Ord. 1110 05-12-03 ORDINANCE NO. 1110
ORDINANCE AUTHORIZING AND ORDERING THE ISSUANCE OF CITY
OF PEARLAND, TEXAS PERMANENT IMPROVEMENT BONDS, SERIES
2003; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING
FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST
THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE
PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO
BE USED IN CONNECTION WITH THE SALE OF THE BONDS;
AUTHORIZING THE PURCHASE OF BOND INSURANCE; MAKING
OTHER PROVISIONS REGARDING SUCH BONDS, INCLUDING USE OF
THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO; AND
DECLARING AN EMERGENCY
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF PEARLAND:
ARTICLE I
FINDINGS AND DETERMINATIONS
Section 1.1:
determines that:
Findings and Determinations. The City Council hereby officially finds and
(a)
The City of Pearland, Texas (the "City"), acting through its City Council, is
authorized by Section 3.07 of its Home Rule Charter and the Constitution and
laws of the State of Texas, particularly Chapters 1331 of the Texas Government
Code, as amended, to issue bonds for the purpose of making needed public
improvements;
(b)
The issuance of the bonds herein authorized was approved by the voters of the
City at an election held for such purpose on November 6, 2001 (the "Election"),
which was called by the City Council pursuant to Resolution No. R2001-116
adopted August 29, 2001;
(c)
The City Council canvassed the returns of the Election and by Ordinance
No. 1040, adopted November 12, 2001 declared the results to be in favor of the
issuance of the Bonds;
(d)
The City has previously issued one installment of bonds authorized by the
Election, totaling $25,000,000, and has now determined that it is necessary and
advisable to authorize, issue and deliver a second installment of such authorized
bonds in an amount of $15,000,000;
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(e)
The City Council is of the opinion and hereby affirmatively finds that it is in the
best interest of the City to issue bonds in the amounts and for the purposes herein
stated.
ARTICLE II
DEFINITIONS AND INTERPRETATIONS
Section 2.1: Definitions. As used herein, the following terms shall have the meanings
specified, unless the context clearly indicates otherwise:
"Act" shall mean Chapters 1331, Texas Government Code, as amended.
"Attorney General" shall mean the Attorney General of the State of Texas.
"Bond" or "Bonds" shall mean any or all of the City of Pearland, Texas Permanent
Improvement Bonds, Series 2003, authorized by this Ordinance.
"City" shall mean the City of Pearland, Texas and, where appropriate, its City Council.
"City Council" shall mean the governing body of the City.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Comptroller" shall mean the Comptroller of Public Accounts of the State of Texas.
"Construction Fund" shall mean the Permanent Improvement Bonds, Series 2003
Construction Fund established by the City and described in section 5.3 of this Ordinance.
"Debt Service Fund" shall mean the Permanent Improvement Bonds, Series 2003 Debt
Service Fund established by the City and described in section 5.2 of this Ordinance.
"Election" shall mean the election held November 6, 2001 which authorized the issuance
of $92,500,000 in bonds for necessary public improvements to City streets and bridges and
$22,500,000 in bonds for necessary public improvements to City drainage projects and facilities.
"Fiscal Year" shall mean the City's then designated fiscal year, which currently is the
twelve-month period beginning on the first day of October of a calendar year and ending on the
last day of September of the next succeeding calendar year and each such period may be
designated with the number of the calendar year in which such period ends.
"Interest Payment Date," when used in connection with any Bond, shall mean September
1, 2003, and each March 1 and September 1 thereafter until maturity or earlier redemption of
such Bond.
"Issuance Date" shall mean the date on which the Bonds are delivered to and paid for by
the Purchaser.
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"Ordinance" shall mean this Ordinance and all amendments hereof and supplements
hereto.
"Outstanding", when used with reference to the Bonds, shall mean, as of a particular date,
all Bonds theretofore and thereupon delivered pursuant to this Ordinance except: (a) any Bonds
canceled by or on behalf of the City at or before such date; (b) any Bonds defeased pursuant to
the defeasance provisions of this Ordinance or otherwise defeased as permitted by applicable
law; and (c) any Bonds in lieu of or in substitution for which a replacement Bond shall have been
delivered pursuant to this Ordinance.
"Paying Agent/Registrar" shall mean Wells Fargo Bank Texas, N.A., Houston, Texas,
and its successors in that capacity.
"Paying Agent/Registrar Agreement" shall mean the agreement between the City and the
Paying Agent/Registrar as described more particularly in Section 6.1 hereof.
"Purchaser" shall mean the entity or entities specified in Section 7.1 hereof.
"Record Date" shall mean the close of business on the 15th day of the calendar month
immediately preceding the applicable Interest Payment Date.
"Register" shall mean the registration books for the Bonds kept by the Paying
Agent/Registrar in which are maintained the names and addresses of, and the principal amounts
registered to, each Registered Owner of Bonds.
"Registered Owner" shall mean the person or entity in whose name any Bond is
registered in the Register.
Section 2.2: Interpretations. All terms defined herein and all pronouns used in this
Ordinance shall be deemed to apply equally to singular and plural and to all genders. The titles
and headings of the articles and sections of this Ordinance have been inserted for convenience of
reference only and are not to be considered a part hereof and shall not in any way modify or
restrict any of the terms or provisions hereof. This Ordinance and all the terms and provisions
hereof shall be liberally construed to effectuate the purposes set forth herein and to sustain the
validity of the Bonds and the validity of the levy of ad valorem taxes to pay the principal of and
interest on the Bonds.
ARTICLE III
TERMS OF THE BONDS
Section 3.1: Amount, Purpose and Authorization. (a) The Bonds shall be issued in fully
registered form, without coupons, under and pursuant to the authority of the City's Home Rule
Charter and the Act in the total authorized aggregate principal amount of FIFTEEN MILLION
AND NO/100 DOLLARS ($15,000,000) for the purpose of providing all or part of the funds
(i) for acquiring, constructing, repairing and improving city streets and bridges, and (ii) for
paying costs of issuance of the Bonds and other professional services related thereto.
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Section3.2: Designation, Date and Interest Payment Dates. The Bonds shall be
designated as the "City of Pearland, Texas Permanent Improvement Bonds, Series 2003," and
shall be dated May 1, 2003. The Bonds shall bear interest at the rates set forth in Section 3.3
below, from the later of May 1, 2003 or the most recent Interest Payment Date to which interest
has been paid or duly provided for, calculated on the basis of a 360-day year of twelve 30-day
months, payable on September 1, 2003, and each March 1 and September 1 thereafter until
maturity or earlier redemption.
If interest on any Bond is not paid on any Interest Payment Date and continues unpaid for
thirty (30) days thereafter, the Paying Agent/Registrar shall establish a new record date for the
payment of such interest, to be known as a Special Record Date. The Paying Agent/Registrar
shall establish a Special Record Date when funds to make such interest payment are received
from or on behalf of the City. Such Special Record Date shall be fifteen (15) days prior to the
date fixed for payment of such past due interest, and notice of the date of payment and the
Special Record Date shall be sent by United States mail, first class, postage prepaid, not later
than five (5) days prior to the Special Record Date, to each affected Registered Owner as of the
close of business on the day prior to mailing of such notice.
Section 3.3: Numbers, Denomination, Interest Rates and Maturities. The Bonds shall
be initially issued bearing the numbers, in the principal amounts and bearing interest at the rates
set forth in the following schedule, and may be transferred and exchanged as set out in this
Ordinance. The Bonds shall mature on March 1 in each of the years and in the amounts set out in
such schedule. Bonds delivered in 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 2005 $100,000 %
R-2 2006 110,000
R-3 2007 120,000
R-4 2008 130,000
R-5 2009 140,000
R-6 2010 335,000
R-7 2011 350,000
R-8 2012 370,000
R-9 2013 390,000
R-10 2014 410,000
R-11 2015 435,000
R-12 2016 455,000
R-13 2017 725,000
R-14 2018 765,000
R-15 2019 805,000
R-16 2020 845,000
R-17 2021 885,000
R-18 2022 935,000
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Bond Year of Principal Interest
Number Maturity Amount Rate
R-19 2023 980,000
R-20 2024 1,030,000
R-21 2025 1,085,000
R-22 2026 1,140,000
R-23 2027 1,200,000
R-24 2028 1,260,000
Section 3.4: Redemption Prior to Maturity. (a) Optional Redemption. The Bonds
maturing on and after March 1, 2014 are subject to r~demption prior to maturity, at the option of
the City, in whole or in part, on March 1, 2013, or any date thereafter, at par plus accrued interest
to the date fixed for redemption.
(b)
Mandatory Redemption. The Bonds maturing on March 1, 20 and March 1,
20__ (the "Term Bonds") are subject to mandatory sinking fund~ the following
amounts (subject to reduction hereinafter provided) on the following dates, in
each case at a redemption price equal to the principal amount of the Bonds or the
portions thereof so called for redemption plus accrued interest to the date fixed for
redemption:
Term Bonds Maturing March 1, 20__
Mandatory Redemption Dates
March 1, 20
March 1, 20__ (maturity)
Principal Amounts
$
$
Term Bonds Maturing March 1, 20__
Mandatory Redemption Dates
March 1, 20__
March 1, 20__ (maturity)
Principal Amounts
$
$
The particular Term Bonds to be redeemed shall be selected by the Registrar by
lot or other customary random selection method, on or before January 15 of each
year in which the Term Bonds are to be mandatorily redeemed. The principal
amount of the 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 January 15 of such year and which have not been made the
basis for a previous reduction.
(c)
Bonds may be redeemed in part 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. In selecting
portions of Bonds for redemption, each Bond shall be treated as representing that
number of Bonds of $5,000 denomination which is obtained by dividing the
principal amount of such Bond by $5,000. Upon presentation and surrender of any
Bond for redemption in part, the Paying Agent/Registrar, in accordance with the
provisions of this Ordinance, shall authenticate and deliver in exchange therefor a
Bond or Bonds of like maturity 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 or portions thereof to be
redeemed, shall be sent by United States mail, first class, postage prepaid, to the
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Registered Owners thereof at their addresses as shown on the Register, not less
than thirty (30) days before the date fixed for such redemption. By the date fixed
for redemption, due provision shall be made with the Paying Agent/Registrar for
the payment of the redemption price of the Bonds called for redemption. If such
notice of redemption is given, and if due provision for such payment is made, all
as provided above, the Bonds which are to be so redeemed thereby automatically
shall be redeemed prior to their scheduled maturities, they shall not bear interest
after the date fixed for redemption, and they shall not be regarded as being
Outstanding except for the purpose of being paid with the funds so provided for
such payment.
Section 3.5: Manner of Payment, Characteristics, Execution and Authentication. The
Paying Agent/Registrar~ is hereby appointed the paying agent for the Bonds. The Bonds shall be
payable, shall have the characteristics and shall be executed, sealed, registered and authenticated,
all as provided and in the manner indicated in the FORM OF BONDS set forth in Article IV of
this Ordinance. If any officer of the City whose manual or facsimile signature shall appear on the
Bonds shall cease to be such officer before the authentication of the Bonds or before the delivery
of the Bonds, such manual or facsimile signature shall nevertheless be valid and sufficient for all
purposes as if such officer had remained in such office.
The approving legal opinion of Andrews & Kurth L.L.P., Houston, Texas, Bond Counsel,
may be printed on the back of the Bonds over the certification of the City Secretary, which may
be executed in facsimile. CUSIP numbers also may be printed on the Bonds, but errors or
omissions in the printing of either the opinion or the numbers shall have no effect on the validity
of the Bonds.
Section 3.6: Authentication. Except for the Bonds to be initially issued, which need not
be authenticated by the Paying Agent/Registrar, only such Bonds as shall bear thereon a
certificate of authentication, substantially in the form provided in Article IV of this Ordinance,
manually executed by an authorized representative of the Paying Agent/Registrar, shall be
entitled to the benefits of this Ordinance or shall be valid or obligatory for any purpose. Such
duly executed certificate of authentication shall be conclusive evidence that the Bond so
authenticated was delivered by the Paying Agent/Registrar hereunder.
Section 3.7: Ownership. The City, the Paying Agent/Registrar and any other person
may treat the person in whose name any Bond is registered as the absolute owner of such Bond
for the purpose of making and receiving payment of the principal thereof and interest thereon
and for all other purposes, whether or not such Bond is overdue, and neither the City nor the
Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments
made to the person deemed to be the Registered Owner of any Bond in accordance with this
Section' shall be valid and effective and shall discharge the liability of the City and the Paying
Agent/Registrar upon such Bond to the extent of the sums paid.
Section3.8: Registration. Transfer and Exchange. The Paying Agent/Registrar is
hereby appointed the registrar for the Bonds. So long as any Bond remains Outstanding, the
Paying Agent/Registrar shall keep the Register at its office in Houston, Texas in which, subject
to such reasonable regulations as it may prescribe, the Paying Agent/Registrar shall provide for
the registration and transfer of the Bonds in accordance with the terms of this Ordinance.
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Each Bond shall be transferable only upon the presentation and surrender thereof at the
office of the Paying Agent/Registrar, accompanied by an assignment duly executed by the
Registered Owner or his authorized representative in form satisfactory to the Paying
Agent/Registrar. Upon due presentation of any Bond for transfer, the Paying Agent/Registrar
shall authenticate and deliver in exchange therefor, within seventy-two (72) hours after such
presentation, a new Bond or Bonds, registered in the name of the transferee or transferees, in
authorized denominations and of the same maturity and aggregate principal amount and bearing
interest at the same rate as the Bond or Bonds so presented and surrendered.
All Bonds shall be exchangeable upon the presentation and surrender thereof at the office
of the Paying Agent/Registrar for a Bond or Bonds, maturity and interest rate and in any
authorized denomination, in an aggregate principal 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. Each Bond delivered by the Paying Agent/Registrar in accordance with this Section
shall be entitled to the benefits and security of this Ordinance to the same extent as the Bond or
Bonds in lieu of which such Bond is delivered.
All Bonds issued in transfer or exchange shall be delivered to the Registered Owners
thereof at the office of the Paying Agent/Registrar or sent by United States mail, first class,
postage prepaid.
The City or the Paying Agent/Registrar may require the Registered Owner of any 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 City.
The Paying Agent/Registrar shall not be required to transfer or exchange any Bond called
for redemption in whole or in part during the forty-five (45) day period immediately prior to the
date fixed for redemption; provided, however, that this restriction shall not apply to the transfer
or exchange by the Registered Owner of the unredeemed portion of a Bond called for redemption
in part. ~
Section 3.9: Replacement 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 the same maturity, interest rate and
principal amount, bearing a number not contemporaneously outstanding. The City or the Paying
Agent/Registrar may require the Registered Owner of such 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
and the City.
If any Bond is lost, apparently destroyed or wrongfully taken, the City, pursuant to the
applicable laws of the State of Texas and ordinances of the City, and in the absence of notice or
knowledge that such Bond has been acquired by a bona fide purchaser, shall execute, and the
Paying Agent/Registrar shall authenticate and deliver, a replacement Bond of the same maturity,
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interest rate and principal amount, bearing a number not contemporaneously outstanding, pro-
vided that the Registered Owner thereof shall have:
(a)
furnished to the City and the Paying Agent/Registrar satisfactory evidence of the
ownership of and the circumstances of the loss, destruction or theft of such Bond;
(b) fumished such security or indemnity as may be required by the Paying
Agent/Registrar and the City to save and hold them harmless;
(c)
paid all expenses and charges in connection therewith, including, but not limited
to, printing costs, legal fees, fees of the Paying Agent/Registrar and any tax or
other governmental charge that may be imposed; and
(d) met any other reasonable requirements of the City and the Paying
Agent/Registrar.
If, after the delivery of such replacement 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 City 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 City or the Paying
Agent/Registrar in connection therewith.
If any such mutilated, lost, apparently destroyed or wrongfully taken Bond has become or
is about to become due and payable, the City 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 shall be entitled to the
benefits and security of this Ordinance to the same extent as the Bond or Bonds in lieu of which
such replacement Bond is delivered.
Section3.10: Cancellation. All Bonds paid or redeemed in accordance with this
Ordinance, 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 periodically furnish the City with certificates of destruction of such Bonds.
ARTICLE IV
FORM OF BONDS
The Bonds, including the Form of Comptroller's Registration Certificate, Form of Paying
Agent/Registrar's Authentication Certificate and Form of Assignment, shall be in substantially
the following forms, with such omissions, insertions and variations as may be necessary or
desirable, and not prohibited by this Ordinance:
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UNITED STATES OF AMERICA
STATE OF TEXAS
CITY OF PEARLAND, TEXAS
PERMANENT IMPROVEMENT BONDS, SERIES 2003
NUMBER DENOMINATION
R- $
REGISTERED REGISTERED
INTEREST RATE:
ISSUE DATE: MATURITY DATE: CUSIP:
May 1, 2003 March 1,
REGISTERED OWNER:
PRINCIPAL AMOUNT:
DOLLARS
THE CITY OF PEARLAND, TEXAS, a municipal corporation of the State of Texas (the
"City"), for value received, hereby promises to pay to the Registered Owner identified above or
its registered assigns, on the maturity date specified above (or on earlier redemption as herein
provided), upon presentation and surrender of this Bond at the office of Wells Fargo Bank Texas,
N.A., Houston, Texas or its successor (the "Paying Agent/Registrar"), the principal amount
identified above (or so much thereof as shall not have been paid or deemed to have been paid
upon prior redemption) payable in any coin or currency of the United States of America which
on the date of payment of such principal is legal tender for the payment of debts due to the
United States of America, and to pay interest thereon at the rate shown above, calculated on a
basis of a 360-day year composed of twelve 30-day months, from the later of the Issue Date
identified above or the most recent interest payment date to which interest has been paid or duly
provided for. Interest on this Bond is payable on September 1, 2003, and each March 1 and
September 1 thereafter until maturity or earlier redemption of this Bond, by check sent by United
States mail, first class, postage prepaid, by the Paying Agent/Registrar to the Registered Owner
of record as of the close of business on the 15th day of the calendar month immediately preceding
the applicable interest payment date, as shown on the registration books kept by the Paying
Agent/Registrar. Any accrued interest payable at maturity or earlier redemption shall be paid
upon presentation and surrender of this Bond at the office of the Paying Agent/Registrar.
THIS BOND IS ONE OF A DULY AUTHORIZED SERIES OF BONDS (the "Bonds")
in the aggregate principal amount of $15,000,000 issued pursuant to an ordinance adopted by the
City Council of the City on May 12, 2003 (the "Ordinance") for the purpose of providing funds
for permanent public improvements in the City, under and pursuant to the authority of
Chapter 1331, Texas Government Code, as amended, the City's Home Rule Charter, and an
election held on November 6, 2001. Proceeds of the Bonds will also be used to pay costs of
issuance of the Bonds and other professional services related thereto.
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.
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THIS BOND shall not be valid or obligatory for any purpose or be entitled to any benefit
under the Ordinance unless this Bond either (i)is registered by the Comptroller of Public
Accounts of the State of Texas by due execution of the registration certificate endorsed hereon or
(ii) is authenticated by the Paying Agent/Registrar by due execution of the authentication
certificate endorsed hereon.
IN WITNESS WHEREOF, the City has caused its corporate seal to be impressed or
placed in facsimile hereon and this Bond to be signed by the Mayor and countersigned by the
City Secretary by their manual, lithographed or printed facsimile signatures.
(AUTHENTICATION OR
REGISTRATION CERTIFICATE)
(SEAL)
CITY OF PEARLAND~_AS
Mayor
COUNTERSIGNED:
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[REVERSE OF BOND]
THE CITY RESERVES THE RIGHT, at its option, to redeem, prior to their maturity,
Bonds maturing on and after March 1, 2014, in whole or in part, on March 1, 2015, or any date
thereafter, at par plus accrued interest to the date fixed for redemption.
MANDATORY REDEMPTION. The Bonds maturing on March 1, 20 and March 1,
20__ (the "Term Bonds") are subject to mandatory sinking fund in the following amounts
(subject to reduction hereinafter provided) on the following dates, in each case at a redemption
price equal to the principal amount of the Bonds or the portions thereof so called for redemption
plus accrued interest to the date fixed for redemption:
Term Bonds Maturing March 1, 20w
Mandatory Redemption Dates
March 1, 20
March 1, 20__ (maturity)
Principal Amounts
$
$
Term Bonds Maturing March 1, 20__
Mandatory Redemption Dates
March I, 20
March 1, 20__ (maturity)
Principal Amounts
$
$
The particular Term Bonds to be redeemed shall be selected by the Registrar by lot or
other customary random selection method, on or before January 15 of each year in which the
Term Bonds are to be mandatorily redeemed. The principal amount of the 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 January 15 of such year and which have not
been made the basis for a previous reduction.
BONDS MAY BE REDEEMED IN PART 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. In selecting portions of Bonds for
redemption, each Bond shall be treated as representing that number of Bonds of $5,000
denomination which is obtained by dividing the principal amount of such Bond by $5,000. Upon
surrender of any Bond for redemption in part, the Paying Agent/Registrar, in accordance with the
provisions of the Ordinance, shall authenticate and deliver in exchange therefor a Bond or Bonds
of like maturity and interest rate in an aggregate principal amount equal to the unredeemed
portion of the Bond so surrendered.
NOTICE OF ANY SUCH REDEMPTION, identifying the Bonds or portions thereof to
be redeemed, shall be sent by United States mail, first class, postage prepaid, to the Registered
Owners thereof at their addresses as shown on the books of registration kept by the Paying
Agent/Registrar, not less than thirty (30) days before the date fixed for such redemption. By the
date fixed for redemption, due provision shall be made with the Paying Agent/Registrar for the
payment of the redemption price of the Bonds called for redemption. If such notice of
redemption is given, and if due provision for such payment is made, all as provided above, the
Bonds which are to be so redeemed thereby automatically shall be redeemed prior to their
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scheduled maturities, they shall not bear interest after the date fixed for redemption, and they
shall not be regarded as being outstanding except for the purpose of being paid with the funds so
provided for such payment.
THIS BOND IS TRANSFERABLE only upon presentation and surrender at the office of
the Paying 'Agent/Registrar, accompanied by an assignment duly executed by the Registered
Owner or its authorized representative, subject to the terms and conditions of the Ordinance.
THIS BOND IS EXCHANGEABLE at the office of the Paying Agent/Registrar for a
Bond or Bonds of the same maturity and interest rate and in the principal amount of $5,000 or
any integral multiple thereof, subject to the terms and conditions of the Ordinance.
THE PAYING AGENT/REGISTRAR is not required to accept for transfer or exchange
any Bond called for redemption, in whole or in part, during the forty-five (45) day period
immediately prior to the date fixed for redemption; provided, however, that such limitation shall
not apply to the transfer or exchange by the Registered Owner of an unredeemed portion of a
Bond called for redemption in part.
THE CITY OR PAYING AGENT/REGISTRAR may require the Registered Owner of
any Bond to pay a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with the transfer or exchange of a Bond. Any fee or charge of the Paying
Agent/Registrar for a transfer or exchange shall be paid by the City.
THE REGISTERED OWNER of this Bond by acceptance hereof, acknowledges and
agrees to be bound by all the terms and conditions of the Ordinance.
IT IS HEREBY DECLARED AND REPRESENTED that this Bond has been duly and
validly issued and delivered; that all acts, conditions and things required or proper to be
performed, exist and to be done precedent to or in the issuance and delivery of this Bond have
been performed, exist and have been done in accordance with law; that the Bonds do not exceed
any constitutional or statutory limitation; and that annual ad valorem taxes sufficient to provide
for the payment of the interest on and principal of this Bond, as such interest comes due and such
principal matures, have been levied and ordered to be levied, within the limits prescribed by law,
against all taxable property in the City and have been irrevocably pledged for such payment.
REFERENCE IS HEREBY MADE TO THE ORDINANCE, a copy of which is filed
with the Paying Agent/Registrar, for the full provisions thereof, to all of which the Registered
Owners of the Bonds assent by acceptance of the Bonds.
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FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE
The following form of Comptroller's Registration Certificate. shall be attached or affixed
to each of the Bonds initially delivered:
OFFICE OF THE COMPTROLLER
OF PUBLIC ACCOUNTS
THE STATE OF TEXAS
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
(SEAL)
Comptroller of Public Accounts
of the State of Texas
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FORM OF PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE
The following form of authentication certificate shall be printed on the face of each of the
Bonds:
AUTHENTICATION CERTIFICATE
This Bond is one of the Bonds described in and delivered pursuant to the within
mentioned Ordinance; and, except for the Bonds initially delivered, this Bond has been issued in
exchange for or replacement of a Bond, Bonds, or a portion of a Bond or Bonds of an issue
which originally was approved by the Attorney General of the State of Texas and registered by
the Comptroller of Public Accounts of the State of Texas.
WELLS FARGO BANK TEXAS, N.A.
as Paying Agent/Registrar
By
Authorized Signature
Date of Authentication:
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FORM OF ASSIGNMENT
The following form of assignment shall be printed on the back of each of the Bonds:
ASSIGNMENT
For value received, the undersigned hereby sells, assigns and transfers
unto
(Please print or type name, address, and zip code of Transferee)
(Please insert Social Security or Taxpayer Identification Number of Transferee)
the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer such bond on the books kept for
registration thereof, with full power of substitution in the premises.
DATED:
Signature Guaranteed:
NOTICE: Signature must be guaranteed
by a member firm of the New York Stock
Exchange or a commercial bank or trust
company.
Registered Owner
NOTICE: The signature above must
correspond to the name of the Registered
Owner as shown on the face of this bond in
every particular, without any alteration,
enlargement or change whatsoever.
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STATEMENT OF INSURANCE
[TO COME]
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ARTICLE V
SECURITY FOR THE BONDS
Section 5.1: Pledge and Lev7 of Taxes. (a) To provide for the payment of principal of
and interest on the Bonds, there is hereby levied, within the limits prescribed by law, for the
current year and each succeeding year thereafter, while the Bonds or any part of the principal
thereof and the interest thereon remain outstanding and unpaid, an ad valorem tax upon all
taxable property within the City sufficient to pay the interest on the Bonds and to create and
provide a sinking fund of not less than 2% of the principal amount of the Bonds or not less than
the principal 'payable out of such tax, whichever is greater, with full allowance being made for
tax delinquencies and the costs of tax collection, and such taxes, when collected, shall be applied
to the payment of principal of and interest on the Bonds by deposit to the Debt Service Fund and
to no other purpose.
(b) The City hereby declares its purpose and intent to provide and levy a tax legally
sufficient to pay the principal of and interest on the Bonds, it having been determined that the
existing and available taxing authority of the City for such purpose is adequate to permit a
legally sufficient tax. As long as any Bonds remain outstanding, all moneys on deposit in, or
credited to, the Debt Service Fund shall be secured by a pledge of security, as provided by law
for cities in the State of Texas.
(c) The City hereby appropriates from current funds on hand and legally available
therefor, funds sufficient, when added to the accrued interest received from the sale of the Series
2003 Bonds, to pay the interest on the Series 2003 Bonds payable on September 1, 2003.
Section 5.2: Debt Service Fund. The Permanent Improvement Bonds, Series 2003 Debt
Service Fund (the "Debt Service Fund") is hereby created as a special fund solely for the benefit
of the Bonds. The City shall establish and maintain such fund at an official City depository and
shall keep such fund separate and apart from all other funds and accounts of the City. Any
amount on deposit in the Debt Service Fund shall be maintained by the City in trust for the
Registered Owners of the Bonds. Such amount, plus any other amounts deposited by the City
into such fund and any and all investment earnings on amounts on deposit in such fund, shall be
used only to pay the principal of, premium, if any, and interest on the Bonds.
Section5.3: Construction Fund. The Permanent Improvement Bonds, Series 2003
Construction Fund (the "Construction Fund") is hereby created as a special fund of the City.
Money in deposit in the Construction Fund shall be used only for the purposes set forth in
Section 3.1 of this Ordinance. Money on deposit in the Construction Fund may, at the option of
the City, be invested as permitted by Texas law, provided that all such deposits and investments
shall be made in such manner that the money required to be expended from the Construction
Fund will be available at the proper time or times.
Section 5.4: Further Proceedings. After the Bonds to be initially issued have been
executed, it shall be the duty of the Mayor to deliver the Bonds to be initially issued and all
pertinent records and proceedings to the Attorney General for examination and approval. After
the Bonds to be initially issued shall have been approved by the Attorney General, they shall be
HOU:2152847.1
delivered to the Comptroller for registration. Upon registration of the Bonds to be initially
issued, the Comptroller (or a deputy lawfully designated in writing to act for the Comptroller)
shall manually sign the Comptroller's registration certificate prescribed herein to be affixed or
attached to the Bonds to be initially issued, and the seal of said Comptroller shall be impressed,
or placed in facsimile, thereon.
ARTICLE VI
CONCERNING THE PAYING AGENT/REGiSTRAR
Section 6.1: Acceptance. Wells Fargo Bank Texas, N.A., Houston, Texas, is hereby
appointed as the initial Paying Agent/Registrar for the Bonds pursuant to the terms and
provisions of the Paying Agent/Registrar Agreement by and between the City and the Paying
Agent/Registrar. The Paying Agent/Registrar Agreement shall be substantially in the form
attached hereto as Exhibit A, the terms and provisions of which are hereby approved, and the
Mayor is hereby authorized to execute and deliver such Paying Agent/Registrar Agreement on
behalf of the City in multiple counterparts and the City Secretary is hereby authorized to attest
thereto and affix the City's seal. Such initial Paying Agent/Registrar and any successor Paying
Agent/Registrar, by undertaking the performance of the duties of the Paying Agent/Registrar
hereunder, and in consideration of the payment of any fees pursuant to the terms of any contract
between the Paying Agent/Registrar and the City and/or the deposits of money pursuant to this
Ordinance, shall be deemed to accept and agree to abide by the terms of this Ordinance.
Section 6.2: Trust Funds. All money transferred to the Paying Agent/Registrar in its
capacity as Paying Agent/Registrar for the Bonds under this Ordinance (except any sums
representing Paying Agent/Registrar's fees) shall be held in trust for the benefit of the City, shall
be the property of the City and shall be disbursed in accordance with this Ordinance.
Section 6.3: Bonds Presented. Subject to the provisions of Section 6.4, all matured
Bonds presented to the Paying Agent/Registrar for payment shall be paid without the necessity of
further instructions from the City. Such Bonds shall be canceled as provided herein.
Section 6.4: Unclaimed Funds Held by the Paying Agent/Registrar.
Paying Agent/Registrar that represent principal of and interest on the
unclaimed by the Registered Owner thereof after the expiration of three years
funds have become due and payable (a)shall be reported and disposed
Agent/Registrar in accordance with the provisions of Title 6 of the Texas
amended, to the extent such provisions are applicable to such funds, or (b)
Funds held by the
Bonds remaining
from the date such
of by the Paying
Property Code, as
to the extent such
provisions do not apply to the funds, such funds shall be paid by the Paying Agent/Registrar to
the City upon receipt by the Paying Agent/Registrar of a written request therefor from the City.
The Paying Agent/Registrar shall have no liability to the Registered Owners of the Bonds
by virtue of actions taken in compliance with this Section.
Section 6.5: Paying Agent/Registrar May Own Bonds. The Paying Agent/Registrar 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/Registrar.
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Section 6.6: Successor Paying Agents/Registrars, The City covenants that at all times
while any Bonds are Outstanding it will provide a legally qualified bank, trust company,
financial institution or other agency to act as Paying Agent/Registrar for the Bonds. The City
reserves the right to change the Paying Agent/Registrar for the Bonds on not less than sixty (60)
days' written notice to the Paying Agent/Registrar, as long as any such notice is effective not less
than 60 days prior to the next succeeding principal or interest payment date on the Bonds.
Promptly upon the appointment of any successor Paying Agent/Registrar, the previous Paying
Agent/Registrar shall deliver the Register or a copy thereof to the new Paying Agent/Registrar,
and the new Paying Agent/Registrar shall notify each Registered Owner, by United States mail,
first class, postage prepaid, of such change and of the address of the new Paying Agent/Registrar.
Each Paying Agent/Registrar hereunder, by acting in that capacity, shall be deemed to have
agreed to the provisions of this Ordinance.
ARTICLE VII
PROVISIONS CONCERNING SALE AND
APPLICATION OF PROCEEDS OF BONDS
Section 7.1: Sale of Bonds; Insurance. The sale of the Bonds to , Inc.,
(the "Purchaser") at a price of the par value thereof, plus a cash premium of $ 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. It is hereby found and determined 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 net interest cost, which is hereby determined to be a net effective interest rate
of %, after receiving sealed bids pursuant to an Official Notice of Sale and
Preliminary Official Statement prepared and distributed in connection with the sale of the Bonds.
The City hereby acknowledges that the Purchaser's bid is contingent upon the issuance of
a policy of municipal bond guaranty insurance from
(" ") insuring the timely payment of principal of and interest on the Bonds. Such insurance
is to be obtained at the Purchaser's expense. The appropriate officials and representatives of the
City 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 , is hereby
approved.
Section 7.2: Approval, Registration and Delivery.. The Mayor is hereby authorized to
have control and custody of the Bonds and all necessary records and proceedings pertaining
thereto pending their delivery, and the Mayor and other officers and employees of the City are
hereby authorized and directed to make such certifications and to execute such instruments as
may be necessary to accomplish the delivery of the 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
certificates clerk or an assistant certificates clerk lawfully designated in writing to act for the
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Comptroller) shall manually sign the Comptroller'S Registration Certificates prescribed herein to
be attached or affixed to each Bond initially delivered and the seal of the Comptroller shall be
impressed or printed or lithographed thereon.
Section 7.3: Offering Documents; Ratings. The City hereby approves the form and
contents of the Official Notice of Sale, Preliminary Official Statement and the final Official
Statement, dated as of the date hereof, relating to the Bonds, and any addenda, supplement or
amendment thereto, and ratifies and approves the distribution of such Preliminary Official
Statement and Official Statement in the offer and sale of the Bonds and in the reoffering of the
Bonds by the Purchaser, with such changes therein or additions thereto as the officials executing
same may deem advisable, such determination to be conclusively evidenced by their execution
thereof. The Mayor is hereby authorized and directed to execute, and the City Secretary is hereby
authorized and directed to attest, the final Official Statement. It is further hereby officially found,
determined and declared that the statements and representations contained in the Official Notice
of Sale, Preliminary Official Statement and final Official Statement are true and correct in all
material respects, to the best knowledge and belief of the City Council, and that, as of the date
thereof, the Preliminary Official Statement was an official statement of the City with respect to
the Bonds that was deemed "final" by an authorized official of the City except for the omission
of no more than the information permitted by subsection (b)(1) of Rule 15c2-12 of the Securities
and Exchange Commission.
Further, the City Council hereby ratifies, authorizes and approves the actions of the
Mayor, the City's financial advisor and other consultants in seeking ratings on the Bonds from
Moody's Investors Service, Inc. and Standard & Poor's Ratings Group and such actions are
hereby ratified and confirmed.
Section 7.4: Application of Proceeds of Bonds; Appropriation. Proceeds from the sale
of the Bonds shall, promptly upon receipt by the City, be applied as follows:
(1)
Accrued interest and premium in the amount of $ shall
be deposited into the Debt Service Fund created in Section 5.2 of this
Ordinance;
(2)
$ of the proceeds shall be applied to pay expenses arising
in connection with the issuance of the Bonds;
(3)
The remaining proceeds in the amount of $15,000,000 shall be deposited
into the Construction Fund created in Section 5.3 of this Ordinance.
Section 7.5: Tax Exemption. The City 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 City
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
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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 City shall comply
with each of the following covenants:
(a)
The City will use all of the proceeds of the Bonds to (i)provide fimds for the
purposes set forth in Section 3.1 hereof and (ii) to pay the costs of issuing the
Bonds. The City 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 City
or a related person.
(b)
The City will not directly or indirectly take any action or omit to take any action,
which action or omission would cause the 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 ad valorem taxes
collected by the City, 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 City 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 City will identify and properly
account for all amounts constituting gross proceeds of the Bonds in accordance
with the Regulations. The City will monitor the yield on the investments of the
proceeds of the Bonds and, to the extent required by the Code and the
Regulations, will restrict the yield on such investments to a yield which is not
materially higher than the yield on the Bonds. To the extent necessary to prevent
the Bonds from constituting "arbitrage bonds," the City will make such payments
as are necessary to cause the yield on all yield restricted nonpurpose investments
allocable to the Bonds to be less than the yield that is materially higher than the
yield on the Bonds.
(f)
The City will not take any action or knowingly omit to take any action, 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 City represents that not more than fifty percent (50%) of the proceeds of the
Bonds was 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
City 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
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(h)
(i)
(J)
(k)
Bonds within the three-year period beginning on the respective dates of issue of
the Bonds.
The City will take all necessary steps to comply with the requirement that certain
amounts earned by the City on the investment of the gross proceeds of the Bonds,
if any, be rebated to the federal government. Specifically, the City will
(i) maintain records regarding the receipt, investment, and expenditure of the
gross proceeds of the 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 City allocable to other obligations of the City or moneys which do not
represent gross proceeds of any obligations of the City and retain such records for
at least six years after the day on which the last outstanding 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 City will exercise reasonable diligence to assure that
no errors are made in the calculations required by the preceding sentence and, if
such an error is made, to discover and promptly correct such error within a
reasonable amount of time thereafter, including payment to the federal
government of any delinquent amounts owed to it, interest thereon and any
penalty.
The City will not directly or indirectly pay any amount otherwise payable to the
federal government pursuant to the foregoing requirements to any person other
than the federal government by entering into any investment arrangement with
respect to the gross proceeds of the Bonds that might result in a reduction in the
amount required to be paid to the federal government because such arrangement
results in 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.
The City will timely file or cause to be filed with the Secretary of the Treasury of
the United States the information required by Section 149(e) of the Code with
respect to the Bonds on such form and in such place as the Secretary may
prescribe.
The City 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 City to exploit the difference between tax-
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exempt and taxable interest rates to gain a material financial advantage, or
(ii) increasing the burden on the market for tax-exempt obligations.
(1)
Proper officers of the City charged with the responsibility for issuing the Bonds
are hereby directed to make, execute and deliver certifications as to facts,
estimates or circumstances in existence as of the Issue Date and stating whether
there are facts, estimates or circumstances that would materially change the City's
expectations. On or after the Issue Date, the City will take such actions as are
necessary and appropriate to assure the continuous accuracy of the representations
contained in such certificates.
(m)
The covenants and representations made or required by this Section are for the
benefit of the Bondholders and any subsequent Bondholder, and may be relied
upon by the Bondholder and any subsequent Bondholder and bond counsel to the
City.
In complying with the foregoing covenants, the City may rely upon an unqualified
opinion issued to the City by nationally recognized bond counsel that any action by the City or
reliance upon any interpretation of the Code or Regulations contained in such opinion will not
cause interest on the Bonds to be includable in gross income for federal income tax purposes
under existing law.
Notwithstanding any other provision of this Ordinance, the City's representations and
obligations under the covenants and provisions of this Section 7.5 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.
Section 7.6: Related Matters. In order that the City shall satisfy in a timely manner all
of its obligations under this Ordinance, the Mayor, City Secretary and all other appropriate
officers, agents, representatives and employees of the City are hereby authorized and directed to
take all other actions that are reasonably necessary to provide for the issuance and delivery of the
Bonds, including, without limitation, executing and delivering on behalf of the City all
certificates, consents, receipts, requests, notices, and other documents as may be reasonably
necessary to satisfy the City's obligations under this Ordinance and to direct the transfer and
application of funds of the City consistent with the provisions of this Ordinance.
ARTICLE VIII
CONTINUING DISCLOSURE UNDERTAKING
Section 8.1: Annual Reports. The City shall provide annually to each NRMSIR and
any SID, within six months after the end of each fiscal year, financial information and operating
data with respect to the City of the general type included in the final Official Statement
authorized by Section 7.3 of this Ordinance, being the information described in Exhibit D hereto.
Any financial statements so to be provided shall be (1)prepared in accordance with the
accounting principles described in Exhibit D hereto 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
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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 Section.
The financial information and operating data to be provided pursuant to this Section may
be set forth in full in one or more documents or may be included by specific reference to any
document (including an official statement or other offering document, if it is available from the
MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC.
Section 8.2: Material Event Notices. The City shall notify any SID and either each
NRMSIR or the MSRB, in a timely manner, of any of the following events with respect to the
Bonds, if such event is material within the meaning of the federal securities laws:
(a) Principal and interest payment delinquencies;
(b) Non-payment related defaults;
(c) Unscheduled draws on debt service reserves reflecting financial difficulties;
(d) Unscheduled draws on credit enhancements reflecting financial difficulties;
(e) Substitution of credit or liquidity providers, or their failure to perform;
(f) Adverse tax opinions or events affecting the tax-exempt status of the Bonds;
(g) Modifications to rights of holders of the Bonds;
(h) Bond calls;
(i) Defeasances; and
(j) Release, substitution, or sale of property securing repayment of the Bonds;
(k) Rating changes.
The City shall notify any SID and either each NRMSIR or the MSRB, in a timely
manner, of any failure by the City to provide financial information or operating data in
accordance with Section 8.1 of this Ordinance by the time required by such Section.
Section 8.3: Limitations, Disclaimers and Amendments. The City shall be obligated to
observe and perform the covenants specified in this Article for so long as, but only for so long as,
the City remains an "obligated person" with respect to the Bonds within the meaning of the Rule,
except that the City in any event will give the notice required by Section 8.2 of any Bond calls
and defeasance that cause the City to be no longer such an "obligated person."
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The provisions of this Article are for the sole benefit of the holders and beneficial owners
of the Bonds, and nothing in this Article, express or implied, shall give any benefit or any legal
or equitable right, remedy, or claim hereunder to any other person. The City undertakes to
provide only the financial information, operating data, financial statements, and notices which it
has expressly agreed to provide pursuant to this Article and does not hereby undertake to provide
any other information that may be relevant or material to a complete presentation of the City's
financial results, condition, or prospects or hereby undertake to update any information provided
in accordance with this Article or otherwise, except as expressly provided herein. The City does
not make any representation or warranty concerning such information or its usefulness to a
decision to invest in or sell 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 ARTICLE, BUT EVERY RIGHT AND REMEDY OF
ANY SUCH PERSON, IN CONTRACT OR TORT, FOR OR ON ACCOUNT OF ANY SUCH
BREACH SHALL BE LIMITED TO AN ACTION FOR MANDAMUS OR SPECIFIC
PERFORMANCE.
No default by the City in observing or performing its obligations under this Article shall
constitute a breach of or default under the Ordinance for purposes of any other provision of this
Ordinance.
Nothing in this Article is intended or shall act to disclaim, waive, or otherwise limit the
duties of the City under federal and state securities laws.
The provisions of this Article 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, but only if (1)the
provisions of this Article, as so amended, would have permitted an underwriter to purchase or
sell the Bonds in the primary offering of the 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 this Ordinance 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
Bonds. If the City so amends the provisions of this Article, it shall include with any amended
financial information or operating data next provided in accordance with Section 8.1 an
explanation, in narrative form, of the reasons for the amendment and of the impact of any change
in the type of financial information or operating data so provided. The City may also amend or
repeal the provisions of this Article if the SEC amends or repeals the applicable provisions of the
Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid,
and the City also may amend the provisions of this Article in its discretion in any other manner
or circumstance, but in either case only if and to the extent that the provisions of this sentence
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would not have prevented an underwriter from lawfully purchasing or selling Bonds in the
primary offering of the Bonds.
Section 8.4: Definitions. As used in this Article, the following terms have the meanings
ascribed to such terms below:
"MSRB" means the Municipal Securities Rulemaking Board.
"NRMSIR" means each person whom the SEC or its staff has determined to be a
nationally recognized municipal securities information repository within the meaning of the Rule
from time to time.
"Rule" means SEC Rule 15c2-12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"SID" means any person designated by the State of Texas or an authorized department,
officer, or agency thereof as, and determined by the SEC or its staff to be, a state information
depository within the meaning of the Rule from time to time.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Defeasance. The City may defease the provisions of this Ordinance and
discharge its obligations to the Registered Owners of any or all of the Bonds to pay the principal
of and interest thereon in any manner permitted by law, including by depositing with the Paying
Agent/Registrar or with the State Treasurer of the State of Texas either:
(a)
(b)
cash in an amount equal to the principal amount of such Bonds plus interest
thereon to the date of maturity or redemption; or
pursuant to an escrow or trust agreement, Cash and/or (i) direct noncallable
obligations of United States of America, including obligations that are
unconditionally guaranteed by the United States of America; (ii) noncallable
obligations of an agency or instrumentality of the United States, including
obligations that are unconditionally guaranteed or insured by the agency or
instrumentality and that, on the date the governing body of the issuer adopts or
approves the proceedings authorizing the issuance of refunding bonds, are
rated as to investment quality by a nationally recognized investment rating
firm not less than AAA or its equivalent; or (iii) noncallable obligations of a
state or an agency or a county, municipality, or other political subdivision of a
state that have been refunded and that, on the date the governing body of the
issuer adopts or approves the proceedings authorizing the issuance of
refunding bonds, are rated as to investment quality by a nationally recognized
investment rating firm not less than AAA or its equivalent, which, in the case
of (i), (ii) or (iii), may be in book-entry form, and the principal of and interest
on which will, when due or redeemable at the option of the holder, without
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further investment or reinvestment of either the principal amount thereof or
the interest earnings thereon, provide money in an amount which, together
with other moneys, if any, held in such escrow at the same time and availhble
for such purpose, shall be sufficient to provide for the timely payment of the
principal of and interest thereon to the date of maturity or earlier redemption;
provided, however, that if any of the Bonds are to be redeemed prior to their respective dates of
maturity, provision shall have been made for giving notice of redemption as provided in this
Ordinance. Upon such deposit, such Bonds shall no longer be regarded to be Outstanding or
unpaid. Any surplus amounts not required to accomplish such defeasance shall be returned to
the City.
Section9.2: Application of Chapter 1208, Government Code. Chapter 1208,
Government Code, applies to the issuance of the Bonds and the pledge of the taxes granted by
the City under Section 5.1 of this Ordinance, and such pledge is therefore valid, effective and
perfected. If Texas law is amended at any time while the Bonds are outstanding and unpaid such
that the pledge of the taxes granted by the City under Section 5.1 of this Ordinance is to be
subject to the filing requirements of Chapter 9, Business & Commerce Code, then in order to
preserve to the Registered Owners of the Bonds the perfection of the security interest in said
pledge, the City agrees to take such measures as it determines are reasonable and necessary
under Texas law to comply with the applicable provisions of Chapter 9, Business & Commerce
Code and enable a filing to perfect the security interest in said pledge to occur.
Section 9.3: Ordinance a Contract - Amendments. This Ordinance shall constitute a
contract with the Registered Owners from time to time, be binding on the City, and shall not be
amended or repealed by the City so long as any Bond remains Outstanding except as permitted in
this Section. The City may, without the consent of or notice to any Registered Owners, from time
to time and at any time, amend this Ordinance in any manner not detrimental to the interests of
the Registered Owners, including the curing of any ambiguity, inconsistency, or formal defect or
omission herein. In addition, the City may, with the consent of Registered Owners who own in
the aggregate 51% of the principal amount of the Bond then Outstanding, amend, add to, or
rescind any of the provisions of this Ordinance; provided that, without the consent of all
Registered Owners of Outstanding Bonds, no such amendment, addition, or rescission shall
(i) extend the time or times of payment of the principal of and interest on the Bonds, reduce the
principal amount thereof, the redemption price, or the rate of interest thereon, or in any other
way modify the terms of payment of the principal of or interest on the Bonds, (ii)give any
preference to any Bond over any other Bond, or (iii)reduce the aggregate principal amount of
Bonds required to be held by Registered Owners for consent to any such amendment, addition,
or rescission.
Section 9.4: Legal Holidays. In any case where the date interest accrues and becomes
payable on the Bonds or principal of the Bonds matures or the date fixed for redemption of any
Bonds or a Record Date shall be in the City a Saturday, Sunday, legal holiday or a day on which
banking institutions are authorized by law to close, then payment of interest or principal need not
be made on such date, or the Record Date shall not occur on such date, but payment may be
made or the Record Date shall occur on the next succeeding day which is not in the City a
Saturday, Sunday, legal holiday or a day on which banking institutions are authorized by law to
HOU:2152847.1
27
close with the same force and effect as if (i) made on the date of maturity or the date fixed for
redemption and no interest shall accrue for the period from the date of maturity or redemption to
the date of actual payment or (ii)the Record Date had occurred on the fifteenth day of that
calendar month.
Section 9.5: No Recourse Against City Officials. No recourse shall be had for the
payment of principal of or interest on any Bonds or for any claim based thereon or on this
Ordinance against any official of the City or any person executing any Bonds.
Section 9.6: Further Proceedings. The Mayor, City Secretary and other appropriate
officials of the City are hereby authorized and directed to do any and all things necessary and/or
convenient to carry out the terms of this Ordinance.
Section9.7: Power to Revise Form of Documents. Notwithstanding any other
provision of this Ordinance, the Mayor is hereby authorized to make or approve such revisions,
additions, deletions, and variations to this Ordinance and in the form of the documents attached
hereto as exhibits as, in the judgment of the Mayor, and in the opinion of Bond Counsel to the
City, may be necessary or convenient to carry out or assist in carrying out the purposes of this
Ordinance, or as may be required for approval of the Bonds by the Attorney General of Texas;
provided, however, that any changes to such documents resulting in substantive amendments to
the terms and conditions of the Bonds or such documents shall be subject to the prior approval of
the City Council.
Section9.8: Severability. If any Section, paragraph, clause or provision of this
Ordinance shall for any reason be held to be invalid or unenforceable, the invalidity or
unenforceability of such Section, paragraph, clause or provision shall not affect any of the
remaining provisions of this Ordinance.
Section9.9: Open Meeting. It is hereby found, determined and declared that a
sufficient written notice of the date, hour, place and subject of the meeting of the City Council at
which this Ordinance was adopted was posted at a place convenient and readily accessible at all
times to the general public at City Hall for the time required by law preceding this meeting, as
required by the Open Meetings Law, Chapter 551, Texas Government Code, and that this
meeting has been open to the 'public as required by law at all times during which this Ordinance
and the subject matter thereof has been discussed, considered and formally acted upon. The City
Council further ratifies, approves and confirms such written notice and the contents and posting
thereof.
Section9.10: Repealer. All orders, resolutions and ordinances, or parts thereof,
inconsistent herewith are hereby repealed to the extent of such inconsistency.
Section 9.11: Declaration of Emergency. It is hereby officially found and determined
that a case of emergency and urgent public necessity exists that requires that this Ordinance be
passed finally and take effect immediately on the date of its introduction, such emergency and
urgent public necessity being that the proceeds from the sale of the Bonds are required as soon as
possible and without delay for the purposes set forth herein.
HOU:2152847.1
28
Section 9.12: Effective Date. This Ordinance shall be in force and effect from and after
its passage on the date shown below.
[Remainder of this page intentionally left blank]
HOU:2152847.1
29
PASSED AND ADOPTED on first and final reading this May 12, 2003.
CITY OF PEARLAN/~EXAS
Mayor
ATTEST
Ci~!ecret~/
(SEAL)
Exhibits:
Exhibit A - Paying Agent/Registrar Agreement
Exhibit B - Preliminary Official Statement and Official Notice of Sale
Exhibit C - Official Statement
Exhibit D - Description of Annual Financial Information
HOU:2152847.1
30
EXHIBIT A
PAYING AGENT/REGISTRAR AGREEMENT
See Tab
HOU:2152847.1
EXHIBIT B
PRELIMINARY OFFICIAL STATEMENT
AND
OFFICIAL NOTICE OF SALE
See Tab
HOU:2152847.1
EXHIBIT C
OFFICIAL STATEMENT
See Tab
HOU:2152847.1
EXHIBIT D
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION
The following information is referred to in Section 8.1 of this Ordinance.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the City to be provided
annually in accordance with such Section are as specified (and included in the Appendix or
under the headings of the Official Statement referred to) below:
1. The audited financial statements of the City, but for the most recently
concluded fiscal year, and, to the extent that such statements are not completed and
available, unaudited financial statements for such fiscal year.
2. The quantitative and financial information and operating data with respect
to the City of the general type included under the headings "INVESTMENT
AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY - Investment
Policies," "CITY TAX DEBT" (except for information under the subheading "Estimated
Overlapping Debt"), "TAX DATA - Historical Analysis of Tax Collection," "TAX
DATA - Analysis of Tax Base, "TAX DATA - Sales Tax" and "SELECTED
FINANCIAL DATA."
Accounting Principles
The accounting principles referred to in such Section are the accounting principles
described in the notes to the financial statements referred to in paragraph 1 above.
HOU:2152847.1
CERTIFICATE FOR ORDINANCE
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 12, 2003, 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
Woodrow "Woody" Owens
Richard F. Tetens
Klaus Seeger
Charles Viktorin
Larry R. Marcott
Young Lorfing
Mayor
Mayor Pro Tem
Council Member
Council Member
Council Member
Council Member
City Secretary
and all of such persons were present except #/^ , thus constituting a quorum.
Whereupon, among other business, the following was transacted at said meeting: a written
ORDINANCE AUTHORIZING AND ORDERING THE ISSUANCE OF CITY
OF PEARLAND, TEXAS PERMANENT IMPROVEMENT BONDS, SERIES
2003; PRESCRIBING THE TERMS AND FORM THEREOF; PROVIDING
FOR THE PAYMENT OF THE PRINCIPAL THEREOF AND INTEREST
THEREON; AWARDING THE SALE THEREOF; AUTHORIZING THE
PREPARATION AND DISTRIBUTION OF AN OFFICIAL STATEMENT TO
BE USED IN CONNECTION WITH THE SALE OF THE BONDS;
AUTHORIZING THE PURCHASE OF BOND INSURANCE; MAKING
OTHER PROVISIONS REGARDING SUCH BONDS, INCLUDING USE OF
THE PROCEEDS THEREOF, AND MATTERS INCIDENT THERETO; AND
DECLARING AN EMERGENCY
(the "Ordinance") was duly introduced for the consideration of the City Council and read in full.
It was then duly moved and seconded that the Ordinance be adopted on first reading; and, after
due discussion, such motion, carrying with it the adoption of the Ordinance, prevailed and
carried by the following vote:
AYES: __5 NAYS:
ABSTENTIONS: _0_
2. That a true, full and correct copy of the Ordinance adopted at the meeting
described in the above and foregoing paragraph is attached to and follows this certificate; that the
Ordinance has been duly recorded in the City Council's minutes of such meeting; that the above
and foregoing paragraph is a true, full and correct excerpt from the City Council's minutes of
HOU:2152847. i
such meeting pertaining to the adoption of the Ordinance; that the persons named in the above
and foregoing paragraph are the duly chosen, qualified and acting officers and members of the
City Council as indicated therein; that each of the officers and members of the City Council was
duly and sufficiently notified officially and personally, in advance, of the date, hour, place and
subject of the aforesaid meeting, and that the Ordinance would be introduced and considered for
adoption at such meeting, and each of such officers and members consented, in advance, to the
holding of such meeting for such purpose; that such meeting was open to the public as required
by law; and that public notice of the date, hour, place and subject of such meeting was given as
required by the Open Meetings Law, Chapter 551, Texas Government Code.
SIGNED AND SEALED this
Cit~ecret~ ~'~ ! /~ )t
CIUOF I~ARLAND,q'EXAS
May 12 ,20u~.~)
Mayor
CITY OF PEARLAND, TEXAS
(SEAL)
HOU:2152847.1
2
CITY OF PEARLAND, TEXAS
(Brazoria and Harris Counties)
1.**4440.4
Sit �3., �:•-.�, •�R
:U.* f
OFFICIAL STATEMENT
DATED.APRIL 30, 2003
$15,000,000
PERMANENT IMPROVEMENT BONDS
SERIES 2003
SELLING 5.00 P.M.
MONDAY, MAY 12, 2003
C.D.S T
RBC
Dain Rauscher
R BC Member NYSE/SIPC
Financial Advisor to the City
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 bymeans of this Official Notice of Sale, the Official
Bid Form and the Preliminary Official Statement.
■
OFFICIAL NOTICE OF SALE
CITY OF PEARLAND, TEXAS
(Brazoria and Harris Counties,Texas)
$15,000,000
PERMANENT IMPROVEMENT BONDS
SERIES 2003
Sealed Bids Will Be Received
Monday,May 12,2003 at 5.00 P.M.
Central Daylight Saving 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
$15,000,000
CITY OF PEARLAND,TEXAS
(Brazoria and Harris Counties,Texas)
PERMANENT IMPROVEMENT BONDS,
SERIES 2003
THE SALE
BONDS OFFERED FOR SALE AT COMPETITIVE RID: The City Council (the "Council") of The City of
Pearland,Texas (the "City") is offering for sale at competitive bid its$15,000,000 Permanent Improvement Bonds,
Series 2003(the"Bonds").
PLACE AND TIME OF SALE. The Council will receive bids at the City Hall, 3519 Liberty Drive, Pearland,
Texas 77581 until 5.00 P.M., C.D.S.T., Monday, May 12, 2003, and the bids will be publicly read at 7.30 P.M.
Bids, which must be submitted in duplicate on the Official Bid Form and plainly marked"Bid for Bonds,"are to be
addressed to "Mayor and City Council, City of Pearland, Texas." All bids must be delivered at the above address
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 RIDDING PROCEDITRF4 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 12, 2003,
SIGNED Official Bid Forms, in duplicate, to Frank Ildebrando, RBC Dain Rauscher Inc., 1001 Fanpin, 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 City 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, until
5:00 p.m.,C.D.S.T.,on Monday,May 12,2003.
Electronically bids must be submitted via PARITY in accordance with this Official Notice of Sale, until 5:00 p.m.,
C.D.S.T.,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 City
The City 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 true interest cost to the City,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.
RIDS BY TELEPHONE OR FACSIMILE. Bidders must submit, prior to Monday, May 12, 2003, SIGNED
Official Bid Forms to Frank Ildebrando,RBC Dain Rauscher Inc., 1001 Fannin,Suite 400,Houston,Texas 77002 and
submit their bid by telephone or facsimile(fax)on the date of sale by 5:00 p.m.,C.D.S.T
Frank Ildebrando of RBC Damn Rauscher Inc. will call telephone bidders who have submitted SIGNED Official Bid
Forms prior to the date of the sale. Fax bids must be received by 5•00 p.m.,C.D.S.T.,on the date of the sale. Contact
Frank Ildebrando of RBC Damn Rauscher Inc.on the day of the sale to obtain the fax phone numbers.
RBC Dain Rauscher Inc. will not be responsible for the submission of any bids received after the above
deadlines. RBC Damn Rauscher Inc. assumes no responsibility or liability with respect to any irregularities
associated with the submission of any bids.
AWARD OF THE BONDS: The Council will take action to award the Bonds (or reject all bids) at a regular
meeting of the City Council on the date of the bid opening, and will adopt an ordinance authorizing the Bonds and
approving the Official Statement(the"Ordinance"). The City reserves the right to reject any or all bids and to waive
any irregularities.
THE BONDS
DESCRIPTION. The Bonds will be dated May 1, 2003 and interest will be calculated on the basis of a 360-day
year of twelve 30-day months. Interest on the Bonds will be paid on September 1,2003,and semiannually on March
1 and September 1 of each year thereafter until maturity or prior redemption. The Bonds maturing on or after
March 1,2014 are subject to redemption prior to their scheduled maturities on March 1,2013,or any date thereafter,
at the option of the City Upon redemption the Bonds will be payable at a price equal to the principal amount thereof
plus accrued interest to the date of redemption. The Bonds will be issued in fully registered form in principal
amounts of$5,000 or any integral multiple thereof. Principal and semiannual interest will be paid by Wells Fargo
Bank Texas, N.A., Houston, Texas, the Paying Agent/Registrar Interest will be paid by check dated as of the
interest payment date and mailed on or before each interest payment date by the Paying Agent/Registrar to the
registered owner appearing on the Paying Agent/Registrar's books on the Record Date (hereinafter defined).
Principal will be paid to the registered owners at maturity upon presentation of the Bonds to the Paying
Agent/Registrar The Bonds will mature March 1 in each year as follows:
Maturity Principal Maturity Principal
Date Amount Date Amount
March 1,2005 $100,000 March 1,2017 725,000
March 1,2006 110,000 March 1,2018 765,000
March 1,2007 120,000 March 1,2019 805,000
March 1,2008 130,000 March 1,2020 845,000
March 1,2009 140,000 March 1,2021 885,000
March 1,2010 335,000 March 1,2022 935,000
March 1,2011 350,000 March 1,2023 980,000
March 1,2012 370,000 March 1,2024 1,030,000
March 1,2013 390,000 March 1,2025 1,085,000
March 1,2014 410,000 March 1,2026 1,140,000
March 1,2015 435,000 March 1,2027 1,200,000
March 1,2016 455,000 March 1,2028 1,260,000
im
PAYING AGENT/REGiSTRAR: The initial Paying Agent/Registrar shall be Wells Fargo Bank Texas, N.A.,
Houston,Texas(see"THE BONDS-Paying Agent/Registrar"in Official Statement).
SOURCE OF PAYMENT: The Bonds are direct obligations of the City, and the principal thereof and interest
thereon are payable solely from the proceeds of an annual ad valorem tax levied upon all taxable property within the
City,within the limits prescribed by law
CONDITIONS OF THE SALE
TYPES OF RiDS 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: For the purpose of awarding sale of the Bonds,the interest cost of each bid will be computed
by determining at the rate(s)specified therein,the total dollar cost of all interest on the Bonds from the date thereof
to their respective maturities,using the table of Bond Years herein,and deducting therefrom the premium bid,if any
Subject to the City's right to reject any or all bids and to waive any irregularities,the Bonds will be awarded to the
bidder(the"Purchaser")whose complying bid,based on the above computation,produces the lowest net interest cost
to the City
GOOD FAITH DEPOSIT. A Good Faith Deposit,payable to the "City of Pearland" in the amount of$300,000 is
required. Such Good Faith Deposit shall be in the form of a Cashier's Check,which is to be retained uncashed by the
City pending the Purchaser's compliance with the terms of his bid and the Official 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 City 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 City 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 RED: The City has given RBC Dain Rauscher Inc.,its Financial Advisor,
the right to bid on the Bonds.
INITIAL OFFERING PRICE CERTIFICATE. To provide the City 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 City, 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 City
and Bond Counsel (as hereinafter defined). In no event will the City 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 City 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.
DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS
The delivery of the Bonds is subject to receipt of the opinion of Andrews & Kurth L.L.P., Houston, Texas, Bond
Counsel for the City,as hereinafter described.
CUSIP NITMBERS. It is anticipated that CUSIP identification numbers will appear on the Bonds, but neither the
failure to print or type such number on any Bonds nor any error with respect thereto shall constitute cause for a
failure or refusal by the Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this
Official Notice of Sale and the terms of the Official Bid Form. All expenses in relation to the printing or typing of
CUSIP numbers on the Bonds shall be paid by the City;provided,however,that the CUSIP Service Bureau fee for
the assignment of the numbers shall be the responsibility of and shall be paid for by the Purchaser
INITIAL DELIVERY OF INITIAL BONDS: Initial delivery will be accomplished by the issuance of registered
Bonds in the aggregate principal amount of$15,000,000,payable to the Purchaser,signed by the manual or facsimile
signature of the Mayor and City Secretary of the City, approved by the Attorney General, and registered by the
Comptroller of Public Accounts. Initial delivery will be at the corporate trust office of the Paying Agent/Registrar
Payment for the Bonds must be made in immediately available funds for unconditional credit to the City, or as
otherwise directed by the City The Purchaser will be given five (5) business days' notice of the time fixed for
delivery of the Bonds. It is anticipated that initial delivery of the Initial Bonds can be made on or about June 12,
2003,and it is understood and agreed that the Purchaser will accept delivery and make payment for Initial Bonds by
10.00 A.M.,on June 12,2003,or thereafter on the date the Bonds are tendered for delivery,up to and including July
15, 2003 If for any reason the City is unable to make delivery on or before July 15, 2003, then the City shall
immediately contact the Purchaser and offer to allow the Purchaser to extend its offer for an additional fifteen(15)
days. If the Purchaser does not elect to extend its offer within six(6) days thereafter, then its Good Faith Deposit
will be returned, and both the City and the Purchaser shall be relieved of any further obligation. In no event shall the
City be liable for any damages, whether direct, consequential or otherwise, by reason of its failure to deliver the
Bonds.
DELIVERY OF DEFINITIVE BONDS: Upon payment for the Initial Bonds at the time of the initial delivery,the
Paying Agent/Registrar shall cancel the Initial Bonds, provided registration instructions have been received by the
Paying Agent/Registrar, and shall register and deliver the registered definitive Bonds, in any integral multiple of
$5,000 for any one maturity, in accordance with written instructions received from the Purchaser and/or members of
the Purchaser's syndicate account. It shall be the duty of the Purchaser and/or members of the Purchaser's syndicate
account to furnish to the Paying Agent/Registrar, at least five business days prior to the initial delivery,final written
instructions designating the names in which the Bonds, are to be registered,the addresses of the registered owners,
the maturities, interest rates and denominations. The Paying Agent/Registrar will not be required to accept
registration instructions after the fifth business day prior to initial delivery If such instructions are not received
within the specified time period,the cancellation of the Initial Bonds and delivery of registered definitive Bonds will
be delayed until such instructions are received.
CONDITIONS TO DELIVERY. The obligation of the Purchaser to take up and pay for the Bonds is subject to the
Purchaser's receipt of(a) the legal opinion of Andrews & Kurth L.L.P., Houston, Texas, Bond Counsel ("Bond
Counsel"), (b) 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, and(c)the certification as to the Official Statement, all as further described
in the Official Statement.
LEGAL OPINION. The City will furnish the Purchaser a transcript of certain certified proceedings held incident to
the authorization and issuance of the Bonds, including a certified copy of the unqualified approving opinion of the
Attorney General of Texas, as recorded ii the Bond Register of the Comptroller of Public_Accounts of the State of
Texas, to the effect that the Bonds, which the Attorney General will have examined, are valid and binding
iv
obligations of the City under the Constitution and laws of the State of Texas.The City also will furnish the approving
legal opinion of Andrews & Kurth L.L.P., Houston, Texas, Bond Counsel, to the effect that, based upon an
examination of such transcript, the Bonds are valid and binding obligations of the City under the Constitution and
laws of the State of Texas. The legal opinion of Bond Counsel will further state that taxable property in the City is
subject to the levy of a continuing, direct annual ad valorem tax, within the limits prescribed by law, to pay the
Bonds and interest thereon. The opinion of Bond Counsel is expected to be reproduced on the back.panel of the
Bonds over a certification by the City Clerk of the City attesting that such legal opinion was dated as of the date of
delivery of and payment for the Bonds and is a true and correct copy of the original opinion. Errors or omissions in
the printing of such legal opinion on the Bonds shall not affect the validity of the Bonds nor constitute case for the
failure or refusal by the Purchaser to accept delivery of and pay for the Bonds.
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 City 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 Initial Purchaser to take and pay for the Bonds,
and of the City to deliver the Bonds, 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(fmancial or otherwise)of
the City 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 will agree in the Ordinance authorizing the Bonds to
provide certain periodic information and notices of material events in accordance with the Securities and Exchange
Commission Rule 15c-12, as described in the 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 Ordinance containing the agreement described under such heading.
GENERAL CONSIDERATIONS
FINANCIAL ADVISOR. RBC Dain Rauscher Inc.is employed as Financial Advisor to the City 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 Dain Rauscher Inc., in its capacity as Financial
Advisor,has not verified and does not assume any responsibility for the information, covenants and representations
contained in any of the legal documentation with respect to the federal income tax status of the Bonds.
v
BLUE SKY LAWS: By submission of its 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, where necessary, the Purchaser will
register the Bonds in accordance with the securities law of the states in which the Bonds are offered or sold. The
City agrees to cooperate with the Purchaser, at the Purchaser's written request and expense, in registering the Bonds
or obtaining an exemption from registration in any state where such action is necessary,but the City will not consent
to service of process in any such state.
MUNICIPAL BOND INSURANCE. The City has submitted an application for municipal bond insurance under
the bidder option program. The premium for such insurance,if any,will be paid by the Purchaser
OFFICIAL STATEMENT
By accepting the winning bid,the City agrees to the following representations and covenants to assist the Purchaser
in complying with Rule 15c2-12 of the Securities and Exchange Commission("SEC").
FTNAT,OFFICIAL STATEMENT: The City has prepared the accompanying Official Statement for dissemination
to potential purchasers of the Bonds,but will not prepare any other document or version for such purpose except as
described below The Purchaser will be responsible for informing the City of the initial offering yields. The City
will prepare a fmal Official Statement describing these offering yields, the interest rates on the Bonds, the selling
compensation, the fmal debt service schedule, the ratings assigned to the Bonds (if not currently included), and the
terms of and obligor on any policy of municipal bond insurance. Accordingly, the City deems the accompanying
Official Statement to be final as of its date,within the meaning of SEC Rule 15c2-12(b)(1),except for the omission
of the foregoing items. By delivering the fmal Official Statement or any amendment or supplement thereto to the
Purchaser on or after the sale date,the City represents the same to be complete as of such date,within the meaning of
SEC Rule 15c2-12(e)(3). Notwithstanding the foregoing, the only representations concerning the absence of
material misstatements or omissions from the Official Statement which are or will be made by the City are those
described in the Official Statement under"GENERAL CONSIDERATIONS-Certification as to Official Statement."
CHANGES TO OFFICIAL STATEMENT: If, subsequent to the date of the Official Statement, the City learns,
through the ordinary course of business and without undertaking any investigation or examination for such purposes,
or is notified by the Purchaser of any adverse event which causes the Official Statement to be materially misleading,
and unless the Purchaser elects to terminate its obligation to purchase the Bonds, as described above under
"DELIVERY AND ACCOMPANYING DOCUMENTS - Conditions to Delivery," the City will promptly prepare
and supply to the Purchaser an appropriate amendment or supplement to the Official Statement satisfactory to the
Purchaser; provided, however, that the obligation of the City to do so will terminate when the City delivers the
Bonds to the Purchaser,unless the Purchaser notifies the City on or before such date that less than all of the Bonds
have been sold to ultimate customers, in which case the City's obligations hereunder will extend for an additional
period of time(but not more than 90 days after the date the City delivers the Bonds)until all of the Bonds have been
sold to ultimate customers.
DELIVERY OF OFFICIAL STATEMENTS: The City will furnish to the Purchaser (and to each other
participating purchaser of the Bonds, within the meaning of SEC Rule 15c2-12(a), designated by the Purchaser),
within seven days after the sale date, up to 200 copies of the Official Statement. The City will also furnish to the
Purchaser a like number of any supplement or amendment prepared by the City for dissemination to potential
purchasers of the Bonds as described above as well as such additional copies of the Official Statement or any
supplement or amendment as the Purchaser may request prior to the 90th day after the end of the underwriting period
referred to in SEC Rule 15c2-12(e)(2). The City will pay the expense of preparing up to 200 copies of the Official
Statement and up to 200 copies of any supplement or amendment issued on or before the delivery date, but the
Purchaser must pay for all other copies of the Official Statement or any supplement or amendment thereto.
OFFICIAL STATEMENT: Upon the award of the sale of the Bonds,the Preliminary Official Statement will be
amended to conform to the terms of the Purchaser's bid and, if necessary, to make certain other changes. In
connection therewith, the Purchaser will be required to furnish information concerning the initial resale offering
prices and yields of the Bonds as well as the names of the members of the underwriting syndicate.
vi
ADDITIONAL,COPIES OF NOTICE,RBD 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 Dain Rauscher Inc., 1001 Fannin,Suite 400,Houston,Texas,
77002,Financial Advisor to the City
On the date of the sale, the City Council will, in the Ordinance 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/ Tom Reid
Mayor
City of Pearland,Texas
April 30,2003
vii
OFFICIAL BID FORM
May 12,2003
Mayor and City Council ,
City of Pearland
3519 Liberty Drive
Pearland,Texas 77581
Gentlemen:
Subject to the terms of your Official Notice of Sale and Official Statement, dated April 30, 2003, which are
incorporated herein by reference, we hereby submit the following bid for the $15,000,000 THE CITY OF
PEARLAND,TEXAS,PERMANENT IMPROVEMENT BONDS, SERIES 2003,dated May 1,2003 This offer is
being made for all said Bonds and for not less than all.
For said legally issued Bonds,we will pay you the par value thereof,plus accrued interest from their date to the date
of delivery to us,plus a cash premium of$ for the Bonds maturing and bearing interest per annum as
follows:
Maturity Principal Interest Maturity Principal Interest
Date Amount Rate Date Amount Rate
March 1,2005(a) $ 100,000 % March 1,2017(a)(b) $ 725,000 %
March 1,2006(a) 110,000 % March 1,2018(a)(b) 765,000 %
March 1,2007(a) 120,000 % March 1,2019(a)(b) 805,000 %
March 1,2008(a) 130,000 % March 1,2020(a)(b) 845,000 %
March 1,2009(a) 140,000 % March 1,2021(a)(b) 885,000 %
March 1,2010(a) 335,000 % March 1,2022(a)(b) 935,000 %
March 1,2011(a) 350,000 % March 1,2023(a)(b) 980,000 %
March 1,2012(a) 370,000 % March 1,2024(a)(b) 1,030,000 %
March 1,2013(a) 390,000 % March 1,2025(a)(b) 1,085,000 %
March 1,2014(a)(b) 410,000 % March 1,2026(a)(b) 1,140,000 %
March 1,2015(a)(b) 435,000 % March 1,2027(a)(b) 1,200,000 %
March 1,2016(a)(b) 455,000 % March 1,2028(a)(b) 1,260,000 %
(a) At the option of the Initial 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
(March 1) Redemption of Term Bonds Rate
$ %
%
%
%
(b) Subject to optional redemption and payment, at the option of the City, in whole or, from time to time, in
part, on March 1, 2013, 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 May 1,2003 $
Less: Premium.. $
NET INTEREST COST $
NET EFFECTIVE INTEREST RATE
The Initial Bonds shall be registered in the name of (syndicate manager). We will
advise Wells Fargo Bank Texas,N.A.,in Houston,Texas the Paying Agent/Registrar,on forms to be provided by the
Paying Agent/Registrar and on registration instructions at least five business days prior to the date set for initial
delivery
Cashier's Check of the Bank, ,Texas,in the amount of$300,000 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 and make payment for the Initial Bonds in immediately available fiindS at the
Corporate Trust Office, Wells Fargo Bank Texas,N.A., in Houston, Texas not later than 10:00 A.M., on June 12,
2003, or thereafter on the date the Bonds are tendered for delivery, pursuant to the terms set forth in the Official
Notice of Sale.
The undersigned agrees to complete, execute and deliver to the City, 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 City and its Bond Counsel.
Respectfully submitted,
By -
Authorized Representative
ACCEPTED this 121 day of May,2003,by the City Council,City of Pearland,Texas.
Mayor
ATTEST
City Clerk
(For your information you will fmd attached a list of the group of purchasers associated with us in this proposal)
OFFICIAL BID FORM _
May 12,2003
Mayor and City Council
City of Pearland
3519 Liberty Drive
Pearland,Texas 77581
• Gentlemen.
Subject to the terms of your Official Notice of Sale and Official Statement, dated April 30, 2003, which are
incorporated herein by reference, we hereby submit the following bid for the $15,000,000 THE CITY OF
PEARLAND,TEXAS,PERMANENT IMPROVEMENT BONDS,.SERIES 2003,dated May 1,2003 This offer is
being made for all said Bonds and for not less than all.
For said legally issued Bonds,we will pay you the par value thereof,plus accrued interest from their date to the date
of delivery to us,plus a cash premium of$ for the Bonds maturing and bearing interest per annum as
follows:
Maturity Principal Interest Maturity Principal Interest
Date Amount Rate Date Amount Rate
March 1,2005(a) $ 100,000 % March 1,2017(a)(b) $ 725,000 %
March 1,2006(a) 110,000 % March 1,2018(a)(b) 765,000 %
March 1,2007(a) 120,000 % March 1,2019(a)(b) 805,000 %
March 1,2008(a) 130,000 % March 1,2020(a)(b) 845,000 %
March 1,2009(a) 140,000 % March 1,2021(a)(b) 885,000 %
March 1,2010(a) 335,000 % March 1,2022(a)(b) 935,000 %
March 1,2011(a) 350,000 % March 1,2023(a)(b) 980,000 %
March 1,2012(a) 370,000 % March 1,2024(a)(b) 1,030,000 %
March 1,2013(a) 390,000 % March 1,2025(a)(b) 1,085,000 %
March 1,2014(a)(b) 410,000 % March 1,2026(a)(b) 1,140,000 %
March 1,2015(a)(b) 435,000 % March 1,2027(a)(b) 1,200,000 %
March 1,2016(a)(b) 455,000 % March 1,2028(a)(b) 1,260,000 %
(a) At the option of the Initial 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
(March 1) Redemption of Term Bonds Rate
$ %
, %
%
%
(b) Subject to optional redemption and payment, at the option of the City, in whole or, from time to time, in
part, on March 1, 2013, 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 May 1,2003 $
Less: Premium. $
NET INTEREST COST $
NET EFFECTIVE INTEREST RATE
The Initial Bonds shall be registered in the name of (syndicate manager). We will
advise Wells Fargo Bank Texas,N.A.,in Houston,Texas the Paying Agent/Registrar,on forms to be provided by the
Paying Agent/Registrar and on registration instructions at least five business days prior to the date set for initial
delivery
Cashier's Check of the Bank, ,Texas,in the amount of$300,000 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 and make payment for the Initial Bonds in immediately available fimds at the
Corporate Trust Office, Wells Fargo Bank Texas,N.A., in Houston, Texas not later than 10:00 A.M., on June 12,
2003, or thereafter on the date the Bonds are tendered for delivery, pursuant to the terms set forth in the Official
Notice of Sale.
The undersigned agrees to complete, execute and deliver to the City, 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 City and its Bond Counsel.
Respectfully submitted,
By
Authorized Representative
ACCEPTED this 12th day of May,2003,by the City Council,City of Pearland,Texas.
Mayor
ATTEST
City Clerk
(For your information you will fmd attached a list of the group of purchasers associated withrus in this proposal)
C PRTtFTCATF.RFGARl7iNG ISM IF.PRICE,
The undersigned hereby certifies with respect to the sale of$15,000,000 City of Pearland, Texas (the "Issuer"),
Permanent Improvement Bonds,Series 2003(the"Bonds"):
1 The undersigned is the underwriter or the manager of the syndicate of underwriters (the
"Underwriters") which has purchased the Bonds at competitive sale. In this capacity, the undersigned is familiar
with the facts stated herein.
2. The term "Initial Offering Prices" means the respective initial offering prices for the Bonds
(expressed as a dollar amount,yield percentage,or percentage of principal amount and exclusive of accrued interest)
as set forth in the following table:
Principal Principal
Amount Year of Offering Amount Year of Offering
Maturing Maturity Price Maturing Maturity Price
$100,000 March 1,2005 % $ 725,000 March 1,2017 %
110,000 March 1,2006 % 765,000 March 1,2018 %
120,000 March 1,2007 _ % 805,000 March 1,2019 %
130,000 March 1,2008 % 845,000 March 1,2020 %
140,000 March 1,2009 % 885,000 March 1,2021 %
335,000 March 1,2010 % 935,000 March 1,2022 %
350,000 March 1,2011 % 980,000 March 1,2023 %
370,000 March 1,2012 % 1,030,000 March 1,2024 %
390,000 March 1,2013 % 1,085,000 March 1,2025 %
410,000 March 1,2014 % 1,140,000 March 1,2026 %
435,000 March 1,2015 % 1,200,000 March 1,2027 %
455,000 March 1,2016 % 1,260,000 March 1,2028 %
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 12,2003
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 12,2003
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 on the Sale Date, 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, as of the Sale Date, 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.
7 The Underwriters have purchased the Bonds for contemporaneous sale to the Public and not for
investment for their own account. Each of the Bonds has actually been offered to the Public at its respective Initial
Offering Price in a bona fide offering of all the Bonds, and, as of the Issue Date, a substantial amount of the Bonds
(at least 10 percent)of each maturity has been sold to the Public in arm's length transactions for cash prices(with no
other consideration being included). Of the Bonds sold, none were sold at prices other than the respective Initial
Offering prices for such Bonds,plus accrued interest.
8. The accrued interest on the Bonds as of the Issue Date is $ The aggregate of the
respective Initial Offering Prices of all of the Bonds,without adjustment for any costs of issuance,is$
9 The Underwriter [has] [has not]purchased bond insurance or another form of credit enhancement
("Guarantee") from securing the payment of the principal of, or interest on, any of the Bonds. With respect to the
Guarantee,
a. The provider of the Guarantee is (the"Guarantor").
b. The fee or premium paid to the Guarantor for the Guarantee is $ (the
"Premium"). The Premium is set forth in the Guarantor's commitment,does not exceed a reasonable charge
for the transfer of the credit risk provided, and does not include any direct or indirect payment or
compensation for any service other than the transfer of such credit risk. The Guarantor has not provided
any service other than the Guarantee, except for any such service for which the Guarantor has charged a
reasonable arm's length price which will be in addition to, and stated separately from, the Premium. No
portion of the Premium is refundable upon the redemption or defeasance of any of the Bonds.
c. As a result of the Guarantee, the interest rates on the Bonds, as set forth above, are less
than those which would have been necessary in order to sell the bonds at the respective Initial Offering
Prices without the Guarantee. As of the Issue Date, the present value of such interest savings expected to
result from the Guarantee is greater than the present value of the Premium, using the yield on the Bonds
(computed for this purpose by treating the Premium as additional interest on the Bonds)as the discount rate.
We understand that the Issuer will rely on the above in making certain representations to Andrews&Kurth L.L.P.,
Houston, Texas, Bond Counsel, and in complying with the conditions of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations in effect thereunder, necessary for interest on the Bonds to be and remain
excludable from gross income for federal income tax purposes.
EXECUTED and DELIVERED this ,2003
(Name of Underwriter or Manager)
By.
Title:
CERTIFICATE.REGARDING ISSITE PR1CF,
The undersigned hereby certifies with respect.to the sale of$15,000,000 City of Pearland, Texas (the."Issuer"),
Permanent Improvement Bonds,Series 2003 (the"Bonds"):
1 The undersigned is the underwriter or the manager of the syndicate of underwriters (the
"Underwriters") which has purchased the Bonds at competitive sale. In this capacity, the undersigned is familiar
with the facts stated herein.
2. The term "Initial Offering Prices" means the respective initial offering prices for the Bonds
(expressed as a dollar amount,yield percentage,or percentage of principal amount and exclusive of accrued interest)
as set forth in the following table:
Principal Principal
Amount Year of Offering Amount Year of Offering
Maturing Maturity Price Maturing Maturity Price
$100,000 March 1,2005 % $ 725,000 March 1,2017
110,000 March 1,2006 % 765,000 March 1,2018
120,000 March 1,2007 % 805,000 March 1,2019 %
130,000 March 1,2008 % 845,000 March 1,2020 %
140,000 March 1,2009 % 885,000 March 1,2021
335,000 March 1,2010 % 935,000 March 1,2022 %
350,000 March 1,2011 % 980,000 March 1,2023 %
370,000 March 1,2012 % 1,030,000 March 1,2024 %
390,000 March I,2013 % 1,085,000 March 1,2025 %
410,000 March 1,2014 % 1,140,000 March 1,2026
435,000 March 1,2015 % 1,200,000 March 1,2027 %
455,000 March 1,2016 % 1,260,000 March 1,2028 %
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 12,2003
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 12,2003
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 on the Sale Date, 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, as of the Sale Date, 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.
7 The Underwriters have purchased the Bonds for contemporaneous sale to the Public and not for
investment for their own account. Each of the Bonds has actually been offered to the Public at its respective Initial
Offering Price in a bona fide offering of all the Bonds, and,as of the Issue Date,a substantial amount of the Bonds
(at least 10 percent)of each maturity has been sold to the Public in arm's length transactions for cash prices(with no
other consideration being included). Of the Bonds sold, none were sold at prices other than the respective Initial
Offering prices for such Bonds,plus accrued interest.
8. The accrued interest on the Bonds as of the Issue Date is $ The aggregate of The
respective Initial Offering Prices of all of the Bonds,without adjustment for any costs of issuance,is$
9 The Underwriter[has] [has not]purchased bond insurance or another form of credit enhancement
("Guarantee") from securing the payment of the principal of, or interest on, any of the Bonds. With respect to the
Guarantee,
a. The provider of the Guarantee is (the"Guarantor").
b. The fee or premium paid to the Guarantor for the Guarantee is $ (the
"Premium"). The Premium is set forth in the Guarantor's commitment,does not exceed a reasonable charge
for the transfer of the credit risk provided, and does not include any direct or indirect payment or
compensation for any service other than the transfer of such credit risk. The Guarantor has not provided
any service other than the Guarantee, except for any such service for which the Guarantor has charged a
reasonable arm's length price which will be in addition to, and stated separately from, the Premium. No
portion of the Premium is refundable upon the redemption or defeasance of any of the Bonds.
c. As a result of the Guarantee,the interest rates on the Bonds, as set forth above, are less
than those which would have been necessary in order to sell the bonds at the respective Initial Offering
Prices without the Guarantee. As of the Issue Date, the present value of such interest savings expected to
result from the Guarantee is greater than the present value of the Premium, using the yield on the Bonds
(computed for this purpose by treating the Premium as additional interest on the Bonds)as the discount rate.
We understand that the Issuer will rely on the above in making certain representations to Andrews&Kurth L.L.P.,
Houston, Texas, Bond Counsel, and in complying with the conditions of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations in effect thereunder, necessary for interest on the Bonds to be and remain
excludable from gross income for federal income tax purposes.
EXECUTED and DELIVERED this ,2003
(Name of Underwriter or Manager)
By
Title:
BOND YEARS
Dated: May 1,2003 Due: As shown below
Years
Cumulative
Year Amount Bond Years Bond Years
March 1,2005 $ 100,000 183.3333 183.3333
March 1,2006 110,000 311.6667 495 0000
March 1,2007 120,000 460.0000 955.0000
March 1,2008 130,000 628.3333 1,583.3333
March 1,2009 140,000 816.6667 2,400 0000
March 1,2010 335,000 2,289 1667 4,689 1667
March 1,2011 350,000 2,741 6667 7,430.8333
March 1,2012 370,000 3,268.3333 10,699 1667
March 1,2013 390,000 3,835.0000 14,534 1667
March 1,2014 410,000 4,441.6667 18,975.8333
March 1,2015 435,000 5,147.5000 24,123.3333
March 1,2016 455,000 5,839 1667 29,962.5000
March 1,2017 725,000 10,029 1667 39,991.6667
March 1,2018 765,000 11,347.5000 51,339 1667
March 1,2019 805,000 12,745.8333 64,085.0000
March 1,2020 845,000 14,224 1667 78,309 1667
March 1,2021 885,000 15,782.5000 94,091.6667
March 1,2022 935,000 17,609 1667 111,700.8333
March 1,2023 980,000 19,436.6667 131,137.5000
March 1,2024 1,030,000 21,458.3333 152,595.8333
March 1,2025 1,085,000 23,689 1667 176,285.0000
March 1,2026 1,140,000 26,030 0000 202,315 0000
March 1,2027 1,200,000 28,600.0000 230,915.0000
March 1,2028 1,260,000 31,290.0000 262,205 0000
AVERAGE MATURITY-17 48 YEARS
PRELIMINARY OFFICIAL STATEMENT DATED APRIL 30,2003
oThis Preliminary Official Statement is subject to completion and amendment. Upon sale of the Bonds,the Official Statement will
T d be completed and delivered to the Underwriter. Prospective purchasers must read the entire Official Statement to make an
b 1 informed investment decision.
o 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
fi l EXEMPTION" HEREIN, AND IS NOT INCLUDABLE IN THE ALTERNATIVE MINIMUM TAXABLE INCOME OF
t; INDIVIDUALS. SEE"TAX EXEMPTION"FOR A DISCUSSION OF THE OPINION OF BOND COUNSEL,INCLUDING THE
--o ALTERNATIVE MINIMUM TAX ON CORPORATIONS.
^S
NEW ISSUE RATINGS: Moody's Investors Service Inc.... ..... .. " "
1 Standard&Poor's Ratings Services . ... .It III
o
. $15,000,000
o CITY OF PEARLAND, TEXAS
'S (A political subdivision of the State of Texas located within Brazoria and Harris Counties)
1.1'sPERMANENT IMPROVEMENT BONDS, SERIES 2003
.8: Dated: May 1,2003 Due: March 1,as shown below
a Principal of and interest on the$15,000,000 City of Pearland,Texas,Permanent Improvement Bonds, Series 2003(the"Bonds")
gj are payable by Wells Fargo Bank Texas,N.A.,Houston,Texas, the paying agent/registrar(the "Paying Agent/Registrar"). The
°; Bonds are issued in fully registered form in principal denominations of$5,000 or any integral multiple thereof. Interest on the
1 Bonds is payable on March 1 and September 1 of each year,commencing September 1,2003,to the registered owners appearing
a 2 on the registration books of the Paying Agent/Registrar on the 15th day of the month preceding each interest payment date(the
'° § "Record Date"). Upon redemption the Bonds will be payable at a price equal to the principal amount thereof plus accrued interest
8 58 to the date of redemption. See"THE BONDS-Description"and"THE BONDS-Redemption Provisions."
o o The Bonds are authorized by an ordinance(the"Ordinance")to be approved by City Council on May 12,2003. The Bonds,when
1; issued,
• will constitute valid and binding obligations of the City of Pearland, Texas (the "City") and will be payable from the
p o proceeds of an annual ad valorem tax, levied within the limits prescribed by law, against taxable property within the City See
a
"THE BONDS—Source of Payment"
' §S 9 PRINCIPAL AMOUNTS,MATURITIES,INTEREST RATES AND PRICES
1! t° (Due March 1)
Initial Initial
6. Interest Reoffering Principal Interest Reoffering
°. Amount Maturity Rate Yield(a) Maturity Amount Rate Yield(a)_
°• ° $ 100,000 2005 % % $ 725,000 2017(b) % %
a y 110,000 2006 765,000 2018(b)
s t.i 120,000 2007 805,000 2019(b)
a b I 130,000 2008 845,000 2020(b)
t 8 140,000 2009 885,000 2021(b)
111 335,000 2010 935,000 2022(b)
1 p• g ,, 350,000 2011 980,000 2023(b)
.s $- 370,000 2012 1,030,000 2024(b)
§5 i 390,000 2013 1,085,000 2025(b)
'I ifs 410,000 2014(b)
1,140,000 2026(b)
435,000 2015(b) 1,200,000 2027(b)
8
°
"8 455,000 2016(b) 1,260,000 2028(b)
S.1 1 (a) The initial yields will be established by and are the sole responsibility of the Underwriter(as defined herein), and may
a g o subsequently be changed.
. , (b) The Bonds maturing on or after March 1,2014 are subject to redemption,at the option of the City,at the par value thereof
1 plus accrued interest, in whole or in part, on March 1, 2013, or any date thereafter. See "THE BONDS—Redemption
10 Provisions."
i 0 The Bonds are offered when,as and if issued,subject to the approving opinion of the Attorney General of the State of Texas and
the opinion of Andrews &Kurth L.L.P., Houston, Texas, Bond Counsel for the City, as to the validity of the issuance of the
, Bonds under the Constitution and laws of the State of Texas. See"LEGAL MATTERS." Delivery of the Bonds is expected to
' G,q ,$, be on Or about June 12,2003.
.1 t SELLING: MONDAY,MAY 12,2003
i AT 5:00 P.M. C.D.S.T.
4,11
i
l
USE OF INFORMATION IN OFFICIAL STATEMENT
No dealer,broker, salesman or other person has been authorized by the City to give any information or to make any
representation other than those contained in this Official Statement,and,if given or made,such other information or
representations must not be relied upon as having been authorized by the City
This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state in which
such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to
4.' do so or to any person to whom it is unlawful to make such offer or solicitation.
This Official Statement contains, in part, estimates, assumptions and matters of opinion which are not intended as
statements of fact, and no representation is made as to the correctness of such estimates, assumptions or matters of
opinion or as to the likelihood that they will be realized. Any information and expressions of opinion herein
contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made.
hereunder shall, under any circumstances, create any implication that there has been no change in the condition of
the City or other matters described herein since the date hereof.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters
have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to
investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the
Underwriters do not guarantee the accuracy or completeness of such information.
TABLE OF CONTENTS
Page
USE OF INFORMATION IN OFFICIAL Estimated Overlapping Debt: 13
STATEMENT 1 Debt Ratios. 13
INTRODUCTION 3 TAX DATA 13
SALE AND DISTRIBUTION OF THE BONDS 3 General 13
Sale of the Bonds 3 Property Tax Code and County-Wide Appraisal
Prices and Marketability 3 District. 13
Securities Laws 3 Tax Rate Limitations 14
Municipal Bond Ratings 4 Property Subject to Taxation by the City 14
Municipal Bond Insurance. 4 Notice and Hearing Procedures 15
OFFICIAL STATEMENT SUMMARY 5 Levy and Collection of Taxes 15
INTRODUCTION 7 Collection of Delinquent Taxes 15
THE BONDS 7 Historical Analysis of Tax Collection 16
Description 7 Analysis of Tax Base 17
Redemption Provisions 7 Estimated Overlapping Taxes. 18
Paying Agent/Registrar 7 Sales Tax 18
Successor Paying Agent/Registrar 8 SELECTED FINANCIAL DATA 19
Source of Payment 8 Historical Operations of the City's General Fund 19
! Authority for Issuance 8 General Fund and Debt Service Fund Balance for
Use of Proceeds. 8 the Past Five Fiscal Years 20
Future Debt 8 Pension Fund. 20
4 Legal Investments in Texas 8 Financial Statements 20
Remedies in the Event of Default. 9 ADMINISTRATION OF THE CITY 21
INVESTMENT AUTHORITY AND Mayor and City Council 21
INVESTMENT OBJECTIVES OF THE Administration 21
CITY 9 Consultants 22
Legal Investments 9 LEGAL MA ITERS 22
' Investment Policies 10 Legal Opinions 22
,
Current Investments 10 No-Litigation Certificate. 23
Additional Provisions 11 No Material Adverse Change 23
1 CITY TAX DEBT 11 TAX EXEMPTION 23
` General 11 TAX TREATMENT OF ORIGINAL ISSUE
Bonded Indebtedness Payable from Ad Valorem DISCOUNT AND PREMIUM BONDS 24
Taxes 11 Discount Bonds 24
Pro-Forma Debt Service Schedule 12 Premium Bonds. 25
.j_I
CONTINUING DISCLOSURE OF Audited Financial Report of the City 27
INFORMATION 25 Compliance With Prior Undertakings 27
Annual Reports 25 GENERAL CONSIDERATIONS 27
Material Event Notices 26 Sources and Compilation of Information 27
Availability of Information From NRMSIRs and Certification as to Official Statement 27
SID 26 Updating of Official Statement. 28
Limitations and Amendments. 26
APPENDIX A-Economic and Demographic Characteristics of the City '1
APPENDIX B-Audited Financial Statements of the City
APPENDIX C-Form of Bond Counsel Opinion
2
INTRODUCTION
All of the summaries of the statutes,resolutions, ordinances,contracts, audits, engineering, and other related reports
set forth in this Official Statement are made subject to all of the provisions of 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 City
This Official Statement contains, in part, estimates, assumptions, and matters of opinion which are not intended as
statements of fact, and no representation is made as to the correctness of such estimates, assumptions, or matters of
opinion, or as to the likelihood that they will be realized. However, the City has agreed to keep this Official
Statement current by amendment or sticker to reflect material changes in the affairs of the City and to the extent that
information actually comes to its attention,the other matters described in this Official Statement until delivery of the
Bonds to the Underwriter and thereafter only as specified in "GENERAL CONSIDERATIONS - Updating of
Official Statement"and"CONTINUING DISCLOSURE OF INFORMATION"
SALE AND DISTRIBUTION OF 1'HE BONDS
Sale of the Bonds
After requesting competitive bids for the Bonds, the City has accepted the bid resulting in the lowest net interest
cost, which bid was tendered by a syndicate managed by ("Underwriter") to
purchase the Bonds bearing the interest rates shown on the cover page hereof under "PRINCIPAL AMOUNTS,
MATURITIES, INTEREST RATES AND PRICES" at a price of the par value thereof, plus a cash premium 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 City of a certificate executed and delivered by the
Underwriter 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 City has
no control over trading of the Bonds after a bona fide offering of the Bonds is made by the Underwriter at the yields
specified on the cover page. Information concerning reoffering yields or prices is the responsibility of the
Underwriter.
The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the
Underwriter 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 UNDERWRITER 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.
Securities Laws
For purposes of compliance with Rule 15c2-12 (the "Rule") of the Securities and Exchange Commission (the
"SEC"), this document, as may be supplemented or corrected by the City from time to time, may be treated as an
Official Statement with respect to the Bonds described herein"deemed final"by the City as of the date hereof(or of
any such supplement or correction) except for the omission of certain information referred to in the succeeding
sentence. This document,when further supplemented by adding information specifying the interest rates and certain
other information relating to the Bonds shall constitute a "FINAL OFFICIAL STATEMENT" of the City with
respect to the Bonds,as such term is defined in the Rule.
No registration statement relating to the Bonds has been filed with the SEC under the Securities Act of 1933, as
amended, in reliance upon the 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 acts of any jurisdiction. The City assumes no responsibility for
registration or qualification 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 provision in such jurisdictions.
3
Municipal Bond Ratings
In connection with the sale of the Bonds, the City has made application to Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Services ("S&P") for ratings and the ratings of " " and " ",
respectively, have been assigned to 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 the City makes no
representation as to the appropriateness of such ratings.
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.
Municipal Bond Insurance
The City has made application for municipal bond insurance under the bidder's option program. The premium for
such insurance,if purchased,will be paid by the Underwriter.
4
OFFICIAL STATEMENT SUMMARY
The following material is a summary of certain information contained herein and is qualified in its entirety by the
detailed information and financial statements appearing elsewhere in this Official Statement. The reader should
refer particularly to sections that are indicated for more complete information.
The Issuer The City of Pearland, Texas (the "City") is a political subdivision and
home rule city of the State of Texas located primarily within Brazoria
and Harris Counties, Texas. See "ADMINISTRATION OF THE
CITY" and "APPENDIX A -Economic and Demographic
Characteristics of the City"herein.
The Bonds $15,000,000 Permanent Improvement Bonds, Series 2003 (the
"Bonds"), are dated May 1, 2003 and mature March 1, 2005 through
March 1,2028. Interest on the Bonds accrues from May 1,2003,and is
payable September 1, 2003, and on each September 1 and March 1
thereafter until maturity or prior redemption. See "THE BONDS -
Description."
Other Characteristics The Bonds are issued in fully registered form in integral multiples of
$5,000 The Bonds maturing on or after March 1, 2014 are subject to
redemption prior to their scheduled maturities on March 1, 2013 or any
date thereafter at the option of the City Upon redemption the Bonds
will be payable at a price equal to the principal amount thereof plus
accrued interest to the date of redemption. See "THE BONDS -
Description of the Bonds" and "THE BONDS - Redemption
Provisions."
Paying Agent/Registrar The initial paying agent/registrar is Wells Fargo Bank Texas, N.A.,
Houston, Texas (the "Paying Agent/Registrar"). See "THE BONDS -
Paying Agent/Registrar"
Source of Payment Principal of and interest on the Bonds are payable from the proceeds of
a continuing, direct annual ad valorem tax, levied within the limits
prescribed by law against taxable property located within the City See
"THE BONDS-Source of Payment."
Use of Proceeds Proceeds from the sale of the Bonds will be used for street
improvements and pay costs of issuance related hereto. See "THE
BONDS-Use of Proceeds."
Ratings Moody's Investors Service,Inc.
Standard&Poor's Ratings Services
Payment Record. - The City has never defaulted on the timely payment of principal of and
interest on its obligations.
5
-Selected Financial Information-
(Unaudited)
2002 Certified Assessed Valuation(100%of estimated market value) $2,171,317,975 (a)
Direct Debt:
Outstanding Bonds and Certificates(as of April 1,2003) $ 79,715,000
The Bonds. 15,000,000
The Certificates 19,650,000 (b)
Total Direct Debt. $ 114,365,000
Estimated Overlapping Debt. $ 179,470,120
Direct and Estimated Overlapping Debt $ 293,835,120
Debt Service Fund Balance(as of April 1,2003) $ 3,951,826 (c)
%of 2002 Per
Assessed Capital
Valuation (42,103)
Debt Ratios:
Direct Tax Supported Debt 5.27% $2,653
Direct Tax Supported and Estimated
Overlapping Debt 13.53% $6,817
2002 Tax Rate(per$100 of Assessed Valuation)
Maintenance and Operation. $0 406
Debt Service .280
Total $0.686
Estimated Annual Debt Service Requirements:
Average(Fiscal Years 2003-2028) $ 6,195,346
Maximum(2008) $ 7,985,158
Tax Collections:
Arithmetic Average,Tax Years(1996/2001) -Current Years 97.84 %
-Current and Prior Years 99.20 %
(a) Certified by the Brazoria County Appraisal District and net of exemptions.
(b) Concurrently with the issuance of the Bonds, the City anticipates issuing $19,650,000 of Certificates of
Obligation,Series 2003 (the"Certificates"). See"CITY TAX DEBT"herein.
(c) Includes the City's remaining debt service requirements due in 2003 on Outstanding Bonds and Certificates
of Obligation in the amount of$1,602,587 to be paid September 1,2003
6
INTRODUCTION
This Official Statement and the Appendices hereto provide certain information with respect to the issuance by the
City of Pearland,Texas(the"City")of its$15,000,000 Permanent Improvement Bonds, Series 2003 (the"Bonds").
The Bonds are issued pursuant to the Texas Constitution, the general laws of the State of Texas, and an Ordinance
authorizing issuance of the Bonds(the"Ordinance")adopted by the City Council of the City(the"Council").
This Official Statement describes the Bonds, the plan of financing, and certain information about the City and its
finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by
reference to each such document and speak only as of the date of this Official Statement. Copies of such documents
may be obtained from the City upon request. Certain capitalized terms used in this Official Statement have the same
meanings assigned to such terms in the Ordinance, except as otherwise indicated herein.
THE BONDS
Description
The Bonds are dated May 1,2003,bear interest from such date at the stated interest rates indicated on the cover page
under "PRINCIPAL AMOUNTS, MATURITIES, INTEREST RATES AND PRICES," which interest is payable
September 1,2003,and each September 1 and March 1 thereafter until maturity or prior redemption. The Bonds are
issued in fully registered form in denominations of$5,000 of principal amount or any multiple thereof Principal of
the Bonds is payable at the principal payment office of Wells Fargo Bank Texas,N.A.,Houston,Texas(the "Paying
Agent/Registrar"). Interest on the Bonds will be payable by check,dated as of the interest payment date,and mailed
by the Paying Agent/Registrar to registered owners as shown on the records of the Paying Agent/Registrar See
"THE BONDS-Paying Agent/Registrar."
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 payment office of the Paying
Agent/Registrar No service charge will be made for any transfer, but the City may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection therewith.
The record date (the "Record Date")for the interest payable on any interest payment date means the 15th day of the
month next preceding such interest payment date.
It will be required that all transfers be made within three business days after request and presentation.
The City 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 City and the Paying
Agent/Registrar of security or indemnity to keep them harmless. The City may require payment of taxes,
governmental charges and other expenses in connection with any such replacement.
Redemption Provisions
The Bonds maturing on March 1, 2014 and thereafter are subject to optional redemption prior to maturity,in whole
or in part, on March 1,2013, or any date thereafter, at the option of the City at a price equal to the principal amount
thereof plus accrued interest to the date of redemption. If less than all of the Bonds are to be redeemed at any time,
the maturities of the Bonds to be redeemed shall be selected by the City
The Ordinance requires that notice of any redemption, identifying the Bonds or portions thereof to be redeemed,
must be given by the Paying Agent/Registrar to the registered owners thereof by first class mail,postage prepaid,at
least 30 days prior to the redemption date.
Paying Agent/Registrar
The initial Paying Agent/Registrar is Wells Fargo Bank Texas,N.A., Houston,Texas. The Bonds are being issued
in fully registered form in integral multiples of$5,000 of principal amount. Interest on the Bonds will be payable
semiannually by the Paying Agent/Registrar by check mailed on each interest payment date by the Paying
Agent/Registrar to the registered owner at the last known address as it appears on the Paying Agent/Registrar's
books on the Record Date.
7
Successor Paying Agent/Registrar
Provision is made in the Ordinance for replacing the Paying Agent/Registrar If the City replaces the Paying
Agent/Registrar, such Paying Agent/Registrar shall, promptly upon the appointment of a successor, deliver the
Paying Agent/Registrar's records to the successor paying agent/registrar (the "Successor Paying Agent/Registrar"),
and the Successor Paying Agent/Registrar shall act in the same capacity as the previous Paying Agent/Registrar
Any Successor Paying Agent/Registrar selected by the City shall be a commercial bank or trust company organized
under the laws of the United States or any state and duly qualified and legally authorized to serve and perform the
duties of the Paying Agent/Registrar for the Bonds.
Source of Payment
The Bonds, are payable as to principal and interest from, and secured by,the proceeds of a continuing,direct annual
ad valorem tax, levied within the limits prescribed by law, against taxable property within the City In the
Ordinance the City covenants that while the Bonds are outstanding,it will levy, assess and undertake to collect such
tax. See"TAX DATA-Tax Rate Limitations"and"THE BONDS-Remedies in the Event of Default."
Authority for Issuance
The'Bonds are being issued pursuant to the applicable provisions of the Constitution and laws of the State of Texas,
particularly Chapter 1331, Texas Government Code, as amended, and the provisions of the Ordinance, which
specifically authorizes the sale and issuance of the Bonds. Further reference to the Ordinance is hereby made. The
Bonds are the second installment of $115,000,000 unlimited tax bonds authorized at an election held for that
purpose on November 6,2001
The following table illustrates the Bonds authorized,issued, and remaining authorized after the sale of the Bonds.
Amount Issued The Authorized
Purpose Authorized to Date Bonds But Unissued
Streets and Bridges $ 92,500,000 $17,000,000 $ 9,000,000 $66,500,000
Drainage 22,500,000 8,000,000 6,000,000 8,500,000
$115,000,000 $25,000,000 $15,000,000 $75,000,000
Use of Proceeds
Proceeds of the Bonds are being used for street and drainage improvements and to pay the costs of issuance of the
Bonds, including the Financial Advisor's fee and Bond Counsel's fee, both of which is contingent upon the sale of
the Bonds,as well as other administrative costs incurred.
Future Debt
After the issuance of the Bonds the City will have $75,000,000 authorized but unissued bonds. The City plans to
issue such authorized bonds in annual installments over the next four years. Concurrently with the issuance of the
Bonds, the City anticipates issuing$19,650,000 of Certificates of Obligation, Series 2003 (the "Certificates"). The
City may also issue additional certificates of obligation in the future. Depending on the rate of development within
the City, changes in assessed valuation,and the amounts, interest rates, maturities and time of issuance of additional
bonds or certificates of obligation, increases in the City's annual ad valorem tax rate may be required to provide for
the payment of the principal of and interest on the City's outstanding bonds, the Bonds, and such future bonds or
certificates of obligation.
Legal Investments in Texas
The Public Security Procedures Act provides that the Bonds are negotiable instruments, are investment securities to
which Chapter 8, Texas Business and Commerce Code applies, and are legal and authorized investments for
insurance companies, for fiduciaries or trustees and for a sinking fund of a municipality or other political
subdivision or public agency of the State of Texas.
8
Texas law further provides that the Bonds are eligible to secure deposits of any public funds of the state,its agencies
or political subdivisions and are lawful and sufficient security for those deposits to the extent of their market value.
For political subdivisions in the State which have adopted investment policies and guidelines in accordance with the
Public Funds Investment Act(Texas Government Code, Chapter 2256), the Bonds may have to be assigned a rating
of"A" or its equivalent as to investment quality by a national rating agency before such obligations are eligible
investments for sinking funds and other public funds.
The City has not made any investigations of any other laws,rules,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 entities or
persons to purchase or invest in the Bonds.
Remedies in the Event of Default
The Ordinance requires the City to assess and collect ad valorem taxes each year sufficient to pay principal and
interest when due on the Bonds. The Ordinance does not provide any other security for the payment of the Bonds,
or any express remedies in the event of default, makes no provision for acceleration of maturity of the Bonds in the
event of default,and does not provide for a trustee to protect the rights of the holders of the Bonds.
Although a holder of the Bonds could presumably obtain judgment against the City in the event of default in the
payment of principal or interest on the Bonds, such judgment could not be satisfied by execution against any
property of the City A holder of the Bonds could,in the event of default, ask a court for a mandamus or court order
compelling the City to levy, assess and collect sufficient ad valorem taxes to pay principal of and interest on the
Bonds as it falls due. Such remedy might need to be enforced on a periodic basis. The enforcement of a claim for
payment of principal or interest on the Bonds would be subject to judicial discretion, sovereign police powers and
the applicable provisions of the federal bankruptcy laws and to any other similar laws affecting the rights of political
subdivisions generally
INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY
The City invests its investable funds in investments authorized by Texas law in accordance with investment policies
approved by the City Council of the City Both state law and the City's investment policies are subject to change.
Legal Investments
Current Texas law provides the City with authority 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 issued by a state or national bank domiciled in the State of Texas, a savings bank domiciled in the State of
Texas,or a state or federal credit union domiciled in the State of Texas and are guaranteed or insured by the Federal
Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or are secured as to principal by
obligations described in the preceding clauses or in any other manner and amount provided by law for City deposits,
(7)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,(8)certain bankers' acceptances with the remaining term of 270 days or less,if
the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least
one nationally recognized credit rating agency, (9)commercial paper with a stated maturity of 270 days or less that
is rated at least A-1 or P-1 or the equivalent by either(a)two nationally recognized credit rating agencies or(b)one
nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a
U.S. or state bank, (10)no-load money market mutual funds registered with the Securities and Exchange
Commission that have a dollar-weighted average stated maturity of 90 days or less and include in their investment
objectives the maintenance of a stable net asset value of$1 for each share,(11)no-load mutual funds registered with
the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest
exclusively in the foregoing obligations and are continuously rated as to investment quality by at least one nationally
9
recognized investment rating firm of no less than AAA or its equivalent, (12)bonds issued, assumed, or guaranteed
by the State of Israel, and(13) guaranteed investment contracts that have a defined termination date and are secured
by obligations described in clause (1) above in an amount at least equal to the amount of bond proceeds invested
under such contract.
The City may invest in such obligations directly or through government investment pools that invest solely in such
obligations provided that the pools are continuously rated no lower than AAA or AAA-m or an equivalent by at least
one nationally recognized rating service. The City is specifically prohibited from investing in:(1)obligations whose
payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed
security collateral and pays no principal, (2)obligations whose payment represents the principal stream of cash flow
from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that
have a stated final maturity of greater than 10 years, and(4) collateralized mortgage obligations the interest rate of
which is determined by an index that adjusts opposite to the changes in the market index.
Investment Policies
Under Texas law,the City is required to invest its funds under written investment policies that primarily emphasize
safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and
capability of investment management; and that includes a list of authorized investments for City funds, maximum
allowable stated maturity of any individual investment and the maximum average dollar-weighted maturity allowed
for pooled fund groups. All City funds must be invested consistent with a formally adopted "Investment Strategy
Statement" that specifically addresses each fund's investment. Each Investment Strategy Statement will describe its
objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4)
marketability of each investment,(5)diversification of the portfolio,and(6)yield.
Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a
person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not
for speculation, but for investment, considering the probable safety of capital and the probable income to be
derived." At least quarterly, the investment officers of the City shall submit an investment report detailing: (1) the
investment position of the City; (2) the beginning market value, any additions and changes to market value and the
ending market value for each pooled fund group,(3)the book value and market value of each separately listed asset
at the beginning and end of the reporting period, (4) the maturity date of each separately invested asset, (5) the
account or fund or pooled fund group for which each individual investment was acquired, and(6)the compliance of
the investment portfolio as it relates to: (a)adopted investment strategy statements and(b)state law No person may
invest City funds without express written authority from the City Council.
The City's policies require investments in accordance with applicable state law The City's Statement of Investment
Policy does not exclude any investments allowable under State law described above under "Legal Investments."
The City generally invests in certificates of deposit, money market accounts and obligations of the United States or
its agencies and instrumentalities.
Current Investments
The City's investment balances on March 31,2003 were as follows.
Principal Market Book
Amount Value Value
Repurchase Agreements $ 970,077 $ 970,077 $ 970,077
Money Market Funds 11,368,393 11,368,393 11,368,393
Government Securities 12,920,000 12,891,492 12,850,248
Certificates of Deposit 14,361,628 14,361,628 14,361,628
Investment Pool 25,530,631 25,530,631 25,530,631
Total Portfolio $65,150,729 $65,122,222 $65,110,978
10
Additional Provisions
Under Texas law, the City is additionally required to: (1) annually review its adopted policies and strategies, (2)
require any investment officers with personal business relationships or relatives with firms seeking to sell securities
to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the Mayor and
Council, (3)require the registered principal of firms seeking to sell securities to the City to: (a) receive and review
the City's investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to
preclude imprudent investment activities, and (c) deliver a written statement attesting to these requirements; (4)
perform and annual audit of the management controls on investments and adherence to the City's investment policy;
(5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers, (6)
restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase
agreement funds to no greater than the term of the reverse repurchase agreement; (7) restrict the investment in
money market mutual funds in the aggregate to no more than 80% of the City's monthly average fund balance,
excluding bond proceeds and reserves and other funds held for debt service, and further restrict the mvestment in
non-money market mutual funds to not more than 15% of the City's monthly average fund balance, excluding bond
proceeds and reserves and other funds held for debt service; and (8) require local government investment pools to
confirm to the new disclosure,rating,net asset value,yield calculation,and advisory board requirements.
CITY TAX DEBT
General
The following tables and calculations relate to the Bonds and to all other tax-supported debt of the City In addition
to outstanding certificates and bonds, the City also has issued revenue bonds and has incurred contractual and other
indebtedness and liabilities which are not included below The City and various other political subdivisions of
government which overlap all or a portion of the City are empowered to incur debt to be paid from revenues raised
or to be raised by taxation against all or a portion of property within the City
Bonded Indebtedness Payable from Ad Valorem Taxes
2002 Certified Assessed Valuation(100%of estimated market value) $2,171,317,975 (a)
Direct Debt:
Outstanding Debt(as of April 1,2003) $ 79,715,000
The Bonds 15,000,000
The Certificates 19,650,000 (b)
Total Direct Debt. $ 114,365,000
Debt Service Fund Balance(as of April 1,2003) $ 3,951,826 (c)
(a) Certified by the Brazoria County Appraisal District and net of exemptions.
(b) Concurrently with the issuance of the Bonds, the City anticipates issuing $19,650,000 Certificates of
Obligation,Series 2003(the"Certificates"). See"CITY TAX DEBT"herein.
(c) Includes the City's remaining debt service requirements due in 2003 on Outstanding Bonds in the amount
of$1,602,587 to be paid September 1,2003
11
Pro-Forma Debt Service Schedule
The following sets forth the principal and interest on the City's Outstanding Debt and the Bonds and the Certificates.
Fiscal
Year Plus:Debt Total Debt
Ending Outstanding Plus. The Bonds(b) Service on the Service
9/30 Debt(a) Principal Interest Certificates(c) Requirement
2003 $ 5,544,806 $ 250,000 $ 333,083 $ 6,127,889
2004 5,620,374 750,000 1,302,175 7,672,549
2005 5,809,314 $ 100,000 747,500 1,317,331 7,974,145
2006 5,791,654 110,000 742,250 1,331,138 7,975,041
2007 5,794,801 120,000 736,500 1,333,856 7,985,158
2008 5,784,201 130,000 730,250 1,340,619 7,985,070
2009 5,593,204 140,000 723,500 1,341,456 7,798,160
2010 4,738,284 335,000 711,625 1,979,306 7,764,215
2011 4,727,749 350,000 694,500 1,987,994 7,760,243
2012 4,725,714 370,000 676,500 1,988,625 7,760,839
2013 4,727,766 390,000 657,500 1,986,269 7,761,535
2014 4,739,984 410,000 637,500 1,667,269 7,454,753
2015 4,757,559 435,000 616,375 1,666,694 7,475,628
2016 4,758,018 455,000 594,125 1,663,238 7,470,380
2017 3,474,230 725,000 564,625 1,666,638 6,430,493
2018 3,483,358 765,000 527,375 1,574,013 6,349,745
2019 2,852,375 805,000 488,125 1,570,488 5,715,988
2020 2,856,875 845,000 446,875 1,573,550 5,722,300
2021 2,865,625 885,000 403,625 1,572,938 5,727,188
2022 2,878,125 935,000 358,125 1,573,519 5,744,769
2023 1,811,625 980,000 310,250 1,570,163 4,672,038
2024 1,817,375 1,030,000 260,000 3,107,375
2025 1,819,125 1,085,000 207,125 3,111,250
2026 1,826,625 1,140,000 151,500 3,118,125
2027 1,829,625 1,200,000 93,000 3,122,625
2028 1,260,000 31,500 1,291,500
Total $100,628,391 $15,000,000 $13,110,250 $32,340,362 $161,079,001
(a) Excludes$17,000,000 Certificates of Obligation, Series 1998 which are self-supporting.
(b) Interest estimated at 5.25%for illustration purposes.
(c) Concurrently with the issuance of the Bonds, the City anticipates issuing $19,650,000 Certificates of
Obligation,Series 2003 (the"Certificates"). See"CITY TAX DEBT"herein.
Estimated Average Annual Requirements(2003/2028) $6,195,346
Estimated Maximum Annual Requirement(2008) $7,985,158
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Estimated Overlapping Debt:
The following table indicates the indebtedness,defined as outstanding obligations payable from ad valorem taxes, of
governmental entities overlapping the City and the estimated percentages and amounts of such indebtedness
attributable to property within the City This information is based upon data secured from the individual
jurisdictions and/or the Texas Municipal Reports. Such figures do not indicate the tax burden levied by the
applicable taxing jurisdictions for operation and maintenance or for other purposes. The City has not independently
verified the accuracy or completeness of the information shown below except for amounts related to the City
Debt as of Overlapping
Taxing Jurisdiction April 1,2003 Percent Amount
Brazoria County $ 25,955,000 6.97% $ 1,809,064
Brazoria County MUD No. 17 14,885,000 100 00 14,885,000
Brazoria County MUD No. 18 17,070,000 99.86 17,046,102
Brazoria County MUD No. 19 13,900,000 100 00 13,900,000
Fort Bend County 84,670,000 0 01 8,467
Pearland ISD 179,276,130 73.35 131,499,041
Harris County 1,195,546,590 0 02 239,109
Harris County Flood Control District 92,089,985 0 02 18,418
Port of Houston Authority 324,595,000 0 02 64,919
TOTAL ESTIMATED OVERLAPPING $179,470,120
The City 114,365,000
Total Direct and Estimated Overlapping Debt $293,835,120
Debt Ratios
Direct and
Direct Debt Overlapping Debt
Per 2002 Certified Assessed Valuation($2,171,317,975) 5.27% 13.53%
Per Capita(42,103) $2,653 $6,817
TAX DATA
General
One of the City's principal sources of operational revenue and its principal source of funds for debt service payments
is the receipts from ad valorem taxation. See "SELECTED FINANCIAL DATA" The following is a recapitulation
of(a) the Texas Property Tax Code, including methodology, limitations, remedies and procedures; (b) historical
analysis of collection and trends of tax receipts and provisions for delinquencies; (c) an analysis of the tax base,
including relative property composition, principal taxpayers and adequacy of the tax base to service debt
requirements;and(d)taxation that may add to the City's taxpayers'tax costs.
Property Tax Code and County-Wide Appraisal District
The Texas Property Tax Code (the "Property Tax Code") establishes for each county in Texas a single appraisal
district with responsibility for recording and appraising property for all taxing units within the county, and a single
appraisal review board, with responsibility for reviewing and equalizing the values established by the appraisal
district. The Property Tax Code requires the appraisal district, by May 15 of each year, or as soon thereafter as
practicable,to prepare appraisal records of property as of January 1 of each year based upon market value.The chief
appraiser must give written notice before May 15, or as soon thereafter as practicable,to each property owner whose
property value is appraised higher than the prior tax year or the value rendered by the property owner or whose
property was not on the appraisal roll the preceding year or whose property was reappraised in the current tax year
Notice must also be given if ownership of the property changed during the preceding year. The appraisal review
board has the ultimate responsibility for determining the value of all taxable property within the City; however, any
property owner who has timely filed notice with the appraisal review board may appeal a final determination by the
appraisal review board by filing suit in a Texas district court. Prior to such appeal or any tax delinquency date,
however,the property owner must pay the tax due on the value of that portion of the property involved that is not in
dispute or the amount of tax imposed in the prior year, whichever is greater, or the amount of tax due under the
13
order from which the appeal is taken. In such event,the value of the property in question will be determined by the
court, or by a jury, if requested by any party In addition taxing units such as the City are entitled to challenge
certain matters before the appraisal review board, including the level of appraisals of a certain category of property,
the exclusion of property from the appraisal records or the grant in whole or in part of an exemption. A taxing unit
may not,however,challenge the valuation of individual properties.
Although the City has the responsibility for establishing tax rates and levying and collecting its taxes each year,
under the Property Tax Code the City does not establish appraisal standards or determine the frequency of
revaluation or reappraisal. The appraisal district is governed by a board of directors elected by the governing bodies
of the county and all cities, towns, school districts and, if entitled to vote, the conservation and reclamation districts
that participate in the appraisal district. The Property Tax Code requires each appraisal district to implement a plan
for periodic reappraisal of property to update appraised values. Such plan must provide for reappraisal of all real
property in the appraisal district at least once every three years. It is not known what frequency of reappraisals will
be utilized by the Brazoria County Appraisal District or whether reappraisals will be conducted on a zone or
county-wide basis.
Tax Rate Limitations
Article XI, Section 5 of the Texas Constitution,provides for an overall limitation for Home Rule Cities of$2.50 per
$100 assessed valuation. The Attorney General of Texas follows a policy, with respect to Home Rule Cities which
have such a$2.50 limitation, of approving ad valorem tax bonds only to the extent that all of such city's ad valorem
tax debt can be serviced by a debt service tax rate of$1.50 at 90%collection.
Property Subject to Taxation by the City
Except for certain exemptions provided by Texas law, all real and tangible personal property and certain categories
of intangible personal property with a tax situs in the City are subject to taxation by the City; however, no effort is
expected to be made by the Brazoria County Appraisal District to include on the tax roll tangible or intangible
personal property not devoted to commercial or industrial use. Principal categories of exempt property include:
property owned by the State of Texas or its political subdivisions; property used for public purposes; property
exempt from ad valorem taxation by federal law; certain household goods, family supplies, and personal effects,
farm products owned by the producer; certain property owned by charitable organizations, youth development
associations, religious organizations, and qualified schools; designated historical sites; solar and wind-powered
energy devices; most individually-owned automobiles; and property of disabled veterans, only to the extent of
$3,000 of taxable property In addition, taxpayers who are over 65 years of age are entitled to apply for an
additional exemption from market value of their residential homestead of$25,000 These over 65 exemptions and
disabled veterans exemptions amounted to$66,417,223 from the 2002 tax roll.
The state constitution permits local governments the option of granting homestead exemptions of up to 20% of
market value. The City has not granted such additional homestead exemption for the 2002 tax year.
An eligible owner of agricultural and timberland may apply to have such properties which meet certain requirements
appraised on the basis of productivity value or market value, whichever is less. The loss of value due to property
values based on productivity value on the 2002 tax roll was approximately$42,789,750
The City has authority to enter into tax abatement agreements to encourage economic development. Under such
agreements, a property owner agrees to construct certain improvements on its property The City in turn agrees not
to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the
agreement. Such abatement agreement may last for a period of up to 10 years. The City has $16,257,530 of such
property that was subject to abatement on January 1,2002.
The constitution of the State of Texas authorizes a property tax exemption for certain business personal property
The City Council had the option to take official action to override the exemption and to continue taxing the property
exempted by the amendment. On December 18, 1989,the City's City Council took such official action not to tax the
property in 1990 and to allow the exemption for 1991 and all future years. This Freeport Goods exemption
amounted to$22,012,030 on the 2002 tax roll.
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Notice and Hearing Procedures
The Property Tax Code establishes procedures for providing notice and the opportunity for a hearing for taxpayers
in the event of certain proposed tax increases and provides for taxpayer referenda which could result in the repeal of
certain tax increases. The Property Tax Code also establishes a procedure for notice to property owners of
reappraisals reflecting increased property values over $1,000, appraisals which are higher than renditions, and
appraisals of property not previously on an appraisal roll.
Levy and Collection of Taxes
The City is responsible for the collection of its taxes, unless it elects to transfer such functions to another
governmental entity Before the later of September 30 or the 60th day after the date the certified appraisal roll is
received by the City, the rate of taxation is set by the City Council based upon the valuation of property within the
City as of the preceding January 1 and the amount required to be raised for debt service,maintenance purposes and
authorized contractual obligations.
The City Council may under certain circumstances be required to advertise and hold a public hearing within the City
on a proposed tax rate before the City Council can hold a public meeting to vote on the tax rate. If the tax rate
adopted exceeds by more than 8% the rate needed to pay debt service and certain contractual obligations and to
produce, when applied to the property which was on the prior year's roll, the prior year's total taxes levied for
purposes other than debt service and such contractual obligations (the "rollback rate"), such excess portion of the
levy may, subject to constitutional restrictions on the impairment of existing obligations, be repealed at an election
within the City held upon petition of 10%of the City's qualified voters and the tax rate adopted for the current year
be reduced to the rollback rate.
The City is prohibited from adopting a tax rate that exceeds the lower of the rollback tax rate or 103 percent of the
"effective tax rate" until it has held a public hearing on the proposed tax rate and has otherwise complied with the
Property Tax Code. Reference is made to the Property Tax Code for definitive requirements for the levy and
collection of ad valorem taxes and the calculation of the various defined tax rates.
Taxes are due on receipt of the tax bill, and become delinquent after January 31 of the following year, or on the first
day of the calendar month next following the expiration of twenty-one (21) days after mailing of the tax bills,
whichever occurs later A delinquent tax account incurs an initial penalty of six percent (6%) of the amount of the
tax and accrues an additional penalty of one percent (1%) per month up to July 1, at which time the total penalty
becomes twelve percent (12%). In addition, delinquent taxes accrue interest at one percent(1%) per month. If the
tax is not paid by July 1, an additional penalty of up to fifteen percent (15%) may under certain circumstances be
imposed by the City The Property Tax Code also makes provision for the split payment of taxes, discounts for early
payments, partial payments of taxes and the postponement of the delinquency date of taxes under certain
circumstances. The City does not permit such payments, except for those property owners who are over the age of
65 as provided in the Property Tax Code.
Collection of Delinquent Taxes
Taxes levied by the City are a personal obligation of the property owner on January 1 of the year for which the tax is
imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes,penalties and
interest ultimately imposed for the year on the property The lien exists in favor of the State and each taxing unit,
including the City, having the power to tax the property The City's tax lien is on a parity with tax liens of all other
such taxing units. A tax lien on real property has priority over the claim of most creditors and other holders of liens
on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax
lien.In the event a taxpayer fails to make timely payment of taxes due the City,the City may file suit to foreclose its
lien securing payment of the tax, to enforce personal liability for the tax, or both. Whether a lien of the United
States is on a parity with or takes priority over a tax lien of the City is determined by applicable federal law In the
absence of such federal law, the City's tax lien takes priority over a tax lien of the United States. The ability of the
City to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other
taxing units, the foreclosure sale price attributable to market conditions, the taxpayer's right to redeem the property
within two years of foreclosure, or by bankruptcy proceedings which restrain the collection of a taxpayer's debts.
15
Historical Analysis of Tax Collection
-Collection Ratios-
Tax Rate Fiscal
Per$100 of %of Collections Year
Tax Assessed Assessed Adjusted Current Current and Ending
Year Valuation Valuation Tax Levy Year Prior Years(b) 9-30
1990 $ 575,624,520 $.8000 $ 4,604,996 98.24% 99.99% 1991
1991 617,887,160 .8000 4,943,097 97 80 98.97 1992
1992 654,804,750 7970 5,218,794 98.53 100.37 1993
1993 730,329,940 7153 5,224,050 96.11 98.24 1994
1994 763,443,870 .6974 5,316,625 98.37 99 65 1995
1995 844,357,847 .6950 5,869,525 98.65 99 72 1996
1996 875,483,990 6950 6,343,113 98.31 99 43 1997
1997 1,012,049,410 6950 7,062,826 98.29 99 45 1998
1998 1,172,298,277 6950 8,147,473 98.10 99.27 1999
1999 1,322,581,461 6950 9,174,224 98.35 99 65 2000
2000 1,563,565,809 6950 10,864,049 97 66 99.31 2001
2001 1,760,551,863 6860 12,890,902 96.79 98.34 2002
2002 2,171,317,975 6860 14,895,214 91.31(a) 92.62(a) 2003
(a)Collections as of April 1,2003
-Tax Rate Distribution-
2002 2001 2000 1999 1998 1997 1996
Maintenance $0 406 $0.430 $0 435 $0.440 $0 440 $0 440 $0 440
Debt Service .280 _ 0.256 0.260 0.255 0.255 0.255 0.255
Total $0 686 $0.686 $0.695 $0.695 $0 695 $0 695 $0.695
-Analysis of Delinquent Taxes-
The following is an analysis,by tax year, of taxes delinquent as of September 30,2002.
Uncollected Adjusted Percentage
Tax Year As of September 30,2002 Tax Levy(a) of Tax Levy
2001 $699,841 $12,890,902 5 43%
2000 285,091 10,864,049 2.62
1999 479,170 9,174,224 5.22
1998 389,445 8,147,473 4.87
1997 293,915 7,062,826 4 16
1996 258,104 6,343,113 4.07
1995 280,499 5,869,525 4 78
1994 383,032 5,316,625 7.20
1993 286,677 5,224,050 5 49
1992 303,983 5,218,769 5.82
(a) The total tax levy has been adjusted to reflect additions and deletions from the tax roll for prior years.
-Delinquent Tax Collection Procedures-
In addition to the legal procedures and penalties described under "Levy and Collection of Taxes", the City has
retained a delinquent tax attorney on a contract basis to file suit to collect delinquent taxes due the City The fees
due such attorney for acting as delinquent tax attorney are payable from an additional penalty imposed upon the
delinquent taxpayer,not to exceed 15%of the tax due.
16
Analysis of Tax Base
-Tax Base Distribution-
2002 Tax Roll 2001 Tax Roll 2000 Tax Roll
Type of Property Amount % Amount % Amount %
Residential $1,569,533,680 71 1% $1,319,762,380 68.7% $1,085,401,620 67 4%
Acreage 61,390,260 2.8 67,023,150 3.6 67,239;100 4.2
Vacant Lots/Tracts 78,875,380 3 6 66,695,330 3 6 46,888,440 2.9
Farm&Ranch 4,627,370 .2 4,810,310 .3 3,826,610 .2
Commercial/Industrial 428,454,870 19 4 398,620,140 20 7 358,489,680 22.3
Utilities 43,116,930 2.0 39,293,380 2.1 32,500,440 2.0
Real Inventory 5,982,970 .3 3,109,880 4 7,180,080 4
Other 16,693,020 .8 4,383,520 6 9,643,330 .6
Gross Assessed
Value $2,208,674,480 $1,903,698,090' $1,611,169,300•
Less: Exemption (148,669,259) (143,146,227) (86,664,421)
Net Assessed
Value $2,060,005,221(a) $1,760,551,863(a) $1,524,504,870(a)
(a) Value may differ from those shown elsewhere in this Official Statement due to subsequent adjustments to
the tax roll.
-Principal Taxpayers-
2002 2001 2000
Taxable Taxable Taxable
Assessed Assessed Assessed
Principal Taxpayer(a) Type of Property Valuation Valuation Valuation
Weatherford U.S.Inc. Oil Field Equipment $ 35,033,690 $ 29,100,820 $ 29,100,820
Reliant Energy Utility 16,221,790 14,070,710 14,070,710
Lowe's Home Centers Retail Store 13,599,840 6,931,600 6,931,600
Southwestern Bell Telephone Utility 11,405,920 10,758,360 10,758,260
Aggreko,Inc. Mobile Temperature Control 10,581,530 7,649,420 7,649,420
Landar Mary's Creek Apartments Apartments 10,097,750 (a) (a)
Green Hollow Apartments 9,119,750 (a) (a)
Krogers Shopping Center 8,808,890 7,719,520 7,719,520
West Lake Residential Apartments 7,649,780 (a) (a)
Texas Windmill Apts. Apartments 6,483,841 (a) (a)
Pearland Enclave Apts. Apartments (a) 10,235,020 10,235,020
TurboCare Manufacture (a) 6,479,410 (a)
Home Depot USA Inc. Retail Store (a) 6,199,660 6,199,660
Continental 34 Fund Ltd. Department Store (a) 6,044,420 6,044,420
Phillips Petroleum Oil Field (a) (a) 5,998,890
Total Ten Principal Taxpayers $128,957,781 $105,188,940 $104,760,320
Percentage Ten Principal Taxpayers
Comprise of their Respective Tax Rolls 6.88% 5.61% %
(a) Not a principal taxpayer in such tax year
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-Tax Adequacy-
Estimated Average Annual Debt Service Requirements
based on Total New Debt Service(2003-2028) $6,195,346
Tax Rate of$0.301 per$100 assessed valuation against
the 2002 Certified Assessed Valuation,at 95%collection,produces $6,208,884
Estimated Maximum Annual Debt Service Requirements
based on Total New Debt Service(in the year 2008) $7,985,158
Tax Rate of$0.387 per$100 assessed valuation against
the 2002 Certified Assessed Valuation,at 95%collection,produces $8,003,478
Estimated Overlapping Taxes
Under Texas law, if ad valorem taxes levied by a taxing authority become delinquent, a lien is created upon the
property which has been taxed, which lien is on a parity with any tax lien on such property in favor of the City In
addition to ad valorem taxes required to retire the aforementioned direct and estimated overlapping debt, certain
taxing jurisdictions including those mentioned in Estimated Overlapping Debt are also authorized by Texas law to
assess, levy, and collect ad valorem taxes for operation, maintenance, administrative and/or general revenue
purposes.
Set forth below is an estimation of ad valorem taxes levied on a $100,000 single-family residence by such
jurisdictions, assuming the assessments are made at their claimed basis of assessment (100%). Such residence is
further assumed to be located within Brazoria County wherein substantially all of the residential property within the
City is located. No recognition is given to local assessments for civic association dues, fire department
contributions, or other charges made by other than political subdivisions.
2002 Tax Estimated
Taxing Jurisdiction Rate/$100 2002 Tax Bill
The City $0.686 $ 686.00
Brazoria County 0.420 420.00
Brazoria Drainage District No.4 0.150 150.00
Pearland ISD 1.837 1,837.00
Estimated Total 2002 Tax Bill: $3,093.00(a)
(a) Ad valorem taxes are levied by three separate municipal utility districts ("MUD") on property located
within the specific MUD These taxes are paid in addition to the above noted City taxes.
Sales Tax
-Authority-
The City has adopted the provisions of Article 1066c,Vernon's Texas Civil Statutes, as amended, which grants the
City the power to impose and levy a 1% sales tax. The City has also voted an additional 1/2%sales and use tax for
economic development under Article 5190.6,Vernon's Texas Civil Statutes, as amended. The City may not pledge
the proceeds from the Sales and Use Tax as security for the Bonds.
18
-Collection History-
The State Comptroller,after deduction of a 2%service fee,currently remits the City's portion of sales tax collections
monthly By statute the Comptroller is required to remit at least twice annually The following is an analysis of the
collection history of the City's sales and use tax:
Ad Valorem Tax Comparisons
Fiscal Year Sales and Use Equivalent Tax Rate %of Actual
Ended 9-30 Tax Receipts Tax Year Equivalent Tax Levy
1990 $1,460,341 (1989) $0.254 30 71
1991 1,548,190 (1990) 0.269 33.62
1992 1,704,160 (1991) 0.260 32.65
1993 1,733,901 (1992) 0.265 33.22
1994 1,905,741 (1993) 0.261 36.48
1995 2,166,219 (1994) 0.284 40 74
1996 2,298,546 (1995) 0.272 3916
1997 2,589,918 (1996) 0.298 40.83
1998 2,962,481 (1997) 0.297 41.94
1999 3,415,183 (1998) 0.291 41.92
2000 3,684,676 (1999) 0.279 4016
2001 4,795,355 (2000) 0.307 4414
2002 5,025,749 (2001) 0.285 38.99
SELECTED FINANCIAL DATA
Historical Operations of the City's General Fund
The following is a condensed statement of revenues and expenses of the City's General Fund for the past five fiscal
years. The inclusion of the following table is not intended to imply that any revenues of the City,other than receipts
from ad valorem taxes as provided in the Ordinance,are pledged to pay principal and interest on the Bonds.
Fiscal Year Ended September 30
2002 2001 2000 1999 1998
REVENUES
General Property Taxes(a) $ 8,054,173 $ 6,784,591 $ 5,876,495 $ 5,260,551 $ 4,555,749
Sales Taxes 5,025,749 4,795,353 3,697,523 3,426,576 2,973,058
Franchises 2,453,829 2,303,730 2,022,789 1,943,545 1,703,715
Licenses&Permits 2,256,638 1,896,728 1,469,799 955,819 615,808
Charges for Services 3,651,825 3,202,767 3,061,545 2,960,214 2,508,087
Fines&Forfeitures 845,322 856,641 731,959 675,691 576,856
Intergovernmental -0- -0- 15,000 489,860 345,674
Other Revenues 908,154 863,457 827,950 655,582 615,016
Total Revenues $23,195,690 $20,703,267 $17,703,060 $16,367,838 $13,893,963
EXPENDITURES
General Government $ 5,052,056 $ 4,217,744 $ 3,580,693 $ 3,685,523 $ 2,828,787
Public Safety 7,411,992 6,692,138 5,944,516 5,695,956 5,015,602
Public Works 7,603,804 5,974,667 5,635,397 5,137,708 4,925,693
Community Services 2,271,052 2,043,620 1,762,770 1,580,624 1,543,440
Total $22,338,904 $18,928,169 $16,923,376 $16,099,811 $14,313,522
(a) Includes penalties and interest.
Source: City's audited financial statements.
19
General Fund and Debt Service Fund Balance for the Past Five Fiscal Years
Fiscal Year Ended September 30
2002 2001 2000. 1999 1998
General Fund $5,024,946 $6,563,942 $ 5,205,209 $ 4,457,492 $ 3,468,849
Debt Service Fund $2,229,529 $1,544,987 $ 681,148 $ 208,324 $ 273,742
Pension Fund
The City participates in the Texas Municipal Retirement System(TMRS), an agency operated by the State of Texas.
Employees of the City who participate in TMRS contribute a fixed percentage, currently 7%, of their gross pay and
the City matching percent is currently 14%. As employees leave municipal employment other than through
retirement, they may withdraw from TMRS those funds they contributed,but forfeit their employer's contributions.
Each municipal employer's requirements for current contributions are offset by the amounts of such forfeitures.
As of March 1, 2003, the City employed 306 full-time employees and 79 part-time and seasonal employees. All
full-time employees are covered by TMRS and the City's contribution for this fiscal year as of September 30,2001,
amounted to approximately$857,939 which includes amortization of prior service cost over 25 years. The City had
an unfunded pension benefit obligation in the amount of approximately$3,109,399 as of December 31, 2001 The
liability for prior service benefits will be amortized over a period of twenty-five years or less by contributions from
the City which are a level percentage of payroll.
Financial Statements
A copy of the City's Financial Statements for the fiscal year ended September 30, 2002, is attached hereto in the
APPENDIX B. Copies of such statements for preceding years are available,for a fee,upon request.
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ADMINISTRATION OF THE CITY
Mayor and City Council
Policy-making and supervisory functions are the responsibility of and are vested in the Mayor and City Council for
the City, under provisions of the "Charter of the City of Pearland" (the "Charter") approved by the electorate
February 6, 1971 The Council is elected at large on the first Saturday in May The Mayor and five Council
members serve three-year staggered terms. The Mayor is entitled to vote only in the event of a tie and has no power
to veto Council action. Members of the Council are described below-
Term
Council Members Period Served Expires May Occupation
Tom Reid 13 Years 2005 Retired
Mayor
Woody Owens 3 Years 2003 Consultant
Council Member
Mayor Pro-Tern
Larry Marcott 3 Years 2003 Management
Council Member
Richard Tetens 2 Years(a) 2004 Retired
Council Member
Charles Viktorin 1 Year 2005 Financial Analyst
Council Member
Klaus Seeger 5 Years 2004 Engineer
Council Member
(a) Elected May, 2001, however Councilman Tetens has served two previous terms (6 years) on the City
Council.
Administration
Under provisions of the Charter, the City Council enacts local legislation, adopts budgets, determines policies and
appoints the City Manager, who is charged with the duties of executing the laws and administering the government
of the City As the chief executive officer and head of the administrative branch of the City government,.the City
Manager is given the power and duties to•
(1) Appoint and remove all department heads and all other employees in the administrative service of
the City and may authorize the head of a department to appoint and remove subordinates in his
respective department;
(2) Prepare the budget annually,submit it to City Council,and be responsible for its administration,
(3) Prepare and submit to City Council a complete report on the finances and administrative activities
of the City;
(4) Keep City Council advised of the financial condition and future needs of the City and make
appropriate recommendations;and
(5) Perform such other necessary duties as prescribed by the Charter or required by City Council.
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Members of the administrative staff are described below-
Name Position Period Served
Bill Eisen City Manager 2 Years
Alan Mueller Deputy City Manager 6 Years
Tobin Maples Executive Director of Community Services 3 Years
Mary Ross Director of Finance 5 Months
Jerry Burns Director of Public Works 5 Years
Young Lorfin City Secretary 6 Years
John Hargrove City Engineer 11 Years
Damn Coker City Attorney 6 Years
Joseph Wertz Director of Projects 1.5 Years
Christopher Doyle Police Chief .24 Years
Consultants
The City has retained several consultants to perform professional services in connection with the independent
auditing of its books and records and other City activities. Several of these consultants are identified below
Bond Counsel Andrews&Kurth L.L.P
Houston,Texas
Certified Public Accountants .Pattillo,Brown&Hill,P C.
Waco,Texas
Financial Advisor RBC Dain Rauscher Inc.
Houston,Texas
LEGAL MATTERS
Legal Opinions
The City will furnish the Underwriter a transcript of certain certified proceedings prepared incident to the
authorization and issuance of the Bonds, including a certified copy of the unqualified approving opinion of the
Attorney General of Texas, as recorded in the Bond Register of the Comptroller of Public Accounts of the State of
Texas, to the effect that the Bonds, which the Attorney General will have examined, are valid and binding
obligations of the City under the Constitution and laws of the State of Texas. The City also will furnish the
approving legal opinion of Andrews &Kurth L.L.P.,Houston,Texas, Bond Counsel, to the effect that, based upon
an examination of such transcript,the Bonds are valid and binding obligations of the City under the Constitution and
laws of the State of Texas. The legal opinion of Bond Counsel will further state that the Bonds are payable,both as
to principal and interest, from the levy of ad valorem taxes, within the limits prescribed by law, against taxable
property within the City The opinion of Bond Counsel is expected to be reproduced on the back panel of the Bonds
over a certification by the City Secretary attesting that such legal opinion is dated as of the date of delivery of and
payment for the Bonds and is a true and correct copy of the original opinion. Errors or omissions in the printing of
such legal opinion on the Bonds shall not affect the validity of the Bonds nor constitute cause for the failure or
refusal by the Underwriter to accept delivery of and pay for the Bonds.
Bond Counsel was not requested to participate, and did not take part, in the preparation of the Official Statement,
and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of
the information contained therein, except that, in its capacity as Bond Counsel, such firm has reviewed the
information describing the Bonds in the Official Statement to verify that such description conforms to the provisions
of the Ordinance. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of
the Bonds is contingent upon the sale and delivery of the Bonds. The legal opinion will be printed on the Bonds.
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No-Litigation Certificate
The City will furnish to the Underwriter a certificate, dated as of the date of delivery of the Bonds, executed by
appropriate City officials,to the effect that no litigation of any nature has been filed or is then pending or threatened,
either in state or federal courts, contesting or attacking the validity of 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.
No Material Adverse Change
The obligations of the Underwriter to take and pay for the Bonds,and of the City to deliver the Bonds,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 City 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.
TAX EXEMPTION
In the opinion of Andrews &Kurth L.L.P., 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 City with certain covenants of
the ordinance authorizing the issuance of the Bonds (the "Ordinance) and has relied on representations by the City,
the City's fmancial advisor, and the Underwriter with respect to matters solely within their knowledge,respectively,
which Bond Counsel has not independently verified. The covenants and representations relate to, among other
things, the use of Bond proceeds and any facilities financed therewith, the source of repayment of the Bonds, the
investment of Bond proceeds and certain other amounts prior to expenditure,and requirements,that excess arbitrage
earned on the investment of Bond proceeds and certain other amounts be paid periodically to the United States and
that the City file an information report with the Internal Revenue Service. If the City should fail to comply with the
covenants in the Ordinance, or if its representations relating to the Bonds that are contained in the Ordinance 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.
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 is not a guarantee of a result, but represents its legal judgment based upon its review of
existing statutes,regulations,published rulings and court decisions and the representations and covenants of the City
described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the
matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The
Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an
audit of the Bonds is commenced,under current procedures the Service is likely to treat the City as the "taxpayer,"
and the owners of the Bonds may have no right to participate in the audit process. In responding to or defending an
audit of the tax-exempt status of the interest on the Bonds,the Issuer may have different or conflicting interests from
the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and
liquidity of the Bonds during the pendency of the audit,regardless of its ultimate outcome.
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Interest on all tax-exempt obligations, such as 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.
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 owner 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 fmal 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 Underwriter,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 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 a
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.
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
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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 obligations of the owner of a Discount Bond or of the City 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 Underwriter, 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 purchased 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.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance,the City has made the following agreement for the benefit of the holders and beneficial owners of
the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay
the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and
operating data annually, and timely notice of specified material events, to 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 all quantitative financial information and operating data with
respect to the City of the general type included in this Official Statement under the headings "CITY TAX DEBT"
(excluding "- Estimated Overlapping Debt"), "TAX DATA — Property Subject to Taxation by the City," "-
Historical Analysis of Tax Collection," "- Analysis of Tax Base," "SELECTED FINANCIAL DATA," and in
25
Appendix"B" The City will update and provide this information within six months after the end of each fiscal year
ending in or after 2003 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").
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 "B" or such other accounting principles as the City may be required to employ from time to
time pursuant to state law or regulation.
The City's current fiscal year end is September 30 Accordingly, it must provide updated information by March 31
in each year,beginning March 31,2004,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 Ordinance makes any provision for debt service reserves or
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.
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 do 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 0
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 Ordinance for purposes of any other provision of the Ordinance. 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.
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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
interests of the holders and beneficial owners ofthe 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 fmal 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 the Rule.
GENERAL CONSIDERATIONS
Sources and Compilation of Information
The information contained in this Official Statement has been obtained primarily from the City and from other
sources believed to be reliable. No representation is made as to the accuracy or completeness of the information
derived from sources other than the City The summaries of the statutes, orders, ordinances and other related
documents are included herein subject to all of the provisions of such documents.These summaries do not purport to
be complete statements of such provisions and reference is made to such documents for further information.
The information contained in this Official Statement in the section entitled "APPENDIX B - Audited Financial
Statements of the City" has been provided by Null-Lairson, P C.,Houston,Texas and has been included herein in
reliance upon their authority as an expert in the fields of auditing and accounting. Bond Counsel has reviewed the
information herein contained under the captions "THE BONDS" (except for sections captioned "Future Debt" and
"Use of Proceeds"), "LEGAL MATTERS - Legal Opinions," "TAX EXEMPTION," "TAX TREATMENT OF
ORIGINAL ISSUE DISCOUNT AND PREMIUM BONDS," and "CONTINUING DISCLOSURE OF
INFORMATION (except for the section captioned "Compliance With Prior Undertakings")," solely to determine
whether such information fairly and accurately describes the Bonds, the Ordinance, and the law set out therein.
Bond Counsel has neither independently verified other factual information contained in this Official Statement nor
conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy or completeness of
this Official Statement.No person is entitled to rely upon the limited participation of such firms 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.
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.
Certification as to Official Statement
At the time of payment for and delivery of the Bonds,the City will furnish the Underwriter a certificate,executed by
the City Secretary and Mayor, acting in their official capacities,to the effect that to the best of their knowledge and
belief: (a) the descriptions and statements of or pertaining to the City contained in this Official Statement, on the
date thereof and on the date of delivery were and are true and correct in all material respects, (b)insofar as the City
27
and its affairs, including its financial affairs, are concerned, this Official Statement did not and does not contain an
untrue statement of a material fact or omit to state a material fact required to be stated herein or necessary to make
the statements herein,in the light of the circumstances under which they were made,not misleading;and(c)insofar
as the descriptions and statements, including financial data contained in this Official Statement, of or pertaining to
entities other than the City and their activities are concerned, such statements and data have been obtained from
sources which the City believes to be reliable and that the City has no reason to believe that they are untrue in any
material respect.
Updating of Official Statement
The City will keep the Official Statement current by amendment or sticker to reflect material changes in the affairs
of the City and, to the extent that information comes to its attention, in the other matters described in the Official
Statement,until the delivery of the Bonds.
This Official Statement was duly authorized and approved by the City Council of the City of Pearland, Texas as of
the date specified on the first page hereof.
/s/
Mayor
City of Pearland
ATTEST
/s/
City Secretary
City of Pearland
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APPENDIX A
ECONOMIC AND DEMOGRAPHIC
CHARACTERISTICS
The following information has been derived from various sources, including the 2002-2003 Texas Almanac, Texas
Municipal Reports, U.S. Census data, "Sales Management Survey of Buying Power", and District officials. While
such sources are believed to be reliable,no representation is made as to the accuracy thereof.
-District Economics-
Pearland Independent School District (the "District"), a residential and agricultural area, includes the City of
Pearland,Texas(the "City"),a commercial center located 15 miles south of downtown Houston at the intersection of
State Highway 35 and Farm to Market Road 518 in the northeast corner of Brazoria County, with a small portion in
Harris County Also included within the District is the Town of Brookside Village with a reported 2000 population
of 1,960
According to the Texas Financial Institutions Directory and Fact Book (2000/2001), there are eight banks in the
Pearland area including Bank of America, N.A., First Community Bank; The Frost National Bank Pearland,
Merchants Bank Pearland; Moody National Bank; Pearland State Bank; Union Planters Bank, N.A., and Wells
Fargo Bank Texas,N.A.
- Economic Factors-
Because of the District's proximity to downtown Houston, it has become an area of continuing growth in residential,
commercial and some light industrial development. At present, there are numerous residential subdivisions either
developed or under construction within the District with homes ranging in value from $75,000 to $400,000, the
average being approximately $125,000. Commercial and industrial activity is centered primarily within the City
Approximately 66%of all taxable values within the District are within the City
-Building Permits-
(Source-City of Pearland)
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(b) 1,424 257,282,301 20 29,585,122 719 15,782,222 2,163 302,649,645
(a) Includes Apartments.
(b) As of December 31,2002
Manufacturing and Commerce
Employment in Brazoria County (the "County") is provided by the extensive petro-chemical industry (Source:
Texas Municipal Report and 2002-2003 Texas Almanac. Also adding to the general economy of the County are
fishing, tourism and recreation activities and agribusiness. The Gulf Intracoastal Waterway comes through the
lowlands near Surfside Beach and is an important waterway in America with reported annual tonnage comparable
to the Panama and Suez Canals.
Major Employers
Industrial activities within the District include the manufacturing of pipe, concrete building materials, mining
equipment, lighting fixtures, large storage tanks and the fabrication and forging of steel. According to the Pearland
Chamber of Commerce the following is a list of the industrial employers located within the District with
employment numbers above 100
100—999 Employees
Albertson's Pro Fax
Bredero Price Randall's
Davis Lynch Raytheon Aircraft Services
FlightSafety International Strickland Chevrolet
Home Depot Super Targer
K-Mart Tele-Flow,Inc.
Kemlon Third Coat Packaging
Kroger TurboCare
Lowe's Universal Weather&Aviation
Pauluhn Electric Manufacturing Weatherford Manufacturing
Pearland,City of
1000+Employees
Pearland ISD Southwest Airlines
Powell Industries Wal-Mart
ECONOMIC AND GROWTH INDICATORS
U.S.Census of Population
City of Pearland Brazoria County
Number %Change Number %Change
1930 --- --- 23,054 +11.84
1940 --- --- 27,069 +17 42
1950 --- --- 46,549 +71.96
1960 1,497 --- 76,204 +63 71
1970 6,444 +330.46 108,312 +42.13
1980 13,248 +105.59 169,587 +56.57
1990 18,927 +42.87 191,707 +13 04
2000 37,640 +98.87 241,767 +26.11
Employment Statistics
Source: Texas Workforce Commission
City of Pearland
2002 2001 2000 1999 1998 1997 1996
Labor Force 12,555 12,074 12,010 11,773 11,905 11,809 11,699
Employed 12,004 11,640 11,556 11,290 11,466 11,282 11,217
Unemployed 551 434 454 483 439 527 482
Rate 4 4 3.6 3.8 4 1 3 7 4.5 4 1
Brazoria County
2002(a) 2001 2000 1999 1998 1997 1996
Labor Force 110,179 r 106,660 106,312 104,330 105,383 105,274 104,171
Employed 102,593 100,336 99,685 97,274 98,970 97,580 97,144
Unemployed 7,586 6,324 6,627 7,056 6,413 7,694 7,027
Rate 6.9 5.9 6.2 6.8 61 7.3 6.7
(a) As of December 31,2002.
Marketing Survey of Buying Power*
Houston-Galveston
Brazoria CMSA Brazoria County
Population(000s)
Total Population 4,854 4 252.2
18-24 10 1 8.8
25-34 15.3 14.0
35-49 24 0 25.2
50+ 21.6 23.3
Households 1,700.4 85.8
Retail By Store Group Sales(000's)
Total Retail Sales $ 62,625,297 $2,457,246
Food&Beverage Stores 7,892,221 418,712
Food&Beverage Stores Estab. 6,340,324 172,988
General Merchandise 7,175,810 393,373
Furnit.&Home Furnish.and Electron.&Appin. 3,787,452 57,079
Motor Vehicle&Parts Dealers $ 19,710,041 $ 789,237
Total EIB($000) $100,908,572 $4,182,291
Median Household EBI 45,482 41,647
$20,000-$34,999 20.2 23 1
$35,000-$49,999 18.0 19.6
$50,000 and Over 44.0 39 4
Buying Power Index 1.8076 .0773
* Statistical data from "Sales & Marketing Management-2002 Survey of Buying Power", copyright in 2002
Sales Management Survey of Buying Power Further reproduction is forbidden.
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY
CITY OF PEARLAND, TEXAS
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED SEPTEMBER 30, 2002
Prepared by•
Finance Department
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
YEAR ENDED SEPTEMBER 30,2002
Page
Exhibit Number
INTRODUCTORY SECTION
Letter of Transmittal i- vi
GFOA Certificate of Achievement for
Excellence in Financial Reporting
Organization Chart. viii
Prmcipal Officials ix
Executive Managers x
FINANCIAL SECTION
Independent Auditors' Report 1 —2
General Purpose Financial Statements:
Combined Balance Sheet—All Fund Types, Account
Groups and Discretely Presented Component Units 1 3 —4
Combined Statement of Revenue, Expenditures and
Changes in Fund Balances —All Governmental Fund Types
and Discretely Presented Component Units 2 5—6
Combined Statement of Revenue, Expenditures and Changes in
Fund Balance—Budget and Actual—General and
Debt Service Funds 3 7— 8
Combined Statement of Revenue, Expenses and Changes in
Retained Earnings —Proprietary Fund Type (Enterprise Fund) 4 9
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30,2002
Page
Exhibit Number
FINANCIAL SECTION (Continued)
General Purpose Financial Statements. (Continued)
Combined Statement of Cash Flows —All Proprietary
Fund Type (Enterprise Fund) 5 10
Notes to Financial Statements 11 —34
Required Supplementary Information:
Pension Information—Texas Municipal Retirement System. 35
Combining and Individual Fund and Account Group
Financial Statements and Schedules.
Governmental Fund Types
General Fund
Comparative Balance Sheets A— 1 36
Statement of Revenue, Expenditures and Changes in
Fund Balance—Budget and Actual. A—2 37
Schedule of Expenditures —Budget and Actual A—3 38 —45
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30, 2002
Page
Exhibit Number
FINANCIAL SECTION (Continued)
Combining and Individual Fund and Account Group
Financial Statements and Schedules: (Continued)
Governmental Fund Types (Continued)
Special Revenue Funds
Combining Balance Sheet B— 1 46 —47
Combining Statement of Revenue, Expenditures and
Changes in Fund Balances B—2 48 —49
Debt Service Fund
Comparative Balance Sheets C— 1 50
Statement of Revenue, Expenditures and Changes in
Fund Balance—Budget and Actual. C—2 51
Capital Projects Funds
Combining Balance Sheet D— 1 52—55
Combmmg Statement of Revenue, Expenditures and
Changes in Fund Balance D—2 56—59
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30,2002
Page
Exhibit Number
FINANCIAL SECTION (Continued)
Combining and Individual Fund and Account Group
Financial Statements and Schedules: (Continued)
Account Groups
General Fixed Assets
Schedule of General Fixed Assets by Source E— 1 60
Schedule of Changes m General Fixed Assets by
Function and Activity E—2 61
Schedule of General Fixed Assets by Function and
Activity E—3 62 —63
General Long-term Debt:
Schedule of General Long-term Debt Service
Requirements to Maturity F 64—67
Enterprise Fund Debt
Schedule of Enterprise Fund Debt Service Requirements to
Maturity G 68 —69
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30,2002
Page
Exhibit Number
FINANCIAL SECTION (Continued)
Combining and Individual Fund and Account Group
Financial Statements and Schedules: (Continued)
Component Units
Combining Balance Sheet H— 1 70
Combining Statement of Revenue, Expenditures and
Changes in Fund Balance H—2 71
Combining Balance Sheet—Pearland Economic Development
Corporation (PEDC) H—3 72
Combining Statement of Revenue, Expenditures and
Changes m Fund Balance—Pearland Economic
Development Corporation(PEDC) H—4 73
Combining Balance Sheet TIRZ#1 and TIRZ#2 H—5 74
Combining Statement of Revenue, Expenditures and
Changes in Fund Balance TIRZ#1 and TIRZ#2 H—6 75
Schedule of'Component Unit Funds Debt Service
Requirement to Matunty H—7 76
(continued)
CITY OF PEARLAND, TEXAS
TABLE OF CONTENTS
(Continued)
YEAR ENDED SEPTEMBER 30,2002
Page
Exhibit Number
UNAUDITED STATISTICAL SECTION
General Governmental Expenditures by Function Last Ten
Fiscal Years 1 77
General Governmental Revenue by Source—Last Ten
Fiscal Years 2 78
Property Tax Levies and Collections —Last Ten Fiscal Years 3 79
Assessed Value of Taxable Property—Last Ten Fiscal Years 4 80
Property Tax Rates —Direct and Overlapping Governments—
Last Ten Fiscal Years 5 81
Principal Taxpayers 6 82
Property Values, Construction and Bank Deposits 7 83
Ratio of Net General Long-term Debt to Assessed Value and
Net Long-term Debt Per Capita—Last Ten Fiscal Years 8 84
Ratio of Annual Debt Service Expenditures for General
Long-term Debt to Total General Governmental
Expenditures and legal Debt Limits—Last Ten Fiscal Years 9 85
Computation of Direct and Overlapping Debt 10 86
Demographic Statistics 11 87
Miscellaneous Statistical Data. 12 88 —89
INTRODUCTORY SECTION
y?,.,1 Yd YYYii
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4 v
To the Honorable Mayor, Members
of City Council, and Citizens of
the City of Pearland
Pearland, Texas.
The comprehensive annual financial report of the City of Pearland, Texas (the "City") for
the fiscal year ended September 30, 2002, is hereby submitted. Responsibility for both
the accuracy of the data, and the completeness and fairness of the presentation, includmg
all disclosures, rests with the City To the best of our knowledge and belief, the enclosed
data are accurate m all material respects and are reported m a manner designed to present
fairly the financial position and results of operations of the various funds and account
groups of the City All disclosures necessary to enable the reader to gain an
understandmg of the City's financial activities have been included.
The comprehensive annual financial report is presented in three sections: Introductory,
Financial, and Statistical Section. The Introductory Section includes this transmittal
letter, the City's organizational chart, and a list of principal officials. The Financial
Section includes the general purpose financial statements and the combining and
individual fund and account group financial statements and schedules, as well as the
auditor's report on the financial statements and schedules. The Statistical Section
mcludes selected financial and demographic information, generally presented on a multi-
year basis.
The financial reporting entity (the "City") includes all the funds and account groups of
the primary government (i.e., the City of Pearland as legally defined), as well as all of its
Component Umts. Component Units are legally separate entities for which the primary
government is financially accountable. The City provides the full range of municipal
services contemplated by statute or charter This includes police and fire protection,
health and social services, public improvements, planning and zoning, and general
administrative services. The City also provides water, sewer, and sanitation services.
Additionally, the City has an Economic Development Corporation, designed to attract
and retain jobs and more fully develop the local ad valorem tax base.
ECONOMIC CONDITION AND OUTLOOK
The City of Pearland hes 15 miles southeast of downtown Houston and 10 miles from the Texas Medical
Center in the northeast corner of Brazona County, with small areas within Harris and Fort Bend Counties
Pearland is accessible by way of four major highways and is six miles from Houston Hobby Airport.
Sales tax receipts have shown favorable increases for the last several years The Pearland Economic
Development Corporation (PEDC) awarded incentive packages to either attract new businesses or allow
existing businesses to expand.
MAJOR INITIATIVES
The Pearland City Council sets its goals each year in a strategic planning workshop Some of the
highlighted goals include:
• Implement the 2001 bond projects;
• Advance improvements to mitigate drainage and flooding issues including regional
detention facilities and storm water detention regulations,
• Address the growth management needs of the City;
• Fiscal responsibility;
• Update the Comprehensive Plan and related City codes;
• Address the infrastructure needs of the City;
• Address the transportation and mobility needs of the City; and
• Maintain and expand intergovernmental communication and cooperation.
FUTURE OUTLOOK
Brazona County's current population is just under 228,000 It is estimated that this will increase to over
330,000 in the next 10 to 15 years. According to the Brazona County Partnership, job growth will be
focused in four primary areas 1) aerospace/high technology, 2) transportation and distribution, 3)
petrochemical and downstream petrochemical companies, and 4) tourism.
In late 1998, the City of Pearland created a Tax Increment Reinvestment Zone (TIRZ #2). This involved
the annexation of over 3,000 acres west of the State Highway 288 (SH 288) corridor The City limit now
extends to portions of Fort Bend County The proposed development, Shadow Creek Ranch, has the
potential to develop the acreage over a 15 to 20-year time frame. It is estimated that 7,000 new single-
family homes, 1,800 assisted living units, and 3,900 multi-family units could be developed. More than
two billion dollars worth of value would be added over the next 20 years
Shadow Creek Ranch will not only improve roads in the area, but will also bring in sewer and drainage,
water, and major landscaping to the area. The added population poises SH 288 for major retail and
commercial development that could eventually include major office buildings, a hospital, and hotels
DEPARTMENT FOCUS
Finance The Finance Department continues to improve in multiple major areas Additional staff has
allowed for enhanced mterest earnings and improved financial projections. The Department continues
to submit winning GFOA awards for budget presentation and financial audit reporting.
FINANCIAL INFORMATION
Management of the City is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse, and to ensure that
adequate accounting data are compiled to allow for the preparation of financial statements in conformity
with generally accepted accounting principles The internal control structure is designed to provide
reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable
assurance recognizes that (1) the cost of controls should not exceed the benefits expected to be derived
and(2) the evaluation of costs and benefits requires estimates and judgments by management.
Accounting Controls We believe that the City's accounting controls provide reasonable assurance that
errors or irregularities that could be material to the financial statements are prevented or would be detected
within a timely period by employees in the normal course of performing their assigned function.
Budgeting Controls. In addition, the City maintains budgetary controls The objective of these budgetary
controls is to ensure compliance with legal provisions embodied in the annual appropriated budget
approved by the City's governing body Activities of the General, Debt Service, and Enterprise Funds are
included in the annual appropriated budget. The level of budgetary control (the level at which
expenditures cannot legally exceed the appropriated amount) is the total approved budget for each
department.
As demonstrated by the statements and schedules included in the financial section of this report, the City
continues to meet its responsibility for sound financial management.
General Government Functions The revenue from the General, Special Revenue, and Debt Service
Funds, and the amount and percentage of increases and decreases in relation to prior year revenue, is
summarized in the following schedule:
2002 2001 Percent of
2002 Percent 2001 Percent Increase Increase
Revenue Source Amount of Total Amount of Total (Decrease) (Decrease)
Property taxes and penalties $12,857,995 34 60% $10,833,292 42.18% $ 2,024,703 18.69%
Sales and hotel/motel taxes 5,103,241 13 73% 4,862,571 18.93% 240,670 4.95%
Franchise and gross receipts taxes 2,453,829 6.60% 2,303,730 8.97% 150,099 6.52%
Licenses and permits 2,256,638 6.07% 1,896,728 7 38% 359,910 18.98%
Fines and forfeitures 845,322 2.27% 856,641 3.34% (11,319) ( 1.32)%
Intergovernmental 8,383,743 22.56% 333,677 1 30% 8,050,066 2,412.53%
Charges for services 3,651,825 9 83% 3,202,767 12.47% 449,058 14 02%
Interest 202,296 0.54% 416,572 1 62% (214,276) (51.44%
Other 1,404,342 3 78% 977,589 3 81% 426,753 43 65%
$37,159,231 100.00% .$25,683,567 100 00% $11,475,664 11.68%
The most significant percentage increase in revenue was derived from intergovernmental revenues This
was primarily due to revenues from the FEMA buyout program. This revenue was a non-recurring
revenue source received from FEMA. The other areas of healthy increases were in the property tax
revenues and licenses and permits. These increase were due to the increase in the tax base and building
activity The decrease in interest was due to the lower interest rate market in this past fiscal year
Allocations of property tax levy by purpose for 2001-2002 fiscal year and the preceding two fiscal years
are as follows (amount per$100/assessed value)
Purpose 2002 2,001 2000
General Fund 0 430 0.435 0 440
General Obligation Debt 0.256 0.260 0.255
Total Tax Rate 0.686 0 695 0.695
The expenditures for the general, special revenue, and debt service funds and the amount, and
percentage of increases and decreases in relation to the prior year expenditures, are summarized in the
following schedule.
2002 2001 Percent of
2002 Percent 2001 Percent Increase Increase
Function Amount of Total Amount of Total (Decrease) (Decrease)
General Government $16,107,540 42.20% $ 4,235,344 19% $11,872,196 280.31%
Public Safety 7,413,321 19 42% 6,692,138 29% 721,183 10.78%
Public Works 7,603,804 19 92% 5,974,667 26% 1,629,137 27.27%
Community Services 2,932,228 7 68% 2,662,367 12% 269,861 10.14%
Debt Service 4,112,490 10.78% 3,275,682 14% 836,808 25.55%
$38,169,383 100 00% $22,840,198 100% $15,329,185 67 11%
The most significant increase was in general government. Of this amount, approximately $11 million
was due to the FEMA buyout program expenditures
Enterprise Operations The City's enterprise operations are comprised of the Water and Sewer System.
Water and Sewer System. Operating revenues totaled $8,223,719 compared to $7,453,484 last year, a
10 3% The increase is due to increase in growth and annexations Comparative data for the past two
fiscal years are presented in the following schedule
Water and Sewer System
2002 2001 2000
Operating Revenues $8,223,719 $7,453,484 $7,146,031
Operating Expenses (before depreciation) 5,243,633, 4,946,621 3,899,289
Operating Income(before depreciation) $2,980,086 $2,506,863 $3,246,742
Number of customers 14,161 11,780 11,000
iv
Debt Administration. The ratio of net debt to assessed valuation and the amount of bonded debt per
capita are useful indicators of the City's debt position to municipal management, citizens, and investors
This data for the City of Pearland at September 30, 2002, are presented in the statistical section of this
report.
The City's assigned "insured" bond ratings on its most recent issue were as follows_
Moody's Standard & Poors
Revenue Bonds AAA AAA
Tax Bonds AAA AAA
Cash Management. Cash, temporarily idle during the year, was invested in certificates of deposit
ranging from 60 to 365 days to maturity Certificate of deposit and cash amounts which exceed FDIC
coverage are collaterahzed by securities owned by the City's depository All investments held by the
City during the year and at September 30, 2002, are classified m the category of lowest credit risk as
defined by the Governmental Accounting Standards Board.
Risk Management. During 2001-02, the City continued an aggressive risk management program for
workers' compensation. Various risk control techniques, including employee accident prevention
training, have been emphasized during the year in order to minimize accident-related losses
OTHER INFORMATION
Independent Audit. The City Charter requires an annual audit of the books of account, financial records,
and transactions of all administrative departments of the City by an independent certified public
accountant. The accounting firm of Pattillo, Brown and Hill, L.L.P was selected by the City Council.
This requirement has been complied with, and the auditors' opinion has been included in this report.
Awards. The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Pearland for
its Comprehensive Annual Financial Report for the fiscal year ended September 30, 2001 This was the
25th consecutive year that the City 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, whose contents conform to
program standards Such reports must satisfy both generally accepted accounting principles and
applicable legal requirements
A Certificate of Achievement is valid for a period of one year only We believe our current report
continues to conform to Certificate of Achievement Program requirements and we are submitting it to
GFOA to determine its eligibility for another certificate.
In addition, the City also received the GFOA's Award for Distinguished Budget Presentation, the 15th
consecutive year for its annual appropriated budget dated September 13, 2001 In order to qualify for
the Distinguished Budget Presentation Award, the City's budget document was judged to be proficient
in several categories including policy documentation, financial planning, and organization.
v
Acknowledgments We would like to express our appreciation to all members of the Finance and
Administration Departments who assisted and contributed to its preparation. We would also like to
thank the Mayor, members of the City Council, and City Manager for their interest and support m
planning and conducting the financial operations of the City in a responsible and progressive manner
Respectfully sub tted,
0--),),
a
err.,
Mary A. Ross
Director of Finance
March 13, 2003
vi
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, 2001
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.
44,1(:_eZzA6
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LtiFS
CANA°" "d CORPORATIONPresident
�00SEAL �o�ti
„mute
Executive Director
City of Pearland Organizational Chart
CITIZENS
CITY COUNCIL
MUNICIPAL JUDGES CITY MANAGER f --► CITY ATTORNEY
ECONOMIC DEPUTY CITY EXECUTIVE CITY SECRETARY
DEVELOPMENT MANAGER DIRECTOR OF
COMMUNITY
SERVICES
FINANCE ENGINEERING
ACCOUNTING I
PROJECTS HUMAN
RESOURCES
PURCHASING
PUBLIC WORKS]
UTILITY BILLING MUNICIPAL
I COURT
FLEET
INFORMATION MAINTENANCE
SYSTEMS
INSPECTION
FIRE MARSHAL/
STREETS AND SERVICES
EMERGENCY MANAGEMENT - - DRAINAGE
BUILDING
FIRE
WATER INSPECTION
PRODUCTION
AND CODE
EMERGENCY WASTEWATER ENFORCEMENT
MEDICAL TREATMENT - - -
SERVICES
WATER AND
PARKS&RECREATION k WASTEWATER PLANNING AND
DISTRIBUTION ZONING
AND COLLECTION
PARKS
WATER AND ANIMAL
WASTEWATER CONTROL
COMMUNITY CONSTRUCTION
CENTER
GRANTS/PUBLIC
CUSTODIAL/ AFFAIRS
BUILDING MAINT -- -
POLICE
RECREATION
CRIMINAL
ATHLETICS INVESTIGATION
DIVISION
AQUATICS/SP
EVENTS I CIVILIAN
RECREATION COMMUNITY
CENTER SERVICE
SENIORS -I PATROL
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
AS OF SEPTEMBER 30,2002
ELECTED OFFICIALS
Tom Reid Mayor
Richard Tetens (Position No 1) Council Member
Woody Owens (Position No 2) Council Member, Mayor Pro-Tern
Charles Viktorin(Position No 3) Council Member
Larry Marcott(Position No 4) Council Member
Klaus Seeger (Position No 5) Council Member
APPOINTED OFFICIALS
Bill Eisen City Manager
Alan Mueller Deputy City Manager
Young Lorfing City Secretary
Damn Coker City Attorney
(continued)
ix
CITY OF PEARLAND, TEXAS
LIST OF PRINCIPAL OFFICIALS
(continued)
AS OF SEPTEMBER 30,2002
EXECUTIVE MANAGERS
Vacant Executive Director of P.E.D C.
Cindy Soto Interne Director of Finance
Chris Doyle Police Chief
Larry Steed Fire Marshall/Emergency
Management Director
Tobin Maples Manager of Administrative Services
Ed Hersh Director of Parks and Recreation
Jerry Burns Director of Public Works
Joseph Wertz Director of Projects
Vacant Director of Inspection Services
John Hargrove City Engmeermg
Glenn Chaney Municipal Court Judge
Edward Silas Municipal Court Judge
Floyd Myers Municipal Court Judge
x
FINANCIAL SECTION
4:
w' I
PATTILLO, ' BROWN & HILL, LLP
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Honorable Mayor and Members
of the City Council
City of Pearland, Texas
We have audited the accompanying general purpose financial statements of the City of Pearland,
Texas, as of and for the year ended September 30, 2002, as listed in the table of contents These general
purpose financial statements are the responsibility of the City's management. Our responsibility is to
express an opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the general purpose financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures m the general
purpose financial statements An audit also includes assessing the accounting principles used and
sigmficant estimates made by management, as well as evaluating the overall general purpose financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all
material respects, the financial position of the City of Pearland, Texas, as of September 30, 2002, and
the results of its operations and the cash flows of its proprietary fund type for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
1
401 WEST HIGHWAY 6■P 0 BOX 20725■WACO,TX 76702-0725■(254)772-49011 FAX.(254)772-4920■www.pbhcpa.com
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In accordance with Government Auditing Standards, we have also issued our report dated
December 20, 2002, on our consideration of the City of Pearland, Texas' internal control over financial
reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and
grants That report is an integral part of an audit performed m accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the results of our audit.
Our audit was conducted for the purpose of forming an opinion on the general purpose financial
statements taken as a whole. The combining and individual fund and account group financial
statements, schedules and statistical data listed in the table of contents are presented for purposes of
additional analysis and are not a required part of the general purpose financial statements of the City of
Pearland, Texas. Such information, except for that portion marked "unaudited" on which we express no
opinion, has been subjected to the auditing procedures applied in the audit of the general purpose
financial statements and, in our opinion, is fairly presented in all material respects in relation to the
general purpose financial statements taken as a whole.
The Required Pension System Supplementary Information listed in the table of contents is not a
required part of the general purpose financial statements, but is supplementary information required by
the Government Accounting Standards Board. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the supplementary information. However, we did not audit the information and express
no opinion on it.
e,_ P
December 20, 2002
2
GENERAL PURPOSE
FINANCIAL STATEMENTS
CITY OF PEARLAND, TEXAS
COMBINED BALANCE SHEET
ALL FUND TYPES,ACCOUNT GROUPS
AND DISCRETELY PRESENTED COMPONENT UNITS
SEPTEMBER 30,2002
(With Comparative Totals for September 30, 2001)
Governmental Fund Types
Special Debt Capital
General Revenue Service Projects
ASSETS AND OTHER DEBITS
Assets:
Cash and cash equivalents $ 253,932 $ 1,130,747 $ 176,152 $ 5,563,010
Investments 4,804,725 15,000 2,053,377 26,193,112
Receivables:
Property taxes 462,989 - 236,852 -
Accounts receivable 588,692 - - 187,841
Less:allowance for estimated uncollectibles ( 65,590) - - -
Grants Receivable - 4,834 - -
Sales and Other Taxes Receivable 1,415,722 - - -
Accrued interest 1,626 58 - 55,085
Due from other funds 612,373 - - -
Inventories 51,915 - -
Restricted assets: ,
Cash and cash equivalents - - - -
Deferred charges - - -
Construction in progress - - -
Fixed assets(net where applicable of accumulated depreciation) - - -
accumulated depreciation)
Other Debits:
Amount available for debt service - - -
Amount to be provided for retirement of general long-term debt - - -
Total Assets and Other Debits $ 8,126,384 $ 1,150,639 $a^, 2,466,381 $ 31,999,048
LIABILITIES,EQUITY AND OTHER CREDITS
Liabilities:
Accounts payable $ 1,692,549 $ 187,526 $ - $ 3,408,190
Accrued liabilities 2,266 - - -
Due to other funds - 71,334 - 81,173
Security deposits - - - -
Accrued compensated absences 690,584 - - -
Deferred revenue 716,039 14,706 236,852 15,966
Deferred issuance cost - - - -
Current portion of long-term debt - - - -
Certificates of obligation - - -
Revenue bonds-less current portion - -1 -
Obligations under capital leases - - -
General obligation bonds - - -
Total Liabilities 3,101,438 273,566 236,852 3,505,329
Equity and Other Credits:
Contributed capital - - -
Investment in general fixed assets - - - -
Retained earnings - - - -
Fund balances:
Reserved for encumbrances 234,010 - - - Y,
Reserved for inventories and prepaid items 51,915 - - -
Unreserved
Designated for debt service - - 2,229,529 -
Designated for subsequent years'expenditures - 877,073 - 28,493,719
Undesignated 4,739,021 - - -
Total Equity and Other Credits 5,024,946 877,073 2,229,529 28,493,719
Total Liabilities,Equity and Other Credits $ 8,126,384 $ 1,150,639 $ 2,466,381 $ 31,999,048
The accompanying notes are an integral part of these financial statements.
3
EXECCBIT 1
Proprietary Total Totals
Fund Type Account Groups Primary Discretely (Memorandum Only)
General General Government Presented
Fixed Long-term (Memorandum Component September 30,
Enterprise Assets Debt Only) Unit 2002 2001
$ - $ - $ - $ 7,123,841 $ 1,142,958 $ 8,266,799 $ 5,801,136
28,416,480 - - 61,482,694 3,761,047 65,243,741 35,432,242
- - - 699,841 - 699,841 550,553
1,094,087 - - 1,870,620 142 1,870,762 2,419,893
( 115,883) - - ( 181,473) - ( 181,473) ( 181,473)
- - - 4,834 - 4,834
- - - 1,415,722 470,552 1,886,274 1,937,737
31,791 - - 88,560 6,288 94,848 41,649
- - - 612,373 - 612,373 2,154,884
- - - 51,915 - 51,915 51,915
340,000 - - 340,000 - 340,000 444,949
654,760 - - 654,760 - 654,760 657,777
14,425,830 - - 14,425,830 - 14,425,830 11,423,287
34,139,822 65,479,400 - 99,619,222 55,403 99,674,625 79,018,306
- - 2,229,529 2,229,529 2,229,529 1,544,987
- - 64,487,273 64,487,273 4,556,023 69,043,296 32,976,911
$ 78,986,887 $ 65,479,400 $ 66,716,802 $ 254,925,541 $ _ 9,992,413 $ 264,917,954 $ 174,274,753
$ 2,731,007 $ - $ - $ 8,019,272 $ 74,305 $ 8,093,577 $ 1,606,225
192,682 - - 194,948 7,726 202,674 166,320
459,866 - - 612,373 - 612,373 2,154,884
750,519 - - 750,519 - 750,519 623,913
310,541 - 1,796,802 2,797,927 6,023 2,803,950 2,289,414
- - 983,563 - 983,563 808,237
- - 52,002
675,000 - - 675,000 - 675,000 645,000
16,835,000 - 51,585,000 68,420,000 4,550,000 72,970,000 15,680,000
24,985,000 - - 24,985,000 - 24,985,000 32,495,000
- _ _ - - 74,724
- - 13,335,000 13,335,000 - 13 335,000 17,260,000
46,939,615 - 66,716,802 120,773,602 4,638,054 125,411,656 73,855,719
22,233,110 - - 22,233,110 - 22,233,110 22,233,110
65,479,400 - 65,479,400 55,403 65,534,803 54,694,569
9,814,162 - - 9,814,162 - 9,814,162 10,867,988
- - 234,010 - 234,010 1,433,514
- - 51,915 - 51,915 -
- - - 2,229,529 - 2,229,529 1,544,987
+ - _ - 29,370,792 - 29,370,792 3,552,583
- - - 4,739,021 5,298,956 10,037,977 6,092,283
,P j: 32,047,272 65,479,400 - 134,151,939 5,354,359 139,506,298 100,419,034
ei $ 78,986,887 $ 65,479,400 $ 66,716,802 $ 254,925,541 $ 9,992,413 $ 264,917,954 $ 174,274,753
4
ii\
CITY OF PEARLAND, TEXAS
COMBINED STATEMENT OF REVENUE,EXPENDITURES
AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES
AND DISCRETELY PRESENTED COMPONENT UNITS
YEAR ENDED SEPTEMBER 30,2002
(With Comparative Totals for Year Ended September 30,2001)
Governmental Fund Types
Special Debt Capital
General _ Revenue Service Projects
REVENUE
Property taxes and penalties $ 8,054,173 $ - $ 4,803,822 $ -
Other taxes 5,044,972 58,269 - -
Licenses and permits 2,256,638 - - -
Fines and forfeitures 845,322 - - -
Franchise fees 2,453,829 - - -
Charges for services 3,651,825 - - -
Intergovernmental - 8,383,743 - 617,545
Interest 155,628 1,649 45,019 446,525
Other 733,303 671,039 - 179,336
Total Revenue 23,195,690 9,114,700 4,848,841 1,243,406
EXPENDITURES
Current:
General government 5,052,056 11,055,484 - 117,437
Public safety 7,411,992 1,329 - 890,055
Public works 7,603,804 - - -
Community services 2,271,052 661,176 - -
Economic development - - - -
Capital outlay - - - 12,239,136
Debt service:
Principal retirement - - 1,920,000 -
Interest and fiscal charges - - 2,192,490 -
Bond issuance costs - - - 181,812
Total Expenditures 22,338,904 11,717,989 4,112,490 13,428,440
EXCESS OF REVENUE OVER
(UNDER)EXPENDITURES 856,786 ( 2,603,289) 736,351 (.._ 12,185,034)
0.1H1 R FINANCING SOURCES (USES)
Operating transfers in 911,552 2,619,677 - 850,439
Proceeds from bond issuance - - 1,900,000 36,650,000
Payments to bond escrow - - ( 1,900,000) -
Operating transfers out ( 3,224,732) - ( 51,809) ( 475,440)
Total Other Financing Sources(Uses) ( 2,313,180) 2,619,677 ( 51,809) 37,024,999
EXCESS OF REVENUE AND OTHER FINANCING
SOURCES OVER(UNDER)EXPENDITURES
AND O 11MR FINANCING USES ( 1,456,394) 16,388 684,542 24,839,965
FUND BALANCE,BEGINNING OF YEAR 6,563,942 860,685 1,544,987 3,653,754
PRIOR PERIOD ADJUSTMENT ( 82,602) - - 1
t
FUND BALANCE,END OF YEAR. $ 5,024,946 $ 877,073 $ 2,229,529 $ 28,493,719
The accompanying notes are an integral part of these financial statements.
5
EXHIBIT 2
Totals Totals
(Memorandum Discretely (Memorandum Only)
Only) Presented
Primary Component September 30,
Government Units 2002 2001
$ 12,857,995 $ 2,926 $ 12,860,921 $ 10,833,292
5,103,241 2,512,463 7,615,704 7,259,846
2,256,638 - 2,256,638 1,896,728
845,322 - 845,322 856,641
2,453,829 - 2,453,829 2,303,730
3,651,825 - 3,651,825 3,202,767
9,001,288 - 9,001,288 363,677
648,821 - 648,821 691,715
1,583,678 206,383 1,790,061 1,676,909
38,402,637 2,721,772 41,124,409 29,085,305
16,224,977 - 16,224,977 4,235,344
8,303,376 - 8,303,376 6,692,138
7,603,804 - 7,603,804 5,974,667
2,932,228 - 2,932,228 2,662,369
- 571,379 571,379 1,079,177
12,239,136 1,269,651 13,508,787 4,920,448
1,920,000 368,779 2,288,779 2,050,616
2,192,490 - 2,192,490 1,595,682
181,812 - 181,812 -
51,597,823 2,209,809 53,807,632 29,210,441
( 13,195,186) 511,963 ( 12,683,223) ( 125,136)
4,381,668 411,639 4,793,307 700,007
38,550,000 - 38,550,000 -
( 1,900,000) - ( 1,900,000) -
( 3,751,981) ( 110,000) ( 3,861,981) ( 128,000)
37,279,687 301,639 37,581,326 572,007
24,084,501 813,602 24,898,103 446,871
12,623,368 4,526,038 17,149,406 15,128,676
( 82,602) ( 40,684) ( 123,286) 1,573,868
$ 36,625,267 $ 5,298,956 $ 41,924,223 $ 17 149,415
6
CITY OF PEARLAND,TEXAS
COMBINED STATEMENT OF REVENUE,EXPENDITURES
AND CHANGES IN FUND BALANCE-BUDGET AND ACTUAL
GENERAL AND DEBT SERVICE FUNDS
YEAR ENDED SEPTEMBER 30,2002
General
Variance
Favorable
Budget Actual (Unfavorable)
REVENUE
Property taxes and penalties $ 8,206,442 $ 8,054,173 $( 152,269)
Other taxes 4,712,800 5,044,972 332,172
Licenses and permits 1,637,000 2,256,638 619,638
Fines and forfeitures 885,700 845,322 ( 40,378)
Franchise fees 2,135,011 2,453,829 318,818
Charges for services 3,586,383 3,651,825 65,442
Interest 483,000 155,628 ( 327,372)
Other 395,625 733,303 337,678
Total Revenue 22,041,961 23,195,690 1,153,729
EXPENDITURES
Current:
General government 6,916,970 5,052,056 1,864,914
Public safety 7,126,729 7,411,992 ( 285,263)
Public works 6,595,637 7,603,804 ( 1,008,167)
Community services 2,138,983 2,271,052 ( 132,069)
Debt service:
Principal retirement - - -
Interest and fiscal agent fees - - -
Total Expenditures 22,778,319 22,338,904 439,415
EXCESS(DEFICIENCY)OF REVENUE
OVER(UNDER)EXPENDITURES ( 736,358) 856,786 1,593,144
OTHER FINANCING SOURCES(USES)
Operating transfers in 810,000 911,552 101,552
Proceeds from debt issuance - - -
Payments to bond escrow - - -
Operating transfers out ( 518,000) ( 3,224,732) ( 2,706,732)
Total Other Financing Sources(Uses) 292,000 ( 2,313,180) ( 2,605,180)
EXCESS(DEFICIENCY)OF REVENUE
AND OTHER FINANCING SOURCES
AND OTHER FINANCING USES ( 444,358) ( 1,456,394) ( 1,012,036)
FUND BALANCES,BEGINNING OF YEAR 6,563,942 6,563,942 -
PRIOR YEAR ADJUSTMENT - ( 82,602) ( 82,602)
FUND BALANCES,END OF YEAR $_ 6,119,584 $ 5,024,946 $(, 1,094,631)
The accompanying notes are an integral part of these financial statements.
7
EXHIBIT 3
Debt Service
Variance
Favorable
Budget Actual (Unfavorable)
$ 4,752,927 $ 4,803,822 $ 50,895
58,000 45,019 ( 12,981)
4,810,927 4,848,841 37,914
2,080,000 1,920,000 160,000
3,326,065 2,192,490 1,133,575
5,406,065 4,112,490 1,293,575
( 595,138) 736,351 1,331,489
1,900,000 1,900,000
( 1,900,000) ( 1,900,000)
( 51,809) ( 51,809)
( 51,809) ( 51,809)
( 595,138) 684,542 1,279,680
1,544,987 1,544,987 -
$ 949,849 $ 2,229,529 $ 1,279,680
8
EXIT 4
CITY OF PEARLAND, TEXAS
COMBINED STATEMENT OF REVENUE,EXPENSES
AND CHANGES IN RETAINED EARNINGS-
PROPRIETARY FUND TYPE (ENTERPRISE FUND)
YEAR ENDED SEPTEMBER 30,2002
Enterprise
OPERATING REVENUE
Water and sewer sales and services $ 7,974,288
Other 249,431
Total Operatmg Revenue 8,223,719
OPERATING EXPENSES
Production and wastewater 2,752,987
Distribution and collection 950,263
Accounting and collections 386,932
Other requirements 525,621
Construction and engineering 627,830
Total Operating Expenses 5,243,633
OPERATING INCOME BEFORE DEPRECIATION 2,980,086
DEPRECIATION AND AMORTIZATION 1,405,238
OPERATING INCOME 1,574,848
NONOPERATING REVENUE (EXPENSES)
Earnings on investments 813,424
Impact fees 3,906,666
Interest and fiscal charges ( 1,891,400)
Total Nonoperating Revenue(Expenses) 2,828,690
TRANSFERS FROM(TO) OTHER FUNDS
Transfers in 128,000
Transfers(out) ( 1,059,326)
Total Operating Transfers ( 931,326)
NET INCOME 3,472,212
RETAINED EARNINGS,BEGINNING OF YEAR 6,341,950
RETAINED EARNINGS,END OF YEAR $ 9,814,162
The accompanying notes are an integral part of these financial statements.
9
EXHIBIT 5
CITY OF PEARLAND, TEXAS
COMBINED STATEMENT OF CASH FLOWS-
PROPRIETARY FUND TYPE-(ENTERPRISE FUND)
YEAR ENDED SEPTEMBER 30,2002
Enterprise
CASH FLOWS FROM OPERATING ACTIVITIES
Operating income $ 1,574,848
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation and amortization 1,405,238
Changes in Assets and Liabilities:
Decrease (increase)in accounts receivable 219,403
Decrease (increase)in accrued interest receivable 9,858
Decrease(increase)in due from other funds 31,549
Decrease(increase)in deferred charges ( 48,985)
Increase(decrease)in customer deposits 126,606
Increase(decrease)in accounts payable 2,410,016
Increase(decrease)in accrued compensated absences 79,349
Increase(decrease)in due to other funds 396,858
Increase(decrease)in current portion of long-term debt 30,000
Increase(decrease)in accrued liabilities 60,390
Net Cash Provided by Operating Activities 6,295,130
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers from other funds 128,000
Transfers to other funds ( 1,059,326)
Net Cash Used in Noncapital Financing Activities ( 931,326)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Contributed capital-impact fees 3,906,666
Purchase of fixed assets ( 14,223,865)
Revenue bond principal payments ( 675,000)
Proceeds from revenue bonds 10,000,000
Interest and fiscal charges ( 1,891,400)
Net Cash Used in Capital and Related Financing Activities ( 2,883,599)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments- 813,424
Purchase of investments ( 10,957,640)
Proceeds from sale of investments 5,108,467
Net Cash Used in Investment Activities ( 5,035,749)
NET DECREASE IN CASH ( 2,555,544)
CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 2,895,544
CASH AND CASH EQUIVALENTS,END OF YEAR $ 340,000
Cash $ -
Restricted cash 340,000
Cash and Cash.Equivalents,End of Year $ 340,000
The accompanying notes are an integral part of these financial statements.
10
CITY OF PEARLAND, TEXAS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 financial statements of the City of Pearland have been prepared in conformity with generally
accepted accounting principles (GAAP) as applied to governmental units The Governmental
Accounting Standards Board (GASB) is the accepted standard-setting body for establishing
governmental accounting and financial reporting principles The more significant of the City's
accounting policies are described below.
Reporting Entity
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. As required by
generally accepted accounting principles, these general purpose financial statements have
been prepared based on the City's financial reporting entity The Pearland Economic
Development Corporation (PEDC) has been included in the City's financial reporting entity
as a discretely presented component unit. The City is considered a primary government for
financial reporting purposes and its activities are not considered a part of any other
governmental or other type of reporting entity
Considerations regarding the potential for inclusion of other entities, organizations, or
functions in the City's financial reporting entity, are based on criteria prescribed by generally
accepted accounting principles These same criteria are evaluated in considering whether the
City is a part of any other governmental or other type of reporting entity The ovemding
elements associated with prescribed criteria considered in determining that the City's
financial reporting entity status is that of a primary government are that it has a separately
elected governing body; it is legally separate; and is fiscally independent of other state and
local governments. Additional prescribed criteria under generally accepted accounting
principles include considerations pertammg to organizations for which the primary
government is financially accountable; and considerations pertaining to other organizations
for which the nature and significance of their relationship with the primary government are
such that exclusion would cause the reporting entity's financial statements to be misleading
or incomplete
(continued)
11
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reporting Entity(Continued)
As required by generally accepted accounting principles, the financial statements of the
reporting entity include those of the City of Pearland (the primary government) and its
component units, entities for which the City is considered to be financially accountable.
Blended component units, although legally separate entities, are, in substance, part of the
government's operations and so data for these units would be combined with data of the City
The City has no blended component units The City's discretely presented component unit is
reported in a separate column in the combined financial statements
Discretely Presented Component Unit:
The component units in the combined financial statements include the financial data of
the City's component units They are reported in a separate column to emphasize they
are legally separate from the City The City Council appoints the Board members for the
Pearland Economic Development Corporation. The City Council appoints several
members to the Tax Increment Reinvestment Zones with the remaining members being
appointed in accordance with state law
1 The Pearland Economic Development Corporation (PEDC) is responsible
for economic development within the City's jurisdiction. The PEDC is
fiscally dependent upon the government because, besides appointing the
Board, the City Council also must approve the PEDC's budget and any
debt issuances.
2. The two Tax Increment Reinvestment Zone's (TIRZ #1 and TIRZ #2)
provide tax assisted property development and/or redevelopment in
specific geographic areas in accordance with apphcable state laws
Besides appointing Board members, the City Council must also approve
the TIRZ's budgets and any debt issuances
The following page presents condensed financial statements for each of the three
discretely presented component units. Additional financial information may be obtained
from their respective administrative offices at the following address
Pearland Economic Development Corporation
or
Tax Increment Reinvestment Zones
3519 Liberty Drive
Pearland, Texas 77581-5416
(continued)
12
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reporting Entity (Continued)
Condensed financial statements of each discretely presented component unit are as follows
Condensed Balance Sheet
Economic Tax Increment Tax Increment
Development Reinvestment Reinvestment
Corporation Zone#1 Zone#2 Totals
ASSETS
Cash and investments $ 4,716,064 $ 11,057 $ 176,884 $ 4,904,005
Accounts receivable 476,982 - - 476,982
Fixed assets 55,403 - - 55,403
Amount to be provided for
retirement of long-term debt 4,556,023 - - 4,556,023
Total Assets $ 9,804,472 $ 11,057 $ 176,884 $ 9,992,413
LIABILITIES
Current liabilities $ 51,802 $ - $ 36,252 $ 88,054
General long-term debt 4,550,000 - - 4,550,000
Total Liabilities 4,601,802 - 36,252 4,638,054
FUND EQUITY
Investment in fixed assets 55,403 - - 55,403
Fund balance,unreserved 5,147,267 11,057 140,632 5,298,956
Total Fund Equity 5,202,670 11,057 140,632 5,354,359
Total Liabilities and Fund Equity $ 9,804,472 $ 11,057 $ 176,884 $ 9,992,413
Condensed Statement of Revenue,Expenditures and Chances in Equity
REVENUE $ 2,586,560 $ 198 $ 135,014 $ 2,721,772
EXPENDITURES
Current 428,818 7,814 134,747 571,379
Capital outlay 1,269,651 - - 1,269,651
Debt service 368,779 - - 368,779
Total Expenditures 2,067,248 7,814 134,747 2,209,809
EXCESS (DEFICIENCY) OF REVENUE
OVER(UNDER)EXPENDITURES 519,312 ( 7,616) 267 511,963
OTHER FINANCING USES
Operatmg transfers in - - 411,639 411,639
Operating transfers out ( 110,000) - - ( 110,000)
Total Other Financing Uses ( 110,000) - 411,639 301,639
EXCESS OF REVENUE AND OTHER
SOURCES OVER EXPENDITURES
AND OTHER USES 409,312 ( 7,616) 411,906 813,602
FUND EQUITY,BEGINNING 4,778,639 18,673 ( 271,274) 4,526,038
PRIOR PERIOD ADJUSTMENT ( 40,684) - - ( 40,684)
FUND EQUITY,ENDING $ 5,147,267 $ 11,057 $ 140,632 $ 5,298,956
(continued)
13
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fund Accounting
The City uses funds and account groups to report on its financial position and the results of
its operations Fund accounting is designed to demonstrate legal compliance and to aid
financial management by segregating transactions related to certain government functions or
activities
A fund is a separate accounting entity with a self-balancing set of accounts An account
group, on the other hand, is a financial reporting device designed to provide accountability
for certain assets and liabilities that are not recorded in the funds because they do not directly
affect net expendable available financial resources. The following is a description of the
various funds and account groups
GOVERNMENTAL FUND TYPES
General Fund — The General Fund is used to account for all financial
transactions not properly includable in other funds The principal source of
revenue of the General Fund are property taxes, sales and use taxes, franchise
fees, permit fees, and fines and forfeitures Expenditures are for general
government, finance, public safety, public works, park maintenance and
recreation, municipal court, planning and zoning, and engineering.
Special Revenue Funds—The Special Revenue Funds are used to account for all
financial transactions for the Regional Detention, Hotel/Motel Tax, Police,
Federal Police, Community Service Funds, and special grant revenue where the
funds are for specific uses.
Debt Service Fund— The Debt Service Fund is used to account for the payment
of interest and principal on,all general obligation debts of the City The primary
source of revenue for debt service is local property taxes.
Capital Projects Funds—The Capital Projects Funds are 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 fixed assets as
designated in each bond issue.
PROPRIETARY FUND TYPE
Enterprise Fund— The Enterprise Fund is used to account for those operations
that are financed and operated in a manner similar to private business or where the
Council has decided that the determination of revenue earned, costs incurred,
and/or net income is necessary for management accountability The Enterprise
fund is used to account for the City's water and sewer service operations
(continued)
14
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fund Accounting (Continued)
ACCOUNT GROUPS
General Fixed Assets Account Group — General fixed assets are not capitalized
in the funds used to acquire or construct them. Instead, capital acquisition and
construction are reflected as expenditures in governmental funds, and the related
assets are reported in the General Fixed Assets Account Group All purchased
fixed assets are valued at cost. Donated fixed assets are valued at their estimated
fair market value on the date received.
The costs of normal maintenance and repairs that do not add to the value of the
asset, or materially extend asset lives, are not capitalized. Improvements to fixed
assets are capitalized. Assets in the General Fixed Assets Account Group are not
depreciated. Interest is not capitahzed on general fixed assets acquired through
the issuance of tax-exempt debt. Public domain (infrastructure) general fixed
assets, consisting of roads, bridges, curbs and gutters, streets, and drainage
systems, are capitalized.
General Long-term Debt Account Group—This account group is used to_account
for the City's long-term liabilities, which include general obligation bonds,
certificates of obligation and obligations under capital leases due at varying dates
through 2022, and the long-term liability for employees' accrued compensated
absences.
Basis of Accounting
The accounting and financial reporting treatment applied to a fund is determined by its
measurement focus. All governmental funds are accounted for using a current financial
resources measurement focus. As such, only current assets and current liabilities generally
are included on the balance sheet.
Operating statements of these funds present increases (revenue and other financing sources)
and decreases (expenditures) in net current assets
The proprietary fund type and component unit are accounted for on a flow of economic
resources measurement focus. With this measurement focus, all assets and all liabilities
associated with the operation of the funds are included on the balance sheet. Fund equity
(net total assets) is segregated into contributed capital, if applicable, and retained earnings
components. Proprietary fund type operating statements present increases (revenue) and
decreases (expenses) in net total assets.
(continued)
15
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of Accounting(Continued)
The modified accrual basis of accounting is used by the government fund types. Under the
modified accrual basis of accounting, revenue is recognized when susceptible to accrual
(when it becomes both measurable and available.) "Measurable" means the amount of the
transaction can be determined and "available" means collectible within the current period or
soon enough thereafter to be used to pay liabilities of the current period. The City considers
the majority of its major revenue as available when collected. Expenditures are recorded
when the related fund liability is incurred. Principal and interest on general long-term debt
are recorded as liabilities when due.
Those revenue susceptible to accrual under the modified accrual basis are property taxes and
other taxes (primarily sales taxes), franchise fees, intergovernmental revenue, and interest
revenue. Licenses and permits and fines and forfeitures revenue are not susceptible to
accrual because generally they are not measurable until received in cash.
The City recognized deferred revenue on its balance sheet. Deferred revenue arises when
potential revenue does not meet both the "measurable" and "available" criteria for
recognition in the current period.
The accounts of the proprietary fund type are maintained, and the financial statements have
been prepared on the accrual basis of accounting Under this basis, revenue is recognized
when it is earned and expenses are recognized when they are incurred. The proprietary fund
type follows generally accepted accounting principles prescribed by the Governmental
Accounting Standards Board (the GASB) and all Financial Accounting Standards Board's
standards issued prior to November 30, 1989 Subsequent to this date, the City accounts for
its proprietary fund type as prescribed by the GASB
Budgets
Annual budgets are adopted for the General and Debt Service Funds The City does not
legally adopt an annual budget for the Special Revenue.and Capital Projects Funds The City
adopts project budgets for the Capital Projects and Special Revenue Funds, which are revised
annually
These budgets are created by ordinance and include all sources and uses of funds as approved
by Council. All annual budgets are prepared on a basis consistent with generally accepted
accounting principles (GAAP)
(continued)
16
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Budgets (Continued)
Encumbrance accounting is utilized in all governmental fund types Encumbrances for
materials, other goods, and purchased services are documented by purchase orders or
contracts. Encumbrances outstanding at year-end do not constitute expenditures or liabilities
The City generally honors these commitments, and it has been the City's practice to increase
the subsequent year's appropriations to complete these transactions At year-end, the City
reserved a portion of fund balance for outstanding encumbrances of$234,010 in the General
Fund.
Cash and Temporary Investments
Cash and temporary investments consist of amounts in an interest-bearing time deposit
account, petty cash funds, and TexPool. TexPool is an external investment pool established
by interlocal contract under state law Investments are stated at fair value based on quoted
market prices at September 30, 2002. 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 m 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 in vestments
Receivables
All trade receivables are shown net of an allowance for uncollectibles
Property taxes are recorded as revenue when levied for the current year and due, payable and
collected in the current year Uncollected amounts at year-end are reported as deferred
revenue. Property taxes collected within 60 days subsequent to September 30, 2002, were
not considered material.
Interfund Receivables and Payables
During the course of operations, transactions occurred between individual funds for specified
purposes These receivables and payables are classified as "due from other funds" or"due to
other funds" on the combined balance sheet.
(continued)
17
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The_preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue, expenditures and expenses
during the reporting period. Actual results could differ from those estimates.
Inventory, which consists of gasoline and auto parts for use in the City's vehicles, is stated at
cost (first-m, first-out method) Expenditures are recognized as the fuel and auto parts are
used.
Restricted Assets
Certain proceeds of Enterprise Fund revenue bonds, as well as certain resources set aside for
their repayment, are classified as restricted assets on the combined balance sheet because
their use is limited by applicable bond covenants.
Compensated Absences
Compensated absences, which include unpaid vacation, sick and other employee benefit
amounts, are accumulated during employment. Amounts accumulated are paid to employees
upon separation from City service. Under the modified accrual basis of accounting, such are
recorded in the General Long-term Debt Account Group net of amounts expected to be
liquidated with expendable available financial resources at the end of the fiscal year, which
are recorded as expenditures of the General Fund. Compensated absences are accrued when
incurred in the proprietary funds and recorded as a fund liability
Fund Equity
Contributed capital is recorded in proprietary funds that have received capital grants or
contributions from developers, customers, or other funds Reserves represent those portions
of fund equity not available for expenditure or legally segregated for a specific future use.
Designations of fund balance represent tentative management plans that are subject to
change.
Cash and Cash Equivalents
For the purpose of the statement of cash flows, the proprietary fund type and component umt
consider all investments with original maturities of three months or less from the date of
acquisition to be cash equivalents
(continued)
18
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Total Columns on Combined Statements
Total columns on the general purpose financial statements are captioned as "memorandum
only" because they do not represent consolidated financial information and are presented
only to facilitate financial position, results of operations or cash flows in accordance with
generally accepted accounting principles. Interfund eliminations have not been made in the
aggregation of this data.
Comparative Data/Reclassifications
Comparative total data for the prior year have been presented in selected sections of the
accompanying financial statements in order to provide an understanding of the changes in the
government's financial position and operations Also, certain amounts presented in the prior
year data have been reclassified in order to be consistent with the current year's presentation.
2. BUDGETARY COMPLIANCE
The City Manager, on or before the 10th day of July of each year, shall submit 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 by the 15th of September of each 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
19
3. DEPOSITS (CASH) AND INVESTMENTS
The City's cash and investments are classified as cash and cash equivalents, mvestments, 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.
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 such as the
Texas Local Government Investment Pool (TexPool) 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.
At year-end, the City's carrying amount of deposits was $27,904,793 and the bank balance was
$28,952,694 Of the bank balance, $300,000 was covered by federal depository insurance or by
collateral held by the City's agent in the City's name. Of the remaining balance, $28,652,694
was collateralized with securities held by the pledging financial institution's trust department or
agent in the City's name
Investments are categorized into these three categories of credit risk:
1 Insured or registered, or securities held by the City or its agent in the government's
name.
2. Uninsured and unregistered, with securities held by the counterparty's trust
department or agent in the City's name.
3 Uninsured and unregistered, with securities held by the counterparty, or by its trust
department or agent,but not in the City's name.
Category Fair
1 2 3 Uncategorized Value
U.S.Government securities $ 10,370,865 $ - $ - $ - $ 10,370,865
TexPool - - - 35,571,048 35,571,048
$ 10,370,865 $ $ - $ 35,571,048 $ 45,941,913
(continued)
20
3. DEPOSITS (CASH) AND INVESTMENTS (Continued)
The deposits in TexPool are not evidenced by securities that exist in physical or book entry form
and, accordingly, are not categorized by risk. However, the nature of these funds requires that they
be used to purchase investments authorized by the Public Funds Act. The primary objective of
these investment pools is to provide a safe environment for the placement of public funds in short-
term, fully collaterah7ed investments.
The State Comptroller of Public Accounts exercises oversight responsibility over TexPool, the
Texas Local Government Investment Pool. Oversight includes the ability to significantly influence
operations, designation of management and accountability for fiscal matters. Additionally, the
State Comptroller has established an advisory board composed of both participants in TexPool and
other persons who do not have a business relationship with TexPool. The Advisory Board
members review the investment policy and management fee structure. Finally, TexPool is rated
AAAm by Standard & Poors, as well as the office of the Comptroller of Public Accounts for
review
TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act
of 1940 Its amortized cost rather than market value to report net assets to compute share prices
Accordingly,the fair value of the position in TexPool is the same as the value of TexPool shares.
Fair value of investments are based on quoted market prices in accordance with GASB Statement
No 31, Accounting and Financial Reporting for Certain Investments and for External Investment
Pools The amount of increase or decrease in the fair value of investments during the year ended
September 30, 2002,was not significant.
4. PROPERTY TAXES
Property taxes for each year are required to be levied by September 15 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 hen is attached to the property to secure the payment of all taxes, penalties,
and interest. The hen exists in the favor of the State and each taxing unit. Appraised values are
established by the Central Appraisal District (CAD) of Brazona County, Texas, through
procedures established by the Texas Legislature. The Pearland Independent School District 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% is added in July for attorney costs. There are no
discounts allowed in taxes.
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. With 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 2001-2002 tax year were $.4300 and $.2560, respectively, per
$100 of assessed valuation. The 2001 assessed value and total tax levy as adjusted through
September 30, 2002,were $1,877,520,613 and$1,524,504,879,respectively
(continued)
21
1
4. PROPERTY TAXES (Continued)
The following is an analysis of the September 30, 2002, delinquent tax balances in the General
and Debt Service Funds, by year of levy
Year Debt
of Levy General Service Total
2001 $ 227,518 $ 135,452 $ 362,970
2000 83,365 37,526 120,891
1999 45,707 25,554 71,261
1998 22,792 12,743 35,535
1997 14,509 8,111 22,620
1996 8,725 4,878 13,603
1995 8,020 4,484 12,504
1994 11,078 6,614 17,692
1993 8,584 5,110 13,694
1992 2,644 1,574 4,218
1991 1,807 1,076 2,883
1990 and prior 13,771 8,199 21,970
$ 448,520 $ 251,321 $ 699,841
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.
5. INTERFUND RECEIVABLES AND PAYABLES
Due From Due To
General Fund
Street Assessments $ 81,173 $ -
Grant Fund 71,334 -
Enterprise Fund 459,866 -
612,373 -
Special Revenue Fund
Grant Fund - 71,334
Capital Projects Fund
Street Assessments - 81,173
Enterprise Fund
General Fund - 459,866
Total $ 612,373 $ 612,373
22
6. CHANGES IN FIXED ASSETS
The following is a summary of changes in general fixed assets for the year ended September 30,
2002.
Balance Balance
September 30, September 30,
2001 Additions Deletions 2002
Land $ 1,607,086 $ 277,319 $ - $ 1,884,405
Buildings 9,888,234 24,359 - 9,912,593
Construction in progress 5,961,546 8,712,381 678,568 13,995,359
Improvements other than buildings 25,623,297 1,071,348 - 26,694,645
Machinery and equipment 11,559,002 1,433,396 - 12,992,398
Totals $ 54,639,165 $ 11,518,803 $ 678,568 $ 65,479,400
The following is a summary in the Enterprise Fund fixed assets for the year ended September 30,
2002.
Balance Balance
September 30, September 30,
2001 Additions Deletions 2002
Land $ 189,070 $ - $ - $ 189,070
Equipment 2,586,951 717,997 - 3,304,948
Buildings and improvements 32,836,061 10,471,528 - 43,307,589
Construction in progress 11,423,322 12,628,206 9,625,698 14,425,830
47,035,404 23,817,731 9,625,698 61,227,437
Less allowance for depreciation ( 11,288,343) ( 1,373,442) - ( 12,661,785)
Totals $ 35,747,061 5 22,444,289 $ 9,625,698 $ 48,565,652
Depreciation on Enterprise Fund fixed assets is recorded using the straight-line method over the
following estimated useful lives of the assets:
Estimated
Description Useful Lives
Equipment 5 to 10 years
Buildings and infrastructure 3 to 50 years
23
7. LONG-TERM DEBT
General Lone-term Debt
The following is a summary of general long-term debt transactions for the year ended September
30, 2002.
Balance Balance
September 30, September 30,
2001 Additions Deletions 2002
Certificates of obligation $ 15,680,000 $ 36,650,000 $ 745,000 $ 51,585,000
General obligation bonds 12,610,000 1,900,000 1,175,000 13,335,000
Capital leases 74,724 - 74,724 -
Compensated absences 1,488,646 308,156 - 1,796,802
Totals $ 29,853,370 $ 38,858,156 $ 1,994,724 $ 66,716,802
Certificates of Obligation and General Obligation Bonds:
Certificates of obligation and general obligation bonds at September 30, 2002, are comprised
of the following individual issues
Net Principal
Effective Payment Interest
Interest Interest Date/ Payment Debt
Issue Rates Rate Maturity Dates Outstanding
$5,000,000 Public Works 5 00%to March 1/
Series 1995 7 00% 03/01/14 September 1 $ 4,085,000
$25,000,000 Certificate of 5.9%to March 1/
Obligation, Series 2002 7 9% 03/01/27 September 1 25,000,000
$6,250,000 Tax and Revenue 5.25%to March 1/
Series 1997 7.25% 03/01/16 September 1 5,850,000
$5,500,000 Tax and Revenue 5.20%to March 1/
Series 1997-A 7.20% 03/01/18 September 1 5,200,000
$11,650,000 Certificate of 4.9%to March 1/
Obligation, Series 2001 5 1% 03/01/21 September 1 11,450,000
$10,830,000 Refunding Bonds 7 10%to March 1/
Series 2000 7.35% 4 6480% 03/01/09 September 1 10,690,000
$2,000,000 Street Improvement 6.00%to March 1/
Bonds, Series 1992 8.00% 4 7613% 03/01/09 September 1 130,000
$1,900,000 TIRZ Refunding March 1/
Bond, Series 2001 3.9% 4 7613% 03/01/10 September 1 1,760,000
$6,510,000 Refunding Bonds 2.65%to March 1/
Series 1993 4 63% 4.3623% 03/01/03 September 1 755,000
Total General Obligation Bonds $ 64,920,000
(continued)
24
7. LONG-TERM DEBT (Continued)
General Long-term Debt (Continued)
The annual requirements to amortize all certificates of obligation and general obligation
bonds outstanding as of September 30, 2002, are as follows
Year Ending
September 30, Total Interest Principal
2003 $ 5,869,145 $ 3,829,145 $ 2,040,000
2004 5,882,410 3,192,410 2,690,000
2005 6,073,162 3,038,162 3,035,000
2006 6,056,922 2,866,922 3,190,000
2007-2027 78,850,684 24,885,684 53,965,000
$ 102,732,323 $ 37,812,323 $ 64,920,000
There is $2,229,529 available in the Debt Service Fund to service the above obligations and
the City's obligations under capital leases.
Compensated Absences
Employees earn vacation leave at the rate of 15 days per year from one to 15 years, 20 days
per year for service of 16 to 19 years, and 25 days per year for service of 20 years or more.
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 received 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 m public safety,
who can accrue up to 320 hours.
The liability for compensated absences at September 30, 2002, is comprised of the following
components
Beginning Ending
Balance Additions Retirement Balance
Vacation $ 169,631 $ 44,258 $ - $ 213,889
Sick 1,093,044 228,229 - 1,321,273
Compensatory time 225,971 35,669 - 261,640
Totals $ 1,488,646 $ 308,156 $ - $ 1,796,802
(continued)
25
7. LONGTERM DEBT (Continued)
Enterprise Fund Debt
The following is a summary of Enterprise Fund long-term debt transactions of the City for
the year ended September 30, 2002
Balance Balance
October 1, September 30,
2001 Additions Retirement 2002
Certificates of obligation $ 17,000,000 $ - $ 75,000 $ 16,925,000
Revenue bonds 16,140,000 10,000,000 570,000 25,570,000
Totals $ 33,140,000 $ 10,000,000 $ 645,000 $ 42,495,000
Revenue Bonds and Certificates of Obligation
Principal
Payment Interest
Date! Payment Debt
Issue Rates Maturity Dates Outstanding
$8,870,000 Water and Sewer 2.9%to March 1/
Revenue Bonds, Series 1996B 5.20% 09/01/16 September 1 $ 7,880,000
$8,000,000 Water and Sewer March 1/
Revenue Bonds, Series 1999 4.90% 09/01/20 September 1 7,690,000
$10,000,000 Water and Sewer March 1/
Revenue Bonds, Series 2001 5.5% 09/01/23 September 1 10,000,000
Total Water and Sewer
Revenue Bonds 25,570,000
$17,100,000 Certificates of 2.6%to March 1/
Obligation, Series 1998 3 8% 03/01/18 September 1 16,925,000
Total Water and Sewer
Certificates of Obligation 16,925,000
Total $ 42,495,000
(continued)
26
7. LONG-TERM DEBT (Continued)
Enterprise Fund Debt
Revenue Bonds and Certificates of Obligation (Continued)
The annual requirements to amortize all revenue and certificates of obligation bonds
outstanding as of September 30, 2002, are as follows
Year Ending
September 30, Total Interest Principal
2003 $ 2,425,530 $ 1,750,530 $ 675,000
2004 2,595,181 1,725,181 870,000
2005 3,337,234 1,677,234 1,660,000
2006 3,335,129 1,615,129 1,720,000
2007-2023 51,817,507 14,247,507 37,570,000
$ 63,510,581 $ 21,015,581 $ 42,495,000
Component Unit Debt
The following is a summary of component unit long-term debt transactions for the year
ended September 30, 2002
Balance Balance
October 1, September 30,
2001 Additions Retirement 2002
Sales tax revenue $ 4,650,000 $ - $ 100,000 $ 4,550,000
Total $ 4,650,000 $ - $ 100,000 $ 4,550,000
The terms of Sales Tax Revenue Bonds recorded in the Economic Development Corporation
Fund, as of September 30, 2002, are as follows
Principal
Payment Interest
Interest Date/ Payment Debt
Issue Rates Maturity Dates Outstanding
Sales Tax Revenue Bonds, 5.2%to March 1/
Series 1997 7% 09/01/16 September 1 $ 4,550,000
Total $ 4,550,000
(continued)
27
7. LONGTERM DEBT (Continued)
Component Unit Debt(Continued)
Annual requirements to amortize all Sales Tax Revenue bonds outstanding as of September
30, 2002, are as follows-
Year Ending
September 30, Total Interest Principal
2003 $ 445,370 $ 260,370 $ 185,000
2004 447,050 247,050 200,000
2005 442,650 232,650 210,000
2006 437,530 217,530 220,000
2007-2016 4,949,100 1,214,100 3,735,000
$ 6,721,700 $ 2,171,700 $ 4,550,000
Annual Debt Service Requirements
General
Long-term
General Enterprise Total Debt
Year Ending Long-term Fund Primary Component
September 30, Debt Debt Government Unit Total
2003 $ 5,869,145 $ 2,425,530 $ 8,294,675 $ 445,370 $ 8,740,045
2004 5,882,410 2,595,181 8,477,591 447,050 8,924,641
2005 6,073,162 3,337,234 9,410,396 442,650 9,853,046
2006 6,056,922 3,335,129 9,392,051 437,530 9,829,581
2007-2027 78,850,684 51,817,507 130,668,191 4,949,100 135,617,291
102,732,323 63,510,581 166,242,904 6,721,700 172,964,604
Less interest ( 37,812,323) ( 21,015,581) ( 58,827,904) ( 2,171,700) ( 60,999,604)
$ 64,920,000 $ 42,495,000 $ 107,415,000 $ 4,550,000 $ 111,965,000
28
8. OPERATING TRANSFERS BETWEEN FUNDS
For the year ended September 30, 2002, operating transfers between funds consisted of the
following:
Transfers Transfers
In Out
General Fund.
Water and Sewer Fund $ 786,552 $ 128,000
Economic Development Corporation 110,000 -
TIRZ#2 - 87,056
Capital Projects Fund 15,000 390,000
Fema Fund - 2,619,677
Total General Fund 911,552 3,224,733
Special Revenue Funds
General Fund 2,619,677 -
Total Special Revenue Funds 2,619,677 -
Debt Service Fund.
TIRZ #2 - 51,809
Total Debt Service Fund - 51,809
Capital Projects Funds
General Fund 390,000 15,000
Capital Improvement 1997 73,765 -
Certificates of Obligation 1997A 386,674 -
2001 Certificates of Obligation - 460,439
Total Capital Projects Funds 850,439 475,439
Enterprise Funds
General Fund 128,000 786,552
TIRZ#2 - 272,774
Total Enterprise Funds 128,000 1,059,326
Economic Development Fund-Component Unit:
General Fund - 110,000
Total Economic Development Fund - 110,000
TIRZ#2-Component Unit:
Debt Service Fund 51,809 -
General Fund 87,056 -
Enterprise Fund 272,774 -
Total TIRZ 411,639 -
Total All Funds $ 4,921,307 $ 4,921,307
29
9. FUND EQUITY
The City's Capital Projects Fund equity at September 30, 2002, has been designated for
subsequent years' expenditures Tentative plans for the expenditure of these resources are as
follows-
Balance
September 30,
2002
Drainage improvements $ 11,848,458
Transportation improvements 16,495,915
Buildings and vehicles 149,346
Total S 28,493,719
10. PENSION PLAN
Plan Description
The City provides pension benefits for all of its fulltime employees through a nontraditional,
joint, contributory, hybrid, defined benefit plan in the statewide Texas Municipal Retirement
System (TMRS), one of 758 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)
30
10. PENSION PLAN (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 actuanally 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, 2000, valuation is effective for rates beginning
January 2000)
Because the actuary determines contribution rates on an annual basis and the City pays the
calculated rate each month, the City will always have a net pension obligation(NPO) of zero
at the beginning and end of the period, and the annually required contributions (ARC) will
always equal contributions made. Trend information regarding ARC and NPO is shown
below
2002 2001 2000
Net Pension Obligation(NPO)
at Beginning of Period $ - $ - $ -
Annual Pension Costs
Annual Required Contribution(ARC) 983,172 857,939 736,702
Contributions Made ( 983,172) ( 857,939) ( 736,702)
NPO at End of Period $ - $ - $ -
Percent Annual Pension Cost Contributed 100% 100% 100%
A schedule of funding progress for TMRS for the three most recent actuarial valuations may
be found in the required supplementary information section of the City's Comprehensive
Annual Financial Report.
(continued)
31
10. PENSION PLAN (Continued)
Contributions (Continued)
Information as to the latest actuarial valuation follows
Actuarial Valuation Date 12/31/01
Actuarial cost method entry age
Amortization method level percentage
of payroll
Amortization period 25 years
Asset valuation method Amortized
cost
Amortization period open
Actuarial Assumptions:
Investment rate of return 8.00%
Projected salary increases None
Includes inflation at None
The City is one of 758 municipalities having its benefit plan administered by TMRS Each of
the 758 municipalities has an annual, individual actuarial valuation performed. All
assumptions for the December 31, 2001, valuations are contained in the 2001 TMRS
Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P 0
Box 149153,Austin, Texas 78714-9153
11 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)
32
11 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.
12. 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 has no present liability nor has the City ever
been required to make rebate payments for issued debt in past years
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.
33
13. FUND DEFICIT
.
The fund balance in Grants Fund is a negative$81,223, also,the Streets Assessments Fund has a
deficit balance of$49,772. These deficits will be funded by future revenue.
14. PRIOR PERIOD ADJUSTMENT
The sales tax receivable amounts did not agree to the receivable amounts per the State
Comptroller's sales tax reports. The amounts decreased beginning fund balance of the General
Fund and the Economic Development Corporation by$82,602 and $40,684,respectively
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REQUIRED
SUPPLEMENTARY INFORMATION
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CITY OF PEARLAND, TEXAS
REQUIRED SUPPLEMENTARY INFORMATION
SEPTEMBER 30,2002
PENSION DATA-TEXAS MUNICIPAL RETIREMENT SYSTEM
The City's annual covered payroll and annual pension cost are actuarially valued on a calendar year basis. Because
the City makes all of the annually required contributions, no net pension obligation exists. The information
presented below was determined as part of the actuarial valuation, as of December 31, for each period presented.
Schedule of Funding Progress
Actuarial Actuarial Actuarial Annual Percentage
Valuation Value Plan Accrued Percentage Unfunded Covered of Covered
Date Assets Liability Funded AAL Payroll Payroll
12/31/97 $ 8,759,905 $ 11,129,222 78 7% $ 2,369,317 $ 6,820,450 34 7%
12/31/98 9,615,238 12,280,029 78.3% 2,664,791 6,787,171 39.3%
12/31/99 10,976,420 14,117,504 77 8% 3,141,084 7,189,179 43 7%
12/31/00 11,842,529 14,951,928 79.2% 3,109,399 8,005,001 38.8%
12/31/01 14,000,841 17,152,477 81 6% 3,151,636 9,161,949 34 4%
35
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APPENDIX C
FORM OF BOND COUNSEL OPINION
ANDREWS &KURTH L.L.P
ATTORNEYS
AUSTIN 600 TRAVIS,SUITE 4200
HOUSTON,TEXAS 77002 TELEPHONE: 713.220.4200
DALLAS FACSIMILE: 713.220.4285
LONDON
LOS ANGELES
NEW YORK
THE WOODLANDS
WASHINGTON,D.C.
June_, 2003
WE HAVE ACTED as Bond Counsel for the City of Pearland, Texas (the "City"),
in connection with an issue of bonds (the "Bonds") described as follows
CITY OF PEARLAND, TEXAS PERMANENT IMPROVEMENT BONDS,
SERIES 2003, dated May 1, 2003, in the aggregate principal amount of
$15,000,000, maturing on March 1 in each year from 2005 through and including
2028 The Bonds are issuable in fully registered form only, in denominations of
$5,000 or integral multiples thereof, bear interest and may be transferred and
exchanged as set out in the Bonds and in the ordinance (the "Bond Ordinance")
adopted by the City Council of the City authorizing their issuance.
WE HAVE ACTED as Bond Counsel for the sole purpose of rendering an
opinion with respect to the legality and validity of the 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 transcnpt of certain certified proceedings
pertaining to the issuance of the Bonds, as described in the Bond Ordinance. The transcript
contains certified copies of certain proceedings of the City; certain certifications and
representations and other material facts within the knowledge and control of the City, upon
which we rely; and certain other customary documents and instruments authorizing and relating
to the issuance of the 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 City or the disclosure thereof in connection with the sale
of the Bonds. Our role in connection with the City'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.
HOU.2151980.2
(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 obligations of the City enforceable in
accordance with the terms and conditions thereof, except to the extent that the
rights and remedies of the owners of the 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 the
Bonds have been authorized and delivered in accordance with law; and
(2) The Bonds are payable, both as to principal and interest, from,
and secured by, the proceeds of a continuing, direct annual ad valorem tax, levied
within the limits prescribed by law, against taxable property within the City,
which taxes have been pledged irrevocably to pay the principal of and interest on
the Bonds.
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 City comply with all requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the
Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal
income tax purposes. The City has covenanted in the Bond Ordinance 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) or a real estate mortgage investment conduit (REMIC)) 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.
HOU:2151980.2
UNDER EXISTING LAW and based upon the assumptions stated in the Official
Statement prepared for use in connection with the sale of the Bonds, it is also our opinion as
follows (1) the difference between (a) the stated redemption price at maturity of each Bond
maturing in the years 20_ through 20 inclusive (the "Discount Bonds"), and (b) the initial
offering price at which a substantial amount of such Discount Bonds of the same maturity were
sold to the public, as described in the Official Statement, constitutes original issue discount with
respect to each such Discount Bond in the hands of an owner who purchased such Discount
Bond at the initial offering price in the initial public offering of the Bonds, and (2) such initial
owner is entitled to exclude from gross income for federal income tax purposes with respect to
such Discount Bond that portion of the original issue discount deemed to be earned for federal
income tax purposes during the period that such Discount Bond continues to be owned by such
owner In the event of the redemption, sale or other taxable disposition of such Discount Bond
prior to its stated maturity, however, any amount realized by such owner in excess of the basis of
such Discount Bond in the hands of such owner (adjusted upward by the portion of the original
issue discount deemed to be earned during the period for which such Discount Bond was held by
such initial owner)is includable in gross income for federal income tax purposes.
PURCHASERS OF DISCOUNT BONDS in the initial public offering are
directed to the discussion entitled "TAX TREATMENT OF ORIGINAL ISSUE DISCOUNT
AND PREMIUM BONDS" set forth in the Official Statement for purposes of determining the
portion of the original issue discount which is deemed to be earned for federal income tax
purposes during the period such Bonds are held by an initial owner The federal income tax
consequences of the purchase, ownership and redemption, sale or other taxable disposition of
Discount Bonds which are not purchased in the initial public offering at the initial offering price
may be determined according to rules which differ from those described above and in the
Official Statement.
EXCEPT AS DESCRIBED ABOVE, we express no opinion as to any federal,
state or local tax consequences 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,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 qualified for
the earned income credit. Such prospective purchasers should consult their tax advisors as to the
consequences of investing in the Bonds.
7867/7866
HOU:2151980.2