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HomeMy WebLinkAboutR2006-075 05-22-06 RESOLUTION NO. R- a 664.-7 s
RESOLUTION OF THE CITY OF PEARLAND, TEXAS APPROVING
THE RESOLUTION AUTHORIZING THE ISSUANCE OF THE
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES
TAX REVENUE BONDS, SERIES 2006; AUTHORIZING A
CONTINUING DISCLOSURE UNDERTAKING IN CONNECTION
WITH SUCH BONDS; AND MAKING VARIOUS FINDINGS AND
PROVISIONS RELATED TO THE SUBJECTS
WHEREAS, on January 21, 1995, the voters of the City of Pearland, Texas (the
"City") approved the levy of a one-half of one percent sales and use tax (the "Sales Tax")
to be used for the benefit of the Pearland Economic Development Corporation (the '
"Corporation"), including, among other things, for paying the costs of acquisition and
construction of streets and roads and drainage and related improvements which promote •
or develop new or expanded business enterprises (the "Project");
WHEREAS, the City, by Ordinance No. R95-36 duly adopted on May 22, 1995,
authorized the creation of the Corporation to act on behalf of the City by receiving and
expending revenues from the Sales Tax for various projects which promote or develop
new or expanded business enterprises;
WHEREAS, on June 26, 1995, the Corporation was duly created, incorporated,
chartered and organized pursuant to Article 5190.6, Texas Revised Civil Statutes (the
"Act");
WHEREAS, pursuant to the Act, the Corporation is authorized to issue bonds for
the purposes of paying the costs of the Project, said bonds being payable from and
secured by the proceeds of the Sales Tax;
WHEREAS, the Corporation desires to issue and sell its Sales Tax Revenue
Bonds, Series 2006 in an aggregate principal amount of $10,235,000 (the "Series 2006
Bonds") for the purposes of(i) paying the costs of the Project and (ii) paying the costs of
issuing the Series 2006 Bonds;
WHEREAS, in connection with the issuance of the Series 2006 Bonds, the City.
has agreed, on behalf of the City and the Corporation, to provide certain financial
information and operating data annually in accordance with the Rule (as defined herein);
and
WHEREAS, the City and the Corporation have previously entered into that
certain Amended and Restated Agreement Regarding the Construction and Maintenance
of Street and Bridge Improvements in connection with the Project (the "Amended and
Restated Agreement").
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF PEARLAND, TEXAS, as follows:
1
HOU:2574652.1
1. Findings and Determinations. It is hereby officially found and determined
that all of the facts recited in the preamble hereto are true and correct and the preamble is
incorporated into and made a part of this Ordinance.
2. Tax Levy and Pledge. The City has covenanted and agreed in the
Amended and Restated Agreement and hereby authorizes the appropriate City officials to
take all steps necessary and authorized under the Act and other applicable laws to
continuously levy and collect the Sales Tax at the rate of%2% so long as any of the Series
2006 Bonds and any Additional Bonds (as defined in the Amended and Restated
Agreement) are outstanding in the manner and to the maximum extent permitted by
applicable law. The City hereby agrees that it will not cause a reduction, abatement, or
exemption in the Sales Tax, or in the rate in which it is authorized to be collected. The
City also agrees that any repeal of the right and power to levy the Sales Tax will not be
effective until all the Series 2006 Bonds and any Additional Bonds have been paid in full
or until they are legally defeased in accordance with the resolutions authorizing their
issuance. The City hereby agrees to pay to the Corporation, by a direct deposit into the
Corporation's Sales Tax Revenue Fund, 100% of the revenues collected from the annual
levy and assessment of the Sales Tax, less any amounts due to the Comptroller of Public
Accounts of the State of Texas for collection costs and other charges, for the term of the
Amended and Restated Agreement.
3. Approval of Bond Resolution. The City hereby authorizes the
Corporation to adopt the resolution authorizing the issuance of the Corporation's Sales
Tax Revenue Bonds, Series 2006, in the aggregate principal amount of$10,235,000 (the
"Bond Resolution"), substantially in the form attached hereto as Exhibit "A," and hereby
approves said Bond Resolution and the issuance of the bonds described therein.
4. Continuing Disclosure Undertaking.
(a) The City hereby agrees to provide annually to each NRMSIR and any
SID, within six months after the end of each fiscal year ending in or after 2006, financial
information and operating data with respect to the Corporation and the City of the general
type included in the final Official Statement authorized by Section 9.3 of the Bond
Resolution, being the financial information and operating data described in the Official
Statement under the captions "HISTORICAL PLEDGED REVENUES," DEBT
SERVICE SCHEDULE" AND "MANAGEMENT AND OPERATION OF THE
CORPORATION" in the Official Statement. Any financial statements so to be provided
shall be (1) prepared in accordance with the accounting principles described in Appendix
C 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 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
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HOU:2574652.1
City otherwise would be required to provide financial information and operating data
pursuant to this Ordinance.
The financial information and operating data to be provided pursuant to this
Ordinance 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.
•
(b) The City hereby agrees to notify any SID and either each NRMSIR or the
MSRB, in a timely manner, of any of the following events with respect to the Series 2006
Bonds, if such event is material within the meaning of the federal securities laws:
•
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 Series 2006 Bonds;
7. Modifications to rights of holders of the Series 2006 Bonds;
8. Bond calls;
9. Defeasances;
10. Release, substitution, or sale of property securing repayment of the
Series 2006 Bonds; and •
11. 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 this Ordinance by the time required by this Ordinance.
(c) The City shall be obligated to observe and perform the covenants specified
in this Paragraph 4 for so long as, but only for so long as, the City or the Corporation
remains an "obligated person" with respect to the Series 2006 Bonds within the meaning
of the Rule, except that the City in any event will give the notice required by this
3
HOU:2574652.1
Ordinance of any Bond calls and defeasance that cause the City or the Corporation to be
no longer such an "obligated person."
The provisions of this Paragraph 4 are for the sole benefit of the holders and
beneficial owners of the Series 2006 Bonds, and nothing in this Paragraph 4, 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 Paragraph 4-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 Paragraph 4 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 Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE
HOLDER OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN
CONTRACT OR 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 PARAGRAPH 4,
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
Paragraph 4 shall constitute a breach of or default under this Ordinance for purposes of
any other provision of this Ordinance.
Nothing in this Paragraph 4 is intended or shall act to disclaim, waive, or
otherwise limit the duties of the City or the Corporation under federal and state securities
laws.
The provisions of this Paragraph 4 may be 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
or the Corporation, but only if (1) the provisions of this Paragraph 4, as so amended,
would have permitted an underwriter to purchase or sell the Series 2006 Bonds in the
primary offering of the Series 2006 Bonds in compliance with the Rule, taking into
account any amendments or interpretations of the Rule to the date of such amendment, as
well as such changed circumstances, and (2) either (a) the holders of a majority in
aggregate principal amount (or any greater amount required by any other provision of the
Bond Resolution that authorizes such an amendment) of the outstanding Bonds 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 Series 2006 Bonds. If the City so
amends the provisions of this Paragraph 4, it shall include with any amended financial
information or operating data next provided in accordance with its Paragraph 4 an
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HOU:2574652.1
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 Paragraph 4 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
Paragraph 4 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 lawfully purchasing or selling Bonds in the primary offering of the
Series 2006 Bonds, giving effect to (a) such provisions as so amended and (b) any
amendments or interpretations of the Rule.
(d) As used in this Ordinance, 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.
6. Further Actions. The Mayor, City Secretary and the other officials of the
City are hereby authorized,jointly and severally, to execute and deliver such certificates,
documents, or papers necessary and advisable, and to'take such actions as are necessary
to carry out the intent and purposes of this Ordinance.
7. Severability. If any word, phrase, clause, sentence, paragraph, section or
other part of this Ordinance, or the application thereof to any person or circumstance,
shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction,
the remainder of this Ordinance and the application of such word, phrase, clause,
sentence, paragraph, section or other part of this Ordinance to any other persons or
circumstances shall not be affected thereby.
8. Effective Date. This Ordinance shall be in full force and effect from and
upon adoption.
9. Repealer. All orders, resolutions and ordinances, or parts thereof,
inconsistent herewith are hereby repealed to the extent of such inconsistency.
5
HOU:2574652.1
PASSED AND APPROVED on'this 22nd day of May, 2006.
Mayor
ATTEST:
Sec /
4� Qea�iva�r�,
.$vARL' Q
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O.
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HOU:2574652.1
EXHIBIT A
BOND RESOLUTION
See Tab
. HOU:2574652.1
MATURITY SCHEDULE OF THE BONDS
FISCAL YEAR PRINCIPAL
AMOUNT
2007 $50,000
2008 $165,000
2009 $170,000
2010 $180,000
2011 $185,000
2012 $200,000
2013 $210,000
2014 $215,000 -
2015 $230,000
2016 $240,000
2017 $255,000
2018 $265,000
2019 .$280,000
2020 $300,000
2021 $310,000
2022 $325,000
2023 $345,000
2024 $365,000
2025 $385,000
2026 $405,000
2027 $1,190,000
2028 $1,255,000
2029 $1,320,000
2030 $1,390,000
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
SALES TAX REVENUE BONDS
SERIES 2006
TRANSCRIPT OF PROCEEDINGS
•
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220=4200
HOU:648931.1 •
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
SALES TAX REVENUE BONDS, SERIES 2006
INDEX OF DOCUMENTS
BOND AUTHORIZATION PROCEEDINGS
Corporation's Resolution Calling Public Hearing and
Authorizing Publication of Notice of Public Hearing and
Right to Petition 1
Affidavit of Publication of Notice of Public Hearing and
Right to Petition 2
City's Resolution Authorizing Issuance of the Bonds 3
Corporation's Resolution Authorizing Issuance of the Bonds 4
Paying Agent/Registrar Agreement 5
Preliminary Official Statement and Official Notice of Sale 6
Official Statement 7
CERTIFICATES
Signature Identification and No-Litigation Certificate 8
General Certificate of the Corporation 9
General Certificate of the City 10
Official Statement Certificate 11
Federal Tax Certificate and Form 8038-G 12
Certificate of Bond Insurer/Surety Bond Provider 13
OPINIONS
Opinion of Bond Counsel 14
Guaranty Opinion 15
Opinion of Attorney General of Texas with Certificate 16
of Comptroller of Public Accounts
Opinion of Counsel to the Bond Insurer/Surety Bond Provider 17
HOU:2578714.1
CLOSING DOCUMENTS
Receipt and Cross Receipt 18
Registrar's Receipt 19
Municipal Bond Insurance Policy 20
Surety Bond 21
Financial Guaranty Agreement(for Surety Bond) 22
Reliance Letter 23
Rating Letters 24
Winning Bid 25
Specimen Bond 26
Bond Review Board Questionnaire 27
HOU:2578714.1
CERTIFICATE FOR RESOLUTION
STATE OF TEXAS §
COUNTIES OF HARRIS AND BRAZORIA §
We, the undersigned officers of the Board of Directors (the "Board") of the Pearland
Economic Development Corporation(the"Corporation"), hereby certify as follows:
1. The Board of the Corporation convened in a regular meeting on March 6, 2006, at
the regular meetingplace thereof, within the City of Pearland, Texas, and the roll was called of
�
the duly constituted officers and members of the Board, to-wit:
Randall Ferguson Chairman
Helen Beckman Secretary
Lucy Stevener Director
Felicia Kyle Director
George Sandars Director
Ed Thompson Director
Gary Idoux Director
and all of such persons were present, thus constituting a quorum. Whereupon, among other
business, the following was transacted at such meeting: a written
RESOLUTION CALLING PUBLIC HEARING, AUTHORIZING
PUBLICATION OF NOTICE OF PUBLIC HEARING AND RIGHT TO
PETITION, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING
THERETO
was duly introduced for the consideration of the Board and read in full. It was then duly moved
and seconded that said resolution be adopted; and, after due discussion, such motion, carrying
with it the adoption of said resolution,prevailed and carried by the following vote:
7 AYES 0 NOES
2. That a true, full and correct copy of the aforesaid resolution adopted at the
meeting described in the above and foregoing paragraph is attached to and follows this
certificate; that such resolution has been duly recorded in the Board's minutes of such meeting;
that the above and foregoing paragraph is a true, full and correct excerpt from the Board's
minutes of such meeting pertaining to the adoption of such resolution; that the persons named in
the above and foregoing paragraph are the duly chosen, qualified and acting officers and
members of the Board as indicated therein; that each of the officers and members of the Board
was duly and sufficiently notified officially and personally, in advance, of the date, hour, place
and purpose of the aforesaid meeting, and that the resolution would be introduced and considered
for adoption at such meeting, and each of such officers and members consented, in advance, to
the holding of such meeting for such purpose; that such meeting was open to the public as
HOU:2554093.1
•
t '
required by law; and that public notice of the date, hour, place and subject of such meeting was
given as required by Chapter 551, Texas Government Code, as amended.
- SIGNED AND SEALED this (4 day of March, 2006.
h an
•
Secretary
•
•
•
HOU:2554093.1
RESOLUTION CALLING PUBLIC HEARING, AUTHORIZING
PUBLICATION OF NOTICE OF PUBLIC HEARING AND RIGHT TO
PETITION, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING
THERETO
WHEREAS, the City of Pearland, Texas (the "City"), by Ordinance No. R95-36 duly
adopted on May 22, 1995, authorized the creation of the Pearland Economic Development
Corporation(the "Corporation") to act on behalf of the City by receiving and expending sales tax
revenues for various projects, including the acquisition and construction of streets and roads and
drainage and related improvements which promote or develop new or expanded business
enterprises (the "Project"); and
WHEREAS, on January 21, 1995, the voters of the City approved the levy of a one-half
of one percent sales and use tax to be used for the benefit of the Corporation, includingthe
�
Project (the"Sales Tax"); and
WHEREAS, on June 26, 1995, the Corporation was duly created, incorporated, chartered
and organized pursuant to Article 5190.6, Texas Revised Civil Statutes, as amended (the "Act");
and
WHEREAS, pursuant to the Act, the Corporation is authorized to issue bonds for the
purpose of constructing the Project, said bonds being payable from and secured by the proceeds
of the Sales Tax; and
WHEREAS, pursuant to the Act, the Corporation is required to publish notice of the
Corporation's intent to undertake the Project and the Corporation must also hold a public hearing
with respect to such Project.
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE PEARLAND
ECONOMIC DEVELOPMENT CORPORATION THAT:
Section 1. Findings and Determinations. The facts recited in the preamble hereto are
found and declared to be true and correct and are hereby adopted by the Board of Directors of the
Corporation(the "Board") and made a part of this Resolution for all purposes.
Section 2. Authorization of Notice and Public Hearing. The Board hereby authorizes
the Executive Director of the Corporation to take any and all actions necessary to cause the
Notice of Public Hearing and Right To Petition attached hereto as Exhibit A to be published on
behalf of the Corporation in a newspaper which is of general circulation in the City, with such
publication to occur not later than Wednesday, March 22, 2006. The Board further determines
that a public hearing on the Project shall be held in the City Council Chambers at Pearland City
Hall, 3519 Liberty Drive, Pearland, Texas, on Monday, May 22, 2006 at 5:00 p.m. as described
on Exhibit A hereto.
Section 3. Authorization of a Preliminary Official Statement. The Board hereby
approves the preparation and distribution by the Corporation's financial advisor to prospective
purchasers of the Bonds of the Preliminary Official Statement, as the same may be completed,
HOU:2549352.3
modified, or supplemented with the approval of the Executive Director of the Corporation or
other authorized officers and agents of the Board.
Section 4. Authorization of Other Matters Relating Thereto. The President and
Secretary of the Board, the Executive Director of the Corporation and other officers and agents
of the Corporation are hereby authorized and directed to do any and all things necessary or
desirable to carry out the provisions of this Resolution.
Section 5. Effective Date. This Resolution shall take effect immediately upon
passage.
Section 6. Public Meeting. It is officially found, determined and declared that the
meeting at which this Resolution is adopted was open to the public and public notice of the time,
place and subject matter of the public business to be considered at such meeting, including this
Resolution,was given all as required by the Texas Government Code,Chapter 551, as amended.
HOU:2549352.3
EXHIBIT A
NOTICE OF PUBLIC HEARING AND RIGHT TO PETITION
TO ALL INTERESTED PERSONS AND PARTIES:
NOTICE IS HEREBY GIVEN that the Board of Directors of the Pearland Economic
Development Corporation (the "Corporation") will meet at its regular meeting place in the City
of Pearland (the "City") City Council Chambers at Pearland City Hall, 3519 Liberty Drive,
Pearland, Texas at 5:00 p.m. on Monday, May 22, 2006, which is the time and place the
Corporation will hold a public hearing on the proposed construction of two lanes of Bailey Oiler
Road running west from SH 35 and existing Oiler Drive to Veterans Drive, including the
acquisition of all necessary rights of way, the construction of drainage and sewage lines along
the proposed construction and associated improvements, the construction of a two lane rail
overpass across the Burlington Northern Lines along the construction route, the construction of
four lane transition turn-in lanes at SH 35 and Veterans Drive and median cuts for future
development along the construction route (collectively, the "Project"). A portion of the proceeds
from the levy of the one-half of one percent sales and use tax, approved by the voters of the City
on January 21, 1995, for the benefit of the Corporation, will be used by the Corporation to pay
the costs of the Project, including paying principal and interest on bonds issued by the
Corporation for the Project.
IF WITHIN 60 DAYS after the publication of this corrected notice the Corporation
receives a petition from more than 10% of the registered voters of the City requesting that an
election be held before the Project is developed or the proceeds of such sales and use tax are used
to pay for such Project, then the Corporation will not develop the Project or use the proceeds of
the sales and use tax to pay the costs of the Project unless and until approved at an election called
and held in the City for such purpose. Petitions may be submitted to the City Secretary, City of
Pearland, 3519 Liberty Drive,Pearland, Texas 77581.
HOU:2549352.3
AFFIDAVIT OF PUBLICATION
The Friendswood Reporter News
P.O. Box 954
Friendswood, Texas 77546
State of Texas
Galveston and Harris Counties
I, Lloyd Morrow, hereby certify that the notice hereby appended was published in
THE REPORTER NEWS, a newspaper of general circulation in Galveston, Harris and
Brazoria Counties, for I issues, as follows:
No. Date (II CIA g 20
No. Date 20
No. Date 20
No. Date 20
No. Date 20
0q):1\
CFO
Subscribe and sworn to before me this 3'O day of /`'[G '
20
:00 LAURA ANN EMMONS
Notary Public,State of Texas06; N4
.0
• , 4. Commission Expires 09-09-20
,rro.•.
• aura Ann Emmons, Publisher
Notary Public, State of Texas
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CERTIFICATE FOR RESOLUTION
THE STATE OF TEXAS §
COUNTIES OF BRAZORIA AND HARRIS §
CITY OF PEARLAND §
We,the undersigned officers of the City of Pearland, Texas (the"City"),hereby certify as
follows:
1. The City Council of the City convened in a regular meeting on May 22, 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:
Tom Reid Mayor
Richard Tetens Mayor Pro-Tern
Helen Beckman Councilmember
Steve Saboe Councilmember
Felicia Kyle Councilmember
Kevin Cole Councilmember
and all of said persons were present except Tom Reid, thus constituting a quorum. Whereupon,
among other business, the following was transacted at said meeting: a written
RESOLUTION OF THE CITY OF PEARLAND, TEXAS APPROVING THE
RESOLUTION AUTHORIZING THE ISSUANCE OF THE PEARLAND
ECONOMIC DEVELOPMENT CORPORATION SALES TAX REVENUE
BONDS, SERIES 2006; AUTHORIZING A CONTINUING DISCLOSURE
UNDERTAKING IN CONNECTION WITH SUCH BONDS; AND MAKING
VARIOUS FINDINGS AND PROVISIONS RELATED TO THE SUBJECTS
(the "Resolution") was duly introduced for the consideration of the City Council. It was then
duly moved and seconded that the Resolution be adopted; and, after due discussion, such motion,
carrying with it the adoption of the Resolution,prevailed and carried by the following vote:
AYES: 5 NAYS: 0
1
1 HOU:2574652.1
2. That a true, full, and correct copy of the Resolution adopted at the meeting
described in the above and foregoing paragraph is attached to and follows this certificate; that the
Resolution has been duly recorded in the City Council's minutes of such meeting; that the above
and foregoing paragraph is a true, full, and correct excerpt from the City Council's minutes of
such meeting pertaining to the adoption of the Resolution; that the persons named in the above
and foregoing paragraph are the duly chosen, qualified, and acting officers and members of the
City Council as indicated therein; that each of the officers and members of the City Council was
duly and sufficiently notified officially and personally, in advance, of the date, hour, place,.and
subject of the aforesaid meeting, and that the Resolution would be introduced and considered for
adoption at said meeting, and each of such officers and members consented, in advance, to the
holding of such meeting for such purpose; that said 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 Chapter 551, Texas Government Code, as amended.
SIGNED AND SEALED this May , 2006.
C' Secret Mayor
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2
HOU:2574652.1
RESOLUTION NO. R-2006-75
RESOLUTION OF THE CITY OF PEARLAND, TEXAS APPROVING THE
RESOLUTION AUTHORIZING THE ISSUANCE OF THE PEARLAND
ECONOMIC DEVELOPMENT CORPORATION SALES TAX REVENUE
BONDS, SERIES 2006; AUTHORIZING A CONTINUING DISCLOSURE
UNDERTAKING IN CONNECTION WITH SUCH BONDS; AND MAKING
VARIOUS FINDINGS AND PROVISIONS RELATED TO THE SUBJECTS
WHEREAS, on January 21, 1995, the voters of the City of Pearland, Texas (the "City")
approved the levy of a one-half of one percent sales and use tax (the "Sales Tax") to be used for.
the benefit of the Pearland Economic Development Corporation (the "Corporation"), including,
among other things, for paying the costs of acquisition and construction of streets and roads and
drainage and related improvements which promote or develop new or expanded business
enterprises (the"Project");
• WHEREAS, the City, by Ordinance No. R95-36 duly adopted on May 22, 1995,
authorized the creation of the Corporation to act on behalf of the City by receiving and •
expending revenues from the Sales Tax for various projects which promote or develop new or
expanded business enterprises;
• WHEREAS, on June 26, 1995, the Corporation was duly created, incorporated, chartered
• and organized pursuant to Article 5190.6, Texas Revised Civil Statutes (the"Act");
WHEREAS, pursuant to the Act, the Corporation is authorized to issue bonds for the
purposes of paying the costs of the Project, said bonds being payable from and secured by the
proceeds of the Sales Tax;
WHEREAS, the Corporation desires to issue and sell its Sales Tax Revenue Bonds,
Series 2006 in an aggregate principal amount of$10,235,000 (the "Series 2006 Bonds") for the
purposes of(i) paying the costs of the Project and (ii)paying the costs of issuing the Series 2006
Bonds;
WHEREAS, in connection with the issuance of the Series 2006 Bonds, the City has
agreed, on behalf of the City and the Corporation, to provide certain financial information and
operating data annually in accordance with the Rule(as defined herein); and
WHEREAS, the City and the Corporation have previously entered into that certain
Amended and Restated Agreement Regarding the Construction and Maintenance of Street and
BridgeImprovementsAgreement").
m connechon with the Project (the"Amended and Restated Agreement ).
NOW, THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS, as follows:
3
HOU:2574652.1
1. Findings and Determinations. It is hereby officially found and determined that all
of the facts recited in the preamble hereto are true and correct and the preamble is incorporated
into and made a part of this Ordinance.
2. Tax Levy and Pledge. The City has covenanted and agreed in the Amended and
Restated Agreement and hereby authorizes the appropriate City officials to take all steps
necessary and authorized under the Act and other applicable laws to continuously levy and
collect the Sales Tax at the rate of %2% so long as any of the Series 2006 Bonds and any
Additional Bonds (as defined in the Amended and Restated Agreement) are'outstanding in the
manner and to the maximum extent permitted by applicable law. The City hereby agrees that it
will not cause a reduction, abatement, or exemption in the Sales Tax, or in the rate in which it is
authorized to be collected. The City also agrees that any repeal of the right and power to levy the
Sales Tax will not be effective until all the Series 2006 Bonds and any Additional Bonds have
been paid in full or until they are legally defeased in accordance with the resolutions authorizing
their issuance. The City hereby agrees to pay to the Corporation, by a direct deposit into the
Corporation's Sales Tax Revenue Fund, 100% of the revenues collected from' the annual levy
and assessment of the Sales Tax, less any amounts due to the Comptroller of Public Accounts of
the State of Texas for collection costs and other charges, for the term of the Amended and
Restated Agreement.
3. Approval of Bond Resolution. The City hereby authorizes the Corporation to
adopt the resolution authorizing the issuance of the Corporation's Sales Tax Revenue Bonds,
Series 2006, in the aggregate principal amount of $10,235,000 (the "Bond Resolution"),
substantially in the form attached hereto as Exhibit "A," and hereby approves said Bond
Resolution and the issuance of the bonds described therein.
4. Continuing Disclosure Undertaking.
(a) The City hereby agrees to provide annually to each NRMSIR and any SID, within
six months after the end of each fiscal year ending in or after 2006, financial information and
operating data with respect to the Corporation and the City of the general type included in the
final Official Statement authorized by Section 9.3 of the Bond Resolution, being the financial
information and operating data described in the Official Statement under the captions
"HISTORICAL PLEDGED REVENUES," DEBT SERVICE SCHEDULE" AND
"MANAGEMENT AND OPERATION OF THE CORPORATION" in the Official Statement.
Any financial statements so to be provided shall be (1) prepared in accordance with the
accounting principles described in Appendix C 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 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
Ordinance.
4
HOU:2574652.1
The financial information and operating data to be provided pursuant to this Ordinance
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.
(b) The City hereby agrees to notify any SID and either each NRMSIR or the MSRB,
in a timely manner, of any of the following events with respect to the Series 2006 Bonds, if such
event is material within the meaning of the federal securities laws:
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
Series 2006 Bonds;
7. Modifications to rights of holders of the Series 2006 Bonds;
8. Bond calls;
9. Defeasances;.
10. Release, substitution, or sale of property securing repayment of the Series
2006 Bonds; and
11. 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 this Ordinance by the time required by this Ordinance.
(c) The City shall be obligated to observe and perform the covenants specified in this
Paragraph 4 for so long as, but only for so long as, the City or the Corporation remains an
"obligated person"with respect to the Series 2006 Bonds within the meaning of the Rule, except
that the City in any event will give the notice required by this Ordinance of any Bond calls and
defeasance that cause the City or the Corporation to be no longer such an"obligated person."
The provisions of this Paragraph 4 are for the sole benefit of the holders and beneficial
owners of the Series 2006 Bonds, and nothing in this Paragraph 4, express or implied, shall give
5
HOU:2574652.1
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 Paragraph 4 and does not
hereby undertake to provide any other information that maybe 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 Paragraph 4 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 Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER
OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR
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 PARAGRAPH 4, 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 Paragraph 4
shall constitute a breach of or default under this Ordinance for purposes of any other provision of
this Ordinance.
Nothing in this Paragraph 4 is intended or shall act to disclaim, waive, or otherwise limit
the duties of the City or the Corporation under federal and state securities laws.
The provisions of this Paragraph 4 may be 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 or the Corporation,but
only if (1) the provisions of this Paragraph 4, as so amended, would have permitted an
underwriter to purchase or sell the Series 2006 Bonds in the primary offering of the Series 2006
Bonds in compliance with the Rule, taking into account any amendments or interpretations of the
Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a)
the holders of a majority in aggregate principal amount (or any greater amount required by any
other provision of the Bond Resolution that authorizes such an amendment) of the outstanding
Bonds 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 Series 2006 Bonds. If the City so amends
the provisions of this Paragraph 4, it shall include with any amended financial information or
operating data next provided in accordance with its Paragraph 4 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 Paragraph 4 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 Paragraph 4 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 lawfully purchasing or selling Bonds in the
6
HOU:2574652.1
primary offering of the Series 2006 Bonds, giving effect to (a) such provisions as so amended
and(b) any amendments or interpretations of the Rule.
(d) As used in this Ordinance, 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.
6. Further Actions. The Mayor, City Secretary and the other officials of the City are
hereby authorized,jointly and severally,.to execute and deliver such certificates, documents, or
papers necessary and advisable, and to take such actions as are necessary to carry out the intent
and purposes of this Ordinance.
7. Severability. If any word, phrase, clause, sentence, paragraph, section or other
part of this Ordinance, or the application thereof to any person or circumstance, shall ever be
held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of
this Ordinance and the application of such word, phrase, clause, sentence, paragraph, section or
other part of this Ordinance to any other persons or circumstances shall not be affected thereby.
8. Effective Date. This Ordinance shall be in full force and effect from and upon
adoption.
9. Repealer. All orders, resolutions and ordinances, or parts thereof, inconsistent
herewith are hereby repealed to the extent of such inconsistency.
7
HOU:2574652.1
I -
-, PASSED AND APPROVED on this 22nd day of May, 2006.
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Mayor
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HOU:2574652.1
EXHIBIT A
BOND RESOLUTION
See Tab 4 •
, 4
HOU:2574652.1
CERTIFICATE FOR RESOLUTION
STATE OF TEXAS §
COUNTY OF HARRIS §
We, the undersigned officers of the Board of Directors (the"Board") of the Pearland
Economic Development Corporation(the"Corporation"),hereby certify as follows:
1. The Board of the Corporation convened in a regular meeting on May 22, 2006, at
the regular meeting place thereof, within the City of Pearland,Texas, and the roll was called of
the duly constituted officers and members of the Board, to-wit:
Randall Ferguson Chairman and President
Lucy Stevener Secretary
Helen.Beckman Director
Felicia Kyle Director
Steve Saboe Director
George Sandars Director
Ed Thompson Director
and all of such persons were present except Steve Saboe, thus constituting a quorum.
Whereupon, among other business, the following was transacted at such meeting: a written
RESOLUTION AUTHORIZING THE ISSUANCE OF $10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006; AND CONTAINING OTHER
PROVISIONS RELATED THERETO
was duly introduced for the consideration of the Board. It was then duly moved and seconded
that such resolution be adopted; and, after due discussion, such motion, carrying with it the
adoption of such resolution, prevailed and carried by the following vote:
6 AYES 0 NOES
HOU:2574645.3
2. That a true, full and correct copy of the above-referenced resolution adopted at the
meeting described in the above and foregoing paragraph is attached to and follows this
certificate; that such resolution has been duly recorded in the Board's minutes of such meeting;
that the above and foregoing paragraph is a true, full and correct excerpt from the Board's
minutes of such meeting pertaining to the adoption of such resolution; that the persons named in
the above and foregoing paragraph are the duly chosen, qualified and acting officers and
members of the Board as indicated therein; that each of the officers and members of the Board
was duly and sufficiently notified officially and personally, in advance, of the date, hour, place
and purpose of the above-referenced meeting, and that the resolution would be introduced and
considered for adoption at such meeting, and each of such officers and members consented, in
advance, to the holding of such meeting for such purpose; that such meeting was open to the
public as required by law; and that public notice of the date, hour, place and subject of such
meeting was given as required by Chapter 551, Texas Government Code, as amended.
SIGNED AND SEALED this 22nd day of May, 2006.
R all Ferguson
Chairman and President
Lucy Stevener
Secretary
(SEAL)
2
HOU:2574645.1
RESOLUTION AUTHORIZING THE ISSUANCE OF $10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006; AND CONTAINING OTHER
PROVISIONS RELATED THERETO
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE PEARLAND
ECONOMIC DEVELOPMENT CORPORATION:
ARTICLE I
FINDINGS AND DETERMINATIONS
Section 1.1: Findings and Determinations. It is hereby officially found
and determined that: On January 21, 1995, the voters of the City approved the levy of one-half
of one percent (1/2%) sales and use tax to be used for the benefit of the Corporation (the "Sales
Tax"), including, among other things, paying the costs of acquisition and construction of streets
and roads and drainage and related improvements which promote or develop new or expanded
business enterprises.
The CityCouncil of the Cityof Pearland Texas (the "City"), byOrdinance No. R95-
�) � Y )�
36 duly adopted on May 22, 1995, authorized the creation of the Pearland Economic
Development Corporation (the "Corporation") to act on behalf of the City by receiving and
expending sales tax revenues for various projects which promote or develop new or expanded
business enterprises.
(c) On June 26, 1995, the Corporation was duly created, incorporated, chartered and
organized pursuant to Article 5190.6, Texas Revised Civil Statutes, as amended(the"Act").
(d) The construction of two lanes of Bailey Oiler Road running west from SH 35 and
existing Oiler Drive to Veterans Drive, including the acquisition of all necessary rights of way,
the construction of drainage and sewage lines along the proposed construction and associated
improvements, the construction of a two lane rail overpass across the Burlington Northern Lines
along the construction route, the construction of four lane transition turn-in lanes at SH 35 and
Veterans Drive and median cuts for future development along the construction route (the
"Project") is important to the economic growth and development of the City and will benefit the
City's residents by aiding the City's efforts to encourage growth and development, stimulate
commerce, promote or develop new or expanded business enterprises, and enhance the health,
safety, and welfare of the City's residents.
(e) As permitted by the Act, the Corporation desires to issue sales tax revenue bonds
upon the terms and conditions and for the purposes herein provided.
3
HOU:2574645.3
ARTICLE II
DEFINITIONS AND INTERPRETATIONS
Section 2.1: Definitions. In this Resolution, the following terms shall
have the following meanings,unless the context clearly indicates otherwise:
"Act" shall mean Article 5190.6, Texas Revised Civil Statutes, as amended.
"Additional Parity Bonds" shall mean the additional bonds permitted to be issued by the
Corporation pursuant to Section 6.1 of this Resolution.
"Attorney General" shall mean the Attorney General of the State of Texas.
"Board of Directors" shall mean the governing body of the Corporation.
"Bond Insurance Policy" shall mean the financial guaranty insurance policy issued by the
Bond Insurer insuring the payment when due of the principal of and interest on the Bonds, as
provided therein.
"Bond Insurer" shall mean Ambac Assurance Corporation,or any successor thereto.
"Bond" or"Bonds" shall mean the Corporation's Sales Tax Revenue Bonds, Series 2006,
but only to the extent such Bonds are Outstanding within the meaning of this Resolution.
"Business Day" shall mean any day other than (i) a Saturday, Sunday, or other day on
which banking institutions in the city where the principal corporate trust office of the Paying
Agent/Registrar is located are authorized by law or executive order to close, or (ii) a day on
which the New York Stock Exchange is closed.
"City" shall mean the City of Pearland, Texas, a municipal corporation and home-rule
city, and where appropriate, the City Council 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.
"Construction Fund" shall mean the Construction Fund created pursuant to Section 9.4 of
this Resolution.
"Corporation" shall mean the Pearland Economic Development Corporation, and any
successor thereto.
"Debt Service Fund" shall mean the Debt Service Fund created pursuant to Section 5.2 of
this Resolution.
"Debt Service Requirement" shall mean the amount necessary to pay the principal of,
premium, if any, and interest due and owing on the Bonds, and any Additional Parity Bonds,
4
HOU:2574645.3
during each Fiscal Year of the Corporation. The Debt Service Schedule for the Bonds is
attached to this Resolution as Exhibit A.
"Fiscal Year" shall mean the fiscal year of the Corporation, which is currently the twelve-
month period beginning on October 1 of each year and ending on September 30 of the following
year.
"Outstanding," when used with reference to the Bonds shall mean, as of a particular date,
the principal amount of all such Bonds theretofore delivered by the Corporation as provided in or
contemplated by this Resolution, except: (a) any such Bond canceled by or on behalf of the
Corporation at or before such date; (b) any such Bond paid or with respect to which provision for
payment has been made pursuant to the provisions of this Resolution or otherwise defeased as
permitted by applicable law; or (c) any such Bond in lieu of or in substitution for which another
Bond shall have been delivered pursuant to this Resolution.
"Owner" or "Registered Owner," when used with respect to any Bond, shall mean the
person or entity in whose name such Bond is registered in the Register. Any reference to a
particular percentage or proportion of the Owners shall mean the Owners at a particular time of
the specified percentage or proportion in aggregate principal amount of all Bonds then
Outstanding under this Resolution, exclusive of Bonds held by the Corporation.
"Parity Bonds" shall mean the Corporation's Sales Tax Revenue and Refunding Bonds,
Series 2005, the Corporation's Sales Tax Revenue Bonds, Series 1997, the Bonds, each series of
Additional Parity Bonds from time to time hereafter issued by the Corporation, and any
refunding bonds issued to refund the Bonds or any Additional Parity Bonds, but only to the
extent such Parity Bonds remain Outstanding.
"Paying Agent/Registrar" shall mean Wells Fargo Bank, N.A., Minneapolis, Minnesota,
and its successors in that capacity.
"Payment Date", when used in connection with any Bond, shall mean March 1, 2007, and
each September 1 and March 1 thereafter until maturity or prior redemption.
"Pledged Revenues" shall mean (a) 100% of the Sales Tax Revenues and (b) 100% of all
of the interest income from the investment or deposit of moneys in the Revenue Fund, the Debt
Service Fund and the Reserve Fund.
"Project" shall mean the construction of two lanes of Bailey Oiler Road running west
from SH 35 and existing Oiler Drive to Veterans Drive, including the acquisition of all necessary
rights of way, the construction of drainage and sewage lines along the proposed construction and
associated improvements, the construction of a two lane rail overpass across the Burlington
Northern Lines along the construction route, the construction of four lane transition turn-in lanes
at SH 35 and Veterans Drive and median cuts for future development along the construction
route.
"Purchaser" shall mean the initial purchaser of the Bonds as defined in Section 9.1 of this
Resolution.
"Record Date" shall mean, for any Payment Date, the fifteenth (15th) calendar day of the
month next preceding each Payment Date.
5
HOU:2574645.3
"Register" shall mean the books of registration kept by the Paying Agent/Registrar in
which are maintained the names and addresses of, and the principal amounts of the Bonds
registered to, each Owner.
"Reserve Fund" shall mean the Reserve Fund created pursuant to Section 5.2 of this
Resolution.
"Reserve Fund Requirement" shall mean an amount (which may consist of money or
authorized investments, or any combination thereof) equal to 100% of the average annual debt
service on any Parity Bonds, the Bonds and any Additional Parity Bonds then Outstanding.
"Reserve Fund Surety Bond" shall mean the surety bond issued by the Reserve Fund
Surety Bond Insurer guaranteeing certain payments into the Reserve Fund with respect to the
Bonds, as provided therein and subject to the limitations set forth therein.
"Reserve Fund Surety Bond Insurer" shall mean Ambac Assurance Corporation, or any
successor thereto.
"Resolution" shall mean this Resolution Authorizing the Issuance of $10,235,000
Pearland Economic Development Corporation Sales Tax Revenue Bonds, Series 2006, and all
amendments hereof and supplements hereto.
"Revenue Fund" shall mean the Revenue Fund created pursuant to Section 5.2 of this
Resolution.
"Sales Tax" shall mean the 1/2 of 1% sales and use tax authorized to be levied by the
City for the benefit of the Corporation for the promotion and development of new and expanded
business enterprises pursuant to an election held on January 21, 1995.
"Sales Tax Revenues" shall mean 100% of the funds collected by the City from the levy
of the Sales Tax, without deduction, offset or credit for any administrative charges or expenses
incurred by the City or the Corporation in connection with the levy and collection of the Sales
Tax, other than any amounts due and owing to the Comptroller for collection costs and other
charges.
"Surplus Fund" shall mean the Surplus Fund created pursuant. to Section 5.2 of this
Resolution.
Section 2.2: Interpretations. All terms defined herein and all pronouns
used in this Resolution 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 Resolution 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 Resolution 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 Parity Bonds and the validity of the lien on and pledge of the Pledged
Revenues to secure the payment of the Parity Bonds.
6
HOU:2574645.3
ARTICLE III
TERMS OF THE BONDS
Section 3.1: Name, Amount, Purpose, Authorization. The Bonds shall
be issued in fully registered form, without coupons, in the aggregate principal amount of TEN
MILLION TWO HUNDRED THIRTY FIVE THOUSAND AND NO/100 DOLLARS
($10,235,000) for the purposes permitted by the Act, including particularly (1) acquiring and
constructing streets and roads, drainage and related improvements within the City, specifically•
the Project, and(2)paying the costs of issuing the Bonds.
Section 3.2: Designation, Date, and Payment Dates. The Bonds shall be
dated June 15, 2006, and designated as the PEARLAND ECONOMIC DEVELOPMENT'
CORPORATION SALES TAX REVENUE BONDS, SERIES 2006, and shall bear interest at
the rates set forth in Section 3.3 of this Resolution from the later of June 15, 2006, or the most
' recent Payment Date to which interest has been paid or duly provided for, calculated on the basis
of a 360-day year composed of twelve 30-day months, payable on March 1, 2007, and
semiannually thereafter on September 1 and March 1 of each year until maturity or prior
redemption.
•
Section 3.3: Initial Bonds; Numbers; Denomination; Interest Rates and
Maturities. Except for the initial Bond, the Bonds shall be initially issued bearing
the numbers,in the principal amounts, and bearing interest at the rates set forth below, and may
be transferred and exchanged as set out in this Resolution. The Bonds shall mature, subject to
prior redemption in accordance with this Resolution,.on September 1 in each of the years and in
the amounts set out in the following schedule. Bonds delivered on transfer of or in exchange for
other Bonds shall be numbered in order of their authentication by the Paying Agent/Registrar,
shall be in the denomination of$5,000 or integral multiples thereof, and shall mature on the same
date and bear interest at the same rate as the Bond or Bonds in lieu of which they are delivered.
Bond Year of Principal Interest
Number Maturity Amount Rate
R-1 2007 $50,000 5.000%
R-2 2008 165,000 4.500
R-3 2009 170,000 4.250
R-4 2010 180,000 4.250
R-5 2011 185,000 5.000
R-6 2012 200,000 5.000
R-7 2013 210,000 5.000
R-8 2014 215,000 5.000
R-9 2015 230,000 5.000
R-10 2016 240,000 4.250
R-11 2017 255,000 4.250
R-12 2018 265,000 4.375
R-13 2019 280,000 4.375
R-14 2020 300,000 4.500
7
HOU:2574645.3
Bond Year of Principal Interest
Number Maturity Amount Rate
R-15 2021 310,000 4.500
*** *** *** ***
R-16 2024 1,035,000 5.000
• *** *** *** ***
R-17 2027 1,980,000 5.000
*** *** *** ***
R-18 2030 3,965,000 4.750
Section 3.4: Optional Redemption. (a) The Corporation reserves the
right, at its option, to redeem Bonds maturing on or after September 1, 2017, in whole, or from
time to time in part, on September 1, 2016 or on any date thereafter, at par plus accrued interest
on the amounts called for redemption to the date fixed for redemption. If less than all of the
Bonds are to be redeemed, the Corporation shall determine the particular Bonds or portions
thereof to be redeemed.
(b) The Bonds maturing on September 1 in the years 2024, 2027 and 2030 (the "Term
Bonds") are subject to mandatory sinking fund redemption in the following amounts (subject to
reduction as hereinafter provided), on the following dates, in each case at a redemption price
equal to the principal amount of the Bonds the portions thereof so called for redemption plus
accrued interest to the date fixed for redemption:
Mandatory Redemption Dates Principal Amounts
Term Bonds Maturing September 1,2024 September 1,2022 $325,000
September 1,2023 345,000
September 1,2024 365,000
Term Bonds Maturing September 1,2027 September 1,2025 $385,000
September 1,2026 405,000
September 1,2027 1,190,000
Term Bonds Maturing September 1,2030 September 1,2028 $1,255,000
September 1,2029 1,320,000
September 1,2030 1,390,000
The particular Term Bonds 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
Bonds are to be mandatorily redeemed. The principal amount of Term Bonds to be mandatorily
redeemed in each year shall be reduced by the principal amount of such Term Bonds that have
been optionally redeemed on or before September 1 of such year and which have not been made
the basis for a previous reduction.
(c) Principal amounts may be redeemed only in integral multiples of $5,000. If a
Bond subject to redemption is in a denomination larger than $5,000, a portion of such Bond may
be redeemed, but only in integral multiples of $5,000. Upon surrender of any Bond for
redemption in part, the Paying Agent/Registrar, in accordance with Section 3.11 of this
Resolution, shall authenticate and deliver in exchange therefor a Bond or Bonds of like maturity
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HOU:2574645.3
and interest rate in an aggregate principal amount equal to the unredeemed portion of the Bond
so surrendered.
(d) Notice of any redemption identifying the Bonds to be redeemed in whole or in
part shall be given by the Paying Agent/Registrar at least thirty days prior to the date fixed for
redemption by sending written notice by first class mail, postage prepaid, to the Owner of each
Bond to be redeemed in whole or in part at the address shown on the Register. Such notices shall
state the redemption date, the redemption price, and the place at which Bonds are to be
surrendered for payment and, if less than all Bonds outstanding are to be redeemed in any one
maturity, the numbers of the Bonds or portions thereof of such maturity to be redeemed. In
selecting portions of Bonds for redemption, the Paying Agent/Registrar shall treat each Bond as
representing that number of Bonds of $5,000 denomination which is obtained by dividing the
principal amount of such Bond by$5,000. The Paying Agent/Registrar shall select the particular
Bonds to be redeemed within any given maturity by lot or other random method. Any notice
given as provided in this Section 3.4 shall be conclusively presumed to have been duly given,
whether or not the Owner receives such notice. By the date fixed for redemption, due provision
shall be made with the Paying Agent/Registrar for payment of the redemption price of the Bonds
or portions thereof to be redeemed, plus accrued interest to the date fixed for redemption. When
Bonds have been called for redemption in whole or in part and due provision has been made to
redeem the same as herein provided, the Bonds or portions thereof so redeemed shall no longer
be regarded as Outstanding except for the purpose of receiving payment solely from the funds so
provided for redemption, and the rights of the Owners to collect interest which would otherwise
accrue after the redemption date on any Bond or portion thereof called for redemption shall
terminate on the date fixed for redemption.
Section 3.5: Execution of Bonds. The Bonds shall be signed on behalf
of the Corporation by the Chairman and countersigned by the Secretary by their manual,
lithographed, or facsimile signatures thereon. Such facsimile signatures on the Bonds shall have
the same effect as if each of the Bonds had been signed manually and in person by each of said
officers. If any officer of the Corporation whose manual or facsimile signature shall appear on
the Bonds shall cease to be such officer before the authentication of such Bonds or before the
delivery of such Bonds, such manual or facsimile signature shall nevertheless be valid and
sufficient for all purposes as if such officer had remained in such office.
Section 3.6: Approval By Attorney General: Registration by
Comptroller. The Bonds to be initially issued shall be delivered to the Attorney
General for examination and approval and shall be registered by the Comptroller. The manually.
executed registration certificate of the Comptroller substantially in the form provided in Article
IV of this Resolution shall be affixed or attached to the Bonds to be initially issued.
Section 3.7: Authentication. Except for the Bonds to be initially issued,
which need not be authenticated, only such Bonds as shall bear thereon a certificate of
authentication substantially in the form provided in Article IV of this Resolution, manually
executed by an authorized representative of the Paying Agent/Registrar, shall be entitled to the
benefits of this Resolution or shall be valid or obligatory for any purpose. Such duly executed
certificate of authentication shall be conclusive evidence that the Bond so authenticated was
delivered by the Paying Agent/Registrar hereunder.
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Section 3.8_ Payment of Principal and Interest. The principal of the
Bonds shall be payable, without exchange or collection charges, in any coin or currency of the
United States of America which, on the date of payment, is legal tender for the payment of debts
due the United States of America, upon their presentation and surrender as they respectively
become due and payable at the principal corporate trust office of the Paying Agent/Registrar.
The interest on each Bond shall be payable by check payable on the Payment Date,mailed by the
Paying Agent/Registrar on or before each Payment Date to the Owner of record as of the Record
Date, to the address of such Owner as shown on the Register, or by such other method,
acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the
Owner.
If the date for the payment of principal or interest on any Bond is not a Business Day,
then the date for such payment shall be the next succeeding Business Day, and payment on such
date shall have the same force and effect as if made on the original date such payment was due.
Section 3.9: Special Record Date. If interest on any Bond is not paid on
any Payment Date and continues unpaid for thirty (30) days thereafter, the Registrar shall
establish a new record date for the payment of such interest, to be known as a "Special Record
Date." The Registrar shall establish a. Special Record Date when funds to make such interest
payment are received from or on behalf of the Corporation. 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 Owner or
record of an affected Bond as of the close of business on the day prior to the mailing of such
notice.
Section 3.10: Ownership. The Corporation, the Paying Agent/Registrar
and any other person may treat the person in whose name any Bond is registered as the absolute
Owner of such Bond for the purpose of making and receiving payment of the principal of or
interest on such Bond, and for all other purposes, whether or not such Bond is overdue, and
neither the Corporation 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 Owner of any
Bond in accordance with this Section 3.10 shall be valid and effectual and shall discharge the
liability of the Corporation and the Paying Agent/Registrar upon such Bond to the extent of the
sums paid.
Section 3.11: Registration, Transfer and Exchange. So long . as any
Bonds remain outstanding, the Paying Agent/Registrar shall keep the Register at its principal
corporate trust office in Minneapolis, Minnesota, and, subject to such reasonable regulations as it
may prescribe, the Paying Agent/Registrar shall provide for the registration and transfer of
Bonds in accordance with the terms of this Resolution.
Each Bond shall be transferable only upon the presentation and surrender thereof at the
principal corporate trust office of the Paying Agent/Registrar, duly endorsed for transfer, or
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
Bond in proper form for transfer, the Paying Agent/Registrar shall authenticate and deliver in
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HOU:2574645.3
exchange therefor, within three (3) Business Days after such presentation, a new Bond or Bonds,
registered in the name of the transferee or transferees, in the same maturity and aggregate
principal amount and bearing interest at the same rate as the Bond or Bonds so presented.
All Bonds shall be exchangeable upon presentation and surrender thereof at the principal
corporate trust office of the Paying Agent/Registrar for a Bond or Bonds of the same maturity
and interest rate, in an aggregate amount equal to the unpaid principal amount of the Bond or
Bonds presented for exchange. The Paying Agent/Registrar shall be and is hereby authorized to
authenticate and deliver exchange Bonds in accordance with the provisions of this Section 3.11.
Each Bond delivered in accordance with this Section 3.11 shall be entitled to the benefits and
security of this Resolution to the same extent as the Bond or Bonds in lieu of which such Bond is
delivered.
The Corporation or the Paying Agent/Registrar may require the Owner of any Bond to
pay a sum sufficient to cover any tax or other governmental charge that may be imposed in
connection with the transfer or exchange of such Bond. Any fee or charge of the Paying
Agent/Registrar for such transfer or exchange shall be paid by the Corporation.
The Paying Agent/Registrar shall not be required to transfer or exchange any Bond called
for redemption, in whole or in part, during the 45-day period immediately prior to the
redemption date; provided, however, that such limitation• shall not apply to the transfer or
exchange by the Owner of the unredeemed portion of a Bond called for redemption in part.
Section 3.12: Book-Entry Only System.
(a) The definitive Bonds shall be initially issued in the form of a separate single fully
registered Bond for each of the maturities thereof. Upon initial issuance, the ownership of each
such Bond shall be registered in the name of Cede & Co., as nominee of DTC, and except as
provided in subsection (b)hereof, all of the Outstanding Bonds shall be registered in the name of
Cede & Co., as nominee of DTC. Upon delivery by DTC to the Paying Agent/Registrar of
written notice to the effect that DTC has determined to substitute a new nominee in place of
Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being
mailed to the Owner at the close of business on the Record Date, the word "Cede & Co." in this
Ordinance shall refer to such new nominee of DTC.
With respect to Bonds 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
Bonds. 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 Bonds, (b)the delivery to any DTC Participant or any other person, other than a holder of the
Bond, as shown on the Register, of any notice with respect to the Bonds, including any notice of
redemption or(c) the payment to any DTC Participant or any other person, other than a holder of
the Bond, as shown in the Register of any amount with respect to principal of Bonds,premium, if
any, or interest on the Bonds.
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•
•
Except as provided in subsection (c) of this Section 3.12, the City and the Paying
Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is
registered in the Register as the absolute owner of such Bond for the purpose of payment of
principal of, premium, if any, and interest on Bonds, for the purpose of giving notices of
redemption and other matters with respect to such Bond, for the purpose of registering transfer
with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar
shall pay all principal of Bonds, premium, if any, and interest on the Bonds 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 Bonds to the extent of the sum or sums so paid. No
person other than an owner shall receive a Bond evidencing the obligation of the City to make
payments of amounts due pursuant to this Ordinance.
(b) •
Payments and Notices to Cede & Co. Notwithstandingany ym other provision of this
•
Ordinance to the contrary, as long as any Bonds 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
Bonds, and all notices with respect to such Bonds shall be made and given, respectively, in the
manner provided in the representation letter of the City to DTC.
Section 3.13: Successor Securities Depository; Transfer Outside Book-.
Entry Only System. In the event that the City or the Paying Agent/Registrar determines that
DTC is incapable of discharging its responsibilities described herein and in the representation
letter of the City to DTC, and that it is in the best interest of the beneficial owners of the Bonds
that they be able to obtain certified Bonds, 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 Bonds to such successor
securities depository or (b) notify DTC of the availability through DTC of Bonds and transfer
one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts.
In such event, the Bonds 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 holders of the Bonds
transferring or exchanging Bonds shall designate, in accordance with the provisions of this
Ordinance.
Section 3.14: Cancellation of Bonds. All Bonds paid or redeemed in
accordance with this Resolution, and all Bonds in lieu of which exchange Bonds or replacement
Bonds are authenticated and delivered in accordance herewith, shall be canceled and destroyed
upon the making of proper records regarding such payment or redemption. The Paying
Agent/Registrar shall furnish the Corporation with appropriate certificates of destruction of such
Bonds.
Section 3.15: Damaged, Mutilated, Lost, or Stolen Bonds. Upon the
presentation and surrender to the Paying Agent/Registrar of a damaged or mutilated Bond, the
Paying Agent/Registrar shall authenticate and deliver in exchange therefor a replacement Bond
of like maturity, interest rate and principal amount, bearing a number not contemporaneously
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outstanding. The Corporation or the Paying Agent/Registrar may require the Owner of such
Bond 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.
If any Bond is lost, apparently destroyed, or wrongfully taken, the Corporation, pursuant
to the applicable laws of the State of Texas and in the absence of notice or knowledge that such
Bond has been acquired by a bona fide purchaser, shall execute and the Paying Agent/Registrar
shall authenticate and deliver, a replacement Bond of like maturity, interest rate and principal
amount, bearing a number not contemporaneously outstanding, provided that the Owner thereof
shall have:
(1) furnished to the Corporation and the Paying Agent/Registrar satisfactory evidence
of the ownership of and the circumstances of the loss, destruction or theft of such
Bond;
(2) furnished such security or indemnity as may be required by the Paying
Agent/Registrar and the Corporation to save them harmless;
3paid all expenses and charges in connection therewith, including, but notlimited
p g g,
to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or
other governmental charge that may be imposed; and
(4) met any other reasonable requirements of the Corporation and the Paying
Agent/Registrar.
If, after the delivery of such replacement Bond, a bona fide purchaser of the original Bond in lieu.
of which such replacement Bond was issued presents for payment such original Bond, the
Corporation and the Paying Agent/Registrar shall be entitled to recover such replacement Bond
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 Corporation or the Paying
Agent/Registrar in connection therewith.
If any such damaged, mutilated, lost, apparently destroyed or wrongfully taken Bond has
become or is about to become due and payable, the Corporation in its discretion may, instead of
issuing a replacement Bond, authorize the Paying Agent/Registrar to pay such Bond.
Each replacement Bond delivered in accordance with this Section 3.15 shall be entitled to
the benefits and security of this Resolution to the same extent as the Bond or Bonds in lieu of
which such replacement Bond is delivered.
ARTICLE IV
FORM OF BONDS AND CERTIFICATES
Section 4.1: Forms. The form of the Bonds, including the form of
Statement of Insurance, the form of the Paying Agent/Registrar's Authentication Certificate, the
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1 4 ,
1
form of Assignment and the form of the Comptroller's Registration Certificate which shall be
attached or affixed to the Bonds initially issued, shall be, respectively, substantially as shown in
Exhibit B hereto, with such additions, deletions and variations as may be necessary or desirable
and not prohibited by this Resolution.
Section 4.2: Legal Opinion; Cusip Numbers. The approving opinion of
Andrews Kurth LLP, Houston, Texas, and CUSIP Numbers may be printed on the Bonds, but
errors or omissions in the printing of such opinion or such numbers shall have no effect on the
validity of the Bonds.
ARTICLE V
SECURITY AND SOURCE OF
PAYMENT FOR ALL PARITY BONDS
Section 5.1: Pledge and Source of Payment. The Corporation hereby
covenants and agrees that all Pledged Revenues shall be deposited and paid into the special funds
established in Section 5.2 of this Resolution, and shall be applied in the manner set out herein, to
provide for the payment of principal, interest and any redemption premium of the Parity Bonds
and all expenses of paying the same. The Parity Bonds shall constitute special obligations of the
Corporation that shall be payable solely from, and shall be equally and ratably secured by a first
lien on, the Pledged Revenues, as collected and received by the Corporation, which Pledged
Revenues shall, in the manner herein provided, be set aside and pledged to the payment of the
Parity Bonds in the Debt Service Fund and Reserve Fund, and any excess Sales Tax Revenues
shall be set aside in the Surplus Fund as hereinafter provided, and the Parity Bonds shall be in all
respects on a parity with and of equal dignity with one another. The owners of the Parity Bonds
shall never have the right to demand payment out of any funds raised or to be raised by ad
valorem taxation. The owners of the Parity Bonds shall never have the right to demand payment..
from Sales Tax Revenues in excess of those collected from the Sales Tax.
Section 5.2: Special Funds. The following special funds are hereby
created, and such funds shall be maintained and accounted for as hereinafter provided, so long as
any Parity Bonds remain Outstanding:
(a) the Revenue Fund;
(b) the Debt Service Fund; .
(c) the Reserve Fund; and
(d) the Surplus Fund.
The Revenue Fund and the Surplus Fund shall be maintained and accounted for as separate
accounts on the books of the Corporation. The Debt Service Fund and any moneys held in the
Reserve Fund shall be maintained at an official depository bank of the Corporation separate and
apart from all other funds and accounts of the City or the Corporation and shall constitute trust
funds which shall be held in trust for the benefit of the Owners of the Parity Bonds and the
proceeds of which shall be and are hereby pledged to the payment of the Parity Bonds. All of the
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funds named above shall be used solely as provided herein so long as any Parity Bonds remain
Outstanding.
• Section 5.3: Flow of Funds. All Pledged Revenues shall be deposited as
collected into the Revenue Fund. Money from time to time on deposit to the credit of the
Revenue Fund shall be applied as follows in the following order or priority:
(a) First, to make all deposits into the Debt Service Fund required by this Resolution, and
any resolution authorizing the issuance of Parity Bonds or Additional Parity Bonds;
(b) Second, to make any rebate payments required pursuant to Section 9.5 of this
Resolution;
(c) Third, to reimburse the Reserve Fund Surety Bond Insurer and any other issuer of a
surety bond issued in satisfaction of the Reserve Fund Requirement, any amounts advanced
under the Reserve Fund Surety Bond or such other surety bonds;
(d) Fourth, to pay interest to the Reserve Fund Surety Bond Insurer and any other issuer
of a surety bond issued in satisfaction of the Reserve Fund Requirement, for any amounts
advanced under the Reserve Fund Surety Bond or such other surety bonds;
(e) Fifth, to make all deposits into the Reserve Fund required by this Resolution, any
resolutions authorizing Parity Bonds and any resolution authorizing the issuance of Additional
Parity Bonds;
(f) Sixth, to make the transfers required by any resolutions authorizing the issuance or
incurrence of subordinate lien obligations (subject to the prior requirements of any resolutions
authorizing the issuance of Parity Bonds or Additional Parity Bonds); and
•
(g) Seventh, to make all deposits into the Surplus Fund as required by this Resolution,
1 said funds to be used for any lawful purpose.
Whenever the total amounts on deposit to the credit of the Debt Service Fund and the Reserve
Fund shall be equivalent to the sum of the aggregate principal amount of all Outstanding Parity
Bonds plus the aggregate amount of all interest accrued and to accrue thereon, no further
payments need be made into the Debt Service Fund or the Reserve Fund.
Section 5.4: Debt Service Fund. On or before the last Business Day of
each month, beginning July, 2006, so long as any Parity Bonds remain Outstanding, there shall
be deposited into the Debt Service Fund from the Revenue Fund such amounts, in approximately
equal monthly installments, as will be sufficient to accumulate the amount required to pay the
Debt Service Requirement on the next Payment Date.
If in any month the Corporation shall fail to make the full transfer to the Debt Service
Fund required by this Resolution, amounts equivalent to such deficiency shall be transferred to
the Debt Service Fund from the first available and unallocated money in the Revenue Fund in the
following month or months, and such transfers shall be in addition to the other amounts required
to be transferred to the Debt Service Fund.
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Money deposited to the credit of the Debt Service Fund shall be used soley for the
purpose of paying principal (at maturity or prior redemption or to purchase Parity Bonds issued
as term bonds in the open market to be credited against mandatory redemption requirements),
interest, and any redemption premium on the Parity Bonds, plus all bank charges and other costs
and expenses related to such payment. On or before each Payment Date on the Parity Bonds, the
Corporation shall transfer from the Debt Service Fund to the paying agents for the Parity Bonds
an amount equal to the principal, interest and any redemption premium payable on the Parity
Bonds on such date, together with an amount equal to all bank charges and other costs and
expenses relating to such payment. The paying agents for the Parity Bonds shall destroy all paid
Parity Bonds and shall provide the Corporation with an appropriate certificate of destruction.
Section 5.5: Reserve Fund. The Corporation shall initially deposit in
the Reserve Fund, within five years from the date of delivery of the Bonds; in equal monthly
installments, an amount which after such five-year period shall equal the Reserve Fund
Requirement. After such five-year period, so long thereafter as the Reserve Fund contains such
amount, no deposits shall be required to be made into the Reserve Fund, and any excess amounts
may be transferred to the Revenue Fund, the Debt Service Fund or the Surplus Fund. But, if and
whenever the balance in the Reserve Fund is reduced below such amount, monthly deposits into
the Reserve Fund from the first available and unallocated money in the Revenue Fund shall be
resumed and continued until the Reserve Fund has been restored to such amount. The Reserve
Fund shall be used to pay the principal of and interest on the Parity Bonds at any time when there
is not sufficient money available in the Debt Service Fund for such purpose and it may be used
finally to pay and retire the last Parity Bonds to mature or be redeemed.
In lieu of cash or investments, the Reserve Fund Requirement may be satisfied in whole
or in part with one or more surety bonds issued by an insurance company rated in the highest
rating category by Standard & Poor's Ratings Group and Moody's Investors Service, and, if
rated by A.M. Best & Company, also rated in the highest rating category by A.M. Best &
Company, including the Reserve Fund Surety Bond pursuant to the Financial Guaranty.
Agreement, a form of which is included in Exhibit C hereto, the terms and provisions of which
are hereby approved. The Chairman is.hereby authorized and directed to execute and deliver
such Guaranty Agreement on behalf of the Corporation, in multiple counterparts and the
Secretary is hereby authorized to attest thereto, together with such changes, additions, deletions
and amendments thereto as such officers shall deem necessary or appropriate. Such Reserve
Fund Surety Bond may be drawn upon only after all cash or investments held in the Reserve
Fund have been used or applied. If the Reserve Fund Requirement is satisfied with the Reserve,
Fund Surety Bond and one or more surety bonds authorized under this Section, draws on the
Reserve Fund Surety Bond and such other surety bonds shall be made on a pro rata basis. The
provisions of Exhibit D relating to the Reserve Fund Surety Bond. Insurer are hereby
incorporated herein for all purposes.
Notwithstanding anything in this Resolution to the contrary, the Bonds may not be
redeemed pursuant to Section 3.4 unless all amounts owed to the Reserve Fund Surety Bond
Insurer pursuant to the Guaranty Agreement have been paid in full.
Section 5.6: Surplus Fund. After making any transfers which may be
required into the Debt Service Fund, the Reserve Fund, or any other fund or funds created in any
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HOU:2574645.3
resolution authorizing the issuance of Parity Bonds, any money remaining in the Revenue Fund
shall be considered surplus, and may be deposited on any Payment Date into the Surplus Fund
and used by the Corporation for any lawful purpose.
Section 5.7: Deficiencies in Funds. If in any month there shall not be
deposited into any fund maintained pursuant to this Article the full amounts required herein;
amounts equivalent to such deficiency shall be set apart and paid into such fund or funds from
the first available and unallocated money in the Revenue Fund, and such payment shall be in
addition to the amounts otherwise required to be paid into such funds during the succeeding
month or months.
Section 5.8:. Investment of Funds; Transfer of Investment
Income. Money in the Revenue Fund, the Debt Service. Fund and the Reserve
Fund may, at the option of the Corporation, be invested in any manner permitted by law for
public funds; provided that all such deposits and investments shall be made in such manner that
the money required to be expended from any fund will be available at the proper time or times,
and provided further that in no event shall such deposits or investments of money in the Reserve
Fund mature later than the final maturity date of the Parity Bonds. All such investments shall be
valued in terms of current market value as of the last Business Day of the Corporation's Fiscal
Year. All such investments shall be promptly sold when necessary to prevent any default in
connection with the Parity Bonds.
All interest and income derived from such deposits and investments shall be transferred
or credited as received to the Revenue Fund, and shall constitute Pledged Revenues.
Section 5.9: Security for Uninvested Funds. So long as. any Parity
Bonds remain Outstanding, all uninvested money on deposit in, or credited to, the Revenue
Fund, the Debt Service Fund and the Reserve Fund shall be secured by the pledge of security, as
provided by Texas law. .
ARTICLE VI
ADDITIONAL BONDS
Section 6.1: Additional Parity Bonds. In addition to inferior lien bonds;
the Corporation expressly reserves the right hereafter to issue, in one or more series, Additional
Parity Bonds for purposes permitted by law, which Additional Parity Bonds, when issued, shall
be payable from and secured by liens on and pledges of the Pledged Revenues in the same
manner and to the same extent as the Bonds and any other Additional Parity Bonds; and the
Additional Parity Bonds, when issued, shall be payable from the Debt Service Fund and shall be
in all respects of equal dignity and on a parity with the Bonds and any other Additional Parity
Bonds. It is specifically provided, however, that no Additional Parity Bonds shall be issued
unless:
(a) Principal of the Additional Parity Bonds is payable on September 1 and interest is
payable on March 1 and September 1;
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HOU:2574645.3 .
(b) The Debt Service Fund and the Reserve Fund each contains the amount of money
then required to be on deposit therein;
(c) For any twelve (12) consecutive months of the preceding 18-month period
immediately preceding the month in which the resolution authorizing such Additional Parity
Bonds is adopted (the "Base Period"), the Pledged Revenues were equal to at least 1.25% of the
average annual principal and interest requirements on all Parity Bonds that will be Outstanding
after the issuance of the series of Additional Parity Bonds then proposed to be issued, as certified
by the Chairman of the Corporation, an authorized officer of the City, or by an independent
certified public accountant or firm of independent certified public accountants; and
(d) Provision is made in the resolution authorizing the Additional Parity Bonds then
proposed to be issued that (1) additional deposits will be made into the Debt Service Fund
sufficient to provide for the principal and interest requirements on the Additional Parity Bonds
and (2) deposits will be made into the Reserve Fund of such amount, or one or more surety
bonds will be provided, so that it will contain a balance not less than the Reserve Fund
Requirement on all Parity Bonds that will be Outstanding after the issuance of such series of
Additional Parity Bonds.
•
Section 6.2: Subordinate Lien Bonds. The Corporation reserves the
right to issue, for any purpose authorized under the Act,bonds, notes or other obligations secured
in whole or in part by liens on the Pledged Revenues that are junior and subordinate to the lien
on Pledged Revenues securing payment of the Parity Bonds. Such subordinate lien obligations
may be further secured by any other source of payment lawfully available for such purposes.
ARTICLE VII
PAYING AGENT/REGISTRAR
Section 7.1: Paying Agent/Registrar; Computation of Amount of
Interest. (a) Wells Fargo Bank, N.A., Minneapolis, Minnesota, is hereby•
appointed Paying Agent and Registrar for the Bonds. The Paying Agent/Registrar Agreement
shall be substantially in the form attached hereto as Exhibit E, the terms and provisions of which
are hereby approved, and the Chairman is hereby authorized and directed to execute and deliver
such Paying Agent/Registrar Agreement on behalf of the Corporation, in multiple counterparts
and the Secretary is hereby authorized to attest thereto, together with such changes, additions,
deletions and amendments thereto as such officers shall deem necessary or appropriate. Such
initial Paying Agent/Registrar and any successor Paying Agent/Registrar, by undertaking the
performance of the duties of the Paying Agent/Registrar hereunder, and in consideration of the
payment of any fees pursuant to the terms of any contract between the Paying Agent/Registrar
and the Corporation and/or the deposits of money pursuant to this Resolution, shall be deemed to
accept and agree to abide by the terms of this Resolution.
(b) All money transferred to the Paying Agent/Registrar by the Corporation under this
Resolution(except sums representing Paying Agent/Registrar's fees) shall be held in trust for the
benefit of the Registered Owners, shall be the property of the Corporation, and shall be disbursed
in accordance with this Resolution.
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HOU:2574645.3
(c) The Paying Agent/Registrar, in its individual or any other capacity, may become an
Owner or pledgee of Bonds with the same rights it would have if it was not the Paying/Agent
Registrar.
(d) The dollar amount of interest due and payable from time to time shall be computed by
the Paying Agent/Registrar.
(e) The Paying Agent/Registrar shall hold in escrow on behalf of the Corporation the
Bonds initially issued by the Corporation and approved by the Attorney General and shall deliver
such Bonds in accordance with this Resolution and the Bond Purchase Agreement.
(f) All matured Bonds presented to the Paying Agent/Registrar for payment shall be paid
without the necessity of further instructions from the Corporation. Such Bonds shall be canceled
as provided herein. Amounts held by the Paying Agent/Registrar which represent principal of
and interest on the Bonds remaining unclaimed by the Owner after the expiration of three (3)
years from the date such amounts have become due and payable shall be reported and disposed
of by the Paying Agent/Registrar in accordance with the applicable provisions of Texas law
including, to the extent applicable, Title 6 of the Texas Property Code, as amended. The Paying
Agent/Registrar shall have no liability to the Owners of the Bonds,by virtue of actions taken in
compliance with this Section.
(g) The Paying Agent/Registrar shall deliver a written demand for payment, in a form
acceptable to.the Reserve Fund Surety Bond Insurer, at least three business days prior to the date
on which a draw under the Reserve Fund Surety Bond will be required. The Paying
Agent/Registrar shall maintain adequate records, verified with the Reserve Fund Surety Bond
Insurer, regarding the amount available to be drawn at any given time under the Reserve Fund
Surety Bond and regarding to the amounts paid and owing to the Reserve Fund Surety Bond
Insurer under the terms of the Guaranty Agreement.
Section 7.2: Successor Paying Agents/Registrars. If the Paying
Agent/Registrar or its successors become unable for any reason to act as Paying Agent/Registrar
hereunder,the Corporation covenants that it will appoint a qualified bank or trust company as the'
Paying Agent/Registrar for the Bonds. No successor Paying Agent/Registrar shall be appointed
unless the Corporation shall have the first given 60 days' written notice, by first class mail, to
each Registered Owner of Bonds.
ARTICLE VIII
COVENANTS AND PROVISIONS
RELATING TO ALL PARITY BONDS
Section 8.1: Punctual Payment of Parity Bonds. The Corporation will
punctually pay or cause to be paid the interest and premium, if any, on and principal of all Parity
Bonds according to the terms thereof and will faithfully do and perform, and at all times fully
observe, any and all covenants, undertakings, stipulations and provisions contained in this
Resolution and in any resolution authorizing the issuance of Additional Parity Bonds. '
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HOU:2574645.3
Section 8.2: Accounts, Records, and Audits. So long as any Parity
Bonds remain Outstanding, the Corporation covenants and agrees that it will maintain a proper
and complete system of records and accounts in which full, true and proper entries will be made
of all dealings, transactions, business and affairs which in any way affect or pertain to the Sales
Tax Revenues or the Pledged Revenues. The Corporation shall after the close of each of its
Fiscal Years cause an audit report of such records and accounts to be prepared by an independent
certified public accountant or independent firm of certified public accountants. Each year
promptly after such audit report is prepared, the Corporation shall furnish a copy thereof without
cost to the Municipal Advisory Council of Texas, the major municipal rating agencies and any
owners of Parity Bonds who shall request same.
Section 8.3: Pledge and Encumbrance of Pledged Revenues. The
Corporation covenants and represents that it has the lawful power to create a lien on and to
pledge the Pledged Revenues to secure the payment of the Parity Bonds and has lawfully
exercised such power under the Constitution and laws of the State of Texas. The Corporation
further covenants and represents that, other than to the payment of the Parity Bonds, the Pledged
Revenues are not and will not be made subject to any other lien pledge or encumbrance to secure
the payment of any debt or obligation of the Corporation, unless such 'lien, pledge or
encumbrance is junior and subordinate to the lien and pledge securing payment of the Parity
Bonds. The Corporation covenants to take all such actions as may be necessary or required from
time to time under Texas law to preserve or perfect the priority of the first lien on Pledged
Revenues created in this section.
Section 8.4: Bondowners' Remedies. This Resolution shall constitute a
contract between the Corporation and the Owners of the Parity Bonds from time to time
Outstanding and this Resolution shall be and remain irrepealable until the Parity Bonds and the
interest thereon shall be fully paid or discharged or provision therefor shall have been made as
provided herein. In the event of a default in the payment of the principal of or interest or
premium, if any, on any of the Parity Bonds or a default in the performance of any duty or
covenant provided by law or in this Resolution, the Owner or Owners of any of the Parity Bonds
may pursue all legal remedies afforded.by the Constitution and laws of the State of Texas to
compel the,Corporation to remedy such default and to prevent further default or defaults.
Without in any way limiting the generality of the foregoing, it is expressly provided that any
Owner of any of the.Parity Bonds may at law or in equity, by suit, action, mandamus, or other
proceedings, enforce and compel performance of all duties required to be performed by.the
Corporation under this Resolution, including the deposit of the Pledged Revenues into the special
funds herein provided, and the application of such Pledged Revenues in the manner required in
this Resolution.
Section 8.5: Discharge by Deposit. The Corporation may defease the
provisions of this Resolution and discharge its obligation to the Owners of any or all of the
Bonds to pay principal thereof and interest and redemption premium, if any, thereon in any
manner now or hereafter permitted by law. Upon such defeasance and discharge, such Bonds .
shall no longer be regarded to be Outstanding or unpaid.
Notwithstanding anything'herein to the contrary, in the event that the principal and/or
interest due on the Bonds shall be paid by the Bond Insurer pursuant to the Bond Insurance
20
HOU:2574645.3
Policy, the Bonds shall remain outstanding for all purposes, not be defeased or otherwise
satisfied and not be considered paid by the Corporation, and the assignment and pledge of all
covenants, agreements and other obligations of the Corporation to the Owners shall continue to
exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be subrogated to
the rights of such Owners.
Section 8.6: Confirmation and Levy of Sales Tax. (a) The Corporation
hereby represents the City has duly complied with the provisions of the Act for the levy of the
Sales Tax at the rate voted at the election held by and within the City_on January 21, 1995,and
such Sales Tax is being imposed within the corporate limits of the City and the receipts of such
Sales Tax are being remitted to the City by the Comptroller of Public Accounts on a monthly
basis.
(b) While any Bonds are Outstanding, the Corporation covenants, agrees and warrants to.
take and pursue all action permissible to cause the Sales Tax, at said rate or at a higher rate if
legally permitted, to be levied and collected continuously, in the manner and to the maximum
extent permitted by law, and to cause no reduction, abatement or exemption in the Sales Tax or
rate of tax below the rate stated, confirmed and ordered in subsection (a) of this Section to be
ordered or permitted while any Bonds shall remain Outstanding.
(c) If hereafter authorized by law to apply, impose and levy the Sales Tax on any taxable
items or transactions that are not subject to the Sales Tax on the date of the adoption hereof, to
the extent it legally may do so, the Corporation agrees to use its best efforts to cause the City to
take such action as may be required to subject such taxable items or transactions to the Sales
Tax.
(d) The Corporation agrees to take and pursue all action legally permissible to cause the
Sales Tax to be collected and remitted and deposited as herein required and as required by the
Act, at the earliest and most frequent times permitted by law.
(e) The Corporation agrees to use its best efforts to cause the City to comply with the Act
and shall cause the Sales Tax Revenues to be deposited to the credit of the Revenue Fund in their
entirety immediately upon receipt by the City. In the alternative and if legally authorized, the
Corporation shall, by appropriate notice, direction, request or other legal method, use its good-
faith efforts to cause the Comptroller of Public Accounts of the State of Texas (the
"Comptroller") to pay all Sales Tax Revenues directly to the Corporation for deposit to the
Revenue Fund.
Section 8.7: Representations as to Security for the Bonds. (a) The
Corporation represents and warrants that, except for the Parity Bonds, the Pledged Revenues are
and will be and remain free and clear of any pledge, lien, charge or encumbrance thereon or with
respect thereto prior to, or of equal rank with, the pledge and lien created in or authorized by this
Resolution except as expressly provided herein.
(b) The Bonds and the provisions of this Resolution are and will be the valid and legally
enforceable obligations of the Corporation in accordance with their terms and the terms of this
21
HOU:2574645.3
Resolution,subject only to any applicable bankruptcy or insolvency laws or to any laws affecting
creditors rights generally.
(c) The Corporation shall at all times, to the extent permitted by law, defend, preserve
and protect the pledge of the Pledged Revenues and all the rights of the Owners against all
claims and demands of all persons whomsoever, and shall take such action necessary to protect
the priority of the pledge of the Pledged Revenues.
(d) The Corporation will take, and use its best efforts to cause the City to take, all steps
reasonably necessary and appropriate to collect all delinquencies in the collection of the Sales
Tax to the fullest extent permitted by the Act.
(e) The provisions, covenants, pledge and lien on and against the Pledged Revenues, as
herein set forth, are established and shall be for the equal benefit, protection and security of the
Owners of Parity Bonds without distinction as to priority and rights under this Resolution.
Section 8.8: No Recourse Against Corporation Officers. No recourse
shall be had for the payment of principal of or interest on any Parity Bonds or for any claim
based thereon or on this Resolution against any officer of the Corporation or any person
executing any Parity Bonds.
Section 8.9: Amendment to Resolution. The Corporation may, with the
consent_of Owners holding a majority in aggregate principal amount of the Bonds then
Outstanding affected thereby,.amend, add to, or rescind any of the provisions of this Resolution;
provided that, without the consent of all Owners of Outstanding Bonds, no such amendment,
addition or rescission shall (1) extend the time or times of payment of the principal of, premium,
if any, and interest on the Bonds, reduce the principal amount thereof, the redemption price
therefor, or the rate of interest thereon, or in any other way modify the,terms of payment of the
principal of, premium, if any, or interest on the Bonds, (2) give any preference to any Bond over
any other Bond, or (3) reduce the aggregate principal amount of Bonds required to be held by
Owners for consent to any such amendment, addition or rescission.
ARTICLE IX
PROVISIONS CONCERNING SALE AND
APPLICATION OF PROCEEDS OF BONDS
Section 9.1: Sale of Bonds; Insurance. The sale of the Bonds to Morgan
Keegan & Co., Inc. (the "Purchaser") at a price of the par value thereof plus accrued interest on
the Bonds, is hereby approved, and delivery of the Bonds to the Purchaser shall be made upon
payment therefor in accordance with the terms of sale and the terms and conditions of the
Purchaser's bid, which is attached hereto as Exhibit F. It is hereby officially found, determined
and declared that the Purchaser is the highest bidder for the Bonds as a result of invitations for
competitive bids. It is further officially found, determined and declared that the Bonds have
been sold at public sale to the bidder offering the lowest interest cost, which is hereby
determined to be a net effective interest rate of 4.795987%, after receiving sealed bids pursuant
22
HOU:2574645.3 '
to an Official Notice of Sale and Preliminary Official Statement prepared and distributed in
connection with the sale of the Bonds.
The Corporation hereby acknowledges that the Purchaser's bid is contingent upon the
issuance of a policy of The Bond Insurance Policy from the Bond Insurer insuring the timely
payment of principal of and interest on the Bonds. The terms and conditions of the Bond
Insurance Policy, as set out in Exhibit C hereto, are incorporated herein for all purposes for so
long as such policy remains in effect. Such Bond Insurance Policy is to be obtained at the
Purchaser's expense. The appropriate officials and representatives of the Corporation 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 Bonds of an appropriate
legend or statement regarding such insurance, as provided by the Bond Insurer, is hereby
approved.
Section 9.2: Approval, Registration and Delivery. The Chairman of the
Corporation is hereby authorized to have control and custody of the Bonds and all necessary
records and proceedings pertaining thereto pending their delivery, and the Chairman and other
appropriate officers of the Corporation are hereby authorized and directed to make such
certifications and to execute such instruments as may be necessary to accomplish the delivery of
the Bonds and to assure the investigation, examination and approval thereof by the Attorney
General and the registration of the initial Bonds by the Comptroller. Upon registration of the
Bonds, the Comptroller (or the Comptroller's bond clerk or an assistant bond clerk lawfully
designated in writing to act for the Comptroller) shall manually sign the Comptroller's
Registration Certificate prescribed herein to be attached or affixed to each Bond initially
delivered.
Section 9.3: Offering Documents; Ratings. The Board of Directors of
the Corporation hereby ratifies, authorizes and approves, in connection with the sale of the
Bonds, the preparation and distribution of the Notice of Sale and Preliminary Official Statement,
a copy of which is attached hereto as Exhibit G. A form of final Official Statement is attached
hereto as Exhibit H, which is substantially the same as the Preliminary Official, except for the
additional information necessary to conform the final Official Statement to the terms of this
Resolution.
Further, the Board of Directors of the Corporation hereby ratifies, authorizes and
approves the actions of the Chairman, the Corporation's financial advisor and other consultants
in seeking ratings on the Bonds from one or more of Moody's Investors Service, Inc. or Standard
Poor's Ratings Group, and such actions are hereby ratified and confirmed.
Section 9.4: Application of Proceeds of Bonds. Proceeds from the sale
of the Bonds shall,promptly upon receipt by the Corporation,be applied as follows:
(i) Accrued interest shall be deposited into the Debt Service Fund created in Section
5.2 of this Resolution;
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(ii) A portion of the proceeds shall be applied to pay expenses arising in connection
with the issuance of the Bonds, 'including payment of the premiums for the
Reserve Fund Surety Policy, if any; and
(iii) The remaining proceeds shall be deposited into the Construction Fund, which is
hereby created by the Corporation, to be used for the purposes permitted by the
Act, including particularly constructing the Project, all under and pursuant to the
authority of the Act.
Section 9.5: Tax Exemption. The Corporation intends that the interest
on the Bonds 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 Bonds. For this
purpose, the Corporation covenants that it will monitor and control the receipt, investment,
expenditure and use of all gross proceeds of the Bonds (including all property the acquisition,
construction or improvement of which is to be financed directly or indirectly with the proceeds
of the Bonds) 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
Bonds to be and remain excludable from the gross income, as defined in Section 61 of the Code,
of the owners of the Bonds for federal income tax purposes. Without limiting the generality of
the foregoing,the Corporation shall comply with each of the following covenants:
(a) The Corporation will use all of the proceeds of the Bonds to (i) provide funds for
the Project, which will be owned and operated by the Corporation and (ii) to pay
the costs of issuing the Bonds. The Corporation will not use any portion of the
proceeds of the Bonds to pay the principal of or interest or redemption premium
on, any other obligation of the Corporation or a related person.
(b) The Corporation will not directly or indirectly take any action, or omit to take any
action, which action or omission would cause the Bonds to. constitute "private
activity bonds"within the meaning of Section 141(a) of the Code.
(c) Principal of and interest on the Bonds will be paid solely from Pledged Revenues
collected by the Corporation, investment earnings on such collections, and as
available,proceeds of the Bonds.
(d) Based upon all facts and estimates now known or reasonably expected to be in
existence on the date the Bonds are delivered, the Corporation reasonably expects
that the proceeds of the Bonds will not be used in a manner that would cause the
Bonds or any portion thereof to be an "arbitrage bond" within the meaning of
Section 148 of the Code.
(e) At all times while the Bonds are outstanding, the Corporation will identify and
properly account for all amounts constituting gross proceeds of the Bonds in
accordance with the Regulations. The Corporation will monitor the yield on the
investments of the proceeds of the Bonds and, to the extent required by the Code
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HOU:2574645.3
and the Regulations, will restrict the yield on such investments to a yield which is
not materially higher than the yield on the Bonds. To the extent necessary to
prevent the Bonds from constituting"arbitrage bonds,"the Corporation will make
such payments as are necessary to cause the yield on all yield restricted
nonpurpose investments allocable to the Bonds to be less than the yield that is
materially higher than the yield on the Bonds.
(f) The Corporation will not take any action or knowingly omit to take any action
that, if taken or omitted, would cause the Bonds to be treated as "federally
guaranteed"obligations for purposes of Section 149(b) of the Code.
(g) The Corporation represents that not more than fifty percent (50%) of the proceeds
of the Bonds will be invested in nonpurpose 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
Corporation reasonably expects that at least eighty-five percent (85%) of the
spendable proceeds of the Bonds will be used to carry out the governmental
purpose of the Bonds within the three-year period beginning on the date of issue
of the Bonds.
(h) The Corporation will take all necessary steps to comply with the requirement that
certain amounts earned by the Corporation on the investment of the gross
proceeds of the Bonds, if any, be rebated to the federal government. Specifically,
the Corporation will (i) maintain records regarding the receipt, investment, and
expenditure of the gross proceeds of the Bonds as may be required to calculate
such excess arbitrage profits separately from records of amounts on deposit in the
funds and accounts of the Corporation allocable to other obligations of the
Corporation or moneys which do not represent gross proceeds of any obligations
of the Corporation and retain such records for at least six years after the day on
which the last outstanding Bond 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
Bonds and (iv) timely pay, as required by applicable Regulations, all amounts.
required to be rebated to the federal government. In addition, the Corporation
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 Corporation 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
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HOU:2574645.3
1 i
with respect to the gross proceeds of the Bonds 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 Bonds not
been relevant to either party.
(j) The Corporation 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 Bonds on such form and in such place as the Secretary
may prescribe.
(k) The Corporation will not issue or use the Bonds as part of an "abusive arbitrage
device" (as defined in Section 1.148-10(a) of the Regulations). Without limiting
the foregoing, the Bonds 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 Corporation 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 Corporation charged with the responsibility for issuing the
Bonds 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 Bonds
and stating whether there are facts, estimates or circumstances that would
materially change the Corporation's expectations. On or after the date of issuance
of the Bonds, the Corporation will. take such actions as• are necessary and
appropriate to assure the continuous accuracy of the representations contained in
such certificates.
(m) The covenants and representations made or required by this Section are for the
benefit of the Bond holders and any subsequent Bond holder, and may be relied
upon by the Bond holders and any subsequent Bond holder and bond counsel to
the Corporation.
In complying with the foregoing covenants, the Corporation may rely upon an
unqualified opinion issued to the Corporation by nationally recognized bond counsel that any
action by the Corporation or reliance upon any interpretation of the Code or Regulations
contained in such opinion will not cause interest on the Bonds to be includable in gross income
- for federal income tax purposes under existing law.
Notwithstanding any other provision of this Resolution, the Corporation's representations
and obligations under the covenants and provisions of this Section 9.5 shall survive the
defeasance and discharge of the Bonds for as long,as such matters are relevant to the exclusion
of interest on the Bonds from the gross income of the owners for federal income tax purposes.
ARTICLE X
MISCELLANEOUS
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Section 10.1: Related Matters. In order that the Corporation shall satisfy,
in a timely manner, all of its obligations under this Resolution, the Chairman, the Secretary and
other appropriate officers and agents of the Corporation are hereby authorized and directed to
take all other actions that are reasonably necessary to provide for issuance and delivery of the
Bonds, including executing by manual or facsimile signature and delivering on behalf of the
Corporation all certificates, consents, receipts, requests, notices, investment agreements and
other documents as may be reasonably necessary to satisfy the Corporation's obligations under
this Resolution and to direct the transfer and application of funds of the Corporation consistent
with the provisions of this Resolution. If requested by the Attorney General of Texas or his
representatives, the Chairman may authorize such ministerial changes in the written text of this
Resolution as are necessary to obtain the Attorney General's approval and as he determines are
consistent with the intent and purposes of this Resolution, which determination shall be final.
Section 10.2: Further Proceedings. The Chairman, Secretary and other
appropriate officers of the Corporation are hereby authorized and directed to do any and all
things necessary and/or convenient to carry out the terms of this Resolution.
Section 10.3: Severability. If any section, paragraph, clause or provision
of this Resolution 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 Resolution.
Section 10.4: Open Meeting. It is hereby found, determined and declared
that a sufficient written notice of the date, hour, place and subject of the meeting of the
Corporation at which this Resolution was adopted was posted at a place convenient and readily
accessible at all times to the general public at the City Hall of the City for the time required by
law preceding this meeting, as required by the Open Meetings Act, Chapter 551, Texas
Government Code, as amended, and that this meeting has been open to the public as required by
law at all times during which this Resolution and the subject matter thereof has been discussed,
considered and formally acted upon. The Corporation further ratifies, approves and confirms
such written notice and the contents and posting thereof.
Section 10.5: No Personal Liability. No recourse shall be had for
payment of the principal of or interest on any Bonds or for any claim based thereon, or on this
Resolution, against any officer or employee of the Corporation or any person executing any
Bonds.
Section 10.6: Repealer. All orders, resolutions and ordinances, or parts
thereof, inconsistent herewith are hereby repealed to the extent of such inconsistency.
Section 10.7: Governing Law. This Resolution shall be construed in
accordance with and governed by the laws of the State of Texas.
Section 10.8: Effective Date. This Resolution shall become effective
immediately upon passage by this Corporation and signature of the Chairman of the Corporation.
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[The remainder of this page intentionally left blank]
HOU:2574645.3
PASSED AND APPROVED this 22"a day of May, 2006.
CHA AN
ATTEST:
cdej9„_._x/&ejA_e____
SECRETARY
Exhibits:
A—Debt Service Schedule
B—Form of Bond
C—Municipal Bond Insurance Provisions
D—Bond Insurance/Surety Bond Provision
E—Paying Agent/Registrar Agreement
F—Winning Bid
G—Notice of Sale and Preliminary Official Statement
H—Official Statement
S-1
HOU:2574645.1
EXHIBIT A
DEBT SERVICE SCHEDULE
•
A-1
HOU:2574645.3
I i
EXHIBIT B
FORM OF BOND
UNITED STATES OF AMERICA
STATE OF TEXAS
I
NUMBER DENOMINATION
IR-
REGISTERED REGISTERED
PEARLAND ECONOMIC
DEVELOPMENT CORPORATION
SALES TAX REVENUE BOND
SERIES 2006
'INTEREST RATE: DATED DATE: 2MATURITY DATE: 2CUSIP:
June 15, 2006 September 1,
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS:
'THE PEARLAND ECONOMIC DEVELOPMENT CORPORATION (the
"Corporation"), a corporation created to act on behalf of the City of Pearland, Texas (the"City"),
in the County of Brazoria, in the State of Texas, for value received hereby promises to pay, but
solely from certain Pledged Revenues as hereinafter provided, to the Registered Owner identified
above or registered assigns, on the Maturity Date specified above, upon presentation and
surrender of this Bond at the principal payment office of Wells Fargo Bank, N.A., Minneapolis,
t Initial Bond shall be numbered T-1.
2 Omitted from initial Bond.
3 The first sentence of the initial Bond shall read as follows:
"THE PEARLAND ECONOMIC DEVELOPMENT CORPORATION (the "Corporation"), a corporation
created to act on behalf of the City of Pearland,Texas(the"City"),in the County of Brazoria,in the State of Texas,
for value received hereby promises to pay,but solely from certain Pledged Revenues as hereinafter provided,to the
Registered Owner identified above or registered assigns, on September 1 of each of the years and in the principal
amounts set forth in the following schedule: [Insert information regarding years of maturity,principal amounts and
interest rates from Section 3.3 of the Resolution.] upon presentation and surrender of this Bond at the principal
payment office of Wells Fargo Bank,N.A.,Minneapolis,Minnesota,or its successor(the"Paying Agent/Registrar"),
the principal amounts identified above, payable in any coin or currency of the United States of America which on
the date of payment of such principal is legal tender for the payment of debts due the United States of America,and
to pay, solely from such Pledged Revenues, interest thereon at the rate shown above, calculated on the basis of a
360-day year, composed of twelve 30-day months, from the later of the Dated Date specified above, or the most
recent interest payment date to which interest has been paid or duly provided for."
B-1
HOU:2574645.3
Minnesota, or its successor (the "Paying Agent/Registrar"), the principal amount identified
above, payable in any coin or currency of the United States of America which on the date of
payment of such principal is legal tender for the payment of debts due the United States of
America, and to pay, solely from such Pledged Revenues, interest thereon at the rate shown
above, calculated on the basis of a 360-day.year, composed of twelve 30-day months, from the
later of the Dated Date specified above or the most recent interest payment date to which interest
has been paid or duly provided for. Interest on this Bond is payable by check sent by United
States mail, first class, postage prepaid, payable on March 1 and September 1, beginning on
March 1, 2007, mailed to the registered owner as shown on the books of registration kept by the
Paying Agent/Registrar as of the fifteenth (15) calendar day of the month next preceding each
interest payment date, or by such other method, acceptable to the Paying Agent/Registrar,
requested by and at the risk and expense of the registered owner. Any accrued interest payable at.
maturity or earlier redemption shall be paid upon presentation and surrender of this Bond at the
principal corporate trust office of the Paying Agent/Registrar.
THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the "Bonds")
aggregating $10,235,000, issued for the purposes permitted by Article 5190.6, Texas Revised
Civil Statutes (the"Act"), including particularly(1) acquiring and constructing streets and roads,
drainage and related improvements within the City, and (2) paying the costs of issuing the
Bonds, all under and pursuant to the authority of the Act and all other applicable law, and a
resolution adopted by the Corporation on May 22, 2006 (the "Resolution"). Capitalized terms
used herein and not otherwise defined have the meanings ascribed to them in the Resolution.
'REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
BOND SET FORTH ON THE REVERSE HEREOF, WHICH PROVISIONS SHALL HAVE
THE SAME FORCE AND EFFECT AS IF SET FORTH AT THIS PLACE.
'THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit
under the Resolution unless this Bond is authenticated by the Paying Agent/Registrar by due
execution of the authentication certificate endorsed hereon.
4 This paragraph shall be omitted from the initial Bond and any other Bond for which text does not appear on the
• back of a printed bond certificate.
5 In the initial Bond,this paragraph shall read:
"THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the
Resolution unless this Bond is registered by the Comptroller of Public Accounts of the State of Texas by due
execution of the registration certificate endorsed hereon." .
Ir '
B-2
HOU:2574645.3
IN WITNESS WHEREOF, the Corporation has caused this Bond to be executed by the
Chairman of the Corporation and countersigned by the Secretary of the Corporation.by the
manual, lithographed or printed facsimile signatures.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
Chairman
COUNTERSIGNED:
Secretary
(Back Panel of Bond)
THE CORPORATION RESERVES THE RIGHT to redeem Bonds maturing on or after
September 1, 2017, in whole or from time to time in part, in integral multiples of$5,000, on
September 1, 2016, or on any date thereafter at par plus accrued interest on the principal amounts
called for redemption to the date fixed for redemption. Reference is made to the Resolution for
complete details concerning the manner of redeeming the Bonds.
THE BONDS maturing on September 1 in the years 2024, 2027 and 2030 (the "Term
Bonds") are subject to mandatory sinking fund redemption in the following amounts (subject to
reduction as hereinafter provided), on the following dates, in each case at a redemption price
equal to the principal amount of the Bonds the portions thereof so called for redemption plus
accrued interest to the date fixed for redemption:
Mandatory Redemption Dates Principal Amounts
Term Bonds Maturing September 1,2024 September 1,2022 $325,000
September 1,2023 345,000
September 1,2024 365,000
Term Bonds Maturing September 1,2027 September 1,2025 $385,000
September 1,2026 405,000
September 1,2027 . 1,190,000
Term Bonds Maturing September 1,2030 September 1,2028 $1,255,000
September 1,2029 1,320,000
September 1,2030 1,390,000
The particular Term Bonds 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
Bonds are to be mandatorilyredeemed. The principal amount of Term Bonds to be mandatoril
p p Y
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HOU:2574645.3
redeemed in each year shall be reduced by the principal amount of such Term Bonds 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.
NOTICE OF ANY REDEMPTION shall be given at least thirty (30) days prior to the
date fixed for redemption by first class mail, postage prepaid, addressed to the registered owner
of each Bond to be redeemed in whole or in part at the address shown on the books of
registration kept by the Paying Agent/Registrar. When Bonds or portions thereof have been
called for redemption, and due provision has been made to redeem the same, the principal
- amounts so redeemed shall be payable solely from the funds provided for redemption, and
interest which would otherwise accrue on the amounts called for redemption shall terminate on
the date fixed for redemption.
THIS BOND AND THE SERIES OF WHICH IT IS A PART are special obligations of
the Corporation that are payable from and are equally and ratably secured by a first lien on the
Pledged Revenues, as defined and provided in the Resolution, which Pledged Revenues are
required to be set aside and pledged to the payment of the Bonds, and all additional bonds issued
on a parity therewith, in the Debt Service Fund and Reserve Fund maintained for the payment of
all such Bonds, and any excess Sales Tax Revenues are to be set aside in the Surplus Fund and
used for any purpose authorized under the Act.
THIS BOND AND THE SERIES OF WHICH IT IS A PART ARE PAYABLE SOLELY
FROM SUCH PLEDGED REVENUES AND NEITHER THE STATE OF TEXAS (THE
"STATE"), THE CITY OF PEARLAND, TEXAS (THE "CITY"), NOR ANY POLITICAL
CORPORATION, SUBDIVISION OR AGENCY.OF THE STATE SHALL BE OBLIGATED
TO PAY THE SAME OR THE INTEREST THEREON AND NEITHER THE FAITH AND
CREDIT NOR THE TAXING POWER OF THE STATE, THE CITY, OR ANY OTHER
POLITICAL CORPORATION, SUBDIVISION OR. AGENCY THEREOF IS PLEDGED TO
THE PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS.
NEITHER THE BONDS NOR ANY INSTRUMENT' RELATED TO THE BONDS: MAY
GIVE A BONDHOLDER A RIGHT TO DEMAND PAYMENT FROM TAX PROCEEDS IN
EXCESS OF THOSE COLLECTED FROM THE SALES AND USE TAX IMPOSED BY THE
CITY PURSUANT TO THE ACT. THE OWNER HEREOF SHALL NEVER HAVE THE
RIGHT TO DEMAND PAYMENT OF THIS BOND OUT OF ANY FUNDS RAISED OR TO
BE RAISED BY AD VALOREM TAXATION.
THIS BOND IS TRANSFERABLE only upon presentation and surrender at the principal
payment office of the Paying Agent/Registrar, duly endorsed for transfer or accompanied by an
assignment duly executed by the registered owner or his authorized representative, subject to the
terms and conditions'of the Resolution.
THE BONDS ARE EXCHANGEABLE at the principal payment office of the Paying
Agent/Registrar for Bonds in the principal amount of $5,000 or any integral multiple thereof,
subject to the terms and conditions of the Resolution.
THE REGISTERED OWNER of this Bond, by acceptance hereof, acknowledges and
agrees to be bound by all the terms and conditions of the Resolution.
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HOU:2574645.3
THE CORPORATION has covenanted in the Resolution that it will at all times provide a
legally qualified paying agent and registrar for the Bonds and will cause notice of any change of
registrar to be mailed to each registered owner.
THE CORPORATION HAS RESERVED THE RIGHT to issue additional parity bonds,
subject to the restrictions contained in the Resolution, which may be equally and ratably payable
from, and secured by a first lien on and pledge of, the Pledged Revenues in the same manner and
to the same extent as this Bond and the series of which it is a part.
IT IS HEREBY DECLARED AND REPRESENTED that this Bond has been duly and
validly issued and delivered; that all acts, conditions, and things required or proper to be
performed, exist, and be done precedent to or in the issuance and delivery of this Bond have been
performed, existed, and been done in accordance with law; that the Bonds do not exceed any
statutory limitation; and that provision has been made for the payment of the principal of and
interest on this Bond and all of the Bonds by the creation of the aforesaid lien on and pledge of
- the Pledged Revenues.
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HOU:2574645.3
FORM OF REGISTRATION CERTIFICATE
THE STATE OF TEXAS
OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO.
I hereby certify that this Bond has been examined, certified as to validity and approved
by the Attorney General of the State of Texas, and that this Bond has been registered by the
Comptroller of Public Accounts of the State of Texas.
WITNESS MY SIGNATURE AND SEAL OF OFFICE this
Comptroller of Public Accounts
of the State of Texas
(SEAL)
FORM OF AUTHENTICATION CERTIFICATE
AUTHENTICATION CERTIFICATE
This Bond is one of the Bonds described in and delivered pursuant to the within-
mentioned Resolution, and, except for the Bonds initially delivered, this Bond has been issued in
exchange for or replacement of a Bond,Bonds or a portion of a Bond or Bonds of an issue which
- originally was approved by the Attorney General of the State of Texas and registered by the
Comptroller of Public Accounts of the State of Texas.
Wells Fargo Bank,N.A.
Minneapolis, Minnesota
By:
Authorized Signature
Date of Authentication:
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HOU:2574645.3
FORM OF STATEMENT OF INSURANCE
STATEMENT OF INSURANCE
Financial Guaranty Insurance Policy No. 30357 (the"Policy") with respect to payments due for principal of
and interest on this Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The
Policy has been delivered to The Bank of New York,New York,New York,as the Insurance Trustee under
said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on
file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be
secured from Ambac Assurance or the Insurance Trustee.All payments required to be made under the Policy
shall be made in accordance with the provisions thereof.The owner of this Bond acknowledges and consents
to the subrogation rights of Ambac Assurance as more fully set forth in the Policy.
FORM OF ASSIGNMENT
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
said Bond on the books kept for registration thereof, with full power of substitution in the
premises.
DATED:
Signature Guaranteed:
Registered Owner
NOTICE: The signature above must
correspond to the name of the registered owner
as shown on the face of this Bond in every
NOTICE: Signature must be guaranteed by a particular, without any alteration, enlargement
member firm of the New York Stock or change whatsoever.
exchange or a commercial bank or trust
company.
B-7
HOU:2574645.3
EXHIBIT C
MUNICIPAL BOND INSURANCE POLICY
See Tab No. 20
C1
HOU:2574645.3
EXHIBIT D
BOND INSURANCE/SURETY BOND PROVISION
See Tab No. 21 •
D-1
HOU:2574645.3
EXHIBIT E
PAYING AGENT/REGISTRAR AGREEMENT
See Tab No. 5
- E-1
HOU:2574645.3
EXHIBIT F
WINNING BID
See Tab No. 25
F-1
HOU:2574645.3
EXHIBIT G
NOTICE OF SALE AND PRELIMINARY OFFICIAL STATEMENT
See Tab No. 6
G-1
HOU:2574645.3
EXHIBIT H
OFFICIAL STATEMENT •
See Tab No. 7
H-1
HOU:2574645.3
PAYING AGENT/REGISTRAR AGREEMENT
THIS PAYING AGENT/REGISTRAR AGREEMENT dated as of May 22, 2006
(together with any amendments or supplements hereto, the "Agreement") is entered into by and
between the PEARLAND ECONOMIC DEVELOPMENT CORPORATION (the "Issuer"), and
WELLS FARGO BANK, N.A., 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 Pearland
Economic Development Corporation Sales Tax Revenue Bonds, Series 2006 (the "Bonds") to be
issued as fully.registered bonds.
WHEREAS, all things necessary to make the Bonds the valid obligations of the Issuer, in
accordance with their terms, will be done upon the issuance and delivery thereof;
WHEREAS, the Issuer and the Bank wish to provide the terms under which the Bank will
act as Paying Agent to pay the principal of, redemption premium, if any, and interest on the
Bonds, in accordance with the terms thereof, and under which the Bank will act as Registrar for
the Bonds; and
WHEREAS, the Issuer and the Bank have duly authorized the execution and delivery of
this Agreement; and all things necessary to make this Agreement the valid agreement of the
parties, in accordance with its terms, have been done..
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I.
APPOINTMENT OF BANK AS
PAYING AGENT AND REGISTRAR
Section 1.1. Appointment.
The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Bonds, to
pay to the Registered Owners of the Bonds, in accordance with the terms and provisions of this
Agreement and the resolution authorizing the issuance of the Bonds (the "Resolution"), the
principal of,redemption premium, if any, and interest on all or any of the Bonds.
The Issuer hereby appoints the Bank as Registrar with respect to the Bonds.
The Bank hereby accepts its appointment, and agrees to act as Paying Agent and
Registrar with respect to the Bonds.
HOU:2578719.1
Section 1.2. Compensation.
As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby
agrees to pay the Bank the fees set forth in the Bank's fee schedule attached as Exhibit A hereto.
The Bank reserves the right to amend the fee schedule at any time, provided the Bank.shall have
furnished the Issuer with a written copy of such amended fee schedule at least 75 days prior to
the date that the new fees are to become effective.
In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Bank in accordance with any of
the provisions hereof (including the reasonable compensation and the expenses and
disbursements of its agents and counsel).
ARTICLE II.
DEFINITIONS
Section 2.1. Definitions.
1�
For all purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
"Bank" means Wells Fargo Bank, N.A., a commercial bank duly organized and existing
under the laws of the United States of America.
"Bond" or "Bonds" means any one or all of the "Pearland Economic Development
Corporation Sales Tax Revenue Bonds, Series 2006" authorized by the Resolution.
"Issuer"means the Pearland Economic Development Corporation.
"Resolution"means the resolution of the Issuer authorizing the issuance of the Bonds.
"Paying Agent"means Wells Fargo Bank,National Association.
"Person" means any individual, corporation, partnership,joint venture, association,joint
stock company, trust, unincorporated organization or government or any agency or political
subdivision of a government or any entity whatsoever:
"Registrar"means the Bank when it is performing the function of registrar.
"Registered Owner"means the Person in whose name any Bond 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 Resolution.
2
HOU:2578719.1
ARTICLE III.
DUTIES OF THE BANK
Section 3.1. Initial Delivery of the Bonds.
The Bonds will be initially registered and delivered by the Bank to the purchaser
designated by the Issuer as set forth in the Resolution. 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 Bonds initially delivered for Bonds of
authorized denominations, registered in accordance with the instructions in such request and the
Resolution.
Section 3.2. Duties of Paying Agent.
As Paying Agent, the Bank shall, provided adequate funds have been provided to it for
such purpose by or on behalf of the Issuer, timely pay on behalf of the Issuer the principal of and
interest on each Bond in accordance with the provisions of the Resolution.
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 3.3. Duties of Registrar.
The Bank shall provide for the proper registration of the Bonds and the timely exchange,
replacement and registration of transfer of the Bonds in accordance with the provisions of the
Resolution. Any changes to Registered Owners for such exchange, replacement and registration
shall be made by the Bank only in accordance with the Resolution. The Bank will maintain the
books of registration in accordance with the Resolution and the Bank's general practices and
procedures in effect from time to time.
Section 3.4. Unauthenticated Obligations.
The Issuer shall provide an adequate inventory of unauthenticated Bonds to facilitate
transfers. The Bank covenants that it will maintain such unauthenticated Bonds in safekeeping
and will use reasonable care in maintaining such Bonds 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.
Section 3.5. Reports.
Upon request of the Issuer, the Bank will provide the Issuer reports which will describe in
reasonable detail all transactions pertaining to the Bonds and the books of registration for the
period of time specified by the Issuer. The Issuer may also inspect and make copies of the
t information in the books of registration and such other documents related to the Bonds and in the
Bank's possession at any time the Bank is customarily open for business, provided that
3
HOU:2578719.1
� .
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 3.6. Canceled Obligations.
All Bonds 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 Bonds previously
authenticated and delivered which the Issuer may have acquired in any manner whatsoever, and
all Bonds so delivered shall be promptly canceled by the Bank. All canceled Bonds held by the
Bank shall be destroyed and evidence of such destruction shall be furnished to the Issuer.
Section 3.7. Reliance on Documents, Etc.
(a) The Bank may conclusively rely, as to the truth of the statements and correctness
of the opinions expressed therein, on certificates or opinions furnished to the Bank by the Issuer.
(b) The Bank shall not be liable to the Issuer for actions taken under this Agreement
as long as it acts in good faith and exercises due diligence, reasonableness and care, as prescribed
by law, with regard to its duties hereunder.
(c) This Agreement is not intended to require the Bank to expend its own funds for
performance of any of its duties hereunder.
(d) The Bank may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys.
Section 3.8. Money Held by Bank.
Money held by the Bank hereunder shall be held in trust for the benefit of the Registered
Owners of the Bonds.
The Bank shall be under no obligation to pay interest on any money received by it
hereunder.
All money deposited with the Bank hereunder shall be secured in the manner and to the
fullest extent required by law for the security of funds of the Issuer.
Any money deposited with the Bank for the payment of the principal of or interest on any
Bonds 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
4
HOU:2578719.1
in accordance with the provisions of Texas law including, to the extent applicable, Title 6 of the
Texas Property Code, as amended. To the extent such provisions of the Property Code do not
apply to. the funds, such funds shall be paid by the Bank to the Issuer upon receipt of a written
request therefor from the Issuer. The Bank shall have no liability to the Registered Owners of
the Bonds by virtue of actions taken in compliance with the foregoing provision.
Section 3.9. Indemnification. To the extent permitted by law, the Issuer agrees to
indemnify the Bank for, and hold it harmless against, any loss, liability, or expense incurred
without negligence or bad faith on its part, arising out of or in connection with its acceptance or
administration of its duties hereunder, including the cost and expense against any claim or
liability in connection with the exercise or performance of any of its powers or duties under this
Agreement.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 4.1. May Own Bonds.
The Bank, in its individual or any other capacity, may become the owner or pledgee of
Bonds with the same rights it would have if it were not the Paying Agent and Registrar for the
Bonds.
Section 4.2. Amendment.
This Agreement may be amended only by an agreement in writing signed by both of the
parties hereof.
Section 4.3. Assignment.
This Agreement may not be assigned by either party without the prior written consent of
the other.
Section 4.4. Notices.
Any request, demand, authorization, direction, notice, consent, waiver or other document
provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or
delivered to the Issuer or the Bank, respectively, at the addresses shown herein, or such other
address as may have been given by one party to the other by 15 days' written notice.
Section 4.5. Effect of Headings.
The Article and Section headings herein are for convenience only and shall not affect the
construction hereof.
5
HOU:2578719.1
Section 4.6. Successors and Assigns.
All covenants and agreements herein by the Issuer and the Bank shall bind their
successors and assigns, whether so expressed or not. This Agreement shall not be assigned by
the Bank without the prior written consent of the Issuer.
Section 4.7. Severability.
If any provision of this Agreement shall be invalid or unenforceable, the validity and
enforceability of the remaining provisions hereof shall not in any way be affected or impaired.
Section 4.8. Benefits of Agreement.
Nothing herein, express or implied, shall give to any Person, other than the parties hereto
and their successors hereunder, any benefit or any legal or equitable right, remedy or claim
hereunder.
Section 4.9. Resolutions Govern Conflicts.
This Agreement and the Resolution 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 Resolution, the Resolution shall govern. The Bank agrees to be
bound by the terms of the Resolution with respect to the Bonds.
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 days' written notice; provided, however,
that no such termination shall be effective until a successor has been appointed and has accepted
the duties of the Bank hereunder. In the event of early termination, regardless of circumstances,
the Bank shall deliver to the Issuer or its designee all funds, Bonds and all books and records
pertaining to the Bank's role as Paying Agent and Registrar with respect to the Bonds, including,
but not limited to,the books of registration.
Section 4.11. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument.
Section 4.12. Governing Law.
This Agreement shall be construed in accordance with and shall be governed by the laws
of the State of Texas.
6
HOU:2578719.1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
. and year first above written.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
By:
hairma
s ' ADDRESS: 3519 Liberty Drive
Pearland,Texas 77581
ATTEST:
4/
Secretary
WELLS FARGO BANK,N.A. .
•
By:
Title:
ADDRESS: 1000 Louisiana Street, Suite 640
Houston, Texas 77002
Attn: Corporate Trust Department .
, ATTEST:
By:
Title:
(SEAL)
S-1
HOU:2578719.1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
By:
Chairman
ADDRESS: 3519 Liberty Drive
Pearland, Texas 77581
ATTEST:
Secretary
WELLS FARGO BANK,N.A.
/AmpBy: LJ
Title: Vice President
ADDRESS: 1000 Louis
iana Street
, Suite 640
Houston, Texas 77002
Attn: Corporate Trust Department
ATTEST:
By: co/7/Gt/J—
em tle N g President
490
E:"ifJ I "v'OA':A'tw a tD
i tv
S-1
HOU:2578719.1
EXHIBIT A
FEE SCHEDULE
•
•
•
•
HOU:2578719.1
s 't�_'k Gregory M. Hasty
Wells Fargo Bank
T j Corporate Trust Services
-01 1445 Ross Avenue, 2nd Floor
Dallas, Texas 75202
kfi, ...•M ..: : Tel: (214)740-1548
Fax: (214)777-4086
SCHEDULE OF FEES
$10,235,000 Pearland Economic Development Corporation
Sales Tax Revenue Bonds, Series 2006
To act as PAYING AGENT& REGISTRAR
Acceptance Fee: $0.00
Initial Fees as they relate to Wells Fargo Bank acting in the capacity of Paying Agent/Registrar —
includes creation and examination of the Paying Agent/Registrar Agreement; acceptance of the
appointment; setting up of Paying Agent/Registrar records and accounting records; and coordination
of closing.
ri Acceptance Fee payable at time of Paying Agent/Registrar Agreement execution.
Annual Administration Fee: $500.00
For ordinary administration• services by Paying Agent/Registrar — includes daily routine account
management; investment transactions; cash transaction processing in accordance with the
agreement; and mailing of trust account statements to all applicable parties. Float credit received by
the bank for receiving funds that remain uninvested are deemed part of the Paying Agent's
compensation. The Annual Administration fees are payable in advance,with the first installment due
at closing.
Out of Pocket Expenses: .
We only charge for out-of-pocket expenses in response to specific tasks assigned by the client.
Therefore, we cannot anticipate what specific out-of-pocket items will be needed or what
corresponding expenses will be incurred. Possible expenses would be, but are not limited to,
express mail and messenger charges, travel expenses to attend closing or other meetings. There
are no charges for indirect out-of-pocket expenses.
This fee schedule is based upon the assumptions listed above which pertain to the
responsibilities and risks involved in Wells Fargo undertaking the role of Paying Agent/Registrar.
These assumptions are based on information provided to us as of the date of this fee schedule.
Our fee schedule Is subject to review and acceptance of the final documents. Should any of the
assumptions, duties or responsibilities change, we reserve the right to affirm, modify or rescind
our fee schedule.
Submitted by:Greg Hasty-June 1,2006
Vice President/Business Development
Wells Fargo Bank
(214)740-1548
Pipeline ID#41914
This Official Notice of Sale does not alone constitute an offer to sell but is merely notice of sale of the Bonds
described herein. The offer to sell such Bonds is being made by means of this Official Notice of Sale, the Official
Bid Form and the Preliminary Official Statement.
OFFICIAL NOTICE OF SALE
PEARLAND
ECONOMIC DEVELOPMENT CORPORATION
$10,235,000
SALES TAX REVENUE BONDS, SERIES 2006
Sealed Bids Will Be Received
Monday,May 22,2006 at 1:00 P.M.
Houston Time
This Official Notice of Sale does not alone constitute an invitation for bids but is merely notice of sale of the Bonds
described herein. The invitation for bids on such Bonds is being made by means of this Official Notice of Sale, the
Official Bid Form and the Official Statement. Prospective purchasers are urged to carefully examine all the
documents to determine the investment quality of the Bonds.
OFFICIAL NOTICE OF SALE
$10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
SALES TAX REVENUE BONDS
SERIES 2006
THE SALE
SALES TAX REVENUE BONDS OFFERED FOR SALE AT COMPETITIVE BIDS: The Board of Directors
(the "Board") of the Pearland Economic Development Corporation (the "Corporation") is offering for sale at
competitive bid its$10,235,000 Sales Tax Revenue Bonds,Series 2006(the"Bonds).
PLACE AND TIME OF SALE: The Board will receive sealed bids until 1:00 P.M.,Houston Time,Monday,May
22, 2006, and the bids will be opened and publicly read at 5:30 P.M. Sealed bids, which must be submitted in
duplicate on the Official Bid Form and plainly marked"Bid for Bonds," are to be addressed to "Pearland Economic
Development Corporation." All bids must be delivered prior to the above-scheduled time. Any bid received after
such scheduled time for bid opening will not be accepted and will be returned unopened.
ELECTRONIC BIDDING PROCEDURE: Any prospective bidder that intends to submit an electronic bid must
submit its electronic bid through the facilities of PARITY. Bidders must submit, prior to Monday, May 22, 2006,
SIGNED Official Bid Forms, in duplicate, to Frank Ildebrando, RBC Capital Markets, 1001 Fannin, Suite 400,
Houston, Texas 77002. Subscription to the i-Deal's BIDCOMP Competitive Bidding System is required in order to
submit an electronic bid. The Corporation will neither confirm any subscription nor be responsible for the failure of any
prospective bidder to subscribe. Electronic bids must be received via PARITY in the manner described below,no later
than 1:00 P.M.,Houston Time,on Monday,May 22,2006.
Electronic bids must be submitted via PARITY in accordance with this Official Notice of Sale,no later than 1:00 P.M.,
Houston Time, but no bid will be received after the time for receiving bids specified above. An electronic bid made
through the facilities of PARITY shall be deemed an irrevocable offer to purchase the Bonds on the terms provided in
the Official Notice of Sale, and shall be binding upon the bidder as if made by a signed, sealed bid delivered to the
Corporation. The Corporation shall not be responsible for any malfunction or mistake made by,or as a result of the use
of the facilities of,PARITY,the use of such facilities being the sole risk of the prospective bidder.
If any provisions of the Official Notice of Sale shall conflict with information provided by PARITY as the approved
provider of electronic bidding services,this Official Notice of Sale shall control. Further information about PARITY,
including any fee charged,may be obtained from i-Deal, 395 Hudson Street,New York,New York 10014,(212) 806-
8304.
For purposes of both the written bid process and the electronic bidding process, the time as maintained by
PARITY shall constitute the official time. For information purposes only, bidders are requested to state in their
electronic bids the net interest cost to the Corporation, as described under"CONDITIONS OF THE SALE-Basis of
Award"below. All electronic bids shall be deemed to incorporate the provisions of this Official Notice of Sale and the
Official Bid Form.
BIDS BY TELEPHONE OR FACSIMILE: Bidders must submit, prior b t, to Monday, May 22, 2006, SIGNED
Official Bid Forms, in duplicate, to Frank Ildebrando, RBC Capital Markets, 1001 Fannin, Suite 400,Houston, Texas
77002 and submit their bid by telephone or facsimile(fax)on the date of sale by 1:00 P.M.,Houston Time.
CONDITIONS OF THE SALE
TYPES OF BIDS AND INTEREST RATES: The Bonds will be sold in one block on an"All or None" basis,and
at a price of not less than their par value plus accrued interest to the date of delivery of the Bonds. Bidders are
invited to name the rate(s) of interest to be borne by the Bonds provided that each rate bid must be in a multiple of
1/8 of 1% or 1/20 of 1% and the net effective interest rate for the Bonds (calculated in the manner required by
Chapter 1204, Texas Government Code, as amended) must not exceed 15%. The highest rate bid may not exceed
the lowest rate bid by more than 2% in rate. No limitation is imposed upon bidders as to the number of rates or
changes which may be used. All Bonds of one maturity must bear one and the same rate. No bids involving
supplemental interest rates will be considered. Each bidder shall state in his bid the total interest cost in dollars and
the net effective interest rate determined hereby, which shall be considered informative only and not as a part of the
bid.
BASIS OF AWARD: The sale of the Bonds will be awarded to the bidder making a bid that conforms to the
specifications herein and which produces the lowest net interest cost rate to the Corporation. The net interest cost
rate is that annual rate which, when used to compute the total present value as of the dated date of the Bonds of all
debt service payments on the Bonds on the basis of semi-annual compounding,using a 360-day year composed of 12
consecutive 30-day months, produces an amount equal to the sum of the par value of the Bonds plus any premium
bid (but not interest accrued from the dated date of the Bonds to the date of their delivery). For the purpose of
calculating the net interest,cost rate, the principal amount of Bonds scheduled for maturity sinking fund redemption
as part of a term bond shall be treated as a serial maturity in each year. In the event of the bidder's error in interest
cost calculations,the interest rates set forth in the Official Bid Form will be considered as the intended bid.
GOOD FAITH DEPOSIT: A Good Faith Deposit,payable to the"Pearland Economic Development Corporation"
in the amount of$204,700 is required. Such Good Faith Deposit shall be in the form of a Cashier's Check,which is
to be retained uncashed by the Corporation pending the Purchaser's compliance with the terms of its bid and the
Notice of Sale and Bidding Instructions. The Good Faith Deposit may accompany the Official Bid Form or it may
be submitted separately. If submitted separately,it shall be made available to the Corporation prior to the opening of
the bids, and shall be accompanied by instructions from the bank on which drawn which authorize its use as a Good
Faith Deposit by the Purchaser who shall be named in such instructions. Unless otherwise agreed,the Good Faith
Deposit will be returned to the purchaser of the Bonds on the date of delivery of the Bonds. No interest will be
allowed on the Good Faith Deposit. In the event the Purchaser should fail or refuse to take up and pay for the Bonds
in accordance with its bid, then said check shall be cashed and accepted by the Corporation as full and complete
liquidated damages. The checks accompanying bids other than the winning bid will be returned immediately after
the bids are opened,and an award of the Bonds has been made.
FINANCIAL ADVISOR'S RIGHT TO BID: The Corporation has given RBC Capital Markets, its Financial
Advisor, the right to bid on the Bonds. RBC Capital Markets is the trade name under which RBC Dain Rauscher
Inc.,a broker-dealer,conducts its investment banking business.
INITIAL OFFERING PRICE CERTIFICATE: To provide the Corporation with information to enable it to
comply with certain conditions of the Internal Revenue Code of 1986 relating to the exclusion of interest on the
Bonds from gross income for federal income tax purposes, the successful bidder will be required to complete,
execute,and deliver to the Corporation,at the time that the Bonds are awarded,a certification regarding"issue price"
substantially in the form attached hereto. If the successful bidder will not reoffer the Bonds for sale or has not sold a
substantial amount of the Bonds of any maturity by the date of delivery, such certificate may be modified in a
manner approved by the Corporation and the Corporation's Bond Counsel (as hereinafter defined). In no event will
the Corporation fail to deliver the Bonds as a result of the successful bidder's inability to certify actual sales of Bonds
at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver
such a certificate by the date of the award of the Bonds, if its bid is accepted by the Corporation. It will be the
responsibility of the successful bidder to institute such syndicate reporting requirements,to make such investigation,
or otherwise to ascertain the facts necessary to enable it to make such certifications with reasonable certainty. Any
questions concerning such certification should be directed to Bond Counsel.
iii
REGISTRATION: The Bonds are transferable only on the bond register kept by the Paying Agent/Registrar upon
surrender and reissuance. The Bonds are exchangeable for an equal principal amount of Bonds of the same maturity
in any authorized denomination upon surrender of the Bonds to be exchanged at the principal office of the Paying
Agent/Registrar. No service charge will be made for any transfer or exchange, but the Corporation may require
payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith.
NO-LITIGATION CERTIFICATE: The customary closing papers, including a certificate to the effect that no
litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Bonds,or,which
would affect the provisions made for their payment or security, or in any manner questioning the validity of said
Bonds will also be furnished.
NO MATERIAL ADVERSE CHANGE: The obligations of the Purchaser to take up and pay for the Bonds, and
of the Corporation to deliver the Bo
nds,onds, are subject to the condition that,up to the time of delivery of and receipt of
payment for the Bonds,there shall have been no material adverse change in the condition(financial or otherwise)of
the Corporation subsequent to the date of sale from that set forth or contemplated in the Preliminary Official
Statement,as it may have been supplemented or amended through the date of sale.
CHANGE IN TAX EXEMPT STATUS: At any time before the Bonds are tendered for delivery, the Purchaser
may withdraw its bid if the interest received by private owners of bonds of the same type and character as the Bonds
shall be declared to be taxable income under present federal income tax laws, either by ruling of the Internal
Revenue Service or by a decision of any Federal court, or shall be declared taxable or be required to be taken into
account in computing any federal income taxes,by the terms of any federal income tax law enacted subsequent to the
date of this Official Notice of Sale.
CONTINUING DISCLOSURE AGREEMENT: The City,on behalf of the City and the Corporation,will agree to
provide certain periodic information and notices of material events in accordance with the Securities and Exchange
Commission Rule 15c2-12, as described in the Preliminary Official Statement under "CONTINUING
DISCLOSURE OF INFORMATION." The Purchaser's obligation to accept and pay for the Bonds is conditioned
upon delivery to the Purchaser or its agent of a certified copy of the resolution containing the agreement described
under such heading.
GENERAL CONSIDERATIONS
FINANCIAL ADVISOR: RBC Capital Markets is employed as Financial Advisor to the Corporation in connection
with the issuance of the Bonds. The Financial Advisor's fee for services rendered with respect to the sale of the
Bonds is contingent upon the issuance and delivery of the Bonds. RBC Capital Markets is the trade name under
which RBC Dain Rauscher Inc.,a broker-dealer,conducts its investment banking business.
SECURITIES REGISTRATION AND QUALIFICATION: No registration statement relating to the Bonds has
been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance
upon exemptions provided thereunder. The Bonds have not been registered or qualified under the Securities Act of
Texas in reliance upon various exemptions contained therein;nor have the Bonds been registered or qualified under
the securities laws or regulations of any other jurisdiction. The Corporation assumes no responsibility for
registration or qualification of the Bonds under the securities laws or regulations of any other jurisdiction in which
the Bonds may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or
qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with
regard to the availability of any exemption from securities registration or qualification provisions in such other
jurisdictions.
By submission of a bid, the Purchaser represents that the sale of the Bonds in states other than Texas will be made
only pursuant to exemptions from registration or qualification or,where necessary,the Initial Purchaser will register
or qualify the Bonds in accordance with the securities laws or regulations of any jurisdiction which so requires. The
v
ADDITIONAL COPIES OF NOTICE.BID FORM AND STATEMENT: A limited number of additional copies
of this Official Notice of Sale, the Official Bid Form and the Official Statement, as available over and above the
normal mailing, may be obtained at the offices of RBC Capital Markets, 1001 Fannin, Suite 400, Houston, Texas,
77002,Financial Advisor to the Corporation.
On the date of the sale,the Board of Directors will,in the Resolution authorizing the issuance of the Bonds,confirm
its approval of the form and content of the Official Statement, and any addenda, supplement or amendment thereto,
and authorize its use in the reoffering of the Bonds by the Purchaser.
/s/ Randall Ferguson
Chairman
Pearland Economic Development Corporation
May 11,2006
vii
OFFICIAL BID FORM
May 22,2006
Board of Directors
Pearland Economic Development Corporation
3519 Liberty Drive
Pearland,Texas 77581
Gentlemen:
' Subject to the terms of your Official Notice of Sale and Official Statement, dated May 11, 2006, which are
incorporated herein by reference, we hereby submit the following bid for the $10,235,000 PEARLAND
_ ECONOMIC DEVELOPMENT CORPORATION, SALES TAX REVENUE BONDS, SERIES 2006, dated June
15,2006. This offer is being made for all said Bonds and for not less than all.
For said legally issued Sales Tax Revenue Bonds, we will pay you the par value thereof,plus accrued interest from
their date to the date of delivery to us,plus a cash premium of$ for the Bonds maturing and bearing
interest per annum as follows:
Maturity Principal Interest Maturity Principal Interest
Date Amount Rate Date Amount Rate
September 1,2007(a) $ 50,000 % September 1,2019(a)(b) $ 280,000
September 1,2008(a) 165,000 September 1,2020(a)(b) 300,000
September 1,2009(a) 170,000 September 1,2021(a)(b) 310,000
September 1,2010(a) 180,000 September 1,2022(a)(b) 325,000
September 1,2011(a) 185,000 September 1,2023(a)(b) 345,000
September 1,2012(a) 200,000 September 1,2024(a)(b) 365,000
September 1,2013(a) 210,000 September 1,2025(a)(b) 385,000
September 1,2014(a) 215,000 September 1,2026(a)(b) 405,000
September 1,2015(a) 230,000 September 1,2027(a)(b) 1,190,000
September 1,2016(a) 240,000 September 1,2028(a)(b) 1,255,000
September 1,2017(a)(b) 255,000 September 1,2029(a)(b) 1,320,000
September 1,2018(a)(b) 265,000 September 1,2030(a)(b) 1,390,000
(a) At the option of the Purchaser,any or all of such serial maturities may be designated as term bonds subject
to mandatory sinking fund redemption as follows;provided that the mandatory sinking fund amount in each
year shall equal the amounts shown above as maturing in such year.
Term Bonds Years of First
Maturity Date Mandatory Principal Amount Interest
(September 1) Redemption of Term Bonds Rate
$ %
(b) Subject to optional redemption and payment, at the option of the Corporation, in whole or, from time to
time, in part, on September 1, 2016, or on any date thereafter at a price equal to the principal amount
thereof,plus accrued interest to the date fixed for redemption.
OFFICIAL BID FORM
May 22,2006
Board of Directors
Pearland Economic Development Corporation
3519 Liberty Drive
Pearland,Texas 77581
Gentlemen:
Subject to the terms of your Official Notice of Sale and Official Statement, dated May 11, 2006, which are
incorporated herein by reference, we hereby submit the following bid for the $10,235,000 PEARLAND
ECONOMIC DEVELOPMENT CORPORATION, SALES TAX REVENUE BONDS, SERIES 2006, dated June
15,2006. This offer is being made for all said Bonds and for not less than all.
For said legally issued Sales Tax Revenue Bonds, we will pay you the par value thereof,plus accrued interest from
their date to the date of delivery to us,plus a cash premium of$ for the Bonds maturing and bearing
interest per annum as follows:
Maturity Principal Interest Maturity Principal Interest
Date Amount Rate Date Amount Rate
September 1,2007(a) $ 50,000 % September 1,2019(a)(b) $ 280,000
September 1,2008(a) 165,000 September 1,2020(a)(b) 300,000
September 1,2009(a) 170,000 September 1,2021(a)(b) 310,000
September 1,2010(a) 180,000 September 1,2022(a)(b) 325,000
September 1,2011(a) 185,000 September 1,2023(a)(b) 345,000
September 1,2012(a) 200,000 September 1,2024(a)(b) 365,000
September 1,2013(a) 210,000 September 1,2025(a)(b) 385,000
September 1,2014(a) 215,000 September 1,2026(a)(b) 405,000
September 1,2015(a) 230,000 September 1,2027(a)(b) 1,190,000
September 1,2016(a) 240,000 September 1,2028(a)(b) 1,255,000
September 1,2017(a)(b) 255,000 September 1,2029(a)(b) 1,320,000
September 1,2018(a)(b) 265,000 September 1,2030(a)(b) 1,390,000
(a) At the option of the Purchaser, any or all of such serial maturities may be designated as term bonds subject
to mandatory sinking fund redemption as follows;provided that the mandatory sinking fund amount in each
year shall equal the amounts shown above as maturing in such year.
Term Bonds Years of First
Maturity Date Mandatory Principal Amount Interest
(September 1) Redemption of Term Bonds Rate
$ %
%a
(b) Subject to optional redemption and payment, at the option of the Corporation, in whole or, from time to
time, in part, on September 1, 2016, or on any date thereafter at a price equal to the principal amount
thereof,plus accrued interest to the date fixed for redemption.
CERTIFICATE REGARDING ISSUE PRICE
The undersigned hereby certifies with respect to the sale of $10,235,000 Pearland Economic Development
Corporation(the"Issuer"),Sales Tax Revenue Bonds,Series 2006(the"Bonds"):
1. The undersigned is a duly authorized representative of the underwriter or of the manager of the
syndicate of underwriters that purchased the Bonds from the Pearland Economic Development Corporation (the
Corporation") pursuant to a competitively bid sale. (Such underwriter or syndicate of underwriters is referred to
herein as the"Underwriters"). In this capacity,the undersigned is familiar with the facts stated herein.
2. The term"Initial Offering Prices"means the respective initial offering prices(exclusive of accrued
interest)for the Bonds of each maturity(stated in term of dollars or as a percent of par)as set forth in the following
table:
Principal Initial Principal Initial
Amount Year of Offering Amount Year of Offering
Maturing Maturity Price Maturing Maturity Price
$ 50,000 September 1,2007 % $ 280,000 September 1,2019 %
165,000 September 1,2008 % 300,000 September 1,2020 %
170,000 September 1,2009 % 310,000 September 1,2021 %
180,000 September 1,2010 %v 325,000 September 1,2022 %
185,000 September 1,2011 % 345,000 September 1,2023 %
200,000 September 1,2012 % 365,000 September 1,2024 %
210,000 September 1,2013 % 385,000 September 1,2025 %
215,000 September 1,2014 % 405,000 September 1,2026 %
230,000 September 1,2015 % 1,190,000 September 1,2027 %
240,000 September 1,2016 % 1,255,000 September 1,2028 %
255,000 September 1,2017 % 1,320,000 September 1,2029 %
265,000 September 1,2018 % 1,390,000 September 1,2030 %
3. The term "Sale Date" means the first day on which there was a binding contract in writing for the
sale of the Bonds by the Issuer to the Underwriters on specific terms that were not later modified or adjusted in any
material respect. In the case of the Bonds,the Sale Date is May 22,2006.
4. The term "Issue Date" means the first day on which there is physical delivery of the written
evidence of the Bonds in exchange for the purchase price(but not earlier than the day interest on the Bonds begins to
accrue for federal income tax purposes). In the case of the Bonds,the Issue Date is June 20,2006.
_ 5. The term "Public" shall not include bond houses, brokers, and similar persons or organizations
acting in the capacity of wholesalers or underwriters.
6. Based on the actual facts and reasonable expectations in existence, the Initial Offering Price for
each Bond:
a. Represented the price (payable in cash, with no other consideration being included, and
— exclusive of accrued interest), at which the Underwriters reasonably expected, each such Bond would be
sold to the Public;and
b. Did not exceed what the Underwriters believed to be the respective fair market value of
each such Bond.
BOND YEARS
Dated: June 15,2006 • Due: As shown below
Years
Maturity Bond Cumulative
Date Amount Years Bond Years
September 1,2007 $ 50,000 60.5556 60.5556
September 1,2008 165,000 365.8333 425.3889
September 1,2009 170,000 545.8889 971.2778
September 1,2010 180,000 758.0000 1,729.2778
September 1,2011 185,000 964.0556 2,693.3333
September 1,2012 200,000 1,242.2222 3,935.5556
September 1,2013 210,000 1,514.3333 5,449.8889
September 1,2014 215,000 1,765.3889 7,215.2778
September 1,2015 230,000 2,118.5556 9,333.8333
September 1,2016 240,000 2,450.6667 11,784.5000
September 1,2017 255,000 2,858.8333 14,643.3333
September 1,2018 265,000 3,235.9444 17,879.2778
September 1,2019 280,000 3,699.1111 21,578.3889
September 1,2020 300,000 4,263.3333 25,841.7222
September 1,2021 310,000 4,715.4444 30,557.1667
September 1,2022 325,000 5,268.6111 35,825.7778
September 1,2023 345,000 5,937.8333 41,763.6111
September 1,2024 365,000 6,647.0556 48,410.6667
September 1,2025 385,000 7,396.2778 55,806.9444
September 1,2026 405,000 7,185.5000 63,992.4444
September 1,2027 1,190,000 25,241.2222 89,233.6667
September 1,2028 1,255,000 27,874.9444 117,108.6111
September 1,2029 1,320,000 30,638.6667 147,747.2778
September 1,2030 1,390,000 33,653.4444 181,400.7222
AVERAGE MATURITY— 17.710 YEARS
g PRELIMINARY OFFICIAL STATEMENT DATED MAY 11,2006
pc
This Preliminary Official Statement is subject to completion and amendment and is intended solely for the solicitation of initial
s bids to purchase the Bonds. Upon the sale of the Bonds, the Official Statement will be completed and delivered to the
e • Underwriters(defined herein).
2 In the opinion of Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposes under
w existing law'subject to the matters described under "TAX EXEMPTION" herein, and is not includable in the alternative
.`g minimum taxable income of individuals. See "TAX EXEMPTION"for a discussion of the opinion of Bond Counsel, including
A. �' the alternative minimum tax on corporations.
b
L A
NEW ISSUE—Book-Entry-Only RATINGS: Moody's Investors Service,Inc. " "
Standard&Poor's Ratings Services.." "
T See"RATINGS"and"BOND INSURANCE"herein.
7 L.
$10,235,000
o PEARLAND ECONOMIC DEVELOPMENT CORPORATION
o SALES TAX REVENUE BONDS,SERIES 2006
O• A U
c c Bonds Dated: June 15,2006 Due: September 1,as shown on the inside cover
The Pearland Economic Development Corporation Sales Tax Revenue Bonds, Series 2006 (the `Bonds") are special limited
o y obligations of the Pearland Economic Development Corporation(the"Corporation") issued pursuant to Article 5190.6, Texas
T ° c Revised Civil Statutes, as amended, and a resolution adopted by the Board of Directors of the Corporation (the "Bond
G Resolution").
0
• ° 3 The Bonds are being issued to finance the construction and improvement of certain roads and overpasses and related
infrastructure [within the City of Pearland, Texas (the "City")] and to pay the costs of issuance of the Bonds, including the
o :c purchase of a reserve fund surety policy. See "PROJECT AND PLAN OF FINANCE" and "RESERVE FUND SURETY
• e) POLICY." -
c Interest on the Bonds shall accrue from June 15,2006(the"Dated Date"),is payable on March 1,2007 and each September 1
c and March 1 thereafter(each a"Payment Date")until maturity or prior redemption,and is calculated on the basis of a 360-day
° year composed of twelve 30-day months. The Bonds are initially issuable only to Cede&Co.,as nominee of The Depository
E S .° Trust Company, New York, New York ("DTC") pursuant to the book-entry only system described herein. Beneficial
o u ownership of the Bonds may be acquired in denominations of$5,000 or integral multiples thereof. No physical delivery of the
Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable by Wells Fargo
v, Bank, N.A., Minneapolis, Minnesota, the paying agent/registrar (the "Paying Agent/Registrar") to Cede & Co., which will
make distribution of the amounts so paid to DTC's participating members for subsequent remittance to the beneficial owners of
o the Bonds. The Bonds are subject to redemption prior to maturity as provided herein.See "DESCRIPTION OF THE
A� BONDS-Redemption."
ffi
E g The Bonds are payable from and secured by a lien on and pledge of the Pledged Revenues(as defined herein) which include
; certain receipts of a one-half of one percent('/:%) sales and use tax collected within the boundaries of the City of Pearland,
ct E. Texas(the "City")for the benefit of the Corporation. THE BONDS CONSTITUTE SPECIAL LIMITED OBLIGATIONS OF
,• 3 THE CORPORATION PAYABLE SOLELY FROM,AND SECURED BY A LIEN ON AND PLEDGE OF,THE PLEDGED
REVENUES, AND ARE NOT PAYABLE FROM NOR SECURED BY ANY OTHER REVENUES, PROPERTY OR
• INCOME OF THE CORPORATION. THE BONDS DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE STATE
• f, OF TEXAS OR ANY POLITICAL SUBDIVISION, CORPORATION, OR AGENCY THEREOF, OR OF THE CITY OF
o N PEARLAND, TEXAS OR THE COUNTIES OF HARRIS OR BRAZORIA, AND THE HOLDERS THEREOF SHALL
• 7 NEVER HAVE THE RIGHT TO DEMAND PAYMENT OF ANY FUNDS RAISED OR TO BE RAISED BY AD
F u ai
, VALOREM TAXATION. See"SECURITY FOR THE BONDS"and"INVESTMENT CONSIDERATIONS."
• °c
, g The Corporation has applied for a municipal bond insurance policy to insure the payment of the principal of and interest on the
Bonds when due. It is expected such municipal bond insurance policy will be issued concurrently with the delivery of the
1• 3.
Bonds. See"BOND INSURANCE"and"RATINGS"herein.
Cr E
G L N
4
C °
0 See Inside Cover Page for Maturity and Pricing Schedule
.�
2 t
E. .2 T- he Bonds are offered for delivery when, as, and if issued and accepted by the Underwriters, and subject to the approving
0 c
° ° opinion of the Attorney General of the State of Texas and the opinion of Andrews Kurth LLP,Houston,Texas,Bond Counsel,
g a- s to the validity of the issuance of the Bonds under the Constitution and laws of the State of Texas. The Bonds are expected to
a be available for delivery through the facilities of DTC on or about June 20,2006.
lA
SELLING: MONDAY,MAY 22,2006
UNTIL 1:00 P.M.,HOUSTON TIME
PRINCIPAL AMOUNTS,MATURITIES,INTEREST RATES AND PRICES
Initial CUSIP Initial CUSIP
Maturity Principal Interest Reoffering Nos. Maturity Principal Interest Reoffering Nos.
(September 1) Amount Rate Yield(a) (c) (September 1) Amount Rate Yield(a) (c)
2007 $ 50,000 % % 2019(b) $ 280,000 % %
2008 165,000 2020(b) 300,000
2009 170,000 2021(b) 310,000
2010 180,000 2022(b) 325,000
2011 185,000 2023(b) 345,000
2012 200,000 2024(b) 365,000
2013 210,000 2025(b) 385,000
2014 215,000 2026(b) 405,000
2015 230,000 2027(b) 1,190,000
2016 240,000 2028(b) 1,255,000
2017(b) 255,000 2029(b) 1,320,000
2018(b) 265,000 2030(b) 1,390,000
(a) The initial yields will be established by and are the sole responsibility of the Underwriters (hereinafter defined)
and may subsequently be changed.
(b) The Bonds having stated maturities on or after September 1,2017,are subject to redemption in whole or in part at the option
of the Corporation on September 1,2016 or any date thereafter,at a price of par plus accrued and unpaid interest to the date
fixed for redemption. See"DESCRIPTION OF THE BONDS-Redemption."
(c) CUSIP numbers have been assigned to the Bonds by Standard and Poor's CUSIP Service Bureau, A Division of the
McGraw-Hill Companies,Inc.,and are included solely for the convenience of the registered owners of the Bonds. Neither
the City,the Financial Advisor,nor the Underwriters are responsible for the selection or correctness of the CUSIP numbers
set forth herein. ?
i
ri
1
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
Board of Directors
Randall Ferguson, Chairman
Helen Beckman,Secretary
Lucy Stevener
Felicia Kyle(1)
George Sandars
Ed Thompson
Gary Idoux
Executive Staff
Fred Welch,Executive Director
Will Benson,Marketing Manager
Karen Dickson,Manager,Business Retention&Expansion
CITY OF PEARLAND,TEXAS
Elected Officials
Tom Reid,Mayor
Kevin Cole,Mayor Pro-Tem, Council Member
Steve Saboe,Council Member
Larry Marcott,Council Member
Woody Owens,Council Member
Richard Tetens,Council Member
Certain Appointed Officials
Bill Eisen,City Manager
Nick Finan,Assistant City Manager
Mickiel Hodge,Assistant City Manager
Claire Manthei,Director of Finance
Young Lorfing, City Secretary
Darrin Coker,City Attorney
Consultants and Advisors
Financial Advisor RBC Capital Markets
Certified Public Accountants Pattillo,Brown&Hill,P.C.
Bond Counsel Andrews Kurth LLP
(1) Felicia Kyle is running for City Council, Position#4. The election will be held Saturday, May 13, 2006. If
elected to City Council, Ms. Kyle will no longer serve on the Board of Directors for Pearland Economic
Development Corporation.
TABLE OF CONTENTS
Page Page
SALE AND DISTRIBUTION OF THE BONDS 3 Major Retail Establishments in the City 17
Use of Information in Official PRO FORMA DEBT SERVICE SCHEDULE 17
Statement 3 MANAGEMENT AND OPERATION OF THE
Sale of the Bonds 3 CORPORATION 18
Prices and Marketability 3 Budgeting and Operations 18
Securities Laws 4 Investments 18
BOND INSURANCE 4 Legal Investments 18
RESERVE FUND SURETY POLICY 4 Investment Policies 19
OFFICIAL STATEMENT SUMMARY 5 Invested Funds of the Corporation 20
INTRODUCTION 7 INVESTMENT CONSIDERATIONS 20
PROJECT AND PLAN OF FINANCE 7 The Sales Tax 20
Purpose 7 Bankruptcy Limitation to Registered
The Project 7 Owners'Rights 21
Authority for Issuance of the Bonds 7 THE CITY 21
THE CORPORATION 7 Limitation 21
General 7 General 21
Management 8 Location 21
DESCRIPTION OF THE BONDS 8 LEGAL MATTERS 21
General 8 General 21
Paying Agent/Registrar 8 Forward Looking Statements 22
Transfers and Exchanges of the Bonds 9 TAX EXEMPTION 22
Redemption 9 TAX TREATMENT OF ORIGINAL ISSUE
Book-Entry Only System 9 DISCOUNT AND PREMIUM BONDS 23
SECURITY FOR THE BONDS 11 Discount Bonds 23
The City Resolution 11 Premium Bonds 24
The Bond Resolution 11 LITIGATION 25
Pledge Under Bond Resolution 12 LEGAL INVESTMENTS IN TEXAS 25
Limited Obligations 12 RATINGS 25
Collection of Sales Tax Revenues and CONTINUING DISCLOSURE OF
the Revenue Fund 12 INFORMATION 25
Additional Parity Bonds and Other Annual Reports 25
Obligations 13 Material Event Notices 26
Remedies 13 Availability of Information From
THE SALES TAX 14 NRMSIRs and SID 26
Source and Authorization 14 Limitations and Amendments 26
Other Sales Taxes 14 Audited Financial Report of the City 27
Collection and Administration 15 Compliance With Prior Undertakings 27
HISTORICAL PLEDGED REVENUES 16 FINANCIAL ADVISOR 27
Historical Sales Tax Collections for the GENERAL CONSIDERATIONS 27
Corporation 16
APPENDIX A- EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION
APPENDIX B- GENERAL INFORMATION REGARDING THE CITY OF PEARLAND
APPENDIX C- AUDITED FINANCIAL STATEMENT OF THE CITY OF PEARLAND FOR THE YEAR
ENDED SEPTEMBER 30,2005
APPENDIX D- FORM OF BOND COUNSEL OPINION
2
SALE AND DISTRIBUTION OF THE BONDS
Use of Information in Official Statement
For the purposes of compliance with Rule 15c2-12 of the Securities and Exchange Commission, this document
constitutes an Official Statement of the Corporation with respect to the Bonds that has been deemed "final" by the
Corporation as of its date except for the omission of no more than the information permitted by Rule 15c2-12(a)(1).
No dealer, broker, salesman or other person has been authorized by the Corporation to give any information or to
make any representations other than those contained in this Official Statement, and, if given or made, such other
information or representations must not be relied upon as having been authorized by the Corporation. All other
information contained herein has been obtained from the Corporation,DTC and other sources which are believed to
be reliable. Such other information is not guaranteed as to accuracy or completeness by,and is not to be relied upon
as,or construed as a promise or representation by,the Issuer or the Underwriters.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor will there be any
sale of any Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale.
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 an
implication that there has been no change in the affairs of the Corporation or other matters described herein since the
date hereof.
Sale of the Bonds
After requesting competitive bids for the Bonds,the Corporation accepted the lowest bid, which was tendered by a
syndicate managed by (collectively referred to herein as the
"Underwriters")to purchase the Bonds,bearing the interest rates on the inside cover page of this Official Statement,
at a cash price of$ , plus accrued interest to the date of delivery. The net effective interest rate on the
bonds is %.
Prices and Marketability
The delivery of the Bonds is conditioned upon the receipt by the Corporation of a certificate executed and delivered
by the Underwriters on or before the date of delivery of the Bonds stating the prices at which a substantial amount of
the Bonds of each maturity have been sold to the public. For this purpose, the term"public" shall not include any
person who is bondhouse, broker or similar person acting in the capacity of underwriter or wholesaler. The
Corporation has no control over trading of the Bonds after a bona fide offering of the Bonds is made by the
Underwriters at the yields specified on the cover page. Information concerning reoffering yields or prices is the
responsibility of the Underwriters.
The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the
Underwriters after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the
initial offering price, including sales to dealers who may sell the Bonds into investment accounts. IN
CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS,AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING,IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME.
Certain information set forth herein has been obtained from the Corporation and other sources which are believed to
be reliable but is not guaranteed as to accuracy or completeness,and is not to be construed as a representation by the
Underwriters.
All of the summaries of the statutes, resolutions, contracts, financial statements, reports, agreements, and other
related documents set forth in this Official Statement are qualified in their entirety by reference to such documents.
These summaries do not purport to be complete statements of such provisions, and reference is made to such
documents,copies of which are available from the Corporation.
3
Securities Laws
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE CORPORATION, AND THE STATE OF TEXAS AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
CORPORATION. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
No registration statement relating to the Bonds has been filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, in reliance upon an exemption provided thereunder. The Bonds have not
been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein;
nor have the Bonds been registered or qualified under the securities laws of any other jurisdiction.The Corporation
assumes no responsibility for registration or qualification for sale or other disposition of the Bonds under the
securities laws of any jurisdiction in which the Bonds may be offered,sold or otherwise transferred.This disclaimer
of responsibility for registration or qualification for sale or other disposition of the Bonds shall not be construed as
an interpretation of any kind with regard to the availability of any exemption from securities registration or
qualification provisions.
BOND INSURANCE
The Corporation has made application for municipal bond insurance under the bidder option program. The premium
for such insurance,if used, will be paid for by the Underwriter.
RESERVE FUND SURETY POLICY
The Corporation has applied for and intends to purchase a reserve fund surety bond (the "Surety Bond") with a
portion of the proceeds from the sale of the Bonds,in order to satisfy the Reserve Fund Requirement for the Bonds.
See"APPENDIX A—EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION."
4
OFFICIAL STATEMENT SUMMARY
The following material is qualified in its entirety by the detailed information and financial statements appearing
elsewhere in this Official Statement,reference to which is made for all purposes. No person is authorized to detach
this Official Statement Summary from this Official Statement or to otherwise use it without this entire Official
Statement(including the appendices).
The Issuer The Pearland Economic Development Corporation(the "Corporation")
is a non-profit corporation created by the City of Pearland, Texas (the
"City")pursuant to Section 4B of Article 5190.6, Texas Revised Civil
Statutes, as amended (the "Act") to promote economic development
within the City and the vicinity thereof. See"THE CORPORATION."
Use of Proceeds The Bonds are being issued to finance the construction and
improvement of certain roads and overpasses and related infrastructure
within the City of Pearland, Texas (the "City") and to pay the costs of
issuance of the Bonds, including the purchase of a reserve fund surety
policy. See "PROJECT AND PLAN OF FINANCE" and "RESERVE
FUND SURETY POLICY."
Authority for Issuance The Bonds are being issued pursuant to the Constitution and laws of
the State of Texas, including particularly the Act and a resolution
adopted by the Corporation authorizing the issuance of the Bonds (the
"Bond Resolution"). The City Council of the City is expected to
approve the issuance of the Bonds by a resolution to be adopted on
May 22, 2006 (the "City Resolution"). See "SECURITY FOR THE
BONDS—The City Resolution."
The Bonds The Bonds are special limited obligations of the Corporation issued in
the aggregate principal amount of $10,235,000, and mature on
September 1 in the years and in the principal amounts set forth on the
inside cover page hereof. Interest on the Bonds accrues from June 15,
2006 and is payable initially on March 1,2007, and on each September
1 and March 1 thereafter until the earlier of maturity or redemption.
See"DESCRIPTION OF THE BONDS."
Security and Source of Payment The Bonds are payable solely from and secured by a lien on and pledge
of the Pledged Revenues(as defined herein),which consists principally
of certain receipts of a one-half of one percent('/%) sales and use tax
(the "Sales Tax") levied and collected within the City. The Sales Tax
was authorized at an election held in the City on January 21, 1995. The
Bonds are not secured by or payable from any other revenues,property,
or income of the Corporation and are not obligations of the State of
Texas, the City, or any other political subdivision, corporation or
agency and shall never be payable from any system of ad valorem
taxation. See"SECURITY FOR THE BONDS."
Redemption The Bonds having stated maturities on or after September 1, 2017, are
subject to redemption at the option of the Corporation on September 1,
2016 or any date thereafter, at par plus accrued and unpaid interest to
the date fixed for redemption. See "DESCRIPTION OF THE
BONDS."
Additional Parity Bonds and
Other Obligations Subject to certain conditions under the Bond Resolution, the
Corporation is authorized to issue additional obligations secured by the
pledge of the Pledged Revenues on a parity with and/or subordinate to
the pledge of such revenues securing the Bonds. See "SECURITY
FOR THE BONDS"and APPENDIX A hereto.'
5
Tax Exemption In the opinion of Bond Counsel, interest on the Bonds 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.
Bond Insurance . See"BOND INSURANCE."
Ratings Moody's Investors Service,Inc. (Insured)
Standard&Poor's Ratings Group(Insured) "_"
Moody's Investors Service,Inc.(Underlying) " "
Standard&Poor's Ratings Group(Underlying)
SELECTED FINANCIAL INFORMATION
(Unaudited)
Fund Balances(as of September 30,2005
Fund Balance $11,949,000 (a)
Reserve Fund (b)
Historical Sales Tax Collections for the Corporation
2005 2004 2003 2002 2001
Total Sales Tax Revenue $3,891,870 $3,369,173 $2,924,067 $2,515,389 $2,397,275
Coverage Based on Sales Tax Revenue
Estimated Average Annual Debt Service of$1,433,923(2006-2030) 2.71 x
Estimated Maximum Annual Debt Service of$1,464,013(2017) 2.66 x
(a) Debt Service requirements are paid from net revenues of the Corporation.
(b) The Reserve Fund is provided by a Surety Policy.
6
OFFICIAL STATEMENT
relating to
$10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
SALES TAX REVENUE BONDS,
SERIES 2006
INTRODUCTION
This Official Statement,including the cover page and the Appendices hereto,provides certain information regarding
the issuance by the Pearland Economic Development Corporation(the"Corporation")of the bonds captioned above
(the"Bonds"). The Bonds are being issued pursuant to Section 4B of Article 5190.6,Texas Revised Civil Statutes,
as amended(the"Act"),and pursuant to the provisions of a resolution of the Corporation authorizing the issuance of
the Bonds (the "Bond Resolution"). All capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Bond Resolution.
The Corporation was created on May 22, 1995 by the City Council of the City of Pearland,Texas(the"City")to act
on behalf of the City for the promotion and development of industrial and manufacturing enterprises and to promote
and encourage employment and public welfare within the City and the vicinity thereof. At an election held within
the City on January 21, 1995,the voters of the City approved a one-half of one percent(WO sales and use tax(the
"Sales Tax")the proceeds of which,pursuant to the Act, may(among other things)be pledged to secure obligations
of the Corporation issued for the purposes thereof. The Sales Tax became effective July 1, 1995. The Sales Tax,
together with all other State and local sales taxes collected in the City,produces a total sales and use tax rate within
the City of 8.25%. See"THE SALES TAX."
This Official Statement contains brief descriptions of the Bonds and their security,the Corporation,the City and its
economy, the Bond Resolution and the City Resolution (hereinafter defined). All descriptions of documents
contained herein are only summaries and are qualified in their entirety by reference to each such document. Copies
of such documents may be obtained from the Corporation at 3519 Liberty Drive; Pearland, Texas 77581 or its
Financial Advisor at RBC Capital Markets; 1001 Fannin Street,Suite 400;Houston,Texas 77002.
PROJECT AND PLAN OF FINANCE
Purpose
The Bonds are being issued to finance the construction and improvement of certain roads and overpasses and related
infrastructure within the City of Pearland, Texas (the "City") and to pay the costs of issuance of the Bonds,
including the purchase of a reserve fund surety policy. See "PROJECT AND PLAN OF FINANCE" and
"RESERVE FUND SURETY POLICY."
The Project
Proceeds of the Bonds will be used within the City to finance the(i)construction of two lanes of Bailey Oiler Road
running west from SH 35 and existing Oiler Drive to Veterans Drive, including the acquisition of all necessary
rights of way, (ii) the construction of drainage and sewage lines along the proposed construction and associated
improvements, (iii) construction of a two lane rail overpass across the Burlington Northern Lines along the
construction route, (iv) construction of four lane transition turn-in lanes at SH 35 and Veterans Drive, and (v)
median cuts for future development along the construction route(collectively,the"Project").
Authority for Issuance of the Bonds
The Bonds are being issued in accordance with the Constitution and general laws of the State of Texas(the"State"),
including particularly the Act, and additionally pursuant to the Bond Resolution. The City is expected to approve
the issuance of the Bonds pursuant to a resolution adopted on May 22, 2006 (the "City Resolution"). See
"SECURITY FOR THE BONDS—The City Resolution."
THE CORPORATION
General
The Corporation is a non-profit corporation created by the City for the purposes of organizing and leading the
economic development effort for the City and the surrounding`area. It was created under Section 4B of the Act.
The Act, originally enacted in 1979, was amended during the 1989 session of the State Legislature to enhance
7
development in the State by the authorization of a one-half of one percent (1/2%) sales and use tax for economic
development. It also required that an economic development corporation be formed to administer the proceeds of
the tax. The Act permits an economic development corporation to conduct operations beyond the creating City's
limits;thus,the Corporation's objectives are to encourage economic development in the entire Pearland area.
Management The Corporation is subject to review by the City Council of the City, which must approve each bond issue of the
Corporation and the Corporation's annual budget. The Corporation has entered into an agreement with the City for
certain services and maintenance of its financial records and accounts and the payment of the Corporation's bills.
The Corporation is overseen by a seven-person citizen board whose members serve without compensation and are
appointed to two-year terms by the City Council and may be removed at any time by the City Council. A list of the
current board members is provided below:
Term Expires
Trustee Office (November) Occupation
Randall Ferguson Chairman 2007 Banking/Attorney
Helen Beckman Secretary 2006 Retired
Felicia Kyle Member 2007 Attorney
Lucy R.Stevener Member 2007 Business Owner
George Sandars Member 2007 Engineer
Ed Thompson Member 2006 Insurance
Gary Idoux Member 2006 Banker
DESCRIPTION OF THE BONDS
General
The Bonds are dated June 15, 2006 (the "Dated Date") and will accrue interest at the rates indicated on the inside
cover page hereof from the later of the Dated Date or the most recent Payment Date(defined below). Interest on the
Bonds is payable initially on March 1,2007,and each September 1 and March 1 thereafter(each a"Payment Date")
until maturity or prior redemption, and is calculated on the basis of a 360-day year composed of twelve 30-day
months. The Bonds mature on September 1 in the years and in the principal amounts set forth on the inside cover
page hereof. The Bonds will be issued in book-entry form and initially registered solely in the name of Cede&Co.,
as nominee of The Depository Trust Company ("DTC") pursuant to the book-entry only system described herein.
Beneficial ownership of the Bonds may be acquired in denominations of$5,000 or integral multiples thereof. No
physical delivery of the Bonds will be made to the beneficial owners thereof. For aslong as the Bonds are book-
entry bonds, as described below under "Book-Entry Only System," payment of the principal of, premium, if any,
and interest on the Bonds will be made and given in accordance with DTC's operational arrangements.
Except as provided under the "Book Entry Only System," principal of the Bonds shall be payable upon their
presentation and surrender as they respectively become due and payable at the principal corporate trust office of the
Paying Agent/Registrar (defined below). The interest on each Bond shall be payable by check payable on the
Payment Date, mailed by the Paying Agent/Registrar on or before each Payment Date to the owner of record as of
the Record Date,to the address of such owner as shown on the register, or by such other method, acceptable to the
Paying Agent/Registrar, requested by, and at the risk and expense of, the owner. If the specified date for any
payment of principal of or interest on the Bonds is not a Business Day, then the date for such payment shall be the
next succeeding Business Day, and payment on such date shall have the same force and effect as if made on the
original date such payment was due.
Paying Agent/Registrar
Wells Fargo. Bank, N.A., Minneapolis, Minnesota, is the initial paying agent and registrar (the "Paying
Agent/Registrar") for the Bonds. In the Bond Resolution, the Corporation reserves the right to replace the Paying
Agent/Registrar, but has covenanted to maintain and provide a Paying Agent/Registrar at all times while the Bonds
are outstanding. Any successor Paying Agent/Registrar shall be a commercial bank, trust company or other entity
duly qualified and legally authorized to serve as and perform the duties and services of paying agent and registrar for
the Bonds. In the event that the entity at any time acting as Paying Agent/Registrar should resign or otherwise cease
to act as such, the Corporation has covenanted to appoint a replacement. Upon any change in the Paying
Agent/Registrar for the Bonds, the Corporation has agreed to promptly cause a written notice thereof to be sent to
each registered owner of the Bonds by first class mail.
8
Transfers and Exchanges of the Bonds
So long as any Bonds remain outstanding, the Paying Agent/Registrar must keep at its principal corporate trust
office a bond register in which, subject to such reasonable regulations as it may prescribe, the Paying
Agent/Registrar must provide for the registration and transfer of the Bonds in accordance with the terms of the Bond
Resolution.
Except as described below under "Book-Entry Only System," the Bonds are transferable only on the bond register
kept by the Paying Agent/Registrar upon surrender and reissuance. The Bonds are exchangeable for an-equal
principal amount of Bonds of the same maturity in any authorized denomination upon surrender of the Bonds to be
exchanged at the principal corporate trust office of the Paying Agent/Registrar. No service charge will be made for
any transfer, but the Corporation or Paying Agent/Registrar may require payment of a sum sufficient to cover any
tax or governmental charge payable in connection therewith. All transfers must be made within three business days
after request and presentation.
The Corporation has agreed to replace mutilated, destroyed, lost or stolen Bonds upon surrender of the mutilated
Bonds, or receipt of satisfactory evidence of such destruction, loss or theft, and receipt by the Corporation and the
Paying Agent/Registrar of security or indemnity. The Corporation may require payment of taxes, governmental
charges and other expenses in connection with any such replacement.
Redemption
-Optional Redemption-
The Bonds scheduled to mature on and after September 1, 2017 are subject to redemption prior to maturity at the
option of the Corporation on September 1, 2016 or any date thereafter, in whole or in part in principal amounts of
$5,000 or any integral multiple thereof. The maturities of the Bonds to be redeemed shall be selected by the
Corporation and the Bonds to be redeemed within a given maturity shall be selected by lot or other random method
by the Paying Agent/Registrar. The redemption price for any Bonds so redeemed shall be equal to par plus accrued
interest to the redemption date.
-Notice of Redemption-
Not less than'30 days prior to a redemption date,a notice of redemption will be sent by the Paying Agent/Registrar
by United States mail,first-class,postage prepaid,to each registered owner of a Bond to be redeemed in whole or in
part at the address of each such owner appearing on the Register. All redemption notices shall state the redemption
date, the redemption price, the place at which the Bonds are to be surrendered for payment, and if less than all the
Bonds are to be redeemed, an identification of the Bonds or portions thereof to be redeemed. ANY NOTICE
GIVEN SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT
THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN,THE BONDS
CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION
DATE, AND, NOTWITHSTANDING THAT ANY BOND OR PORTION THEREOF HAS NOT BEEN
SURRENDERED FOR PAYMENT, INTEREST ON SUCH BOND OR PORTION THEREOF SHALL CEASE
TO ACCRUE. So long as the Bonds are in book-entry form,any notice of redemption or other notices with respect
to the Bonds will be sent only to DTC (or any successor securities depository for the Bonds), and not to the
beneficial owners of such Bonds. .
Book-Entry Only System
This section describes how ownership of the Bonds is to be transferred and how the principal of premium, if any,
and interest on the Bonds are to be paid to and credited by The Depository Trust Company("DTC"), New York,
New York, while the Bonds are registered in its nominee's name. The information in this section concerning DTC
and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official
Statement. The Corporation believes the source of such information to be reliable, but takes no responsibility for the
accuracy or completeness thereof
The Corporation cannot and does not give any assurance that(1)DTC will distribute payments of debt service on
the Bonds, or redemption or other notices, to DTC Participant, (2)DTC Participants or others will distribute debt
service payments paid to DTC or its nominee(as the registered owner of the Bonds), or redemption or other notices,
to the Beneficial Owners, or that they will do so on a timely basis, or(3) DTC will serve and act in the manner
described in this Official Statement. The current rules applicable to DTC are on file with the Securities and
Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on
file with DTC.
9
DTC will act as a securities depository for the Bonds. The Bonds will be issued as fully-registered securities
registered in the name of Cede & Co., DTC's or such other name as may be requested by an authorized
representative of DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds in the
aggregate principal amount of each 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 Bank Law,a
"banking,organization" within the meaning of the New York Banking law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing
agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds
and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal
debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants")
deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other
securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges
between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation("DTCC"). DTCC,in turn,is owned by a number of Direct Participants of DTC and Members
of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries
of DTCC),as well as by the New York Stock Exchange,Inc.,the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants").
DTC has Standard&Poor's highest rating, AAA. The DTC Rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants,.which will receive a
credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases. Beneficial Owners are, however, expected to receive
written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the
Direct Participant or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers
of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.
To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are registered in the name of
DTC's partnership nominee,Cede&Co.or such other name as may be requested by an authorized representative of
DTC. The deposit of Bonds with DTC and their registration in the name of Cede&Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,
which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,.by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them,subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the-transmission to them of notices of
significant events with respect to the Bonds, such as redemptions, defaults, and proposed amendments to the Bond
documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds
for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of
notices be provided directly to them.
Redemption notices will be sent to DTC. If less than all of the Bonds are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
10
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless
authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures,DTC mails an
Omnibus Proxy to the Issuer 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 the Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon
DTC's receipt of funds and corresponding detail information from Issuer or Paying Agent, on payable date in
accordance with their respective holdings shown on DTC's records. Payments by DTC 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 names," and will be the responsibility of such
Participant and not of DTC,the Paying Agent or the Corporation,subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to
Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the Corporation or the Paying Agent/Registrar,and disbursement of such payment 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 Bonds at any time by giving
reasonable notice to the Corporation or the Paying Agent/Registrar. Under such circumstances, in the event that a
successor securities depository is not obtained,Bond certificates are required to be printed and delivered.
The Corporation may decide to discontinue use of the system of book-entry transfers through DTC (or a successor
securities depository). In that event,Bond certificates will be printed and delivered.
The information under this section concerning DTC and DTC's book-entry system has been obtained from sources
that the Corporation believes to be reliable,but the Corporation takes no responsibility for the accuracy thereof.
THE PAYING AGENT/REGISTRAR AND THE CORPORATION, SO LONG AS THE DTC BOOK-ENTRY
SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF PROPOSED AMENDMENT TO THE
BOND RESOLUTION, NOTICES OF REDEMPTION, OR OTHER NOTICES WITH RESPECT TO SUCH
BONDS ONLY TO DTC. ANY FAILURE BY DTC TO ADVISE ANY DTC PARTICIPANT OR OF ANY
DIRECT PARTICIPANT OR INDIRECT PARTICIPANT TO NOTIFY THE BENEFICIAL OWNERS, OF ANY
NOTICES AND THEIR CONTENTS OR EFFECT WILL NOT AFFECT ANY ACTION PREMISED ON ANY
SUCH NOTICE. NEITHER THE CORPORATION NOR THE PAYING AGENT/REGISTRAR WILL HAVE
ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS, OR
THE PERSONS FOR WHOM DTC PARTICIPANTS ACT AS NOMINEES, WITH RESPECT TO THE
PAYMENTS ON THE BONDS OR.THE PROVIDING OF NOTICE TO DIRECT PARTICIPANTS, INDIRECT
PARTICIPANTS,OR BENEFICIAL OWNERS.
SECURITY FOR THE BONDS
The City Resolution
On.May 22, 2006, the City Council'of the City will adopt the City Resolution to approve the Bond Resolution and
the issuance of the Bonds by the Corporation. In the City Resolution,the City will covenant.and agree that so long
as the Bonds are Outstanding it will take and pursue all action necessary and authorized under State law to cause the
Sales Tax to be levied and collected continuously at the rate of one-half of one percent(1/2%), and will not cause a
reduction,abatement or exemption in the Sales Tax or in the'rate in which it is authorized to be collected. The City
will further agree to deposit into the Revenue Fund all of the Sales Tax Revenues collected from the levy and
assessment of the Sales Tax,less any amounts due to the Comptroller for collection costs and other charges.
The Municipal Sales and Use Tax Act provides that the Sales Tax does not apply to the sale of a taxable item unless
the item is also taxable under the Texas Limited Sales,Excise and Use Tax Act. The Sales Tax-is therefore subject
to broadening and reduction in the base against which it is levied by action of the State Legislature without the
consent of the City or the Corporation. See"INVESTMENT CONSIDERATIONS."
•
The Bond Resolution '
On May 22, 2006, the Board of Directors of the Corporation will adopt a resolution authorizing the issuance of the
Bonds, establishing the revenue financing structure and providing security for the repayment of the Bonds. For a
more complete description of the terms of the Bond Resolution,see"APPENDIX A—EXCERPTS OF CERTAIN
PROVISIONS OF THE BOND RESOLUTION."
11
Pledge Under Bond Resolution
The Bonds, along with any Additional Parity Bonds(as defined herein)issued pursuant to the Bond Resolution,are
special limited obligations of the Corporation payable solely from, and secured on a parity by a lien on and pledge
of, the Pledged Revenues. Under the Bond Resolution, Pledged Revenues (the "Pledged Revenues") consist
primarily of Sales Tax Revenues (defined below), and also include all interest income from the investment or
deposit of moneys in the Revenue Fund, the Debt Service Fund and the Reserve Fund created under the Bond
Resolution.
Sales Tax Revenues (the "Sales Tax Revenues") include all funds collected by the City from the levy of the Sales
Tax,less any amounts due or owing to the State Comptroller of Public Accounts(the"Comptroller")for collection
costs and certain other charges. The Sales Tax consists of the one-half of one percent('/z%)sales tax authorized to
be levied by the City for the benefit of the Corporation for the promotion and development of new and expanded
business enterprises pursuant to an election held on January 21, 1995.
Pledged Revenues also include all interest income (if any)derived from the investment or deposit of moneys in the
Revenue Fund, the Debt Service Fund and the Reserve Fund. Money in the Revenue Fund,the Debt Service Fund
and the Reserve Fund may, at the option of the Corporation,be invested in any manner permitted by law for public
funds; provided that all such deposits and investments shall be made in such manner that the money required to be
expended from any fund will be available at the proper time or times, and provided further that in no event shall
such deposits or investments of money in the Reserve Fund mature later than the final maturity date of the Parity
Bonds. All such investments shall be valued in terms of current market value as of the last Business Day of the
Corporation's Fiscal Year. All such investments shall be promptly sold when necessary to prevent any default in
connection with the Parity Bonds. All interest and income derived from such deposits and investments shall be
transferred or credited as received to the Revenue Fund, and shall constitute Pledged Revenues. For additional
information relating to the investments of the Corporation, see "MANAGEMENT AND OPERATION OF THE
CORPORATION—Investments."
Pursuant to the Bond Resolution, after all required transfers of the Pledged Revenues have been made into
the Debt Service Fund, the Reserve Fund, and any other funds created in any resolution authorizing the
issuance of Parity Bonds,any amounts remaining in the Revenue Fund may be transferred semiannually,free
of the lien of the Bond Resolution,to the Surplus Fund of the Corporation and used for any lawful purpose.
See also"Additional Parity Bonds and Other Obligations"below.
Limited Obligations
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE CORPORATION, PAYABLE SOLELY
FROM,AND SECURED BY A LIEN ON AND PLEDGE OF,THE PLEDGED REVENUES. THE BONDS ARE
NOT PAYABLE FROM OR SECURED BY ANY OTHER REVENUES, PROPERTY OR INCOME OF THE
CORPORATION. THERE IS NO MORTGAGE ON ANY OF THE REAL PROPERTY OF THE
CORPORATION TO SECURE PAYMENT OF THE BONDS. THE BONDS DO NOT CONSTITUTE A DEBT
OR OBLIGATION OF THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION, CORPORATION, OR
AGENCY THEREOF, OR OF THE CITY OF PEARLAND, TEXAS, OR THE COUNTIES OF HARRIS OR
BRAZORIA. THE HOLDERS OF THE BONDS SHALL NEVER HAVE THE RIGHT TO DEMAND
PAYMENT OF THE BONDS FROM ANY FUNDS RAISED OR TO BE. RAISED BY AD VALOREM
TAXATION.
Collection of Sales Tax Revenues and the Revenue Fund
Pursuant to the Bond Resolution,the Corporation has created a revenue fund(the"Revenue Fund")to be maintained
as a separate account on the books of the Corporation. The Corporation has covenanted to deposit all Sales Tax
Revenues into the Revenue Fund immediately upon receipt from the City or the Comptroller. The Sales Tax
Revenues on deposit in the Revenue Fund shall, on a monthly basis, be transferred into the Debt Service Fund in
approximately equal monthly installments in such amounts as will be sufficient to accumulate the total amount
required to pay the principal and interest due on the Parity Bonds on the next Payment Date therefor. On or before
each Payment Date, the Corporation shall transfer funds on deposit in the Debt Service Fund to the Paying
Agent/Registrar in the amounts required by the Bond Resolution for payment of principal and interest on the Parity
Bonds and all bank charges or other costs and expenses relating to such payment. See "APPENDIX A -
EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION."
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Additional Parity Bonds and Other Obligations
In the Bond Resolution,the Corporation has reserved the right to issue additional bonds("Additional Parity Bonds")
payable from and equally and ratably secured by a lien on and pledge of the Pledged Revenues, subject to the prior
satisfaction of certain terms and conditions. See "APPENDIX A- EXCERPTS OF CERTAIN PROVISIONS OF
THE BOND RESOLUTION."
In addition, the Corporation has reserved the right to issue, for any purpose authorized under the Act, additional
bonds, notes, or other obligations secured in whole or in part by liens on the Pledged Revenues that are junior and
subordinate to the lien on the Pledged Revenues securing payment of the Parity Bonds. Such subordinate lien
obligations may be,further secured by any other,source of payment lawfully available for such purposes. See
"APPENDIX A-EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION."
The Corporation has entered into a development agreement (the "Development Agreement") with the City and a
private developer(the"Developer")dated as of December 20,2004 relating to the development of a commercial and
retail project on an approximately 127-acre tract of land (the "Tract") located in the City. Under the terms of the
Development Agreement, the Corporation has agreed to remit ninety percent (90%) of the Sales Tax which it
collects solely from businesses located on such Tract,in order to provide for a portion of the financing required for
development of the Tract. The obligation of the Corporation to pay such amounts pursuant to the Development
Agreement is subordinate and junior to the pledge of the Sales Tax Revenues to the Bonds and any Additional Parity
Bonds; thus, such obligation will be paid solely to the extent that,funds are lawfully available after payment of debt
service on the'Bonds and any Additional Parity Bonds. In the Development Agreement,the Corporation has further
agreed not to include amounts owed under the Development Agreement in the calculation of Pledged Revenues
necessary to satisfy the coverage test for the issuance of Additional Parity Bonds contained in the Bond Resolution.
Copies of the Development Agreement may be obtained from the Corporation at,3519 Liberty Drive; Pearland,
Texas 77581.
Remedies
The Bond Resolution does not provide for acceleration of the maturities of the Bonds in the event of a default in
payment of principal or interest on the Parity Bonds or a default in the performance by the Corporation of any duty
or covenant under the Bond Resolution. Although a registered owner of Bonds could presumably obtain a judgment
against the Corporation to carry out, respect, or enforce any covenant or obligation under the Bond Resolution if a
default occurred in the payment of the principal or interest on the Bonds, such judgment could not be satisfied by
execution against any property of the Corporation other than the Pledged Revenues. Such registered owner's only
practical remedy,if a default occurs, is a mandamus or mandatory injunction proceeding to compel the Corporation
to observe or perform'any of its obligations under the Bond Resolution. 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 Bond Resolution does not provide for the appointment of a trustee to represent the interests of the owners of the
Bonds upon any failure of the Corporation to perform in accordance with the terms of the Bond Resolution,or upon
any other condition. Furthermore, the Corporation is eligible to seek relief from its creditors under the U.S.
Bankruptcy Code. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Bond
Resolution and the Bonds are qualified with respect to the customary rights of debtors relative to their creditors. See
also"INVESTMENT CONSIDERATIONS"herein.
A Reserve Fund is created under the Bond Resolution and must be maintained for so long as any Parity Bonds
remain Outstanding. The Reserve Fund Requirement (the "Reserve Fund Requirement") is equal to an amount
(which may consist of money and/or authorized investments) equal to 100% of the average annual debt service on
the Bonds and any Additional Parity Bonds then Outstanding. In lieu of funding the Reserve Fund with cash or
investments,the Corporation has applied for and intends to purchase a reserve fund surety bond(the"Surety Bond")
with a portion of the proceeds from the sale of the Bonds, in order to satisfy the Reserve Fund Requirement for the
Bonds. See "RESERVE FUND .SURETY POLICY" and "APPENDIX A - EXCERPTS OF CERTAIN
PROVISIONS OF THE BOND RESOLUTION."
In addition,the Corporation has applied for a municipal bond insurance policy to insure the payment of the principal
and interest on the Bonds when due. It is expected that such municipal bond insurance policy will be issued
concurrently with the delivery of the Bonds. See"BOND INSURANCE"and"RATINGS"herein.
13
THE SALES TAX
Source and Authorization
The Act authorizes the levy of a sales and use tax at a rate of up to one-half of one percent(' %)to be used by an
economic development corporation for the promotion of economic development. The City was authorized by the
voters at an election held therein on January 21, 1995 to levy the Sales Tax at the rate of one-half of one percent
(1/2%)for the benefit of the Corporation. The imposition,computation, administration, collection and remittance of
the Sales Tax is governed by Chapter 151,Texas Tax Code,as amended(the"Texas Limited Sales,Excise,and Use
Tax Act")and by Chapter 321,Texas Tax Code,as amended(the"Municipal Sales and Use Tax Act")except to the
extent that such chapters are in conflict with the Act, and reference is made thereto for a more complete description
of the Sales Tax.
State law also permits the City to enter into strategic partnership agreements with municipal utility districts located
within the City's extraterritorial jurisdiction, by mutual consent of the City and the municipal utility district. The
City has entered into strategic partnership agreements with a number of municipal utility districts. Among other
things, such agreements authorize the City to impose its sales and use taxes (including the Sales Tax) within the
boundaries of such districts prior to the full annexation of the districts by the City.
In general, as applied to the Sales Tax, a taxable item includes any tangible personal property and certain taxable
services. "Taxable services"include certain amusement services,cable television services,personal services,motor
vehicle parking and storage services, the repair, remodeling, maintenance and restoration of most tangible personal
property,certain telecommunications services,credit reporting services,debt collection services, insurance services,
information services, real property services, data processing services, real property repair and remodeling, security
services, telephone answering services, and Internet access service. Certain items are exempted by State law from
sales and use taxes,including items purchased for resale,certain coin-operated machine sales,food products(except
food products which are sold for immediate consumption, e.g. by restaurants, lunch counters, etc.), certain health
care supplies (including medicines, corrective lens and various therapeutic appliances and devices), certain
agricultural items (if the item is to be used exclusively on a farm.or ranch or in the production of agricultural
products),gas and electricity purchased for residential and certain other uses(unless a city has taken steps to repeal
the exemption), certain property used in manufacturing, telecommunications services, newspapers and magazines,
and basic fees for Internet access service. During an annual "tax holiday," school clothing and supplies and other
items are exempt. In addition, items which are taxed under other State laws are generally exempted from sales
taxes. These items include certain natural resources,cement,motor vehicles and insurance premiums. Alcohol and
tobacco products are subject to both State alcohol and tobacco taxes as well as sales taxes. In addition, purchases
made by various exempt organizations are not subject to the sales and use taxes. Such organizations include the
federal and state governments, political subdivisions, Indian tribes, religious institutions and certain charitable
organizations and non-profit corporations. Also, State law provides an exemption from sales taxes on items
purchased under a contract in effect when the legislation authorizing such tax(or the increase in the rate thereof) is
enacted,up to a maximum of three years.
In general, a sale of a taxable item is deemed to occur within the municipality, political subdivision, county or
special district in which the sale is consummated. The tax levied on the use, storage or consumption of tangible
personal property is considered to be consummated at the location where the item is first stored, used or consumed.
Thus,the use is considered to be consummated in a municipality that imposes the use tax and the tax is levied there
if the item is shipped from outside the state or from a municipality which does not impose a use tax to a point within
the municipality that imposes the use tax.
Other Sales Taxes
In addition to the Sales Tax levied by the City on behalf of the Corporation,as described above,the State levies and
collects a 6.25% sales and use tax against essentially the same taxable items and transactions as the Sales Tax is
levied. Under current State law,the maximum aggregate sales and use tax which may be levied within a given area
by most authorized political subdivisions and municipalities within such area, including the State and the City, is
8.25%. The current aggregate sales and use tax levied in the City is 8.25%,of which 6.25% is levied by the State,
1% is levied by the City for its general fund, Y2 of 1% is levied by Brazoria County, and V2 of 1% is levied by the
City on behalf of the Corporation.
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Collection and Administration
The Comptroller administers and enforces all sales tax laws and collects all sales and use taxes levied by the State,
and levying counties, municipalities, political subdivisions, and other special districts having sales tax powers.
Certain limited items are taxed for the benefit of the State under non-sales tax statutes, such as certain natural
resources and other items described above, and are not subject to the sales tax base available to municipalities,
counties, political subdivisions, and other special districts, including the tax base against which the Sales Tax is
levied. Municipalities may by local option determine to tax certain telecommunication services on the same basis as
the State taxes such services or to opt out of the tax holiday. The City has not opted to repeal the local
telecommunication services exemption. The City has not opted out of the tax holiday. With respect to the taxation
of the residential use of gas and electricity,the State is not authorized to collect a sales tax, while municipalities,on
a local option basis,may tax such use. The City has opted to tax the residential use of gas and electricity.
In recent years,several changes in the State sales tax laws have contributed to the growth of local sales tax revenues.
These changes have added additional goods and services to the list of taxable items. Other items have been
subjected to sales tax on a interim basis or have been taxed pursuant to legislation which includes planned phase-
outs of the tax.
With certain exceptions, sales and use taxes in the State are collected at the point of sale and are remitted to the
Comptroller by the "taxpayer,"who is,generally speaking,the business that collects the tax resulting from a taxable
transaction. Taxpayers owing $500 or more in sales and use tax dollars in a calendar month submit their tax
collections to the Comptroller on a monthly basis; taxpayers owing less than$500 in sales and use tax dollars in a
calendar month or less than $1,500 in a calendar quarter submit their tax collections quarterly. Taxpayers owing
less than$1,000 annually may submit their tax collections annually. Generally,taxpayers are required to submit tax
reports to the Comptroller on the same date as payment is due. The Comptroller is required by law to distribute
funds to the receiving political subdivisions periodically and as promptly as feasible but not less frequently than
twice during each fiscal year of the State. Historically,and at the present time,the Comptroller distributes the funds
monthly to the City,with the largest payments being made quarterly in February,May, August and November. The
Comptroller has initiated a direct deposit program using electronic funds transfers to expedite the distribution of
monthly allocation checks. If a political subdivision desires to participate in the electronic funds transfers, it may
make application to the Comptroller. The City participates in this program. Otherwise, the Comptroller mails the
allocation check, which is typically received by the middle of the month following the month in which the taxpayer
reports and remits payment on the tax. The following table sets forth the month in which political subdivisions
typically receive their sales and use tax receipts by type of reporting taxpayer.
Month Allocation Includes the Following
Received Reporting Taxpayers
January Monthly
February Monthly-Quarterly-Yearly
March Monthly
April Monthly
May Monthly-Quarterly
June Monthly
July Monthly
August Monthly-Quarterly
September Monthly
October Monthly
November Monthly-Quarterly
December Monthly
The Comptroller is responsible for enforcing the collection of sales and use taxes in the State. Under State law, the
Comptroller utilizes sales tax permits, sales tax bonds and audits to encourage timely payment of sales and use
taxes. Each entity selling, renting, leasing or otherwise providing taxable goods or services is required to have a
sales tax permit. Permits are required for each individual location of a taxpayer and are valid for only one year,
requiring an annual renewal. As a general rule, every person who applies for a sales tax permit for the first time or
has become delinquent in paying the sales or use tax is required to post security in an amount sufficient to protect
against the failure to pay taxes. The Comptroller's audit procedures include auditing the largest 2%of the sales and
•
15
use tax taxpayers (who report about 65%of all sales and use taxes in the State annually), every three or four years.
Other taxpayers are selected at random or upon some other basis for audits. The Comptroller also engages in
taxpayer education programs and mails a report to each taxpayer before the last day of the month, quarter or year
that it covers.
Once a taxpayer becomes delinquent in the payment of a sales or use tax,the Comptroller may collect the delinquent
tax by using one or more of the following methods: (i) collection by an automated collection center or local field
office, (ii)estimating the taxpayer's liability based on the highest amount due in the previous 12 months and billing
the taxpayer for the estimated amount,(iii)filing liens and requiring a new or increased payment bond,(iv)utilizing
forced collection procedures,such as seizing assets of the taxpayer(such as a banking account)or freezing assets of
the taxpayer that are in the custody of third parties, (v) removing a taxpayer's sales and use tax permit, and (vi)
certifying the account to the Office of the Attorney General of Texas for the filing of suit for collection. A political
subdivision may not sue for delinquent taxes unless it joins the Attorney General as a plaintiff or unless it-first
receives the permission of the Attorney General and the Comptroller.
The Comptroller retains 2% of the tax receipts for collection of,the tax; additionally, under State law, a taxpayer
may deduct and withhold 1/2 of 1% of the amount of taxes due on a timely return as reimbursement for the cost of
collecting sales and use taxes. In addition, a taxpayer who prepays its tax liability on the basis of a reasonable
estimate of the tax liability for a month or quarter in which a prepayment is made may deduct and withhold 1.25%
of the amount of the prepayment in addition to the 1/2 of 1%allowed for the cost of collecting the sales and use tax.
HISTORICAL PLEDGED REVENUES
Historical Sales Tax Collections for the Corporation
•
The collections of the Corporation shown on this schedule are based on the fiscal year (ending September 30) in
which the Corporation actually received payment of the Sales Tax Revenues from the Comptroller and the City.
Total Sales Tax
Revenues of the
Fiscal Year Corporation*
2000 $1,841,918
2001 2,397,275
2002 2,515,389
2003 2,924,067
2004 3,369,173
2005 3,891,870
* Includes only the Sales Tax Revenues pledged to secure the Bonds.
Estimated Average Annual Debt Service Requirement(2006-2030) $1,433,923 (a)
Coverage Based on Sales Tax Revenue 2.71 x
Estimated Maximum Annual Debt Service Requirement(2017) $1,464,013 (a)
Coverage Based on Sales Tax Revenue 2.66 x
(a) See"PRO-FORMA DEBT SERVICE SCHEDULE."
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Major Retail Establishments in the City
Listed below is a sample of the major retail establishments located within the boundaries of the City. The list was
compiled by estimating the largest retailers' square footages by visual inspection,and is not based on the amount of
actual sales revenues or sales taxes generated,since such information is deemed confidential and protected by State
law. Retailers are listed in alphabetical order.
Best Buy Kroger(2 stores) Pet Smart
Big Lots Linens&Things Pier One
Circuit City Lowe's Randall's(2 stores)
CVS Pharmacy Marshall's Ross Dress For Less
Eckerds Michael's Strickland Chevrolet
Home Depot Office Max Super Target
Kohl's Palais Royal Walgreens(2 stores)
Koza's Petco Wal-Mart(3 stores)
PRO FORMA DEBT SERVICE SCHEDULE
Fiscal
Year Current ' Total New Total
Ending Debt Service Plus: The Bonds Principal Debt Service
9-30 Requirements Principal Interest(a) &Interest Requirements
2006 $ 765,900 $ 765,900
2007 762,275 $ 50,000 $ 650,775 $ 700,775 1,463,050,
2008 762,650 165,000 534,713 699,713 1,462,363
2009 766,850 170,000 526,050 696,050 1,462,900
2010 765,600 180,000 517,125; 697,125 1,462,725
2011 768,088 185,000 507,675 692,675 1,460,763
2012 765,088 200,000 497,963 697,963 1,463,050
2013 765,738 210,000 487,463 697,463 1,463,200
2014 768,738 215,000 476,438 691,438 1,460,175
2015 765,938 230,000 465,150 695,150 1,461,088
2016 767,538 240,000 453,075 693,075 1,460,613
2017 768,538 255,000 440,475 695,475 1,464,013
2018 768,288 265,000 427,088 692,088 1,460,375
2019 766,788 280,000 413,175 693,175 1,459,963
2020 764,588 300,000 398,475 698,475 1,463,063
2021 766,588 310,000 382,725 , 692,725 1,459,313
2022 766,988 325,000 366,450 691,450 1,458,438
2023 766,363 345,000 349,388 694,388 1,460,750
2024 764,550 365,000 331,275 696,275 1,460,825
2025 766,200 385,000 312,113 697,113 1,463,313
2026 766,238 405,000 291,900 696,900 1,463,138
2027 1,190,000 270,638 1,460,638 1,460,638
2028 1,255,000 208,163 1,463,163 1,463,163
2029 1,320,000 142,275 1,462,275 1,462,275
2030 1,390,000 72,975 1,462,975 1,462,975
$16,089,532 $10.235,000 $9,523,542 $19,758.542 $35,848,069
(a) Interest has been estimated at 5.25%for purposes of illustration.
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MANAGEMENT AND OPERATION OF THE CORPORATION
Budgeting and Operations
The Corporation's combined statement of revenues, expenditures and changes in fund balances for Fiscal Years
2001 through 2005 are summarized below. •
Fiscal Year Ending September 30,
2005 2004(a) 2003 2002 2001
REVENUES:
Taxes $ 3,891,870 $3,369,173 $2,924,067 $2,515,389 $2,397,275
Interest 303,129 99,774 33,945 -0- -0-
Other 12,000 10,000 5,000 206,383 407,317
Total Revenue $ 4,206,999 $3,478,947 $2,963,012 $2,721,772 $2,804,592
EXPENDITURES:
Economic Development $ 1,960,469 $ 715,279 $ 260,325 $ 571,379 $1,079,177
Capital Outlay -0- -0- 300,552 1,269,651 403,722
Debt Service 1,023,698 447,050 446,568 368,779 370,616
Total Expenditures $'2,984,167 $ 1,162,329 $1,007,445 $2,209,809 $1,853,515
REVENUE OVER(UNDER)
EXPENDITURES $ 1,222,832 $2,316,618 $1,955,568 $ 511,963 $ 951,077
OPERATING TRANSFERS:
In $11,160,448 -0- $ 212,768 $ 411,639 -0-
Out (4,354,626) $(1,640,316) (4,195,886) (110,000) $ (322,721)
TOTAL REVENUES OVER
(UNDER)EXPENDITURES $ 8,028,654 $ 676,302 ($2,027,550) $ 813,602 $ 628,309
Prior Period Adjustments (26,482) -0- -0- (40,684) (372,948)
END OF YEAR FUND
BALANCE $11,949,880 $3,947,708 $3,271.406 $5,298,956 $4,526,038
(a) Estimated,pending confirmation by the Auditors for the City.
Investments
The Corporation invests its funds only in investments authorized by State law in accordance with investment
policies approved by the Board of Directors of the Corporation and the City Council of the City. Both State law and
the Corporation's investment policies are subject to change.
Legal Investments
Under State law, the Corporation 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) certificates of deposit that are guaranteed or
insured by the Federal Deposit Insurance Corporation or are secured as to principal by obligations described in the
preceding clauses or in any other manner and amount provided by law for Corporation deposits, (7)(a)certificates
of deposit and share certificates issued by a depository institution that has its main office or a branch office in the
State of Texas, that are (i) guaranteed or insured by the Federal Deposit Insurance Corporation or the National
Credit Union Share Insurance Fund or their respective successors, or are secured as to principal by obligations
18
described in clauses(1)through(6)above or in any other manner and amount provided by law for County deposits,
and (b) certificates of deposit or share certificates issued by a depository institution that has its main office or a
branch office in the State of Texas that participate in the Certificate of Account Registry Service; (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) bankers' acceptances with the remaining term of 270 days or.less, if the short-term
obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one
nationally recognized credit rating agency, (10) commercial paper with maturities that are 270 days or less that is
rated at least A-1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one
nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a
U.S. or state bank, (11)no-load money market mutual funds regulated by the Securities and Exchange Commission
that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives
the maintenance of a stable net asset value of$1 for each share, (12) no-load mutual funds registered with the
Securities and Exchange Commission that: have an average weighted maturity of less than two years; invests
exclusively in obligations described in the preceding clauses;and are continuously rated as to investment quality by
at least one nationally recognized investment rating firm of not less than AAA or its equivalent, (13) bonds issued,
assumed,or guaranteed by the State of Israel,and(14)guaranteed investment contracts secured by obligations of the
United States of America or its agencies and instrumentalities,other than the prohibited obligations described in the •
next succeeding paragraph.
The Corporation may invest in such bonds directly or through government investment pools that invest solely in
such Bonds 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 Corporation 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 State law, the Corporation 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 Corporation funds,
maximum allowable stated maturity of any individual investment and the maximum average dollar-weighted
maturity allowed for pooled fund groups. All Corporation 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 State law, the Corporation's investments must be made "with judgment and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the
person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the
probable income to be derived:" At least quarterly the investment officers of the Corporation 'shall submit an
investment report detailing: (1) the investment position of the Corporation, (2) that all investment officers jointly
prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the
ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the
beginning and end of the reporting period, (5)the maturity date of each separately invested asset, (6)the account or
fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the
investment portfolio as it relates to:(a)adopted investment strategy statements and(b)state law.
•
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Invested Funds of the Corporation
As of March 1,2006,the Corporation's funds were invested in the following categories:
Percent of Book Market
Description Total Value Value
Certificates of Deposit 4% $ 518,579 $ 518,579
Money Market Funds 96% 12,334,789 12,334,789
Total $12,853,368 $12,853,368
INVESTMENT CONSIDERATIONS
The Sales Tax
The primary source of security for the Bonds will be receipts of the Sales Tax Revenues received by the City for the
benefit of the Corporation. The generation of revenues from the Sales Tax is closely related to the amount of
economic activity in the City. Sales and use tax receipts,unlike other taxes levied by municipalities, immediately
reflect changes in the economic conditions.
Historically, the Comptroller has remitted sales and use tax allocation checks to municipalities on a monthly basis,
but State law currently only requires that such allocation be made at least twice annually and such procedures could
change in the future. Additionally,the tax base of taxable items and services subject to State and local sales and use
taxes are subject to legislative action, and have been changed in recent years by the State Legislature. State law
provides that the Sales Tax cannot be levied against any taxable item or service unless such item or service is also
subject to the State,sales and use tax.
In recent years the State Legislature has enacted laws permitting the State,together with its political subdivisions,to
levy sales and use taxes of up to 8.25%. The current total sales and use tax rate within the City's boundaries is
8.25%(including State,county, and City sales taxes as well as the Sales Tax), which is among the highest sales tax
rates in the nation(although the State has no personal or corporate income tax). The rate of the sales and use taxes
authorized in the State could be further increased by the State Legislature, and the Corporation has no way of
predicting any such increase or the effect that would have on the Sales Tax Revenues which secure the Bonds. State
leaders have appointed committees to study methods of achieving greater tax equity within the State's tax system.
Any changes which may be enacted by the State legislature could affect the tax base against which the Sales Tax is
levied; and the City (and hence the Corporation as the beneficiary of the City's action), except in certain limited
instances described below,has no control over the components of the tax base. Neither the City nor the Corporation
currently has statutory authority to increase or decrease the maximum authorized rate of the Sales Tax.
Tax receipts received by the Corporation are expected to be subject to seasonal variations and to variations caused
by the State laws and administrative practices governing the remittance of sales and use tax receipts which authorize
different taxpayers to remit the tax receipts at different times throughout the year.
The Sales Tax is collected by the Comptroller and remitted(less certain costs of collection and.other charges)to the
City along with other City sales and use tax receipts. The City allocates a portion of the receipts to the Corporation
which represents the one-half of one percent(1/2%) tax rate of the Sales Tax. Generally, sales and use taxes in the
State are collected at the point of a taxable transaction and remitted by the taxpayer to the Comptroller. The
Comptroller has the primary responsibility for enforcing sales and use tax laws and collecting delinquent taxes. The
collection efforts of the Comptroller are subject to applicable federal bankruptcy code provisions with respect to the
protection of debtors.
Changes in the tax base against which a sales and use tax is assessed, as well as changes in the rate of such taxes,
make projections of future tax revenue collections very difficult. No independent projections have been made with
respect to the revenues available to pay debt service on the Bonds.
Historical information regarding the sales tax base and Sales Tax collections of the Corporation is included herein,
and while the Corporation has no reason to expect that receipts of the Sales Tax Revenues will ever be insufficient
to pay its outstanding debt secured by such revenues, it makes no representation that, over the term of the Bonds,
sales and services within the City will provide sufficient Sales Tax Revenues to pay principal and interest when due
on the Outstanding Parity Bonds.
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•
Bankruptcy Limitation to Registered Owners'Rights
The enforceability of the rights and remedies of registered owners of the Bonds is limited by laws relating to
bankruptcy, reorganization or other similar laws of general application affecting the rights of creditors of political
subdivisions such as the Corporation. If the Corporation proceeded voluntarily under Chapter 9 of the Federal
Bankruptcy Code, it could file a plan for an adjustment of its debts. If such a plan were confirmed by the
bankruptcy court, it could, among other matters, reduce or eliminate the principal amount of the Corporation's
indebtedness, defer or rearrange the Corporation's debt service schedule, reduce or eliminate interest, modify or
abrogate collateral or security arrangements, substitute (in whole or in part) other securities, or otherwise
compromise and modify the rights and remedies of the registered owners of the Bonds and their claims against the
Corporation.
THE CITY
Limitation
The information provided herein and in APPENDIX B with respect to the City is being provided for r the sole
purpose of providing economic and demographic information for the City, as such information may be a factor in
evaluating the potential for future collections of Sales Tax Revenues. The Bonds do not constitute a debt or
obligation of the City, and the Holders thereof shall never have the right to demand payment of any funds
raised or to be raised by any system of ad valorem taxation.
General
The City is a home-rule city governed by a council/manager form of government. The City Council of the City
consists of five members elected at-large for three-year staggered terms. The Mayor and City Council provide
community leadership,develop policies to guide the City in delivering services and achieving community goals,and
encourage citizens awareness and involvement. For additional demographic and economic information relating to
the City and surrounding area,see APPENDIX B hereto.
Location
The City is located in the upper Gulf Coast region of Texas and is situated primarily in the northeast corner of
Brazoria County, approximately fifteen miles southeast of the City of Houston's central business district. The City
currently encompasses approximately 44 square miles within the City limits and includes approximately 29
additional square miles within its extra territorial jurisdiction("ETJ").
State Highway 288 traverses the City's west side, providing access to the port of Freeport to the south and to the
Houston Medical Center and downtown Houston to the north. The Sam Houston Tollway(Beltway 8)runs near and
parallel to the City's northern boundaries in an east-west direction. Interstate Highway 45 lies just east of the City,
providing access to the Johnson Space Center and the Port of Galveston to the south and downtown Houston to the
north. Additionally, State Highway 35 bisects the City in a north-south direction, providing access to Houston's
Hobby airport approximately six miles to the north.
•
LEGAL MATTERS
General
Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving opinion of
the Attorney General of the State and the approval of certain legal matters by Andrews Kurth LLP,Houston,Texas,
Bond Counsel, whose opinion will be delivered at the closing of the sale of the Bonds in substantially the form
attached hereto as APPENDIX D.
In their capacity as Bond Counsel, Andrews Kurth LLP has reviewed the information appearing in this Official
Statement under the sections "PROJECT AND PLAN OF FINANCE — Authority for Issuance of the Bonds,"
"DESCRIPTION OF THE BONDS" (except for the information under the subcaption"Book-Entry Only System"),
"SECURITY FOR THE BONDS," "TAX EXEMPTION," "TAX TREATMENT OF ORIGINAL ISSUE
DISCOUNT AND PREMIUM BONDS,""LEGAL INVESTMENTS IN TEXAS,""CONTINUING DISCLOSURE
OF INFORMATION" (except for the information under the subcaption "Compliance with Prior Undertakings"),
"LEGAL MATTERS--General" (insofar as such information relates to the opinions of Bond Counsel), and
"APPENDIX A — EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION," solely to
determine whether such information fairly summarizes the procedures and documents referred to therein and is in
accordance with applicable federal and State law with regard to the sale of the Bonds. Bond Counsel has not
independently verified the factual information contained in this Official Statement, nor has such firm conducted an
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investigation of the affairs of the Corporation for the purpose of passing upon the accuracy or completeness of this
Official Statement. No person is entitled to rely upon such firms' limited participation as an assumption of
responsibility for, or an expression of opinion of any kind with regard to,the accuracy or completeness of any of the
other information contained herein.
The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional
judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a
legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of
the transaction opined upon,or of the future performance of the parties to the transaction. Nor does the rendering of
an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.
Forward Looking Statements
The statements contained in this Official Statement, and in any other information provided to the reader by the
Corporation that are not purely historical,are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,as amended,including
statements regarding the Corporation's expectations, hopes, intentions, or strategies regarding the future. Readers
should not place undue reliance on forward-looking statements. All forward-looking statements included in this
Official Statement are based on information available to the Corporation on the date hereof, and the Corporation
assumes no obligation to update any such forward-looking statements. It is important to note that the Corporation's
actual results could differ materially from those in such forward-looking statements.
The forward-looking statements included herein are necessarily based on various assumptions and estimates and are
inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible
invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic,
business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be
taken by third parties, including students, customers, suppliers, business partners and competitors, and legislative,
judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments
with respect to, among other things, future economic, competitive, and market conditions and future business
decisions,all of which are difficult or impossible to predict accurately and many of which are beyond the control of
the Corporation. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Official Statement will prove to be accurate.
TAX EXEMPTION
In the opinion of Andrews Kurth LLP,Houston,Texas,Bond Counsel,interest on the Bonds(1)is 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 Bonds. Such authorities are subject to change and any such
change could prospectively or retroactively result in the inclusion of the interest on the Bonds 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 Corporation with certain
covenants of the Bond Resolution and has relied on representations by the Corporation with respect to matters solely
within the knowledge of the Corporation, which Bond Counsel has not independently verified. The covenants and
representations relate to, among other things, the use of the proceeds of the Bonds and any facilities financed
therewith, the source of repayment of the Bonds, the investment of the proceeds of the Bonds and certain other
amounts prior to expenditure, and requirements, that excess arbitrage earned on the investment of the proceeds of
the Bonds and certain other amounts be paid periodically to the United States and that the Corporation file an
information report with the Internal Revenue Service. If the Corporation should fail to comply with the covenants in
the Bond Resolution, or if its representations relating to the Bonds that are contained in the Bond Resolution should
be determined to be inaccurate or incomplete, interest on the Bonds could become taxable from the date of delivery
of the Bonds,regardless of the date on which the event causing such taxability occurs.
Interest on all tax-exempt obligations, such as the Bonds, owned by a corporation (other than an S corporation, a
qualified mutual fund,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
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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 and set forth below under"TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND
PREMIUM BONDS," 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 acquisitions or disposition of the Bonds.
Bond Counsel's opinion isnot a guarantee of a result,but represents a legal judgment based upon review of existing
statutes,regulations,published rulings and court decisions and the representations and covenants of the Corporation
described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the
matters addressed in the opinion of Bond Counsel,and no assurance can be given that the Service would agree with
the opinion of Bond Counsel,if the tax-exempt status of the interest on the Bonds were the subject of an audit. If an
audit is commenced, under current procedures the Service is likely to treat the Corporation as the "taxpayer," and
the owners would 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 Bonds, the Corporation may have different or conflicting interests from the
owners.
Under the Code, taxpayers are required to provide information on their returns regarding the amount of tax-exempt
interest,such as interest on the Bonds,received or accrued during the year.
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations, such as the
Bonds, may result in collateral federal income tax consequences to, among others, financial institutions, 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 and individuals otherwise eligible for the earned income credit. Such prospective purchasers should
consult their own tax advisors as to the consequences of investing in the Bonds.
If a tax-exempt obligation, such as the Bonds,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. The applicability of the market discount
rules may adversely affect the liquidity or secondary market price of the Bonds. Purchasers should consult their
own tax advisors regarding the potential implications of market discount with respect to the Bonds.
TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS
Discount Bonds
According to representations of the Underwriters, certain of the Bonds may be offered at initial offering prices
which are less than the stated redemption prices at maturity of such Bonds. If the initial offering prices of the Bonds
are lower than the stated redemption price payable at maturity, the Bonds of that maturity (the "Discount Bonds")
will be considered to have "original issue discount" for federal income tax purposes. An initial owner who
purchases a Discount Bond in the initial public offering of the Bonds at such an initial offering price will acquire
such Discount Bond with original issue discount equal to the difference between (a) the stated redemption price
payable at the maturity of such Discount Bond and(b)the initial public offering price to the public of such Discount
Bond. Under existing law,such original issue discount will be treated for federal income tax purposes as additional
interest on such Bond 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 Bond continues to be owned by such initial owner. Except as otherwise provided herein, the
discussion regarding interest on the Bonds under the caption "TAX EXEMPTION" generally applies to original
issue discount deemed to be earned on a Discount Bond while held by an owner who has purchased such Bond at the
initial offering price in the initial public offering of the Bonds and that discussion should be considered in
connection with this portion of the Official Statement.
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In the event of a redemption, sale, or other taxable disposition of a Discount Bond prior to its stated maturity,
however, any amount realized by such initial owner in excess of the basis of such Discount Bond in the hands of
such owner (increased to reflect the portion of the original issue discount deemed to have been earned while such
Discount Bond 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 Bond will be treated for federal income tax purposes as interest on a
Bond,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
Bonds 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 Bond 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 Bond. 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 Bonds of the owner of a Discount Bond or of the Corporation. The portion of the
principal of a Discount Bond representing original issue discount is payable upon the maturity or earlier redemption
of such Bond to the registered owner of the Discount Bond at that time.
Under special tax accounting rules prescribed by existing law, a portion of the original issue discount on each
Discount Bond 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
Bonds by an owner that did not purchase such Bonds 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 Bonds 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 Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase,
ownership,redemption,sale or other disposition of such Discount Bonds.
Premium Bonds
According to representations of the Underwriters, certain of the Bonds may be offered at initial offering prices
which exceed the stated redemption prices payable at the maturity of such Bonds. If any of the Bonds of such
maturities are sold to members of the public (which for this purpose excludes bond houses, brokers and similar
person or organizations acting in the capacity of wholesalers or underwriters)at such initial offering prices,each of
the Bonds of such maturities ("Premium Bonds") 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 Bond in the
hands of an initial purchaser who purchases.such Bond in the initial offering must be reduced each year and upon
the sale or other taxable disposition of the Bond 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 Bond 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 Bond which is amortizable each year(or
shorter period in the event of a sale or disposition of a Premium Bond) is determined under special tax accounting
rules which use a constant yield throughout the term of the Premium Bond based on the initial purchaser's original
basis in such Bond.
The federal income tax consequences of the purchase, ownership,redemption, sale or other disposition by an owner
of Bonds that are not purchased in the initial offering or which are purchases at an amount representing a price other
than the initial offering prices for the Bonds of the same maturity may be determined according to rules which differ
from those described above. Moreover, all prospective purchasers of Bonds 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 Bonds.
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LITIGATION
The Corporation will furnish the Underwriters a certificate, dated as of the date of delivery of the Bonds, executed
by the appropriate Corporation officials, acting in their official capacities as such, to the effect that no litigation of
any nature is then pending or, to their knowledge, threatened against the Corporation, either in state or federal
courts, contesting or attacking the Bonds;restraining or enjoining the issuance,execution, or delivery of the Bonds;
affecting the provisions made for the payment of or security for the Bonds; or in any manner questioning the
authority or proceedings for the issuance, execution or delivery of the Bonds;or affecting the validity of the Bonds,
or the corporate existence or boundaries of the Corporation.
LEGAL INVESTMENTS IN TEXAS
Under State law,the Bonds are legal and authorized investments for banks, savings banks,trust companies, savings
and loan associations, insurance companies, fiduciaries and trustees, and for the sinking funds of municipalities or
other political subdivisions or public agencies of the State. The Corporation has not made any investigation of other
laws,regulations, or investment criteria that might affect the suitability of the Bonds for any of the above purposes
or limit the authority of any of the above persons or entities to purchase or invest in the Bonds.
RATINGS
In connection with the sale of the Bonds, the Corporation has made application to Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("S&P") for ratings and the ratings of " " and "_",
respectively, have been assigned to the Bonds with the understanding that upon delivery of the Bonds, a municipal
bond insurance policy insuring the timely payment of the principal of and interest on the Bonds will be issued by
. Moody's and S&P have assigned underlying ratings of " " and "_;"
respectively, on the Bonds. An explanation of the significance of such ratings may be obtained from Moody's and
S&P. The ratings reflect only the views of Moody's and S&P, and neither the Corporation nor the Financial
Advisor undertakes any responsibility to oppose a revision or withdrawal of such rating.
There is no assurance that such ratings will continue for any period of time or that they will not be revised
downward or withdrawn entirely by Moody's and/or S&P, if, in the judgment of Moody's and S&P, circumstances
so warrant. Any such downward revision or withdrawal of the ratings may have an adverse effect on the market
price of the Bonds.
CONTINUING DISCLOSURE OF INFORMATION
In order to provide certain continuing disclosure with respect to the Series 2006 Sales Tax Revenue Bonds in
accordance with Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities •
Exchange Act of 1934, as the same may be amended from time to time ("Rule 15c2-12"), the City of Pearland,
Texas has entered into a Disclosure Dissemination Agent Agreement ("Disclosure Dissemination Agreement") for
the benefit of the Holders of the Series 2006 Sales Tax Revenue Bonds with Digital Assurance Certification,L.L.C.
("DAC"), under which the City of Pearland, Texas has designated DAC as Disclosure Dissemination Agent. The
form of Disclosure Dissemination Agreement can be obtained from www.dacbond.com.
In the City Resolution,the City,on behalf of the City and the Corporation,has made the following agreement for the
benefit of the holders and beneficial owners of the Bonds. The City is required to observe the agreement for so long
as the City or the Corporation remains an obligated person with respect to the Bonds. Under the agreement,the City
will be obligated to provide certain updated financial information and operating data annually, and timely notice of
specified material events to certain information vendors. This information will be available to securities brokers and
others who subscribe to receive the information from the vendors.
Annual Reports .
The City will provide certain updated financial information and operating data to certain, information vendors
annually. The information to be updated includes the financial information and operating data with respect to the
City and the Corporation of the general type included in this Official Statement under the captions "Historical
Pledged Revenues,""Debt Service Schedule,"and "Management and Operation of the Corporation." The City will
update and provide this information within six months after the end of each fiscal year ending in or after 2006. The
City will provide the updated information to each nationally recognized municipal securities information repository
("NRMSIR")and to the Texas Municipal Advisory Council,the state information depository("SID")designated by
the State of Texas and approved by the staff of the United States Securities and Exchange Commission(the"SEC").
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The City may provide updated information in full text or may incorporate by reference certain other publicly
available documents, as permitted by SEC Rule 15c2-12, as amended and in effect from time to time (the "Rule").
The updated information will include audited financial statements, if the City commissions an audit and it is
completed by the required time. If audited financial statements are not commissioned or are not available by the
required time,the City will provide unaudited financial statements and audited financial statements when and if they
become available. Any such financial statements will be prepared in accordance with the accounting principles
described in APPENDIX C or such other accounting principles as the City may be required to employ from time to
time pursuant to state law or regulation.
The City's current fiscal year end is September 30. Accordingly,it must provide updated information by March 31
in each year,beginning March 31,2007,unless the City changes its fiscal year. If the City changes its fiscal year,it
will notify each NRMSIR and the SID of the change.
Material Event Notices
The City will also provide timely notices of certain events to certain information vendors. The City will provide
notice of any of the following events with respect to the Bonds,if such event is material to a decision to purchase or
sell Bonds: (1) principal and interest payment delinquencies; (2)'non-payment related defaults; (3) unscheduled
draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements
reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6)
adverse tax opinions or events affecting the tax-exempt status of the Bonds;(7)modifications to rights of holders of
the Bonds;(8)calls;(9)defeasances;(10)release, substitution,or sale of property securing repayment of the Bonds;
and(11)rating changes. Neither the Bonds nor the City Resolution makes any provision for liquidity enhancement.
In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial
statements in accordance with its agreement described above under "Annual Reports." The City will provide each
notice described in this paragraph to the SID and to either each NRMSIR or the Municipal.Securities Rulemaking
Board("MSRB").
Availability of Information From NRMSIRs and SID
The City has agreed to provide the foregoing information only to NRMSIRs and the SID. The information will be
available to holders of and beneficial owners of the Bonds only if the holders comply with the procedures and pay
the charges established by such information vendors or obtain the information through securities brokers who have
done so.
The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID and has been
approved as such by the SEC staff. 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.
Limitations and Amendments
The City has agreed to update information and to provide notices of material events only as described above. The
City has not agreed to provide other information that may be relevant or material to a complete presentation of its
financial results of operations,condition,or prospects or agreed to update any information that is provided,except as
described above. The City makes no representation or warranty concerning such information or concerning its
usefulness to a decision to invest in or sell Bonds at any future date. The City disclaims any contractual or tort
liability for damages resulting in whole or in part from any breach, whether negligent or without fault on its part,of
its continuing disclosure agreement or from any statement made pursuant to its agreement. Holders or beneficial
owners of Bonds may seek as their sole remedy a writ of mandamus to compel the City to comply with its
agreement. No default by the City with respect to its continuing disclosure agreement shall constitute a breach of or
default under the City Resolution for purposes of any other provision of the City Resolution. Nothing in this
paragraph is intended or shall act to disclaim, waive,or otherwise limit the duties of the City under federal and state
securities laws. The City's undertakings and agreements are subject to appropriation of necessary funds and to
applicable legal restrictions.
The City may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a change
in legal requirements,a change in law, or a change in the identity,nature, status or type of operations of the.City if,
but only if(i)the agreement, as so amended, would have permitted a.purchaser to purchase or sell the Bonds in the
offering made hereby in compliance with the Rule, taking into account any amendments or interpretations of the
Rule to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a
majority in aggregate amount of the outstanding Bonds consent to such amendment or(b)a person unaffiliated with
the City(such as nationally recognized bond counsel)determines that the amendment will.not materially impair the
26
interests of the holders and beneficial owners of the Bonds. The City may also amend or repeal the agreement if the
SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction determines that such
provisions are invalid,and the City may amend the agreement in its discretion in any other circumstance or manner,
but in either case only to the extent that its right to do so would not prevent the Underwriters from purchasing the
Bonds in the offering described herein in compliance with the Rule. If the City amends the agreement,it has agreed
to include with any financial information or operating data next provided in accordance with its agreement described
above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the
impact of any change in the type of financial information and operating data so provided.
Audited Financial Report of the City
The City presently requires that an annual audit be performed by an independent public accounting firm in
accordance with generally accepted auditing standards for governmental units. The most recent audit,and additional
financial information are available for public inspection, or copies may be obtained by written request, to the extent
permitted by law, addressed to the City, with such fee,if any, for copies as may from time to time be authorized by
the City.
Compliance With Prior Undertakings
The City has complied in all material respects with its prior continuing disclosure agreements made in accordance
with SEC Rule 15c2-12.
FINANCIAL ADVISOR
RBC Capital Markets is employed as Financial Advisor to the Corporation in connection with the issuance of the
Bonds. RBC Capital Markets is the trade name under which RBC Damn Rauscher Inc., a broker-dealer, conducts
municipal investment banking business. The Financial Advisor's fee for services rendered with respect to the sale
of the Bonds is contingent upon the issuance and delivery of the Bonds.
GENERAL CONSIDERATIONS
The financial data and other information contained herein have been obtained from the Corporation's and the City's
records,financial statements and other sources which are believed to be reliable. No representation is made as to the
accuracy or completeness of the information derived from sources other than the Corporation and the City. There is
no guarantee that any of the assumptions or estimates contained herein will be realized.
All of the summaries of the bonds, statutes, documents, and resolutions contained in this Official Statement are
made subject to all of the provisions of such bonds, statutes, documents, and resolutions. These summaries do not
purport to be complete statements of such provisions and reference is made to such documents for further
information. Reference is made to original documents in all respects.
The information contained in this Official Statement in the section entitled "APPENDIX C — AUDITED
FINANCIAL STATEMENTS OF THE CITY OF PEARLAND FOR THE YEAR ENDED SEPTEMBER 30,2005"
has been provided by Pattillo, Brown&Hill,P.C.,Waco,Texas and has been included herein in reliance upon their
authority as an expert in the fields of auditing and accounting.
Neither this Official statement nor any statement that may have been made orally or in writing is to be constructed
as or as part of a contract with the original purchasers or subsequent owners of the Bonds.
THIS OFFICIAL STATEMENT has been approved, and the execution and delivery of this Official Statement
authorized,by the Board of the Corporation.
/s/ Randall Ferguson
Chairman,Board of Directors
Pearland Economic Development Corporation
ATTEST:
/s/ Helen Beckman
Secretary,Board of Directors
Pearland Economic Development Corporation
27
APPENDIX A
EXCERPTS OF CERTAIN PROVISIONS OF THE BOND RESOLUTION
Excerpts of certain provisions of the Bond Resolution are reproduced in this APPENDIX A. This APPENDIX A is
qualified in its entirety to the full provisions of the Bond Resolution,copies of which are available upon request to
the Corporation.
Section 2.1: Definitions. In this Resolution,the following terms shall have the following meanings,unless the
context clearly indicates otherwise:
"Act"shall mean Article 5190.6,Texas Revised Civil Statutes,as amended.
•
"Additional Parity Bonds" shall mean the additional bonds permitted to be issued by the
Corporation pursuant to Section 6.1 of this Resolution.
"Attorney General"shall mean the Attorney General of the State of Texas.
"Board of Directors"shall mean the governing body of the Corporation.
"Bond Insurance Policy"shall mean the municipal bond new issuance insurance policy issued by
the Bond Insurer that guarantees payment of principal of and interest on the Bonds.
"Bond Insurer"shall mean ,or any successor thereto.
"Bond" or'`Bonds" shall mean the Corporation's Sales Tax Revenue Bonds, Series 2006, but
only to the extent such Bonds are Outstanding within the meaning of this Resolution.
"Business Day" shall mean any day other than (i) a Saturday, Sunday, or other day on which
banking institutions in the city where the principal corporate trust office of the Paying
Agent/Registrar is located are authorized by law or executive order to close, or (ii) a day on
which the New York Stock Exchange is closed.
"City" shall mean the City of Pearland,Texas, a municipal corporation and home-rule city, and
where appropriate,the City Council 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.
"Construction Fund" shall mean the Construction Fund created pursuant to Section 9.4 of this
Resolution.
"Corporation" shall mean the Pearland Economic Development Corporation, and any successor
thereto.
"Debt Service Fund" shall mean the Debt Service Fund created pursuant to Section 5.2 of this
Resolution.
"Debt Service Requirement" shall mean the amount necessary to pay the principal of, premium,
if any, and interest due and owing on the Bonds, and any Additional Parity Bonds, during each
Fiscal Year of the Corporation. The Debt Service Schedule for the Bonds is attached to this
Resolution as Exhibit A.
"Fiscal Year"shall mean the fiscal year of the Corporation, which is currently the twelve-month
period beginning on October 1 of each year and ending on September 30 of the following year.
"Outstanding," when used with reference to the Bonds shall mean, as of a particular date, the
principal amount of all such Bonds theretofore delivered by the Corporation as provided in or
contemplated by this Resolution, except: (a) any such Bond canceled by or on behalf of the
Corporation at or before such date;(b)any such Bond paid or with respect to which provision for
payment has been made pursuant to the provisions of this Resolution or otherwise defeased as
permitted by applicable law; or(c)any such Bond in lieu of or in substitution for which another
Bond shall have been delivered pursuant to this Resolution.
"Owner"or"Registered Owner," when used with respect to any Bond, shall mean the person or
entity in whose name such Bond is registered in the Register. Any reference to a particular
percentage or proportion of the Owners shall mean the Owners at a particular time of the
specified percentage or proportion in aggregate principal amount of all Bonds then Outstanding
under this Resolution,exclusive of Bonds held by the Corporation.
"Parity Bonds" shall mean the Bonds, each series of Additional Parity Bonds from time to time
hereafter issued by the Corporation, and any refunding bonds issued to refund the Bonds or any
Additional Parity Bonds,but only to the extent such Parity Bonds remain Outstanding.
"Paying Agent/Registrar" shall mean Wells Fargo Bank, N.A., Minneapolis, Minnesota, and its
successors in that capacity.
"Payment Date", when used in connection with any Bond, shall mean March 1, 2007, and each
March 1 and September 1 thereafter until maturity or prior redemption.
"Pledged Revenues" shall mean (a) 100% of the Sales Tax Revenues and (b) 100% of all of the
interest income from the investment or deposit of moneys in the Revenue Fund,the Debt Service
Fund and the Reserve Fund.
"Project"shall mean the construction of two lanes of Bailey Oiler Road running west from SH 35
and existing Oiler Drive to Veterans Drive, including the acquisition of all necessary,-rights of
way, the construction of drainage and sewage lines along the proposed construction and
' associated improvements, the construction of a two lane rail overpass across the Burlington
Northern Lines along the construction route,the construction of four lane transition turn-in lanes
at SH 35 and Veterans Drive and median cuts for future development along the construction
route.
"Purchaser" shall mean the initial purchaser of the Bonds as defined in Section 9.1 of this
Resolution.
"Record Date" shall mean,for any Payment Date,the fifteenth(15th)calendar day of the month
next preceding each Payment Date.
"Register" shall mean the books of registration kept by the Paying Agent/Registrar in which are
maintained the names and addresses of, and the principal amounts of the Bonds registered to,
each Owner.
"Reserve Fund"shall mean the Reserve Fund created pursuant to Section 5.2 of this Resolution.
"Reserve Fund Requirement" shall mean an amount(which may consist of money or authorized
investments,or any combination thereof)equal to 100%of the average annual debt service on the
Bonds and any Additional Parity Bonds then Outstanding.
"Reserve Fund Surety Bond"shall mean the reserve fund surety bond issued by the Reserve Fund
Surety Bond Insurer.
"Reserve Fund Surety Bond Insurer" shall mean , or any
successor thereto.
"Resolution" shall mean this Resolution Authorizing the Issuance of $10,235,000 Pearland
Economic Development Corporation Sales Tax Revenue Bonds, Series 2006, and all
amendments hereof and supplements hereto.
"Revenue Fund"shall mean the Revenue Fund created pursuant to Section 5.2 of this Resolution.
"Sales Tax"shall mean the 1/2 of 1%sales and use tax authorized to be levied by the City for the
benefit of the Corporation for the promotion and development of new and expanded business
enterprises pursuant to an election held on January 21, 1995.
"Sales Tax Revenues" shall mean 100% of the funds collected by the City from the levy of the
Sales Tax,without deduction, offset or credit for any administrative charges or expenses incurred
by the City or the Corporation in connection with the levy and collection of the Sales Tax, other
than any amounts due and owing to the Comptroller for collection costs and other charges.
"Surplus Fund"shall mean the Surplus Fund created pursuant to Section 5.2 of this Resolution.
Section 5.1: Pledge and Source of Payment. The Corporation hereby covenants and agrees that all Pledged
Revenues shall be deposited and paid into the special funds established in Section 5.2 of this
Resolution, and shall be applied in the manner set out herein, to provide for the payment of
principal, interest and any redemption premium of the Parity Bonds and all expenses of paying
the same. The Parity Bonds shall constitute special obligations of the Corporation that shall be
payable solely from,-and shall be equally and ratably secured by-a first-lien on, the Pledged
Revenues, as collected and received by the Corporation, which Pledged Revenues shall, in the
manner herein provided,be set aside and pledged to the payment of the Parity Bonds in the Debt
Service Fund and Reserve Fund, and any excess Sales Tax Revenues shall be set aside in the
Surplus Fund as hereinafter provided, and the Parity Bonds shall be in all respects on a parity
with and of equal dignity with one another. The owners of the Parity Bonds shall never have the
right to demand payment out of any funds raised or to be raised by ad valorem taxation. The
owners of the Parity Bonds shall never have the right to demand payment from Sales Tax
Revenues in excess of those collected from the Sales Tax.
Section 5.2: Special Funds. The following special funds are hereby created, and such funds shall be
maintained and accounted for as hereinafter provided, so long as any Parity Bonds remain
Outstanding:
(a) the Revenue Fund;
(b) the Debt Service Fund; -
(c) the Reserve Fund;and
(d) the Surplus Fund.
The Revenue Fund and the Surplus Fund shall be maintained and accounted for as separate
accounts on the books of the Corporation. The Debt Service Fund and'any moneys held in the
Reserve Fund shall be maintained at an official depository bank of the Corporation separate and
apart from all other funds and accounts of the City or the Corporation and shall constitute trust
funds which shall be held in trust for the benefit of the Owners of the Parity Bonds and the
proceeds of which shall be and are hereby pledged to the payment of the.Parity Bonds.All of the
funds named above shall be used solely as provided herein so long-as any Parity Bonds remain
Outstanding.
* ** *
Section_5.3: Flow of Funds. All Pledged Revenues shall be deposited as collected into the Revenue Fund.
Money from time to time on deposit to the credit of the Revenue Fund shall be applied as follows
in the following order or priority:
(i) First, to make all deposits into the Debt Service Fund required by this Resolution, and
any resolution authorizing the issuance of Additional Parity Bonds;
(ii) Second,to make any rebate payments required pursuant to Section 9.5 of this Resolution;
(iii) Third, to reimburse the Reserve Fund Surety Bond Insurer and any other issuer of a
surety bond issued in satisfaction of the Reserve Fund Requirement, any amounts
advanced under the Reserve Fund Surety Bond or such other surety bonds;
(iv) Fourth,to pay interest to the Reserve Fund Surety Bond Insurer and any other issuer of a
surety bond issued in satisfaction of the Reserve Fund Requirement, for any amounts
advanced under the Reserve Fund Surety Bond or such other surety bonds;
(v) Fifth, to make all deposits into the Reserve Fund required by this Resolution, and any
resolution authorizing the issuance of Additional Parity Bonds;
(vi) Sixth, to make the transfers required by any resolutions authorizing the issuance or
incurrence of subordinate lien obligations (subject to the prior requirements of any
resolutions authorizing the issuance of Additional Parity Bonds);and
(vii) Seventh, to make all deposits into the Surplus Fund as required by this Resolution, said
funds to be used for any lawful purpose.
Whenever the total amounts on deposit to the credit of the Debt Service Fund and the Reserve
Fund shall be equivalent to the sum of the aggregate principal amount of all Outstanding Parity
Bonds plus the aggregate amount of all interest accrued and to accrue thereon, no further
payments need be made into the Debt Service Fund or the Reserve Fund.
Section 5.4: Debt Service Fund. On or before the last Business Day of each month, beginning July, 2006, so
long as any Parity Bonds remain Outstanding,there shall be deposited into the Debt Service Fund
from the Revenue Fund such amounts, in approximately equal monthly installments, as will be
sufficient to accumulate the amount required to pay the Debt Service Requirement on the next
Payment Date.
If in any month the Corporation shall fail to make the full transfer to the Debt Service Fund
required by this Resolution, amounts equivalent to such deficiency shall be transferred to the
Debt Service Fund from the first available and unallocated money in the Revenue Fund in the
following month or months, and such transfers shall be in addition to the other amounts required
to be transferred to the Debt Service Fund.
Money deposited to the credit of the Debt Service Fund shall be used solely for the purpose of
paying principal (at maturity or prior redemption or to purchase Parity Bonds issued as term
bonds in the open market to be credited against mandatory redemption requirements), interest,
and any redemption premium on the Parity Bonds, plus all bank charges and other costs and
expenses related to such payment. On or before each Payment Date on the Parity Bonds, the
Corporation shall transfer from the Debt Service Fund to the paying agents for the Parity Bonds
an amount equal to the principal, interest and any redemption premium payable on the Parity
Bonds on such date, together with an amount equal to all bank charges and other costs and
expenses relating to such payment. The paying agents for the Parity Bonds shall destroy all paid
Parity Bonds and shall provide the Corporation with an appropriate certificate of destruction.
Section 5.5: Reserve Fund. The Corporation shall initially deposit in the Reserve Fund, within five years
from the date of delivery of the Bonds, in equal monthly installments, an amount which after
such five-year period shall equal the Reserve Fund Requirement. After such five-year period,so
long thereafter as the Reserve Fund contains such amount, no deposits shall be required to be
made into the Reserve Fund, and any excess amounts may be transferred to the Revenue Fund,
the Debt Service Fund or the Surplus Fund. But, if and whenever the balance in the Reserve
Fund is reduced below such amount, monthly deposits into the Reserve Fund from the first
available and unallocated money in the Revenue Fund shall be resumed and continued until the
Reserve Fund has been restored to such amount. The Reserve Fund shall be used to pay the
principal of and interest on the Parity Bonds at any time when there is not sufficient money
available in the Debt Service Fund for such purpose and it may be used finally to pay and retire
the last Parity Bonds to mature or be redeemed.
In lieu of cash or investments,the Reserve Fund Requirement may be satisfied in whole or in part
with one or more surety bonds issued by an insurance company rated in the highest rating
category by Standard & Poor's Ratings Group and Moody's Investors Service, and, if rated by
A.M. Best & Company, also rated in the highest rating category by A.M. Best & Company,
including the Reserve Fund Surety Bond pursuant to the Financial Guaranty Agreement, a form
of which is attached hereto as Exhibit F, the terms and provisions of which are hereby approved.
The Chairman is hereby authorized and directed to execute and deliver such Financial Guaranty
Agreement on behalf of the Corporation, in multiple counterparts and the Secretary is hereby
authorized to attest thereto, together with such changes, additions, deletions and amendments
thereto as such officers shall deem necessary or appropriate. Such Reserve Fund Surety Bond
may be drawn upon only after all cash or investments held in the Reserve Fund have been used or
applied. If the Reserve Fund Requirement is satisfied with the Reserve Fund Surety Bond and
one or more surety bonds authorized under this Section,draws on the Reserve Fund Surety Bond
and such other surety bonds shall be made on a pro rata basis.
Notwithstanding anything in this Resolution to the contrary, the Bonds may not be redeemed
pursuant to Section 3.4 unless all amounts owed to the Reserve Fund Surety Bond Insurer
pursuant to the Financial Guaranty Agreement have been paid in full.
Section 5.6: Surplus Fund. After making any transfers which may be required into the Debt Service Fund,the
Reserve Fund, or any other fund or funds created in any resolution authorizing the issuance of
Parity Bonds,any money remaining in the Revenue Fund shall be considered surplus,and may be
deposited on any Payment Date into the Surplus Fund and used by the Corporation for any lawful
purpose.
** * *
Section6.1: Additional Parity Bonds. In addition to inferior lien bonds, the Corporation expressly reserves
the right hereafter to issue,in one or more series,Additional Parity Bonds for purposes permitted
by law, which Additional Parity Bonds, when issued, shall be payable from and secured by liens
on and pledges of the Pledged Revenues in the same manner and to the same extent as the Bonds
and any other Additional Parity Bonds; and the Additional Parity Bonds, when issued, shall be
payable from the Debt Service Fund and shall be in all respects of equal dignity and on a parity
with the Bonds and any other Additional Parity Bonds. It is specifically provided,however, that
no Additional Parity Bonds shall be issued unless:
(i) Principal of the Additional Parity Bonds is payable on September 1 and.interest is
payable on March 1 and September 1;
(ii) The Debt Service Fund and the Reserve Fund each contains the amount of money then
required to be on deposit therein;
(iii) For any twelve (12) consecutive months of the preceding 18-month period immediately
preceding the month in which the resolution authorizing such Additional Parity Bonds is
adopted (the "Base Period"), the Pledged Revenues were equal to at least 1.25% of the
average annual principal and interest requirements on all Parity Bonds that will be
Outstanding after the issuance of the series of Additional Parity Bonds then proposed to
be issued, as certified by the Chairman of the Corporation, an authorized officer of the
City, or by an independent certified public accountant or firm of independent certified
public accountants;and
(iv) Provision is made in the resolution authorizing the Additional Parity Bonds then
proposed to be issued that (1) additional deposits will be made into the Debt Service
Fund sufficient to provide for the principal and interest requirements on the Additional
Parity Bonds and(2)deposits will be made into the Reserve Fund of such amount,or one
or more surety bonds will be provided, so that it will contain a balance not less than the
Reserve Fund Requirement on all Parity Bonds that will be Outstanding after the issuance
of such series of Additional Parity Bonds.
Section 6.2: Subordinate Lien Bonds. The Corporation reserves the right to issue,for any purpose authorized
under the Act, bonds, notes or other obligations secured in whole or in part by liens on the
Pledged Revenues that are junior and subordinate to the lien on Pledged Revenues securing
payment of the Parity Bonds. Such subordinate lien obligations may be further secured by any
other source of payment lawfully available for such purposes.
* **
APPENDIX B
GENERAL INFORMATION REGARDING THE CITY OF PEARLAND
The following information has been derived from various sources,including the U.S.Census data,Texas Workforce
Commission, "Sales Management Survey of Buying Power",Claritas, and City of Pearland, Texas officials. While
such sources are believed to be reliable,no representation is made as to the accuracy thereof.
The information provided in this APPENDIX B is being provided for the sole purpose of providing economic and
demographic information for the City, as such information may be a factor in evaluating the potential for future
collections of Sales Tax Revenues. However,the Bonds do not constitute a debt or obligation of the City,and
the Holders thereof shall never have the right to demand payment of any funds raised or to be raised by any
system of ad valorem taxation.
Residential and Commercial Development
Because of the City's proximity to downtown Houston, it has become an area of continuing growth in residential,
commercial and some light industrial development. As of April 2006, there are numerous residential subdivisions
either developed or under construction within the City with homes ranging in value from$75,000 to$400,000, the
average being approximately$185,400.
-Building Permits-
Residential Commercial Other(a) Total
Year
12-31 No. Value No. Value No. Value No. Value
1990 670 35,378,197 90 . 2,947,222 119 931,546 879 39,256,965
1991 382 36,416,253 12 2,503,500 402 5,507,501 796 44,427,254
1992 402 37,249,884 16 6,849,000 453 11,764,178 871 55,863,062
1993 481 39,236,381 15 6,475,570 863 5,961,881 1,359 51,673,832
1994 362 25,173,050 12 2,997,021 582 7,425;514 956 35,595,585
1995 340 34,734,829 13 3,762,900 528 7,799,090 881 46,296,819
1996 478. 38,301,224 19 5,189,850 392 85,320,262 889 128,811,066
1997 415 43,712,441 30 10,785,050 402 50,038,171 847 104,535,662
1998 506 60,691,036 23 12,696,415 422 40,739,351 951 114,126,808
1999 536 64,525,679 22 13,847,245 532 48,265,402 1,090 126,638,386
2000 818 202,795,755 17 43,414,385 604 59,823,285 1,439 306,033,425
2001 1,245 212,152,849 20 10,868,583 705 21,129,833 1,970 244,151,265
2002 1,424 257,282,301 20 29,585,122 719 15,782,222 2,163 302,649,645
2003 1,684 312,354,189 49 41,504,192 742 17,717,326 2,475 371,575,707
2004 2,102 384,666,248 43 39,220,592 645 21,702,813 2,790 445,589,653
2005 2,610 479,228,095 51 40,675,200 664 30,299,897 3,325 550,203,192
(a) Includes apartments and public facilities.
Source: City of Pearland
Employment
The City has a well-rounded workforce with a significant percentage of workers employed in professional or
executive positions or as administrative support for professionals. The industries employing the greatest number of
Pearland's residents are manufacturing of durable goods, retail trade and education. Industrial activities within the
City include the manufacturing of pipe, concrete building materials, mining equipment, lighting fixtures, large
storage tanks and the fabrication and forging of steel. The following is a list of the industrial employers located
within the City with employment numbers above 100,as of December 2005.
-Major Employers-
(100+Employees)
Davis-Lynch Randall's
Home Depot ShawCor Pipe Protection
Kemlon Strickland Chevrolet
Kroger Super Target
Lowe's Tele-Flow
Pauluhn Electric Manufacturing Turbo Care
Pearland,City of Wal-Mart
Pearland ISD Weatherford Manufacturing
Pro Fax
Source: Pearland Economic Development Corporation;2005;Texas Workforce Commission
-Pearland Employment By Industry Sector-
Industrial 36%
Retail/Leisure 33%
Other 15%
Office 10%
Healthcare 6%
Source: US Census Bureau;TIP Strategies,2000
-Pearland Percentage Population by Occupation-
Management,Professional,related 40.9%
Sales and Office 29.7%
Production, Transportation, Material 10.5%
Moving
Construction,Extraction,and Maintenance 9.6%
Service 9.3%
Farming,Forestry,and Fishing .1%
Source: US Census Bureau,2000
-Civilian Labor Force-
City of Pearland
2005 2004 2003 2002 2001 2000 1999 1998 _ 1997
Labor Force 27,906 20,398 13,035 12,555 12,074 12,010 11,773 11,905 11,809
Employed 26,809 19,403 12,323 12,004 11,640 11,556 11,290 11,466 11,282
Unemployed 1,097 994 712 551 434 454 483 439 527
Rate 3.9 4.9 5.5 4.4 3.6 3.8 4.1 3.7 4.5
Brazoria County
2005 2004 2003 2002 2001 2000 1999 1998 1997
Labor Force 132,814 125,175 116,777 110,179 106,660 106,312 104,330 105,383 105,274
Employed 126,536 115,693 106,393 102,593 100,336 99,685 97,274 98,970 97,580
Unemployed 6,278 9,480 10,384 7,586 6,324 6,627 7,056 6,413 7,694
Rate 4.7 7.7 8.9 6.9 5.9 6.2 6.8 6.1 7.3
•
Source: Texas Workforce Commission.
Population and Demographics
-City Population-
Number %Change
1960 1,497 ---
1970 6,444 +330.46
1980 13,248 +105.59
1990 18,927 +42.87
2000 37,640 +98.87
2005* 69,808 +85.46
* As of December 2005.
Source: U.S.Census
Marketing Survey of Buying Power*
Houston
CMSA Brazoria County
Population(000s)
Total Population 5,341.3 271.9
18-24 10.0 9.9
25-34 14.8 13.7
35-49 23.1 23.9
50+ 23.6 24.5
Households 1,865.4 93.0
Retail By Store Group Sales(000's)
Total Retail Sales $ 81,154,286 $3,203,521
Food&Beverage Stores 9,044,420 369,610
Food&Beverage Stores Estab. 8,160,895 231,535
General Merchandise 11,987,182 641,421
Furnit.&Home Furnish.and Electron.&Appin. 5,176,520 73,145
Motor Vehicle&Parts Dealers $ 22,198,875 $ 927,372
Total EBI($000) $107,301,634 $5,067,825
Median Household EBI 42,818 45,928
$20,000-$34,999 20.8 19.1
$35,000-$49,999 18.1 18.6
$50,000 and Over 41.6 45.0
Buying Power Index 1.8831 0.858
* Statistical data from "Sales & Marketing Management — 2005 Survey of Buying Power", copyright in 2005
Sales Management Survey of Buying Power. Further reproduction is forbidden.
APPENDIX C
AUDITED FINANCIAL STATEMENT OF THE CITY OF PEARLAND
FOR THE YEAR ENDED SEPTEMBER 30,2005
Attached are the audited financial statements for the City of Pearland, Texas for the Fiscal Year ended September
30, 2005. The financial statements include certain financial information relating to the Corporation, as a legally
separate component unit of the City. This information is reported in the financial statements separately from the
information related to the primary government of the City and its other component units. The inclusion of the City's
financial statements shall in no manner characterize the Bonds as a debt or obligation of the City. As described in
the Official Statement, the Bonds are special limited obligations of the Corporation, payable solely from, and
secured by a lien on and pledge of, the Pledged Revenues. The Bonds do not constitute a debt or obligation of
the City,and the Holders thereof shall never have the right to demand payment of any funds raised or to be
raised by any system of ad valorem taxation.
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7r4, T E X A S ,, :, r. .Y v
CITY OF
PEARLAND, TEXAS
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
SEPTEMBER 30, 2005
CITY OF PEARLAND, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2005
Prepared by:
Finance Department
THIS PAGE LEFT BLANK INTENTIONALLY
INTRODUCTORY SECTION
cy
'S
ktf:C '1\1
T E X A S o
To the Honorable Mayor, Members
of City Council, and Citizens of the
City of Pearland, Texas
State law requires that the City shall have its records and accounts audited annually and shall have an
audited financial statement prepared based on the audit. We are pleased to submit to you the
Comprehensive Annual Financial Report for the City of Pearland, Texas (the "City") for the fiscal year
ended September 30, 2005. This report is published in order to provide the City Council, our Citizens,
and other interested parties with detailed information concerning the financial conditions and activities
of the City.
Management assumes full responsibility for the completeness and reliability of the information
contained in this report, based upon a comprehensive framework of internal control that it has
established for this purpose. Because the cost of internal control should not exceed anticipated benefits,
the objective is to provide reasonable, rather than absolute, assurance that the financial statements are
free of any material misstatements.
Pattillo, Brown & Hill, L.L.P., Certified Public Accountants, have issued an unqualified ("clean")
opinion on the City of Pearland's financial statements for the year ended September 30, 2005. The
independent auditors' report is located at the front of the financial section of this report.,
Management's discussion,and analysis (MD&A) immediately follows the independent auditors' report
and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A
complements this letter of transmittal and should be read in conjunction with it.
PROFILE OF THE GOVERNMENT
The City of Pearland, incorporated in 1959, is located across the northern end of Brazoria County and
shares a common border with Houston, Texas to the north. The City of Pearland, encompassing
approximately 50 square miles, is the fastest growing city in Brazoria County, increasing from
approximately 18,000 residents in 1990 to 70,000 residents estimated as of December 2005.
i
The City of Pearland is a home-rule City operating under a Council-Manager form of government.
Policy-making and legislative authority are vested. in a governing council (Council) consisting of the
mayor and five other members. The Mayor arid all Council members are elected at large. The Mayor is
allowed to vote only in case of a tie vote. The Mayor and each Council member hold office for a period
of three years and until his/her successor is elected and qualified. Council members shall be limited to
two full consecutive terms of office and there is no limitation on the office of Mayor. The City Manager
is appointed by Council and is responsible for implementation of Council policy, execution of the laws,
and all day-to-day operations of the City.
A full range of municipal services, is provided by the City of Pearland including public safety (police,
fire, and emergency medical services); solid waste; water and wastewater utilities; public improvements;
repair and maintenance of infrastructure; recreational and community activities; ' and general
administrative services.
As an independent political subdivision of the State of Texas, the City is considered a primary
government. Pursuant to standards established by the Governmental Accounting Standards Board
(GASB), the City also reports for all funds for which the City, as the primary government, is financially
accountable. As such, this report includes financial activities of three component units as follows: The
Pearland Economic Development Corporation was created by the City in 1995 under the Texas
Development Corporation Act of 1979 for the purpose of promoting, assisting, and enhancing economic
and related development activities on behalf of the City. The Tax Increment Reinvestment Zone (TIRZ
#2) was created in 1998 for the purposes of development and redevelopment in the Zone Area, better
known as Shadow Creek Ranch. The City participates in the Zone by contributing tax, increments
produced in the Zone to the Tax Increment Fund. The Development Authority of Pearland was created
in 2004 to provide financing for the development of the Zone.
LOCAL ECONOMY
Located minutes away from Downtown Houston, Texas, the nation's second largest seaport, the world-
renowned Texas Medical Center, and NASA-Johnson Space Center, Pearland is the premier location for
residential and commercial growth. With abundant land, business facilities, a sound infrastructure, and a
diverse workforce supported by educational programs, Pearland's growth has been consistent and will
continue to be sustained over time with continued residential and commercial development.
The total construction value of all building permits issued during fiscal year 2004-2005 totaled over
$550 million, the majority of which can be attributable to residential construction. New single-family
housing permits totaled 2,610. Residential permitting activity is anticipated to remain at this level for
several years as the development of a 3,300-acre master planned community, Shadow Creek Ranch,
continues. Homes are priced from $140,000 to $1 million and ultimate development will consist of as
many as 7,000 single-family homes, 1,800 assisted living units, and 3,900 multi-family units and offer
700 acres of greenbelts and parks, 300 acres of recreational lakes, and commercial and retail centers.
Commercial development tends to follow residential development. As such, the City of Pearland is
experiencing and will continue to experience retail and office development.
ii
The Promenade Shops at Shadow Creek, an 800,000 square foot lifestyle center,is tentatively scheduled to
open in the fall of 2007. Bass Pro Shops has committed to anchor the center. The Promenade Shops is part
of The Spectrum at Clear Creek, a new 1,000-acre mixed-use business and technology park, which will
target emerging companies working in advanced sciences. The development will blend components of
industrial flex, office and corporate campus uses with retail;leisure, and other lifestyle components.
Nashville based HCA, Inc. is building an 81,500 square foot medical complex,'which will,include a
medical office building, outpatient diagnostics and an emergency center. HCA, Inc. will also begin
construction of a hospital at the same site in the summer of 2006. Memorial Hermann Hospital will
begin construction of a three-story medical office building on SH 288, north of Broadway in early 2006.
The City currently is in negotiations with a developer that will bring to the City a new 700,000 square
foot open-air pedestrian regional shopping center. The center, which could open in the fall of 2008,
would be located on a 110-acre tract adjacent to the Shadow Creek subdivision.
Because of Pearland's proximity to Houston;Hobby Airport and land availability, Pearland is quickly
becoming home to a growing aviation industry. Two aviation companies located near Houston Hobby
have relocated to Pearland, comprising a total of 9,500 square feet.
MAJOR INITIATIVES
The City of Pearland continues to experience dramatic growth and new opportunities. The City Council,
staff, and community share a vision that combines progress and innovation with prudent controls to
shape Pearland's future even as it becomes one of the largest suburbs in the Houston area. Our slogan
"Where town and country meet" reinforces the message that Pearland will maintain its small-town feel
despite becoming a mid-sized city.
The Old Town Site
The historic center of Pearland, the Old Town Site, has received special attention over the last several
years, with a focus on careful planning that will result in a substantially revitalized neighborhood. The
City rehabilitated the sewer system, added over a half-million dollars worth of sidewalks, and completed
a makeover of Zychlinski Old Town Park, complete with walking trails, playground equipment,
landscaping, and a basketball court. The City now looks forward to implementation of a "Village
District" zoning concept intended to allow for mixed-use properties in the area.
Sense of Community
The City preserves.its small-town feel by providing opportunities for all citizens, new and old, to
participate in community activities and events. Each year, a greater number of citizens gather at a wide
variety of city-sponsored events, including Winter fest, teen and senior dances, the summer concert
series; and the Christmas tree lighting ceremony and parade. Participation at the Knapp Senior Center
also continues to grow,sparked by new daily programs, field trips, and transportation. Improvements to
the building and parking lot will be completed in the near future. Subsequent to the annexation of
Brazoria County Municipal Utility District (MUD) #5, the City has taken control of the Westside Event
Center, opening up new possibilities for providing services to citizens on that side of town.
in
Community Appearance
The City of Pearland continues to pride itself on a clean, attractive appearance in the midst of
unprecedented growth. Maintaining close collaboration with the Keep America Beautiful affiliate has
resulted in a. growing number of successful programs to reduce littering, encourage recycling, and
educate citizens on a variety of environmental issues. Participation at the Recycling Center continues to
grow, strengthened by the highly popular Household Hazardous Waste Collection program.. City staff is
now working with other communities to expand recycling and hazardous waste collection opportunities
on a regional scale.
City staff and volunteers have worked together to improve the effectiveness of the volunteer-driven
"Eyes of Pearland" community appearance program. Volunteers supplement the efforts of City code
enforcement staff to address structures or fences in ill repair, high weeds, "bandit" signs, and other
violations of local ordinances. Citizen Police Academy graduates continue to assist with handicapped-
parking violations, while also supporting code enforcement efforts in the removal of "bandit" signs.
Combined, these efforts provide a community-driven response to code violations, while allowing City
staff to concentrate on other pressing issues.
Public Safety
Among numerous other reasons, families move to Pearland for a high degree of personal safety and a
low crime rate. The City Council continues to emphasize public safety, adding a minimum of six new
police officers each year to keep pace with growth. The Police Department has expanded traffic and
commercial vehicle enforcement with added motorcycle and DOT-certified officers, while capitalizing
on improved computer equipment to improve crime tracking and analysis. Community policing remains
a focus, with crime prevention, victim assistance, and youth intervention programs further reinforcing
the City's small-town feel.
The City and the Volunteer Fire Department requested a re-evaluation of our fire insurance rating by the
Insurance Service Organization (ISO). As a result of this re-evaluation, the City's ISO rating was
reduced from a score of 5 to one of 3. This will result in reduced property insurance premiums for
property owners in the City.
The City has also formed a committee of the public safety leadership in the City to begin planning for
the addition of paid firefighting personnel. This committee, which includes the, leadership of the
Volunteer Fire Department, is developing a plan to begin combined volunteer-paid personnel operations
in October 2007.
Community Enrichment Initiatives
The Mayor, City Council, and City staff continue to promote a variety of community-oriented
recreational, cultural; and educational activities designed to enhance the quality of life in Pearland. The
Parks and Recreation Department constantly seeks new funding avenues for planned improvements
including recreational trails and a possible skateboard park. Meanwhile, City funds are being used to
build additional soccer fields, a spray park, and added parking capacity.
iv
To enrich our cultural landscape, the Pearland Arts League, with coordination and support from City
Council and staff, has established itself as an effective community organization with a history of
successful events. The League is supported by strong, community-backed board leadership, and now
looks forward to partnering with the Convention and Visitors Bureau to collaborate on bigger and better
events in the future.
Lastly, to add to the ever-increasing menu of educational opportunities, the Mayor and staff members
have helped cultivate a partnership between Alvin Community College and the University of Houston to
offer upper-level classes in Pearland. Furthermore, plans for a University of Houston campus and a San
Jacinto Community College campus in Pearland continue to take shape.
Growth Management
Over the past several years, the City has adopted and updated a number of codes to enhance the value
and attractiveness of new development. In order to combine these various codes for easier use by staff
and developers, the City Council adopted a Unified Development Code, which officially goes into effect
May 1, 2006. City staff is conducting presentations to realtors, developers, and other groups in the
business community to provide outreach and education on the new regulations. The City also directly
facilitates a variety of development projects that will help shape the future of our community.
Through Strategic Partnership Agreements, the City has a responsible and financially sound plan for the
annexation of municipal utility districts (MUD) in our extra-territorial jurisdiction. In December of
2005, the City welcomed approximately 5,000 new residents to the City with the annexation of Brazoria
County MUD #5. In December of 2006, the City will welcome another 5,000 new residents with the
annexation of Brazoria County MUD#1.
With continued residential and commercial growth, the need to build new infrastructure and maintain
existing infrastructure will be a priority and implemented through an aggressive capital improvement
program. The City has $29.8 million voted but, un-issued bond authorization remaining from its 2001
bond referendum, which is expected to be issued over the next year. The City, through master plans,
developer agreements, and studies is working toward a 2007 bond referendum to ensure that the City
maintains a quality of life that the citizens have come to expect.
Transportation Improvements and Strategic Planning
Charged with planning, establishing, and maintaining an effective transportation system in the midst of
such dramatic growth, the City of Pearland is involved in numerous activities to face this challenge.
•Major components of our$92.5 million transportation bond program(passed in 2001) are now complete,
with others either in progress or ready to start. The Barry Rose Road and Cullen Boulevard extension
projects are finished, and the Yost Road project is nearing completion. The first phase of the $46
million Dixie Farm Road project will start construction this year, resulting in a vastly improved primary
connection to IH 45. Projects completed also include the extension of Kirby Drive from Shadow Creek
Ranch to Beltway 8 and the construction of McHard Road from SH 35 to Pearland Parkway.
v
The City is also involved in regional efforts for long-range transportation planning. City staff
participates on TxDOT-sponsored study steering committees for improvements to SH 288 and SH 35.
The City has also participated with the Houston-Galveston Area Council and the cities of Friendswood
and League City in a mobility study for FM 518. The City of Pearland also played a key role in the
development and passage of the November 2004 Brazoria County Mobility Bond project.
Storm Water Management
The City has responded to disasters over the last five years with planning and mitigation efforts that will
ensure the best possible management of our floodplain. Over the past two years, the City has adopted
revised Drainage Design Criteria as well as a Hazard Mitigation Plan, providing additional mitigation
measures while also maintaining compliance with state and federal requirements. Moreover, in 2005,
the City of Pearland was approved by FEMA for inclusion in the Community Rating System as a Class 8
community, earning flood insurance premium discounts of up to 10% for.our citizens. The City is
working to improve this rating and increase discounts available to our residents.
Water and Sewer Strategic Planning
The City continues to make strides in providing adequate water and sewer capacity for the future.
Building upon major surface water purchases since 2003, the City has increased both intake and
treatment capacity that will result in an additional 10 million gallons per day (MGD) over the next three
years. This surface water initiative not only ensures an adequate water supply through 2022, but also
alleviates subsidence by reducing our dependence on groundwater. Furthermore,the City has maintained
its five wastewater treatment plants within governmental compliance, and is currently planning another
major plant expansion.
While planning for the future and maintaining our treatment plants, the City is also expanding its water
and sewer service area while maintaining the existing infrastructure. Several in-line extension projects
are in progress, working to network annexed areas and replace substandard well and septic tank service.
Moreover, the City is wrapping up a six-year program to correct sewer inflow and infiltration in older
sections of the City.
AWARDS AND ACKNOWLEDGEMENTS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for the Excellence in Financial Reporting to the City of Pearland, Texas, for
its Comprehensive Annual Financial Report for the year ended September 30, 2004. This was the 28`h
consecutive year that the government has received this prestigious award.
In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily
readable and efficiently organized comprehensive annual financial report. This report must satisfy both
generally accepted principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program's
requirements, and we are submitting it to GFOA to determine its eligibility for another certificate.
vi
In addition, the government also received the GFOA's Distinguished Budget Presentation Award for its
annual budget document for fiscal year 2004-2005. In order to qualify for the Distinguished Budget
Presentation Award, the government's budget document had to be judged proficient as a policy
document, a financial plan, an operations guide,.and a communications device.
The preparation of this report was accomplished with the dedicated service of the entire staff of the
Finance Department. We express our appreciation to all members of the Department who assisted and
contributed to the preparation of this report. We also thank the Mayor and members of the City Council
for their support in planning and conducting the financial operations of the City in a responsible manner.
Respectfully submitted,
William Eisen, City Manager Claire Manthei,Director of Finance
vii
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Pearland,
Texas
For its Comprehensive Annual.
Financial Report
for the,Fiscal Year Ended
September 30, 2004
A.Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports(CAFRs)achieve the highest
standards in government accounting
and financial reporting.
664411
COMMON 2 President
*Cep ofe‘of...P
Executive Director
viii
Organizational Chart
CITIZENS OF
PEARLAND
MAYOR AND
CITY COUNCIL
MUNICIPAL JUDGES BOARDS&
COMMISSIONS
CITY ATTORNEY
CITY MANAGER
ASSISTANT ASSISTANT
CITY MANAGER - - CITY MANAGER
PUBLIC WORKS COMMUNITY
DEVELOPMENT
ENGINEERING
PROJECT MUNICIPAL COURT
MANAGEMENT
ANIMAL CONTROL
PLANNING
POLICE
- PUBLIC AFFAIRS
FIRE MARSHAL
PARKS&
EMERGENCY RECREATION
MANAGEMENT
DIRECTOR OF
FIRE FINANCE
EMERGENCY
MEDICAL SERVICES
FINANCE
PURCHASING
CITY SECRETARY
INFORMATION --I GRANTS
HUMAN TECHNOLOGY
RESOURCES
W&S
BILLING &
COLLECTIONS
ix
CITY OF PEARLAND,TEXAS
LIST OF PRINCIPAL OFFICIALS
YEAR ENDED SEPTEMBER 30,2005
ELECTED OFFICIALS
Tom Reid Mayor
Richard Tetens (Position 1) Council Member
Woody Owens (Position 2) Council Member
Steve Saboe (Position 3) Council Member
Larry Marcott(Position 4) Council Member
Kevin Cole (Position 5) Council Member,Mayor Pro-Tem
APPOINTED OFFICIALS
Bill Eisen City Manager
Young Lorfing City Secretary
Darrin Coker City Attorney
(continued)
x
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
(Continued)
YEAR ENDED SEPTEMBER 30,2005
EXECUTIVE MANAGERS
Nicholas Finan Assistant City Manager
Mickiel Hodge Assistant City Manager
Fredrick Howard Welch Executive Director of P.E.D.C.
Claire Manthei Director of Finance
Chris Doyle Police Chief
Steve Chapman Fire Marshal/Emergency
Management Director
Rhonda Cyrus Director of Parks and Recreation
Daniel Cameron Director of Public Works
Joseph Wertz Director of Projects
Kola D. Olayiwola Director of Inspection Services
Doug Kneupper City Engineer
Glenn Chaney Municipal Court Judge
Letitia Farnie Municipal Court Judge
Roy Simmons Municipal Court Judge
Jeff Sundseth Director of EMS
Paul Jamison Fire Chief
Mary Hickling Director of Human Resources
Lata Krishnarao Director of Planning
xi
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FINANCIAL SECTION
THIS PAGE LEFT BLANK INTENTIONALLY
FifFM
PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and
Member of the City of Council
City of Pearland, Texas
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each major fund, and the
aggregate remaining fund information of the City of Pearland,. Texas, as of and,for the year ended
September 30, 2005, which collectively comprise the City's basic financial statements as listed in the
table of contents. These financial statements are the responsibility of the City of Pearland, Texas'
management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit.in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business-type activities, the
aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of the City of Pearland, Texas, as of September 30, 2005, and the respective changes in
financial position and cash flows, where applicable, thereof and the respective budgetary comparison for
the General Fund for the year then ended in conformity with accounting principles generally accepted in
the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated March
10, 2006, on our consideration of the City of Pearland, Texas' internal control over financial reporting and
on our tests of its compliance with certain provisions of laws,regulations, contracts, and grant agreements
and other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in conjunction
with this report in considering the results of our audit.
1
401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901■FAX:(254)772-4920■www.pbhcpa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460 U ALBUQUERQUE,NM(505)266-5904
The management's discussion and analysis on pages 3 through 10 is not a required part of the
basic financial statements but is supplementary information required by accounting principles generally
accepted in the United States of America. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation of the
required supplementary information. However, we did not audit the information and express no opinion
on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Pearland, Texas' basic financial statements.The introductory section,
combining and individual fund financial statements and schedules, and statistical tables are presented for
purposes of additional analysis and are not a required part of the basic financial statements. The
combining and individual fund financial statements and schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in
all material respects in relation to the basic financial statements taken as a whole. The introductory
section and statistical tables have not been subjected to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we express no opinion on them.
Pa,4446 tok
L.L ?
March 10, 2006
2
MANAGEMENT'S
DISCUSSION AND ANALYSIS
THIS PAGE LEFT BLANK INTENTIONALLY
Management's Discussion and Analysis
As management of the City of Pearland, we offer readers of the City's financial statements this narrative
overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2005.
We encourage readers to consider the information presented here in conjunction with additional information
that we have furnished in our letter of transmittal, which can be found on pages i—vii of this report.
FINANCIAL HIGHLIGHTS
• The assets of the primary government of the City of Pearland exceeded its liabilities as
of September 30, 2005, by $68,951,906 ;(net assets). Of this,amount, $6,337,483
(unrestricted net assets) may be used to meet the City's ongoing obligations to citizens
and creditors in accordance with the City's fund designation and fiscal policies.
• The City's total net assets increased by$12,323,374.
• At the close of the current fiscal year, the City of Pearland's governmental funds
reported combined ending fund balances of $58,857,765, an increase of $79,932 in
comparison with the prior year. Approximately $44 million of this ending balance can
be attributed to work in progress for capital projects, which is expected to decrease the
fund balance in the following fiscal year.
• As of September 30, 2005, the unreserved, undesignated fund balance for the General
Fund was $8,201,447 or 25.9% of total General Fund expenditures.
• The City of Pearland's General Obligation and Certificates of Obligation debt increased
to $148,445,000, an increase of $32,915,000, net of debt retirement, over the previous
year. The key factor was the sale of $37,015,000 in Permanent Improvement- and
Refunding Bonds. The City of Pearland Economic Development Corporation issued
$11,005,000 of Sales Tax Revenue and Refunding Bonds and the Development
Authority of Pearland issued$13,995,000 in Tax Increment Contract Revenue bonds.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the 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 themselves.
Government-wide Financial Statements— The government-wide financial statements are designed to
provide readers with a broad overview of the City's finances, in a manner similar to a private-sector
business.
The Statement of Net Assets presents information on all of the City's assets and liabilities,with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
3
The Statement of Activities 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 related cash flows. Thus, revenues and expenses are reported in this
statement for.some items that will only result in cash flows in the future fiscal periods (e.g., uncollected
taxes and earned but unused compensated absences).
Both of the government-wide financial statements distinguish functions of the City that are principally
supported by taxes and intergovernmental revenues (governmental activities) from functions that are
intended to recover all or a significant portion of their costs through user fees and charges (business-type
activities). The governmental activities of the City of Pearland include General Government,Public Safety,
Public Works and Community Services. The business-type activities of the City include Water and Sewer.
The government-wide financial statements include not only the City of Pearland, itself (known as the
primary government), but also a legally separate Economic Development Corporation,'Tax Increment
Reinvestment Zone (TIRZ) and the Development Authority of Pearland for which the City of Pearland
is financially accountable. Financial information for these component units is reported separately from
the financial information presented for the primary government, itself. The government-wide financial
statements can be found on pages 12— 14 of this report.
Fund Financial Statements —A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City, like other state
and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements. All funds of the City can be divided into two categories — governmental funds and
proprietary funds.
Governmental Funds — Governmental funds are used to account for essentially the same functions
reported as governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental fund financial statements focus on current sources
and uses of spendable resources, as well as on balances of spendable resources available at the end of
the fiscal year. Such information may be useful in evaluating a government's near-term financing
requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact of the government's near-term financing
decisions. Both the governmental funds balance sheet and the governmental fund statements of
revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
Beginning on page 15 of this report, information is presented separately in the Governmental Fund
Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures, and Changes in
Fund Balances for the General, Debt Service, Capital Projects and other funds, which are considered to
be major funds. Data from the other governmental funds are combined into a single, aggregated
presentation. Individual fund data for each of these non-major governmental funds is provided in the
form of combining statements elsewhere in this report.
4
The City of Pearland adopts an annual appropriated budget for its General Fund. A budgetary
comparison statement has been provided for the General Fund to demonstrate compliance with the
budget.
Proprietary Funds — The City maintains one type of proprietary fund. Enterprise Funds are used to
report the same functions presented as business-type activities in the government-wide financial
statements. The City uses an Enterprise Fund to account for its Water and Sewer Fund.
Proprietary funds provide the same type of information as the government-wide financial statements,
only in more detail. The basic proprietary fund financial statements, which begin on page 19 of this
report,provide separate information for the Water and Sewer Enterprise Fund since it is considered to be
a major fund of the City.
Notes to the Financial Statements —The notes provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements. The notes to
the financial statements can be found on pages 22—46 of this report.
Other Information =In addition to the basic financial statements and accompanying notes, this report
also presents combining fund statements and schedules that further support the information in the
financial statements. The combining fund statements and schedules for nonmajor funds are presented
immediately following the notes to the financial statements beginning on page 47 of this report.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government's financial
position. In the case of the City of Pearland, assets exceeded liabilities by$68,951,906 as of September
30, 2005.
The largest portion of the City's net assets, 71 percent, reflects its investments in capital assets (e.g.,
land, building, equipment, improvements, construction in progress and infrastructure), less any
outstanding debt used to acquire those assets. The City uses these capital assets to provide service to
citizens; consequently, these assets are not available for future spending. Although the City's
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources, since the capital assets themselves
cannot be used to liquidate these liabilities. Since the City does not capitalize all infrastructure assets at
this time, the financial statements do not fully reflect the City's total assets but does reflect its total
liabilities for the corresponding debt.
5
COMPARATIVE SCHEDULE OF NET ASSETS
SEPTEMBER 30,2005 AND 2004
Governmental Activities Business-type Activities Totals
2005 2004 2005 2004 2005 2004
Current and other asset $ 65,342,583 $ 64,371,013 $ 17,834,831 $ 23,448,781 $ 83,177,414 $ 87,819,794
Capital assets 92,505,150 67,143,104 88,846,250 76,429,323 181,351,400 143,572,427
Total assets 157,847,733 131,514,117 106,681,081 99,878,104 264,528,814 231,392,221
Other liabilities 8,853,968 2,750,146 6,662,540 3,207,343 15,516,508 5,957,489
Long-term liabilities 133,262,658 118,165,340 46,797,742 50,640,860 180,060,400 168,806,200
Total liabilities 142,116,626 120,915,486 53,460,282 53,848,203 195,576,908 174,763,689
Net assets:
Invested in capital assets,
net of related debt 3,084,208 ( 2,537,520) 45,641,648 36,022,558 48,725,856 33,485,038
Restricted 6,861,792 6,390,504 7,026,775 5,979,068 13,888,567 12,369,572
Unrestricted 5,785,107 6,745,647 552,376 4,028,275 6,337,483 10,773,922
Total net assets $ 15,731,107 $ 10,598,631 $ 53,220,799 $ 46,029,901 $ 68,951,906 $ 56,628,532
A portion of the City's net assets ($13,888,567) represents resources that are subject to external
restriction on how they may be used. The remaining balance ($6,337,483) of unrestricted net assets may
be used to meet the City's ongoing obligations to citizens and creditors.
Analysis of the City's Operations — The following tables provide a summary of the City's operations
for the year ended September 30, 2005. Governmental activities increased the City of Pearland's net
assets by$5,132,476, accounting for approximately 42% of the total growth in net assets. Business-type
activities increased the City's net assets by $7,190,898, accounting for approximately 58% of the total
growth in net assets.
6
COMPARATIVE SCHEDULE OF CHANGES IN NET ASSESTS
SEPTEMBER 30,2005 AND 2004
Governmental Activities Business-type Activities Totals
2005 2004 2005 2004 2005 2004
Revenues:
Program revenues: '
Charges for services $ 12,309,406 $ 11,040,246 $ 11,219,499 $ 11,892,876 $ 23,528,905 $ 22,933,122
Operating grants
and contributions 1,154,531 • 855,917 47,293 1,154,531 903,210
Capital grants
and contributions 1,117,712 2,074,506 8,365,452 6,932,959 9,483,164 9,007,465
General revenues:
Ad valorem taxes 19,804,541 17,907,163 19,804,541 17,907,163
Sales taxes 7,785,161 6,739,484 7,785,161 6,739,484
Franchise taxes 3,097,163 2,883,188 3,097,163 2,883,188
Other taxes 241,046 193,464 241,046 193,464
Investment earnings 1,863,323 1,115,100 399,275 417,258 2,262,598 1,532,358
Miscellaneous 827,589 782,165 827,589 782,165
Total revenues 48,200,472. 43,591,233 19,984,226 19,290,386 68,184,698 62,881,619
Expenses:
General government 8,714,401 7,314,239 8,714,401 7,314,239
Public safety 11,856,643 10,524,915 11,856,643 10,524,915
Public works 12,858,259 9,912,937 12,858,259 9,912,937
Community services 2,939,228 2,700,356 2,939,228 2,700,356
Interest on long-term
debt 5,115,039 5,549,292 5,115,039 5,549,292
Water and sewer 13,624,497 15,265,350 13,624,497 15,265,350
Total expenses 41,483,570 36,001,739 13,624,497 15,265,350 55,108,067 51,267,089
Increases in net assets
before transfers 6,716,902 7,589,494 6,359,729 4,025,036 13,076,631 11,614,530
Transfers 359,482 524,110 ( 359,482) ( 524,110)
Change in net assets 7,076,384 8,113,604 6,000,247 3,500,926 13,076,631 11,614,530
Net assets,beginning 10,598,631 2,583,968 46,029,901 42,528,975 56,628,532 45,112,943
Prior period adjustment ( 1,943,908) ( 98,941) 1,190,651 ( 753,257) ( 98,941)
Net assets,ending $ 15,731,107 $ 10,598,631 $ 53,220,799 $ 46,029,901 $ 68,951,906 $ 56,628,532
7
Revenues by Source - Governmental Activities
.......:.. .
Ad valorem taxes
41% Investment earnings
6%
Capital grants and Franchise taxes
contributions .. ` ""s : 6%
k � � � .,d „roc, Other taxes
Operating grants and , ® A
contributions t't '; , ',!. `°- Investment earnings
2% Ih 7r $.I p: 4 yw .". „4
Charges for services :
26% Miscellaneous
2%
Expenses and Program Revenues - Governmental
Activities
14,000,000
12,000,000 ,,l'
10,000,000 ''
8,000,000 Expenses
6,000,000
INRevenues
4,000,000 , *� J ',
ke
d
',:i E,,ErillAllt 4 II ki
- I I I I
General Public safety Public works Community Interest on
government services long-term debt
8
Governmental Activities—The major increase in revenues comes from the tax category. The property
tax base increased by approximately $412 million, due to construction of new residences, businesses,
and revaluation of property. The current year tax collection rate was approximately 98% of the levy.
Additionally, there was an increase in both license and'permit revenues_and engineering and inspection
revenues due to an increase in both residential and commercial building permits. Fines and forfeitures
were up due to increased citations issued, and investment earnings are down due to the continued low
interest rates. Charges for services increased due to population growth.
•
Business-type Activities — The City has one enterprise operation,the Water and Sewer Fund. Total
charges for services of the Water and Sewer Fund were $11,219,499 for the fiscal year. This is slightly
lower than the previous year, however, expenses are significantly lower by $1.6 million due to
construction activities.
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
Governmental Funds — The focus of the City of Pearland's governmental funds is 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
as a useful measure of a government's net resources available for spending at the end of the fiscal year.
At the end of the current fiscal year, the City of Pearland's governmental funds reported combined
ending fund balances of$58,857,765. Of this total amount, $55 million constitutes an unreserved fund
balance and can be used to fund day-to-day operations and capital projects. The remainder of the fund
balance, $3.9 million, is reserved to indicate that it is not available for new spending because it has
already been committed to pay for encumbrances or debt service or to provide for other items. Refer to
page 15 of this report for a more detailed presentation of governmental fund balances.
In the General Fund, the City originally budgeted for a decrease in fund balance. The actual increase to
fund balance for the General Fund was $4,059,350 over the budgeted amounts.
Proprietary Funds — The City's proprietary fund statements, beginning on page 19 of this report,
provide the same type of information found in the government-wide financial statements, but in more
detail.
Unrestricted net assets of the only proprietary fund are $552,376. This fund experienced increases in
total net assets during 2005 of$6,000,247. This increase was primarily due to increased contributions
from impact fees.
General Fund Budgetary Highlights — During the year, revenues exceeded budgetary estimates by
$3.4 million and expenditures were less than budgetary estimates by $1.3 million, thus eliminating any
need to draw upon existing fund balance.
Refer to the General Fund Statement of Revenue, Expenditures and Changes in Fund Balances—Budget
and Actual on page 18 of this report for a detailed presentation of the actual General Fund operations
compared to both the original and final budget for fiscal year 2005.
9
CAPITAL ASSETS
The City of Pearland's investment in capital assets for its governmental and business-type activities as
of September 30, 2005, amounts to $181,351,400 (net of accumulated depreciation) as reflected in the
following schedule. This investment in capital assets includes land, building, equipment, improvements
other than buildings, infrastructure and construction work in progress. This represents a net increase of
$37.8 million or 26% over last year. Major capital asset events occurring during the current fiscal year
related primarily to three basic categories: water and sewer infrastructure projects, streets and mobility
projects, and drainage improvement projects.
CITY OF PEARLAND'S CAPITAL ASSETS AT YEAR-END
Governmental Activities Business-type Activities Totals
2005 2004 2005 2004 2005 2004
Land $ 2,717,453 $ 2,509,691 $ 367,962 $ 367,962 $ 3,085,415 $ 2,877,653
Buildings and
improvements 12,834,943 12,575,655 22,610,028 21,518,110 35,444,971 34,093,765
Equipment 9,282,167 8,619,886 8,347,893 7,895,580 17,630,060 16,515,466
Infrastructure/
water distribution 61,799,139 42,674,657 57,228,510 60,791,814 119,027,649 103,466,471
Construction in
progress 20,698,167 12,946,218 19,424,558 2,166,494 40,122,725 15,112,712
Less:accumulated
depreciation ( 14,826,719) ( 12,183,003) ( 19,132,701) ( 16,310,637) ( 33,959,420) ( 28,493,640)
Total capital assets $ 92,505,150 $ 67,143,104 $ 88,846,250 $ 76,429,323 $ 181,351,400 $ 143,572,427
Additional information on the City's capital assets can be found in Note 4,pages 35—36 of this report.
LONG-TERM DEBT
At the end of the current fiscal year, the City of Pearland had debt totaling $180,925,000, excluding
capital leases. Of this amount, $148,445,000 represents debt backed by the full faith and credit of the
government and$32,480,000 represents bonds secured solely by water and sewer revenues.
CITY OF PEARLAND'S
OUTSTANDING DEBT AT YEAR-END
Governmental Activities Business-type Activities Totals
2005 2004 2005 2004 2005 2004
General obligation $ 60,175,000 $ 25,345,000 $ $ $ 60,175,000 $ 25,345,000
Revenue bonds
payable 32,480,000 33,505,000 32,480,000 33,505,000
Certificates of
obligation 72,390,000 90,185,000 15,880,000 16,735,000 88,270,000 106,920,000
$ 132,565,000 $ 115,530,000 $ 48,360,000 $ 50,240,000 $ 180,925,000 $ 165,770,000
10
During the fiscal year, the City issued$37,015,000 in Permanent Improvement and Refunding Bonds.
The City's General Obligation, Certificates of Obligation, and Revenue Bond underlying ratings are
listed below.
Standard
Moody's and Poor's
Tax Bonds Al A+
W/S Revenue Bonds Baal A
All of the City's bond issues have been successful in qualifying for bond insurance resulting in ratings of
"Aaa" and "AAA" from Moody's and Standard & Poor's, respectively. Additional information on the
City of Pearland's long-term debt can be found on pages 37—42 of this report.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
One of the primary factors considered in the 2006 budget development is the overall economy and how
it affects Pearland's growth. Pearland continues to be one of the fastest growing cities in the Houston
area with such developments as Shadow Creek Ranch, the Lakes at Highland Glen and Southern Trails.
New single-family housing starts totaled 2,610 for 2005 and total construction value of all permits for
2005 was $550 million. The continued growth creates the need to expand services and provide
infrastructure.
The Pearland City Council approved a$38.0 million General Fund budget'for the 2005-2006 fiscal year.
This is a 16% increase over the adopted 2004-2005 fiscal year budget. This includes approximately $1.0
million to serve the newly annexed area formerly known as Brazoria County MUD 5, which has an
estimated population of 5,000. Twenty-five new personnel were added to the General Fund budget.
The growth in the budget is driven by increased costs of doing business, as well as, funding for growth
and development. The budget incorporates a tax rate reduction of 2.9% to $0.6744 per $100 of
valuation. The budget also includes the third installment of the 2001 voter approved bond referendum
for mobility projects. After the issuance, there will be a$29.8 million voted,but unissued bonds.
The Pearland Economic Development Corporation fiscal year 2006 budget includes bond proceeds from
the sale of Sales Tax Bonds totaling $11,005,000 for the Kirby Road Extension and related water, sewer
and drainage.
REQUESTS FOR INFORMATION
The financial report is designed to provide our citizens, customers, investors and creditors with a general
overview of the City's finances. If you have questions about this report or need any additional financial
information, contact Claire Manthei, Director of Finance, at 3519 Liberty Drive, Pearland, Texas 77581,
or call (281) 652-1600. For general information, visit the City's website at www.cityofpearland.com:
11
BASIC
FINANCIAL STATEMENTS
CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
SEPTEMBER 30,2005
Primary Government Component Units
Economic Development
Governmental Business-type Development . TIRZ Authority
Activities Activities Total Corporation Developments of Pearland
ASSETS
Cash and investments $ 60,503,560 $ 10,413,796 $ 70,917,356 $ 1,198,360 $ 1,168,096 $ 65,344
Receivables,net of allowances
for uncollectibles
Accounts 913,860 2,245,558 3,159,418 142 •
Property taxes 797,744 797,744 234,287
Sales taxes 1,456,049 1,456,049 724,601
Other taxes 664,345 664,345
Intergovernmental 270,306 270,306
Accrued interest 2,387 20,079 22,466 20,097
Prepaid items 1,324 1,324 3,450
Inventories. 69,549 69,549
Restricted cash and investments 4,527,602 4,527,602 10,035,804 1,630,157
Deferred charges 663,459 627,796 1,291,255 256,439 927,778
Capital assets:
Land 2,717,453 367,962 3,085,415
Buildings and improvements 12,834,943 22,610,028 35,444,971 19,501
Machinery and equipment 9,282,167 8,347,893 17,630,060 124,959
Infrastructure 24,631,483 57,228,510 81,859,993
Construction in progress 57,865,823 19,424,558 77,290,381
Less:accumulated depreciation ( 14,826,719) ( 19,132,701) ( 33,959,420) ( 144,460)
Total capital assets 92,505,150 88,846,250 181,351,400
Total assets 157,847,733 106,681,081 264,528,814 12,238,893 1,402,383 • 2,623,279
LIABILITIES
Accounts payable 3,987,205 • 3,094,901 7,082,106 21,076
Accrued liabilities 494,613 157,955 652,568 11,498
Unearned revenue 167,061 167,061 179,285
Accrued interest •
523,316 117,851 641,167
Customer deposits 1,253,770 1,253,770
• Noncurrent liabilities:
Due within one year 3,681,773 2,038,063 5,719,836 351,088 815,000
Due in more than one year 133,262,658 46,797,742 180,060,400 10,219,274 13,180,000
Total liabilities 142,116,626 53,460,282 195,576,908 10,602,936 179,285 13,995,000
NET ASSETS
Invested in capital assets,
net of related debt 3,084,208 45,641,648 48,725,856
Restricted for:
Debt service 3,607,258 275,502 3,882,760
Capital improvements 904,397 6,751,273 7,655,670
Public safety 449,775 449,775
Parks and recreation 992,941 992,941
Economic development 669,937 669,937
Community services 237,484 237,484
Unrestricted 5,785,107 552,376 6,337,483 1,635,957 1,223,098 ( 11,371,721)
Total net assets $ 15,731,107 $ 53,220,799 $ 68,951,906 $ 1,635,957 $ 1,223,098 $ ( 11,371,721)
The notes to the financial statements are an integral part of this statement. •
12
CITY OF PEARLAND,TEXAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30,2005
Program Revenues
Operating Capital •
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions
Primary Government:
Governmental activities:
General government $ 8,714,401 $ 185,235 $ 2,380 $ 799,999
Public safety 11,856,643 3,639,966 673,276 311,921
Public works 12,858,259 7,221,015 5,792
Community services 2,939,228 1,263,190 478,875
Interest on long-term debt 5,115,039
Total governmental activities 41,483,570 12,309,406 1,154,531 1,117,712
Business-type activities:
Water and sewer 13,624,497 11,219,499 8,365,452
Total business-type activities 13,624,497 11,219,499 8,365,452
Total primary government $ 55,108,067 $ 23,528,905 $ 1,154,531 $ 9,483,164
Component Units:
Economic Development Corporation $ 2,312,729 $ $ $
TIRZ Developments 1,888,506
Development Authority of Pearland 13,225,937 1,824,418
Total component units $ 17,427,172 $ $ $ 1,824,418
General revenues:
Taxes:
Property,levied for general purposes
Property,levied for debt service
Sales
Franchise
Other
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net ac ets
Net assets,beginning
Prior period adjustment
Net assets,beginning,as restated
Net assets,ending
The notes to the financial statements are an integral part of this statement.
13
Net(Expenses)Revenues and
Changes in Net Assets
Primary Government Component Units
Economic Development
Governmental Business-type Development TIRZ Authority
Activities Activities Total Corporation Developments of Pearland
$ ( 7,726,787) $ $ ( 7,726,787) $ $ $
( 7,231,480) ( 7,231,480)
( 5,631,452) ( 5,631,452)
( 1,197,163) ( 1,197,163)
( 5,115,039) ( 5,115,039)
( 26,901,921) ( 26,901,921)
5,960,454 5,960,454
5,960,454 5,960,454
( 26,901,921) 5,960,454 ( 20,941,467)
( 2,312,729)
( 1,888,506)
( 11,401,519)
( 2,312,729) ( 1,888,506) ( 11,401,519)
9,678,307 9,678,307 2,531,251
10,126,234 10,126,234
7,785,161 7,785,161 3,891,870
3,097,163 3,097,163
241,046 241,046
1,863,323 399,275 2,262,598 303,129 8,390 29,798
827,589 827,589 12,000
359,482 ( 359,482)
33,978,305 39,793 34,018,098 4,206,999 2,539,641 29,798
7,076,384 6,000,247 13,076,631 1,894,270 651,135 ( 11,371,721)
10,598,631 46,029,901 56,628,532 ( 231,831) 571,963
( 1,943,908) 1,190,651 ( 753,257) ( 26,482)
8,654,723 47,220,552 55,875,275 ( 258,313) 571,963
$ 15,731,107 $ 53,220,799 $ 68,951,906 $ 1,635,957 $ 1,223,098 $ ( 11,371,721)
14
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CITY OF PEARLAND, TEXAS
BALANCE SHEET
GOVERNMENTAL FUNDS
SEPTEMBER 30,2005
Total
Debt Capital Other Governmental
General Service Projects Funds Funds
ASSETS
Cash and investments $ 6,945,697 $ 3,843,924 $ 46,538,692 $ 3,175,247 $ 60,503,560
Receivables,net of allowances for uncollectibles
Accounts 802,568 46,605 64,687 913,860
Property taxes 511,094 286,650 797,744
Sales taxes 1,456,049 1,456,049
Other taxes 664,345 664,345
Intergovernmental 216,443 53,863 270,306
Accrued interest 1,393 994 2,387
Prepaid items 1,324 1,324
Inventories 69,549 69,549
Total assets $ 10,668,462 $ 4,130,574 $ 46,585,297 $ 3,294,791 $ 64,679,124
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable 940,728 3,009,966 36,511 3,987,205
Accrued liabilities 464,613 30,000 494,613
Deferred revenue 1,060,350 275,445 3,746 1,339,541
Total liabilities 2,465,691 275,445 3,039,966 40,257 5,821,359
Fund balances:
Reserved for:
Inventories 69,549 69,549
Prepaid items 1,324 1,324
Debt service 3,855,129 3,855,129
Unreserved,reported in:
General fund 8,201,447 8,201,447
Special revenue funds 2,462,352 2,462,352
Capital projects fund 43,545,331 792,182 44,337,513
Total fund balances 8,202,771 3,855,129 43,545,331 3,254,534 58,857,765
Total liabilities and fund balances $ 10,668,462 $ 4,130,574 $ 46,585,297 $ 3,294,791
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets used in governmental activities are not financial resources and,therefore,are not reported in the funds. 92,505,150
Other long-term assets are not available to pay for current-period expenditures and,therefore,are deferred in the funds. 1,172,480
Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds. ( 136,804,288)
Net assets of governmental activities $ 15,731,107
The notes to the financial statements are an integral part of this statement.
15
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CITY OF PEARLAND, TEXAS
STATEMENT OF REVENUES,EXPENDITURES AND
CHANGES IN FUND BALANCES ,
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30,2005
Total
Debt Capital Other Governmental
General Service Projects Funds Funds
REVENUES
Taxes:
Property $ 9,649,452 $ 10,095,935 $ $ $ 19,745,387
Sales 7,785,161 7,785,161
Mixed beverage 55,181 55,181
Hotel/motel 469 185,396 185,865
Franchise 3,097,163 3,097,163
Permits,licenses and fees 3,863,592 3,863,592
Fines 1,883,381 51,586 1,934,967
Charges for services . 6,138,610 6,138,610
Intergovernmental 871,196 1,111,920 398,388 2,381,504
Other revenue 595,369 8,846 568,098 1,172,313
Investment earnings 415,296 57,687 1,335,250 55,090 1,863,323
Total revenues 34,354,870 10,153,622 2,456,016 1,258,558 48,223,066
EXPENDITURES
Current:
General government 6,664,735 84,839 6,749,574
Public safety 10,816,906 264,555 11,081,461
Public works 10,449,814 10,449,814
Community services 2,692,450 54,729 2,747,179
Capital outlay 1,019,976 27,531,520 109,355 28,660,851
Debt service:
Principal 3,534,534 3,534,534
Interest and fiscal charges 5,027,376 527,689 5,555,065
Intergovernmental 1,083,896 1,083,896
Total expenditures 31,643,881 9,645,806 28,059,209 513,478 69,862,374
EXCESS(DEFICIENCY)OF REVENUES
OVER(UNDER)EXPENDITURES 2,710,989 507,816 ( 25,603,193) 745,080 ( 21,639,308)
OTHER FINANCING SOURCES(USES)
Transfers in 2,063,264 339,561 2,384,774 82,000 4,869,599
Transfers out ( 3,003,294) ( 608,559) ( 898,264) ( 4,510,117)
Issuance of capital lease 271,193 271,193
Capital-related debt issued 37,015,000 37,015,000
Premium from capital-related debt issued 1,368,186 1,368,186
Payment to escrow agent ( 17,294,621) ( 17,294,621)
Total other financing sources and(uses) ( 940,030) 339,561 23,135,973 ( 816,264) 21,719,240
NET CHANGE IN FUND BALANCES 1,770,959 847,377 ( 2,467,220) ( 71,184) 79,932
FUND BALANCES,BEGINNING AS
PREVIOUSLY STATED 8,285,590 3,007,752 46,012,551 3,415,848 60,721,741
PRIOR PERIOD ADJUSTMENT ( 1,853,778) - - ( 90,130) ( 1,943,908)
FUND BALANCES,BEGINNING AS RESTATED 6,431,812 3,007,752 46,012,551 3,325,718 58,777,833
FUND BALANCES,ENDING $ 8,202,771 $ 3,855,129 $ 43,545,331 $ 3,254,534 $ 58,857,765
The notes to the financial statements are an integral part of this statement.
16
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CITY OF PEARLAND,TEXAS
RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30,2005
Amounts reported for governmental activities in the Statement of Activities (pages 13 - 14)
are different because: •
Net change in fund balances-total governmental funds(page 16) $ 79,932
Governmental funds report capital outlays as expenditures. However, in the statement of
activities the cost of those assets is allocated over their estimated useful lives and reported as
depreciation expense. This is the amount by which capital outlays exceeded depreciation in
the current period. 25,362,046
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds. ( 22,594)
The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to
governmental funds, while the repayment of the principal of long-term debt consumes the
current financial resources of governmental funds. Neither transaction, however, has any
effect on net assets. This amount is the net effect of these differences in the treatment of long-
term debt and related items. ( 17,273,098)
Some expenses reported in the'statement of activities do not require the use of current
financial resources and,therefore,are not reported as expenditures in governmental funds. ( 1,069,902)
Change in net assets of governmental activities(pages 13- 14) $ 7,076,384
The notes to the financial statements are an integral part of this statement.
17
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CITY OF PEARLAND,TEXAS
GENERAL FUND
STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL
FOR THE YEAR ENDED SEPTEMBER 30,2005
Variance with
Final Budget-
Budgeted Amounts Actual Positive
Original Final Amounts (Negative)
REVENUES
Property taxes and penalties $ 9,767,610 $ 9,767,610 $ 9,649,452 $ ( 118,158)
Other taxes 6,931,000 6,931,000 7,840,811 909,811
Franchise fees 3,015,000 3,015,000 3,097,163 82,163
Licenses and permits 3,180,335 3,180,335 3,863,592 683,257
Fines and forfeitures 1,590,200 1,590,200 1,883,381 293,181
Charges for services 5,269,949 5,269,949 6,138,610 868,661
Intergovernmental 879,300 879,300 871,196 ( 8,104)
Other income 282,100 288,100 595,369 307,269
Investment earnings 1,000 1,000 415,296 414,296
Total revenues 30,916,494 30,922,494 34,354,870 3,432,376
EXPENDITURES
Current:
General government 6,380,991 6,720,970 6,664,735 56,235
Public safety 10,706,646 11,031,997 10,816,906 215,091
Public works 9,926,159 10,916,013 10,449,814 466,199
Community services 3,801,935 3,123,164 2,692,450 430,714
Capital outlay 1,762,877 1,138,759 1,019,976 118,783
Total expenditures 32,578,608 32,930,903 31,643,881 1,287,022
EXCESS(DEFICIENCY)OF REVENUES
OVER(UNDER)EXPENDITURES ( 1,662,114) ( 2,008,409) 2,710,989 4,719,398
OTHER FINANCING SOURCES(USES)
Transfers in 1,765,806 1,765,806 2,063,264 297,458
Transfers out ( 459,000) ( 2,045,788) ( 3,003,294) ( 957,506)
Total other financing sources(uses) 1,306,806 ( 279,982) ( 940,030) ( 660,048)
NET CHANGE IN FUND BALANCES ( 355,308) ( 2,288,391) 1,770,959 4,059,350
FUND BALANCES,BEGINNING AS
PREVIOUSLY STATED 8,285,590 8,285,590 8,285,590
PRIOR PERIOD ADJUSTMENT ( 1,853,778) ( 1,853,778) ( 1,853,778)
FUND BALANCES,BEGINNING
AS RESTATED 6,431,812 6,431,812 6,431,812
FUND BALANCES,ENDING $ 6,076,504 $ 4,143,421 $ 8,202,771 $ 4,059,350
The notes to the financial statements are an integral part of this statement.
18
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CITY OF PEARLAND, TEXAS
STATEMENT OF NET ASSETS
PROPRIETARY FUND
SEPTEMBER 30,2005
Business-type
Activities
Enterprise Fund
Water and Sewer
ASSETS
Current assets:
Cash and investments $ 10,413,796
Accounts receivable,net of allowances 2,245,558
Accrued interest 20,079
Restricted cash and investments - 4,527,602
Total current assets •
17,207,035
Noncurrent assets:
Deferred charges 627,796
Capital assets:
Land 367,962
Buildings and improvements 22,610,028
Machinery and equipment 8,347,893
Infrastructure 57,228,510
Construction work in progress 19,424,558
Less:accumulated depreciation ( 19,132,701)
Total capital assets 88,846,250
Total noncurrent assets 89,474,046
Total assets 106,681,081
LIABILITIES
Current liabilities:
Accounts payable 3,094,901
Accrued liabilities 157,955
Accrued interest 117,851
Customer deposits 1,253,770
Compensated absences 83,063
Certificates of obligation 880,000
Revenue bonds 1,075,000
Total current liabilities 6,662,540
Noncurrent liabilities:
Compensated absences 392,742
Certificates of obligation 15,000,000
Revenue bonds 31,405,000
Total noncurrent liabilities 46,797,742
Total liabilities 53,460,282
NET ASSETS
Invested in capital assets,net of related debt 45,641,648
Restricted for:
Debt service 275,502
Capital improvements 6,751,273
Unrestricted 552,376
Total net assets $ 53,220,799
The notes to the financial statements are an integral part of this statement.
19
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CITY OF PEARLAND,TEXAS
STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30,2005
Business-type
Activities
Enterprise Fund
Water and Sewer
OPERATING REVENUES
Charges for services $ 10,947,737
Other 271,762
Total operating revenues 11,219,499
OPERATING EXPENSES
Production and wastewater 4,507,571
Distribution and collection 1,415,078
Accounting and collections 1,124,626
Other requirements 792,301
Construction and engineering 767,233
Depreciation 2,864,261
Total operating expenses 11,471,070
OPERATING LOSS ( 251,571)
NONOPERATING REVENUES(EXPENSES)
Earnings on investments 399,275
Interest and fiscal charges ( 2,153,427)
Total nonoperating revenues(expenses) ( 1,754,152)
LOSS BEFORE CONTRIBUTIONS
AND TRANSFERS ( 2,005,723)
CAPITAL CONTRIBUTIONS 8,365,452
TRANSFERS IN 536,520
TRANSFERS OUT ( 896,002)
CHANGE IN NET ASSETS 6,000,247
TOTAL NET ASSETS,BEGINNING 46,029,901
PRIOR PERIOD ADJUSTMENT 1,190,651
TOTAL NET ASSETS,ENDING $ 53,220,799
The notes to the financial statements are an integral part of this statement.
20
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CITY OF PEARLAND,TEXAS
STATEMENT OF CASH FLOWS
PROPRIETARY FUND
FOR THE YEAR ENDED SEPTEMBER 30,2005
Business-type
Activities
Enterprise Fund
Water and Sewer
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 12,888,744
Cash paid to suppliers for goods and services
( 2,710,758)
Cash paid to employees for services
( 4,460,630)
Net cash provided by operating activities 5,717,356
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Cash paid to other funds 1,190,651
Transfers from other funds 536,520
Transfers to other funds ( 896,002)
Net cash used for noncapital for financing activities 831,169
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Principal repayments on bonds ( 1,880,000)
Cash received from capital contributions 8,365,452
Interest and fiscal charges on debt ( 2,111,230)
Acquisition and construction of capital assets ( 15,281,188)
Net cash used for capital and related financing activities ( 10,906,966)
CASH FLOWS FROM INVESTING ACTIVITIES
Earnings on investments 273,163
Net cash provided by investing activities 273,163
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 4,085,278)
CASH AND CASH EQUIVALENTS,BEGINNING 19,026,676
•
CASH AND CASH EQUIVALENTS,ENDING $ 14,941,398
Cash and investments $ 10,413,796
Restricted cash and investments 4,527,602
Cash and cash equivalents,ending $ 14,941,398
Reconciliation of operating loss to net cash
provided by operating activities:
Operating loss $ ( 251,571)
Adjustments to reconcile operating loss
to net cash provided by operating activities:
Depreciation 2,864,261
Changes in assets and liabilities:
Decrease(increase)in assets:
Accounts receivable 1,500,001
Increase(decrease)in liabilities:
Accounts.payable 1,229,941
Accrued liabilities 130,535
Customer deposits 169,244
Compensated absences payable 74,945
Net cash provided by operating activities $ 5,717,356
The notes to the financial statements are an integral part of this statement.
21
CITY OF PEARLAND,TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2005
•
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Pearland, Texas, was incorporated in December 1959, and adopted the "Home
Rule Charter" February 6, 1971, pursuant to the laws of the State of Texas. The City
operates under a "Council-Manager" form of government and provides services authorized
by its charter. Presently, these services include police and fire protection, water and sewer
services, drainage, sanitation, building and code inspection, planning, zoning, engineering,
street repair and maintenance, park maintenance, recreational activities for citizens, and
general administrative services. The City is an independent political subdivision of the State
of Texas, governed by an elected mayor and five-member Council, and is considered a
primary government.
The accompanying financial statements present the government and its component units,
entities for which the government is considered to be financially accountable. Each
discretely presented component unit is reported in a separate column in the government-wide
financial statements (see note below for description) to emphasize that it is legally separate
from the government.
Discretely Presented Component Units—The component units' column in the government-
wide financial statements includes the financial data of the City's component units.
1. The Pearland Economic Development Corporation (PEDC) is responsible for
economic development within the City's jurisdiction. The PEDC was created
in 1995 and is fiscally dependent upon the primary government because,
besides appointing the Board, the City Council also must approve the PEDC's
budget and any debt issuances.
2. The Tax Increment Reinvestment Zone (TIRZ #2) provides tax assisted
property development and/or redevelopment in specific geographic areas in
accordance with applicable state laws. TIRZ#2 was created in 1998. Besides
appointing Board members, the City Council must also approve the TIRZ's
budgets and any debt issuances done on behalf of the TIRZ.
3. The Development Authority of Pearland was created by the City in 2004 by
Resolution No. 2004-107 to aid, assist and account on behalf of the_City to
provide financing for the Reinvestment Zone Number Two. Proceeds from
bond sales are to be used to reimburse developers and fund a debt service
reserve.
(continued)
22
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement
of activities) report information on all of the primary government and its component units.
For the most part, the effect of interfund activity has been removed from these statements.
Governmental activities, which normally are supported by taxes and intergovernmental
revenue, are reported separately from business-type activities, which rely to a significant
extent on fees and charges for support. Likewise, the primary government is reported
separately from certain legally separate component units for which the primary government is
financially accountable.
The statement of activities'demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenue. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenue includes 1) charges to
customers or applicants who purchase, use, or directly benefit from goods, services, or
privileges provided by a given function or segment, and 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or
segment. Taxes and other items not properly included among program revenue are reported
instead as general revenue.
Separate financial statements are provided for governmental funds and proprietary funds.
Major individual governmental funds and major individual Enterprise Funds are reported as
separate columns in the fund financial statements.
(continued)
23
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Measurement Focus,Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund financial
statements. Revenue is recorded when earned and expenses are recorded when a liability is
incurred, regardless of the timing of related cash flows. Property taxes are recognized as
revenue in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenue is recognized as
soon as it is both measurable and available. Revenue is considered to be available when it is
collectible within the current period or soon enough thereafter to pay liabilities of the current
period. For this purpose, the government considers revenue to be available if collected
within 60 days of the end of the current fiscal period. Expenditures generally are recorded
when a liability is Ancurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures •related to compensated absences and claims and
judgments, are recorded only when payment is due.
Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal
period are all considered to be susceptible to accrual and so have been recognized as revenue
of the current fiscal.period. All other revenue items are considered to be measurable and
available only when cash is received by the City.
The City reports the following major governmental funds:
The General Fund is the City's primary operating fund. It accounts for all
financial resources of the general government, except those required to be
accounted for in another fund.
The Debt Service Fund is used to account for the resources accumulated and
payments made for principal and interest on long-term general obligation debt of
the governmental funds.
The Capital Projects Fund is used to account for the proceeds from the sale of
general obligation bonds and certificates of obligation and expenditures of these
proceeds for the acquisition of capital assets as designated in each bond issue.
(continued)
24
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Measurement Focus,Basis of Accounting and Financial Statement Presentation
(Continued)
The City reports the following major Enterprise Fund:
The Water and Sewer Fund accounts for the activities necessary for the provision
of water and wastewater services.
Private-sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both,the government-wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. The City also has the option of following
subsequent private-sector guidance for their business-type activities and Enterprise Funds,
subject to this same limitation. The City has elected not to follow subsequent private-sector
guidance.
As a general rule, the effect of interfund activity;has been eliminated from the government-
wide financial statements. Exceptions to this general rule are charges between the City's
water and sewer function and various other functions of the government. Elimination of
these charges would distort the direct costs and program revenue reported for the various
functions concerned.
Amounts reported as program revenues include: 1) charges to customers or applicants for
goods, services, or privileges provided, 2).operating grants and contributions, and 3) capital
grants and contributions, including special assessments. Internally dedicated resources are
reported as general revenues rather than as program revenue. Likewise, general revenue
includes all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items.
Operating revenues and expenses generally result from providing services and producing and
delivering goods in connection with a proprietary fund's principal ongoing operations. The
principal operating revenues of the City's Enterprise Funds and Internal Service Funds are
charges to customers for sales and services. Operating expenses for Enterprise Funds and
Internal Service Funds include the cost of sales and services, administrative expenses, and
depreciation on capital assets. All revenue and expenses not meeting this definition are
reported as nonoperating revenue and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to
use restricted resources first, then unrestricted resources as needed.
(continued)
25
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets,Liabilities and Net Assets or Eauity
Cash and Investments
Cash and investments consist of amounts in an interest-bearing time deposit account, petty
cash funds, and U. S. Government Securities. Investments are stated at fair value based on
quoted market prices at September 30, 2005. The net increase or decrease in the fair value of
investments is recorded as investment earnings. Investments are generally held to maturity.
The City pools cash resources of its various funds to facilitate the management of cash. Cash
applicable to a particular fund is readily identifiable. The balance- in the pooled cash
accounts is available to meet current operating requirements. Cash in excess of current
requirements is invested in various interest-bearing securities and disclosed as part of the
City's investments. The City pools excess cash of the various individual funds to purchase
investments. These pooled investments are reported in the combined balance sheet as
investments in each fund based on each fund's share of the pooled investments. Interest
income is allocated to each respective individual fund monthly based on its respective share
of pooled investments.
Receivables and Payables
Activity between funds that are, representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as "due to/from other funds" (i.e., the
current portion of interfund loans). Any residual balances outstanding between the
governmental activities and business-type activities are reported in the government-wide
financial statements as "internal balances."
All trade receivables are shown net of an allowance for uncollectibles. Trade accounts
receivable in excess of 180 days comprise the trade accounts receivable allowance for
uncollectibles.
Property taxes for each year are required to be levied by October 1 and.are due upon receipt
of the City's tax bill and become delinquent on February 1 of the following year. On January
1 of each year, a tax lien is attached to the property to secure the payment of all taxes,
penalties and interest. The lien exists in the favor of the State and each taxing unit.
Appraised values are established by the Central Appraisal District (CAD) of Brazoria
County, Texas, through procedures established by the Texas Legislature. The Brazoria
County Tax office bills and collects the City's property taxes.
A penalty of 7% is added to delinquent taxes on February 1 and increases 2% each month
through September. An additional penalty of 15% or 20% is added in July for attorney costs.
There are no discounts allowed in taxes.
(continued)
26
1, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets,Liabilities and Net Assets or Equity(Continued)
Receivables and Payables
The City is permitted, by Article XI, Section 5, of the State of Texas Constitution and the
City Charter, to levy property taxes up to $2.50 per $100 of assessed valuation for general
governmental services. Within the $2.50 maximum levy, there is no legal limit upon the
amount of property taxes, which can be levied for debt service. The property tax rates to
finance general governmental services and debt service for the 2004 tax year were $.3389
and $.3559, respectively, per $100 of assessed valuation. The 2004 assessed value and total
tax levy as adjusted through September 30, 2005, were $3,019,449,422 and $20,979,391,
respectively.
The City has enacted an ordinance providing for the exemption of $25,000 of the assessed
value of residential homesteads of persons 65 years of age or older from property taxes. This
is provided by Section 1-b(a) of Article 8 of the Constitution of Texas. Additionally, the
market value of agricultural land is reduced to agricultural value for purposes of the City's
tax levy calculation.
Inventories
Inventory, which consists of gasoline and auto parts for use in the City's vehicles, is stated at
cost (first-in, first-out method). Expenditures are recognized as the fuel and auto parts are
consumed rather when purchased.
Restricted Assets
Certain proceeds of the Enterprise Fund and Economic Development Corporation revenue
bonds and certain resources set aside for their repayment are classified as restricted assets on
the balance sheet because their use is limited by applicable bond covenants. Certain
resources are also set aside for repayment of Development Authority bonds and are reported
. as restricted assets.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure, are reported in
the applicable governmental or business-type activities columns in the government-wide
financial statements. The City defines capital assets as assets with an initial, individual cost
of more than $1,000 and an estimated useful life in excess of one year. Such assets are
recorded at historical cost or estimated historical cost if purchased or constructed. Donated
capital assets are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend assets' lives are not capitalized.
(continued)
27
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets, Liabilities and Net Assets or Equity (Continued)
Capital Assets(Continued)
The City has elected to delay implementation of the requirements of GASB Statement No. 34
related to infrastructure (roads, sidewalks, etc.) assets acquired prior to October 1, 2002. The
City has implemented the general provisions of GASB Statement No. 34 and will complete
the implementation of the retroactive provisions for infrastructure no later than September
30, 2007.
Property, plant, and equipment is depreciated using the straight-line method over the
following useful lives:
Assets Years
Buildings and improvements 20-45 -
Machinery and equipment 5-15
Infrastructure 40-50
Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation, sick
and holiday pay benefits.
Employees earn vacation leave at the rate of 15 days per year from 1 to 15 years of service,
20 days per year for service of 16 to 19 years, and 25 days per year for service of 20 years or
more. Employees hired after October 1, 2005, earn vacation at a rate of 10 days per year
from 1 —6 years of service, 15 days per year for 7 — 15 years of service, and 20 days for over
16 years of service. Employees are required to take their earned vacation. Employees who
are unable to use their vacation, for various reasons, may, with the City Manager's approval,
carry over 50 percent of the unused portion of the vacation, or receive compensation for a
maximum of 40 hours.
City employees receive 11 paid holidays per year. Employees may be paid or may elect to
receive compensatory time off for the holiday. Overtime is earned at one and one-half times
the regular rate of pay. Employees may be paid or receive compensatory time. The
maximum accrual for overtime is 160 hours, except for employees involved in public safety,
who can accrue up to 320 hours.
All sick leave benefits are accumulated and paid to employees upon separation from the City.
Vacation, sick and holiday pay benefits are accrued when incurred in the government-wide
and proprietary fund financial statements. A liability for these amounts is reported in
governmental funds only if they have matured, for example, as a result of employee
resignations and retirements.
(continued)
28
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.(Continued)
D. Assets,Liabilities and Net Assets or Equity (Continued)
Long-term Obligations
In the government-wide financial statements and proprietary fund types in the fund financial
statements, long-term debt and other long-term obligations are reported as liabilities in the
applicable. governmental activities, business-type activities, or proprietary fund type
statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred
and amortized over the life of the bonds using the straight-line method which approximates
the effective interest method. Bonds payable are reported net of the applicable bond
premium or discount. Bond issuance costs are reported as deferred charges and amortized
over the term of the related debt.
In the fund financial statements, governmental fund,types recognize bond premiums and
discounts, as well as bond issuance costs, during the current period. The face amount of debt
issued is reported as other financing sources. Premiums received on debt issuances are
reported as other financing sources while discounts on debt issuances are reported as other
financing uses. Issuance costs, whether or not withheld from the actual debt proceeds
received, are reported as debt service expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for
amounts that are not available for appropriation or are legally restricted by outside parties for
use'for a specific purpose. Designations of fund balance represent tentative management
plans that are subject to change.
Net Assets
Net assets represent the difference between assets and liabilities. Net assets invested in
capital assets, net of related debt consists of capital assets, net of accumulated depreciation,
reduced by the outstanding balances of any borrowing used for the acquisition, construction
or improvements of those assets, and adding back unspent proceeds. As of September 30,
2005, the City has elected to delay implementation of the requirements of GASB 34 related
to infrastructure assets acquired prior to October 1, 2002. As a result, net assets invested in
capital assets, net of related debt does not consist of infrastructure acquired prior to October
1, 2002, but does consist of the infrastructures related debt. Net assets are reported as
restricted when there are limitations imposed on their use either through the enabling
legislations adopted by the City or through external restrictions imposed by creditors,
grantors or laws or regulations of other governments.
Estimates
The preparation of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
29
2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the.
Government-wide Statement of Net Assets
The governmental fund.balance sheet includes a reconciliation between fund, balance — total
governmental funds and net assets—governmental activities as reported in the government-wide
statement of net assets. One element of that reconciliation explains, "Long-term liabilities,
including bonds payable, are not due and payable in the current period and therefore are not
reported in the funds." The details of this $136,804,288 difference are as follows:
Certificates and General Obligation Bonds $ 132,565,000
Deferred charge for issuance cost ( 663,459)
Deferred amount for issuance premium 1,458,694
Deferred loss on refunding bonds ( 789,621)
Accrued interest payable 523,316
Compensated absences 3,314,699
Capital lease obligation 395,659
Net adjustment to reduce fund balance-total
governmental funds to arrive at net assets-
governmental activities $ 136,804,288
Explanation of Certain Differences Between the Governmental. Fund Statement of
Revenue, Expenditures and Changes in Fund Balances and the Government-wide
Statement of Activities
The governmental fund statement of revenue, expenditures and changes in fund balances
includes a reconciliation between net changes in fund balances — total governmental fund and
changes in net assets of governmental activities as reported in the government-wide statement of
activities. One element of that reconciliation explains, "Governmental funds .report capital
outlays as expenditures. However, in the statement of activities the cost of those assets is
allocated over their estimated useful lives and reported as depreciation expense." The details of
this $25,362,046 difference are as follows:
Capital outlay $ 28,005,762
Depreciation expense ( 2,643,716)
Net adjustment to increase net changes in fund balances-
total governmental funds to arrive at changes in net
assets of governmental activities $ 25,362,046
(continued)
30
2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
(Continued)
Explanation of Certain Differences Between the Governmental Fund Statement of
Revenue, Expenditures and Changes in Fund Balances and the Government-wide
Statement of Activities (Continued)
Another element of that reconciliation states, "Revenues in the statement of activities that do not
provide current financial resources are not reported as revenues in the funds." The details of this
$(22,594)difference are as follows:
Property taxes $ 59,154
Court fines ( 81,748)
Net adjustment to increase net changes in fund balances-
total governmental funds to arrive at changes in net
assets of governmental activities $ ( 22,594)
Another element of that reconciliation states, "The issuance of long-term debt (e.g., bonds, leases)
provides current financial resources to governmental funds, while the repayment of the principal of
long-term debt consumes the current financial resources of governmental funds. Neither
transaction, however, has any effect on net assets. Also, governmental funds report the effect of
issuance costs, premiums, and similar items when debt is first issued, whereas these amounts are
deferred and amortized in the statement of activities. The details of this $(17,273,098) difference
are as follows:
Debt issued or incurred:
Issuance of general obligation bonds $ ( 37,015,000)
Bond issuance cost 548,191
Premium on issuance of bonds ( 1,368,186)
Capital lease financing ( 271,193)
Amortization of bond issue costs 3,935
Payment to escrow agent 17,294,621
Principal repayments:
General obligation debt 3,534,534
•
Net adjustment to reduce net changes in fund balances-
total governmental funds to arrive at changes in net
assets of governmental activities $_ ( 17,273,098)
Another element of that reconciliation states, "Some expenses reported in the statement of
activities do not require the use of current financial resources and therefore are not reported as
expenditures in governmental funds." The details of this $(1,069,902)difference are as follows:
Compensated absences $ ( 957,802)
Interest expense ( 112,100)
Net adjustment to increase net changes in fund balances-
total governmental funds to arrive at changes in net
assets of governmental activities $ ( 1,069,902)
31
3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
Annual appropriated budgets are adopted on a basis consistent with generally accepted
accounting principles for the General Fund and Debt Service Fund. The City adopts project-
length budgets for the Capital Projects and Special Revenue Funds. All annual appropriations
lapse at fiscal year-end.
The City Manager, between 60 and 90 days prior to the beginning of each fiscal year, submits to
Council a proposed budget. The Council shall review the proposed budget and revise as deemed
appropriate prior to circulation for public hearing.
After the public hearing, the Council may adopt the budget with or without amendment. In
amending the budget, Council may add or increase programs or amounts and may delete or
decrease any amount, except expenditures required by law or for debt or for estimated cash
deficits, provided no amendments to the budget shall increase the authorized expenditures to an
amount greater than the total of estimated income plus funds available from prior years.
The Council shall adopt the budget no later than 15 days prior to the beginning of the fiscal year.
Adoption of the budget shall constitute appropriation of the amounts specified therein as
expenditures and shall constitute a levy of the property tax therein proposed.
Every appropriation lapses at the close of the fiscal year to the extent it has not been expended.
Any encumbered appropriation lapses at year-end, but is generally reappropriated as part of the
subsequent year's budget. Expenditures may not legally exceed appropriations at the fund level.
At any time during the fiscal year, the City Manager may request Council to transfer by
ordinance any unencumbered appropriation balance between funds.
No significant supplemental appropriations were necessary during the year.
4. DETAILED NOTES ON ALL FUNDS
Cash and Investments
The City's cash and investments are classified as cash and cash equivalents, investments, and
restricted cash and investments. The cash and cash equivalents,include cash on hand, deposits
with financial institutions and other investments which have maturities at purchase date of less
than three months. The restricted cash includes cash on deposit with financial institutions.
(continued)
32
4. DETAILED NOTES ON ALL FUNDS (Continued)
Cash and Investments(Continued)
The Council has adopted a written investment policy regarding the investment of its funds as
defined by the Public Funds Investment Act (Chapter 2256 Texas Government Code). The
investments of the City are in compliance with the Council's investment policies. It is the City's
policy to restrict its investments to direct obligations of the U. S. Government, commercial
paper, fully collateralized certificates of deposit and other interest-bearing time and demand
deposits, and other instruments and investments in public funds investment pools. State law
provides that collateral pledged as security for bank deposits must have a market value of not
less than the uninsured amount of the deposits and must consist of 1) obligations of the United
States of its agencies and instrumentalities; 2) direct obligations of the State of Texas or its
agencies; 3) other obligations, the principal and interest on which are unconditionally
guaranteed or insured by the State of Texas; and/or 4) obligations of states, agencies, counties,
cities, and other political subdivisions of any state having been rated as to investment quality by
a nationally recognized investment rating firm and having received a rating of not less than A or
its equivalent.
The deposit and investment policies for the Pearland Economic Development Corporation, TIRZ
Developments, and Development Authority of Pearland are substantially the same as the City.
Deposits and Investments
•
As of September 30, 2005, the City had the following investments:
Weighted Average
Investment Type Fair Value Maturity(Days)
Primary government:
Fannie Mae Discount Note $ 1,152,974 17
Freddie Mac Discount Note 1,851,659 91
Total portfolio $ 3,004,633
Portfolio weighted average maturity(days) 63
Interest Rate Risk. In accordance with its investment policy, the City manages its exposure to
declines in fair market values by limiting the weighted average maturity of its investment
portfolios to a maximum of 365 days.
(continued)
33
4. DETAILED NOTES ON ALL FUNDS (Continued)
Deposits and Investments (Continued)
Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank failure, the
City's deposits may not be returned to it. State statutes require that all deposits in financial
institutions be fully collateralized by U. S. Government obligations or its agencies and
instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a fair
value of not less than the principal amount of deposits. As of September 30, 2005, $64,957,376 of
the City's $65,257,376 deposit balance was collateralized with securities held by the pledging
financial institution. The remaining balance, $300,000 was covered by FDIC insurance. As of the
same date, $13,808,363 of the component units' deposit balance was collateralized with securities
held by the pledging financial institution and by FDIC.
Credit Risk. It is the City's policy to limit its investments to investment types with an investment
quality rating not less than A or its equivalent by a nationally recognized statistical rating
organization. The City's investments as of September 30, 2005, were rated as follows:
Investment Type Rating Rating Agency
U.S.Agency Securities:
Fannie Mae Discount Note AAA Moody's Investor Service
Freddie Mac Discount Note Aaa Moody's Investor Service
Receivables
Receivables as of year-end for the City's individual major funds, nonmajor funds in the
aggregate, and discretely presented component units in the aggregate including the applicable
allowances for uncollectible accounts, are as follows:
Debt Capital Nomnajor Water Component
General Service Projects Governmental and Sewer Units Total
Receivables:
Accounts $ 868,158 $ $ 46,605 $ 64,687 $ 2,714,763 $ 142 $ 3,694,355
Property taxes 511,094 286,650 234,287 1,032,031
Sales taxes 1,456,049 724,601 2,180,650
Other taxes 664,345 664,345
Intergovernmental 216,443 53,863 270,306
Accrued interest 1,393 994 20,079 20,097 42,563
Gross receivables 3,717,482 286,650 46,605 119,544 2,734,842 979,127 7,884,250
• Less:allowance for
uncollectibles 65,590 469,205 534,795
Net total
receivables $ 3,651,892 $ 286,650 $ 46,605 $ 119,544 $ 2,265,637 $ 979,127 $ 7,349,455
Governmental funds report deferred revenue in connection with receivables for revenue that is
not considered to be available to liquidate liabilities of the current period. Governmental funds
also defer revenue recognition in connection with resources that have been received, but not yet
earned. At the end of the current fiscal year, the various components of deferred revenue and
unearned revenue reported in the governmental funds were as follows:
(continued)
34
4. DETAILED NOTES ON ALL FUNDS (Continued)
Receivables (Continued)
Unavailable Unearned
General fund:
Delinquent property taxes receivable $ 500,028 $
Municipal court 393,261
Other 167,061
Debt service fund:
Delinquent property taxes receivable 275,445
Nonmajor governmental:
Municipal court 3,746
Governmental Funds $ 1,172,480 $ 167,061
Capital Assets
Capital asset activity for the year ended September 30,2005, was as follows:
Primary Government
Decreases
Beginning and Ending
Balance Increases Reclassifications Balance
Governmental activities:
Capital assets,not being depreciated:
Land $ 2,509,691 $ 207,762 $ $ 2,717,453
Construction in progress 12,946,218 26,335,777 ( 18,583,828) 20,698,167
Total capital assets not being depreciated 15,455,909 26,543,539 ( 18,583,828) 23,415,620
Capital assets,being depreciated:
Buildings 10,357,504 104,827 10,462,331
Improvements other than buildings 2,218,151 154,461 2,372,612
Machinery and equipment 8,619,886 662,281 9,282,167
Infrastructure 42,674,657 540,654 18,583,828 61,799,139
Total capital assets being depreciated 63,870,198 1,462,223 18,583,828 83,916,249
Less accumulated depreciation:
Buildings 3,589,225 227,342 3,816,567
Improvements other than buildings 1,357,101 90,268 1,447,369
Machinery and equipment 5,714,914 1,259,239 6,974,153
Infrastructure 1,521,763 1,066,867 2,588,630
Total accumulated depreciation 12,183,003 2,643,716 14,826,719
Total capital assets,being depreciated,net 51,687,195 ( 1,181,493) 18,583,828 69,089,530
Governmental activities capital assets,net $ 67,143,104 $ 25,362,046 $ $ 92,505,150
(continued)
35
4. DETAILED NOTES ON ALL FUNDS (Continued)
Capital Assets (Continued)
Decreases
Beginning and Ending
Balance Increases Reclassifications Balance
Business-type activities:
Capital assets,not being depreciated:
Land $ 367,962 $ $ $ 367,962
Construction in progress 2,166,494 17,258,064 19,424,558
Total assets not being depreciated 2,534,456 17,258,064 19,792,520
Capital assets,being depreciated:
Buildings and improvements 21,518,110 1,091,918 22,610,028
Machinery and equipment 7,895,580 452,313 8,347,893
Water and sewer system 60,791,814 3,063,383 6,626,687 57,228,510
Total capital assets,being depreciated 90,205,504 4,607,614 6,626,687 88,186,431
Less accumulated depreciation:
Buildings and improvements 8,198,116 695,693 8,893,809
Machinery and equipment 4,083,651 695,658 4,779,309
Water and sewer system 4,028,870 1,430,713 5,459,583
Total accumulated depreciation 16,310,637 2,822,064 19,132,701
Total capital assets being depreciated,net 73,894,867 1,785,550 6,626,687 69,053,730
Business-type activities capital assets,net $ 76,429,323 $ 19,043,614 $ 6,626,687 $ 88,846,250
Depreciation expense was charged to functions/programs of the primary government as follows:
Governmental activities:
General government $ 581,618
Public safety 475,869
Public works 1,454,043
Community services 132,186
Total depreciation expense-governmental activities $ 2,643,716
Business-type activities:
Water and sewer $ 2,822,064
Total depreciation expense-business-type activities $ 2,822,064
Interfund Transfers
Transfers In
Debt Capital Nonmajor Water
General Service Projects Governmental and Sewer Total
Transfers Out:
General $ - $ - $ 2,384,774 $ 82,000 $ 536,520 $ 3,003,294
Capital projects 404,000 204,559 - - - 608,559
Nonmajor governmental 898,264 - - - - 898,264
Water and sewer 761,000 135,002 - - 896,002
Total Transfers $ 2,063,264 $ 339,561 $ 2,384,774 $ 82,000 $ 536,520 $ 5,406,119
(continued)
36
4. DETAILED NOTES ON ALL FUNDS (Continued)
Interfund Transfers (Continued)
Transfers are used to (1) move revenues from the fund that statute or budget requires to collect
them to the fund that statute or budget requires to expend them, (2) move receipts restricted to
debt service from the funds collecting the receipts to the Debt Service Fund as debt service
payments become due, and(3)use unrestricted revenues collected in the General Fund to finance
various programs accounted for in other funds in accordance with budgetary authorizations.
Long-term Debt
General Obligation Bonds and Certificates of Obligation
The City issues general obligation bonds and certificates of obligation to provide funds for the
acquisition and construction of major capital facilities. General obligation bonds and certificates
, of obligation have been issued for both governmental and business-type activities. The original
amount of general obligation bonds and certificates of obligation issued in prior years was
$153,795,000. During the year, general obligation bonds and certificates of obligation totaling
$37,015,000 were issued to fund general obligation projects and refund certain debt issues.
General obligation bonds and certificates of obligation are direct obligations and pledge the full
faith and credit of the government. These bonds generally are issued as 20-year serial bonds
with equal amounts of principal maturing each year. General obligation bonds and certificates of
obligation currently outstanding are as follows:
Purpose Interest Rates Amount
Governmental activities 3.00-7.25% $ 107,550,000
Governmental activities-refunding 3.25-5.5% 25,015,000
Business-type activities 2.6-6.5% 15,880,000
•
$ 148,445,000
Annual debt service requirements to maturity for general obligation bonds and certificates of
obligation are as follows:
Year Ending Governmental Activities Business-type Activities
September 30, Principal Interest Principal Interest
2006 $ 2,850,000 $, 6,279,799 $ 880,000 $ 548,674
2007 2,525,000 5,936,666 915,000 521,072
2008 2,650,000 5,822,694 945,000 492,006
2009 4,340,000 5,663,043 980,000 461,197
2010 4,885,000 5,445,556 1,015,000 428,271
2011-2015 27,045,000 23,764,608 5,645,000 1,570,214
2016-2020 29,330,000 17,396,188 5,500,000 347,768
2021-2025 32,735,000 10,351,167
2026-2030 26,205,000 2,268,629
Total $ 132,565,000 $ 82,928,350 $ 15,880,000 $ 4,369,202
(continued)
37
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt(Continued)
The various bond obligations contain certain financial limitations and restrictions. The
ordinances authorizing the issuance of general obligation bonds created an interest and sinking
fund (general debt service fund). The ordinances require the City to ascertain a rate and amount
of tax which will be sufficient to pay interest as it comes due and provide a reserve fund which is
adequate to meet principal as it matures. The City is in compliance with all such significant
financial restrictions.
Revenue Bonds
The City also issues bonds where the City pledges income derived from the acquired or
constructed assets to pay debt service. The original amount of revenue bonds issued in prior
years was$36,370,000 Revenue bonds outstanding at year-end are as follows:
Purpose Interest Rates Amount
Water and sewer improvements 4.00-6.00% $ 32,480,000
Revenue bond debt service requirements to maturity are as follows:
Year Ending Business-type Activities
September 30, Principal Interest
2006 $ 1,075,000 $ 1,459,365
2007 1,125,000 1,411,888
2008 1,180,000 1,361,558
2009 1,235,000 1,308,250
2010 1,295,000 1,251,918
2011-2015 7,485,000 5,254,083
2016-2020 9,380,000 3,431,769
2021-2025 9,705,000 1,222,249
Total $ 32,480,000 $ 16,701,080
Obligations Under Capital Leases
During the current year, the City entered into a capital lease agreement in order to purchase
equipment and vehicles for various departments. The assets acquired through these lease
agreements are as follows:
Governmental
Activities
Asset:
Equipment and vehicles $ 455,193
Less:accumulated depreciation 26,284
Total $ 428,909
(continued)
38
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt(Continued)
Obligations Under Capital Leases(Continued)
Year Ending Lease
September 30, Obligation
2006 $ 159,629
2007 159,629
2008 95,069
Total 414,327
Less interest portion ( 18,668)
Obligations under capital leases $ 395,659
The primary government's long-term liability activity for the year ended September 30, 2005,
was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental activities
Bonds payable:
General obligation $ 25,345,000 $ 37,015,000 $ 2,185,000 $ • 60,175,000 $ 2,295,000
Certificates of obligation 90,185,000 17,795,000 72,390,000 555,000
Deferred amount for
issuance premium 94,443 1,368,186 3,935 1,458,694 60,943
Deferred loss on refunding ( 789,621) ( 789,621) ( 39,481)
Total bonds payable 115,624,443 37,593,565 19,983,935 133,234,073 2,871,462
Capital lease 184,000 271,193 59,534 395,659 147,371
Compensated absences 2,356,897 1,234,722 276,920 3,314,699 662,940
Governmental activity
long-term liabilities 118,165,340 39,099,480 20.320,389 136,944,431 3,681,773
Business-type activities
Bonds payable:
Certificates of obligation 16,735,000 855,000 15,880,000 880,000
Revenue 33,505,000 1,025,000 32,480,000 1,075,000
Total bonds payable 50,240,000 1,880,000 48,360,000 1,955,000
Compensated absences 400,860 82,447 67,991 415,316 83,063
Business-type activity
long-term liabilities $ 50,640,860 $ 82,447 $ 1,947,991 $ 48,775,316 $ 2,038,063
The governmental activities compensated absences are generally liquidated by the General Fund.
(continued)
39
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt(Continued)
Advance Refunding
The City issued $16,510,000 of general obligation refunding bonds to provide resources to
purchase U. S. Government State and Local Government Series securities that were placed in an
irrevocable trust for the purpose of generating resources for all future debt service payments of
$17,294,621 of general obligation bonds. As a result, the refunded bonds are considered to be
defeased and the liability has been removed from the governmental activities column of the
statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt
by $789,621. This amount is being netted against the new debt and amortized over the
remaining life of the refunded debt, which is shorter than the life of the new debt issued. This
advance refunding was undertaken to increase total debt service payments over the next 12 years
by$1,031,367 and resulted in an economic gain of$871,970.
Federal Tax Compliance(Arbitrage)for Long-term Debt
In accordance with provisions of Section 148 of the Internal Revenue Code of 1986, as amended,
(the "Code") the City's long-term debt obligations must meet certain minimum criteria to be
considered and continue to be considered "tax-exempt." This "tax-exempt" status means that
interest income earned by purchasers of the City's long-term debt instruments is not subject to
federal income taxes. Related Treasury Regulations promulgated under Section 148 of the Code
generally provide that the determination of whether these obligations are tax-exempt is made as
of the date such obligations are issued based on a reasonable expectation regarding the use of the
proceeds of the bonds issued. Long-term debt that does not meet and continue to meet the
minimum criteria of Section 148 of the Code and the.related Treasury Regulations described
above are considered"arbitrage bonds" and are not considered"tax-exempt" as described above.
Rebate
Obligations will become arbitrage bonds (as described above) if certain arbitrage profits are not
paid to the federal government as rebate under Section 148(f) of the Code. The City's
obligations to calculate and make rebate payments (if any) will continue as long as there are
gross proceeds allocable to outstanding debt issues. The City has performed calculations
required under Section 148(f) of the Code and a liability in the amount of$53,317 was reported
in the Water and Sewer Fund.
(continued)
40
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt(Continued) •
Unexpended Debt Issuance Proceeds (Yield Restriction Requirements)
Section 148 of the Code also provides that in order for debt not to be considered arbitrage bonds
(as described above),proceeds of such debt must be invested at a yield that is not materially higher
than the yield on the debt issued starting on the third anniversary of the issue date of such debt.
Accordingly, any unexpended proceeds of debt issued by the City that remain unexpended more
than three years after such debt was issued should be yield restricted. The yield restriction may be
accomplished by making yield reduction payments pursuant to Treasury Regulation Section 1.148-
5(c). The City is currently pursuing compliance with these yield restriction requirements and does
not anticipate associated significant noncompliance issues. The City is continuing to proceed with
reasonable diligence to expend any remaining unexpended debt issuance proceeds on qualifying
projects.
Component Units
The terms of Sales Tax and Tax Increment Revenue Bonds are as follows:
Purpose Interest Rates Amount
Sales Tax Revenue-Economic Development 2.5%-5% • $ 10,590,000
Tax Increment Revenue-Development Authority 3.25%-5.5% 13,995,000
The Pearland Economic Development Corporation issued $4,365,000 of sales tax revenue
refunding bonds to provide resources to purchase U. S. Government State and Local Government
Series securities that were placed in an irrevocable trust for the purpose of generating resources
for all future debt service payments of$4,349,474 of sales tax revenue bonds. As a result, the
refunded bonds are considered to be defeased and the liability has been removed from the
statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt
by $189,626. This amount is being netted against the new debt and amortized over the
remaining life of the refunded debt, which'is shorter than the life of the new debt issued. This
advance refunding was undertaken to increase total debt service payments over the next 10 years
by$1,135,935 and resulted in an economic gain of$790,921.
(continued)
41
4. DETAILED NOTES ON ALL FUNDS (Continued)
Long-term Debt(Continued)
Component Units (Continued)
Long-term activity for the year ended September 30, 2005, was as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Economic Development Corporation:
Sales Tax Revenue Bonds $ 4,165,000 $ 11,005,000 $ 4,580,000 $ 10,590,000 $ 345,000
Deferred amount for
issuance premium 155,448 155,448 7,772
Deferred loss on refunding ( 189,626) ( 189,626) ( 9,481)
Compensated absences 14,540 28,191 28,191 14,540 7,797
Total long-term
liabilities $ 4,179,540 $ 10,999,013 $ 4,608,191 $ 10,570,362 $ 351,088
Development Authority of Pearland:
Tax Increment Revenue Bonds $ $ 13,995,000 $ _ $ 13,995,000 $ 815,000
Total long-term
liabilities $ $ 13,995,000 $ $ 13,995,000 $ 815,000
Annual debt service requirements to maturity for sales tax revenue bonds are as follows:
Year Ending
September 30, Principal Interest
2006. $ 345,000 $ • 420,900
2007 350,000 412,275
2008 360,000 402,650
2009 375,000 391,850
2010 385,000 380,600
2011-2015 2,140,000 1,693,590
2016-2020 2,645,000 1,190,740
2021-2025 3,255,000 575,689
2026 735,000 31,238
Total $ 10,590,000 $ 5,499,532
Annual debt service requirements to maturity for tax increment revenue bonds are as follows:
Year Ending
September 30, Principal Interest
2006 $ 815,000 $ 668,858
2007 840,000 642,370
2008 360,000 614,020
2009 375,000 601,060
2010 390,000 586,435
2011-2015 2,215,000 2,663,241
2016-2020 2,790,000 2,085,615
2021-2025 3,570,000 1,307,981
2026-2028 2,640,000 292,489
Total $ 13,995,000 $ 9,462,069
(continued)
42
4.. DETAILED NOTES ON ALL FUNDS (Continued)
Contingent Liabilities
Amounts received or receivable from grant agencies are subject to audit and adjustment by
grantor agencies,principally the federal government. Any disallowed claims, including amounts
already collected, may constitute a liability of the applicable funds. The amount, if any, of
expenditures that may be disallowed by the grantor cannot be determined at this time, although
the government expects such amounts, if any, to be immaterial.
The City is a defendant in various lawsuits. .Although the outcome of these lawsuits is not
presently determinable, in the opinion of the City's counsel, the resolution of these matters will
not have a material adverse effect on the financial condition of the City.
Pension Plans—Primary Government
Plan Description
The City provides pension benefits for all of its full-time employees through a non-traditional,
joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement
System (TMRS), one of 801 administered by TMRS, an agent multiple-employer public
employee retirement system.
Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the
City-financed monetary credits, with interest. At the date the plan began, the City granted
monetary credits for service rendered before the plan began of a theoretical amount equal to two
times what would have been contributed by the employee, with interest, prior to establishment of
the plan. Monetary credits for service since the plan began are a percent (100%, 150%, or 200%)
of the employee's accumulated contributions. In addition, the City can grant, as often as
annually, another type of monetary credit referred to as an updated service credit which is a
theoretical amount which, when added to the employee's accumulated contributions and the
monetary credits for service since the plan began, would be the total monetary credits and
employee contributions, accumulated with interest, if the current employee contribution rate and
City matching percent had always been in existence; and if the employee's salary had always
been the average of his salary in the last three years that are one year before the effective date.
At retirement, the benefit is calculated as if the sum of the employee's accumulated
contributions, with interest, and the employer-financed monetary credits, with interest, were used
to purchase an annuity. .
Members can retire at age 60 and above with 5 or more years of service or with 20 years of
service regardless of age. A member is vested after 5 years. The plan provisions are adopted by
the governing body of the City, within the options available in the state statutes governing TMRS
and within the actuarial constraints also in the statutes.
(continued)
43
4. DETAILED NOTES ON ALL FUNDS (Continued)
Pension Plans—Primary Government(Continued)
Contributions
The contribution rate for the employees is 7% and the City matching ratio is currently 2 to 1,
both as adopted by the governing body of the City. Under the state law governing TMRS, the
actuary annually determines the City contribution rate. This rate consists of the normal cost
contribution rate and the prior service contribution rate, both of which are calculated to be a level
percent of payroll from year to year. The normal cost contribution rate finances the currently
accruing monetary credits due to the City matching percent, which the obligation of the City as
of an employee's retirement date, not at'the time the employee's contributions are made. 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(overfunded) actuarial liability (asset) over
the remainder of the plan's 25-year amortization period. When the City periodically adopts
updated service credits and increases its annuities in effect, the increased unfunded actuarial
liability is to be amortized over a new 25-year period. The unit credit actuarial cost method is
used for determining the City contribution rate. Both the employees and the City make
contributions monthly. Since the City needs to know its contribution rate in advance to budget
for it, there is a one-year delay between the actuarial valuation that is the basis for the rate and
the calendar year when the rate goes into effect (i.e., December 31, 2004, valuation is effective
for rates beginning January 2006).
Schedule of Actuarial Liabilities and Funding Progress
For the Years Ended September 30,2002,2003 and 2004
Actual Valuation Date 12/31/02 - 12/31/03 12/31/04
Actuarial value of assets $ 16,390,251 $ 18,772,272 $ 21,971,144
Actuarial accrued liability 19,963,606 23,190,084 26,517,882
Percent funded 82.1% 80.9% 82.9%
Unfunded(overfunded)actuarial accrued liability(UAAL) 3,573,355 4,417,812 4,546,738
Annual covered payroll 11,151,256 12,731,012 13,703,115
UAAL as a percentage of covered payroll 32.0% 34.7% 33.2%
Net pension obligation(NPO at the beginning of period
Annual Pension Cost:
Annual required contribution(ARC) 1,228,907 1,371,452 1,480,301
Contributions made 1,228,907 1,371,452 1,480,301
Increase in NPO
NPO at the end of the period $
(continued)
44
4. DETAILED NOTES ON ALL FUNDS (Continued)
Pension Plans—Primary Government(Continued)
Contributions (Continued)
Actuarial Assumptions
Actuarial Cost Method - Unit Credit
Amortization Method - Level.Percent of Payroll
Remaining Amortization Period - 25 Years-Open Period
Asset Valuation Method - Amortized Cost(to accurately reflect the
requirements of GASB Statement No.25,
paragraphs 36e and 138)
Investment Rate of Return - 7%
Projected Salary Increases - None
Includes Inflation at - None
Cost-of-living Adjustments - None
The City is one of 801 municipalities having its benefit plan administered by TMRS. Each of the
794 municipalities has an annual, individual actuarial valuation performed. All assumptions for
the December 31, 2004, valuations are contained in the 2004 TMRS Comprehensive Annual
Financial Report, a copy of which may be obtained by writing to P. O. Box 149153, Austin,
Texas 78714-9153.
Risk Management
The City is exposed to various risks of loss related to torts: theft of, damage to, and destruction
of assets; errors and omissions; injuries to employees; and natural disasters. The City's risk
management program mainly encompasses obtaining property and liability insurance through
Texas Municipal League (TML-IRP), an Intergovernmental Risk-Pool and through commercial
insurance carriers. The City purchases commercial general insurance through the Texas
Municipal League, an unincorporated association of political subdivisions of the State of Texas.
This policy encompasses general liability, incidental, medical malpractice, automobile liability,
law enforcement liability, errors and omissions liability, property, automobile vehicle liability,
and damages with limits of liability for each occurrence. The City has not had any significant
reduction in insurance coverage, and the amounts of insurance settlements have not exceeded
insurance coverage for any of the last three years. The participation of the City in the TML-IRP
is limited to payment of premiums. At year-end, the City did not have any significant claims
pending.
(continued)
45
4. DETAILED NOTES ON ALL FUNDS (Continued)
Risk Management(Continued)
Workers' Compensation
The City is a member of the Texas Municipal League (TML) Workers' Compensation
Intergovernmental Risk Pool, an unincorporated association of political subdivisions of the State of
Texas. The fund contracts with a third-party administrator for administration, investigation, and
adjustment services in the handling of claims.. Premiums are based on the estimated City payroll
by risk factor and rates. The premiums are adjusted by the City's experience modifier. All loss
contingencies, including claims incurred, but not reported, if any, are recorded and accounted for
by the TML Pool. The City's liability is limited to the payment of premiums as assessed by TML.
Prior Period Adjustment
As of September 30, 2004, the City (overstated) understated certain assets between funds.
Beginning fund equity was restated in each of the following funds to correct this error in the
prior year.
Amount of
Fund Restatement
General $ ( 1,853,778)
Nonmajor governmental ( 90,130)
Water and sewer 1,190,651
Economic Development Corporation ( 26,482)
Subsequent Events
Debt Issuance
On October 1, 2005, the Development Authority of Pearland, a discretely presented component
unit, issued Tax Increment Revenue Bonds, Series 2005, in the amount of $9,775,000. These
bonds were used to reimburse developers for certain project costs including infrastructure and
related improvements made by such developers within Reinvestment Zone Number Two.
Annexation
On December 31, 2005, the City annexed approximately 582 acres of land consisting of all of
Brazoria County Municipal Utility District No. 5 and adjacent portions of County Road 403 and
FM 865,Brazoria County into the City. Upon the dissolution of the District,the City assumes all
property and assets owned by the District, as well as all debts, liabilities and obligations of the
District, and must provide all City services to the annexed areas. Capital assets and long-term
debt acquired were approximately$11.7 million and$8.3 million,respectively.
46
CITY OF PEARLAND,TEXAS
ECONOMIC DEVELOPMENT CORPORATION
' BALANCE SHEET
SEPTEMBER 30,2005
ASSETS
Cash and investments $ 4,438,285
Restricted cash and investments for:
Construction 6,795,879
Sales taxes receivable 724,743
Accrued interest 20,097
Prepaid items 3,451
Total assets 11,982,455
LIABILITIES AND FUND BALANCE
Liabilities:
Accounts payable 21,077
Accrued liabilities 11,498
Total liabilities 32,575
Fund balance:
Reserved for:
Prepaid items 3,451
Construction 6,795,879
Unreserved,undesignated 5,150,550
Total fund balance 11,949,880
Total liabilities and fund balance $ 11,982,455
RECONCILIATION OF FUND BALANCE TO NET ASSETS
Fund balance of component unit-Economic Development Corporation $ 11,949,880
Other long-term assets are not available to pay for current-period expenditures and,
therefore,are deferred in the funds. 256,439
Long-term liabilities are not due and payable in the current period and therefore are not
reported in the funds. ( 10,570,362)
Net assets of component unit-Economic Development Corporation $ 1,635,957
58
CITY OF PEARLAND,,TEXAS
ECONOMIC DEVELOPMENT CORPORATION
STATEMENT OF REVENUES,EXPENDITURES
AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30,2005
REVENUES
Sales taxes $ 3,891,870
Other income 12,000
Investment earnings 303,129
Total revenues 4,206,999
EXPENDITURES
Current:
Economic development 1,960,469
Debt service:
Principal 415,000
Interest and fiscal charges 608,698
Total expenditures 2,984,167
EXCESS(DEFICIENCY)OF REVENUES
OVER(UNDER)EXPENDITURES 1,222,832
OTHER FINANCING SOURCES(USES)
Capital-related debt issued 11 005,000
Premium from capital-related debt issued 155,448
Payment to escrow agent
( 4,354,626)
Total other financing sources(uses) 6,805,822
NET CHANGE IN FUND BALANCE 8,028,654
FUND BALANCE,BEGINNING AS
PREVIOUSLY STATED 3,947,708
PRIOR PERIOD ADJUSTMENT ( 26,482)
FUND BALANCE,BEGINNING AS RESTATED 3,921,226
FUND BALANCE,ENDING $ 11,949,880
RECONCILIATION FROM NET CHANGE IN FUND BALANCE TO
CHANGE IN NET ASSETS
Net change in fund balance-Economic Development Corporation $ 8,028,654
The issuance of long-term debt (e.g., bonds) provides current financial resources to governmental
funds, while the repayment of the principal of long-term debt consumes the current financial resources
of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the
net effect of these differences in the treatment of long-term debt and related items. ( 6,134,383)
Change in net assets of component unit-Economic Development Corporation $ 1,894,271
59
APPENDIX D
FORM OF BOND COUNSEL OPINION
AN D R E W S 600 Travis,Suite 4200
ATTORNEYS Houston,Texas 77002
KU RI H LLP 713.220.4200 Phone
713.220.4285 Fax
andrewskurth.com
,2006
WE HAVE ACTED as Bond Counsel for the Pearland Economic Development
Corporation (the"Corporation") in connection with an issue of bonds(the"Bonds")described as
follows:
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006, dated June 15, 2006, in the aggregate
principal amount of $10,235,000, maturing on September 1 in each year from
2007 through and including 2030. The Bonds are issuable in fully registered form
only, in denominations of$5,000 or integral multiples thereof, bear interest, are
subject to redemption prior to maturity and may be transferred and exchanged as
set out in,the Bonds and in the resolution(the"Resolution")adopted by the Board
of Directors of the Corporation 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 Bonds under The Constitution and laws of the State of
Texas and with respect to the exclusion of interest on the Bonds from gross income 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 Bonds, as described in the Resolution. The transcript contains certified copies of
certain proceedings of the Corporation and the City of Pearland, Texas (the "City"); certain
certifications and representations and other material facts within the knowledge and control of
the Corporation and the City, upon which we rely; and certain other customary documents and
instruments authorizing and relating to the issuance of the Bonds. We have also examined
executed Bond 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 Corporation or the City or the disclosure thereof in connection
with the sale of the Bonds. Our role in connection with the Corporation's Official Statement
prepared for use in connection with the sale of the Bonds 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 Bonds in full compliance with the Constitution
and laws of the State of Texas presently in effect; the Bonds constitute valid and
legally binding special obligations of the Corporation enforceable in accordance
with the terms and conditions thereof, except to the extent that the rights and
Austin Dallas Houston London Los Angeles New York The Woodlands Washington,DC
remedies of the owners of the Bonds may be limited by laws heretofore or
hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the rights of creditors of political subdivisions and
the exercise of judicial discretion in appropriate cases; and
(2) The Bonds are secured by and payable solely, both as to principal
and interest, from the receipts of a sales and use tax levied by the City,for the
benefit of the Corporation, which taxes have been pledged irrevocably to pay the
principal of and interest on the Bonds;and
(3) The Bonds are special obligations solely of the Corporation and are
not obligations of the State of Texas, the City nor any political corporation,
subdivision or agency of the State.
ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further
opinion that, subject to the restrictions hereinafter described, interest on the Bonds 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 Corporation 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 Bonds in
order that interest thereon be, or continue to be, excluded from gross income for federal income
tax purposes. The Corporation has covenanted in the Resolution to comply with each such
requirement. Failure to comply with certain of such requirements may cause the inclusion of
interest on the Bonds in gross income for federal income tax purposes to be retroactive to the
date of issuance of the Bonds. 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 Bonds in
gross income of the owners thereof for federal income tax purposes.
INTEREST ON all tax-exempt obligations, including the Bonds, 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 Bonds 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 Bonds. Prospective
purchasers of the Bonds should be aware that the ownership of tax-exempt obligations, such as
the Bonds, 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 Bonds.
SIGNATURE IDENTIFICATION AND
NO-LITIGATION CERTIFICATE
THE STATE OF TEXAS
COUNTIES OF BRAZORIA AND HARRIS §
We, the undersigned officers of the Pearland Economic Development Corporation (the
"Corporation"), certify that we officially signed,by our manual or facsimile signatures, on behalf
of the Corporation,the following described bonds, to wit:
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006, dated June 15, 2006, in the original
aggregate principal amount of$10,235,000 (the"Bonds").
That the Bonds 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 Bonds,
whether in manual or facsimile form, as the case may be, as their own signatures.
That on the date of such signing and on the date hereof, we were and are the duly chosen,
qualified and acting officers authorized to execute the Bonds.
We further certify that no litigation is pending or, to our knowledge, threatened in any
court to restrain or enjoin the issuance or delivery of the Bonds, or the levy, collection or
application of the sales taxes pledged or to be pledged to pay the principal of and interest on the
Bonds, or the pledge thereof, or in any way contesting or affecting the validity of the Bonds, the
resolution dated May 22, 2006, authorizing.the issuance, sale and delivery of the Bonds (the
"Resolution"), or contesting the powers of the Corporation or the authorization of the Bonds or
the Resolution.
We further certify that the information and data contained in the General Certificate dated
May 22, 2006, remain true and correct as of this date.
HOU:2578721.1
WITNESS OUR HANDS AND THE SEAL OF THE CORPORATION this
2..0 , 2006.
SIGNATURES TITLE OF OFFICE
Chairman
Secretary
Before me, on this day p Y ersonall appearedforegoing the fore oin 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 ZZ day of M , 2006.
f
joa'n/i .
(d./✓.//:do/�./.>.illl.�✓.i.�1./dl✓✓1d,.4 Notary Public
p�tstYPt/0,, SHANNON NI. MILLER k Typed or Printed Name:
NOTARY PUBLIC,STATE OF TEXAS l) yl�
MY COMMISSION EXPIRES tl
F< MAY 31, 2009 S Y‘OVI. M, IAA S
t My Commission Expires:
Pten 2,1I, ..O0C1
(Notary Seal)
HOU:2578721.1
GENERAL CERTIFICATE
We, the undersigned, Chairman and Secretary of the Pearland Economic Development
Corporation (the "Corporation"), hereby make and execute this certificate for the benefit of all
persons interested in the Corporation's $10,235,000 Sales Tax Revenue Bonds, Series 2006 (the
`Bonds"), dated June 15,2006,now in the process of issuance. We certify that:
1. The City Council of the City of Pearland, Texas (the "City"), by Ordinance No.
R95-36 duly adopted on.May 22, 1995, authorized the creation of the Corporation to act on behalf
of the City by receiving and expending sales tax revenues for various projects, and on June 26,
1995, the Corporation was duly created, incorporated, chartered, and organized pursuant to Article
5190.6,Texas Revised Civil Statutes, as amended(the"Act").
2. Attached hereto as Exhibit A is a true, correct, and complete copy of the Articles of
Incorporation of the Corporation, which were filed with the Secretary of State of Texas on June 26,
1995. The Articles of Incorporation have not been amended, repealed, changed, or altered since
June 26, 1995. Attached hereto as Exhibit B is a true, correct, and complete copy of the amended
Bylaws of the Corporation, which were adopted by the Corporation on November 2, 1999 and
approved by the City Council of the City on April 26, 1999. The Bylaws have been amended,
repealed, changed, or altered since April 26, 1999.
3. Attached hereto as Exhibit C is a true, correct, and complete copy of a Certificate of
Continued Existence from the Secretary of State of Texas. Attached hereto as Exhibit D is a true,
correct, and complete copy of a Certificate of Good Standing from the Comptroller of Public
Accounts of the State of Texas.
4. On May 22, 2006, the Board of Directors of the Corporation consisted of the
following persons:
Randall Ferguson Chairman
Helen Beckman Secretary
George Sandars Director
Lucy Stevener Director
Ed Thompson Director
Gary Idoux Director
Felicia Kyle Director
On May 22, 2006, Directors Beckman and Kyle resigned their positions on the Board. New
directors have not yet been appointed to the Board of Directors to fill these vacancies. The
remaining members of the Board of Directors have remained the same since May 22,2006.
5. An official seal has not been adopted by the corporation, therefore, there is no seal
affixed to this certificate.
6. No litigation is pending or, to the best of our knowledge, threatened against the
Corporation with respect to the issuance of the Bonds, or the title or authority of the officers and
directors of the Corporation.
1
HOU:2578722.1
7. Due notice of all meetings relating to the sale, issuance, and delivery of the Bonds
has been given to the directors of the Corporation in accordance with the Corporation's Bylaws and
State law.
8.. Attached hereto as Exhibit E is a true and correct copy of a debt service schedule for
the Bonds.
9. Attached hereto as Exhibit F is a true and correct copy of.the Affidavit of •
Publication relating to the publication of notice for the public hearing held on May 22,_ 2006,
pursuant to Section 4B(n)of the Act.
10. The resolution authorizing the issuance of the Bonds and other documents relating to
the issuance of the Bonds (the "Bond Documents") (a) have been properly executed by the
Corporation and due performance thereof has been authorized by the Corporation, (b) are in
substantially the form as approved by or on behalf of the Corporation and (c) are in full force and
effect and have not been amended or rescinded except as may have been approved by the Chairman
of the Corporation with the advice of Bond Counsel.
11. The Corporation has taken no action that, if finally concluded, would constitute a
breach or violation of any of the covenants and provisions of the Bond Documents.
12. The terms and performance of the Bond Documents by the Corporation are not in
conflict with the Articles of Incorporation or Bylaws of the Corporation or any other instrument or.
restriction to which the Corporation is a part or subject.
[Signature page follows.]
2
HOU:2578722.1
•
WITNESS OUR HANDS this 22nd day of May, 2006.
• PEARLAND ECONOMIC DEVELOPMENT •
CORPORATION
Secretary
S-i V
HOU:2578722.1
•
EXHIBIT A
Articles of Incorporation
HOU:2578722.1
ARTICLES OF INCORPORATION
OF THE
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
A NON-PROFIT CORPORATION
WE,THE UNDERSIGNED natural persons, being at least 18 years of age and
qualified electors of the City
ty of Pearland, Texas, a home rule municipal
corporation, acting as incorporators of a public instrumentality and non-profit
economic development corporation (the Corporation) under the Development
Corporation Act of 1979 (Tex. Rev. Civ. Stat. Ann. art. 5190.6)(the Act), with
'the approval of the governing body of the City of Pearland, Texas, as
evidenced_ by the attached Resolution, adopt the following Articles of
Incorporation for the Corporation:
ARTICLE
NAME
The name of the Corporation is the PEARLAND ECONOMIC
DEVELOPMENT CORPORATION.
ARTICLE II
NON-PROFIT CORPORATION
The Corporation is a non-profit corporation governed by Section 4B of
di the Development Corporation Act of 1979, as amended.
EXHIBIT A
111
Revised May 15. 1995 Page 1 of 8
I
ARTICLE III
DURATION
The period of duration of the Corporation is perpetual.
i
ARTICLE IV
PURPOSE
The.Corporation is organized exclusively for the purposes of benefitting
and accomplishing public purposes on behalf of the City of.Pearland, Texas,
by promoting, assisting, and enhancing economic development activities, as
provided by the Act. The Corporation shall have and exercise all of the rights,
powers, privileges, authority, and functions provided for in the Act, including
the issuance of bonds onbehalf of the City of Pearland.
The. Corporation shall have and exercise all of the rights, powers, •
privileges, authority and functions given by the general laws of Texas to non-
•
profit corporations incorporated under the Act including, without limitation,
Article 1396-1.01, et seq., Tex. Rev. Civ. Stat. Ann., as amended.
The Corporation shall have all other powers of a like or different nature
not prohibited by law which are available to non-profit corporations in Texas
and corporations created under the Act and which are necessary or useful to
enable the Corporation to perform the purposes for which it is created,
Revised May 15,1995 Page 2 of 8
I
PI
Iincluding, but not limited to, the power to issue bonds, notes, or other
obligations, and otherwise exercise its borrowing power to accomplish the
purposes for which it was created.
The Corporation is created as a kcal government corporation pursuant
to the Act and shall be a governmental tal unit within the meaning of Subdivision
' (2), Section 101.001, Civil Practice and Remedies Code,
as amended. The
operations of the Corporation are governmental and not proprietary functions
for the purposes of the Texas Tort Claims Act, Section 101 .001 et seq., Civil
Practices and Remedies Code, as amended.
ARTICLE V
INITIAL REGISTERED OFFICE AND AGENT
The initial registered office of the corporation is located at 3519 Liberty
Drive, Pearland, Texas, 77581, and the name of the initial registered agent at
I •
that address is Paul Grohman, City Manager.
ARTICLE VI
DIREC
TORS
The affairs of the Corporation shall be managed by a Board of Directors
of seven persons appointed by the City Council of the City of Pearland. The
names of the seven initial Directors, their addresses and the expiration dates
Revised May 15. 1995 Page 3.of 8
I of their initial terms are as follows:
DIRECTOR ADDRESS TERM EXPIRES
Connie Beaumont 3210 Westminister April , 1997
Pearland, Tx 77581
Dennis Frauenberger 2602 Taylor Lane April , 1997
Pearland, Tx 77581
Tricia Holland 2319 Frances . April , 1997
Pearland, Tx 77581
Susan Lenamon 2909. Saxton Court April , 1997
Pearland, Tx 77581
Bob Lewis 2404 Country Club Drive April , 1997
Pearland, Tx 77581
Stella Roberts 2918 Green Tee Drive April , 1997
Pearland, Tx 77581
Charles Sones 3013 Country Club Drive April , 1997
Pearland, Tx 77581
Directors shall serve for two (2) year terms of office. Directors shall be
1 eligible for re-appointment without limit to the number of terms served.
Directors serve at the pleasure of the City Council and,.are removable by
majority vote of the City Council at any time, with or without cause.
The Directors shall serve without compensation, but shall be reimbursed
I for actual and reasonable exp
enses incurred in the performance of their duties
as Directors. .
Revised May 15. 1995 Page 4 of 8
ARTICLE VII
MEMBERSHIP AND STOCK
The Corporation has no members and is a non-stock corporation.
ARTICLE VIII
AMENDMENTS
These Articles of Incorporation maybe amended asprovided for in the
Act. Amendments may be made by the Board of Directors if first approved by
the City Council of the City of Pearland. The City Council of the City of
Pearland may, at its sole discretion, amend these Articles of Incorporation and
change the structure, organization, programs, or activities of the Corporation,
For dissolve the Corporation.
ARTICLE IX
INCORPORATORS
The name and address of each Incorporator is:
INCORPORATOR ADDRESS
Richard Tetens 2105 W. Mary's Creek
Pearland, Tx 77581
Randy K. Weber 2810 Westminister
Pearland, Tx 77581
Jerry Richardson 5309 Groveton
Pearland, Tx 77581
Revised May 15.1995 Page 5 of 8
Helen Beckman 2705 Churchill
Pearland, Tx 77581
Kevin Cole 2017 Isla
Pearland, Tx 77581
ARTICLE X
AUTHORIZATION
The City Council of the City of Pearland has specifically authorized the.
Corporation by Resolution to,act on its behalf to further the public purposes
stated in the Resolution and these Articles of Incorporation and has approved
these Articles of Incorporation. A copy of the Resolution is attached.
ARTICLE XI S
o
NET EARNINGS
The City of Pearland shall, at all times, have an unrestricted right to
receive any income earned by the Corporation, exclusive of amounts needed
to cover reasonable expenditures and reasonable reserves for future
activities. Unless otherwise directed by the City of Pearland, any income of
the Corporation received by the City of Pearland shall be deposited into the
Economic Development Fund, its successor, or other such funds as shall be
designated by the City Council from time to time. No part of the Corporation's
income shall inure to the benefit of any private interests.
Revised May 15, 1995 Page 6 of 8 0
ARTICLE XII
DISSOLUTION
If the Corporation ever should be dissolved when it has any interest in
any funds or property, the funds or property shall be transferred and delivered
to the City of Pearland after satisfaction of debts and claims.
ARTICLE XIII
DIRECTOR LIABILITY
No director shall be liable to the Corporation for monetary damages for
an act or omission, in the Director's capacity as a Director, except that the
provisions of Article XIII shall not eliminate or limit the liability of a director for.
Ir
L (i) a breach of the Director's duty of loyalty to the Corporation;
(ii) an act or omission not in good faith that constitutes a breach of a
duty of the director to the Corporation or that involves intentional misconduct
or a knowing violation of the law;
(iii) a transaction from which the Director received an improper benefit,
whether or not the benefit resulted from an act taken within the scope of the
Director's office;
(iv) an act or omission for which the liability of a Director is expressly
provided by applicable statute; or
Revised May 15.1995 Page 7 of 8
1
.
(v) an act related to an unlawful distribution of the assets of the
Corporation.
If the Act or the Texas Miscellaneous Corporation Laws Act (collectively, the
"Acts") are hereafter amended to authorize the further limitation of the liability
of directors or trustees, then the limitation on personal liability provided in this
Article shall, without the necessity of further action by the Corporation or the
Board of Directors, be modified to provide such limitation to the fullest extent
permitted by the amended Acts. No amendment to or repeal of this Article
shall apply to or have anyeffect
ect on the liability or alleged liability of any
, director of the Corporation for or with respect to anyacts or omissionsof
such
director occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, we have signed these Articles of
Incorporation as incorporators of the Peariand Economic Development
•
Corporation. •
.
A ,,../M lateL_____.
1 ' Mayor Council Member
07/1
_ , ,,e,j,_...4 g....,,,_\ i„,),fi,,
Mayor Pro Tend- Council Member
I. .\\)
et_a_ -1r, ,.----...b
- C uncil Member Council Member
Revised May 15. 1595 Page 8 of 8
1
EXHIBIT B.
Amended Bylaws
11
0376230.0I
HOU:2405790.1
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•
•
EXHIBIT B
Amended Bylaws •
•
•
•
•
•
•
•
•
•
•
•
HOU:2578722.1
reb 1s 05 04: 04p PEDC 2816521704 p.4
•
EXHIBIT 'A'
CORPORATE BYLAWS
OF THE
•
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
These Bylaws govern the affairs of the Pearland Economic Development
Corporation (the Corporation) 'a public instrumentality and a non-profit
corporation created under Section 4B of the Development Corporation Act of
•
1979 (Tex. Rev. Civ. Stat. Ann. art. 5190.6), as amended (the Act), by the City
Council of the City of Pearland (the City Council) to act on behalf of the City of
Pearland (City).
ARTICLE I. PURPOSE
1.01. The Purpose of the Corporation is to promote, assist, and enhance
economic development activities and quality of life opportunities within the City
and its extraterritorial jurisdiction that promote economic development as
authorized by the Act. The Corporation has no members and is a non-stock
I - • corporation.
L
1.02. The Corporation shall have and exercise all of the rights, powers,
privileges, authority and functions given by the general laws ' of Texas to
non-profit corporations incorporated under the Act including, without limitation,
Article 1396-1.01, et seq., Tex. Rev. Civ. Stat. Ann., as amended.
1.03. The Corporation
shall have all other powers of a like or different nature not
prohibited by law which are available to non-profit corporations in Texas and
L corporations created under the Act and which are necessary or useful to enable
the Corporation to perform the purposes for which it is created, including, but not
limited to, the power to issue bonds, notes, or other obligations, and otherwise
exercise its borrowing power to accomplish the purposes for which it was created.
111 1.04. The Corporation is created as a local government corporation pursuant to
the •Act and shall be a governmental unit within the meaning of Subdivision (2),
• Section 101.001, Civil Practice and Remedies Code, as amended. The
operations of the Corporation are governmental and not proprietary functions for
L. the purposes of the Texas Tort Claims Act, Section 101.001 et seq., Civil
.Practices and Remedies Code, as amended.
Page 1 of 14
Feb 16 05 04: 05p .PEDC 2816521704 p-5
ARTICLE II. REGISTERED OFFICE AND AGENT .
2.01. The registered agent for the Corporation shall be an individual resident of
the state. The registered office for the Corporation shall be within the boundaries
of the City of Pearland. The Board of Directors (the Board) shall initially maintain
1 1, and use the Pearland City Hall as its administrative office, but may move its
administrative office or establish additional offices with the prior approval of the
City Council.
i
ARTICLE III. BOARD OF DIRECTORS
Powers
3.01. The Corporation shall be managed by a Board of Directors which is
authorized to exercise the powers authorized by the Act, subject to any limitations
of these bylaws, including the following:
a. To purchase or acquire for the Corporation any property,• rights, or
I' privileges and to. pay therefore either wholly or partly in money,
bonds, debentures, or other securities of the Corporation as may be
lawful.
b. To create, make and issue notes, mortgages, bonds, deeds of trust,
1 trust agreements and negotiable or transferrable instruments and
securities, secured by a mortgage or deed of trust on any real
property of the Corporation or otherwise, and to do every other act
1. or thing necessary to effect the same.
c. To sell or lease the real or personal property of the Corporation on .
j the terms the Board sees fit and to execute deeds, leases, and other
• conveyances or contracts as necessary for carrying out the purpose
of this Corporation.
L Duties
3.02. Directors shall exercise ordinary business judgment in managing the affairs
capacity,
of the Corporation. In acting in their official directors shall act in good
• faith and take actions they reasonably believe to be in the best interests of the
■
Corporation and which are lawful. The Board is further required to perform the
following duties:
IPage2of14
L
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L _ eb 16 05 04:05p . PEDC • 2616521704 p•6
a. Program. The Board shall cause to be prepared an Economic
Development Plan (the Plan) in accordance with policies and
directives established by the City Council. The Board shall review
the Plan at least once a year and submit it to the City Council for its
approval. The Plan shall include:
1. The short- and long-term objectives of the Corporation and
• how they might be achieved, including specific details of
proposed efforts or programs to achieve those objectives;
2.. Guidelines for how the Corporation proposes to use the sales
and use tax funds received by the Corporation. to achieve its
objectives, including any limitations on the use of funds; and,
3. Any other information the City Council requests in writing be
included in the Plan. .
b. Capital Improvements Program (CIP). The Board shall be allowed
to work in conjunction with the Planning and Zoning Commission to
develop a five (5) year CIP in accordance with City Charter, as
amended.
- c. Reports to City Council. With each annual submission of the Plan
to the City Council, and at any other times requested . by the
City Council, the Corporation. shall submit a written Performance
Report, detailing the activities and accomplishments of the
Corporation since the prior Report.
d. Briefings. The president and executive director shall appear before
the City Council to •brief the City Council on activities of the
Corporation .
•
e. Budget. At least ninety (90) days prior to commencement of the
1996-97 fiscal year and each fiscal year thereafter, the. Board shall
adopt a proposed budget of expected revenues and proposed
expenditures of the next ensuing fiscal year. The budget shall
contain such classifications and shall be in such form as. may be
prescribed from time to time by the Finance Department of the City. .
of Pearland. The Corporation budget shall not be effective until the
same has been approved by the City Council.
I
Page 3of 14
•
r-b 16 05 04: 05p PEDC 2816521704 P•7
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•
Number and Qualifications
3.03. The Board shall consist of seven (7) persons, who shall be appointed by
the City Council. No Director shall be a person who is a City employee,
City Councilmember, or any other publicly elected official, Chamber of Commerce
director, or member of any City boards.
3.04. Each director shall be a resident of the City of Pearland.
•
Term
3.05. Directors shall be appointed to serve two (2) year terms of office: Directors
shall be eligible for reappointment without limit to the number of terms served.
Effective May 1, 1999, directors shall serve staggered terms as set out in this
section. To assist in the transition toward staggered terms, the seven (7)
directors appointed to serve on the Board, effective May 1 , 1999 will serve as
follows:
(a)' Three randomly chosen directors' terms will commence on May 1,
1999 and continue through April 30, 2000;
(b) Four randomly chosen directors' terms will commence on May 1,
1999 and continue through April' 30, 2001.
•
Attendance
•
3.06. Directorship in the Corporation shall be accompanied by active
participation in the activities of the Board, and any director who is absent from
three (3) consecutive meetings of the Board without valid excuse as determined
by the Board, shall automatically be dismissed from directorship. The Board shall
at once notify the City Council that a vacancy on the Board exists.
Vacancies
I3.07. Vacancies on the Board shall be filled by appointment by the City Council.
Non-Voting Directors
I - Corporation,
3.08. The mayor, city manager, executive director of the the
chairman of the board and the president of the. Pearland/Hobby Area Chamber
I' of Commerce and executive director of the Tri-Tech' Regional Council, or their
I! -I
Page4of14
16 05 04: 05p PEDC 2816521704 P•8
designees, shall serve as ex-officio non-voting directors of the Board. The Board
may appoint additional non-voting directors subject to approval of the City
Council. Such additional non-voting directors shall serve a term of one year or
until their successors are appointed. Non-voting directors shall be given notice
of all meetings of the Board and may participate in discussions at Board
meetings, but shall not be entitled to vote. Non-voting directors may participate
in executive sessions at the request of the Board. Non-voting directors need not
reside in the City.
Compensation
•
3.09. The directors shall, not receive any salary or compensation for their
services. However, directors may be reimbursed for their actual and reasonable
expenses incurred in the performance of their duties, including but not limited to
• the cost of travel, lodging and incidental expenses reasonably related to the
corporate duties of the Board. Travel expenses incurred by directors to attend
regular and special meetings are not eligible for reimbursement.
ARTICLE IV. OFFICERS
•
• Officer Positions
4.01. The
officers of the Corporation shall be a president, a vice president and
a secretary, whom shall be members of the Board. The Board may elect other
officers as the City Council deems necessary. Any two or more offices may be
held by the same person except the offices of the president and secretary.
•
• Election and Terms of Office
4.02. The president, vice president, secretary and any other officers the City
Council deems necessary shall be elected annually by the Board and vacancies
in these officer positions may be filled by the Board for the unexpired terms. Each
h F officer shall hold office until a successor is duly.elected and qualified. AU officers
shall be subject to removal, with or without cause, at any time by a vote of a
majority of the whole Board.
President
•
4.03. The president shall be the chief executive officer of the Corporation, and
shall preside at all Board meetings. The president shall supervise and control the
business and affairs of the Corporation and perform any other duties prescribed
from time to time by the Board. The president shall have the right to vote on all
Page5of14 •
•
'eb 16 05 04: 05p PEDC 2816521704 p• 9
matters coming before the Board, and may execute deeds, mortgages, bonds,
contracts or other instruments, as authorized by the Board. The president shall
appoint the members of all committees and all committee chairs.
Vice President
4.04. The vice president shall perform the duties assigned by the Board. In the
absence of the president, or if the president is unable or refuses to act, the vice
president shall perform the duties of president.
Secretary
4.05. The secretary shall be the custodian of the Corporate records, and shall
record and keep all votes and minutes of the meetings of the Board. The
secretary shall give notice of all meetings of the Board and its committees, and
shall perform such other duties as may be prescribed by the president or the
Board. An assistant secretary shall assist the secretary in performance of his or
her duties.
Executive Director
II
4.06. The city manager, in consultation with the Board, may employ an executive
director to serve as the general manager and chief administrative officer of the
Corporation. The executive director shall be subject to the supervision of the
city manager and shall perform the duties specifically delegated to him or her by
the Board, and such other economic development duties as assigned by the city
manager. The executive director shall serve at the pleasure of the city manager
and receive compensation from the funds of the Corporation approved by him or
her in consultation with the Board. All incentive or merit provisions must be
approved by the city manager and a majority of the Board. The executive
director shall be responsible for policy and program implementation and the day
to day operations of the Corporation, including the hiring of employees, and the
supervision and dismissal of those employees. The executive director shall
compile and submit to the Board regular reports and recommendations regarding
the programs, policies, and business affairs of the Corporation. The executive
director shall be a non-voting, ex-officio member of the Board and of any
committees created by the Board. The executive director shall be employee
of the City of Pearland.
a •
Page 6 of 14
'eb 16 05 04: 06p PEDC 2816521704 p. 10
,
•
Assistant Secretary and Legal Counsel .
, 4.07. An assistant secretary position is created to assist the secretary and the
Board in the conduct of the affairs of the Corporation. The city attorney, or such
other attorneys selected by the city attorney with the approval of the City Council,
shall represent the Corporation in all litigation. The city attorney shall be the legal
advisor of, attorney and counsel for, the Corporation and all officers thereof, in
conformance with the City Charter, as amended. The assistant secretary and
city attorney shall be employees of the City.
ARTICLE V. BOARD COMMITTEES __. ___._
5.01. The president may appoint persons to serve on standing or ad hoc
comm n ittees. A committee may include persons who are not directors of the
1' Corporation and who may not reside in the City. Committees will operate under
1 general rules adopted by the Board. Committees may be charged with specific
duties or authority, but shall not have the authority to:
il
t
a. Amend the articles of incorporation, amend, alter, or repeal the
bylaws, or adopt a plan of merger or consolidation with another I,
corporation.
• b. Authorize the sale, lease, exchange or mortgage of any of the
I property or assets of the Corporation or commit Corporation funds
without the prior approval of the Board.
c. Authorize or revoke proceedings for the voluntary dissolution of the
Corporation or adopt a plan for the distribution of the assets of the
Corporation.
d. Approve any transaction to which the Corporation is a party, take
any action outside the scope of authority delegated to it by. the •
,._
Board, take final action on a matter that requires the approval of the
Board, or take any action that involves a potential conflict of interest
• as defined in these bylaws.
Committee Terms
111 5.02. The members of each standing or ad hoc committee shall serve until
successors are appointed, unless the Committee is terminated or a member is
removed, resigns, or ceases to qualify as a member. Vacancies on committees
may be filled in the same manner as the original appointment.
Page 7 of 14 .
•
. eb 16 05 04: 07p PEDC 2816521704 p. 11
•
ARTICLE VI. MEETINGS •
•
Regular Meetings
6.01. The Board shall hold at least four (4) regular meetings each year.
Special Meetings
6.02. Special meetings of the,Board may be called at the written request of the
president or at least two (2) directors.
Notice
6.03. Written or printed notice of each regular meeting of the Board shall be
delivered to each director not less than seventy two (72) hours before the time
of the meeting. The notice shall state the place, date, and time .of the meeting.
In the case of special meetings, notice may be issued to directors by mail,
telephone,fax, or in person at least seventy two (72) hours before the time of the
meeting and shall include who called the meeting and the purpose of the meeting.
•
Quorum
6.04. Four (4) directors shall constitute a quorum for the transaction of business
at any meeting of the Board.
Action of Board
6.05. The vote of a majority of the directors present and voting at a meeting at
which a quorum is present shall be sufficient to constitute the act of the Board.
Proxies
.
6.06. A director may not vote by proxy.
Open Meetings
6.07. All meetings and deliberations of the Board shall. be called, posted,.
convened and conducted in accordance with the Texas Open Meetings Act, as
amended.
•
ARTICLE VII. FINANCIAL ADMINISTRATION
Fiscal Year
Page 8of 14 -
•
111 . •
r-eb 16 05 04: 07p PEDC 2816521704 p. 12
7.01. The fiscal year of the Corporation shall run concurrently with the fiscal year,
of the City..
•
Accounts to be Kept with City
7.02. The Corporation shall contract with the City for the administration of its
accounts, expenditures, deposits, investment of funds and accounts, and other
financial services for the Corporation. The City finance director shall designate
the accounts and depositories to be created and designated for such.purposes,
and the methods of withdrawal of funds therefrom for use by and for the purposes
• of the Corporation shall be approved by the executive director and presented for
the signature of the city manager and finance director or other person as the
Board shall designate.
Audits
7.03. The City shall cause the Corporation's books, records, accounts, and
financial statements, and all other financial activities for the previous fiscal year
to be audited at. least once each fiscal year by an outside, independent, certified
to bythe CityCouncil. An
y such audit shall include
selected firm
public accounting
a written management letter which details suggested management controls and
i - operating efficiencies. The audit and management letter shall include
recommendations for improving cost reductions and safeguarding assets. A
II copy of any such audit and management letter shall be provided to each director,
and discussed in an open meeting prior to its submission to the City Council.
Each audit and management letter shall be submitted annually to the City Council
for approval. Such audit shall be at the expense of the Corporation. '
I
Limitations on Expenditures
a project, the Corporation shall hold
Before expending funds to undertakep
7.04. p 9
at least one public hearing on the proposed project, in accordance with the Act.
Contracts - General
7.05. The Corporation shall follow and be bound by the same purchasing and
contracting provisions of State law, including. the provisions on competitive
bidding, that are applicable to the City. The Board may by official action
authorize any officer or agent of the Corporation to enter into a contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation. This authority may be limited to a specific contract or instrument or
it may extend to any number and type of possible contracts and instruments. Any .
•
•
Page 9 of 14
•
•
r-'eb 16 05 04: O8p PEDC 2816521704 p. 13
•
•
•
contract of the Corporation which will require an expenditure of funds in excess
of $100,000 that the City Council has not previously approved as part of the
Corporation's annual budget or in a city tax abatement agreement, must be.
approved by the City Council before any payment on the contract is made.
Contracts - Administrative Services •
7.06. Subject to the paramount authority of the city manager under the
City Charter, the Corporation shall have the right to utilize the services and the
staff and employees of the City, provided (i) that the Corporation shall pay
reasonable compensation to the City for such services, and (ii) the performance
of such services does not materially interfere 'with the other duties of such
personnel of the City. An administrative services contract shall be executed
between the Board and the City Council for 'the services provided by the
city attorney, assistant secretary, finance department and other City departments,
staff and employees.
Gifts
•
7.07. 'The Board may accept on behalf of the Corporation any gift or bequest.
Special funds shall include all funds from government contracts, grants, and gifts
designated by a donor for special purposes. All other funds shall be general
funds.
Potential Conflicts of Interest
7.08. The members of the Board are local public officials within the meaning.of
Chapter 171 of the Local Government Code, as amended, and shall adhere to
the City Council code of ethics. If a director has a substantial interest in a
business entity or real property which is the subject of deliberation by the.Board,
the director shall file an affidavit with the secretary of the corporation stating the
nature and extent of the interest. Such affidavit shall be filed prior to any
deliberation, vote or decision upon the matter by the Board, and the interested
director shall abstain from any deliberation, vote or decision upon the matter.
•
Bonds
7.09. Any bonds issued by the Corporation shall be in accordance with the Act
and shall not be issued until approved by the City Council and by the bond
counsel and financial advisers of the City.
•
• Page 10 of 14 •
. gib 16 05 04: 08p PEDC 2816521704 p. 14
•
ARTICLE VIII. BOOKS, RECORDS, AUDITS •
Maintenance of Records
8.01 . The Corporation shall keep and property maintain, or contract with the City
to keep and properly maintain, in accordance with GAAP, complete books,
records, accounts, and financial statements pertaining to its corporate funds,
activities, and affairs. In addition to proper financial records, the Corporation
shall keep correct and complete minutes of all board and committee meetings
and all records required by the City of Pearland, by contracting agents, or by
funding sources.
Compliance with State Law
8.02. All records shall.be kept and administered in accordance with the Texas
Open.Records Act, as amended.
•
Inspection
8.03. Any member of the City Council or director or officer of the Corporation
may inspect and receive copies of all books and records of the Corporation
required to be kept by the Bylaws.
ARTICLE IX. INDEMNIFICATION AND INSURANCE .
' Corporation to Indemnify .
9.01. The Corporation shall indemnify any director or officer or former director
or officer of the Corporation for expenses and costs, including attorney's fees,
actually and necessarily incurred by the officer or director in connection with any
claim asserted against the officer or director by action in court or otherwise by
reason of the person being or having been a director or officer and acting in his
or her official capacity, except in relation to matters as to which the person shall
have been guilty of gross negligence or misconduct in respect of the matter in
which indemnity is sought.
I- -
Corporation Shall Provide Insurance
l 9.02. The Corporation or City shall contract for and maintain insurance on behalf
of any person who is, or was .a director, officer, employee, or agent of the
Corporation to insure such person against any liability asserted against the
person by reason of the person being or having been a director, officer,
Page 11of14 •
Feb 16 05 04: 08p PEDC 2916521704 p. 15
employee, or agent of the Corporation. The premiums for the insurance shall be.
paid by the Corporation.
ARTICLE X. AMENDMENTS TO BYLAWS
10.01. The Board may alter, amend, or repeal the bylaws or adopt new bylaws,.
but the change shall be effective only upon approval by the City Council.
ARTICLE Xl. PARLIAMENTARY AUTHORITY
11.01. Robert's Rules of Order, Newly Revised, shall be the parliamentary
.authority for all matters of procedure not specifically covered by the bylaws or any
specific rules of procedure adopted by the Board.
ARTICLE X11. DISSOLUTION OF THE CORPORATION
12.01. The Corporation is a non-profit corporation. Upon dissolution, all of the
Corporation's assets shall be conveyed to the City of Pearland.
ARTICLE X111. MISCELLANEOUS PROVISIONS
Legal Authorities Governing Construction Of Bylaws
13.01. The bylaws shall be construed in accordance with the laws of the State
of Texas. All references in the bylaws to statutes, regulations, or other sources
of legal authority shall refer to the authorities cited, or their successors, as they
may be amended from time to time. It is expressly provided that the provisions
of the Development Corporation Act of 1979 applicable to corporations governed
under Section 4B of that Act are incorporated within these bylaws by reference.
In the event of any conflict between the applicable provisions of such Act and
these bylaws, then the applicable provisions of such Act shall control.
Legal Construction
13.02. If any Bylaw provision is held to be invalid, illegal or unenforceable in any
respect, the invalidity, illegality or unenforceability shall not affect any other.
provision and the bylaws shall be construed as if the invalid, illegal or
unenforceable provision had not been included in the bylaws. .
Seal
Page 12of14 0
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.'eb 16 05 .04: 09p • PEDC 2816521704 p. 16
13.03. The board of directors may provide for a corporate seal. Such seal would .
consist ,of concentric circles containing the words, "Pearland Economic
Development Corporation", and, "Texas", in one circle and the word,
"Incorporated" together with the date of incorporation of the Corporation in the
other circle.
.Headings
13.04. The headings used in the bylaws are used for convenience and shall not
be considered in construing the terms of the bylaws.
Parties Bound
13.05. The bylaws shall be binding upon and inure to the benefit of the directors,
officers and agents of the Corporation and their respective heirs, executors,
administrators, legal representatives, successors, and assigns except as
otherwise provided in the bylaws. •
Effective Date
13.06. These bylaws, and any subsequent amendments thereto, shall be and from the date upon which approval on P has been given both by the
II " board of directors and the City Council.
•
•
p
p . • Page 13 of 14
•
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eb 16 05 04: 09P PEDC 2816521704 p. 17
CERTIFICATE OF SECRETARY
I certify that I am the duly elected and acting secretary of the
PEARLAND ECONOMIC DEVELOPMENT CORPORATION. and the foregoing
bylaws constitute the bylaws of the Corporation. These bylaws were approved
by the city Council of the City of Pearland, Texas, at a meeting held on the
day of A PRI c. 19 99 , and adopted at a meeting of
the Bo rd of Directors held on the a D day of N o v�M fSf�L
19gB .
Signed this o7 NC day of f i DVEhbbc . 19 C'l
ETARY F THE CORPORATION
•
•
Page 14 of 14
EXHIBIT C
Certificate of Continued Existence
HOU:2578722.1
Corporations Section Roger p�, Roger Williams
P.O.Box 13697 co' - e Secretary of State
Austin,Texas 78711-3697 /`.
Office of the Secretary of State
The undersigned, as Secretaryof State of Texas, does herebycertify that the document, Articles Of
b
Incorporation for PEARLAND ECONOMIC DEVELOPMENT CORPORATION(filing number:
136116401), a Domestic Nonprofit Corporation, was filed in this office on June 26, 1995.
It is further certified that the entity status in Texas is in existence.
In testimony whereof, I have hereunto signed my name
officially and caused to be impressed hereon the Seal of
State at my office in Austin, Texas on June 02, 2006.
-14117 if.?4,4441141114411: I 7.
Al Al Roger Williams
tt. �-'� Secretary of State
IB .
Come visit us on the internet at http://www.sos.state.tx.us/
Phone:(512)463-5555 Fax:(512)463-5709 TTY:7-1-1
Prepared by:SOS-WEB Document: 131785390002
•
EXHIBIT D
Certificate of Good Standing •
•
•
HOU:2578722.1
Certificate of Account Status -Exempt Letter • • • Page 1 of 1
•
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
• CAROLE KEETON STRAYNORN • COMPTROLLER • AUSTITI, TEXAS 78774
June 2, 2006
•
•
•
CERTIFICATE OF ACCOUNT STATUS
•
THE STATE OF TEXAS
COUNTY OF TRAVIS
I, Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of
Texas, DO HEREBY CERTIFY that according to the records of this office
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
is exempt from payment of franchise tax and consequently is in good standing
with this office.
GIVEN'UNDER MY HAND AND
SEAL OF OFFICE in the City of •
Austin, this 2nd day of
June 2006 A.D.
Carole Keeton Strayhorn
Texas Comptroller
Taxpayer number: 30117882123
File number: 0136116401
•
Form 05-303(Rev.1-03/6)
•
http://ecpa.cpa.state.tx.us/coa/servlet/cpa.app.coa.CoaLetter - 6/2/2006
EXHIBIT E
Debt Service Schedule
HOU:2578722.1
City of Pearland -Economic Development Corporation
Current Debt plus New Debt
FINAL NUMBERS-May 23,2006
Dated Date 0 6/1 512 0 0 6 Series 2006 EDC Bonds Delivery Date 06/20/2006
New Interest Interest
Year Current Principal Various Various Total " Total New Total Debt
Ending
Debt Due Due Due New .Principal Service
09/30 Requirement 09/01 03101 09/01 Interest &Interest Requirement5
2005 650,935 650,93765,900
1
2006 765,900
2007 762,275 50,000 347,178 244,109 591,287 641,287. ,403,562
2008 762,650 165,000 242,859 242,859 485,719 650,719 1,413,369 n
2009 766,850 ___.__
-- _
170,000 239,147 239,147 478,294_ 648,294 1,415,144
2010 765,600 180,000 235,534 235,534 471,069 651,069 1,416,669
2011 768,088 185,000 231,709 231,709. 463,419 648,419 1,416,506
2012. 765,088 200,000 227,084 227,084 454,169 654,169 1,419,256
2013 765,738 210,000 222,084 222,084 444,169 654,169 1,419,906
•
2014 768,738 215,000 216,834 216,834 433,669 648,669 1,417,406
2015 765,938 230,000 211,459 211,459 422,919 652,919 1,418,856
2016 767,538 240,000 205,709 205,709 411,419 651,419 1,418,956
•
2017 768,538 255,000 200,609 200,609 401,219 656,219 1,424,756
2018 768,288 265,000 195,191 195,191 390,381 655,381 1,423,669
2019 766,788 280,000 189,394 189,394 378,788_ 658,788 1,425,575 -
2020 764,588 300,000 183,269 183,269 366,538 666,538 1,431,125
2021 766,588 310,000 176,519 176,519 353,038 663,038 1,429,625
2022 766,988 325,000 169,544 169,544 339,088 664,088 1,431,075
2023 766,363 345,000 161,419 161,419 322,838 667,838 1,434,200
2024 764,550 365,000 152,794 152,794 305,588_._ 670,588 1,435,138
2025 766,200 385,000 143,669 143,669 287,338 672,338 1,438,538
2026 766,238 405,000 134,044 134,044 268,088 673,088 1,439,325
2027 1,190,000 123,919 123,919 247,838 1,437,838 1,437,838
2028 1,255,000 94,169 94,169 188,338 1,443,338 1,443,338
2029 1,320,000 64,363 64,363 128,725 _ 1,448,725 1,448,725
2030 1,390,000 33,013 33,013 66,025 1,456,025 1,456,025
Totals $16,740,467 $10,235,000 $4,401,513 $4,298,444 $8,699,963 $18,934,963 $35,675,417
NEW2006: Dated Date:06/15/2006 Principal Due Dates:09/01/2007-09/01/2030 Maturing Amount:10,235,000.00
•
i
yy
PEARLAND_EDC:NEW2006 AGGPRIOR Prepared by:RBC Capital Markets-Houston,Texas 05/23/2006 @ 10:11 v7.53
t
Page-1
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EXHIBIT F
Affidavit of Publication of Notice
See Tab No.2 •
•
•
HOU:2578722.1
GENERAL CERTIFICATE OF THE CITY OF PEARLAND,TEXAS
THE STATE OF TEXAS §
COUNTIES OF BRAZORIA AND HARRIS §
CITY OF PEARLAND §
We, the undersigned officers of the CITY OF PEARLAND, TEXAS (the "City"), do
hereby make and execute this certificate for the benefit of all persons interested in the
$10,235,000 Pearland Economic Development Corporation Sales Tax Revenue Bonds, Series
2006 (the"Bonds") dated June 15, 2006,now in the process of issuance, as follows:
1. From May 22, 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:
Torn Reid Mayor
Richard Tetens Mayor Pro-Tem
Helen Beckman Councilmember
Charles Viktorin Councilmember
Felicia Kyle Councilmember
Kevin Cole Councilmember
2. The City is a home rule municipality operating under its own charter, which has
not been amended, repealed, changed or altered since certain amendments were made thereto at
an election held on May 13, 2006. The canvassing Order showing the changes made to the
City's charter in the May 13, 2006 election is attached hereto as Exhibit "A." Prior to the
changes made at the May 13, 2006 election the City's Charter had not been changed since
August 11, 2005, the date of approval by the Attorney General of the State of`Texas of the City
of Pearland, Texas Permanent Improvement Bonds and Refunding Bonds, Series 2005, dated
July 15, 2005, which are the last obligations issued by or on behalf of the City.
3. On May 22, 1995, the City Council of the City by Ordinance No. 95-36, duly
authorized the creation of the Pearland Economic Development Corporation (the "Corporation")
and approved the initial Bylaws and Articles of Incorporation of the Corporation. A true, correct
and.full copy of the Ordinance creating the Corporation, including as exhibits the Articles of
Incorporation and Bylaws of the Corporation is attached hereto as Exhibit"B."
4. Attached hereto as Exhibit "C" are true, correct, and full copies of the
proceedings of the City pertaining to the levy of the one-half of one percent (1/2%) sales and use
tax securing the Bonds (the "Sales Tax") and the election held on January 21, 1995 (the
"Election") at which the Sales Tax was approved by the voters of the City. •
5: Attached hereto as Exhibit "D" is a true, correct and full copy of the resolution of
the City, adopted April 26, 1999, approving the amended Bylaws of the Corporation, which were
adopted by the Corporation on November 2, 1998.
_
HOU:2579303.1
6. The City Council of the City has approved all programs and expenditures of the
Corporation.
7. No litigation is pending or, to the best of our knowledge, threatened, against the
City or the Corporation with respect to the issuance or approval of the Bonds, the creation of the
Corporation, or the title or authority of the governing body or directors of the Corporation.
8. The total Sales Tax Revenues received by the City on behalf of the Corporation
for the past three fiscal.years were as follows:
Fiscal Year Ended
September 30 Sales Tax Revenues
2005 r $3,891,870
2004 3,369,173
2003 2,924,067
9. The City Council of the City has not taken any action to change the structure,
organization, programs, or activities of the Corporation which would limit the effectiveness of
the Resolution and other documents relating to the issuance, sale, or delivery of the Bonds or
which would otherwise affect the issuance of the Bonds, nor has the existence of the Corporation
been terminated.
10. During the one year period preceding the Election, there were no other elections
held in the City pursuant to Chapter 321, Tax Code. The Election was held in conformity with
the Texas Election Code, including specifically, the bilingual requirements contained therein.
11. As of May 22, 2006,the City Council had not received a petition from more than 10
percent of the registered voters of the City requesting that an election be.held before the proceeds
from the levy of the Sales Tax be used to undertake the Project (as defined in the Notice of Public
Hearing and Right to Petition published by the Corporation in The Pearland Reporter News on
March 8, 2006)or pay the maintenance and operating costs of the Project.
12. The City has not created any other corporations, other than the Corporation, under
section 4B of Article 5190.6,Texas Revised Civil Statutes (the"Act").
13. The City was and is eligible to create the Corporation under the Act as a city that
has a population of fewer than 50,000 according to the most recent federal decennial census that
is located in two or more counties, one of which has a population of 500,000 or greater according
to the most recent federal decennial census.
14. The combined rate of all sales and use taxes, including the Sales Tax,imposed by
the City and other political subdivisions of the State of Texas having territory in the City did not
exceed two percent (2%) at the time the Sales Tax was adopted by the City and such combined
sales and use taxes do not currently exceed two percent(2%).
15. The City was and is eligible under section 321.101(b) of the Tax Code to adopt
the additional sales and use tax approved by the voters at an election held on January 21, 1995,to
be used to reduce the property tax rate.
2
HOU:2579303.1
16. The election to adopt the Sales Tax, held within the City on January 21, 1995 was
not held earlier than.one year after the date of any previous election held in the City under Chapter
321 of the Tax Code.
17. On May 22, 2006, the Board of Directors of the Corporation consisted of the
following individuals:
Randall Ferguson Chairman
Helen Beckman Secretary
Felicia Kyle Director
Lucy Stevener Director
George Sandars Director
Ed Thompson Director
Gary Idoux Director
Directors Beckman and Kyle resigned on May 22, 2006, and new directors have not yet
been appointed to the Board of Directors to fill these vacancies. The remaining members of the
Board of Directors have remained the same since May 22, 2006.
18. The Attorney General of the State of Texas is hereby authorized to date this
certificate on and as of the date of his approval of the Bonds, and this Certificate and the matters
certified herein shall be deemed for all purposes to be true, accurate, and correct on and as of that
date, and on and as of the date of delivery of the Bonds unless the City, through one of the
undersigned officers, has notified the Attorney General, the Corporation, and the purchaser of the
Bonds in writing to the contrary prior to either of such dates.
[Remainder of page Intentionally Left Blank]
3
HOU:2579303.1
`_I
- ` WITNESS OUR HANDS AND THE OFFICIAL SEAL OF THE CITY, this2Z day of
May, 2006.
•
CITY OF PEARLAND, TE
Mayor -
•
°°°°111111Itoo
QD• s�ev City ::cretary
j SEA •�
—� 0 ' coo
i �a ♦
♦
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S-1
runt r1 G7Q4n1 1
EXHIBIT A
Charter Amendment Canvassing Ordinance
•
HOU:2579303.1
Pt
oee
PEARLAND
TEXAS
89:: •
CERTIFICATION
THE STATE OF TEXAS §
COUNTIES OF BRAZORIA, HARRIS, &
FORT BEND. §
I, Young Lorfing, City Secretary of the City of Pearland, Texas, hereby certifies
that the attached constitutes a true and correct copy of Resolution No. R2006-65 duly
passed and approved by the City Council on the 22nd day of May 2006. Witness
myhand and seal of the Cityof Pearland, Texas, this 25th day of May 2006, at.
Pearland, Texas.
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ity S etary
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3519 LIBERTY DRIVE • PEARLAND,TEXAS 77581-5416 • 281-652-1600 • wwww.ci.pearland.tx.us
ta Printed on Recycled Paper
RESOLUTION NO. R2006-65
A RESOLUTION AND ORDER OF THE CITY COUNCIL OF THE CITY
OF PEARLAND, TEXAS, CANVASSING THE RETURNS AND
DECLARING THE RESULTS OF THE GENERAL AND SPECIAL
ELECTION HELD IN THE CITY OF PEARLAND, TEXAS, ON MAY 13,
2006.
WHEREAS, there was held in the City of Pearland, Texas, on the 13th day of
May, 2006, a City General Election and Special Election at which the offices to be filled
for Member of the Council, Position No. Two (2), and Member of the Council, Position
No. Four(4), along with Five (5) proposed Charter Amendments were submitted to a
• vote of the duly qualified resident electors of said City.
WHEREAS, at this Special Meeting of the City Council of the City of Pearland, on
May 22, 2006, after date of said election, being held for the purpose of canvassing the
returns and declaring the results of the General and Special Election held on May 13,
2006; now therefore,
BE IT RESOLVED AND ORDERED BY THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS:
SECTION I.
That the election described was duly called and notice thereof given in
accordance with law; that said election was held in the manner required by law; that due
returns of said election have been made by the proper officers; and it appeared from
said returns, duly and legally made, that there were cast at such election 1,142. valid
and legal votes;and that said election resulted in the following vote totals:
FOR MEMBER OF THE COUNCIL, POSITION NUMBER TWO {2)
NAME OF CANDIDATE NUMBER OF VOTES RECEIVED PERCENTAGE
Helen Beckman 808 70.75 %
RESOLUTION NO. 2005-65
FOR MEMBER OF THE COUNCIL, POSITION NUMBER FOUR (4)
NAME OF CANDIDATE NUMBER OF VOTES RECEIVED PERCENTAGE
Randy L. Patro 483 45.39 %
Felicia Kyle 581 54.61 %
PROPOSED CHARTER AMENDMENTS
AMENDMENT NO. 1
AMENDING SECTION 1.02 FOR 745 71.98%
AGAINST 290 28.02%
AMENDMENT NO. 2
AMENDING SECTION 3.01 FOR 766 74.95%
AGAINST 256 25.05%
AMENDMENT NO. 3
AMENDING SECTION 3.08 FOR 922 87.39%
AGAINST 133 12.61%
AMENDMENT NO. 4
AMENDING SECTION 6.13 FOR 867 85.08%
AGAINST 152 14.92%
AMENDMENT NO. 5
AMENDING SECTION 6.14 FOR 898 87.70%
AGAINST 126 12.30%
SECTION II.
The City Council of the City of Pearland, Texas, hereby officially and affirmatively
declares that the results as shown above are the real and true results of the election
held on May 13, 2006, within the City of Pearland, Texas, that the candidate elected for
Member of Council, Position Number Two (2) is declared to Helen Beckman and the
candidate elected for Member of the Council, Position Number Four (4) is declared to
2
RESOLUTION NO. 2006-65
be Felicia Kyle, and said above parties are hereby declared duly elected to said
respective offices, subject to taking of their Oaths of Office and Statements of Elected
Officers as provided by the laws of the State of Texas.
SECTION III. •
The City Council of the City of Pearland, Texas, hereby officially and affirmatively.
declares that Amendment Numbers 1 through 5 (attached hereto as Exhibit "A"
passed.
SECTION IV.
The following Exhibit A, (Charter Amendments), Exhibit B (Cumulative Report) &
Exhibit C (Canvass Report) are attached hereto and made a part hereof by reference.
PASSED, APPROVED, ADOPTED, and ORDERED this 22nd day of May, A. D.,
2006. "el. 6ilae
4 rf. 4i.VS, I om id
1• Pk �` Mayor
Af sr••••••••
.00
ng
.'t`, y Se ary
APPROVED AS TO FORM: .
Darrin M. Coker
City Attorney
3
Exhibit "A"
Resolution No. R2006-65
•
2005 CITY OF PEARLAND
CHARTER REVIEW COMMISSION'S
PROPOSED CHARTER AMENDMENTS
AND RECOMMENDATION
CHARTER AMENDMENTS
Section 1.02. Incorporation.
The inhabitants of the City of Pearland in Brazon4 and Harris and r§:#11:014 Counties,
Texas, within the corporate limits as now established and as hereafter altered, shall
continue to be and are hereby constituted a municipal body politic and corporate,.in
perpetuity, under the name "CITY OF PEARLAND," hereinafter referred to as the
"city," and having such powers, privileges, rights, duties and immunities as are herein
provided.
Section 3.01. Number, selection and term.
The legislative and governing body of the city shall consist of mayor and five (5) council
members and shall be known as the "city council of the City of Pearland, Brazoria and
Hams and -6:03114 Counties, Texas."
(a) The mayor shall be elected from the city at large. The councilmembers shall be
elected from the city at large by positions and shall be known as positions 1, 2, 3, 4
and5.
.(b) The mayor shall be the presiding officer of the city council and shall be recognized as
the head of the city government for all ceremonial purposes and by the governor for
purposes of military Jaw._ The mayor shall be allowed to vote only in case of a tie
, vote The mayor shall not be mcludecin>any calculatiop=ohe�inber of Motes
Y:'1 � I. C y 'Q .a»3" e' sF ti a ^, ty+M +f .l.ef £.{ cf F` G- 'it •a Sy R 3."'�^'f` nil
needed.for Elie city cbuncily to talceYany aciionaulhonzed by�thi� charker exeet when_
the`mayprf2 ailnwed to voten.,t ie case4of a I0ot
Section 3.08. Meeting of the city council.
The city council shall hold at least two (2) regular meetings in each month at a time to be
fixed by said city council by ordinance or resolution fixing the dates of such regular
meetings. As many additional special meetings may be held during the month as may be
necessary for the transaction of all business of the city and its citizens. All meetings shall
be public, except where authorized by law, and shall be held at the city hall, provided,
however, the city council may designate another place for such meetings after publishing
the due notice thereof in one (1) issue of the official newspaper of said city. The city
secretary, upon written request of the mayor or any two councilmembers, shall call
special meetings of the city council, notice of such special meetings shall be given to
2005 Proposed Amendments
.3 t.. - 4S yam '
each member of the city council at leastiseven #wo,(72);�hours,bg fgre the sfartzo£the
�. v4 r c ..rN r a } ... ,M.O u..n.v..kcf.�5.4.+.+�r'1M4-�aC�N>:�r.
meeting, which said notice shall state the date for such meeting and the subject to be
considered at such meeting, and no other subject shall be there considered except with
unanimous consent of the city council. Said notice to the city council shall be sufficient if
delivered to the councilmembers in person, or in the event of the inability to locate said
councilmember within the City of Pearland, Texas, delivery of such notice to his or her
home shall be sufficient.
Section 4.08. Department of Health and Sanitation.
(c) Duties of the health authority: The city health authority shall advise the city manager
on a program of public health; shall cooperate in the preparation of sanitary code; shall
cooperate with nearby cities on problems of health and sanitation; shall cooperate with
the commissioner's court of Brazoria and Hams andFort,Bend Counties, Texas and its
(their) agencies, and with the state health department and other departments of the state
government in matters pertaining to health and sanitation.
Section 6.13. Initiative.
Qualified voters of the City of Pearland may initiate legislation by submitting a petition
addressed to the city council which requests the submission of a proposed ordinance or
resolution to a vote of the qualified voters of the city. Said petition must be signed by
qualified voters of the city equal in number to fat'least thirty (30) per cent of the
number cast at the regular last municipal election of the city, or one hundred fifty (150)
qualified voters, whichever is greater, and each copy of the petition shall have attached to
it a copy of the proposed legislation. The petition shall be signed as provided in section
6.03 of this charter. The petition may consist of one (1) or more notarized copies as
permitted in section 6.05 of this charter. Such petition shall be filed with the person
performing the duties of city secretary. Within five (5) days after the filing of such
petition, the person performing the duties of city secretary shall certify such petition or
return same to petitioners. After certification, the person performing the duties of the city
secretary shall present said petition and proposed ordinance or resolution to the city
council at the next regular meeting. Upon presentation to the city council of the petition
- and draft of the proposed ordinance or resolution, it shall become the duty of the city
ni
council within ten (10) days after receipt thereof, to pass and adopt such ordinance or
resolution without alteration as to meaning or effect in the opinion of the persons filing
the petition or to call a special election, to be held within thirty (30) days thereafter, at
which the qualified voters of the City of Pearland shall vote on the question of adopting
or rejecting the proposed legislation. However, if any other municipal election is to be
held within sixty(60) days after the filing of the petition, the question maybe voted on at
such election. No ordinance shall be proposed by an initiative petition which is on the
same subject as an ordinance so submitted and defeated at an election held within the
proceeding twelve (12) months.
2005 Proposed Amendments
Section 6.14. Referendum.
Qualified voters of the City of Pearland may require that any ordinance or resolution with
the exception of ordinances or resolution levying taxes or issuing tax or revenue,bonds,
passed by the city council be submitted to the voters of the city for approval or
disapproval , by submitting a petition for this purpose within thirty (30) days after final
passage of said ordinances or resolution or within thirty (30) days after is publication.
Said petition shall be addressed, prepared, signed and verified as required for petitions
initiating legislation, as provided in section 6.13 of this charter and shall be submitted to
the person performing the duties of city secretary. Immediately upon the filing of such
petition, the city secretary shall present said petition to the city council Lif`t1 e gu ar:
meeting f41ie.cztx;_council. Thereupon the city council shall immediately t itmin
i eeling reconsider such ordinance or resolution and if it does not entirely repeal the
same, shall submit it to popular vote as provided in section 6.13 of this charter. Pending
the holding of such election, such ordinance or resolution shall be suspended from taking
effect and shall not later take effect unless a majority of the qualified voters voting
thereon at such election shall vote in favor thereof.
Resolution No. c O6-u
Cumulative Report - Unofficial -- _ .
City of Pearland - Municipal Officers and Special Election May 13, 2006
Page 1 of 2 05/13/2006 09:15 PM
Total Number of Voters: 1,142 of 0 0.00% Precincts Reporting 2 of 2= 100.00%
•
Party Candidate `L Early Election Total
1
COUNCILMEMBER,POSITION TWO(2),Vote For 1
Helen Beckman 287 100.00% 541 100,00% 808 100.00%
Cast Votes: 287 74.58% 541 69.01% 808 70.75%
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 91 25.42% 243 30.99% 334 29.25%
COUNCILMEMBER,POSITION FOUR(4),Vote For 1
•
Randy L.Patro 153 44.61% 330 45.77% 483 45.39%
Felicia Kyle 190 55.39% 391 54.23% 581 54.61%
Cast Votes: 343 95.81% 721 91.98% 1,084 93.17%
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 15 4.19% 63 8.04% ' '78 6.83%
PROPOSED AMENDMENT NO.1,Vote For 1 .
For 249. 76.38% 496 69.98% 745 71.98%
Against 77 23.62% 213 30.04% 290 28.02%
Cast Votes: 328 91.06% 709 90.43% 1,035 90.63%
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 32 8.94% 75 9.57% 107 9.37%
PROPOSED AMENDMENT NO.2,Vote For 1
For 256 79.50% 510 72.88% 786 74.95%
Against 66 20.50% 190 27.14% 256 25.05%
Cast Votes: 322 89.94% 700 89.29% 1,022 89.49%
e
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 36 10.08% 84 10.71% 120 10.51% -
•
PROPOSED AMENDMENT NO.3,Vote For 1 •
For
297 88.68% 825 86.81% 922. 87.39%
Against 38 11.34% 95 13.19% 133 12.81%
Cast Votes: 335 93.58% 720 91.84% 1,055 92.38% •
0 0.00% 0 0.00%
' Over Votes: 0 O,00% 8.16%64 °
Under Votes:
23 6.42% 87 7.62/e
Cumulative Report - Unofficial
City of Pearland - Municipal Officers and Special Election - May 13, 2006
Page 2 of 2 05/13/2006 09:15 PM
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2= 100.00°
Party Candidate `_ Early 1 Election ` Total
l 1 1
PROPOSED AMENDMENT NO.4,Vote For 1
Far 272 85.80% 595 84.76% 887 85.08%
Against 45 14.20% 107 15.24% 152 14.92%
Cast Votes: 317 88.55% 702 89.54% 1,019 89.23%
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 41 11.45% 82 10.48% 123 10.77%
PROPOSED AMENDMENT NO.5,Vote For 1
For 289 89.20% 609 87.00% 898 87.70%
Against 35 10.80% 91 13.00% 128 12.30%
Cast Votes: 324 90.50% 700 89.29% 1,024 89.67%
Over Votes: 0 0.00% 0 0.00% 0 0.00%
Under Votes: 34 9.50% 84 10.71% 118 10.33%
ui
6
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election May 13, 2006 .
Page 1 of T 05/19/2006 01:05 PM
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2=100.00%
COUNCILMEMBER, POSITION TWO (2)
Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout c
Ballots Ballots ' 1e
E
Cast Cast m c
c F-
I,
a,
x
512 136 ' 241 377 0 0.00% 258 258
548 222 543 785 0 0.00% 550 550
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•
*-Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006 •
Page 2 of 7 05f19/2006 01:05 Pill
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2= 100.00%
COUNCILMEMBER, POSITION FOUR (4)
Precinct Early Election Total. Registered Percent
Voting Day Ballots Cast Voters Turnout o.
Ballots Ballots a m rn
T
Cast Cast o. Y m
•
T *13 i li
A LL
r`
512 138 241 377 0 0.00% 148 210 358
548 222 543 785 0 0.00% 337 371 708
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•.Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006 •
. Page 3 of 7 05/19/2006 01:05 PM
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2= 100.00%
PROPOSED AMENDMENT NO. 1 II
Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout ,
Ballots Ballots
Cast Cast a c m
LL cn F
Q
512 136 241 377 0 0.00% 243 106 349
546 222 543 765 0 0.00% 502 184 686
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•-Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006 •.
Page 4 of 7 0511912006 01:05 PM
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2= 100.00%
PROPOSED AMENDMENT NO. 2 Il
Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout
Ballots Ballots
Cast Cast ,- S o
o
LL 15
OI F
Q .
512 136 241 377 0 0.00% 243 102 . 345
548 222 543 785 0 0.00% 523 154 677
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•
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•-Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006
•
Page 5 of 7 05119/2006 01:05 PM
Total Number of Voters: 1,142 of 0=0.00% Precincts Reporting 2 of 2= 100.00%
I PROPOSED AMENDMENT NO.3 „.. .m.m.m.m.m.m.ji
L, Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout
Ballots Ballots
Cast Cast `o c 2.
U. 01 F
Q
512 138 241 377 0 0.00% 318 42 358
548 222 543 765 0 0.00% 808 91 697
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•
•-Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006
•
Page 6 of 7 05/19/2006 01:05 PM
Precincts Reporting 2 of 2= 100.00%
Total Number of Voters: 1.142 of 0=0.00% `
PROPOSED AMENDMENT NO._4 1
Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout..
Ballots Ballots
Cast Cast N 0
O C To
u. O
CD H
Q
512 136 241 377 0 0.00% 295 54 349
546
, • 222 543 765 r,. 0 0 00% ". 5
72 98 670
y � 7:Ke � A, :v=q , . thitp � � .,r• � 7 ?� s :�« . ] � {!^ '3^�, :fC �� i� � AI�
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•••Suppressed due to low voter turnout
Canvass Report — Total Voters — Unofficial
City of Pearland — Municipal Officers and Special Election — May 13, 2006
Page 7 of 7 05/19/2006 01:05 PM
Precincts Reporting 2 of 2= 100.00%
Total Number of Voters: 1,142 of 0=0.00% `
PROPOSED AMENDMENT NO. 5 1
Precinct Early Election Total Registered Percent
Voting Day Ballots Cast Voters Turnout
Ballots Ballots.
Cast Cast ` N N
o c m
U. A O
co F
a
512 138 241 377 0 0.00% 308 45 351
548 222 543 765 0 0.00% 592 81 673
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•.Suppressed due to low voter turnout
•
EXHIBIT B
Ordinance No. 95-36 Authorizing
Creation of the Corporation
•
•
J HOU:2579303.1
evEA,9� Cfl ) of pe... (Grillsond
III
* * 3519 liberty Drive • Peorland,Texas 77581-5416
1 TE X PS (281)485-2411 • fax(281) 485-8764.
I_
CERTIFICATION
STATE OF TEXAS §
COUNTIES OF BRAZORIA & HARRIS §
CITY OF PEARLAND §
•
I, Wendy Standorf, Interim City Secretary of the City of Pearland, Texas, hereby
certify that the attached constitutes a true and correct copy of Resolution No. R95-36
duly passed and approved by the City Council at a regular meeting held on the 22nd day
of May, 1995.
Witness my hand and seal of the City of Pearland, Texas, this 18th day of March,
1997, at Pearland, Texas.
Wendy Sta
Interim Ci Secretary
(SEAL) •
1
RESOLUTION NO. R95-36
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, AUTHORIZING THE CREATION OF THE PEARLAND ECONOMIC
DEVELOPMENT CORPORATION AS AN INSTRUMENTALITY OF THE CITY
I__' OF PEARLAND, TEXAS, FOR THE PURPOSE OF PROMOTING AND
DEVELOPING NEW AND EXPANDED BUSINESS ENTERPRISES
UTILIZING A ONE-HALF CENT (1/20 LOCAL SALES AND USE TAX;
li__ APPOINTING THE INITIAL BOARD OF DIRECTORS OF SAID
CORPORATION; AND CONTAINING OTHER PROVISIONS RELATING TO
THE SUBJECT.
LI
WHEREAS, the Development Corporation Act of 1979,
. Article 5190.6, Section 4B, Texas Revised Civil Statutes, as
amended (the "Act") authorizes the City of Pearland, Texas (the
"City") to create and administer an economic development corpora-
tion to act on behalf of the City in the promotion and development
of new and expanded business enterprises, including certain
•projects, as defined in the Act;
WHEREAS, the Act authorizes the City to adopt a sales and use
IItax throughout the City to finance projects of the economic
development corporation;
WHEREAS, the electorate of the City authorized a one-half cent
(1/20 local sales and use tax on January. 21, 1995 for the benefit
of the Corporation to promote and develop new and expanded business
enterprises;
WHEREAS, seven (7) natural persons, each of whom is at least
eighteen (18) years of age and a qualified elector of the City
• (Connie Beaumont, Dennis Frauenberger, Tricia Holland, Susan
Lenamon, Bob Lewis, Stella Roberts, Charles Sones) , have filed with ,
the City Council of the City a written application (the "Petition")
IIrequesting that the City authorize and approve the creation of the
Pearland Economic Development Corporation (the '"Corporation") _ to
IIact on behalf of the City and approve the Articles of Incorporation
and Bylaws to be used in creating the Corporation in the form
attached to this Ordinance as Exhibit A;
WHEREAS, the Corporation has been or will be created and
organized as a Texas non-profit corporation pursuant to the provi-
~ sions of Section 4B of the Act for such limited purposes;
S . -1-
I
11, .
RESOLUTION NO. R95-3b
I1
WHEREAS, the City is eligible .to create a Corporation governed
II, by Section 4B of the Act because it is a city to which Section 4A
of the Act applies as a City located in a county with a population
of 500,000 or fewer according to, the most recent federal decennial
__ census;
WHEREAS, the City has not created another corporation to be
governed by Section 4B of the Act; and
1 WHEREAS, the City Council has reviewed and approved the
Petition and Articles of Incorporation and Bylaws and has deter
1 I mined to authorize and approve the creation of the Corporation; a
not-for-profit entity, as its constituted authority and
instrumentality to accomplish the . specific public purposes as
. authorized by Section 4B of the Act.
BE IT RESOLVED EY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. Findings and Determinations. It is hereby offi •
-
; cially found and determined that:
(a) All of the facts recited in the preamble hereto are found •
and declared to be true and correct and the preamble is
1 ,J incorporated into and made a part of this Resolution.
(b) The City is a'lawfully incorporated city of the State of
Texas, authorized to create the Corporation under the
provisions of Section 4B of the Act.
1 Section 2. Creation. of the Corporation.
(a) The Corporation is hereby authorized and approved for
creation as an economic development corporation to act on
behalf of the City to accomplish the specific public
purposes authorized by Section 4B of the Act.
(b) The Corporation is hereby designated as a duly con
stituted authority and instrumentality ' of the City
(within the meaning of those terms and the regulations of
II the United States Department of Treasury and rulings of
the Internal Revenue Service prescribed and promulgated
li . . .
pursuant to Section 103 of the Internal Revenue Code of
-2-
I
•
RESOLUTION NO. R95-36
1954, as amended (the "Code") ) and shall be authorized to
act on behalf of the City for the specific public pur-
poses specified in Section 4B of the Act; the Corporation.
II' is not intended to be and shall not be a political sub-
division or a political corporation within the meaning of
the Constitution and laws of the State of Texas, includ-
ing, without limitation, Article 'III, Section 52 of the
Texas Constitution, and the City does not delegate to the
Corporation any of its attributes of sovereignty, includ-
ing the power to tax, the power of eminent domain and the
police power. •
(c) The Corporation may, under the conditions set forth• in
this Ordinance, issue obligations on behalf of the City,
acquire, lease,' sell or convey certain properties and.
' ` make loans for the promotion and development of commer=
cial, industrial and manufacturing enterprises and to
contract with entities, public and private, to accomplish
the projects authorized by Section 4B of the Act. The
City shall not lend its credit or grant any.public money
or thing of value in aid of the Corporation. Further-
more, obligations issued by the Corporation with the
approval of the City shall be deemed not to constitute a
debt of the State of Texas, the City or of. any other
political corporation, subdivision or agency of the State
of Texas or a pledge of the faith and credit of any of
them, but such obligations, shall be payable solely from
the funds herein provided. The Corporation shall, not be
•
authorized to incur financial obligations which cannot be
paid from proceeds of the obligations or from revenues
realized from the lease or sale of a project or realized
from a loan made by the Corporation to finance or
• refinance in whole or in ]
ro a part project, or from the
P
sales tax revenues approved by the voters of the City
-3-
i
•
RESOLUTION NO. R95-36
pursuant to the Act. "Project" shall have the meaning
set forth in Section 4B of the Act.
Section 3. Articles of Incorporation and Bylaws. : The
Articles of .Incorporation of the Corporation and Bylaws of the
Corporation, in the forms attached to this Resolution as Exhibits
B and C, are hereby approved for use and adoption by the •
Corporation; provided, however, that any amendments to the Articles
of Incorporation or Bylaws shall be subject to further approval by.
the City Council of the City.
Section 4. Issuance of .Bonds. The City Council of the City
shall approve, by written ordinance or resolution, any agreement to.
issue, or resolution agreeing to issue; bonds, .including refunding
bonds, adopted by the Corporation, which agreement or resolution
shall set out the amount and purposes of the bonds. Furthermore,
no issue of bonds, including refunding bonds shall be sold and
delivered by the Corporation without a written ordinance of the
City Council of the City adopted not more than sixty (60) days
prior to the date of the sale of the bonds specifically approving
the resolution of the Corporation providing for the issuance of the
bonds.
Section 5. Initial Directors. The initial directors of the
Corporation are the following:
BABE MEM
a. Connie Beaumont 2 Years
b. Dennis Frauenberger 2 Years
c. Tricia Holland 2 Years
d. Susan Lenamon 2 Years
e. Bob Lewis 2 Years •
f. Stella Roberts . 2 Years
g. Charles Sones • 2 Years
Section 6. Initial Officers. Until designated otherwise by
the Corporation's directors, the initial .officerss. of the
Corporation are the following:
• President flPnnis FrauPnhPrgo r
Vice-President Tricia Holland
Secretary mean T.Pnamnn
I
-4-
RESOLUTION NO. R95-36
THE STATE OF TEXAS
§ KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF BRAZORIA §
I, the undersigned, a notary public, do hereby certify that on
the r . day of rn , 1995, personally appeared
before me, Connie Beaumont, Dennis Frauenberger, Tricia Holland,
Susan Lenamon, Bob Lewis, Stella Roberts, and Charles Sones, who
each being by me first duly sworn, severally declared that they are
the persons who signed the foregoing Petition, and that ' the.
statements therein contained are true.
IN• WITNESS WHEREOF, we have hereunto set our hands this ooa-,
'rif• day of ttr , 1995.
lit44a) AP S
NOTARY PUBLIC in and for the
A D..1001E9 State of Texas
%AJyip "�iLI L�IgY�
w S°� Der21. 1995 My Commission Expires: 9/,L,/9S
♦ J +ir J
p w
•
•
I
EXHIBIT B
ARTICLES OF INCORPORATION
OF THE
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
A NON-PROFIT CORPORATION
WE,THE UNDERSIGNED natural persons, being at least 18 years of age and
qualified electors of the City of Pearland, Texas, a home rule municipal
corporation, acting as incorporators of a public instrumentality and non-profit
economic development corporation (the Corporation) under the Development
Corporation Alct of 1979 (Tex. Rev. Civ. Stat. Ann. art. 5190.6)(the Act), with
•the approva of the governing body of the City of Pearland, Texas, as
evidenced by the attached Resolution, adopt the following Articles of
Incorporation for the Corporation:
ARTICLE
NAME
The name of the Corporation is the PEARLAND ECONOMIC
DEVELOPMENT CORPORATION.
ARTICLE II
NON-PROFIT CORPORATION
The Corporation is a non-profit corporation governed by Section 4B of
the Development Corporation Act of 1979, as amended.
Revl5ed May 15. 1995 Page 1 of 8
of their initial terms are as follows:
DIRECTOR ADDRESS TERM EXPIRES
Connie Beaumont 3210 Westminister April , 1997
Pearland, Tx 77581
Dennis Frauenberger 2602 Taylor Lane April , 1997
Pearland, Tx 77581
Tricia Holland 2319 Frances April , 1997
Pearland, Tx 77581
Susan Lenamon 2909 Saxton Court April , 1997
Pearland, Tx 77581
Bob Lewis 2404 Country Club Drive April , 1997
Pearland, Tx 77581
Stella Roberts 2918 Green Tee Drive April 1997
Pearland, Tx 77581
Charles Sones 3013 Country Club Drive April , 1997
Pearland, Tx 77581
Directors shall serve for two (2) year terms of office. Directors shall be
eligible for. re-appointment without limit to the number of terms served.
Directors serve at the pleasure of the City Council and are removable by
majority vote of the City Council at any time, with or without cause.
The Directors shall serve without compensation, but shall be reimbursed
for actual and reasonable expenses incurred in the performance of their duties
as Directors.
Revised May 15. 1995 Page 4 of 8
I`I , •
ARTICLE VII
MEMBERSHIP AND STOCK
The Corporation has no members and is a non-stock corporation.
ARTICLE VIII
AMENDMENTS
These Articles of Incorporation may be amended as provided for in the
Act. Amendments may be made by the Board of Directors if first approved by
the City Council of the City of Pearland. The City Council of the City of
Pearland may, at its sole discretion, amend these Articles of Incorporation and
change the structure, organization, programs, or activities of the Corporation,
or dissolve the Corporation.
ARTICLE IX
INCORPORATORS
•
The name and address of each Incorporator is:
INCORPORATOR ADDRESS
Richard Tetens 2105 W. Mary's Creek
Pearland, Tx 77581
Randy K. Weber 2810 Westminister
Pearland, Tx 77581
Jerry Richardson 5309 Groveton
Pearland, Tx 77581
Revised May 15, 1995 Page 5 of 8
, _S
Helen Beckman 2705 Churchill
Pearland, Tx 77581
Kevin Cole 2017 Isla
Pearland, Tx 77581
ARTICLE X
AUTHORIZATION
The City Council of the City of Pearland has specifically authorized the
Corporation by Resolution to act on its behalf to further the public purposes
stated in the Resolution and these Articles of Incorporation and has approved
these Articles of Incorporation. A cop
y py of the Resolution is attached.
ARTICLE XI
NET EARNINGS
The City of Pearland shall, at all times, have an unrestricted right to
receive any income earned by the Corporation, exclusive of amounts needed
to cover reasonable expenditures and reasonable reserves for future
activities. Unless otherwise directed by the City of Pearland, any income of
the Corporation received by the City of Pearland shall be deposited into the
Economic Development Fund, its successor, or other such funds as shall be
designated by the City Council from time to time. No part of the Corporation's
income shall inure to the benefit of any private interests.
111 p
Revised May 15, 1995 Page 6 of 8
ARTICLE XII
DISSOLUTION
If the Corporation ever should be dissolved when it has any interest in
anyfunds orproperty, the funds or property shall be transferred and delivered
to the City of Pearland after satisfaction of debts and claims.
rr ARTICLE XIII
I `
DIRECTOR LIABILITY
No director shall be liable to the Corporation for monetary damages for
an act or omission in the Director's capacity as a Director, except that the
provisions of Article XIII shall not eliminate or limit the liability of a director for.
(i) a breach of the Director's duty of loyalty to the Corporation;
(ii) an act or omission not in good faith that constitutes a breach of a
duty of the director to the Corporation or that involves intentional misconduct
or a knowing violation of the law;
(iii) a transaction from which the Director received an improper benefit,
whether or not the benefit resulted from an act taken within the scope of the
Director's office;
(iv). an act or omission for which the liability of a Director is expressly
provided by applicable statute; or
Revised May 15. 1995 Page 7 of 8
(v) an act related to an unlawful distribution of the assets of the
Corporation.
�aF
If the Act or the Texas Miscellaneous Corporation Laws Act (collectively, the
"Acts") are hereafter amended to authorize the further limitation of the liability
of directors or trustees, then the limitation on personal liability provided in this
Article shall, without the necessity of further action by the Corporation or the
Board of Directors, be modified to provide such limitation to the fullest extent
permitted by the amended Acts. No amendment to or repeal of this Article
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
. • director occurring prior to such amendment or repeal.
IN WITNESS WHEREOF, we have signed these Articles of
Incorporation as incorporators of the Pearland Economic Development
Corporation. •
. "M
Mayor Council Member
Mayor Pro Te Council Member
/1—(sL
C uncil Member Council Member
Revised May 15, 1995 Page
g 8 of 8
t
•
• EXHIBIT C
II;
CORPORATE BYLAWS
I�
OF THE
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
These Bylaws govern the affairs of the Pearland Economic Development
Corporation (the Corporation), a public instrumentality and a non-profit
-
corporation created under Section 4B of the Development Corporation Act of
- 1979. (Tex. Rev. Civ. Stat. Ann. art. 5190.6), as amended (the Act), by the City
Council of the City of Pearland (the City Council) to act on behalf of the City
of Pearland (City).
ARTICLE I. PURPOSE
1.01. The Purpose of the Corporation is to promote, assist, and enhance
economic development activities and quality of life opportunities within the City
and: its extraterritorial jurisdiction that promote economic development as
authorized by the Act. The Corporation has no members and is a non-stock
- corporation.
1.02. The Corporation shall have and exercise all of the rights, powers,
privileges, authority and functions given by the general laws of Texas to non-
profit corporations incorporated under the Act including, without limitation,
Article 1396-1.01, et seq., Tex. Rev. Civ. Stat. Ann., as amended.
1.03. The Corporation shall have all other powers of a like or different nature
not prohibited by law which are available to non-profit corporations in Texas
and corporations created under the Act and which are necessary or useful to
enable the Corporation to perform the purposes for which it .is created, •
including, but not limited to, the power to issue bonds, notes, or other
I obligations, and otherwise exercise its borrowing power to accomplish the
purposes for which it was created. •
1.04. The Corporation is created as a local government corporation pursuant
to the Act and shall be a governmental unit within the meaning of Subdivision
(2), Section 101.001 , Civil Practice and Remedies Code, as amended. The
Revised May 15, 1995
•
operations of the Corporation are governmental and not proprietary functions
for the purposes of the Texas Tort Claims Act, Section 101.001 et seq., Civil •
Practices and Remedies Code, as amended.
ARTICLE II. REGISTERED OFFICE AND AGENT
2.01. The registered agent for the. Corporation shall be an individual resident
of the state. The registered office for the Corporation shall be within the
boundaries of the City of Pearland. The Board of Directors (the Board) shall
initially maintain and use the Pearland City Hall as its administrative office, but
may move its administrative office or establish additional offices with the prior
approval of the City Council.
ARTICLE III. BOARD OF DIRECTORS
Powers
3.01. The Corporation shall be managed by a Board of Directors which is
authorized to exercise the powers authorized by the Act, subject to any
limitations of these bylaws, including the following:
a. To purchase or acquire for the Corporation any property, rights,
or privileges and to pay therefore either wholly or partly in money,
bonds, debentures, or other securities of the Corporation as may
be lawful.
b. To create, make and issue notes, mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferrable instruments
and securities, secured by a mortgage or deed of trust on any real
property of the Corporation or otherwise, and to do every other act
or thing necessary to effect the same.
c. To sell or lease the real or personal property of the Corporation on
the terms the Board sees fit and to execute deeds, leases, and
other conveyances or contracts as necessary for carrying out the
purpose of this.Corporation.
Revised May 15, 1995 Page 2 of 15
I
•
Duties
3.02: Directors shall exercise ordinary business judgment in managing the
affairs of the.Corporation. In acting in their official capacity, directors shall act.
in good faith and take actions they reasonably believe to be in the best
interests of the Corporation and which are lawful. The Board is further
required to perform the following duties:
a. Program. The Board shall cause to be prepared an Economic
Development Plan (the Plan) in accordance with policies and
directives established by the City Council. The Board shall review
I; the Plan at least once a year and submit it to the City Council for
its approval. The Plan shall include:
1. The short and long-term objectives of the Corporation and
how they might be achieved, including specific details of
proposed efforts or programs to achieve those objectives;
2. Guidelines for how the Corporation proposes to use the
sales and use tax funds received by the Corporation to
achieve its objectives, including .any limitations on the use
of funds; and, . .
3. . Any other information the City Council requests in writing be
included in the Plan.
b. Capital Improvements Program (CIP). The Board shall be
allowed to work in conjunction with the Planning and Zoning
Commission to develop a five (5) year CIP in accordance with City
Charter, as amended.
c. Reports to City Council. With each annual submission of the
Plan to the City Council, and at any other times requested by the
City Council, the Corporation shall submit a written Performance
Report, detailing the activities and accomplishments , of the
Corporation since the prior Report.
d. Briefings. The president or executive director shall appear
Revised May 15, 1995 Page 3 of 15
before the City Council to brief the City Council on activities of the
Corporation at least quarterly andat tim
es q y such other as
requested by the mayor or two or more members of the City
Council.
e. Budget. At least one hundred and twenty (120) days prior'to
commencement of the
e 199 6 97 fiscal year and each fiscal year
thereafter, the Board shall adopt a proposed budget of expected
revenues and proposed expenditures of the next ensuing fiscal
year. The budget shall contain such classifications and shall be
in such form as may be prescribed from time to time by the
Finance Department of the City of Pearland. The Corporation
budget shall not be effective until the same has been approved by
the City Council.
rNumber and Qualifications
3.03. The Board shall consist of seven (7) persons, who shall be appointed
by the City Council. Three (3) directors shall be persons who are not
employees, officers or members of the governing body of the City. A director
may be removed by the City Council at any time without cause. •
3.04. Each director shall be a resident of the City of Pearland.
Term
•
3.05. Directors shall be appointed to serve two (2) year terms of office.
Directors shall be eligible for re-appointment without limit to the number of
terms served.
Attendance .
3.06. Directorship in the Corporation shall be accompanied by active
participation in the activities of the Board, and any director who is absent from
three (3) consecutive meetings of the Board without valid excuse as
determined by the Board, shall automatically be dismissed from directorship.
The. Board shall at once notify the City Council that a vacancy on the Board
exists.
Revised May 15. 199s Page 4 of 15 .
Vacancies
3.07. Vacancies on the Board shall be filled by appointment by the City
Council.
Ex-Officio Directors
•
3.08. The mayor, city manager, executive director of the Corporation, the
chairman of the board and the 'president of the Pearland/Hobby Area
Chamber of Commerce and executive director of the Tri-Tech Regional
Council, or their designees, shall serve as ex-officio directors of the Board.
The Board may appoint additional ex-officio directors subject to approval of
the City Council. Such additional ex-officio directors shall serve a term of one
year or until their successors are appointed. Ex-officio directors shall be given
notice of all meetings of the Board and may participate in discussions at Board
meetings, but shall not be entitled to vote. Ex-officio directors may participate
in executive sessions at the request of the Board. Ex-officio directors need
not reside in the City.
Compensation
3.09 The directors shall not receive anysalary
ry or compensation for their.
services. However, directors may be reimbursed for their actual and
reasonable expenses incurred in the performance of their duties, including but
not limited to the cost of travel, lodging and incidental expenses reasonably
related to the corporate duties of the Board. Travel expenses incurred by
directors to attend regular and special meetings are not eligible for
reimbursement.
ARTICLE IV. OFFICERS _
Officer Positions
II4.01. The officers of the Corporation shall be a president, a vice president and
a secretary, whom shall be members of the Board. The Board may elect
other officers as the City Council deems necessary. Any two or more offices
.R may be held by the same person except the offices of the president and
secretary.
•
Revised May 15, 1995 Page 5 of 15
fi•
•
Election and Terms of Office
4.02. The president, vice president, secretary and any other officers the City
Council deems necessary shall be elected annually by the Board and .
vacancies in these officer positions may be filled by the Board for the
unexpired terms. Each officer shall hold office until a successor is duly
elected and qualified. All officers shall be subject to removal, with or without
. cause, at any time by a vote of a majority of the whole Board.
President
• 4.03. The president shall be the chief executive officer of the Corporation. He
or she shall preside at all Board meetings and generally supervise and control
•
the business and affairs of the Corporation and perform any other duties
prescribed from time to time by the Board. The president shall have the right
to vote on all matters coming before the Board. He may execute deeds,
mortgages, bonds, contracts or other instruments, as authorized by the Board.
The president shall appoint the members of all committees and all committee
chairs.
• Vice President
4.04. The vice president shall perform the duties assigned to him by the
Board. In the absence of the president, or if the president is unable or refuses
to act, the vice president shall perform the duties of president.
cr
Se etary
4.05. The secretary shall be the custodian of the Corporate records. The
secretary shall record and keep all votes and minutes of the meetings of the
Board. The secretary shall give notice of all meetings of the Board and its
committees, and shall perform such other duties as may be prescribed by the
president or the Board. An assistant secretary shall assist the secretary in
performance of her duties.
Executive Director
4.06. The city manager, in consultation with the Board, may employ an
Revised May 15. 1995 Page 6 of 15 .
I
•
executive director to serve as the general manager and chief administrative
officer of the Corporation. The executive director shall be subject to the
supervision of the city manager and shall perform the duties specifically
delegated to him or her by the Board, and such other economic development
duties as assigned by the city manager. The executive director shall serve at
the pleasure of the city manager and receive compensation from the funds of
the Corporation approved by him or her in consultation with the Board. All
incentive or merit provisions must be approved by the city manager and a
majority of the Board. The executive director shall be responsible for policy
and program implementation and the day to day operations of the
Corporation, including the hiring of employees, and the supervision and
' dismissal of those employees. The executive director shall compile and'
submit to the Board regular reports and recommendations regarding .the
programs, policies, and business affairs of the Corporation. The executive
director shall be a non-voting, ex-officio member of the Board and of any
committees created by the Board. The executive director shall be an
employee of the City of Pearland.
Assistant Secretary and Legal Counsel
4.07. An assistant secretary position is created to assist the secretary and the
Board in the conduct of the affairs of the Corporation. The city attorney, or
such other attorneys selected by the city attorney with the approval of the City
Council, shall represent the Corporation in all litigation. The city attorney shall
be the legal advisor of, attorney and counsel for, the Corporation and all
officers thereof, in conformance with the City Charter, as amended. The.
assistant secretary and city attorney shall be employees of the City.
ARTICLE V. BOARD COMMITTEES
5.01. The president may appoint persons to serve on standing or ad hoc
committees. A committee may include persons who are not directors of the
Corporation and who may not reside in the City. Committees will operate
under general rules adopted by the Board. Committees may be charged with
specific duties or authority, but shall not have the authority to:
a. Amend the articles of incorporation, amend, alter, or repeal the
bylaws, or adopt a plan of merger or consolidation with another
Revised May 15, 1995 Page 7 of 15
I
•
corporation.
•
b. Authorize the sale; lease, exchange or mortgage of any of the
property or assets of the Corporation or commit Corporation funds
without the prior approval of the Board.
c. Authorize or revoke proceedings for the voluntary dissolution of
the Corporation or adopt a plan for the distribution of the assets
of the Corporation.
d. Approve any transaction to which the Corporation is a party, take
any action outside the scope of authority delegated to it by the
Board, take final action on a matter that requires the approval of
the Board, or take any action that:involves a potential conflict of
interest as defined in these bylaws.
Committee Terms
5.02. The members of each standing or ad hoc committee shall serve until
successors are appointed , unless the Committee is terminated or a member
is removed, resigns, or ceases to qualify as a member. Vacancies on
committees may be filled in the same manner as the original appointment.
ARTICLE VI. MEETINGS
•
Regular Meetings
6.01. The Board shall hold at least four (4) regular meetings each year.
Special Meetings
6.02. Special meetings of the Board may be called at the written request of
the mayor, the president or at least two (2) directors.
Notice
t notice of each regular meetingof the Board shall be
6.03. Written or printed o ce g
delivered to each director not less than seventy two (72) hours before the time
Revised May 15, 1995 Page 8 of 15
•
of the meeting. The notice shall state the place, date, and time of the
meeting. In the case of special meetings, notice maybe issued to directors.
9 9
by mail, telephone, fax, or in person at least seventy two (72) hours before the
Itime of the meeting and shall include who called the meeting and the purpose
of the meeting.
Quorum
6.04. Four (4) directors shall constitute a quorum for the transaction of
business at any meeting of the Board.
Action of Board
6.05. The vote of a majority of the directors present and voting at a meeting
at which a quorum is present shall be sufficient to constitute the act of the
Board.
Proxies
•
6.06. A director may not vote by proxy.
• Open Meetings
6.07. All meetings and deliberations of the Board shall be called, posted,
convened and conducted in accordance with the Texas Open Meetings Act,
.as amended. •
ARTICLE VII. FINANCIAL ADMINISTRATION
•
Fiscal Year •
7.01. The fiscal year of the Corporation shall run concurrently with the fiscal
year of the City. .
Accounts to be Kept with City
7.02. The Corporation shall contract with the City for the administration of its
accounts, expenditures, deposits, investment of funds and accounts, and
Revised May 15. 1995 Page 9 of 15
•
other financial services for the Corporation. The City finance director shall
designate the accounts and depositories to be created and designated for
such purposes, and the methods of withdrawal of funds therefrom for use by
and for the purposes of the Corporation upon the signature of its president
and secretary or other director as the Board shall designate.
Audits
I 7.03. The City shall cause the Corporation's books, records, accounts, and
financial statements, and all other financial activities for the previous fiscal
year to be audited at least once each fiscal year by an outside, independent,
certified public accounting firm selected by the City Council. Any such audit
shall include a written management letter which details suggested
management controls and operating efficiencies. The management letter
shall include recommendations for improving cost reductions and
safeguarding assets. Each audit shall be prepared and submitted annually to
the City Council for approval. Such audit shall be at the expense of the
Corporation.
Limitations on Expenditures
7.04. Before expending funds to undertake a project, the Corporation shall
hold at least one public hearing on the proposed project, in accordance with
the Act.
•
Checks and Drafts
7.05. All checks, drafts, or orders for the. payment of money, notes, or other
evidences of indebtedness issued in the name of the Corporation shall be
signed or bear the facsimile of the signature of its president and secretary, or
other director as the Board shall designate. .
Contracts - General
7.06. The Corporation shall follow and be bound by the same purchasing and
contracting' provisions of State law, including the provisions on competitive
bidding, that are applicable to the City. The Board may by official action
authorize any officer or agent of the Corporation to enter into a contract or
Revised May 15. 1995 Page 10 of 15
1
execute and deliver any instrument in the name of and on behalf of the
Corporation. This authority may be limited to a specific contract or instrument
or it may extend to any number and type of possible contracts and
instruments. Any contract of the Corporation which will require an expenditure
of funds in excess of $100,000 that the City Council has not previously
approved as part of the Corporation's annual budget or in a city tax abatement
agreement, must be approved by the City Council before any payment on the
contract is made.
Contracts - Administrative Services
7.07. Subject to the paramount authority of the city manager under the City
Charter, the Corporation shall have the right to utilize the services and the
= staff and employees of the City, provided (i) that the Corporation shall pay
reasonable compensation to the City for such services, and (ii) the
performance of such services does not materially interfere with the other
duties of such personnel of the City. An administrative services contract shall
be executed between the Board and the City Council for the services provided
by the executive director, city attorney, assistant secretary, finance
department and other City departments, staff and employees.
Gifts
7.08. The Board may accept on behalf of the Corporation any gift or bequest.
Special funds shall include all funds from government contracts, grants, and .
gifts designated by a donor for special purposes. All other funds shall be
general funds.
Potential Conflicts of Interest
7.09. The members of the Board are local public officials within the meaning
of Chapter 171 of the Local Government Code, as amended, and shall adhere
to the City Council code of ethics. If a director has a substantial interest in a
business entity or real property which is the subject of deliberation by. the
Board, the director shall file an affidavit with the secretary of the corporation
stating the nature and extent of the interest. Such affidavit shall be filed prior
to any deliberation, vote or decision upon the matter by the Board, and the
interested director shall abstain from any deliberation, vote or decision upon
111 Revised May 15. 1995 Page 11 of 15
the matter.
Bonds
7.10. Any bonds issued by the Corporation shall be in accordance with the Act
and shall not be issued until approved by the City Council and by the bond
counsel and financial advisers of the City.
ARTICLE VIII. BOOKS, RECORDS, AUDITS
Maintenance of Records
8.01. The Corporation shall keep and properly maintain, in accordance with
GAAP, complete books, records, accounts, and financial statements
pertaining to its corporate funds, activities, and affairs. In addition to proper
financial records, the Corporation shall keep correct and complete minutes of
all board and committee meetings and all records required by the City of
Pearland, by contracting agents, or by funding sources.
Compliance with State Law
8.02. All records shall be kept and administered in accordance with the Texas
Open Records Act, as amended.
Inspection
8.03. Any member of the City Council or director or officer of the Corporation
may inspect and receive copies of all books and records of the Corporation
required to be kept by the Bylaws.
ARTICLE IX. INDEMNIFICATION AND INSURANCE
Corporation to Indemnify
9.01 . The Corporation shall indemnify any director or officer or former director
or officer of the Corporation for expenses and costs, including attorney's fees,
actually and necessarily incurred by the officer or director in connection with
any claim asserted against the officer or director by action in court or
111 .Revised May 15. 1995 Page 12 of 15
S
otherwise by reason of the person being or having been a director or officer
and acting in his or her official capacity, except in relation to matters as to
which the person shall have been guilty of gross negligence or misconduct in
respect of the matter in which indemnity is sought.
Corporation May Provide Insurance
9.02. The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the Corporation
to insure such person against any liability asserted against the person by
reason of the person being or having been a director, officer, employee, or
agent of the Corporation. The premiums for the insurance shall be paid by the
Corporation.
ARTICLE X. AMENDMENTS TO BYLAWS
10.01. The Board may alter, amend, or repeal the bylaws or adopt new
bylaws, but the change shall be effective only upon approval by the City
Council.
ARTICLE Xl. PARLIAMENTARY AUTHORITY
11.01. Robert's Rules of Order, Newly Revised, shall be the
parliamentary authority for all matters of procedure not specifically covered by
the bylaws or any specific rules of procedure adopted by the Board.
ARTICLE XII. DISSOLUTION OF THE CORPORATION
12.01. The Corporation is a non-profit corporation. Upon dissolution, all
of the Corporation's assets shall be conveyed to the City of Pearland.
ARTICLE XIII. MISCELLANEOUS PROVISIONS
Legal Authorities Governing Construction of Bylaws
• 13.01. The bylaws shall be construed in accordance with the laws of the
State of Texas. All references in the bylaws to statutes, regulations, or other
sources of legal authority shall refer to the authorities cited, or their
Revised May 15, 1995 Page 13 of 15
1
•
successors, as they may be amended from time to time. It is expressly
provided that theprovisions of theDevelopment r 7 p o ded Corporation Act of 19 9
applicable to corporations governed under Section 4B of that Act are
incorporated within these bylaws by reference. : 'In the event of any conflict
between the applicable provisions of such Act and these bylaws, then the
I ,
applicable provisions of such Act shall control.
• Legal Construction
13.02. If any Bylaw provision is held to be invalid, illegal or unenforceable
in any respect, the invalidity, illegality or unenforceability shall not affect any
other provision and the bylaws shall be construed as if the invalid, illegal or
unenforceable provision had not been included in the bylaws.
Seal
13.03. The board of directors may provide for a corporate seal. Such
seal would consist of concentric circles containing the words, "Pearland
Economic Development Corporation", and, "Texas", in one circle and the
word, "Incorporated" together with the date of incorporation of the Corporation •
in the other circle.
Headings
13.04. The headings used in the bylaws are used for convenience and
shall not be considered in construing the terms of the bylaws.
Parties Bound
13.05. The bylaws shall be binding upon and inure to the benefit,of the
directors, officers and agents of the Corporation and their respective heirs,
executors, administrators, legal representatives, successors, and assigns
except as otherwise provided in the bylaws.
Effective Date
. 13.06. These bylaws, and any subsequent amendments thereto, shall be
effective of and from the date upon which approval has been given both by the
Revised May 15. 1995 Page 14 of 15
board of directors and the City Council.
CERTIFICATE OF SECRETARY
certify that I am the duly elected and acting secretary of the
PEARLAND ECONOMIC DEVELOPMENT CORPORATION, and the
foregoing bylaws constitute the bylaws of the Corporation. These bylaws
were approved by the City Council of the City of Pearland, Texas, at a
meeting held on the , 2A day of 112dwy , 1995, and adopted at a
meeting of the Board of Directors held idn the f day of _ J'2
1995.
Signed this I day of C�Vizt../ 1995:
SECRETARY OF THE CORPORATION
IRevised May 15, 1995 Page 15 of 15
EXHIBIT C
Proceedings Authorizing Levy of 1/2°A Sales Tax
HOU:2579303.1
Cn tj op © k� of
* 3519 liberty Drive • Peorland,Texas 77581-5416
TF X A5 (281)485-2411 • Fax(281)485-8764
CERTIFICATION
i STATE OF TEXAS §
COUNTIES OF BRAZORIA & HARRIS §
CITY OF PEARLAND §
I, Wendy Standorf, Interim City Secretary of the City of Pearland, Texas, hereby
certify that the attached constitutes a true and correct copy of Ordinance No. 682,
passed and approved by City Council on November 28, 1994.
Witness my hand and seal of the City of Pearland, Texas, this 22nd day of April,
1997, at Pearland, Texas. . .
endy Stand
Interim City retary
I (SEAL)
111
0 PnnNO on Recycled POW
l
fORDINANCE NO. 682
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS, ORDERING A SPECIAL ELECTION ON ADOPTION OF AN
ADDITIONAL ONE-HALF OF ONE PERCENT (ONE-HALF [1/2] CENT)
SALES AND USE TAX WITHIN THE CITY OF PEARLAND TO BE USED
BY A CITY INDUSTRIAL DEVELOPMENT CORPORATION FOR THE
PROMOTION AND DEVELOPMENT OF NEW AND EXPANDED BUSINESS
ENTERPRISES AND ANY OTHER PURPOSE AUTHORIZED BY SECTION
4B, ARTICLE 5190 . 6, V.T.C.S . , AS AMENDED, (THE
DEVELOPMENT CORPORATION ACT OF 1979) ; PROVIDING FOR THE
LOCATION OF POLLING PLACES, PROVIDING FOR NOTICE OF
ELECTION AND ORDAINING OTHER RELATED MATTERS.
WHEREAS, pursuant to Section 4B(d) , Development Corporation
Act of 1979 (Article 5190.6, V.T.C. S. ) , the City Council is
authorized to call a Special Election on the adoption of an
additional one-half of one percent (one-half [1/2] cent) Sales and
Use Tax within the City to be used by a city industrial development
corporation for the promotion and development of new and expanded
business enterprises and all other purposes authorized by Section
4B, Development Corporation Act of 1979 (Article 5190 .6, V.T.C.S. ) ;
and
WHEREAS, the City Charter .of the City• of Pearland and the laws
of the State of Texas provide that the Election Code of the State
of Texas is applicable to said Special Election; and
WHEREAS, the City Council desires to call a Special. Election •
upon the adoption of such additional Sales and Use Tax; therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS :
Section 1 ._ A Special Election is hereby ordered in accordance
with the Texas Election Code to be held within the City of
1
Pearland, Texas, on Saturday, January 21, 1995 , from 7 :00 A.M. to
7 :00 P.M. in Brazoria County Election Precincts 12, 26, 28 , 29,
31, 36, 40 , 46 , 47, 51, 58 , and 61 and Harris County Election.
Precinct 537 , at the Melvin Knapp Activity Building, 2425 S . Grand
Blvd. , Pearland, Texas.
Section 2 . In accordance with the Texas Election Code, the
following proposition shall be submitted by official ballot to the
resident qualified voters of the City of Pearland, Texas, who are
eligible to vote:
Proposition
The adoption of an additional one-half cent ( 1/2 ) Sales
and Use Tax within the city to be used by a city indus-
trial development corporation for the promotion and
develo ment of new and expanded business ente rises and
any other purpose authorize y Section 4B, Article
5190.6, V.T.C.S. , as amended, (The Development Corpora-
tion Act of 1979) , including but not limited to land,
buildings, equipment, facilities and improvements found.
by the board of directors of the city's industrial
development corporation to: (a) be required or suitable
for use for professional and amateur (including
children's) sports, athletic, entertainment, tourist,
convention, and public park purposes and events, includ-
ing stadiums, ball parks, auditoriums, amphitheaters,
concert halls, learning centers, parks and park facili-
ties, open space, improvements, municipal buildings,
museums, exhibition facilities, - and related store, .
restaurant, concession, and automobile parking facili-
ties, related area transportation facilities, and related-
,
roads, streets, and water and sewer facilities, and other'
related improvements that enhance any of those items; or
(b) promote or develop new or expanded business
enterprises, including a project to provide public safety
facilities, streets and roads, drainage and related
improvements, demolition of existing structures, general
municipally owned improvements, as well as any improve
ments or facilities that are related to any of these
projects and any other project that the board in its
discretion determines promotes or develops new or
I/ expanded business enterprises; or (c) pay the principal .
of, interest on, and other costs relating to bonds or
other obligations issued by the industrial development
11 2
I
corporation to pay the costs of the projects, including
maintenance and operation costs, or to refund bonds or
other obligations issued to pay the costs of projects.
Section 3 . Immediately below the proposition there shall. be
printed the words, one above the other, as follows, so as to permit
the electors to vote "FOR" or "AGAINST" the proposition, with the
ballots to contain such provisions,, markings arid language as
required by law:
"FOR"
"AGAINST"
Section 4 . Inez Farmer is hereby appointed as Presiding Judge
fof said Special Election and Oleta Hawkins as Alternate Presiding
l '
Judge. The Presiding Judge shall appoint the necessary clerks to
assist her which shall be not less than two (2) nor more than seven
(7) . Notice of appointment of Presiding Judge shall be in
accordance with Section 32 . 009 of the Texas Election Code.
Section 5 . In accordance with the Texas Election Code, early
voting by personal appearance shall be conducted each weekday
between the hours of 8:00 A.M. and 5 : 00 P.M. at Pe-arland City Hall.
- 3519 Liberty Drive, Pearland, Texas. The period for early voting
by personal appearance shall begin on the 20th day before election
day and continue through the fourth day before election day. If
the 20th day for beginning the period of early. voting is a
ISaturday, Sunday, official city holiday, or legal state holiday,
11 the period will begin on the next regular business day. The above
designated lace for earlyvotingis also the earlyvoting clerk's
9n P g
IImailing address to which ballot applications and ballots voted by
3
mail may be sent. Late voting by sick or disabled voters after
close of regular early voting period shall be in accordance with
Chapter 102 of the Texas Election Code.
Section 6. The City. Secretary is hereby appointed Clerk for.
early voting and Sharon Parks and Tommie Jean Vial are hereby
appointed Deputy Clerks for early voting.
Section 7. In accordance with the Texas Election Code
, it is
hereby determined that electronic voting systems shall be used in
said Special Election for all voting, including early voting by
- personal appearance and by mail. Inez Farmer is hereby appointed as
the Presiding Judge of the Early Voting Ballot Board and shall
appoint the necessary clerks to assist her which shall be not less
than two (2) .
Section 8 . Notice of this Special Election shall be given in
accordance with the terms and .provisions of Chapter 4 of the
Election Code and the City Secretary is hereby instructed to have
said notice posted and/or published in accordance with Chapter 4.
Section 9. Immediately after the Special Election is held,
the officer holding the same shall make known results of the
returns thereof to the Mayor in accordance with the Texas Election
Code.
Section 10 . The City Secretary is hereby authorized and
instructed to provide and furnish all necessary election supplies
to conduct said Special Election.
4
: NO. 682
;SED and APPROVED on first reading this /1 day of
t , A. D. , 1994 .
C. V. Cop n r, May2
,,
s
ies, ' y Secretary, TRMC
SED and APPROVED on second and final reading this o2j1 day
, A. D. , 1994.
'
"e2/474-,:ifc.---7
C. V. Coppinger, Mayor
es, C' y Secretary, TRMC
D AS TO ORM:
/ ///
(:
':e Mc lloug , ity A orney
5
PEAR
� :r,. Cn ) o O � o Cl((llo
f
3 111 c
*�, 5* 3519 liberty Drive • Peorlond,Texos 77581-5416-
F X N (281)485-2411 • Fox.(281)485-8764
CERTIFICATION
STATE OF TEXAS §
COUNTIES OF BRAZORIA & HARRIS §
CITY OF PEARLAND § .
I, Wendy Standorf, Interim City Secretary of the City of Pearland, Texas, hereby
certify that the attached constitutes a true and correct copy of Resolution No. R95-1,
passed and approved by.City Council on January 23, 1995.
Witness my hand and seal of the City of Pearland, Texas, this 22nd day of April,
1997, at Pearland, Texas.
Wendy Sta orf
Interim City Secretary
I (SEAL)
i. 0 Owned on Recycled Pepsi
1 i
RESOLUTION NO. R95-1
A RESOLUTION AND ORDER OF THE CITY COUNCIL OF THE CITY OF
PEARLAND, TEXAS, CANVASSING THE RETURNS AND DECLARING THE
RESULTS OF THE SALES AND USE TAX SPECIAL ELECTION HELD IN
THE CITY OF PEARLAND, TEXAS, ON JANUARY 21, 1995.
On this the 23rd day of January, 1995, the City Council of the
City of Pearland, Texas, convened in Regular Session open to the
IIpublic at the regular meeting place thereof with the following
members present, to-wit:
.C. V. Coppinger
PP 9 Mayor
D. A. Miller Council, Position One
Richard Tetens Council, Position Two
Randy Weber Council, Position Three
Jerry Richardson Council, Position Four
David Smith Council, Position Five
Pat Jones . City. Secretary
and the following absent: NONE
constituting a quorum, and among other proceedings had were the
following:
Councilmember WEBER introduced a Resolution and
11 Order and moved its adoption. The motion was seconded by
Councilmember SMITH , and the motion carried with the
adoption of the Resolution and Order prevailed by the following
vote: AYES COUNCILMEMBERS RICHARDSON, WEBER, SMITH, TETENS, AND MILLER
ABSTENTIONS NONE
NAYS NONE •
• 1
The Resolution is as follows:
WHEREAS, there was held in the City of Pearland, Texas, on the
21st day of January, 1995 , a Sales and Use Tax Special Election for
the purpose of submitting by official ballot to the resident
qualified voters a proposition on the adoption of an additional
1 one-half of one percent (one-half [1/20] cent) sales and use tax
within the City of Pearland to be used by a city industrial
development corporation for the promotion and development of new
and expanded business enterprises and any other purpose authorized
by Section 4B, Article 5190. 6, V.T.C.S. , as amended, (The
Development Corporation Act) .
WHEREAS, at this Regular meeting of the City Council of the
City of Pearland, on January 23 , 1995 , after date of said election,
being the first meeting of the City Council to be held since said
election at which returns of said election could be considered and
final results declared.
NOW THEREFORE, BE IT RESOLVED AND ORDERED BY THE CITY COUNCIL
OF THE CITY OF PEARLAND, TEXAS:
Section I . .
That the election described was duly called and notice thereof
given in accordance with law; that said election was held in the
manner required by law; that due returns of said election have been
made by the proper officers; and it appeared from said returns,
duly and legally made, that there were cast at such election 978
valid and legal votes; and that said election resulted in the
■' following vote totals:
2
EXHIBIT "B" (` .
-EARLY VOTING-PRLND CITY-KNAPP Page 1
:42 :05 21-Jan-1995
. SPECIAL ELECTION
BRAZORIA COUNTY,TEXAS-JANUARY 21, 1995
• Posn Count Pct
ots Cast - TOTAL . . . . 204
. D "CITY PROPOSITION • '
PTION OF ADDITIONAL ONE-HALF CENT (1/2) SALES & USE
,.' WITHIN THE CITY USED. .FOR PROMOTION & DEVELOPMENT. . .
;TE FOR 1
IOR .
. . . . • . . 17 122 60 . 40
MIAGAINST . . 18 80 39 . 60
Total . 202 100 . 00
' the undersigned,. certify that the above results
r' true and correct. • .
Signed:
•
•
•
•
144:41rid
•
•
i
EXHIBIT "C" l
4,..' PEARLAND CITY-KNAPP ACT.CENTER Page 1
:47 :44 21-Jan-1995
SPECIAL ELECTION
BRAZORIA COUNTY,TEXAS-JANUARY 21,1995
' Posn Count Pot
.otsCast - TOTAL . 778
ARLAND 'CITY PROPOSITION
�ITION OF ADDITIONAL ONELF CENT PROMOTION/&, SALES 11 USE
DEVELOPMENT. . .
X WITHIN THE CITY USED—FOR
FOR 1 17 427 55.03
FOR . . , • . , . . .
AGAINST . . 18 349 44 .97
Total . • •• •• •• . • 776 100. 00
the ,undersigned, certify that the above results
true and correct.
Signed: .
.
EXHIBIT D
Resolution of the.City Approving Amended Bylaws of the Corporation
HOU:2579303.1
Feb 16 05 04: 04p PEDC • 2816521704 p.2
RESOLUTION NO. R99-36
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND,
TEXAS,APPROVING AMENDMENTS TO THE CORPORATE BYLAWS OF
THE PEARLAND ECONOMIC DEVELOPMENT CORPORATION.
WHEREAS, the intent and purpose of the Corporate Bylaws of the Pearland
Economic Development Corporation ("PEDC") may vary from time to time; and
WHEREAS, the PEDC Board of Directors may recommend changes to the
PEDC's existing Corporate Bylaws; and •
WHEREAS, the PEDC Board of Directors held a meeting on November 2, 1998,
and voted unanimously to recommend certain amendments to the PEDC Bylaws; and WHEREAS, any proposed changes to the Corporate Bylaws shall not become
effective,until the same has been approved by the City Council of the City of Pearland;
•
(. _I now, therefore,
BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE PEARLAND ECONOMIC
DEVELOPMENT CORPORATION: •
Section 1. That the Corporate Bylaws of the Pearland Economic Development
Corporation, a copy of which is attached hereto as Exhibit "A" and incorporated herein
for all purposes, is hereby adopted and implemented.
■ .
Section 2. Effective Date. This Resolution shall take effect immediately upon
passage.
Section 3. Public Meeting. It is officially found, determined and declared that
the meeting at which this Resolution is adopted was open to the public and public notice
1111 of the time, place and subject matter of the public business to be considered at such
meeting, including this Resolution, was given all as required by the Texas Government
Code, Chapter 551, as amended.
1
_ Feb 16 05 04: 04p PEDC 2816521704 p.3
{
RESOLUTION NO. R99-36
PASSED, APPROVED AND ADOPTED this n' f� day of Nix- I ,
A.D., 1999.
TOM REID
MAYOR
ATTEST:
•
UNG
I C I S ETAR
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
•
2
i
O4: 04pPEDC 26165217'04 p•4
Feb 16 05
i
I
1 •
EXHIBIT 'A'
•
-' CORPORATE BYLAWS
OF THE
• PEARLAND ECONOMIC DEVELOPMENT CORPORATION
These Bylaws govern the affairs of the Pearland Economic Development
Corporation (the Corporation), 'a public instrumentality and a non-profit
corporation created under Section 4B of the Development Corporation Act of
1979 (Tex. Rev. Civ. Stat. Ann. art. 5190.6), as amended (the Act), by the City
Council of the City of Pearland (the City Council) to act on behalf of the City of
r Pearland (City).
ARTICLE I. PURPOSE •
1.01. The Purpose of the Corporation is to promote, assist, and enhance
economic development activities and quality of life opportunities within the City
and its extraterritorial jurisdiction that promote economic development as
authorized by the Act. The Corporation has no members and is a non-stock
• corporation.
1.02. The Corporation shall have and exercise all of the rights, powers,
privileges, authority and functions given by the general laws ' of Texas to
non-profit corporations incorporated under the Act including, without limitation,
Article 1396-1.01, et seq., Tex'. Rev. Civ. Stat. Ann., as amended.
1.03. The Corporation ion shall have all other powers of a like or different nature not
�
prohibited by law which are available to non-profit corporations in Texas and .
corporations created under the Act and which are necessary or useful to enable
the Corporation to perform the purposes for which it is created, including, but not
limited to, the power to issue bonds, notes, or other obligations, and otherwise
I
exercise its borrowing power to accomplish the purposes for which it was created.
• 1.04. The Corporation is created as a local government corporation pursuant to
the Act and shall be a governmental unit within the meaning of Subdivision (2),
• Section 101.001, Civil Practice and Remedies Code,. as amended. The
operations
of the Corporation are governmental and not proprietary. functions for
the purposes of the Texas Tort Claims Act, Section 101.001 et seq., Civil
Practices and Remedies Code, as amended.
IPage of14
•
Feb 16 05 04: 05p PEDC 2816521704 p•5
•
•
ARTICLE 11. REGISTERED OFFICE AND AGENT
2.01. The registered agent for the Corporation shall be an individual resident of
the state. The registered office for the Corporation shall be within the boundaries
of the City
it of Pearland. The Board of Directors (the Board) shall initially maintain
and use the Pearland City Hall as its administrative office, but may move its
Iadministrative office or establish additional offices with the prior approval of the
City Council.
ARTICLE III. BOARD OF DIRECTORS
Powers
3.01. The Corporation shall be managed by a Board of Directors which is-
, authorized to exercise the powers authorized by the Act, subject to any limitations
of these bylaws, including the following:
I -
a. To purchase or acquire for the Corporation any property, rights, or
l_ • privileges and to pay therefore either wholly or partly in money,
bonds, debentures, or other securities of the Corporation as may be
lawful.
b. To create, make and issue notes, mortgages, bonds, deeds of trust,
trust agreements and negotiable or transferrable instruments and
securities, secured by a mortgage or deed of trust on any real
property of the Corporation or otherwise, and to do every other act
or thing necessary to effect the same. 0
c. To sell or lease the real or personal property of the Corporation on
the terms the Board sees fit and to execute deeds, leases, and other
conveyances or contracts as necessary for carrying out the purpose
of this Corporation.
Duties
3.02. Directors shall exercise ordinary business judgment in managing the affairs
of the Corporation. In acting in their official capacity, directors shall act in good
faith and take actions they reasonably believe to be in the best interests of the
Corporation and which are lawful. The Board is further required to perform the
following duties:
Page2of14
Feb 16 05 04: 05p PEDC 2816521704 p.6
- • a Program. The Board shall cause to be prepared an Economic
• Development Plan (the Plan) in .accordance with policies and
I directives established by the City Council. The Board shall review
the Plan at least once a year and submit it to the City Council for its
approval. The Plan shall include:
•
1. The short- and long-term objectives of the Corporation and
• how they might be achieved, including specific details of
proposed efforts or programs to achieve those objectives;
•
2.. Guidelines for how the Corporation proposes to use the sales
and use tax funds received by the Corporation to achieve its
objectives, including any limitations on the use of funds; and,
• 3. Any other information the City Council requests in writing, be
included in the Plan.
•
. b. Capital Improvements Program (CIP). The Board shall be allowed
to work in conjunction with the. Planning and Zoning Commission to
develop a five (5) year CIP in accordance with City Charter, as
- amended.
c. Reports to City Council. With each annual submission of the Plan •
• to the City Council, and at any other times requested by the
City Council, the Corporation shall submit a written Performance
•
Report, detailing the activities and accomplishments of the
Corporation since the prior Report. •
•
d. Briefings. The president and executive director shall appear before
the City Council to •brief the City Council on activities of the
Corporation .
e. Budget. At least ninety (90) days prior to commencement of the
1996-97 fiscal year and each fiscal year thereafter, the Board shall
adopt a proposed budget of expected revenues and proposed
expenditures of the next ensuing fiscal year. The budget shall
contain such classifications and shall be in such form as. may be
prescribed from time to time by the Finance Department of the City
•
of Pearland. The Corporation budget shall .not be effective until the
same has been approved by the City Council.
•
Page 3of 14 . •
Feb 16 05 04: 05p PEDC • 2816521704 P•7
Number and Qualifications .
3.03. The Board shall consist of seven (7) persons, who shall be appointed by
i! the City Council. No Director shall be a person who is a 'City employee,
City Councilmember, or any other publicly elected official, Chamber of Commerce
director, or member of any City boards.
[ ' • ••
3.04. Each director shall be a resident of the City of Pearland.• .
• Term .
3.05. Directors shall be appointed to serve two (2) year terms of office. Directors
shall be eligible for reappointment without limit to the number of terms served.
Effective May 1, 1999, directors shall serve staggered terms as set out in this
section. To assist in the transition toward staggered terms, the seven (7)
l directors appointed to serve on the Board, effective May 1 , 1999 will serve as
follows: .
I (a) Three randomly chosen directors' terms will commence on May 1,
1999 and continue through April 30, 2000;
I. b Four randomly chosen directors' terms will commence on May 1,
._ 1999 and continue through April 30, 2001.
L
•
Attendance
I. inthe Corporation shall be accompanied by active
3.06. Directorship
participation in the activities of the Board, and any director who is absent from
L three (3) consecutive meetings of the Board without valid excuse as determined
by the Board, shall automatically be dismissed from directorship. The.Board shall
at once notify the City Council that a vacancy on the Board exists.
l •
Vacancies
L 3.07. Vacancies on the Board shall be filled by appointment by the City Council.
P Non-Voting Directors
• Corporation,
The mayor, city manager, executive director of the. Corpor , the
II chairman of the board and the president of the Pearland/Hobby Area Chamber
of Commerce and executive director of the Tri-Tech Regional Council, or their
IPage4of14 •
•
l- gib 16 05 04: 05p
PEDC 2816521704 P•8
I '
designees, shall serve as ex-officio non-voting directors of the Board. The Board .
may: appoint additional. non-voting directors subject to approval of the City
Council. Such additional non-voting directors shall serve a term of one year or
until their successors are appointed. Non-voting directors shall be given notice
of all meetings of the Board and may participate in discussions at Board
meetings, but shall not be entitled to vote. Non-voting directors may participate
• in executive sessions at the request of the Board. Non-voting directors need not
reside in the City.
Compensation
•
3.09. The directors shall ;not-receive any salary-or"compensation for their
•
services. However, directors may be reimbursed for their actual and'reasonable
expenses incurred in the performance of their duties, including but not limited to
the cost of travel, lodging and incidental expenses reasonably related to the
corporate duties of the Board. Travel expenses incurred by directors to attend
regular and special meetings are not eligible for reimbursement.
ARTICLE IV. OFFICERS
Officer Positions
4.01. The officers of the Corporation shall be a president, a vice president and
a secretary, whom shall be members of the Board. The
or more e Board may
y elect other. •
ces may be
officers as the City Council deems necessary. Any tw
held by the same person except the offices of the president and secretary.
•
Election and Terms of Office
4.02. The president, vice president, secretary and any other officers the. City
Council deems necessary shall be elected annually by the Board and vacancies
in these officer positions may be filled by the Board for the unexpired terms. Each
•
officer shall hold office until a successor is duly elected and qualified. All officers
•
shall be subject to removal, with or without cause, .at any time by a vote of a
majority of the whole Board.
President •
4.03. The president shall be the chief executive officer of the Corporation, and
y,; ,e at all Board meetings. The president shall supervise and control the
business and affairs of the Corporation and perform any other duties prescribed
from time to time by the Board. The president shall have the right to vote on all
Page 5 of 14
I • •
Feb 16 05 04: 05p PEDC 2816521704 p•9
1 matters coming before the Board, and may execute deeds, mortgages, bonds,
contracts or other instruments, as authorized by the Board. The president shall.
appoint the members of all committees and all committee chairs.
�' Vice President
L4.04. The vice president shall perform the duties assigned by the Board. In the
absence of the president, or if the president is unable or refuses to act, the vice
president shall perform the duties of president.
Secretary
4.05. The secretary shall be the custodian of the Corporate records, and shall
record and keep all votes and minutes of the meetings of the Board. The
secretary shall give notice of all meetings of the Board and its committees, and
shall perform such other duties as may be prescribed by the 'president or the
Board. An assistant secretary shall assist the secretary in performance of his or
' her duties.
Executive.Director
•
4.06. The city manager, in consultation with the Board, may employ an executive
director to serve as the general manager and chief administrative officer of the
Corporation. The executive director shall be subject to the supervision of the
city manager and shall perform the duties specifically delegated to him or her by
the Board, and such other economic development duties as assigned by the city
manager. The executive director shall. serve at the pleasure of the city manager
and receive compensation from the funds of the Corporation approved by him or
her in consultation with the Board. All incentive or merit
provird. sions
he must executive
approved by the city manager and a majority of the
Bodirector shall be responsible for policy and program implementation and.the day
to day operations of the Corporation, including the hiring of employees, and the
supervision and dismissal of those employees. The executive director shall
compile and submit to the Board regular reports and recommendations regarding
the programs, policies, and business affairs of the Corporation. . The executive
Idirector shall be a non-voting, ex-officio member of the Board and of any
committees created by the Board. The executive director shall be an employee
of the City of Pearland.
•
IP .
• • Page6of14 •
.'eb 16 05 04: 06p PEDC 2816521704 p. 10
Assistant Secretary and Legal Counsel
4.07. An assistant secretary position is created to assist the secretary and the
Board in the conduct of the affairs of the Corporation. The city attorney, or such
other attorneys selected by the city attorney with the approval of the City Council,
shall represent the Corporation in all litigation. The city attorney shall be the legal
advisor of, attorney and counsel for, the Corporation and all officers thereof, in
conformance with the City Charter, as amended. The assistant secretary and city attorney shall be employees of the City.
ARTICLE V. BOARD..COMMITTEES
5.01.
The president may appoint persons to serve on standing or ad hoc
committees. A committee may include persons who are not directors of the
Corporation and who may not reside in the City. Committees will operate under
general rules adopted by the Board. Committees may be charged with specific
• duties or authority, but shall not have the authority to:
•
.--. a. Amend the articles of incorporation, amend, alter, .or repeal the
bylaws, or adopt a plan of merger or consolidation with another
corporation. •
• b. Authorize the sale, lease, exchange or mortgage of any of the
property or assets of the Corporation or commit Corporation funds
without the prior approval of the Board.
c. Authorize or revoke proceedings for the voluntary dissolution of the
Corporation or adopt a plan for the distribution of the assets of the
Corporation.
` d. Approve any transaction to which the Corporation Is a party, take
any action outside the scope of authority delegated to it by the
Board, take final action on a matter that requires the approval of the
Board, or take any action that involves a potential conflict of interest
as defined in these bylaws.
Committee Terms
IP . 5.02. The members of each standing or ad hoc committee shall serve until
successors are appointed, unless the Committee is terminated or a member is
removed, resigns, or ceases to qualify as a member. Vacancies on committees
may be filled in the same manner as the original appointment.
Page7of14 •
•
r'eb 16 05 04: 07p PEDC 2816521704 p. 11
•
•
ARTICLE VI. MEETINGS
Regular Meetings •
•
6.01. The Board shall hold at least four (4) regular meetings each year.
•
Special Meetings
6.02. Special meetings of the Board may be called at the written request of the
president or at least two (2) directors.
Notice
6.03. Written or printed notice of each regular meeting of the Board shall be
delivered to each director not less than seventy two (72) hours before the time
of the meeting. The notice shall state the place, date, and time of the meeting.
In the case of special meetings, notice may be issued to directors by mail,
telephone, fax, or in person at least seventy two (72) hours before the time of the
meeting and shall include who called the meeting and the purpose of.the meeting.
Quorum •
•
6.04. Four (4) directors shall constitute a quorum for the transaction of business
at any meeting of the Board.
{
Action of Board
6.05. The vote of a majority of the directors present and voting at a meeting at
which a quorum is present shall be sufficient to constitute the act of the Board.
Proxies
•
6.06. A director may not vote by proxy. •
Open Meetings .
•
. 6.07. All meetings and deliberations of the Board shall be called, posted,
convened and conducted in accordance with the Texas Open Meetings Act, as
amended.
•
ARTICLE VII. FINANCIAL ADMINISTRATION
Fiscal Year .
.
Page 8of14 •
"eb 16 05 04: 07p. PEDC 2616521704 p. 12
•
I7.01. The fiscal year of the Corporation shall run concurrently with the fiscal year
of the City.
•
Accounts to be Kept with City
7.02. The Corporation shall contract with the City for the administration of its
accounts, expenditures, deposits, investment of funds and accounts, and other
financial services for the Corporation. The City finance director shall designate
the accounts and depositories to be created and designated for such purposes,
and the methods of withdrawal of funds therefrom for use by and for the purposes
of the Corporation shall be approved by the executive director and presented for
the signature of the city manager and finance director or other person as the
Board shall designate.
Audits
7.03. The City shall cause the Corporation's books, records, accounts, and
financial statements, and all other financial activities for the previous fiscal year
to be audited at least once each fiscal year by an outside, independent, certified.
public accounting firm selected by the City. Council.. Any such audit shall include
a written management letter which details suggested management controls and
operating efficiencies. The audit and management letter . shall include
recommendations for improving cost reductions and safeguarding assets. A
'copy of any such audit and management letter shall be provided to each director,
and discussed in an open meeting prior to its submission to the City Council.
Each audit and management letter shall be submitted annually to the City Council
for approval. Such audit shall be at the expense of the Corporation.
•
Limitations on Expenditures .
7.04. Before expending funds to undertake a project, the Corporation shall hold
at least one public hearing on the proposed project, in accordance with the Act.
•
Contracts - General
7.05. The Corporation shall follow and be bound by the same purchasing and
contracting provisions of State law, including• the provisions on competitive
bidding, that are applicable to the City. The Board may by official action
authorize any "officer or agent of the Corporation to enter into a contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation. This authority may be limited to a specific contract or instrument or
it may extend to any number and type of possible contracts and instruments. Any .
•
Page 9 of 14 •
•
'eb 16 05 04: 08p PEDC 2816521704 p. 13
•
contract of the Corporation which will require an expenditure of funds in excess
of $100,000 that the City Council has not previously approved as part of the
• Corporation's annual budget or in a city tax abatement agreement, must be
approved by the City Council before any payment on the contract is made.
Contracts - Administrative Services
7.06. Subject to the paramount authority of the city manager under the
City Charter, the Corporation shall have the right to utilize the services and the
• staff and employees of the City, provided . (I) that the Corporation shall pay •
reasonable compensation to the City for such services, and (ii) the performance
of such services does not materially interfere with the other duties of such
personnel of the City. An administrative services contract shall be executed
between the Board and the City Council for the services provided by the
city attorney, assistant secretary, finance department and other City departments,
staff and employees:
•
Gifts
7.07. The Board may accept on behalf of. the Corporation any gift or bequest.
Special funds shall include all funds from government contracts, grants, and gifts
designated by a donor for special purposes. All other funds shall be general
funds.
•
Potential Conflicts of Interest
7.08. The members of the Board are local public officials within the meaning of
Chapter 171 of the Local Government Code, as amended, and shall adhere to
the City Council code of ethics. If a director has a substantial interest in a
business entity or real property which is the subject of deliberation by the Board,
the director shall file an affidavit with the secretary of the corporation stating the
nature and extent of the interest. Such affidavit shall be filed prior to any
deliberation, vote or decision upon the matter by the Board, and the interested
director shall abstain from any deliberation, vote or decision upon the matter.
•
Bonds
7.09. Any bonds issued by the Corporation shall be in accordance with the Act
and shall not be issued until approved by the City Council and by the bond
counsel and financial advisers of the.City.
•
Page10of14
Feb 16 05 04: 08p PEDC 2816521704 p. 14
ARTICLE VIII. BOOKS, RECORDS, AUDITS
•
Maintenance of Records
8.01. The Corporation shall keep and properly maintain, or contract with the City
to keep and properly maintain, in accordance with GAAP, complete books,
_ records, accounts, and financial statements pertaining ,to its corporate funds,
activities, and affairs. In addition to proper financial records, the Corporation
shall keep correct and complete minutes of all board and committee meetings
. and all records required by the City of Pearland, by contracting agents, or by
funding sources.
Compliance with State Law
8.02. All records shall be kept and administered in accordance with the Texas
Open Records Act, as amended.
. Inspection
8.03. Any member of the City Council or director or officer of the Corporation
may inspect and receive copies of all books and records of the Corporation
required to be kept by the Bylaws.
' ARTICLE IX. INDEMNIFICATION AND INSURANCE
• Corporation to Indemnify
anydirector or officer or former director
9.01. The Corporation shall indemnify
or officer of the Corporation for expenses and costs, including attorney's fees,
actually and necessarily incurred by the officer or director in connection with any
claim asserted against the officer or director by action in court or otherwise by
reason of the person being or having been a director or officer and acting in his
or her official capacity, except in relation to matters as to which the person shall
have been guilty of gross negligence or misconduct in respect of the matter in
which indemnity is sought.
Corporation Shall Provide Insurance •
I. 9.02. The Corporation or City shall contract for and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of. the
Corporation to insure such person against any liability asserted against the
■- person by reason of the person being or having been a director, officer,
Page 11 of 14
•
!I'--
Feb 16 05 04: 08p PEDC 2816521704 p. 15
•
•
employee, or agent of the Corporation. The premiums for the insurance shall be
paid by the Corporation.
ARTICLE X. AMENDMENTS TO BYLAWS •
10.01. The Board may alter, amend, or repeal the bylaws or adopt new bylaws,
but the change shall be effective only upon approval by the City Council.
ARTICLE.X1. PARLIAMENTARY AUTHORITY
•
11.01. Robert's Rules of Order, Newly Revised, shall be, the parliamentary
authority for all matters of procedure not specifically covered bythe bylaws or any
- specific rules of procedure adopted by the Board.
ARTICLE XII. DISSOLUTION OF THE CORPORATION
12.01. The Corporation is a non-profit corporation. Upon dissolution, all of the
Corporation's assets shall be conveyed to the City of Pearland.
ARTICLE XIII. MISCELLANEOUS PROVISIONS
Legal Authorities Governing Construction Of Bylaws
13.01. The bylaws shall be construed in accordance with the laws of the State •
of Texas. All references in the bylaws to statutes, regulations, or other sources
of legal authority shall refer to the authorities cited, or their successors, as they
may be amended from time to time. It is expressly provided that the provisions
of the Development Corporation Act of 1979 applicable to corporations governed
under Section 4B of that Act are incorporated within these bylaws by reference.
In the event of any conflict between the applicable provisions of such Act and
these bylaws, then the applicable provisions of such Act shall control.
Legal Construction
13.02. If any Bylaw provision is.held to be invalid, illegal or unenforceable in any
I . respect, the invalidity, illegality or unenforceability shall not affect any other.
provision and the bylaws shall be construed as if the invalid, illegal or
unenforceable provision had not been included in the bylaws.
Seal •
•
Page 12 of 14 .
Feb 16 05 04: 09p PEDC 2816521704 p. 16
•
•
• 13.03. The board of directors may provide for a corporate seal. Such seal would .
consist ,of concentric circles containing the words, "Pearland Economic
Development Corporation", and, 'Texas", in one circle and the word,
"Incorporated"
together with the date of incorporation of the Corporation in the
other circle.
•Headings
13.04. The headings used.in the bylaws are used for convenience and shall not
be considered in construing the terms of the bylaws.
Parties Bound
13.05. The bylaws shall be binding upon and inure to the benefit of the directors,
officers and agents of the Corporation and their respective heirs, executors,
• administrators, legal representatives, successors, and assigns except as
otherwise provided in the bylaws.
•
• Effective Date
13.06. These bylaws, and any subsequent amendments thereto, shall be
• effective on and from the date upon which approval has been given both by the .
board of directors and the City Council.
•
•
•
•
•
•
Page 13 of 14 •
Feb 16 05 04: 09p PEDC • 2916521704 p. 17•.
I •
CERTIFICATE OF SECRETARY
•
•
acting
etary of the
i certify that I am the duly elected and rthe foregoing
PEARLAND ECONOMIC DEVELOPMENT CORPORATION, and
bylaws constitute the bylaws of the Corporation. These bylaws.
tin are held approved
the
Y
- • by the7�ity Council of the City of Pearl19d Texas,
and adopted at a meeting of
. �� day of P L
- the 8o rd of Directors held on the day of NovEMP5f�2
•
2.63
I' = day of N OVEMb.- • 19
Signed this -- Y
ETARY F THE CORPORATION
I .LF
l—-- •
i
1
,
si
P . •
.......
1
1, ' Page 14of14 •
6 •
OFFICIAL STATEMENT CERTIFICATE
STATE OF TEXAS §
COUNTIES OF BRAZORIA, FORT BEND AND HARRIS §
PEARLAND ECONOMIC DEVELOPMENT CORPORATION §
I, the undersigned, President of the Board of Directors of the Pearland Economic
Development Corporation (the "Corporation"), acting solely in my official capacity, do hereby
certify on behalf of the Corporation that:
1. I have reviewed the Official Statement of the Corporation dated April 22, 2006
(the "Official Statement"), relating to the $10,235,000 PEARLAND ECONOMIC
DEVELOPMENT CORPORATION SALES TAX REVENUE BONDS, SERIES 2006.
2. To the best of my knowledge and belief, as of the date hereof, the descriptions
and statements of or pertaining to the Corporation contained in the Official Statement, and any
addenda, supplement or amendment thereto, on the date thereof, on the date of sale of the Bonds,
and on the date hereof, are true and correct in all material respects.
3. To the best of my knowledge and belief, as of the date of the Official Statement
and the date hereof, insofar as it relates to the Corporation and its affairs, including its financial
affairs, the Official Statement did not and does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made, not misleading.
4. To the best of my knowledge and belief, the descriptions and statements of or
pertaining to entities other than the Corporation and such entities' activities, including financial
data, have been obtained from sources which are believed to be reliable and there is no reason to
believe that such descriptions and statements are untrue in any material respect.
5. There has been no material adverse change in the financial condition of the
Corporation since September 30, 2005, the date of the last audited financial statements of the
Corporation appearing in the Official Statement.
6. To the best of my knowledge and belief, except as disclosed in the Official
Statement, no litigation of any nature has been filed or is pending or threatened, either in state or
federal courts, contesting or attacking the Bonds; restraining or enjoining the issuance,
execution or delivery of the Bonds; affecting the provisions made for the payment of or security
for the Bonds; in any manner questioning the authority or proceedings for the issuance,
execution or delivery of the Bonds; or affecting the validity of the Bonds.
[Execution Page Follows]
HOU:2579371.1
IN WITNESS WHEREOF, I have hereunto set my hand on behalf of the Corporation, as
of '5uti.L.2C) , 2006.
r de , oard of 'rectors
Pearland Economic Development
Corporation
[EXECUTION PAGE]
HOU:2579371.1
FEDERAL TAX CERTIFICATE
Pearland Economic Development Corporation
Sales Tax Revenue Bonds, Series 2006
I, the undersigned officer of the Pearland Economic Development Corporation of
Brazoria and Harris Counties, Texas, a political subdivision of the State of Texas (together with
any successor to its duties and functions, the "Corporation") 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 Corporation's Sales Tax
Revenue Bonds, Series 2006 (the "Bonds") in the aggregate principal amount of $10,235,000,
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 Corporation for
the office shown below my signature. In such capacity, I am charged, along with others, with
responsibility for issuing the Bonds. 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 the resolution adopted on May 22, 2006, authorizing the issuance of the
Bonds (the Resolution), and particularly the provisions thereof relating to the treatment of the
Bonds 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 1.141-15, 1.148-0 through 1.148-11, 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 Resolution.
2. Reasonable Expectations. As an officer of the Corporation responsible for
issuing the Bonds, the undersigned hereby certifies, in good faith, that the Corporation's
expectations, as of the Issue Date (as defined herein), regarding the amount and use of the gross
proceeds of the Bonds and other matters relevant to the treatment of interest on the Bonds 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 Morgan Keegan & Co., Inc., the initial purchaser that purchased.
the Bonds from the Corporation (the"Initial Purchaser") in the Certificate Regarding,Issue Price,
attached hereto as Exhibit A and certain representations of RBC Capital Markets, the financial
advisor to the Corporation (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 Corporation is issuing the Bonds
pursuant to the Resolution to provide funds, which will be used:
HOU:2584596.2
(a) to finance the construction of two lanes of Bailey Oiler Road running west
from SH 35 and existing Oiler Drive to Veterans Drive, including the acquisition of all
necessary rights of way, the construction of drainage and sewage lines along the proposed
construction and associated improvements, the construction of a two lane.rail overpass
across the Burlington Northern Lines alongthe construction route, the construction of
�
four lane transition turn-in lanes at SH 35 and Veterans Drive and median cuts for future
development along the construction route(collectively,the"Project"); and
(b) to pay the costs issuing the Bonds.
4. Proceeds of the Bonds. The sales proceeds from the sale of the. Bonds is
$10,407,566.05, which represents the aggregate principal amount of the Bonds of
$10,235,000.00,plus net original issue premium of$172,566.05.
5. Use of Proceeds of the Bonds. The sales proceeds from the sale of the Bonds
will be expended and applied by the Corporation as follows:
(a) Proceeds of the Bonds in the amount of$10,110,000.00 will be used by
the Corporation to pay costs of the Project.
(b) Proceeds of the Bonds in the amount of $90,066.05 represents the
underwriters' fee and will be retained by the Initial Purchaser from the sales proceeds as
a cost to the Corporation of issuing the Bonds.
(c) Proceeds of the Bonds in the amount of approximately $107,000.00. will
be used by the Corporation to pay costs of issuance of the Bonds.
(d) Proceeds of the Bonds in the amount of$82,500.00 will be disbursed on
the date hereof to pay the cost of insuring the Bonds.
(e) Proceeds of the Bonds in the amount of$18,000.00 will be disbursed on
the date hereof to pay the premium for the surety policy to be held in the Reserve Fund
for the Bonds.
6. Pre-Issuance Accrued Interest. In addition to the sale proceeds described in
paragraph 4, the Corporation will receive, upon the issuance of the Bonds, the amount of
$6,780.82. representing interest on the Bonds accruing during the period from June 15, 2006, to
the date hereof. Such amount will be deposited in the Corporation's Debt Service Fund created
pursuant to the Resolution (the "Debt Service Fund") and, along with all investment earnings
therefrom, will be disbursed to payinterest on the Bonds on March 1, 2007, the first interest
payment date on the Bonds. Because the amount of$6,780.82 represents accrued interest on the
Bonds for a period of less than one year and will be used to pay interest on the Bonds within one
year from the Issue Date, such amount constitutes pre-issuance accrued interest on the Bonds
and, as such, is not considered proceeds.
7. 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 Bonds
and amounts to be held in the Debt Service Fund for the payment of debt service on the Bonds
2
HOU:2584596.2
(as discussed in paragraphs 6 and 14) which have or will have at any time a sufficiently direct
nexus to the Bonds or to any governmental purpose of the Bonds to conclude that such amounts
would have been used for that governmental purpose if the proceeds of the Bonds 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 Bonds 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 Bonds; and
(ii) any fund, amount, or investment that is directly or indirectly
pledged to pay principal or interest on the Bonds. 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
Corporation 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 Bonds. Based on the reasonable expectations of the
Corporation as of the date hereof, the term of the Bonds is not longer than, and the
Corporation will not allow the Bonds to remain outstanding longer than, is reasonably
necessary for the governmental purposes for which the Bonds are being issued. The
weighted average maturity of the Bonds does not exceed 120 percent of the reasonably
expected economic life of the capital projects being financed and refinanced by the
Bonds, determined in the same manner as provided under Section 147(b) of the Code. In
addition, none of the proceeds of the Bonds will be used to finance working capital
expenditures.
8. No Other Issue. There are no other tax-exempt obligations issued by the
Corporation or any related party of the Corporation which (a) are sold at the same time as the
Bonds (within 15 days), (b) are reasonably expected to be paid from the same source of funds as
the Bonds and (c)have been or will be sold pursuant to the same plan of financing as the Bonds.
9. Temporary Period Requirements for the Bonds.
(a) Pre-Issuance Accrued Interest. The amount described in paragraph 6
represents pre-issuance accrued interest on the Bonds for a period not in excess of one
year and will be expended within one year; therefore, such amount may be invested at an
unrestricted yield.
(b) Expenditure Test. The District expects at least 85 percent of the net sale
proceeds of the Bonds will have been expended prior to June 20, 2009, for costs of the
3
HOU:2584596.2
Project. All net sale proceeds of the Bonds not expended prior to June 20, 2009, will be
invested on and after such date until final expenditure at a yield (as defined in
paragraph 13) which is not materially higher than the yield on the Bonds,except as set
forth in paragraph 17 below.
(c) Time Test. The District has incurred or will incur within six months of
the date hereof a substantial binding obligation to a third party pursuant to which the
District is obligated to expend at least five percent of the net sale proceeds of the Bonds
on the Project.
(d) Due Diligence. The District expects that the Project will proceed with due
diligence to completion and that the net sale proceeds of the Bonds will be expended on
the Project with reasonable dispatch.
(e) Investment Proceeds. The District expects that all amounts derived from
the investment of monies received from the sale of the Bonds 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 Bonds 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 Bonds, except as provided in paragraph 17 below.
The term "net sale proceeds" shall mean any amount actually or constructively received
from the sale of the Bonds, 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 Bonds.
10. No Overissuance. Based on the expectations set forth in the preceding
paragraphs, the amount of the proceeds from the issuance of the Bonds, plus all investment
proceeds to be received with respect to the Bonds, does not exceed by any amount, the amount
required for the governmental purposes for which the Bonds are being issued, as described in
paragraph 3 above.
11. Flow of Funds. Under the Resolution, the Corporation is obligated to collect and
receive certain revenues of the Corporation in an amount sufficient to pay. debt service on the
Bonds. All revenues collected and received by the Corporation for and on account of the Bonds
will be deposited into the Debt Service Fund.
12. Issue Price. The term "Issue Price," with respect to the entire issue of Bonds,
means the aggregate of the initial offering prices for all of the Bonds, plus pre-issuance accrued
interest as of date of issue on the entire issue of Bonds (unless as otherwise indicated herein).
For substantially identical Bonds, 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 Regarding Issue Price, attached as Exhibit A and incorporated
4
HOU:2584596.2
herein by reference, the Issue Price of the Bonds, without taking into account any costs of
issuance or pre-issuance accrued interest, is $10,407,566.05.
13. Yield on the Bonds. 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 Bonds, 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 Bonds produces an amount equal to (i) the Issue Price of the
Bonds, plus (ii)pre-issuance accrued interest on the Bonds as of the Issue Date. Yield on the
Bonds shall not take into account or reflect any underwriter's discount or cost of issuance of the
Bonds. For purposes hereof, yield is and shall be calculated on the basis of a 360-day year with
interest compounded semi-annually.
The yield on the Bonds subject to optional redemption and maturing in the years 2022
through 2027 (the "Yield-to-Call Bonds") is computed by treating each of the Yield-to-Call
Bonds as retired at par plus accrued interest on February 15, 2016, because such Bonds are
issued at an Issue Price that exceeds the stated redemption price at maturity of such Bonds by
more than one-fourth of one percent multiplied by the product of the stated redemption price at
maturity of such Bonds and the number of complete years to the first optional redemption date
for the Yield-to-Call Bonds. The treatment of the Yield-to-Call Bonds as retired on February 15,
2016,produces the lowest yield on the Bonds.
Except for the Yield-to-Call Bonds, the yield with respect to the Bonds subject to
optional redemption is computed by treating each Bond as retired at the stated redemption price
on the final maturity date because (i) the Corporation has no present intention to redeem prior to
maturity the Bonds which are subject to optional redemption,.(ii)no Bond is subject to optional
redemption at any time for a price less than the retirement price at final maturity plus accrued
interest, (iii)no Bond is subject to optional redemption within five years of the Issue Date,
(iv)no Bond subject to optional redemption is issued at an Issue Price that exceeds the stated
redemption price at maturity of such Bond by more than one-fourth of one percent multiplied by
the product of the stated redemption price at maturity of such Bond and the number of complete
years to the first optional redemption date for such Bond; and (v)no Bond subject to optional
redemption bears interest at a rate that increases during the term of the Bond.
The insurance premium in the amount of $82,500.00 paid to insure the Bonds and the
premium in the amount of $18,000.00 paid to purchase the Reserve Fund Surety Policy (as
defined in the Resolution) for the.Bonds (collectively, the "Insurance Premium"), constitutes a
fee for a qualified guarantee; thus the Insurance Premium in the amount of$100,500.00 will be
treated as additional interest on the Bonds for the purpose of calculating the yield on the Bonds.
The Insurance Premium represents a fee for a qualified guarantee based on the representations
set forth below:
(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 Bonds which results assuming recovery of
the Insurance Premium.
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HOU:2584596.2
(b) Guarantee In Substance. The guarantee imposes secondary liability on
Ambac Assurance Corporation ("AMBAC") that unconditionally shifts substantially all
of the credit risk for all or part of the payments on the Bonds. AMBAC is not a co-
obligor and does not expect to make any payments other than payments for which it will
be reimbursed immediately. AMBAC and related parties thereto will not use more than
ten percent of the gross proceeds of the Bonds that are guaranteed by AMBAC.
(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 Corporation to
AMBAC 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'Bonds or for the cost of casualty insurance for property financed or
refinanced by the Bonds. The.Insurance Premium is not refundable upon redemption of
the Bonds prior to maturity.
The yield on the Bonds, calculated in this manner and as stated in the Certificate of
Financial Advisor, attached hereto as Exhibit B, is 4.691930 percent. -
14. Debt Service Fund. The Corporation created pursuant to the Resolution the Debt
Service Fund to be used primarily to achieve a proper matching of revenues and debt service on.
the Bonds within each bond year. The Corporation 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 Bonds. The Corporation 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 Bonds. The portion of the Debt Service Fund which will
be depleted by the payment of debt service on the Bonds 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 Bonds, remaining in the Debt
Service Fund, after the annual payment of all principal of and interest and premium, if any, on
the Bonds, 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
Corporation reasonably expects that the sum of any amounts in the Debt Service Fund which.
(i) are allocable to such Reserve Portion and the Reserve Fund or (ii) are allocable to the Bona
Fide Portion, but are not spent for the payment of debt service on the Bonds within_13 months
after the date of receipt of such amount, together with the amounts on deposit in the Reserve
Fund, will not exceed the least of(x) 10 percent of the Issue Price (as:defined in paragraph 12),
(y) the maximum annual principal and interest requirements on the Bonds, or (z) 125 percent of
the.average annual principal and interest requirement on the Bonds, at any time so long as the
Bonds 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 Bonds, except as set forth in
paragraph'17 below.
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HOU:2584596.2
15. Reserve Fund. The Corporation continued pursuant to the Resolution the
Reserve Fund will be used to secure payment of debt service on the Bonds in the event the
balance in the Debt Service Fund is insufficient. The reserve requirement represented by the
Surety Bond Policy purchased to fund the Reserve Fund allocable to the Bonds will not exceed
the least of (i) 10 percent of the Issue Price (as defined in paragraph 12, (ii) the maximum,
annual principal and interest requirement on the Bonds, or(iii) 125 percent of the average annual
principal and interest requirements on the Bonds, 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
Bonds, except as set forth in paragraph 17 below.
16. No Other Sinking Funds. Other than the Debt Service Fund and the Reserve
Fund, there are no o other funds or accounts comprised of investment property established by and
on behalf of the Corporation (a) which are expected to be used, or expected to generate earnings
to be used, to pay debt service on the Bonds, or which are reserved or pledged as collateral for
payment of debt service on the Bonds and (b) for which there is reasonable assurance that
amounts therein will be available to pay debt service on the Bonds if the Corporation encounters
financial difficulties. Use of amounts in the Debt Service Fund and the Reserve 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 Bonds.
17. Minor Portion. The Corporation expects that the gross proceeds of the Bonds,
including all proceeds received with respect to the Bonds 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 Bonds, 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 9 above. To the
extent that such amounts remain unexpended or are otherwise on hand following the periods set
forth in paragraph 9 above exceeds the amount specified in this paragraph, the Corporation 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 Bonds or $100,000 in the aggregate, at a yield not materially
higher than the yield on the Bonds.
18. Identification of Replacement Proceeds. Notwithstanding the expectations of
the Corporation as stated above in paragraph 7 the Corporation will at all times while the Bonds
are outstanding) identify all replacement proceeds with respect to the Bonds, including any
sinking fund created for repayment of the principal or interest on the Bonds or any other amounts
held in any fund of the Corporation reasonably expected by the Corporation to be used to pay the
principal of or interest on the Bonds. If the Corporation identifies any replacement proceeds and.
- determines that a temporary period pursuant to Section 1.148-2(e) of the Regulations is not
applicable to such replacement proceeds, the Corporation will limit the yield on the investment
of such replacement proceeds to the yield on the Bonds until such proceeds are treated as spent
in accordance with the Regulations. The Corporation acknowledges that failure to properly
identify replacement proceeds and account for the investment and expenditure thereof as
required by the Regulations may result in interest on the Bonds being includable in the gross
income of the holders of the Bonds.
19. Compliance with Rebate Requirements. The Corporation has covenanted in
the Resolution that, unless the Bonds meet an exception to the rebate requirement, it will take all
7
HOU:2584596.2
necessary steps to comply with the requirement that rebatable arbitrage earnings on the
investment of the gross proceeds of the Bonds,within the meaning of Section 148(f)'of the Code,
be rebated to the federal government. Specifically, the Corporation will (i) maintain separate
records regarding the amount and timing of disbursements of proceeds of the Bonds (ii)maintain
records regarding the investment of the gross proceeds of the Bonds as may be required to
calculate the amount earned on the investment of the gross proceeds of the Bonds which are part
of a reasonably required reserve or replacement fund separately from records of amounts in other
funds or accounts maintained for the Bonds amounts on deposit in the funds and accounts of the
Corporation allocable to other bond issues of the Corporation or moneys which do not represent
gross proceeds of any Bond of the Corporation (iii) calculate at such times as required by
applicable Regulations, the rebatable amount earned from the investment of the gross proceeds
of any Bond of the Corporation, (iv) calculate at such times as required by applicable
Regulations, the rebatable amount earned from the investment of the gross proceeds of the Bonds
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 Bonds 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 Corporation acknowledges that the purposes
of compliance with Section 148 of the Code, gross proceeds of the Bonds 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 Corporation will employ accountants or other persons
with expertise in performing the rebate calculations as is necessary to insure compliance with the
Code. The Corporation will employ legal counsel as is necessary to resolve the interpretive
issues involved in complying with the rebate requirements of the Code. Further, the Corporation
will not 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 Bonds. In the event that the
Corporation fails to comply with the rebate requirements of the Code, the Corporation agrees to
take all steps available under the Code to bring the Bonds into compliance with the Code; such
steps include paying any penalty, interest or other amounts which will allow the Corporation to
return to compliance with the rebate requirements of the Code. If the Corporation is required to
pay rebate or other amounts, such as penalties and interest, to the United States with respect to
the Bonds pursuant to Section 148(f) of the Code in order to prevent the Bonds from constituting.
arbitrage bonds or being otherwise classified or treated such that interest on the Bonds would not
be excludable from the gross income of the holders thereof for federal income tax purposes, the
Corporation will timely make such payments from available funds of the Corporation, and the
Corporation reasonably expects that it will have the ability to make such payments from
available funds of the Corporation in the event such payments become necessary. The
undersigned reasonably expects that the Corporation will fulfill its covenants and representations
in this regard. .
The Corporation hereby makes the following elections with respect to the Construction
Proceeds of the Bonds:
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
8
HOU:2584596.2
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 1.148-7(i)(2) of the
Regulations.
❑ ® ❑ 3. To treat the portion of the Bond 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 Bonds. Section
1.148-7(j)(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 Bonds fail to satisfy any of the semiannual
spending requirements for the two-year rebate
exception. Section 1.148-7(k)(1) of the Regulations.
20. Not a Refunding. No portion of the proceeds of the Bonds are expected to be
used to pay any principal of or interest on any issue of governmental obligations other than the
Bonds..
21. Not a Reimbursement.' Except for those expenditures described in the resolution
of the Corporation adopted on March 6, 2006 (attached hereto as Exhibit C) regarding certain
expenditures already paid by the City with respect to the Project prior to the date hereof, and
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 Bonds, none of the proceeds of the Bonds will
be allocated to, or otherwise used, to reimburse any expenditure paid, either actually or
constructively,by the Corporation prior to the Issue Date.
22. No Change in Use. The Corporation does not expect to dispose of any portion of
any project related to the Bonds, or to change the use of the proceeds of the Bonds while any of
the Bonds are outstanding.
23. Not a Hedge Bond. The Bonds are not "hedge bonds" within the meaning of
Section 1.149(g)-1 of the Regulations.
24. No Abusive Arbitrage Device. The Bonds are not and will not be a part of an
issue in which an abusive arbitrage device (as defined in Section 1.148-10(a) of the Regulations)
is used. Without limiting the foregoing, the Bonds 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 Corporation to exploit the difference between
tax-exempt and taxable interest rates to gain a material financial advantage, and (ii)increasing
9
HOU:2584596.2
the burden on the market for tax-exempt obligations. In this regard, the Corporation issued the
Bonds 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 Corporation has
not issued the Bonds in an amount higher than is reasonably necessary to accomplish the
governmental purposes of the Bonds, the Corporation has not issued the Bonds earlier than is
reasonably necessary to accomplish the governmental purposes of the Bonds and the Corporation
is not allowing the Bonds to remain outstanding longer than is reasonably necessary to
accomplish the governmental purposes of the Bonds. The Corporation would have issued the
Bonds regardless of any arbitrage benefit, which it may realize in connection with the Bonds. In
fact, the Corporation reasonably expects that even if the Bonds 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 Bonds are in fact now being issued, the Corporation would have issued
the Bonds, notwithstanding the loss of any opportunity to borrow at lower tax-exempt rates and
invest at higher taxable rates.
(a) No Impermissible Sinking Fund. No portion of the Bonds has a
maturity determined primarily for the purpose of creating a sinking fund with respect to
the Bonds the yield on which will be blended'with the yield on the investment of other
proceeds of the Bonds 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 Bonds (and that is directly related to capital
expenditures financed by the Bonds), the Corporation will only expend proceeds of the
Bonds for (i) costs that would be chargeable to the capital accounts of the Project if the
Corporation's income were subject to federal income taxation and (ii)interest on the
Bonds in an amount that does not cause the aggregate amount of interest paid on all of
the Bonds to exceed that amount of interest on the Bonds 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 Bonds or (B) the date that is one year after the date on which
the Project is placed in service.
(c) No Related Sinking Fund. No portion of the Bonds has a,maturity
determined primarily for the purpose of creating a sinking fund with respect to the Bonds
the yield on which will be blended with the yield on the Escrowed Securities to reduce
the negative arbitrage in the Escrow Fund.
(d) No Sale of a Conduit Loan. No portion of the gross proceeds of the
Bonds has been or will be used to acquire, finance or refinance a conduit loan.
25. Allocations and Accounting. The proceeds of the Bonds 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 Bonds, if earlier. The allocation
of proceeds will be made by employing the direct-tracing method of accounting, unless the
Corporation elects otherwise.
10
HOU:2584596.2
26. 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 Bonds is 17.655 years, which is the sum of the products of
o
the Issue Price of each group of identical Bonds and the number of years to maturity(determined
separately for each group of identical Bonds and taking into account mandatory redemptions),
divided by the aggregate sale proceeds of the'Bonds.
27. No Private Use, Payments or Loan Financing.
(a) General. The Corporation reasonably expects, as of the date hereof, that
no action or event during the entire stated term of the Bonds 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 Bonds, or the facilities
refinanced by the Bonds, will be used in a trade or business of a nongovernmental
person. For purposes of determining use, the Corporation 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 proceeds of the Bonds is treated as
the,direct use of proceeds; (C) a nongovernmental person will be treated as a
private business user of proceeds of the Bonds 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 Bonds.
(ii) The Corporation 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
Bonds, or the facilities refinanced by the Bonds, 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 Bonds 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 Bonds). For this purpose any
action within the control of the Corporation is treated as a deliberate action. A
deliberate action occurs on the date the Corporation enters into a binding contract
with a nongovernmental person for use of the proceeds of the Bonds that is not
subject to any material contingencies.
(iii) No portion of the proceeds of the Bonds will be directly or
indirectly used to make or finance a loan to any person other than a state or local
governmental unit.
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HOU:2584596.2
(b) Dispositions of Personal Property in the Ordinary Course.
Dispositions of personal property financed or refinanced with any portion of the proceeds
of the Bonds 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 Bonds
financing 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;
(iii) Such personal property will no longer be suitable for its
governmental purposes on the date of disposition; and
(iv) The Corporation is required to deposit amounts received from such
disposition in a commingled fund with substantial tax or other governmental
revenues and the Corporation reasonably expects to spend such amounts on
governmental programs within 6 months from the date of commingling.
28. No Arbitrage. On the basis of the foregoing facts, estimates and circumstances,
it is expected that the proceeds of the Bonds will not be used in a manner that would cause any of
the Bonds 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.
[SIGNATURE PAGE FOLLOWS]
tl
12
HOU:2584596.2
WITNESS MY HAND, this 20th day of June, 2006.
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
By;
red elch
Executive Director
EXHIBIT A—Certificate Regarding Issue Price
EXHIBIT B—Certificate of Financial Advisor
EXHIBIT C —Reimbursement Resolution
13
HOU:2584596.2
EXHIBIT A
CERTIFICATE REGARDING ISSUE PRICE
A-1
HOU:2584596.2
EXHIBIT B
CERTIFICATE OF FINANCIAL ADVISOR
The undersigned hereby certifies with respect to the sale of Pearland Economic
Development Corporation Sales Tax Revenue Bonds, Series 2006 (the"Bonds"), as follows: -
1. The undersigned is a duly authorized representative of RBC Capital Markets, the
financial advisor (the "Financial Advisor") to Pearland Economic Development Corporation (the
"Corporation") in connection with the sale and delivery of the Bonds. In this capacity, the
undersigned is familiar with the facts stated herein.
2. Based on the scheduled debt service on the Bonds, an amount of not less than the
Reserve Fund Requirement (as defined in the Ordinance) maintained in the Reserve Fund for the
Bonds is consistent with accepted standards of prudent fiscal management for similar
governmental entities in order to provide a reserve against periodic fluctuations in the amount
and timing of revenue collections of the Corporation and unanticipated financial problems of the
Corporation.
3. 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 Bonds, 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 Bonds produces an
amount equal to (i)the Issue Price of the Bonds, plus (ii)pre-issuance accrued interest on the
Bonds as of the Issue Date. Yield on the Bonds shall not take into account or reflect any
underwriter's discount or cost of issuance of the Bonds. For purposes hereof, yield is and shall
be calculated on the basis of a 360=day year with interest compounded semi-annually.
The yield on the Bonds subject to optional redemption and maturing in the years 2022
through 2027 (the "Yield-to-Call Bonds") is computed by treating each of the Yield-to-Call
Bonds as retired at par plus accrued interest on February 15, 2016, because such Bonds are
issued at an Issue Price that exceeds the stated redemption price at maturity of such Bonds by
more than one-fourth of one percent multiplied by the product of the stated redemption price at
maturity of such Bonds and the number of complete years to the first optional redemption date
for the Yield-to-Call Bonds. The treatment of the Yield-to-Call Bonds as retired on February 15,
2016,produces the lowest yield on the Bonds.
Except for the Yield-to-Call Bonds, the yield with respect to the Bonds subject to
optional redemption is computed by treating each Bond as retired at the stated redemption price
on the final maturity date because (i)the Corporation has no present intention to redeem prior to
maturity the Bonds which are subject to optional redemption, (ii)no Bond is subject to optional
redemption at any time for a price less than the retirement price at final maturity plus accrued
interest, (iii)no Bond is subject to optional redemption within five years of the Issue Date,
(iv)no Bond subject to optional redemption is issued at an Issue Price that exceeds the stated
redemption price at maturity of such Bond by more than one-fourth of one percent multiplied by
the product of the stated redemption price at maturity of such Bond and the number of complete
B-1
HOU:2584596.2
years to the first optional redemption date for such Bond; and (v)no Bond subject to optional
redemption bears interest at a rate that increases during the term of the Bond.
The insurance premium in the amount of $82,500.00 paid to insure the Bonds and the
premium in the amount of $18,000.00 paid to purchase the Reserve Fund Surety Policy (as
defined in the Resolution) for the Bonds (collectively, the "Insurance Premium"), constitutes a
fee for a qualified guarantee; thus the Insurance Premium in the amount of$100,500.00 will be
treated as additional interest on the Bonds for the purpose of calculating the yield on the Bonds.
The Insurance Premium represents a fee for a qualified guarantee based on the representations
set forth below:
(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 Bonds which results assuming recovery of
the Insurance Premium.
(d) Guarantee In Substance. The guarantee imposes secondary liability on
AMBAC Assurance Corporation("AMBAC")that unconditionally shifts substantially all
of the credit risk for all or part of the payments on the Bonds. AMBAC is not a co-
obligor and does not expect to make any payments other than payments for which it will
be reimbursed immediately. AMBAC and related parties thereto will not use more than
ten percent of the gross proceeds of the Bonds that are guaranteed by AMBAC.
(e). 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 .Corporation to
AMBAC 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 Bonds or for the cost of casualty insurance for property financed or
refinanced by the Bonds. The Insurance Premium is not refundable upon redemption of
the Bonds prior to maturity.
The yield on the Bonds as calculated in this manner is 4.691930 percent.
3. The Financial Advisor calculated the weighted average maturity.of the Bonds to
be 17.655 years. The weighted average maturity is the sum of the products of the Issue Price of
each group of identical Bonds and the number of years to maturity (determined separately for
each group of identical Bonds and taking into account mandatory redemptions), divided by the
aggregate sale proceeds of the Bonds.
4. With respect to the issuance of the Bonds, 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]
B-2
HOU:2584596.2
The Financial Advisor hereby authorizes the Corporation 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 Corporation with the
provisions of the Code regarding the exclusion from gross income of the interest on the Bonds.
Further, we hereby authorize Andrews Kurth LLP,Bond Counsel to the Corporation,to rely on
the statements made herein in connection with its opinion that interest on the Bonds is
excludable from gross income for federal income tax purposes.
EXECUTED and DELIVERED as of and on June 20,2006.
RBC CAPITAL MARKETS
7
By: / 06z.,
Rya 'Hara
Vic President
B-3
HOU:2584596.2
i _'
Form 8038-G Information Return for Tax-Exempt Governmental Obligations
► Under Internal Revenue Code section 149(e) OMB No.1545-0720
(Rev. November 2000) ► See separate Instructions.
Department of the Treasury Caution:If the issue price is under$100,000, use Form 8038-GC.
Internal Revenue Service
Part I Reporting Authority If Amended Return, check here ► ❑
1 Issuer's name 2 Issuer's employer identification number
Pearland Economic Development Corporation 74; 6028909
3 Number and street(or P.O. box if mail is not delivered to street address) Room/suite 4 Report number
3519 Liberty Drive 3 2006-1
5 City,town, or post office, state,and ZIP code 6 Date of issue
Pearland,Texas 77581 06/20/2006
7 Name of issue 8 CUSIP number
Sales Tax Revenue Bonds,Series 2006 704871 CL4
9 Name and title of officer or legal representative whom the IRS may call for more information 10 Telephone number of officer or legal representative
Kathryn V.Garner, Bond Counsel ( 713 ) 220-3948
Part II Type of Issue (check applicable box(es) and enter the issue price) See instructions and attach schedule
— 11 ❑ Education 11
12 ❑ Health and hospital 12
13 11 Transportation 13 10,407,566.05
14 ❑ Public safety 14
15 ❑ Environment(including sewage bonds) 15
16 ❑ Housing 16
17 ❑ Utilities 17
18 ❑ Other. Describe ► 18
19 If obligations are TANs or RANs, check box ► ❑ If obligations are BANs, check box ► ❑
20 If obligations are in the form of a lease or installment sale, check box ► ❑ ��
Part III Description of Obligations. Complete for the entire issue for which this form is being filed.
(a)Final maturity date (b)Issue price (c)Stated redemption (d)Weighted (e)Yield
price at maturity average maturity
21 09/01/2030 $ 10,407,566.05 $ 10,235,000.00 17.655 years 4.691930
Part IV Uses of Proceeds of Bond Issue (including underwriters' discount)
22 Proceeds used for accrued interest 22 6,780.82
23 Issue price of entire issue (enter amount from line 21, column (b)) 23 10,407,566.05
24 Proceeds used for bond issuance costs(including underwriters' discount) . 24 197,066.05 r
25 Proceeds used for credit enhancement 25 100,500.00
26 Proceeds allocated to reasonably required reserve or replacement fund . 26 0.00
27 Proceeds used to currently refund prior issues 27 0.00 j
_, 28 Proceeds used to advance refund prior issues 28 0.00
29 Total (add lines 24 through 28) 29 297,566.05
30 Nonrefunding proceeds of the issue (subtract line 29 from line 23 and enter amount here). . 30 10,110,000.00
Part V Description of Refunded Bonds (Complete this part only for refunding bonds.)
31 Enter the remaining weighted average maturity of the bonds to be currently refunded . . . ► years
32 Enter the remaining weighted average maturity of the bonds to be advance refunded . . ► years
33 Enter the last date on which the refunded bonds will be called ►
34 Enter the date(s)the refunded bonds were issued ►
Part VI Miscellaneous
35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . , , 35
36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract(see instructions) 36a
b Enter the final maturity date of the guaranteed investment contract ► rA
37 Pooled financings: a Proceeds of this issue that are to be used to make loans to other governmental units 37a
b If this issue is a loan made from the proceeds of another tax-exempt issue, check box ► ❑ and enter the name of the
issuer ► and the date of the issue ►
38 If the issuer has designated the issue under section 265(b)(3)(B)(i)(III) (small issuer exception), check box . . ► ❑
39 If the issuer has elected to pay a penalty in lieu of arbitrage rebate, check box ► ❑
40 If the issuer has identified a hedge, check box ► ❑
Under penalties of perjury,I declare that I have examined this return and accompanying schedules and statements,and to the best of my knowledge
and belief,they are true,correct,and complete.
- Sign / J
, Here /_...."A
Ai�1"� ��` £( l Fred Welch,Executive Director
signature of issuer's authorized representative Date rType or print name and title
For Paperwork Reduction Act Notice, see page 2 of the Instructions. Cat.No.63773S Form 8038-G (Rev. 11-2000)
CERTIFICATE OF BOND INSURER
In connection with the issuance of$10,235,000 in aggregate principal amount of the
Pearland Economic Development Corporation, Texas (the "Obligor"), Sales Tax Revenue
Bonds,Series 2006,dated June 15,2006(the"Obligations"),Ambac Assurance Corporation
("Ambac") is issuing a Surety Bond (the "Surety") and a Financial Guaranty Insurance
Policy (the "Policy"). The Surety guarantees payment of an amount not to exceed
$788,957.00 to fund the Reserve Requirement(as defined in the Surety), all as more fully set
out in the Surety, and the Policy guarantees the payment of principal of and interest when
due on the Obligations,all as more fully set out in the Policy.
Ambac On behalf of Ambac,the undersigned hereby certifies that:
(i) the Surety is an unconditional and recourse obligation of Ambac to pay the
scheduled payments of interest and principal on the Obligations in the event a draw on the
Debt Service Reserve Fund is required under the Resolution and the amount credited to such
Debt Service Reserve Fund is insufficient to make such payment(up to but not in excess of
the Surety Bond Coverage as defined in the Surety);
(ii) the Policy is an unconditional and recourse obligation of Ambac (enforceable
by or on behalf of the holders of the Obligations) to pay the scheduled payments of interest
and principal on the Obligations in the event of a Nonpayment as defined in the Policy;
(iii) the premiums of$18,000.00 for the Surety and$82,500.00 for the Policy were
determined in arm's length negotiations in accordance with our standard procedures, are
required to be paid as a condition to the issuance of the Surety and the Policy, and represent
reasonable charges for the transfer of credit risk;
(iv) no portion of such premiums represents a payment for any direct or indirect
services other than the transfer of credit risk,including costs of underwriting or remarketing
the Obligations or the cost of insurance for casualty of Obligation financed property;
(v) we are not co-obligors on the Obligations and we do not reasonably expect that
we will be called upon to make any payment under the Surety or the Policy;and
(vi) the Obligor is not entitled to a refund of any portion of the premiums for the
Surety or the Policy in the event that the Obligations are retired prior to their stated maturity.
IN WITNESS WHEREOF, Ambac Assurance Corporation has caused this
certificate to be executed in its name on this 20th day of June, 2006, by one of its officers
duly authorized as of such date.
AMBAC ASSURANCE CORPORATION
By: kaa„,viAok'
Nicholas A.Concilio
Vice President and
Assistant General Counsel
INCUMBENCY CERTIFICATE OF
AMBAC ASSURANCE CORPORATION
I, Yolanda Ortiz, Assistant Secretary of Ambac Assurance Corporation, do
hereby certify that:
Ambac 1. The below-named persons are the Vice President and Assistant
General Counsel, the Vice President, and the Assistant Secretary of
Ambac Assurance Corporation and the signatures set opposite their
names are genuine and true signatures.
2. Nicholas A. Concilio, Danielle Packer and Mike Filomio are
authorized to execute guaranty agreements and surety bonds
guaranteeing obligations on behalf of Ambac Assurance
Corporation.
Name Title Signature
Nicholas A. Concilio Vice President and aA, Gt
Assistant General Counsel
Danielle Packer Vice President
Mike Filomio Assistant Secretary
IN WITNESS WHEREOF, I hereunto set my hand and deliver this
Certificate on this 16th day of June,2006.
AMBAC ASSURANCE CORPORATION
By:
olanda Ortiz
ssistant Secret
A N D R E W S 600 Travis,Suite 4200
Houston,Texas 77002
ATTORNEYS K U R T H LLP 713.220.4200 Phone
713.220.4285 Fax
andrewskurth.com
June 20, 2006
WE HAVE ACTED as Bond Counsel for the Pearland Economic Development
Corporation (the "Corporation") in connection with an issue of bonds (the "Bonds") described as
follows:
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006, dated June 15, 2006, in the aggregate
principal amount of $10,235,000, maturing on September 1 in each year from
2007 through 2021, inclusive, and on September 1 in the years 2024, 2027, and
2030. The Bonds are issuable in fully registered form only, in denominations of
$5,000 or integral multiples thereof, bear interest, are subject to redemption prior
to maturity and may be transferred and exchanged as set out in the Bonds and in
the resolution (the "Resolution") adopted by the Board of Directors of the
Corporation 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 Bonds under the Constitution and laws of the State of
Texas and with respect to the exclusion of interest on the Bonds from gross income under federal
income tax law. In suchcapacity
c acit 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 Bonds, as described in the Resolution. The transcript contains certified copies of
certain proceedings of the Corporation and the City of Pearland, Texas (the "City"); certain
certifications and representations and other material facts within the knowledge and control of
the Corporation and the City, upon which we rely; and certain other customary documents and
instruments authorizing and relating to the issuance of the Bonds. We have also examined
executed Bond 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 Corporation or the City or the disclosure thereof in connection
with the sale of the Bonds. Our role in connection with the Corporation's Official Statement
prepared for use in connection with the sale of the Bonds 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 Bonds in full compliance with the Constitution
and laws of the State of Texas presently in effect; the Bonds constitute valid and
legally binding special obligations of the Corporation enforceable in accordance
HOU:2574675.1
Austin Dallas Houston London Los Angeles New York The Woodlands Washington,DC
with the terms and conditions thereof, except to the extent that the rights and
remedies of the owners of the Bonds may be limited by laws heretofore or
hereafter enacted relating to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the rights of creditors of political subdivisions and
the exercise of judicial discretion in appropriate cases; and
(2) The Bonds are secured by and payable solely, both as to principal
and interest, from the receipts of a sales and use tax levied by the City for the
benefit of the Corporation, which taxes have been pledged irrevocably to pay the
principal of and interest on the Bonds; and
(3) The Bonds are special obligations solely of the Corporation and are
not obligations of the State of Texas, the City nor any political corporation,
subdivision or agency of the State.
ALSO BASED ON OUR EXAMINATION AS DESCRIBED ABOVE, it is our further
opinion that, subject to the restrictions hereinafter described, interest on the Bonds 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 Corporation 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 Bonds in
order that interest thereon be, or continue to be, excluded from gross income for federal income
tax purposes. The Corporation has covenanted in the Resolution to comply with each such
requirement. Failure to comply with certain of such requirements may cause the inclusion of
interest on the Bonds in gross income for federal income tax purposes to be retroactive to the
date of issuance of the Bonds. 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 Bonds in
gross income of the owners thereof for federal income tax purposes.
INTEREST ON all tax-exempt obligations, including the Bonds, 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 Bonds 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 Bonds. Prospective
purchasers of the Bonds should be aware that the ownership of tax-exempt obligations, such as
the Bonds, may result in collateral federal income tax consequences to, among others, financial
institutions, life insurance companies, property and casualty insurance companies, certain foreign
HOU:2574675.I
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 Bonds.
YAILIL L(.4\
7867/7866
HOU:2574675.1
/� w i D p C \A t S 600 Travis,Suite 4200
/'1�v R C �/1/ Houston, Texas 77002
ATTORNEYS KU R T H LLP 713.220.4200 Phone
713.220.4285 Fax
andrewskurth.com
June 20, 2006
Ambac Assurance Corporation
One State Street Plaza
New York,New York 10004
Re: Pearland Economic Development Corporation Sales Tax Revenue Bonds, Series
2006
Ladies and Gentlemen:
We have acted as Bond Counsel to the Pearland Economic Development Corporation (the
"Corporation"), in connection with the issuance by the Corporation of the above-referenced bonds
(the"Bonds") and the execution and delivery by the Corporation of a Guaranty Agreement, dated as
of June 20, 2006 (the "Agreement"), between the Corporation and Ambac Assurance Corporation
("Ambac"). The Agreement is being executed and delivered by the Corporation pursuant to the
provisions of a resolution adopted by the Board of Directors of the Corporation on May 22, 2006
authorizing the issuance of the Bonds (the"Resolution"). The Resolution authorizes the purchase of
a surety policy (the "Surety Policy") for the Reserve Fund established for the Bonds and further
provides for the execution of such documents necessary to obtain the Surety Policy. The
Agreement provides the terms under which the Corporation is required to reimburse Ambac for
payments made by Ambac under the Surety Policy. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Agreement and the Resolution.
We have examined the Agreement, the Surety Policy, the Resolution, and such other official
proceedings, documents, opinions, certificates and materials as we have deemed necessary for the
purpose of rendering the opinions expressed below. In our examinations, we have assumed the
authenticity of all documents submitted to us as originals, the conformity to original copies of all
documents submitted to us as certified or photostatic copies,the authenticity of the originals of such
latter documents, and the accuracy of the statements contained in such certificates.
Based upon the foregoing and subject to the qualifications and exceptions hereinafter
noted, we are of the opinion that, under applicable laws of the United States of America and the
State of Texas in force and effect on the date hereof, the Agreement has been duly authorized,
executed and delivered by the Corporation and constitutes a valid and legally binding agreement
of the Corporation enforceable in accordance with its terms.
Our opinion expressed in the preceding paragraph is qualified to the extent that (a) the
enforceability of the obligations of the Corporation under the Agreement, including the payment
of fees and amounts due thereunder may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, or similar laws of general application from time to time affecting the
HOU:2588406.1
Austin Beijing Dallas Houston London Los Angeles New York The Woodlands Washington, DC
June 20, 2006
Page 2
rights of creditors and secured parties generally and(ii) general principles of equity which permit
the exercise of judicial discretion; and (b) a particular court may refuse to grant certain equitable
remedies, including, without limitation, specific performance with respect to the enforceability of
any of the provisions of the Agreement.
Our opinion is limited solely to the laws of the United States of America and the State of
Texas, and we express no opinion with respect to laws or court decisions of any other
jurisdiction. The opinion expressed herein may be relied upon only by the addressees hereof and
by other persons to whom specific permission to rely on such opinion is given in writing.
•
Respectfully submitted,
ap,41)/uidjA
HOU:2588406.1
ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
'June 19, 2006
THIS IS TO CERTIFY that Pearland Economic Development Corporation(the
"Issuer") has submitted to me Pearland Economic Development Corporation Sales
Tax Revenue Bond,Series 2006(the"Bond"),in the principal amount of$10,23 5,000,
for approval. The Bond is dated June 15, 2006, numbered T-1, and was authorized •
by a Resolution of the Issuer passed on May 22, 2006 (the "Resolution").
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 any official statement or other offering material relating to
the Bond.
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
Resolution):
(1) The Bond has been issued in accordance with law and is a valid and binding special
obligation of the Issuer.
(2) The Bond is secured by and payable solely from a first lien on and pledge of the
Pledged Revenues,which includes the proceeds received by the City and transferred
to the Issuer from a Sales Tax levied pursuant to Section 4B of the Act. •
(3) The owner of the Bond shall never have the right to demand payment of the Bond
from any tax proceeds,other than the Pledged Revenues collected by the City for the
benefit of the Issuer pursuant to Section 4B of the Act, or from any other source.
POST OFFICE Box 12548, AUSTIN, TEXAS 78711-2548 TEL:(512)463-2100 WWW.OAG.STATE.TX.US
An Equal Employment Opportunity Employer • Printed on Regaled Paper
Pearland Economic Development Corporation Sales Tax Revenue Bond,Series 2006-$10,235,000
-Page 2 -
(4) Neither the State of Texas, the City of Pearland, Texas, nor any other political
corporation, subdivision, or agency of the State of Texas, shall be obligated to pay
the Bond or the interest thereon and neither the faith and credit nor the taxingpower
of the State of Texas,the City of Pearland,Texas,or any other political corporation,
subdivision,or agency thereof is pledged to the payment of the principal of or interest
on such Bond.
Therefore, the Bond is approved.
abLts.fsle_
Attorney eneral of the State of Texas
No.44929
Book No.2006B
AAA
OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, Melissa Mora , ❑ Bond Clerk n 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 19th day of June. 2006, I signed the name of the Comptroller to the certificate of registration
endorsed upon the:
Pearland Economic Development Corporation Sales Tax Revenue Bond,Series 2006,
numbered T-1, d e June 15. 2006, nd that in signing the certificate of registration I used the
following signatu :
IN WITNES EREOF I have execute is a tificate this e 19th day of June. 2006.
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 this certificate have been duly registered in the office of the
- Comptroller, under Registration Number 71528.
GIVEN under my hand and seal of office at Austin, Texas, this the 19th day of June. 2006.
CAROLE KEETON STRAYHORN
Comptroller of Public.Accounts
of the State of Texas
OFFICE OF COMPTROLLER
OF THE STATE OF TEXAS
I, CAROLE KEETON STRAYHORN, 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:
Pearland Economic Development Corporation Sales Tax Revenue Bond, Series
2006
numbered T-1, of the denomination of $ 10,235,000, dated June 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 19th day of June, 2006, under Registration Number 71528.
Given under myhand and seal of office, at Austin, Texas, the 19th dayof
June, 2006.
CAROLE KEETON STRAYHORN
Comptroller of Public Accounts
of the State of Texas
1
Ambac Assurance Corporation
One State Street Plaza
NewYork,NY 10004
212.668.0340 Fax:212.509.9190
A member of the Ambac Financial Gu%Inc.
June 20,2006
Pearland Economic Development Corporation RBC Dail Rauscher Inc.
3519 Liberty Drive 1001 Fannin Street
Pearland,TX 77581 Houston,TX 77002
Morgan Keegan&Company,Inc. Andrews Kurth LLP
50 North Front Street 600 Travis
Memphis,TN 38103 Houston,TX 77002
Ambac Wells Fargo Bank,N.A.
1000 Louisiana Street
Houston,TX 77002
Ladies and Gentlemen:
This opinion has been requested of the undersigned, a Vice President and an Assistant
General Counsel of Ambac Assurance Corporation,a Wisconsin stock insurance corporation
("Ambac Assurance"), in connection with the issuance by Ambac Assurance of a certain
Financial Guaranty Insurance Policy(the"Policy")and a certain Surety Bond(the"Surety"),
each effective as of the date hereof. The Policy insures $10,235,000 in aggregate principal
amount of the Pearland Economic Development corporation, Texas (the "Obligor"), Sales
Tax Revenue Bonds, Series 2006, dated June 15, 2006 (the "Obligations"), and the Surety
guarantees payment of an amount not to exceed $788,957.00 to fund the Reserve
Requirement(as defined in the Surety)established in connection with the Obligations.
In connection with my opinion herein, I have examined the Policy, the Surety and such
statutes,documents and proceedings as I have considered necessary or appropriate under the
circumstances to render the following opinion, including, without limiting the generality of
the foregoing, certain statements contained in the Official Statement of the Obligor dated
May 22, 2006 relating to the Obligations (the "Official Statement") under the headings
"FINANCIAL GUARANTY INSURANCE", "RESERVE FUND SURETY POLICY
SECURITY FOR THE OBLIGATIONS" and "APPENDIX E — SPECIMEN OF
FINANCIAL GUARANTY INSURANCE POLICY".
Based upon the foregoing and having regard to legal considerations I deem relevant,I am of
the opinion that:
1. Ambac Assurance is a stock insurance corporation duly organized and validly
existing under the laws of the State of Wisconsin and duly qualified to conduct an
insurance business in the State of Texas.
2. Ambac Assurance has full corporate power and authority to execute and deliver the
Policy and the Surety, and the Policy and the Surety have been duly authorized,
executed and delivered by Ambac Assurance and constitute legal,valid and binding
obligations of Ambac Assurance enforceable in accordance with their terms, except
to the extent that the enforceability(but not the validity)of such obligations may be
limited by any applicable bankruptcy,insolvency,liquidation,rehabilitation or other
similar law or enactment now or hereafter enacted affecting the enforcement of
creditors'rights.
3. The execution and delivery by Ambac Assurance of the Policy and the Surety will
not, and the consummation of the transactions contemplated thereby and the
satisfaction of the terms thereof will not, conflict with or result in a breach of any of
the terms, conditions or provisions of the Certificate of Authority, Articles of
Incorporation or By-Laws of Ambac Assurance, or any restriction contained in any
contract,agreement or instrument to which Ambac Assurance is a party or by which
it is bound or constitute a default under any of the foregoing.
Ambac
4. Proceedings legally required for the issuance of the Policy and the Surety have been
taken by Ambac Assurance and licenses, orders, consents or other authorizations or
approvals of any governmental boards or bodies legally required for the
enforceability of the Policy and the Surety have been obtained; any proceedings not
taken and any licenses, authorizations or approvals not obtained are not material to
the enforceability of the Policy or the Surety.
5. The statements contained in the Official Statement under the headings
"FINANCIAL GUARANTY INSURANCE" and "RESERVE FUND SURETY
POLICY SECURITY FOR THE OBLIGATIONS", 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 Ambac Financial Group, Inc. (the "Company") and Ambac Assurance,
fairly and accurately describe the Company and Ambac Assurance, except that all
references therein to the "Obligations" should be considered references to the
"Bonds"(as such term is defined in the Official Statement).
6. The form of the Policy contained in the Official Statement under the heading
"APPENDIX E — SPECIMEN OF FINANCIAL GUARANTY INSURANCE
POLICY"is a true and complete copy of the form of the Policy.
The opinions expressed herein are solely for your benefit, and may not be relied upon by
any other person.
Very truly yours,
Nicholas A. Concilio
Vice President and
Assistant General Counsel
$10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
SALES TAX REVENUE BONDS
SERIES 2006
RECEIPT AND CROSS RECEIPT
June 20, 2006
I, the undersigned, a duly authorized representative of Wells Fargo Bank, National
Association, paying agent/registrar for the Pearland Economic Development Corporation Sales
Tax Revenue Bonds, Series 2006 (the "Bonds"), hereby acknowledge receipt on behalf of the
Pearland Economic Development Corporation (the "Corporation") of the full purchase price for
the Bonds in the total amount of$10,241,780.82 (representing the par amount of the Bonds of
$10,235,000.00,plus accrued interest of$6,780.82) on the date hereof.
WELLS FARGO BANK,NATIONAL ASSOCIATION
By: w¢�
Name: Christina Faith
Title: Vice President
I, the undersigned, a duly authorized representative of Morgan Keegan & Company, Inc.,
hereby acknowledge receipt from the Corporation of the initial bonds of its $10,235,000 Sales
Tax Revenue Bonds, Series 2006, dated June 15, 2006, which have been delivered to the
undersigned in proper form on the date hereof.
MORGAN KEEGAN& COMPANY, INC.
By:
Name:
Title:
HOU:2588850.1
JUN-23-2006 10:44 MORGAN KEEGAN-DTI4FIF504 9015794465 P.02/02
$10,235,000
PEARLAND ECONOMIC DEVELOPMENT CORPORATION
SALES TAX REVENUE BONDS
SERIES 2006
RECEIPT AND CROSS RECEIPT
June 20,2006
I, the undersigned, a duly authorized representative of Wells Fargo Bank, National
Association, paying agent/registrar for the Pearland Economic Development Corporation Sales
Tax Revenue Bonds, Series 2006 (the "Bonds"), hereby acknowledge receipt on behalf of the
Pearland Economic Development Corporation (the "Corporation") of the full purchase price for
the Bonds in the total amount of$10,241,780.82 (representing the par amount of the Bonds of
$10,235,000.00,plus accrued interest of$6,780.82)on the date hereof.
WELLS FARGO BANK,NATIONAL ASSOCIATION
•
By:
Name:
Title:
I, the undersigned,a duly authorized representative of Morgan Keegan&Company, Inc.,
hereby acknowledge receipt from the Corporation of the initial bonds of its $10,235,000 Sales
Tax Revenue Bonds, Series 2006, dated June 15, 2006, which have been delivered to the
undersigned in proper form on the date hereof.
MORGAN KEEGAN&COMPANY,INC.
By: Wa 3. 1 y 0
Name: 1-4S6- C.\rNe_Jc1t
Title: f S'f'VP
t1nT T.',C000Cl1 1
TOTAL P.02
REGISTRAR'S RECEIPT
The undersigned duly authorized representative of Wells Fargo Bank, National
Association, the Registrar of the following described bonds:
PEARLAND ECONOMIC DEVELOPMENT CORPORATION SALES TAX
REVENUE BONDS, SERIES 2006, in the total authorized aggregate amount of
$10,235,000
certifies that it has duly registered the above-mentioned bonds in accordance with the Resolution,
dated May 22, 2006, and that such bonds have been delivered to the purchaser thereof.
EXECUTED AND DELIVERED this June 20, 2006.
WELLS FARGO BANK,NATIONAL
ASSOCIATION
Name: C ns
Title: vice President
HOU:2588855.1
ilmbacAmbac Assurance Corporation
One State Street Plaza, 15th Floor
New York,New York 10004
Financial Guaranty Insurance Policy Telephone: (212) 668-0340
Obligor: PEARLAND ECONOMIC DEVELOPMENT CORPORATION Policy Number: 25383BE
Obligations: AS DESCRIBED ON THE REVERSE HEREOF Premium: $82,500.00
Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the
premium and subject to the terms of this Policy,hereby agrees to pay to The Bank of New York,as trustee,or its successor(the
"Insurance Trustee"),for the benefit of the Holders,that portion of the principal of and interest on the above-described obligations
(the"Obligations")which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor.
Ambac will make such payments to the Insurance Trustee within onebusiness dayfollowingwritten notification to Ambac of
PY (1)
Nonpayment.Upon a Holder's presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons,
uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of
principal and interest which is then Due for Payment but is unpaid.Upon such disbursement,Ambac shall become the owner of
the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder's rights to payment thereon.
In cases where the Obligations are issued in registered form,the Insurance Trustee shall disburse principal to a Holder only upon
presentation and surrender to the Insurance Trustee of the unpaid Obligation,uncanceled and free of any adverse claim,together
with an instrument of assignment,in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such
Holder's duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac
or its nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation to
the Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery
to the Insurance Trustee of an instrument of assignment,in form satisfactory to Ambac and the Insurance Trustee,duly executed
by the Holder or such Holder's duly authorized representative,transferring to Ambac all rights under such Obligation to receive
the interest in respect of which the insurance disbursement was made.Ambac shall be subrogated to all of the Holders'rights
_' to payment on registered Obligations to the extent of any insurance disbursements so made.
In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest on an
Obligation which has become Due for Payment and which is made to a Holder by or on behalf of theObligor has been deemed •
a preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance
with a final,nonappealable order of a court of competent jurisdiction,such Holder will be entitled to payment from Ambac to
the extent of such recovery if sufficient funds are not otherwise available.
As used herein,the term"Holder"means any person other than (i)the Obligor or(ii)any person whose obligations constitute
the underlying security or source of payment for the Obligations who, at the time of Nonpayment, is the owner of an
Obligation or of a coupon relating to an Obligation. As used herein, "Due for Payment",when referring to the principal of
Obligations,is when the scheduled maturity date or mandatory redemption date for the application of a required sinking fund
installment has been reached and does not refer to any earlier date on which payment is due by reason of call for redemption
(other than by application of required sinking fund installments), acceleration or other advancement of maturity; and, when
referring to interest on the Obligations, is when the scheduled date for payment of interest has been reached. As used herein,
"Nonpayment"means the failure of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in
full of all principal of and interest on the Obligations which are Due for Payment.
' f This Policy is noncancelable. The premium on this Policy is not refundable for any reason,including payment of the Obligations
prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time may
become due in respect of any Obligation,other than at the sole option of Ambac,nor against any risk other than Nonpayment.
In witness whereof,Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the
countersignature of its duly authorized representative.
el '•ol
President ° ` SEAL `1 ecretaryg-A-A--14—
r,4:\
June 20 2006 �% '".`;:.0 0.6..
Effective Date: ��`_��• Authoriz epresentative
THE BANK OF NEW YORK acknowledges that it has agreed encuict4aito
to perform the duties of Insurance Trustee under this Policy.
I Form No.: 2B-0012 (1/01) Authorized Officer of Insurance Trustee
A- 09783
� I
ArnbaCAmbac Assurance Corporation
• c/o CT Corporation Systems
44 East Mifflin Street
Madison,Wisconsin 53703
Administrative Office:
One State Street Plaza
New York,New York 10004
• Telephone: (212)668-0340
• IMPORTANT NOTICE
To obtain information or make a complaint you may contact the Texas Department of Insurance to obtain
information on companies,coverages,rights or complaints at:
•
1-800-252-3439
•
You may write the Texas Department of Insurance at:
P.O.Box 149104,Austin,Texas 78714-9104. FAX: (512)475-1771
• PREMIUM OR CLAIM DISPUTES
•
Should you have a dispute concerning your premium or about a claim you should contact Ambac
Assurance Corporation first. If the dispute is not resolved,you may contact the Texas Department of
Insurance. `
•
ATTACH THIS NOTICE TO YOUR POLICY: This notice is for information only and does not
become a part or condition of the attached document.
Form No.: 25-5080(7/97)
SURETY BOND
Ambac Assurance Corporation
Statutory Office: Administrative Office:
do CT Corporation One State Street Plaza.
44 East Mifflin Street New York,New York 10004
Madison,Wisconsin 53703 Telephone:(212)668-0340
Policy No. SB2297BE
Ambac Assurance Corporation ("Ambac"), in consideration of the payment of the premium and
subject to the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the
full and complete payments which are to be applied to payment of principal of and interest on the
Obligations (as hereinafter defined) and which are required to be made by or on behalf of the
Pearland Economic Development Corporation (the "Obligor") to Wells Fargo Bank, N.A.,
Minneapolis, Minnesota(the "Paying Agent"), as such payments are due by the Obligor but shall
not be so paid, pursuant to a Resolution of the Obligor, adopted on. May 22, 2006 (the
"Resolution"), authorizing the issuance of the Obligor's $10,235,000 in aggregate principal
amount of Sales Tax Revenue Bonds, Series 2006 (the "Obligations") and providing the terms
and conditions for the issuance of said Obligations; provided that the amount available at any
particular time to be paid to the Paying Agent under the terms hereof shall not exceed the Surety
Bond Coverage, defined herein as the lesser of$788,957 or the Reserve Fund Requirement for
the Obligations, as that term is defined in the Resolution (the "Reserve Requirement"). The
Surety Bond Coverage.shall be reduced and may be reinstated from .time to time as set forth
herein.. .
1. As used herein, the term "Owner" shall mean the registered owner of any Obligation as
indicated in the books maintained by the applicable Paying Agent, the Obligor or any designee of
the Obligor for such purpose. The term "Owner" shall not include the Obligor or any person or
entity whose obligation or obligations by agreement constitute the underlying security or source of
payment of the Obligations. '
2. Upon the later of: (i) one (1) day after receipt by the General Counsel of Ambac of a
demand for payment in the form attached hereto as Attachment 1 (the"Demand for Payment"), duly
executed by the Paying Agent certifying that payment due as required by the Resolution has not
been made to the Paying Agent; or (ii) the payment date of the Obligations as specified in the
Demand for Payment presented by the Paying Agent to the General Counsel of Ambac,Ambac will
make a deposit of funds in an account with the Paying Agent or its successor, sufficient for the
payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in
the Demand for Payment)up to but not in excess of the Surety Bond Coverage.
3. Demand for Payment hereunder may be made by prepaid telecopy, telex, or telegram of the
executed Demand for Payment do the General Counsel of Ambac. If a Demand.for Payment made
hereunder does not, in any instance, conform to the terms and conditions of this Surety Bond,
Ambac shall give notice to the Paying Agent, as promptly as reasonably practicable that such
Demand for Payment was not effected in accordance with the terms and conditions of this Surety
Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for Payment
was not effected in accordance with this Surety Bond,the Paying Agent may attempt to correct any
such nonconforming Demand for Payment if, and to the extent that,the Paying Agent is entitled and
able to do so.
4. The amount payable by Ambac under this Surety Bond pursuant to a Demand for Payment
shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced
automatically to the extent of each payment made by Ambac hereunder and will be reinstated to the
extent of each reimbursement of Ambac by the Obligor pursuant to Article II of the Guaranty
Agreement, dated as of June 20, 2006 (the"Guaranty Agreement"), by and between Ambac and the
Obligor; provided, that in no event shall such reinstatement exceed the Surety Bond Coverage.
Ambac will notify the Paying Agent, in writing within five (5) days of such reimbursement,that the
Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the
Guaranty Agreement and such reinstatement shall be effective as of the date Ambac gives such
notice. The notice to the Paying Agent will be substantially, in the form attached hereto as
Attachment 2. The Surety Bond Coverage shall be automatically reduced to the extent that the
Reserve Requirement for the Obligations is lowered or reduced pursuant to the terms of the
Resolution.
5. Any service of process on Ambac may be made to Ambac or the office of the General
Counsel of Ambac and such service of process shall be valid and binding as to Ambac. During the
term of its appointment, General Counsel will act as agent for the acceptance of service of process.
and its offices are located at One State Street Plaza,New York,New York 10004, Telephone: (212)
668-0340.
6. This Surety Bond is noncancelable for any reason. The term of this Surety Bond shall expire
on the earlier of(i) September 1, 2030 or (ii) the date on which the Obligor, to the satisfaction of
Ambac, has made all payments required to be made on the Obligations pursuant to the Resolution.
The premium on this Surety Bond is not refundable-for any reason, including the payment prior to
maturity of the Obligations.
7. This Surety Bond shall be governed by and interpreted under the laws of the State of
Wisconsin, and any suit hereunder in connection with any payment may be brought only by the
Paying Agent within one year after (i) a Demand for Payment, with respect to such payment, is
made pursuant to the terms of this Surety Bond and Ambac has failed to make such payment or(ii)
payment would otherwise have been due hereunder but for the failure on the part of the Paying
Agent to deliver to Ambac a Demand for Payment pursuant to the terms of this Surety Bond,
whichever is earlier. .
Form No.:2B-0009-C(7/97) 2
i d
IN WITNESS WHEREOF,Ambac has caused this.Surety Bond to be executed and attested on its
r-,
behalf this 20th day of June, 2006.
Ambac Assurance Corporation
fri2S ,
Attest: By: \
Assistant Secretary Vice President
)
Form No.[2B-0009-C(7/97) 3
Attachment 1
Surety Bond No. SB2297BE
DEMAND FOR PAYMENT
,20_
Ambac Assurance Corporation
One State Street Plaza
New York,New York 10004
Attention: General Counsel
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond") issued by
Ambac Assurance Corporation ("Ambac"). The terms which are capitalized herein and not
otherwise defined have the meanings specified in the Surety Bond unless the context otherwise
requires.
The Paying Agent hereby certifies that:
(a) Payment by the Obligor to the Paying Agent was due on [a date not less than
one (1) day prior to the applicable payment date for the Obligations] under the Resolution attached
hereto as Exhibit A, in an amount equal to $ (the "Amount Due"). The Amount Due is
payable to the Owners of the Obligations on
(b) $ has been deposited in the [fund/account] from moneys paid by the
Obligor or from other funds legally available to the Paying Agent for payment to the Owners of the
Obligations,which amount is$ less than the Amount Due(the"Deficiency").
(c) The Paying Agent has not heretofore made demand under the Surety Bond for the
Amount Due or any portion thereof
The Paying Agent hereby requests that payment of the Deficiency(up to but not in excess of
the Surety Bond Coverage) be made by Ambac under the Surety Bond and directs that payment
under the Surety Bond be made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Surety Bond:
[Paying Agent's Account]
[Paying Agent]
By: .
Its:
__ Form No.:2B-0009-C(7/97) 4
Attachment 2
Surety Bond No. SB2297BE
NOTICE OF REINSTATEMENT
20_
[Paying Agent]
[Address]
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond") issued by
Ambac Assurance. Corporation ("Ambac"). The terms which are capitalized herein and not
otherwise defined have the meanings specified in the Surety Bond unless the context otherwise
requires.
Ambac hereby delivers notice that it is in receipt of payment from the Obligor pursuant to
Article II of the Guaranty Agreement and as of the date hereof the Surety Bond Coverage is
$ , subject to a reduction as the Reserve Requirement for the Obligations is
lowered or reduced pursuant to the terms of the Resolution.
AMBAC ASSURANCE CORPORATION
Attest: By:
Title: Title:
Form No.:2B-0009-C(7/97) 5
SURETY BOND .
Ambac Assurance Corporation
Statutory Office: Administrative Office:
do CT Corporation One State Street Plaza
44 East Mifflin Street New York,New York 10004
Madison,Wisconsin 53703 Telephone:(212)668-0340
Policy No. SB2297BE
Ambac Assurance Corporation ("Ambac"), in consideration of the payment of the premium and
subject to the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the
- full and complete payments which are to be applied to payment of principal of and interest on the
Obligations (as hereinafter defined) and which are required,to be made by or on behalf of the
Pearland Economic Development Corporation (the "Obligor") to Wells Fargo Bank, N.A.,
Minneapolis, Minnesota(the "Paying Agent"), as such payments are due by the Obligor but shall
not be so paid pursuant to a Resolution of the Obligor, adopted on May. 22, 2006 (the
"Resolution"), authorizing the issuance of the Obligor's $10,235,000 in aggregate principal
amount of Sales Tax Revenue Bonds, Series 2006 (the "Obligations") and providing the terms
and conditions for the issuance of said Obligations; provided that the amount available at any
particular time to be paid to the Paying Agent under the terms hereof shall not exceed the Surety
Bond Coverage, defined herein as the lesser of$788,957 or the Reserve Fund Requirement for
the Obligations, as that term is defined in the Resolution (the "Reserve Requirement"). The
Surety Bond Coverage shall be reduced and may be reinstated from time to time as set forth
herein.
1. . As used herein, the term "Owner" shall mean the registered owner of any Obligation as
indicated in the books maintained by the applicable Paying Agent, the Obligor or any designee of
the Obligor for such purpose. The term "Owner" shall not include the Obligor or any person or
entity whose obligation or obligations by agreement constitute the underlying security or source of
payment of the Obligations.
2. Upon the later of: (i) one (1) day after receipt by the General Counsel of Ambac of a
demand for payment in the form•attached hereto as Attachment 1 (the"Demand for Payment"), duly
executed by the Paying Agent certifying that payment due as required by the Resolution has not
been made to the Paying Agent; or (ii) the payment date of the Obligations as specified in the
Demand for Payment presented by the Paying Agent to the General Counsel of Ambac,Ambac will
make a deposit of funds in an account with the Paying Agent or,its successor, sufficient,for the
payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in
the Demand for Payment)up to but not in excess of the Surety Bond Coverage.
3. Demand for Payment hereunder may be made by prepaid telecopy, telex, or telegram of the
executed Demand for Payment do the General Counsel of Ambac. If a Demand for Payment made
hereunder does not, in any instance, conform to the terms and conditions of this Surety Bond,
Ambac shall give notice to the Paying Agent, as promptly as reasonably practicable that such
Demand for Payment was not effected in accordance with the terms and conditions of this Surety
Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for Payment
was not effected in accordance with this Surety Bond,the Paying Agent may attempt to correct any
such nonconforming Demand for Payment if, and to the extent that,the Paying Agent is entitled and
able to do so.
4. The amount payable by Ambac under this Surety Bond pursuant to a Demand for Payment
shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced
automatically to the extent of each payment made by Ambac hereunder and will be reinstated to the
extent of each reimbursement of Ambac by the Obligor pursuant to Article II of the Guaranty
Agreement, dated as of June 20, 2006 (the"Guaranty Agreement"), by and between Ambac and the
Obligor; provided, that in no event, shall such reinstatement exceed the Surety Bond Coverage.
Ambac will notify the Paying Agent, in writing within five (5) days of such reimbursement,that the
Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the
Guaranty Agreement and such reinstatement shall be effective as of the date Ambac gives such
notice. The notice to the Paying Agent will be substantially in the form attached hereto as
Attachment 2. The Surety Bond Coverage shall be automatically reduced to the extent that the
Reserve Requirement for.the Obligations is lowered or reduced pursuant to the terms of the
Resolution.
5. Any service of process on Ambac may be made to Ambac or the office of the General
Counsel of Ambac and such service of process shall be valid and binding as to Ambac. During the
term of its appointment, General Counsel will act as agent for the acceptance of service of process
and its offices are located at One State Street Plaza,New York,New York 10004, Telephone: (212)
668-0340.
6. This Surety Bond is noncancelable for any reason. The term of this Surety Bond shall expire
on the earlier of(i) September 1, 2030 or (ii) the date on which the Obligor, to the satisfaction of
Ambac, has made all payments required to be made on the Obligations pursuant to the Resolution.
The premium on this Surety Bond is not refundable for any reason, including the payment prior to
maturity of the Obligations.
7. This Surety Bond shall be governed.by and interpreted under the laws of the State of
Wisconsin, and any suit hereunder in connection with any payment may be brought only by the
Paying Agent within one year after (i) a Demand for Payment, with respect to such payment, is
made pursuant to the terms of this Surety Bond and Ambac has failed to make such payment or(ii)
payment would otherwise have been due hereunder but for the failure on the part of the Paying
Agent to deliver to Ambac a Demand for Payment pursuant to the terms of this Surety Bond,
whichever is earlier.
Form No.:2B-0009-C(7/97) 2
f IN WITNESS WHEREOF, Ambac has caused this Surety Bond to be executed and attested on its
behalf this 20th day of June,2006.
Ambac Assurance Corporation.
Attest: M25—
By: \
Assistant Secretary Vice President
Form No.:2B-0009-C(7/97) 3
Attachment 1
Surety Bond No. SB2297BE
DEMAND FOR PAYMENT
20_.
Ambac Assurance Corporation
One State Street Plaza
New York,New York 10004
Attention: General Counsel
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond") issued by
Ambac Assurance Corporation ("Ambac"). The terms which.are capitalized herein and not
otherwise defined have the meanings specified in.the Surety Bond unless the context otherwise
requires.
The Paying Agent hereby certifies that:
(a) Payment by the Obligor to the Paying Agent was due on [a date not less than
one (1) day prior to the applicable payment date for the Obligations] under the Resolution attached
hereto as Exhibit A, in an amount equal to $ (the "Amount Due"). The Amount Due is
payable to the Owners of the Obligations on
(b) $ has been deposited in the [fund/account] from moneys paid by the
Obligor or from other funds legally available to the Paying Agent for payment to the Owners of the
Obligations,which amount is $ less than the Amount Due (the"Deficiency").
(c) The Paying Agent has not heretofore made demand under the Surety Bond for the
Amount Due or any portion thereof.
The Paying Agent hereby requests that payment of the Deficiency(up to but not in excess of
the Surety Bond Coverage) be made by Ambac under the Surety Bond and directs that payment
under the Surety Bond be made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Surety Bond:
[Paying Agent's Account]
[Paying Agent]
By:
Its:
r_I
{
Form No.:2B-0009-C(7/97) 4
Attachment 2
Surety Bond No. SB2297BE
NOTICE OF REINSTATEMENT
,20_
[Paying Agent]
[Address]
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond") issued by
Ambac Assurance Corporation ("Ambac"). The terms which are capitalized herein and not
otherwise defined have the meanings specified in the Surety Bond unless the context otherwise
requires.
Ambac hereby delivers notice that it is in receipt of payment from the Obligor pursuant to
Article II of the Guaranty Agreement and as of the date hereof the Surety. Bond Coverage is
$ , subject to a reduction as the Reserve Requirement for the Obligations is
lowered or reduced pursuant to the terms of the Resolution.
AMBAC ASSURANCE CORPORATION
Attest: By:
Title: Title:
•
Form No.:2B-0009-C(7/97) 5
SURETY BOND
Ambac Assurance Corporation
Statutory Office: Administrative Office:
do CT Corporation One State Street Plaza
44 East Mifflin Street New York,New York 10004
Madison,Wisconsin 53703 Telephone:(212)668-0340
Policy No. SB2297BE
•
Ambac Assurance Corporation ("Ambac"), in consideration of the payment of the premium and
subject to the terms of this Surety Bond, hereby unconditionally and irrevocably guarantees the
full and complete payments which are to be applied to payment of principal of and interest on the
Obligations (as hereinafter defined) and which are required to be made by or on behalf of the
Pearland Economic Development Corporation (the "Obligor"). to Wells Fargo Bank, N.A.,
Minneapolis, Minnesota (the "Paying Agent"), as such payments are due by the Obligor but shall
not be so paid pursuant to a Resolution of the Obligor, adopted on May 22, 2006 (the
"Resolution"), authorizing the issuance of the Obligor's $10,235,000 in aggregate principal
amount of Sales Tax Revenue Bonds, Series 2006 (the "Obligations") and providing the terms
and conditions for the issuance of said Obligations; provided that the amount available at any
particular time to be paid to the Paying Agent under the terms hereof shall not exceed the Surety
Bond Coverage, defined herein as the lesser of$788,957 or the Reserve Fund Requirement for
the Obligations, as that term is defined in the Resolution (the "Reserve Requirement"). The
Surety Bond Coverage shall be reduced and may be reinstated from time to time as set forth
herein..
1.. As used herein, the term "Owner" shall mean the registered owner of any Obligation as
indicated in the books maintained by the applicable Paying Agent, the Obligor or any designee of
the Obligor for such purpose. The. term "Owner" shall not include the Obligor or any person or
entity whose obligation or obligations by agreement constitute the underlying security or source of
payment of the Obligations.
2. Upon the later of: (i) one (1) day after receipt by the General Counsel of Ambac of a
demand for payment in the form attached hereto as Attachment 1 (the"Demand for Payment"),duly
executed by the Paying Agent certifying that payment due as required by the Resolution has not
been made to the Paying Agent; or (ii) the payment date of the Obligations as specified in the
Demand for Payment presented by the Paying Agent to the General Counsel of Ambac, Ambac will
make a deposit of funds in an account with the Paying Agent or its successor, sufficient for the
payment to the Paying Agent, of amounts which are then due to the Paying Agent (as specified in
the Demand for Payment)up to but not in excess of the Surety Bond Coverage.
3. Demand for Payment hereunder may be made by prepaid telecopy, telex, or telegram of the
executed Demand for Payment do the General Counsel of Ambac. If a Demand for Payment made
hereunder does not, in any instance, conform to the terms and conditions of this Surety. Bond,
Ambac shall give notice to the Paying Agent, as promptly as reasonably practicable that such
Demand for Payment was not effected in accordance with the terms and conditions of this Surety
Bond and briefly state the reason(s) therefor. Upon being notified that such Demand for Payment
was not effected in accordance with this Surety Bond,the Paying Agent may attempt to correct any
such nonconforming Demand for Payment if,and to the extent that,the Paying Agent is entitled and
able to do so.
4. The amount payable by Ambac under this Surety Bond pursuant to a Demand for Payment
shall be limited to the Surety Bond Coverage. The Surety Bond Coverage shall be reduced
automatically to the extent of each payment made by Ambac hereunder and will be reinstated to the
extent of each reimbursement of Ambac by the Obligor pursuant to Article II of the Guaranty.
Agreement, dated as of June 20, 2006 (the"Guaranty Agreement"), by and between Ambac and the
Obligor; provided, that in no event shall such reinstatement exceed the Surety Bond Coverage.
Ambac will notify the Paying Agent, in writing within five (5) days of such reimbursement,that the
Surety Bond Coverage has been reinstated to the extent of such reimbursement pursuant to the
Guaranty Agreement and such reinstatement shall be effective as of the date Ambac gives such
notice. The notice to the Paying Agent_ will be substantially in the form attached hereto as
Attachment 2. The Surety Bond Coverage shall be automatically reduced to the extent that the
Reserve Requirement for the Obligations is lowered or reduced pursuant to the terms of the
Resolution.
5.. Any service of process on Ambac may be made to Ambac or the office of the General
Counsel of Ambac and such service of process shall be valid and binding as to Ambac. During the
term of its appointment, General Counsel will act as agent for the acceptance of service of process
and its offices are located at One State Street Plaza,New York,New York 10004, Telephone: (212)
668-0340.
6. This Surety Bond is noncancelable for any reason. The term of this Surety Bond shall expire
on the earlier of(i) September 1, 2030 or (ii) the date on which the Obligor, to the satisfaction of
Ambac, has made all paymentsrequired re uired to be made on the Obligations pursuant to the Resolution.
The premium on this Surety Bond is not refundable for any reason, including the payment prior to
maturity of the Obligations.
7. This Surety Bond shall be governed by and interpreted under the laws of the State of
Wisconsin, and any suit hereunder in connection with any payment may be brought only by the
Paying Agent within one year after (i) a Demand for Payment, with respect to such payment, is
made pursuant to the terms of this Surety Bond and Ambac has failed to make such payment or(ii)
payment would otherwise have been due hereunder but for the failure on the part of the Paying
Agent to deliver to Ambac a Demand for Payment pursuant to the terms of this Surety Bond,
whichever is earlier.
•
Form No.:2B-0009-C(7/97)
2
•
IN WITNESS WHEREOF, Ambac has caused this Surety Bond to be executed and attested on its
behalf this 20th day of June, 2006.
Ambac Assurance Corporation
Attest: By:
Assistant Secretary Vice President
Form No.:2B-0009-C(7/97) 3
•
Attachment 1
Surety Bond No. SB2297BE
DEMAND FOR PAYMENT
,20_
Ambac Assurance Corporation
One State Street Plaza
New York,New York 10004
Attention: General Counsel
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond") issued by
Ambac Assurance Corporation ("Ambac"). The terms which are capitalized herein and not
otherwise defined have the meanings specified in the Surety Bond unless the context otherwise
requires.
The Paying Agent hereby certifies that:
(a) Payment by the Obligor to the Paying Agent was due on [a date not less than
one (1) day prior to the applicable payment date for the Obligations] under the Resolution attached
hereto as Exhibit A, in an amount equal to $ (the "Amount Due"). The Amount Due is
payable to the Owners of the Obligations on
(b) $ has been deposited in the [fund/account] from moneys paid by the
Obligor or from other funds legally available to the Paying Agent for payment to the Owners of the •
Obligations,which amount is $ less than the Amount Due(the"Deficiency").
(c) The Paying Agent has not heretofore made demand under the Surety Bond for the
Amount Due or any portion thereof.
The Paying Agent hereby requests that payment of the Deficiency(up to but not in excess of
the Surety Bond Coverage) be made by Ambac under the Surety Bond and directs that payment
under the Surety Bond be made to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Surety Bond:
[Paying Agent's Account]
[Paying Agent]
By:
Its:
Form No.:2B-0009-C(7/97) 4
Attachment 2 .
Surety Bond No. SB2297BE
NOTICE OF REINSTATEMENT
,20_
[Paying Agent]
[Address]
Reference is made to the Surety Bond No. SB2297BE (the "Surety Bond"). issued by
Ambac Assurance Corporation ("Ambac"). The terms which are capitalized herein and not
otherwise defined have the meanings specified in the Surety Bond unless the context otherwise
requires.
Ambac hereby delivers notice that it is in receipt of payment from the Obligor pursuant to
Article II of the Guaranty Agreement and as of the date hereof the Surety Bond Coverage is
$ , subject to a reduction as the Reserve, Requirement for the Obligations is
lowered or reduced pursuant to the terms of the Resolution.
•
AMBAC ASSURANCE CORPORATION
Attest: -_ By:
Title: Title:
Form No.:2B-0009-C(7/97) 5
GUARANTY AGREEMENT
GUARANTY AGREEMENT dated as of June 20, 2006 by and between the Pearland Economic
Development Corporation, a public body corporate organized and existing under the laws of the State of -
Texas (the "Obligor"); and AMBAC ASSURANCE CORPORATION ("Ambac"), a Wisconsin •
domiciled stock insurance corporation.
WITNESSETH :
WHEREAS, the Obligor has or will issue $10,235,000 in aggregate principal amount of Sales
Tax Revenue Bonds, Series 2006 and has previously issued its Sales Tax Revenue and Refunding Bonds,
Series 2005 (the"Obligations"); and
WHEREAS, Ambac will issue its Surety Bond(the"Surety Bond"), substantially in the form set
forth in Annex A to this Agreement, guaranteeing certain payments by the Obligor subject to the terms
and limitations of the Surety Bond; and
WHEREAS, to induce Ambac to issue the Surety Bond, the Obligor has agreed to pay the
premium for such Surety Bond and to reimburse Ambac for all payments made by Ambac under the
Surety Bond from Legally Available Funds,all as more fully set forth in this Agreement; and
WHEREAS, the Obligor understands that Ambac expressly requires the delivery of this
Agreement as part of the consideration for the execution by Ambac of the Surety Bond; and
NOW, THEREFORE, in consideration of the premises and of the agreements herein contained
and of the execution of the Surety Bond,the Obligor and Ambac agree as follows:
ARTICLE I
DEFINITIONS; SURETY BOND
Section 1.01. Definitions. Except as otherwise expressly provided herein or unless the context otherwise
requires,the terms which are capitalized herein shall have the meanings specified in Annex B hereto. .
Section 1.02. Surety Bond.
(a) Ambac will issue the Surety Bond in accordance with and subject to the terms and conditions of the
Commitment.
(b) The maximum liability of Ambac under the Surety Bond and the coverage and term thereof shall be
subject to and limited by the Surety Bond Coverage and the terms and conditions of the Surety Bond..
(c) Payments made under the Surety Bond will reduce the Surety Bond Coverage to the extent of that
payment, provided that the Surety Bond Coverage shall be automatically reinstated to the extent of the
reimbursement of principal by the Obligor of any payment made by Ambac. Ambac shall notify the
Paying Agent in writing no later than the fifth(5th) day following the reimbursement by the Obligor that
the Surety Bond has been reinstated to the extent of such reimbursement.
Section 1.03. Premium. In consideration of Ambac agreeing to issue the Surety Bond hereunder, the
Obligor hereby agrees to pay or cause to be paid from Legally Available Funds the premium set forth in
the Commitment.
Section 1.04. Certain Other Expenses. The Obligor will pay all reasonable fees and disbursements of
Ambac's counsel related to any modification of this Agreement or the Surety Bond.
ARTICLE H
REIMBURSEMENT OBLIGATIONS OF OBLIGOR AND SECURITY THEREFOR
Section 2.01. Reimbursement for Payments Under the Surety Bond and Expenses.
(a) The Obligor will reimburse Ambac, from Legally Available Funds within the Reimbursement Period,
without demand or notice by Ambac to the Obligor or any other person,to the extent of each Surety Bond
Payment with interest on each Surety Bond Payment from and including the date made to the date of the
reimbursement by the Obligor at the Effective Interest Rate. The Obligor agrees that it shall make
monthly level principal repayments for each Surety Bond Payment during the Reimbursement Period.
Interest on each Surety Bond Payment shall be paid monthly during the Reimbursement Period. To the
extent that interest payments due hereunder are not paid on a monthly basis, or are not paid as each
principal repayment is made, interest shall accrue on such unpaid amounts at a rate equal to the Effective
Interest Rate.
(b) The Obligor also agrees to reimburse Ambac, from Legally Available Funds, immediately and
unconditionally upon demand for all reasonable expenses incurred by Ambac in connection with the
Surety Bond and the enforcement by Ambac of the Obligor's obligations under this Agreement together
with,interest on all such expenses from and including the date which is 30 days from the date a statement
for such expenses is received by the Obligor incurred to the date of payment at the rate set forth in
subsection(a)of this Section 2.01.
(c) The Obligor's obligation to make payments in excess of the Surety Bond Payment under this Section
is applicable only to the extent permitted by law and is subject in all respects to annual appropriation
therefor by the Obligor.
Section 2.02. Allocation of Payments. Ambac and the Obligor hereby agree that each repayment of
principal received by Ambac from or on behalf of the Obligor as a reimbursement to Ambac as required
by Section 2.01(a)hereof shall be applied to reinstate all or a portion of the Surety Bond Coverage to the
extent of such repayment. Any interest payable pursuant to Section 2.01(a) hereof shall not be applied to.
the reinstatement of any portion of the Surety Bond Coverage.
Section 2.03. Security for Payments: Instruments of Further Assurance. To the extent, but only to the
extent, that the Resolution pledges to the Owners or any paying agent therefor, or grants a security
interest or lien in or on the Collateral and Revenues in order to secure the Obligations or provide a source
of payment for the Obligations,the Obligor hereby grants to Ambac a security interest in or lien on,as the
case may be, and pledges to Ambac all such Collateral and Revenues as security for payment of all
amounts due hereunder, which security interest, lien and/or pledge created or granted under this Section
2.03 shall be subordinate only to the interests of the Owners and any paying agent therefor in such
Collateral and Revenues. The Obligor agrees that it will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, any and all financing statements, if
applicable,and all other further instruments as may be required by law or as shall reasonably be requested
2
by Ambac for the perfection of the security interest, if any, granted under this Section 2.03 and for the
preservation and protection of all rights of Ambac under this Section 2.03.
Section 2.04. Unconditional Obligation. The obligations of the Obligor hereunder are absolute and
unconditional and will be paid or performed strictly in accordance with this Agreement,irrespective of:
(a) any lack of validity or enforceability of, or any amendment or other modification of, or waiver with
respect to the Resolution or the Obligations;
(b) any exchange,release or nonperfection of any security interest in property securing the Obligations or
this Agreement or any obligations hereunder;
(c) any circumstances which might otherwise constitute a defense available to, or discharge of, the
Obligor with respect to the Obligations;
(d) whether or not such obligations are contingent or matured, disputed or undisputed, liquidated or
unliquidated.
ARTICLE III
EVENTS OF DEFAULT; REMEDIES
Section 3.01. Events of Default. The following events shall constitute Events of Default hereunder:
(a) The Obligor shall fail to pay to Ambac any amount payable under Sections 1.04 and 2.01 hereof and
such failure shall have continued for a period in excess of the Reimbursement Period;
•
(b) Any material representation or warranty made by the Obligor hereunder or under the Resolution or
any statement in the application for the Surety Bond or any report, certificate, financial statement or other
instrument provided in connection with the Commitment, the Surety Bond or herewith shall have been
materially false at the time when made;
(c) Except as otherwise provided in this Section 3.01, the Obligor shall fail to perform any of its other
obligations under this Agreement,provided that such failure continues for more than thirty(30)days after
receipt by the Obligor of notice of such failure to perform;
(d) The Obligor shall (i) voluntarily commence any proceeding or file any petition seeking relief under
the United.States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or.
similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any
such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a
•
receiver, trustee, custodian, sequestrator or similar official for the Obligor or for a substantial part of its
property, (iv) file,an answer admitting the material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due or (vii) take action for the
purpose of effecting any of the foregoing; or
(e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (i) relief in respect of the Obligor, or of a substantial part of its property,
under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or
3
I
similar law or(ii)the appointment of a receiver,trustee, custodian, sequestrator or similar official for the
Obligor or for a substantial part of its property; and such proceeding or petition shall continue
undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall
continue unstayed and in effect for thirty(30)days.
Section 3.02. Remedies. If an Event of Default shall occur and be continuing, then Ambac may take
whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and
thereafter to become due under this Agreement or any related instrument and enforce any obligation,
agreement or covenant of the Obligor under this Agreement; provided,however,that Ambac may not take
any action to direct or require acceleration or other early redemption of the Obligations or adversely affect
the rights of the Owners.All rights and remedies of Ambac under this Section 3.02 are cumulative and the
exercise of any one remedy does not preclude the exercise of one or more of the other available remedies.
ARTICLE IV
SETTLEMENT
Ambac shall have the exclusive right to decide and determine whether any claim, liability, suit or
judgment made or brought against Ambac, the Obligor or any other party on the Surety Bond shall or
shall not be paid, compromised, resisted, defended, tried or appealed, and Ambac's decision thereon, if
made in good faith, shall be final and binding upon the Obligor.An itemized statement of payments made
by Ambac, certified by an officer of Ambac,or the voucher or vouchers for such payments, shall be prima
facie evidence of the liability of the Obligor, and if the Obligor fails to reimburse AYnbac, pursuant to
subsection (b) of Section 2.01 hereof, upon the receipt of such statement of payments, interest shall be
computed on such amount from the date of any payment made by Ambac at the rate set forth in
subsection(a)of Section 2.01 hereof.
ARTICLE V
MISCELLANEOUS
Section 5.01. Computations. All computations of premium, interest and fees hereunder shall be made on
the basis of the actual number of days elapsed over a year of 360 days.
Section 5.02. Exercise of Rights. No failure or delay on the part of Ambac to exercise any right,power
or privilege under this Agreement and no course of dealing between Ambac and the Obligor or any other
party shall operate as a waiver of any such right, power or privilege,.nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which Ambac would otherwise have pursuant to
law or equity. No notice to or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances, or constitute a waiver of the right of the other
party to any other or further action in any circumstances without notice or demand.
Section 5.03. Amendment and Waiver. Any provision of this Agreement may be amended, waived,
supplemented, discharged or terminated only with the prior written consent of the Obligor and Ambac.
The Obligor hereby agrees that upon the written request of the Paying Agent, Ambac may make or
consent to issue any substitute for the Surety Bond to cure any ambiguity or formal defect or omission in
4
the Surety Bond which does not materially change the terms of the Surety Bond nor adversely affect the
rights of the Owners, and this Agreement shall apply to such substituted Surety Bond. Ambac agrees to
deliver to the Obligor and to the company or companies, if any, rating the Obligations, a copy of such
substituted Surety Bond.
Section 5.04. Successors and Assigns;Descriptive Headings.
(a) This Agreement shall bind, and the benefits thereof shall inure to, the Obligor and Ambac and their
respective successors and assigns; provided, that the Obligor may not transfer or assign any or all of its
rights and obligations hereunder without the prior written consent of Ambac.
(b) The descriptive headings of the various provisions of this Agreement are inserted for convenience of
reference only and shall not be deemed to affect the meaning or construction of any of the provisions
hereof.
Section 5.05. Other Sureties. If Ambac shall procure any other surety to reinsure the Surety Bond, this
Agreement shall inure to the benefit of such other surety, its successors and assigns, so as to give to it a
direct right of action against the Obligor to enforce this Agreement, and"Ambac,"wherever used herein,
shall be deemed to include such reinsuring surety, as its respective interests may appear.
Section 5.06. Signature on Bond. The Obligor's liability shall not be affected by its failure to sign the
Surety Bond nor by any claim that other indemnity or security was to have been obtained nor by the
release of any indemnity,nor the return or exchange of any collateral that may have been obtained.
Section 5.07. Waiver. The Obligor waives any defense that this Agreement was executed subsequent to
the date of the Surety Bond, admitting and covenanting that such Surety Bond was executed pursuant to
the Obligor's request and in reliance on the Obligor's promise to execute this Agreement.
Section 5.08. Notices, Requests, Demands. Except as otherwise expressly provided herein, all written
notices,.requests, demands or other communications to or upon the respective parties hereto shall be
deemed to have been given or made when actually received, or in the case of telex or telecopier notice
sent over a telex or a telecopier machine owned or operated by a party hereto, when sent, addressed as
specified below or at such other address as either of the parties hereto or the Paying Agent may hereafter
specify in writing to the others:
If to the Obligor: Pearland Economic Development Corporation
3519 Liberty Drive
Pearland,TX 77581
Attention:Executive Director
If to the Paying Agent: Wells Fargo Bank,N.A.
1000 Louisiana Street
Suite 640
— Houston,TX 77002
Attention: Corporate Trust Services
If to Ambac: Ambac Assurance Corporation
One State Street Plaza, 19th Floor
New York,New York 10004
Attention: General Counsel
5
Section 5.09. Survival of Representations and Warranties. All representations, warranties and
obligations contained herein shall survive the execution and delivery of this Agreement and the Surety
Bond.
Section 5.10. Governing Law. This Agreement and the rights and obligations of the parties under this
Agreement shall be governed by and construed and interpreted in accordance with the laws of the State.
Section 5.11. Counterparts. This Agreement may be executed in any number of copies and by the
different parties hereto on the same or separate counterparts, each of which shall be deemed to be an
original instrument. Complete counterparts of this Agreement shall be lodged with the Obligor and
Ambac.
Section 5.12. Severability. In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof. .
6
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be
duly executed and delivered as of the date first above written.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
Attest:Q / /,cc i'1✓ . , _ By:
Title: Treasurer Title: xecutive Director
AMBAC ASSURANCE CORPORATION
Attest: By:
Title: Assistant Secretary Title: Vice President and
Assistant General Counsel
7
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be
duly executed and delivered as of the date first above written.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
Attest: By:
Treasurer Executive Director
AMBAC ASSURANCE CORPORATION
Attest: By: � � "" ^1
I�
Assistant cretary Vice President and
Assistant General Counsel
7
ANNEX A
SURETY BOND
8
ANNEX B
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires, all capitalized terms shall have the meaning as set out below.
"Agreement"means this Guaranty Agreement.
"Ambac"has the same meaning as set forth in the first paragraph of this Agreement.
"Collateral and Revenues"means the Pledged Revenues as defined in the Resolution.
"Commitment"means the Ambac Commitment for Surety Bond in the form attached hereto as Annex C.
"Debt Service Payments" means those payments required to be made by the Obligor which will be
applied to payment of principal of and interest on the Obligations.
"Effective Interest Rate" means the lesser of the Reimbursement Rate or the maximum rate of interest
permitted by then applicable law of the State; provided, however, that the Effective Interest Rate shall in
no event be less than the interest rate on the Obligations.
"Event of Default"shall mean those events of default set forth in Section 3.01 of this Agreement.
"Legally Available Funds"means the Pledged Revenues as defined in the Resolution.
"Obligations"has the same meaning as set forth in the second paragraph of this Agreement.
"Obligor"has the same meaning as set forth in the first paragraph of this Agreement.
"Owners" means the registered owner of any Obligation as indicated in the books maintained by the
applicable paying agent,the Obligor or any designee of the Obligor for such purpose. The term"Owner"
shall not include the Obligor or any person or entity whose obligation or obligations by agreement
constitute the underlying security or source of payment for the Obligations.
"Paying Agent" means Wells Fargo Bank,N.A.,Houston,Texas.
"Reimbursement Period" means, with respect to a particular Surety Bond Payment, the period
commencing on the date of such Surety Bond Payment and ending 12 months following such Surety
Bond Payment.
"Reimbursement Rate" means Citibank's prime rate plus two (2) percent per annum, as of the date of
such Surety Bond Payment, said "prime rate" being the rate of interest announced from time to time by
Citibank,New York,New York, as its prime rate. The rate of interest shall be calculated on the basis of a
360 day year.
9
•
"Resolution"means the Obligor's Resolution, adopted on May 22, 2006, authorizing the issuance of the
Obligations.
"State"means the State of Texas.
"Surety Bond" means the surety bond issued by Ambac substantially in the form attached to this
Agreement as Annex A.
"Surety Bond Coverage" means the amount available at any particular time to be paid to the Paying
Agent under the terms of the Surety Bond,which amount shall never exceed$788,957.00.
"SuretyBond Payment" means an amount equal to the Debt Service Payment less (i) that portion of the
Ym q Ym
Debt Service Payment paid by the Obligor, and (ii) other funds legally available to the Paying.Agent for
payment to the Owners, all as certified by the Paying Agent in a demand for payment rendered pursuant
to the terms of the Surety Bond.
•
10
ANNEX C
COMMITMENT
11
AN D R E VY S 600 Travis, Suite 4200
ATTORNEYS K U p t1T H Houston,Texas 77002
1 Lip 713.220.4200 Phone
713.220.4285 Fax
andrewskurth.com
June 20, 2006
Ambac Assurance Corporation
One State Street Plaza
New York,New York 10004
Re: $10,235,000 Pearland Economic Development Authority Sales Tax Revenue
Bonds, 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,
jjksiu ju f-tk)
7867/7868
HOU:2585297.1
M'.ev
Moody's Investors Service
99 Church Street
New York, NY
June 16, 2006
Ambac
One State Street Plaza
New York, NY 10004
To Whom It May Concern:
Moody's Investors Service has assigned the rating of Aaa (Ambac Insured - Policy No.
25383BE) to the $10,235,000.00, Pearland Economic Development Corporation,
Texas - Sales Tax Revenue Bonds, Series 2006, dated June 15, 2006 which sold on
May 22, 2006. The rating is based upon an insurance policy provided by Ambac.
Should you have any questions regarding the above, please do not hesitate to contact
Karen Malkowski at (201) 395-6370.
Sincerely yours,
AQ,am, Cut irl
Sean Cullen
Senior Vice President
SC / PS
TheMcGraw•Hlll Companies �` ,''. . » « ' ' ?: A t, 431
STANDARD N water Street, Floor
New York,NY 10041-041.0003
tel 212 438.2074
&POOR'S reference no.:777107
1' 1
June 16,2006
Ambac Assurance Corporation
One State Street Plaza 15th FL
New York,NY 10004
Attention: Ms. Yolanda Ortiz,Insurance Coordinator
Re: $10,235,000 Pearland Economic Development Corporation, Texas,Sales Tax Revenue
Bonds,Series 2006, dated:June 15, 2006, consisting of 3,255,000 Serial Bonds due:
September 1, 2007-2021; $1,035,000 Term Bonds due:September 1,2024; $1,980,000 Term
Bonds due:September 1, 2027; $3,965,000 Term Bonds due:September 1,2030,
(POLICY#25383BE)
Dear Ms. Ortiz:
Standard&Poor's has reviewed the rating on the above-referenced obligations. After such
review,we have changed the rating to "AAA"from"A". The rating reflects our assessment of the
likelihood of repayment of principal and interest based on the bond insurance policy your company
is providing. Therefore,rating adjustments may result from changes in the financial position of
your company or from alterations in the documents governing the issue.
The rating is not investment, financial, or other advice and you should not and cannot rely upon
the rating as such. The rating is based on information supplied to us by you but does not represent
an audit. We undertake no duty of due diligence or independent verification of any information.
The assignment of a rating does not create a fiduciary relationship between us and you or between
us and other recipients of the rating. We have not consented to and will not consent to being
named an"expert"under the applicable securities laws, including without limitation, Section 7 of
the Securities Act of 1933. The rating is not a"market rating"nor is it a recommendation to buy,
hold, or sell the obligations.
This letter constitutes Standard&Poor's permission to you to disseminate the above-assigned
rating to interested parties. Standard&Poor's reserves the right to inform its own clients,
subscribers, and the public of the rating.
Standard&Poor's relies on the issuer and its counsel, accountants, and other experts for the
accuracy and completeness of the information submitted in connection with the rating. This rating
is based on financial information and documents we received prior to the issuance of this letter.
Standard&Poor's assumes that the documents you have provided to us are final. If any
subsequent changes were made in the final documents,you must notify us of such changes by
sending us the revised final documents with the changes clearly marked.
Ms. Yolanda Ortiz
Page 2
June 16, 2006
Standard&Poor's is pleased to be of service to you. For more information please visit our
website at www.standardandpoors.com. If we can be of help in any other way,please contact us.
Thank you for choosing Standard&Poor's and we look forward to working with you again.
Sincerely yours,
Standard&Poor's Ratings Services
a division of The McGraw-Hill Companies,Inc.
t
ak
'i.1. "),A.i .!)
OFFICIAL BID FORM
May 22,2006
Board of Directors
Pearland Economic Development Corporation
3519 Liberty Drive
Pearland,Texas 77581
Gentlemen:
i Subject to the terms of your Official Notice of Sale and Official Statement, dated May 11, 2006, which are
incorporated herein by reference, we hereby submit the following-bid for the $10,235,000 PEARLAND
ECONOMIC DEVELOPMENT CORPORATION, SALES TAX REVENUE BONDS, SERIES 2006, dated June
15,2006. This offer is being made for all said Bonds and for not less than all.
For said legally issued Sales Tax Revenue Bonds,we will pay you the par value thereof,plus accrued interest from
their date to the date of delivery to us,plus a cash premium of$ 'b- for the Bonds maturing and bearing
interest per annum as follows:
Maturity Principal Interest Maturity Principal Interest
Date Amount Rate Date Amount Rate
September 1,2007(a) $ 50,000 5.00 V q September 1,2019(a)(b) $ 280,000 LI.31 S
September 1,2008(a) 165,000 y•SO° September 1,2020(a)(b) 300,000 i4.S Od
September 1,2009(a) 170,000 il•2S0 September 1,2021(a)(b) 310,000 44.760
September 1,2010(a) 180,000 c{.zs O September 1,2022(a)(b) 325,000 II 5.OA)
September 1,2011(a) 185,000 S•000 September 1,2023(a)(b) 345,000 11 S• 0147
September 1,2012(a) 200,000 S.Oto September 1,2024(a)(b) 365,000 Tl S• 000
September 1,2013(a) 210,000 5.600 September 1,2025(a)(b) 385,000 TL S.Ot.0
September 1,2014(a) 215,000 S•60 O September 1,2026(a)(b) 405,000 IL 5•uw
September 1,2015(a) 230,000 S. )O0 September 1,2027(a)(b) 1,190,000 1-2 s•00v
September 1,2016(a) 240,000 y•LSO September 1,2028(a)(b) 1,255,000 T3 '•-Co
September 1,2017(a)(b) 255,000 Li.Zsit, September 1,2029(a)(b) 1,320,000 1-3 y•iso
September 1,2018(a)(b) 265,000 4.31 S. September 1,2030(a)(b) 1,390,000 T3 4•.750
(a) At the option of the Purchaser,any or all of such serial maturities may be designated as term bonds subject
to mandatory sinking fund redemption as follows;provided that the mandatory sinking fund amount in each
year shall equal the amounts shown above as maturing in such year.
Term Bonds Years of First
Maturity Date Mandatory Principal Amount Interest
(September 1) Redemption of Term Bonds Rate
T I
20zy so LL $ 1,035,coo 5.vex, %
11 202l 20ZS I,i90a0 co. vv %
T3 20 30 202,8 3,96S,uw 14. 1SO%
{
(b) Subject to optional redemption and payment, at the option of the Corporation, in whole or, from time to
time, in part, on September 1, 2016, or on any date thereafter at a price equal to the principal amount
thereof,plus accrued interest to the date fixed for redemption.
Interest cost,in accordance with the above bid,is:
Total Interest Cost from June 15,2006 $ B, 699,q SS. t4
Less: Premium $ — C-
NET INTEREST COST $g,69a1 9 s r. 40
NET EFFECTIVE INTEREST RATE 4 (,.I[r 4.79 5 q 0 1 %
The Initial Bonds shall be registered in the name of IVi0Q 6A11 11"664
which •will, upon payment for the
Bonds, be cancelled by the Paying Agent/Registrar. The Bonds will then be registered in the name of Cede&Co.
(DTC's partnership nominee),under the Book-Entry-Only System.
Cashier's Check of the Feb rT Bank, Qv'Tt.1 ,Texas,in the amount of$204,700 which
represents our Good Faith Deposit(is attached hereto)or(has been made available to you prior to the opening of this
Bid), and is submitted in accordance with the terms as set forth in the "Official Notice of Sale" and "Official.
Statement."
We agree to accept delivery of the Bonds utilizing the Book-Entry-Only System through DTC and make payment for
the Initial Bond in immediately available funds in the Corporate Trust Office, Wells Fargo Bank, N.A., Houston,
Texas, not later than 10:00 AM, CST, on June 20, 2006, or thereafter on the date the Bonds are tendered for
delivery,pursuant to the terms set forth in the Notice of Sale and Bidding Instructions.It will be the obligation of the
purchaser of the Bonds to complete the DTC Eligibility Questionnaire.
The undersigned agrees to complete,execute and deliver to the Corporation,by the date of delivery of the Bonds,a
certificate relating to the "issue price" of the Bonds in the form and to the effect attached to or accompanying the
Official Notice of Sale,with such changes thereto as may be acceptable to the Corporation and its Bond Counsel.
Respectfully submitted,
N
uthorized Repres tative {� /Lr l X
ACCEPTED 22"d Q��-5-`��"I
this day of May,2006,the Board of Directors,Pearland Economic Development Corporation.
airman
ATTEST:
et--,11//
Secretary
(For your information you will find attached a list of the group of purchasers associated with us in this proposal)
,
UNITED STATES OF AMERICA
STATE OF TEXAS
• NUMBER A,^,:. DENOMINATION
.;,y
T-1 , t ,.. $10,235,000
REGISTERED x� x i, , REGISTERED
PEARLAND ECONOMIC )EVELOiMENT CORPORATION
SALES T A jVE',,,I�iIJE BOND
X�RE�
SERIES 206.
DATED DATE: June 15,2006 '-
REGISTERED OWNER: MORGAN KEEGAN*CQ C.
PRINCIPAL AMOUNT: TEN MILLION T,WOJ-IUNDRED THIRTY FIVE THOUSAND AND NO/100
DOLLARS: 4J .
THE PEARLAND ECONOMIC( VEE MENT CORPORATION (the "Corporation"), a corporation
created to act on behalf of the City of Pearlaz Texi (the"City"), in the County of Brazoria, in the State of Texas, .
for value received hereby promises to pay,but..Viel from certain Pledged Revenues as hereinafter provided,to the
Registered Owner identified above or regxstered assigns, on September 1 of each of the years and in the principal
amounts set forth in the following scheg ,e:Ni €
Yier of Principal Interest
Bond No. :<+f' Maturity Amount Rate
Vni
R-1 .-.4 F3 2007 $50,000 5.000%
R-2 z, 2008 165,000 4.500
R-3 2009 170,000 4.250
R-4
R-5 2010 180,000 4.250
2011 185,000 5.000
R-6 w . f 2012 200,000 5.000
R-7 2013 210,000 5.000
R-8 2014 215,000 5.000
R-9 2015 230,000 5.000
R-10 2016 240,000 4.250
R-11 2017 255,000 4.250
R-12 2018 265,000 4.375
R-13 2019 280,000 4.375
R-14 2020 300,000 4.500
R-15 2021 310,000 4.500
*** *** *** ***
R-16 2024 1,035,000 5.000
*** *** *** ***
R-17 2027 1,980,000 5.000.
*** *** *** ***
R-18 2030 3,965,000 4.750
upon presentation and surrender of this Bond at the principal payment office of Wells Fargo Bank, N.A.,
Minneapolis, Minnesota, or its successor (the "Paying Agent/Registrar"), the principal amounts identified above,
payable in any coin or currency of the United States of America which on the date of payment of such principal is
legal tender for the payment of debts due the United States of America, and to pay, solely from such Pledged
Revenues, interest thereon at the rate shown above, calculated on the basis of a 360-day year, composed of twelve
30-day months, from the later of the Dated Date specified above, or the most recent interest payment date to which
interest has been paid or duly provided for.
Page 1 of 7
HOU:2587425.2
THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the "Bonds") aggregating
$10,235,000, issued for the purposes permitted by Article 5190.6, Texas Revised Civil Statutes (the "Act"),
including particularly(1)acquiring and constructing streets and roads,drainage and,related improvements within the
City, and (2) paying the costs of issuing the Bonds, all under and pursuant to the authority of the Act and all other
applicable law, and a resolution adopted by the Corporation on May 22,2006(the"Resolution"). Capitalized terms
used herein and not otherwise defined have the meanings ascribed to them in the Resolution.
THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit under the
Resolution unless this Bond is registered by the Comptroller of Public Accounts of the State of Texas by due
execution of the registration certificate endorsed hereon.
THE CORPORATION RESERVES THE RIGHT to redeem Bonds maturing on or after September 1,
2017, in whole or from time to time in part, in integral multiples of$5,000;0nASeptember 1, 2016, or on any date
thereafter at par plus accrued interest on the principal amounts called:'for redemption to the date fixed for
redemption. Reference is made to the Resolution for complete details"co1ceining the manner of redeeming the
Bonds.
THE BONDS maturing on September 1 in the years 2024, 202FT,and 2030 (the"Term Bonds") are subject
to mandatory sinking fund redemption in the following amounts'(subjectXto reduction as hereinafter provided),on the
following dates,in each case at a redemption price equal.to the;principal amount of the Bonds the portions thereof so
called for redemption plus accrued interest to the date flied>for`rc eniption:
Mandatory Redemption Dates Principal Amounts
Term Bonds Maturing September 1,2024 `e.. September 1,2022 $325,000
September 1,2023 345,000
`` September 1,2024 365,000
Term Bonds Maturing September 1,.2027 cyp September 1,2025 $385,000.
September 1,2026 405,000
.: September 1,2027 1,190,000
Term Bonds Maturing Septemlte1,2030 September 1,2028 $1,255,000
September 1,2029 1,320,000
fii` l September 1,2030 1,390,000
THE PARTICUL`,'431i-1`Term Bonds 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 Bonds are to be
mandatorily redeemed. The principal amount of Term Bonds to be mandatorily redeemed in each year shall be
reduced by the principal amount of such Term Bonds that have been optionally redeemed on or before September 1
of such year and which have not been made the basis for a previous reduction.
NOTICE OF ANY REDEMPTION shall be given at least thirty. (30) days prior to the date fixed for
redemption by first class mail, postage prepaid, addressed to the registered owner of each Bond to be redeemed in
whole or in part at the address shown on the books of registration kept by the Paying Agent/Registrar. When Bonds
or portions thereof have been called for redemption, and due provision has been made to redeem the same, the
principal amounts so redeemed shall be payable solely from the funds provided for redemption, and interest which
would otherwise accrue on the amounts called for redemption shall terminate on the date fixed for redemption.
THIS BOND AND THE SERIES OF WHICH IT IS A PART are special obligations of the.Corporation
that are payable from and are equally and ratably secured by a first lien on the Pledged Revenues, as defined and
provided in the Resolution, which Pledged Revenues are required to be set aside and pledged,to the payment of the
Bonds,and all additional bonds issued on a parity therewith,in the Debt Service Fund and Reserve Fund maintained
for the payment of all such Bonds, and any excess Sales Tax Revenues are to be set aside in.the Surplus Fund and
used for any purpose authorized under the Act.
Page 2 of 7
HOU:2582967.1
THIS BOND AND THE SERIES OF WHICH IT IS A PART ARE PAYABLE SOLELY FROM SUCH
PLEDGED REVENUES AND NEITHER THE STATE OF TEXAS (THE "STATE"), THE CITY OF
PEARLAND, TEXAS (THE "CITY"), NOR ANY POLITICAL CORPORATION, SUBDIVISION OR AGENCY
OF THE STATE SHALL BE OBLIGATED TO PAY THE SAME OR THE INTEREST THEREON AND
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE, THE CITY, OR ANY
OTHER POLITICAL CORPORATION, SUBDIVISION OR AGENCY THEREOF IS PLEDGED TO THE
PAYMENT OF THE PRINCIPAL OF OR THE INTEREST ON THE BONDS. NEITHER THE BONDS NOR'
ANY INSTRUMENT RELATED TO THE BONDS MAY GIVE A BONDHOLDER A RIGHT TO DEMAND
PAYMENT FROM TAX.PROCEEDS IN EXCESS OF THOSE COLLECTED FROM THE SALES AND USE
TAX IMPOSED BY THE CITY PURSUANT TO THE ACT. THE OWNER HEREOF SHALL NEVER HAVE
THE RIGHT TO DEMAND PAYMENT OF THIS BOND OUT OF ANY FUNDS RAISED OR TO BE RAISED
BY AD VALOREM TAXATION.
ra,
THIS BOND IS TRANSFERABLE only upon presentation and su.' i -r at the principal payment office of
the Paying Agent/Registrar, duly endorsed for transfer or accornpa nic,A4ssignment duly executed by the
registered owner or his authorized representative,subject to the termannj itions of the Resolution.
tv
THE BONDS ARE EXCHANGEABLE at the princip4: 'ay nti face of the Paying Agent/Registrar for
Bonds in the principal amount of$5,000 or any integral multiple-itl: xe.of,4 bject to the terms and conditions of the
Resolution. 444 $
THE REGISTERED OWNER of this Bond, by.ftwi e`hereof;acknowledges and agrees to be bound
byall the terms and conditions of the Resolution. '` "'" ,
THE CORPORATION has covenanted in the Rem•.:fa•Qn that it will at all times provide a legally qualified
paying agent and registrar for the Bonds and w•.Muse noI�e of any change of registrar to be mailed to.each
registered owner. $t'•.
THE CORPORATION HAS RESET VED-fI RIGHT to issue additional parity bonds, subject to the
restrictions contained in the Resolution, w +b¢,..equally and ratably payable from, and secured by a first lien
on and pledge of, the Pledged Revenues ii 'eg,an anner and to the same extent as this Bond and the series of
which it is a part. -';t a;
IT IS HEREBY DECLA' ■40- REPRESENTED that this Bond has been duly and validly issued and
delivered; that all acts, conditions,and flequired or proper to be performed, exist, and be done precedent to or
in the issuance and delivery oft itkit o haW been performed, existed, and been done in accordance with law; that
the Bonds do not exceed any st.l.tq,yrrr:ation; and that provision has been made for the payment of the principal
of and interest on this Bond an. .40 'L.," •onds by the creation of the aforesaid lien on and pledge of the Pledged
Revenues.
Page 3 of 7
HOU:2582967.1
' y -
IN WITNESS WHEREOF, the Corporation has caused this Bond to be executed by the Chairman of the
Corporation and countersigned by the Secretary of the Corporation by the manual, lithographed or printed facsimile
signatures.
PEARLAND ECONOMIC DEVELOPMENT
CORPORATION
Chairman
COUNTERSIGNED:
.,S cretaxy
/,iy A),
iEe
>h:7?
(4t
w . .S• $
`.3 "
Page4of7
HOU:2582967.I
1 .
REGISTRATION CERTIFICATE
r.
THE STATE OF TEXAS
OFFICE OF THE COMPTROLLER OF PUBLIC ACCOUNTS REGISTER NO.
I hereby certify that this Bond has been examined, certified as to validity and approved by the Attorney
General of the State of Texas, and that this Bond has been registered by the Comptroller of Public Accounts of the
State of Texas.
• WITNESS MY SIGNATURE AND SEAL OF OF CE this ' 1 2UO
Comptroller of Public Accounts
of the State of Texas
•
(SEAL)
•
•
r (L
Page 5 of 7
HOU:2582967.1
STATEMENT OF INSURANCE
Financial Guaranty Insurance Policy No. 30357 (the "Policy") with respect to payments due for principal of
and interest on this Bond has been issued by Ambac Assurance Corporation ("Ambac Assurance"). The
Policy has been delivered to The Bank of New York, New York,New York, as the Insurance Trustee under
said Policy and will be held by such Insurance Trustee or any successor insurance trustee. The Policy is on
file and available for inspection at the principal office of the Insurance Trustee and a copy thereof may be
secured from Ambac Assurance or the Insurance Trustee.All payments required to be made under the Policy
shall be made in accordance with the provisions thereof.The owner of this Bond acknowledges and consents
to the subrogation rights of Ambac Assurance as more fully set forth in the Policy.
.44
fi ?
' eyifiy
lt'
:7' . -
Page6of7
HOU:2582967.1
•
ASSIGNMENT
For value received,the undersigned hereby sells,assigns,and transfers unto
(Please print or type name,address,and zip code of Transferee)
(Please insert Social Security or Taxpayer Identification Number of Transferee)
the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer said Bond on the
books kept for registration thereof,with full power of substitution in the premises.
DATED:
Signature Guaranteed:
stered Owner
NOTICE: The si -atgze,"a ve must correspond to the
name of the reg ste% owner as shown on the face of
this Bond in every particular,without any alteration,
NOTICE: Signature must be guaranteed by a member enlargement or.,c-langg whatsoever.
firm of the New York Stock exchange or a
commercial bank or trust company.
Page7of7
HOU:2582967.I
$10,235,000
Pearland Economic Development Corporation
Sales Tax Revenue Bonds, 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 Official Statement and the following information, if not
included in the Official Statement or such statement has not been prepared.
1. Name of bond issue: Pearland Economic Development Corporation Sales
Tax Revenue Bonds, Series 2006
2. a) par amount of issue: $10,235,000
b) dollar amount of bond premium, if any: $185,434.80
c) dollar amount of bond original issue discount, if any: $12,868.75
3. Dated.date: April 15,2005, with interest to accrue from the date of
delivery
4. Closing date(expected delivery date, on or about): June 20, 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: N/A
7. Mandatory redemption provisions: See Official Statement.
8. Debt-service schedule,principal and interest, and annual totals, with fiscal
year identified: See Official Statement.
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: See Official Statement
11. Pledge: tax(ad valorem, sales, other), revenue, combination: sales
tax revenue
12. Type of credit enhancement(including PSF guarantee): N/A
13. Rating service(s) and rating(s) assigned to issue: Moody's: "Aaa"
S&P: "AAA"
B. Additional Information
1. Type of sale: Competitive '
2. Pricing: May 22, 2006, 7:00 p.m.
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
HOU:2586495.1 . '
6. 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)463-1741 or(512)475-4802 (FAX).
SERVICE FIRM ONE-TIME FEE ANNUAL FEE(a)
(in dollars)
Bond Rating Moody's $12,500.00
Standard&Poor's $12,500.00
Fitch N/A
Other General Costs of Issuance(b) $81,500.00 $500.00
Any Specialized Costs of Issuance(c) F N/A
Credit Facility N/A
- Bond Insurance $18,000.00
Total Underwriting Spread(d) $90,066.05 � ry
Did underwriter pay rating fee(s) No Which one(s)?
Did underwriter pay bond insurance fee? Yes
PARTICIPANTS FIRM_
Financial Advisor RBC Capital Markets
Bond Counsel Andrews Kurth LLP
Paying Agent/Registrar;Escrow Agent;Authenticating Agent Wells Fargo Bank,N.A.
Underwriters Morgan Keegan&Co.,Inc.
Trustee None
Purchaser's Counsel None
(a) relates to the ongoing fees or recurring costs of 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) defined as the differential between the price paid to the issuer for the issue and the.
prices at which the securities are initially offered to the investing public
Person Completing Form:
Telephone No. (713) 220-4876
Name: Marcus Deitz Fax No. (713) 238-7125
HOU:2586495.1
•
•
EXHIBIT A
•
•
•
•
•
HOU:2586495.1 •
City of Pearland -Economic Development Corporation
REVISED FINAL NUMBERS-June 12,2006
Dated Date=06/15/2006 Series 2006 EDC Bonds Delivery Date=06/20/2006
Term Bond Bond Coupon Interest Total Fiscal Year. Debt Service
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
03/01/2007 - - - - 347,177.78 347,177.78 - 347,177.78
09/01/2007 - 50,000.00 50,775.00 5.000 3.660000 101.550000 244,109.38 294,109.38 641,287.16 294,109.38
03/01/2008 - - - - 242,859.38 242,859.38 242,859.38
09/01/2008 - 165,000.00 167,752.20 4.500 3.700000 101.668000 242,859.38 407,859.38 650,718.76 407,859.38
03/01/2009 - - - 239,146.88 239,146.88 239,146.88
09/01/2009 - 170,000.00 172,684.30 4.250 3.720000 101.579000 239,146.88 409,146.88 648,293.76 409,146.88
03/01/2010 - - - - 235,534.38 235,534.38 235,534.38
09/01/2010 180,000.00 183,526.20 4.250 3.740000 101.959000 235,534.38 415,534.38 651,068.76 415,534.38
03/01/2011 - - - - 231,709.38 231,709.38 - 231,709 38
09/01/2011 185,000.00 195,191.65 5.000 3.820000 105.509000 231,709.38 416,709.38 648,418.76 416,709.38
03/01/2012 - - - - - 227,084.38 227,084.38 227,084.38
09/01/2012 200,000.00 212,222.00 5.000 3.880000 106.111000 227,084.38 427,084.38 654,168.76 427,084.38
03/01/2013 - - - 222,084.38 222,084.38 - 222,084.38
09/01/2013 - 210,000.00 223,412.70 5.000 3.970000 106.387000 222,084.38 432,084.38 654,168.76 432,084.38
03/01/2014 - - - - 216,834.38 216,834.38 - 216,834.38
09/01/2014 215,000.00 228,957.80 5.000 4.060000 106.492000 216,834.38 431,834.38 648,668.76 431,834.38
03/01/2015 - - - - 211,459.38 211,459.38 - 211,459.38
09/01/2015 230,000.00 244,625.70 5.000 4.160000 106.359000 211,459.38 441,459.38 652,918.76 441,459.38
03/01/2016 - - - - 205,709.38 205,709.38 - 205,709.38
09/01/2016 - 240,000.00 240,000.00 4.250 4.250000 100.000000 205,709.38 445,709.38 651,418.76 8,835,709.38
03/01/2017 - - - - 200,609.38 200,609.38
09/01/2017 - 255,000.00 * 252,743.25 4.250 4.350000 99.115000 200,609.38 455,609.38 656,218.76 --
03/01/2018 - - - - 195,190.63 195,190.63
09/01/2018 - 265,000.00 * 263,129.10 4.375 4.450000 99.294000 195,190.63 460,190.63 655,381.26 -
03/01/2019 - - - - 189,393.75 189,393.75
09/01/2019 - 280,000.00 * 276,528.00 4.375 4.500000 98.760000 189,393.75 469,393.75 658,787.50 -
03/01/2020 - -
- - 183,268.75 183,268.75 -
_
09/01/2020 - 300,000.00 * 298,113.00 4.500 4.560000 99.371000 183,268.75 483,268.75 666,537.50 -03/01/2021 - - - -
- 176,518.75 176,518.75
09/01/2021 - 310,000.00 * 306,617.90 4.500 4.600000 98.909000 176,518.75 486,518.75 663,037.50 -
03/01/2022 - - - - 169,543.75 169,543.75 -
09/01/2022 - (1) 325,000.00 * 337,879.75 5.000 4.510059 103.963000 169,543.75 494,543.75 664,087.50 -
03/01/2023 - - - - 161,418.75 161,418.75 -
09/01/2023 - (1) 345,000.00 * 358,672.35 5.000 4.510059 103.963000 161,418.75 506,418.75 667,837.50
03/01/2024 - - - - - 152,793.75 152,793.75 -
09/01/2024 1,035,000.00 (1) 365,000.00 * 379,464.95 5.000 4.510000 103.963000 152,793.75 517,793.75 670,587.50 -
03/01/2025 - - - - 143,668.75 143,668.75 -
09/01/2025 - (2) 385,000.00 * 398,663.65 5.000 4.560080 103.549000 143,668.75 528,668.75 672,337.50 03/01/2026 - - - 134,043.75 134,043.75 -
09/01/2026 - (2) 405,000.00 " 419,373.45 5.000 4.560080 103.549000 134,043.75 539,043.75 673,087.50
03/01/2027 - - - 123,918.75 123,918.75 -
-
09/01/2027 1,980,000.00 (2) 1,190,000.00 * 1,232,233.10 5.000 4.560000 103.549000 123,918.75 1,313,918.75 1,437,837.50 -
03/01/2028 - - - 94,168.75 94,168.75 - _
09/01/2028 - (3) 1,255,000.00 " 1,255,000.00 4.750 4.750000 100.000000 94,168.75 1,349,168.75 1,443,337.50
03/01/2029 - - - 64,362.50 64,362.50 - -
09/01/2029 - (3) 1,320,000.00 * 1,320,000.00 4.750 4.750000 100.000000 64,362.50 1,384,362.50 1,448,725.00
-
03/01/2030 - - - - - - 33,012.50 33,012.50 - -
Page-3
i p
Term Bond Bond Coupon Interest Total Fiscal Year Debt Service -
Dates Maturities Redemptions Proceeds Rate Yield Price Amount Debt Service Debt Service to Call
09/01/2030 3,965,000.00 (3) 1,390,000.00 * 1,390,000.00 4.750 4.750000 100.000000 33,012.50 1,423,012.50 1,456,025.00 -
Total 6,980,000.00 10,235,000.00 10,407,566.05 8,699,956.02 18,934,956.02 18,934,956.02 14,891,131.00
Acc Int -6,780.82 -6,780.82 - -
Grand Totals 6,980,000.00 10,235,000.00 10,407,566.05 8,693,175.20 18,928,175.20 18,934,956.02 14,891,131.00 1
*-Bonds callable... 09/01/2016 @ 100.000
TIC(Incl.all expenses)....4.89766641% Average Coupon 4.79598753% Net Eff.Int.Rate(Texas Vernon's)= 4.700858%(with Adjstmnt of$0.00).
TIC(Arbitrage TIC) 4.69193007% Average Life(yrs)... 17.72 IRS Form 8038-G NIC =4.637172%(with Adjstmnt of$0.00).
Bond Years 181,400.72 WAM(yrs) 17.655021 NIC= 4.700858%(with Adjstmnt of$0.00).
Term bonds and their respective sinking payments are marked by "(n)" where each"n"identifies each respective term bond.
1
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j
i
z
R
1
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PEARLAND EDC:NEW2006 Prepared by:RBC Capital Markets-Houston,Texas 06/12/2006 @ 11:38 v7.53
g
Page-4