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06-10-06-Resolution-Notice of Intent to Issue Certificates of Obligation 7M Water Sewer Electric Utility Improvements-06/19/2006
.RESOLUTION 06-10-06 A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS AUTHORIZING AND APPROVING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION; AUTHORIZING THE HIRING OF FINANCIAL ADVISOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council (the "City Council") of the City of Sanger, Texas (the "City") has determined that it is advisable and necessary to issue and sell one or more series of certificates of obligations (the "Certificates") in an amount not to exceed $7,000,000 as provided pursuant to the provisions of the Certificate of Obligation Act of 1971, as amended, Local Government Code, Section 271.041 through 271.063, for the purposes of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to -wit, (1) street improvements; (2) water, sewer and electric utility improvements (the "Project"); and (3) the payment for professional services related thereto; and WHEREAS, prior to the issuance of the Certificates, the City Council is required to publish notice of its intention to issue the Certificates in a newspaper of general circulationin the City, such notice stating (i) the time and place the City Council tentatively proposes to pass the Resolution authorizing the issuance of the Certificates, (ii) the maximum amount proposed to be issued, (iii) the purposes for which the Certificates are to be issued, and (iv) the manner in which the City Council proposes to pay the Certificates; and WHEREAS, the City Council has entered into or will enter into various contracts pertaining to the expenditure of lawfully available funds of the City to finance the costs of the Project; and WHEREAS, the City Council desires to hire Government Capital Securities Corporation as the City's financial advisor; and WHEREAS, the City Council hereby finds and determines that the adoption of this Resolution is in the best interests of the citizens of the City; now, therefore, BE IT RESOLVED BY THE OF THE CITY OF SANGER, TEXAS THAT: SECTION 1. The City Secretary is hereby authorized and directed to cause notice to be published of the City Council's intention to issue the Certificates in an amount not to exceed $7,000,000 for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to -wit, (1) street improvements; (2) water, sewer and electric utility improvements; and (3) the payment for professional services related thereto. The Certificates will be payable from the levy of any annual ad valorem tax, within the limitations prescribed by law, upon all taxable property within the City and additionally from a pledge of and lien on surplus net revenues derived from the operation of the City's water and sewer system not to exceed $1,000. The notice hereby approved and authorized to be published shall read substantially in the form and content of attached hereto, which notice is incorporated herein by reference as a part of this Resolution for all purposes. HOU:2587330.1 SECTION 2. The City Secretary shall cause the notice described in Section 1 to be published in a newspaper of general circulation in the City, once a week for two consecutive weeks, the date of the first publication shall be at least fifteen (15) days prior to the date stated therein for passage of the Ordinance authorizing the issuance of the Certificates. SECTION 3. Government Capital Securities Corporation is hereby hired as the City's ftnancial advisor. SECTION 4. The City Secretary is directed to maintain a copy of this Resolution in the City's official records in a manner that will allow any member of the general public to review this Resolution during the normal business hours of the City during the period beginning thirty (30) days after the adoption hereof and ending on the date of issuance of the Certificates. SECTION 5. This Resolution may be relied upon by the appropriate officials at the Office of the Attorney General for the State of Texas, and established compliance by the City with the requirements of Texas law. SECTION 6. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment. and findings of the City Council. SECTION 7. All Resolutions and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. SECTION 8. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas. SECTION 9. If any provision of this Resolution or the application thereof to any person or circumstances shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted without such invalid provision. SECTION 10. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION 11. This Resolution shall be in force and effect from and after the date of its adoption, and it is so resolved. [The remainder of this page intentionally left blank.) HOU:2587330.1 PASSED AND ADOPTED, this the 19th day of June, 2006. ATTEST: (SEAL) _ _ s` 5 ppv 4' l } 4i c.¢'IYie . i4 r,, , ^'. . ,,3 r y a ✓' 9 .''F' V qv° ' _ ,✓ `4 l Goo m °° .®tl °ocac oeeo ` , t Haan.. .4 :,-. CITY OF SANGER, TEXAS vlayor Signature Page to Resolution Authorizing Publication ofNotice oflntention to Issue Certificates of Obligation HOU:2587330.1 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2006 TRANSCRIPT OF PROCEEDINGS Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas 77002 (713) 2204200 HOU:648931.1 AIN1 Q REWS ATTORNEYS K U R T H LLP VIA U.S. MAIL Ms. Rosalie Chavez City of Sanger, Texas P.O. Box 1729 Sanger, Texas 76266 Re: Dear Rose: City of Sanger, Series 2006 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com Shannon Miller 713.220.3931 Phone 713.238.7493 Fax ShannonMiller@andrewskurth.com October 27, 2006 Texas Combination Tax and Revenue Certificates of Obligation, Please find enclosed one transcript of proceedings for the referenced transaction. It was a pleasure working with you and the City and we look forward to working with you again. Please let me know if you have any questions regarding the enclosed. Very truly yours, ��' � ' " � , _ Shannon Miller Paralegal Enclosure Austin Beijing Dallas Houston London Los Angeles New York The 1,Noodlands Washington, DC CITY OF SANDER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2006 INDEX OF CONTENTS CERTIFICATE PROCEEDINGS AND DOCUMENTS Closing Memorandum 1 Resolution Authorizing Publication of Notice 2 of Intention to Issue Certificates Affidavits of Publication of Notice of Intent 3 Ordinance Authorizing Issuance of the Certificates 4 Ordinance Readopting, Ratifying and Confirming Ordinance 5 Purchase Agreement 6 Preliminary Official Statement � Official Statement g Paying Agent/Registrar Agreement g CERTIFICATES General Certificate 10 Signature Identification and No -Litigation Certificate 11 Federal Tax Certificate and Form 8038G 12 Closing Certificate 13 Official Statement Certificate of the Bond Insurer 14 OPINIONS Approving Opinion of Bond Counsel 15 HOU:2602384.1 Opinion of Attorney General of Texas with Certificate of Comptroller of Public Accounts Opinion of Underwriter's Counsel Supplemental Opinion of Bond Counsel Opinion of Counsel to the Bond Insurer MISCELLANEOUS Receipt and Cross Receipt Registrar's Receipt Insurance Policy Rating Agency Letter Specimen Certificate Bond Review Board Questionnaire Reliance Letter to Bond Insurer 16 17 19 21 22 23 24 25 26 HOU:2602384.1 CLOSING MEMORANDUM $6,500,000 City of Sanger, Texas (DENTON COUNTY) Combination Tax and Revenue Certificates of Obligation SERIES 2006 Date: September 5, 2006 To: Attached Distribution List From: John S. Jumper SAMCO Capital Markets, Inc. (901) 754-2111 Closing and delivery of the captioned bonds (the "Bonds") is scheduled to occur at 10:OOA.M. Central Daylight Time, on Tuesday September 5, 2006 (the "Closing Date"). The closing is to occur at the office of Andrew Kurth, LLP., 600 Travis Street, Suite 4200, Houston, TX 77002. The following events and transactions are to occur with respect to the receipt and disbursement of funds: The purchase price for the Bonds is $6,460,226.45 determined as follows: Principal amount of Bonds $6,500,000.00 Plus Premium $ 37,783.00 Less Underwriter's Discount $ (77,556.55) Purchase Price for Bonds $6,460,226.AA; The amount of $6,460,226.45 shall be wired to the Bank of New York, (the "Bank") as follows: Bank: The Bank of New York in New York, N.Y. ABA No.: 021000018 Account No.: GLA 111565 TAS 184152 REF: City of Sanger Attention: Debbie Bennett (214)-880.8223 L The Bank shall make the following deposits and transfers: 1. The amount of $66,254.36 shall be wired to CIFG for payment of Insurance Premium and Surety Bond ($52,543.63 shall be allocated for Insurance Premium and $8,817.75 for the Surety Bond) as follows: JP Morgan Chase Bank ABA: 0210-0002-1 For Acct: Brown Brothers Harriman & Co Acct: 9204-033231 For Further Credit to Acct: 2311694 CIFG NA Policy #: CIFG NA4134 2. $6,293,730.78 shall be wired to the Construction Fund as follows: Sanger Bank Routing # 111917309 Account # 0118430 3. $750.00 shall be retained by the Bank as payment of an Acceptance Fee. 4. $30,000.00 shall be wired to Andrew Kurth LLP for Bond Counsel services and expenses as follows: JPMorgan Chase Bank, Houston, TX Accounting#:00100184952 ABA Routing#* 113000609 Client Matter# :24825-167845 Attn: Misty Dibrell, Client Services Group (713)-750-3725 CsR.houston.4(c�jpmoran.com 2 5. $4,000.00 shall be wired to McCall, Parkhurst & Horton, LLP for Underwriter's Counsel services and incurred expenses as follows: Bank Name: Colonial Bank (Colonial BHAM) ABA: 0620-0131-9 Account # 000000 1 529(credit to McCall, Parkhurst & Horton Oper. Acct.) Ref: (2199.088/MAM-City of Sanger, Texas Certificate of Obligation) 6. $49,280.00 shall be wired to Government Capital Securities for Financial Advisor fee & expenses as follows: Bank Name:Wells Fargo Bank Bank ABA Number: 121000248 Bank Account Number: 6859041375 REF: City of Sanger 7. $8,275.00 shall be wired to Moody's Investor Service for rating services provided as follows: Bank Name — SUNTRUST BANK Account Name — Moody's Investors Service Bank ABA Number — 061000104 Bank Account Number — 8801939847 8. $2,373.51 shall be wired to RR Donnelley for printing services provided as follows: Bank of America ABA 121000358 Account Number 1233552859 Ref# 1209366700 9. $5,562.80 shall be wired to the SAMCO Capital Markets, Inc. for underwriting expenses as follows: Wachovia Bank, N.A. ABA Routing Number - 111025013 Account Number - 2000019286392 3 CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § THE UNDERSIGNED HEREBY CERTIFIES that: i. On the 19th day of June, 2006, a regular meeting of the, City Council (the "City Council") of the City of Sanger, Texas (the "City"), was held at the regular meeting place in the City Hall of the City, the duly constituted members of the City Council being as follows: Joe Higgs Mike James Glenn Ervin Mike Walker Andy Garza Robert Patton Mayor Councilman, Place 1 Councilman, Place 2 Councilman, Place 3 Councilman, Place 4 Councilman, Place 5 and all of said persons were present at said meeting, except the following: Mike Walker. Among other business considered at said meeting, the attached Resolution entitled. "A RESOLUTION BY THE CITY COUNCIL OF THE CITY OF BANGER, TEXAS AUTHORIZING AND APPROVING PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION; AUTHORIZING THE HIRING OF FINANCIAL ADVISOR; AND .PROVIDING AN EFFECTIVE DATE " was introduced and submitted to the City Council for passage. After presentation and due consideration of the Resolution and, upon a motion duly made and seconded, the Resolution was July passed and adopted by the City Council to be effective immediately by the following vote: 4 Voted "For" 0 Voted "Against" 0 abstained all as shown in the official Minutes of the City Council for the meeting held on the aforesaid date. 2. The attached Resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the City Council; and that said meeting, and the deliberation of the aforesaid public business, was open to the public and written notice of said meeting, including the subject of the above entitled Resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. HOU:2604916.1 IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of the City, this t,�e..19th da of June 2006. ,. .`; ; .. _ �: �� . f City Secretary { �` (SEAL) �� � �..�., Signature Page to Certircate ofReso/ution HOU:2587330.1 RESOLUTION 0 6 -10 - 0 6 A RESOLUTION BY THE OF SANGER, TEXAS ACITY COUNCIL OF THE CITY CITY AND APPROVING PUBLICATION OF NOTICE OF INTENTION TO ISSUE. CERTIFICATES OF OBLIGATION; AUTHORING THE FFECTIVE DATE HIRING OF FINANCIAL ADVLSOR, AND PROVIDING AN E, WHEREAS, the City Council (the "City Council") of the City of Sanger, Texas "City") has determined that it is advisable and necessary to issue and sell one o (the certificates of obligations (the "Certificates" more series of Pursuant to the provisions of the Certificate of b Obligation Act of lount not to d $7,000,000 as provided Government Code, Section 271.041 through 971, as amended, Local obligations of the City to be incurred for miffing Per , for the purposes of paying contractual public purposes, to -wit 1 g Permanent public improvements and for other improvements (the "Project() )and (3) the Provements; (2) water, sewer and electric utility Payment for professional services related thereto; and WHEREAS, prior to the issuance of the Certificates, the City Council is required publish notice of its intention to issue the Certificates in a newspaper of general circulationq ed to City, such notice stating (i) the time and place the City Council tentatively proposes in the Resolution authorizing the issuance of the Certificates ii the maximum amount proposed to pass the issued, (iii) the purposes for which the Certificates are to be issued, and (iv) the t p�posed to be the City Council proposes to pay the Certificates; and manner m which WHEREAS, the City Council has entered into or will enter into various contracts pertaining to the expenditure of lawfully available funds of the City to finance the costs of Project; and the WHEREAS, the City Council desires to hire Government Capital Securities Co ration as the City's financial advisor; and rpo WHEREAS, the City Council hereby fords and determines that th L' solution is in the best interests of the citizens of the City; now, therefore, e adoption of this BE IT RESOLVED BY THE OF THE CITY OF SANGER, TEXAS THAT; SECTION 10 The City Secretary is hereby authorized and directed to cause notice to be published of the City Council's intention to issue the Certificates in an amount not to exceed $7,000,000 for the purpose of paying contractual obligations of the City to be incurred making permanent public improvements and for other public purposes, to -wit, 1 for improvements; (2) water, sewer and electric utility improvements; and (3) the payment street professional services related thereto. The Certificates will be payable from the le of a p yment for annual ad valorem tax, within the limitations prescribed by law, upon all taxable property any the City and additionally from a pledge of and lien on surplus net revenues derived om thin th operation of the City's water and sewer system not to exceed $1,000. The notice hereby approved and authorized to be published shall read substantially in the form and content of attached hereto, which notice is incorporated herein by reference as a part of this Resolution for all purposes. HOU:2587330. I SECTION 2. The City Secretary shall cause the notice described in Section published in a newspaper of general circulation in the City, once a week for tw 1 to be con weeks, the date of the first publication shall therein for passage be at least fifteen (15) days prior to the date of the Ordinance authorizing the issuance of the Certific date stated aces. SECTION 3. Government Capital Securities Corporation is hereby hired as the Ci ' financial advisor, ttY s SECTION 4. The City Secretary is directed to maintain a copy of this Resolution in City's official records in a manner that will allow any member of the general public the this Resolution during the normal business hours of the City during the period be (30) days after the adoption hereof and ending ur the date of issuancep to review of the Certificates. thim SECTION 5. This Resolution may be relied Upon b y the Office of the Attorney General for the State of Texas, and estabh'shed compliancebropriate ials at the with the requirements of Texas law, y the City SECTION 6. The recitals contained in the preamble hereof are hereby and such recitals are hereby made a part of this Resolution for all found to be true, Part of the judgment and findings of the City Council. purposes and are adopted as a SECTION 7. All Resolutions and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent o conflict, and the provisions of this Resolution shall be and remain controlling as to the matters h resolved herein. SECTION 8. This Resolution shall be construed and othe State of Texas. enfprced in accordance with the laws f SECTION 9. If any provision of this Resolution or the application thereof to. any person or circumstances shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, anthe City Council hereby declares +u"t this Resolution would have been enacted without such invalid provision. d SECTION 10. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION 11. This Resolution shall be in force and effect from and after the date of its adoption, and it is so resolved. The remainder of this page intentionally left blanl�J HOLT:2587330.1 PASSED AND this the 19th day Of June, 2006, c (SEAL) CITY OF SANGER, TEXAS Signature Page to Reso/utioo Authorizing Pub/ication ofNotice oflnteotion to Issue CertiTcates of Obligation HOU:2587330.1 NOTICE OF INTENTION TO ISSUE CITY OF SANGER, TEXAS CERTIFICATES OF OBLIGATION NOTICE IS HEREBY GIVEN that the City Council of the City of Sanger, Texas will convene a special meeting at its regular meeting place in the City Hall in Sanger, Texas, at 7:00 p.m., on the 7th day of August, 2006, and, during such meeting, the City Council will consider the passage of an Ordinance or Ordinances and take such other actions as may be deemed necessary to authorize the issuance of one or more series of certificates of obligation in aggregate principal amount not to exceed $7,000,000 (the "Certificates") for the purposes or purposes of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to -wit: (1) street improvements; (2) water, sewer and electric utility improvements; and (3) the payment for professional services related thereto. The Certificates will be payable from the levy of an annual ad valorem tax, within the limitations prescribed by law, upon all taxable property within the City and from a lien on and pledge of surplus net revenues derived by the City from the operation of the City's water and sewer system not to exceed $1,000. The Certificates are to be issued, and this notice is given under and pursuant to the provisions of the Certificate of Obligation Act of 1971, as amended, Local Government Code Section 271.041 through Section 271.063 and Chapter 1502, Government Code, as amended. City Secretary City of Sanger, Texas HOU2587330.1 e , AFFIDAVIT OF NEWSPAPER PUBLISHER THE STATE OF TEXAS § COUNTY OF DENTON § Before me, the undersigned authority, on this day personally appeared �� � I 1 _ " F K � who being by �e duly sworn, deposes and says that he/she is the Publisher of ' � and that said newspaper (i) devotes not less than 25% of its total column lineage to general interest items, (ii) is published at least once each week, (iii) is entered as asecond-class postal matter in the county in which it is published and is generally circulated within the territory of the City of Sanger, Texas (the "City"), and (iv) was published regularly and continuously for at least 12 months before August 15, 2006, the date on which the City published the attached notice in said newspaper. Publisher SUBSCRIBED AND SWORN TO before me this the �� day of 2006. ��;\/L • `/� :1 • A .�, 7. 'i'��� � 1 C �-Rsh� �� �-�--t�flC �� Q Notary of Texas My commission expires: ��-� � ��(��� �� ' O— g C X L O~ + Y t� y1 C O S O C r W E N � N ` C O �� R� N 0 0��� Y Q ~ O«� N C r 0`i q O _ rr i• .� O M _V c ` G pl � Hnvc�a E+ own%... � +r-+ ��r 325-_ u a z�W V' `vmcu w +0`o+s.�� qoE o} u oc=�3� a•.. �co �w«w. 'E ° °' '" OZ<Z ��x o,drc.+cro`tDi�ogo$�.o'co-�;�mwa'"3>xh3'co>o~"'oa—PE=`_Lc K i-Qv� moa'�' rn q�.-..eu N�of o...ao c c�.�»>q.oaq T.�.aa�-- t m_Vu >o 2 N-- W V 1�- E O) c c •1 O� L O= q 8 L O�� O w .« y am+ n�. �. r tl �- b. q � C 6+ 4� c 01 .r > `' 1- f C O p�p �• 6 q n X � �; + U6 a. V q V O p � � f'!L F-t9 W= y q �N .X C a CY >`�- E$ ul�" mQ ay aC Yi 4,q V C ««uF V C}V—.O +`'X+C a d V �a + L O ZOR._ iV.CUWCEIFVI. {�O�p�+�O�iNgwn t0lYgN0`O+O— OF q.pp C�'i�O�+••N0�-QqN E ` o�vo "�'i�Empc'�E`='O`vM�'oQn�o�n� �cgL".�n3aaE.-`-'moo>=cCce�o;~�+�vuoio� c�y �`o Vy O+�=O�t3C4+� Uf.UgnO�EWOEyIEaZV:-oE�_ ��M`o.: n> � W Q a W� er » i. Q u—+ M M �o � q o-u. `o ri ` n ,� w � +._ �� o � � t c A o rn �+ � o �,'$ vwXO t)«2'wd=•-o.oiu'Soc.i.vt'�i«._a��naErud���_t�qu33cc�v�tai1°`,�n�rno:t�� �' phFW- OZ aUi c ` w q >a� qac � {6+��a avi a«. a`r.upoi c_r woa `+°i= c~ac rio o .n tJ M.y��`>p u�+ r + V ZN ZW.=.y�rA'pCUMC�IVOCN�IpOCaUVCnnN'�..�vM�dO���OC.��NF�NOnOg15VN�q !'I s N v n �� HOU:2588695.1 'I1lesday, August 15, 2006 1ht t RC, 08/08 6 157 1 For ind waive it ulari• NOTICE OF INTENTION TO Dall n ca lack ISSUE CITY OF SANGER ilU • tin rites. TEXASCERTIFICATES ' !se s the OF OSLIGgTION Dail , be ost ad* 4920 CM ns ction NOTICE Is HEREBY G)y. Dail 1. I ids EN that the City Council of 107 Gat the City Of Sanger, Texas will 121 , T convene a special Meetingat 21 Inw AS Its regular meeting Place In Dail , T 101 6101 E ON the City Hall in Sanger, Tex• a as, at 7:00 porn„ 92 on the 30th 192 ) T)' 'u ation day of August, 2006, and, dur- ll 1 r T) ) ing such meeting, the CityDa, 393 Council will consider the pas. 17 res sage of an Ordinance or Ordi• Dall TX jaM rr, nd all nances and take such other Dalla ' D, actions as may be deemed Dalla TX aY may You necessary to authorize the is' ddl Is on You nuance of one or more series �81 T' a herebyof certificates of obligation in yPc before aggregate principal amount 1417 I ri ial istrict not to exceed Sumo000 (the Carrot uildl *Certificates') for the pur- 4S0 E poses or purposes of Paying All sa s a F r, Den• contractual obligations of the USA r n Texas City to be Incurred for make fuse a a tten an- ing permanent public Imo esd provements and for other only 0:00 0' public purposes, der. V wl t Mon ices, to wit: (1) entra e ° Iration street improvements; (2) water, sewer and electric e leave all l ys from leave u I ante of utility Improvements; and hou er. e Ing Sep. (3) the Payment for profes• der if do not sional serv{ca related there - no grou a tember to. The Certificates will be It dgment Payable from the levy of an Stor' al annual ad valorem tax, with• U' y0U' Fre in the limitations prescribed Ca a . Ifon o as filed by law, uPOnall taxable prop- uary 2i, erty within the City and from B40 Keyt a lien on and Pledge of sure Re EI a docketof Plus net revenues derived by i eyla Nam the City1rom the operation of y's water and sewer Th terns the Cit n Tarver list unite 0 d in the system not to exceed $I,000, certificates are to be is* auT mobil The Ceti Iranian, tra ern, r e sued, and this notice is given cl pici nT the na- under and pursuant to the tyegL provisions of the Certificate off a eqt s follows, of Obligation Act of 1971, as Pli sto w actual amended Local Government fu hOL co costs of Code Seri fu ishing reiudg- on i11.011 through eq omen d st )udg- Section 271.063 and Chapter s tten' tofmom 1502, Government Code, as id t on or amended, D o8/l: City Secretary rtl this ci- City of Sanger, Texas nP serve DRC, 08115 3 22/06 ng the re- w, nd the a make NOTICE TO VENDORS au rests. INVITATION TO BID un r my CSPI 2106-i AFFIDAVIT OF NEWSPAPER PUBLISHER THE STATE OF TEXAS § COUNTY OF DENTON § Before me, the undersigned authority, on this day personally appeared _ SoN who eing by me -- sworn, deposes and says that he/she is the Publisher of and that said newspaper (i) devotes not less than 25% of its total column lineage to general interest items, (ii) is published at least once each week, (iii) is entered as a second-class postal matter in the county in which it is published and is generally circulated within the territory of the City of Sanger, Texas (the "City"), and (iv) was published regularly and continuously for at least 12 months before August 22, 2006, the date on which the City published the attached notice in said newspaper. a uvuattvt SUBSCRIBED AND SWORN TO before me this the c�_ day of 2006. C State of Texas My commission HOU:2588695.1 -. 1 • Mobile/Manufactured Homes For Sale 760 We say, yes!!! Good Credit, Little Credit or Problem Credit. We have what you need! DW or SW. Homes ready to move in now. Denton County Area. RBIi32767.972-294.2560. Resort � Lake Property 785 70 X 90 WOODED LAKE - VIEW LOT IN KEATINGS KOVE/Shady Shores, TX. 525,000.9/0.321•Z920 Lake &Resort 60 miles north of�e<, metroplex. Free got ,lake, security. Compare oi�r dues at 5712/month Lake Kfowa Rea�ty 1.800.525-6734 , Wanted to Buy 795 WANTED � Lotto construct residence or duplex. Ca11940-206.220P LEGAL NOTICES N0.2006.231 AN ORDINANCE OFITHE CITY OF DENTON, TEtXAS,' AMENDING A SPEgIFIC'� USE PERMIT FOR A DRIVE -THROUGH FACILI- TY ON APPROXIMATELY 0.72ACRESOF LAND,GEN- ERALLY LOCATED�ON THE EAST SIDE'OF �IL- LIAN MILLER PARKWAY APPROXIMATELY ', 170 FEET NORTH OF WIND RIVER LANE AND AP- PROXIMATELY 100 FEET WEST OF LAKE FORKCIR- CLE, WITHIN A NEIGH- BORHOOD RESIDENTIAL MIXED USE (NRMU) ZON- ING DISTRICT CLAS61F1- CATION AND USE DESIG- NATION; AND IS PLATTED AS LOT 1, BLOCK A, WIND RIVER ESTATES Pt+ASE 1 ADDITION IN THE CITY OF DENTON, DENTON COON- TY, TEXAS; PROVIDING A SEVERABILITY CLAUSE; PROVIDING FOR A PEN- ALTY IN THE MAXIMUM AMOUNT OF 52000.00 FOR VIOLATIONS THEREOF; AND PROVIDING AN EF• FECTIVE DATE (SOd-0005). DRC, OB/21 6 22/66 THE STATE OF TEXAS COUNTY OF DE�JTON i Civil Citation by Publication Cause No. 2006.60023393__ Minority and small business vendors or contractors are encouraged to bid on any and ail City of Denton pro)eds. CITY OF DENTON, TEXAS (910).3.19.7100 TOM D, C.P.M. E��ASINGA T r' ,: � ,. .NDTICEOF INTENTION TO ISSUE CITY OF SANGER, TEXASCERTIFICATES OF OBLIGATION NOTICE IS HEREBY GIV- EN that the City Council of the City of Sanger, Texas will convene a special meeting at Its regular meeting place in the City Hall in Sanger, Tex• as, at 7:00 p.m., on the 301h day of August, 2006, and, dur- ing such n(eeting, the City Council will consider the pas• sage of an Ordinance or Ordi- nances and take such other actions as may be deemed necessary to authorize the is- suan4e of one or more series of certificates of obligation in ,aggregate principal amount not to exceed 57,000,000 (the 'Certificates') for the pur- poses or purposes of paying �, contractual obligations of the City to be incurred for mak- ing permanent public im- provements and for other public purposes, to wit: (i) street improvements; (2) water, sewer and electric utility Improvements; and (3) the payment for profes- sional services related therr to. The Certificates will be payable from the levy of an annual ad valorem tax, with• in the limitations prescribed by taw, upon all taxable prop• arty within the City and from a Ilan on and pledge of sur- plus net revenues derived by the City from theoperation of the City's water and sewer system not to exceed 57,000. The Certificates are to be is- sued, and this notice is given under and pursuant To the provisions of the Certificate of Obligation Act of 1971, as amended, Local Government Code Section 271.011 through Section 271.063 and Chapter 1502, Government Code, as amended. City Secretary City of Sanger, Texas DRC, 08/15 & 22/06 _. ,�.. LEGAL NOTICES and all bids and to waive de- fecis inbids. No officer or employee Of the CltyofDentonshalihaveafl- NOTICE OF PUBLIC SALE nancialinterest, direct or in• � property to satisfy land - direct, in any contract with lord's Ilan. Sale is 10 am,�Aug the Clty of Denton. 31, 2006, at 391 E Round Grove Rd., Lewisville, TX. Property wilt be sold to the highest bidder for cash. Cleanup and removal deposit may be required. Setter rr serves the right to withdraw property from sale. Property includescontenfsofspacesof the following tenants; DONALD REED, dining chairs, punching bag, boxes, mattress, box springs, suit-. case, microwave, mist. household, books. i SCOTT ANDERS, table; 4 hairs, stereo, speakers, box- s, ironing board. ontact Securlock Storage, 9 2.315.5000, 391 E. Round G ova Rd., Lewisville, TX LEGAL NOTICES 08/15 & 22/O6 NOTICE OF SALE Luther Davis, :tioneer, YTXB325 Storage USA, pursuant to Chatter 59 of the Texas Prop• art Code (Chapter 576 of the 68T� Legislature), wilt con- duct apublic sale of the con- tent� of the units listed below to katisfy del(nquent ac- counts (Landlord's Llen): Storage USA sales wilt be conducted on September 5, 200d, beginning at 9:30 am at ahE? following locations. 1 3906 W. Airport Freeway, Ding, TX T5060 1 i Fort Worth Avenue, D tits, TX 75208 5[31 Lemmon Avenue, Dallas, TX 75209 4j11 N. Central Expressway, Dallas, TX 75204 4420 McKinney Avenue, Dallas, TX 75205 id740 Garland Road, D$ilas, TX 75218 12A90 Inwood Road, D�Ilas, TX 75241 • bipl Wagner Way; Piano, TX 75023 1s�211 Preston Rd. D Iias, TX 75252 17� Preston Rd. Dallas, TX 75252 �78530 N. Dallas Pkwy, D�ilas, TX 75287 id280 Addison Road, Bison, TX 75001• 8 Waypoint Drive, arrollton, TX 75006 117 W. Frankford Rd arroilton, TX 75007. All sales are final. Storage USA reserves the right to rr fuse any and ail bids. Cash only sales to the highest bid- der. Viewing done from the Tt>.esfiay, August 22, 2006 j, 13B c' T0: Daniel Tarver, and all CITY OF HIGHLANj�' whom it may concern. VILLAGE PLANt�IWG AND ZONING COMMISSION Nonce 'e Defendant; You �,_....,,,,.,,.,. CERTIFICATE FOR ORDINANCE THE STATE OF TEXAS § COUNTIES OF SMITH AND CHEROKEE § CITY OF BANGER § We, the undersigned officers of the City of Sanger, follows: Texas (the "City"), hereby certify as 1. The City Council of the City convened in a regular meeting on August 7, 2006, at the regular meeting place thereof, within the City, and the roll was called of the duly constituted officers and members of the City Council, to wit: Joe Higgs Mike James Glenn Ervin Mike Walker Andy Garza Robert Patton Mayor Councilman, Place 1 Councilman, Place 2 Councilman, Place 3 Councilman, Place 4 Councilman, Place 5 and all of such persons were present, thus constituting a quorum. Whereupon, among other business, the following was transacted at said meeting: a written AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF BANGER, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2006; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE .USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; AUTHORIZING THE PURCHASE OF BOND INSURANCE; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT' THERETO; AND DECLARING AN EMERGENCY (the "Ordinance") was duly introduced for the consideration of the City Council and read in full. It was then duly moved and seconded that the Ordinance be adopted on first reading; and, after due discussion, such motion, carrying with it the adoption of the Ordinance, prevailed and carried by the following vote: AYES: 5 NAYS: 0 ABSTENTIONS: 1 HOU:2602319.3 2. That a true, full and correct copy of the Ordinance adopted at the meeting described in the above and foregoing paragraph is attached to and follows this certificate; that the Ordinance has been duly recorded in the City Council's minutes of such meeting; that the above and foregoing paragraph is a true, full and correct excerpt from the City Council's minutes of such meeting pertaining to the adoption of the Ordinance; that the persons named in the above and foregoing paragraph are the duly chosen, qualified and acting officers and members of the City Council as indicated therein; that each of the. officers and members of the City Council was duly and sufficiently notified officially and personally, in advance, of the date, hour, place and subject of the aforesaid meeting, and that the Ordinance would be introduced and considered for adoption at such meeting, and each of such officers and members consented, in advance, to the holding of such meeting for such purpose; that such meeting was open to the public as required by law; and that public notice of the date, hour, place and subject of such meeting was given as required by the Open Meetings Law, Chapter 551, Texas Government Code. IGNED AND SEALED this August 7, 2006. City.Secretaiy,�,. c % ayor CITY OF: Sl1NGER, TEXASIt I CITY OF SANGER, .11 It to IF wo I It It OF SEAL'' .` k 4 to r` y I� 1.00 S-1 HOU:2602319.1 ORDINANCE AN ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; AUTHORIZING THE PURCHASE OF BOND INSURANCE; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SANGER: ARTICLE I Secti_on 1.1: Findinas and Determinations. The City Council hereby officially finds and determines that: (a) The City of Sanger, Texas (the "City"), acting through its City Council, is authorized pursuant to and in accordance with the provisions of Texas Local Government Code, Chapter 271, Subchapter C, as amended (the "Act'), to issue certificates of obligation to provide all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights- of4ay for authorized needs and purposes and for the payment of contractual obligations for professional services, to wit (1) street improvements; (2) water, sewer and electric utility improvements, and (3) professional services rendered in connection with the above listed projects. (b) The City Council authorized the publication of a notice of intention to issue Certificates of Obligation, Series 2006 (the "Certificates") to the effect that the City Council was tentatively scheduled to meet at 7*00 p.m. on June 19, 2006 at its regular meeting place to adopt an ordinance authorizing the issuance of the Certificates to be payable from (i) an ad valorem tax levied, within the limits prescribed by law, on the taxable property located within the City, and (ii) the revenues to be derived from the City's water and sewer system (the "System") after the payment of all operation and maintenance expenses thereof (the "Net Revenues") in an amount not to exceed $1,000, to the extent that ad valorem taxes are ever insufficient or unavailable for such purposes, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. HOU:2602319.3 (c) Such notice was published at the times and in the manner required by the Act. (d) No petition signed by at least five percent (5%) of the qualified voters of the City has been filed with or presented to any official of the City protesting the issuance of such Certificates on or before August 7, 2006, or the date of passage of this Ordinance. (e) The City has determined that it is in the best interests of the City and that it is otherwise desirable to issue the Certificates to provide all or part of the funds to pay contractual obligations to be incurred for the purposes authorized by the Act. ARTICLE II DEFINITIONS AND INTERPRETATIONS Section 2.1: Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise: "Act" shall mean Texas Local. Government Code, Chapter 271, SubchC, as amended. apter "Attorney General" shall mean the Attorney General of the State of Texas. "Bond Insurance Policy" shall mean the financial guaranty insurance policy issued by the Bond Insurer insuring the payment when due of the principal and interest on the Certificates as provided therein. "Bond Insurer" shall mean CIFG Assurance North America, Inc. "Certificate" or "Certificates" shall mean any or all of the City of Sanger, Texas Certificates %J Obligation, Series 20061 authorized by this Ordinance. "City" shall mean the City of Sanger, Texas and, where appropriate, its City Council. "City Council" shall mean the governing body of the City. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Comptroller" shall mean the Comptroller of Public Accounts of the State of Texas. "DTC" shall mean The Depository Trust Company, New York, New York, or any successor securities depository. "DTC Participant" shall mean brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created to hold securities to facilitate the clearance and settlement of securities transactions among DTC Participants. "Fiscal Year" shall mean the City's then designated fiscal year, which currently is the twelve-month period beginning on the first day of October of a calendar year and ending on the F? HOU:2602319.3 last day of September of the next succeeding calendar year and each such period may be designated with the number of the calendar year in which such period ends. "Interest Payment Date," when used in connection with any Certificate, shall mean March 1, 2007, and each March 1 and September 1 thereafter until maturity or earlier redemption of such Certificate. "Issuance Date" shall for by the Underwriter, mean the date on which the Certificates are delivered to and paid "Ordinance" shall mean this hereto. Ordinance and all amendments hereof and supplements "Outstanding", when used with reference to the Certificates, 0hall mean, as of a particular date, all Certificates theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Certificates canceled by or on behalf of the City at or before such date; (b) any Certificates defeased pursuant to the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable law; and (c) any Certificates in lieu of or in substitution for which a replacement Certificate shall have been delivered pursuant to this Ordinance. "Paying AgentlRegistrar" shall mean The Bank of New York Trust Company, N.A., and its successors in that capacity. "Record Date" shall mean the close of business on the fifteenth day of the calendar month immediately preceding the applicable Interest Payment Date. "Register" shall mean the registration books for the Certificates kept by the Paying Agent/Registrar in which are maintained the names and addresses of, and the principal amounts registered to, each Registered Owner of Certificates. "Registered Owner" shall mean the person or entity in whose name any Certificate is registered in the Register. "Underwriter" shall mean the entity or z.ntities specified in Section 7.1 hereof. Section 2.2: Interpretations. All terms defined herein and all pronouns used in this Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles and headings of the articles and sections of this Ordinance have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the validity of the Certificates and the validity of the levy of ad valorem taxes to pay the principal of and interest on the Certificates. 3 HOU:2602319.3 ARTICLE III TERMS OF THE CERTIFICATES Section 3.1: Amount Purpose and Authorization. (a) The Certificates shall be issued in fully registered form, without coupons, under and pursuant to the authority of the Act in the total authorized aggregate principal amount of SIX MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($6,500,000) for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the purposes described in paragraph 1.1(a) hereof. Section 3.2: Desis�nation Date and Interest Payment Dates. The Certificates shall be designated as the "City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006," and shall be dated August 15, 2006. The Certificates shall bear interest at the rates set forth in Section 3.3 below, from their date of delivery calculated on the basis of a 360-day year of twelve 30-day months, payable on March 1, 2007, and each March 1 and September 1 thereafter until maturity or earlier redemption. If interest on any Certificate is not paid on any Interest Payment Date and continues unpaid for thirty (30) days thereafter, the Paying Agent/Registrar shall establish a new record date for the payment of such interest, to be known as a Special Record Date. The Paying Agent/Registrar shall establish a Special Record Date when funds to make such interest payment are received from or on behalf of the City. Such Special Record Date shall be fifteen (15) days prior to the date fixed for payment of such past due interest, and notice of the date of payment and the Special Record Date shall be sent by United States mail, first class, postage prepaid, not later than five (5) days prior to the Special Record Date, to each affected Registered Owner as of the close of business on the day prior to mailing of such notice. Section 3.3: Numbers Denomination Interest Rates and Maturities. The Certificates shall be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates set forth in the following schedule, and may be transferred and exchanged as set out in this Ordinance. The Certificates shall mature on September 1 in each of the years and in the amounts set out in such schedule. Certificates delivered in transfer of or in exchange for other Certificates shall be numbered in order of their authentication by the Paying Agen+/Registrar, shall be in the denomination of $5,000 or integral multiples thereof and shall mature on the same date and bear interest at the same rate as the Certificate or Certificates in lieu of which they are delivered. Certificate Year of Principal Interest Number Maturity Amount Rate R4 2007 $3259000 4.000% R-2 2008 335,000 4.000 R-3 2009 3509000 4.000 R4 2010 3655000 4.000 R-5 2011 380,000 4.000 R-6 2012 395,000 4.000 11-7 2013 410,000 4.000 R-8 2014 4259000 4.000 HOU:2602319.3 R-9 2015 440,000 4.000 R-10 2016 4609000 5.000 R-11 2017 485,000 4.000 RA2 2020 1,565,000 4.050 R43 2021 5655000 4.100 Section 3.4: Redemption Prior to Maturity. (a) The Certificates maturing on and after September 1, 2017 are subject to redemption prior to maturity, at the option of the City, in whole or in part, on September 1, 2016, or any date thereafter, at par plus accrued interest to the date fixed for redemption. (b) The Certificates maturing on September 1 in the year 2020 (the "Term Certificates") are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Term Certificates Maturing September 1, 2020 Mandatory Redemption Dates September 1, 2018 September 1, MY September 1, 2020 (maturity) Principal Amounts $5009000 5209000 5451000 The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before September 1 of each year .in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed on or before January 1 of such year and which have not been made the basis for a previous reduction. (c) Certificates may be redeemed in part only in integral multiples of $5,000. If a Certif ate subject to redemption is in a denomination larger than $5,000, a portion of c»�h Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon presentation and surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of this Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. (d) Notice of any redemption, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered Owners thereof at their addresses as shown on the Register, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the redemption price of the Certificates 5 HOU:2602319.3 called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being Outstanding except for the purpose of being paid with the funds so provided for such payment. Section 3.5: Manner of Pavment, Characteristics Execution and Authentication. The Paying Agent/Registrar is hereby appointed the paying agent for the Certificates. The Certificates shall be payable, shall have the characteristics and shall be executed, sealed, registered and authenticated, all as provided and in the manner indicated in the FORM OF CERTIFICATES set forth in Article IV of this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the Certificates shall cease to be such officer before the authentication of the Certificates or before the delivery of the Certificates, such manual or facsimile signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in such office. The approving legal opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, may be printed on the back of the Certificates over the certification of the City Secretary, which may be executed in facsimile. CUSIP numbers also may be printed on the Certificates, but errors or omissions in the printing of either the opinion or the numbers shall have no effect on the validity of the Certificates. Section 3.6: Authentication. Except for the Certificates to be initially issued, which need not be authenticated by the Registrar, only such Certificates as shall bear thereon a certificate of authentication, substantially in the form provided in Article IV of this Ordinance, manually executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such duly executed certificate of authentication shall be conclusive evidence that the Certificate so authenticated was delivered by the Paying Agent/Registrar hereunder. Section 3.7: Ownership. The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment of the principal thereof and interest thereon and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the Registered Owner of any Certificate in accordance with this Section shall be valid and effective and shall discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. Section 3.8: Registration Transfer and Exchange. The Paying Agent/Registrar is hereby appointed the registrar for the Certificates. So long as any Certificate remains Outstanding, the Paying Agent/Registrar shall keep the Register at the City Administrator's office in which, subject to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of the Certificates in accordance with the terms of this Ordinance. G� HOU:2602319.3 Each Certificate shall be transferable only upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or his authorized representative in form satisfactory to the Paying Agent/Registrar. Upon due presentation of any Certificate for transfer, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such presentation, a new Certificate or Certificates, registered in the name of the transferee or transferees, in authorized denominations and of the same maturity and aggregate principal amount and bearing interest at the same rate as the Certificate or Certificates so presented and surrendered. All Certificates shall be exchangeable upon the presentation and surrender thereof at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates, maturity and interest rate and in any authorized denomination, in an aggregate principal amount equal to the unpaid principal amount of the Certificate or Certificates presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to authenticate and deliver exchange Certificates in accordance with the provisions of this Section. Each Certificate delivered by the Paying Agent/Registrar in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such Certificate is delivered. All Certificates issued in transfer or exchange shall be delivered to the Registered Owners thereof at the principal corporate trust office of the Paying Agent/Registrar or sent by United States mail, first class, postage prepaid. The City or the Paying Agent/Registrar may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of such Certificate. Any -fee or charge of the Paying Agent/Registrar for such transfer or exchange shall'be paid by the City. The Paying Agent/Registrar shall not be required to transfer or exchange any Certificate called for redemption in whole or in part during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that this restriction shall not apply to the transfer or exchange by the Registered Owner of the unredeemed portion of a Certificate called for redemption in part. Section 3.9: Book -Entry Only System The definitive Certificates shall be initially issued in the form of a separate single fully registered Certificate for each of the maturities thereof. Upon initial issuance, the ownership of each such Certificate shall be registered in the name of Cede & Co., as nominee of DTC, and except as provided in Section 3.11 hereof, all of the Outstanding Certificates shall be registered in the name of Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the Owner at the close of business on the Record Date, the word "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. HOU:2602319.3 With respect to Certificates registered in the name of Cede & Co., as nominee of DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Certificates. Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (a) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Certificates, (b) the delivery to any DTC Participant or any other person, other than a Certificateholder, as shown on the Register, of any notice with respect to the Certificates, including any notice of redemption or (c) the payment to any DTC Participant or any other person, other than a Certificateholder as shown in the Register, of any amount with respect to principal of Certificates, premium, if any, or interest on the Certificates. Except as provided in Section 3.10 of this Ordinance, the City and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Certificate is registered in the Register as the absolute owner of such Certificate for the purpose of payment of principal of, premium, if any, and interest on Certificates, for the purpose of giving notices of redemption and other matters with respect to such Certificate, for the purpose of registering transfer with respect to such Certificate, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of Certificates, premium, if any, and interest on the Certificates only to or upon the order. of the respective owners, as shown in the Register as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the City's obligations with respect to payment of principal of, premium, if any, and interest on the Certificates to the extent of the sum or sums so paid. No person other than an owner shall receive a Certificate evidencing the obligation of the City to make payments of amounts due pursuant to this Ordinance. Section 3.10: Payments and Notices to Cede & Co • Notwithstanding any other provision of this Ordinance to the contrary, as long as any Certificates are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on the Certificates, and all notices with respect to such Certificates shall be made and given, respectively, in the manner provided in the representation letter of the City to DTC. Section 3.11: Successor Securities T>eUositorv; Transfer Outside hook Entry Only S stem. In the event that the City or the Paying Agent/Registrar determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the City or the Paying Agent/Registrar shall (a) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities and Exchange Act of 1934, as amended, notify DTC of the appointment of such successor securities depository and transfer one or more separate Certificates to such successor securities depository or (b) notify DTC of the availability through DTC of Certificates and transfer one or more separate Certificates to DTC Participants having Certificates credited to their DTC accounts. In such event, the Certificates shall no longer be restricted to being registered in the Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Certificateholders transferring or exchanging Certificates shall designate, in accordance with the provisions of this Ordinance. HOU:2602319.3 Section 3.12: Replacement Certificates. Upon the presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Certificate, the Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Certificate, of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding. The City or the Paying Agent/Registrar may require the Registered Owner of such Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith and any other expenses connected therewith, including the fees and expenses of the Paying Agent/Registrar and the City. If any Certificate is lost, apparently destroyed or wrongfully taken, the City, pursuant to the applicable laws of the State of Texas and ordinances of the City, and in the absence of notice or knowledge that such Certificate has been acquired by a bona fide purchaser, shall execute, and the Paying Agent/Registrar shall authenticate and deliver, a replacement Certificate of the same maturity, interest rate and principal amount, bearing a number not contemporaneously outstanding, provided that the Registered Owner thereof shall have: (a) furnished to the City and the Paying Agent/Registrar satisfactory evidence of the ownership of and the circumstances of the loss, destruction or theft of such Certificate, (b) furnished such security or indemnity as may be required by the Paying Agent/Registrar and the City to save and hold them harmless, (c) paid all expenses and charges in connection therewith, including, but not limited to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or other governmental charge that may be imposed; and (d) met any other reasonable requirements of the City and the Paying Agent/Registrar. If, after the delivery of such replacement Certificate, a bona fide purchaser of the original Certificate in lieu of which such replacement Certificate was issued presents for payment such original Certificate, the City and the Paying Agent/Registrar shall be entitled to recover such replacement Certificate from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the City or the Paying Agent/Registrar in connection therewith. If any such mutilated, lost, apparently destroyed or wrongfully taken Certificate has become or is about to become due and payable, the City in its discretion may, instead of issuing a replacement Certificate, authorize the Paying Agent/Registrar to pay such Certificate. Each replacement Certificate delivered in accordance with this Section shall be entitled to the benefits and security of this Ordinance to the same extent as the Certificate or Certificates in lieu of which such replacement Certificate is delivered. Section 3.13: Cancellation. All Certificates paid or redeemed in accordance with this Ordinance, and all Certificates in lieu of which exchange Certificates or replacement Certificates are authenticated and delivered in accordance herewith, shall be canceled and destroyed upon the HOU:2602319.3 making of proper records regarding such payment or redemption. The Paying Agent/Registrar shall periodically furnish the City with certificates of destruction of such Certificates. ARTICLE IV FORM OF CERTIFICATES The Certificates, including the Form of Comptroller's Registration Certificate, Form of Paying Agent/Registrar Authentication Certificate, Statement of Insurance and Form of Assignment, shall be in substantially the following forms, with such omissions, insertions and variations as may be necessary or desirable, and not prohibited by this Ordinance: EI; HOU:2602319.3 UNITED STATES OF AMERICA STATE OF TEXAS CITY OF SANGER, TEXAS REGISTERED 0 DENOMINATION REGISTERED COMBINATION TAX AND REVENUE CERTIFICATE OF OBLIGATION SERIES 2006 INTEREST RATE: DATED DATE: MATURITY DATE: CUSIP: August 15, 2006 September 1, REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS THE CITY OF SANGER, TEXAS, a municipal corporation of the State of Texas (the "City"), for value received, hereby promises to pay to the Registered Owner identified above or its registered assigns, on the maturity date specified above (or on earlier redemption as herein provided), upon presentation and surrender of this Certificate at the principal corporate trust office of The Bank of New York Trust Company, Dallas, Texas, or its successor (the "Paying Agent/Registrar"), the principal amount identified above (or so much thereof as shall not have been paid or deemed to have been paid upon prior redemption) 'payable in any coin or currency of the United States of America which on the date of payment of such principal is legal tender for the payment of debts due to the United States of America, and to pay interest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twelve 30-day months, from the Dated Date identified above. Interest on this Certificate is payable on March 1, 2007, and each March 1 and September 1 thereafter until maturity or earlier redemption of this Certificate, by check sent by United States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner of record as of the close of business on the fifteenth day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFIC" ATES (the Certificates") in the aggregate principal amount of $6,500,000 issued pursuant to an ordinance adopted by the City Council of the City on August 7, 2006, as ratified and readopted on August 30, 2006 (the "Ordinance") for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights -of -way for authorized needs and purposes and for the payment of contractual obligations for professional 11 HOU:2602319.3 services, to wit (1) street improvements; (2) water, sewer and electric utility improvements, and (3) professional services rendered in connection with the above listed projects. THIS CERTIFICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates maturing on and after September 1, 2017, in whole or in part, on September 1, 2016, or any date thereafter, at par plus accrued interest to the date fixed for redemption. THE CERTIFICATES MATURING ON SEPTEMBER 1 in the year 2020 (the "Term Certificates") are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Term Certificates Maturing September 1, 2020 Mandatory Redemption Principal Dates Amounts September 1, 2018 $500 000 September 1, 2019 5209000 September 1, 2020 545 000 (maturity) The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before September, l of each year in which Term Certificates are to be mandatorily redeemed. The principals amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed on or before September l of such year and which have not been made the basis for a previous reduction. CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples of $5,000. If a Certificate su�ject to redemption is in a denomination larger than $5,000, a portion of such Certificate may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for redemption, each Certificate shall be treated as representing that number of Certificates of $5,000 denomination which is obtained by dividing the principal amount of such Certificate by $5,000. Upon surrender of any Certificate for redemption in part, the Paying Agent/Registrar, in accordance with the provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rate in an aggregate principal amount equal to the unredeemed portion of the Certificate so surrendered. NOTICE OF ANY SUCH REDEMPTION, identifying the Certificates or portions thereof to be redeemed, shall be sent by United States mail, first class, postage prepaid, to th'e Registered Owners thereof at their addresses as shown on the books of registration kept by the Paying Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the date fixed for redemption, due provision shall be made with the Paying Agent/Registrar 12 HOU26023193 for the payment of the redemption price of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such payment is made, all as provided above, the Certificates which are to be so redeemed thereby automatically shall be redeemed prior to their scheduled maturities, they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the purpose of being paid with the funds so provided for such payment. THIS CERTIFICATE IS TRANSFERABLE only upon presentation and surrender at the principal corporate trust office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, subject to the terms and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registrar for a Certificate or Certificates of the same maturity and interest rate and in the principal amount of $5,000 or any integral multiple thereof, subject to the terms and conditions of the Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee. or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by. the City. THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things regi.iircd or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the revenues to be derived from the City's water and sewer system, after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the 13 HOU:2602319.3 City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered Owners of the Certificates assent by acceptance of the Certificates. IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and this Certificate to be signed by the Mayor, countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures. (SEAL) CITY OF SANGER, TEXAS Mayor COUNTERSIGNED: City Secretary 14 HOU:2602319.3 FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE The following form of Comptroller's Registration Certificate shall be attached or affixed to each of the Certificates initially delivered: THE STATE OF TEXAS OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO. I hereby certify that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this certificate has been registered by the Comptroller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this Comptroller of Public Accounts SEAL] of the State of Texas [ FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE The following form of authentication certificate shall be printed on the face of each of the Certificates other than those initially delivered: AUTHENTICATION CERTIFICATE THE BANK OF NEW YORK TRUST COMPANY, N.A. By: Authorized Signature Date of Authentication: HOU:2602319.3 STATEMENT OF INSURANCE CIFG Assurance North America, Inc. ("CIFG NA"), New York, New York, has delivered its financial guaranty insurance policy (the "Policy") with respect to the scheduled payments of principal and interest on this Certificate as described herein below to The Bank of New York Trust Company, Dallas, Texas or its successor, as paying agent/registrar (the "Paying Agent/Registrar") for the $6,500,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006, Said Policy is on file and available for inspection at the principal office of the Paying Agent/Registrar and a copy may be obtained from CIFG NA or the Paying Agent/Registrar, FORM OF ASSIGNMENT The following form of assignment shall be printed on the back of each of the Certificates: ASSIGNMENT For value received, the undersigned hereby sells, assigns and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer such bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New 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. ARTICLE V Section 5.1: Pledae and Levy of Taxes and Revenues. (a) To provide for the payment of principal of and interest on the Certificates, there is hereby levied, within the limits prescribed by law, for the current year and each succeeding year thereafter, while the Certificates or any part of the principal thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all taxable property within the City sufficient to pay the interest on the 16 HOU:2602319.3 Certificates and to create and provide a sinking fund of not less than 2% of the principal amount of the Certificates or not less than the principal payable out of such tax, whichever is greater, with full allowance being made for tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied to the payment of principal of and interest on the Certificates by deposit to the Combination Tax and Revenue Certificates of Obligation, Series 2006 Debt Service Fund and to no other purpose. (b) The City hereby declares its purpose and intent to provide and levy a tax legally sufficient to pay the principal of and interest on the Certificates, it having been determined that the existing and available taxing authority of the City for such purpose is adequate to permit a legally sufficient tax. As long as any Certificates remain outstanding, all moneys on deposit in, or credited to, the Combination Tax and Revenue Certificates of Obligation, Series 2006 Debt Service Fund shall be secured by a pledge of security, as provided by law for cities in the State of Texas. (c) In addition, pursuant to the authority of Chapter 1502, Texas Government Code, as amended, the City also hereby pledges the revenues to be derived from the City's water and sewer system, after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payment of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. Section 5.2: Debt Service Fund. The Combination Tax and Revenue Certificates of Obligation, Series 2006 Debt Service Fund is hereby created as a special fund solely for the benefit of the Certificates. The City shall establish and maintain such fund at an official City depository and shall keep such fund separate and apart from all other funds and accounts of the City. Any amount nr deposit in the Certificates of Obligation, Series 2006 Debt Service Fund shall be maintained by the City in trust for the Registered Owners of the Certificates. Such amount, plus any other amounts deposited by the City into such fund and any and all investment earnings on amounts on deposit in such fund, shall be used only to pay the principal of, premium, if any, and interest on the Certificates. Section 5.3: Further Proceedings. After the Certificates to be initially issued have been executed, it shall be the duty of the Mayor to deliver the Certificates to be initially issued and all pertinent records and proceedings to the Attorney General for examination and approval. After the Certificates to be initially issued shall have been approved by the Attorney General, they shall be delivered to the Comptroller for registration. Upon registration of the Certificates to be initially issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's registration certificate prescribed herein to be affixed or attached to the Certificates to be initially issued, and the seal of said Comptroller shall be impressed, or placed in facsimile, thereon. 17 HOU:2602319.3 ARTICLE VI Section 6 1 Acceptance. The Bank of New York Trust Company, N.A., Dallas, Texas, is hereby appointed as the initial Paying Agent/Registrar for the Certificates pursuant to the terms and provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form attached hereto as Exhibit A, the terms and provisions of which are hereby approved, and the Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest thereto and affix the City's seal. Such initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the payment of any fees pursuant to the terns of any contract between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance. Section 6.2: Trust Funds. All money transferred to the Paying Agent/Registrar in its capacity as Paying Agent/Registrar for the Certificates under this Ordinance (except any sums representing Paying Agent/Registrar's fees) shall be held in trust for the benefit of the City, shall be the property of the City and shall be disbursed in accordance with this Ordinance. Section 6.3: Certificates Presented. Subject to the provisions of Section 6.4, all matured Certificates presented to the Paying Agent/Registrar for payment shall be paid without the necessity of further instructions from the City. Such Certificates shall be canceled as provided herein. Section 6.4: Unclaimed Funds Held b ty he Paying � ent/Re istrar. Funds held by the Paying Agent/Registrar that represent principal of and interest on the Certificates remaining unclaimed by the Registered Owner thereof after the expiration of three years from the date such funds have become due and payable (a) shall be reported and disposed of by the Paying Agent/Registrar in accordance with the provisions of Title 6 of the Texas Property Code, as amended, to the extent such provisions are applicable to such funds, or (b) io the extent such provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City. The Paying Agent/Registrar shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with this Section. Section 6.5: Paying AeentlReLristrar May Own Certificates. The Paying Agent/Registrar in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent/Registrar. Section 6.6: Successor Paving A ents/Re 'strars. The City covenants that at all times while any Certificates are Outstanding it will provide a legally qualified bank, trust company, financial institution or other agency to act as Paying Agent/Registrar for the Certificates. The City reserves the right to change the Paying Agent/Registrar for the Certificates on not less than HOU:2602319.3 sixty (60) days' written notice to the Paying Agent/Registrar, as long as any such notice is effective not less than 60 days prior to the next succeeding principal or interest payment date on the Certificates. Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar, and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail, first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar, Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have agreed to the provisions of this Ordinance. ARTICLE VII PROVISIONS CONCERNING SALE AND Section 7.1: Sale of Certificates Execution of Purchase A Bement Insurance. The Certificates are hereby sold and shall be delivered to the Underwriter for a price of $65460,226.45 (representing the par value thereof, plus a net original issue premium of $37,783.00, less an underwriter's discount of $77,556.55), in accordance with the terms of and conditions in the Purchase Agreement. The Purchase Agreement, substantially in the form attached hereto as Exhibit D, is hereby approved. The Mayor and other appropriate officials of the City are hereby authorized and directed to execute the Purchase Agreement on behalf of the City, and the Mayor and all other appropriate officials, agents and representatives of the City are hereby authorized to do any and all things necessary or desirable to satisfy the conditions set out therein and to provide for the issuance and delivery of the Certificates. It is hereby found and determined that the terms of the sale of the Certificates contained in the Purchase Agreement are the most advantageous terms reasonably obtainable by the City at this time. The City hereby acknowledges that the sale of the Certificates pursuant to the Purchase Agreement is contingent upon the issuance of a policy of municipal bond insurance from the Bond Insurer insuring the timely payment of principal of and interest on the Certificates. The terms and conditions of the Bond Insurance Policy, as set forth in Exhibit E hereto, are incorporated herein for all purposes for so long as such policy remains in effect. The purchase of such a policy and the payment of the premium therefor is hereby 5.,Pproved and the Mayor and other appropriate City officials are hereby authorized and directed to execute such documents and certificates and to do any and all things necessary or desirable to obtain such insurance and the printing on the Certificates of an appropriate legend or statement regarding such insurance, as provided by the Bond Insurer, is hereby approved. Section 7.2: Approval, Registration and Delivery. The Mayor is hereby authorized to have control and custody of the Certificates and all necessary records and proceedings pertaining thereto pending their delivery, and the Mayor and other officers and employees of the City are hereby authorized and directed to make such certifications and to execute such instruments as may be necessary to accomplish the delivery of the Certificates and to assure the investigation, examination and approval thereof by the Attorney General and the registration of the initial Certificates by the Comptroller. Upon registration of the Certificates, the Comptroller (or the Comptroller's certificates clerk or an assistant certificates clerk lawfully designated in writing to act for the Comptroller) shall manually sign the Comptroller's Registration Certificates HOU:2602319.3 prescribed herein to be attached or affixed to each Certificates initially delivered and the seal of the Comptroller shall be impressed or printed or lithographed thereon. Section 7.3: Offering Documents• Ratings, The City hereby approves the form and contents of the Official Notice of Sale, Preliminary Official Statement and the final Official Statement, dated as of the date hereof, relating to the Certificates, and any addenda, supplement or amendment thereto, and ratifies and approves the distribution of such Preliminary Official Statement and Official Statement in the offer and sale of the Certificates and in the reoffering of the Certificates by the Underwriter, with such changes therein or additions thereto as the officials executing same may deem advisable, such determination to be conclusively evidenced by their execution thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby authorized and directed to attest, the final Official Statement. It is further hereby officially found, determined and declared that the statements and representations contained in the Preliminary Official Statement and final Official Statement are true and correct in all material respects, to the best knowledge and belief of the City Council, and that, as of the date thereof, the Preliminary Official Statement was an official statement of the City with respect to the Certificates that was deemed "final" by an authorized official of the City except for the omission of no more than the information permitted by subsection (b)(1) of Rule 15c242 of the Securities and Exchange Commission. Copies of the Preliminary Official Statement and the Official Statement are attached hereto as Exhibits B and C, respectively. Further, the City Council hereby ratifies, authorizes and approves the actions of the Mayor, the City's financial advisor and other consultants in seeking a rating on the Certificates From Moody's Investors Service, Inc. and such actions are hereby ratified and confirmed. Section 7.4: Application of Proceeds of Certificates. Proceeds from the sale of the Certificates shall, promptly upon receipt by the City, be applied as follows: to (1) Accrued interest shall be deposited into the Combination Tax and Revenue Certificates of Obligation, Series 2006 Debt Service Fund created in Section 5.2 of this Ordinance; !?) A portion of the proceeds shall be applied to pay expenses arising in connection with the issuance of the Certificates; (3) The remaining proceeds shall be applied, together with other funds of the City, to provide funds to pay contractual obligations to be 3.1 of this Ordinance. incurred for the purposes set forth in Section Section 7.5: Tax Exemption The City intends that the interest on the Certificates shall be excludable from gross income of the owners thereof for federal income tax purposes pursuant to Sections 103 and 141 through 150 of the Internal Revenue Code of 1986, as amended (the "Code"), and all applicable temporary, proposed and final regulations (the "Regulations") and procedures promulgated thereunder and applicable to the Certificates. For this purpose, the City covenants that it will monitor and control the receipt, investment, expenditure and use of all gross proceeds of the Certificates (including all property the acquisition, construction or improvement of which is to be financed directly or indirectly with the proceeds of the HOU:2602319.3 Certificates) and take or omit to take such other and further actions as may be required by Sections 103 and 141 through 150 of the Code and the Regulations to cause interest on the Certificates to be and remain excludable from the gross income, as defined in Section 61 of the Code, of the owners of the Certificates for federal income tax purposes. Without limiting the generality of the foregoing, the City shall comply with each of the following covenants: (a) The City will use all of the proceeds of the Certificates to (i) provide funds to pay contractual obligations to be incurred for the purposes set forth in Section 3.1 hereof, which will be owned and operated by the City and (ii) to pay the costs of issuing the Certificates. The City will not use any portion of the proceeds of the Certificates to pay the principal of or interest or redemption premium on, any other obligation of the City or a related person. (b) The City will not directly or indirectly take any action, or omit to take any action, which action or omission would cause the Certificates to constitute "private activity bonds" within the meaning of Section 141(a) of the Code. (c) Principal of and interest on the Certificates will be paid solely from both ad valorem taxes and pledged revenues collected by the City, investment earnings on such collections, and as available, proceeds of the Certificates. (d) Based upon all facts and estimates now known or reasonably expected to be in existence on the date the Certificates are delivered, the City reasonably expects that the proceeds of the Certificates will not be used in a manner that would cause the Certificates or any portion thereof to be an "arbitrage bond" within the meaning of Section 148 of the Code. (e) At all times while the Certificates are outstanding, -the City will identify and properly account for all amounts constituting gross proceeds of the Certificates in accordance with the Regulations. The City will monitor the yield on theoinvestments of the proceeds of the Certificates and, to the extent required by the Code and the Regulations, will restrict the yield on such investments to a yield which is not materially higher than the yield on the Certificates. To the extent necessary to prevent the Certificates from constituting "arbitrage bonds," the City will make such payments as are necessary to cause the yield on all yield restricted nonpurpose investments allocable to the Certificates to be less than the yield that is materially higher than the yield on the Certificates. (fl The City will not take any action or knowingly omit to take any action that, if taken or omitted, would cause the Certificates to be treated as "federally guaranteed" obligations for purposes of Section 149(b) of the Code. (g) The City represents that not more than fifty percent (5001^) of the proceeds of the Certificates will be invested in nonpurpose investments (as defined in Section 148(1)ko)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expects that at least eighty-five percent (85%) of the spendable proceeds of the Certificates will be used to carry out the governmental purpose of the Certificates within the three-year period beginning on the date of issue of the Certificates. 21 HOU:2602319.3 (h) The City will take all necessary steps to comply with the requirement that certain amounts earned by the City on the investment of the gross proceeds of the Certificates, if any, be rebated to the federal government. Specifically, the City will (i) maintain records regarding the receipt, investment, and expenditure of the gross proceeds of the Certificates as may be required to calculate such excess arbitrage profits separately from records of amounts on deposit in the funds and accounts of the City allocable to other obligations of the City or moneys which do not represent gross proceeds of any obligations of the City and retain such records for at least six years after the day on which the last outstanding Certificate is discharged, (ii) account for all gross proceeds under a reasonable, consistently applied method of accounting, not employed as an artifice or device to avoid in whole or in part, the requirements of Section 148 of the Code, including any specified method of accounting required by applicable Regulations to be used for all or a portion of any gross proceeds, (iii) calculate, at such times as are required by applicable Regulations, the amount of excess arbitrage profits, if any, earned from the investment of the gross proceeds of the Certificates and (iv) timely pay, as required by applicable Regulations, all amounts required to be rebated to the federal government. In addition, the City will exercise reasonable diligence to assure that no errors are made in the calculations required by the preceding sentence and, if such an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter, including payment to the federal government of any delinquent amounts owed to it, interest thereon and any penalty. (i) The City will not directly or indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Certificates that might result in a reduction in the amount required to be paid to the federal government because such arrangement results in a smaller profit or a larger loss than would have resulted if such arrangement had been at arm's length and had the yield on the Certificates not been relevant to either party. (j) The City will timely file or cause to be filed with the Secretary of the Treasury of the United States the information required by Section 149(e) of the Code with respect to the Certificates on such form and in such place as the Secretary may prescribe. (k) The City will not issue or use the Certificates as part of an "abusive arbitrage device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting the foregoing, the Certificates are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (i) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, or (ii) increasing the burden on the market for tax-exempt obligations. (1) Proper officers of the City charged with the responsibility for issuing the Certificates are hereby directed to make, execute and deliver certifications as to facts, estimates or circumstances in existence as of the date of issuance of the Certificates and stating whether there are facts, estimates or circumstances that would materially change the City's expectations. On or after the date of issuance of the Certificates, the City will take such actions as are necessary and appropriate to assure the continuous accuracy of the representations contained in such certificates. 22 HOU:2602319.3 (m) The City hereby designates the Certificates as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the City represents, covenants and warrants the following: (a) that during the calendar year in which the Certificates are issued, the City (including any subordinate entities) has not designated nor will designate obligations that when aggregated with the Certificates , will result in more than $10,000,000 of "qualified tax-exempt bonds" being issued; and (b) that the City reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Certificates are issued, by the City (or any subordinate entities) will not exceed $10100090000 (n) The covenants and representations made or required by this Section are for the benefit of the Certificate holders and any subsequent Certificate holder, and may be relied upon by the Certificate holders and any subsequent Certificate holder and bond counsel to the City. In complying with the foregoing covenants, the City may rely upon an unqualified opinion issued to the City by nationally recognized bond counsel that any action by the City or reliance upon any interpretation of the Code or Regulations contained in such opinion will not cause interest on the Certificates to be includable in gross income for federal income tax purposes under existing law. Notwithstanding any other provision of this Ordinance, the City's representations and Obligations under the covenants and provisions of this Section 7.5 all survive the defeasance and discharge of the Certificates for as long as such matters are relevant to the exclusion of interest on the Certificates from the gross income of the owners for federal income tax purposes. Section 7.6: Related Matters. In order that the City shall satisfy in a timely manner all of its obligations under this Ordinance, the Mayor, the Mayor, City Secretary and all other appropriate officers, agents, representatives and employees of the. City are hereby authorized and directed to take all other actions that are reasonably necessary to provide for the issuance and delivery of the Certificates, including, without limitation, executing and delivering on behalf of the City all certificates, consents, receipts, requests, notices, and other documents as may be reasonably necessary to satisfy the City's obligations under this Ordinance and to direct the transfer and application of funds of the City consistent with the provisions of this Ordinance. ARTICLE VIII Section 8.1: Annual Reports. The City shall provide, upon request to any person or, at the option of the City, at least annually to any SID, financial information and operating data with respect to the City of the general type included in the final Official Statement authorized by Section 7.3 of this Ordinance, being the financial information and operating data described in Tables 140 of Appendix A to the Official Statement. The City shall update such information within six months after the end of each fiscal year. Any financial statements so to be provided shall be (1) prepared in accordance with the accounting principles described in Appendix D to the Official Statement and (2) audited, if the City commissions an audit of such statements and the audit is completed within the period during which they must be provided. If audited financial statements are not so provided, then the City shall provide audited financial statements for the 23 HOU:2602319.3 applicable fiscal year to each NRMSIR and any SID, when and if audited financial statements become available. If the City changes its fiscal year, it will notify each NRMSIR and any SID of the change (and of the date of the new fiscal year end) prior to the next date by which the City otherwise would be required to provide financial information and operating data pursuant to this Section. The financial information and operating data to be provided pursuant to this Section may be set forth in full in one or more documents or may be included by specific reference to any document (including an official statement or other offering document, if it is available from the MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC. Section 8.2: Material Event Notices. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the Certificates, if such event is material within the meaning of the federal securities laws: (a) Principal and interest payment delinquencies; (b) Non-payment related defaults; (c) Unscheduled draws on debt service reserves reflecting financial difficulties; (d) Unscheduled draws on credit enhancements reflecting financial difficulties; (e) Substitution of credit or liquidity providers, or their failure to perform; (f) Adverse tax opinions or events affecting the tax-exempt status of the Certificates; (g) Modifications to rights of holders of the Certificates, (h) Certificate calls, (i) Defeasances; (j) Release, substitution, or sale of property securing repayment of the Certificates; and (k) Rating changes. The City shall notify any SID and either each NRMSIR or the MSRB, in a timely manner, of any failure by the City to provide financial information or operating data in accordance with Section 8.1 of this Ordinance by the time required by such Section. Section 8.3: Limitations Disclaimers and Amendments. The City shall be obligated to observe and perform the covenants specified in this Article for so long as, but only for so long as, the City remains an "obligated person" with respect to the Certificates within the meaning of the Rule, except that the City in any event will give the notice required by Section 8.2 of any Certificate calls and defeasance that cause the City to be no longer such an "obligated person." F•L! HOU:2602319.3 The provisions of this Article are for the sole benefit of the holders and beneficial owners of the Certificates, and nothing in this Article, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The City undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the City's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Article or otherwise, except as expressly provided herein. The City does not make any representation or warranty concerning such information or its usefulness to a decision to invest in or sell Certificates at any future date. UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER OR BENEFICIAL OWNER OF ANY CERTIFICATE OR ANY OTHER PERSON, IN CONTRACT OR TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY THE CITY, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS ARTICLE, BUT EVERY RIGHT AND REMEDY OF ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC PERFORMANCE. No default by the City in observing or performing its obligations under this Article shall constitute a breach of or default under the Ordinance for purposes of any other provision of this Ordinance. Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the duties of the City under federal and state securities laws. The provisions of this Article maybe amended by the'City from time to time to adapt the changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions of this Article, as so amended, would have permitted an underwriter to purchase or sell the Certificates in the primary offering of the Certificates in compliance with the Rule, taking i:ito account any amendments or interpretations of the Rule to the date of .;ach amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount (or any greater amount required by any other provision of this Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interests of the holder and beneficial owners of the Certificates. If the City so amends the provisions of this Article, it shall include with any amended financial information or operating data next provided in accordance with Section 8.1 an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information or operating data so provided. The City may also amend or repeal the provisions of this Article if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, and the City also may amend the provisions of this Article in its discretion in any other manner or circumstance, but in either case only if and to the extent that the provisions of this sentence would not have prevented an underwriter from 25 HOU:2602319.3 lawfully purchasing or selling Certificates in the primary offering of the Certificates, giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. Section 8.4: Definitions. As used in this Article, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. "NRMSIR" means each person whom the SEC or its staff has determined to be a nationally recognized municipal securities information repository within the meaning of the Rule from time to time. "Rule" means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. "SID" means any person designated by the State of Texas or an authorized department, officer, or agency thereof as, and determined by the SEC or its staff to be, a state information depository within the meaning of the Rule from time to time. ARTICLE IX MISCELLANEOUS Section 9.1: Defeasance. Subject to Section 10.8 hereof, the City may defease the provisions of this Ordinance and discharge its obligations to the Registered Owners of any or all of the Certificates to pay the principal of and interest thereon in% any manner permitted by law, including by depositing with the Paying Agent/Registrar or with the Comptroller of Public Accounts of the State of Texas either: (a) cash in an amount equal to the principal amount of such Certificates plus interest thereon to the date of maturity or redemption; or (b) pursuant to an escrow or trust agreement, cash and/or (i) direct noncallable obligations of United States of America, including obligations that are unconditionally guaranteed by the United States of America; (ii) noncallable obligations of an agency or instrumentality of the United States, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent; or (iii) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that, on the date the governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, which, in the case of (i), (ii) or (iii), may be in book -entry form, and the principal of and interest on which will, when due or redeemable at the option of the holder, without further investment or reinvestment of either the principal amount thereof or the IITI HOU:2602319.3 interest earnings thereon, provide money in an amount which, together with other moneys, if any, held in such escrow at the same time and available for such purpose, shall be sufficient to provide for the timely payment of the principal of and interest thereon to the date of maturity or earlier redemption; provided, however, that if any of the Certificates are to be redeemed prior to their respective dates of maturity, provision shall have been made for giving notice of redemption as provided in this Ordinance. Upon such deposit, such Certificates shall no longer be regarded to be Outstanding or unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to the City. Section 9.2: Ordinance aContract -Amendments. This Ordinance shall constitute a contract with the Registered Owners from time to time, be binding on the City, and shall not be amended or repealed by the City so long as any Certificate remains Outstanding except as permitted in this Section. The City may, without the consent of or notice to any Registered Owners, from time to time and at any time, amend this Ordinance in any manner not detrimental to the interests of the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or omission herein. In addition, the City may, with the consent of Registered Owners who own in the aggregate 51 % of the principal amount of the Certificates then Outstanding, amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the consent of all Registered Owners of Outstanding Certificates, no such amendment, addition, or rescission shall (1) extend the time or times of payment of the principal of and interest on the Certificates, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of payment of the principal of or interest on the Certificates, (ii) give any preference to any Certificate over any other Certificate, or (iii) reduce the aggregate principal amount of Certificates required to be held by Registered Owners for consent to any such amendment, addition, or rescission. Section 9.3: Legal Holidays. In any case where the date interest accrues and becomes payable on the Certificates or principal of the Certificates matures or the date fixed for redemption of any Certificates or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close, then payment of interest or principal »ced not be made on such date, or the Record Date shall not occur on such date, but payment may be made or the Record Date shall occur on the next succeeding day which is not in the City a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to close with the same force and effect as if (i) made on the date of maturity or the date fixed for redemption and no interest shall accrue for the period from the date of maturity or redemption to the date of actual payment or (ii) the Record Date had occurred on the fifteenth Jay of that calendar month. Section 9.4: No Recourse Against Citv Officials. No recourse shall be had for the payment of principal of or interest on any Certificates or for any claim based thereon or on this Ordinance against any official of the City or any person executing any Certificates. Section 9.5: Further Proceedings, The Mayor, Mayor Pro-Tem, City Secretary and other appropriate officials of the City are hereby authorized and directed to do any and all things necessary and/or convenient to carry out the terms of this Ordinance. 27 HOU:2602319.3 Section 9.6: Severability. If any Section, paragraph, clause or provision of this Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such Section, paragraph, clause or provision shall not affect any of the remaining provisions of this Ordinance. Section 9.7: Open Meetine. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 9.8: Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 9.9: Emergency. It is hereby officially found and determined that this Ordinance relates to an immediate public emergency affecting life, health, property and the public peace, and that such emergency exists, the specific emergency being that the proceeds from the sale of the Certificates are required as soon as possible for necessary and urgently needed improvements, and that this Ordinance be passed and approved on the date of its introduction, Section 9.10: Effective Date. This Ordinance shall be in force and effect from and after its passage on the date shown below. HOU:2602319.3 PASSED AND APPROVED on first reading this August 7, 20060 CITY OF SANGER, TEXAS ATTEST City Secretary, � ,�',;;a (SEAL) • • ��� �. Jfil i 1 tiili`�t Exhibit A -Paying Agent/Registrar Agreement Exhibit B - Preliminary Official Statement Exhibit C - Official Statement Exhibit D - Purchase Agreement Exhibit E — Insurance Provisions S-1 HOU:2602319.1 EXHIBIT A PAYING AGENT/REGISTRAR AGREEMENT See Tab No. 1 HOU:2602319.3 EXHIBIT B PRELIMINARY OFFICIAL STATEMENT See Tab No. HOU:2602319.3 EXHIBIT C OFFICIAL STATEMENT See Tab No. HOU:26023193 EXHIBIT D PURCHASE AGREEMENT See Tab No. w HOU:2602319.3 EXHIBIT E INSURANCE PROVISIONS HOU:2602319.3 CQ I CIFG IXIS FINANCIAL GUARANTY COMMITMENT TO ISSUE. FINANCIAL GUARANTY INSURANCE POLICY Execution Version Re: $7,000,000 CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 Due no later than September 1, 2021 August 7, 2006 Mr. Jack Smith, City Manager City of Sanger 201 Bolivar Street _ P.O. Box 1729 Sanger, Texas 76266 E-mail: lack smithna,airmail net Dear Mr. Smith: This letter constitutes a commitment (the "Commitment"}.ly CIFG Assurance North America, Inc. ("CIFG NA" or the "Insurer") to issue a financial guaranty insurance policy (the "Policy") in the form attached hereto as Schedule 6, in connection with the above -captioned obligations .(the "Bonds'), subject to the terms and conditions set forth herein. Capitalized terms used and not defined herein shall have the respective meanings given to them in the financing documents related to the Bonds. The issuance of the Policy shall be subject to the prior satisfaction of the following ternis and conditions: 1. Payment of Premium. Payment by or on behalf of the above -captioned Issuer (the "Issuer") on the date of delivery of and payment for the Bonds, of a non-refundable premium in an amount equal to 0.75% of the total principal and interest due on the Bonds. The premium set out in this paragraph shall be the total premium required to be paid on the Policy issued pursuant to this Commitment. The amount of said premium shall be confirmed by CIFG NA and shall be payable to CIFG NA by electronic funds transfer, according to the instructions enclosed herein as Schedule 1. 2. Guaranty; Bonds to be Insured. The Policy will guarantee the timely payment of scheduled principal and interest on the Bonds. The total insured principal amount of the Bands shall not exceed $7,000,000, with no maturity occurring later than September 1, 2021. CIFG Assurance North America, Inc. 825 Third Avenue. 6th Floor New York, NY 10022 Tel. (212) 909-3939 Fax (212) 909-3958 wwwocifg.com GROI/PE GAISSE D'EPARGNE 3. Ratin>?s. The Bonds do not have to be rated prior to the issuance of the Policy. At the option of the Issuer, the Bonds may be rated by Moody's Investors Service, Standard & Poor's Ratings Services and/or Fitch Ratings prior to the issuance of the Policy, and if so, must be rated at least Baal, BBB+ and BBB+, respectively. The Issuer must pay all fees and charges assessed by the respective rating agencies for ratings with respect to the Bonds promptly upon presentation of an invoice therefor (whether prior or subsequent to the issuance of the Bonds). 4. Form of Financin¢ Documents and Other Leeal Documentation. CIFG NA shall have approved the form and content of any disclosure document (but as to any disclosure document only as it relates to CIFG NA and the Policy) and all financing documents related to the Bonds (including, by way of example and without limitation, the Bonds, all )rdinances, trust indentures .or agreements and any insurance agreement, loan agreements, leases, purchase and sale agreements, mortgages, deeds of trust, security agreements, assignments and any supplements thereto) and the various legal opinions delivered in connection with the issuance and sale of the Bonds. 5. No Event Tmnairin� Sale of Bonds. No event shall have occurred which would permit any underwriter or any other purchaser of the Bonds,. otherwise required, to elect not to purchase the Bonds at closing. 6. No Material Adverse Change in Principal Leaal Documents, Principal Parties or Security for Bonds. There shall have been no material adverse change in or affecting the Bonds or the security therefor, the Issuer, the obligor (the "Obligor") with respect to the Bonds (if applicable), the financing documents, the project.(the "Project") to be financed with the proceeds of the Bonds (if applicable), the manager (the "Manager") of the Project (if applicable), the official statement (or any similar disclosurq documents), including the financial statements included therein, or any legal opinions to be executed and delivered in connection with the issuance and safe of the Bonds. 7. No Material Adverse Change in Information Submissions. There shall have been no,material adverse change in any information submitted to CIFG NA with regard to the Bonds, the Issuer, th-t Obligor (if applicable), the financing documents, the Project (if applicable) or the Manager (if applicable): 8. CIFG NA Statement to Annear on Bonds. A Statement of Insurance, in the form set forth in Schedule 2, shall be printed on the Bonds or attached to the Bonds. The Bonds shall contain no reference to the Policy or to CIFG NA other than as shall have been expressly approved by CIFG NA in writing. The final form of Bond shall have been submitted to CIFG NA as soon as possible, but not Iater than one (1) business day prior to closing for approval. 9. Incorporation of Schedules. CIFG NA shall receive the documents and information contained in Schedule 3 as soon as possible, but not later than one (1) business day prior to closing. The financing documents shall include the General Document Provisions contained in Schedule 4, and any other additional provisions requested by CIFG NA orally or in IXIS FINANCIAL GUARANTY 825 Third Avenue, 6' Floors- New York, NY 10022 writing. The preliminary official statement and the official statement shall contain the language attached hereto as Schedule 5 and only such other references to CIFG NA as CIFG NA shall approve. 10. No Untrue Statements or Omissions in Documents. CIFG NA shall receive an opinion of counsel or a certificate of an officer of the Issuer stating that each of the preliminary official statement and the final official statement (or other offering document with respect to the Bonds), and all information and documents submitted to CIFG NA with regard to the Bonds, the Issuer, the Obligor (if applicable), the financing documents, the Project (if applicable) or the Manager (if applicable), do not contain any untrue or misleading statement of a material fact or fail to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading. 11. Oainion of Bond Counsel. CIFG NA shall receive the unqualified approving opinion of bond counsel rendered by a law firm, and in form and substance, acceptable to CIFG NA. The form of bond counsel's opinion shall indicate, if applicable, that the Bonds are exempt from federal income taxation, that the Issuer must comply with certain covenants under the tax law and that the Issuer has the legal power to comply with such covenants. In addition, such opinion shall opine as to the validity and enforceability of the . Bonds and the basic financing documents and that the bond resolution creates the valid lien that it purports to create in the trust estate. Such opinion of bond counsel shall be addressed to CIFG NA or a letter shall be provided to CIFG NA to the effect that CIFG NA may rely on such opinion as if it were addressed to CIFG.NA. 12. Confirmation of Counsel. CIFG NA shall receive confirmation from bond counsel or another counsel acceptable to CIFG NA to the effect that the financing documents, the official statement and the various legal opinions executed and delivered in connection with the issuance and sale of the Bonds are substantially in the forms theretofore submitted to CIFG NA for review, with only such amendments, modifications or deletions as approved by CIFG NA and stating that all requirements contained in Exhibit A to this Commitment have been met and that the provisions contained in Schedule 4 to this Commitment have been incorporated into the appropriate documents. 13. Offering Documents: Closing Transcript. CIFG NA shall be provided with five (5) copies of each of the preliminary official statement and final official statement (or other offering document with respect to the Bonds) as soon as they are printed and available (and in all events prior to Bond pricing and closing, respectively). On the day of closing, as a condition of delivery of the Policy, originals of the primary financing documents and legal opinions shall be immediately delivered by hand or sent via overnight mail for delivery not later than the day after closing. Within fifteen (15) days after the closing for the Bonds, CIFG NA shall be provided with two (2) complete sets of the executed documents (one (1) original and one (1) copy). CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue,6'" Floor - New York, NY 10022 14. Governing Law, Counterparts, Etc. This letter shall be governed by and construed in accordance with the laws of the State of New York, United States of America. This letter may be executed in separate counterparts and such counterparts shall, when taken together, constitute one and the same agreement. Delivery of an executed counterpart of this letter by telecopier or electronic mail shall be effective as delivery of a manually executed counterpart of this letter. Issuer hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this letter or the transactions contemplated hereby, including, without limitation, the negotiation, performance or enforcement hereof. 15. Expiration. Unless CIFG.NA shall have received a copy of the signature page of this Commitment fully executed by the Issuer, this offer to insure shall expire seven (7) days from the date hereof. Upon execution by all parties to this Commitment, this Commitment shall be in effect until sixty (60) _days from the date hereof. 16. Acceptance. By executing this Commitment, the Issuer agrees to use CIFG NA financial guaranty insurance in connection with the sale of the Bonds. AGREED AND ACCEPTED: CITY OF BANGER, TEXAS By: Name: Title: CIFG ASSURANCE By: Name Title: AMERICA, INC. Robert M. Drillings . Managing Director &Vice President IXIS FINANCIAL GUARANTY 2i5 third Avenue,6'" FI o�- New York,�NY 10022 Exhibit A CONDITIONS TO FINANCIAL GUARANTY INSURANCE COMMITMENT NOTE THAT THESE ITEMS ARE SUB.IECT IN ALL RESPECTS TO MODIFICATION AND SUPPLEMENT BASED ON REVIEW OF ALL FINANCING DOCUMENTS AND OTHER MATERIALS BY CIFG NA AND ITS COUNSEL. 1. Approval of Financing Documents. This Commitment is subject to receipt and review by CIFG NA and its counsel of all financing documents related to the Bonds (including, without limitation, all bond indentures or trust agreements, loan agreements, leases, installment purchase and sale agreements, master trust indentures,. mortgages, deeds of trust, security agreements, assignments and all supplements thereto). All such financing documents must be in form and substance satisfactory to CIFG NA in its sole and absolute discretion. IXIS FINANCIAL GUARANTY 215Th1ArdAvenue,6'"F orb-New�York,NY 10022 Schedule 1 iNSTR UCTIONS FOR ELECTRONIC TRANSFER OF FUNDS TO CIFG ASSURANCE NORTH AMERICA, INC. FEDERAL FUNDS TRANSFER (CASH WIRES) .TPMorgan Chase Bank ABA# 0210-0002-1 For the account of Brown Brothers Harriman & Co. Account # 9204-033231 For further credit to Account #.2311694 CIFG Assurance North America (Premium Account) CIFG NA Policy Number: CIFG NA-1134 Advise CIFG NA CIosing Coordinator, Ms. Yahayra Reyes, at (212) 909-0436 immediately upon transmission of wire. Please indicate the _Policy Number, the name and address of the sending bank and the complete Federal Reserve Reference No. on the wire. NOTE: If the Trustee or Paying Agent uses an account in connection with the Bonds at Morgan Chase Bank, please make reference to the Trustee's account number on the*Closing Memorandum. IXIS FINANCIAL GUARANT7 8215GhAdsAvenue,6'"Fl orb --New York, NY 10022 Schedule 2 STATEMENT OF INSURANCE (for printing on or attachment to the Bonds) CIFG Assurance North America, Inc. ("CIFG NA"), New York, New York, has delivered its financial guaranty insurance policy (the "Policy") with respect to the scheduled payments. of principal of and interest on this Bond as described herembelow to The Bank of New York Trust Company, Dallas, Texas or, its successor, as paying agent/bond registrar (the. "Paying Agent/Registrar") for the [$ 1.City of Sanger, Texas (Denton County), Combination Tax and Revenue Certificates of Obligation, Series 2006. Said Policy is on file and available for inspection at the principal office of the Paying Agent/Registrar and a copy thereof may be obtained from CIFG NA or the Paying Agent/Registrar. IXIS FINANCIAL GUARANTY CIFG Assurance North America, Inc. 825 Third Avenue, 6'" floor -New York, NY 10022 Schedule 3 DOCUMENTS AND INFORMATION TO BE SUPPLIED TO CIFG NA BY THE ISSUER AND ISSUER'S COUNSEL IN FINAL FORM NOT LESS THAN FIVE (5) BUSINESS DAYS . PRIOR TO CLOSING A. Trust indenture and any other financing documents affecting the issuance of or security for the Bonds, including all applicable Bond resolutions and ordinances (if any). B. The following opinions addressed to CIFG NA from counsel, in form and content, acceptable to CIFG NA: 1. Approving opinion of bond counsel. 2. Counsel to the Issuer (if applicable). 3. Counsel to the Obligor and any guarantor (if applicable). C. Description of all pending Iitigation, current ERISA matters, if any, and any material change in the Issuer's financial position from and after the date of the financial statements provided to CIFG NA, D: Other and further documents, including such additional opinions, supporting certificates, reliance letters and other documents and items for each of the parties involved in the financing, which are customarily required in connection with bond issues of the type proposed by the Issuer. E. In the event that the Bonds are issued in connection with an advance refunding, CIFG NA shall receive and approve the following: 1. Escrow agreement. 2. Opinions regarding the validit;% aLd enforceability of escrow agreement. 3. CPA verification. 4. Defeasance opinion. IXIS FINANCIAL GUARANTY CIFG Assurance North America, Inc. 825 Third Avenue, 6`" Fioor -New York, NY 10022 G� Schedule 4 GENERAL DOCUMENT PROVISIONS must provide that: The financing documents 1. Any notice that is required to be given to the holders of the Bonds (collectively, the `Bondholders"), nationally recognized municipal securities information repositories or state information depositories pursuant to Rule .1 5c2- 1 2(b)(5) adopted by the Securities and Exchange Commission or.to the Trustee or, if applicable, the Paying Agent pursuant to the financing documents shall also be provided to CIFG NA. All notices required to be given to CIFG NA shall be in writing and shall be sent by: registered or certified mail addressed to CIFG Assurance North America, Inc., 825 Third Avenue, 6`h Floor, New York, New York.10022, Attn: General Counsel; all electronic mail sent to CIFG NA shall be addressed both to surveillancena cifg.com and to general.counseome 2. Within one hundred eighty (180} days of the end of the Issuer's fiscal year, a copy of the audited financial statements of the Issuer and copy of the annual. budget of the Issuer shall be sent to CIFG Assurance North America, Inc., 825 Third Avenue, 6 h Floor, New York, New York 10022, Attn: Surveillance, 3. CIFG NA shall have the right to receive such additional information as it may reasonably request. 4. The Issuer will permit CIFG NA to discuss the affairs, finances and accounts of the Issuer or any information CIFG NA may reasonably request regarding the security for the Bonds with appropriate officers of the Issuer, and will grant CIFG NA access to the facilities, books and records of the Issuer on any business day upon reasonable prior notice. 5. CIFG NA shall have the right, if CIFG NA has a reasonable basis to believe that the financial position of the Issuer has materially deteriorated or financial irregularities have occurred since the date of the date of the most recently provided annual audit or quarterly report, or that such audit or report fails to accurately set forth the financial position of the Issuer; to direct Issuer to cause to be prepared a financial report at the Issuer's expense in form and content acceptable to CIFG NA and the Issuer shall comply with such direction within thirty (30) days after written notice of the direction from CIFG NA; provided, however, that if compliance cannot occur within such period, then such period will be extended with the prior consent of CIFG NA so long as compliance is begun within such period and diligently pursued. IX}S FINANCIAL GUARANTY 8215GhirdAvenue,6"'FI o�-NewGYork,NY 10022 B. Defeasance. The financing documents must provide that in the event that the principal and/or interest due on the Bonds shall be paid by CIFG NA pursuant to the Policy, the Bonds shall remain outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Issuer, and the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Issuer to the registered owners shall continue to exist and shall run to the benefit of CIFG NA, and CIFG NA shall be subrogated to the rights of such registered owners including, without limitation, any rights that such owners may have in respect of securities law violations arising from the offer and sale of the Bonds. In addition, the defeasance section of the financing documents will require the ifems from Schedule 3, Item E and the following additional items: 1. Opinion that refunding and defeasance will not adversely impact the exclusion from gross income for federal income tax purposes of interest on the .Bonds or refunded bonds. 2. Intentionally omitted. 3. The escrow agreement shall provide that: (a) Any substitution of securities shall require a CPA verification and the prior written consent .of CIFG NA. (b).The Issuer will not exercise any optional,redempbion of Bonds secured by the escrow agreement or any other redemption other than mandatory sinking fund redemptions unless (1) the right to make any such redemption has been expressly reserved in the escrow agreement and such reservation has been disclosed in detail in the official statement for the refunding bonds, and (ii) as a condition of any such redemption there shall be provided to CIFG NA a CPA verification as to t'.t sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following such redemption. (c) The Issuer shall not amend the escrow agreement or enter into a forward purchase agreement or other agreement with respect to rights in the escrow without the prior written consent of CIFG NA, In addition, the defeasance section of the indenture for all Bonds shall require all of the documents and requirements set forth in this item B as a condition of future defeasance of the Bonds. 2 ' CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue, 6`� Floor -New York, NY 10022 C. Trustee and Pang Agent. The financing documents must include the following provisions: 1. CIFG NA shall receive prior written notice of any name change of the trustee (the "Trustee") or, if applicable, the paying agent (the "Paying Agent") for the Bonds or the resignation or removal of the Trustee or, if applicable, the Paying Agent. 2. No removal, resignation or termination of the Trustee or, if applicable, the Paying Agent shall take effect until a successor, acceptable to CIFG NA, shall be appointed. I . D. Amendments and Supplements. With respect to amendments or supplements to the financing documents which do not require the consent of the Bondholders, CIFG NA must be given notice of any such amendments or supplements. With respect to amendments or supplements to the financing documents which require the consent of the Bondholders, CIFG NA's prior written consent is required. All financing documents must contain a provision that requires copies of any Amendments or supplements to such documents which are consented to by CIFG NA shall be sent to the rating agencies which have assigned a rating to the Bonds. Notwithstanding any other provision of the financing documents, in determining whether. the rights of Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of any financing document, the Trustee or, if applicable, the Paying Agent shall consider the effect on the Bondholders as if there were no Policy. E. CIFG NA As Third Party Beneficiary, To the extent that the financing documents confer upon or give or grant to CIFG NA any right, remedy or claim under or by reason of the financing documents, the financing documents must contain a provision which states that CIFG NA is explicitly recognized as- being a third party beneficiary thereunder and may enforce any such right, remedy or claim conferred, given or granted thereunder. F. Consent Itiehts of CIFG NA. The financing documents shall include the following consent provisions: 1. Consent o, CIFGNA, Any provision of a financing document expressly recognizing or granting rights in or to CIFG NA may not be amended in any manner which affects the rights of CIFG NA thereunder without the prior written consent of CIFG NA. 2. Consent of CIFG NA in Addition to Bondholder Consent. Wherever any financing document requires the consent of Bondholders, CIFG NA's consent shall also be required. IXIS FINANCIAL GUARANTY 8215 Th�sAvenue.6�' FloorA-- New York, NY 10022 3. Consent of CIFG NA in the Event of Insolvency. Any reorganization or liquidation plan with respect to the Issuer must be acceptable to CIFG NA. In the event of any reorganization or liquidation, CIFG NA shall have the right to vote on behalf of all Bondholders absent a default by CIFG NA under the Policy. 4. Consent of CIFG NA Upon Default. Anything in a financing document to the contrary notwithstanding, upon the occurrence and continuance of an event of default as defined therein, CIFG NA shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders or the Trustee for the benefit of the Bondholders under any financing document. G. Pavment Procedure Under the Policy. The financing documents shall include the following provisions. l . In the event that on the second (2"d) business day prior to the payment date on the Bonds, the Paying Agent or Trustee has not received sufficient moneys to pay all principal of and interest on the Bonds due on the second (21d) following business day, the Paying Agent or Trustee shall immediately notify CIFG NA or its designee on the same business day by telephone or electronic mail, confirmed in writing by registered or certified mail, of the amount of the deficiency. 2. If any deficiency is made up in whole or in part prior to or on the payment date, the Paying Agent or Trustee shall so notify CIFG NA or its designee. 3. In addition, if the Paying Agent or Trustee hasp notice that any Bondholder has been required to disgorge payments of principal or interest on the Bonds pursuant to a final non -appealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Paying Agent or Trustee shall notify CIFG NA or its designee of such fact by telephone or electronic ,nail, confirmed in writing by registered or certified mail. 4. The Paying Agent or Trustee shall irrevocably be designated, appointed, directed and authorized to act as attorney -in -fact for hoiders of the Bonds as follows: (a) If there is a deficiency in amounts required to pay interest on the Bonds, the Paying Agent or Trustee shall (i) execute and deliver to CIFG NA, in form satisfactory to CIFG NA, an instrument appointing CIFG NA as agent for such holders in any legal proceeding related to the payment of and an assignment to CIFG NA of the claims for interest on the Bonds, (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from CIFG NA with respect to the claims IXIS FINANCIAL GUARANTY 82�5 Third Avenue, 6'" F oor1- News York, NY 10022 for interest so assigned, and (iii) disburse the same to such respective holders; and % (b) If there is a deficiency in amounts required to pay principal of the Bonds, the Paying Agent or Trustee shall (i) execute and deliver to CIFG NA, in form satisfactory to CIFG NA, an instrument appointing CIFG NA as agent for such holder in any legal proceeding related to the payment of such principal and an assignment to CIFG NA of the Bond surrendered to CIFG NA (but such assignment shall be delivered only if payment from CIFG NA is received), (ii) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefor from CIFG NA, and (iii) disburse the same to such holders. 5. Payments with respect to claims for interest on and principal of Bonds disbursed by the Paying Agent or Trustee from proceeds of the Policy shall not be considered to discharge the obligation of the Issuer with respect to such Bonds, and CIFG.NA shall become the owner of such unpaid Bond and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of this subsection or otherwise: 6. Irrespective of whether any such assignment is executed and delivered, the Issuer and the Paying Agent or Trustee shall agree for -the benefit of CIFG NA that: (a) They recognize that to the extent CIFG NA makes payments duectly or indirectly (e.g., by paying through the Paying Agent), on account of principal of or interest on the Bonds, CIFG NA will be subrogated to the rights of such holders to receive the amount of such principal and interest from the Issuer, with interest thereon as provided and solely from the sources stated in the financing documents and the Bonds$ and (b) They will accordingly pay to CIFG NA the amount of such principal and interest, with interest thereon as pided in the financing documents and the Bonds, but only from the sources and in the manner provided herein for the payment of principal of and interest on the Bonds to holders, and will otherwise treat CIFG NA as the owner of such rights to the amount of such principal and interest. The Issuer shall agree to pay or reimburse CIFG NA any and all charges, fees, costs and expenses which CIFG NA may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, in connection with (i) any accounts established to facilitate payments under the Policy, (ii) the administration, enforcement, defense or preservation of any rights in respect of the trust agreement or any other financing document including defending, IXIS FINANCIAL GUARANTY 215Ghh'd�Avenue,6'"FI orAmNew�York,NY 10022 monitoring or participating in any litigation or proceeding (including any bankruptcy proceeding in respect of the Issuer or any affiliate thereof) relating to this agreement or any other financing document, any party to this agreement or any other financing document or the transaction contemplated by the financing documents (the "Transaction"), (iii) the foreclosure against, sale or other disposition of any collateral securing any obligations under this agreement or any other financing document, or the pursuit of any remedies under the trust agreement or any other financing document, to the extent such costs and expenses are not recovered from such foreclosure, sale or other disposition, or (iv) any amendment, waiver or other action with respect to, or related to, this agreement or any other financing document whether or not executed or completed; costs and expenses shall include a reasonable allocation of compensation and overhead attributable to the time of employees of CIFG NA spent in connection with the actions described in clauses (ii) - (iv) above, and CIFG NA shall reserve the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of this agreement or any other financing document. 8. In addition to any and all rights. of zeimbursement, subrogation and any other rights pursuant hereto or under law or inequity, the Issuer shall agree to pay or reimburse CIFG NA any and all charges, fees, costs, claims, losses, liabilities (including penalties), judgments, demands, damages, and expenses which CIFG NA or its officers, directors, shareholders, employees, agents and each Person, if any, who controls CIFG NA within the meaning of either Section 15 of the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934 may reasonably pay or incur, including, but not limited to, fees and expenses of attorneys, accountants, consultants and auditors and reasonable costs of investigations, of any nature in connection with, in respect of or relating to the transactions contemplated by this agreement or any other financing document by reason of. (a) any omission or action (other than of or by CIFG NA) in connection with the offering, issuance gale, remarketing or delivery of the Bonds; (b) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft committed by any director, officer, employee or agent of the Issuer in connection with any transaction arising from or relating to this agreement or any other financing document, (c) the violation by the Issuer of any law, rule or regulation, or any judgment, order or decree applicable to it; (d) the breach by the Issuer of any representation, warranty or covenant under this .agreement or any other financing document or the occurrence, in - respect of the Issuer, under this agreement or any other financing 0 CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue, 6'^ Fioor -New York, NY 10022 document of any "event of default" or any event which, with the giving of notice or lapse of time or both, would constitute any "event of default"; or (e) any untrue statement or alleged untrue statement of a material fact contained in any official statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such claims arise out of or are based upon any untrue statement or omission in information included in an official statement and furnished by CIFG NA in writing expressly for use therein. 9. CIFG NA shall be entitled to pay any amount payable under the Policy in respect of Regular Payments (as defined in the Policy) on the Bonds, including any amount payable upon its. election on the Bonds on an accelerated basis, whether or not any notice and certificate shall have been Received (as defined in the Policy) by CIFG NA as provided in the Policy. CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue.6w Floor - New York, NY 10022 Schedule 5 CIFG ASSURANCE NORTH AMERICA, INC. OFFICIAL STATEMENT DISCLOSURE (to be printed in Official Statement) t1i1 : • .11 �. �r CIFG Assurance North America, Inc. The information set forth in the following paragraphs has been provided by CIFG Assurance North America, Inc. ("CIFG" or the "Insurer") for inclusion in this Official Statement. CIFG does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or, omitted herefrom, other than withrespect to the accuracy of the information regarding CIFG -set forth under the heading "The Bond Insurer". CIFG makes no representation regarding the Bonds or the advisability of investing in the Bonds: General CIFG is a monoline financial guaranty insurance company incorporated. under the laws of the State of New York. The address of the principal executive offices of the Insurer is 825 Third Avenue, Sixth Floor, New York, New York 10022, its toll -free telephone number is (866) CIFG=212 and its general telephone number is (212) 909-3939 and its website is located at www.cifg.com, The Insurer is a member of the CIFG Group of financial guaranty companies, which also includes CIFG Europe, a French insurance company Iicensed t . do business in the European Union, and CIFG Guaranty, a dedicated French reinsurance corporation. In addition to its capital and surplus as set forth below, the Insurer is supported by a net worth maintenance agreement from CIFG Guaranty, which provides that CIFG Guaranty will maintain the Insurer's New York statutory capital and surplus at no less .than $80 million, and may cede a substantial portion (not to exceed 90%) of its exposure on each transaction to CIFG Guaranty through a facultative reinsurance agreement. Each of the Insurer, CIFG Europe and CIFG Guaranty has received an insurer financial strength rating of "AAA"from Fitch, an insurer financial strength rating of "Aaa" from Moody's, and an insurer fins��icial enhancement rating of "AAA" from Standard and Poor's, the highest rating assigned by earb rating agency. Each such rating should be evaluated independently. The ratings reflect the respective rating agency's current assessment of each company's capacity to pay claims on a timely basis and are not recommendations to buy, sell or hold the Bonds. Such ratings may be subject to revision or withdrawal at any time. The Insurer is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York, its state of domicile, and is licensed to do business in 46 jurisdictions. The Insurer is subject to Article 69 of the New York Insurance Law which, among other things, limits the business of such insurers to financial guaranty insurance and related lines, requires that such insurers maintain a minimum surplus to policyholders, establishes contingency, loss and unearned premium reserve requirements for such insurers, and limits the size of individual transactions and the volume of transactions that may be underwritten by such insurers. Other provisions of the New York Insurance Law applicable to non -life insurance companies such as the Insurer regulate, among other things, permitted investments, payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liabilities for borrowings. Capitalization. The following tables set forth the capitalization of the Insurer on the basis of accounting principles generally accepted in the United States ("US GAAP") and statutory accounting practices prescribed or permitted by the New York State Insurance Department, respectively. Total Assets ......................................... Total Liabilities. 066091 we Shareholder's Equity ........................... ....................................... ...................................... Meseta AdmittedAssets....................................................................................... Liabilities.........:.....mamma ...... ale ........:........ ova ............:.. memo ...... memo ................... Capitaland Surplus....................................................................:............. US GAAP December 31, 2005 (in thousands of US dollars) $ 324,134 $ 2020042 $ 122r092 Statutory Accounting Practices December 31, 2005 (in thousands of i1.0 dnnarcl $ 175,333 $ m,758 $ 108,575 The following table sets forth the capitalization of CIFG Guaranty on the basis of US GAAP. Assets ........:......... Liabiiities........:......................................:............................too ..... woo .... Shareholder's Equity .................................................................meet US GAAP December 3112005 (in thousands (in thousands of euros) of US dollars) (1) E 736,208 $ 871,634 E 196,794 $ 232,995 E 5391414 $ 638,639 (1) The translation of euros into dollars is presented solely for the convenience of the reader, using the observed exchange rate at December 31, 2005 of $1.18395 to E1.00. The convenience translation should not be construed as representation that the euro amounts have been, could have been, or in the future could be, converted into U.S. Dollars at this or any rate of exchange. For further information concerning the Insurer and CIFG Guaranty, see the audited financial statements of both companies, including the respective notes thereto, rrepared in accordance with US GAAP as of December 31, 2005 and 2004 and for each of the three years in the period ended December 317 2005, and the unaudited int Aim financial statements of the Insurer as of March 31, 2006 and for the three-month period ended March 31, 2006, which are available on the CIFG Group's website at www.cif .com. Copies of the most recent audited annual and unaudited interim financial statements of the Insurer prepared in accordance with accounting principles prescribed or permitted by the New York State Insurance Department, are also available on the website and may be obtained, without charge, upon request to the Insurer at its address above, Attention: Finance Department. Schedule 6 SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY ' CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue,6'" Floor •New York.NY 10022 tX15 FINANCIAL GUARANTY CIFG Assurance North America, i'nC. 825 Third Avenue, Sixth Floor New York, NY 10022 For information, contact (212) 909-3939 Toll -free (866) 2434212 FINANCIAL GUARANTY INSURANCE POLICY ISSUER: CUSIP: OBLIGATIONS: CIFG ASSURANCE NORTH AMERICA, INC. ("C1FG NA'7; fo IRREVOCABLY GUARANTEES to each Policyholder, subject only to endorsement hereto), the full and complete payment by or on behalf of th Obligations, ,For the further protection of each Policyholder, CIFG NA (1) payment of any amount required to be paid under this assignment as described in Endorsement No. 1 hereto and .! (2) payment of the amount of any distribution of Policyholder that is subsequently avoided in whole or,�7' 1 hereto. .� CIFG NA shall be subrogated to the rights o ch Policyholder CIFG NA hereunder. Upon disbursement' resp an Obligation, any, and all rights to payment of i 10mvew0f o tkW thereon. Policy No.: o; gations made during the Tum of this Policy to such applicable law, all az described in Endorsement No. 'payments under the Obligations to the extent of any payment by shall biome {he owner of the Obligation, appurtenant coupon, if The following terms shall the mea �gs sped ,subject to and including any modifications set forth in any endorsement hereto, for all purposes of this oh ffec 'w�te,"' ssuer" and "Obligations" mean, respectively, the EftecGve Date, Issuer and Obligations referenced above. "Policyholder" mea a Obligati are in book -entry form, the registered owner of any Obligation as indicated on the registration books main r on f the Iss r such purpose or, if the Obligations are in bearer form, the holder of any Obligation; provided, however, any actin eha f and for the benefit of such registered owner or holder shall be deemed to be the Policyholder to th t of sue steels au Regular Payments" means payments of interest and principal which are agreed to be made during the Term of th icy i ccordance w the original trnrs of the Obligations when issued and without reEO4 any amendment or modification such Ob' s thereafter, pa ents which b,. ozac due on an accelerated basis as a result of (a) a default by the Issuer or any other ft elxtithe Issuer to pay principal or other amounts on an accelerated basis or (c) any other cause, shall not constitute Reguyments' unlessA hall elect, in its sole discretion, to pay such principal due upon such acceleration together with any estttto t of am�in. "Term of this Policy" has the meaning set forth in Endorsement No, 1 hereto, This Policy seu forth � 4 full the undertaking of CIFG NA, and shall not be modified, altered or affected by any other agreement or instrument, including any dification or amendment thereto or to the Obligations (except a contemporaneous or subsequent agreement or instrument given C A or to which CIFG NA has given its written consent) or by the merger, consolidation or dissolution of the Issuer. The premiums pai ' pect of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be cancelled or revoked during the Term of this Policy, including for nonpayment of premium due to CIFG NA. Payments under this Policy may not be accelerated except at the sole option of CIFG NA. In witness whereof, CIFG ASSURANCE NORTH AMERICA, INC. has caused this Policy to be executed on its behalf by its Authorized Officer. CIFG ASSURANCE NORTH AMERICA, INC. Authorized Officer CIFGNA Bonds-1 (8-04) CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § CITY OF BANGER § THE UNDERSIGNED HEREBY CERTIFIES that: On the 30th day of August, 2006, a special meeting of the City Council (the "City Council") of the City of Sanger, Texas (the "City"), was held at the regular meeting place in the City Hall of the City, the duly constituted members of the City Council being as follows: Joe Higgs Mike James Glenn Ervin Mike Walker Andy Garza Robert Patton Mayor Councilman, Place 1 Councilman, Place 2 Councilman, Place 3 Councilman, Place 4 Councilman, Place 5 and all of said persons were present at said meeting, except the following: C--(�y� I��in, ,thus constituting a quorum. Among other business considered at said meeting, the attached Ordinance entitled: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS, READOPTING, RATIFYING AND I CONFIRMING AN ORDINANCE, ADOPTED AUGUST 7, 2006, AUTHORIZING THE CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006; RATIFYING AND CONFIRMING THE PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION, AND MATTERS INCIDENT THERETO was introduced and submitted to the City Council for passage. After presentation and due consideration of the Ordinance and, upon a motion duly made and seconded, the Ordinance was July passed and adopted by the City Council to be effective immediately by the following vote: LOOOA Voted "For" 0 Voted "Against" _ abstained all as shown in the official Minutes of the City Council for the meeting held on the aforesaid date. The attached Ordinance is a true .and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the City Council; and that said meeting, and the deliberation of the aforesaid public business, was open to the public and written notice of said meeting, including the subject of the above HOU:2607312.1 entitled Ordinance, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. HOU:2607312.1 IN ti�'ITNI!rSS �'VHEREOF, I have hereunto signed my name officially and affixed the seal of the City, this the 30th day of August, 2006. (SEAL) I IOU:2G07312.1 City Secretary ORDINANCE AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANGER, TEXAS, READOPTING, RATIFYING AND CONFIRMING AN ORDINANCE, ADOPTED AUGUST 7, 2006, AUTHORIZING THE CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006; RATIFYING AND CONFIRMING THE PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION, AND MATTERS INCIDENT THERETO WHEREAS, the City of Sanger, Texas (the "City"), acting through its City Council, is authorized pursuant to and in accordance with the provisions of Texas Local Government Code, Chapter 271, Subchapter C, as amended (the "Act"), to issue certificates of obligation to provide all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights- of4ay for authorized needs and purposes and for the payment of contractual obligations for professional services, to wit (1) street improvements; (2) water, sewer and electric utility improvements, and (3) professional services rendered in connection with the above listed projects. WHEREAS, the City Council of the City previously adopted an Ordinance, captioned ORDINANCE AUTHORIZING THE ISSUANCE OF CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO BE USED IN CONNECTION WITH THE SALE OF THE CERTIFICATES; AUTHORIZING THE PURCHASE OF BOND INSURANCE; MAKING OTHER PROVISIONS REGARDING SUCH CERTIFICATES, INCLUDING USE OF THE PROCEEDS THEREOF, AND MATTERS fCIDENT THERETO (the "Prior Ordinance") on August 7, 2006, by a vote of 4-0; with one abstention. WHEREAS, a notice of intention to issue Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") to the effect that the City Council was tentatively scheduled to meet at 7*00 p.m. on August 7, 2006 at its regular meeting place to adopt an ordinance authorizing the issuance of the Certificates to be payable from (i) an ad valorem tax levied, within the limits prescribed by law, on the taxable property located within the City, and (ii) the revenues to be derived from the City's water and sewer system (the "System") after the payment of all operation and maintenance expenses thereof (the "Net Revenues") in an amount not to exceed $1,000, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge HOU:2607312.1 senior to the pledge of the Net Revenues to the payment of the Certificates was published on August 15, 2006 and on August 22, 2006 in the manner required by the Act. WHEREAS, a notice of intention to the effect that the City Council was tentatively scheduled to meet at 7*00 p.m. on August 30, 2006, at its regular meeting place to readopt, ratify and confirm the City Council's adoption of the Prior Ordinance relating to the i0. ssuance of the Certificates was published on August 15, 2006 and on August 22, 2006 in the manner required by the Act. WHEREAS, no petition signed by at least five percent (5%) of the qualified voters of the City has been filed with or presented to any official of the City protesting the issuance of such Certificates on or before August 30, 2006, or the date of passage of this Ordinance. WHEREAS, the City has determined that it is in the best interests of the City and that it is otherwise desirable to issue the Certificates to provide all or part of the funds to pay contractual obligations to be incurred for the purposes authorized by the Act. WHEREAS, the City now desires to readopt, ratify and confirm in all things the Prior Ordinance; now therefore, BE IT ORDAINED BY 1'HE CITY COUNCIL OF THE CITY OF BANGER, TEXAS: ARTICLE I. DEFINITIONS AND INTERPRETATIONS Section 1.1: Definitions. As used herein, the following terms shall have the meanings specified, unless the context clearly indicates otherwise, "Prior Ordinance" shall have the meaning assigned in the recitals hereto. ARTICLE II. RATIFICATION AND CON17IRMAT1��1 Section 2.1: Readoption, Ratification and Confirmation of Prior Ordinance. The Prior Ordinance is hereby in all things readopted, ratified and confirmed. Section 2.2: Ratification and Confirmation of Publication of Notice. The publication by the City Secretary on August 15, 2006 of notice of intention to issue the Certificates and the publication on August 22, 2006 by the City Secretary of notice to readopt, ratify and confirm the Prior Ordinance regarding the issuance of the Certificates are each hereby ratified and confirmed. HOU:2607312.1 ARTICLE III. MISCELLANEOUS Section 3.1: Open Meetins?. It is hereby found, determined and declared that a sufficient written notice of the date, hour, place and subject of the meeting of the City Council at which this Ordinance was adopted was posted at a place convenient and readily accessible at all times to the general public at City Hall for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code, and that this meeting has been open to the public as required by law at all times during which this Ordinance and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 3.2: Repealer. All orders, Ordinances and ordinances, or parts thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency. Section 3.3: Effective Date, This Ordinance shall be in force and effect from and after its passage on the date shown below. The facts and recitations set forth in the preamble of this ordinance are herebfound to - be true and correct. or Remainder of page intentionally left blank) HOU:2607312.1 PASSED Ai1TD APPROVED on first and final reading this August 30, 2006. CITY OF SANGER, TEXAS ATTEST G, City Secretary; (tt SEAL) ..,_.. HOU2607312. CERTIFICATE OF ABSENT COUNCIL MEMBER STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § I, the undersigned, was a member of the City Council (the "Council") of the City of Sanger at the time that a special meeting of the Council was held on August 30, 2006, which meeting I failed to attend, and at which meeting the Council adopted the following order: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANGER5 TEXAS, READOPTING, RATIFYING AND CONFIRMING AN ORDINANCE, ADOPTED AUGUST 7, 2006, AUTHORIZING THE CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006; RATIFYING AND CONFIRMING THE PUBLICATION OF NOTICE OF INTENTION TO ISSUE CERTIFICATES OF OBLIGATION, AND MATTERS INCIDENT THERETO I hereby acknowledge that sufficient notice of such meeting was given to me and hereby waive any other notice to which I otherwise may have been entitled. WITNESS MY HAND THIS August .3 I , 2Q06. Name: 01 CITY OF BANGER, TEXAS (A political subdivision of the State of Texas located in Denton County) $6,500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006 PURCHASE AGREEMENT August 7, 2006 Honorable Mayor and City Council City of Sanger, Texas 201 Bolivar Street Sanger, TX 76266 Ladies and Gentlemen: The undersigned, SAMCO Capital Markets, Inc. (the "Underwriter"), acting on its own behalf and not acting as fiduciary or agent for the City of Sanger, Texas (the "Issuer"), offers to enter into the following agreement (the "Agreement") with the Issuer, which, upon the Issuer's written acceptance of this offer, will be binding upon the Issuer and upon the Underwriter. This offer is made subject to the Issuer's written acceptance hereof on or before 10:00 p.m., Sanger, Texas time, on August 7, 2006, and, if not so accepted, will be subject to withdrawal by the Underwriter upon written notice delivered to the Issuer at any time prior to the acceptance hereof by the Issuer. Terms not otherwise defined in this Agreement shall have the same meanings set forth in the Ordinance (as defined herein) or in the Official S"t'atement (as defined herein). 1. Purchase and Sale ofthe Certiircates Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell and deliver to the Underwriter, all, but not less than all, of the Issuer's $6,500,000 Combir.::�n Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"). Inasmuch as this purchase and sale represents a negotiated transaction, the Issuer understands, and hereby confirms, that the Underwriter is not acting as a fiduciary of the Issuer, but rather is acting solely in its capacity as Underwriter for its own account. The principal amount of the Certificates to be issued, the dated date therefor, the maturities, redemption provisions and interest rates per annum are set forth in Schedule I hereto. The Certificates shall be as described in, and shall be issued and secured under and pursuant to the provisions of an ordinance adopted by the Issuer on August 7, 2006 (the "Ordinance"). The purchase price for the Certificates shall be $6,460,226.45 (representing the par amount of the Certificates, plus a net original issue premium of $37,783.00 and less an underwriting discount of $77,556.55). HOU:2602948.1 2. Public Offering. The Underwriter agrees to make a bona fide public offering of all of the Certificates at a price not to exceed the public offering price set forth on the inside front cover of the Official Statement and may subsequently change such offering price without any requirement of prior notice. On or before Closing, the Underwriter shall execute an Issue Price Certificate prepared by Bond Counsel verifying the initial offering prices to the public at which a substantial amount of each stated maturity of the Certificates was sold to the public. The Underwriter may offer and sell Certificates to certain dealers (including dealers depositing Certificates into investment trusts) and others at prices lower than the public offering price stated on the inside front cover of the Official Statement. 3. The Official Statement (a) The Issuer previously has delivered copies (in an electronic format) of the Preliminary Official Statement dated August 4, 2006 (the "Preliminary Official Statement") to the Underwriter. The Issuer will prepare a final Official Statement relating to the Certificates, which will be (i) dated the date of this Agreement, (ii) complete within the meaning of Rule 15c242 of the United States Securities and Exchange Commission, as amended (the "Rule"), and (iii) substantially in the form of the most recent version of the Preliminary Official Statement provided to the Underwriter before the execution hereof. Such final Official Statement, including the cover page thereto, all exhibits, appendices, maps, charts, pictures, diagrams, reports, and statements included or incorporated therein or attached thereto, and all amendments and supplements thereto that may be authorized for use with respect to the Certificates, is herein referred to as the "Official Statement." Until the Official Statement has been prepared and is available for distribution, the Issuer shall provide to the Underwriter sufficient quantities (which may be in electronic mail form) of the Preliminary Official Statement as the Underwriter deems necessary to satisfy the obligations of the Underwriter under the Rule with respect to distribution to each potential customer,, upon request, of a copy of the Preliminary Official Statement.Its (b) The Preliminary Official Statement has been prepared for use in connection with the public offering, sale and distribution of the Certificates by the Underwriter. The Issuer hereby represents and warrants that the Preliminary Official Statement has been deemed final by the Issuer as of its ''ate, except for the omission o. such information which is dependent upon the final pricing of the Certificates for completion, all as permitted to be excluded by Section (b)(1) of the Rule. (c) The Issuer hereby authorizes the Official Statement and the information therein contained to be used by the Underwriter in connection with the public offering and the sale of the Certificates. The Issuer consents to the use by the Underwriter prior to the date hereof of the Preliminary Official Statement in connection with the public offering of the Certificates. The Issuer shall provide, or cause to be provided, to the Underwriter as soon as practicable after the date of the Issuer's acceptance of this Agreement (but, in any event, not later than within seven (7) business days after the Issuer's acceptance of this Agreement and in sufficient time to accompany any confirmation that requests payment from any customer) copies of the Official Statement which is complete as of the date of its delivery to the Underwriter in such 2 HOU:2602948.1 quantity as the Underwriter shall request in order for the Underwriter to comply with Section (b)(4) of the Rule and the rules of the Municipal Securities Rulemaking Board. (d) If, after the date of this Agreement to and including the date the Underwriter are no longer required to provide an Official Statement to potential customers who request the same pursuant to the Rule (being twenty-five (25) days from the "end of the underwriting period" (as defined in the Rule)), the Issuer becomes aware of any fact or event which might or would cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading, or if it is necessary to amend or supplement the Official Statement to comply with law, the Issuer will notify the Underwriter (and for the purposes of this clause provide the Underwriter with such information as it may from time to time request), and if, in the reasonable opinion of the Underwriter, such fact or event requires preparation and publication of a supplement or amendment to the Official Statement, the Issuer will forthwith prepare and furnish, at the Issuer's own expense (in a form and manner approved by the Underwriter), a reasonable number of copies of either amendments or supplements to the Official Statement so that the statements in the Official Statement as so amended and supplemented will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or so that the Official Statement will comply with law. If such notification shall be subsequent to the Closing, the Issuer shall furnish such legal opinions, certificates, instruments and other documents as the Underwriter may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. (e) The Underwriter hereby agrees to file the Official Statement with a nationally recognized municipal securities information, repository. Unless otherwise notified in writing by the Underwriter, the Issuer can assume that the "end of the underwriting period" for purposes of the Rule is the date of the Closing. 4. Representations Warranties and Covenants of the Issuer The Issuer hereby represents and warrants to and covenants with the Underwriter that: (a) The City is a home rule law city operating as such under the laws of the State of Texas (the "State") and the State Constitution, and is issuing the Certificates pursuant to the provisions of Subchapter C of Chapter 271, Texas Local Government Code, as amended, (the "Act'), and has full legal right, power and authority under the Acts, and at the date of the Closing will have full legal right, power and authority (i) to enter into, execute and deliver this Agreement, the Ordinance and the Continuing Disclosure Undertaking (as defined in Section 60)(3) hereof) and all documents required hereunder and thereunder to be executed and delivered by the Issuer this Agreement, the Ordinance and the Continuing Disclosure Undertaking are hereinafter referred to as the "Issuer Documents"), (ii) to sell, issue and deliver the Certificates to the Underwriter as provided herein, and (ill) to carry out and consummate the transactions described in the Issuer Documents and the Official Statement, and the Issuer has complied, and will at the Closing be in compliance in all respects with the terms of the Acts and the Issuer Documents as they pertain to such transactions, 3 HOU:2602948.1 (b) By all necessary official action of the Issuer prior to or concurrently with the acceptance hereof, the Issuer has duly authorized all necessary action to be taken by it for (i) the adoption of the Ordinance and the issuance and sale of the Certificates, (ii) the approval, execution and delivery of, and the performance by the Issuer of the obligations on its part, contained in the Certificates and the Issuer Documents and (iii) the consummation by it of all other transactions described in the Official Statement and the Issuer Documents and any and all such other agreements and documents as may be required to be executed, delivered and/or received by the Issuer in order to carry out, give effect to, and consummate the transactions described herein and in the Official Statement; (c) The Issuer Documents constitute legal, valid and binding obligations of the Issuer, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; the Certificates, when issued, delivered and paid for, in accordance with the Ordinance and this Agreement, will constitute legal, valid and binding obligations of the Issuer entitled to the benefits of the Ordinance and enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws and principles of equity relating to or affecting the enforcement of creditors' rights; upon the issuance, authentication and delivery of the Certificates as aforesaid, the Ordinance will provide, for the benefit of the holders, from time to time, of the Certificates, the legally valid and binding pledge of taxes and revenues and lien it purports to create as set forth in the Ordinance; (d) The Issuer is not in material breach of or default in any material respect under any applicable constitutional provision, law or administrative regulation of the State or the United States or any applicable, judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is otherwise subject, and no event has occurred and is continuing which constitutes or with the passage of time or the giving of notice, or both, would constitute a default or event of default by the Issuer under any of the foregoing; and the execution and delivery of the Certificates, the Issuer Documents and the adoption of the Ordinance and compliance with the provisions on the Issuer's part contained therein, will not conflict with or constitute a material breach of or default under any constitutional provision, law or administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Issuer is a party or to which the Issuer is or to which any of its property or assets are otherwise subject nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Issuer to be pledged to secure the Certificates, or under the terms of any such law, regulation or instrument, except as provided by the Certificates and the Ordinance; (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matters which are required for the due authorization of, which would constitute a condition precedent to, or the absence of which would materially HOU:2602948.1 adversely affect the due performance by the Issuer of its obligations under, the Issuer Documents and the Certificates have been duly obtained or will be obtained prior to Closing, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any jurisdiction in connection with the offering and sale of the Certificates; (fl The Certificates and the Ordinance conform to the descriptions thereof contained in the Official Statement under the caption "THE CERTIFICATES"; the proceeds of the sale of the Certificates will be applied generally as described in the Official Statement under the caption "THE CERTIFICATES — Sources and Uses of Funds" and the Continuing Disclosure Undertaking conforms to the description thereof contained in the Official Statement under the caption "CONTINUING DISCLOSURE OF INFORMATION"; (g) Except as disclosed in the Official Statement, there is no litigation, action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, pending or, to the best knowledge of the Issuer, after due inquiry, threatened against the Issuer, affecting the existence of the Issuer or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Certificates or the collection and pledge of the ad valorem taxes and the Pledged Revenues of the System (as defined in the Ordinance) pledged to the payment of principal of and interest on the Certificates pursuant to the Ordinance or in any way contesting or affecting the validity or enforceability of the Certificates or the Issuer Documents, or contesting the exclusion from gross income of interest on the Certificates for federal income tax purposes, or contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto, or contesting the powers of the Issuer or any authority for the issuance of ,the Certificates, the adoptiVOW on of the Ordinance or the execution and delivery of the Issuer Documents, nor, to the best knowledge of the Issuer, is there any basis therefor, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity or enforceability of the Certificates or the Issuer Documents; - (h) As of the date ther.;oi, the Preliminary Official Statement did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (i) At the time of the Issuer's acceptance hereof and (unless the Official Statement is amended or supplemented pursuant to paragraph (d) of Section 3 of this Agreement) at all times subsequent thereto during the period up to and including twenty-five (25) days subsequent to the "end of the underwriting period," the Official Statement does not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (j) If the Official Statement is supplemented or amended pursuant to paragraph (d) of Section 3 of this Agreement, at the time of each supplement or HOU:2602948.1 amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto during the period up to and including twenty-five (25) days subsequent to the "end of the underwriting period", the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which made, not misleading; (k) The Issuer will apply, or cause to be applied, the proceeds from the sale of the Certificates as provided in and subject to all of the terms and provisions of the Ordinance and will not take or omit to take any action which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Certificates; (1) The Issuer will furnish such information and execute such instruments and take such action in cooperation with the Underwriter, at the sole expense of the Underwriter, as the Underwriter may reasonably request (1) to (1) qualify the Certificates for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions in the United States as the Underwriter may designate and (ii) determine the eligibility of the Certificates for investment under the laws of such states and other jurisdictions and (2) to continue such qualifications in effect so long as required for the distribution of the Certificates (provided, however, that the Issuer will not be required to qualify as a for corporation or to file any consents to service of process under the laws of any jurisdiction) and will advise the Underwriter immediately of receipt by the Issuer of any notification with respect to the suspension of the qualification of the Certificates for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (m) The financial statements of,'' and other financial information regarding, the Issuer in the Official Statement fairly present the financial position, results of operations and condition of the Issuer as of the dates and for the periods therein set forth; and there has been no adverse change of a material nature in the financial position, results of operations or condition, financial or otherwise since the date of such statements and information; (n) Except as disclosed in the Official Statement, the Issuer is not a party to any litigation or other proceeding pending or, to its knowledge, threatened which, if decided adversely to the Issuer, would have a materially adverse effect on the financial condition of the Issuer; (o) Prior to the Closing, the Issuer will not offer or issue any bonds, notes or other obligations for borrowed money or incur any material liabilities, direct or contingent, payable from or secured by any of the revenues or assets which will secure the Certificates, except as may be incurred in the ordinary course of business, without the prior approval of the Underwriter; (p) Any certificate, signed by any official of the Issuer authorized to do so in connection with the transactions contemplated by this Agreement, shall be 0 HOU:2602948.1 deemed a representation and warranty by the Issuer to the Underwriter as to the statements made therein; and (%i) The Issuer covenants that between the date hereof and the Closing it will take no actions which will cause the representations and warranties made in this Section to be untrue as of the Closing. By delivering the Official Statement to the Underwriter, the Issuer shall be deemed to have reaffirmed, with respect to such Official Statement, the representations, warranties and covenants set forth above with respect to the Preliminary Official Statement, 5. ClosinQ. (a) At 10:00 a.m., Houston, Texas time, on September 5, 2006, or at such other time and date as shall have been mutually agreed upon by the Issuer and the Underwriter (the "Closing"), the Issuer will, subject to the terms and conditions hereof, deliver the Certificates to the Underwriter duly executed and authenticated, together with the other documents hereinafter mentioned, and the Underwriter will, subject to the terms and conditions hereof, accept such delivery and pay the purchase price of the Certificates as set forth in Section 1 of this Agreement by wire transfer payable in immediately available funds to the order of the Issuer. Payment for the Certificates as aforesaid shall be made at the offices of The Bank of New York Trust Company, Dallas, Texas (the "Paying Agent/Registrar"), or such other place as shall have been mutually agreed upon by the Issuer and the Underwriter. (b) Delivery of the Certificates in definitive form shall be made through The Depository Trust Company, New York, New York ("DTC'), or at the office of the Paying Agent/Registrar acting on behalf of DTC1. . The Certificates shall be delivered in definitive fully registered form, bearing•aCUSIP numbers without coupons, with one Certificate for each maturity of the Certificates, registered in the name of Cede & Co., all as provided in the Ordinance and shall be made available to the Underwriter at least one business day before Closing for the purpose of inspection. 6. Closing Conditions The Underwriter has entered into this A�e<;ment in reliance upon the representations, warranties and agreements of the Issuer contained herein, and in reliance upon the representations, warranties and agreements to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Issuer of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Agreement to purchase, to accept delivery of and to pay for the Certificates shall be conditioned upon the performance by the Issuer of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions, including the delivery by the Issuer of such documents as are enumerated herein, in form and substance reasonably satisfactory to the Underwriter: (a) The representations and warranties of the Issuer contained herein shall be true, complete and correct on the date hereof and on and as of the date of th Closing, as if made on the date of the Closing; e 7 HOU:2602948.1 (b) The Issuer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing; (c) At the time of the Closing, (i) the Issuer Documents and the Certificates shall be in full force and effect in the form heretofore approved by the Underwriter and shall not have been amended, modified or supplemented, and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; (ii) the net proceeds of the sale of the Certificates and any funds to be provided by the Issuer shall be deposited and applied as described in the Official Statement and in the Ordinance and (Ili) all actions of the Issuer required to be taken by the Issuer shall be performed in order for Bond Counsel and counsel to the Underwriter to deliver their respective opinions referred to hereafter; (d) At the time of the Closing, all official action of the Issuer relating to the Certificates and the Issuer Documents shall be in full force and effect and shall not have been amended, modified or supplemented; (e) At or prior to the Closing, the Ordinance shall have been duly executed and delivered by the Issuer and the Issuer shall have duly executed and delivered and the Paying Agent/Registrar shall have duly authenticated the definitive Certificates; (fl At or prior to the Closing, the municipal bond insurance policy insuring the payment of the principal of and interest on the Certificates when due shall have been duly executed, issued and delivered by CIFG Assurance North America, Inc, the "Bond Insurer")• (g) At the time of the Closing, ' there shall not have occurred any change or any development involving a prospective change in the condition, financial or otherwise, or in the revenues or operations of the Issuer, from that set .forth in the Official Statement that in the reasonable judgment of the Underwriter, is material and adverse and that makes it, in the reasonable judgment of the Underwriter, impracticable to market the Certificates on the terms and in the manner contemplated in the Official Statement: (h) The Issuer shall not have failed to pay principal or interest when due on any of its outstanding obligations for borrowed money; (i) All steps to be taken and all instruments and other documents to be A and all other legal matters in cormection with the transactions described in this Agreement shall be reasonably satisfactory in legal form and effect to the Underwriter; and (j) At or prior to the Closing, the Underwriter shall have received one copy of each of the following documents: (1) The Official Statement, and each supplement or amendment thereto, if any, as may have been agreed to by the Underwriter; HOU:2602948.1 ' (2) A copy of the Ordinance, certified by the City Secret ary as been duly adopted and in full force and effect, with such supplements having or amendments as may have been agreed to by the Underwriter; (3) The undertaking of the Issuer which satisfies the requirements of section (d)(2) of the Rule (the "Continuing Disclosure Undertaking"); (4) The approving opinion of Andrews Kurth LLP Houston, Texas ('Bond Counsel"), with respect to the Certificates, in substantially the form attached to the Official Statement; (5) A supplemental opinion of Bond Counsel addressed to the Issuer and the Underwriter substantially to the effect that: (i) the Ordinance has been d effect; duly adopted and is in full force an (ii) the Certificates are exempted securities under the Securities Act of 1933, as amended (the "1933 Act"), and the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act'), and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act; and (iii) the statements and information contained in the Official Statement under the captions "THE CERTIFICATES" (except the subheading "Sources and Uses of Funds"), " TAX (6) An opinion, dated the date of the Closing and addressed to the Underwriter, of counsel to the Underwriter to the effect that: (i) the Certificates are exempted securities under the 1933 Act and the Trust Indenture Act and it is not necessary, in connection with the offering and sale of the Certificates, to register the Certificates under the 1933 Act and the Ordinance need not be qualified under the Trust Indenture Act; and (ii) based upon their participation in the preparation of the Official Statement as counsel for the Underwriter and their participation at, - conferences at which the Official Statement was discussed, but without having undertaken to determine independently the accuracy, completeness or fairness of the statements contained in the Official Statement, such counsel has no reason to believe that the Official Statement contains any Es HOU:2602948.1 untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (except for any financial, forecast, technical and statistical statements and data included in the Official Statement and the information regarding DTC and its book -entry system and the information regarding the municipal bond insurance policy, if any, in each case as to which no view need be expressed); (7) A certificate, dated the date of Closing, of an appropriate official of the Issuer to the effect that (i) the representations and warranties of the Issuer contained herein are true and correct in all material respects on and as of the date of Closing as if made on the date of Closing; (ii) except as disclosed in the Official Statement, no litigation or proceeding against the Issuer is pending or, to the best of his or her knowledge, threatened in any court or administrative body, nor is there a basis for litigation, which would (a) contest the right of the council members, officers or officials of the Issuer to hold and exercise their respective positions, (b) contest the due organization and valid existence of the Issuer, (c) contest the validity, due authorization and execution of the Certificates or the Issuer Documents or (d) attempt to limit , enjoin or otherwise restrict or prevent the Issuer from functioning and collecting revenues, including payments on the Certificates, pursuant to the Ordinance, and other income or the levy or collection of the taxes and the Pledged Revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, (iii) all official action of the Issuer relating to the Official Statement, the Certificates and Issuer Documents have been duly taken by the Issuer, are in full force and effect and have not been modified, amended, supplemented or repealed; (iv) to the best of his or her knowledge, no event affecting the Issuer has occurred since the date of the Official Statement which should be disclosedin 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 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 Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; and (v) there has not been any material adverse change in the financial condition of the Issuer since September 30, 2005, the latest date as of which audited financial information is available; (8) A certificate of the Issuer, dated the date of the Closing, of an appropriate official of the Issuer in form and substance satisfactory to Bond Counsel and counsel to the Underwriter (1) setting forth the facts, estimates and circustances in exi mstence on the date of the Closing, which establish that it is not expected that the proceeds of the Certificates will be used. in a manner that would cause the Certificates to be "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended (the "Code"), and any applicable regulations (whether final, temporary or proposed), issued pursuant to 10 HOU:2602948.1 the Code, and (ii) certifying that to the best of the knowledge and belief of the Issuer there are no other facts, estimates or circumstances that would materially change the conclusions, representations and expectations contained in such certificate; (9) The approving opinion of the Attorney General of the State of Texas and the registration certificate of the Comptroller of Public Accounts of the State of Texas in respect of the Certificates; (10) Any other certificates and opinions required by the Ordinance for the issuance thereunder of the Certificates; (11) Evidence of a rating assigned to the Certificates of "Aaa" by Moody's Investor's Service, Inc., based upon the municipal bond insurance policy issued by the Bond Insurer; (12) A copy of the municipal bond insurance policy issued by the Bond Insurer insuring the payment of the principal of and interest on the Certificates when due, together with an opinion of counsel to the Bond Insurer in form and substance satisfactory to the Underwriter; (13) A certificate of the Bond Insurer with respect to the accuracy of statements contained in the Official Statement regarding the municipal bond insurance policy and the Bond Insurer and the due authorization, execution, issuance and delivery of the municipal bond insurance policy; and (14) Such additional legal opinions, certificates, instruments and other documents as Bond Counsel, the Underwriter or counsel to the Underwriter may reasonably request to evidence the truth and accuracy, .as of the date hereof and as of the date of the Closing, of the Issuer's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Issuer on or prior to the date of the Closing of all the respective agreements then to be performed and conditions then to be satisfied by the Issuer. All of the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to the Underwriter. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates contained in this Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Certificates shall be terminated for any reason permitted by this Agreement, this Agreement shall terminate and neither the Underwriter nor the Issuer shall be under any further obligation hereunder, except that the respective obligations of the Issuer and the Underwriter set forth in Sections 4 and 8 hereof shall continue in full force and effect. 7. Termination. The Underwriter shall have the right to cancel their obligation to purchase the Certificates if, between the date of this Agreement and the Closing, the market price 11 HOU:2602948.1 or marketability of the Certificates shall be materially adversely affected, in the reasonable judgment of the Underwriter, by the occurrence of any of the following: (a) legislation shall be enacted by or introduced in the Congress of the United States or recommended to the Congress for passage by the President of the United States, or the Treasury Department of the United States or the Internal Revenue Service or any member of the Congress or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration, a decision by a court of the United States or of the State or the United States Tax Court shall be rendered, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made or proposed, the effect of any or all of which would be to impose, directly or indirectly, federal income taxation upon interest received on obligations of the general character of the Certificates, of the interest on the Certificates as described in the Official Statement, or other action or events shall have transpired which may have the purpose or effect, directly or indirectly, of changing the federal income tax consequences of any of the transactions contemplated herein; (b) legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Certificates, including any or all underlying arrangements, are not exempt from registration under or other requirements of the 1933 Act, or that the Ordinance is not exempt from qualification under or other requirements of the Trust Indenture Act, or that the issuance, offering or sale of'obligations of the general character of the Certificates, including any *or all underlying arrangements, as described herein or by the Official Statement or otherwise, is or would be in violation of the federal securities laws as amended and then in effect, (c) any state blue sky or securities commission or other governmental agency or body in any state in which more than 15% of the Certificates have been solo shall have withheld registration, exemption or clearance of the offering of the Certificates as described herein, or issued a stop order or similar ruling relating thereto, (d) a general suspension of trading in securities on the New York Stock Exchange or the American Stock Exchange, the establishment of minimum prices on either such exchange, the establishment of material restrictions (not in force as of the date hereof) upon trading securities generally by any governmental authority or any national securities exchange, a general banking moratorium declared by federal, State of New York, or State officials authorized to do so; (e) the New York Stock Exchange or other national securities exchange or any governmental authority shall impose, as to the Certificates or as to obligations of the general character of the Certificates, any material restrictions not now 12 HOU:2602948. I in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; (fl any amendment to the federal or state Constitution or action by any federal or state court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Issuer, its property, income, securities (or interest thereon), or the validity or enforceability of the rates and charges or the collection of revenues to pay principal of and interest on the Certificates; (g) any event occurring, or information becoming known which, in the reasonable judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (h) there shall have occurred since the date of this Agreement any materially adverse change in the affairs or financial condition of the Issuer; (i) the United States shall have either become engaged in hostilities that did not exist prior to the date hereof or issued a declaration of war or a national emergency, or there shall have occurred a new material outbreak or escalation of hostilities or a national or international calamity or crisis, financial or otherwise; (j) any fact or event shall exist or have existed that, in the Underwriter's reasonable judgment, requires or has required an amendment of or supplement to the Official Statement; (k) there shall have occurred any.downg'ading, or any notice shall have been given of any intended or potential downgrading in the rating accorded any of the Issuer's obligations (including the rating to be accorded the Certif sates); and (1) the purchase of and payment for the Certificates by the Underwriter, or the resale of the Certificates by the Underwriter, on the terms and conditions herein provided shall be prohibited by any applicable law, governmental authority, board, agency or commission. S. Expenses, (a) The Underwriter shall be under no obligation to pay, and the Issuer shall pay, any expenses incident to the performance of the Issuer's obligations hereunder, including, but not limited to (i) the cost of preparation and printing of the Certificates; (ii) the fees and disbursements of Bond Counsel and the Issuer's Financial Advisor; (iii) the fees and disbursements of any other engineers, accountants, and other experts, consultants or advisers retained by the Issuer; (iv) the fees for bond ratings and municipal bond insurance, if any; (v) the costs of preparing, printing and mailing the Preliminary Official Statement and the Official Statement; (vi) the fees and expenses of the Paying Agent/Registrar; (vii) advertising expenses (except any advertising expenses of the Underwriter as set forth below); (viii) the out-of-pocket, miscellaneous and closing HOU:2602948.1 expenses, including the cost of travel, of the officers and members of the Issuer; (ix) the Attorney General's review fee; and (x) any other expenses mutually agreed to by the Issuer and the Underwriter to be reasonably considered expenses of the Issuer which are incident to the transactions described herein. (b) The Underwriter shall pay (i) the cost of preparation and printing of this Agreement, the Blue Sky Survey and Legal Investment Memorandum, if any; (ii) all advertising expenses in connection with the public offering of the Certificates; and (iii) all other expenses incurred by them in connection with the public offering of the Certificates, including the fees and disbursements of counsel retained by the Underwriter. 9. Not_ ices Any notice or other communication to be given to the Issuer under this Agreement may be given by delivering the same in writing to City of Sanger, Texas, 201 Bolivar Street, Sanger, TX 76266, Attention: City Manager; and any notice or other communication to be given to the Underwriter under this Agreement may be given by delivering the same in writing to SAMCO Capital Markets, 6750 Poplar Avenue, Suite 217, Memphis, Tennessee 38138 Attention: John Jumper, 10. Parties in Interest. This Agreement as heretofore specified shall constitute the entire agreement between us and is made solely for the benefit of the Issuer and the Underwriter (including successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. This Agreement may not be assigned by the Issuer. All of the Issuer's representations, warranties and agreements contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Certificates pursuant to this Agreement; and (Ili) any termination of this Agreement. 11. Effectiveness. This Agreement shall become.. effective upon the acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance. 12. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, 13. Severabili`_ If any provision of this Agreement shall be held or deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with any provision or provisions of any Constitution, statute, rule of public policy or any other reason, such circumstances shall not have the effect of rendering the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatever. 14. Business Day. For purposes of this Agreement, "business day" means any day on which the New York Stock Exchange is open for trading. 15. Section Headings Section headings have been inserted in this Agreement as a matter of convenience of reference only, and it is agreed that such section headings are not a part of this Agreement and will not be used in the interpretation of any provisions of this Agreement. 14 HOU:2602948.1 16. Counteraarts. This Agreement may be executed in several counterparts each of which shall be regarded as an original (with the same effect as if the signatures thereto and hereto were upon the same document) and all of which shall constitute one and � the same document [Execution Page Follows) 15 HOU:2602948.1 If you agree with the foregoing, please sign the enclosed counterpart of this Agreement and return it to the Underwriter. This Agreement shall become a binding agreement between the Issuer and the Underwriter when at least the counterpart of this letter shall have been signed by or on behalf of each of the parties hereto. Respectfully submitted, SAMCO CAPITAL MARKETS ACCEPTED AND AGREED to as of the date hereof: CITY OF BANGER, TEXAS Name: Title: Schedule I —Schedule of Terms S-1 HOU:2602948.1 Scixdulc I —Schedule of Term S-1 ' a vro Mt . 1 1 •s+ r 1 . 1 • r ul • SCHEDULEI $6,500,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 Interest Accrues From: Date of Delivery $4,935,000 Serial Certificates Maturi (Septembe� l�al Amo�� Interest Reoffering 2007 $325,000 Rate Yield@l 2008 335,000 4.000 3.650% 4.000 3.700 2009 350,000 4.000 3.730 2010 365,000 4.000 3.740 2011 380,000 4.000 3.780 2012 395,000 4.000 3.830 2013 410,000 4.000 3.880 2014 425,000 4.000 3.940 2015 440,000 4.000 3.980 2016 460,000 5.000 4.000 2017 485,000 4.000 4.050 *** 2021 565,000 4.100 4.200 $1,565,000 4.050%Term Certificate due September 1, 2020, Yield 4.130%, taXbx`) (a) The Issuer reserves the right, at its option, to redeem Certificates having stated maturities on and after September 1, 2017, in whole or in part in principal amounts of $5,000 or any integral multiple thereof, on September 1, 2016, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. (b) The initial offering prices or yields of the Certificates are furnished by the Underwriter and represent the initial offering prices or yields to the public, which may be changed by the Underwriter at any time. (c) The Term Certificates are subject to mandatory sinking fund redemption prior to their stated maturity as described in the Ordinance. HOU:2602948.1 Series 2006 w u c ' E ° u n o rn A 'u v 'y o.: u r o _E_ V L V 0 3 a .__ a E a 'a u 'C A . v T L 'v o u ' o u U E " i 8 'g' T A o A EL_ u 10 r A , u o c u U u ° u y o o m o a 3 5 ;u E u `o 00 o o a E m °u u oL, v r o9 u ` ' ' C o .2 E L v L AA — o . r _ c E =° u a` `u w 9 p C L ? A C A r°= o •u E c e G a o _u `C c O n c 3 A € ._ a` E q > 3 PRELIMINARY OFFICIAL STATEMENT Dated: August 4, 2006 NEW ISSUE: Book -Entry -Only In the opinion of Bond Counsel, interest on the Certificates is excludable from gross income for federal incocne tax purposes under existing late, subject to the matters described under "TAX EXEMPTION" herein, and is not includable in the alternative minimum taxable income of individuals. See "TAX EXEMPTION" for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City designated the Certificates as qualified tax-exempt obligations. See "QUALIFIED TAX- EXEMPT OBLIGATIONS. " THE CERTIFICATES WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS. $6,475,000* CITY OF BANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 Dated Date: August 15, 2006 Due: September 1, as shown on inside cover Interest on the $6,475,000 City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), will accrue from their date of delivery, and will be payable March 1 and September 1 of each year, commencing on March 1, 2007. The Certificates will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal on the Certificates will be payable to the registered owner (the "Owner") at maturity or prior redemption upon presentation at the principal corporate office of the paying agent/registrar (the "Paying Agent/Registrar"), initially The Bank of New York Trust Company, Dallas, Texas. The Certificates will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will be responsible for distributing the principal and interest payments to the participating members of DTC and the participating members will be responsible for distributing the payment to the owners of beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. Proceeds from the sale of the Certificates will be used to pay for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) professional services related thereto. See "THE CERTIFICATES —Sources and Uses of Funds" herein. The Certificates maturing on and after September 1, 2017, are subject to optional redemption in whole or in part on September 1, 2016, or on any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest as more fully described herein. See "THE CERTIFICATES —Redemption Provisions" herein. The Certificates will constitute direct obligations of the City of Sanger, Texas (the "City"), payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed by law, and from a limited pledge (not to exceed $1,000) of surplus net revenues of the City's waterworks and sewer system as provided in the ordinance authorizing the Certificates. The payment of the principal of and interest on the Certificates when due will be insured by a municipal bond insurance policy to be issued by CIFG Assurance North America, Inc. simultaneously with the delivery of the Certificates. See "BOND INSURANCE" herein. " ' CIFG I%IS FINANCIAL GUA AANTT MATURITY SCHEDULE (On Inside Cover Page) The Certificates are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and Andrews Kurth LLP, Bond Counsel, Houston, Texas. Certain legal matters will be passed upon by the Underwriter by its counsel McCall, Parkhurst &Horton L.L.P. The Certificates are expected to be available for delivery to the Underwriter through DTC on or about August 30, 2006. * Preliminary, subject to change. SAMCO CAPITAL MARKETS Maturity (September 1)t°� 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 MATURITY SCHEDULE Principal Amount'" 355,000 335,000 350A0 365,000 375,000 390,000 405,000 420,000 44Q000 45.5,000 475,000 495,000 515,000 540,000 560,000 Interest Initial Rate Yield/Price CUSIPtt') Preliminary, sub-ject to change. Certificates maturing on and after September 1, 2017, are subject to redemption, in whole or in part, at the option of the City at the par value thereof plus accrued interest on September 1, 2016, or any date thereafter. See "THE CERTIFICATES — Redemption Provisions." " CUSIP Numbers have been assigned to the Certificates by the CUSIP Service Bureau and are included solely for the convenience of the purchasers of the Certificates . Neither the City, the Financial Advisor nor the Underwriter shall be responsible for the selection or correctness of the CUSIP Numbers set forth above. CITY OF BANGER, TEXAS CITY COUNCIL Joe Higgs Mayor Mike James Mayor Pro-Tem Glenn Ervin Councilmember Mike Walker Councilmember Andy Garza Councilmember Robert Patton Councilmember ADMINISTRATIVE OFFICERB Jack Smith City Manager Rosalie Chavez Assistant City Manager/ City Secretary Nichols, Jackson, Dillard, City's Attorney Hager & Smith, L.L.P. CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Andrews Kurth LLP, Houston, Texas William C. Spore &Company, P.C., Bedford, Texas Government Capital Securities Corporation, Southlake, Texas Bond Counsel Independent Auditor Financial Advisor USE OF INFORMATION IN OFFICIAL STATIJMENT For purposes of compliance with Rule t5c2-12 of the Secures and Exchange Commission, this document may be treated as an Official Statement of the City with respect to the Certificates described herein 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 to give any information, or to make any representations other than those contained in this Official Statement, and, it' given or made, such other information or representations must not be relied upon as having been authorized by the City, the Financial Advisor or the Underwriter. This Official Statement is not to be used in connection with an offer to sell or the solicitation of a❑ offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE ISSUE AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Other than with respect to information coueerning C[FG Assurance North America, Inc. ("CIFG") contained under the caption "BOND INSURANCE" and Appendix E — "Specimen Municipal Bond Insurance Policy" herein, none of the information in this Official Statement has been supplied or verified by CIFG and CIFG makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Certificates; or (iii) the tax exempt status of the interest on the Certificates. Neither the City, the Financial Advisor nor the Underwriter make any representation as to the accuracy, completeness or adequacy of the information contained in this Official Statement regm•ding The Depository Trust Company or its Book -Entry - Only System or CIFG. TABLE Or CONTENTS INTRODUCTORY STATEMENT ...........................7 PLAN OF FINANCING............................................7 Purpose. 9 0 V No* #4 V * F V a* 0 to 0 * 0 S * SON 60 **a 0 a 0 0 ON v 9 v 9 0 v I V 0 S S & 9 0 9 9 0 v 0 07 THE CERTIFICATES...............................................7 Authorization.........................................................7 Security for the Certificates...................................7 Redemption Provisions..........................................7 Notice of Redemption............................................8 Bond Insurance......................................................8 Sources and Uses of Funds....................................8 GENERAL INFORMATION REGARDING THE CERTIFICATES.........................................8 General Description...............................................8 Legality..................................................................9 Defeasance.............................................................9 Amendments to the Ordinance...............................9 OWNERSHIP ..........................................................10 OWNER'S REMEDIES..........................................10 BOOK -ENTRY -ONLY SYSTEM .......................... W REGISTRATION, TRANSFER AND EXCHANGE......................................................12 Paying Agent/Registrar........................................12 Successor Paying Agent/Registrar .......................12 Future Registration...............................................12 Record Date for Interest Payment ........................12 Limitation on Transfer of Certificates.................. 12 Replacement of Certificates.................................12 THE BOND INSURANCE.....................................13 CIFG Assurance North America, Inc...................13 General.................................................................13 Capitalization.......................................................13 TAX INFORMATION............................................14 Summary of Certain Provisions of the Property Tax Code..........................................14 Effective Tax Rate and Rollback Tax Rate..........15 Property Assessment and Tax Payment ...............16 Penalties and Interest...........................................16 City Application of Property Tax Code ...............16 Municipal Sales Tax.............................................17 TAX RATE LIMITATIONS...................................17 RETIREMENT PLAN.............................................17 INVESTMENT POLICIES.....................................18 Accounting Principles Generally Accepted in the United States.............................................18 Legal Investments. 1 8 Investment Policies..............................................18 Additional Provisions............. Current Investments.............................................19 DEBTSERVICE.....................................................19 Bonded Debt Limitation.......................................19 RATINGS................................................................20 PENDING LITIGATION........................................20 LEGAL MATTERS.................................................20 TAXEXEMPTION.................................................20 TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES................................................21 Discount Certificates............................................21 Premium Certificates............................................22 QUALIFIED TAX-EXEMPT OBLIGATIONS......22 LEGAL INVESTMENTS IN TEXAS.....................23 REGISTRATION AND QUALIFICATION OF ISSUEFOR SALE.............................................23 CONTINUING DISCLOSURE OF INFORMATION................................................23 Information Upon Request and Annual Reports............................................................23 Material Event Notices.........................................23 Availability of Information from NRMSIRs andSID...........................................................24 Limitations and Amendments..............................24 Compliance with Prior Undertakings ...................24 FINANCIAL ADVISOR.........................................24 UNDERWRITING..................................................24 CONCLUDING STATEMENT..............................25 Financial Information Regarding the City of Sanger, Texas General Information Regarding the City of Sanger, Texas Form of Opinion of Bond Counsel General Purpose Audited Financial Statements for the Fiscal Year Ended September 30, 2005 Specimen Municipal Bond Insurance Policy Appendix A Appendix B Appendix C Appendix D Appendix E SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete infonnation contained in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the schedules and appendices hereto. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement including the Appendices hereto. The Issuer The City of Sanger, Texas, is located in Denton County, Texas. For information regarding the City, see Appendices A and B. The Certificates $6,475,000* Combination Tax and Revenue Certificates of Obligation, Series 2006, dated August 15, 2006, maturing serially on September 1, 2007 through 2021, inclusive. Interest on the Certificates will accrue from their date of delivery and will be paid semiannually on March 1 and September 1, commencing March 1, 2007, until maturity or prior redemption. Purpose of'Certificates Proceeds from the sale of the Certificates will be used for (1) street improvements; (2) water, sewer and electric utility inprovements; and (3) professional services related thereto. See 'THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization and Security The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, Chapter 1502, Texas Goverment Code, and an ordinance adopted by the City Council on August 7, 2006. The Certificates are payable from ad valorem taxes to be levied, within the limits prescribed by law, on all taxable property within the City and a limited pledge of surplus net revenues derived from the City's waterworks and sewer system, not to exceed $1,000, as provided in the ordinance authorizing the Certificates. Redemption The Certificates maturing on and after September 1, 2017, are subject to optional redemption in whole or in part on September 1, 2016, or on any date thereafter at a price of par plus accrued interest as more fully described herein. See "THE CERTIFICATES dd. Redemption Provisions" herein. Ratings The Certificates are rated `Aaa" by Moody's Investors Service, Inc. ("Moody's") by virtue of a municipal bond insurance policy issued by CIFG Assurance North America, Inc. See "BOND INSURANCE" and "RATINGS" herein. The underlying rating of the Certificates is pending from Moody's. Bond Insurance The scheduled payment of principal of and interest on the Certificates, when due, will be guaranteed under an insurance policy to be issued concurrently with tine delivery of the Certificates by CIFG Assurance North America, Inc. See `BOND INSURANCE" herein. Book -Entry -Only System The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York, pursuant to the book -entry only system described herein. Beneficial ownership of the Certificates may be acquired in principal denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of, premium if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the DTC Participants (as defined herein) for subsequent remittance to the owners of the beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. (Tire remainder o/lhis page inteniionnlly !e%t b/c�nk.J `" Preliminary, subject to change. OFFICIAL STATEMENT RELATING TO $6,475,000'� CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 INTRODUCTORY STATEMENT This Official Statement, which includes the cover page, the schedules and the appendices hereto, provides certain information regarding the issuance by the City of $6,475,000* Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"). The Certificates will be authorized to be issued, sold and delivered by an ordinance adopted by the City 's governing body (the "City Council"), and such ordinance is referred to herein as the "Ordinance." Capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Ordinance, except as otherwise indicated herein. The City is a political subdivision of the State of Texas (the "State") and a municipal corporation organized and existing under the laws of the State and the City's home rule charter (the "City Charter"), which was initially approved by the electorate of the City on November 2, 1999. For information regarding the City, see Appendices A and B of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue to be repeated in the future. PLAN OF FINANCING Purpose Proceeds from die sale of the Certificates will be used for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) professional services related thereto. THE CERTIFICATES Authorization The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, as amended, Chapter 1502, Texas Government Code, as amended, and the Ordinance, as authorized by the City Charter. Security for the Certificates The Certificates are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City, and by a limited pledge of surplus net revenues derived from the City's waterworks and sewer system the "System"), not to exceed $1,000, as provided in the Ordinance. Redemption Provisions The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after September 1, 2017, in whole or in part, in integral multiples of• $5,000, on September 1, 2016 or any dale thereafter, such redemption dale or dates to be fixed by the City, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. 11' less than all of the Certificates are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to select by lot the Certificates, or portions thereof, within each maturity to be redeemed. * Preliminary, subject to change. 7 Notice of Redemption Not less than 30 days prior to a redemption date for the Certificates, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of a Certificate to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. It' notice is so given and sufficient funds are provided for the payment of the redemption price of the Certificates, interest shall cease to accrue after the date fixed for redemption whether or not the Certificates have been submitted for payment. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE, NOTICE HAVING BEEN SO GIVEN, AND THE FUNDS NECESSARY TO REDEEM SUCH CERTIFICATES HAVING BEEN PROVIDED, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. Bond Insurance The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by CIFG Assurance North America, Inc. See "BOND INSURANCE" and Appendix E - Specimen Municipal Bond Insurance Policy herein. Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount of Certificates $ Net Original Issue Discount Accrued Interest Total Sources of Funds $ Uses Deposit to Construction Fund $ Costs of Issuance (including Underwriters Discount and Bond Insurance Premium) Deposit to Interest and Sinking Fund Total Uses of Funds $ GENERAL INFORMATION REGARDING THE CERTIFICATES General Description The Certificates will be dated August 15, 2006, and will he issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Certificates will bear interest from their date of delivery. Interest will be paid semiannually on each March 1 and September I, commencing March (. 200to Interest will accrue on the Certificates on the basis of a 360-day year consisting of twelve 30-day months. The Certificates will be issued as book -entry only securities pursuant to arrangements made with The Depository Trust Company, New York, New York. See `BOOK -ENTRY -ONLY SYSTEM." Principal on the Certificates will be payable to the registered owners (the "Owners") at maturity or prior redemption upon presentatio❑ and surrender of such Certificates at the principal corporate office of the paying agent/registrar (the "Paying Agent/RegisUar"), initially The Bank of New York Trust Company, Dallas, Texas. Interest on the Certificates will he payable by check dated as of the interest payment date and mailed by the Paying Agent/Registrar to Owners as shown on the records of the Paying Agent/Registrar on the Record Date (see "REGISTRATION, TRANSFER AND EXCHANGE — Record Date for Interest Payment" herein), or by such other customary banking arrangement, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. If the date for the payment of* the principal of or interest on a Certificate shall be a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. The Certificates will mature on the dates, in the amounts and bear interest at the rates as set forth on inside front cover page of this Official Statement. Legality The Certificates are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and Andrews Kurth LLP, Houston, Texas, Bond Counsel. (See "LEGAL MATTERS' and Appendix Q. Defeasance The Ordinance provides for the defeasance of the Certificates when payment of the principal of and premium, if any, on the Certificates plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent or other authorized entity, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amourits and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper compensation and expenses of the paying agent for the Certificates. The Ordinance provides that "Defeasance Securities" means (1) direct, noncallable obligations of the Unites States of America, including obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (3) noncallable obligations of a state agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The City has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the City moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Certificates shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of Che Certificates have been made as described above, all rights of the City to initiate proceedings to call such Certificates for redemption or take any other action amending the terms of such Certificates are extinguished; provided, however, that the right to call Certificates for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption, (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of the firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Amendments to the Ordinance In the Ordinance, the City has reserved the right to amend such Ordinance without the consent of airy holder of the Certificates for the purpose of amending or supplementing such Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders of the Certificates, (ii) grant additional rights or security for the benefit of the holders of the Certificates, (iii) add events of default as shall not be inconsistent with the provisions of such Ordinance that do not materially adversely affect the interests of the holders of the Certificates, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the City, do not materially adversely affect the interests of the holders of the Certificates. Each Ordinance further provides that the holders of the Certificates aggregating in principal amount 51% of the outstanding Certificates shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary or desirable by the City; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Certificates no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. OWNERSHIP The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment of principal and interest, and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar will be bound by any ❑otice or knowledge to the contrary. All payments made to the person deemed to be the owner of any Certificate in accordance with the Ordinance will be valid and effectual and will discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. OWNER'S REMEDIES The Ordinance does not provide for the appointment of a trustee to represent the interests of the Certificate holders upon any failure of the City to perform in accordance with the terns of the Ordinance or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinance. Furthermore, the Ordinance does not establish specific events of default with respect to the Certificates and, under State law, there is no right to the acceleration of maturity of the Certificates upon the failure of the City to observe any covenant under the Ordinance. A registered owner of Certificates could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Certificates; however, such judgment could not be satisfied by execution against any properly of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as it becomes due or perform other material terms and covenants contained in the Ordinance. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Certificates are valid and binding obligations for all purposes according to their terms. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Certificate holders of all 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 statc 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 Certificates are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. BOOK -ENTRY -ONLY SYSTEM The Depository Trust Company ("DTC"), New York, NY, will act as securities depository 1'or the Certificates. The Certificates will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership ❑orninee) or such other name as may be requested by an authorized representative of DTC. One fully -registered certificate will be issued for each maturity of the Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is alimited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over I00countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange ,LC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain 10 a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Certificates with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Certificates within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circuinstances, in the event that a successor depository is not obtained. Certificate certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Certificate certificates will be printed and delivered. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood while the Certificates are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar The initial Paying Agent/Registrar is The Bank of New York Trust Company, Dallas, Texas. The Certificates are being issued in fully registered form in integral multiples of $5,000 of principal amount. Interest on the Certificates will be payable senuannually by the Paying Agent/Registrar by check mailed oil each interest payment date by the Paying Agent/Registrar to the registered owner at the address as it appears on the Paying Agent/Registrar's books on the Record Date or by such other customary banking arrangement acceptable to the Paying Agent/Registrar requested by and at the risk and expense of the registered owner. Successor Paying Agent/Registrar Provision is made in the Ordinance for replacement of the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the City, the new Paying Agent/Registrar shall accept the previous Paying Agent/Register's records and act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Register selected by the City shall be a commercial bank, a trust company, financial institution or other entity duly qualified and legally authorized to serve and perform the services of the Paying Agent/Registrar for the Certificates. Future Registration In the event the book -entry only system should be discontinued, printed Certificates will be delivered to the Owners and thereafter the Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Certificates may be assigned by the execution of an assignment form on the Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Certificate will be delivered by the Paying Agent/Registrar in lieu of the Certificate being transferred or exchanged at the designated office of the Paying Agent/Register, or sent by United States mail, first class, postage prepaid, to the new registered Owner at the Owner's request, risk and expense. New Certificates issued in an exchange or transfer of Certificates will be delivered to the registered Owner or assignee of the Owner after the receipt of the Certificates to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar, New Certificates registered and delivered in an exchange or transfer shall be of like kind and in authorized denominations and for a like aggregate principal amount as the Certificate or Certificates surrendered for exchange or transfer. See "BOOK -ENTRY -ONLY SYSTEM" for a description of the system to be utilized initially in the settlement and transfer of the Certificates. Record Date for Interest Payment The record date ("Record Date") for the interest payable o❑ any interest payment date is the last business day of the month next preceding such interest payment date, as specified in the Ordinance. h� the event of a nonpayment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (the "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be 15 days after the Special Record Date) shall be sent at least 5 business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Certificate appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Limitation on Transfer of Certificates Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate (i) during Uie period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Certificate, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate. Replacement of Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount as the Certificate so mutilated, destroyed, stolen or lost will he issued. In the case of a mutilated Certificate, such new Certificate will be delivered 12 only upon surrender and cancellation of such mutilated Certificate. In the case of any Certificate issued in lieu of and in substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only (a) upon tiling with the City and the Paying Agent/Registrar evidence satisfactory to them that such Certificate has been destroyed, stolen or lost and proof of the ownership thereof and (b) upon furnishing the City and the Paying Agent/Registrar with indemnity satisfactory to them. The person requesting the authentication and delivery of a new Certificate must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. BOND INSURANCE CIFG Assurance North America, Inc. The information set forth in the following paragraphs has been provided by CIFG Assurance North America, Inc. ("CIFG" or the "Insurer") for inclusion in this Official Statement. CIFG does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefr•om, other than with respect to the accuracy of the information regarding CIFG set forth under the heading "BOND INSURANCE". CIFG makes no representation regarding the Certificates or the advisability of investing in the Certificates. General CIFG is a monoline financial guaranty insurance company incorporated under the laws of the State of New York. The address of the principal executive offices of the Insurer is 825 Third Avenue, Sixth Floor, New York, New York 10022; its toll-fi•ee telephone number is (866) CIFG-212 and its general telephone number is (212) 909-3939 and its website is located at www.cifg.com. The Insurer is a member of the CIFG Group of financial guaranty companies, which also includes CIFG Europe, a French insurance company licensed to do business in the European Union, and CIFG Guaranty, a dedicated French reinsurance corporation. In addition to its capital and surplus as set forth below, the Insurer is supported by a net worth maintenance agreement from CIFG Guaranty, which provides that CIFG Guaranty will maintain the Insurer's New York statutory capital and surplus at no less than $80 million, and may cede a substantial portion (not to exceed 90%) of its exposure on each transaction to CIFG Guaranty through a facultative reinsurance agreement. Each of the Insurer, CIFG Europe and CIFG Guaranty has received an insurer financial strength rating of "AAA" from Fitch, an insurer financial strength rating of "Aaa" from Moody's, and an insurer financial enhancemenC rating of "AAA" from Standard and Poor's, the highest rating assigned by each rating agency. Each such rating should be evaluated independently. The ratings reflect the respective rating agency's current assessment of each company's capacity to pay claims on a timely basis and are not recommendations to buy, sell or hold the Certificates. Such ratings may be subject to revision or withdrawal at any time. The Insurer is licensed and subject to regulation as a financial guaranty insurance corporation tinder the laws of the State of New York, its state of domicile, and is licensed to do business in 46 jurisdictions. The Insurer is subject to Article 69 of the New York Insurance Law which, among other things, limits the business of such insurers to financial guaranty insurance and related lines, requires that such insurers maintain a minimum surplus to policyholders, establishes contingency, loss and unearned premium reserve requirements for such insurers, and limits the size of individual transactions and the volume of transactions that may be underwritten by such insurers. Other provisions of the New York Insurance Law applicable to non -life insurance companies such as the Insurer regulate, among other things, permitted investments, payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liabilities for borrowings. Capitalization The following tables set forth the capitalization of the Insurer on the basis of accounting principles generally accepted in the United States ("US GAAP") and statutory accounting practices prescribed or permitted by the New York State h�surance Department, respectively. TotalAssets.............................................................................................. TotalLiabilities........................................................................................ Shareholder's Equi[y................................................................................ US GAAP December 31, 2005 (in thousands of US dollars) $ 324,134 $ 202,042 $ 122,092 13 Statutory Accounting Practices December 31, 2005 (in thousands of US dollars) AdmittedAssets....................................................................................... Liabilities.................................................................................................. Capitaland Surplus.................................................................................. The following table sets forth the capitalization of CIFG Guaranty on the basis of US GAAP. Assets....................................................................................................... Jabilitics......................................................................................0...I....... Shareholder's Equity ................................................................................ $ 175,333 $ 66,758 $ 1084575 US GAAP December 31, 2005 (ir1 thousands (in thousands of euros) of US dollars) (1) € 736,208 $ 8714634 € 1969794 $ 232,995 € 539,414 $ 638,639 (1) The translation of euros into dollars is presented solely for the convenience of the reader, using the observed exchange rate at December 31, 2005 of $1,18395 to €1.00. The convenience translation should not be construed as representation that the eur'o amounts have been, could have been, or in the future could be, converted into U.S. Dollars at this or any rate of exchange. For further information concerning the Insurer and CIFG Guaranty, see the audited financial statements of both companies, including the respective notes thereto, prepared in accordance with US GAAP as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, and the unaudited interim financial statements of the Insurer as of March 31, 2006 and for the three-month period ended March 31, 2006, which are available on the CIFG Group's website at www.cit'g.com. Copies of the most recent audited annual and unaudited interim financial statements of the Insurer prepared in accordance with accounting principles prescribed or permitted by the New York State Insurance Department, are also available o❑ the website and may be obtained, without charge, upon request to the Insurer at its address above, Attention: Finance Department. TAX INFORMATION Summary of Certain Provisions of the Property Tax Code The appraisal of property within the City is the responsibility of the Ellis County Appraisal DisUict (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 assess all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining the market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the Appraisal District's chief appraiser determines the method to be used. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board, consisting of three members appointed by the Board of Directors oi'the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least once every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.A.T.C.S., 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 tax 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 Stale law, the governing body of a political subdivision, at its option, may grant: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; and (2) An exemption of up to 20% of the market value of residence homesteads; minimum exemption $5,000. 14 In the case of residence homestead exemptions granted under Section 14b, 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. Recent legislation and a related amendment to the Texas Constitution authorize cities to limit the total ad valorem tax (except for increases attributable to certain improvements) on the residence homestead of the disabled or persons 65 years of age or older and their spouses to the amount of tax imposed in the later of (1) the year such residence qualified for an exemption based on the disability or age of the owner or (2) the year the City chose to establish the above -referenced limitation. On the receipt of a petition signed by five percent of the registered voters of the City, the City shall call an election to determine by majority vote whether to establish such a tax limitation. Once established, a city may not repeal or rescind the tax limitation. If a disabled or elderly person dies in a year in which the person received a residence homestead exemption, the total amount of ad valorem taxes imposed o❑ the homestead by a city may not be increased while it remains the residence homestead of that person's surviving spouse if the spouse is fifty-five years of age or older or disabled at the time of the person's death. A proportionate share of the limitation applicable to a person's homestead is transferred to a new residence homestead of such person if the person moves to a different residence within the same city. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section I-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 I-d and 1-d-1. 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. Non -business personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non -business property are exempt from ad valorem taxation. Section I -•j of Article VIII authorizes an ad valorem tax exemption for "freeport property". Freeport property is defined as goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter, into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City has adopted a tax abatement policy with respect to certain areas within the City. See Appendix A — Tables 1, 3 and 4 for information relating to the City's taxable assessed valuation, property tax rates and collections and tax rate distribution. Effective Tax Rate and Rollback Tax Rate Before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City, the City Council must adopt a tax rate per $100 taxable value for the current year. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings have been held on the proposed tax rate following notice of such public hearings (including the requirement that notice be posted on the City's website il'the City owns, operates or controls an internet website and public notice be given by television if the City has tree 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 15 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 lax 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 operatio❑ tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Property Assessment and Tax Payment Property within the City is assessed as of January t of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. On and gas reserves are assessed on the basis of a valuation process which uses an average daily price of oil and gas for the prior year. Taxes become due October I of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years of age and over and taxpayers qualifying for the disabled person exemption are allowed to pay taxes on their residential homestead in tour installments with the first installment due on February 1 of each year and the final installment due on August 1. Penalties and Interest Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Month Cumulative Interest Total 2 9 3 Il 4 13 5 15 6`'`' 33 ��� Includes an additional JS%penalty to defray attorneys' fees. `�' Interest continues to accrue after July 1 at the rate that increases 1 °/n per month until puid. After July, penalty remains at 12%, and interest increases at the rate of I °In each month. In addition, if an account is delinquent i❑ July, an attorneys collection fee of up to IS°In may be 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 Property Tax Code The City grants an exemption of $301000 of the market value of Use residence homestead of persons 65 years of age or older and $20,000 for Use 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. I6 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 l-j property. The City has entered into a tax abatement agreement with Wal-Mart Regional Warehouse and has adopted criteria therefore, which is a prerequisite to the execution of abatement agreements. The abatement agreement, which is for 50% of the assessed valuation, will expire in 2012. Municipal Sales Tax The City has adopted the provisions of V.A.T.C.S. Tax Code § 321.001 et seq., which grants the City the power to impose and levy a 1 % Local Sales and Use Tax within the City. The proceeds of such tax are credited to the General Fund and are not pledged to payment of the Certificates. Collections and enforcements are effected through the offices of the State Comptroller of Public Accounts, who monthly remits the proceeds of the tax, after deduction of a 2% service fee, to the City. The Tax Code provides certain cities and counties the option of assessing a maximum one-half percent (1/2%) sales tax on retail sates of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the estimated amount of the sales tax revenues to be generated in the current year. Subject to the approval of a majority of the voters in a local option election, state law also provides certain cities the option of assessing a sales and use tax for a variety of other purposes, including economic and industrial development, municipal street maintenance and repair, and sports and community venues. State law limits the maximum aggregate sales and use tax rate in any area to 8'/%. 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%n (when combined with the State sales and use tax rate of 6r/4%). In addition to the one percent (1%) local sales and use tax referred to above, at an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 4A, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. At an election held on May 2, 1998 voters of the City approved the imposition of an additional one- half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 413, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. The City has not held an election regarding an additional sales tax for the purpose of reducing its ad valorem taxes. TAX RATE LIMITATIONS Article XI, Section 5, of the State Constihrtion 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. RETIREMENT PLAN The City participates in [he Texas Municipal Retirement System which is a joint contributory retirement plan covering all fidl- 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 5% of gross earnings. The City is required to contribute at an actuarially determined rate; the current rate as of September 30, 2005 is 5.51 %. 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, 2005 totaled $86,672. For additional information regarding the City's Retirement Plans, see Appendix D - "General Purpose Financial Statements for the Fiscal Year Ended September 30, 2005, Note 6 -Retirement Plan". 17 INVESTMENT POLICIES Accounting Principles Generally Accepted in the United States The City policy is to adhere to accounting principles generally accepted in the United States (see Appendix D "General Purpose Financial Statements for the Fiscal Year Ended September 30, 20051l), Legal Investments Under current State law, the City is authorized to invest in (1) obligations of the United Stales or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United Slates or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issued, assumed, or guaranteed by the State of Israel, (7) certificates of deposit meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by or through an institution that either has its main office or a branch in 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, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) securities lending programs if (i) the securities loaned under the program are collateralized and a loan made under the program allows for termination at any time and is either secured by (a) obligations that are described in clauses ( I ) 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 (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City and held in the City's name; (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, (10) certain banker's acceptances with the remaining term of 270 days or less, if the short term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated as least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U. S. or state bank, (12) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (13)no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent, and (14) guaranteed investment contracts that have a defined termination date and are secured by obligations described in clause (1) above in an amount at least equal to the amount of bond proceeds invested under such contract. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than Aaa or AAA-m or an equivalent by al least one nationally recognized rating service. The City is specifically prohibited from investing in: (I) 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 strean 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 taw, 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 inveshment management; and [hat includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. Additional Provisions Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers with personal business relationships or relativeswith firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the investment in mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, and prohibit the investment in mutual funds of any portion of bond proceeds, reserves and funds held for debt service; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. Current Investments As of September 30, 2005, the City's investment portfolio was invested in the following categories. As of such date, the market value of such investments was approximately 100°l0 of their book value. Type of Investment Amount Percentage Cash $ 100 0.01 Certificates of Deposit, Checking 2,831,264 99.99 Accounts and Savings Accounts Total $2,8314364 DEBT SERVICE Bonded Debt Limitation Under current State law, there is no direct limitation on dre amount of funded debt that the City may issue or incur. However, the City's maximum ad valorem tax rate is limited by the Constitution and laws of the State of Texas to $2.50 per $100 of assessed valuation for all City purposes. The City's Charter, (Article 5. Section 2) states: "The City Council shall have the power and is hereby authorised and made its duty to levy, assess, and collect annually for general purposes authorized by laws and Ibr the purpose of paying the interest and providing the sinking fund on the bonded indebtedness of the City of Mesquite now in existence or which may hereafter be created an ad valorem tax on real, personal or mixed property in such amounts and at such rates as shall be determined by the City Council subject to applicable limitations and prohibitions now or hereafter contained in the Constitution of the State of Texas." Article XI, Section 5 of the State Constitution states in part: "but no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one-half per cent of the taxable property of such city..." jv� RATINGS The Certificates are rated "Aaa" by Moody's Investor's Service, Inc. ("Moody's") by virtue of a municipal bond insurance policy issued by CIFG Assurance North America, Inc. The presently outstanding uninsured general obligation debt of the City is pending rating from Moody's. The ratings reflect only the view of such organizations at the time such ratings were given and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by said rating companies, it' in the _judgment of said rating companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. PENDING LITIGATION Various lawsuits pending against the City involve claims relating to general liability, automotive liability, workers' compensation, civil rights actions, and various contractual matters. In the opinion of the City's management, the outcome of the pending litigation will not have a material adverse effect on the City's financial position or operations, LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Certificates, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Certificates are valid and binding obligations of the City, and based upon examination of such transcripts of proceedings, the approving legal opinions of Bond Counsel to the effect that (i) the Certificates issued in compliance with the provisions of the Ordinance are valid and legally binding obligations of the City and (ii) the interest on the Certificates is exempt from federal income taxation under existing statutes, published rulings, regulations, and court decisions (see "TAX EXEMPTION"). Bond Counsel has not been engaged to investigate the financial resources of the City or its ability to provide for payment of the Certificates, and the opinion of Bond Counsel will make no statement as to such matters, or as to the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase the Certificates. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Certificates are contingent on the sale and delivery of the Certificates. The applicable legal opinion will be printed on or attached to the definitive Certificates. Certain legal matters will be passed upon by the Underwriter by its counsel McCall, Parkhurst & Horton L.L.P. TAX EXEMPTION In the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, interest on the Certificates is (1) exchidable under Section 103 of the ]nternal Revenue Code of 1986, as amended (the "Code"), from gross income of the owners thereof for federal income tax purposes and (2) is not includable in the alternative minimum taxable income of individuals or corporations, except as described below. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Certificates. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinance authorizing the issuance of the Certificates (the "Ordinance") and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Certificate proceeds and any facilities financed therewith, the source of repayment of the Certificates, the investment of Certificate proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Certificate proceeds and certain other amounts he paid periodically to the United States and that the City file an information report with the Internal Revenue Service (the "Service"). If the City should fail to comply with the covenants in the Ordinance, or if its representations relating to the Certificates that are contained in the Ordinance should be determined to be inaccurate or incomplete, interest on the Certificates could become taxable from the date of delivery of the Certificates, regardless of the date on which the event causing such taxability occurs. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) oil a financial asset securitization investment trust (FASITp will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative Minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting li•om the ownership of, receipt or accrual of interest on or acquisition or disposition of the Certificates. 20 Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of' Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest o❑ municipal obligations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the City as the "taxpayer," and the owners of the Certificates may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Certificates, the City may have different or conflicting interests from the owners of the Certificates. Public awareness of any future audit of the Certificates could adversely affect the value and liquidity of the Certificates during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the year. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. Such prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. If atax-exempt obligation, such as the Certificates, was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue, the Code provides ordinary income tax treatment of gain recognized upon the disposition of such "market discount bond." A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., a market discount). Such treatment applies to "market discount bonds" to the extent the gain from the disposition thereof exceeds the accrued market discount of such bonds unless a statutory de minirnis rule applies. The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of the Certificates. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Certificates. TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES Discount Certificates Some of the Certificates may be offered at initial offering prices which are less than the stated redemption prices at maturity of such Certificates. If the initial offering prices of the Certificates are lower than the stated redemption price payable at maturity, the Certificates of that maturity (the "Discount Certificates") will be considered to have "original issue discount" for federal income tax purposes. An initial owner who purchases a Discount Certificate in the initial public offering of the Certificates at such an initial offering price will acquire such Discount Certificate with original issue discount equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Certificate and (b) the initial offering price to the public of such Discount Certificate. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on a Certificate and such initial owner will be entitled to exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Certificate continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Certificates under the caption "TAX EXEMPTION" generally applies to original issue discount deemed to be earned on a Discount Certificate while held by an owner who has purchased such Certificate at the initial offering price in the initial public offering of the Certificates and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Certificate prior to its stated maturity, however, any amount realized by such initial owner in excess of the basis of such Discount Certificate in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Certificate continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Certificate will he treated for federal income tax purposes as interest on a Certificate, such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to he earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Certificates must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Certificate may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Certificate. See "TAX EXEMPTION" for a 21 discussion regarding the alternative minimum taxable income consequences for corporations and 1'61 a reference to collateral federal tax consequences for certain other owners. The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect the rights or obligations of the owner of a Discount Certificate or of the City. The portion of the principal of a Discount Certificate representing original issue discount is payable upon the maturity or carlier redemption of such Certificate to the registered owner of the Discount Certificate at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Certificate is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under a❑ actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Certificates by an owner that did not purchase such Certificates in the initial public offering and at the initial offering price may be determined according to rules which differ from those described above. All prospective purchasers of Discount Certificates should consult their tax advisors with respect to the determination for federal, state and local income tax proposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Certificates, Prenuum Certificates Some of the Certificates may be offered at initial offering prices which exceed the stated redemption prices payable at the maturity of such Certificates. If any of the Cel'titicates of such maturities are sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or organizations acting in the capacity of wholesalers or underwriters) at such initial offering prices, each of the Certificates of such maturities ("Premium Certificates") will be considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis for federal income tax purposes of a Premium Certificate in the hands of an initial purchaser who purchases such Certificate in the initial offering must be reduced each year and upon the sale or other taxable disposition of the Certificate by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Certificate by the initial purchaser, Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond Prenuum. The amount of bond premium on a Premium Certificate which is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Certificate) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Certificate based on the initial purchaser's original basis in such Certificate . The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Certificates that are not purchased in the initial offering or which are purchased at an amount representing a price other tha❑ the initial offering prices for the Certificates of the same maturity may be determined according to rules which differ from those described above. Moreover, all prospective purchasers of Certificates should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Certificates. QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265(a) of the Code provides, in general, that interest expenses incurred to acquire or carry tax-exempt obligations are not deductible from the gross income of the holder. For certain holders that are "financial institutions" within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than certain private activity bonds) which are designated by an issuer as "qualified lax -exempt obligations." An issuer may only designate an issue as an issue of "qualified tax-exempt obligations" where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year in which the issue so designated is issued. The City will designate the Certificates as "qualified tax-exempt obligations." Further, the City will represent that it has or will take such action necessary for the Certificates to constitute "qualified tax-exempt obligations." Notwithstanding the designation of the Certificates as "qualified tax-exempt obligations," financial institutions acquiring the Certificates will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Certificates. 22 LEGAL INVESTMENTS IN TEXAS Section t201.041 of the Public Security Procedures Act provides that the Certificates 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 sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. For political subdivisions in the State which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Certificates may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. See "RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Certificates are legal investments foil state banks, savings banks, trust companies with capital of at least one million dollars, and savings and loan associations. Texas law further provides that the Certificates 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 Certificates are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE The sale of tine Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon tlne exemption provided thereunder by Section 3(a)(2); and the Certificates has not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been qualified under the securities act of any other jurisdiction. The City assumes no responsibility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. CONTINUING DISCLOSURE OF INFORMATION The offering of the Certificates qualifies for the Rule 15c2-12(d)(2) exemption fi•om Rule ISc2-12(b)(5) regarding tine City's disclosure obligations because the City has less than $10 000 000 in aggregate amount of outstanding municipal securities, including the Certificates. Pursuant to the exemption, the City in the Ordinance has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Information Upon Request and Annual Reports The City will provide (i) certain financial information and operating data, which is customarily prepared by the City and is publicly available to any person upon request made to tlne City in writing, subject to such information having been previously filed with the Texas State Information Depository; and (ii) timely notice of specified material events and certain information vendors. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement in Appendix A — Financial Information Regarding the City of Sanger, Texas (Tables 1-10) and in Appendix D. The City may provide updated information in full text or may incorporate by reference certain other publicly available documents as permitted by SEC Rule 15c2-12 (the "Rule"). Information agreed to be provided by the City on request may be obtained by contacting the City at 201 Bolivar St., P.O. Box 729, Sanger, Texas 76266. Material Event Notices The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Certificates, if such event is material to a decision to purchase or sell the Certificates: ( I) principal and interest paynnent delinquencies; (2) non-payment related defauhs; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of' credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax- exempt status of the Certificates; (7) modifications to rights of holders of the Certificates, as applicable; (8) Certificate calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates, as applicable; and (11) rating changes. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). ?3 AvailaUility of Information from NRMSIRs and SID The City has agreed to provide the foregoing annual information upon request to any person or, at the Uty's option, at least annually to the SID. The information will be available to holders of the Certificates only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. The Municipal Advisory Council of Texas (the "MAC") has bee❑ designated by Che State as a SID and the United States Securities and Exchange Commission (the "SEC") staff has determined that the MAC is a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768-2177, and its telephone number is 512/476-6947. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office" repository I'or information filings made by municipal issuers, such as the Board, which repository then transmits the filed information to the NRMSIRs and the appropriate SID. Any filing by the City may be made solely by transmitting such tiling to the MAC as provided at http://www.disclosureusa.org unless the SEC has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004. Limitations and Amendments The City bas agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell the Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreements or from any statement made pursuant to its agreement, although holders of the Certificates may seek a writ of mandamus to compel the City to comply with its agreement. The continuing disclosure agreements may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions, as so amended, would have permitted a❑ underwriter to purchase or sell the Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offerings as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of the Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The City may also amend or repeal tine provisions of the continuing disclosure agreement il' the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an ❑nderwriter from lawfully purchasing or selling tine Certificates in the primary offering of the Certificates. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with it's agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings During the last five years, the City has not failed to comply in any material respect wile any continuing disclosure agreement made by it in accordance with the Rule. FINANCIAL ADVISOR Government Capital Securities Corporation is employed as financial advisor to the City to assist in the issuance of the Certificates. The fee of the financial advisor for services with respect to the Certificates is contingent upon the issuance and tine sale of tine Certificates. UNDERWRITING The Underwriter has agreed, suf?jecl to certain customary conditions to delivery, to purchase the Certificates at prices equal to the initial offering prices to the public, as shown on the inside cover page, of this Official Statennent, less an Underwriter's Discount of $ on the Certificates. 24 The Underwriter will be obligated to purchase all of the Certificates if any Certiticates are purchased. Certificates may be offered and sold to certain dealers and others at prices lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriter. CONCLUDING STATEMENT The information set forth herein has been obtained from the City's records, audited financial statements and other sources which are considered to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will ever be realized. All of the summaries of the statutes, documents and the Ordinance contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and the Ordinance. These summaries do not purport to be complete statements of such provisions and reference is made to such summarized documents for further information. Reference is made to official documents in all respects. The City has reviewed and approved the Official Statement and said instrument has been authorized for use and distribution by the Underwriter for the purpose of offering the Certificates. ATTEST: City Secretary, City of Sanger, Texas CITY OF SANGER, TEXAS Mayor, City of Sanger, Texas 2.5 This page intentionally left blank. FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS This page intentionally left blank. FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION 2005 Total Value of Taxable Property Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions Disabled and Deceased Veterans' Exemptions Productivity Value Loss Homestead 10% Cap Adjustment Abatement Freeport Other 2005 Net Taxable Assessed Valuation (100% of Actual)"� TABLE 1 $ 385,175,367 $ 7,146,153 802,098 1646969692 1,74MM X550.633 9,33 L558 7,179,147 73,447,007 $ 311,728,360 �°� See "TAX INFORMATION — Cih� Application of Property Tax Code" in the Official Statement for a description of'the City's taxation procedures. Source: Denton County Appraisal District PRINCIPAL TAXPAYERS Name Walmart Stores East, L.P. CBI/Sanger LTD Central Telephone Co. Hughes Family Partners Lennar Homes of Tex Land & Co. Springer Family Rentals LLC Vast Inc. Sanger Development Elk River -Sanger II LP Elk River -Sanger I LP Total TABLE 2 % of Total 20(14 Net Taxable 2004 Assessed Type of Business Assessed Valuation Valuation* Distribution $ 82,91Q197 26.60% Distribution 5,200,000 1.67% telephone/utility 3,3421675 1.07% development-res. 2,670724 0.86% development-res, 25467,190 0.79% real estate 11747,926 0.56% real estate L7381456 0.56% development-res. 1,557,083 0.50% development-res. 11502,352 0.48% development-res. 1,393,361 0.45% $ 104,529.964 33.53% Based on 2005 Net Taxable Assessed Valuation $31 L728,360 Sotn•ce: Texas Comptroller of Public Accounts and Denton Central Appraisal District A-1 PROPERTY TAX RATES AND COLLECTIONS"1 TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total"" Ended 1995-96 $ 78,2409705 $0,48370 95,81 % 97.90% 9-30-96 1996-97 84,764,092 0,48130 96.31 % 100.68% 9-30-97 1997 98 914372,796 0,47260 96.20%n 98.24°ho 9-30-98 1998-99 96,449,856 0.50280 95053%0 99.76%n 9-30-99 1999-00 10042438 0.52280 95,88%n 99.86% 9-30-00 2000-01 1294014,176 0.52280 96.14% 98.15% 9-30-01 2001-02 14601,829 0.58879 94.11Wc' 96.78% 9-30-02 2002-03 226,882,983 0.56547 79.03% 79403% 9-30-03 2003-04 256,31 M62 0.56547 97.38°kc 97.38% 9-30-04 2004-05 290M 1,961 0459260 97.41 % 97.41 % 9-30-2005 (a) See "TAX INFORMATION — Cihy Application oLf Propert1v Tax Code" in the Official Statement for a description of the City's taxation procedures. (b) Ev(lltrdes interest atnd penalties. Source: Texas A4unicipal Report published by the Municipal AahlisorNI Co1lnCil oT T eras, the Denton County Appraisal Dish•ict, and the Cih''s 2005 Annual Financial Statements. Note: Assessed Valuations may change daring the year due to various supplements and protests, and valuations on a later date or in other tables of this Official Statement mciy not match those shown on this table. TAX RATE DISTRIBUTION TABLE 4 2004-05 2003-04 2002-03 2001-02 2000w0l 19994H) Maintenance & Operations $0.41155 $0439003 $0,34629 $0037241 $ 0,36510 $0,33900 I & S Fund 0,15928 0.20257 0421918 0.21665 0,15770 0018380 TOTAL $0,57083 $0,59260 $0.56547 W58879 $ 0,52280 $0.52280 Source: City WATER RATES Existing Rates Residential (F.1 Minimum per unit served for 0 - I ,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 30,000 Commercial Minimum per unit served for 0 - 1,000 gallons Next 4,000 gallons Next 10,000 gallons Next 15,000 gallons Over 304000 November 21, 2005 $15.25 2.35 1 60 3.05 3,90 October 1, 2(101 r thousand gallons per thousand gallons per thousand gallons Per thousand gallons per thousand gallons per thousand gallons per thousand gallons Pe thousand gallons TABLE 5 A-2 PRINCIPAL WATER CUSTOMERS LOOS-06 TABLE 6 (As of September• 30, 2005) Name of Customer Sanger Mobile Home Park Sanger Mobile Home Park Sanger Trail Apartments Sanger High School The Sportsman Chisum Trail Apts Khosrow Sadeghian Living Center of America Karl Klement Apts Average Monthly Consumption in Gallons 878,900 271,066 255,133 208,008 206,32_5 168,150 161 *000 136,300 123,033 Total 2,407,9 t 5 Average Monthly Bill $ 3,671.04 1,157.17 1,9.52.16 818,78 810,95 863,94 781.84 538,55 440,53 $ 1 I ,034.96 SEWER RATES TABLE 7 Existing Rates (Effective June 304 2001) Residential Minimum (first 1,000 gallons) $ 16.00 Per 14000 gallons over first 1,000 gallons L00 Maximum 30,00 Commercial 3/A inch meter $ 22,00 1 inch meter 24.00 1'h inch meter 28.00 2 inch meter 33.00 3 inch meter 41,00 4 inch meter 76,00 Per 1,000 gallons over first 1,000 gallons 1.00 Multi -Family Dwellings The amount due for multi -family dwellings shall be the residential rate multiplied by the number of occupied dwelling units. A-3 PRINCIPAL SEWER CUSTOMERS TABLE S (As of September 30, 2005) Name of Customer Sanger Mobile Home Park Sanger Trail Apts, Sanger Mobile Home Park Chisum Trail Apts. Khosrow Sadeghia MHP Sanger High School The Sportsman Karl Klement Apts. Living Center of America Average Monthly hill $ 2,549.42 14952.16 903,10 720,98 633,03 240,00 220.78 210.37 173.54 Total 7,603438 ELECTRIC RATES TABLE 9 Existing Rates (Effective June 30, 2001) Residential Small Commercial Large Commercial Facilities Charge (minimum per month) $ 9.00 $ I5.00 Energy Charge (per kWh) $ 0,0761634 $ 0.0816960 $ 0,0377050 Facility Charge $ - $ $ 35,00 Plus per kWH Charge $ $ $ 9.00 PRINCIPAL ELECTRIC CUSTOMERS 2004-2005 TABLE 10 (As of September 30, 2004) Name of Customer Wahnart Super Save SISD Chisohn Trail Elementary Living Center of America Dick Hoffman Sundown Ranch Colston Co. SISD Gym -Acker Sanger Middle School McDonald's Jack In the Box Average Monthly 1,498,800 98,713 68,720 58,400 55,280 44,520 37 986 37,233 35,931 334243 Total 1,968,836 Average Monthly Bill $ 119,838.00 7,995.79 6,608.63 49796.71 5,533.18 4,599.29 3,252.13 3 M8.94 3,336.73 2,763.44 $ 162,632.84 � Frscal Year from include 10/Ol/04 through 9/.30/OS one year average consumption and ai�erage bAl. d GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 The Certificates* Tiscal Year 30- Current Total Combined Debt Sept Debt Service Principal Interest Total Service 2006 399,10.5.00 - - 399,105.00 2007 394,525400 355,000.00 2284266.06 583,266,06 977,791,06 2008 3994180,00 3354000,00 247,847.00 582,847.00 982,027.00 2009 3974650400 350,000.00 235,351 a50 585,351.50 983,001.50 2010 185,235,00 365,000.00 222,191,50 587,191.50 772,426.50 2011 185,385.00 375,000.00 208,358,00 583,358.00 768,743.00 2012 18.5,975.00 390A0.00 194,070.50 584,070.50 770,(k45.50 2013 191,245,00 405,000.00 179,0.55050 584,055.50 775,300.50 2014 190,965.00 420,000.00 163,179.50 583,179.50 774,144450 2015 l W340.00 440,000,00 146,421.50 586,421.50 776,761.50 2016 189,490,00 455,000.00 128,601.50 583,601.50 773,091,50 2017 1934280.00 475,000.00 109,901600 584,901.00 778,181.00 2018 191,465.00 495,000,00 90,141_00 585,141.00 77606.00 2019 194,340.00 515,000400 69,301.50 584,301650 778,641.50 2020 196,500.00 540,000,00 475414000 587,414.00 783,914.00 2021 193,000.00 560,000.00 24,248600 584,248.00 777,248.00 2022 194,2.50.00 194,2%00 $ 4,071,930.00 $ �' preliminary, subject [o change 6475,000.00 $ 2,2945348.06 $ 8,769,348.06 $ 12,841,278.06 A-5 This page intentionally left blank. APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF BANGER, TEXAS This page intentionally left blank. 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. The City's 2000 census was 4,534 which is a 29.25% increase since 1990. Education The City is served by the Sanger Independent School District. The District covers approximately 42 square miles in Denton County and serves the City and its surrounding rural areas. The District is comprised of one early childhood center for grades pre -kindergarten through kindergarten, one elementary school for grades first through third, one intermediate school for grades fourth through sixth, one junior high school for grades seventh through eighth, and one high school for grades ninth through twelfth. All campuses offer enriched curricula with special programs for gifted/talented students as well as students achieving below grade level and are equipped with computers and cafeteria service. Denton County Denton County is located in north central Texas, encompassing 911 square miles, and was created in 1846 from Fannin County. The County is the third largest county of the nine counties comprising the Dallas -Fort Worth Consolidated Metropolitan Statistical Area. The County is traversed by Interstate Highway 35, US Highways 77, 377 and 380 and State Highways 114 and 121. The economy is diversified by manufacturing, state supported institutions and agriculture. The 2000 census was 423,976, B-1 This page intentionally left blank. APPENDIX C FORM OF OPINION OF I30ND COUNSEL This page intentionally left blank. ATTORNEYS K U K T H LLP , 2006 Andrews &Kurth L.L.P. 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com WE HAVE ACTED as Bond Counsel for the City of Sanger, Texas (the "City"), in connection with an issue of certificates of obligation (the "Certificates") described as follows: CITY OF BANGER, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2006, dated August 1, 2006, in the aggregate principal amount of $7,000,000, maturing on September 1 in each year from 20_ through 20, inclusive. The Certificates are issuable in fully registered form only, in denominations of $5,000 or integral multiples thereof, bear interest and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the City authorizing their issuance. WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the City; certain certifications and representations and other material facts within the knowledge and control of the City, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R-1 of this issue. WE HAVE NOT BEEN REQUESTED to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Certificates. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. BASED ON SUCH EXAMINATION, it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the City enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, C-1 Austin Dallas Houston London Los Angeles New York The Woodlands Washington, DC Page 2 moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with law; and (2) The Certificates are payable, both as to principal and interest, from, and secured by, the proceeds of a continuing, direct annual ad valorem tax, levied within the limits prescribed by law, against taxable property within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates; and (3) The Certificates are further secured by a limited and subordinate pledge of the net revenues of the water and sewer system of the City. The revenues to be derived from the operation of the City's water and sewer system after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, to the extent that ad valorem taxes may ever be insufficient or unavailable for said purpose; provided, however, that such pledge is junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of Net Revenues to the payment of the Certificates. The City has reserved the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind secured by a pledge of the Net Revenues that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates is excludable from gross income of the owners thereof for federal income tax purposes under existing law and is not subject to the alternative minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Certificates in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted in the Ordinance to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Certificates in gross income for federal income tax purposes to be retroactive to the date of issuance of the Certificates. The Code and the existing regulations, rulings and court decisions thereunder, upon which the foregoing opinions of Bond Counsel are based, are subject to change, which could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof for federal income tax purposes. INTEREST ON all tax-exempt obligations, including the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, areal estate C-2 2006 Page 3 investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Purchasers of Certificates are directed to the discussion entitled "TAX EXEMPTION" set forth in the Official Statement. EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any federal, state or local tax consequences under present law, or future legislation, resulting from the ownership of, receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualified for the earned income tax credit. For the foregoing reasons, prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. C-3 This page intentionally left blank. APPENDIX D BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 309 2005 This page intentionally Left blank. �. '�" �. �. �- -�� � ,�, `�0 4? � 4.., �F .. � � � � � � tA, L� w- _�.. �� E � � � � cu SJ �r ;r? i � �- [?? E } � Liz � c� 4a �y � SU slt a� � E. �a � � � � � n �? "ter ti� ,�� �� � �� ,..J qz --� 4..,. 1_L �, li3 PJ? �� era u- C� �- �. clt t c.�) �. �: �. CEi �� Li U �� �: E �: �:.� �a �� �.�< � ¢4..:: 6U � � �i. � � �� .+.-� ui ^�? 517 � (� LP) C35 � � tts c;:i � �x � � � t2 �} � ce � �° � � �.� �`�.�-�� Eve G'7 11 _ i�,� CL .0 jai t""; Cf) �. (25 � �`k � r;r} rrA � � �F? � C;;a'r � tY7 ti3 �_ �].. .�: � C� .L .. � .� w t William U. t)pore, ti. Ceirtltitd Public ACt:ou Cant` Ind, lei rl.cni.Atdtlot sJU s)i I o the C itl C'cuncil t�lty' of'Stner, Texas 1 ht:ee tlticiitetf to accclil$fy47 irt fillariGia( stateillcrits of` t.lt7 °ertltnc t£t<? t tip hits, I�tisirltss :ti'l�e activities and inai r funds ofthe City of Sanger, Texas as of Sellternber'50, 2005. anU for theyear Moll ended, which Collectively Coniprise the C'ity's Basic financial statements as listcd in the table: cif contents. These financial otatetlients are the responsibility of Cit' 's management, Nly responsibility is to CNpress all opinion oil tkiese general purpose finallCial statenlents 13aSecl 111V t!,U lit, f corldticte.d n1�' edit irl aceoldancc i4it11 ttuditincf sty ndards ��eneraii}= accepted ire the L,itlitecl Stlltes c1f' Nnlericsl and the stt111cfarcls applicable to flnalic a1 audits Contained in Oove°1rfltnenl ,4 zr hilli SlCatt2 1/04fA', issued by the C'ornpuvoller General of file united :Mates, Those standards recltnr.e that I platy and I?erfornl the audit to obianl re€I'sonable assurance about whether the financial statements are free o dTlatBr€al nll$staterll nt. An audit ir1(It1t Ls 1`tanllniilij., (1r1 a to -it bta ls, evidence si€pportm.., tile: l 11OL111th and disclosures i1l till financial statements. An audit also includes assessilio the accouruino principles iced and significant. estimates made b4' 111at1agenivit, as well as e altlatfncs the overall financial statement presentation. I believe that my audit provides a reasonable birds for mIyl Op€11011. In rl-1�• of)inion, tie fint�lzlc:iti stitelllellts rcf%rred to abol c:: plesctlt fatrl}, in all illatcrial 1cspect5. th3e respective financial position of the governmental ac.ttvitie . busier ss-tv'? actitltles surer major f:iznds cy lie, t'it of Saner, `Texas at September0� 005 and the cha U,es in financial 11c)sition arid cash f ot%v ; 1Oiere applicable, of, those: activities for the year then ended in €::onforillity with accounting, principles generally accepted in rile I7n1ted States of America. fn ac:c;ortltlllc� 's�itl1 t_3«1�€vt�ttl�rtl rf tttr`r�rrrsr ,S'rcrrtc�crr`c1�°, I ha�`e alarl is5rred nl�,repc:)r tiatec T�`I�ircli (5, C1C€ on rn}s cotlss eration cl.l the %:Jkv ofSan�,er,s i11tLr11tL c.orltlUl kiNer firlallcial report(11{1 atld ill+ tests of Its compliance NvIth certain provisions of laws, regulailolls, Golltracts and f?rants. That report is all Integgral part of an audit 3t rfor€nee in accordance nee l6ffi Got4ei-mijent A itt iii)ia Slt7di lenAds and should be read in c:orilunction with this report in considering the results o' the aisdit "l`IIe nla.la;o1:111c.11i's discussion and rtntiiusis. the liudoetrlry' cc5n1Darisoil schedtllt: for the �ene.r<tl at3c s1lc:cial re.43enlse ftlncfs t111d the pcllsion plan fiindin�; l�rc4K rl:.ss are r1t)t. a recllrireci I�zrt. c1f' the b�lsic financial statcnlents, but are supplementary information required by CiASB I have alliilied cer alll limited procedures, which consisted principally of inquiries of manafrement ref ardinj..; the methods of nleasurenictlt and pl`esentatlon ()f' the suplllenlentarN .infornlation Howe'%, r, l did not audit the lni'ornlatlon and e:xpresS no opinion on it. N {Iy audit was conducted for the: purpose of forming ail tspirlic)ri on tfle c-.`its« s �iasic. fttla=leizil stateirlcnts. Tea;: other stlpplctnc;litar.}� infc�rriirttic�rl scllecit.11es cfescribs:ti itl the acct)tlll�rtrl��ilr,� table >i� contents are presented for purposes of additional arialy sis arid i r,: 110t a recltlired part of the basic financial statements of, the C-1ty of Sall er, Texas, Such = litlrn`ixisi()P:' has been 1 bjt;:tc:ct to the aticlitin`> procedures applied 111 the: audit of t111 basicflrriirlClcil s9:41t €,Iellts arid, lt1 t171" tii} itlit?ll 14 fairly plesel"ite f lil all material respects in relation to the basic.: fltiancial statements taken is '1 vdiole' William CS Lspcit� 2 PC 39.1-)fi Highway 360, Snit -102 # C-:t'rapc>vino,, TY 76051 # F�►1'11?1w661 2*,,:!«.� : �a ° y��2 2:�■>: *!-#»;,■,;:w.< »»:+:■f»2 .>at. ..:- �:.,2:. @£mkr,moa TommyK»cmd GannEwa Joe H|ggs e|fie James 9$e bawler �,:�:•2.! �,s� m Chavez fanny S %nme & KeR Ha mess mch e% Jackso m DHm yd, Hager& Sm Rh SEE ACC�OP#ki§RG NOTES TO RNANgALST»T� ]E&TS D2 CI'It' "I 3 1Nk.,ER l�IAl�,�AU IVII';NT'S DISCUSSION AND ANALV IS I15I' C T1II5 ,�1 �Clr lj l lra'C)I I.I its n,arracn,entity of San�?er, 4ve offer readers cifI�c C:it}'s fl�arcirrl st�tc«7lit. this t,arrative overview and analysis of the financial activities of the Cite ['or the fiscal y=ear ended 3eptera ber 30, 2005. The information provided }sere should be used in colliunction with the Basic flnanciat state Bents. This d14c.ussicn ;a.e,d ar,tllysis is intcndt�d to sel�,rc as an it,tro:�uction to the � It4's hasi;; Iirr;Ir,ciai Statements. The C ity's basic financial statements are comprised of three components: 'I) IrovemmentItIwisle financial statements, (2) Rind financial statements and (3) Motes to the financial statements. •this report also contairis other supplementary information in addition to the basic financial AaternQnt.- P1r1liiir•#in� the C:u,t�� .ris :�'4�`'},a1e-Uo��erztriie.ttt-�ti°irie lal�it��c-lYt1 .Stxitc�n�t�.nts 'i"Ire Strr!tc=�rtcrrt c}f:'�et �.sseis anti tire; `�ti�t�:niezat crf �ctt=iti�s T}tc for=ernrrrer°�t-rvitfe frlrancia] staterltct,ts are dei�i�ned tip f±rclvide. rc:adc.rs ��°t11 a E�r-oad o�=cr-��•ie�v of the City's finances in a manner similar to a privatesector business, T}ae Statersterit of Net �sscts �pa�e 8) I�rese.nts ii,forrnation or, a}I cat` t},c City} �; a�;ets <ii,d liabilities, witri tine ditterencc hetween the two reported as net assets vei time, increases ter decreases in r,et assets may serve: as a useful indicator of whether the financial position of the City is Improving � or cIr"terioratir, The Statcrxtct,t of F�ctis•ities �I�a:.'o «) prescut5 infc�rrnatir,n sho�vin�; l�o�=#�• the C:.:it�,�'s net a.ss€�ts z han eel dL41 11 t},e f'rsc:at year, .ill ck,ar, cs in Itt't a0 %re 0 are reported 3v1,c1, tt,c underl�tirr e� can# xiving rise to tile:. change occurs, regardless of the timing of, the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result .it, cash flOWS 1.11 fr_tture fiscal periods (.g uncollected taxes and carried but unused compensated <rhsenc es), Capital Irrant funds are reported as revenues m the Statement of Activitle5: `T`f,c: City' provides two types of acti��°itir?s - Governmental type. activities and I3lrsir,css type activities: Ciovcrl,r„elttal type; activities A t+4ost cif the C;ity's 13{ sic services are repc.�rted l,erc, inched};,), poltce, nllllil�:rpal cc-1tiI'l, allllTliil i.47lltr'o}; flr°L, trl�ra�', Gl�llletlltr7rti' c;,inter, �31�?111t;:G'rin�}., enforcC'Ii3errt.{m8pection, parks., }3ublic works, sanitation, senior centei, Switllrillng pool arid general a(Iministration.. Property taNes, sales taxes, franchise fees, permit revenues and n,41111cipat court fines finance most of these activities. D-3 I tasiaiess T fay , ctrz iti :sI fie UtY char&es a tee to customers to help cover all or most of the: t;Ost t& cerl am services it. provides. `flit. Cktv s electric. Neater and sewer wster7l is reported., here. el�at•tit�f? tfae �"it�'s Ic�st i�nili�dir�t F���cls 1{�"r��ld litar�x�cal t;�tertYertts I'he lurid f€aaricial sta�tc::raaents L�cfin errs pave I 1 and �rc��ide: dctailid irrafcartataicar, ahoart the rttr�st 5i nificant fonds -not tkie Cite as a -a whole Some hands are required to he esi ahlished by State la; and by Eland covenants. However, the City Council may establish other Rinds to help; it. control. and nianaage money for particular PUrposes. Tile (Aty,,'_5 minds of f'rarads - r�r}t�r�a�atcjaticri �rrt�1 )i4o )i4iePmy use difi'ere.nt accounting approaches C�r��,�ertatiicrata.l furtd:� - 14Ir;st crf'tlie C,itvs htrsic sertiees <are: rekiortc.t� ir, �,�r��,ertirii<-ratatf bands, which focus oil llovv nioney flows into and tercet Of'tile binds atnd thebalances left at tile: end of the year thatare available for sl;endin, These funds are r epovted usin� air, aacctitaratir9g Diet -hod called modiCted let;rill accounting, N liich measures cash and all other- financial assets that can be readily converted to cash. The grovernme nt.al Rind statements pro% 'de a detailed slag tdte:rtxa VIM Of tile C::ity's general go•veiOa me.jit operations and the hasic WT-vices it prcivi Governmental fund Information Beeps )Oou determine rshethcr there are moire or fever financial resources that cat) he silent in the near future to finance the Citr's proorams. `c describe the relation shift (or difterences) bc;met ti governmental activities (reli irted In the Statement of Net Assets and the Statement €�f Activities) and �ovr rtatiietital f`iiraGl. in as ret iancifiation at the bottom (if the fiend financial statements, • E'rt��ri�tar*.["urtf�; - 't�'hera file C°it�� c;fjar�;Gs c,rtstcrn7ers itar the ser��ic;es it �r-e-r�fides, i17csc 5ers,ices arc Tetaet°alk refic�rted iri prop rietariv h€tabs. MOPrietarrf iunds are repcirtt,d in the same way thai all activities are rt fporte:d In tile. Statement of Net Assets and the Statement of activities: In Eaclk the, C°ity's water and re%v�er f`=anal care tiie sail. as tilekjusiness�type ai4'tiVILieS we report t in the governmwni-4Nqfiaae statements but we provide more detail and additional inforn .ation, Such as cash flows, firer proprietary funds. ',`�deitc>ti tea h'natz�cia"iI. Str�tcrttcrttr lie notes kare-ry tde aadditieinal int:orrtiatic-rn that i;1 essential tci a full undcrstaridirt�� ter[° the ta<<3tat lirc:rvitlecl iri the �.t�ti��Lrririierrt-�},side and fttnd financial sCatenterits. "1'h: notes to rile fittarrcial staternerm; hevir., on page 16. Tlie C'it�'s net assets are; as fe?ffciws; NP ASSLTS i��l+'�g?t'Jtu1Et•S`t`F`.LAGT`IVLTII=a E3l1S,lf'l�,SS-Tl'��i�`�'TiVITz.E.._S 2005 2034 2C05 20011 Current r ill er 4s waaital Astx,ts Total Mutts 71 Lcrt-1'errr e ' § 1,4"i6,146 51420470C 6,c�M 8452 �, ::>,025 S 1,'i,fj iE3 S 51OR7t312 6,91e,320 3,T1f7,260 �4,9L1,0ti� 11 509,57:3 14,490,650 3,Sy5,v� i1 ,3 v,1ii1 c3J1 9is a94,g173 5 R1 Uks Ginter Liabilities Tgtii Liabilities 73,3,744 t D �5 «J 779i 476` W d'EGF 38 1 A,01,E1a: �,397,42C 1,30931?3 :.. D4.10i ln�trsted in Capital T(QTr1l �r�Ih�1�RY apt VcRNIOEtgT 2EA 5 ?Cn", to 130..279 , 3630e631 ?,13? ..5.59 �a93_ 189 1612, 93, 29 :. 10, 796, 41 7 �A2.2y.C1 � t'9i3,P.;31 10,070,€i`3 ?Je3t of Debt .2,;�57,F4 i,y41,92 7,it�2,'.-Ji7 � `r'�3A.:�:32 v,eS3s,fi2i 8,735.92# �e`t�tttctud Ot??,t 7 592,786 5074 7781 415,554 11170,846 1 M 1, 350 L€dlrestt9ett l (17'3 534) (4.7061 1403,3<<0 1.263,102 1 „r« 1,84 97a,',', )Pt Tt31 I Net As,;s is $ 2J4110P?9 $ 2,24a,dc12 $ 84Vj3j ; 55 $ B,�75,995 110234,318 01725,5csu ,fit ;Septenil�er :�i�, '?t�t�� llie City � �asst~ts e.�ct�eded i#s liabili#ies h�,t �f 1,� ��,:� ? �; ati illerease cif` l 108 , 73 8 from tale Prior year. Ttt�:. lar�e�t f�c}rt��� cat: tEac �;ity�`'s r7et rissets is it.�; sa7ve;tt���1�t in c�tl�tal assets, �1at7d, >�rtilcliii�, ecfuil�lncrit and infrastructure,} These capital assets represent 79?F� of' the City�''s tot, assets Tl�e City uses these capital assets to provide services to the City's citiz� tis; consequently these assets are tint aviailahte for future. spending. �>a.tlysi;� �f`C#y's t?pet-Rttictras The fc�llel��,rit7� t��E3le lt�t��.=ides a su►��rllary �f the C:ity's 1-s�jer'aticlns fair tl-te year etidcd Sel�tet7.11aet• t Q, 20055 ���ith comparative totals lot, the year ended September 30, 2004, R E'JEtJ t� E-S t=r�t�rarta F�euanue�' Gttarges f©r Se^ ices C peraVng Grants Capital Citants Donations. Genorai Rovenuer. Propertj/ Taxes Sales 6 Reverage Taxes ranctifse `faxes Hotel!Nlotel Taxes interest Income, Transfers TOTAL REVENUES �Rs�GR,4t�1 EXPENSES General Ga�rernattent `3truats8 Sani4i ion Gjiture & Rev-eation Interest xpense TOTAL EXPENSES �Hr"tiE'JC:;L IN tvET ASSETS tC3 t H'_ ?R I fa1ARl` �'�fJl+Lf�,glhll".I�?iAIAC'T(�t�J�� ��IuINE�a-I"YF'�=r;!:Tl�v'IT;ES i�<<f=Zt�Jf,Et�T 200"R 2004 2CC 2004 2t�r5 2CO4 7E�,83F 767,741 � �,25rJ,,11� y r';`•65,1^1 � 5,r35,254 $ 1ti32;a 1�`a,a75- 17,273 0 0 204,454 1`r,273� 204,454 117321907 1,479,i731 3�au,r33s 2E3,61;3 11 514 11,058 55,475 33,535 (ii4,41ta;535937 ;150, 3uf14 19,055 y4'�39 1?.�,305 iSh,Lir Jai, l?Csl.�Or; 3,047,623 3,S?3,713 6,034,t}5�v 7,38,O1S 1,'32 �07 1'�s,d 17 11, 514 110,412 0 12,E 2173 1,�79,D31 7it7.94u 133.�69 0,76 729 ;�67,65 2�3,154 .. -- 3+a7,655 2t1t§,1i'��# i,D04,Sc�1 i?63,30i - -- 1,3�4.'c3(i4 �3-3,'s04 51?1,45=s 54ti3Oi 2 - -- 1.4 3 5 ;6,313 �91 2133634 - 19 213,6 14 ,S91 - 7457,613 6,,?35,353 7,457 613 6,1.,45,L:53 3,4563122 2td;:3.660 71457;613 C 3 353 10, 1133.735 9,039 033 i i �D1 S 730,033 617,237 150025553 S 1,108 733 S 1 r'31:,eLv D-5 I" rtal r°evenues incrc:ascd DV 11.72rom 2Citilal with gorretrrnrentalactivity rcr'craue.s, irrtre.a;;rrnt�;. c: l% grad proprieta.r'r� hand trscr c;liarges (re��erirac,$) it Creasing 1_y,12°t 1"��tal C"it}° rx'ide. expens s increased by 220.87�. 3 f'rom �.004 with governmental activit}; C'-;tipen. ,Ses Increasing and proprietary ;find expenses increasing! "C 55%, The City, % ide 1`eVerrrac.s exceeded expenses lm, 1.,108,7.38. _? ,� ' ,� 1..1r' f :` Tie flrcus rat :lac. C"itr`strernriaetital ftarad is tc� Iir�ritie irifirniati�n ur{ ncar�te:rrn inllcrW, }cautllovvs.„ and balances of spendable re sOet�ari.�CS. St/rCh ;n1'c�r1nry at3:�ale'• is tyrs}�:f€ril ir; pax sscssTivn�'A. 1i3r8'e�a t"lit�,"';�. ). rraancna .Ll u%, r"nt'�..r�.�,in particular,. unreserved fund balance ina Y' sui- e It' rt A�R4i.�5Ur Of" l ro ernment's net resc:atrrc.Cs aar<ti aable i�0r spending at the end erf'the Fiscal near. Tl�e %`it�,'s`�+���er°raraaurat;�I t'uracis iaichrdc the �cn�:ral I'uncl a<rid the.: sl���cia[ rc;rrerrr�re !`land. Tlae sl,er,�iai. rt:,vetlue find is used to acc:.uur9t R)r the aCtiv'itieS of tl e (ty-'s tr.4,Gi hleridccl coraipunerai units, the Sanger 'Texas Indusiriaal Developnac"rrt Corporation (1A) and the Saiigr.er Texas Devek.)pment C_"orportation (413) along, N ith the l iotel'1°a otel tax fiands received by the Gov, 4 . Thoe tA and 4l3 funds are Contrc;lled by the City Council of the Cite of Sanger xand their rerrenu(2s ;are reStriuterx for r.c:�ataa�naic. dc,"e c�Ianrent as dc. .'Leal irr its bv� lairvs. `1'dac 1lcrtel.41�7=eI tax finnsi are collectedlaw° the lcac;6al 1110te) wire used by the C,iIy to pronaote tcaurisni. At Septei7nbc r 30, 21005 the specie al re enuc ' and lia(I fa restricted fund balance of $I349,850 Tlae. laraci baalarice csf' tlae �enr<r$I f�rrad d+creas+�d lad= `�53�,r,.�2 pritiaarily3 due trr capital r�rr.rtla�s related to street projects included in tile. 2002 Bond package rvhich rvcrc expended during th," current fiscal year The proceeds of'the 1001. Bond prour°arn 1,vere, ancluded in fund r venues n fiscal year "'002 tali are y' � a included in capital outlay each frsc,at y°car as the stands are r_x.ltera€iedA total of $629,713 of the 2002 Bond proceeds were owed during 21005, r=,rth SA13,857 crf urar,perrt bond proceeds still on hand at September 302005. Prnpurty= tax re.r�c.taucs ir�r�.reasrrci ���' r'`3�1,3�,�, a 17 7Et��:� inc.rcasrr. TI�e aa�sessc,d r41uc r-rf prcy,re"rty in ilia C'it laa: . rcrc 5cd 1 1.15 ftom the prior yew and has increased by i 5ti j a15 since 2002. llistr3racaall�the ('ir.}r hits e=rtly- traaristcrrc.d i`urads f'rcan� ilac pr��prie[ary" fiarid t�? tla� ,.f�:rac;ral I`ttnd aas f°tantls r'rre needed tlac encrail fatnd. Turin 2Crr bta%1, trar4lur. rage :?l4.32? unit actual traanstcr s r+ re. tiralr.' Proprietary funds - ".[`lac C:Ws pr-caliric:tar��,� fluid staenierais (cicctric.., r�»�aatrar grad se,�r.er f�rrrd'6 pr'r3ritle ilia s 6fnu t+; jae cr' inftartiaatic,n 1r3ur�d iri ilari 4"l,cirernnier,tpr?y'idc financial �taati:na{rats,vtrt itr nacre" detail, Th,e unrestricted balance tat the pMprieta i)Rm,d iracra a.sed by $140,277, tc Sl,{;t+'3,,79 at Septeiinbcr 30, 2005. General Funti Budgetary Highlights 'l'iic- r-rriirdarl l-rarriv�et ���r tire. c.ral fund was rriicrit-ied by the City C'otrrac,il in 'rf,arcla �..t"�t�C-�. T11e anauradraienis iracr cased btrd�actcd r er=eriares and e;�pr,ndita:€-e:s I�}5��3�,175 `I'ki� arareradrtrenis r'v`r:',r4 nick: to more accurately reflect e\pcnditurus that ry'cre incurred daring the fiscal veal and land D-6 ti om an increase in revenues over buclgeted revenues and to reflect the carry= over of S630,C1UU Of 2002 Bond funds that were expended for street inrprovernems 113 20051 actual revenues exceeded originally budgeLed revenues by �2�S;��C3. .tit tt_tal revenues irrcludif l rocee is from r e v notes payable able artci c��p It leases of S" i ���f� which l� were not included in the original budget. Budgeted revenues include.d transfers from the proprietary fund of �;214 321 , lic actual transfer-s from the proprietary= fund were S54.889. Tax reveriue� (��.0 i`%r), ch�t� s,es f��r ser�ices i l 1,2 `°�� police tides (`fi1.41 °�;) a��cl license ar�ci l�ernxit 1,30%) revenues all exceeded the orig:tnGll\� budgeted revenues. Total exlaendrtures exceetleti c�ri�ir�E€lye bu�l�;eted exper�,=itures by ��t�'�,131� prir��4�ril� due. to street i111provements of $629,7 13 made during the. year w37i(:,h were pail fron-i the 2tt02 Bond funds: As r-lientioned above, these.: expenditures were rrot irrclttde;d in tite original budget.. `Ihe special rep°errtte �.�� and �B i'rrrrds ar:tual sales tax re'en,re.s excet:tie€i bu�i�eted revenues by 36,330 each tine ro increased sales tax collections. "I'he 4B fund budgeted project expenditures totaled $152,050 r the fiscal year lout actilal project expenditures were only 42,436. These unspent funds have been added to the re<,triaed fund balance and will be used in Riture years. Tl�e �`ity�'s `tr7�,estnlent in cal�itctl assets as crl' St:tktea�ber (l, 2t�rf� an�ourlts to lf�;�)3�7,27� �nct cif �iepreclation): The investment it) capital a:�5ets ini lucles land, l�lrildings, equipment and infrastructure, infrastructure includes streets, water and sewer wstems. The: �'ity�'s calrital ;assets :ire as follows: t.'a tt�r G�n�t-ucti�n ''€n ?r�c�5s �daiidingu ; Egt;:�st� Qnt ' lG'�1'�tt_ it%�iT��L.1�.5�ET� (net of ave��rn€al�t�� ctep�ec�tiUn� �,t'i`v�t°.RNtv1FhTAi�nclTl'.+:TIED 6J`�;IE�ESS "v'��.�,c'rIL'rTI�S Tt�TAi-:s s� 376,840 0 G , �. 376;840 u 3 i Z1 S4. 45,6�1 E4J 8„ �w 312;a6Q 2,17 `�,2�r fit39,GWd `y ?,177,224 S 5.4,20.7[)5 � S'"� +?,31n S $ C1.930 278 S 1 �cn ,acid 1'�dditional ir�forr��ation orl thr:. t'rt�-'s c<ipit:al assets c;arl lie l��urrd in dote 3. 'I'lre t:ity� added lore -term debts drrrin� tlr.e y�car for the l�urclrase of vellicic�, eieetric depEtrfn,ent c.clttipment arrd [gar ��ct:ouritin� softr�ari� trlt�rttcles. D-7 C utstanditlM lcirlgt ter nl deists are as f0llt_ ws: t�1'r3TAta' altJt.= rtEf3T r T'Y .� 1t G�C.1 L''t fiJra3ElJ it.FCTu'4''IYi EiI ,;`dL50-r'e`t'E F, 'I'V;IK..c '.0, A'LS 2005 2004 �. 52005 MflcateF of i. bligatic,t1 evenue oridt� 0 0 4,120,00) 404C5,000 4 i2 i o. AC405,E p plc cs P�j aLle 20,5 R21,370 <' , J 604 1ra43 78a4 94 51 aa 0;c=�� 1.,3 at5 tal Leases 42 368 Kq 536 �� 5P2 30,831 88 87 7 7u �7_;; atbwugh Settlement Pa + 157,704 2�k . �,t 4 - rOT.•,t, i,i �? i� 7 35 $ 4,u w A 8^"7 ��dditciti�tl inf�rniaticiri ern the C`it�r's 3c�n��,-tc�c�rt'i debts ctti lle t�itnd it= 14c�te �. 3ud�eted g,erler•al fund reVeti ICS for fiscal year 20(JO are S4,216.52f s 4Nr rich is an irrcrecasv.. of 954 frOM budgeted revenues for fiscal Year 2005 The 2(ft budgeted revenues includes trttrawters'rOtli the }rorca riet<lry fitted ctftt, l'rc�l�rictar'}t 1`iund `�rJ;)t t�rtd�eted re4etltttt.s at-e �?,2���1, l 1�1, ��llicll is an iricre�t:tj cif �;?.+,�;it ,��er 21,105 budgeted reve]]Ue. , Budgeted connection fees (%vater and sc�tver tali fees and ctt}7er ccstin> cticrn fees) >csr 2005 are ?�000 while actual tap lees reventfes for 2�0,05 and .2004 N ere �'740,4 17 and s 7 1 3J.'196 respectively, The. Cite historic dly has used tuff fee: ttlr i.mprovenients to the Ywater and sewer infra StFUCtUre systenls: "ibis itriane:itil r`e��ct1-t is desi�t7es¢ tct i�rc���t�le 1t1r c�itizerls, eusttirt�ers, it;erestc�t s arnd creltcsrs ��'ith a eneral c erg°ier snt tiie �^ its,. e�f, San�,er l ' you have questions about tills report or need aid' additional inftirtllation. conircict the (tt� SecretttrN at_ 201 f3c; iWar �?tacet. Stirt�er., f'� , 76266 Ear pit 944JA59_7930 CITY Vr SANQR GUVER1\1iV1ENT-VVIUM STATEMENT Vr NET ASSETS ASSETS CURRENT ASSETS Cash Accounts Receivable (net) Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURRENT ASSETS Restricted Cash Band Issue: Costs (net) & Capitalized Interest Capital Assets: Land Construction in Process Infrastructure Buildings & Equipment Less � Accumulated Depreciation Total Capital Assets,. Net of Accum. Depr, TOTAL NONCURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIAE�ILITIES Accounts Payable & Accrued Expenses Deferred Revenues Customer Deposits Interfund Payables 'Compensated Absences Revenue & Cert. of Obligation Bonds Payable Notes Payable Capital Leases Payable Yarbrough Settlement Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue & Cert: of Obligation Bonds Payable Notes Payable Capital Leases Payable Yarbrough Settlement Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS Invested. in Capital Assets: r€et e�f Related DeSI'�t Restricted For: Debt Service Insurance Parks Hotel/Motel and Econornic: Development Unrestricted TOTAL NET ASSETS GC}VERN�IENTAL ACTIVITIES 13,92r 220,w21 9,147 243,395 _a 1,i 72,75 i 0 a 51124,801 2,614,431 (2,6951366) 51420,706 ^ ( 6,593,451 6,83eja 193,683 9;943 (9,9na1) 59,767 250,000 168,227 16.637 42,448 730,744 2,645,aa0 539,031� 25,731 155,256 -- .3 365:825- 4 095,769 2,257,55a 8P,342 6,967 50,732 (179,534) .n_ 2,741,08.E BUSINESS TYPE ACTIVITIES yJ 23,632 920,420 17,591 270t768 1,232 411 1,621,a54 i 27.,617 3 32,1C4 45,691 16,542,900 1,908;227 (7,299AD9) 13 `. 11509,5 13,258,244 14,4ma 9D&aa,655 fi8a,750 199;317 9,961 2:279 300,000 1294669 29,838 a 1,�a1,8.f4 3,t320,Of10 1 t�8,935 66,671 a 3,9n5 6 5,'397,4` a 7;1 �2,a77 507,779 a 1 0 1A03,379 $ 9,093235 TCIiTAL 37:u59 1,140,741 26,738 270,768 _ _.. _...... . I t475,8a6 2.793,SQ5 127,617 689,aC4 45,691 21,667,701 4,52Z658 U94,775) 16,93a 279 191851,701 _ __ 211327.507 874,433 209,26Q 0 112,04E3 55I�,aaa 297,896 46,475 42,448 21132 5 5 5,405,000 647,973 92,402 1559256 7,36Q 6a31 al 9,493 189 9,439,627 596,121 17,G2C 6a9'67 550,732 1,223845 5 11,334'18ma-v am SEE ACCt3I,rPAN4'lI1C NC7TE5 TCJ �-1NA.NCIAL STi;TEI�,SEfITS D-9 9 LLj rri cis ,-- � Kri A"a CT, r--- G :V s Sa"J Q r— c�-, � era st c�•� cis 4® µ awl: �' ,—• � E�7 �t 7 6Ca ra u's Lea =a�a ASSETS Cash Receivables: Sales & Beverage T axes Franchise) Taxes Denton County -Fire Runs Interest Vendor Refunds Due front Other Funds Property Taxes Prepaid Expenses Tt7TAL ASSETS CITY OF SANGER BALANCE SHEET GGVERNMENTAI FINDS September Q$ 2t105 GENERAL 'UND � 3i2,23 35 <41 22,243 16$565 2,061 1,865 91961 106,767 9,147 57€�,257 Tt�TAI. I'ECIAL GOVERNMENTAL FtE /ENUE FUNDS 514,442 11186,678 '35,4ti8 0 0 0 0 0 0 70,82G� 22,243 16,565 2,061 1,865 9, 61 1 L�6,767 9,147 Accou��ts F'ayat:�ie 119,620 Q 119,62fl Accrued Expenses 1 i,462 0 17.462 Deferred Revenues 116.710 0 1167710 TOTAL LIABILITIES 253,732 0 253.792 FIND BALANCES Reserved For: Capital Outlay 434857 9 43,857 Dent Service 445485 0 44,485 Insurance 17,026 17,026 Parks 6,96 i 0 61967 Prepaid Expenses 91147 0 9,147 Hotelf1v'lotel Fund 221333 22,333 Economic; Development 827,51 7 827,517 Designated For: Capital Outlay 18151064 0 1851064 Libarary 4,938 41938 Parks 55,972 55,972 Unreserved, Repottod In General Fund (44,991) 0 (44,991) --.. TOTAL FUND BALANCES-322,465 849,850 11172 1 315 TOTAL L[AE31LITIES & FINIJ BALANCES � 576.257 849,850 $ 1,426.107 SEE F-�CCt;�t4+1PANYII�G NOTES Tb F1�1�.PVCI,�;L STI�.TI=e,9EtTS iatimIWEIRMOMMI 1=und L.3 C�vG?n�. amounts, ra�parte� for go,rerna�enta activities in the Statement of Not Assets are different because: capital assets used in �o9J'ernntentai �ct�v�ties .ere not financini re sc urces and therefore are not reparled in the Fund Balamne `.sheet i�ropesty Tees recea4�al�'ie are Host a�ailaf-ile t�� t7aY br current period expenditures and therefore are deferr d, in the;. fund balratice shout t-J�"f `G�:'rn'b aE��liltlf;-, <(id C"�t,4t �,�91f3 i3n4i �7-�3°��"sitl{£'• (fl tht} current period and therefore are not reported in the Fund Balance Sheet Wit' u � i� r— e��t ,-- �-- t`J' �.Fa c �a tCS f'�, s� c� i Ufa �x9 �� CL"? � t"�1 '.$ fST iCF 4"? t:( �9 � �� t.- � tom- t�57 t?� _ �:g Lt: �^ .'� .J 4'� � a, � � �': �. �� �^� �. �; � �s ui � � � � �� �� � � �-- � � � iu � � cry — � - � � �- , �»„ � ;.c n. +� ua c � �y "' :� �. � :a � a � �- ova x ,..,� '� u c °ca -C ,� a, = C Yam' 'a..`' t� _� GW t�7 u. G `"�' cn u) ITS 1Fit �} �F ��a G -� ii} �" � 13 �� � sia .�. � � �� L �� L� [Ik Cll �? fn `r q :;5 '� a ' � G� ' �- � rrF v..3 't"'"� C � �d8 LU '�w �, � � c—.. � "� as c� �- ,� � � cam., �+, � � � a,w � ;,�i t4 iv � <� ,� aJ �; :1 ar; by �;; ;� � .,! tU �, rra t� � ,� ,' `- c5 � t� 7•: �....� art.. ,�. �--^ � ''�-� — �_ ,� �, cU 4,+ �a ui t� M. � �5 � � .. , � ! � e^i+ � �-�' ;f � [� � � � �tl.�? G1' � � G''3 -�-� cap �. ti3 � � �. ac� "xa tt"' i"-- t"°�:l ej� !3'"e Lf`} 4`�.I C.�7 1 >("! l"'�i C!5 £� C''F {�,1 W"? a"z t"�1 '�3` � ti''�. i �'! Chi � � � '�3' ma's , Lf} , �.. ��, E '"3 Sid f"? r-- r ('�& r �ii. ii � L's.`"! !. L�! ia:'� f`*- �7 i�7 °�J �! +�' :�. i:3 � � �i? �:3 f'�il l�� `�' ;`.�' 1f! 4 s td"k 4"7_ £"? s�"-* tr3 f`�, 4''•1 , � c€4. t ; t.�"J i� � tT`! ': _[ i°� CC7 Ri§' c— [Y;i� C`v '�.i' CY'.) td"S iU : � ip r_sa u`3 €'-` tip i^`!� a'A:1 : s� ; W 5 $ -' �? ! C7� --� j-,,� _-- °tl � ,-- ' �' ,-- £"YI `�' x!'1 Ih- <#" sJ.� i °�a �-- s� Ui c� '�' ; t � C €.r i �" � i C*7 r— �. �„, �:. r�.. � �.;� � u-� �-� ��- � Q— � � � tea- �� ra . �� � _ � € � � � m ._.,I � � L f� erg- c? �;.a ea � � . � �? c� � c'� c'ol ,— ' r3- �€- � c� �,7 s�. a �;'� ; cc3 e*d . c_a i. � i1J Ski s--- Si} . � `s3' t57 i r, , : t i � � } [+'3 ' c—• < ? 43 l e,::: �-' k.« � t 3t`1 '�$' , to 7 ; !3� G C3 : ti3 i �' #' t t'R " _ _ �' ®4 � Ltl i�*.I .— :� ; {d �-." ,— ,�,p.., ^ct '�" . C7J LGY '�$' . � � Qi d5., LL. i�." (� "� ;. �} Lij � u'? f�- �'} � tc'7 %t a CV Q"� 3�, ti' : Sx.J Ct", t^7 4"`�J iii l� a-^ tom' +v,� . C7} ;.C� �7 . e9' . £`J: i iF"? M i'sl C'7 r ('+� t-� �? Lki i� �- . S"�j � � ^* Cl�B Cqi l "3 "1�' � "t . 4i'I i`"7 C� �Sl `t9' �7 C.�„'3 �'^ +ytj ' � +','"s �::� i!'} �3 C'si C'!� �.7_'iXi� ; � r�k U� C°� C"i C� � a? ; ta3_ �:$' d� r 4i� d:'� . �.�"' � tea $i"} ''�' � t",i �-: U`} S73 7I`l : 6E�! gfii r`-.. CC7- �"'.3 r {,,,;.. x^- ; ii"7 d°al `s# 7 : �- i'v. '. �� �- k`"d C;� `�� •c— d''vl ' A� C' :� ti +& . ."*.i �T ?�I s-� �"J� C:�'s �a C+7 � : i--. �' Ia :s ' i i'"7 {fl i'"�t x� ra � . LLl �` �� a:,+7° !� � �y � ', � f,7 � x � �_ 'ls � � ="; B.�i �"' � � it � � � , a �a ,� � �! c � Ci.: �? �_, �^ l,id lit 4ii 4�� U � � C ` � (it a' ��,. `� 9�) t�. I�# IJ� `� c7 � il. ,� {,e� W ii! �Y +s� ��� ads � � ^- �� � �����} c ��.. �: �.w .��:� tsa �'' �? � �� �, � � � � � �_ � � � � � h- ate! � � l� � �- �, � � �:' � �� ¢� c � P-- ias � .._ � �. _� ', � � """" C'� �� u l°� Lai [t, LL. CURRENT ASSETS Cash Lccounts Receivable (net) Interest Receivable Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURREt+1T ASSETS Restricted. Cass Lund Issue Casts (net) Capital kz�setu�. Land Construction in Process Distribution u Collection Systems Buildings & Equipment Lass - Accumulated Depreciation Total Capital Assetsn Net of Accurri TOTAL NONCURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Accrued Expenses Customer Deposits Due to Other Funds Comported Absences Revenue Bonds PayableNotes Payable Capital Leaves Payable TOTAL CURRENT LIABILITIES CITY OF SANGER 711 •C11' 1, Sel7temt,er 3tiI 2445 ASSETS 23;6a?L` 905819 14,601 17,591 270,768 1,2321411 1,E�21,054 27f617 312x1�64 45,691 16,542,900 1 908,227 (71299;409) Depr. 11,509 573 9 3,258 244. NONCURRENT LIABILITIES Revenue Bands PayaE�la Notes Payable Capital Leases Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES Invc�ted in Crap€tal Asuts, r�et psi Related Debt Rustrict€d far Di bt Service Unrestricted TOTAL NET ASSETS LIABILIT[ES 570,432 110,316 199,317 9,961 52;279 3002000 129569 29t8038 1,401,5'i4 NET ASSETS 3>620,OU0 08.935 6f�,671 51 397;420 i,162,5'77 5C�?,r79 1,403,379 9,093,235 aEE ACCOhrIPANYINC NOTES TO FIf�ANCIr�L STATE(viENTS D-IS PROPRIETARY Connection Fees 29.317 tvliscull rnCOLIS 1G. . �-M..✓-rnai� �iE1�.�11 i14V �v�tvtJEs Ij,�u�,;31 Per canneh �ertfice 't ,1 �rJ,t �4 3ur(tiosed V' it+ rlEle=,,dt' 4,2 18,948 'uppiies & contract 618,335 ERepai'r & Nlaintenance 321,272 t Itilities 850a82 Franchise Fees 174t616 1)epreciat on 791,567 T'C7'I-AL. �PE��"lt�d E��t1JS�� 7,3�C,�L4 Cit�E.��iIt�G iNGOP>i� 14�,434 Interest Incame �3 g37 sip Fcs '11,1r?3 Interest Expense (241, 345) Transfers OUt to General Fund TOTAL NC}NOPERAiIN REVENUES (EXPENSES) 4681€b3_ CHANGE liV NET ASSETS 17.237 Phi ASSETS - BEGINNING 8475,998 94093.235 SEE H�C�t,iPhE�lYihJ� t��`T'ES i"q FIhJF�,PJGir"4� STA�Et.aEt�JTS TcEr kite i'c41r it( et ;V-11 %.1tal?%.1 :;i?, 2()4.► CASH FLt�WS FRal�1 OPERATING ACTIVITIES; Cash Received from Customers 7 ,274,728 Cash Payments to Suppler. for Goods and ServirciS (51224,245) Cash Payments ter Employees Services ;1,183 1805) NET CASH PROVIDED BY OPERATING ACTIVITIES66,57`l CASH FLOWS FROt�i NC3NCAPITAL FINANCING ACTIVITIES: Cash Transferred to Other Funds (40t953) .............. CASH FLOWS FR0��1 CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets (1,268,871) Additions to Long -Term Debt 286,014 Principal Paid can Bonds and Notes (430,521) Interest Paid on Bonds and Notes (230939) Tap Fees Collected 711,100 Capital Contributed - Grants &. Developers 24,159 NET CASH USED FOR. CAPITAL. AND RELATED FINANCING ACTIVITIES (913,058) CASH FLOWS FROi�1 INVESTING ACTIVITIES: Ic�terest on Investments 41,3a4 NET [NGREASE (DECKER sEj 1N CASH (45;98t3) CASH -BEGINNING OF YEAR 1,690,666 IZ CASH -END OF YEAR 1644.,686 CASH PER BALANCE SHEET: Current Assets , Cash � ;,632 Noncurrent Assets Restricted Cash 11621,054 TOTAL CASH PER BALANCE SHEET - 136441686_ RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED E3Y OPERATING ACTIVITIES; Ol�er��tinc� Ir�con�e Adjustr��er�t try Reconcile Operating Incorr�e to Net Gash Provided by Operating Activities: Depreciation (Increase) Decrease in Receivables (Increase) Decrease in Inventory/Prepaid Expense Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Expenses Increase (Decrease) in Customer Deposits NET GASH PROVIDED BY OPERATING ACTIVITIES 148,434 � 7�1,667 (246,328) (29,685) 19M27 20;924 (18,262) 666,67.7_. SEE ACCbIa9PA.NY'ING NOTES TO FINANCIAL Sl`ATCd1ENi`S t vo I Ci l IIlri: Ia'l tit 4::_t; l.a S 1-10111e I UIC, (Harter City, as defined by the State of'Texas T.re Clt4'` 171`o ides the f:Olkxwii11) sera`icts -''71 1rlcgnt-- ., a[itt:lrll control, c tlnlnitlriii ' Gent i', frig., lil7C ?r` '" fit, tBT .4 tll r3t1111'�lls'ct,4 5 17 uriti'.,ipa t c,;r1i�"t, laks, polio, pubtlC lworks, samtatRM. SC1110, CC]Iter NWOJR7'lll,r74, pool all, +�T,�.letal admintstpaw.'e 4ei`1'tCer Ili addition the C.1t\Oa4'al'S ta,"li o pewA ral;tes the. Clty 4 electric. watet iail;_I :se;, cir `°, Stems Tlie C:iti,'s; iirlalteia3 str�te:�rilr�tlt.s t.,� f�l��l_lated irl r�c.�.+�rdalic�. �e��'itll �,e:7�-rai11°y at�eel`rt�cl acccltlntil7� l)rincillles (GAAP.). The Cvovernitae,ntial ,'hiCComiting Standuds Board (G:° SB) is responsible for t stablisl1111?',. ('JA- l I' r st oe and lucat i?ti'e": ['17Ii&etit tl rsltazJl ttti 7r't?rls:alllltil'i7li blta 1, °,i;:3t lalClli and Itlterl�r"e€aticari 'l. C��a;yerrlrilenis are also required to fc1lov 'lie. pvonc.5rYr1cenieraq cd` the Ena3n6al .cd tlritir Standards f3 7ar l tP , SI3,+ ;swil ci it r:+la;�li a-r, r ih« r tj IOS9 i°,°�,heyn apl ll ablo that do itt c.elrlfiict e5ith or contradictti,SF3 lrclrlttanlemerrtS, The ri 411r" s1, niii sent accounting policies established in GA.A<P and used b%5 the. City are d1sa:,lrssE:d below ."�� recluilett ht- �erlerally rt✓�"�I'.ts4t,i �cLx;aunttl�? 11rir�tilll�s, Clio friarlc.ial �ataterlT�.i,s �;�rf` CEe lel}i)i..Ilt:{�'. elitity` ineltldC i10SC 0 11it C ityl rlf Whi Ter c;tlae Itrirltm _+,m erMlIeln allu ita coy nlpmlem Llrrit= . I lle lollo4ving component nt units are HIClUded lit the C`,itv's Iipor'ttrt'v', C1711t'y° because of it°, kill->eratl{ nal and iinaneial relationship Nvith the City. e.i' �. C't-lrrIlc�t,erttt trim � {r�1; Tle ..a11r�e[` Ter�ati t:,�i-;i�;ta°ri�l 1<ll,iw3eltt ¢ -1 �t3 }R t� e } _ _Y any { , can 4y (i removed t t qj j ,e r}� its' S , elf the City t)f ?Cant er and an}F of �1�t'ail. ni can b rem ed f on'i officeL?'t` xhic i b{y� C i_ts .L.19 at its' vk All, f`he S.T I 1 C" � a° inc orporatett in the state: of i ceaas r s a iionTprol t industhal devve.lol mlvn c,t:1rpor`ati011 ut°t,e°r SecLion 4A ell" tile. Development Corporation Act c.rY° l t� �.� (ire I�lirllt:l e (if the S.T I.11C is to prcmlote eti.ollolliic development within the City of Sanuer, Separate finaro..«ai tatenaents Oi the C n1ponent ilriit will he ri'rtalned frol1 the t 'iv's idl llnlstrritlG'e. 43f 1 :" . Idle,"rick:-d C'onip+witaellt Unit - $.,=113}; The 4ar,�.;ei" Texas DeveloI7:ttelit t:orl?irlrtti1:ilr R, S T D i" ;t i.�; i_>.c`�'er`rlecl f7\' � 17y}d<T% t:+t �e�`ell dl.rewti;,rs. � an C?C 'a�'l7Cit71 aC� tbi�il�;�lnit:ul?�y` Ili4'- � lt`r' Ct��tlile:tl tlt thly t_`itYM1, e7t Saner and any of 1,vlioni Bait lire retl�c�k.�ed from office b the Cit�y� �"t�uwil al I ilil f'i�e, `� "1' I C. �v<s iric,clrlorated in the state erl` Texas :as as a1 rlcrt l:,rrtit itidtttrirll development Lc_irlltr itiiti aan 1t:= ie;ct€om 4B of tlx: Devpele3lJl1 ent Corporation tion Act of I1�'11779. The Iltlrf)Ose ofthe S.T. .( is to piot:not< .cono.niic aria Ca:11r1 ]'rLmit°.' deve;lc?Illnet t ''.7tliirl than C:lt'y 6. S n(,e.r Separate t;%'l n .dell St 3t '"rl rai: It tlh C(K11j"a01dtlr UTM C1.n hl obtained t7-oM the � itv s e rr` tc ii%lrtili" r z.a 4"'tit' 1-3i 7C eS ���F:3 C'I I`1' UV Z5A1ti1L3LIK is Vj I'i S IIZ FIN �l(:'I.e.L 4T, TF 1}I l♦ ?°d 10 SEi'T�I4�FiI~R fit), ?tl(} 13, I3��.�1C' I�I���.�`C:11�L'�T:�►TE�'IE;ITS-��1'.k�I�1�il�Il��'l`-i�°'II�E �'I'.t'I"E�EN'I': Tine C'it��'s basic:. Izrrancir;I :�tatertretrt:� ineltrde Ir�atil �c��err�rr7elit-��ci�: �r�l�crrtin;.; tlae C;it�yas a ��Eacic;i Arid fluid financial statements (reporting the City's iiijor hinds), Both the government -wide and fund finanncial statements categorize primary activities as either- goveiIin nental or business type. The (iW s ambulance, animal contra(, ccrrnirriumly center, fire; library, enforc ement3tirrspec ion, municipal court, barks, police, public works, sanitation,, senior center, swimming pool (and general adnninistrative services departments and the hotet/mote.l, 4A and 4B special revenue funds are classified as �overnrnental activities. The Clt} s electric, water 41nd sewer services are classified ai business -type activities, In flag ��r�°erir�r�ent���•ide �tat��rrter,t crf' �?et :':;sets; ��,crverrlrlaeltal aeti�ities ar°e lrresrlrteci rfn :t consolidated basis and are reported on a full accrual, ecoriorniQ resource basis. which recoginizes all long4erm assets and receivables ak, well as lorig--term debt and obligations. The Cityl i net assets are reported in three parts- invested in capital assets, net of related debt, restricted net assets, and tinrestric:.ted 11Ct assets The E_it' first utilizes restricted resources to finance qualifying activities. The for{erririnelnt-���ide Statclnnclnt of r`�.cti�'ities repcnrts bcitln tine dross atnd rnet ci�sts of each of t=1e C'it4's Purnctions general government, public salet �, public. I.vorks, culture rind recreation). I"ne functions are also supported by general government revenues (property, sales and franchise taxes)_ f"lie Statement (if' Activities reduces gross expenses (incltiding depreciation) by related Iarcigrt€inn revenues, operating and capital grants. Program revenues must be directl}, associated with the function (police, inspection), Operating grants include operating specific: and discretionary{ grants C hile capital grants reflect capital specific grants, Developer contributions for public works infrastructure are included in capital grants, `l'tie. net. costs (.1N3P fiincticnn) ar.e ntnri-t,tlly coverc:,d bar general revenue {prc.�pert�s, sales, francJnise taxes), "C"lne C;itv does not allocate indirect costs. 'I'tnis �ovei'nnlent-wide focus is rnncirc. chn the sustainal>ilit�curl` tine City as am etntit:�l and the: �.�lnan�Te it: tl�e C'itv's net assets resulting. fi"otnn tine currealt �e41r's sncti�iti��s. 'I'lnc financial transactions oI'tfr�: City are arc: reported itn inclixridnril (finds in the, the f'ttrrd fnanncial statctxicrnts. l raeln f`iiind is accounted f'or b}r pro�,ridin� tt :sel��aryite set of gel�bulaiicin� acc,oit�7ts that cc�tirfnri:e its assets, liabilities; fluid equity, revenues and expenditure s/expetnscs. The various funds are reported by generic classification Nvithirn the financiaal statements.. °IYiie following t%zttd types are used by the Cite. tyTEzi T'Li '1"11E 1`'11� 1'1k,'jt%1- 31ATE IN3E1`N I �,E1'TEt4'I13ER 30, 200 Tltl� l�a�tts caf the ���,crntllelatal fCliiClu�' IZIetlsl�retltent till tIe. f=,,IIIIy 5t�tt'IIIeIIts,) is rfp�)ti tletcl.rrrlllati�rl cif' llllatic.ial pt, ition and than es Ira financial position (tsources, uses, and halanCes o financial 1'eSOLWCCS) rattler than upon net Income, The i'ollowY no is a description cif the grovernmental flSnds of tile City (�elle.ral 1=t1tld -The CTeneral �urlti is tl)e �etteral olaertltin�l tll�c €elf t-he C'it;+!°. It is uset) t� a�:.el�Itrllt #c)r 311 financial resowc.es not accounted fOr in other flurils. �ipes:ial 1�c:',e€;tre - Tte �pcc:.ial 1%e-•ti`ellt:Ie ia'tJtad is used t� acc:c�rlilt fc)r the lare)c..eeds cal. the �a1ler- Texas hidustrtal Dcvelopi- ent Corporation and the Sanger Economic Development C orporatIon series to x revenues aiuie the. Hotel,"N otel tax, revenues. The 1' un€1 balance; is reserved to signI Y anlr)unts that ;ire restri t,eG to be used I'm economic CleaP'l:IOPI)ICilt aDcl prolljotlola v�.]thl l the City' m. P►-€r1a�`ic�t�tt��` 1:� clads: � lae ts��tUlls t�f �'rC��li"Ct�'Ir y� flull�ls' IlaCasttr4`,Ilenk l4 I.1pC713 det�;r12a€€�at3t)�I e2I; C1I7C.lat2tl�; CrIc.C)¢IIC., LIIaII�;tis nI llet assets, financial position, algid: cash Ilcws. The getterall� accepted acc.ollntill principles appk<t:ltle are ttiease Slil cal Let nusiness in t11e private sector. Be follo��.�illgy is a description of t11e proprietan' I:bnds of the Cite: )✓.lectliu, ��'ater al:d `�e«�a+e€ - The Electric, t``ater arJd �L.�-�rer I°ur)d is tsed tcl accotlll ft]1- t11e c�perati ll caf t11e C'it� `s elec,tric, 4rater tatld seS'Aer SYSIela)s I rvi celi a lue is diaed to external customers for goods and ser},ices and the activity is (a' financed \,vlt.11 debt secured by a pledtie ot'tlte. Ilea re'a`erluek; and a •7 . , 1 has �}Ie r'r~tltllrerllertt that (lie oast t)t° 1)icr�'1d,�111�, ser���'ia;e5, �nc,111u11I,, � capital costs, l)e recovered lay;' user fees and c.harues, The C'it'v cictes 11t.It. ha'a?e lrn-v fidtl.4tar�r ftrn43s, l-5 "a°.� 1� of aCt�.i't€Jt'i[ttl�' I,itCE's tC) 11"sL� � ' 3)i at '4'a`111L1i I"ei°'e£Ilies t)r EtiI3.�'.C7(�Jt+.trbn'S eb4l�e3lSti;� zaiL� rGiCl�nlZei� 11? t11e ac.�:+�-iullt5 all�l rcla�l-ted in thti flllaticial statelt�etlts. It 1°el>~^�eei lrill.a;i1� tca the tiltiarts,�j cif tl�c IYleastirenlelllS r1.tCCll I"egrUdleSs of the Illeasurement tocus applied, la CCt`lltd: 131+C11 ovt'I'IIIII;;'I1al r1C11'a'Jt1es attcl l�ustness type avtta'111eS tr3 CIIE'. L7,C)'�°l'r1111If.')lt�S�w`1C14'_ tlilltl�,:[171 5t`�t4'nI['.E'It" tittd the tri)priellr�, 61>IId �teitelllelat5 a1"�' '11'esClate�l �tI the a�e;rual taast5 caI �CC:elll€Itlrl�. Re�,ettttes aI'e re. oc;lai ed 'oh tl 4a<lled and ex pe.tlsed are rA cCognired WIler1 ==.IC::Irreat, CITY OF SANGER NOTES : TO THE FINANCIAL STATEMENTS ?: Iflilfed ,cczrlal Ther�terrtnlellt«l fend friarreirrl state.snerits are resel�ted curl the Iai€�difi d etc i:rual laa Is;r' aCcournti€l . Under the modified accrual basis ofaccounting, revenues are recorded kt4ien susceptible to accrual, i,el both measurable and available. ` leasLIrab€e" means knowing or being lible to I€:asonably estimate tine amount. ` _ wail aide" means collectible within the current l eriod or within 60 days after vear end. Expenditures are generally recognized under the modified accrual basis of aCCO LIMlrl ,; when the related liability is incurred. The e\ceptlon to this general ride is that principle aid interest on general obligation long terra debt, if any is recunlaized When dues :�. IZeti�e��rte �eccr��zticr�a; 'I`}le C'it�• cc�I,sider-s �rc�f�elt�=, sales and frrrrcllisc- taxes as �l�aiable if' c�llect��1 ��itlirl ��� r}�t}s after °ear end. All ether governmental revenues are rectrynized when received. . I�e.:�trieled I�es�rtrz`ees: 4��hen rrn c,��errs�: is inc�rrre�} f�jr }�E.Ir}r��se4 f��r t.�thich i�€ath restricted and unrestricted Iesc�urce:s are. available t}re City first applies restricted f sources.. 1> t'ash arid. C'it:sh Etlt�i�°�t[trtts: rl'}�e C_`it�,' }�s�s defillec} cash altci cash e.c�r;i�°alerlts to liclude cash c�ta band and d�Irratrd defsits. 2. C'rizitxtl tt;. C°al>ittrl assets f,krrcEr;tsed trr <�c�uired ���it}j aI7 c�ri,��inal cyst ref }I,+Jt.�l ur rrrcire are r-el��al-fed at }I'tstc�ric.a cost err e:atilrr;rtetl lristcrrical c��st. C"c�ntrilauted assets are, rer�urted at flair rraar-ket �,ralu�° as c�f� the date. recelved. Additions, or irrlproverllents and other capital outiays that sis_:;nificantly extell i the use601 l,i't ofcart ci4 Gts tare i a litttlt7 (}. Otherfists IIlclirr d fur repairs and rrra€I1'+.erlr?nce w. e expensed as inCUrred. Depreciation is 1.)FO f ded on the straigjllt-lire basis over the: followin,, estirilated useful hV rs: }3uilciinos 5 - S0 vcars E�[uilrrl�ent � ?Cf �=tars Els ctl ic, Water & Sewer Systems 10 50 years �Tlirastructure - `streets 10 years `*er 34 requires tlae City to repoI-t and depreciate. rre��= irltrastnacttll-e tlssets ct4`c�cti��e �4itli the. 5.�=it}r t}Ic fiscal gear 1sL�ilrnin� C)�;tc�l�€:r 1, ?t?Cl� and fire C`it�` llrts elected ter irrrl�[eIrert flje retrc�<Icti�e infrastrttclure provisions at the sane Wile, These infrastructure assets are raker to tie the laraest asset class of tile Cite D-21 i I I I UV Z. AI2ER I'()'IIIL I�IIII&IIIL: Ir',I� UlT4ATE11VI r.IN i ;�. I�c�ectaues: uLr tafiliall}- all{r'� erntite vital ftar�d rea crtrc , arc tc.crtrd. I�, open is l5 arc wiilld grid c trllected kvithin the sanic period in which the taxes are levItA, Subsidies, grants and develoPer corltributions to }rroprietalv Rinds, �,vhich finance, either capital or cutrtirtt crl),eratIons, are warted as nor operatim, re:VULIcs based upon GTASB No L�;�}�zriditrtrrr� are ret:c`rni�ed 3.�,°lien tlrc related f�urd lialailitti is inc.ttrre�l. . 'r�ftapct�srxted ��k�scftc�a `Iryhe �;it�� ac:crucs accumulated util7aid �°4rc.atiotr titre ��lie:.t carrbcd la�f the ,�nilrlo5`ec `l"lie. �aorrcurre:nt }iortion (;the amount estimated to be uwe.d in subsetluertt � ears%a is maintained sLpat atr land represents Mt reconctlni{gr item between the fund and govermiient-wlide presenlatron& Cs. ifft���•fta'td ,=etiritt'. int.l>rl'lttld a,;.,ti�,it�is re}:�c�rted its either loans or ttafrsfers. L4�r�n� art; rc°porte.d as itjtcrftind re�;ciwahae. anu }aayame as appropriate and are subject to chnimation upon consolidation. `I ransfers be:tw% ere roverttrrienta€ or proprietary funds are betted as Part of tile: rec.olmlement ter the, o;ovc rnnient-v- ide t t ancial statements. ''� tkt�t�. C:assiftct�►tic�r�s; 1�,Fa'Ll��T31t?lid,5° [c�uit�r is r,iaassifie.d as. tiet assct�; stntl tlisl�layed in titre. c,trnrpernetits: a: Investedin capital assets, net of related debt Ccrrisists of ca}vital a:�sets riet trf rtc:cuntttkatcd dc}ireciatic_rri <ttir.M rc;dttt✓cd l�y� caul.;�tar7dir�� Ir�alatrcc�s cif atr�,= h�:rtids, t�otcs err citliet trrrrrc�ti�ir��s that are:. atttil3utable to the acquisition, cerrrstruction, or improvement ttf'those assets, .ranv outstantlijwy debt is reduced by any unzipent debt proceeds at the end of thy: fiscal year heForc the reduction discussed a17ove.. 1. Restricte:d net assets - Consists of tlet assets wish constraints placed on the use either (1 ex te.rnal g7roups such as creditors. Lr'iintcus, contributors, or laws or regulations of other go vet't3f3iellts'., cr w2j 41W through cOnstitulional provisions or enabling legislation, c.. Unres ric:ted net assets _ A11 other net assets that do not meet t'ic. criteria art' "fest:ric:ie"ci" or rrivcstcd ita ca}itt<tl assets, tae.t tal'related ceht„" )Tr�s 7'() Tffll: N`1 �IrtINN AJ, a I,%'N'l IJJi�l'I' a�P'I'Eh1i3Ef2 :�tl. ?f}Cl� l 'arttr: lctdi�taaC t1f4 Cio�'err2►rrerltal trlr]d e�lttit�is elElslied �� ftrr]€l balance E�ur�d L]al;lt]c,r< is f.'urtrer cla,5ifir;d as reser',ed and unreserved, with reserved 4irrttter split between designated and undesi�gnatc d, Proprietar��� fund e€laity is Classified the sane as in the government -wide. swer]ents, b. �rici I�ettts. .=�ll���aance f��r urr��rll�c:t�il�ke. r��:�c,tn]+s reec�i��aE�le; in tkt�3 I'=c�l�riet�tr�� F'unri at e�te►]�l.7er :I�i, �(lt�� is P41 162 TI]e allos�°�rn�.e nor dclllclrrent 1]rc�l:rert;= ta;^c�S is riot. l�r'o�,dc:.d as it is corasider�:d to t]e irrrrnat�lal, _€1. �.;rtN�i:tttlizcci lntt_z'�sf: I�or t3rc�t�rietars{ f`ur?ci rel�ortin€� the t-it}� capitllizes corr:�trtls,:tc�r] ��eriod interest ct�sts ��viren irrcurr�ti. i�or �r��,•e.rnrner]t-;�,•ide. rc]c?,�tir]�e, the ��n�ral firr]d eapitaizes cc�nstrrreticln lreric]ti intr::rest. costs .�k]cr] i (] crr rred It `1c,l�tcn]��c� ;,t, vi'US t}re tv:itj,'s �;asl] aecou2]t5 totat�;d ��,� � I,:���1 of'��1]ich ?,�_� I,?G�t �.��a:s held ►] chcukin accoulltw at a loc<rl firrtrnuittl ir]stittrtior]. 1GC,01 of tl e lank t�atell rccs tw°ere coerei federal depository insurance (risk category 1). and tt]e remaining $2? 311,249 was covered by eollatcral held I)v the l�l dgin 3Elr,k's went ir] the ►]a►]]c of tktc: City (risk cafe ;c7r�, ). `here �,a��et-e no uncollateratized cash acc o linf.s. 'I'tIe sc�c;alrites �leds,��ed Ley tfre C.'it}�'s tlel�ostor�� irlstitrrtior2 are t;s fcrllo���s: SECURITY FFC�3 FHL� FHL.MC Fi�IMA t S TREASURY NOTE PAR 0700 113r�0,000 ?Lrfl,00J 4UU,4VUU FMV 49U,��� 1,336,768 6�2,r��3 ���r41] ►]d gash eiltlt.'zlenTs i�rl tl]t', k7til�ir�Ge 5k]4�t GC7r]5s.3t c�If"tlte to w►t]�;: 1�e:1t;v t;asl2 �; 1r?f! CI]ecltt►g,, S�r'�rt2]gs and �.':'s?�� FIVA j 'ITN ' OF ` NAkiEy ?tip TL T(.? T1IE F Ia, IN �44 N 'I." L 'I 1%"1,"i„1I I� 4 N'A �.�t�.prtt9! c3S��t ctU; ��"�i�' 1�.1t' �i(;'. 11�C`%s� \`l;i1l''i:rl(1�� C:t�i�tll�;•L,r 5l�, ��..'i_�_? l� eiti si?��41'«�, �. Lard Easem�nta frfrastructrarr C�uilding4s & linpruvernents Cfficu Equipment Equipa.-tent TOTAL AT HISTORICAL COST 1rE�S AhCCtJit,1LATIi�C I�ERECIATIC�1� and 6. Easements IInfrastructure Buildings & Improvewients Dtflce Equipr meat .gtflpnie.nt TOTAL ACCUMULATED DEPRIECIATION Land Ce�m.�true;i�ri {r �C�iGe�s Eui€dings Equipment. ""stater System `aewer Systerl Electric System,,. TOTAL AT HISTORICAL COST Erusldings Equipment Sewer System E c tnc System TOTAL ACCUMULATED 4 495,088 888,356 106,820 1,342,572 2W676 1,226,992 232,553 74,728 578,091 2,1 12,364 0 6291713 541726 34,227 187,730 906,395 348,810 34,103 225659 17i',430 563,002 c 5.097� ,312 � 323,?,93 4 312,164 374,315 1,112,891 80,783 4<559,556 4.41�1:7 9c 15.531.�199 p ,Pq (Q ,Q2t3 UX063 1,639,639 1 , 528,05't2 4,429,212 6,507,,r: s _s 0 �, 45,69 t 21,516 399.535 564.697 1 999 02 1246.572 3.277,483 13s,4'35 189,404 169,965 28`e,786 791,66r I3ELET1�3��� Ir u 0 376.8:40 5.124,&l 943,081�. 141,047 1 1530,302 8 1 10 07 1 i ,575,802 266,556 07,387 755„521 �,69513616 E�ICaiAI� BAL�,�I�E 5 362;1434 45 i�91 39583 1,512,396 5,245,480 6,,559,058 467381362 808,982 84.1t7° 974,,298 1,a29..043 16974967 2,t 13,998 29944r 11,500,5i3 E 13 UP r1? art: 491uE' I > "4' t EAl 3(i, 2t10 � t��P�t�clATlt�>if EXPEE A� ��A�E� T ot��Rt�talEtvTaL ACT14fIT1ES �� ��}t.�Uw: �,dmnistratier7 � 11,g72 Police 57,421 Municipal Court t1502 knimal Control 73501 rife 38,835 EnfcrcernentOnspection 5,O13 Parks & Recreation 579 Engineering 35,$92 Streets 379,598 Swimming Pool 12,799 Vehicle Maintenance 51044 Sullivan & Community Centers 2,273 Literary 14:473 TOTAL DEPRECIATION EXPENSE 583.002 221,9r38 evaer 213,332 El iric 356,347 79107 i<�icnera; lU `I`�:rr�� D�llt: i3orrd �1blitratioris. ��rtifrcates of {�bliLyation, start.izt� �� t�;nzher l , l c����, interest 1�ai;� �;t;n�-RtrttiGz�r11�, �n ��l<.rrlr l , aratl Sr~�?terttl�t:r l , at rates ran63 1ta from 6�0 to 7.501/o The Bonds weere iSSLIed for street improvements and library bttildinL wnstrud,ion and are to be repaid from p;'opertv tag; revenues and are ffrrthek Secured by a plr:doe of Ente.rprie e Futid Net Ike.=ermes '1'c;xas Tax and ReveratrC CCr-titic.ates of Obligation, Scries �'0t7`? � 0,igirral anlotrtit dui` $2236UW l�rirtci�al l�ai€i artr�t�ttlly stastirt� �epterx�l�er 1, 2t�(1:1; Ir�t�rest }paid scrz�i�attr�rrall�,� c�rr 1:areh 1, ar�d September 1, at rates raffia} from 4 210 to 5.70%. 1 � -� �` � �� TI�� l�r�r�tis were is5r�ed for zlrr: �r�r-•)Ose o_* cotistructiml and improvirlCity streets and are to be repaid f'r-r-)111 property tax 1'eVellUes and are additionally secured by a pledgt.e oC1 raterprlse Fund Net Rev2nues. (TINOFSANGER �kelI 3 1" I I C 1a'1LNAIN JA1, 751 A I'P,iN1 A k::4' j'� 3C10 '?OUP+ �0105 the City had. established and )iairta aid the proper �It�l�.a 174�YY tl�'1'y. r41 omilkI rnstallm rells }:,I S 1,6 15i .With.. ,e f nal Install e.m due Jamill] 1 251', rrld lla � � ':'ll: ' sr ; tllskasllil+,`.nts rr t larlrlln 1t °,cj"'tr .17U1er` ,��,r, ��ti_:+ The li+,i � �r'�lc:�°rds +,.'a t' used tc1 purchase arid rt:mode'; a buddingr to bt uk,~ d b4 the nolire delJcIMIC'tik. V> hic:ll also Sen'es as. c.iillalteratl tOr tile ilo➢ e. ncitalltn nt.s of SI.�ISS, ith tile final installi lent due Apr. `20"'Iri The note Clears it?tt t'�t ,,t � �� '; alld has `e%lf n installments tell' ;rl ,1 c k �`�-I� t',il�Ii{,r .tti `11.i is f'll� Cl:s>7� l:''C + t re 't1SkCI 1i;7 I urk`llase parks gal] il�r-r�erlt. `��11i411 CdSo se7%'e� ars cr�llsrtel` I itia .„lr� note. ���te l'a��ablt: � �all�el� L3arlk - t_�r`r++itlal aellcilrllt i11~ `�? 1,t�<rr tll�- r�c�ie r�tltart, thirt�:� �;ix crl4rrrtlrl�,, 1lstasllrllt'nts r�;af'. S _?, NvIt;h the firlail irlstal111� ent slue ` ep en.b,:1" `>t�rt.� �. Tlr note bearitlte;` .st at `u liSeptember l4 lot proc t: s were Used ttatid, has t%v lve 'nstallmen s r �1ir �at 310 �i?, } urchase at t1FC truck, which also seneyes as collateral fcn the notv.. '"°��lt� 1'a�irbl - '�airl�=�r 1�ar€1i~;: - C�.i<<srlal arrllr,rrrtt t1I' I���}a 01;�Ii, tll� r2cik� 1'��.Iari€�� si:k;tlt- rticrlltltl itlItallrllc:ilts t' '. .4 #, itll the° linall illstallt7lr nt �1rle L�c.ccn.l,er` t;{JoI 1 #1c rl tc: DCM`S intr.rest { and his flirty rime installments remaining at Sep ell.bei _p,t.r, 211l(15 l"ll ° nole procee(ls 'Here rised. to purchase at firs truck. vvilic,h tal:so Serves as collarenal ror tlle. riote4 4e 4� 1''a bps;. � `"SClC1:I" ink d t�l?atl i'alll�ilCilt f ct=),It�1°,, thy: rla�t�. r��e�tarrr:s tllrrt4 sr,°� lll�'+titlllt �nstallntetlis a1' �, l , l tip„ �� till tl�>i fln<rl a � �bt-r.la�r�,, ��_rll�,.. l`h�. tlYm'ti l�c�ars ttlt�°rc st at v ^' r and has, tv.: e [.V r il)e tlltita llt7 eats rtmair71nty at SQpL nflb i C fJ,�_, Tl3r a r1�i � l�rC1Ck.L tlti tii�r rised to purchase i"#4.0 Vehicles which also serve as collateral fOr' the 1101.C. '.�clts:' 1'avlrble - Salrr{Ter F1ar;rlla - t-)rlfjirlt! alllfut.rlt c1IN S*,1 °7,7 1 �. tile. rlsate ic,t.aires tllir k• siev rrltillth+Is° itl<talltalerlts ��tl� �^ �� <�itl] tll� frrlal lrlstallrll�rlt alrre F�l�n,rar',, �rl,�,a, j� arnd has tkVents, dills a°lstallt Tents rewEainini at ` ept rnber �700, Tl"s'e rtoicc l).O, ee>d '.Were used to ilrlrehase a r ehicle wvvlmh ails+,, serves as collateral for tile note l\c1tc;. 11'a1yalble - (Jtrarantv National Bank - Original a.rlOr1:1 cif ti850.4000. tile llc,te. re€fu.-e:s cine ll�ind;��:d cYt:�:llt�° n.rlrltll� irrstallrtla:rlt�; �,iT ��,��t��, ��,'itll tkle t<llal installzll�r�t drl� 4larc.11 ?�:Il 1 l lire n:+.�:. lis iliks;letit at 2 Ski I)el-C 1.1t balder prime rate and ll r4 si? tI' five lust rlllil# rrrs rt'11i ICflrrs++` ,1t ` si:p t lll't 1" w+yl., �(,It`?, The note ta'roicet'E?s were used to pumllase lancl 161 a tiicvcnc.ipnlei'I llrOM bMltween the Sa'anLcer Texas Industrial Development Corporation and O'Va II144, Stores East, Inc.. The loan will be repaid from the 4A sales tax proceeds to be collected by the Saner Texas industrMd [fie elopmeret CotIllorattion. As finds are available addiziotlal principal have bee�.jrei apt{tde oi. t e rtt,tl D-26 CITE' OF SANGER a �:al�it�e[ I.c;ase W ;'a}�ital. C;t�Let£sin,� - C.,1ri�;itlal 1_lalatlt�t erf` ��1�,�t;, T11�: lease reciuires a do��:=th avil1ent pluis four annual rental ��� ynients of $14,436 voth two annual payments retllaining at `;ePterriber 30210t=y The City has a purchase option dutin�gj, the term of the lease to purchase: the cciuipment at a designated put•cllase option lance. The City intends to exercise this Option at tlhe end }+ the lease terns. The proceeds of the lease were used to purchase parks equipment which also E.rves as security Cor the lease. tr:alait;hl l .tsi:;e - I_�i� �rsfieti ,e=ht3itt�, IIl� : - t�}ri�irtal l��tlt:rtce t�f :� l �,�dC�. Tl�e le:a��; reclttir-es a ci�.ati�-ra laaynient plus tfll1 right monthly rental payments of ` 68 w t 1 fold;'° eight lae�t, I11t €1ts renaainilt(F r t (; September It ? ;hts The City Itas a purchase option durMST the terra of the lease to purchase the etlulpmertt at a designated purchase e option price. The City` intends to exercise this aptiot1 at the MCI )f the lease tertth. The proceeds of the lease: were Used to PtlrcllasC: UPLIraded FICCO IIIT E' tof ware A�Iilch also seFvTes as security for :he lel-Se L.a'tx�shlit Jud�t11er1# l'ayt�lalc: 1t1 �tl� 2rt�2 tEhe C�itti' issued the ot-de:r of fttlal �ttd�.�tlhetlt ir1 t11� la'<�rsuit I�ac,Etar `I'ar�roclfnit �: tl� t ` oaf SanI uu l tie lawsuit related to the termination of lAucliard Yarurolio,11, a fe�rrlaer laolir e ofilcer I,ith the Cite, The, C: tv was ordered to pwa Mr, Yarhrouuh a total of S F2(),120 in annual Insiallmem"; [)eginnino on October , 2002 with the final installment clue April it 1 20091 1'ro�are:tal�` 1'�uthd: Q c»hd C�hli�aticatls; Texas llti[itv Svste,I;n Reverlue Bonds, Se:I-ies 1��)Ci � C?ri�,ina! tirthotrnt c,f �1,fl��fJ,t=�Gti, larirtcilaal ltttiel e1t1C1iCchll�'` oCh �:°lays l _`F� lL?tG'I'L�'it 17a1�1 seI11l-1t1I1iI,IjIIL' t:tl ,1'1�i1' l �°) Cld l�ea'+`entlatbC� l `3, tit I'a teS I'an„�,tlh� fC'C�I71 4.2°,'G to 4.75004 The bonds, were isskLted to provide Rip is for inllarovIIIvg ttnd eNtendini4 the Ctt.,dS Sev�ver systeal. The Bonds are to be repaid from and are secured lko the:. l°;.1te.rlarise 1°`und l* et `Cee;as Unlit} Svstetah .eliulditw lteve11t1e Flc,rtcls, Series 199�? - Original amount cal' $1,7135,000, laritttil�<rE land t�rlrtu£tll� (331 l�•le��'• 1 � Ithtel•est }athid serili-�Ihnlaall�,can ;�1a� 1 � and ����:°ettllaer 15, at rates I� r�ir1l.?iI1��:.ft�4)C11 4.2hr� to O. The bonds were issued to provide funds sufficient to advance refund rrtaturities 2000 through ll 2201 l of the C t 's outstanding Series 1991 Bonds, i4. The Bonds are: tote rcpaicl front arhd are sectrrecl by the E, eraaris�e fund 'Net Revenues, UtilitySystem fZer�enat~ Bonds, Series :�)Cj2 - Original amount of ",>�1f�,f3�1t1, l�ritt�_ilaa; paid annually C3Ch 1`a'[<��' l �, lthtel�eSl: �fhld 5€'_C'ala-a tltlLta[l�' CaCl _�'�a3;4` l `� at3cl l�'�:�t''eilll.'eC � :?, etC rates rall�?rClt�f tfC?t31 ��._`?°'o tc�? D-27 "` `F:3 `I'Ij ` `II U; I:'IP t l'rC'IA1' 3"1 A I`EINICAN 1 3 Sr•:1=�`�°:������;�� ���, Bata i.l.)�'. ax. The be�rlCls L4'" r uti4tT{ t;Et lirCl'w'tl'91TI7C�w)r 112i1�rt','a'lilk? il,llwl t'i?1; ri71r, aC l L617 Ir°Cat3 ent plant and ieplaCrn4? val'iou,; %vatei and sewelines, The Bi)rlds are tO OQ 1'i'pals;l trtlrT3 and a ra Secured by the Enterprise Fund l```et RIev nues. The:. l�clne� s�)blir�rtic�ias re�c�uirc that r.,�;1t°ain cash rc�Cr��. acCr�ritlts. b� rllaiiltait}.e�d. Est Sc�ltdb'rllbe:r _�;i. 005 the City had established and maintained the proper reserve, accounts, hitst�s I'°ar�abieu.: `�'clte Pa�,�ETI�le - Satil£�er l'3Tr,F: - i�)ri�.,?ii�r-sl a1��rtarlt elf ��t�i�.�'� t3�c Ta�1te: iw �rir�: �1�� cifi;i��aTlrl.: il' r7�,y demand is made then the nc.tte requires li t' Lr1llFllcll principal payments of $;,M,1,1Q fJer,innill"; ir€ C)ct.L7 er mot.+1,3'' 1 e nott� bears, 4.` 5"'ei 1,'ltll t';rle arlrlua7 l`xj°4'l `ieilt. reT 1s11111T1!r, at S�'l1tCC1117C.r ell 2tl( . The; noLe ll€rOcCe l; I'v"ere used for Nvater syslem improveme;r'ats. I';cate I�rl�°all.' - SaIIl�Cr t_�ar�l�: - tiri�irlal arllc��.lL t�f` ��;=r1 -1.'=l 1, iiistanniems of $1,12r1, r�> tll the tlnatl installment due March 2r01 ). elnd has fifty fouinstallments; remalr7 n at September ,3(f. I)urcha se a back.hoc, which also seµ. eves as collateral l ()r the note, the rlc�t.e recliaire�; �;ixt}� Tilt)iltll',' I'hC nc)te. bear;; Mierest at l`lle, note; prccc eds Wcare=, t..SCd tee .- � Irl�> Cltite; r�.tli�1 t°a� .tlr l'i a�'•: nlelrtE?a�' 1115talllllt.11ts C)l i, s 18, ti'Affll the 1Tna) Tnstawlmellt clll4 /Apl-.u' `�a.i 1 a. I he i ote bears Intere: t at � `;';: and has thirtiv ore ins alln eats remainingat SCj3t�T�lber j(j5 71 a1�, ]'hC. iiC ti llae"t�ltt�s 'k'.'€ri' 1rseRd to 1Xlre base aT ditnitr':lck, which also serve as cotlarteral tIlr the note C:al)>al I.e4lses� C'al�ital casc � :ALTIC - tifri�irlal hatlanc:e r_�% ,�t�.`+���s+ ']"ll� lead:. re�lrae"e� tllirl.�° :>i�: il�clT111111ri-lt 1��1�'"al�e.nts �t S?.7{�1 iwitll tl)irt}= l3Tsr l�aa}�a��e.tlts c�tllailliilc� eat ��1�1�rrlber �t?��+r•t°; Tller �::it�'" )las r 3urchase option durinL tale tcrml rat` the lease to purchase se the equipaicnt it a desitmated [)urcllase clPticln Price, "I`llc C''it±, irlterAd try eaert:ise this option at the erle� e>::lle lease terrll i'flr 1}rc�ce.�:cis O.1 the lease v erC used to purchase a Hydraulic Derrick Truck used 1;,,, the electric tsC.li;: tMellt. "l` ley r chicle ik, security for the lease. C'alliial Lease - DiversifiedLending. Inc,, - Original balance of $18 ,860. `1'��- lllease requires a dcy%};rl j��a�rrlcrlt plus ful�° ei�.h't rll�rltflly rer.rltal laaynrerlts cif ";,icy' �,�=itll fc�rt4ei;�lli 11a�;rlletlts re,T11�11r;iT��� apt iepterllber" 301 'i_0's. The CitN has a PrtrChaSC alAitln during the tern~ Of the lease teo purchase the Cquipment, al a ire,;,-natccl purchase option price The City "Itends to ex rcis(. this option. at the cjid, a)f the lease teml. The proceeds of the lease Nver e us"d to PUIwChaSC Uririaded accounting so l vatrc �vllich also ';CF CS as Security for the lease C ITS' 13v �i 14"A'. . tIIFE0 TC} THE: rl 'r 11 U J'lkTEi 7F T ET�I13I?;ft 3t?, 2t1E1 Tt�n�-tc�s-t�1 ��:��t actin'°itr� ic�f tt�� ti;�,i:•.{tl ����tt^ is a� t�rl�c����s: CC7VEliNhriENTAL AGTf\CITIES BONR (iBL1GATION~S .series 10 4 Certificates of Obligation Series 2002 C;ertitiWes of Obligation NOTES PAYABLE Sanger Bank SangetBank Sanger Bank 5angerBank Sanger Batik Sanger Batik Sanger Bank t3uaranty National bank = 4A Fund TOTAL DOTES PAYABLE CAPITAL LEAS)=S Iversified TOTAL CAPITAL LEASES LAirVSUIT ,lUi7GEh1ENT PAYABLE YartirnE.3h f'ayahie ACCRUED COMPENSATED ABSENCCwS A�.urued �'acati:�ra Pa} �;acrued Sink Pay TOTAL ACCRUED COMPEN. ABSEN. TOTAL GOVERNMENTAL ACTIVITIES BUSINESS=1`YPE ACTIVITIES REVENUE Bt3N13 OBLIGATIONS aeries 1�96 5onas 1999 TOTAL REVENUE BONDS NOTES PAYABLE aanc�er Bank aanc�er Bark uanc�er f3�,nls Sanger Bank TOTAL NOTES PAYABLE CAPITAL LEASES alter' DiveP's<fied lenders. F�ltr= TOTAL CAPITAL LEASES _ Cl1RRENT- BEGIN} IN ALUITIC7_ h E ELETlONS EPIUINO PORTION 885:C�'J 2.245,000 117,A4A 27,21a 9,9'37 55,127 1013 4{43 to �J 8t18,1 8't1.:3r"8 ;� 158:t)tltJ BUD() v 235,000 16,953 W 1087 27,72° 22,, 7;#S 7, 32 ,273 �6,%l, 41 171,123 y �' i3C3,JL'u 21 6ZS. JGC f=fit , aC 1 G4,26w. ?C,2W27,402 W3i,4tv.`'.2 810210 32,�63 141442 4 3 " 7 ,620, 7u7,26' 85 C0 9 14, 2u 1 1 s�.263 U 2(.4C2 2�,a15 12F86 8 7')82 f 1T4227 ti 18<8SD u,A6C ;',4G ,s,467 39, 336 18,8t0 $ 4"36JB µ 165 7 ,S�Et 42,3:�2 1'i' ;495 59,)527 1,215 a S 1,211 y 41,117 8,6`u1u? � 4,2902061 a 77,025 $ 4E41382 $ 3,9t72,1C✓ $ �.3'r.Cr�'`•? _4,465. (XM 3+�r,83i Q n ts�b,�8r� d v. or• 3E.t�..' 5 4�%,CGC 15�,(lGC 85,Uuv m 7r,959 �,438 16.474 105,833 ;r 72�,1t�fJ SSu,CC� 1,1c�,ac� 1gia,C=`CC "29J,'7(C3 J ,CCG_ W 4312040CC $ 317J,CCTJ S 78,u62 Q `4,t63 104,779 2,38., ct, ,,rsC�? 81,�i;38 2e,3"• ; 91688 t;�E3,u s9 a 2�J ar.it TOTAL BUSINESS -TYPE ACTIVTIES 433,521 4145FE.113 $ C II Y Ii �ANG E R C3TE3'1'4J `I1IE rIINAINk IAI. T,,N vJNJJal'N'1' I'ulur't Diet i rliatt r(tEes alre as t�s1J�IK.s: CIi)s7er'lllllnill1'11e:,�iC;tlVlt145 ?000 1) t II�, 01t1 011 2CI; 't_a't 1 20 2�' I oral 1'ritl�'ii�a1 4^7_ +' 456 9 t 5cl `}26 22 94 t )00 16CI i00 Itltct•est 17810100 15ta, I64 1 34111 ; 355,220 2057075 _1 .,25 r L�LIs(r1e5s-lvla�� `�C:4ltleti Prirlil�a 459, 07 Fi`+' =s`v'8 3961_461 ?67., 117 :1 C 6fi40 1 , 1901000 T45 1 1 lrter�st S ' 16,893 19 6, 20 176,38 g 7 � I'rtrt�ert;�' tti3x le,ik� l,ac11 C�clslEler t c�t� tle � �asevSsfs'd (t1t�Ilra �,eci;i 1"<1ILte- t s �sf'ttic llri�lr Jarltlalry' 1 aJl Zeal and Personal Droperty located in the City, faxes are due October 1, the levy date, and are ielir gUCtlt alter Ole fb'Emving JanuarY 31. :��t tlliv iun�i le�:'c: l�rL��el�,� taxes acre re.c,c�r'cie.d as re�ei'ti°at�le� araci de_fierred rc�.��(1Lte� of the tale tk��: taxes are artier: ; i 3�eVl111.1es ale, Uteri recognized as the taxes are collected. RED IDI:11EVT I'L.�I�: I`Ile tu'it�I�rta�, ides pealtiiL�fr1 I�,rnelt� t�1r r3 c�l� its 1ilil�tinle. erl�l<��'e.es tl�r+�-t�.rt�,l a rrclTi->, atclitclrl<11, j�lal Ci:1t14ribL t�1: v', dti.ri�;i enc.frt �latl in t11e state-� idE `I' .as Iunicillsrl 1 etia el�le.11t ` aMUM a,�ent rlaullil�fc:-c(1,p1�vl r public. retirellIellt s'tsterll. 13ellelrrs cJellerici i,llor1 tlle sLinl Ali' the enlplc���ec-"s eotitriMititln7 to tllP-flatl), Willi illterpist, ti tkas C t€1'-tll1a1d14Cd t11a)1c LLIr`}' Creiltt V(tll iT1te2'i' t, 1'�eillbulS Ca11 I"eIIT°e a1 a1C; �I` T.+,` a[ at141v'e dl ltkl tell t11" t110re years of SeINC ]cc OA with twenty ti'ke years of serivelce renardless ol`a4je. A member 3S VCSLed alter en Ycai I111G: ctlr3tr1but7tltl atL tilt t.l1e Ct31p1a7�`t;eS 15 C13` �,YroSS i':a1IliT1L�, aLrlti tk1c� (tt' I1r'o'+'lile5 a mf°s111kli;v" >vi7Tlli"l�'13iaC)w.l �°�* ~. � 1'`'"n c.�l� �;i-i��S eaCillTr�cE. 'I t7[5 ratl C-i-li�4t;�1.;, �7f 1Jle. tlt�l'ntal �G9~%1 C(irlti"11'+tr�tt`sr1 arltij tl:e 7IfV�I se.r'v'ice Corte6butlon mteN Ffic r1 rnial b tl',°;t contributlOil vtllfe, fintritlCeS tilt' PL:uT"re:ltly zIQCrf ll11tt rnonetalry Credits ail:"d til+; prior ser''t'ice contribUtiOtl =a e LM!Ort17G:i tole L 11'llllde l (Overfunded) actt amit llability (<isse:) over the re 11a1indler (if the 111an's twentti' five year amortizatiml period, "Mlle. C:itv's contributlW11S, Tbr the fiscal year totaled 5,686,67... 1 1''1" 4'IL3E Ii 311I 2Qt) '1"[lc:. sc.11ecul€. cif �ctuairiail I:iaibiltcs arld £a_andiri� Frc��;re.ss f�£r the }�e��r ended `�c::l�tcanbcr 3f�, '?ra�� is as lcilkcJtR«: �cttiart;. �,a��Iattc�rr date; .Lct�tariacl t:; };t 4letho d Illortization rIICLli )d f sset valuation € ethod ctuanal ValUtriti011 ofassets actuarial ,accrued Liability, 1'erLentar��e fi,Ialded Jnfunded actu3 ria4k accrued liability ([JikAI,) klinual coy vcr•ed payroll [ ._ AL as percentage of covered 111.ayrclll I`<<et �er�;�itlll c�lli�atic�rj - bei�itrr�il�y�� nnua.l required cont-r1but101)s ontributiOrls Made 'et pension obligation ending t alit t='cyst Le��el I�erc.ent (yl`Fai�,�r•crll Amortized Cost l 966A74 9 1 , i. l% , I60;933 9. 0% If14,32) 1 1244 -. ) Thc: l�rc�r ;�� � fiscal 4eair;� ���:a•c: 1 tl(}��� funded, tlrc Ilet. Ilcll�il�tl c}i�li�att7rr ���ar� �:r�rcr aind tllc arrnrr�i �,�altaibutic,ri; ��,zc::re �I`>t,��i? arrd �t�9,tt5t �'Ite C_`itg� of �Sari���er is c�Il�: elf �1� I ttrurriciljGiltics ]la��ial� the laer}eiit [�lair� ardlllinist�red i��r T�1R� �:atc3l cat' the to l 1 Iurrii ifjalities llai� e an arlrt tal it cli iduatl acttaarial 4°a[uatil_7n pedurni d. All assuryiptiOtis fOr' the 12-31 rs04 valuatlOns are contained In the 2004 `Cl IRS ['crr; rPreller SIV AIIIIUal 1 irtancial l c} c rt, a cc�k \ f °klich nlav be obtailtcd by writing to T'.O. Bo; 1491 53 Austin, Tt xtts 78714-91 5>. D-32 GiTY OF SANGER For the Year Ended September 3q, 20t5 Beg(nnn0 Budgetary F��nci Balaric RESOURCES. TAXES R Property Taxes Sales & Beverage Taxes Franchise Taaxes TOTAL TAXES iNTERGt'�VERPa�t1E.NTAL. Literary County Funding Fire County Funding Grant Revenuos TOTAL INTERGOVERNMENTAL CFiARCES F©R SERVICES: Variances 6. Flats Swirnming Pool Sanitation Collection Rental Fees Literary Fees Other Fees Misc. Income TOTAL CHARGES FOR SERVICES FINES: Police Fines LICENSES & PERflx91TS: F'ertn�ts � Inspections DONATIONREVENUES, Beautfiicalic�n Board Parks TOTAL DONATION REVENUES INVESTMENT INCOME OTHER SOURCES: E'rc�ceecis of Notes Pay�it�leiCagita( Let7se Transfers from 4.4. Fund Transfers from 48 Fund Transfers from Proprietary Fund TOTAL OTHER SOURCES C3RiGiNAL BUDGET, , __0 1,£ 1$,C100 353,000 275,650 2,246 650 � 7,f100 99,000 0 11 G,000 45,000 1 t ,000 350,000 31500 4,000 7,200 40,000 4602700 123,500 146,400 0 0 26,f}00 0 0 0 2141322 214,322 3,333,572 FINAL ` BUDGET 6jo,o b 1,C�30,Ot;0 422,4CO 299t650 --- 2.352,050 � 7,000 99,000 0 1161000 45,00(} 11,000 453,000 3�500 4;000 7,200 40,000 563,700 E 23,500 146,40t 26,000 5u,375 42,400 0 214,322 315,097 4,272;74 AMOUNTS 426,327 304,0033 23448,995 � 7,356 19,353 11,306 140,015 'S,450 4,345 453,777 2,555 8,595 1,936 2t867 512,525 124.ff12 5,97 0 67 35.(Jt�1 75.669 0 42,436 54,889 173,1 G4 VAR[ANCE V+�ITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (63010m) 86.f�35 3,927 4,353 5.945 32.015 (5,550) (6,655) 7`r7 (945) 4,595 (55264) (37,133) (51;175) 512 5,967 0 5x957 2,�JG1 17,494 {42,4t30j 42,436 159,4>3) 41, 03) 3,t7779) SEE ��CCOf�I�AtIYING NOTES TO F(N�,NCIr�L STATEP�IElTS �BJ1l VIIa7T til'6 i 10.I I'kr Personnel Services Irasuranre Professional Fees ,3uppljg?< & contract Sc wic;e Repair &. Maintenance Utilities & Telcphor,e Vehicle Capital Outlay Debt Service TOTAL ADMINISTRATION POL.I�; Personnei Services Professional Fues Repair & Maintenance Supplies & contract Service Utilities & Tcwlophor�r Vehicle ,Capital ,Capital oullray Debt Service TOTAL POLICE w 76,153 39,802 5,200 53,038 1,500 8,300 550 12,416 41,616 238,575 527,184 500 11,000 70.011 14;045 26.000 29,000 23,740 761,48b 7 6.153 39,802 °5,200 53.C38 1,5330 8X0 550 48,991 41,616 .275, 15ta 52 7.1.84 500 11IDOO 70,G11 14,045 26,0L0 29,000 23,740 701 r�,U2y,�ry 30 1G",746 5t,555 3,510 327 106 42.782 _ 40.856 284, 542,D68 5 tl 2,6a6 4 3143 11,883 26,751 40,767 19,074 0874205 ALBUDGET VORABLE 2r2 �5,546� 1 973 444 6;209 i;8 240) (14,884 7U 8,344 26,574 2„162 (751) t11.767t 4,666 14,274 f�UPVIC�IPAL COURT: Per:�c�tanel Sc�r.pic;e:s 74,928 74;928 7 4,926 2 Professional Fees 91600 9,000 71500 11500 Repairs & Maintenance 11415 15415 21782 (1,367 Supplies & contract SetVice 24,850 24:850 21,622 31228 -Jtilities & Telephone 21300 2,300 746 1,554 ;`apital Outlay 11750 11750 0 1750 TOTAL MUNICIPAL COURT 114,24�.. 114,243 107 ,576 6,667 AlV1P�OlAL OhJTROL: F'er'Sc�nnr�l �Grvi�as 38,6J88 ?,8,088 35,042 2.1' 46 Supplies & contract Semfice 12,350 12,350 10A67 1;88 Utilities & Telephone 31000 31000 20295 705 Jehicle 500 500 1 P406 (0�00) Capital Outlay 101000 10,000 4,000 6,000 TOTAL ANIMAL CONTROL 63,938 6 3,938 54,11 d 9 828 S�� ACCOI�1Pt�I�J`s'1hO NOTE TO FI^Jr,^JCt;L Sil"+`l'f=f�15Ps?75 CITY OF SANGER BtJU"t:I AR UUNIPARISON SCHEIJULE - GENERAL FUNIJ Fflr the Year Ended SetstembPr 3Q, 2005 FIRE: P�>r4cnn�?I �c�ruar:ns Ambulance Service Repair & (maintenance Supplies & Contract Service Utilities & Telephone Vehicle Debt Service Capital outlay TOTAL FIRE ENFOi�CE�iENTrINSPECTIQN Personnel Services Repair & Maintenance Supplies & Contract Servic0 Utilities & Telephone Vehicle Capital Outlay TOTAL ENFORCE MENTIINSPECTION 1�P+1+�[NEEI%lNc Per�annel Services Repair &Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL ENGINEERING JZ PARKS RECR€AT1O1\j; Persranne) Servicas Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL PARKS & RECREATION STREETS: Per�c�nnef servi:es Repair & 1wainterianc:e Solid Waste Collection Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt service TOTAL STREETS 104,937 86,400 17,000 94,432 10,100 4,000 64;180 0 381,049 104,937 86A00 1 TOOD 94A32 10,10E 4,000 64,180 0 381,049 83,051 86,400 11,720 62,314 8,266 4,577 57,197 10,620 324 145 5,280 32,118 1,834 (577 6,983 (10,620) 56.904 77,769 31,169 30,259 910 31000 3,000 1,244 11756 43,100 117,100 114,859 2;241 21000 2r000 298 1,702 4,200 1200 27 1;173 750 750 0 750 130,81q 155,21 9 140F 8(_ 8,53 0 C} 30,750 0 323,917 31,000 32,700 2,400 8,000 31,470 0 429,481 20,136 `a7,00O 253,200 59,800 12,800 20,000 109t200 _.._._ 3€351908 918,044 0 0 75,750 0 0 75 50 323,917 31,000 32700 2,400 8,000 95,67G� 0 _.. 493 687 20,136 57.t100 3r30.2O0 59,800 12,800 20,000 7397200 385 908 _ i,65,"u4 0 0 7 9,332 (3,582) 150 (150) 3,475 (3,475) 83 027 T277) s2�.289 19,7Ci6 29,551 2,188 9,672 97.542 4,078 449,026 40;164 44,035 4wj,02 f 341134 40,025 18,310 659,427 407,072 1,652,1 GO4 11.29t 3..14'9 2.12 (1,672) 01872) (41078) 4,81 (2G,028} 12,965 (28,827 25,660 (27,225) 1 1691a 79,773 (21,164) 221850... SEE ACCOf+rtPANI'INC NC��C'ES TO FINAh� ;IAL STATE1mE�ITS S§Nit�1(�'iING PtOOI,; Personnel Services Repair & Maintenance 3uppWs & Contract Service Utilities & Telephone Capitll Outlay TOTAL SWIMMING MING POOL iIEHtCLE �JtA1NTENANCE. Personnel Services R( pair & Wntenanco Supplies & Contract Service Utilities & Telephone Jehicle Capital Outlay; TOTAL VEHICLE MAINTENANCE St3LLIl/AN , COI,1t'a1UNITY CENTi�RS Repair a maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SULLIVAN & COMMUNITY CTRS Lit3l�AI�Y: Personnel Services Repair & Maintenance Supplies & Contract Service rJtilities & Telephone Capital Outlay Debt Service: TOTAL LIBRARY 0 � ., • EmmWA w .. 161000 15,210 3,500 8.000 64,624 41,705 3,200 11,400 31600 11000 12,3350 f 3,255 21.,914 16,000 15,210 31500 8,000 64,624 41,70+5 3,200 11,400 3,600 1=0 12,350 24.t�92 2,125 9,055 4,606 7.F 39.878 �4.104 2,769 3,409 30069 11028 18,698 7',077 11 ;2,178' 1 W,875 6,15 (1,tt1���Cyy{8� %2,399) 431 7,991 531 (�8) (e,1348) 'All 178 9.?50 9,2w0 6,379 2,871 11,45i} 11,45tt ta,321 ;„129 4,700 4,7013 2,515 2,185 3$400 15,400 19:755 (4,355) 28,800 40t800 364970 31830 91,399 4,800 9,210 8,500 7,100 37A919 158.508 3,333,572 91,399 44272,747 Q.80t? 921a 8,500 7,100 37,499 00, 748 5,775 7,438 8,800 1329 37,489 1591579 4.137,710 t1.0i17 135,Ct;3 .�ai�E A.CC:Ofv1Pr`1NYINO NOTES TO PI1`J�,l'JCi,�1L STi-�TEtti19Ei�T5 rrY OF SANGER BUDGETARY CONIPARIaON SCriEDULE - SPECIAL REVENUE FUNDS For tle Year Ettcled Septembert , 295 RESOURCES; Sales Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Supplies & Contract Services Professional Fees Debt Service T ransfer to General Fend for Streets TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE 4B FUND Beginning Budgetory Fund Balance IRESOURCES: Sales Taxes IMestrncnt Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: A®MINISTRATIC7N Supplies & Contract Services Transfer to General Fund for Parks TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE HC?TELlMOTEL FUND I�ecl�rtn�nr� I3c�dgetary rt�nc3 Balance RESOURCES: ; .Aleohc�Ilr.. Beverage Taxes Irive,stment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Prop obon ENDING BUDGETARY FUND BALANCE S ORIGINAL BUDGET S 175rC100 0 17S,C 00 2,45Ci 1,,000 154,050 0 LL 157,5C0 .. _..17.54t7.. 0 175,��0 Q 175 t000 2,450 152,t35Ci 154,50b 2fIOQ FINAL ACTUAL BUDGET AMOUNTS 175,t��0 0 175,b'0 2,45f1 11000 154,050 0 157,5ff ....17 500.. 9 175,t1�ii1 t} 75,000 2,45 52:OSG 20 50 J S 211,33t} 4,G83 21 ,013 vARIANCE WIT�i FINAL BUDGET FAVORABLE (UNFAVORABLE) 4.�83 $ 1,42t3 1,G30 M149 (9,149) 89,993 64,057 0 0 Ibi 552 5 93i 114;451 S 961951. 0 a [J S 211,�3® 13,45� 2241786 1,22 U 42 43 4 r65b 181>13U �; 36,330 13,455 49,786 1,23t1 109,614 11 U44 0 $,20� i 1,514 3,314 0 €� 275 275 0 8,203 11,789 �,'S9 �52) SF:E ACG9�IvtPANYING I*1bTES TC1 FIh�1�t�C1AL S`I'ATEhd1ENTS 11YaFsA � ■ �. r: 1 �- rri 1 car tkI Year Iitieei Sepie411 er 0 20D5 htatuarst�l Vs�lta�.tic,n date actuarial Value of assets t%CtUariat Accirued IJit)Illtie > >;AALj t Jntunded (OverfijnsdedAAL (UAAL) Ftactdeti Ratio 'overed Payroll JAL as a Percentage of Covered Payroll IA 12-:51 t14 1,805,541 1,9G,474 160..933 91.4'.: 792,164 9,0% 12-31-J3 1,710 2Q9 1,851,29 141,t�G�7 1,711A43 ,2ru ,,. S 1.450,590 1 ,499.9 7 39,077 9"1.4`/': I ,567,373 2,5% D-39 OMPARATIVE SCHEDULEOF - FUND BALANCE A Ec r the �' r Etaded Sepfetr�beA Sit, 2005 �. Oti4 REVENUES PralaertyTaxes 11718,635 8 1,484,301 Sales & Beverage Taxer 426,327 395,633 Franchise Taxes 304,03.3 283,619 intergovernrrient:a.l 148,015 150188 Charges for Services 512,525 482,028 Fines 1241012 142312 Licenses & Permit' 148,299 142,601 Donations 5,967 5,187 (merest Inc;onle 38,051 33,984 TOTAL REVENUES �,g25,874 3,120,753 EXPENDITURES General Government 3255Z8 270,263 Public: Safety 1,188105E 1,065,G60 Home Grant Expenditures 0 0 Streets & Sanitation 625573 5051569 Oultr.rre & Recre<at oirj 517,3U2 4i37,488 Gapitral Outlay 9051395 1,987,776 Debt Service: Principal 3921825 390,875 Interest 161,941 1961842 TOTAL EXPENDITURES 4,137 17 i0 41903,873 EXCESS REVENUES OVER {LiNIER) E}4PENC�ITURES711,836} ?1,783,120} F'rc�c;aads of dates Payak'ilor`Capital Leases 75,8E3 194,9v3 `Transfer ir'c�rri Eoonar��ic Deveic{>rx7arrt 42,4?6 52,0a 1 Transfer from Proprietary Fwid 54,889 100,305 ........................ . TOTAL OTHER FINANCING SOURCES (USES) 173,194 357,369 EXCESS REVENUES OVER (UNCIER) EXPENDITURES 1;538,G42� 41,425,751r FUND BALANCE - BEGINNING 8E1,107 2,255,858 � 322,465 � 8E1,107 SEE AOC�7I'M1P,�PJYII�lG Nt�T1=S T;� FIN�;i�l.1�"+.L ST,�'fEPu1Et'ITS D-40 CITY Ur SANGER Ct0MBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - SPECIAL REVENUE FUNDS For the Year Ended Se}�ten�ber 30, 2005 With a Comparative Total for the Year Ended September 30, 2004 REVl.�NUES Sales Taxes I- iotelr`h.lotel Tax Iritcrest Income TOTAL REVENUES EXPENDITURES Promotion Supplies & Contract Services Piol'ussional Fees Debt Service TOTAL EXPENDITURES EXCESS REVENUES t?VEf� k IV LwR} EXPENDITURES HOTELt 4A 1OTEL FUND 5 0 S ��1,33G 11,514 0 275 4,683 11,789 216,013 t�THER FINANCING SOURCES �ilSlSj Transfier ter General F4ind fcr Streets Transfer to General Fund for Parks TOTAL OTHER FINANCING SOURCES (USES) EXCESS R)WVI=NUES OVER (UNDf�R) EXPENDITURES FUND BALANCE � ENDING 8,252 0 0 0 5,252 3,537 3,537 0 1,A20 1 Ci,149 85:993 101,562 w 114,451 211;330 0 13.456 _224.786 Ci 1;220 6 223,566 Tt�TAL Q'_5 11,514 18,414 452,588 €f.252 Z640 10,149 111,034 TciTAL 2Q _4.. 11,058 4,551 407,925 5,578 2,636 0 89,993 98,207 3{I9:718 Q 0 {3 7..527j A2,A3j �42;A3S� {2A,544j _--- (A2,A36) (4243) (62,071) 181,130 299,118 247,647 18,796 204,776 8271160 550,732 303,085 ..... 221,333 '-- - 310 227 ` 0 22 t} 849,850 �s 550,732 SI=E #�CCC.?P.�F6�hlYING NC,7TE5 T'J FIf�ANCIA� STATI�(u1El`etTS IF IN 24p5 �harWes fir �erurces 7 ,493,93� S 6,443,474 �onneclion Fees 2912, 17 28215 tvltscelir rtec rls 161068 51561 TOTAL OPERATING REVENUE 7 ,539 3 6,48012, 0 t?c�r:�ranrt��l crvic�3:� 1,i�Ci,164 Flurcha:sed WalterfEler;tricity 4.21 a1948 StrPp OS & Contract Services 618,335 f�epair & tv al ntcriarice 321,272 Aiiitics 8516a2 Franchise Fee; 1741616 Dopi c.iation 791,667 TOTAL c�RERATI�JG EXPE�ISE� _t,3�G,£S�4 C►PERATIG INGCi�u1E 4P,434 Will IN ilia interest Income Tad Fees 711,100 Grants & Developer Cocitr'ibuticns 0 Inteiest Expense 4`2411345 Transfers Out to Genet al Fund (545689) TOTAL NOiOPERATlItiiG REVENUES (EXPENSES) _ __ 468,803 CHANGE 171237 IN NET ABET 6 ................... . IJET ASSETS - BEGINNING 6,475,998 i�ET ASSETS - ENCiiiVG � 9.0931235 1,092,202 3, ti9 ,711 4651343 2591146 75,105 1501350 aS6,626 6€t4,6U1 2Q4,4544 (14 1220) (1 C70,3U5j 662,676 1,002,563 7,4731335 S 8.47v ,998 SEE ACa.C7l'�ipr"�f�i`flhwlG C�1C3TE� TG F€fw�,�ul�'+L uTATEta9Ef�T� D-42 yLL$ 5? i Lp eLp�'� q � n+�s +pp�i�'S,� '_• �S V) UJ L 1 LU iw um 0 LU J LU LU CL u (1) z M 0/ 6A) �t0LoNNr�( Sri 10 a , r- 0 (a co m (N co (D ( CL 0 09 C* r Lf, r I C) j 0; {?' 00 N CO M r+ a)': Ln Ul 00 Liles'' c`�r 4 ra`��'' 4zi Lu css LU Zz y} t as m o) tri m T DO LU CD V qO: C V, iz? LO 0 ,— �t Tdt 0 C7 Ca C) d d m UI E _ r iJtico<t(0s tva G Cis C) w t� xt �r Cl LD , cri W) co co n QD iV (N fn M M r 7r7 f 4 u Lui UJI cn u7: N N Cv csa ra N Yt c� crr 1c) ccl o C:)cicn s a. co: N M Le) N cn LU in •L'- t— T_ V fi co 00 cCD o CO LU x uj Q z d C:d W m W m 0 U = D in c e 4t coY^ tl [o ry^ CC7 c� �7 C3 f=J (�] A �" ''. t'„ � r•"_ 4F!.. 3 Yore+ 4 �(} Cl7 i Cl CC7 I L7i cTi CO tf1 I �X (N �+S � Ca h- r7 C) r t } cq €3a MI to r 6) N LU U) z LU l!] LU LU U) z ui uj 0 x LU G v w u C N U F- a c a) tx a < f n Q CH 0 z co CD Lri 0 �7 �a C1f 'L V`i ) eE�l� �y t D-43 Series �9�4 C�rtificat�s o� �7bligatic�n _ ___ _.. _ l�e�r l�rtc�irig Se�aterr�ber 3t1, 2QC��a �C?G� �(�y1{�€t3� L 41�7 PFtIN�9PAL 1 SS.�CiC� 175,QQC� 1 �Q.�OG 2C70,flGG� Series 20p �ertific�tes caf C�biig�tian __ �'e�r �ndirrg Se�teenber 3t], k�f;ENCiP�L �OGJ�' �S�,JQt� ��t�r ��a„�C �OG�� g5,�°�Q 2� 1 �r 1 �gr�Cl�7 2t�9 .a 1 �5,C10 2Q1� 1"t�,Gil� ry?D55 q1' 12g.,tiQt� GV i� �G�.�13UV �Q'� J 1 ��,��1� �C116 � �.�}(iC� 2�I1 t `i4�,gQG �p1 � 1 �t7,flgG �a�� ��c,,��r �Ug 17g_�JC�G D�� i r �,fl�iC� 2C�2 � ��,t�G�^ __ �, 2,i6�,�ICIG °ear ���di�eg �eptei�tber 3ti� 2f��16 �G��J7 �G�C�B ���� ���� 2�11 2f;12 Y !- i�iT�R�ST' 1 C�5,47C� 1 f��J,�2 aa,i €itl �J,�S� �a„�3� �;�,�5� �5,�q�� trLL i�'t �J y�� ��},:34� 54,49Q 43,��f7 �1,46� 34,"�4[� �6,�,�JQ � �,�S�gG �,�� ................. S 1,Q�;a,g95 �,1?4 9.�6i� G, f U� `u'�'� G ��ur �� � 1 ��,��C� �. REC�t�li4'1E@ii'S 9�1.4 � � ���.2 ��,1 �C� ��.5� ���,"�3 ���.��� ��.9�5 .fig 91.24 a 3 �4J,�4a� ��a,��� ���.4�� � g3,4Si� �g1,46� ���.�� �g�,5t�� ��3.©L1Q 1g,��Q _ __ 3.:228,g�J _ _. � � , S �;�C���s��t�dYl�1� I�tJT�S i�1 i=IN�R1C�1�.�. S � �,TEtti�t�"�JiS D-44 CITY CF SANCEIk EST SERVICE REQUIREMENTS - GENERAL LONGJERM DEBT �T� PAYABLE - �Ar��ER SANK Year Ending September 30, PRINCIPAL INTEREST 2006 S 10,253 d 146 NOTE PAYABLE -SANER SANK TOTAL REQUIREMENTS 1 r,4u9 10,409 Y��r landing TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 S 27,402 S 631 S 28;033 S 27,46 a 631 S 281033 Pt�C7TE I�AYABLE - BANGER �AN�C Y��r ndir�c� Septclil er 30, 2006 2007 2008 2009 I�RINCIPAL 23,81 S 24,846 25,924 6,62 S 81 t2' 0.. NC)TE PAYABLE - SAI�CER _BAND __ Year Ending September 30, 2006 2007 2008 PRINCIPAL 13,425 6.770 .._. _..- 32,063 !NOTE PAYA.3LE - aA.�1Cl=fit 13AItiJi< Year Ending S�pletn.�er 3i�, 2006 2007 2008 PRINCIPAL S 6.79 6.U48 2.598 S 14.442. TOTAL INTEREST REQUIREMENTS 2,991 2606 11959 26.8O5 882 26,806 47 61672 _ __ - -- 5,879 S 8 t` .089 INTEREST S 1:114 557 61 TCiTAL REQUIREMENTS 13,982 13,982 ,831 33,7 T{�TAL E�Ei1UlREPv�ENTS fi 6,298 6.298 2,626 5 15,222 ScE A�'CCfvlP�t`�NYIr�dC €�IOTP=S TO P'PP��;t�CI��,L, ST�ITP�P�'1�P�lTS D-45 �'eae Endlr�g September 30, PRINCIPAL INTEREST" 2006 8 73,832 $ 16,161 2007 76$840 13,153 2008 79,971 10,022 2009 83.229 6,764 2010 86,619 3,374 2011 37129 373 437,620 49,847 �apltal Lease - �lT�►L CITY LERASI� Year Ending September 30, PRINCIPAL INTEREST 2006 132170 ':.267 2007 13j788 648 _.... _&... 1 III-VV. �p�itai l*e�se � C�IERSI�gED LEk�C1ERS, I(V�. Year Endinr Septer��ber 30, 2006 2007 2008 2009 RRIf�CII•'�AL J,4a7 3712 3,975 4,256 15,4' K3 'Levasuit Jrsdgrx��nt payable - Yar°br�ruh Ye ar Ending Selatea�ibee 3i3, 2006 2007 2008 2009 2010 �RI�ECIRdAL 42,448 43,297 44,1—,�63 45,04.a` 22,749 9� e f1�TEREST 949 704 441 160 2,254 TC�T�AL REQUIREMENTS 80,993 89,993 8 99 89 99 89 993 7 ,602 487.46 Tc�TAL REQUIREMENTS 14.437 14 ,436 2:8 187 3 T'�T�AL RE�l61REI4�ENT'S 4,416 4,416 4.416 4,41,E 17,6 4 Tr�TAL RE�UIREf�7ENTS 42,448 43,297 44cl+ 3 45.04 i{ 44 1 19f 7O;4 SEE t�,CG���a�F'�,4�i'�'GI'b� h�flTES T� Fl��i�,i`��Crs,� ST�TEf�,�rEP�TS D-46 Year finding September 30, 2006 2007 2008 2009 2010 2011 201 3 2014 2015 2�116 2017 2t} 18 019 2020 2021 2t�22 CITY �F �AN�EI� ��gi s�Rv'I�E REGiUIR�ME[�TS - �ER9IRAL Lf�t�C�ATLR.DIEBT PRfNC]PAL 477,312 45 974 458,22 450,833 226,941 2,070,285 --160,64 116A04 1201 000 125,000 130,000 652,051 135,000 1451000 15U04 160,000 1707000 760,000 175 000 185,000 360,000 Septel3er 3ti, 2005 IN�`ERESi" 178,G00 156,164 1 U4, i 74 112,330 90,421 70,045 71,245 65,905 f�t�,340 355,220 54 4d�. 48,280 4i ,465 34,340 20,504 18,00(l 9,250 27,2�fl F��fiUl��t4d1�iVT3 655,312 613.138 892.400 5G3:183 317.362 2,7413�5 i 92,449 191 ,245 190,965 190,340 1,C�07,271 '. 189,.4yy9ryry�0yy 1 �J,GVIJ 191,465 194,;'�40 1 �0,500 19d,25C1 337,250 1_,,258 684 5,10{1,071 .� t"+.CCQtw1F'.�if�Y1PiC NC?iES TQ FI€�l�,t'�1Gta.L VT`AT�Pe+tE(�T.�> rEBT SERVICE - RPRISE FUN Series i98 f'�evenue on Year Ending September 30, PRINCIPAL 2UC•l6 240 yyyy�7 L008 2009 ?010 2U'1 012 2013 2014 2015 2016 5,DX0 55,000 603000 6U,Q(�U 65.000 70nj00 ?0.000 ;'S,OOU BO,OH 85,UU0 w 72U,5it1U Series 1q�3 Rev�rlue Re�undinr� �n� Year Ending September 30, PRINCIPAL 2Q06 165,UUt1 2QUO I;%Jju u 2008 180,000 2009 1906000 010 195,0W00 2011 205,000 Series Z�02 Revenue Bond dear �nc�in+� _ September 30, PRINCIPAL 2/�ryryt06 2'bJ ld fT 2008 2009 010 2U11 2012 203 20s4 2015 2016 2017 2018 2019 2020 2021. 2022 5 85,000 91; 0„OU 100,GC0 1051000 1101000 120,000 125,000 4930,000 14U.t7Ci0 145,000 155,Uuu 160 000 170=0 180.000 190"Coo 195,coo r �t 32,84U 30,790 28.690 26.297 23.628 20,898 17.908 14,652 11,363 7,837 4,037 3 218.94 II�JTERES�' 47 ,975 4C,Ua? 33,653 25,913 17,600 9.020 175 J23 8 121,600 116, 5t:0 °811,1C0 105,4U0 99,400 93,100 88.150 82.51O 76„510 70,140 63,140 55,745 47,840 39,520 3U,510 20,790 10 530 5 1 232 485.. 82,840 8, 4Jc8n � 86,297 7 9 fri 690 83,628 85,898 87.908 84.552 86:"63 87,837 89,0317 9380940 5 212;975 210,964 213,653 215 91 212,600 214„020 1,2801_23. 2U6,600 206.�UU 206,100 205,400 204t4OO 203,100 208,150 207;510 206,„,510 210# 140, 208,140 210,745 2075840 2095520 210.510 210.790 205,530 3,527.485 SCmm� R,CCflC`��CC�At�YIC�� I`1CTES Tea F1t�t�,C'�CIA.L ST,�i`LC`�IC'�`i NOTE F'AYAE;I.E w �i�GE�Z �RP�K Yeaf Ending e tember 30, 2006 �'Ftld`,IC[PAL 'NCiTE PAYA�L.E - �Af�GEE� �A1��C Year Ending ete€ntaer 3�t, 26�6 26 2�16g 2il 1 t� Pfti�1CiP�L 12,�2 i 2;�66 Nt}TE PAY�iB�.E AIi;ER BA�1K Year Ending �e�kertti:aer 3�1, 2QG6 PRIN�I�AL. 2#,1�16 1t34,7�g '�a�ital Lease - DI�iE�S1��El� I..EC�[3E�Z, I►�G'. Year Ending epter�ik�er 3fl, 2Qt�6 2�Jti� '2�6g Yeaf Eracfis�g Septernt�er 3Q, 2t�fl6 3.712 1i�TEFiE�T 1,681 INTEi�ES`� lNTEi�E�T g4g 1B�TEREST a 6,u�1 �,645 16.�36 �Eciu��E�iEiXs F�Ecaul�E��ENTs 134�� REQUIF�E�IENTS - 1G,783 REQIJiRE�IEN�`S ,� 16 Ti�Tr�E RECiU1RE€�1E1T� 32,A 12 32,�d�i2 27.�1 2000 w 459,0t7 7 2007 395*433 2008 3963 35'1 009 307:1 J7' 2010 300,540 1,985,113 oil 3K000 012 190500C) 2 !'s 95.'000 2014 205.v00 2015 22050uo 1 Iv 191,000 '. 201G 3)0, oo 017 1555000 2018 1 6 a.o30 2019 170400ID 2020 1 Gj,033 895X0 2021 190,o0u 204229a 000 385.obo a 4,455 113 210,393 �;. 19o,2w5 <7 .333 158,350 140:714 888.543 123,018 100,C50 97, J 62 S7,373 771977 492,088 67,177 ,745 47,040 39,520 30,510 240,.09 92 moo, 7 90r 1 o.530 31,3220' S 1,652, t43 7o.40EJ 5 591.094 5 72,744 5zb A67 507,351 2,R7 3,050 503to1 B 290,058. 292.102 292 873 1.'0¢2 038 9717 '. 27 $ 7 210,745 207,04J 20^9,520 2105 10 1,135,;r92 0 21, 7 fib.. 205,530 32 0.10r 5L;5 CITY of SANDER GOVERNMENTAL AND PROPRIETARY FUNDS SCHEDULE OF RESTRICTED GASH S :I7ti 1t►1y9 21ld15 _. GENERAL FUNCi Equipn�ant Reg�la�erri�r�t Fronds Insurano� Fund B�atitfio�itson Board Funds Lsl�rary Ss�viri Sideav�lk Fund Arrjt�ult�n�e Fund P�ar{� Departr�ient Fur�el t~Jnapor�t 2Q02 Ec�r�d Furrds Gc�rii�ionte of C�blip�t=ors R�survn end I � S Funds TGTAL f�ENI�RAL FUND SPI��IAL --------------- All eltrA +:ll B�c�r1�s€riic De+relopr��rtt - Snotion 4A i conorttic Dovelaprrrent - Section 48 ENTERPRISE FUND -- Revenue Band I & S Hinds Revenue I3csnd Resme I"trnds R evenuo Bisrid Emergency Fund Gesstonicr U04 Deposits Unspent 2002 Revenue Bar��l Funds Li ts_*a` a Severer Imprrrvement Funds Erie; Plus Prcgrartn fx Safet�r o Inaenliv�: Funds 28,812 17,026 6,967 4.938 KOM 1060252 55,972 43,857 44,485 358,309 22,333 301,523 490.586 814 442 16�5.639 322,923 16,212 200,216 5 911 T928 ,131 _....__-1,621,054 ...............__._........_ vEE �,CCUIu1PAfVYING NC7TBS TC� FINF,NGIhL ST.+�1TEt�rIENTS CITY aF mam1vE ANALYSIS OF TAXES RECEIVABLE For the War Ended September 30, 2005 200512044 21003 ADJUSTED TAX ROLL 1,718;611 1,449,712 1,296,134 Legs: Collections and Adjusfirne °ts 1,1374, 32 1 ,411,752, 1 ,257 , 647 CURRENT YEAR TAXES RECEIVABLE END OF YEAR PRIOR YEAR TAXES RECEIVABLE END OF YEAR rOTA,L TAXES RECEIVABLE - END OF YEAR A�se��ed Value Tax Rate per 1 till Percent of Current Taxes Collected to Billed 62;1�8 54,53�t? 5�,�7 ,357 5v.7�3 Q,5a2 05 0.565470 S 5,,555473 522545 97,41 r: 97,38"% 97,03% 194.11. 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[rr 1�}aTlnirl� �1Tl} Perl��rn3it3� ill�,r �itl4�it, 1 �:�.�ttsic{ercrn3 C°it�' cat �iGat���t-"'s it�ltc;rt14�1 �:c�ltr��E t1�.%er tiTT�ttt�itsl :L�l�.flYills,� €€3 tY.`"�C'C ill t��t�:.i'Tllane tll',% Itsai�itl[lzJ �r}t.f'f�it]r`k':°t liar'=1� �1CiC�7t3ti� c>E`C'i�'1'h'h'.S� i711' tw�airli:lT7 r)rl ;nll°- t111R1rit�t�1 tit::�C;I17�tiLS d1Tlt1 €1�7t l�J �'rCatit�4" a^+`slerselt-� C7r1 111�' Ir1t�i'Tl�l �.CatltC`s:.ti C;'a"� ttt73TC,131 i�t::�1T_ll�tils?. ���,;. r,�lllair3erkati+,lil �i'tt�t;: ?1,t�rTl�l cc7€3trr11 cl�:-t�r iil4�ilc.ial r�}��7t�tin�, 1�"t�tlld r.r�t Tt��,C.,tt��>�€�i1� disc.}ir-7sc gall iiltatti'r � ill t}1� ltltrTlaal C;i7r1tTC7F a7`a`trT �iC�9Tlt;llt( i��flf7€-�it3t� tlltiit 1311`�,11i �€� il,i`er=ell �wtiilit7tr:�5e:5. �, C't1Clt�, lTi'G '��r't,�;i�11�`3� 15 k7. ti C�°°Ci4'«;i;C�±TI ttT �.4'lt:E» Chit` %�t:"rrLCl CyI C7ltratid'3ii l?i� llrr�: L1T' illilrt' :'.+�'A `t}1; 191�i6rTiull CC1±lI1"��1 �,"t°1"tI'�t;ilt�T�t;4 .}ilf"a r1C'+i r�rtrc'� �i� �� t-�lal�.tt:l� �,}`}�' }ae,c;l 1llr;:'. �1;�� �1L31 t117�4f�1ettit'l1C'� `€1 s?.Iltt?UTIt� Cft�l �6,'4�ltllci �"� i11��Ct't4I1} Ir1 €�}�t1C7rl rtl t}iC_ $i[4�TrlG.l�l' tiC�i1f31�11t5 d�ivti3+� �'TLTC�It€�la lll��' CIti.�Ur iir:� il�.�`t �1C� dCt��t�'C� t.'a'rCli[r3 is ttt3"iC'.1'v' ��l'_T`tC1C{ A`1' r�tn}�lca';�C�c� ill tlT�4 T14,:`r�a! ct:7t�r�;e cf`1��rt�,7rn3i,l�� tla�:it- st��i{�:a�e�.f ii,tl3cti�,tls_ P t�«tr,cl lug T��att+�r il`���'=�itt` tE�; �'%ti:, re}�r'Irt is ini�r;i3t�;c� fi�7r tllc° tl('C�r€33atiori send rase: c7i' tti�ll�l�elt3�r�5t, 1-�tartr7rtlill� �;'ia�'rar �tTld C.'r�>,� C'4;�r�Tl�il tw�� the f_;it�.% �i' �,all'?E�i`, T'c;�a5, atti�i is ri��t i€leilc��ri �c� ilr tiil�i slir7-�tlr�i tic�t ilc• l.ls�.dx >_�� �itla�:7rie ��€t}lta�r t31at1 APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY This page intentionally left blank. CIFG IXIS FINANCIAL GUARANTY CIFG Assurance North America, Inc. 825 Third Avenue, Sixth Floor New York, NY 10022 For information, contact (212) 9W3939 Toll -free (866) 2434212 FINANCIAL GUARANTY INSURANCE POLICY ISSUER: PolicyNo.: CIFG NA-## �K CUS1P: Effective Date:__, 200_ OBLIGATIONS:, CIFG ASSURANCE NORTH AMERICA, INC. ("CIFG NA"), for consideration'"received 6erc'by UNCONbf IONALLY AND IRREVOCABLY GUARANTEES to each Policyholder, subject only to the tert� and coiltlitkohs of this Policy (which includes each endorsement hereto), the full and complete payment by or on behalf of the Issueil. Regular Paytrionts of principal of and interest on the Ae Obligations.; s For ttte further protection of each Policyholder, CIFG NA (I) payment of any amount required to be paid under this assignment as described in Endorsement No. I hereto and (2) payment of the amount of any distribution of principal Policyholder that is subsequently avoided in whole or in piis a 1 hereto. CIFG NA shall be subrogated to the rights oNyach Policyholder to CIFG NA hereunder. Upon disbursement in respec�an Obligation, CI. any, and all rights to payment of principalithoreof of Y(teCest thereon. and A's receipt of notice and instruments of Obligations made during the Term of this Policy to such ader applicable law, all as described in Endorsement No. eivt payments under the Obligations to the extent of any payment by NA shall become the owner of the Obligation, appurtenant coupon, if The following terms shall ha a the meaniQgs specifre#�belUW`subject to and including any modifications set forih in any endorsement hereto, for all purposes of this Po` �� Effectiyc Date," �ssuer' and "Obligations" mean, respectively, the Effective Date, Issuer and Obligations referenced above Policyholder' mbg�s ifwlhe Obligations are in bookcntry form, the registered owner of any Obligation as indicated on the registration books maim jrtedb or on lief of the Issue tor such purpose or, if the Obligations are in bearer form, the holder of any Obligation; provided, however, t4Fe actiXil- dii behalf;a and for the benefit of such registered owner or holder shall be deemed to be the Policyholder to the ex ent of sued hvstee's a6ot ,rjty.:Akcgular Payments" means payments of interest and principal which are agreed to be made during the Term of thi4yPohcy iu ccordance wjt�rx the original terms of the Obligations when issued and without regard to any amendment or modification of such Obllpattogii thereafter; paytents which become due on an accelerated basis as a result of (a) a default by the Issuer or any other persgn; (b)tpn election the Issuer to pay principal or other amounts on an accelerated basis or (c) any other cause, shall not constitute "Regular Payments" unless CO; NA shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any •- accruedinterest to the date of acceltidn. "Term of this Policy" has the meaning set forth in Endorsement No. I hereto. This Pblity`'sets forth'p full the undertaking of CIFG NA, and shall not be modified, altered or affected by any other agreement or instrument, including any Modification or amendment thereto or to the Obligations (except a contemporaneous or subsequent agreement or instrument given by CIFG IdA or to which CIFG NA has given its written consent) or by the merger, consolidation or dissolution of the Issuer. The premiums pai&up, •espect of this Policy arc nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be cancelled or revoked during the Term of this Policy, including for nonpayment of premium due to CIFG NA. Payments under this Policy may not be accelerated except at the sole option of CIFG NA. In witness whereof; CIFG ASSURANCE NORTH AMERICA, INC, has caused this Policy to be executed on its behalf by its Authorized Officer. IIy CIFG ASSURANCE NORTH AMERICA, INC. Authorized Officer C[FGNA Bonds-1 (8-04) E-1 This page intentionally left blank. OFFICIAL STATEMENT Dated: August 7, 2006 NEW ISSUE: Book -Entry -Only In the opinion of Bond Counsel, interest on the Certificates is excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "TAX EXEMPTION" herein, and is not includable in the alternative minimum taxable income of individuals. See "TAX EXEMPTION" for a discussion of the opinion of Bond Counsel, including the alternative minimum tax on corporations. The City designated the Certificates as qualified tax-exeinpt obligations. See "QUALIFIED TAX- EXEMPT OBLIGATIONS. " THE CERTIFICATES WILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $6,500,000 CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 Dated Date: August 15, 2006 Due: September 1, as shown on inside cover Interest on the $6,500,000 City of Sanger, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), will accrue from their date of delivery, and will be payable March 1 and September 1 of each year, commencing on March 1, 2007. The Certificates will be issued only in fully registered form in principal denominations of $5,000 or any integral multiple thereof. Principal on the Certificates will be payable to the registered owner (the "Owner") at maturity or prior redemption upon presentation at the principal corporate office of the paying agent/registrar (the "Paying Agent/Registrar"), initially The Bank of New York Trust Company, Dallas, Texas. The Certificates will be initially registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ("DTC"). DTC will be responsible for distributing the principal and interest payments to the participating members of DTC and the participating members will be responsible for distributing the payment to the owners of beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. Proceeds from the sale of the Certificates will be used to pay for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. The Certificates maturing on and after September 1, 2017, are subject to optional redemption in whole or in part on September 1, 2016, or on any date thereafter at a redemption price equal to the principal amount thereof plus accrued interest as more fully described herein. See "THE CERTIFICATES — Redemption Provisions" herein. The Certificates will constitute direct obligations of the City of Sanger, Texas (the "City"), payable from ad valorem taxes levied against all taxable property within the City within the limits prescribed by law, and from a limited pledge (not to exceed $1,000) of surplus net revenues of the City's waterworks and sewer system as provided in the ordinance authorizing the Certificates. The payment of the principal of and interest on the Certificates when due will be insured by a municipal bond insurance policy to be issued by CTFG Assurance North America, Inc. simultaneously with the delivery of the Certificates. See "BOND INSURANCE" herein. CIFG MATURITY SCHEDULE (On Inside Cover Page) The Certificates are offered when, as and if issued, subject to the approval of legality by the Attorney General of the State of Texas and Andrews Kurth LLP, Bond Counsel, Houston, Texas. Certain legal matters will be passed upon by the Underwriter by its counsel McCall, Parkhurst m Horton L.L.P. The Certificates are expected to be available for delivery to the Underwriter through DTC on or about September S, 2006. SAMCO CAPITAL MARKETS MATURITY SCHEDULE $4,935,000 Serial Bonds Maturity Principal Interest Initial (September 1) tA> Amount Rate Yield/Price CUSIP1111 2007 $3259000 4.000% 3.650% 800876 CG 7 2008 3355000 4.000% 3.700% 800876 CH 5 2009 350,000 4.000% 3,730% 800876 CJ 1 2010 365,000 4.000% 3.740% 800876 CK 8 2011 380,000 4.000%a 3.780% 800876 CL 6 2012 395,000 4.000% 3.830% 800876 CM 4 2013 410,000 4.000% 3,880% 800876 CN 2 2014 425,000 4.000% 3.940% 800876 CP 7 2015 440,000 4,000% 3.980% 800876 CQ 5 2016 460,000 5.000% 4.000% 800876 CR 3 2017 485,000 4,000% 4.050% 800876 CS 1 2021 565,000 4.100% 4.200% 800876 CW 2 $1,565,000t"lt`� 4.050%Term Certificate due September 1, 2020, Yield 4.130%; CUSIP No. 80087G CV4tt'1 �"� Certificates maturing on and after September 1, 2017, are subject to redemption, in whole or in part, at the option of the City at the par value thereof plus accrued interest on September 1, 2016, or any date thereafter. See "THE CERTIFICATES — Redemption Provisions." CUSIP Numbers have been assigned to the Certificates by the CUSIP Service Bureau and are included solely for the convenience of the purchasers of the Certificates . Neither the City, the Financial Advisor nor the Underwriter shall be responsible for the selection or correctness of the CUSIP Numbers set forth above. 0 Term Certificates are subject to mandatory sinking fund redemption. See "THE CERTIFICATES — Redemption Provisions." 11 CITY OF SANGER, TEXAS CITY COUNCIL Joe Higgs Mayor Glenn Ervin Mayor Pro-Tem Mike James Councilmember Mike Walker Councilmember Andy Garza Councilmember Robert Patton Councilmember ADMINISTRATIVE OFFICERS Jack Smith City Manager Rosalie Chavez Assistant City Manager/ City Secretary Nichols, Jackson, Dillard, City's Attorney Hager & Smith, L.L.P. CONSULTANTS, ADVISORS AND INDEPENDENT AUDITORS Andrews Kurth LLP, Houston, Texas William C. Spore &Company, P.C., Bedford, Texas Government Capital Securities Corporation, Southlake, Texas iii Bond Counsel Independent Auditor Financial Advisor USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any information, or to An 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, the Financial Advisor or the Underwriter. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER -ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE THE MARKET PRICE OF THE ISSUE AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET, SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. Other than with respect to information concerning CIFG Assurance North America, Inc. ("CIFG") contained under the caption "BOND INSURANCE" and Appendix E — "Specimen Municipal Bond Insurance Policy" herein, none of the information in this Official Statement has been supplied or verified by CIFG and CIFG makes no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Certificates; or (iii) the tax exempt status of the interest on the Certificates. Neither the City, the Financial Advisor nor the Underwriter make any representation as to the accuracy, completeness or adequacy of the information contained in this Official Statement regarding The Depository Trust Company or its Book -Entry - Only System or CIFG. iv TABLE OF CONTENTS INTRODUCTORY STATEMENT ...........................1 PLAN OF FINANCING... Purpose, . 0 0 a 0 6 0 0 a S 6 a 4 0 * 0 * * a a a 6 & 0 a 0 6 p 0 4 4 t 0 * l THE CERTIFICATES...............................................1 Authorization.........................................................1 Security for the Certificates...................................1 Redemption Provisions..........................................1 Notice of Redemption............................................2 Bond Insurance......................................................2 Sources and Uses of Funds....................................2 GENERAL INFORMATION REGARDING THE CERTIFICATES.........................................3 General Description...............................................3 Legality..................................................................3 Defeasance.............................................................3 Amendments to the Ordinance...............................4 OWNERSHIP............................................................4 OWNER'S REMEDIES............................................4 BOOK -ENTRY -ONLY SYSTEM ............................5 REGISTRATION, TRANSFER AND EXCHANGES..... & a a 6 as *** 0 a 0 6 6 a 4 0 0*0 9 9 * 46 Paying Agent/Registrar..........................................6 Successor Paying Agent/Registrar .........................6 Future Registration..............................0..066.0.0004.....#6 Record Date for Interest Payment ..........................7 Limitation on Transfer of Certificates ....................7 Replacement of Certificates...................................7 BOND INSURANCE................................................7 CIFG Assurance North America, Inc. a 6 4 * 4 0 0 * * # 0 6 6 a&***** 7 General................................................................... 7 Capitalization.........................................................8 TAX INFORMATION..............................................9 Summary of Certain Provisions of the PropertyTax Code............................................9 Effective Tax Rate and Rollback Tax Rate ..........10 Property Assessment and Tax Payment ...............10 Penalties and Interest...........................................11 City Application of Property Tax Code ...............11 Municipal Sales Tax.............................................11 TAX RATE LIMITATIONS...................................12 RETIREMENT PLAN.............................................12 INVESTMENT POLICIES.....................................12 Accounting Principles Generally Accepted in the United States.............................................12 Legal Investments ............................................... a 12 Investment Policies..............................................13 Additional Provisions..... offset 66909ses see *Dove 0400 4 a 6 6 S a a a 6 6 a a 13 Current Investments.............................................14 DEBT SERVICE.....................................................14 Bonded Debt Limitations,... Sasso *boom foods 666 14 RATINGS............................................................... s 14 PENDING LITIGATION........................................14 LEGAL MATTERS.................................................14 TAX EXEMPTION.......vetoes eased ......................possesses 15 TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES................................................16 Discount Certificates............................................16 Premium Certificates.......... 60 assess pages 066*44 616 QUALIFIED TAX-EXEMPT OBLIGATIONS ......17 LEGAL INVESTMENTS IN TEXAS......... 6S9*00 teepee 17 REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE........as* ........................... *safe .t 17 CONTINUING DISCLOSURE OF INFORMATION................................................18 Information Upon Request and Annual Reports............................................................18 Material Event Notices.........................................18 Availability of Information from NRMSIRs andSID...........................................................18 Limitations and Amendments..............................18 Compliance with Prior Undertakings ...................19 FINANCIAL ADVISOR.........................................19 UNDERWRITING..................................................19 CONCLUDING STATEMENT..............................19 Financial Information Regarding the City of Sanger, Texas General Information Regarding the City of Sanger, Texas Form of Opinion of Bond Counsel General Purpose Audited Financial Statements for the Fiscal Year Ended September 30, 2005 Specimen Municipal Bond Insurance Policy v Appendix A Appendix B Appendix C Appendix D Appendix E SUMMARY STATEMENT This Summary Statement is subject in all respects to the n.are complete information contained in this Official Statement. The offering of the Certificates to potential investors is made only by means of this entire Official Statement, including the schedules and appendices hereto. No person is authorized to detach this Summary Statement from this Official Statement or to otherwise use it without this entire Official Statement including the Appendices hereto. The Issuer The City of Sanger, Texas, is located in Denton County, Texas. For information regarding the City, see Appendices A and B. The Certificates $6,500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006, dated August 15, 2006, maturing serially on September 1, 2007 through 2021, inclusive. Interest on the Certificates will accrue from their date of delivery and will be paid semiannually on March 1 and September 1, commencing March 1, 2007, until maturity or prior redemption. Purpose of Certificates Proceeds from the sale of the Certificates will be used for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) professional services related thereto. See "THE CERTIFICATES — Sources and Uses of Funds" herein. Authorization and Security The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, Chapter 1502, Texas Government Code, and an ordinance adopted by the City Council on August 7, 2006. The Certificates are payable from ad valorem taxes to be levied, within the limits prescribed by law, on all taxable property within the City and a limited pledge of surplus net revenues derived from the City's waterworks and sewer system, not to exceed $1,000, as provided in the ordinance authorizing the Certificates. Redemption The Certificates maturing on and after September 1, 2017, are subject to optional redemption in whole or in part on September 1, 2016, or on any date thereafter at a price of par plus accrued interest as more fully described herein. Term Certificates are subject to mandatory sinking fund redemption. See "THE CERTIFICATES -- Redemption Provisions" herein. Ratings The Certificates are rated "Aaa" by Moody's Investor's Service, Inc. ("Moody's") by virtue of a municipal bond insurance policy issued by CIFG Assurance North America, Inc. See "BOND INSURANCE" and "RATINGS" herein. The underlying rating of the Certificates is `Baa2" by Moody's. Bond Insurance The scheduled payment of principal of and interest on the Certificates, when due, will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by CIFG Assurance North America, Inc. See "BOND INSURANCE" herein. Book -Entry -Only System The Certificates are initially issuable only to Cede & Co., the nominee of The Depository Trust Company, New York, New York, pursuant to the book -entry only system described herein. Beneficial ownership of the Certificates may be acquired in principal denominations of $5,000 or integral multiples thereof. No physical delivery of the Certificates will be made to the purchasers thereof. Principal of, premium if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the DTC Participants (as defined herein) for subsequent remittance to the owners of the beneficial interests in the Certificates. See "BOOK -ENTRY -ONLY SYSTEM" herein. (The remainder of this page irTtentionally left blanl�] vi OFFICIAL STATEMENT RELATING TO $6,500,000 CITY OF SANGER, TEXAS (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 INTRODUCTORY STATEMENT This Official Statement, which includes the cover page, the schedules and the appendices hereto, provides certain information regarding the issuance by the City of $6,500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"). The Certificates will be authorized to be issued, sold and delivered by an ordinance adopted by the City's governing body (the "City Council"), and such ordinance is referred to herein as the "Ordinance." Capitalized terms used in this Official Statement have the same meaning assigned to such terms in the Ordinance, except as otherwise indicated herein. The City is a political subdivision of the State of Texas (the "State") and a municipal corporation organized and existing under the laws of the State and the City's home rule charter (the "City Charter"), which was initially approved by the electorate of the City on November 2, 1999. For information regarding the City, see Appendices A and B of this Official Statement. All financial and other information presented in this Official Statement has been provided by the City, except for information expressly attributed to other sources. The presentation of information, including tables of receipts from taxes and other sources, is intended to show recent historic information, and is not intended to indicate future or continuing trends in the financial position or other affairs of the City. No representation is made that past experience, as is shown by that financial and other information, will necessarily continue to be repeated in the future. PLAN OF FINANCING Purpose Proceeds from the sale of the Certificates will be used for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) professional services related thereto. THE CERTIFICATES Authorization The Certificates are direct obligations of the City, issued pursuant to Chapter 271, Subchapter C, Texas Local Government Code, as amended, Chapter 1502, Texas Government Code, as amended, and the Ordinance, as authorized by the City Charter. Security for the Certificates The Certificates are payable from ad valorem taxes to be levied and collected, within the limits prescribed by law, on all taxable property within the City, and by a limited pledge of surplus net revenues derived from the City's waterworks and sewer system (the "System"), not to exceed $1,000, as provided in the Ordinance. Redemption Provisions Optional Redemption. The City reserves the right, at its option, to redeem the Certificates having stated maturities on and after September 1, 2017, in whole or in part, in integral multiples of $5,000, on September 1, 2016 or any date thereafter, such redemption date or dates to be fixed by the City, at a redemption price equal to the principal amount thereof plus accrued interest to the date fixed for redemption. If less than all of the Certificates are to be redeemed, the City shall determine the maturity or maturities and the amounts thereof to be redeemed and shall direct the Paying Agent/Registrar to select by lot the Certificates, or portions thereof, within each maturity to be redeemed. Mandatory Redemption. The Certificates maturing on September 1 in the year 2020 (the "Term Certificates") are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Term Certificate Maturing September 1, 2020 Mandatory Redemption Dates Principal Amounts September 1, 2018 $500,000 September 1, 2019 520,000 September 1, 2020 (maturity) 545,000 The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before September 1 of each year in which Term Certificates are to be mandatorily redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Term Certificates that have been optionally redeemed on or before January 1 of such year and which have not been made the basis for a previous reduction. Notice of Redemption Not less than 30 days prior to a redemption date for the Certificates, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to each registered owner of a Certificate to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. If notice is so given and sufficient funds are provided for the payment of the redemption price of the Certificates, interest shall cease to accrue after the date fixed for redemption whether or not the Certificates have been submitted for payment. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE, NOTICE HAVING BEEN SO GIVEN, AND THE FUNDS NECESSARY TO REDEEM SUCH CERTIFICATES HAVING BEEN PROVIDED, THE CERTIFICATES CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. Bond Insurance The scheduled payment of principal of and interest on the Certificates when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Certificates by CIFG Assurance North America, Inc. See "BOND INSURANCE" and Appendix E - Specimen Municipal Bond Insurance Policy herein. Sources and Uses of Funds The proceeds from the sale of the Certificates will be applied approximately as follows: Sources Principal Amount of Certificates Net Original Issue Premium Total Sources of Funds Uses Deposit to Construction Fund Costs of Issuance (including Underwriter's Discount and Bond Insurance Premium) Deposit to Interest and Sinking Fund Total Uses of Funds 2 '.. 11 111 11 ' 11 $6,300,000.00 235,615.91 2,167.09 �6.537 783.00 GENERAL INFORMATION REGARDING THE CERTIFICATES General Description The Certificates will be dated August 15, 2006, and will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Certificates will bear interest from their date of delivery. Interest will be paid semiannually on each March 1 and September 1, commencing March 1, 2007, Interest will accrue on the Certificates on the basis of a 360-day year consisting of twelve 30-day months. The Certificates will be issued as book -entry only securities pursuant to arrangements made with The Depository Trust Company, New York, New York. See "BOOK -ENTRY -ONLY SYSTEM." Principal on the Certificates will be payable to the registered owners (the "Owners") at maturity or prior redemption upon presentation and surrender of such Certificates at the principal corporate office of the paying agent/registrar (the "Paying Agent/Registrar'), initially The Bank of New York Trust Company, Dallas, Texas. Interest on the Certificates will be payable by check dated as of the interest payment date and mailed by the Paying Agent/Registrar to Owners as shown on the records of the Paying Agent/Registrar on the Record Date (see "REGISTRATION, TRANSFER AND EXCHANGE — Record Date for Interest Payment" herein), or by such other customary banking arrangement, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the Owner. If the date for the payment of the principal of or interest on a Certificate shall be a Saturday, Sunday, legal holiday, or a day on which banking institutions in.the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. The Certificates will mature on the dates, in the amounts and bear interest at the rates as set forth on inside front cover page of this Official Statement, Legality The Certificates are offered when, as and if issued, subject to the approvals of legality by the Attorney General of the State of Texas and Andrews Kurth LLP, Houston, Texas, Bond Counsel. (See "LEGAL MATTERS" and Appendix Q. Defeasance The Ordinance provides for the defeasance of the Certificates when payment of the principal of and premium, if any, on the Certificates plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent or other authorized entity, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper compensation and expenses of the paying agent for the Certificates. The Ordinance provides that "Defeasance Securities" means (1) direct, noncallable obligations of the Unites States of America, including obligations that are unconditionally guaranteed by the United States of America, (2) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (3) noncallable obligations of a state agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The City has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the City moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Certificates shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Certificates have been made as described above, all rights of the City to initiate proceedings to call such Certificates for redemption or take any other action amending the terms of such Certificates are extinguished; provided, however, that the right to call Certificates for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption, (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of the firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. 3 Amendments to the Ordinance In the Ordinance, the City has reserved the right to amend such Ordinance without the consent of any holder of the Certificates for the purpose of amending or supplementing such Ordinance to (i) cure any ambiguity, defect or omission therein that does not materially adversely affect the interests of the holders of the Certificates, (ii) grant additional rights or security for the benefit of the holders of the Certificates, (iii) add events of default as shall not be inconsistent with the provisions of such Ordinance that do not materially adversely affect the interests of the holders of the Certificates, (iv) qualify the Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect or (v) make such other provisions in regard to matters or questions arising under the Ordinance that are not inconsistent with the provisions thereof and which, in the opinion of Bond Counsel for the City, do not materially adversely affect the interests of the holders of the Certificates. Each Ordinance further provides that the holders of the Certificates aggregating in principal amount 51% of the outstanding Certificates shall have the right from time to time to approve any amendment not described above to the Ordinance if it is deemed necessary or desirable by the City; provided, however, that without the consent of 100% of the holders in original principal amount of the then outstanding Certificates no amendment may be made for the purpose of: (i) making any change in the maturity of any of the outstanding Certificates; (ii) reducing the rate of interest borne by any of the outstanding Certificates; (iii) reducing the amount of the principal of, or redemption premium, if any, payable on any outstanding Certificates; (iv) modifying the terms of payment of principal or of interest or redemption premium on outstanding Certificates, or imposing any condition with respect to such payment; or (v) changing the minimum percentage of the principal amount of the Certificates necessary for consent to such amendment. Reference is made to the Ordinance for further provisions relating to the amendment thereof. OWNERSHIP The City, the Paying Agent/Registrar and any other person may treat the person in whose name any Certificate is registered as the absolute owner of such Certificate for the purpose of making and receiving payment of principal and interest, and for all other purposes, whether or not such Certificate is overdue, and neither the City nor the Paying Agent/Registrar will be bound by any notice or knowledge to the contrary. All payments made to the person deemed to be the owner of any Certificate in accordance with the Ordinance will be valid and effectual and will discharge the liability of the City and the Paying Agent/Registrar upon such Certificate to the extent of the sums paid. OWNER'S REMEDIES The Ordinance does not provide for the appointment of a trustee to represent the interests of the Certificate holders upon any failure of the City to perform in accordance with the terms of the Ordinance or upon any other condition and, in the event of any such failure to perform, the registered owners would be responsible for the initiation and cost of any legal action to enforce performance of the Ordinance. Furthermore, the Ordinance does not establish specific events of default with respect to the Certificates and, under State law, there is no right to the acceleration of maturity of the Certificates upon the failure of the City to observe any covenant under the Ordinance. A registered owner of Certificates could seek a judgment against the City if a default occurred in the payment of principal of or interest on any such Certificates; however, such judgment could not be satisfied by execution against any property of the City and a suit for monetary damages could be vulnerable to the defense of sovereign immunity. A registered owner's only practical remedy, if a default occurs, is a mandamus or mandatory injunction proceeding to compel the City to levy, assess and collect an annual ad valorem tax sufficient to pay principal of and interest on the Certificates as it becomes due or perform other material terms and covenants contained in the Ordinance. In general, Texas courts have held that a writ of mandamus may be issued to require a public official to perform legally imposed ministerial duties necessary for the performance of a valid contract, and Texas law provides that, following their approval by the Attorney General and issuance, the Certificates are valid and binding obligations for all purposes according to their terms. However, the enforcement of any such remedy may be difficult and time consuming and a registered owner could be required to enforce such remedy on a periodic basis. The City is also eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or Certificate holders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Certificates are qualified with respect to the customary rights of debtors relative to their creditors, including rights afforded to creditors under the Bankruptcy Code. 0 BOOK -ENTRY -ONLY SYSTEM The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Certificates. The Certificates 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 certificate will be issued for each maturity of the Certificates, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.ore. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Certificates with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as redemptions, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Certificates within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or Paying Agent/Registrar, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and 5 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, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Certificate certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Certificate certificates will be printed and delivered. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement. In reading this Official Statement it should be understood while the Certificates are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Certificates, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar The initial Paying Agent/Registrar is The Bank of New York Trust Company, Dallas, Texas. The Certificates are being issued in fully registered form in integral multiples of $5,000 of principal amount. Interest on the Certificates will be payable semiannually by the Paying Agent/Registrar by check mailed on each interest payment date by the Paying Agent/Registrar to the registered owner at the address as it appears on the Paying Agent/Registrar's books on the Record Date or by such other customary banking arrangement acceptable to the Paying Agent/Registrar requested by and at the risk and expense of the registered owner. Successor Paying Agent/Registrar Provision is made in the Ordinance for replacement of the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the City, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the City shall be a commercial bank, a trust company, financial institution or other entity duly qualified and legally authorized to serve and perform the services of the Paying Agent/Registrar for the Certificates. Future Registration In the event the book -entry only system should be discontinued, printed Certificates will be delivered to the Owners and thereafter the Certificates may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the Owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Certificates may be assigned by the execution of an assignment form on the Certificates or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar, A new Certificate will be delivered by the Paying Agent/Registrar in lieu of the Certificate being transferred or exchanged at the designated office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered Owner at the Owner's request, risk and expense. New Certificates issued in an exchange or transfer of Certificates will be delivered to the registered Owner or assignee of the Owner after the receipt of the Certificates to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the Owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Certificates registered and delivered in an exchange or transfer shall be of like kind and in authorized denominations and for a like aggregate principal amount as the Certificate or Certificates surrendered for exchange or transfer. See "BOOK -ENTRY -ONLY SYSTEM" for a description of the system to be utilized initially in the settlement and transfer of the Certificates. Record Date for Interest Payment The record date ("Record Date") for the interest payable on any interest payment date is the fifteenth day of the month immediately preceding such interest payment date, as specified in the Ordinance. In the event of a nonpayment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (the "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the City. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be 15 days after the Special Record Date) shall be sent at least 5 business days prior to the Special Record Date by United States mail, first class, postage prepaid, to the address of each Owner of a Certificate appearing on the books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Limitation on Transfer of Certificates Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Certificate (i) during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or (ii) with respect to any Certificate, or any portion thereof, called for redemption prior to maturity within 45 days prior to its redemption date, provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate. Replacement of Certificates If any Certificate is mutilated, destroyed, stolen or lost, a new Certificate in the same principal amount as the Certificate so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Certificate, such new Certificate will be delivered only upon surrender and cancellation of such mutilated Certificate. In the case of any Certificate issued in lieu of and in substitution for a Certificate which has been destroyed, stolen or lost, such new Certificate will be delivered only (a) upon filing with the City and the Paying Agent/Registrar evidence satisfactory to them that such Certificate has been destroyed, stolen or lost and proof of the ownership thereof and (b) upon furnishing the City and the Paying Agent/Registrar with indemnity satisfactory to them. The person requesting the authentication and delivery of a new Certificate must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. BOND INSURANCE CIFG Assurance North America, Inc. The information set forth in the following paragraphs has been provided by CIFG Assurance North America, Inc. ("CIFG" or the "Insurer) for inclusion in this Official Statement. CIFG does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding CIFG set forth under the heading "BOND INSURANCE". CIFG makes no representation regarding the Certificates or the advisability of investing in the Certificates. General CIFG is a monoline financial guaranty insurance company incorporated under the laws of the State of New York. The address of the principal executive offices of the Insurer is 825 Third Avenue, Sixth Floor, New York, New York 10022; its toll -free telephone number is (866) CIFG-212 and its general telephone number is (212) 909-3939 and its website is located at www.cifg.com. The Insurer is a member of the CIFG Group of financial guaranty companies, which also includes CIFG Europe, a French insurance company licensed to do business in the European Union, and CIFG Guaranty, a dedicated French reinsurance corporation. In addition to its capital and surplus as set forth below, the Insurer is supported by a net worth maintenance agreement from CIFG Guaranty, which provides that CIFG Guaranty will maintain the Insurer's New York statutory capital and surplus at no less than $80 million, and may cede a substantial portion (not to exceed 90%) of its exposure on each transaction to CIFG Guaranty through a facultative reinsurance agreement. Each of the Insurer, CIFG Europe and CIFG Guaranty has received an insurer financial strength rating of "AAA" from Fitch, an insurer financial strength rating of "Aaa" from Moody's, and an insurer financial enhancement rating of "AAA" from Standard and Poor's, the highest rating assigned by each rating agency. Each such rating should be evaluated independently. The ratings reflect the respective rating agency's current assessment of each company's capacity to pay claims on a timely basis and are not recommendations to buy, sell or hold the Certificates. Such ratings may be subject to revision or withdrawal at any time. 0 The Insurer is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York, its state of domicile, and is licensed to do business in 46 jurisdictions. The Insurer is subject to Article 69 of the New York Insurance Law which, among other things, limits the business of such insurers to financial guaranty insurance and related lines, requires that such insurers maintain a minimum surplus to policyholders, establishes contingency, loss and unearned premium reserve requirements for such insurers, and limits the size of individual transactions and the volume of transactions that may be underwritten by such insurers. Other provisions of the New York Insurance Law applicable to non -life insurance companies such as the Insurer regulate, among other things, permitted investments, payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liabilities for borrowings. Capitalization The following tables set forth the capitalization of the Insurer on the basis of accounting principles generally accepted in the United States ("US GAAP") and statutory accounting practices prescribed or permitted by the New York State Insurance Department, respectively. TotalAssets.............................................................................................. TotalLiabilities........................................................................................ Shareholder's Equity................................................................................ AdmittedAssets....................................................................................... Liabilities.................................................................................................. Capital and Surplus. US GAAP December 31, 2005 housands; of US dol. 324,134 $ $ 202,042 $ 122,092 Statutory Accounting Practices December 31, 2005 (in thousands of US dollars) $ 1759333 $ 66,758 $ 108,575 The following table sets forth the capitalization of CIFG Guaranty on the basis of US GAAP. Assets....................................................................................................... Liabilities.................................................................................................. Shareholder's Equity.........................memo me* ...........................:...... memo .....smote US GAAP December 31.2005 (in thousands of US dollars (in thousands of euros) ) (1) € 736,208 $ 871,634 € 196,794 $ 232,995 € 539,414 $ 638,639 (1) The translation of euros into dollars is presented solely for the convenience of the reader, using the observed exchange rate at December 31, 2005 of $1.18395 to €1.00. The convenience translation should not be construed as representation that the euro amounts have been, could have been, or in the future could be, converted into U.S. Dollars at this or any rate of exchange. For further information concerning the Insurer and CIFG Guaranty, see the audited financial statements of both companies, including the respective notes thereto, prepared in accordance with US GAAP as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, and the unaudited interim financial statements of the Insurer as of March 31, 2006 and for the three-month period ended March 31, 2006, which are available on the CIFG Group's website at www.cifg.com. Copies of the most recent audited annual and unaudited interim financial statements of the Insurer prepared in accordance with accounting principles prescribed or permitted by the New York State Insurance Department, are also available on the website and may be obtained, without charge, upon request to the Insurer at its address above, Attention: Finance Department. 0 TAX INFORMATION Summary of Certain Provisions of the Property Tax Code 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 assess all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining the market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the Appraisal District's chief appraiser determines the method to be used. The value placed upon property within the Appraisal District is subject to review by the Appraisal Review Board, consisting of three members appointed by the Board of Directors of the Appraisal District. The Appraisal District is required to review the value of property within the Appraisal District at least once every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the V.A.T.C.S., 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 tax 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: (1) An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; and (2) An exemption of up to 20% of the market value of residence homesteads; minimum exemption $5,000. In the case of residence homestead exemptions granted under Section 14b, 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. Recent legislation and a related amendment to the Texas Constitution authorize cities to limit the total ad valorem tax (except for increases attributable to certain improvements) on the residence homestead of the disabled or persons 65 years of age or older and their spouses to the amount of tax imposed in the later of (1) the year such residence qualified for an exemption based on the disability or age of the owner or (2) the year the City chose to establish the above -referenced limitation. On the receipt of a petition signed by five percent of the registered voters of the City, the City shall call an election to determine by majority vote whether to establish such a tax limitation. Once established, a city may not repeal or rescind the tax limitation. If a disabled or elderly person dies in a year in which the person received a residence homestead exemption, the total amount of ad valorem taxes imposed on the homestead by a city may not be increased while it remains the residence homestead of that person's surviving spouse if the spouse is fifty-five years of age or older or disabled at the time of the person's death. A proportionate share of the limitation applicable to a person's homestead is transferred to a new residence homestead of such person if the person moves to a different residence within the same city. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to $12,000, dependent upon the degree of disability or whether the exemption is applicable to a surviving spouse or children. Article VIII provides that eligible owners of both agricultural land (Section 1A) 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 IAA. 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. Non -business personal property, such as automobiles or light trucks, are exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as non -business property are exempt from ad valorem taxation. E Section 1 J of Article VIII authorizes an ad valorem tax exemption for "freeport property". Freeport property is defined as goods detained in the State for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. The City also may enter, into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City has adopted a tax abatement policy with respect to certain areas within the City. See Appendix A — Tables 1, 3 and 4 for information relating to the City's taxable assessed valuation, property tax rates and collections and tax rate distribution. Effective Tax Rate and Rollback Tax Rate Before the later of September 30 or the 60th day after the date the certified appraisal roll is received by the City, the City Council must adopt a tax rate per $100 taxable value for the current year. If the City Council does not adopt a tax rate by such required date the tax rate for that tax year is the lower of the effective tax rate calculated for that tax year or the tax rate adopted by the City for the preceding tax year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or Me 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 intemet 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 he adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Property Assessment and Tax Payment Property within the City is assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process which uses an .average daily price of oil and gas for the prior year. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years of age and over and taxpayers qualifying for the disabled person exemption are allowed to pay taxes on their residential homestead in four installments with the first installment due on February 1 of each year and the final installment due on August 1. I�1 Penalties and Interest Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Month Penalty February 6% March 7 April 8 May 9 June 10 July 27t't Cumulative Interest Total I% 7% 2 9 3 11 4 13 5 15 6(2) 33 "� Includes an additional 15%penalty to defray attorneys' fees. Interest continues to accrue after July 1 at the rate that increases I % per month until paid. 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, an attorney's collection fee of up to 15% may be 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 Property Tax Code The City grants an exemption of $30,000 of the market value of the residence homestead of persons 65 years of age or older and $202000 for the 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 entered into a tax abatement agreement with Wal-Mart Regional Warehouse and has adopted criteria therefore, which is a prerequisite to the execution of abatement agreements. The abatement agreement, which is for 50% of the assessed valuation, will expire in 2012. Municipal Sales Tax The City has adopted the provisions of V.A.T.C.S. Tax Code § 321.001 et seq., which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City. The proceeds of such tax are credited to the General Fund and are not pledged to payment of the Certificates. Collections and enforcements are effected through the offices of the State Comptroller of Public Accounts, who monthly remits the proceeds of the tax, after deduction of a 2% service fee, to the City. The Tax Code provides certain cities and counties the option of assessing a maximum one-half percent (1/2%) sales tax on retail sales of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the estimated amount of the sales tax revenues to be generated in the current year. Subject to the approval of a majority of the voters in a local option election, state law also provides certain cities the option of assessing a sales and use tax for a variety of other purposes, including economic and industrial development, municipal street maintenance and repair, and sports and community venues. State law limits the maximum aggregate sales and use tax rate in any area to 8'/a%. Accordingly, the collection of local sales and use taxes in the area of the City (including sales and use taxes levied by the City) is limited to no more than 2% (when combined with the State sales and use tax rate of 6'/a%). 11 In addition to the one percent (1%) local sales and use tax referred to above, at an election held on May 2, 1998 voters of the City approved the imposition of an additional one-half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 4A, Article 5190.6 of Vernon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. At an election held on May 2, 1998 voters of the City approved the imposition of an additional one- half percent (1/2%) sales and use tax for economic development purposes in accordance with Section 413, Article 5190.6 of lemon's Annotated Texas Civil Statutes. Levy of the additional sales and use tax began in December, 1998. The City has not held an election regarding an additional sales tax for the purpose of reducing its ad valorem taxes. TAX RATE LIMITATIONS Article XI, Section 5, of the State Constitution is applicable to the City and imposes a limitation on ad valorem taxes which can be imposed by the City of $2.50 per $100 taxable assessed valuation. The 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. 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 5% of gross earnings. The City is required to contribute at an actuarially determined rate; the current rate as of September 30, 2005 is 5.51%. 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, 2005 totaled $86,672. For additional information regarding the City's Retirement Plans, see Appendix D - "General Purpose Financial Statements for the Fiscal Year Ended September 30, 2005, Note 6 -Retirement Plan". INVESTMENT POLICIES Accounting Principles Generally Accepted in the United States The City policy is to adhere to accounting principles generally accepted in the United States (see Appendix D "General Purpose Financial Statements for the Fiscal Year Ended September 30, 2005"). Legal Investments Under current State law, the City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) bonds issued, assumed, or guaranteed by the State of Israel, (7) certificates of deposit meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code) that are issued by or through an institution that either has its main office or a branch in 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, (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1), and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (9) securities lending programs if (i) the securities loaned under the program are collateralized and a loan made under the program allows for termination at any time and 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 (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City and held in the City's name; (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, (10) certain banker's 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 A4 12 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (11) commercial paper with a stated maturity of 270 days or less that is rated as least A4 or P4 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U. S. or state bank, (12) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (13) no-load mutual funds registered with the Securities and Exchange Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses; and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent, and (14) guaranteed investment contracts that have a defined termination date and are secured by obligations described in clause (1) above in an amount at least equal to the amount of bond proceeds invested under such contract. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than Aaa or AAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage -backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Investment Policies Under Texas law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds' investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City, (2) that all investment officers jointly signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. Additional Provisions Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (3) require the registered principal of firms seeking to sell securities to the City to: (a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers; (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the investment in mutual funds in the aggregate to no more than 15% of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, and prohibit the investment in mutual funds of any portion of bond proceeds, reserves and funds held for debt service; and (8) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements. 13 Current Investments so September 30, 2005, 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. Tvue of Investment Amount Percentase Cash $ 100 0.01 Certificates of Deposit, Checking 2,8319264 99.99 Accounts and Savings Accounts Total 140*4Q% DEBT SERVICE Bonded Debt Limitation Under current State law, there is no direct limitation on the amount of funded debt that the City may issue or incur. However, the City's maximum ad valorem tax rate is limited by the Constitution and laws of the State of Texas to $2.50 per $100 of assessed valuation for all City purposes. The City's Charter, (Article 5, Section 2) states: "The City Council shall have the power and is hereby authorized and made its duty to levy, assess, and collect annually for general purposes authorized by laws and for the purpose of paying the interest and providing the sinking fund on the bonded indebtedness of the City of Mesquite now in existence or which may hereafter be created an ad valorem tax on real, personal or mixed property in such amounts and at such rates as shall be determined by the City Council subject to applicable limitations and prohibitions now or hereafter contained in the Constitution of the State of Texas." Article XI, Section 5 of the State Constitution states in part: "but no tax for any purpose shall ever be lawful for any one year, which shall exceed two and one-half per cent of the taxable property of such city..." RATINGS The Certificates are rated "Aaa" by Moody's Investor's Service, Inc. ("Moody's") by virtue of a municipal bond insurance policy issued by CIFG Assurance North America, Inc. The presently outstanding uninsured general obligation debt of the City is rated "Baa2" by Moody's. The ratings reflect only the view of such organizations at the time such ratings were given and the City makes no representation as to the appropriateness of the ratings. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by said rating companies, if in the judgment of said rating companies, circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. PENDING LITIGATION Various lawsuits pending against the City involve claims relating to general liability, automotive liability, workers' compensation, civil rights actions, and various contractual matters. In the opinion of the City's management, the outcome of the pending litigation will not have a material adverse effect on the City financial position or operations. LEGAL MATTERS The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Certificates, including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Certificates are valid and binding obligations of the City, and based upon examination of such transcripts of proceedings, the approving legal opinions of Bond Counsel to the effect that (i) the Certificates issued in compliance with the provisions of the Ordinance are valid and legally binding obligations of the City and (ii) the interest on the Certificates is exempt from federal income taxation under existing statutes, published rulings, regulations, and court decisions (see "TAX EXEMPTION"). Bond Counsel has not been engaged to investigate the financial resources of the City or its ability to provide for payment of the Certificates, and the opinion of Bond Counsel will make no statement as to such matters, or as to the accuracy or completeness of this Official Statement or any other information that may have been relied on by anyone in making the decision to purchase the Certificates. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Certificates are contingent on the sale and delivery of the Certificates. The applicable legal opinion will be printed on or attached to the definitive Certificates. Certain legal matters will be passed upon by the Underwriter by its counsel McCall, Parkhurst & Horton L.L.P. TAX EXEMPTION In the opinion of Andrews Kurth LLP, Houston, Texas, Bond Counsel, interest on the Certificates is (1) excludable under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), from gross income of the owners thereof for federal income tax purposes and (2) is not includable in the alternative minimum taxable income of individuals or corporations, except as described below. The foregoing opinions of Bond Counsel are based on the Code and the regulations, rulings and court decisions thereunder in existence on the date of issue of the Certificates. Such authorities are subject to change and any such change could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof or change the treatment of such interest for purposes of computing alternative minimum taxable income. In rendering its opinions, Bond Counsel has assumed continuing compliance by the City with certain covenants of the Ordinance authorizing the issuance of the Certificates (the "Ordinance") and has relied on representations by the City with respect to matters solely within the knowledge of the City, which Bond Counsel has not independently verified. The covenants and representations relate to, among other things, the use of Certificate proceeds and any facilities financed therewith, the source of repayment of the Certificates, the investment of Certificate proceeds and certain other amounts prior to expenditure, and requirements that excess arbitrage earned on the investment of Certificate proceeds and certain other amounts be paid periodically to the United States and that the City file an information report with the Internal Revenue Service (the "Service"). If the City should fail to comply with the covenants in the Ordinance, or if its representations relating to the Certificates that are contained in the Ordinance should be determined to be inaccurate or incomplete, interest on the Certificates could become taxable from the date of delivery of the Certificates, regardless of the date on which the event causing such taxability occurs. Interest on all tax-exempt obligations, such as the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Except as stated above, Bond Counsel will express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt or accrual of interest on or acquisition or disposition of the Certificates. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Service with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the City as the "taxpayer," and the owners of the Certificates may have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Certificates, the City may have different or conflicting interests from the owners of the Certificates. Public awareness of any future audit of the Certificates could adversely affect the value and liquidity of the Certificates during the pendency of the audit, regardless of its ultimate outcome. Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt interest, such as interest on the Certificates, received or accrued during the year. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. Such prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. If a tax-exempt obligation, such as the Certificates, was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue, the Code provides ordinary income tax treatment of gain recognized upon the disposition of such "market discount bond." A "market discount bond" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., a market discount). Such treatment applies to "market discount bonds" to the extent the gain from the disposition thereof exceeds the accrued market discount of such bonds unless a statutory de minimis rule applies. The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. 15 The applicability of the market discount rules may adversely affect the liquidity or secondary market price of the Certificates. Purchasers should consult their own tax advisors regarding the potential implications of market discount with respect to the Certificates. TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES Discount Certificates Some of the Certificates may be offered a[ initial offering prices which are less than the stated redemption prices at maturity of such Certificates. If the initial offering prices of the Certificates are lower than the stated redemption price payable at maturity, the Certificates of that maturity (the "Discount Certificates") will be considered to have "original issue discount' for federal income tax purposes. An initial owner who purchases a Discount Certificate in the initial public offering of the Certificates at such an initial offering price will acquire such Discount Certificate with original issue discount equal to the difference between (a) the stated redemption price payable at the maturity of such Discount Certificate and (b) the initial offering price to the public of such Discount Certificate. Under existing law, such original issue discount will be treated for federal income tax purposes as additional interest on a Certificate and such initial owner will be entitled to exclude from gross income for federal income tax purposes that portion of such original issue discount deemed to be earned (as discussed below) during the period while such Discount Certificate continues to be owned by such initial owner. Except as otherwise provided herein, the discussion regarding interest on the Certificates under the caption "TAX EXEMPTION' generally applies to original issue discount deemed to be earned on a Discount Certificate while held by an owner who has purchased such Certificate at the initial offering price in the initial public offering of the Certificates and that discussion should be considered in connection with this portion of the Official Statement. In the event of a redemption, sale, or other taxable disposition of a Discount Certificate prior to its stated maturity, however, any amount realized by such initial owner in excess of the basis of such Discount Certificate in the hands of such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such Discount Certificate continues to be held by such initial owner) will be includable in gross income for federal income tax purposes. Because original issue discount on a Discount Certificate will be treated for federal income tax purposes as interest on a Certificate, such original issue discount must be taken into account for certain federal income tax purposes as it is deemed to be earned even though there will not be a corresponding cash payment. Corporations that purchase Discount Certificates must take into account original issue discount as it is deemed to be earned for purposes of determining alternative minimum tax. Other owners of a Discount Certificate may be required to take into account such original issue discount as it is deemed to be earned for purposes of determining certain collateral federal tax consequences of owning a Certificate. See "TAX EXEMPTION' for a discussion regarding the alternative minimum taxable income consequences for corporations and for a reference to collateral federal tax consequences for certain other owners. The characterization of original issue discount as interest is for federal income tax purposes only and does not otherwise affect the rights or obligations of the owner of a Discount Certificate or of the City. The portion of the principal of a Discount Certificate representing original issue discount is payable upon the maturity or earlier redemption of such Certificate to the registered owner of the Discount Certificate at that time. Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each Discount Certificate is deemed to be earned each day. The portion of the original issue discount deemed to be earned each day is determined under an actuarial method of accrual, using the yield to maturity as the constant interest rate and semi-annual compounding. The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition of Discount Certificates by an owner that did not purchase such Certificates in the initial public offering and at the initial offering price may be determined according to rules which differ from those described above. All prospective purchasers of Discount Certificates should consult their tax advisors with respect to the determination for federal, state and local income tax purposes of interest and original issue discount accrued upon redemption, sale or other disposition of such Discount Certificates and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of such Discount Certificates. Premium Certificates Some of the Certificates may be offered at initial offering prices which exceed the stated redemption prices payable at the maturity of such Certificates. If any of the Certificates of such maturities are sold to members of the public (which for this purpose excludes bond houses, brokers and similar persons or organizations acting in the capacity of wholesalers or underwriters) at such initial offering prices, each of the Certificates of such maturities ("Premium Certificates") will be considered for federal income tax purposes to have "bond premium" equal to the amount of such excess. The basis for federal income tax purposes of a Premium Certificate in the hands of an initial purchaser who purchases such Certificate in the initial offering must be reduced 16 each year and upon the sale or other taxable disposition of the Certificate by the amount of amortizable bond premium. This reduction in basis will increase the amount of any gain (or decrease the amount of any loss) recognized for federal income tax purposes upon the sale or other taxable disposition of a Premium Certificate by the initial purchaser. Generally, no corresponding deduction is allowed for federal income tax purposes, for the reduction in basis resulting from amortizable bond premium. The amount of bond premium on a Premium Certificate which is amortizable each year (or shorter period in the event of a sale or disposition of a Premium Certificate) is determined under special tax accounting rules which use a constant yield throughout the term of the Premium Certificate based on the initial purchaser's original basis in such Certificate . The federal income tax consequences of the purchase, ownership, redemption, sale or other disposition by an owner of Certificates that are not purchased in the initial offering or which are purchased at an amount representing a price other than the initial offering prices for the Certificates of the same maturity may be determined according to rules which differ from those described above. Moreover, all prospective purchasers of Certificates should consult their tax advisors with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, redemption, sale or other disposition of Premium Certificates, QUALIFIED TAX-EXEMPT OBLIGATIONS Section 265(a) of the Code provides, in general, that interest expenses incurred to acquire or carry tax-exempt obligations are not deductible from the gross income of the holder. For certain holders that are "financial institutions" within the meaning of such section, complete disallowance of such expense would apply to taxable years beginning after December 31, 1986, with respect to tax-exempt obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this rule for interest expense incurred by financial institutions to carry tax-exempt obligations (other than certain private activity bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may only designate an issue as an issue of "qualified tax-exempt obligations" where less than $10 million of tax-exempt obligations are issued by the issuer during the calendar year in which the issue so designated is issued. The City will designate the Certificates as "qualified tax-exempt obligations." Further, the City will represent that it has or will take such action necessary for the Certificates to constitute "qualified tax-exempt obligations." Notwithstanding the designation of the Certificates as "qualified tax-exempt obligations," financial institutions acquiring the Certificates will be subject to a twenty percent (20%) disallowance of interest expenses allocable to the Certificates. LEGAL INVESTMENTS IN TEXAS Section 1201.041 of the Public Security Procedures Act provides that the Certificates 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 sinking funds of municipalities or other political subdivisions or public agencies of the State of Texas. For political subdivisions in the State which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act (V.T.C.A., Government Code, Chapter 2256), the Certificates may have to be assigned a rating of "A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible investments for sinking funds and other public funds. See "RATINGS" herein. In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Certificates are legal investments for state banks, savings banks, trust companies with capital of at least one million dollars, and savings and loan associations. Texas law further provides that the Certificates 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 Certificates are legal investments for various institutions in those states. REGISTRATION AND QUALIFICATION OF ISSUE FOR SALE The sale of the Certificates has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Certificates has not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Certificates been qualified under the securities act of any other jurisdiction. The City assumes no responsibility for qualification of the Certificates under the securities laws of any jurisdiction in which the Certificates may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Certificates shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. 17 CONTINUING DISCLOSURE OF INFORMATION The offering of the Certificates qualifies for the Rule 15c2-12(d)(2) exemption from Rule 15c2-12(b)(5) regarding the City's disclosure obligations because the City has less than $10,000,000 in aggregate amount of outstanding municipal securities, including the Certificates. Pursuant to the exemption, the City in the Ordinance has made the following agreement for the benefit of the holders and beneficial owners of the Certificates. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Certificates. Information Upon Request and Annual Reports The City will provide (i) certain financial information and operating data, which is customarily prepared by the City and is publicly available to any person upon request made to the City in writing, subject to such information having been previously filed with the Texas State Information Depository; and (ii) timely notice of specified material events and certain information vendors. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement in Appendix A — Financial Information Regarding the City of Sanger, Texas (Tables 140) and in Appendix D. The City may provide updated information in full text or may incorporate by reference certain other publicly available documents as permitted by SEC Rule 15c242 (the "Rule"). Information agreed to be provided by the City on request may be obtained by contacting the City at 201 Bolivar St., P.O. Box 729, Sanger, Texas 76266. Material Event Notices The City will also provide timely notices of certain events to certain information vendors. The City will provide notice of any of the following events with respect to the Certificates, if such event is material to a decision to purchase or sell the Certificates: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax- exempt status of the Certificates; (7) modifications to rights of holders of the Certificates, as applicable; (8) Certificate calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Certificates, as applicable; and (11) rating changes. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under "Annual Reports." The City will provide each notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). Availability of Information from NRMSIRs and SID The City has agreed to provide the foregoing annual information upon request to any person or, at the City's option, at least annually to the SID. The information will be available to holders of the Certificates only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. The Municipal Advisory Council of Texas (the "MAC") has been designated by the State as a SID and the United States Securities and Exchange Commission (the "SEC") staff has determined that the MAC is a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P. O. Box 2177, Austin, Texas 78768-2177, and its telephone number is 512/476-6947. The MAC has also received SEC approval to operate, and has begun to operate, a "central post office" repository for information filings made by municipal issuers, such as the Board, which repository then transmits the filed information to the NRMSIRs and the appropriate SID. Any filing by the City may be made solely by transmitting such filing to the MAC as provided at http://www.disclosureusa.org unless the SEC has withdrawn the interpretive advice in its letter to the MAC dated September 7, 2004. Limitations and Amendments The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell the Certificates at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreements or from any statement made pursuant to its agreement, although holders of the Certificates may seek a writ of mandamus to compel the City to comply with its agreement. The continuing disclosure agreements may be amended by the City from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, but only if (1) the provisions, as so amended, would have permitted an underwriter to purchase or sell the Certificates in the primary offering of the Certificates in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offerings as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal amount (or any greater amount required by any other provision of the Ordinance that authorizes such an amendment) of the outstanding Certificates consent to such amendment or (b) a person that is unaffiliated with the City (such as nationally recognized bond counsel) determines that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Certificates. The City may also amend or repeal the provisions of the continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling the Certificates in the primary offering of the Certificates. If the City so amends the agreement, it has agreed to include with the next financial information and operating data provided in accordance with it's agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Compliance with Prior Undertakings During the last five years, the City has not failed to comply in any material respect with any continuing disclosure agreement made by it in accordance with the Rule. FINANCIAL ADVISOR Government Capital Securities Corporation is employed as financial advisor to the City to assist in the issuance of the Certificates. The fee of the financial advisor for services with respect to the Certificates is contingent upon the issuance and the sale of the Certificates. The Underwriter has agreed, subject to certain customary conditions to delivery, to purchase the Certificates at prices equal to the initial offering prices to the public, as shown on the inside cover page, of this Official Statement, less an Underwriter's Discount of $77,556.55 on the Certificates. The Underwriter will be obligated to purchase all of the Certificates if any Certificates are purchased. Certificates may be offered and sold to certain dealers and others at prices lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriter. CONCLUDING STATEMENT The information set forth herein has been obtained from the City's records, audited financial statements and other sources which are considered to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will ever be realized. All of the summaries of the statutes, documents and the Ordinance contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and the Ordinance. These summaries do not purport to be complete statements of such provisions and reference is made to such summarized documents for further information. Reference is made to official documents in all respects. The City has reviewed and approved the Official Statement and said instrument has been authorized for use and distribution by the Underwriter for the purpose of offering the Certificates. ATTEST: /s/ Rosalie Chavez City Secretary, City of Sanger, Texas CITY OF SANGER, TEXAS Joe HiQes Mayor, City of Sanger, Texas 19 This page intentionally left blank. APPENDIX A FINANCIAL INFORMATION REGARDING THE CITY OF SANGER, TEXAS This page intentionally left blank. FINANCIAL INFORMATION FOR THE CITY ASSESSED VALUATION TABLE 1 2005 Total Value of Taxable Property $ 385,175,367 Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions $ 711462153 Disabled and Deceased Veterans' Exemptions 802,098 Productivity Value Loss 16,696,692 Homestead 10% Cap Adjustment 1,740,726 Abatement 30,550.633 Freeport %3315558 Other 7,17%147 732447,007 2005 Net Taxable Assessed Valuation (100% of Actual)(a) $ 3113728,360 See "TAX INFORMATION— City Application of 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 Walmart Stores East, L.P. CEI/Sanger LTD Central Telephone Co. Hughes Family Partners Lennar Homes of Tex Land Springer Family Rentals LLC Vast Inc. Sanger Development Elk River -Sanger II LP Elk River -Sanger I LP Total % of Total 2004 Net Taxable 2004 Assessed T Re of Business Assessed Valuation Valuation* Distribution $ 821910,197 26.60% Distribution 51200,000 1.67% telephone/utility 31342,675 1.07% development-res. 21670,724 0.86% development-res. 29467,190 0.79% real estate 11747,926 0.56% real estate 11738,456 0.56% development-res. 11557,083 0.50% development-res. 1,5021352 0.48% development-res. 1,3934361 0.45%0 $104.529.964 3 53 * Based on 2005 Net Taxable Assessed Valuation $311,728,360 Source: Texas Comptroller of Public Accounts and Denton Central Appraisal District PROPERTY TAX RATES AND COLLECTIONStaI TABLE 3 Fiscal Tax Net Taxable Tax Collection % Year Year Assessed Valuation Rate Current Total Ended 1995-96 $ 78,240,705 W48370 95.8l% 97.90% 9-30-96 1996-97 84,764,092 0.48130 96.31% 100468% 9-30-97 1997-98 917372,796 0.47260 96.20% 98.24% 9-30-98 199&99 96,44%856 0.50280 95.53% 99.76% 9-30-99 1999-00 109,642,638 0.52280 95.88% 99.86% 9-30-00 2000-01 129,014,176 0.52280 96.14% 98.15% 9-30-01 2001-02 1461091,829 0.58879 94.11%Icl 96.78% 9-30-02 2002-03 2267882,983 0.56547 79.03% 79.03% 9-30-03 2003-04 256,3101962 0.56547 97.38% 97.38% 9-30-04 2004-05 2901011,961 0.59260 97.41% 97.41% 9-30-2005 �°� See "TAX INFORMATION -City Application of 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 2005 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 2004-05 2003-04 2002-03 2001-02 2000-01 1999=00 Maintenance & Operations W41155 $0.39003 $0.34629 $0.37241 $ 0.36510 $0.33900 I & S Fund 0,15928 0.20257 0.21918 0.21665 0.15770 0.18380 TOTAL $0.57083 $0.59260 $0956547 $0.58879 $ 0.52280 $0.52280 Source: City WATER RATES TABLE 5 Existing Rates Residential (Effective November Minimum per unit served for 0 - 1,000 gallons $15.25 Next 4,000 gallons 2.35 per thousand gallons Next 10,000 gallons 2.60 per thousand gallons Next 15,000 gallons 3.05 per thousand gallons Over 30,000 3.90 per thousand gallons Commercial (Effective October 1, 2001) Minimum per unit served for 0 - 1,000 gallons $18.00 Next 4,000 gallons 2.75 per thousand gallons Next 10,000 gallons 3.00 per thousand gallons Next 15,000 gallons 3.25 per thousand gallons Over 30,000 4.00 per thousand gallons A-2 PRINCIPAL WATER CUSTOMERS 2005-06 (As of September 30, 2005) Name of Customer Sanger Mobile Home Park Sanger Mobile Home Park Sanger Trail Apartments Sanger High School The Sportsman Chisum Trail Apts Khosrow Sadeghian Living Center of America Karl Klement Apts Average Monthly Consumption in Gallons 878,900 271,066 255,133 2089008 206,325 168,150 161,000 1362300 123,033 Total 294079915 Average Monthly Bill $ 3,671.04 1,157.17 1,952.16 818.78 810.95 863.94 781.84 538.55 440.53 $ 11,034.96 SEWER RATES TABLE 7 Existing Rates (Effective June 30.200ll Residential Minimum (first 1,000 gallons) $ 16.00 Per 1,000 gallons over first 1,000 gallons 1.00 Maximum 30.00 Commercial 3/a inch meter $ 22.00 1 inch meter 24.00 1'/s inch meter 28,00 2 inch meter 33.00 3 inch meter 41.00 4 inch meter 76.00 Per 1,000 gallons over first 1,000 gallons 1000 Multi -Family Dwellings The amount due for multi -family dwellings shall be the residential rate multiplied by the number of occupied dwelling units. A-3 PRINCIPAL SEWER CUSTOMERS TABLE 8 (As of September 30, 2005) Name of Customer Sanger Mobile Home Park Sanger Trail Apts. Sanger Mobile Home Park Chisum Trail Apts. Khosrow Sadeghia MHP Sanger High School The Sportsman Karl Klement Apts. Living Center of America Averaae Monthly Bill $ 2,549.42 1195116 903.10 720.98 633.03 240.00 220.78 210.37 173.54 Total 7.603.38 ELECTRIC RATES TABLE 9 Facilities Charge (minimum per month) Energy Charge (per kWh) Facility Charge Plus per kWH Charge Existing Rates Effective June 30. 20011 idential Res $ 9.00 $ 0.0761634 Small Commercial $ 15.00 $ 0.0816960 Large Commercial $ 0.0377050 $ 35.00 $ 9.00 PRINCII'AL ELECTRIC CUSTOMERS 2004-2005 TABLE 10 (As of September 30, 2004) Name of Customer rt Walma Super Save SISD Chisolm Trail Elementary Living Center of America Dick Hoffman Sundown Ranch Golston Co. SISD Gym -Acker Sanger Middle School McDonald's Jack In the Box Average Monthly Consumption in Kilowatt Hours 1,498,800 98,713 68,720 58,400 55,280 44,520 37,986 37,233 35,931 33,243 Total 1.968.836 Averaae Monthly Bill $ 119,838.00 7,995.79 6,608.63 4,796.71 5,533.18 41599,29 3,252.13 3,908.94 3,336.73 2.763.44 $ 162.632.84 Fiscal Year from inclnde 10/Ol/04 through 91301O5 one year average consumption and average bill. GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TABLE 11 The Certificates Fiscal Year 30- Current Total Combined Debt Sept Debt Service Principal Interest Total Service 2006 $399,105M - - - $39%105.00 2007 394,525.00 $325,000*00 $262,992.53 $587,99153 9821517.53 2008 399,180M 3351000.0O 252,947,50 587,94T50 987,127.50 2009 397,650.00 350,000M 239,547.50 58%547.50 987,197.50 2010 185,235.00 3651000.0O 225,547.50 590,547*50 775,782*50 2011 185,385.00 3809000*00 210,947650 590,947.50 776,332*50 2012 185,975.00 39500.00 195,747M 590,747.50 776,722.50 2013 191,245*00 410,000*00 17%947.50 58%947.50 781119150 2014 190,965*00 425,000*00 163,547.50 588,547.50 779,512*50 2015 190,340.00 440,000M 146,547.50 586,547*50 7769887950 2016 189,490.00 460,000.00 128,947*50 588,947.50 778,43T50 2017 193,280.00 485,000*00 105,947.50 590,94750 784,227.50 2018 191,465*00 500,000600 86,547.50 586,547M 778,012.50 2019 1945340.00 5201000.00 66,297*50 5867297*50 780,637*50 2020 196,500*00 54500M 459237650 590,237.50 786,737.50 2021 193,000M 5651000.0O 23,165A0 588,165.00 781,165.00 2022 194,250A0 - - - 1947250.00 $4,0719930A0 $69500,000M $2,333,915A3 $8,833,915.03 $12,905,845.03 A-5 This page intentionally left blank. APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF BANGER, TEXAS This page intentionally left blank. 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. The City's 2000 census was 4,534 which is a 29.25% increase since 1990, Education The City is served by the Sanger Independent School District. The District covers approximately 42 square miles in Denton County and serves the City and its surrounding rural areas. The District is comprised of one early childhood center for grades pre -kindergarten through kindergarten, one elementary school for grades first through third, one intermediate school for grades fourth through sixth, one junior high school for grades seventh through eighth, and one high school for grades ninth through twelfth. All campuses offer enriched curricula with special programs for gifted/talented students as well as students achieving below grade level and are equipped with computers and cafeteria service. Denton County Denton County is located in north central Texas, encompassing 911 square miles, and was created in 1846 from Fannin County. The County is the third largest county of the nine counties comprising the Dallas -Fort Worth Consolidated Metropolitan Statistical Area. The County is traversed by Interstate Highway 35, US Highways 77, 377 and 380 and State Highways 114 and 121. The economy is diversified by manufacturing, state supported institutions and agriculture. The 2000 census was 423,976. B-1 This page intentionally left blank. APPENDIX C FORM OF OPINION OF BOND COUNSEL This page intentionally left blank. AN D REWS ATTORNEYS K U R T H LLP September 5, 2006 Andrews & Kurth L.L.P. 600 Travis, Sufte 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com WE HAVE ACTED as Bond Counsel for the City of Sanger, Texas (the "City"), in connection with an issue of certificates of obligation (the "Certificates") described as follows: CITY OF 5ANGER, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2006, dated August 15, 2006, in the aggregate principal amount of $6,500,000, maturing on September 1 in each year from 2007 through 2017, inclusive, 2020 and 2021. The Certificates are issuable in fully registered form only, in denominations of $5,000 or integral multiples thereof, bear interest and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the City authorizing their issuance. WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the City; certain certifications and representations and other material facts within the knowledge and control of the City, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R-1 of this issue. WE HAVE NOT BEEN REQUESTED to examine, and have not investigated or verified, any original proceedings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Certificates. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. BASED ON SUCH EXAMINATION, it is our opinion as follows:. (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the City enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political Austin Dallas Houston London Los Angeles New York C-1 The Woodlands Washington, DC September 5, 2006 Page 2 subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with laws and (2) The Certificates are payable, both as to principal and interest, from, and secured by, the proceeds of a continuing, direct annual ad valorem tax, levied within the limits prescribed by law, against taxable property within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates; and (3) The Certificates are further secured by a limited and subordinate pledge of the net revenues of the water and sewer system of the City. The revenues to be derived from the operation of the City's water and sewer system after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, to the extent that ad valorem taxes may ever be insufficient or unavailable for said purpose; provided, however, that such pledge is junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of Net Revenues to the payment of the Certificates. The City has reserved the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind secured by a pledge of the Net Revenues that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates is excludable from gross income of the owners thereof for federal income tax purposes under existing law and is not subject to the alternative minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Certificates in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted in the Ordinance to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Certificates in gross income for federal income tax purposes to be retroactive to the date of issuance of the Certificates. The Code and the existing regulations, rulings and court decisions thereunder, upon which the foregoing opinions of Bond Counsel are based, are subject to change, which could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof for federal income tax purposes. INTEREST ON all tax-exempt obligations, including the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (RETT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum C-2 September 5, Mub Page 3 tax imposed by the Code is computed. Purchasers of Certificates are directed to the discussion entitled "TAX EXEMPTION" set forth in the Official Statement, EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any federal, state or local tax consequences under present law, or future legislation, resulting from the ownership of, receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, Financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASTT that holds tax-exempt obligations and individuals otherwise qualified for the earned income tax credit. For the foregoing reasons, prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. C-3 This page intentionally left blank. APPENDIX D BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 309 2005 This page intentionally left blank. CITY CiF SANGEft FthIANGlAL STA7" SEPTLNIB�R 30'Z405. TABLE OF CONTENTS CITY t]FFICIALS RE©UIREQ SUPPLEMENTARY INFORMATION: Managerneffs Discussion and Analysis BASIC. FINANCIAL STATEMEIV7S; Goverrfinent-wide Financial Statements:. Statement of Net Assets Statement of Activities Fund Financial Statements; Balance Sheet- Governmental Funds Statement of Revenues, Expenditures and Changes In Fund Balance Governmental Funds Statement of Net Assets - Proprietary Fund Statement of Revenues, Expenditures and Changes in Fund Net Assets _ Proprietary Fund Statement of Cash Flows - Proprietary Fund Notes to Finanaal Statements REQt1tRED SUPPLEMENTARY INFORMATION. Budgetary Comparison Schedule -.Genera! Fund Budgetary Corr►parisan Schedule "Special Revenue Fund Schedule of Pension. Plan Funding Progress OTHER SUPPLEMEfVTARYINFORMATION: Comparative Schedule of Revenues, Expenditures and Changes in Fund Balance -General Fund Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Special Revenue Fund Comparative Schedule of Revenues, Expenses, and Changes in Net Assets Proprietary. Fund Combining Schedule of Revenues & Expenses - Proprietary Fund Schedules of Future Debt Service Requirements; General. Long -Term Debt Proprietary Fund Schedule of Restricted Cash Accounts Schedule of Property Taxes Home Grant Receipts & Expenditures MI�Ljvj!uf , - &. • ��'•_. tNlliam C. Spare, P.C. Certified Public Accountamb To the City Council City of Sanger, Texas I have audited the accompanying financial ,statements or tl activities and major funds of the City of Sanger, Texas as of h ended, which collectively comprise the City's basic tinanc contents. These financial statements are the responsibility of to express an opinion on these general purpose financial state governmental activities, business -type ptember 30, 2005, and for the year then 1 statements as listed in the table of It management. My responsibility is tints based upon my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Arrtlitittg ,Stondards issued by the Comptroller General of the United States. Those standards require that .I plan and perform the audit to obtain reasonable assurance ,about whether the financial statements are free of material misstatement, An audit includes examining, on a test basis, evidence supporting the amounts and L disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management; as well as.,evaluating the overall financial statement presentation. I believe that; my audit provides a reasonable basis for my, opinion. In my opinion, the financial statements referred to above pt respective financial position of the governmental activities, bi the City of Sanger, Texas at September 30, 2005 and the cha where applicable, of these activities, for the year then ended generally accepted in the United States of America; In accordance with �oves+nrrterrt Auditing,.Starrc�rrrcts, I h tint fairly,. in all.. material respects, the Hess -type activities and major funds of es in financial position and cash flows, conformity, with accounting principles lso The tmanagement's discussion ,and :analysis; the budgetary coniparisan schedule_for the general and' special revenue funds and the ,pension ptan funding progress are not a required part, of the basic financial statements, but are supplementary' informationrequired by GASB', I have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measuretT2cnt and presentation of the supplementary information. However; I did not audit the'. information and express no opinion on it, My _audit was conducted for the purpose of forming an statements: The' other 'supplementary information' schedules �; Spy PC* D-1 opinion on the City's basic financial '3950 hi:'ighivay 360,: CITY OF SANGER CITY OFFICIALS September 30, 2005' ELECTEt7 OFFICIALS MAYtJR MAYOR PRCi TEM CQUNCILMEMBERS APPOINTED OFFICIALS CITY MANAGER CITY SECRETARYIASSISTANT CITY MANAGER MUNICIPAL COURT JUDGE CITY ATTORNEY SEE ACCOMPANYING. Tommy Kincaid Glenn Ervin Jae Higgs Mike. James Mike Lawler Robert Patton Jack Smith Rosalle Chavez Danny Spindle & Ken Hartless N€chols, Jackson, Dillard, Hager&. Smith NOTES TO FINANCIAL STATEMENTS D-2 CITY or SArrGER MANAGEMENT'S DISCUSSION A iTSING TIIIS ANNUAL'R7PORT As management at`'the City of Sanger, we offer readers c narrative overview and analysis of the financial activities September 30, 2005. The information provided here should financial statements, D ANALYSIS the Gity's financial: statements this' the City for the fiscal year ended e used'in conjunction with the basic' This discussion and analysis is intended to serve as an introduction to ttie City's basic financial statements. The City's basic financial statements are comprised of three components: (1) government -wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains other supplementary 'information in addition to the basic financial statements. Reporting the City as a'4Vhale-Government.-ti9 The Statement of Net Assets and; the Statement of Activities The government-wide'financial statements are designed to prc of the City's finances in a ;manner, similar to a private -sector bi The Statement of.Net Assets (page 8) presents informat liabilities, with the diit'erence.between the two reported as decreases in net assets may ,serve as a useful indicator of whi is improving or, deteriorating, Ffnar�eial Statements readers with a broad overview on all of the City's assets and assets. fiver time, increases or the financial position of the City The Statement Qf Activities -(page 9) presents information showing how the ,City's net assets changed during the fiscal year, All changes in net assets are reported when the underlying event giving rise to the change occurs, "regardless of the timing of the related cash flows. Thus; revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g, uncollected taxes and earned but -unused compensated absences) Capital grant funds are reported as, revenues in the Statement of Activities, The City provides two types of activities 4 Governmental type activities and Business type activitieI : Governmental type. activities -.'Most of the City's basic services are reported police, municipal court, animal control, 'fire, 'library, community cente enforcement/inspection, parks, : public works; sanitation; senior center, switr general administration_ Property taxes, sales taxes, franchise fees, permi municipal court fines finance most of these activities, here, including ', engineering, min pool and revenues and • Business Type Activities - The City charges a fee to customers to help cover all or most of the cost of certain services it provides. The City's electric, water and sewer system is reported here. Reporting the City's Most Significant Funds Fund Financial Statements, The Fund financial .statements begin on page l l and provide detailed information about, the most significant funds not the City as a whole. Some funds are required to be established by State law and by bond covenants., However, the City Council may establish other funds to help it control and manage money for particular purposes, The City's kinds of funds governmental and proprietary - use different accounting approaches. Governmental funds -_ Most of the City basic services are reported in governmental'; funds, which focus on how money flows into and out of the funds and the balances left at the end of the year that are available for spending. These funds are reported using an accounting method called modified accrual accounting,which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental actin>ities,(reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation at the bottom of the fund financial statements. , • Proprietary funds -When the City charges customers; for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact the City's water and sewer fund are the same as the business -type activities we report in the government -wide statements but we provide more detail and: additional information, such as cash flows, for proprietary funds. Notes to Financial Statements The notes provide additional information that is essential to a full understanding provided in the government -wide and fund. financial statements, The notes to statements begin on page 16. GOVERNMENT -WIDE FINA,NCIAI. ANALYSIS The City's net assetsare as .follows; D-4 of the data the financial .Current 8 Other Assets Capital Assets Total Assets Long -Term Debt Other Liabilities Total Liabilities invested In Capital Not of Debt Restricted Unrestricted Total Net Assets NET ASSETS TOTAL PRIMARY GOVERNMENTAL ACTIVtT1ES, UW, IMC4S-=PE ACTiVITtE3 GOVERNMENT 2005 200d 2006 2004 2OZ 2004 $ 1;416,i46 ',S i,719,008 $ 2,981;082 514201706 5,097,312 11,5094573 618361852 6,8161320 1449016W 3,301025 31787,260 31995,606 730,744 7791478 11401,814 4,095,769 0W,738 5,397,420 2,257,550 1,941,592 7;it32,Q77 663,067 592,786. 507,779 179,534 (284,796) 111403;379 $ 2,741,083 $ 2.249,582 $ 91093;235 At September 3q, 2q0 the City's assets exceeded its liab $ 1108,73 $ from the prior year. The largest portion of the City's net assets is its investl equipment and infrastructure;} These capital assets repress City uses <these'eapital assets to provide services to the C1 are not available for future spending;. Analysis; of City's C}perations The fol(Qwing table provides a sumrrrary �f the Gity's �per< 0)2005 with comparative totals for the year ended Septeml REVENUES. Program Reyenuea; Charges for Services Operating Grants Capital Grants & Donations General Revenues: Property Taxes Sales & Beverage Taxes Franchise Taxes Hotel/Motel Taxes interest income Transfers TOTALREVENUES PROGRAM EXPENSES General GovernmentPublic Safety Streets & Sanitation Culture & Recreation Interest Expense Water & Sevier TOTALEXPENSES CHANGE IN NET ASSETS cHANc;E$ IN NET A GOVERNMENTAL AGj'IVITIE:3 BUSINESS-TY 2005 2004 2C05 S 764,836 $ 767;841 $ 81250,418 ; 136,709 155,37*� 17,273 0 0 1,732,907 11479,031 �48,987' ?t17;949 3EX1033 283,619 074,616) 11,514 11,068 WK 56,475 38,535 53,937 541889 100;305 (54 889) 3,9471623 3,623,713 810741850' 367,655 288,164 1306,819 1,161;666 r. 1,004,804 683,304 581,453 546,912 19u,591 213,634 - 71457,613 31455,122 21893,680 ' 7,457,613 $ 491,501, 3 7301033 $, 617,237 : � D-5 2,77A118' b 11,200,981 W-gralWA 6 794,332 9,438,627 8,735,924 416,%4 1,170,946 11011;350 11263,102 1,223,645 978,306 8,475,998 S ''11,634,318 4 1U,725,580 es by �11,834,318; an increase of nit' in tlapital .assets;" {land, building,, 7g% of the City's total assets. The s citizens, consequently these assets :inns for the year ended September'. r 30, 2004_. TOTAL PRIMARY- 7L1iITiES;' GOVERNMENT 2004 2005 2004 7,165,151 $ WW 9,0�35,254 1 7,932M992 138,709 155r375 204,454 17,273 204.454 WW 11732,907 11479;031 WE 848,987 787,949 t150,350) 129,417 133,269 W- 11,514` 11,058 19,066 110,412 57,601 (I00,305) 0 0 7413U`16 121022A73 10,761,729 WN 367,655 288,184 -- 1,306,619 1,161;668 -- 1,tX14,804 683,304 581,453 546,912 - 195,591 213,534 61135,353 71457,613 6,135,353 6,135;353 10,913,735 MENEM 9,029.033 1,002,683 $ 1,108;738 $ 1,732,698 Total revenues increased by 11.72%o from 2004 with goy 8.94% and proprietary fund user charges (revenues) I expenses increased by 20,87% from 2004 with governmen and proprietary fund expenses increasing 21,55%, The Cif $1,108,7381 rnmental activity revenues increasing. creasing 13.12%0, Total City-wide 1 activity expenses increasing-19,44% -wide revenues exceeded expenses by G(,�VE11;Iti�IVIENTAL Fi1T1+P} AI�tA.I,'lr'SYS. The focus of the City's governmental fund U5 to provide information on near ®term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements, in particular, unreserved fund balance may serve a measure of a government's net resources available for spending at the end of the fiscal year. The City's governmental funds include the general fund and the~ special revenue fund. The special revenue fund is used to account for the activities of the City's two blended component units; the Sanger Texas Industrial Development Corporation (4A) and the Sanger Texas Development Corporation (4$) along with the Hotel/Motel tax funds received by the City, The 4A and 4B funds are controlled by the City Council of the City of Sanger and their revenues are restrictedfor economic development as described in its by-laws; The Hotel/Motel tax funds are collected by the local motel are used by the City to promote tourism, At September 30, 2005 the special' revenue fund had a restricted fund balance of $849,850, The' fund balance of the general fund decreased by $538,642 primarily due to capital outlays related to street projects included in the 2002 Bond package which were expended during the current fiscal year, The proceeds of the 2002 Bond program were included in fund revenues in fiscal year 2002 and are included in capital outlay each fiscal year as the funds are expended, A total of $629,713 of the 2002 Bond proceeds were used during 2005, with $43,857 of unspent, bond proceeds still on hand at September 30, 2005, Property tax revenues increased by 5234,334, a 15,790/A increase. The assessed value of property in the City has increased 13,15% from the prior year and has increased by $159,705,458 since 20026 historically the City has only transferred funds from the proprietary. fund to t11e general fund as funds were needed by the general fund. During 2005 budgeted transfers were $214,322 but actual transfers were only $54,889. Proprietary funds � The City's proprietary fund statements (electric, water and sewer fund) provide the same type of information found in the gavernm�nt-wide financial statements, but_in mare detail. The unrestricted balance of the proprietary fund increased by $140,277 to $1,4031379 at September 30, 2005, General Fund Budgetary Highlights The original budget for the general fund was amended by the City Council in March 2006. The amendments increased budgeted revenues and expenditures by $939,175, The amendments were: made to more accurately reflect expenditures that were incurred during the fiscal year and paid from an increase in revenues over budgeted revenues and to 2002 Bond funds that were expended for street improvement Actual revenues exceeded originally budgeted revenues by proceeds from new notes payable and capital leases of $75, original budget. Budgeted revenues included <transfers fron The actual transfers from the proprietary fund were $54889,. Tax revenues,(9;01°l0), charges for services (11,25%) prJlice (1.30%) revenues all exceeded the originally budgeted revenl Wflect the carry over of $630,000 of in 2005. 265.496. Actual revenues included 69, which were not included in the the proprietary fund of $214322,. (0,�41°l0) and license and ptrrmit Total expenditures exceeded originally tutigeted expenditures by $$p4,13$ primarily due to street improvements of $629;713 made during the yearwhich were paid from the 2002; Bond funds, As mentioned above, these expenditures were not included in the original budget. The special revenue 4A and 4B funds actual sales tax. revenues exceeded buttgeted revenues by $36,330 each due to increased sales tax collections. The 4B fund budgeted project expenditures totaled $152,050 for the fiscal year but actual project expenditures were only $42,436, These unspent funds have been added to the restricted fund balance and will be used in future years, CAPITAL A�SE�'S The City°s investment; in capital assets as of September 30, 2005 amounts to $16;930,�78 (net of depreciation), ,The investment in, capital assets includes land, buildings} equipment and infrastructure. Infrastructure includes streets, water and sewer systems, The City's capital assets are as follows. CAPITAL :ASSETS AT YEARENQ {net of accumulated depreciation} GOVERNMENTALAGTIVrTIES Bt1StNESS4YF?EAfiTI\/tTIES TOTALS �� 2t� 2iX}4; . 2005 2004 Land $ 376,840 $ 376840 ,,$ 312,164 $ 312,164 $ 689,004 S $80,004 Construction in Process 0 0 45,691 21177,224 45,691 21177,224 Infrastructure 3,5484999 31268,096 10,301*892 8,1121910 13,8500891 11,381,006 Buildings & Equipment 1,4941866 11452t376 849;626 598,683 2,344,692 210511059 TOTAL 3 514209705 '$ 5,097,312 S _ 11,509,573 $ . 11*200,981 $ 16,930,278 $ i6,298,293 Additional.. information an the City's, capital assets can be found' in Note 3 . IlEBT ADI4�INISTRAiTIOI�I. The City added long-term debts during the,year far the purchase of vehicles, electric department equipment and f©r accounting sofi�vare upgrades.. l� Outstanding long-term debts are as follows, QUTSTANDING DEBT AT YEAR-END GOVERNMENTAL. ACTIVITIES BUSNNES$-TYKE ACTIVITIES TOTALS 2005 2004 20% 2004 2005 2004 Cesttflcatesof obligation $ 21t395,000 $ 31130,000 $ 0 S', 0 . $ 2,6951003 $ 31130,000 Revenue Bonds 0 0 41120,000 4,4051000 4,1201000 41405,000 Notes Payable 707,265 821,379 2380604 163,784 9451869 9$$1153 '. Capital Leases 424368 39,536 964509 30,637 1384677 70,373 Yarbrough Settlement Pay 197,704 239,320 0 0 197,704 .. 239,320 TC7TAL $ 3,842,337 $ 4,230,235 $' 4,455,113 $ 41599,621 $ 8,297,450 $ 8,8213,856 Additional information on the City's long-term debts can be found in Note 4 ECUNUhiIC FACTORS AND NEXT YEAR'S' Budgeted general fund revenues for seal year 2006 are $4,215,526, which is an increase'af $882,954 from budgeted revenues for fiscal year 2005, The 2006 budgeted revenues includes transfers from the proprietary fund of $489,886, Proprietary fund 2006 budgeted revenues are $7,294,114, which is an increase of.$823,436 over 2005 budgeted revenues. Budgeted connection fees" (water and sewer tap fees and other connection fees) for 2005 are $825000 while actual tap fees revenues for 2005 and 2004 were $740,417 and $713,096 respectively`, The City historically has used tap fees for improvements to the water and sewer infrastructure systems. BEQUEST FQR; INFQRRZATION This financial report is designed to provide'our citizens, customers, investors and creditors with a general overview of the City of Sanger. if you have questions about this report or need any additional information, contact tile City Secretary at, 201 Bolivar Street, Sanger, TX, 76266 or at 940=45&7930, CITY OF SANGER GOVERNMENTMIDE STATEMENT OF ASSETS CURRENT ASSETS Cash Accounts Receivable (net) Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURRENT ASSETS` Restricted Cash Bond Issue Costs (net) & Capitalized Interest Capital Assets Land Construction in Process Infrastructure Buildings & Equipment Less -Accumulated Depreciation Total Capital Assets, Net of Accum, Depr. TOTAL NONCURRENT ASSETS TOTAL ASSETS LiABILiTtES CURRENT LIABILITIES Accounts Payable & Accrued Expenses Deferred Revenues & Customer Deposits Interfund Payables Compensated Absences Revenue & Cert. of Obligation Bonds Payable- Notes Payable Capital Leases. Payable. Yarbrough Settlement Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue & Cert. of Obligation Bonds Payable Notes Payable Capital Leases Payable Yarbrough Settlement Payable' TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES NE'T ASSETS Invested in Capital Assets, net of Related Debt Restricted For, Debt Service Insurance Parks HoteUMotel and Economic Development Unrestricted TOTAL NET ASSETS S Mtember 301 2006 ASSETS 13927 $ 220,321 9147 0 243395 1,172;751 0 376840 0 5,124801 2,614431 ooa 25,731 155256 2,25 5 '1 suSINESS' TYRE ACTIVITIES 23,632 920,420 17,591 270,768 1;232;411 1;621,054 127,517 312;164 45,691 1.6;542,900 08,227 (7;299,409) 13,258,244 14;490 655 11;509,57 680;75a 199,317 9;9s1 52,279 300,000< 129,6619 29,838 0 1,401,814 3 820,000 108,935 66,671 ©. 31995,606 51397,420 7,0182,077 507,779 0 967 0 732 0 54 1,403,379 083 $ 9093235 ,BEE ACCOMPANYING NOTES 401=1NANCIAL STATEMENTS D-9 T4.T._AL. $ 37;559 1114(01774y 11 261 f 38 270,768 1,475,$a6 2,7931 1271617 689;004 45,691 21;ti67,701 4,522,658 874,433 2Q9,260 0 112,046 550,000 297,896. 46,475 42,448 � 2,182,558' 6,465;OU0 647,973 92,402 9,439,627 598,121 47,026 6,967 550,732 1,223,845 $ 111834,318' �. cA 1� P+ tl r+ " N O M1 Ca o NW ! N c7) U") Q) O r W) 00 V CS) C) 'it ICJ It c ( h; to 0 �. tiW)ut)vC) N M'ctNrr Mi 0 N (n v�vva.i � r N Ar- 4 r r r d3' II � In Lo tll 0 O M CO �� b ['7 C) M W 00 clo rL) 0) QO �U7 ; N 0) N N C11 4w tt Ln M a� of m J F+ f'� M `st V) 0) gn r✓ N M f— W N Cn U) ;Q 8 0 CO M - Ps 00 O O lco CO Z Lr) IM O r in iM cn C) C) O U) d; 00 00. LO ui 0 W W C`i cO � M LfJ � t� C\i w qd^ r� �p Oa j r CX) e= h- Lf) lt) er r r M Rt Ca r to 0 C)) v qt 0 u: � � ,� i ' ti co cf) O d N r* T NN r M CV N > 4 U) 00 0 N) O C) Q M p�p� i!3 0 C) 0) N N N z Oct 0) it- W w L� et pry m F,; h, O, r w z 0W . 0 0 H > s W ONOWWO v O V) 0)W um LU r G Cn Ica Mt N ft W w00 ti U t/1 Lnrn�m� cy M w Ln +- C) to U)' ;tv r M w to OD mw Rn m rt F. CL cc � o In v V o) aC W N W (n W W ram+ 1- Imm °'mi 4 } ism m 0� c c o 4)) W w 0)�- � � R» w 1. E a w w ) 4 1" M W :L OCR, yW y Z Z , t/) W G 0� N CL J 4) ~ a) U W W ® F " V ~ Q~ 1 <- w �Z � > � � gwr 0 ►L (D CL 50 C H S 0 a Cn r� 's Wit- !- U Z 2 D-10 CITY OF SANGER BALANCE SHEET G©VERNMENTAL FUNDS September 30, 2005 ASSETS Cash Receivables, Sales & Beverage Taxes Franchise "faxes Denton County -Fire Runs Interest' Vendor Refunds Due from Other Funds Property Taxes Prepaid Expenses TOTAL ASSETS LIABILITIES. Acccunts Payable Accrued Expenses Deferred Revenues. Tt�TAL LIABILITIES FUND BALANCES Reserved For; Capital Dutlay. Debt Service Insurance Parks Prepaid Expenses Hotel/Motel Fund Economic Development' Designated Far: Capital Outlay Llbarary Parks Unreserved, Reported In, General Fund' TOTAL FUND BALANCES TOTAL LIABILITIES & FUND.BALANCES $ SEE ACCOMPANYING NOTE GENERAL FUND 372,231 35;41; 22,24; 1 i?;5fa 2 064 1;s6; 106,76' 914; 17,462 �6,ir 43;8: TOTAL SPECIAL GOVERNMENTAL REVENUE FUNDS 8141442 $ 11186V8 3540$ 0. 0 0. 0 0 0 0 849,860 0 0 0 0 0 22,333 8271517 0 0 645,550 70,820 22, Z43` 16�565. 1,865. 9,9$1 106;757' 47 1,4�6�107 119,�2Q 17,462 11G;710 253;792 43,857 44,485 7,026 6,967 9;147 22,333 827;517 85;064 4,938 55,972 (44,99.1} 1,172,395 _. 849,850 $ r 1426J07 'STATEMENTS CITY OF SANGER RECONCIUATiON OF THE GOVERNMENTAL FUNDS TO STATEMENT OF NET ASSETS September 30, 2004 Nallibi"116aw BALANCE SHEET 0 Amounts reported for governmental' activities in ttie Statement of Net Assets are different because: Capital assets used In governmental adtiviities are not financial resources and therefore are not reported in the Fund Balance Sheet Property Taxes receivable'are not available to'pay for current period' expenditures and therefore are deferred in the fund balance sheet Long terra liabilities and not due and payable in the current period and therefore are not reported in the Fund Balance Sheet NET ASSETS OF t'sOVERNMENTAL ACTIVITIES SEE ACCUfvIPANYING NOTES TQ FINANCIAI_,STATEMENTS. D-12 1;1�72,315' 5,�20,706 10Fa'76T (3,958�7Q�} 2,741,083.. CITY OF SANGER STATEMENT OF REVENUES$ EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the Year Ended Sep1e111ber.30, 2005 TOTAL GENERAL SPECIAL GOVERNMENTAL FUND REVENUE FUNDS' REVENUES Property Taxes $ 1,718,635 $ 0 1;718,635 Sales B, Beverage Taxes 426,327 422,660 848,987 Franchise Taxes 3040033 0 304,033 Hotel/Motel Tax 0 111514 110514 Intergovernmental 1481015' 0 148,015 Charges for Services 512,5215 10 512;525 Fines 1,24,012 0 12012 Licenses & Permits 148,299 0 148;299 Donations 51967 0 51967 Interest Income 38,061 180414 56,475 _ TOTAL REVENUES �3,425,874 452,588 31878462 EXPENDITURES General Government 325,528 211041 346,569 Public Safety 111 8,066 ; 0 11188,066 Streets & Sanitation 625,573' 0 625,573 Culture & Recreation 517;362 = 0 517,382 Ca al 906,395 0 906,395 Debt Service, Principal 392,825 70,942 463,767 Interest 181,941 19,051 200,992 TOTAL EXPENDITURES' 41137,710 111,034 4t248,744 EXCESS REVENUES OVER (UNDER) EXPENDITURES (71.11836} 341,554 (3702282) OTHER FINANCING SOURCES (USES) Proceeds of Notes Payable 75,869 0 75,869 Transfer to/from Economic Development 42,436 (42,436) 0 Transfer from Proprietary Fund 54,889 0 54,889 TOTAL OTHER FINANCING' SOURCES (USES) 173,194 (42,436) 130,758 EXCESS REVENUES OVER (UNDER) EXPENDITURES (538,642) 299,118 (239,524) FUND BALANCE -BEGINNING 861,107 550,732 11411,839 FUND BALANCE- ENDING S 322,465 $ 849,§50 $ 11172,315 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS D43 CITY OF SANGER RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES For the Year Ended September 30, 2004 Net Change in Fund Balance'- Governmental Funds 1$' (239,524) Arnoun#s reported for governmental activities in the Statement of Activities are different because; Governmental funds report capital outlay as expenditures. However In the statement of activities the cost of these assets is allocated over the estimated useful lives as depreciation expense: Capitalasseta'recorded,inthe curreht period Depreciation expense on'capital assets Nate Payable'proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets; Repayment on debt principle is an expenditure in the govemmental funds, but the repayment reduces long-termliabilities In the statement of net assets, Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds: Deferred Revenues -Property Taxes Some expenses in the statement of activities da not require the use of current financial resources and therefore are not reported as expenditures in the. governmental funds: Accrued Interest Expense CHANGE IN NET ASSETS fJF tOVERNMENTAL ACTNITIES 906395 (583,0g2) 463,767 14272 5,4t)1 61 SEE AGCOMpANYING NOTES TO FINANCIAL STATEMENTS. D- ] 4 CITY OF SANGER STATEMENT OF NET. ASSEI PROPRIETARY FUND September 30I 2005 CURRENT -ASSETS: Gash Accounts Receivable (net) interest Receivable Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURRENT ASSETS Restricted Cash Bond. Issue Casts (net) Capital Assets: Land Construction in Process Distribution & Collection.Systems Buildings& Equipment Less Accumulated Depreciation Total Capital Assets; Net of Accum, Depr. TOTAL NONCURRENT ASSETS TOTAL ASSETS. CURRENT LIABILITIES Accaurtts Payable Accrued Expenses Customer Deposits. Due to Other Funds Compensated Absences Revenue Bonds Payable Notes Payable Capital Leases Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue Bonds Payable. Notes Payable Capital Leases Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES'. .Invested in Cap°rtal Assets, net of Related Debt Restricted for Debt $enrice unrestnicted TOTAL NET ASSETS' ASSETS LIABILITIES NET ASSETS SEE ACCOMPANYING NOTES TO D-15 0 1,fi210a4 127617 312P164. 45691 $,542900 1,908227 110318 199,317 3,820,000 1089++�3}`5 66��i 3,995�606 7,182077 507,779 1;403,379 STATEMENTS C(TY OF SANGER STATEMENT OF REVENUES, EXPENSES & PROPRIETARY OPERATING REVENUES Charges for Services Connection Fees Miscellaneous CHANGES IN FUND NET ASSETS FUND For the Year Ended Sep#emer , b3020Q5 TOTAL OPERATING REVENUES - OPERATING EXPENSES Personnel Services Purchased Water/Electricity Supplies & Contract Services Repair & Maintenance Utilities Franchise Fees Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATIi<IG REVENUES. (EXPENSES). Interest Income lap Fees. Interest Expense Transfers Out to Geneeal Fund WATER, SEWER & ELECTRIC $ 7,493'933 29,317 16,068 7;539,318 TOTAL NONOPERATING REVENUES (EXPENSES} CHANGE IN NET ASSETS NET ASSETS -BEGINNING NET ASSETS -ENDING 1,180,164 41218,948 618,335 321,272 85882 1.74,616 791,667 7,390,884 48,434 53,93 711,10 (241134 ia4,88 AS 617,237 8,475,998 9,093,235 SEE ACCOMPANY{NG NQTES TQ FINANCIAL STATEMENTS D-16 CITY OF SANGER COMBINED STATEMENT OF CASH FLOWS - PROPRIETARY FUND For thwk ear Ended September 30, CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Customers $ 7,1274, Cash Payments to Suppliers for Goods and Services (5,224; Cash Payments for Employees Services (1,183, NET CASH PROVIDED BY OPERATING ACTIVITIES 8661 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Cash Transferred to Other Funds m (401 CASH FLAWS FROM CAPITALAND'RELATED FINANCING ACTIVITIM Acquisition of Capital Assets Additions to Lang -Term Debt Principal Paid on Bonds and Notes Interest Paid on Bands and Notes Tap Fees Collected Capital Contributed - Grants & Developers NET CASH USED FOR CAPITAL AND RELATED FINANCING ACTIVITIES CASH FLOWS FROM INtfESTING ACTIVITIES: Interest on Investments NET INCREASE (DECREASE) IN CASH CASH. -BEGINNING OF YEAR CASH.' -.END OF YEAR CASH PER BALANCES Current Assets -Cash Noncurrent Assets - Restricted Cash . TOTALCASH PER BALANCE SHEET (1:,268871) 286;014 (430j621) (234939) 7111 1100 24159 (913 058) 41354 RECONCILIATION OF OPERATING INS CASH PROVIDED BY OPERATING ; C7petating lncome. $ 148 Adjustrnertt to Reconcile Operating lncome- to Net Cash Provided by Operating Activities. Depreciation 791 (Increase) Decrease In Receivables (246 (Increase) Decrease in Inventory/Prepaid Expense (29 Increase (Decrease) in Accounts Payable 199 Increase (Decrease) in Accrued Expenses 20 increase (Decrease) in Customer Deposits (18 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 866 SEE ACCOMPANYING NOTES TO FI D-17 STATEMENTS. CITY OF S NOTES TO THE FINANCIAL S1✓PT'EIVIBEFt Jul NQTIa l: StIAiIViARY QF SIGNIFICANT ACCQi1P ATEMENTS POLICIES The City of Sanger operates under a CouncilwMayor form of government, following the laws of a Home Rule Charter City as defined by the State of Texas. The City provides the following services. ambulance, anima} control, community center, fire, library, enforcement/inspection, municipal court, parrs, police, public works, 'sanitation, senior center, 'swimming pool and genera} administrative services. In addition the City owns and operates the City's electric, water and sewer systems: The City's financial. statements are prepared in accordance with generally accepted accounting principles (GASP). The Governmental Accounting; Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations), Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do. not conflict with or contradict GASB pronouncements, The more significant accounting policies established in GAAP and used by the City are discussed below: A.REP�RTIl�1G ENTITY As required by generally accepted accounting. principles, the -financial statements of ttte reporting entity include those of the City of Sanger (the primary government) and its component units. The following component units are included in the City's reporting entity because of its operational and financial relationship with the City, Blended Component Y.:init - (4A); TM Saner Texas. (S.T'.l.D'.C.) is governed by a board of'five directors, all' of v dustrial Development Cor Blended Component Unit - (413) The. Sanger Texas Development Corporation (S.T.D,C.) is governed, by a board of seven directors, all of whom are appointed by the City Council of the City of ` Sanger and any of whom can be removed from office by the City Council at its' will. The S.T.D.C. was incorporated in the state of Texas as a non-profit industrial development corporation under Section 4B of the Development Corporation Act of 1979, The purpose of the S.T,D,C.. is to promote economic and community development within the City of Sanger. Separate financial statements of the component unit can be obtained from the City's administrative offices CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2OQS B. BASIC FINANCIAL STATEMENTSWGOVERNMENT-W'IDE STATEMENTS: The City's basic financial statements include both governm+ and fund financial statements (reporting the City's 'major 'fun( financial statements categorize primary activities as either g< ambulance, animal control, community center, fire, library, parks, police, , public works, sanitation, . senior center, sari services departments and the hotel/Motel, 4A and 4B s governmental activities; The City's electric, water and sew( activities: In the gr�vernment-wide Statement of Net .:Assets:_ goven consolidated basis and are reported` on a full accrual, econon long-term,assets and receivables as well as long-term debt an report ed in three parts- invested in capital assets, net of unrestricted net assets. The City first utilizes restricted resour "I'he government -wide Statement of -.Activities reports both City's Functions (general government, public safety, publi functions are also supported by general government revent The. Statement of Activities reduces gross expenses (inch revenues; operating and capital grants, Program revenu( function (police, inspection), Operating grants include or while capital grants reflect capital specific grants. Des infrastructure are included in capital grants, tt-wide (reporting the City as a whole) �) Both the government -wide and fund` iernmental or business type, The City's �forcement/inspection, municipal court, iming pool and general administrative ecial revenue funds are classified as services are classified as bus.inessytype rental 'activities are presented on 'a resource basis; which recognizes all obligations,. The City's net assets are toted debt; restricted net assets; and ;s to finance qualifying activities. he gross and net costs of each of thee.. works, culture and recreation), The s (property, sales and franchise taxes). Ling depreciation) by related program must be directly associated with the rating -specific and discretionary grants toper contributions for public works The net costs (by function) are. normally covered by general revenue (property, sales, franchise taxes}, The City does not allocate indirect costs, This government -wide focus is more on the sustainablity the City's net assets resulting from the current year's activi Ct .BASIC 1;�`I1�rANCIAL STATEMENTS - I+>JNri FNANt The financial transactions of the City are reported in individt Each fund is accounted for by providing a separate set 'of assets, liabilities, fund equity, 'revenues and expenditures/expo generic classification within the financial statements, The following fund types are -used by the City... City as an entity and the change in L STAfiI+1MENTS: funds in the fund financial statements.. 'balancing accounts that comprise its es. The various funds are reported by CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS' SEPTEMBER 3% 2005' 1. Governmental Funds; The focus of the governmental funds' measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income, The following is a description of the governmental funds of the City: General Fund ~ The General Fund is the general, operating fund of the City, It is used to account for all financial resources not accounted for in other funds, Special' Revenue - The Special' Revenue Fund is used to account for the proceeds of the Sanger Texas Industrial Development Corporation and the Sanger Economic Development Corporation sales tax revenues and the Hotel/Motel tax revenues, The fund balance is reserved to signify amounts that are restricted to be used for economic development and promotion within the City. 2. Proprietary Funds; The focus of proprietary funds' measurement is upon determination of operating income, changes in net assets, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to business in the private sector_ The following is'a description of the proprietary funds of the City; Electric, Water and SewerThe Electric, Water and Sewer Fund is used to accountforthe operation of the City's electric, water and sewer systems for which a fee is charged to external customers for goods and services and the activity is (a) financed with debt secured by a pledge of the net revenues and (b) has the requirement that the cost of providing services, including capital costs, be recovered by user fees and charges, The City does not have any fiduciary funds;.. A: BASIS OF ACCOX.INTING: Basis of accounting refers to the point at which revenues or expenditureslexpenses are recognized in t}te accounts and reported in the financial statements. It related" primarily to the timing of the measurements made regardless of the measurement focus applied, 1. Accrual* Both governmental activities and business type activities in the government -wide financial statements and the proprietary .fund statements are presented.. an the accrual: basis of accounting. Revenues: are recognized when earned and expensed` are recognized when incurred, CITY OIL SAN'GER NOTES TO THE FINANCIAL STA I EMENTS SE�'TE1IIBEI2 30, 200a 2. Modified Accrual: The governmental fund financial 'statements are presented on 'the iinodified accrual basis ot': accounting, Under the modified accrual basis of accounting, 'revenues are recorded when susceptible. to accrual: Le, both measurable and available, `°lyieasurable" means knowing or being able to reasonably estimate the amount. "Available" means collectible within the current period or within 60 days after year end. <Expenditures are generally recognized. under the modified accrual 'basis of accounting when the related liability is incurred, The exception to this general rule is that principle and interest on general obligation longterm debt ' if any, is recognized when due. 3. Revenue Recogni#ion. The City' considers property, sales and franchise -taxes. as available if collected within 60 days: after year end, All other governmental revenues are recognized when received. �. Restricted Itesvurces:: When an expense is .incurred for purposes'' for which bath available the City first: applies restricted resources, E, FINANCIAI STATEMENT Alli�?UNTS: 1 Cash and Cash Equi!��tler�#s: The City has defined cash and cash equivalents to include 2. Capital Assetst and unrestricted resources are on hand and demand deposits_ capital assets purchased or acquired ��ith an original cost of $Iy000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, or improvements and other. capital outlays that sighihcantly extend the useful lives of an assets are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred, Depreciation is provided on the straight4ine basis over the fallowing estimated useful lives. Buildings . S y,50 years' Equipment 3 - 20 years Electric, Water & Sewer Systems 10 - 50 years Infrastructure Streets 10 years OASB Ncr. 34 requires -.the City to report and depreciate ne° with the fiscal year beginning. Qctober 1, 2003 and the City infrastructure provisions at the same time. These I infrastructL class of the City. D-21 infrastructure assets ef`feetve with the rs elected to implement the retroactive assets are likely to be the largest asset CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEP I EM13Eit 3a, 2005 3. I2evet�ues. Substantially all .governmental fund revenues are accrued. Property taxes are billed and collected within the same period in which the taxes are levied. Subsidies, grants and developer contributions to proprietary funds, which finance either capital or current operations, are reported as nonoperating' revenues based upon GASB. No.33 4. Expenditures: Expenditures are recognized when the related fund liability is incurred. a. Compensated Absences: The Cite accrues accumulated unpaid vacation time when earned by the emplo}ee, The noncurrent portion (the amount estimated to be used in subsequent years) is maintained separately and represents a reconciling item between the fund and government -wide presentations, 6, Interfund Activity: Interfund activity is reported as either loans or transfers. Loans are reported as interfund receivables and payable as appropriateand are subject to elimination upon consolidation. Transfers between governmental or proprietary funds are netted as part of the reconcilement to the government -wide financial statements. 7. Equity Ciassificatiuns: Crdverxrmexrt-ti��i'de ,Statomexrts Equity is classified as net assets and displayed in three components; a: Itivested in capital assets; net of related debt - Consists of capital assets net of. accumulated'. depreciation and reduced by outstanding balances of any bonds, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Any outstanding debt is reduced by any unspent debt proceeds at the end of the fiscal year before the reduction discussed above b. Restricted net assets - Consists of net assets with constraints placed on the use either' (1) external'groups such as creditors, grantors, contributors; or laws or regulations of other governments, or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the criteria of "restricted" or "invested in capital assets, net of related debt," NOTES TQ THE FM NCIAL SEPTEMBER 30, Ttttrcl Statetnettts Governmental fund equity is classified as fund; balance: Fui and unreserved, with reserved further split between design equity is classified the same as in the government�vnde state 8. 'Bad Debts; Allowance for uncollecta6le accounts receivable in the R443162A The alawance for delinquent property taxes is not provided 9. CRpitalizeci Tnteresf: For proprietary -fund reporting the Csty capitalizes constructit For government -wide reporting, the :general fund capitalizes incurred. N�ITE 2t CAs�i: balance is further classified as .reserved d and undesignated. Proprietary fund frietary Fund at September 30, �OQS is At September 3d, 2405 the Cty's cash accounts totaled $2,�; checking accounts at a local financial institution: $100015 federal depository insurance (risk: category I), and the r collateral held by the pledging Bank's agent in the name of the uncollateralized cash accounts: The securities pledged by the City's;.depostory institution PAR SECl,1RfT,Y FFCB $ 500,000 FHLB 11900,000 FHLMG 1,3501000 FNMA 700,000 U S TREASURY NOTE 400,000'. 4;850,000 Cash and cash equivalents on the balance sheet consist of the Petty Cash $ 104 Checking, Savings and CUs �1,264 D-23 it is considered to'be immaterial. period interest costs when- incurred, ►struction period interest costs when i 1,3f4 of which 2;83I,264 was held in of the bank baiances were covered by emaining $2,' 31,249 was covered by City (risk category 2). There were no follows: FMV 490;856 1;885,96 11336,768 692,063 395,375 $ 41801,031 following: CITY OF NOTES TO THE FINANCIAL STATEMUN I S SEPTEMBER 30, 2005 1SIOTE 3* CAPITAL ASSETS* Capital assert activity for the fiscal year ended September,30, 2005 is as follows. CAPITAL ASSETS GOVERNMENTAL. ACTIVITIES Land i3 Easements. Infrastructure Buildings & Improvements. Office Equipment Equipment TOTAL AT HISTORICAL COST LESS ACCUMULATED DEPRECIATION Land & Easements Infrastructure Buildings '& Improvements'. Office Equipment Equipment TOTAL ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSETS, NET CAPITAL ASSETS. PROPRIETARY FUND Land Construction in Process 3uildings Equipment NNater System Sewer System Electric System TOTAL AT HISTORICAL COST ACCUMULATED DEPRECIATION Land Buildings Equipment Water System Sewer System Electric System "TOTAL ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSEfiS, NET 376„840 4,495,088 888,356. 106,820 1,342572 7,209,676 0 1 f226,992 232,553 74,728 578,091 2,112,364 5,097,312 ADDITIONS S 0 629,713 54,725 34;227 187,730' 906395 0 348,810 34,103 22,659 177,430 583,002 8 323,393 S 3121.64 $ 0 374,315 1,112,891 4,660,783 4,559,556 4*491,790 15,531,499 0 70,026 840,863 1,639,639 1,528,002 2,�429,212 6,507,742 $ 9,023,757 0 45,691. 21,516 399„505; 564697 1,999o502 246,572 3,277483 0 14077 133435 1891404 1691965 284,786 DELETIONS o 0 0 0 0 0. 0 0 0 0 0 0 $ 376,840 5124,801 943,061 141,047 115304302 8,116,071 0 1,:)foto 2 266,656 97,387 755,521 2,695,366 $ 0 $ 5,420,705 $ 0 0 0 0 0 0 0 0 791,667 $ 2485,8i6 $ 0 0 0 0 0 0 0 312,164 45,691 395,831 1,512,3g6 5,24$,480 61559,058 41738,362 0 84,103 974,298 11829*043 1,697,967 21713,998 7,299,409 $ 11,5091573___ CITY OF SAN NQTES TU THE FINA Iti %CMju SEPTEIVIBER *7vt 2, DEPRECIATION EXPENSE 1NAS GHARt3ED T4? GOVERNMENT', Administration .Police Municipal` Court Animal Control Fire Enforcem ent/Inspecti on Parks 4 Recreation E ng neer'!ng Streets Swimming Pool Vehicle Maintenance Sullivan & Community Centers Library. TOTAL DEPRECIATION EXPENSE 11,972 67421 1,602' 7,501' 3$r835 5,01.3 579 35,892 379,698 12,799 5,044 2,273 14,473 583,002 TE1VM a ACTIVITIES AS FOLLOWS# I�EFRECiATiC)IV EXI�ENSE 41PAS CHARGECi TG BUSINESS -TYPE AG'TIVI'T1ES AS FOLLOWS: Water 221,988 Sewer ` 213,332 I:iectdc 3560347 791,667 NOTE d: LONE -TERM D)�BT .The fol}owing is a summary of the Gty's Long -Terns Debt. General Lung Term Debt; Bind f?hit gafona: Geftificates of Obligation, Series }994 - Original amount of $1?900,00iJ principal paid annually,. starting September t, 1"5; Interest paid semi-annually on March 1, and September 1, at rates ranging from 5,.60 to 7,50%_ The Bonds were issued for street improvements and library building. construction and are to be repaid from property tax revenues and are further secured by a pledge of Enterprise Fund Net Revenues, T exas Tax and Revenue Certificates of Obligation, Series 2002 principal paid annually starting September, 1} 2�03, Interest paid September 1, at rates ranging .from 4.20 to 5;70%. The Bonds constructing and improving City, streets and are to be repaid front additionally secured by a pledge of Enterprise Fund Net Revenues. Original .amount of $2,360;000; SelTll-annually' on March- 1; and were issued for the purpose of property tax revenues and are CITE' OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2005' The Bond Obligations, require that certain cash reserve accounts be maintained. ZOOS the City had established and maintained the proper reserve accounts. Notes payable. A# September 0; Nate Payable -Sanger Bank -Original amount of $150,000, the note requires one hundred twenty monthly installments of,$1,615, with the final installment due January 2012, The note bears interest' at 5,25% and has seventy six installments remaining at September 30, 2005. The note proceeds were used to purchase; and remodel a building to be used by the police department, which also serves as collateral for the note. Note Payable - Sanger Bank - Onginal amount of $49,775, the note requires thirty six monthly installments of $1,488,_with the final installment due April 2006. The note bears interest at 4.25% and has seven installments remaining at September 30, 2005. The note proceeds were used to purchase parks equipment, which also serves as collateral for the note. Note Payable - Sanger Bank - Original amount of $74,993, the note requires thirty six monthly installments of $2,353, with the final installment due September 2006. The note bears interestat 4.25% and has twelve installments remaining at September 30, 2005. The note proceeds were used to purchase a fire truck, which also serves as collateral for the note. Note Payable y Sanger Bank Original amount of $120,000, the note requires sixty monthly installments of $2,234, with the final installment due December 2008, The note bears interest at 4.25% and has thirty nine installments remaining at September 30, 2005, The note proceeds were used to purchase a fire truck, which also serves as collateral for the note. Note Payable Sanger Bank - Original amount of $39,29,.5, the note requires thirty six monthly� installments of $1,165, with the final installment due February 2008._ The note bears interest at 4,25% and has twenty nine installments remaining at September 30, 2005, The note proceeds were used to purchase two vehicles which also serve as collateral for the note. Mote Payable aV Sanger Barak Original amount of $177,715, the note requires thirty six monthly installments of $525, with the final installment due February 2008., The note bears interest at 4,25% and: has twenty nine installments remaining at September 30, 2005 The note proceeds were used to purchase a vehicle which also serves as collateral for the note.,', Note. Payable - (:guaranty National Bank - Original amount of $850,000, the note requires one hundred eighfy monthly installments of $7499, with the final installment due IUlarch 2011. "The note bears interest at 2.80 percent under prime rate and has sixty five installments remaining at September 30, 2005, The note proceeds were used to purchase land for a development project between the Sanger Texas Industrial Development Corporation and Walmart. Stores East, Inc. The loan will be repaid from the 4A sales tax proceeds to be collected by the Sanger Texas Industrial Development Corporation As funds are available additional principal have been made on the note. CM OF SANGER NOTES TO THE FINANCIAL STATEl4'IENTS SEPTEMBr In 30 . Capital I:;eases; Capital Lease -Capitany'Leasing Original balance of $65,986. The lease requires a. down payment plus four annual rental -payments of $14,436 with two annual payments remaining at September 30, 2005. The City has a purchase option during the term of the lease to purchase the'. equipment at a designated purchase option price. The City intends fo exercise this option at the end of the lease term, The proceeds of the lease were used to purchase parks equipment which also serves as security for the lease. Capital Lease � lrliuersifaed fending„ Tnc, -: Original balance cif $18,86Q, The lease requires a down payment plus fifty eight monthly rental payments of $368 with forty eight payments remaining at September 30„ 2005. The City has a. purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchaseupgraded accounting software which also serves, as security for the lease. Lawsuit Judgment Payable: . In July 2002 the City was issued the order t�ffnal=judgment City of Sanger. The;.lawsuit related to the. termination .ofR with the City. The City was ordered to pay Mr. Yarbrough beginning on October 1, 2002 with the final installment due, Proprietary Fund; Bond C}bligations: the lawsuit Richard Yarbrough vs. the and Yarbrough, a former police officeroral of $320,120 in annual installments ril 1, 2009. Texas Utility System Revenue Bonds, Series 1996 - Original amount of �1,0600,000, principal paid annually an May 15; Interest `paid semi-annually on Iv1ay:15 and November 15, at rates ranging from 4.2% to 4.75%. The bonds were issued to provide funds for improving and extending the City's INN Sewer System, The Bonds are to be repaid from and are secured by the Enterprise Fund Net Revenues, Texas Utility System Refunding Revenue Bonds; Series 19c9 - :Original' amount of $I,733 Utility System Revenue Bonds, Series 2002 NowQriginal amount of $2,540,O0Q, principal pond artnually on 111ay I5; Interest paid semi-annually on 1�lay IS and November 15, at rates ranging from 4;5% to D-27 CITY OF SANG] 1�OTES TO THE FINANCIAL STATEMENTS 5,0%, The bonds were issued to provide "funds for improving and enlarging the City`s;wastewater treatment plant and replacing various water and sewer lines. The Bonds are to be repaid from and are secured by the Enterprise Fund Net Revenues, The Bond Obligations require that certain cash reserve accounts be maintained. At September 30, 2005 the City had established and maintained the proper reserve accounts, NotesPayable; lvote Payable -.Sanger Bank •. Original amount of $400,"i44, the note is due on demand,. if no demand is made then the note requires five annual principal payments of $80,149 beginning in October 2002. The note bears 4,25% with one annual payment remaining at September 30, 2005, The note proceeds were used for water system improvements, I�dote Payable - Sanger Bank Original amount of $60,401, the note requires sixty monthly installments;of $1,120, with the final installment due March 2010. The note bears interest at 4,25%' and has fifty four installments remaining at September 30, 2005. The note proceeds were used to purchase a backhoe, which also serves as collateral for the note, Note Payable Sanger Bank - Original amount of $120,253, thenote requires thirty six monthly installments of $3,598, with the final installment due April 2008. The note bears interest at 4.25% and has thirty one installments remaining at September 30, 2005, The note proceeds were used to purchase a digger truck, which also: serves as collateral for the note. Capital Leases: Capital Lease - ,ALTEC - Original balance of $86,500. The lease requires thirty six monthly -rental. payments of $2,?Ol with thirty four payments remaining at September 30, 2005, The City has a purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase a Hydraulic Derrick Truck used by the electric department. The vehicle is security for the lease, Capital Lease Diversified Lending, Inc. Original balance of $18,860, The lease requires a down payment plus fifty eight monthly rental payments of $368 with forty eight payments' remaining at September 30, 2005, The City has -a purchase option during the terra of the lease to purchase the equipment at a designated purchase option price, The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase upgraded accounting software which also serves as security for the lease. N0 ES TO THE FINANCIAL SEPTEMBER 30, 20 Tang -term debt activity far the fiscal year is as follows, GOVERNMENTAL AGT#VtT#ES BOND OBLIGATIONS Series 1994 Certificates of Obligation Series 2002 Certificates of Obligation NOTES PAYABLE Sanger Bank, Sanger Bank Sanger Bank Sanger Bank'. Sanger Bank Sanger Bank Sanger Bank Guaranty National Bank • 4A Fund TOTAL NOTES PAYABLE' CAPITAL LEASES; Capital City Lease Diversified TOTAL CAPITAL LEASES LAWSUIT JUDGEMENT PAYABLE. Yarbrougn Payable ACCRUED COMPENSATED ABSENCES Accrued Vacation Pay.. _ Accrued Sick Pay TOTAL ACCRUED COMPEN. ABSEN, TOTALCsOVERNMENTAL ACTIVITIES BUSINESS•TYPE ACTIVITIES REVENUE BOND OBLIGATIONS Series 199fi Series 1999 Series 2002 TOTAL REVENUE BONDS NUTE<S, PAYABLE $anger Bank Sanger Bank Sanger Bank Sanger Bank' TOTAL NOTES PAYABLE CAPITAL LEASES. Altec' Diversified Lenders, Inc; Alter TOTAL CAPITAL LEASES TOTAL BUSINESS•TYFE ACT#V#TlEB BEGINNING A[)OITIONS $ 885,000 $ 0 2;245„000 �0 31130,000 $ 0 117;444 6 27,21E 0 9,087 0 55,127 0 1034943 0; 0 39,295. 0 17,715 508,561 0 821,378 $ 57,010 i ATEMENTS 13,179 16,953 s,087 27;725 22,733 7;232 12,578 ENDINCa CURRENT- FORTION • iii :• iii iii a•• . i•i • iii 164,265 263 0 27;402 8 ;M 32,463 14;442 497:620 14,251' 1.0,263 0 27,402 23,815 12A8 5,796 73,832 $' 168,227' ' $ 13;170 3;467 16,637 $ 239;320 $' 0 $ 4,616 $ i97,704 $ 42,44t3 42,332 $ 0 17;495 '1;155 $ 59;827 $ 1,155 S 4 $ 77025 $ 145,851 13,922 n. 0' $ 163,783 t7 0 60,401 1204263 0 18,86(� 86, 500 $ 105,360 $' 4;599,820 ,$ 266,014 1,215 0 1;215 ii• •i• i11 i 2t350000 i 7Q;999 13;922 5,43t3 15,474 105,833 411i7 18,650. $ 59,767 720004. 1,105,4p0 2,295,000 $ 4120,400 $ 91,117 18;650 $ 59t767 i i•i .� ii• ••i $ 78862 $ 7$,862. 4 0 54,963 11,323, 1043779 39,484 S 238;604 $ 129,669 434,t'i21 $ 4,455,:113 $_ 459,507 , CITY OF SANGER NOTES TO THE FINANCIAL, STATEMENTS SEPTEMBER 30, 2005 Future debt maturities are as follows: Governmental Type Activities: Business -Type Activities, Year Principal Interest Principal Interest 2006 $ 477,312 $ 178,000 $ 459,507 $ 216,893 2007 456s974 156, I64 3953488 196,206 2008 458 226 134,174 396,361 1761383 2009 4501833 112,330 367,117 158 350 2010 226y941 90,421 366,640 140,711 2011-201.5 6527051 355,220 11190,000 492,088 201&2020 760,000 2051075 895,000 2401792 2021-2022 3600000 _ 22o250 3850000.' 310320 Total $ $1,2580634 $ 1.13, $106520 T43 NQTE 5« PROPERTY TAX« Property tax is le�ried each C}ctober l on the assessed (appraised) -value as of the. prior January 1 for all real and personal property located in the City. Taxes are due October 1, the levy date, and are delinquent after the following January 31. At the fund level property taxes are recorded as receivables and deferred revenues at the time the taxes are assessed. Revenues are then recognized as the taxes are collected. NOTE.6r RETIREMENT PLANS. The City provides pension benefits for all of its full-time employees through anon -traditional, joint contributory, defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple -employer public retirement system, 3enefits depend upon the sum of the employee's contributions' to the plan, with interest, and the Ctyfinanced monetary credits, with interest, Members can retire at ages sixty and above with ten or more years of service or with twenty five years of service regardless of age,, A member is vested after ten years` The contribution rate for the employees' is 5% of gross earning and the City provides a monthly contribution of 5.51% of gross earnings, This rate consists of the normal cost contribution and the prior service' contribution rate. The normal cost contribution rate finances the currently accruing -nonetary credits and the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the,plan's twenty five year amortization period, The City's. contributions for the fiscal year totaled $86,672; GITY'OF VOTES TO THE F14N %A -AL SEPTEMBER 30, The schedule of Actuarial Liabilities and _Funding Progress as follows: .Actuarial. valuation dafe Actuarial Cost Method' Amortization method. Asset valuation method IL Actuarial valuation of assets Actuarial Accrued Liability Percentage funded Unfunded actuarial accrued' liability (UAAL) Annual covered payroll UAAL as percentage of covered payroll Net pension obligation. -beginning Annual required contributions Contributions made Net pension obligation - end►ng, T:evel Per The. prior two fiscal years were' 100% funded; the net contributions were $86672 and $69,056., `fhe City- of Sanger is one of ZO01 municipalities having the 1 Af the 801 Municipalities have an annual, individual actuar for the l2-3144 valuations, are contained in the 2004 Report, a copy of which may be obtained by writing to P.O. AfiEMENT5 the }spar ended September 30, ZOOS is. 11034 Cast rt ofPayroll rtizeti Cast 1805541 1,966,474 JI08 160,933 1 792;164 9,0% 0 104,353 obligation .was zero and the annual efit plan administered by TMRS. Each valuCA tion perforrned: All assumptions. CRS Comprehensive Annual Financial ►x 149153, Austin, Texas 78714-9153, I�� GITY OF SANGE BUDGETARY For the Year Ended September 30, 2005 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL ACTUAL FAVORABLE BUDGET BUDGETL AMOUNTS (UNFAVORABLE) Beginning Budgetary Fund Balance $ 0 $ 630,000 $ 0 $ (6301000) RESOURCES: TAXES: Property Taxes 1,618,000 11630,000 1,7181635 88,635 ,Sales & Beverage Taxes, 353,000 422;400 426,327 31927. Franchise Taxes 275,650 299,650 304,033 41383 TOTAL TAXES 21246;650 21352,050 % M 21448,995 96,945 INTERGOVERNMENTAL: Library County Funding 17000 17,000 17356 356 Fire County Funding 99,000 99,000 1191353 20,353 Grant Revenues 0 0 11306 11306 TOTAL INTERGOVERNMENTAL 1160000 116,000 148,015 32,015 CHARGES FOR SERVICES:` Variances & Plats 45,000 445,000 38,450 (61550) Swimming Pool 11 1000 11 000 41345 (61655) Sanitation Collection 350;000 453,000 453,777 777 Rental Fees 31500 13,500 21555 (945) Library Fees 41000 41000 81595 41595' Other Fees 7,200 7,200 11936 (5;264) Misc. income 40,000 40,000 21867 (37,133)' TOTAL CHARGES FOR SERVICES 4601700 563,700 512,525 (510175) FINES: Police Fines 123,500 123,500 124,0.12 512 LICENSES & PERMITS: Permits & Inspections 146,400 1146,400 1481299 11899 DONATION REVENUES: Beautification Board 0 0 51967 51967 Parks 00 0 0 TOTAL DONATION REVENUES 0 0 51967 5,967 INVESTMENT INCOME 261000 26,000 38,061 127061 OTHER' SOURCES:' Proceeds of Notes Payable/Capltal Lease 0' 58,375 75,669 17,494 Transfers from 4A Fund 0 420400 0 (42,400)' Transfers from 4B Fund 0 0 42,436 42,436 Transfers from Proprietary Fund` 214,322 214,322 54,889 (159,433). TOTAL OTHER SOURCES' 214,322 3154097 173,194 (141,903) TOTAL RESOURCES AVAILABLE 3,3331572 SEE ACCOMPANYING NOTES TO D-33 3,599,068 ATEMENT`S CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUNC1 For the Year Ended September 30 2005 CHARGES TO APPROPRIATIONS: ADMINISTRATION: Personnel Services Insurance Professional Fees Supplies & Contract Service Repair & Maintenance Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL ADMINISTRATION POLICE: Personnel Services Professional Fees Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL POLICE MUNICIPAL COURT. Personnel Services' Professional Fees; Repairs & Maintenance Supplies& Contract Service Utilities & Telephone Capital Outlay TOTAL MUNICIPAL COURT ANIMAL CONTROL; Personnel Services Supplies& Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ANIMAL CONTROL ORIGINAL BUDGET 76,153 39,802 5,200 53038 1,500 8,300 550 12,�4'16 41,616 238,675 527,184 500 11,000 70,011 14,045 26,000 29,000 23,740 701,480 74,928 s,000 1,415 24,850 21300 1,750. 114;243 3$,088 12350 3,000 500 10,000 63,938 76,153 39,802 5,200 53,038> 1,500 8,300 550 48,991 41,616. 527,184 500 11,000 70,011 14,045 26,000 29,000. 23,740 701,480 74,928 91000 1,415 24,650 2,300 1,750 114,243 38,088 � 2,350 3,000 500 10,000 63,938 .ACTUAL AMOUNTS 7s823 32,530 10,746 58,556 3;510 6,327 106 42,782' 49m856 284,235 542,068 570 2,656 43,437 11,863 26,751 40;767 19 p074 6$7,206 74,926 7,500 2,782 21,622 746 0 107,576 35,942 10;467 2,295 1406' 4,000 54,110 SEE ACCOMPANYING NOTES TO FINANCiAL.STATEMEiVTS D-34 A VARINCE 1N1 fH FINAL BUDGET FAVORABLE (UNFAVORABLE) (3,670) 7,272 (5,546) (5,517) (2,010) 1,973 444 6;209 (8,240). (9,a85) (14,884} (70) 8,344 26,574 2,162 (751) (11,767) 4,666 14,274 ,2 1,5ao' (11367) 3,228 1,554 1,750 6,667 2,146 1,883 705 (906) 6,000 9,828 GITY OF BUDGETARY COMPARISON SCHEI For the Year Ent F(RE: Personnel Services Ambulance Service Repair & Maintenance Supplies &' Contract Service Utilities & Telephone Vehicle Debt Service Capital outlay, TOTAL FIRE ENFORCEMENT/INSPECTION Personnel Services' Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ENFORCEMENTIINSPECTION ENGINE�RIIdG Personnel Services. Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL ENGINEERING PARKS & RECREATION Rersonnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL PARKS &RECREATION. STREETS: Personnel Services.. Repair & Maintenance Solid Waste Collection Supplies & Contract' Service Utilities .& Telephone Vehicle Capital Outlay Debt Service TOTAL STREETS ORIGINAL BUDGET 104;937 86,400 17;000 9 $A32 10;100 4;000 6 Ir leo 0 381,049 -GENERAL FUND. ember 30, 2005 AL ACTUAL CE i" AMOUNTS 14,937 83,051 36,400 $6,400 ! 7,000 11;720; #4,432 62,314 f0,100 8266 4,000 4,577 80 57,197 0 10,620 49 324,145 .VARIANCE WITH FINAL BUDGET FAVORABLE {UNFAVORABLE) 21856' 0 5;280 32,118 11834 (577) 6,983' (10,620) 56,904 77;769 31,169 30,259; 910 131000 31000 1;244 1,756 43,100 11,7,100 114,859 21241 21000 2,000 298 11702 4,200 1,200" 27 1,1,73 750 7so 10 750 130,819 i55,219 146,687 6 532 0 0 0 0 0 0 70 (70) 30t750 751750 79,332 (31582) 0 0 6150 (150) 0 0 31475 (3,475) 30,750 75,750 83,027 (71277) 323,917 323,917 326,289 (2,372). 31,Ot}0 31,OOQ 19,706 11,294 32,700 32,700 29,551 13,149 21460 21400 2,188 212 81000 8,000 9,672 (1,672) 31,470 95,670 97,542 (1,872) © 0 41078 _ (078) 429,487 493,687 489,026 4,661 20,136 20136 40,164 (20,028) 57,000 57,000 44,035 12,965'. 253,200 380,200 409,027 (28,827) 59,800 50,800 341134` 25,666 12,8oa 12,800 40,025 (27,225) 20,000 20,000 181310 11690 109,200 739,200 659,427 79,773 385,908 385,908 407,072 (21,164) 918,044 � 11675,044 1/652194 ' - 22,850 ''SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS' D-35 CITY OF SANGER' BUDGETARY'COMPARISON SCHEDULE - GEN=RAM. FUND For the Year Ended September 30, 2005 5VIIIMMING`POOL.. Personnel "Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SWIMMING POOL VEHICLE' MAINTENANCEt Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay:... TOTAL VEHICLE MAINTENANCE SULLIVAN &COMMUNITY CENTERS Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SULLIVAN & COMMUNITY CTRS LIBRARY: personnel Services Repair & Maintenance Supplies & Contract Service Utilities &Telephone Capital Outlay Debt Service' TOTAL LIBRARY TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE ORMGINAL FINAL ry �ICTIJAL ' BUDGET BUDGET AMOUNTS VARIANCE'WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) 21,914 21,914 24,092 (21178) 16,000 161000 21125 13,875 15,210 154210 91055 6,155 3500 31500 4,606 (1,106) 80000 8,000 0 8,000 64,624 64,624 39,878 24,746 41,705 41,705 44 104 (21399) 31200 3,200 21769 431 11,400 11,400 3,4409 71991 31600 3,600 31069 531 11000 1,000 1,028 (28) 12,350 12,350 181698 (61348) 73,255w` 734255 73,077 178_ 9,250 91250 61379 2j871 11 A50 11,450 8,321 3,129 41700 4,700 2,515 2,185 31400 15,400 19,755 (�41355) 28,800 40,800 Y' 36,970ry 31830 91,399 91,399 90,748 651 41800 4,800 51775 (975) 91210 9,210 T438 11772 8,500 81500 81800 (300) 71100 71100 9329 (2229) 37,499 37,499 37,489 10 T. 1580508 158,508 159,579 (1;071) 3,333572 4,272,747 037,710 135,037' 0 $ 0 $(538642) $ (538,642)` SEE ACCOMPANYING NQTES TO D-36 STATEMENTS ILL CITY OF BUDGETARY COMPARISON SCHEDULE For the'Y+ear Ended ORIGINAL BUDGET 4A FUND Beginning Budgetary Fund Balance $ 0 RE$dURCEa Sales Taxes 1751000 Investment Income 0. TOTAL RESOURCES AVAILABLE 175000 CHARGES TO APPROPRIATIONS: ADMINISTRATION Supplies & Contract Services 21450 Professional Fees I X0 Debt Service 154,050 Transfer to General Fund for Streets 0 TOTAL CHARGES TO APPROPRIATIONS 157,500 ENDING BUDGETARY FUND BALANCE $ 17,500 $ RESOURCES: Sales Taxes 175,000 Investment Income p TOTAL. RESOURCES AVAILABLE. 175,000 CHARGES "TO APPROPRIATIONS: ADMINISTRATION: Supplies & Contract Services 2;450 Transfer to General Fund for Parks 152,050 TOTAL CHARGES TO APPROPRIATIONS 154,500 ENDING BUDGETARY FUND BALANCE $ ` 20,500 $ I ( HOTELIMOTEL FUND Beginning Budgetary Fund Balance $ 0 $ R EsoURces, ,4lcoholtc Beverage Taxes 0 investment Income 10 TOTAL RESOURCES AVAILABLE 0 CHARGES TO APPROPRIATIONS, .ADMINISTRATION Promoden 0' ENDING BUDGETARY FUND BALANCE $ I'LL 0 $ SEE ACCOMPANYING NOTES TO. D-37 1 1 1 �ECIAL REVENUE FUNDS �r30;2005 VARIANCE WITH. FINAL BUDGET L ACTUAL _ FAVORABLE E AMOUNTS (UNFAVORABLE) 0 5 ,000 211,330 0 4,683 ,000 216,013 ;450 1,420 ,Q00 10,149 050 s9,99a 0 0 500' 101,562' 500 $ 114,451. 36,330 4,683 41,013 1,030 (91149) 64,057 0 55,938 $ ��86,951 )04 211,330 36,330 0 13,456 131456 100 2249786 49,786 ;450 1,220 ,050 42,43E ,500 _� 43,656 ,500 $ 181,130 $ ,2Q0 11514 3,314 0 275 275 ,200 11,789 31589 8,252 (52) DIAL STATEMENTS. CITY OF SANGER SCHEDULE OF PENSION PLAN FUNDING PROGRESS For the Year Ended September 30, 2006 DEFINED BENEFIT RETIREMENT, PLAN Actuarial Valuation pate 12'�31-04 12-31-03 12-31-02 Actuarial Value of Assets $' 11805,541 $ 1,710,290 $ 1.,4601890 Actuarial Accrued Liabillties (AAL) 19966,474 1,851,297 1,499;967` Unfunded (Overfunded) AAL (UAAL,) 160,933 141 t007 39,077 Funded Ratio 9148% 9244% 9744 Covered Payroll 1,792,164 11711,143 11567,373 UAAL as a Percentage of Covered Payroll 940% 8.2% 2.5% SEE ACCOMPANYING NOTES TQ FINANCIAL STATEMENTS D-38 C'H=R SUPPLEMENTARY F ►RMATKill CITY OF SANGER COMPARATIVE SCHEDULE OF REVENUES, EXPEN FUND BALANCE - GENERAL For the Yeer Ended September 3(1, 2l REVENUES. Property Taxes Sales & Beverage Taxes Franchise Taxes Intergovernmental Charges for Services Fines Licenses Permits Donations Interest Income TOTAL. REVENUES EXPENDITURES General Government Public Safety Home Grant Expenditures. Streets & Sanitation Culture & Recreation Capital Outlay Debt Service: Principal Interest TOTAL EXPENDITURES EXCESS REVENUES C?1/ER (UNDER} EXPENDITURES. OTHER FINANCING SOURCES (USES) Proceeds of Notes Payable/Capital Leases Transfer from Economic ®eveicpment Transfer from Proprietary Fund TOTAL OTHER FINANCING SOURCES (USES) EXCESS REVENUES OVER (UNDER} EXPEIVCIITURES FUND. BALANCE -ENDING zoas $ '1,718,635 426,327 304,033 148,015 512,525 124,01z 148,299 5,967 38,061 3,425,874 325,528 1 g188,066 0 25,573 517,382 906,395' 392,825 181,941 4,137,710 (711,836} 75,869 42,436 54,889 173,194 (533,E;42} 8611107 $ 322,465 ES, AND CHANGES IN 8 ZOQ4 zaa4. $ 1,484,3Q1 395,633 283*619 150,188 482,928 142,312 142,601 5,187 33,984 3,120,753 27Q;263 1,065,060 0 5051569 4871488 1,9871776 390,875 1,86,842 41903,873` (1,783,120}. 194,993 62,071 100,305 357,369 (1,425,751 2,286,858 � 861,107 SEE ACCOMPANi'1NG NOTES TO FINANCIAL STATEMENTS D-40 CITY Ors SANGER COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -SPECIAL REVENUE FUNDS For. the Year Ended Septernberf30, 2005 With a Comparative Total for the Year Ended September 30, 2004 REVENUES Sates Taxes Hotel/Motel Tax Interest Income TOTAL REVENUES EXPENDITURES Promotion Supplies & Contract Serv€ces. Professional Fees Debt Service TOTAL EXPENDITURES EXCESS REVENUES OVER (UNDER) EXPENDITURES. H O`TELI 4A MOTEL tNJ2' $ 0 5 211 11,514' 275 4 11,789 21 E OTHER FINANCING SOURCES (USES] 7 ransfer to General Fund for Streets Transfer to General Fund for Parks TOTAL OTHER FINANCING SOURCES (USES) EXCESS REVENUES -OVER {UNDER} EXPENDITURES FUND BALANCE - l3EGINNING FUND BALANCE -ENDING Q � 211,330 0 0 3 13,456 K 224;786 TOTAL 5 422,66Q 11;514 18,414 452,588 D 0 8,252 1,420 1,220 2,640 1 Q149 0 10,149 89,993 .0 89,993 101,562 1 F220 111,t}34 114,451 223,566 341;554 Q 0 Q 0 {42,43fi} (42,436} Tt�TAL 2004 $ 392,316 11,058 4,551 407,925 5,578 2 636 0 89;993 98,207 809718 {37527} {24,544} (42,436) {42,436} 181;13Q 299,118 247,647 3271160 550,732 303,085 508,290 $ 849850 $ 550x732 SEE ACCaMPANYING NOTES TQ FINANCIAL STATEMENTS D-41 CITY OF SANGER COMPARATIVE SCHEDULE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS w PROPRIETARY FUND For the Year Ended September 30, OPERATING REVENUES Charges for Services Connection Fees Miscellaneous TOTAL OPERATING REVENUES OPERATING EXPENSES Personnel Saniicos Purchased Water/Electricity Supplies & Contract Services Repair & Maintenance Utilities Franchise Fees Depreciation TOTAL. OPERATING EXPENSES .OPERATING INCOME fVONOPERATING REVENUES (EXPENSES] .Interest income.,. Tap Fees Grants & Developer Contributions Interest Expense Transfers Out to General Fund TOTAL NONOPERATIIVG REVENUES (EXPENSES CHANGE IN NET ASSETS NET ASSETS � BEGINNING NET ASSETS- ENDING 2QAS 8 2Ug4 T493,933 $ 29,317 16,068 76539,318. 1180,164 4,218,948 618,335 321,272 85,882 174,616' 791,667 7,390,884 148,434 53,937 711,100 8,475,998 2004. ti,443,474 28,215 8581 6,480,270 1,092,2t)2 3,3911711 4851343 2891146 75,105 1501350 656,626 Mx� 6,140,483 339,787 19,066 684,881 204;454 (1451220) (100305)ova 1,002,663 7,473,335 �+ 8�475,998 SEE ACCQI!,WANYING NOTES TO FINANCIAL STATEMENTS D-42 t4t0.M ONE NtrD0 CF0 M t`! a u� (o co of to to co u .- .co r NC~O �r r LU wz O 0) Ott%w00 � � cn W N M to W t. o t�cn.trooa rn rn ao o°o co V" N Tm00 ty Wra M 0 v rn co N G (o Z m c� W E zW � N�,(D�(DImi CWD N M if} 49C � i- t � ui to 00 to o (D v 0 00. U. �� 'C C,i N' N 0 00 r- tli Ptp to W col in .J (L W ui U`G v _CL'! u7 N 00 N N 0 M N''' C 00 O c Q p} N rr WI U) e~-O �N 0 T vj 2 W tL Z W U) a Z N uui W j ° w tY, c Wtoo ccv z e o c 0. u cryeca° �� aH ow �Uit 4W i_W Z*.: o.(LV)wZ)0LL D43 Mur� ro • a0 tc o e-v,t o a ? o o c 5 � o v ? Mt � ntC'o " 4 C f i N s i � I w 0 C i w Z ? o o c 5 � o v ? Mt � ntC'o " 4 C f i N s i � I w 0 C i w Z ? Mt � ntC'o " 4 C f i N s i � I w 0 C i w Z f i N s i � I w 0 C i w Z C i w Z Year Ending September 30, 2006 2007 2008 2009 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENEF PRINCIPAL $ 165,000 175,000 1900000 200,000 $ 730,000 September 30, 2006 INTEREST 43,635 33,900 23,400 12,000 _.. d��...__ $ 112,935 'Series 2002 Certificates of Obligatlan�� Year Er►ding September 30, 2006" 2007 2008 2009 2010' 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 PRINCIPAL $ 85,000 85,000 90,000 95,000 100,000 105,000 1101000 120,000 125,000 130,000 135„000 145,000 150,000 1600000 170,000 175,000 185,000 $ 21165,000. INTEREST 105,470 100,625 95,780 90,650 85,235 80,385 75,975 71,245 65,965 60,340 54,490 48,280 41465 34,340 26,500 18;000 _ 9a250 ,1,063995 Nt3TE PAYABLE - SANGER BANK �� Year Ending September 30, 2006 2007 2008 2009 2010 2011 2012 PRINCIPAL 14,251 $ 15,018 15,826 16,676 17,573 18,518 6,404 $ - 104265' INTEREST 5,134 41368 3t560 2,709 1,812 867 70 18,520 LONG-TERM DEBT TOTAI. REQUIREMENTS 208,635 208,900 213,400 212,000 842,935 rl� EMENT REQUIR 190,470 185,625 185,780 185,650 185,235 185,385 185,975 191;245 190,965 190,340 189,490. 193,280 191,465 194,340 196i500 193,000 194,250 3,228,995 TQTAr, REQUIREMENTS 19,091 19,091 19,091 19,091 19,091 19,091 6,998 121,544 SEE ACCOhIlRANYING NOTES TO FINANCIAL STATEMENTS D-44 CITY OF SANGER' DEBT SERVICE REQUIREMENTS = GINEF NOTE PAYABLE It BANGER BANK Year Ending September 30, 2006 PRINCIPAL 10,263 NbTE' PAYABLE = BANGER BANK Year Ending September 30 2006'. Year Ending September30, 2006 2007 2008 2009 10;21a3 September 30, 2005 INTEREST: $ 146 146 PRINCIPAL: INTEREST' 27,402 $ 631 PRINCIPAL: INTEREST $ 23815 to 21991 24,846 11959 25,924, 882 6625 47 81,210 $ 51879 NOTE PAYABLE =BANGER BANK: - Year Ending Beptember 30, 2006 2007 2008 PRINCIPAL.. 12,868 wo 13,425 5,770` 32,063 'Nt)TE PAYABLE -BANGER BANK' Year Ending September 30, PRINCIPAL. 2006 $ 5,796 2007 6,048, 2008 2,598 $ 14 A42 INTEREST 1,114 557 61 $` 1,732 $ INTEREST $02 $ 250 28 �.. 780 SEE ACCdMPANYING NOTES Ta D-45 LOtVG=TERM DEBT TOTAL REQUIREMENTS 10,409 10;409 TOTAL REQUIREMENTS 28,033 .TOTAL REQUIREMENTS 26,806 26,805 26;806 6,672 87�089 TOTAL. RE4UIREMENTS 13,982< 13982 5,831 33;795: TOTAL. REQUIREMENTS.. $' 6298 8,298 2626 8' 15,222: STATEMENTS CITY OF SANGER DEBTSERVICE REQUIREMENTS - GENERAL September 30, 2005 NOTE PAYABLE - GUARANTY NATIONAL» 13ANK - 4A. FUND {, PRINCIPAL 73,832 76 A40 79,971 83,229'. 86,619 37,129 ._ 437 620 Capital Lease -CAPITAL CITY LEASING INTEREST 16,161 13,153 10,022 6,764 3374 373' 49,84T Year En+ding September 30, PRINCIPAL INTEREST 2006 $ 134170 $ 11267 2007 13,788 648 26,95e $ li915 Yeat Ending September 30, 2006 2007 2008 2009 0 PRINCIPAL .INTEREST 3,467 $ 949 5 3,712 704 3,575 441 4,256 160 $' 15,410 $' _._,.,. 2,254 $ Lawsuit Jwdgment Payable Yathtuugh Year Ending September 30, 2006 2007 2008 2009 2010 PiRIIVCIP`AL. � 42,448 43,297 44,163 45,047 22,749 197,704 INTEREST LONG-TERM DEBT TOTAL REQUIREMENTS 89,993 89,993 89,993 89,993 89„993' 37,502 487,467 REQUIREMENTS 14,437 14,436 28,873 TOTAL EMENTS REQUIR 4,416 4,416 41416 4,416 17,664 TOTAL REQUIREMENTS 42,448 43,297 44,163 45,047 22,749 197,704 SEE ACCOMf'AIVYING IvoTES Td FINANCIAL STA7EMEN7S D-46 CITY' OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT September 30, 2005 Year Ending I TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS. 2006 $ 477312 $ 178;Q0a $' 6550312 2007 4561974 156;164 613J 38 2008 458,226 1341174 592t400 2009 450,833 112,330 563,168 2010 226,941 90,421 3171362 f 2,070,286E 6710089 ( 2,741,375 201 t 160,647 81,625 2422272 2012 116,404 76; 045 1921449 2013 120,000 71,245 191,245 2014 125,000 651965 190,965 2015 130,000 60,340 190,340 1 652,05IJ 1 355,2201 10007,2711 2016 135,000 54,490 1899490 2017 145;OQ0 48,280 1931280 2018 150,000 41,465 191,465 2019 160,000 34,340 194;340 2020 170,000 26,500 196t500 76o 205,07� 965,075 100, 2021 175,000 18,000 193,000 2022185,000 9,250 194,250 111 360,000 27250 387 25 $ 3,842,337 $ 1,258,634 $ .§51,.._0t7;971 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS D-4'7 Year ErMding September 30, 2006 2007 2008 2009 ?010 2011 2012 2013 2014 ?015' 2016 C" Y Ot* SANGER DEBT SERVICE REQUIREMENTS -ENTERPRISE FUND PRINCIPAL. 5 54,400 50,000 55,000 60,000 60,000 65,000 70,000 70,400 75,000 80,000 85,000 720,000_ September 30, PRINCIPAL 2006 2007 2008 2a09. 1010 2011 2006 2007 2008 2009 2010 2011 2012" 2013' 2014 2015 2016 2017 2018 2019 2020 2021 2022 S' 165,000; 1701000. 180,000 190,000 195,000 205,000 14105,000 PRINCIPAL S 85,a00 9a,aar� 95,000 100,000 105,000 110,000 120,000 125,000 130,000 140,000 145,000 155,000 160,000 170,000 1800000 190,000 195=0 2,295�0Ct{3 j_ September 30, 2005 INTEREST 32,840 30,790 28,690 26 p297 23,628 20,898. 17,908 14,652 11,363 7,837 _ 4,037 5 218 940. INTEREST $ 47,975 40,962 33,653 25,913 17,600 9,020' $ 175,123 INfiERESI` $ 121,600 116,500 111,100 105,400 99,400 93,100 88,150 825110 76,510 70,140 63,140 55,745 47840 39,520 30,510 20,790 10,s30 11232,485 TQTAL REQUIREMENTS 82840 80,790 83,690 86,297 83,628 85,898 87,908 K652 86,363' 87,837 89,037 938,940 TQTA4 REQUIREMENTS �a 212,975 210,962 213,653. 215,913 212600 214,020. 1280,123 TOTAL REQUIREMENTS S 206,600 ', 206,500: 206,100 205,400 204,400 203,100 208,150 207;510 206,510 210,140 208,140 2100745 207,840 209,520 210,510 21,0,790 205,4530 S A527,485, SEE ACCOMPANYING. NOTES TO FINANCIAL STATEMENTS 1348 CITY OF.SANGER I3EBT SERVICE REQUIREMENTS - ENTERPRISE FUND (NC}TE PAYABLE - SANGER BANK Year Ending September 30, 2006 :Year Ending September 30, 2006 2007 2008 2000 2010. PRINCIPAL $ 78,862 September 30, 2005 INTEREST $ 78;862 $ 1,681 PRINCIPAL �NflTE PAYABLE -BANGER BANK Year Ending September 30, 2006 2007 2008 6 Year Ending, September 30, 2006 2007 2008' 2009. "Year Ending.. September 30, 2006 2007 2008. 11,323 11,814 12;326' 1200 6;640 54,963 PRIIUCIPAI, 39,484 41,195 2!4*100 104,779 PRINCIPAL. 3,467 3,712 3;975 4,257 ..15,411 PRINCIPAL 26,371 28767 25,960 81;098 INTEREST 2,11.7 1,626 1;114 580 83 $ 5,520 INTEREST $ 3,690 11979 335' 5L 6,004 INTEREST $ 949 704 441 160 2,254 INTEREST $ 6,441 3,645 1',050 3EE ACCOMPANYING NQTE.S TU TOTAL. REQUIREMENTS 80,543 TOTAL REQUIREMENTS $ 13,440 13,440' 13,440: 13,440 6723' $ 60�483; TOTAL EMENT$ REQUIR � 43174' 43,174 24;435 _ 110,783 'TOTAL, REQUIREMENTS 4;416 4;416 4,416 017 17*665 T©TAC RE4UlREM�N"t5 32,412 32,412 27,010 91,834 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND September 30, 2005 TOTALS Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 4591507 $ 216,893 $', 676 400 2007 395,488 1961206 591,694 2008 396,361 176,383 572,744 2009 367,1171581350 525,467 2010 366,640 140,711 507,351 �^ �985,113 ! 888,543 2,873165B 2011 380,©00 123,018 503,018 2012 1900000 106,056 296,058 2013 1950000 97,162 292 J 62 2014 205,000 87,673 292,873 2015 220,000 77,977 297,977 11190,0001 1 492,0881 1- 11682,088 2016 230,000 67,177 297,177 2017 155,000 55,745 210,745 2018 160,000 47,840 207,840 2019 170,000 39,520 2091520 2020 1800000 30,510 2104510 895,000 + 240t7921 1,135 7 2021 190,000 200790 210,790 2022 195,000 10,530 205,530 385,000 31,320 1 416,320,11 41455113 $ 1,652,743 $ m 6,107,856 SEE ACC©MPANYING NQTES TO FINANCIAL STATEMENTS CITY OF SANGER GOVERNMENTAL AND PROPRIETAI SCHEDULE OF RESTRICTED Seywiss in 30I 2Ug5 GENERAL FUND Equipment Replacement Funds Insurance Fund Beautification Beard l=unds Library Savings Sidewalk Fund Amt>ulanc� Fund Park Deparfrnen# .Fund.. Unspent 240213ond funds certificate of Qbligation Reserve and l & �, Funds TOTAL GENERAL FUND SPECIAL REVENUE FUND HotellMotel Economic Development -Section 4A Ecanamic Development -Section 4f3 TOTAL SPECIAL REVENUE FUND Revenue Bond. I & S Funds Revenue Bond Reserve Funds Revenue Bond Emergency Fund Customer Utility Deposits Unspent ZOt)2 Revenue Bo nd Furlds. Vwt ater & Sewer Improvement Funds One Pius Program '&Safety 8� Incentnre Funds Y FUNDS 6,967 4,93+3 �a,aa4 106,252 55,972 43,857 44,485' TOTAL ENTERPRISE FUND �: 1 SEE ACCOMPANYING NOTES TO f D-51 341,52�. 490,586 322,923 16,212 24a,2 16 1: 5' STATEMEhJTS CITY OF SANGER ANALYSIS OF TAXES RECEIVABLE For the Year Ended September 30, 2(H15 ADJUSTED TAX ROLL Less: Collections and Adjustments CURRENT YEAR TAXES RECEIVABLE END OF YEAR RECEIVABLE :- TOTAL TAXES, R ENO OF YEAR Assessed Value Tax Rate per $100' Percent of Current Taxes Collected to. Billed $' 1,718,611 1;674,t em 44,579 62,188„ 1,41101 w zoo2. 1,296,134 $ 860,357 1,257,647 809,649 59,278 $ 106,767 $�.�. 92,495 $ 97 765 $ 1;01,787 290,011,961 S 256,310962r $ 224,729,064 $ 130,306;503 $ o.ssz600 $ ' a:sssA7a $ 97.41 % 97.38°I° 0.565470 $ 0,522840 57.0 % 94.11% SEE ACCQMPANYING NOTES TO FINANCIAL STATt=MENTS r 0 0 V! LL 'Uj W W } Q I Lam] Z Z Ul CL gO W �+0006 w w #a N QCLa wz-W LL 0 w 0 0 u0° f•- Uo oao W.uuW OL 0 OW w F- W i` WIL,LIAM C, SPORE, P.C. Certil:ied Public Accountants 3950 Hwy 360, Grapevine, TX 76051 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORUNG BASED UPON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVLIZNMEN7AL'AUDITING S'TAlv`I ARD To the City Council City of Sanger; Texas I have audited the financial Statements of'the governmental activities, the business -type activities and major,' funds of the City of Sanger, Texas as of and for the year ended September 30, ,2005, which collectively comprise the City?s basic financial statements and have issued my report thereon dated "arch 15, 2006. Iconducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in, Governmeni 4uditing Standards,issued by the Comptroller General of the United ,States. As part of obtaining reasonable assurance about whether City of Sanger's financial Statements are free of material misstatement; I performed tests of its compliance with certain provision of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the. determination of financial statement. amounts, However, providing an opinion on compliance with those provisions was not an objective of my audit and, accordingly, I do not express such an opinion, The results of my tests disclosed no instances of noncompliance that are required to be reported under C overnment Auc2iang .Strtndardv, Internal Ce�ntrol Over Financial Re on rtinp In planniing and performing my audit, I considered City of Banger's internal control over financial reporting in order to determine my auditing, procedures for the purpose of expressing my opinion on the financial statements and not to provide assurance on the internal control over financial reporting_ My consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses, A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I noted no matters involving the internal control over financial reporting and its operation that I consider to be material weaknesses. This report is intended for the information and use of management, Honorable Mayor and City Council' of the City of Sanger, Texas, and is not intended to be' and should not be used by anyone other than these specified parties„ 14larnh 1 S24C?6 APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY This page intentionally left blank. IX15 FINANCIAL GUARANTY ISSUER: CUSIP: CIFG Assurance North America, Inc. 825 Third Avenue, Sixth Floor New York, NY 10022 For information, contact (212) 909-3939 Toll -free (866) 2434212 FINANCIAL GUARANTY INSURANCE POLICY OBLIGATIONS: CIFG ASSURANCE NORTH AMERICA, INC. ("CIFG NA'�, for c IRREVOCABLY GUARANTEES to each Policyholder, subject only to the endorsement hereto), the full and complete payment by or on behalf of the Is Obligations. Far the further protection of each Policyholder, CIFG NA irrevocably and ui (1) payment of any amount required to be paid under this assignment as described in Endorsement No. I hereto and (2) payment of the amount of any distribution of Policyholder that is subsequently avoided in whole or� 1 hereto. A Effective Date: CIFG NA-## 200_ 's receipt of notice and instruments of gations made during the Tetra of this Policy to such applicable law, all as described in Endorsement No. CIFG NA shall be subrogated to the rights ch Policyholder to eceiv�ayments under the Obligations to the extent of any payment by CIFG NA hereunder. Upon disbursement i res an Obligation, CI N shall become the owner of the Obligation, appurtenant coupon, if any, and all rights to payment of princip f o est thereon. The following terms shall a the m gs spe subject to and including any modifications set forth in any endorsement hereto, for all purposes of this ff9 e," At and "Obligations" mean, respectively, the Effective mate, Issuer and Obligations referenced above. "Policyholder" a Obligati are in bookmentry form, the registered owner of any Obligation as indicated on the registration books main ' r on of the Issue r such purpose or, if the Obligations are in bearer form, the holder of any Obligation; provided, however, t n acti behalf and for the benefit of such registered owner or holder shall be deemed to be the Policyholder to the t of suc tee's a egular Payments" means payments of interest and principal which are agreed to be made during the Term fi Iicy i ceordance he original terms of the Obligations when issued and without regard to any amendment or modification such O ereafter, payments which become due on an accelerated basis as a result of (a) a default by the Issuer or any other per n electi the Issuer to pay principal or other amounts on an accelerated basis or (c) any other cause, shall not constitute "Regul aymen " unless A shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any aecru terest to the date of a 0. "Term of this Policy" has the meaning set forth in Endorsement No. 1 hereto. This`Pe31iLriFts fort full the undertaking of CIFG NA, and shall not be modified, altered or affected by any other agreement or instrument, including any ification or amendment thereto or to the Obligations (except a contemporaneous or subsequent agrcement or instrument given' CIF A or to which C1FG NA has given its written consent) or by the merger, consolidation or dissolution of the Issuer. The premiums pai Peet of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Ohl �tions prior to maturity. This Policy may not be cancelled or revoked during the Term of this Policy, including for nonpayment of premium due to CIFG NA. Payments under this Policy may not be accelerated except at the sole option of CIFG NA. In witness whereof, CIFG ASSURANCE NORTH AMERICA, INC, has caused this Policy to be executed on its behalf by its Authorized Officer, CIFGNA Bonds -I (8-04) CIFG ASSURANCE NORTH AMER[CA, INC. By _ Authorized Officer E-1 This page intentionally left blank. PAYING AGENT/REGISTRAR AGREEMENT THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of August 7, 2006 (together with any amendments or supplements hereto, the "Agreement") is entered into by and between the CITY OF SANGER, TEXAS (the "Issuer'), and THE BANK OF NEW YORK TRUST COMPANY, N.A., Dallas, Texas. as paying agent/registrar (together with any successor in such capacity, the "Bank"). WITNESSETH: WHEREAS, the Issuer has duly authorized and provided for the issuance of its City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") in the aggregate principal amount of $6,500,000 to be issued as fully registered certificates; WHEREAS, all things necessary to make the Certificates the valid obligations of the Issuer, in accordance with their terms, will be done upon the issuance and delivery thereof; WHEREAS, the Issuer ar_d the Bank wish to provide the terms under which the Bank will act as Paying Agent to pay the principal of, redemption premium, if any, and interest on the Certificates, in accordance with the terms thereof, and under which the Bank will act as Registrar for the Certificates, and WHEREAS, the Issuer and the Bank have duly authorized the execution and delivery of this Agreemem, and all things necessary to make this Agreement the valid agreement of the parties, in accordance with its terms, have been done. NOW, THEREFORE, it is mutually agreed as follows: ARTICLE ONE APPOINTMENT OF BANK A PAYING AGENT AND REGISTRAR Section 1.01. Appointment, The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Certificates, to pay to the Registered Owners of the Certificates, in accordance with the terms and provisions of this Agreement and the ordinance authorizing the issuance of the Certificates (the "Ordinance"), the principal of, redemption premium, if any, and interest on all or any of the Certificates. The Issuer hereby appoints the Bank as Registrar with respect to the Certificates. HOU:2602392.1 The Bank hereby accepts its appointment, and agrees to act as Paying Agent and Registrar with respect to the Certificates. Section 1.02. Compensation. In consideration of the deposits of funds required to be made with the Bank by the Issuer pursuant to the provisions of the Ordinance, the Bank shall be paid the fees set forth in the Bank's fee schedule attached as Exhibit A hereto and agrees to abide by and accept the terms hereof and of the Ordinance relating to the duties of the Paying Agent/Registrar, ARTICLE TWO DEFINITIONS Section 2.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Bank" means The Bank of New York Trust Company, N.A., Dallas, Texas, a commercial bank which is a national bank duly organized and existing under the laws of the United States of America. "Certificate" or "Certificates" means any one or all of the "City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 authorized by the Ordinance. "Issuer" means the City of Sanger, Texas. "Ordinance" means the ordinance of the Issuer approved by its City Council on August 7, 2006, pursuant to which the Certificates are issued. "Paying Agent" means the Bank when it is performing the function of paying agent. "Person" means any individual, corporation, partnership, joint venture, associations, joint stock company, trust, unincorporated organization or government or any agency or political subdivision of a government or any entity whatsoever. "Registrar" means the Bank when it is performing the function of registrar. "Registered Owner" means the Person in whose name any Certificate is registered in the books of registration maintained by the Bank under this Agreement. All other capitalized terms shall have the meanings assigned to them in the Ordinance. 2 HOU:2602392.1 ARTICLE THREE DUTIES OF THE BANK Section 3.01. Initial Delivery of the Certificates. The Certificates will be initially registered and delivered by the Bank to the purchaser designated by the Issuer as set forth in the Ordinance. If such purchaser delivers a written request to the Bank not later than five business days prior to the date of initial delivery, the Bank will, on the date of initial delivery, exchange the Certificates initially delivered for Certificates of authorized denominations, registered in accordance with the instructions in such request and the Ordinance. Section 3.02. _Duties of Paying A ent. As Paying Agent, the Bank shall, provided adequate funds have been provided to it for such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and interest on each Certificate in accordance with the provisions of the Ordinance. If the issue is to be Depository. Trust Company (DTC) eligible, the Paying Agent will comply with all eligibility requirements as outlined and agreed upon in the eligibility questionnaire. Section 3.03. Duties of Registrar. The Bank shall provide for the proper registration of the Certificates and the timely exchange, replacement and registration of transfer of the Certificates in accordance with the provisions of the Ordinance. Any changes to Registered Owners for such exchange, replacement and registration shall be made by the Bank only in accordance with the Ordinance. The Bank will maintain the books of registration in accordance with the Bank's general practices and procedures in effect from time to times provided, however, that the Bank agrees to maintain books of registration for the Certificates at the City Secretary's office in City of Sanger, Texas, which books of registration may be a copy of the register which shall be kept current by the Bank. Section 3.04. Unauthenticated Certificates. The Issuer shall provide an adequate inventory of unauthenticated Certificates to facilitate transfers. The Bank covenants that it will maintain such unauthenticated Certificates in safekeeping and will use reasonable care in maintaining such Certificates in safekeeping, which shall be not less than the care it maintains for debt securities of other government entities or corporations for which it serves as registrar, or which it maintains for its own bonds. 3 HOU:2602392. l Section 3.05. R orts. Upon request of the Issuer, the Bank will provide the Issuer reports which will describe in reasonable detail all transactions pertaining to the Certificates and the books of registration for the period of time specified by the Issuer. The Issuer may also inspect and make copies of the information in the books of registration and such other documents related to the Certificates and in the Bank's possession at any time the Bank is customarily open for business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to convert the information into written form. The Bank will not release or disclose the content of the books of registration to any person other than to, or at the written request of, an authorized officer or employee of the Issuer, except upon receipt of a subpoena, court order or as otherwise required by law. Upon receipt of a subpoena, court order or other lawful request, the Bank will notify the Issuer immediately so that the Issuer may contest the subpoena, court order or other request if it so chooses. Section 3.06. Canceled Certificates, All Certificates surrendered for payment, redemption, transfer, exchange or replacement, if surrendered to the Bank, shall be promptly canceled by it and, if surrendered to the Issuer, shall be delivered to the Bank and, if not already canceled, shall be promptly canceled by the Bank. The Issuer may at any time deliver to the Bank for cancellation any Certificates previously authenticated and delivered which the Issuer may have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly canceled by the Bank. All canceled Certificates held by the Bank shall be destroyed and evidence of such destruction shall be furnished to the Issuer. Section 3.07. Reliance on Documents Etc. (a) The Bank may conclusively rely, as to the truth of the statements and correctness of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer. (b) Thy, Bank shall not be liable to the Issuer for actions taken under this Agreement as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed by law, with regard to its duties hereunder. (c) This Agreement is not intended to require the Bank to expend its own funds for performance of any of its duties hereunder. (d) The Bank may exercise any of the powers hereunder and perform any duties hereunder either directly or by or through agents or attorneys. (e) The Bank is also authorized to transfer funds relating to the closing and initial If of the securities in the manner disclosed in the closing memorandum approved by the Issuer as prepared by the Issuer's financial advisor or other agent. The Bank may act on a HOU:2602392. I facsimile transmission of the closing memorandum to be followed by an original of the closing memorandum signed by the financial advisor or the Issuer. Section 3.06. Monev Held by Bank. Money held by the Bank hereunder shall be held in trust for the benefit of the Restered Owners of the Certificates. gi The Bank shall be hereunder, under no obligation to pay interest on any money received by it All money deposited with the Bank hereunder shall be secured in the manner and to the Fullest extent required by law for the security of funds of the Issuer. Any money deposited with the Bank for the payment of the principal of or interest on any Certificates and remaining unclaimed by the Registered Owner after the expiration of three years from the date such funds have become due and payable shall be reported and disposed of by the Bank in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the Texas Property Code, as amended. To the extent such provisions of the Property Code do not apply to the fiends, such funds shall be paid by the Bank to the Issuer upon receipt of a written request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of the Certificates by virtue of actions taken in compliance with the foregoing provision. ARTICLE FOUR MISCELLANEOUS PROVISIONS Section 4.01. Mav Own Certificates. The Bank, in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Paying Agent and Registrar for the Certificates. Section 4.02. Amendment. This Agreement may be amended only by an agreement in writing signed by both of the parties hereof. Section 4.03. Assignment. This Agreement may not be assigned by either party without the prior written consent of the other. Section 4.04, Notices. HOU:2602392.1 Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other address as may have been given by one party to the other by 15 days' written notice. Section 4.05. Effect of Headin s. The Article onstruction hereof. and Section headings herein are for convenience only and shall not affect the c Section 4.06. Successors and Assi ns. All covenants and agreements herein by the Issuer and the Bank shall bind their successors and assigns, whether so expressed or not. This Agreement shall not be assigned by the Bank without the prior written consent of the Issuer. Section 4.0�. Seve_ ram, If any provision of this Agreement shall be invalid or unenforceable, the validity and enforceability of the remaining provisions hereof shall not in any way be affected or impaired. Section 4.08. Benefits of A Bement. Nothing herein, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim hereunder. Section 4.09. Ordinance Governs Conflicts. This Agreement and the Ordinance constitute the entire agreement between the parties hereto relative to the Bank acting as Paying Agent and Registrar and if any conflict exists between this Agreement and the Ordinance, the Ordinance shall govern. The Bank agrees to be bound by the terms of the Ordinance with respect to the Certificatcs. Section 4.10. Term and Termination. This Agreement shall be effective from and after its date and may be terminated for any reason by the Issuer or the Bank at any time upon 60 dayswritten notice; provided, however, that no such termination shall be effective until a successor has been appointed and has accepted the duties of the Bank hereunder. In the event of early termination, regardless of circumstances, the Bank shall deliver to the Issuer or its designee all funds, Certificates and all books and records pertaining to the Bank's role as Paying Agent and Registrar with respect to the Certificates, including, but not limited to, the books of registration. Section 4.11. Governin Law. HOU:2602392.1 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. CITY OF SANGER, TEXAS By: ADDRESS: 201 Bolivar Street Sanger, Texas 76266 ATTEST: CyL Gti Rosalie Chavez; City Secretary (SEAL) THE BANK OF NEW YORK TRUST COMPANY, DALLAS, TEXAS By: Title: ATTN: Corporate Trust Department ATTEST: By: Title: (SEAL) HOU:2602392.1 This Agreement shall be construed in accordance with and shall be governed by the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ATTEST: Rosalie Chavez, City Secretary (SEAL) ATTEST: By* �a Title: (SEAL) 0 CITY OF BANGER, TEXAS By: Joe Higgs, Mayor ADDRESS: 201 Bolivar Street Sanger, Texas 76266 THE BANK OF NEW YORK TRUST COMPANY, N.A. DALLAS, TEXAS 7 Title: ATTN: Corporate Trust Department HOU:2602392.1 EXHIBIT A Fee Schedule HOU:2602392. t `Ape BANK of NEW YORK.. City of Sanger, Texas Combination Tax & Revenue Certificates of Obligation Series 2006 - $7,000,000 Fee Schedule Acceptance Fee: Waived A one-time charge covering the Bank Officer's review of governing documents, communication with embers of the closing party, including representatives of the issuer, investment banker(s) and attomey(s), establishment of procedures and controls, set-up of trust accounts and tickler suspense items and the receipt and disbursement/investment of bond proceeds. This fee is payable on the closing date. Annual Paying Agent Administration Fee: $'750 An annual charge covering the normal paying agent duties related to account administration and bondholder services. This fee is payable annually, in advance, on the closing date and each anniversary thereafter. Extraordinary Services /Miscellaneous Fees: By Appraisal The charges for performing extraordinary or other services not contemplated at the time of the execution of the transaction or not specifically covered elsewhere in this schedule will be determined by appraisal in amounts commensurate with the service to be provided. If it is contemplated that the Trustee hold and/or value collateral or enter into any investment contract, forward purchase or similar or other agreement, additional acceptance, administration and counsel review fees will be applicable to the agreement governing such services. If the bonds are converted to certificated form, additional annual fees will be charged for any applicable tender agent and/or registrar/paying agent services. Additional information will be provided at such time. Should this transaction terminate prior to closing, all out-of-pocket expenses incurred, including legal fees, will be billed at cost. If all outstanding bonds of a series are defeased or called in full prior to their maturity, a termination fee may be assessed at that time. Miscellaneous fees may include, but are not necessarily limited to the following, if applicable: UCC filing fees, money market sweep fees, auditor VW on fees, wire transfer fees, transaction fees to settle third -party trades and reconcilement fees to balance trust account balances to third -party investment provider statements. Terms and Disclosures Terms of Proposal Final acceptance of the appointment under the Indenture is subje�+ +o approval of authorized officers of BIN and full review and execution of all documentation related hereto. Please note that if this transaction does not close, you will be responsible for paying any expenses incurred, including Counsel fees. We reserve the right to terminate this offer if we do not enter into final written documents within three months from the date this document is first transmitted to you. Fees may be subject to adjustment during the life of the engagement. Customer Notice Required by the USA Patriot Act To help the US government fight the funding of terrorism and money laundering activities, US Federal law requires all financial institutions to obtain, verify, and record information that identifies each person (whether an individual or organization) for which a relationship is established. What this means to you: When you establish a relationship with BNY, we will ask you to provide certain information (and documents) that will help us to identify you. We will ask for your organization's name, physical address, tax identification or other government registration number and other information that will help us to identify you. We may also ask for a Certificate of Incorporation or similar document or other pertinent identifying documentation for your type of organization. The Bank of Now York Trust Company, N.A. 1016t Centurion Parkway• Jacksonville •Florida 32256 GENERAL CERTIFICATE STATE OF TEXAS COUNTY OF DENTON CITY OF SANGER We, the undersigned officers of the City of Sanger, Texas (the "City'), do hereby make and execute this certificate for the benefit of the Attorney General of the State of Texas and all other persons interested in the City's $69500,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006, dated August 15, 2006 (the "Certificates"), now in the process of issuance, as follows: (1) The City is a duly incorporated Home Rule City, having more than 51000 inhabitants, operating and existing under the Constitution and laws of the State of Texas and the duly adopted Home Rule Charter of the City, which Charter has not been changed since the approval by the Attorney General of the State of Texas of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2002, dated June 1, 2002, which were the last obligations issued by or on behalf of the City. (2) The Certificates are being issued to provide funds to pay contractual obligations to be incurred for (1) street improvements; (2) water, sewer and electric utility improvements; and (3) the payment for professional services related thereto. (3) The currently effective ad valorem tax appraisal roll of the City (the "Tax Roll") is the Tax Roll prepared and approved during the calendar year.2005, being the most recently approved Tax Roll of the City; the taxable property in the City has been appraised, assessed and valued as required and provided by the Texas Constitution and Property Tax Code (collectively, "Texas law"); the Tax Roll for the year has been submitted to the City Council of the City as required by Texas law, and has been approved and recorded by the City Council; and according to the Tax Roll for the year, the net aggregate taxable value of taxable property in the City (after deducting the amount of all applicable exemptions required or authorized under Texas law), upon which the annual ad valorem tax of the City has been or will be imposed or levied, is $311,728,3600 (4) From August 7, 2006 to the date hereof, the following individuals were the duly elected and qualified Mayor, and City Council of the City holding the offices opposite'their names: Joe Higgs Mike James Glenn Ervin Mike Walker Andy Gary,; Robert Patton Mayor Councilman, Place 1 Councilman, Place 2 Councilman, Place 3 Councilman, Place 4 Councilman, Place 5 (6) From August 7, 2006, to the date hereof, Rosalie Chavez has been the duly appointed and qualified City Secretary of the City. (7) The Certificates were sold at a price equal to $61460,226.45 (representing the par amount of the Certificates plus a net premium of $37,783.00, less an underwriter's discount of $77556.55) b negotiated sale to SAMCO Capital Markets, Inc.. ,y means of a (8) Save and except for the pledge of the Net Revenues of the System to the payment of the Certificates and the City's Certificates of Obligation, Series 1994 and its Combination Tax and Revenue Certificates of Obligation, Series 2002, the Net Revenues of the System have not been pledged in any other manner or for any. other purpose, and the pledge of the Net Revenues of the System to the Certificates evidences the only lien, encumbrance, or indebtedness of the System or against Net Revenues of the System. (9) Attached to this certificate as Exhibit A is a true, full and correct debt service schedule for the Certificates. Attached as Exhibit B is a true, full and correct debt service schedule for all of the City's outstanding HOU:2602410.2 tax supported debt, including the Certificates. The principal amount of the City's total outstanding tax supported debt, is $12,841,278.06, (9) The following is a true, full and current schedule of System revenues, remaining after the payment of all operation and maintenance expenses thereof ("Net Revenues"), for fiscal year ended September 30, 2005, was $148,434, and for the previous three fiscal years: 2002 $674,961 Fiscal Year Ended September 30, 2003 $1,014,734 2004 $1,024,668 (10) The current monthly rates and charges for services provided by the System are as follows: (11) The City is not in default as to any covenant, condition or obligation on any prior bonds or other obligations payable from the Net Revenues of the System. 2 HOU:2602410.2 SIGNED AND SEALED this Avjv5 ?-, 2006. City Secretary (CITY S0010490 EAL). too %i F CITY OF SANGER, TEXAS Mayor 3 HOU:2602410.1 Exhibit A Debt Service Schedule for the Certificates HOU:2602410.1 �>Iry of danger, Texas Comb Tax &Rev C/O, Series 2006 $6,500,000.00 CIFG Insured Debt Service Schedule Part 1 of 2 Date Principal Coupon Interest o9/O5/2006 _ Total P+1 Fiscal Total 03/Ol /2007 - _ _ 09/O1/2007 325,000.00 ° 130,018.78 130,018.78 09/30/2007 _ 4.000% 132,973.75 457,973.75 - 03/012008 _� S87,992.53 09/01/2008 335,000.00 0 126,473.75 126,473.75 _ 09/30/2008 _ 4'000% 126,473.75 461,473.75 03/Oi/2009 587,947.50 09/Ol/2009 350,000.00 0. 119,773.75 119,773.75 _ 09/30/2009 _ 4'000% 119,773.75 469,773.75 03/O1/2010 � 589,547.50 09/Ol/2010 365,000.00 0� 112,773.75 112,773.75 09/30/2010 4.000% 112,773.75 _ 477,773.75 03/O1/2011 _� - 590,547.50 09/O1/2011 380,OOO.GU o 105,473.75 105,473.75 _ 09/30/2011 4'�/° 105,473.75 _ _ 485,473.75 03/Ol /2012 _ � 590,947.50 09/01/2012 395,000.00 , 97,873.75 97,873.75 _ 09/30/2012 _ 4'000% 97,873.75 492,873.75 _ 03/O1/2013 _ - 590,747.50 09/Ol/2013 410,000.00 0• 89,973.75 89,973.75 _ 09/30/2013 _ 4.000% 89,973.75 499,973.75 _ 03/01/20 ] 4 _� S89,947.50 09/01/2014 425,000.00 , 81,773.75 81,773.75 _ 09/30/20I4 _ 4'�/° 81,773.75 '•• 506,773.75 _ 03/Ol /2015 _ 588,547.50 09/01/2015 440,000.00 , 73,273.75 73,273.75 _ 09/30/2015 _ 4'000% 73,273.75 513,273.75 _ 03/O1/2016 _ � - 586,547.50 09/O1/2016 460,000.00 °� 64,473.75 64,473.75 _ 09/30/20' ; _ 5'0�/° 64,473.75 524,473.75 _ 03/01/20I 7 _ 588,947.50 09/O1/2017 485,000.00 0 52,973.75 52,973.75 _ 09/30/2017 _ 4'000% 52,973.75 537,973.75 _ 03/Oi/2018 _ _ - 590,947.50 09/O1/2018 500,000.00 0 43,273.75 43,273.75 _ 09/30/2018 _ 4.050% 43,273.75 543.273.75 _ 03/01/2019 _ 586,547.50 09/O1/2019 520,000.00 ° 33,148.75 33,148.75 _ 09/30/2019 4.050% 33,148.75 553,I48.75 _ 03/01/2020 586,297.50 09/01 /2020 _ 22,618.75 22,618.75 _ 545,000.00 4.050% 22,618.75 09/30/2020 _ 567,618.75 _ 590,237.50 Series 2006 Final ALT 1 SINGLE PURPOSE � 8/142006 1 11:13 AM $6,500,000.00 CIFG Insured Debt Service Schedule Date Principal Coupon 03/01/2021 _ 09/01/2021 565,000000 q 10O% 09/30/2021 _ T Part 2 of 2 Interest Total P+l Fiscal Total 11,582.50 119582450 11,582.50 576,582.50 _ coo . •"�a6,5UU1000.00 Joo,roj.w ' 52,333,915.03 S8,833,915.03 Yield Statistics iAverage Coupon Net Interest Cost Q True Interest Cost Bond Yield for Art All Inclusive Cost I i IRS Form 8038 Net Interest Cost j Weighted Average Series 2006 Final AlT � SINGLE PURPOSE 1 8/i42006 1 11:13 AM S56,732.78 8.728 Yeats 4.1138741 % 4.1839809% 4_I 8.707 Years Exhibit B Debt Service Schedule for All of the City's Outstanding Tax Supported Debt Riacal Year 30- Combined Debt Sept Service 2006 $3999105600 2007 982,517*53 2008 9879127.50 2009 987,197M 2010 775,782.50 2011 776,332.50 2012 776,72230 2013 781,192.50 2014 779951150 2015 776,887,50 2016 778,437.50 2017 784,227.50 2018 778,01150 2019 780,637.50 2020 786,737.50 2021 781,165.00 2022 194,250.00 $12,905,845*03 HOU:260?410.1 SIGNATURE IDENTIFICATION AND NO -LITIGATION CERTIFICATE THE STATE OF TEXAS § COUNTY OF DENTON § CITY OF SANGER § We, the undersigned officers of the City of Sanger, Texas (the "City"), certify that we officially signed, by our manual or facsimile signatures, on behalf of the City, the folio described certificates of obligation, to wit: wing CITY OF BANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006, dated August 15, 2006, and aggregating $6,500,000 (the "Certificates"). That the Certificates have been duly and officially executed by the undersigned with their manual or facsimile signatures in the same manner appearing hereon, and the undersigned hereby adopt and ratify their respective signatures in the manner appearing on each of the Certificates, imile form, as the case may be, as their own signatures, whether in manual or facs That on the date of such signing and on the date hereof, we were and are the duly chosen, qualified and acting officers authorized to execute the Certificates, and holding the official titles set forth below opposite such signatures. We further certify that no litigation is pending or, to otu'knowledge, threatened in any court in any way affecting the existence or boundaries of the City or the titles of its officers to their respective positions or their authority to act on the City's behalf or to restrain or enjoin the issuance or delivery of the Certificates, or the levy, collection or application of the ad valorem taxes or revenues pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof, or in any way cuaLesting r- Uwsffecting aie validity of the Certificates, the ordinance dated August 7, 2006, authorizing the issuance, sale and delivery of the Certificates (the "Ordinance"), or contesting the powers of the City or the authorization of the Certificates or the Ordinance, or contesting in any way the accuracy, completeness or fairness of the Official Statement. We further certify that the seal that has been impressed, or placed in facsimile, upon each of the Certificates is the legally adopted, proper and only official seal of the City, such official seal being impressed upon this certificate. We further certify that no petition or other request has been filed with or presented to any official of the City requesting that any of the proceedings authorizing the Certificates be submitted to a referendum or other election. HOU:2602404.1 We runner certify that the information and data contained in the General Certificate dated August 7, 2006 remain true and correct as of this date, WITNESS OUR HANDS AND THE SEAL OF THE CITY this 2006. SIGNATURES TITLE OF OFFICE (CITY SEAL) Mayor, City of Sanger, Texas City Secretary, City of Sanger, Texas Before me, on this day personally appeared the foregoing individuals, known to me to be the persons whose names were subscribed in my presence to the foregoing instrument. Given under my hand and seal of office this ;r PUVft (Notary Seal) Typed or Pri>.c. Name. My Commission Expires: HOU:2602404. I FEDERAL TAX CERTIFICATE CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION , SERIES 2006 I, the undersigned officer of the City of Sanger, Texas, a political subdivision of the State of Texas (together with any successor to its duties and functions, the "City") make this certification for the benefit of all persons interested in the exclusion from gross income and certain other treatment for federal income tax purposes of the interest to be paid on the City's Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") in the aggregate principal amount of $6,500,000, which are being issued and delivered simultaneously with the delivery of this certificate (the "Certificate"). I do hereby certify as follows: 1. General. I am the duly chosen, qualified and acting officer of the City for the office shown below my signature. In such capacity, I am charged, along with others, with responsibility for issuing the Certificates. I am familiar with the facts, estimates and expectations certified herein, and I am duly authorized to execute and deliver this Certificate. I am familiar with the provisions of ordinances adopted on August 7, 2006 and August 30,.2006, authorizing the issuance of the Certificates (the "Ordinance'), and particularly the provisions thereof relating to the treatment of the Certificates and the interest thereon for federal income tax purposes. I am aware of the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), including Sections 103 and 141 through 150 thereof, and the Treasury Regulations (the "Regulations") promulgated under the Code. This Certificate is being executed and delivered pursuant to the relevant provisions of the Code and Sections 1.141-1 through 1.14145, 1.14&0 through 1.14&11, 1.149(d), 1.149(g)-1, 1.150-1 and 1.150-2 of the Regulations. Certain terms used herein have the same meanings as given to those terms in the Code and the Regulations. Capitalized terms used in this Certificate (unless otherwise indicated herein) shall have the meanings ascribed to them in the Ordinance. 2. Reasonable Expectations. As an officer of the City responsible for issuing the Certificates, the undersigned her;;c,; certifies, in good faith, that the City's expectations, as of the Issue Date (as defined herein), regarding the amount and use of the gross proceeds of the Certificates and other matters relevant to the treatment of interest on the Certificates for federal income tax purposes are accurately and completely stated herein, that all of such expectations are reasonable and are based on the facts and estimates stated in this Certificate, that all of the facts and estimates stated in this Certificate are accurate. The undersigned has relied on certain representations made by SAMCO Capital Markets the Underwriter, with respect to the Certificates (the "Underwriter") in the Certificate of Underwriter, attached hereto as Exhibit A and certain representations of Government Capital Securities Corporation, the financial advisor to the City (the "Financial Advisor") in the Certificate of Financial Advisor, attached hereto as Exhibit B. The undersigned is aware of no other facts, estimates or circumstances which would indicate that any of the expectations stated herein are not reasonable. 3. Description of Governmental Purposes. The City is issuing the Certificates pursuant to the Ordinance to provide funds, which will be used to finance: DAL:629969.2 (a) street improvements and water, sewer and electric utility improvements (the "Project") or (collectively, the "Project"); and (b) to pay the costs issuing the Certificates. 4. Proceeds of the Certificates. The sales proceeds from the sale of the Certificates is $6,537,783.00, which represents the aggregate principal amount of the Certificates of $6,500,000 plus net original issue premium of $37,783.00. 5. Use of Proceeds of the Certificates. The sales proceeds from the sale of the Certificates will be expended and applied by the City as follows: (a) Proceeds of the Certificates in the amount of $6,300,000.00 will be used by the City to pay costs of the Project. (b) Proceeds of the Certificates in the amount of approximately $91,805.00 will be used by the City to pay costs of issuance of the Certificates. (c) Proceeds of the Certificates in the amount of $77,556.55 represents the Underwriter's compensation and will be retained by the Underwriter from the sales proceeds as a cost to the City of issuing the Certificates. (d) Proceeds of the Certificates in the amount of $66,254.36 will be disbursed on the date hereof to pay the insurance premium for the Certificates. (e) Proceeds of the Certificates in the amount of $2,167.00 represents a rounding amount that will be used to pay additional costs of issuance, if any, and thereafter will be deposited n the Debt Service Fund (as defined below) to be used on March 1, 2007, to pay interest on the Certificates. 6. No Pre -Issuance Accrued Interest. Interest on the Certificates begins to accrue on Issue Date; therefore, the Certificates are being issued without pre -issuance accrued interest. 7. Investment Proceeds. Earnings on the irivestmer' � f proceeds of the Certificates described in paragraph 5(a) will be used in addition to the amounts described in paragraph 5(a) to pay costs associated with the Project. The total cost of the Project is expected to equal or exceed the sum of the amount described in paragraph 5(a) and the investment earnings thereon which are to be used to pay costs of the Project. Earnings on the investment of proceeds of the Certificates described in paragraph 5(b) will be used in addition to the amounts described in paragraph 5(b) to pay the costs of issuance of the Certificates. The City will have no investment earnings on the amount described in paragraph 5(c) as such amount will be retained by the Underwriter as a cost to the City of issuing the Certificates. Earnings on the investment of proceeds of the Certificates described in paragraphs 5(d) through 5(e) will be used for the purposes described in paragraphs 5(e). 8. Replacement Proceeds. There are no amounts on hand, and there are no amounts expected to be received, other than amounts identified herein as proceeds of the Certificates and amounts to be held in the Debt Service Fund for the payment of debt service on -2- DAL:629969.2 the Certificates (as discussed in paragraph 12) which have or will have at any time a sufficiently direct nexus to the Certificates or to any governmental purpose of the Certificates to conclude that such amounts would have been used for that governmental purpose if the proceeds of the Certificates were not used or to be used for that governmental purpose. More specifically -- (a) Sinking Funds and Pledged Funds. Other than the Debt Service Fund and the amounts and investments on deposit therein from time to time, there are not now and will not be at any time while the Certificates are outstanding -- (i) any debt service fund, reserve fund, replacement fund, any similar fund, or any amount or investment reasonably expected to be used, directly or indirectly (such as, by the generation of income to be used), to pay principal or interest on the Certificates; and (ii) any fund, amount, or investment that is directly or indirectly pledged to pay principal or interest on the Certificates. A pledge includes, but is not limited to, any arrangement, regardless of its form, which provides reasonable assurance that the amount will be available to pay principal or interest, even if the City encounters financial difficulty. A pledge to a guarantor or an agreement to maintain an amount at a particular level or balance for the direct or indirect benefit of bondholder or a guarantor would constitute a pledge for this purpose. (b) No Other Replacement Proceeds. There will be no other replacement proceeds allocable to the Certificates. Based on the reasonable expectations of the City as of the date hereof, the term of the Certificates is not longer than, and the City will not allow the Certificates to remain outstanding longer than, is reasonably necessary for the governmental purposes for which the Certificates are., being issued:. The weighted average maturity of the Certificates does not exceed 120 percent of the reasonably expected economic life of the capital projects being financed by the Certificates, determined in the same manner as provided under Section 147(b) of the Code. In addition, none of the proceeds of the Certificates will be used to finance working capital expenditures. 9. No Overissuance. Based on the expectations set forth in the preceding paragraphs, the amount of the proceeds from the issuance of the Certificates, plus all investment proceeds to be received with respect to the Certificates, does not exceed by any amount, the amount required for the governmental purposes for which the Certificates are being issued, as described in paragraph 3 above. 10. Temporary Period Requirements for the Certificates. (a) Expenditure Test. The City expects at least 85 percent of the net sale proceeds of the Certificates will have been expended prior to September 55 2009 for costs of the Project. All net sale proceeds of the Certificates not expended prior to September 5, 2009 will be invested on and after such date until final expenditure at a yield (as defined in paragraph 14) which is not materially higher than the yield on the Certificates, except as set forth in paragraph 18 below. -3- DAL:629969.2 (b) Time Test. The City has incurred or will incur within six months of the date hereof a substantial binding obligation to a third party pursuant to which the City is obligated to expend at least five percent of the net sale proceeds of the Certificates on the Project. (c) Due Diligence. The City expects that the Project will proceed with due diligence to completion and that the net sale proceeds of the Certificates will be expended on the Project with reasonable dispatch. (d) Investment Proceeds. The City expects that all amounts derived from the investment of monies received from the sale of the Certificates and from the reinvestment of such investment proceeds will be expended within three years from the date hereof or within one year after receipt of such investment income, whichever is later. All investment proceeds of the Certificates not expended prior to such date will be invested on and after such date until final expenditure at a yield which is not materially higher than the yield on the Certificates, except as provided in paragraph 18 below. The term "net sale proceeds" shall mean any amount actually or constructively received from the sale of the Certificates, including amounts constituting the underwriter's discount or compensation and accrued interest, other than pre -issuance accrued interest, less amounts invested as part of a reasonably required reserve or replacement fund or as part of a minor portion for the Certificates. 11. Flow of Funds. Under the Certificates, the City is obligated to levy, assess and collect an ad valorem tax on property located in the City in an amount sufficient to pay debt service on the Certificates. All taxes levied, assessed and collected by the City for and on account of the Certificates will be deposited into the Debt Service Fund. 12. Debt Service Fund. The City created pursuant to the Ordinance the Combination Tax and Revenue Certificates of Obligation, Series 2006 Debt Service Fund. (the "Debt Service Fund") to be used primarily to achieve a proper matching of revenues and debt service on the Certificates within each bond year. The City expects that the taxes levied, assessed and collected each year, and amounts received from investment of moneys held in the Debt Service Fund, will be sufficient to pay debt service each year on the Certificates. The City will adjust the annual tax rates as necessary, taking into account other moneys available or to be available for the payment of debt service on the Certificates. The portion of the Debt Service Fund which will be depleted by the payment of debt service on the Certificates at least once each bond year, except for a reasonable carryover amount not to exceed the greater of (a) one year's earnings on the Debt Service Fund for the immediately preceding bond year or (b) one -twelfth of the principal and interest payments on the issue for the immediately preceding bond year, will constitute a bona fide Debt Service Fund and will be treated as a separate fund (the "Bona Fide Portion") for purposes of this Certificate. Amounts, other than proceeds of the Certificates, remaining in the Debt Service Fund, after the annual payment of all principal of and interest and premium, if any, on the Certificates, other than the reasonable carryover amount described in the preceding sentence will be treated for purposes of this Certificate as a separate fund (the "Reserve Portion"). The City reasonably expects that the sum of any amounts in the Debt Service Fund which (i) are allocable to such Reserve Portion or (ii) are allocable to the Bona Fide Portion, but DAL:629969.2 aA e not spent for the payment of debt service on the Certificates within 13 months after the date of receipt of such amount, will not exceed the least of (x) 10 percent of the Issue .Price (as defined in paragraph 13), (y) the maximum annual principal and interest requirements on the Certificates, or (z) 125 percent of the average annual principal and interest requirement on the Certificates, at any time so long as the Certificates are outstanding. To the extent any such accumulations exceed such amount, the excess amount will be invested at a yield not in excess of the yield on the Certificates, except as set forth in paragraph 18 below. 13. Issue Price. The term "Issue Price," with respect to the entire issue of Certificates, means the aggregate of the initial offering prices for all of the Certificates, plus pre - issuance accrued interest as of date of issue on the entire issue of Certificates (unless as otherwise indicated herein). For substantially identical Certificates, the Issue Price is the first price at which a substantial amount (i.e., at least ten percent) was sold to the public (excluding bond houses, brokers or similar persons or organizations acting in the capacity of underwriters and wholesalers). Based on the foregoing and on the Certificate of Underwriter attached as Exhibit A and incorporated herein by reference, the Issue Price of the Certificates, without taking into account any costs of issuance or pre -issuance accrued interest, is $6,537,783.000 14. Yield on the Certificates. For purposes of this Certificate, the term "yield" shall have the meaning ascribed to it in Section 148(h) of the Code and the Regulations in effect thereunder and, when used with respect to the Certificates, shall mean that interest rate which when used as a discount factor to compute the present value as of the Issue Date of all scheduled payments of principal of and interest on the Certificates produces an amount equal to (i) the Issue Price of the Certificates, plus (ii) pre -issuance accrued interest on the Certificates as of the Issue Date. Yield on the Certificates shall not take into account or reflect any underwriter's discount or cost of issuance of the Certificates. For purposes hereof, yield is and shall be calculated on the basis of a 360-day year with interest compounded semi-annually. 00 The yield with respect to the Certificates subject to optional redemption is computed by treating each Certificate as retired at the stated redemption price on the final maturity date because (i) the City has no present intention to redeem prior to maturity the Certificates which are subject to optional redemption, (ii) no Certificate is subject to optional redemption at any time for a price less than the retirement price at final maturity plus accrued interest ili no Certificate is subject to optional redemption within five years of the Issue Date, (iv) no Certificate subject to optional redemption is issued at an Issue Price that exceeds the stated redemption price at maturity of such Certificate by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity of such Certificate and the number of complete years to the first optional redemption date for such Certificate; and (v) no Certificate subject to optional redemption bears interest at a rate that increases during the term of the Certificate. The insurance premium (the "Insurance Premium") paid to insure the Certificates, constitutes a fee for a qualified guarantee; thus the Insurance Premium in the amount of $66,254.36 will be treated as additional interest on the Certificates for the purpose of calculating the yield on the Certificates. The Insurance Premium represents a fee for a qualified guarantee based on the representations set forth below and in the Certificate of Financial Advisor attached hereto as Exhibit B: -s- DAL:629969.2 (a) Interest Savings. The present value of the interest savings expected to be realized as a result of such guarantee exceeds the present value of the Insurance Premium discounted at a rate equal to the yield on the Certificates which results assuming recovery of the Insurance Premium. (b) Guarantee In Substance. The guarantee imposes secondary liability on CIFG Assurance North America, Inc. ("CIFG") that unconditionally shifts substantially all of the credit risk for all or part of the payments on the Certificates. CIFG is not a co - obligor and does not expect to make any payments other than payments for which it will be reimbursed immediately. CIFG and related parties thereto will not use more than ten percent of the gross proceeds of the Certificates that are guaranteed by CIFG. (c) Reasonable Charges. The Insurance Premium does not exceed a reasonable arms -length charge for the transfer of credit risk. The Insurance Premium is separately stated from all other fees and payments payable by the City to CIFG for any other direct or indirect services other than transfer of the credit risk. The Insurance Premium does not include payment for the cost of underwriting or remarketing the Certificates or for the cost of casualty insurance for property financed or refinanced by the Certificates. The Insurance Premium is not refundable upon redemption of the Certificates prior to maturity. The Certificates due 2020 (the "Term Certificates") are subject to mandatory redemption. The yield on the Term Certificates is calculated by treating the outstanding stated principal amounts payable on the mandatory redemption dates as payments on such dates based on representations of the Financial Advisor that the stated redemption price at maturity of such Term Certificates does not exceed the issue price of such Tenn Certificates by more than one- fourth of one percent multiplied by the product of the stated redemption price at maturity and the number of years to the date of the weighted average maturity (determined by taking into account the mandatory redemption schedule) of such Tenn Certificates. The yield on the Certificates, calculated in this manner and as stated in the Certificate of Financial Advisor, attached hereto as Exhibit b, is 4.1757424 percent. 15. Qualified Tax -Exempt Obligations. Section 265 of the Code permits designation of governmental obligations such as the Certificates as "qualified -tax-exempt obligations." The Certificates have been, or are hereby, designated by the City as a "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. The Certificates are not private activity bonds within the meaning of Section 141(a) of the Code. The City (and all entities related to the City) does not reasonably expect to issue, and will not designate, tax- exempt obligations, including the City, in an aggregate amount (based in each case on the higher of the principal amount or the issue price) in excess of $10,000,000 during the calendar year 2006. 16. Other Issues. There are no obligations issued by the City or any related party of the City which (a) are sold at the same time as the Certificates (within I5 days), (b) are reasonably expected to be paid from the same source of funds as the Certificates and (c) have been or will be sold pursuant to the same plan of financing as the Certificates. -6- DAL:629969.2 17. No Other Sinking Funds. Other than the Debt Service Fund, there are no other funds or accounts comprised of investment property established by and on behalf of the City (a) which are expected to be used, or expected to generate earnings to be used, to pay debt service on the Certificates, or which are reserved or pledged as collateral for payment of debt service on the Certificates and (b) for which there is reasonable assurance that amounts therein will be available to pay debt service on the Certificates if the City encounters financial difficulties. Use of amounts in the Debt Service Fund is described above. There is no other fund established, or to be created or established, which would be treated as a sinking fund with respect to the Certificates. 18. Minor Portion. The City expects that the gross proceeds of the Certificates, including all proceeds received with respect to the Certificates and all investment proceeds received on such amounts, and all other amounts pledged or anticipated to be used to pay principal of and interest on the Certificates, other than amounts representing a portion of the Bona Fide Portion of the Debt Service Fund, will be expended in accordance with paragraphs 5 and 10 above. To the extent that such amounts remain unexpended or are otherwise on hand following the periods set forth in paragraph 10 above exceeds the amount specified in this paragraph, the City will invest such amounts, other than a minor portion in an amount not exceeding the lesser of 5 percent of the sale proceeds of the Certificates or $100,000 in the aggregate, at a yield not materially higher, than the yield on the Certificates. 19. Compliance with Rebate Requirements The City has covenanted in the Ordinance that, unless the Certificates meet an exception to the rebate requirement, it will take all necessary steps to comply with the requirement that rebatable arbitrage earnings on the investment of the gross proceeds of the Certificates, within the meaning of Section 148(f) of the Code, be rebated to the federal government. Specifically, the City will (i) maintain separate records regarding the amount and timing of disbursements of proceeds of the Certificates (ii) maintain records regarding the investment of the gross proceeds of the Certificates as may be required to calculate the amount earned on the investment of the gross proceeds of the Certificates which are part of a reasonably required reserve or replacement fund separately from records of amounts in other funds or accounts maintained for the Certificates amounts on deposit in the funds and accounts of the City allocable to other bond issues of the City or moneys which do not represent gross proceeds of any obligation of tlic City ( i) calculate at such times as required by applicable Regulations, the rebatable amount earned from the investment of the gross proceeds of any obligation of the City, (iv) calculate at such times as required by applicable Regulations, the rebatable amount earned from the investment of the gross proceeds of the Certificates which are part of a reasonably required reserve or replacement fund, and (v) pay, not less often than every fifth anniversary date of the delivery of the Certificates or on such other dates as permitted or required by applicable Regulations, all amounts required to be rebated and all penalties required to be paid to the federal government. The City acknowledges that the purposes of compliance with Section 148 of the Code, gross proceeds of the Certificates must be accounted for on the basis of a reasonable, consistently applied method of accounting, not employed in whole or in part as an artifice or device. The City will employ accountants or other persons with expertise in performing the rebate calculations as is necessary to insure compliance with the Code. The City will employ legal counsel as is necessary to resolve the interpretive issues involved in complying with the rebate requirements of the Code. Further, the City will not indirectly pay any amount otherwise payable to the federal government pursuant to the foregoing -7- DAL:629969.2 ' requirements to any person other than the federal government by entering into any investment arrangement with respect to the gross proceeds of the Certificates. In the event that the City fails to comply with the rebate requirements of the Code, the City agrees to take all steps available under the Code to bring the Certificates into compliance with the Code; such steps include paying any penalty, interest or other amounts which will allow the City to return to compliance with the rebate requirements of the Code. If the City is required to pay rebate or other amounts, such as penalties and interest, to the United States with respect to the Certificates pursuant to Section 148(f) of the Code in order to prevent the Certificates from constituting arbitrage bonds or being otherwise classified or treated such that interest on the Certificates would not be excludable from the gross income of the holders thereof for federal income tax purposes, the City will timely make such payments from available funds of the City and the City reasonably expects that it will have the ability to make such payments from available funds of the City in the event such payments become necessary. The undersigned reasonably expects that the City will fulfill its covenants and representations in this regard. The City hereby makes the following elections with respect to the proceeds of the Bonds subject to the rebate requirement: DO NOT ELECT ELECT N/A ® ❑ ❑ 1. To use actual facts to apply the provisions of paragraphs (e) through (m) of section 1.148-7 of the Regulations. ❑ ❑ ® 2. To exclude earnings on a reasonably required reserve or,. replacement .:fund from the definition of "available Constructions Proceeds" for purposes of the spending requirements. Section 1.14&7(i)(2) of the Regulations. ❑ ® ❑ 3. To treat the portion of the Certificate that is not a refunding issue as two, and only two, separate issues, one of which (a) meets the definition of a construction issue and (b) is reasonably expected as of the date hereof to finance all of the construction expenditures to be financed by the Certificates. Section 1.148-7o)(1) of the Regulations. ❑ ® ❑ 4. To pay a penalty (the "1-1 /2" penalty) to the United States in lieu of the obligation to pay arbitrage rebate on available Construction Proceeds in the event that the Certificates fail to satisfy any of the semiannual spending requirements for the two-year rebate exception. Section 1.148-7(k)(1) of the Regulations. -8- DAL:629969.2 20. Not a Refunding. No portion of the proceeds of the Certificates are expected to be used to pay any interest on or principal of any issue of governmental obligations other than the Certificates. 21. Not a Reimbursement. Except for certain preliminary expenditures, if any (as defined in Section 1.150-2(f)(2) of the Regulations) not exceeding 20 percent of the Issue Price of the Certificates, [and those expenditures described in the [RESOLUTION] of the City adopted on (attached hereto as Exhibit —__) regarding certain expenditures already paid by the City with respect to the Project prior to the date hereof,} none of the proceeds of the Certificates will be allocated to, or otherwise used, to reimburse any expenditure paid, either actually or constructively, by the City prior to the Issue Date. 22. Not a Hedge Bond. Not more than 50 percent of the proceeds of the Certificates will be invested in non -purpose investments (as defined in Section 148(f)(6)(A) of the Code) having a substantially guaranteed yield for four years or more within the meaning of Section 149(g)(3)(A)(ii) of the Code, and the City reasonably expects that at least 85 percent of the spendable proceeds of the Certificates will be used to carry out the governmental purposes of the Certificates within the three-year period beginning on the date the Certificates were issued. 23. No Change In Use. The City does not expect to dispose of any portion of the Project related to the Certificates, or to change the use of the proceeds of the Certificates while any of the Certificates are outstanding. 24. No Abusive Arbitrage Device. The Certificates are not and will not be a part of an issue in which an abusive arbitrage device (as defined .in Section 1.1:4&10(a) of the Regulations) is used. Without limiting the foregoing, the Certificates are not and will not be a part of a transaction or series of transactions that attempts to circumvent the provisions of Section 148 of the Code and the Regulations, by (1) enabling the City to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, and (ii) increasing the burden on the market for tax-exempt obligations. In this regard, the City issued the Certificates for the primary purpose of accomplishing the bona fide governmental purposes set forth in paragraph 3 of this Certificate. Based on all the facts and circumstances, the City has not issued the Certificates in an amount higher than is reasonably necessary to accomplish the governmental purposes of the Certificates, the City has not issued the Certificates earlier than is reasonably necessary to accomplish the governmental purposes of the Certificates and the City is not allowing the Certificates to remain outstanding longer than is reasonably necessary to accomplish the governmental purposes of the Certificates. The City would have issued the Certificates regardless of any arbitrage benefit, which it may realize in connection with the Certificates. In fact, the City reasonably expects that even if the Certificates were not tax-exempt obligations and if market rates of interest on taxable and tax-exempt obligations were equal to each other and to the rates at which the Certificates are in fact now being issued, the City would have issued the Certificates, notwithstanding the loss of any opportunity to borrow at lower tax-exempt rates and invest at higher taxable rates. -9- DAL:629969.2 (a) No Impermissible Sinking Fund. No portion of the Certificates has a maturity determined primarily for the purpose of creating a sinking fund with respect to the Certificates the yield on which will be blended with the yield on the investment of other proceeds of the Certificates to reduce the negative arbitrage related to such investment. (b) No Working Capital. Except for an amount that does not exceed 5 percent of the Sale Proceeds of the Certificates (and that is directly related to capital expenditures financed by the Certificates), the City will only expend proceeds of the Certificates for (i) costs that would be chargeable to the capital accounts of the Project if the City's income were subject to federal income taxation and (ii) interest on the Certificates in an amount that does not cause the aggregate amount of interest paid on all of the Certificates to exceed that amount of interest on the Certificates that is attributable to the period that commences on the date hereof and ends on the later of (A) the date that is three years from the issue date of the Certificates or (B) the date that is one year after the date on which the Project is placed in service. (c) No Sale of a Conduit Loan. No portion of the gross proceeds of the Certificates has been or will be used to acquire, finance or refinance a conduit loan. 25. Allocations and Accounting. The proceeds of the Certificates will be allocated to expenditures not later than 18 months after the later of the date the expenditure is made or the date the Project is placed in service, but in no event later than the date that is 60 days after the fifth anniversary of the date hereof or the retirement of the last Certificates, if earlier. The allocation of proceeds will be made by employing the direct -tracing method of accounting, unless the City elects otherwise. 26. No Arbitrage. On the basis of the foregoing facts, estimates and circumstances, it is expected that the proceeds of the Certificates will not be used in a manner that would cause any of the Certificates to be an "arbitrage bond" within the meaning of Section 148 of the Code and the Regulations. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change such expectations. 27. No Private Use, Payments or Loan Financing. (a) General. The City reasonably expects, as of the date hereof, that no action or event during the entire stated term %J the Certificates will cause either the "private business tests" or the "private loan financing test," as such terms are defined in the Regulations, to be met. (i) No portion of the proceeds of the Certificates will be used in a trade or business of a nongovernmental person. For purposes of determining use, the City will apply rules set forth in applicable Regulations and Revenue Procedures promulgated by the Internal Revenue Service, including, among others, the following rules: (A) any activity carried on by a person other than a natural person or a state or local governmental unit will be treated as a trade or business of a nongovernmental person, (B) the use of all or any portion of the -10- DAL:629969.2 proceeds of the Certificates is treated as the direct use of proceeds; (C) a nongovernmental person will be treated as a private business user of proceeds of the Certificates as a result of ownership, actual or beneficial use of the proceeds pursuant to a lease, or a management or incentive payment contract, or certain other arrangements such as a take -or -pay or other output -type contract; and (D) the private business use test is met if a nongovernmental person has special legal entitlements to use directly or indirectly the proceeds of the Certificates. (ii) The City has not taken and will not take any deliberate action that would cause or permit the use of any portion of the proceeds of the Certificates to change such that such portion will be deemed to be used in the trade or business of a nongovernmental person for so long as any of the Certificates remain outstanding (or until an opinion of nationally recognized bond counsel is received to the effect that such change in use will not adversely affect the excludability from gross income for federal income tax purposes of interest payable on the Certificates). For this purpose any action within the control of the City is treated as a deliberate action. A deliberate action occurs on the date the City enters into a binding contract with a nongovernmental person for use of the proceeds of the Certificates that is not subject to any material contingencies. (iii) No portion of the proceeds of the Certificates will be directly or indirectly used to make or finance a loan to any person other than a state or local governmental unit. (b) Dispositions of Personal Property in the Ordinary Course. Dispositions of personal property financed with any portion of the proceeds of the Certificates will occur in the ordinary course of an established governmental program and will satisfy the following requirements: (i) The weighted average maturity of the portion. of the Certificates financinFM personal property is not greater than 120 percent of the reasonably expected actual use of such personal property for governmental purposes; (ii) The reasonably expected fair market value of such personal property on the date of disposition will be not greater than 25 percent of its cost; Such personal property will no longer be suitable for its governmental purposes on the date of disposition; and (iv) The City is required to deposit amounts received from such disposition in a commingled fund with substantial tax or other governmental revenues and the City reasonably expects to spend such amounts on governmental programs within 6 months from the date of commingling. 28. Weighted Average Maturity. As calculated by the Financial Advisor in the manner described below and set forth in the Certificate of Financial Advisor, Exhibit B hereto, the weighted average maturity of the Certificates is 8.707 years which is the sum of the products of the Issue Price of each group of identical Certificates and the number of years to maturity -11- DAL:629969.2 (determined separately for each group of identical Certificates and taking into account mandatory redemptions), divided by the aggregate sale proceeds of the Certificates. [SIGNATURE PAGE FOLLOWS] -12- DAL:629969.2 WITNESS MY HAND, this 5.� day of 1�0ctenr er, 2006 CITY OF SANGER, ILEAAS � t By: EXHIBIT A —Certificate of Underwriter EXHIBIT B — Certificate of Financial Advisor Signature Page to Federal Tax Certificate 13 HOU:2584596.2 EXHIBIT A CERTIFICATE OF UNDERWRITER The undersigned hereby certifies with respect to the sale of the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), as follows: l . The undersigned is a duly authorized representative of SAMCO Capital Markets, Inc. ("the Underwriter"), that purchased the Certificates from the City of Sanger, Texas (the "City"), pursuant to a negotiated sale. In this capacity, the undersigned is familiar with the facts stated herein. 2. The respective initial offering prices (exclusive of accrued interest) for each maturity (stated in term of dollars) of the Certificates are set forth on the inside cover page of the Official Statement issued in connection with the sale of the Certificates and dated August 7, 2006. 3. The Underwriter purchased the Certificates for contemporaneous sale to the Public and not for investment for its own account. Each of the Certificates has actually been offered to the Public at its respective initial offering price in a bona fide public offering of all the Certificates and, as of the Issue Date, a substantial amount of the Certificates (at least ten percent) of each maturity has been sold to the Public in arm's length transactions for cash prices (with no other consideration being included). Of the Certificates sold, none were sold at prices other than the respective initial offering prices for such Certificates, plus pre -issuance accrued interest. The initial offering prices do not exceed the respective fair market value of each such maturity of the Certificates as of the Sale Date and are based, on actual facts and reasonable expectations in existence on the Sale Date. Based on the foregoing, the Issue Price of the Certificates (without taking into account costs of issuance or pre -issuance accrued interest), is $6,537,783.00. 4. The term "Public" shall not include bond houses, brokers or similar persons or organizations acting in the capacity of wholesalers or underwriters. The term "Sale Date" means the first day on which there was a binding contract in writing for the issuance of the Certificates by the City to the Underwriter of the Certificates on specific terms that were not later modified or adjusted in any material respect. In the case of the Certificates, the Sale Date is August 7, 2006. The term "Issue Date" means the first day on which there is physical delivery of the written evidence of the Certificates in exchange for the purchase price (but not earlier than the day interest on the Certificates begins to accrue for federal income tax purposes). In the case of the Certificates, the Issue Date is September 5, 2006. [SIGNATURE PAGE FOLLOWS] A- I DAL:629969.2 The Underwriter hereby authorizes the City to rely on the statements made herein in connection with making the representations set forth in the Federal Tax Certificate to which this Certificate is attached and in connection with compliance by the City with the provisions of the Code regarding the exclusion from gross income of the interest on the Certificates. Further, we hereby authorize Andrews Kurth LLP, Bond Counsel to the City to rely on the statements made herein in connection with its opinion that interest on the Certificates is excludable from gross income for federal income tax purposes. EXECUTED and DELIVERED as of and on September �, 2006. SAMCO C�IPITAL MARKETS, INC. A-2 DAL:b32733.1 CERTIFICATE OF FINANCIAL ADVISOR The undersigned hereby certifies with respect to the sale of $6,500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), as follows: 1. The undersigned is a duly authorized representative of Government Capital Securities Corporation, the financial advisor (the "Financial Advisor") to City of Sanger, Texas the "City") in connection with the sale and delivery of the Certificates. In this capacity, the undersigned is familiar with the facts stated herein. 2. The term "yield" shall have the meaning ascribed to it in Section 148(h) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder. In the case of the Certificates, the term "yield" means that interest rate which when used as a discount factor in computing the present value as of the date hereof of all scheduled payments of principal of and interest on the Certificates produces an amount equal to the Issue Price of the Certificates, plus pre -issuance accrued interest. No underwriters' discount, issuance costs, or costs of carrying or repaying the Certificates has been taken into account for purposes of computing the yield on the Certificates. For purposes hereof, yield shall be calculated on the basis of a 360-day year with interest compounded semi-annually. The yield with respect to the Certificates subject to optional redemption is computed by treating each Certificate as retired at the stated redemption price on the final maturity date because (1) the City has no present intention to redeem prior to maturity the Certificates which are subject to optional redemption, (ii) no Certificate is subject to optional redemption at any time for a price less than the retirement price at final maturity plus accrued. interest iii no Certificate is subject to optional redemption within five 'years of the Issue Date, (iv) no Certificate subject to optional redemption is issued at an Issue Price that exceeds the stated redemption price at maturity of such Certificate by more than one-fourth of. one percent multiplied by the product of the stated redemption price at maturity of such Certificate and the number of complete years to the first optional redemption date for such Certificate; and (v) no Certificate subject to optional rP?jcjnption hears interest at a rate that increases during the term of the Certificate. The insurance premium (the "Insurance Premium") paid to insure the Certificates, constitutes a fee for a qualified guarantee; thus the Insurance Premium in the amount of $66,254.36 will be treated as additional interest on the Certificates for the purpose of calculating the yield on the Certificates. The Insurance Premium represents a fee for a qualified guarantee based on the representations set forth below and included in the Federal Tax Certificate to which this Certificate is attached. (a) Interest Savings. The present value of the interest savings expected to be realized as a result of such guarantee exceeds the present value of the Insurance Premium discounted at a rate equal to the yield on the Certificates which results assuming recovery of the Insurance Premium, B-1 DAL:629969.2 (b) Guarantee In Substance. The guarantee imposes secondary liability on CIFG Assurance North America, Inc. ("CIFG") that unconditionally shifts substantially all of the credit risk for all or part of the payments on the Certificates. CIFG is not a co - obligor and does not expect to make any payments other than payments for which it will be reimbursed immediately. CIFG and related parties thereto will not use more than ten percent of the gross proceeds of the Certificates that are guaranteed by CIFG. (c) Reasonable Charges. The Insurance Premium does not exceed a reasonable arms4ength charge for the transfer of credit risk. The Insurance Premium is separately stated from all other fees and payments payable by the City to CIFG for any other direct or indirect services other than transfer of the credit risk. The Insurance Premium does not include payment for the cost of underwriting or remarketing the Certificates or for the cost of casualty insurance for property financed or refinanced by the Certificates. The Insurance Premium is not refundable upon redemption of the Certificates prior to maturity. The Certificates due 2020 (the "Term Certificates"), are subject to mandatory redemption. The yield on the Term Certificates is calculated by treating the outstanding stated principal amounts payable on the mandatory redemption dates as payments on such dates because the stated redemption price at maturity of such Term Certificates does not exceed the issue price of such Term Certificates by more than one-fourth of one percent multiplied by the product of the stated redemption price at maturity and the number of years to the date of the weighted average maturity (determined by taking into account the mandatory redemption schedule) of such Term Certificates. The yield on the Certificates, calculated in this manner and based on an amount equal to $6,537, 783.00, which represents the Issue Price of the Certificates as set forth -in the Certificate of Underwriter attached as Exhibit A, is 4.1757424 percent. 1. The Financial Advisor Calculated the weighted average maturity of the Certificates to be 8.707 years, which is the sum of the products of the Issue Price of each group of identical Certificates and the number of years to maturity (determined separately for each group of identical Certificates and taking into account mandato,71 redemptions), divided by the aggregate sale proceeds of the Certificates. 2. With respect to the issuance of the Certificates, the representations set forth in paragraph 24 of the Federal Tax Certificate are, to the best of our knowledge, true, correct and complete. [SIGNATURE PAGE FOLLOWS] DAL:629969.2 The Financial Advisor hereby authorizes the City to rely on the statements made herein in connection with making the representations set forth in the Federal Tax Certificate to which this Certificate is attached and in connection with compliance by the City with the provisions of the Code regarding the exclusion from gross income of the interest on the Certificates. Further, we hereby authorize Andrews Kurth LLP, Bond Counsel to the City to rely on the statements made herein in connection with its opinion that interest on the Certificates is excludable from gross income for federal income tax purposes. EXECUTED and DELNERED as of and on September 5, 2006. GOVERNMENT CAPITAL SECURITIES CORPORATION ► A By: Name: Ted Christensen Title: Vice President eC�c] DAL:629969.2 CLOSINU CERTIFICATE STATE OF TEXAS § COUNTY OF DENTON § In accordance with Section 6(j)(7) of the Bond Purchase Agreement entered into by the Underwriter referred to therein and the City of Sanger, Texas (the "City") in connection with the We of the City's Combination Tax and Revenue Certificates of Obligation, Series 2006 (the 'Certificates'), I, the undersigned, Mayor of the City, acting in my official capacity, hereby certify as follows: 1. The representations and warranties of the City contained in the Bond Purchase Agreement are true and correct in all material respects on and as of the date hereof as if made on the date hereof. 2. No litigation or proceeding against the City is pending or, to our knowledge, threatened in any court or administrative body nor is there a basis for litigation which would (a) contest the right of the members or officials of the City to hold and exercise their respective positions, (b) contest the due organization and valid existence of the City, (c) contest the validity, due authorization and execution of the Certificates, the Order or the Bond Purchase Agreement or (d) attempt to limit, enjoin or otherwise restrict or prevent the City from functioning and collecting taxes, including payments on the Certificates, pursuant to the Bond Order, or the levy or collection of the taxes pledged or to be pledged to pay the principal of and interest on the Certificates, or the pledge thereof. 3. The Ordinance has been duly adopted by the City, is ,in full force and effect and has not been modified, amended or repealed. 4. To the best of our knowledge, no event affecting the City 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 1161,L of the circumstances under which made, not misleading in any material respect as of the time of Closing, and the information contained in the Official Statement is correct in all material respects and, as of the date of the Official Statement did not, and as of the date of the Closing does not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. HOU:2602783.1 EXECUTED ON BEHALF OF THE CITY as of CITY OF SANUER, TEXAS Mayor City of Sanger, Texas 2006. HOU:2602783.1 EXECUTED ON BEHALF OF THE CITY as of WiQ MW S , 2006. CITY OF BANGER, TEXAS City of Sanger, Texas >4 HOU:2602783.1 CERTIFICATE OF BOND INSURER AS TO OFFICIAL STATEMENT CIFG Assurance North America, Inc. ("CIFG"), by its undersigned duly authorized officer, hereby certifies as follows in connection with the Official Statement dated August 7, 2006 (the "Official Statement") relating to the $6,500,000 City of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006, with respect to which CIFG is issuing. Its bond insurance policy and endorsements thereto (the "Policy") effective as of the date hereof 1. The statements contained in the Official Statement under the heading 'BOND INSURANCE," insofar as such statements constitute summaries of the matters referred to therein, accurately reflect and fairly present the information purported to be shown and, insofar as such statements describe CIFG, fairly and accurately describe CIFG. 2. The form of Policy contained in the Official Statement under the heading "Appendix E - Specimen Municipal Bond Insurance Policy" is a true and complete copy of the form of Policy. CIFG makes no certifications or representations whatsoever as to any statements or information in the Official Statement other than the specific statements and information expressly referred to in paragraphs 1 and 2 above. IN WITNESS WHEREOF, CIFG has caused this Certificate to be executed as of the date set forth below by the duly authorized officer of CIFG whose name and title appear below. Date: September 5, 2006 i CIFG ASSURANCE � ORTH AMERICA, INC. r� B Robert IJlDrillings Managing Director and Vice President AN D REWS ATTORNEYS K U R T H LLP September 5, 2006 Andrews WE L.L.P. 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com WE HAVE ACTED as Bond Counsel for the City of Sanger, Texas (the "City in connection with an issue of certificates of obligation (the "Certificates") described as follows: CITY OF SANGER, TEXAS CERTIFICATES OF OBLIGATION, SERIES 2006, dated August 15, 2006, in the aggregate principal amount of $7,000,000, maturing on September 1 in each year from 2007 through 2017, inclusive, and on September 1 in the years 2020 and 2021. The Certificates are issuable in fully registered form only, in denominations of $5,000 or integral multiples thereof, bear interest and may be transferred and exchanged as set out in the Certificates and in the ordinance (the "Ordinance") adopted by the City Council of the City authorizing their issuance. WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an opinion with respect to the legality and validity of the Certificates under the Constitution and laws of the State of Texas and with respect to the exclusion of interest on the Certificates from gross income under federal income tax law. In such capacity we have examined the Constitution and laws of the State of Texas; federal income tax law; and a transcript of certain certified proceedings pertaining to the issuance of the Certificates, as described in the Ordinance. The transcript contains certified copies of certain proceedings of the City; certain certifications and representations and other material facts within the knowledge and control of the City, upon which we rely; and certain other customary documents and instruments authorizing and relating to the issuance of the Certificates. We have also examined executed Certificate No. R4 of this issue. WE HAVE NOT BEEN REQUESTED to examine, and have not investigated or verified, any original prover: sings, records, data or other material, but have relied upon the transcript of certified proceedings. We have not assumed any responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in connection with the sale of the Certificates. Our role in connection with the City's Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. BASED ON SUCH EXAMINATION, it is our opinion as follows: (1) The transcript of certified proceedings evidences complete legal authority for the issuance of the Certificates in full compliance with the Constitution and laws of the State of Texas presently in effect; the Certificates constitute valid and legally binding obligations of the City enforceable in accordance with the terms and conditions thereof, except to the extent that the rights and remedies of the owners of the Certificates may be limited by laws HOU:2601043.1 Austin Dallas Houston London Los Angeles New York The Woodlands Washington, DC September 5, 2006 Page 2 heretofore or hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors of political subdivisions and the exercise of judicial discretion in appropriate cases; and the Certificates have been authorized and delivered in accordance with law; and (2) The Certificates are payable, both as to principal and interest, from, and secured by, the proceeds of a continuing, direct annual ad valorem tax, levied within the limits prescribed by law, against taxable property within the City, which taxes have been pledged irrevocably to pay the principal of and interest on the Certificates; and (3) The Certificates are further secured by a limited and subordinate pledge of the net revenues of the water and sewer system of the City. The revenues to be derived from the operation of the City's water and sewer system after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, to the extent that ad valorem taxes may ever be insufficient or unavailable for said purpose; provided, however, that such pledge is junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of Net Revenues to the payment of the Certificates. The City has reserved the right to issue, for any lawful purpose at anytime, in one or more installments, bonds, certificates of obligation and other obligations of any. kind secured by a pledge of the Net Revenues that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further opinion that, subject to the restrictions hereinafter described, interest on the Certificates is excludable from gross income of the owners thereof for federal income tax purposes under existing law and is not subject to the alternative minimum tax on individuals or, except as hereinafter described, corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Certificates in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted in the Ordinance to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Certificates in gross income for federal income tax purposes to be retroactive to the date of issuance of the Certificates. The Code and the existing regulations, rulings and court decisions thereunder, upon which the foregoing opinions of Bond Counsel are based, are subject to change, which could prospectively or retroactively result in the inclusion of the interest on the Certificates in gross income of the owners thereof for federal income tax purposes. HOU:2601043. I September D. 2006 Page 3 INTEREST ON all tax-exempt obligations, including the Certificates, owned by a corporation (other than an S corporation, a regulated investment company, a real estate investment trust (REIT), a real estate mortgage investment conduit (REMIC) or a financial asset securitization investment trust (FASIT)) will be included in such corporation's adjusted current earnings for purposes of calculating such corporation's alternative minimum taxable income. A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by the Code is computed. Purchasers of Certificates are directed to the discussion entitled "TAX EXEMPTION" set forth in the Official Statement, EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any federal, state or local tax consequences under present law, or future legislation, resulting from the ownership of, receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Prospective purchasers of the Certificates should be aware that the ownership of tax-exempt obligations, such as the Certificates, may result in collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, taxpayers who are deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, taxpayers owning an interest in a FASIT that holds tax-exempt obligations and individuals otherwise qualified for the earned income tax credit. For the foregoing reasons, prospective purchasers should consult their tax advisors as to the consequences of investing in the Certificates. HOU:2601043. I ATTORNEY GENERAL OF TEXAS GREG ABBOTT September 13 2006 THIS IS TO CERTIFY that the City of Sanger, Texas (the "Issuer"), has submitted to me City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), in the aggregate principal amount of $6,500,000, for approval. The Certificates are dated August 15, 2006, numbered R- 1 through R4 3, and were authorized by an Ordinance of the Issuer passed on August 7, 2006 and ratified on August 30, 2006 (collectively, the "Ordinance"). I have examined the law and such certified proceedings and other papers as I deem necessary to render this opinion. As to questions of fact material to my opinion, I have relied upon representations of the Issuer contained in the certified proceedings and other certifications of public officials furnished to me without undertaking to verify the same by independent investigation. I express no opinion relating to the official statement or any other offering material relating to the Certificates. Based on my examination, I am of the opinion, as of the date hereof and under existing law, as follows (capitalized terms, except as herein defined, have the meanings given to them in the )rdinance): (1) The Certificates have been issued in accordance with law and are valid and binding obligations of the Issuer. (2) The Certificates are payable from the proceeds of an annual ad valorem tax levied, within the limits prescribed by law, against all taxable property in the Issuer, and are further payable by a junior and subordinate pledge of the Net Revenues of the Issuer's water and sewer system, in an amount not to exceed $1,000. Therefore, the Certificates are approved, of the State of Texas No. 45198 3ook No. 2006-C JCII Yosr Or•r•tce Bos 12548, A�s'ria, "1'ex.�s 78711-2548 •ria-:(512)4G3-2100 �r�r�r.onc.srnrr:.r�.cs �Li Equ.J linip(aymtd/ Or�nrhn�i/y Bnirinytr Yrin/td oir Rrpv(ed PaPrr OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, CAROLS KEETON STRAYHORNI Comptroller of Public Accounts of the State of Texas, do hereby certify that the attachment is a true and correct copy of the opinion of the Attorney General approving the: Series 2006 numbered R-1 /R-13. of the denomination of $various, dated August 15. 2006, as authorized by issuer, interest various percent, under and by authority of which said bonds/certificates were registered electronically in the office of the Comptroller, on the 1 st day of September 2006, under Registration Number 71785. Given under my hand and seal of office, at Austin, Texas, the 1st day of September. 2006, CAROLS KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas OFFICE OF COMPTROLLER OF THE STATE OF TEXAS I, Melissa Mora , Bond Clerk OX Assistant Bond Clerk in the office of the Comptroller of the State of Texas, do hereby certify that, acting under the direction and authority of the Comptroller on the 1st day of September. 2006, 1 signed the name of the Comptroller to the certificate of registration endorsed upon the: Citv of Sanaer, Texas Combination Tax and Revenue Certificates of Obligation Series 2006, numbered R-1 /R- cfiated Au ust 15 20 6, and that in signing the certificate of registration I used the following sign turen I n A IN WITNE� WE�iEREOF wave execu�i�bi� certificate this I, Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas, certify that the person who has signed the above certificate was duly designated and appointed by me under authority vested in me by Chapter 403, Subchapter H, Government Code, with authority to sign my name to all certificates of registration, and/or cancellation of bonds required by law to be registered and/or cancelled by me, and was acting as such on the date first mentioned in this certificate, and -that the bonds/certificates described in ffis certificate have been duly registered in the office of the Comptroller, under Registration Number 71785. GIVEN under my hand and seal of office at Austin, Texas, this the 1st day of September. 2006. CAROLS KEETON STRAYHORN Comptroller of Public Accounts of the State of Texas McCALL, 600 CONGRESS AVENUE 1250 ONE AMERICAN CENTER AUSTIN, TEXAS 787014248 TELEPHONE: (512) 47&3805 FACSIMILE:(512)472-0871 SAMCO Capital Markets Dallas, Texas LAW OFFICES PARKHURST & 717 NORTH HARWOOD NINTH FLOOR DALLAS, TEXAS 75201.8587 TELEPHONE: (214) 754-9200 FACSIMILE:(214)754-925D HORTON L.L.P. 700 N. ST. MARTS STREET September 5, 2006 $6,500,000 CITY OF SANGER, TEXAS 1525 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205.3503 TELEPHONE: (210) 225-2800 FACSIMILE:(210)225-2984 (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006 Ladies and Gentlemen: We have acted as counsel to SAMCO Capital Markets, as the underwriter (the "Underwriter") of that issue of City Of Sanger, Texas (Denton County) Combination Tax and Revenue Certificates of Obligation, Series 2006, in the original aggregate principal amount of $6,500,000 (the "Bonds"), authorized pursuant to an Ordinance (the "Ordinance") adopted by the City Council on August 7, 2006, which was ratified on August 30, 2006. The Bonds are being sold pursuant to the terms of a Bond Purchase Agreement, dated as of August 7, 2006 (the "Bond Purchase Agreement"), among the Underwriter and the Issuer. Capitalized terms used herein, but not otherwise defined herein, shall have the meanings given to them in the Bond Purchase Agreement. We have examined such documents and satisfied ourselves as to such matters as we have deemed necessary in order to enable us to express the opinions set forth below. As to various questions of fact material to our opinions, we have relied upon representations and statements of the Issuer in the Official Statement, dated August 7, 2006 (the "Official Statement"), We have not verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Official Statement. We have, however, participated in the preparation of the Official Statement, including, among other things, general discussions and inquiries concerning various legal and related subjects, discussions with representatives of the Underwriter and the review of certain records, documents and proceedings. Based upon the information made available to us in the course of our participation in the preparation of the Official Statement as counsel for the Underwriter and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement no facts came to our attention which would lead us to believe that the Official Statement, as of its date and as of the date hereof contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that no opinion or belief is expressed as to any financial or statistical data contained in the Official Statement). This letter is furnished to you solely for your benefit and no other party is entitled to rely hereon. Respectfully, ��'yv " ANDREWS ATTORNEYS K U R T H LLP September 5, 2006 CITY OF BANGER, TEXAS 201 Bolivar Street Sanger, Texas 76266 SAMCO CAPITAL MARKETS, INC. 6750 Poplar Avenue, Suite 217 Memphis, Tennessee 38138 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com Re: $6,500,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates") Ladies and Gentlelnen: This letter is provided pursuant to Section 6(j)(5) of the Purchase Agreement (the "Agreement"), dated August 7, 2006, among the Underwriter referred to therein and the City of Sanger, Texas (the "City"), relating to the issuance and sale by the City of its Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"). Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the ordinance authorizing issuance of the Certificates (the "Ordinance"), We have acted as Bond Counsel in connection with the issuance and sale of the Certificates. Based upon our review of the docutents described in our other opinion dated as of even date herewith, our discussions with you and others, our review of the documents, certificates, opinions and other instruments delivered at the closing of the sale of the Certificates on the date hereof and such other materials as we deem relevant, we are of the opinion that: 1. The Ordinance has been duly adopted and is in full force and effect; 2. The Certificates are exempted securities under 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 such Certificates, to register the Certificates under the 1933 Act or to qualify the Ordinance under the Trust Indenture Act, 3. The statements and information appearing in the Official Statement under the captions THE CERTIFICATES" (except for the subheading "Sources and Uses of Funds"), "TAX RATE LIMITATIONS", "LEGAL MATTERS", "TAX EXEMPTION," "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM CERTIFICATES," and "CONTINUING DISCLOSURE OF INFORMATION" (except the subheading "Compliance With Prior Undertakings") accurately and fairly describe the provisions of the Ordinance and the Certificates and are correct as to matters of law. This opinion may be relied upon only by you. HOU:2612178.1 Austin Dallas Houston London Los Angeles New York The Woodlands Washington, DC September S, 2006 Page 2 Reference is made hereby to our Bond Counsel opinion of even date herewith. Please be advised that such opinion may be relied upon as if it were addressed to you. Very truly yours, 7867/7866 HOU:2612178.1 CIFG IXIS FINANCIAL GUARANTY September 55 2006 City of Sanger, Texas (Denton County) SAMCO Capital Markets, as underwriter of the within -mentioned Bonds Ladies and Gentlemen: I am General Counsel, Global Infrastructure &Public Finance of CIFG Assurance North America, Inc., a New York stock insurance company ("CIFG"), and have acted as such in connection with the issuance by CIFG of a certain Bond Insurance Policy, number CIFG NA- 1134 and endorsements thereto, effective as of the date hereof (the "Policy'), insuring Combination Tax and Revenue Certificates of Obligation, Series 2006 in aggregate principal amount of $6,500,000 issued by the City of Sanger, Texas (Denton County). I or lawyers under my supervision have examined the Policy and such corporate records, certificates and other documents and such questions of law as I have considered necessary or appropriate in the circumstances for purposes of this opinion. Based upon such examination and having regard to legal con$ iderations I deem relevant, I am of the opinion that: 1. CIFG is a stock insurance company duly organized and validly existing in good standing under the laws of the "eV New York with power and authority under applicable laws to conduct its insurance business in the manner in which it is being conducted. 2. The Policy has been duly authorized, executed and delivered by CIFG and constitutes a legal, valid and binding obligation of CIFG enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, liquidation, reorganization, rehabilitation, moratorium and other state and federal laws affecting the enforcement of creditors' rights and to general principles of equity, 3. The execution, delivery and performance of the Policy and the consummation of the transactions contemplated thereby will not conflict with or result in a breach of any of the terms, conditions or provisions of the Charter or By -Laws of CIFG, or any restriction contained in any contract, agreement or instrument to which CIFG is a party or by which it is bound or constitute a default under any of the foregoing. CIFG Assurance North America, Inc. 825 Third Avenue, 6ch Floor New York, NY 10022 Tel. (212) 909-3939 Fax (212) 909-3958 www.cifg.com GROUPE CAISSE D'EPARGNE City of Sanger, Texas (Denton County) SAMCO Capital Markets September 5, 2006 Page 2. 4. All proceedings legally required for the issuance of the Policy have been taken by CIFG and all licenses, orders, consents or other authorizations or approvals of any governmental boards or bodies legally required for the enforceability of the Policy in all material respects have been obtained. I have, with your approval, relied as to certain matters on information obtained from public officials, officers of CIFG and other sources believed by me to be responsible. This opinion is furnished to you solely for your benefit and may not be relied upon or distributed to any other person. Very t yours, :/� R ert M. Drillings �" �' I C 1 F G ' CIFG Assurance North America, Inc. IXIS FINANCIAL GUARANTY 825 Third Avenue, 6`^ Floor -New York, NY 10022 $6,500,000 CITY OF SANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2006 RECEIPT AND CROSS RECEIPT September 19 2006 I, the undersigned, a duly authorized representative of The Bank of New York Trust Company, N.A., paying agent/registrar for the City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 (the "Certificates"), hereby acknowledge receipt on behalf of the City of Sanger, Texas (the "City") of the full purchase price for the Certificates in the total amount of $6,460,226.45 (representing the par amount of the Certificates of $6,500,000, plus a net premium of $37,783.00, less an underwriter's discount of $77,556.55) on the date hereof. THE BANK OF NEW YORK TRUST COMPANY, N.A. By: Name: DEBORAH A. BENNETT Title: VICE PRESIDENT I, the undersigned, a duly authorized representative of SAMCO Capital Markets, Inc., hereby acknowledge receipt from the City of the initial Certificates of its $69500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006, dated August 15, 2006, which have been delivered to the undersigned in proper form on the date hereof. SAMCO CAPITAL MARKETS, INC. Name: Title: HOU:2612035.1 REGISTRAR'S RECEIPT The undersigned duly authorized representative of The Bank of New York Trust Company, N.A., the Registrar of the following described bonds: CITY OF BANGER, TEXAS COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION, SERIES 2006, in the total authorized aggregate amount of $6,500,000 certifies that it has duly registered the above -mentioned bonds in accordance with the Resolution, dated August 7, 2006 and as amended on August 30, 2006, and that such bonds have been delivered to the purchaser thereof. EXECUTED AND DELIVERED this s ep t emb er 5 , , 2006. THE BANK OF NEW YORK TRUST COMPANY, N.A. HOU:2612033.1 CIFG IXIS FINANCIAL GUARANTY CIFG Assurance North America, Inc. 825 Third Avenue, Sixth Floor New York, NY 10022 For information, contact (212) 909-3939 Toll -free (866) 2434212 FINANCIAL GUARANTY INSURANCE POLICY ISSUER: City of Sanger, Texas (Denton County) Policy No.: CIFG NA-1 134 CUSIP: 800876CG7, 800876CH5, 800876CJI, 800876CK8, 800876CL6, Effective Date: September5, 2006 800876CM4, 800876CN2, 800876CP7, 800876CQ5, 800876CR3, 800876CSIq 800876CV4, 800876CW2 OBLIGATIONS: $6,500,000 Combination Tax and Revenue Certificates of Obligation, Series 2006 CIFG ASSURANCE NORTH AMERICA,"CIFG NA"), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to each Policyholder, subject only to the terms and conditions of this Policy (which includes each endorsement hereto), the full and complete payment by or on behalf of the Issuer of Regular Payments of principal of and interest on the Obligations. For the further protection of each Policyholder, CIFG NA irrevocably and unconditionally guarantees: (1) payment of any amount required to be paid under this Policy by CIFG NA following CIFG NA's receipt of notice and instnrments of assignment as described in Endorsement No. 1 hereto and (2) payment of the amount of any distribution of principal of and interest on the Obligations made during the Tenn of this Policy to such Policyholder that is subsequently avoided in whole or in part as a preference payment under hereto. applicable law, all as described ui Endorsement No. I CIFG NA shall be subrogated to the rights of each Policyholder to receive payments under the Obligations to the extent of any payment by CIFG NA hereunder. Upon disbursement in respect of an Obligation, CIFG NA shall become the owner of the Obligationappurtenant coupon, if any, and all rights to payment of principal thereof or interest thereon. f , The following terms shall have the meanings specified below, subject to and including any modifications set forth in any endorsement hereto, for all purposes of this Policy. "Effective Date," "Issuer" and "Obligations" mean, respectively, the Effective DateIssuer and Obligations referenced above. "Policyholder" means, if the Obligations are in book -entry form, the registered owner of any Obligat, ion as indicated on the registration books maintained by or on behalf of the Issuer for such purpose or, if the Obligations are in bearer form, the holder of any Obligation; provided, however, chat any trustee acting on behalf of and for the benefit of such registered owner or holder shall be deemed to be the Policyholder to the extent of such trustee's authority. "Regular Payments" means payments of interest and principal which are ^:.Yd to be made during the Term of this Policy in accordance with the original terms of the Obligations when irs;u _l and without regard to any amendment or modification of such Obligations thereafter, payments which become due on an accelerated basis as a result of (a) a default by the Issuer or any other person, (b) an election by the Issuer to pay principal or other amounts on an accelerated basis or (c) any other cause, shall not constitute "Regular Payments" unless CIFG NA shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration. `Term of this Policy" has the meaning set forth in Endorsement No. l hereto. This Policy sets forth in full the undertaking of CIFG NA, and shalt not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto or to the Obligations (except a contemporaneous or subsequent agreement or instrument given by C[FG NA or to which CIFG NA has given its written consent) or by the merger, consolidation or dissolution of the Issuer. The premiums paid in respect of this Policy are nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Obligations prior to maturity. This Policy may not be cancelled or revoked during the Tern of this Policy, including for nonpayment of premium due to CIFG NA. Payments under this Policy may not be accelerated except at the sole option of CIFG NA. In witness whereof, CIFG ASSURANCE NORTH AMERICA, INC. has caused this Policy to be executed on its behalf by its Authorized Officer. , CIFG ASSURANCE fj(ORTH AMERICA, INC. i� Robert M. Drillings C[FGNA Bonds -I (8-04) Managing Director and Vice President a CIFG IXIS FINANCIAL GUARANTY ENDORSEMENT NO. 1 TO FINANCIAL GUARANTY INSURANCE POLICY NO. CIFG NA-1134 CIFG ASSURANCE NORTH AMERICA, INC. 1. Definitions. For all purposes of this Policy, the terms specified below shall have the meanings or constructions provided below. Capitalized terms used without definition herein shall have the meanings provided in the documents governing the Obligations unless the context shall otherwise require. "Business Day" means any day (other than a Saturday or Sunday) that in the City of New York is neither a legal holiday nor a day on which banking institutions are authorized or obligated by law or executive order to be closed. "CIFG NA" means CIFG Assurance North America, Inc. and its successors and permitted assigns. "Policy" means this Financial Guaranty Insurance Policy and includes each endorsement thereto. "Receipt" and "Received" mean actual delivery to each of CIFG NA and the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York City time, on a Business Days delivery either on a day that is not a Business Day, or after 12:00 noon, New York City time, shall be deemed to be Receipt on the next succeeding Business Day. If,any notice or certificate given hereunder by the Policyholder is not in proper form or is not properly completed, executed or delivered in all material respects, it shall be deemed not to have been Received, and CIFG NA or its Fiscal Agent shall promptly so advise the Policyholder and the Policyholder may submit an amended notice. "Re lgu ar Payment Date" means (i), when referring to interest on an Obligation, t'.��:,� ��tated date for payment of interest and (ii), when referring to the principal of an Obligation, the stated final maturity date thereof or the date on which the same shall have been duly called for mandatory redemption (by sinking fund or otherwise) and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by such mandatory redemption), acceleration or other advancement of maturity unless CIFG NA shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration. "Regular Payments" means any and all regularly scheduled payments of principal of and interest on the Obligations required to be made in accordance with their original terms and without regard to any subsequent amendment or modification thereof except amendments or modifications to which CIFG NA has given its prior written consent. Regular Payments shall not include, nor shall coverage be provided under this Policy in respect of: (1) payments which become due on an accelerated basis as a result of (a) a default by the Issuer or any other person, CIFG NA Endorse-1 (8-04) IXIS FINANCIAL GUARANTY Policy Number CIFG NA-1134 Effective Date: September 5, 2006 (b) an election by the Issuer to make payment on an accelerated basis, or (c) any other cause, unless CIFG NA shall elect, in its sole discretion, to pay any amount due upon such acceleration together with any accrued interest to the date of acceleration; (2) any amounts due in respect of the Obligations attributable to any increase in interest rate, penalty or other sum payable by the Issuer by reason of any default or event of default in respect of the Obligations, whether by the Issuer or any other person, or by reason of any deterioration of the creditworthiness of the Issuer or any other person, or (3) any taxes, withholding or other charge imposed by any governmental authority due in connection with the payment of any Regular Payment to the Policyholder. "Term of this Policy"means the period from and including the Effective Date to and including the date on which (1) all Regular Payments have been paid and the Obligations have been terminated in accordance with their terms; (ii) any period during which any Regular Payment could have been avoided in whole or in part as a preference payment under applicable bankruptcy, insolvency, receivership or similar law shall have expired; and (iii) if any proceedings requisite to avoidance as a preference payment have been commenced prior to the occurrence of (i) and (ii), a final and nonappealable order in resolution of each such proceeding has been entered. 2. Notices and Conditions to Pavment in Respect of Re ular Pa ents. Following Receipt by CIFG NA of a notice of claim and certificate from the Policyholder in the form attached as Exhibit A to this Endorsement (a "Notice of Claim and Certificate"), CIFG NA will pay any amount payable hereunder in respect of Regular Payments on the Obligations on (i) in respect of the first Regular Payment Date after Receipt by CIFG NA of such Notice of Claim and Certificate, the later to occur of (a) 10:00 a.m., New York City time, on the Business Day following such Receipt and (b) 10*00 a.m., New York City time, on the Regular Payment Date on which such payment is due on the Obligations and (ii) in respect of each subsequent Regular Payment Date after Receipt by CIFG NA of such Notice of Claim land Certificate, 10:00 a.m., New York City time, on the Regular Payment Date on which such payment is due on the Obligations. Payments due hereunder in respect of Regular Payments will be disbursed to the Policyholder by wire transfer of immediately available funds to such account as the Policyholder shall specify in writing at the time of or prior to the delivery of the Notice of Claim and Certificate in respect of such Regular Payment. CIFG NA shall be entitled to pay any amount hereunder in respect of Regular Payments on the Obligations, including any amount payable upon its election on the Obligations on an accelerated basis, whether or not any notice and certificate shall have been Received by CIFG NA as provided above; provided, however, that by acceptance of this Policy the Policyholder agrees to provide upon request to CIFG NA a Notice of Claim and Certificate in respect of any such payments or deliveries made by CIFG NA. CIFG NA's obligation hereunder in respect of Regular Payments shall be discharged to the extent funds are disbursed by CIFG NA as provided herein whether or not such funds are properly applied by any custodian or agent appointed by the Policyholder. 3. Notices anri ('.nn[i;t;nnc to Pac,,,,n.,+;., Unn..o..� 1.r D,.�..t.._ Preference Payments. If any Regular Payment paid in respect of the Obligations during the Term 2 CIFG IXIS FINANCIAL GUARANTY Policy Number CIFG NA-1134 Effective Date: September 5, 2006 of this Policy is avoided as a preferential transfer or similar payment (a "Preference Payment") under applicable bankruptcy, insolvency, receivership or similar law ("Insolvency Law"), CIFG NA will pay such amount out of the funds of CIFG NA on the later of (a) the date when due to be paid pursuant to the Order referred to below or (b) the first to occur of (i) the fourth Business Day following Receipt by CIFG NA from the Policyholder of (A) a certified copy of the order (the "Order") of the court or other governmental body of competent jurisdiction to the effect that the Policyholder is required to return all or part of such Regular Payment because such payment was avoidable as a Preference Payment under applicable Insolvency Law, (B) a certificate of the Policyholder that the Order has been entered and is not subject to any stay and (C) an assignment duly executed and delivered by the Policyholder in such form as is reasonably required by CIFG NA, and provided to the Policyholder by CIFG NA, irrevocably assigning to CIFG NA all rights and claims of the Policyholder relating to or arising under the Obligations against the Issuer or its estate or otherwise with respect to such Preference Payment or (ii) the date of Receipt by CIFG NA from the Policyholder of the items referred to in clauses (A), (B) and (C) above if, at least four Business Days prior to such date of Receipt, CIFG NA shall have Received written notice from the Policyholder that such items were to be delivered on such date and such date was specified in such notice. Such payment shall be disbursed to the receiver, conservator, debtor4n- possession or trustee in bankruptcy named in the Order, and not the Policyholder directly (unless the Policyholder has previously paid such amount to the receiver, conservator, debtor -in - possession or trustee in bankruptcy named in the Order, in which case such payment shall be disbursed to the Policyholder upon proof of such payment reasonably satisfactory to CIFG NA). 4. Fiscal A ent. At any time during the Term of this Policy, CIFG NA may appoint a fiscal agent (the "Fiscal Agent") for purposes of this Policy by written notice to the Policyholder at the notice address specified in the documents governing the Obligations specifying the name and notice address of the Fiscal Agent. From and after the date of receipt of such notice by the Policyholder, (i) copies of all notices and documents required to be delivered to CIFG NA pursuant to this Policy shall be simultaneously delivered to the Fiscal Agent and CIFG NA and shall not be deemed Received until Received by each, and (ii) all payments required to be made by CIFG NA under this Policy may be made directly by CIFG NA or by the Fiscal Agent on behalf of CIFG NA. The Fiscal Agent is the agent of CIFG NA only and the Fiscal Agent shall in no event be liable to any Policyholder for any acts of the Fiscal Agent or any failure of CIFG t4A to deposit, or cause to be deposited, sufficient funds to make payments due under the Policy. 5. Notices. All notices to be given hereunder shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail or personally delivered or telecopied to CIFG NA as follows: CIFG Assurance North America, Inc. 825 Third Avenue, Sixth Floor New York, New York 10022 Attention: General Counsel Telecopy No.: (212) 909-3959 3 IXIS FINANCIAL GUARANTY Policy Number CIFG NA-1134 Effective Date: September 5, 2006 CIFG NA may specify a different address or addresses by writing mailed or delivered to the Policyholder. 6. Priorities. In the event that any term or provision of the face of this Policy is inconsistent with the provisions of this Endorsement, the provisions of this Endorsement shall take precedence and shall be binding. 7. Assignment of CIFG NA Obli ations. The obligations of CIFG NA hereunder may be assigned to any affiliate of CIFG NA that is licensed as a financial guaranty insurance corporation, provided that at the time of such assignment the insurance strength or insurance financial strength of such affiliate is rated at least equal to the insurance strength or insurance financial strength of CIFG NA, and that the rating of the Obligations shall not have been reduced as a result of such assignment, by Moody's Investors Service and Standard & Poor's Ratings Group or their respective successors as nationally recognized statistical rating organizations. 8. Surrender of Policy. The Policyholder shall surrender this Policy to CIFG NA for cancellation upon expiration of the Tenn of this Policy. IN WITNESS WHEREOF, CIFG ASSURANCE NORTH AMERICA, INC. has caused this Endorsement No. 1 to be executed by its Autho*ed Officer. I� CIFG ASSURANCE N AMERICA, INC. Officer Robert M. Drillings Managing Director and Vice President n Exhibit A To Endorsement No. 1 NOTICE OF CLAIM AND CERTIFICATE CIFG Assurance North America, Inc. 825 Third Avenue, Sixth Floor New York, NY 10022 The undersigned, a duly authorized officer of [Policyholder) (or any permitted successor or assignee of its rights under the Obligations defined below) (the "Policyholder"), hereby certifies to CIFG Assurance North America, Inc. ("CIFG NA"), with reference to Financial Guaranty Insurance Policy No. CIFG NAA 134 having an Effective Date of September 5, 2006 (the "Policy") issued by CIFG NA in respect of the Obligations (capitalized terms used without definition herein having the meanings provided in the Policy unless the context shall otherwise require), that: (i) The Policyholder is the Policyholder under the Policy. (ii) [The Policyholder has not been timely advised in writing by the Issuer as to a source of funds reasonably satisfactory to the Policyholder sufficient to make payment in full of a Regular Payment required to be made on the immediately following Regular Payment Date] [The Regular Payment required to be made on the Regular Payment Date falling on [date] has not been paid in full]. The Regular Payment has been calculated as follows. [show calculation]. (iii) Accordingly, the Policyholder is hereby making a claim under the Policy for the amount of the foregoing Regular Payment and, when due, any subsequent Regular Payments. The Policyholder will withdraw this Notice of Claim and Certificate, or submit a restated Notice of Claim and Certificate reduLang the amount of the claim hereunder, if the required amount of any Regular Payment has been reduced (including reduction to zero) on or prior to any date on which CIFG NA is required to make payment or delivery under the Policy. (iv) If the Policyholder receives from the Issuer and CIFG NA an amount in excess of a Regular Payment, the Policyholder shall immediately return the excess amount to CIFG NA. (v) In consideration of the payments made and to be made to the Policyholder by CIFG NA under the Policy, the Policyholder hereby assigns to CIFG NA all of its interest in and rights with respect to the Obligations (including the documents governing the Obligations). The foregoing assignment is in addition to, and not in limitation of, rights of subrogation otherwise available to CIFG NA in respect of such payments. Payments to CIFG NA in respect of the foregoing assignment A-1 shall in all cases be subject to and subordinate to the rights of the Policyholder to receive all Regular Payments in respect of the aforementioned Obligations. The Policyholder shall take such action and deliver such instruments as may be reasonably requested or required by CIFG NA to effectuate the purpose or provisions of this clause (v). (vi) The Policyholder hereby agrees that, so long as no CIFG NA Termination Event (as defined below) shall have occurred and be continuing, CIFG NA may at any time during the continuation of any proceeding by or against the Issuer under any applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to such Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment made with respect to the Obligations (a "Preference Claim"), (B) the direction of any appeal of any order relating to any Preference Claim at the expense of CIFG NA and (C) the posting of any surety, supersedeas or performance bond pending any such appeal. In addition, so long as no CIFG Termination Event shall have occurred and be continuing, the Policyholder hereby agrees that CIFG NA shall be subrogated to, and the Policyholder hereby assigns, to the fullest extent permitted by law, the rights of the Policyholder in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. A "CIFG NA Termination Event" shall be any event of default specified in the documents governing the Obligations with respect to CIFG NA as insurer of the Obligations or, if none is so specified, either: (i) CIFG NA's failure to make a payment required under the Policy in accordance with its terms or (ii) its institution of a proceeding seeking a judgment of insolvency or bankruptcy; the institution against it of such a proceeding or petition that is not dismissed, discharged or stayed within 180 days of the institution of such a proceeding or petition; or the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets. (vii) Payment should be made by wire transfer directed to the following account in [city]: [Policyholder's wire transfer information] IN WITNESS WHEREOF, the Policyholder has executed and delivered this Notice of Claim and Certificate as of the day of . [POLICYHOLDER] By Title ---------------------------------------------------------------------------------------------------------- For CIFG NA or Fiscal Agent Use Only Wire transfer sent on Confirmation Number I:�c? by CIFG IXIS FINANCIAL GUARANTY ENDORSEMENT N0.2 TO FINANCIAL GUARANTY INSURANCE POLICY NO, CIFG NA-1134 CIFG ASSURANCE NORTH AMERICA, INC. Notwithstanding the terms and provisions contained in this Policy, it is further understood that any person who, with intent to defraud or knowing that he is facilitating a fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud. IN WITNESS WHEREOF, CIFG ASSURANCE NORTH AMERICAINC. has caused this Endorsement No. 2 to be executed by its Authorized ;officer. , CIFG ASSURANCE NORTI���iMERICA, INC. Authori�d Officer Robert M. Drillings Managing Director and Vice President CIFGNA Fraud Endorse-2 (8-04) 17� *�wl�CIFG IX15 FINANCIAL GUARANTY ENDORSEMENT N0.3 TO FINANCIAL GUARANTY INSURANCE POLICY NO, CIFG NA-1134 CIFG ASSURANCE NORTH AMERICA, INC. THIS POLICY IS NOT COVERED BY THE TEXAS PROPERTY AND CASUALTY GUARANTY ASSOCIATION SPECIFIED IN ARTICLE 28.21-C OF THE TEXAS INSURANCE CODE, IN WITNESS WHEREOF, CIFG ASSURANCE NORTH AMERICA, INChas caused this Endorsement No. 3 to be executed by its Authorized Officer. . CIFG ASSURANCE NO AMERICA, INC. v By Authorized Officer Robert M. Drillings Managing Director and Vice President CIFGNA Bonds Endorse-3-NY (8-04) Moody's Investors Service 99 Church Street New York, NY August 29, 2006 CIFG Assurance North America, Inc 825 Third Avenue, 6th Floor New York, NY 10022 To Whom It May Concern: Moody's Investors Service has assigried the rating of Aaa (CIFG Assurance North America, Inc Insured - Policy No. CIFGNA=1134) to the $6,500,000,00, City of Sanger, Texas (Denton County)_ = Combination Tax and Revenue Certificates of Obligation, Series 2005, dated August 15, 2006 which sold through negotiation on August 7, 2006. The rating is based upon an insurance policy provided by CIFG Assurance North America, Inc. Should you have any questions regarding the above, please do not hesitate to contact Karen Malkowski at (201) 395-6370. Sincerely yours, Sean Cullen Senior Vice President UNITED STATES OF AMERICA STATE OF TEXAS CITY OF BANGER, TEXAS ��� DENOMINATION R-1 REGISTERED 5325,000 REGISTERED COMBINATION TAX AND REVENUE CERTIFICATE OF A13LIGATION SERIES 2006 '� �'' ,,T._ �r INTEREST RATE: DELIVERY DATE: MA • CUSIP: 4.00% September 5, 2006 F � ��'�',�:4TE: �:;�Septc�mber i',.2007 800876 CG 7 REGISTERED OWNER; SAMCO CAPITAL � • �� �• ;; THE CITY OF BANGER, TEXAS, a mnriicipal c`o��poration of the State of Texas (the "City', for value received, hereby promises to pay to the Reg�istete4i Owne identified above or its registered assigns, on the maturity date specified above (or on earlier re��iiptioa��s; tie�`ein provided), upon presentation and surrender of this Certificate at the principal corporate ti1str of%e of 'i'he Bank of New York Trust Company, N.A., Dallas, Texas, or its successor the "Pa `'' ( ying Agent/Repisirar"�;'the.�rincipal amount identified above (or so much tbereof as shall not have been paid or deemed to ha�!�'1�e� pit�;�p�n prior redemption) payable in any coin or currency of the United States of America which on the`.`c7at�•�`payrrient of such principal is legal tender for the payment of debts due to the • f• :.;. United States of America,;ar�d f�'• �� mterest thereon at the rate shown above, calculated on a basis of a 360-day year composed of twel>V� 3�D=.day �ths, from the Delivery Date identified above. Interest on this Certificate is I+Y h�f `.\ payable on March 1, 2 , •�.4�td�each March 1 and September 1 thereafter until maturity or earlier redemption of this Certificate, by check sent b TPi�`ted States mail first class ,postage prepaid, by the Paying Agent/Registrar to the Registered Owner of recor .,� of the close of business on the fifteenth day of the calendar month immediately preceding the applicable interest payment date, as shown on the registration books kept by the Paying Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid upon presentation and surrender of this Certificate at the principal corporate trust office of the Paying Agent/Registrar. THIS CERTIFICATE IS ONE OF A DULY AUTHORIZED SERIES OF CERTIFICATES (the "Certificates") in the aggregate principal amount of 56,500,000 issued pursuant to an ordinance adopted by the City Council of the City on August 7, 2006 (the "Ordinance") and for the purpose of providing all or part of the funds to pay contractual obligations to be incurred for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights -of --way for authorized needs and purposes and for the payment of contractual obligations for professional services, to wit (1) street improvements; (2) water, sewer and electric utility improvements, and (3) professional services rendered in connection with the above listed projects. THIS CERTffICATE shall not be valid or obligatory for any purpose or be entitled to any benefit under the Ordinance unless this Certificate either (i) is registered by the Comptroller of Public Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or (ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication certificate endorsed hereon. THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity, Certificates maturing on and after September 1, 2017, in whole or in part, on September 1, 20l ti, or any date thereafter, at par plus accrued interest to the date fixed for redemption. HOU:2607359.1 THE CERTIFICATES MATURING ON SEPTEMBER I in the year 2020 (the `Term Certificates' are subject to mandatory sinking fund redemption in the following amounts (subject to reduction as hereinafter provided), on the following dates, in each case at a redemption price equal to the principal amount of the Certificates or the portions thereof so called for redemption plus accrued interest to the date fixed for redemption: Term Certificates Maturing September 1, 2020 _Mandatory Redemption Dates September 1, 2018 September 1, 2019 September 1, 2020 (maturity) Princi Amoun $500,000 520,000 545,000 The particular Term Certificates to be redeemed shall be selected by the Registrar by lot or other customary random selection method, on or before September_ 1 of each year in which Term Certificates are to be mandatonly redeemed. The principal amount of Term Certificates to be mandatorily redeemed in each year shall be reduced by the principal amount of such Tenn Certificates that have been optionally redeemed on or before September 1 _ of such year and which have not been made the basis for a previous reduction. �_; ,. CERTIFICATES MAY BE REDEEMED IN PART only in integral multiples df..$ �' If a Certificate subject to redemption is in a denomination larger than $5,000, a portion of suCh`.Certifio�tt may be redeemed, but only in integral multiples of $5,000. In selecting portions of Certificates for°rederription�e:ach Certificate shall be treated as representing that number of Certificates of $5,000 denominatioi� wjiich.�i&� obtained by dividing the principal amount of such Certificate by �5,000. Upon surrender of any Getificate;forr€demption in part, the Pa ' t , .- Ym8 Agent/Registraz, in accordance with the provisions of the Ordinance; S}iall�-�uthettficate and deliver in exchange therefor a Certificate or Certificates of like maturity and interest rateata, an �eggre$ate principal amount equal to the unredeemed portion of the Certificate so surrendered. � :� � `� � �' NOTICE OF ANY SUCH REDEMPTION, identifying the' VQtrtificates or portions thereof to be redeemed, . shall be sent by United States mail, fast class, postage pre�isid, to!the Pegistered Owners thereof at their addresses as shown on the books of registration kept by the Paling �gent/Registraz, not less than thirty.(30) days before the date fixed for such redemption. By the date fixeci:_fdr redetr�pti©� due provision shall be made with the Paying Agent/Registraz for the payment of the redemptioII�ing�:of the Certificates called for redemption. If such notice of redemption is given, and if due provision for such p'�y''irient�}s=made, all as provided above, the Certificates which are to be so redeemed thereby automatically sh�;ba, re�e�fi'ed prior to their scheduled maturities, they shall not bear interest after the date fixed for redempti�oa=� arxc�;'they shall not be regarded as being outstanding except for the purpose of being paid with the funds so�rov�ded"for such payment. THIS CERTIFICATE IS'��:��,� .)"£P:ABLE onl u on resentation and surrender at 'the " Y P P principal corporate trust office of the Paying �� gistraz, accompanied by an assignment duly executed by the Registered Owner or its authorized representative, s�ject to the teens and conditions of the Ordinance. THIS CERTIFICATE IS EXCHANGEABLE at the principal corporate trust office of the Paying Agent/Registraz for a Certificate or Certificates of the same maturity and interest rate and in the principal. amount of. $5,000 or any integral multiple thereof, subject to the terms and conditions of the.Ordinance. THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange any Certificate called for redemption, in whole or in part, during the forty-five (45) day period immediately prior to the date fixed for redemption; provided, however, that such limitation shall not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a Certificate called for redemption in part. THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of any Certificate to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the transfer or exchange of a Certificate. Any fee or charge of the Paying Agent/Registrar for a transfer or exchange shall be paid by the City. HOU:2507359. t THE REGISTERED OWNER of this Certificate by acceptance hereof, acknowledges and agrees to be bound by all the terms and conditions of the Ordinance. IT IS HEREBY DECLARED AND REPRESENTED that this Certificate has been duly and validly issued and delivered; that all acts, conditions and things required or proper to be performed, exist and to be done precedent to or in the issuance and delivery of this Certificate have been performed, exist and have been done in accordance with law; that the Certificates do not exceed any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide for the payment of the interest on and principal of this Certificate, as such interest comes due and such principal matures, have been levied and ordered to be levied, within the limits prescribed by law, against all taxable property in the City and have been irrevocably pledged for such payment. IT IS FURTHER DECLARED AND REPRESENTED that the revenues to be derived from the City's water and sewer system, after the payment of all operation and maintenance expenses thereof (the "Net Revenues"), in an amount not to exceed $1,000, are pledged to the payment of the principal of and interest on the Certificates, provided that the pledge of Net Revenues is and shall be junior and subordinate in all respects to the pledge of Net Revenues to the payment of any obligation of the City, whether authorized heretofore or hereafter, which the City designates as having a pledge senior to the pledge of the Net Revenues to the payrie�t� of the Certificates. The City also reserves the right to issue, for any lawful purpose at any time, in one or more installments, bonds, certificates of obligation and other obligations of any kind, secured in whole or in part by a pledge of Net Revenues, that may be prior and superior in right to, on a parity with, or junior and subordinate to the pledge of Net Revenues securing the Certificates. IF IF IF REFERENCE IS HEREBY MADE TO THE ORDINANLE, a copy of which is filed with the Paying Agent/Registrar, for the full provisions_ thereof, to all of wh ch'theF F.Re gistered Owners of the Certificates assent by acceptance of the Certificates. IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or placed in facsimile hereon and this Certificate to be signed by the, Mayon; countersigned by the City Secretary by their manual, lithographed or printed facsimile signatures.. IF IF FF- IF IF I IF F- to 0 ? l �S i• O\� P E I R (SEAL) CITY OF SAPVGER, TEXAS Mayor COUNTERSIGNED: City Secretary HOU:2607359.1 COMPTROLLER'S REGISTRATION CERTIFICATE The following form of Compvoller's Regisvation Certificate shall be attached or affixed to each of the Certificates initially delivered: THE STATE OF TEXAS REGISTER NO. OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS I hereby certify that this certificate has been examined, certified as to validity and approved by the Attorney General of the State of Texas, and that this certificate has been registered by the Compvoller of Public Accounts of the State of Texas. WITNESS MY SIGNATURE AND SEAL OF OFFICE this �,' Compvoller of Public Accounts of the State of Texas i±ro i.n�n��c0 1 ASSIGNMENT For value received, the undersigned hereby sells, assign and transfers unto (Please print or type name, address, and zip code of Transferee) (Please insert Social Security or Taxpayer Identification Number of Transferee) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer such bond on the books kept for registration thereof, with full power of substitution in the premises. DATED: Signature Guaranteed: NOTICE: Signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 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. HOU:2607359.1 SI&� OF �5�� CffG A &nke Koh �enca be CC�G mA� ¥e Yoh Ke Yoh h# d live � m ��d� �� in7Amplicy(e`o!!c)w�mRmelt±e2hd»dp�mBop�cplkmd�e�o �Cmfia � AKneh=�b»*m�ea�omc*YokT�lCmpmyg��Tl#omncenrep� a mme ave ( e` a/n wg n��is �� aI �e$$5 $0 0 C!ty o S3a� T &e C mb�a o T� � RvneC��cBeoO�lg§o%Sdc■20.&aePl,ykA m«maaa|aktl�m�§o■B�ep�d� omgo ±oP /�n &gn�e§taz mdaQp ma b o b�� fr @ CEO XA a �eP �a�e�ek�. � & 66�� � »] � > .' .� } � �r pew �\� �� � � z � �! t� � `/� ,, y. � HR gm59, AN D REWS ATTORNEYS K U R T H LLP September 5, 2006 CIFG Assurance North America, Inc. 825 Third Avenue, 6`h Floor New York, New York 10022 600 Travis, Suite 4200 Houston, Texas 77002 713.220.4200 Phone 713.220.4285 Fax andrewskurth.com Re: $6,500,000 City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 Ladies and Gentlemen: We have this day issued our opinion as Bond Counsel in connection with the referenced Bonds. Please be advised that you may rely upon such opinion as if it were addressed to you. Very truly yours, 7867/7868 HOU:2611394. I CITY OF SANGER, TEXAS $6,500,000 COMBINATION TAX AND REVENUE CERTIFICATES OF OBLIGATION SERIES 2006 The following information is included in the transcript submitted to the Office of the Attorney General for the purpose of obtaining Attorney General approval of the issuance of the referenced bonds, as required by H.B. 1564, 74th Legislature, Regular Session (Tex. Laws 1995, ch. 383, at 2930). A. An additional copy of the Final Official Statement and the following information, if not included in the Final Official Statement or such statement has not been prepared. 1. Name of bond issue: City of Sanger, Texas Combination Tax and Revenue Certificates of Obligation, Series 2006 20 a) par amount of issue: $6,500,000 b) dollar amount of bond premium, if any: $37,783.00 c) dollar amount of bond original issue discount, if any: N/A 3. Dated date: August 15, 2006 4. Closing date (expected delivery date, on or about): September 5, 2006 5. By year, maturity amounts, coupon rates, prices or yields. See Exhibit A. (If no reoffering yield (NRO) indicated, please provide yield separately.) 6. Call provisions, including premiums, if any: See Official Statement 7. Mandatory redemption provisions: N/A 8. Debt -service schedule, principal and interest, and annual totals, with fiscal year identified: See Exhibit A. 9. Use of derivative products associated with financing: N/A 10. If applicable, schedule of bonds refunded, including, by year, principal amount, coupon, and interest cost: N/A 11. Pledge: tax (ad valorem, sales, other), revenue, combination: Ad valorem tax 12. Type of credit enhancement (including PSF guarantee): CIFG Assurance North America, Inc: 13. Rating service(s) and rating(s) assigned to issue: Moody's "Aaa" Be Additional Information 1. Type of sale: Negotiated 2. Pricing: Negotiated sale: August 7, 2006 Competitive sale: N/A 3. If purchaser of bonds is a governmental entity, such as the Texas Water Development Board, please name purchaser: N/A 4. If a refunding bond issue, please provide final schedule of cash and present value savings (loss): N/A 5. If a school district refunding bond issue, and the refunding involves "old debt" per the Texas Education Code, please provide schedule of principal and interest payments of refunding bonds associated with "old debt": N/A If the same issue also involves "new debt," please provide a schedule of principal and interest payments on the "new debt" portion as well. These two schedules together should equal total debt service by maturity: All of the refunded bonds represent (and accordingly all of the refunding bonds are associated with) "new debt." N/A 6. CAB's and CIB's —please provide the per annum bond interest rates by maturity as shown in the bond order document: N/A HOU:2610046.1 7. Costs of Issuance — please provide best estimate of costs. If final costs are significantly different, please submit changes directly to the Texas Bond Review Board. Call (512) 4634 741 or (512) 475-4802 (FAX). SERVICE FIRM ONE-TIME FEE ANNUAL FEE a) in dollars Bond Rating Mood 's $8,275.00 Standard & N/A Poor's Fitch N/A Other General Costs of Issuance b $919805000 $750.00 Any Specialized Costs of Issuance c N/A Credit Facility N/A Bond Insurance $669254936 Total Underwriting Spread d $77,556.55 Did underwriter pay rating fees No Which ones ? Did underwriter pay bond insurance fee? Yes PARTICIPANTS FIRM Financial Advisor Government Capital Corporation Bond Counsel Andrews Kurth LLP Paying Agent/Registrar; Authenticating Agent The Bank of New York Trust Company, N.A. Underwriters SAMCO Capital Markets, Inc. Trustee None Underwriter's Counsel McCall Parkhurst, & Horton, LLP Administrator None �a) iV;iaLw w uia viigviug 1CCS or recurring costs or a financing for services such as paying agent, remarketing agent, credit provider and other- similar services (may be expressed as a formula as appropriate) (b) e.g., bond counsel, financial advisor, paying agent, printing, AG approval (c) e.g., remarketing fees, escrow verification fees, etc. (d) the cost for marketing and selling the bonds, including takedown, structuring fee, underwriting risk and expenses. PERSON COMPLETING FORM: Name: Hoang T. Vu Telephone No. (713) 220-3879 Fax No. (713) 238-7129 HOU:2610046.1 Exhibit A HOU:2610046.1 of Sanger, Texas Comb Tax & Rev C/O, Series 2006 $6,500,000.00 CIFG Insured Debt Service Schedule Date Principal Coupon Interest Total P+1 09/30/2006 _ 09/30/2007 325,000.00 4.000% 262,992.53 587,992.53 09/30/2008 3359000.00 4.000% 2529947.50 5879947.50 09/30/2009 3505000.00 4.000% 239,547.50 589,547650 09/30/2010 365 000.00 4.000% 2259547.50 590t547.50 09/30/2011 3802000.00 4.000% 210,947,50 590,947650 09/30/2012 3951000.00 4.000% 195,747.50 590,747.50 09/30/2013 410,000600 4.000% 179,947.50 589,947,50 09/30/2014 425,000.00 4.000% 1639547,50 5889547.50 09/30/2015 _. ____.. ___ .__ 440 000.00 ___ .___ _ 4.000% 146,547.50 586,547.50 09/30/2016 4601000.00 5.000% 1289947950 588,947.50 09/30/2017 4851000.00 4.000% 105,94T50 590,947.50 09/30/2018 600,000000 4.050% 86,547.50 586,547950 09/30/2019 520,000.00 4.050% 66,297.50 586,297.50 09/30/2020 545,000.00 4.050% 45,237.50 590,237.50------- ----- ------------- ---- -- - ------ -- - --- - - -- ---- -- 7* 5 -------- ----- . 9092 ..__.- _ - 09/30/2021 565,000.00 4.100% 23,165.00 5881165.00 Total $6,5009000.00 - $2,333,915*03 $898334915.03 Yield Statistics Bond Year Dollars Average Life Average Coupon Net Interest Cost (NIC) True Interest Cost (TIC) Bond Yield for Arbitrage Purposes All Inclusive Cost (AIC) $56,732.78 8.728 Years 4.1138741 % 4.1839809% 4.2007378% _....___ 4. 1757424% 4.5570104% IRS Form 8038 Net Interest Cost 4.0335274% ..__...... Weighted Average Maturity 8.707 Years Series 2006 Final ALT � SINGLE PURPOSE l 8/142006 l 11:13 AM