanger Trails, LLC Real Estate 11,355,173 2.44% Sam’s East, Inc. Distribution 6,475,804 1.39% Altec Capital Services LLC Financial Services 3,822,250 0.82% Maccamp Ltd. RV Sales and Service 3,040,820 0.65% Springer Family Rentals, LLC Real Estate 2,506,485 0.54% Stonewood Resorts, LLC Real Estate 2,119,135 0.45% Sam’s Cross Dock Distribution 2,040,574 0.44% S&T Rentals, LLC Real Estate 1,985,619 0.43% Total $131,139,226 28.15% * Based on 2015 Net Taxable Assessed Valuation of $465,804,829. ________________ Source: Texas Comptroller of Public Accounts and Denton Central Appraisal District PROPERTY TAX RATES AND COLLECTIONS(a) TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total(b) Ended 2002 $226,882,983 0.565470 97.03% 99.39% 9-30-03 2003 289,937,097 0.565470 97.38% 99.71% 9-30-04 2004 312,537,172 0.570830 97.40% 99.70% 9-30-05 2005 338,298,363 0.590460 98.16% 99.70% 9-30-06 2006 353,244,529 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 0.620000 97.72% 99.43% 9-30-09 2009 363,053,298 0.620000 97.78% 98.99% 9-30-10 2010 365,706,678 0.633049 97.70% 97.70% 9-30-11 2011 358,015,773 0.633049 98.69% 98.71% 9-30-12 2012 389,390,028 0.633049 99.20% 101.00% 9-30-13 2013 415,503,377 0.665000 99.80% 101.92% 9-30-14 2014 435,573,587 0.679500 99.27% 99.27% 9-30-15 2015 465,804,829 0.679500 In progress 9-30-16 ________________ (a) 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 2015 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 2015-16 2014-15 2013-14 2012-13 2011-12 Maintenance & Operations $0.433353 $0.418751 $0.409405 $0.446174 $0.445994 Dedicated for Street Maintenance 0.080000 0.080000 0.080000 0.186875 0.187055 I & S Fund 0.166147 0.180749 0.175595 0.186875 0.187055 TOTAL $0.679500 $0.679500 $0.665000 $0.633049 $0.633049 ________________ Source: City WATER RATES TABLE 5 Existing Rates Residential (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons $19.72 Next 4,000 gallons 3.41 per thousand gallons Next 10,000 gallons 3.75 per thousand gallons Next 15,000 gallons 4.60 per thousand gallons Over 30,000 5.92 per thousand gallons Commercial (Effective January 1, 2015) Minimum per unit served for 0 - 1,000 gallons $24.97 Next 4,000 gallons 3.96 per thousand gallons Next 10,000 gallons 4.29 per thousand gallons Next 15,000 gallons 4.68 per thousand gallons Over 30,000 5.78 per thousand gallons PRINCIPAL WATER CUSTOMERS 2014-15 TABLE 6 (For the twelve months ending September 30, 2015) Name of Customer Average Monthly Consumption in Gallons Average Monthly Bill Sanger High School 553,600 $3,165 Stonewood Resorts, LLC 527,700 3,256 Walmart 337,200 1,881 Butterfield Elementary 227,900 1,261 Stonewood Resorts, LLC 138,300 1,076 Chisum Trail/Integra Peak Mgt 115,900 1,044 Sanger Middle School 107,800 595 Elk River 114,300 547 Khosrow Sadeghian 103,400 506 Karl Klement Properties 76,600 645 Total 2,410,900 $12,335 None of the City’s revenues from its water system is pledged to the payment of the Bonds, and the City will not use such revenues to make payment on the Bonds. 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) ¾ inch meter $ 33.52 1 inch meter 36.69 1½ inch 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 3.16 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, 2015 ) Name of Customer Average Monthly Bill Stonewood Resorts LLC $ 3,462 Sanger High School 2,211 Walmart Distribution Center 1,252 Chisum Trail/Integra Peak Mgt 1,159 Stonewood Resorts, LLC 1,106 Butterfield Elementary 976 Karl Klement Properties 701 Elk River 455 Sanger Middle School 438 Khosrow Sadeghian 235 Total $9,522 ELECTRIC RATES TABLE 9 None of the City’s revenues from its sewer system is pledged to the payment of the Bonds, and the City will not use such revenues to make payment on the Bonds. Existing Rates (Effective November 15, 2010) Residential Commercial Large Industrial Facility Charge (minimum per month) $10.00 $ 16.00 $ 35.00 Energy Charge (per KWH) $ 0.1175 $ 0.12 $ 0.105 ERCOT Pass-through per month $ 4.00 $ 4.00 $ 4.00 PRINCIPAL ELECTRIC CUSTOMERS 2014-2015 TABLE 10 (For the twelve months ending September 30, 2015 ) Name of Customer Average Monthly Consumption in Kilowatt Hours Average Monthly Bill Walmart Distribution Center 1,132,600 $118,961 Super Save 90,813 10,917 Waggon Master RV Park 70,350 8,462 MacCamp 62,950 7,574 Sam’s – Walmart Stores East LP 55,467 6,676 McDonalds 42,813 5,157 Latham Stairs Millwork Inc. 33,513 4,041 Jack in the Box 30,583 3,690 North Texas Plastics 29,153 3,518 Sportsman 28,193 3,403 Total 1,576,435 $172,399 None of the City’s revenues from its electric system is pledged to the payment of the Bonds, and the City will n ot use such revenues to make payment on the Bonds. Appendix A - 1 GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 Fiscal Year 30-Sept Total Outstanding Debt Service Less Refunded Obligations Debt Service Series 2016 Refunding Bonds Principal Series 2016 Refunding Bonds Interest Total Debt Service 2016 $ 1,833,017.08 $ 52,973.75 $ 15,000.00 $ 19,846.67 $ 1,814,890.00 2017 2,015,372.50 590,947.50 475,000.00 91,300.00 1,990,725.00 2018 2,014,182.50 586,547.50 480,000.00 81,800.00 1,989,435.00 2019 2,015,667.50 586,297.50 500,000.00 62,600.00 1,991,970.00 2020 2,014,772.50 590,237.50 525,000.00 42,600.00 1,992,135.00 2021 2,016,345.00 588,165.00 540,000.00 21,600.00 1,989,780.00 2022 1,198,061.25 - - - 1,198,061.25 2023 1,184,635.00 - - - 1,184,635.00 2024 1,175,045.00 - - - 1,175,045.00 2025 1,173,605.00 - - - 1,173,605.00 2026 1,178,307.50 - - - 1,178,307.50 2027 910,945.00 - - - 910,945.00 2028 773,325.00 - - - 773,325.00 2029 775,200.00 - - - 775,200.00 2030 774,843.75 - - - 774,843.75 2031 778,000.00 - - - 778,000.00 2032 774,937.50 - - - 774,937.50 2033 770,656.25 - - - 770,656.25 2034 450,312.50 - - - 450,312.50 2035 449,656.25 - - - 449,656.25 2036 453,343.75 - - - 453,343.75 TOTAL $24,730,230.83 $2,995,168.75 $2,535,000.00 $319,746.67 $24,589,808.75 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 7,601 as of July 1, 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 an elementary school, an early childhood center for grades kindergarten through second grade, an intermediate school for grades third through fifth, a sixth grade campus, a middle school serving grades seventh and eighth, and a high school. 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. APPENDIX B GENERAL INFORMATION REGARDING THE CITY APPENDIX C AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015 June 13, 2016 City of Sanger, Texas General Obligation Refunding Bonds, Series 2016 (Final Opinion) Ladies and Gentlemen: We have acted as bond counsel to the City of Sanger, Texas (the “City”) in connection with the issuance of $2,535,000 aggregate principal amount of bonds designated as “City of Sanger, Texas General Obligation Refunding Bonds, Series 2016” (the “Bonds”). The Bonds are authorized by an ordinance adopted by the City Council (the “City Council”) on May 16, 2016 (the “Ordinance”). Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Ordinance. In such connection, we have reviewed the Ordinance, the tax certificate of the City dated the date hereof (the “Tax Certificate”), certificates of the City, and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Ordinance and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Ordinance and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal remedies against cities in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Our services did not include financial or other non-legal advice. APPENDIX D FORM OF BOND COUNSEL OPINION City of Sanger, Texas June 13, 2016 Page 2 Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bonds constitute the valid and binding obligations of the City. 2. The City Council has power and is obligated to levy an annual ad valorem tax, within the limits prescribed by law, upon taxable property located within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Bonds. 3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although we observe that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds. Faithfully yours, OHSUSA:764958146.2 CLOSING CERTIFICATE OF THE ISSUER I, the undersigned authorized representative of the City of Sanger, Texas (the “Issuer”), acting solely in my official capacity, hereby certify as follows in connection with the issuance of $2,535,000 City of Sanger, Texas, General Obligation Refunding Bonds, Series 2016 (the “Bonds”). This certificate is being provided pursuant to Section 6(i)(8) of that certain Purchase Agreement dated May 19, 2016 between the Issuer and the Underwriter (the “Agreement”). Capitalized terms used herein without definition are defined in the Purchase Agreement: (i) the representations and warranties of the Issuer contained in the Agreement are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except to the extent disclosed in the Official Statement, no litigation or proceeding against it is pending or, to my knowledge, threatened in any court or administrative body, nor to my knowledge is there a basis for litigation, which would (a) contest the right of the officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Bonds or the Issuer Documents or (d) attempt to limit, enjoin or otherwise prevent the Issuer from functioning and collecting taxes and other income or levying and collecting the taxes pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof; (iii) all official action of the Issuer relating to the Bonds, the Issuer Documents and the Official Statement have been duly taken by the Issuer, are in full force and effect, and have not been amended, modified, supplemented or repealed; (iv) to the best of my knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein, in light of the circumstances under which made, not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2015, the latest date as of which audited financial information is available. [Signature Page Follows] June 13, 2016 Page 2 OHSUSA:765267409.1 paragraph hereof. We have further assumed compliance with all covenants and agreements contained in such documents. In addition, we call attention to the fact that the rights and obligations under the Bonds, the Bond Ordinance, the Tax Certificate and the Purchase Agreement and their enforceability may be subject to bankruptcy, insolvency, reorganization, receivership, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies in the State of Texas. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty) right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents. Finally, we undertake no responsibility for the accuracy, except as expressly set forth in numbered paragraph 3 below, completeness or fairness of the Official Statement dated May 19, 2016 (the “Official Statement”) or other offering material relating to the Bonds and express no opinion relating thereto. Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions: 1. The Bond Ordinance has been duly adopted and is in full force and effect. 2. The Bonds 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 Bonds to register the Bonds under the 1933 Act or to qualify the Bond Ordinance under the Trust Indenture Act. 3. We have reviewed the statements and information appearing in the Official Statement under the captions “THE BONDS” (except the subcaptions “Book-Entry-Only System” and “Remedies Of Holders Of The Bonds”) and “CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance With Prior Undertakings”) and we are of the opinion that the statements and information contained therein accurately reflect the provisions of the Ordinance; further, we have reviewed the statements and information contained in the Official Statement under the captions “TAX MATTERS,” “OTHER INFORMATION - Registration And Qualification Of Bonds For Sale,” “OTHER INFORMATION - Legal Investments And Eligibility To Secure Public Funds In Texas,” and “OTHER INFORMATION - Legal Matters” (except for the last sentence of the first paragraph) and we are of the opinion that the statements and information contained therein accurately describe the laws and legal issues contained therein. This letter is furnished by us as bond counsel to the Issuer. No attorney-client relationship has existed or exists between our firm and you in connection with the Bonds or by virtue of this letter. Our engagement with respect to the Bonds has concluded with their issuance. We disclaim any obligation to d. Dollar Amount of Bond Premium, if any: f. Dollar Amount of Bond Original Issue Discount, if any: b. Name of Bond Issue: c. Type of Issuer: (Governmental Entity, Component or Related Entity) List Component/Related Entity/Other General Obligation Refunding Bonds, Series 2016 See Attached Exhibit A Yes N/A N/A 6/13/2016 9/30/2016 See Attached Exhibit A 6/13/2016 2. a. Total Par Amount: b. New Money Par: c. Refunding Par: g. If available, please email the DF2 file to brblgs@brb.state.tx.us. $2,535,000.00 $0.00 e. Cash Premium (Competitive Sales, usually found in the Initial Purchasers Section), if any: 7. Maturity Dates, Maturity Amounts, Coupon Rates, Prices or Yields (If no reoffering yield (NRO) indicated, please provide yield separately.): 13. Pledge: tax (ad valorem, other), revenue, sales tax revenue, combination tax & rev: 9. Mandatory Sinking Fund Redemption Dates: 8. Call Provisions, including Premiums, if any:See Attached Exhibit B 6. First Interest Payment Date: 12. Derivative Products (Swaps, Interest Rate Management Agreements, etc.) - List any derivatives associated with financing: 14. Credit Enhancement (including PSF guarantee): A. Please provide the following information for each bond series as well as an additional copy of the Final Official Statement. (Provide the requested information on this worksheet. The Bond Review Board does not receive the full transcript): City of Sanger, Texas1. a. Name of the Governmental Entity: $2,535,000.00 $213,925.85 6/1/2016 5. Closing Date (expected delivery date, on or about): 4. Date Interest Accrues from: 3. Dated Date: 11. Do the bonds have a specific designation as qualified tax-exempt obligations? 10. Debt-Service Schedule (Principal and Interest, and Annual Totals, with the Fiscal Year identified): N/A Tax OFFICE OF THE ATTORNEY GENERAL PUBLIC FINANCE DIVISION Additional Transcript Requirements Pursuant to Texas Government Code §1202.008 The following information is to be included in the transcript submitted to the Office of the Attorney General to obtain Attorney General approval of the issuance of bonds or other obligations. This information has been designated by the Bond Review Board as that to be collected pursuant to Texas Government Code §1202.008. If space is limited, please provide a specific cross-reference to the page in the Final Official Statement. Please submit excel copy of this form to brblgs@brb.state.tx.us Updated May 2015 15. Ratings: Assigned to the issue/Underlying: Assigned to this issue Underlying Moody's A1 N/A S&P N/A N/A Fitch N/A N/A Other N/A N/A Not Rated N/A N/A B. Additional Information 7,601 Source: 07/01/2014 US Census estimate N/A N/A See Attached Exhibit D N/A N/A N/A Private Placement N/A N/A N/A 5/19/2016 1.21% N/A See Attached Exhibit C 17. Date of Sale: 16. Type of Sale: (Negotiated, Competitive, Private Placement, Other) 27. Commercial Paper Authorized - List all commercial paper programs, the amounts authorized and the amounts currently outstanding. 30. If the issuer is an ISD, is any portion of the debt exempt from Texas Education Agency Code 45.0031 (50-cent Debt test)? 29. Federal Program - If the debt is being issued under any direct special government program; name the program and the amount of authority being used: 28. Population - Provide the most current available population data: 21. Cash and Present Value Savings/Loss - If a refunding bond issue, please provide final schedule of cash and present value savings or loss. 20. Refunded Obligations - If applicable, include a schedule of obligations refunded by year, principal amount, and coupon. 19. Governmental Purchaser - please name purchaser (i.e. Texas Water Development Board): 18. Net effective interest rate pursuant to Government Code Chapter 1204.005: 26. CABs and CIBs – If not provided in the OS, please provide the per annum bond interest rates by maturity as shown in the bond order document. If provided in the OS, list the page(s): 25. Upcoming Called Bond Election: Please provide an attached schedule which shows date of election, purpose and amount by proposition. 24. Authorized but Unissued - For issues that require the use of voted bond authorization, list all authorized but unissued voted authority available, if any. 23. If voter approved - Provide bond election date(s), original amount(s) authorized and current amounts of principal and premium charged against voted authority. 22. Cash Defeasances - List all issues and maturities that have been cash defeased since the last issue of public securities approved by the Attorney General. If other please explain Updated May 2015 Service Firm One-Time Fee Annual Fees (1) Bond Rating:Moody's 11,000.00 Standard & Poor's Fitch Other: Other Costs of Issuance: (2) Financial Advisor Government Capital Securities Corporation 25,850.00 Bond Counsel Orrick, Herrington & Sutcliffe LLP 12,000.00 Co Bond Counsel Issuer Counsel Bank Counsel Disclosure Counsel Paying Agent BOKF, NA 1,500.00 Trustee Remarketing Fees Liquidity Fees Accountant/CPA Printing POS/OS Posting Attorney General's Fee 2,535.00 Issuer Fees Escrow Agent BOKF, NA (see line 72 above) Escrow Verification Fees Grant Thornton LLP 2,500.00 Travel TCEQ Fee Bond Application Fee TWDB Fee Private Placement Fee Contingency Misc. Costs of Issuance: (3) 4,292.26 Total Costs of Issuance:59,677.26 - Credit Facility Bond Insurance Underwriting Spread: Takedown 8,931.25 Management Fee 2,535.00 Underwriter Counsel Powell & Leon, LLP Spread Expenses 11,386.51 Total Underwriting Spread:(4)22,852.76 - (2) Include all fees and expenses paid or reimbursed by the issuer. (3) Provide all other costs of issuance and identify the service provider and associated fees. No (4) Include all marketing and selling costs including structuring (management) fee, takedown, underwriting risk fee and expenses. 31. Costs of Issuance - Provide the information below: (If final costs are materially different, please submit changes directly to the Texas Bond Review Board, 512-463-1741 or fax 512-475-4802) (1) Refers to any recurring costs of an issuance including fees for paying agent, remarketing agent, credit provider and other similar services (may be expressed as a formula as appropriate). Did Underwriter Pay Bond Insurance Fee? Yes or No Did Underwriter Pay Underwriter Counsel’s Fee? Yes or No No No Did Underwriter Pay Rating Fee? Yes or No Updated May 2015 UW Participants Firm Senior Managing Underwriter Oppenheimer & Co., Inc. Other Underwriters Person Completing Form: Name:Hoang Vu Firm:Orrick, Herrington & Sutcliffe LLP Telephone:713.658.6430 E-mail:hvu@orrick.com The information presented on this form is used by the Texas Bond Review Board for compiling outstanding debt information and related costs of issuance for governmental issuers in Texas. For more information please see http://www.brb.state.tx.us/local_debt.aspx Updated May 2015 Exhibit A - Debt-Service Schedule Exhibit B - Call Provisions Exhibit C - Refunded Obligations Exhibit D - Cash and Present Value Savings/Loss U.S. PUBLIC FINANCE CREDIT OPINION 5 May 2016 New Issue Contacts Ryan Hazlett 214-979-6852 Associate Analyst ryan.hazlett@moodys.com Robert Weber 212-553-7280 VP-Senior Analyst robert.weber@moodys.com Sanger (City of) TX New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds Summary Rating Rationale Moody's Investors Service has assigned a A1 rating to the City of Sanger's TX $2.6 million General Obligation (GO) Refunding Bonds, Series 2016. At the same time Moody's upgrades to A1 the rating on $12.8 million of outstanding general obligation limited tax debt. The upgrade to A1 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 with rapid principal amortization. Credit Strengths »Trend of growing reserve levels »Continued growth in tax base expected »Favorable location 40 miles north of Dallas Credit Challenges »Modestly sized tax base »Moderate taxpayer concentration Rating Outlook Moody's generally does not assign outlooks to local government credits with this amount of debt outstanding. Factors that Could Lead to an Upgrade »Trend of significant tax base expansion »Substantive improvement in socioeconomic indicators »Strengthening of reserves in line with rated peers Factors that Could Lead to a Downgrade »Protracted tax base declines »Declines in reserves and / or liquidity MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. 2 5 May 2016 Sanger (City of) TX: New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds Key Indicators Exhibit 1 Source: Moody's Investors Service Recent Developments Recent developments are incorporated in the Detailed Rating Considerations. Detailed Rating Considerations Economy and Tax Base: Modestly-Sized Tax Base; Further Growth Expected The city's tax base will continue to grow moderately over the near term given ongoing commercial and residential development. Located in Denton County (Aaa/Stable), 40 miles north of Dallas (Aa2/Stable) on Interstate 35, the city is primarily a residential community. Significant residential development over the past four years increased full value to $465 million in 2016 from $358 million in 2012. Management reports ongoing residential development and reports numerous housing subdivisions in various stages of development will drive full value up to $550 million in 2017, an increase of 18% over 2016. The city's top ten taxpayers are moderately concentrated at 28.2% of fiscal 2016 assessed values. Wal-Mart Stores, Inc. (Aa2/Stable) is the largest taxpayer comprising 21% of the tax base. Favorably, Wal-Mart distribution facility serves the northern section of the Dallas/ Fort Worth metroplex. The city's socioeconomic profile is slightly below average with the American Community Survey 2014 median family income equal to 97.5% of the US. However, the unemployment rate for Denton County is favorable at 3.2% as of February 2016 versus the 5.2% 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 continued to drive growth in the tax base. Financial Operations and Reserves: Stable Reserves; Growth Expected The city's financial profile is expected to strengthen supported by strong fiscal management and conservative budgeting. Following a slight operating deficit and draw on reserves in fiscal 2012, the city posted General Fund surpluses over the past three years, strengthening reserves above the city's targeted fund balance policy of $1.0 million. Management attributes increasing sales taxes, growing tax base, and conservative budgeting practices as the primary drivers behind the recent surpluses. Fiscal 2015 ended with a $738,000 surplus, which increased the available General Fund balance to $1.9 million, or a healthy 28.3% of revenues. Operating funds (General and Debt Service) ended fiscal 2015 with an available balance of $2.2 million, or 33.5% of revenues. A significant amount of fiscal 2015 General Fund operations were supported by transfers from the city's enterprise funds (15.9%). The enterprise funds (water, MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE 3 5 May 2016 Sanger (City of) TX: New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds sewer, electric) have historically reported stable operations. At fiscal year-end 2015, enterprise cash stood at $2.5 million (21.5% of operating revenues) and an unrestricted position of $7.8 million (67% of revenues). Management expects to end fiscal 2016 with a surplus growing the General Fund balance to $2.0 million, or 30% of fiscal 2015 revenues. Favorably, 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 2017 as evidenced by ongoing development, increasing sales tax revenues, and conservative budgeting. LIQUIDITY Liquidity maintained in the city's operating funds at fiscal year-end 2015 was a healthy $2.4 million (36.4% of revenues). The city's liquidity position is expected to increase in line with the expected surplus in fiscal 2016. Debt and Pensions: Average Debt Burden; Rapid Payout Sanger's debt liabilities is expected to remain manageable given a growing tax base and conservative capital planning. Inclusive of the current sale, the city's direct debt burden is slighty above the national average at 1.5% and 4.7% 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 3.0% of fiscal 2016 assessed value. Management has an extensive ten-year capital improvement plan but reports plans to allow for outstanding bonds to mature and capturing the expansion of the tax base before moving forward. 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 98.1% 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 2015 adjusted net pension liability (ANPL) for the city, under our methodology for adjusting reported pension data, is $5.6 million, or 0.84 times operating revenues. The three year average of the city's ANPL to Operating Revenues is 0.56 times, while the three-year average of ANPL to full value is a manageable 0.86%. 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 The city's management is strong, implementing and maintaining fund balance policies help to mitigate the reliance on the utility system transfers for operations. Texas cities have an institutional framework score of “Aa,” or strong. Cities rely on stable property taxes for 30% -40% of their operating revenues, while 25%-35% comes from economically sensitive sales taxes, resulting in moderate predictability overall. Cities maintain moderate flexibility under the state-mandated cap ($25 per $1,000 of AV, with no more than $15 for debt) to raise property taxes as most cities are well below the cap. Expenditures primarily consist of personnel costs, which are highly predictable. Cities have high flexibility to reduce expenditures given no union presence. Legal Security The Bonds constitute direct obligations of the City, payable from the levy and collection of a direct and continuing as valorem tax, within the limited prescribed by law, on all taxable property within the City. Use of Proceeds Proceeds from the sale of the Bonds will be used to refund a portion of the 2006 Bonds for present value savings. MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE 4 5 May 2016 Sanger (City of) TX: New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds 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. Methodology The principal methodology used in this rating was US Local Government General Obligation Debt published in January 2014. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology. Ratings Exhibit 2 Sanger (City of) TX Issue Rating General Obligation Refunding Bonds, Series 2016 A1 Rating Type Underlying LT Sale Amount $2,615,000 Expected Sale Date 05/06/2016 Rating Description General Obligation Limited Tax Source: Moody's Investors Service MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE 5 5 May 2016 Sanger (City of) TX: New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds © 2016 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. 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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000. MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. REPORT NUMBER 1024993 MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE 6 5 May 2016 Sanger (City of) TX: New Issue: Moody's upgrades to A1 the City of Sanger's, TX outstanding GOLT bonds Contacts Robert Weber 212-553-7280 VP-Senior Analyst robert.weber@moodys.com Ryan Hazlett 214-979-6852 Associate Analyst ryan.hazlett@moodys.com CLIENT SERVICES Americas 1-212-553-1653 Asia Pacific 852-3551-3077 Japan 81-3-5408-4100 EMEA 44-20-7772-5454 Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-1 $15,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 2.000% June 1, 2016 September 1, 2016 800876 FS8 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FIFTEEN THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-2 $475,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 2.000% June 1, 2016 September 1, 2017 800876 FM1 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FOUR HUNDRED SEVENTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-3 $480,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 4.000% June 1, 2016 September 1, 2018 800876 FN9 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FOUR HUNDRED EIGHTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-4 $500,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 4.000% June 1, 2016 September 1, 2019 800876 FP4 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FIVE HUNDRED THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-5 $525,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 4.000% June 1, 2016 September 1, 2020 800876 FQ2 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FIVE HUNDRED TWENTY-FIVE THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N Page 1 of 5OHSUSA:765332507.1 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS, GENERAL OBLIGATION REFUNDING BOND SERIES 2016 NUMBER PRINCIPAL AMOUNT R-6 $540,000 REGISTERED REGISTERED INTEREST RATE DATED DATE MATURITY DATE CUSIP 4.000% June 1, 2016 September 1, 2021 800876 FR0 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: FIVE HUNDRED FORTY THOUSAND DOLLARS THE CITY OF SANGER, TEXAS, a Home Rule City of the State of Texas (the “City”), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Bond at the principal corporate trust office of BOKF, NA, Austin, Texas, or its successor (the “Paying Agent/Registrar”), the principal amount identified above, 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 later of the date of delivery or the most recent interest payment date to which interest has been paid or duly provided for. Interest on this Bond is payable on September 1, 2016, and each March 1 and September 1 thereafter until maturity of this Bond, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the last business day of the month next preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity shall be paid upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar. THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the “Bonds”) in the aggregate principal amount of $2,535,000 issued pursuant to an ordinance adopted by the City Council of the City on May 16, 2016 (the “Ordinance”) for the purpose of refunding certain outstanding obligations (the “Refunded Obligations”) of the City under and pursuant to the authority of Chapter 1207, Texas Government Code, as amended. Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds and refunding the Refunded Obligations. SP E C I M E N OHSUSA:765332507.1 Page 2 of 5 THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Bond is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THIS BOND is not subject to redemption prior to maturity. THIS BOND 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 BOND IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Bond or Bonds 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 CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Bond 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 Bond. 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 Bond 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 Bond 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 Bond have been performed, exist and have been done in accordance with law; that the Bonds 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 Bond, 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. 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 Bonds assent by acceptance of the Bonds. SP E C I M E N OHSUSA:765332507.1 Page 3 of 5 IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and this Bond 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 * * * SP E C I M E N OHSUSA:765332507.1 Page 4 of 5 AUTHENTICATION CERTIFICATE This Bond is one of the Bonds described in and delivered pursuant to the within- mentioned Ordinance; and, except for the Bonds initially delivered, this Bond has been issued in exchange for or replacement of a Bond, Bonds, or a portion of a Bond or Bonds of an issue which originally was approved by the Attorney General of the State of Texas and registered by the Comptroller of Public Accounts of the State of Texas. BOKF, NA, as Paying Agent/Registrar By: Authorized Signature: Date of Authentication: * * * SP E C I M E N OHSUSA:765332507.1 Page 5 of 5 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 the within 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. 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. * * * * SP E C I M E N 1 June 9, 2016 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 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 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 UNDERWRITER’S COUNSEL Powell & Leon, LLP 115 Wild Basin Rd, Suite 106 Austin, Texas 78746 Darrick Eugene Phone: (512) 744-1411 deugene@powell-leon.com BOND COUNSEL Orrick, Herrington & Sutcliff LLP Hoang Vu / Amanda Stephens 1301 McKinney Street, Suite 4100 Houston, Texas 77010 Phone: (713) 658-6430 hvu@orrick.com PAYING AGENT BOK Financial Jose A. Gaytan, Jr. 100 Congress Avenue, Ste.250 Austin, Texas 78701 Phone: (512) 813-2002 jgaytan@bankoftexas.com Re: Closing Instructions with respect to the City of Sanger, Texas, $2,535,000 General Obligation Refunding Bonds, Series 2016 (the “Bonds”). Payment for the above referenced Bonds is scheduled to occur at 10:00 A.M. CST on Monday, June 13, 2016 (the "Closing Date"), and payment therefore is to occur at the offices of BOK Financial, the paying agent/registrar (“BOKF”). SOURCES OF FUNDS Principal Amount of Bonds $2,535,000.00 PLUS: Premium 213,925.85 TOTAL SOURCES $2,748,925.85 USES OF FUNDS Deposit to Refunding Escrow Fund $ 2,666,395.83 PLUS: Costs of Issuance (plus rounding amount) 59,677.26 PLUS: Underwriter's Discount 22,852.76 TOTAL USES $ 2,748,925.85 CONFIRMATION OF PURCHASE PRICE Principal Amount of Bonds $2,535,000.00 PLUS: Premium 213,925.85 LESS: Underwriter's Discount 22,852.76 PURCHASE PRICE OF THE BONDS $2,726,073.09 FINAL 2 (A) Prior to 10:00 A.M. on the Closing Date, Oppenheimer & Co. (the “Underwriter”) shall wire in immediately available funds $2,726,073.09 (consisting of the par amount of the Bonds of $2,535,000.00 plus original issue premium of $213,925.85 and less underwriter’s discount of $22,852.76). 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 2016 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) BOKF will retain in Escrow Account for Series 2006 refunded bonds: $2,666,395.83 (2) Wire transfer costs of issuance funds to: To: Wells Fargo Bank Texas, NA ABA: 121000248 Account Name: Government Capital Securities Corporation Account No.: 6859041375 58,177.26 (4) Paying Agent/Escrow Agent Fees Retained by Paying Agent/Escrow Agent 1,500.00 TOTAL $2,726,073.09 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, Daniel C. Roseveare Robert Bruning Managing Director Associate Director Oppenheimer & Co. Oppenheimer & Co. May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) TABLE OF CONTENTS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Report Page Sources and Uses of Funds ...........................1 Bond Summary Statistics ............................2 Bond Pricing .................................4 Savings ....................................5 Summary of Refunding Results ..........................6 Summary of Bonds Refunded ..........................7 Prior Bond Debt Service ............................8 Bond Debt Service ...............................9 Escrow Descriptions ..............................10 Escrow Cost ..................................11 Escrow Statistics ................................12 Escrow Requirements ..............................13 Escrow Sufficiency ...............................14 Escrow Cash Flow ...............................15 Proof of Arbitrage Yield .............................16 Form 8038 Statistics ..............................17 Underwriter's Discount .............................19 Cost of Issuance ................................20 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 1 SOURCES AND USES OF FUNDS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Dated Date 06/13/2016 Delivery Date 06/13/2016 Sources: Bond Proceeds: Par Amount 2,535,000.00 Premium 213,925.85 2,748,925.85 Uses: Refunding Escrow Deposits: Cash Deposit 0.83 SLGS Purchases 2,666,395.00 2,666,395.83 Delivery Date Expenses: Cost of Issuance 59,677.26 Underwriter's Discount 22,852.76 82,530.02 2,748,925.85 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 2 BOND SUMMARY STATISTICS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Dated Date 06/13/2016 Delivery Date 06/13/2016 Last Maturity 09/01/2021 Arbitrage Yield 1.206687% True Interest Cost (TIC) 1.475695% Net Interest Cost (NIC) 1.553231% All-In TIC 2.193089% Average Coupon 3.859694% Average Life (years) 3.268 Duration of Issue (years) 3.121 Par Amount 2,535,000.00 Bond Proceeds 2,748,925.85 Total Interest 319,746.67 Net Interest 128,673.58 Total Debt Service 2,854,746.67 Maximum Annual Debt Service 567,600.00 Average Annual Debt Service 547,235.78 Underwriter's Fees (per $1000) Average Takedown 3.523176 Management Fee 1.000000 Other Fee 4.491720 Total Underwriter's Discount 9.014895 Bid Price 107.537400 Par Average Average Bond Component Value Price Coupon Life Serial Bond 2,535,000.00 108.439 3.860% 3.268 2,535,000.00 3.268 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 3 BOND SUMMARY STATISTICS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers All-In Arbitrage TIC TIC Yield Par Value 2,535,000.00 2,535,000.00 2,535,000.00 + Accrued Interest + Premium (Discount) 213,925.85 213,925.85 213,925.85 - Underwriter's Discount -22,852.76 -22,852.76 - Cost of Issuance Expense -59,677.26 - Other Amounts Target Value 2,726,073.09 2,666,395.83 2,748,925.85 Target Date 06/13/2016 06/13/2016 06/13/2016 Yield 1.475695% 2.193089% 1.206687% May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 4 BOND PRICING City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Maturity Premium Bond Component Date Amount Rate Yield Price (-Discount) Takedown Serial Bond: 09/01/2016 15,000 2.000% 0.800% 100.258 38.70 5.000 09/01/2017 475,000 2.000% 0.850% 101.388 6,593.00 2.500 09/01/2018 480,000 4.000% 1.000% 106.559 31,483.20 3.750 09/01/2019 500,000 4.000% 1.150% 108.973 44,865.00 3.750 09/01/2020 525,000 4.000% 1.250% 111.259 59,109.75 3.750 09/01/2021 540,000 4.000% 1.350% 113.303 71,836.20 3.750 2,535,000 213,925.85 Dated Date 06/13/2016 Delivery Date 06/13/2016 First Coupon 09/01/2016 Par Amount 2,535,000.00 Premium 213,925.85 Production 2,748,925.85 108.438890% Underwriter's Discount -22,852.76 -0.901490% Purchase Price 2,726,073.09 107.537400% Accrued Interest Net Proceeds 2,726,073.09 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 5 SAVINGS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Present Value Prior Refunding to 06/13/2016 Date Debt Service Debt Service Savings @ 1.2066865% 09/30/2016 52,973.75 34,846.67 18,127.08 18,079.89 09/30/2017 590,947.50 566,300.00 24,647.50 24,332.90 09/30/2018 586,547.50 561,800.00 24,747.50 24,110.20 09/30/2019 586,297.50 562,600.00 23,697.50 22,808.69 09/30/2020 590,237.50 567,600.00 22,637.50 21,525.33 09/30/2021 588,165.00 561,600.00 26,565.00 24,953.46 2,995,168.75 2,854,746.67 140,422.08 135,810.48 Savings Summary PV of savings from cash flow 135,810.48 Net PV Savings 135,810.48 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 6 SUMMARY OF REFUNDING RESULTS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Dated Date 06/13/2016 Delivery Date 06/13/2016 Arbitrage yield 1.206687% Escrow yield 0.273235% Value of Negative Arbitrage 5,367.45 Bond Par Amount 2,535,000.00 True Interest Cost 1.475695% Net Interest Cost 1.553231% Average Coupon 3.859694% Average Life 3.268 Par amount of refunded bonds 2,615,000.00 Average coupon of refunded bonds 4.063679% Average life of refunded bonds 3.295 PV of prior debt to 06/13/2016 @ 1.206687% 2,884,736.33 Net PV Savings 135,810.48 Percentage savings of refunded bonds 5.193517% Percentage savings of refunding bonds 5.357415% May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 7 SUMMARY OF BONDS REFUNDED City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Maturity Interest Par Call Call Bond Date Rate Amount Date Price Series 2006 GO Bonds (adv), 2006: SERIAL 09/01/2017 4.000%485,000.00 09/01/2016 100.000 09/01/2021 4.100% 565,000.00 09/01/2016 100.000 TERM20 09/01/2020 4.050% 1,565,000.00 09/01/2016 100.000 2,615,000.00 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 8 PRIOR BOND DEBT SERVICE City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Period Annual Ending Principal Coupon Interest Debt Service Debt Service 09/01/2016 52,973.75 52,973.75 09/30/2016 52,973.75 03/01/2017 52,973.75 52,973.75 09/01/2017 485,000 4.000%52,973.75 537,973.75 09/30/2017 590,947.50 03/01/2018 43,273.75 43,273.75 09/01/2018 500,000 4.050%43,273.75 543,273.75 09/30/2018 586,547.50 03/01/2019 33,148.75 33,148.75 09/01/2019 520,000 4.050%33,148.75 553,148.75 09/30/2019 586,297.50 03/01/2020 22,618.75 22,618.75 09/01/2020 545,000 4.050%22,618.75 567,618.75 09/30/2020 590,237.50 03/01/2021 11,582.50 11,582.50 09/01/2021 565,000 4.100%11,582.50 576,582.50 09/30/2021 588,165.00 2,615,000 380,168.75 2,995,168.75 2,995,168.75 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 9 BOND DEBT SERVICE City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Period Ending Principal Coupon Interest Debt Service 09/30/2016 15,000 2.000%19,846.67 34,846.67 09/30/2017 475,000 2.000%91,300.00 566,300.00 09/30/2018 480,000 4.000%81,800.00 561,800.00 09/30/2019 500,000 4.000%62,600.00 562,600.00 09/30/2020 525,000 4.000%42,600.00 567,600.00 09/30/2021 540,000 4.000%21,600.00 561,600.00 2,535,000 319,746.67 2,854,746.67 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 10 ESCROW DESCRIPTIONS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Type of Type of Maturity First Int Par Max Security SLGS Date Pmt Date Amount Rate Rate Jun 13, 2016: SLGS Certificate 09/01/2016 09/01/2016 2,666,395 0.270% 0.270% 2,666,395 SLGS Summary SLGS Rates File 19MAY16 Total Certificates of Indebtedness 2,666,395.00 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 11 ESCROW COST City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Type of Maturity Par Total Security Date Amount Rate Cost SLGS 09/01/2016 2,666,395 0.270% 2,666,395.00 2,666,395 2,666,395.00 Purchase Cost of Cash Total Date Securities Deposit Escrow Cost 06/13/2016 2,666,395 0.83 2,666,395.83 2,666,395 0.83 2,666,395.83 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 12 ESCROW STATISTICS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Modified Yield to Yield to Perfect Value of Total Duration Receipt Disbursement Escrow Negative Cost of Escrow Cost (years) Date Date Cost Arbitrage Dead Time Global Proceeds Escrow: 2,666,395.83 0.216 0.273235% 0.273235% 2,661,028.38 5,367.45 2,666,395.83 2,661,028.38 5,367.45 0.00 Delivery date 06/13/2016 Arbitrage yield 1.206687% May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 13 ESCROW REQUIREMENTS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Period Principal Ending Interest Redeemed Total 09/01/2016 52,973.75 2,615,000.00 2,667,973.75 52,973.75 2,615,000.00 2,667,973.75 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 14 ESCROW SUFFICIENCY City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Escrow Net Escrow Excess Excess Date Requirement Receipts Receipts Balance 06/13/2016 0.83 0.83 0.83 09/01/2016 2,667,973.75 2,667,972.92 -0.83 2,667,973.75 2,667,973.75 0.00 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 15 ESCROW CASH FLOW City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Net Escrow Date Principal Interest Receipts 09/01/2016 2,666,395.00 1,577.92 2,667,972.92 2,666,395.00 1,577.92 2,667,972.92 Escrow Cost Summary Purchase date 06/13/2016 Purchase cost of securities 2,666,395.00 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 16 PROOF OF ARBITRAGE YIELD City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Present Value to 06/13/2016 Date Debt Service @ 1.2066865045% 09/01/2016 34,846.67 34,755.96 03/01/2017 45,650.00 45,258.10 09/01/2017 520,650.00 513,084.62 03/01/2018 40,900.00 40,063.97 09/01/2018 520,900.00 507,192.31 03/01/2019 31,300.00 30,293.55 09/01/2019 531,300.00 511,132.26 03/01/2020 21,300.00 20,368.58 09/01/2020 546,300.00 519,277.91 03/01/2021 10,800.00 10,204.22 09/01/2021 550,800.00 517,294.37 2,854,746.67 2,748,925.85 Proceeds Summary Delivery date 06/13/2016 Par Value 2,535,000.00 Premium (Discount) 213,925.85 Target for yield calculation 2,748,925.85 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 17 FORM 8038 STATISTICS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Dated Date 06/13/2016 Delivery Date 06/13/2016 Redemption Bond Component Date Principal Coupon Price Issue Price at Maturity Serial Bond: 09/01/2016 15,000.00 2.000%100.258 15,038.70 15,000.00 09/01/2017 475,000.00 2.000%101.388 481,593.00 475,000.00 09/01/2018 480,000.00 4.000%106.559 511,483.20 480,000.00 09/01/2019 500,000.00 4.000%108.973 544,865.00 500,000.00 09/01/2020 525,000.00 4.000%111.259 584,109.75 525,000.00 09/01/2021 540,000.00 4.000%113.303 611,836.20 540,000.00 2,535,000.00 2,748,925.85 2,535,000.00 Stated Weighted Maturity Interest Issue Redemption Average Date Rate Price at Maturity Maturity Yield Final Maturity 09/01/2021 4.000% 611,836.20 540,000.00 Entire Issue 2,748,925.85 2,535,000.00 3.3214 1.2067% Proceeds used for accrued interest 0.00 Proceeds used for bond issuance costs (including underwriters' discount) 82,530.02 Proceeds used for credit enhancement 0.00 Proceeds allocated to reasonably required reserve or replacement fund 0.00 Proceeds used to currently refund prior issues 2,666,395.83 Proceeds used to advance refund prior issues 0.00 Remaining weighted average maturity of the bonds to be currently refunded 3.2951 Remaining weighted average maturity of the bonds to be advance refunded 0.0000 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 18 FORM 8038 STATISTICS City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Refunded Bonds Bond Component Date Principal Coupon Price Issue Price Series 2006 GO Bonds (adv): SERIAL 09/01/2017 485,000.00 4.000% 100.000 485,000.00 SERIAL 09/01/2021 565,000.00 4.100% 100.000 565,000.00 TERM20 09/01/2018 500,000.00 4.050% 100.000 500,000.00 TERM20 09/01/2019 520,000.00 4.050% 100.000 520,000.00 TERM20 09/01/2020 545,000.00 4.050% 100.000 545,000.00 2,615,000.00 2,615,000.00 Remaining Last Weighted Call Issue Average Date Date Maturity Series 2006 GO Bonds (adv) 09/01/2016 08/15/2006 3.2951 All Refunded Issues 09/01/2016 3.2951 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 19 UNDERWRITER'S DISCOUNT City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Underwriter's Discount $/1000 Amount Average Takedown 3.52318 8,931.25 Management Fee 1.00000 2,535.00 Expenses 4.49172 11,386.51 9.01490 22,852.76 May 19, 2016 12:08 pm Prepared by DBC Finance (City of Sanger:SANGER-REF06,REF06) Page 20 COST OF ISSUANCE City of Sanger General Obligation Refunding Bonds, Series 2016 Final Numbers Cost of Issuance $/1000 Amount Financial Advisor 10.00000 25,350.00 FA Expenses 0.19724 500.00 Bond Counsel 4.73373 12,000.00 Attorney General 1.00000 2,535.00 Verification 0.98619 2,500.00 Escrow/Paying Agent 0.59172 1,500.00 Moody's Rating Fee 4.33925 11,000.00 Miscellaneous 1.69320 4,292.26 23.54133 59,677.26