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Ordinance No. 2017-04
(Title: An ordinance authorizing the issuance and sale of City of Friendswood, Texas, General Obligation Bonds, Series 2017) ORDINANCE N0.2017-04 AUTHORIZING THE ISSUANCE AND SALE OF CITY OF FRIENDSWOOD, TEXAS, GENERAL OBLIGATION BONDS, SERIES 2017; PROVIDING FOR THE PAYMENT OF SAID BONDS; APPROVING THE OFFICIAL STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT. THE STATE OF TEXAS § COUNTIES OF GALVESTON AND § HARRIS § CITY OF FRIENDSWOOD WHEREAS, it is deemed advisable and to be in the best interest of the City of Friendswood, Texas (the "City" or "Issuer") that certain bonds authorized at an election previously held in the City on November 5, 20li (the "Election"), be sold at this time, the amount of bonds authorized, the purpose, the amount of bonds previously sold, and the amount now to be sold being as follows: AMOUNT AMOUNT AMOUNT AMOUNT PREVIOUSL BEING REMAININ AUTHORIZED PURPOSE Y SOLD ISSUED(') G $7,710,000 Street improvements $1,858,000 $5,852,000 $0 (1) Includes premium deposited into the Project Fund and applied against voted authorization. WHEREAS, this City Council of the City (the "Council") finds and determines that it is necessary and proper to order the issuance, sale and delivery of such voted bonds; and WHEREAS, the bonds hereinafter authorized to be issued are to be issued, sold and delivered pursuant to the general laws of the State of Texas, including Texas Government Code, Chapter 1331, as amended, and the City's Home Rule Charter; and WHEREAS, it is officially found, determined, and declared that the meeting at which this Ordinance has been adopted was open to the public and public notice of the time, place and subject matter of the public business to be considered and acted upon at said meeting, including this Ordinance, was given, all as required by the applicable provisions of Texas Government Code Chapter 551; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD, TEXAS: Section 1. RECITALS, AMOUNT AND PURPOSE OF THE BONDS. The recitals set forth in the preamble hereof are incorporated herein and shall have the same force and effect as if set forth in this Section. The "City of Friendswood, Texas, General Obligation Bonds, Series 2017" (the "Bonds") are hereby authorized to be issued and delivered in the aggregate principal amount of $ for the public purpose of (i) designing, constructing, improving, extending, expanding, upgrading and developing streets and roads, bridges and intersections including utility relocation, landscaping, sidewalks, traffic safety and operational improvements, the purchase of any necessary right-of-way, drainage and other related costs in the City, including, but not limited to, such improvements for Blackhawk Boulevard, Mary Ann Drive, Shadowbend Avenue, Townes Road, Winding Road and Woodlawn Drive (collectively, the "Projects"); and (ii) paying the costs incurred in connection with the issuance of the Bonds. Section 2. DESIGNATION, DATE, DENOMINATIONS, NUMBERS, AND MATURITIES AND INTEREST RATES OF BONDS. Each bond issued pursuant to this Ordinance shall be designated: "CITY OF FRIENDSWOOD, TEXAS, GENERAL OBLIGATION BOND, SERIES 2017," and initially there shall be issued, sold, and delivered hereunder one fully registered bond, without interest coupons, dated March 1, 2017, in the principal amount stated above and in the denominations hereinafter stated, numbered T-1, with bonds issued in replacement thereof being in the denominations and principal amounts Ord 2017-04 2 hereinafter stated and numbered consecutively from R-1 upward, payable to the respective Registered Owners thereof (with the initial bond being made payable to the initial purchaser as described in Section 10 hereof), or to the registered assignee or assignees of said bonds or any portion or portions thereof (in each case, the "Registered Owner"), and said Bonds shall mature and be payable serially on March 1 in each of the years and in the principal amounts, respectively, and shall bear interest from the date set forth in the FORM OF BOND set forth in Section 4 of this Ordinance to their respective dates of maturity or redemption prior to maturity at the rates per annum, as set forth in the schedule included in the FORM OF BOND in Section 4 hereof. The Bonds shall be subject to redemption prior to maturity as set forth in the FORM OF BOND included in Section 4 hereof. Section 3. CHARACTERISTICS OF THE BONDS. (a) Apnointment of Paving A7ent/Retristrar. The Issuer hereby appoints The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, to serve as paying agent and registrar for the Bonds (the "Paying Agent/Registrar"). The Mayor or the City Manager is authorized and directed to execute and deliver in the name and under the corporate seal and on behalf of the Issuer a Paying Agent/Registrar Agreement with the Paying Agent/Registrar in substantially the form presented at this meeting. (b) Registration, Transfer. Conversion and Exchange. The Issuer shall keep or cause to be kept at the corporate trust office of the Paying AgentrRegistrar books or records for the registration of the transfer, conversion and exchange of the Bonds (the "Registration Books"), and the Issuer hereby appoints the Paying Agent/Registrar as its registrar and transfer agent to keep such books or records and make such registrations of transfers, conversions and exchanges under such reasonable regulations as the Issuer and Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make such registrations, transfers, conversions and exchanges as herein provided within three days of presentation in due and proper form. The Paying Agent/Registrar shall obtain and record in the Registration Books the address of the registered owner of each Bond to which payments with respect to the Bonds shall be mailed, as herein provided; but it shall be the duty of each registered owner to notify the Paying Agent/Registrar in writing of the address to which payments shall be mailed, and such interest payments shall not be mailed unless such notice has been given. The Issuer shall have the right to inspect the Registration Books during regular business hours of the Paying Agent/Registrar, but otherwise the Paying Agent/Registrar shall keep the Registration Books confidential and, unless otherwise required by law, shall not permit their inspection by any other entity. The Issuer shall pay the Paying Agent/Registrar's standard or customary fees and charges for making such registration, transfer, conversion, exchange and delivery of a substitute Bond or Bonds. Registration of assignments, transfers, conversions and exchanges of Bonds shall be made in the manner Ord 2017-04 provided and with the effect stated in the FORM OF BOND set forth in this Ordinance. Each substitute Bond shall bear a letter and/or number to distinguish it from each other Bond. (c) Authentication. Except as provided in subsection (i) of this section, an authorized representative of the Paying Agent/Registrar shall, before the delivery of any such Bond, date and manually sign said Bond, and no such Bond shall be deemed to be issued or outstanding unless such Bond is so executed. The Paying Agent/Registrar promptly shall cancel all paid Bonds and Bonds surrendered for conversion and exchange. No additional ordinances, orders or resolutions need be passed or adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange of any Bond or portion thereof, and the Paying Agent/Registrar shall provide for the printing, execution and delivery of the substitute Bonds in the manner prescribed herein. Pursuant to Subchapter D, Chapter 1201, Texas Government Code, the duty of conversion and exchange of Bonds as aforesaid is hereby imposed upon the Paying Agent/Registrar, and, upon the execution of said Bond, the converted and exchanged Bond shall be valid, incontestable, and enforceable in the same manner and with the same effect as the Bonds which initially were issued and delivered pursuant to this Ordinance, approved by the Attorney General, and registered by the Comptroller of Public Accounts. (d) Payment of Principal and Interest. The Issuer hereby further appoints the Paying Agent/Registrar to act as the paying agent for paying the principal of and interest on the Bonds, all as provided in this Ordinance. The Paying Agent/Registrar shall keep proper records of all payments made by the Issuer and the Paying Agent/Registrar with respect to the Bonds, and of all conversions and exchanges of Bonds, and all replacements of Bonds, as provided in this Ordinance. However, in the event of a nonpayment of interest on a scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five (5) business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. (e) Payment to Registered Owner. Notwithstanding any other provision of this Ordinance to the contrary, the Issuer and the Paying Agent/Registrar shall be entitled to treat and consider the person in whose name each Bond is registered in the Registration Books as the absolute owner of such Bond for the purpose of payment of principal and interest with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Paying Agent/Registrar shall pay all principal of and interest on the Bonds only to or upon the order of the registered owners, as shown in the Registration Books as provided in this Ordinance, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer's obligations with respect to payment of principal of and interest on the Bonds to the extent of the sum or sums so paid. No person other than a registered owner, as shown in the Registration Books, shall receive a Bond certificate evidencing the obligation of the Issuer to make payments of principal and Ord 2017-04 4 interest pursuant to this Ordinance. (f) Pine Aaent/Registrar, The Issuer covenants with the registered owners of the Bonds that at all times while the Bonds are outstanding the Issuer will provide a competent and legally qualified bank, trust company, financial institution or other agency to act as and perform the services of Paying Agent/Registrar for the Bonds under this Ordinance, and that the Paying Agent/Registrar will be one entity. By accepting the position and performing as such, each Paying Agent/Registrar shall be deemed to have agreed to the provisions of this Ordinance, and a certified copy of this Ordinance shall be delivered to each Paying Agent/Registrar. (g) Substitute Parma Agent/Registrar. The Issuer reserves the right to, and may, at its option, change the Paying Agent/Registrar upon not less than 120 days written notice to the Paying Agent/Registrar, to be effective not later than 60 days prior to the next principal or interest payment date after such notice. In the event that the entity at any time acting as Paying Agent/Registrar (or its successor by merger, acquisition, or other method) should resign or otherwise cease to act as such, the Issuer covenants that promptly it will appoint a competent and legally qualified bank, trust company, financial institution, or other agency to act as Paying Agent/Registrar under this Ordinance. Upon any change in the Paying Agent/Registrar, the previous Paying Agent/Registrar promptly shall transfer and deliver the Registration Books (or a copy thereof), along with all other pertinent books and records relating to the Bonds, to the new Paying Agent/Registrar designated and appointed by the Issuer. Upon any change in the Paying Agent/Registrar, the Issuer promptly will cause a written notice thereof to be sent by the new Paying Agent/Registrar to each registered owner of the Bonds, by United States mail, first-class postage prepaid, which notice also shall give the address of the new Paying Agent/Registrar. (g) Book -Entry Only sue. The Bonds issued in exchange for the Bonds initially issued to the purchaser or purchasers specified herein shall be initially issued in the form of a separate single fully registered Bond for each of the maturities thereof and the ownership of each such Bond shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company of New York ("DTC"), and except as provided in subsections (i) and 0) of this Section, all of the outstanding Bonds shall be registered in the name of Cede & Co., as nominee of DTC. (h) Blanket Letter of Representations. The previous execution and delivery of the Blanket Letter of Representations with respect to obligations of the Issuer is hereby ratified and confirmed; and the provisions thereof shall be fully applicable to the Bonds. Notwithstanding anything to the contrary contained herein, while the Bonds are subject to DTC's Book -Entry Only System and to the extent permitted by law, the Letter of Representations is hereby incorporated herein and its provisions shall prevail over any other provisions of this Ordinance in the event of conflict. (i) Bonds Registered in the Name of Cede & Co. With respect to Bonds registered in the name of Cede & Co., as nominee of DTC, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation to any securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations on whose behalf DTC was created ("DTC Participant") to hold securities to facilitate the clearance and settlement of securities transactions Ord 2017-04 5 among DTC Participants or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Issuer and the Paying Agent/Registrar shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a registered owner of Bonds, as shown on the Registration Books, of any notice with respect to the Bonds, or (iii) the payment to any DTC Participant or any other person, other than a registered owner of Bonds, as shown in the Registration Books of any amount with respect to principal of or interest on the Bonds. Upon delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Ordinance with respect to interest checks being mailed to the registered owner at the close of business on the Record date, the words "Cede & Co." in this Ordinance shall refer to such new nominee of DTC. (j) Successor Securities Depository; Transfers Outside Book -Entry System. In the event that the Issuer determines that DTC is incapable of discharging its responsibilities described herein and in the representation letter of the Issuer to DTC or that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Issuer shall (i) appoint a successor securities depository, qualified to act as such under Section 17A of the Securities and Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bonds to such successor securities depository or (ii) notify DTC and DTC Participants of the availability through DTC of Bonds and transfer one or more separate Bonds to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Registration Books in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names registered owners transferring or exchanging Bonds shall designate, in accordance with the provisions of this Ordinance. (k) Payments to Cede & Co. Notwithstanding any other provision of this Ordinance to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the representation letter of the Issuer to DTC. (1) General Characteristics of the Bonds. The Bonds (i) shall be issued in fully registered form, without interest coupons, with the principal of and interest on such Bonds to be payable only to the Registered Owners thereof, (ii) may and shall be redeemed prior to their scheduled maturities, (iii) may be transferred and assigned, (iv) may be converted and exchanged for other Bonds, (v) shall have the characteristics, (vi) shall be signed, sealed, executed and authenticated, (vii) the principal of and interest on the Bonds shall be payable, and (viii) shall be administered and the Paying Agent/Registrar and the Issuer shall have certain duties and responsibilities with respect to the Bonds, all as provided, and in the manner and to the effect as required or indicated, in the FORM OF BOND set forth in this Ordinance. The Bonds initially issued and delivered pursuant to this Ordinance is not required to be, and shall not be, authenticated by the Paying Agent/Registrar, but on each substitute Bond issued in conversion of and exchange for any Bond Ord 2017-04 6 or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the Paying Agent/registrar's Authentication Bond, in the FORM OF BOND set forth in this Ordinance. (m) Cancellation of Initial Bond. On the closing date, one initial Bond representing the entire principal amount of the Bonds, payable in stated installments to the order of the initial purchaser of the Bonds or its designee, executed by manual or facsimile signature of the Mayor and City Secretary, approved by the Attorney General of Texas, and registered and manually signed by the Comptroller of Public Accounts of the State of Texas, will be delivered to such purchaser or its designee. Upon payment for the initial Bond, the Paying Agent/Registrar shall insert the Delivery Date on Bond No. T-1, cancel the initial Bond and deliver to The Depository Trust Company ("DTC") on behalf of such purchaser one registered definitive Bond for each year of maturity of the Bonds, in the aggregate principal amount of all of the Bonds for such maturity, registered in the name of Cede & Co., as nominee of DTC. To the extent that the Paying Agent/Registrar is eligible to participate in DTC's FAST System, pursuant to an agreement between the Paying Agent/Registrar and DTC, the Paying Agent/Registrar shall hold the definitive Bonds in safekeeping for DTC. (n) Conditional Notice of Redemption. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by this Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that such Bonds have not been redeemed. Secfion 4. FORM OF BONDS. The form of the Bonds, including the form of Paying Agent/Registrar's Authentication Certificate, the form of Assignment and the form of Registration Certificate of the Comptroller of Public Accounts of the State of Texas to be attached to the Bonds initially issued and delivered pursuant to this Ordinance, shall be, respectively, substantially as follows, with such appropriate variations, omissions or insertions as are permitted or required by this Ordinance. Ord 2017-04 (a) Form of Bond. NO, R-_ UNITED STATES OF AMERICA PRIlVCIPAL STATE OF TEXAS AMOUNT CITY OF FRIENDSWOOD, TEXAS GENERAL OBLIGATION BOND SERIES 2017 Interest Rate Delivery Date Maturity Date CUSIP No. % March 7, 2017 March 1, 20_ REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS ON THE MATURITY DATE specified above, the City of Friendswood, in Galveston and Harris Counties, Texas (the "Issuer"), being a political subdivision and municipal corporation of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on the Maturity Date specified above, the Principal Amount specified above. The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360-day year of twelve 30-day months) from the Delivery Date specified above at the Interest Rate per annum specified above. Interest is payable on September 1, 2017 and semiannually on each March 1 and September 1 thereafter to the Maturity Date specified above, or the date of redemption prior to maturity; except, if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full. THE PRINCIPAL OF AND INTEREST ON this Bond are payable in lawful money of the United States of America, without exchange or collection charges. The principal of this Bond shall be paid to the registered owner hereof upon presentation and surrender of this Bond at maturity, or upon the date fixed for its redemption prior to maturity, at the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, which is the "Paying Agent/Registrar" for this Bond. The payment of interest on this Bond shall be made by the Paying Agent/Registrar to the registered owner hereof on each interest payment date by check or draft, dated as of such interest payment date, drawn by the Paying Agent/Registrar on, and payable solely from, funds of the Issuer required by the ordinance authorizing the issuance of this Bond (the "Bond Ordinance") to be on deposit with the Paying Agent/Registrar for such purpose as hereinafter provided; and such check or draft shall be sent by the Paying Ord 2017-04 8 Agent/Registrar by United States mail, first-class postage prepaid, on each such interest payment date, to the registered owner hereof, at its address as it appeared on the fifteenth day of the month preceding each such date (the "Record Date") on the Registration Books kept by the Paying Agent/Registrar, as hereinafter described. In addition, interest may be paid by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of, the registered owner. In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first- class postage prepaid, to the address of each owner of a Bond appearing on the Registration Books at the close of business on the last business day next preceding the date of mailing of such notice. ANY ACCRUED INTEREST due at maturity or upon the redemption of this Bond prior to maturity as provided herein shall be paid to the registered owner upon presentation and surrender of this Bond for redemption and payment at the principal corporate trust office of the Paying Agent/Registrar. The Issuer covenants with the registered owner of this Bond that on or before each principal payment date, interest payment date, and accrued interest payment date for this Bond it will make available to the Paying Agent/Registrar, from the "Interest and Sinking Fund" created by the Bond Ordinance, the amounts required to provide for the payment, in immediately available funds, of all principal of and interest on the Bonds, when due. IF THE DATE for the payment of the principal of or interest on this Bond shall be a Saturday, Sunday, a legal holiday or a day on which banking institutions in the city where the principal corporate trust office of the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment shall be the next succeeding day that is not such a Saturday, Sunday, legal holiday or day on which banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. THIS BOND is one of a series of Bonds dated March 1, 2017, authorized in accordance with the Constitution and laws of the State of Texas in the principal amount of $ for the public purposes of (i) designing, constructing, improving, extending, expanding, upgrading and developing streets and roads, bridges and intersections including utility relocation, landscaping, sidewalks, traffic safety and operational improvements, the purchase of any necessary right-of- way, drainage and other related costs in the City, including, but not limited to, such improvements for Blackhawk Boulevard, Mary Ann Drive, Shadowbend Avenue, Townes Road, Winding Road and Woodlawn Drive (collectively, the 'Projects"); and (ii) paying the costs incurred in connection with the issuance of the Bonds. ON MARCH 1, 2026, or on any date thereafter, the outstanding Bonds of this series may be redeemed prior to their scheduled maturities, at the option of the Issuer, with funds derived from any available and lawful source, as a whole, or in part, and, if in part, the particular Bonds, or portions thereof, to be redeemed shall be selected and designated by the Issuer (provided that Ord 2017-04 a portion of a Bond may be redeemed only in an integral multiple of $5,000), at a redemption price equal to the principal amount to be redeemed plus accrued interest to the date fixed for redemption. AT LEAST 30 days prior to the date fixed for any redemption of Bonds or portions thereof prior to maturity a written notice of such redemption shall be sent by the Paying Agent/Registrar by United States mail, first-class postage prepaid to the registered owner of each Bond to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice; provided, however, that the failure of the registered owner to receive such notice, or any defect therein or in the sending or mailing thereof, shall not affect the validity or effectiveness of the proceedings for the redemption of any Bond. By the date fixed for any such redemption due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof that are to be so redeemed. If such written notice of redemption is sent and if due provision for such payment is made, all as provided above, the Bonds or portions thereof that are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. If a portion of any Bond shall be redeemed, a substitute Bond or Bonds having the same maturity date, bearing interest at the same rate, in any denomination or denominations in any integral multiple of $5,000, at the written request of the registered owner, and in aggregate principal amount equal to the unredeemed portion thereof, will be issued to the registered owner upon the surrender thereof for cancellation, at the expense of the Issuer, all as provided in the Bond Ordinance, WITH RESPECT TO ANY OPTIONAL REDEMPTION OF THE BONDS, unless certain prerequisites to such redemption required by the Bond Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed will have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may state that said redemption may, at the option of the Issuer, be conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the Issuer will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that such Bonds have not been redeemed. ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without interest coupons, in the denomination of any integral multiple of $5,000. As provided in the Bond Ordinance, this Bond may, at the request of the registered owner or the assignee or assignees hereof, be assigned, transferred, converted into and exchanged for a like aggregate principal amount of fully registered Bonds, without interest coupons, payable to the appropriate registered owner, assignee or assignees, as the case may be, having the same denomination or denominations in any integral multiple of $5,000 as requested in writing by the appropriate Ord 2017-04 10 registered owner, assignee or assignees, as the case may be, upon surrender of this Bond to the Paying Agent/Registrar for cancellation, all in accordance with the form and procedures set forth in the Bond Ordinance. Among other requirements for such assignment and transfer, this Bond must be presented and surrendered to the Paying Agent/Registrar, together with proper instruments of assignment, in form and with guarantee of signatures satisfactory to the Paying Agent/Registrar, evidencing assignment of this Bond or any portion or portions hereof in any integral multiple of $5,000 to the assignee or assignees in whose name or names this Bond or any such portion or portions hereof is or are to be registered. The form of Assignment printed or endorsed on this Bond may be executed by the registered owner to evidence the assignment hereof, but such method is not exclusive, and other instruments of assignment satisfactory to the Paying Agent/Registrar may be used to evidence the assignment of this Bond or any portion or portions hereof from time to time by the registered owner. The Paying Agent/Registrar's reasonable standard or customary fees and charges for assigning, transferring, converting and exchanging any Bond or portion thereof will be paid by the Issuer. In any circumstance, any taxes or governmental charges required to be paid with respect thereto shall be paid by the one requesting such assignment, transfer, conversion or exchange, as a condition precedent to the exercise of such privilege. The Paying Agent/Registrar shall not be required to make any such transfer, conversion, or exchange of any Bonds during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date or, with respect to any Bond or any portion thereof called for redemption prior to maturity, within 45 days prior to its redemption date. IN THE EVENT any Paying Agent/Registrar for the Bonds is changed by the Issuer, resigns, or otherwise ceases to act as such, the Issuer has covenanted in the Bond Ordinance that it promptly will appoint a competent and legally qualified substitute therefor, and cause written notice thereof to be mailed to the registered owners of the Bonds. IT IS HEREBY certified, recited and covenanted that this Bond has been duly and validly authorized, issued and delivered; that all acts, conditions and things required or proper to be performed, exist and be done precedent to or in the authorization, issuance and delivery of this Bond have been performed, existed and been done in accordance with law; 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 against all taxable property in said Issuer, and have been pledged for such payment, within the limit prescribed by law. THE ISSUER HAS RESERVED THE RIGHT to amend the Bond Ordinance as provided therein, and under some (but not all) circumstances amendments thereto must be approved by the registered owners of a majority in aggregate principal amount of the outstanding Bonds. BY BECOMING the registered owner of this Bond, the registered owner thereby acknowledges all of the terms and provisions of the Bond Ordinance, agrees to be bound by such terms and provisions, acknowledges that the Bond Ordinance is duly recorded and available for inspection in the official minutes and records of the governing body of the Issuer, and agrees that the terms and provisions of this Bond and the Bond Ordinance constitute a contract between each registered owner hereof and the Issuer. Ord 2017-04 11 IN WITNESS WHEREOF, the Issuer has caused this Bond to be signed with the manual or facsimile signature of the Mayor of the Issuer and countersigned with the manual or facsimile signature of the City Secretary of the Issuer, and has caused the official seal of the Issuer to be duly impressed, or placed in facsimile, on this Bond. City Secretary (SEAL) Mayor (b) Form of Paving AQent/Re„istrar's Authentication Certificate. PAYING AGENT/REGISTRAR'S AUTHENTICATION CERTIFICATE To be executed if this Bond is not accompanied by an executed Registration Certificate of the Comptroller of Public Accounts of the State of Texas) It is hereby certified that this Bond has been issued under the provisions of the Bond Ordinance described in the text of this Bond; and that this Bond has been issued in conversion or replacement of, or in exchange for, a Bond, Bonds, or a portion of a Bond or Bonds of a series that 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. Dated: (c) Form of Assianrnent. THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. Dallas, Texas Paying Agent/Registrar By: Authorized Representative ASSIGNMENT (Please print or type clearly) For value received, the undersigned hereby sells, assigns and transfers unto: Transferee's Social Security or Taxpayer Identification Number: Transferee's name and address, including zip code: the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints Ord2017-04 12 , attorney, to register the transfer of the within Bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: Signatures) must be guaranteed by NOTICE: The signature above must an eligible guarantor institution participating correspond with the name of the registered in a securities transfer association recognized owner as it appears upon the front of this signature guarantee program. Bond in every particular, without alteration or enlargement or any change whatsoever. (d) Form of Registration Certificate of the Comptroller of Public Accounts. COMPTROLLER'S REGISTRATION CERTIFICATE: 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 this Comptroller of Public Accounts of the State of Texas (COMPTROLLER'S SEAL) (e) Initial Bond Insertions. (i) The initial Bonds be in the form set forth is paragraph (a) of this Section, except that: A. immediately under the name of the Bond, the headings "Interest Rate" and "Maturity Date" shall both be completed with the words "As shown below" and "CUSIP No. " shall be deleted. B. the first paragraph shall be deleted and the following will be inserted: "THE CITY OF FRIENDSWOOD, TEXAS, in Galveston and Hams Counties, Texas (the "Issuer"), being a political subdivision and municipal corporafion of the State of Texas, hereby promises to pay to the Registered Owner specified above, or registered assigns (hereinafter called the "Registered Owner"), on March 1 in each of the years, in the principal installments and bearing interest at the per annum rates set forth in the following schedule: Ord 2017-04 13 Principal Interest Principal Interest Years Amount Rates Years Amount Rates 2018 $ 200,000 2.00 % 2025 $ 4152000 3.00 % 2019 205,000 2.00 2026 44500 3.00 2020 20500 2.00 2027 470,000 4.00 2021 300,000 3.00 2028 49500 4.00 2022 400,000 2.50 2029 515,000 4.00 2023 41000 2.50 2030 54000 4.00 2024 42000 3.00 2031 56500 4.00 The Issuer promises to pay interest on the unpaid principal amount hereof (calculated on the basis of a 360-day year of twelve 30-day months) from the Delivery Date specified above at the respective Interest Rate per annum specified above. Interest is payable on September 1, 2017, and semiannually on each March 1 and September 1 thereafter to the date of payment of the principal installment specified above, or the date of redemption prior to maturity; except, that if this Bond is required to be authenticated and the date of its authentication is later than the first Record Date (hereinafter defined), such Principal Amount shall bear interest from the interest payment date next preceding the date of authentication, unless such date of authentication is after any Record Date but on or before the next following interest payment date, in which case such principal amount shall bear interest from such next following interest payment date; provided, however, that if on the date of authentication hereof the interest on the Bond or Bonds, if any, for which this Bond is being exchanged is due but has not been paid, then this Bond shall bear interest from the date to which such interest has been paid in full." C. The Initial Bond shall be numbered "" Ord 2017-04 14 Section 5. INTEREST AND SINKING FUND. (a) A special "Interest and Sinking Fund" is hereby created and shall be established and maintained by the Issuer as a separate fund or account and the funds therein shall be deposited into and held in an account at an official depository bank of said Issuer. Said Interest and Sinking Fund shall be kept separate and apart from all other funds and accounts of said Issuer, and shall be used only for paying the interest on and principal of said Bonds. All amounts received from the sale of the Bonds as accrued interest shall be deposited upon receipt to the Interest and Sinking Fund, and all ad valorem taxes levied and collected for and on account of said Bonds shall be deposited, as collected, to the credit of said Interest and Sinking Fund. During each year while any of said Bonds are outstanding and unpaid, the governing body of said Issuer shall compute and ascertain a rate and amount of ad valorem tax that will be sufficient to raise and produce the money required to pay the interest on said Bonds as such interest comes due, and to provide and maintain a sinking fund adequate to pay the principal of said Bonds as such principal matures (but never less than 2% of the original amount of said Bonds as a sinking fund each year); and said tax shall be based on the latest approved tax rolls of said Issuer, with full allowances being made for tax delinquencies and the cost of tax collection. Said rate and amount of ad valorem tax is hereby levied, and is hereby ordered to be levied, against all taxable property in said Issuer, for each year while any of said Bonds are outstanding and unpaid, and said tax shall be assessed and collected each such year and deposited to the credit of the aforesaid Interest and Sinking Fund. Said ad valorem taxes sufficient to provide for the payment of the interest on and principal of said Bonds, as such interest comes due and such principal matures, are hereby pledged for such payment, within the limit prescribed by law. If lawfully available moneys of the Issuer are actually on deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied for any year, then the amount of taxes that otherwise would have been required to be levied pursuant to this Section may be reduced to the extent and by the amount of the lawfully available funds then on deposit in the Interest and Sinking Fund. (b) Article 1208, Government Code, applies to the issuance of the Bonds and the pledge of the taxes granted by the Issuer under this Section, and is therefore valid, effective, and perfected. Should Texas law be amended at any time while the Bonds are outstanding and unpaid, the result of such amendment being that the pledge of the taxes granted by the Issuer under this Section is to be subject to the filing requirements of Chapter 9, Business & Commerce Code, in order to preserve to the registered owners of the Bonds a security interest in said pledge, the Issuer 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 of a security interest in said pledge to occur. Ord 2017-04 15 Section 6. DEFEASANCE OF BONDS. (a) Any Bond and the interest thereon shall be deemed to be paid, retired and no longer outstanding (a "Defeased Bond") within the meaning of this Ordinance, except to the extent provided in subsection (d) of this Section, when payment of the principal of such Bond, plus interest thereon to the due date (whether such due date be by reason of maturity or otherwise) either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided for on or before such due date by irrevocably depositing with or making available to the Paying Agent/Registrar in accordance with an escrow agreement or other instrument (the "Future Escrow Agreement") for such payment (1) lawful money of the United States of America sufficient to make such payment or (2) Defeasance Securities that mature as to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient money to provide for such payment, and when proper arrangements have been made by the Issuer with the Paying Agent/Registrar for the payment of its services until all Defeased Bonds shall have become due and payable. At such time as a Bond shall be deemed to be a Defeased Bond hereunder, as aforesaid, such Bond and the interest thereon shall no longer be secured by, payable from, or entitled to the benefits of, the ad valorem taxes herein levied and pledged as provided in this Ordinance, and such principal and interest shall be payable solely from such money or Defeasance Securities. Notwithstanding any other provision of this Ordinance to the contrary, it is hereby provided that any determination not to redeem Defeased Bonds that is made in conjunction with the payment arrangements specified in Subsection (a)(i) or (ii) of this Section shall not be irrevocable, provided that: (1) in the proceedings providing for such payment arrangements, the Issuer expressly reserves the right to call the Defeased Bonds for redemption; (2) gives notice of the reservation of that right to the owners of the Defeased Bonds immediately following the making of the payment arrangements; and (3) directs that notice of the reservation be included in any redemption notices that it authorizes. (b) Any moneys so deposited with the Paying Agent/Registrar may at the written direction of the Issuer be invested in Defeasance Securities, maturing in the amounts and times as hereinbefore set forth, and all income from such Defeasance Securities received by the Paying Agent/Registrar that is not required for the payment of the Bonds and interest thereon, with respect to which such money has been so deposited, shall be turned over to the Issuer, or deposited as directed in writing by the Issuer. Any Future Escrow Agreement pursuant to which the money and/or Defeasance Securities are held for the payment of Defeased Bonds may contain provisions permitting the investment or reinvestment of such moneys in Defeasance Securities or the substitution of other Defeasance Securities upon the satisfaction of the requirements specified in Subsection (a)(i) or (ii) of this Section. All income from such Defeasance Securities received by the Paying Agent/Registrar which is not required for the payment of the Defeased Bonds, with respect to which such money has been so deposited, shall be remitted to the Issuer or deposited as directed in writing by the Issuer. (c) The term 'Defeasance Securities" means any securities and obligations now or hereafter authorized by State law that are eligible to refund, retire or otherwise discharge obligations such as the Bonds. (d) Until all Defeased Bonds shall have become due and payable, the Paying Agent/Registrar shall perform the services of Paying Agent/Registrar for such Defeased Bonds the same as if they had not been defeased, and the Issuer shall make proper arrangements to provide and pay for such services as required by this Ordinance. (e) In the event that the Issuer elects to defease less than all of the principal amount of Ord 2017-04 16 Bonds of a maturity, the Paying Agent/Registrar shall select, or cause to be selected, such amount of Bonds by such random method as it deems fair and appropriate. Section 7. DAMAGED, MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. (a) Replacement Bonds. In the event any outstanding on is damaged, mutilated, lost, stolen or destroyed, the Paying Agent/Registrar shall cause to be printed, executed and delivered, a new Bond of the same principal amount, maturity and interest rate, as the damaged, mutilated, lost, stolen or destroyed Bond, in replacement for such Bond in the manner hereinafter provided. (b) Application for Replacement Bonds. Application for replacement of damaged, mutilated, lost, stolen or destroyed Bonds shall be made by the registered owner thereof to the Paying Agent/Registrar. In every case of loss, theft or destruction of a Bond, the registered owner applying for a replacement Bond shall famish to the Issuer and to the Paying Agent/Registrar such security or indemnity as may be required by them to save each of them harmless from any loss or damage with respect thereto. Also, in every case of loss, theft or destruction of a Bond, the registered owner shall furnish to the Issuer and to the Paying Agent/Registrar evidence to their satisfaction of the loss, theft or destruction of such Bond, as the case may be. In every case of damage or mutilation of a Bond, the registered owner shall surrender to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated. (c) No Default Occurred. Notwithstanding the foregoing provisions of this Section, in the event any such Bond shall have matured, and no default has occurred that is then continuing in the payment of the principal of or interest on the Bond, the Issuer may authorize the payment of the same (without surrender thereof except in the case of a damaged or mutilated Bond) instead of issuing a replacement Bond, provided security or indemnity is furnished as above provided in this Section. (d) Charge for Issuing Replacement Bonds. Prior to the issuance of any replacement Bond, the Paying Agent/Registrar shall charge the registered owner of such Bond with all legal, printing, and other expenses in connection therewith. Every replacement Bond issued pursuant to the provisions of this Section by virtue of the fact that any Bond is lost, stolen or destroyed shall constitute a contractual obligation of the Issuer whether or not the lost, stolen or destroyed Bond shall be found at any time, or be enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and proportionately with any and all other Bonds duly issued under this Ordinance. (e) Authority for Issuing Replacement Bonds. In accordance with Sec. 1206.022, Government Code, this Section 7 of this Ordinance shall constitute authority for the issuance of any such replacement Bond without necessity of further action by the governing body of the Issuer or any other body or person, and the duty of the replacement of such Bonds is hereby authorized and imposed upon the Paying Agent/Registrar, and the Paying Agent/Registrar shall authenticate and deliver such Bonds in the form and manner and with the effect, as provided in Section 3 of this Ordinance for Bonds issued in conversion and exchange for other Bonds. Ord 2017-04 17 Section 8. CUSTODY, APPROVAL, AND REGISTRATION OF BONDS; BOND COUNSEL'S OPINION; CUSIP NUMBERS AND CONTINGENT INSURANCE PROVISION, IF OBTAINED; ENGAGEMENT OF BOND COUNSEL. (a) The Mayor of the Issuer is hereby authorized to have control of the Bonds initially issued and delivered hereunder and all necessary records and proceedings pertaining to the Bonds pending their delivery and their investigation, examination, and approval by the Attorney General of the State of Texas, and their registration by the Comptroller of Public Accounts of the State of Texas. Upon registration of the Bonds said Comptroller of Public Accounts (or a deputy designated in writing to act for said Comptroller) shall manually sign the Comptroller s Registration Certificate attached to such Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on such Bond. The approving legal opinion of the Issuer's Bond Counsel and the assigned CUSIP numbers may, at the option of the Issuer, be printed on the Bonds issued and delivered under this Ordinance, but neither shall have any legal effect, and shall be solely for the convenience and information of the registered owners of the Bonds. In addition, if bond insurance is obtained, the Bonds may bear an appropriate legend as provided by the insurer. (b) The obligation of the initial purchaser to accept delivery of the Bonds is subject to the initial purchaser being furnished with the final, approving opinion of McCall, Parkhurst & Horton L.L.P., bond counsel to the Issuer, which opinion shall be dated as of and delivered on the date of initial delivery of the Bonds to the initial purchaser. The engagement of such firm as bond counsel to the Issuer in connection with issuance, sale and delivery of the Bonds is hereby approved and confirmed. Section 9. COVENANTS REGARDING TAX EXEMPTION OF INTEREST ON THE BONDS. (a) Covenants. The Issuer covenants to take any action necessary to assure, or refrain from any action which would adversely affect, the treatment of the Bonds as obligations described in section 103 of the Code, the interest on which is not includable in the "gross income" of the Registered Owner for purposes of federal income taxation. In fartherance thereof, the Issuer covenants as follows: (i) to take any action to assure that no more than 10 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited to a reserve fund, if any) are used for any "private business use," as defined in section 141(b)(6) of the Code or, if more than 10 percent of the proceeds or the projects financed therewith are so used, such amounts, whether or not received by the Issuer, with respect to such private business use, do not, under the terms of this Order or any underlying arrangement, directly or indirectly, secure or provide for the payment of more than 10 percent of the debt service on the Bonds, in contravention of section 141(b)(2) of the Code; (ii) to take any action to assure that in the event that the "private business use" described in subsection (a)(i) hereof exceeds 5 percent of the proceeds of the Bonds or the projects financed therewith (less amounts deposited into a reserve fund, if any) then the amount in excess of 5 percent is used for a "private business use" which is "related" and not "disproportionate," within the meaning of section 141(b)(3) of the Code, to the governmental use; Ord 2017-04 18 (iii) to take any action to assure that no amount which is greater than the lesser of $5,000,000, or 5 percent of the proceeds of the Bonds (less amounts deposited into a reserve fund, if any) is directly or indirectly used to finance loans to persons, other than state or local governmental units, in contravention of section 141(c) of the Code; (iv) to refrain from taking any action which would otherwise result in the Bonds being treated as "private activity bonds" within the meaning of section 141(b) of the Code; (v) to refrain from taking any action that would result in the Bonds being "federally guaranteed" within the meaning of section 149(b) of the Code; (vi) to refrain from using any portion of the proceeds of the Bonds, directly or indirectly, to acquire or to replace funds which were used, directly or indirectly, to acquire investment property (as defined in section 148(b)(2) of the Code) which produces a materially higher yield over the term of the Bonds, other than investment property acquired with: (A) proceeds of the Bonds invested for a reasonable temporary period of 3 years or less or, in the case of a current refunding bond, for a period of 90 days or less or, in the case of an advance refunding, for a period of 30 days or less, until such proceeds are needed for the purpose for which the bonds are issued, (B) amounts invested in a bona fide debt service fund, within the meaning of section 1.148 l (b) of the Treasury Regulations, and (C) amounts deposited in any reasonably required reserve or replacement fund to the extent such amounts do not exceed 10 percent of the proceeds of the Bonds; (vii) to otherwise restrict the use of the proceeds of the Bonds or amounts treated as proceeds of the Bonds, as may be necessary, so that the Bonds do not otherwise contravene the requirements of section 148 of the Code (relating to arbitrage) and, to the extent applicable, section 149(d) of the Code (relating to advance ref endings); (viii) to pay to the United States of America at least once during each five-year period (beginning on the date of delivery of the Bonds) an amount that is at least equal to 90 percent of the "Excess Earnings" (within the meaning of section 148(f) of the Code) and to pay to the United States of America, not later than 60 days after the Bonds have been paid in full, 100 percent of the amount then required to be paid as a result of Excess Earnings under section 148(f) of the Code; and (ix) to assure that the Bonds are used for solely for new money construction projects. (b) Rebate Fund. In order to facilitate compliance with subsection 11(a)(viii), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of the United States of America, and such fund shall not be subject to the claim of any other person, including without limitation the Registered Owners. The Rebate Fund is established for the additional purpose of compliance with section 148 of the Code. (c) Proceeds. The Issuer understands that the term "proceeds" includes "disposition proceeds" as defined in the Treasury Regulations and, in the case of refunding bonds, transferred proceeds (if any) and proceeds of refunded obligations expended prior to the date of issuance of the Bonds. It is the understanding of the Issuer that the covenants contained herein are intended Ord 2017-04 19 to assure compliance with the Code and any regulations or rulings promulgated by the U.S. Department of the Treasury pursuant thereto. In the event that regulations or rulings are hereafter promulgated which modify or expand provisions of the Code, as applicable to the Bonds, the Issuer will not be required to comply with any covenant contained herein to the extent that such failure to comply, in the opinion of nationally recognized bond counsel, will not adversely affect the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In the event that regulations or rulings are hereafter promulgated which impose additional requirements which are applicable to the Bonds, the Issuer agrees to comply with the additional requirements to the extent necessary, in the opinion of nationally recognized bond counsel, to preserve the exemption from federal income taxation of interest on the Bonds under section 103 of the Code. In furtherance of such intention, the Issuer hereby authorizes and directs the Mayor, Mayor Pro Tem, City Manager, Director of Administrative Services and City Secretary, individually or jointly, to execute any documents, certificates or reports required by the Code and to make such elections, on behalf of the Issuer, that may be permitted by the Code as are consistent with the purpose for the issuance of the Bonds. (d) Allocation of. and Limitation on. Expenditures for the Project. The Issuer covenants to account for the expenditure of sale proceeds and investment earnings to be used for the construction and acquisition of the Project on its books and records by allocating proceeds to expenditures within 18 months of the later of the date that (1) the expenditure is made, or (2) the Project is completed. The foregoing notwithstanding, the Issuer shall not expend sale proceeds or investment earnings thereon more than 60 days after the earlier of (1) the fifth anniversary of the delivery of the Bonds, or (2) the date the Bonds are refired, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such expenditure will not adversely affect the status, for federal income tax purposes, of the Bonds or the interest thereon. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (e) Disposition of Project. The Issuer covenants that the property financed with the proceeds of the Bonds in accordance with the Election, as described in the recitals to this Order, wi11 not be sold or otherwise disposed in a transaction resulting in the receipt by the Issuer of cash or other compensation, unless the Issuer obtains an opinion of nationally -recognized bond counsel that such sale or other disposition will not adversely affect the tax-exempt status of the Bonds. For purposes of the foregoing, the portion of the property comprising personal property and disposed in the ordinary course shall not be treated as a transaction resulting in the receipt of cash or other compensation. For purposes hereof, the Issuer shall not be obligated to comply with this covenant if it obtains an opinion that such failure to comply will not adversely affect the excludability for federal income tax purposes from gross income of the interest. (f) Designation as a Qualified Tax-Ex=t Obligation. The Issuer hereby designates the Bonds as "qualified tax-exempt obligations" as defined in section 265(b)(3) of the Code. In furtherance of such designation, the Issuer represents, covenants and warrants the following: (a) that during the calendar year in which the Bonds are issued, the Issuer (including any subordinate entities) has not designated nor will designate obligations that when aggregated with the Bonds, will result in more than $10,000,000 of "qualified tax-exempt obligations" being issued; (b) that the Issuer reasonably anticipates that the amount of tax-exempt obligations issued, during the calendar year in which the Bonds are issued, by the Issuer (or any subordinate entities) will not exceed $10,000,000; and, (c) that the Issuer will take such action or refrain from such action as Ord 2017-04 20 necessary, and as more particularly set forth in this Section, hereof, in order that the Bonds will not be considered a "private activity bond" within the meaning of section 141 of the Code. Section W. SALE OF BONDS AND APPROVAL OF OFFICIAL STATEMENT; PROJECT FUND; USE OF PREMIUM; FURTHER PROCEDURES. (a) The Issuer hereby creates and establishes and shall maintain on the books of the Issuer a separate fund to be entitled the "Series 2017 Bond Construction Fund" (the "Project Fund") for use by the Issuer for payment of all lawful costs associated with the acquisition and construction of the Project as hereinbefore provided and to pay the costs of issuance of the Bonds. Upon payment of all such costs, any moneys remaining on deposit in the Project Fund shall be transferred to the Interest and Sinking Fund. (b) The Bonds are hereby sold and shall be delivered to Coastal Securities, Inc. (the "Underwriter"), at a price of $5,996,915.85 (which represents the par amount of the Bonds, plus an original offering premium of W5,07435, less an underwriting discount of $43,158.50), pursuant to the terms and provisions of a Purchase Agreement that the Mayor is hereby authorized to execute and deliver. It is hereby officially found, determined and declared that the terms of this sale are the most advantageous reasonably obtainable to the Issuer. The initial Bond of this series shall be registered in the name of Coastal Securities, Inc. (c) The net premium received from the sale of the Bonds shall be applied as follows: the sum of $43,158.50 shall be applied to pay the Underwriter's discount for the Bonds; the sum of $56,055.02 shall be applied to pay the costs of issuance of the Bonds (with any excess to be deposited into the Interest and Sinking Fund); the sum of $88,860.81 shall be deposited into the Interest and Sinking Fund and used to pay capitalized interest; and the sum of $247,000, together with principal amount of $5,605,000 (for a total of $5,852,000), shall be deposited to the Project Fund and used for the purposes approved by the voters at the Election (d) The Issuer may place proceeds of the Bonds (including investment earnings thereon) and amounts deposited into the Interest and Sinking Fund in investments authorized by the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended; provided, however, that the Issuer hereby covenants that the proceeds of the sale of the Bonds will be used as soon as practicable for the purposes for which the Bonds are issued. (e) All deposits authorized or required by this Ordinance shall be secured to the fullest extent required by law for the security of public funds. (f) The Mayor, the Mayor Pro Tem, the City Manager, the Director of Administrative Services and the City Secretary, individually or jointly, shall be and they are hereby expressly authorized, empowered and directed from time to time and at any time to do and perform all such acts and things and to execute, acknowledge and deliver in the name and under the corporate seal and on behalf of the Issuer such documents, certificates and instruments, whether or not herein mentioned, as may be necessary or desirable in order to carry out the terms and provisions of this Ordinance, the Letter of Representations, the Bonds, the sale of the Bonds and the Official Statement. In case any officer whose signature shall appear on any Bond shall cease to be such officer before the delivery of such Bond, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer had remained in office until such delivery. Ord 2017-04 21 Section 11. DEFAULT AND REMEDIES. (a) Events of Default. Each of the following occurrences or events for the purpose of this Ordinance is hereby declared to be an Event of Default: (i) the failure to make payment of the principal of or interest on any of the Bonds when the same becomes due and payable; or (ii) default in the performance or observance of any other covenant, agreement or obligation of the City, the failure to perform which materially, adversely affects the rights of the registered owners of the Bonds, including, but not limited to, their prospect or ability to be repaid in accordance with this Ordinance, and the continuation thereof for a period of 60 days after notice of such default is given by any Registered Owner to the City. (b) Remedies for Default. (i) Upon the happening of any Event of Default, then and in every case, any Registered Owner or an authorized representative thereof, including, but not limited to, a trustee or trustees therefor, may proceed against the City for the purpose of protecting and enforcing the rights of the Registered Owners under this Ordinance, by mandamus or other suit, action or special proceeding in equity or at law, in any court of competent jurisdiction, for any relief permitted by law, including the specific performance of any covenant or agreement contained herein, or thereby to enjoin any act or thing that may be unlawful or in violation of any right of the Registered Owners hereunder or any combination of such remedies. (ii) It is provided that all such proceedings shall be instituted and maintained for the equal benefit of all Registered Owners of Bonds then outstanding. (c) Remedies Not Exclusive. (i) No remedy herein conferred or reserved is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under the Bonds or now or hereafter existing at law or in equity; provided, however, that notwithstanding any other provision of this Ordinance, the right to accelerate the debt evidenced by the Bonds shall not be available as a remedy under this Ordinance. (ii) The exercise of any remedy herein conferred or reserved shall not be deemed a waiver of any other available remedy. (iii) By accepting the delivery of a Bond authorized under this Ordinance, such Registered Owner agrees that the certifications required to effectuate any covenants or representations contained in this Ordinance do not and shall never constitute or give rise to a personal or pecuniary liability or charge against the officers, employees or trustees of the City or the Council. Section 12. COMPLIANCE WITH RULE 15c2-12. (a) Definitions. As used in this Section, the following terms have the meanings ascribed to such terms below: "MSRB" means the Municipal Securities Rulemaking Board. Ord 2017-04 11 "Rule " means SEC Rule 15c2-12, as amended from time to time. "SEC" means the United States Securities and Exchange Commission. (b) Annual Reports. (i) The Issuer shall provide annually to the MSRB, in the electronic format prescribed by the MSRB certain updated financial information and operating data pertaining to the Issuer, being the following: (i) the Issuer's annual financial audit report; and (ii) the information found under the headings "INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY - Current Investments", "CITY TAX DEBT", "TAX DATA" (except under the subheading "Estimated Overlapping Taxes") and "SELECTED FINANCIAL DATA" in the Official Statement for the Bonds. The Issuer will update and provide the information in the foregoing headings within six months after the end of each fiscal year ending in and after 2016. The Issuer will additionally provide its annual financial audit report when and if available and, in any event, within 12 months after the end of each fiscal year ending in or after 2016. If the annual financial audit report is not complete within 12 months after any such fiscal year end, then the Issuer will file unaudited financial statements within such 12 month period and audited financial statements for the applicable fiscal year, when and if the audit report on such statements becomes available. (ii) Any financial information so to be provided shall be (i) prepared in accordance with the accounting principles described in the financial statements of the Issuer appended to the Official Statement, or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation, and (ii) audited, if the Issuer commissions an audit of such statements and the audit is completed within the period during which they must be provided. (iii) If the Issuer changes its fiscal year, it will notify the MSRB of the change and of the date of the new fiscal year end) prior to the next date by which the Issuer 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 documents available to the public on the MSRB's internet website or filed with the SEC. All documents provided to the MSRB shall be accompanied by identifying information as prescribed by the MSRB. (c) Event Notices. (i) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of any of the following events with respect to the Bonds, if such event is material within the meaning of the federal securities laws: (1) non-payment related defaults; (2) modifications to rights of Bondholders; (1) Bond calls; (4) release, substitution, or sale of property securing repayment of the Bonds; (5) the consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to Ord 2017-04 23 its terms; and (6) appointment of a successor or additional trustee or the change of name of a trustee. (ii) The Issuer shall notify the MSRB in an electronic format as prescribed by the MSRB, in a timely manner (but not in excess of ten business days after the occurrence of the event) of any of the following events with respect to the Bonds, without regard to whether such event is considered material within the meaning of the federal securities laws: (1) principal and interest payment delinquencies; (2) unscheduled draws on debt service reserves reflecting financial difficulties; (3) unscheduled draws on credit enhancements reflecting financial difficulties; (4) substitution of credit or liquidity providers, or their failure to perform; (5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701—TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (6) tender offers; (7) defeasances; (8) rating changes; and (9) bankruptcy, insolvency, receivership or similar event of an obligated person. (iii) The Issuer shall notify the MSRB, in a timely manner, of any failure by the Issuer to provide financial information or operating data in accordance with subsection (b) of this Section by the time required by such subsection. (d) Limitations, Disclaimers. and Amendments. (i) The Issuer shall be obligated to observe and perform the covenants specified in this Section for so long as, but only for so long as, the Issuer remains an "obligated person" with respect to the Bonds within the meaning of the Rule, except that the Issuer in any event will give notice of any deposit made in accordance with this Ordinance or applicable law that causes Bonds no longer to be outstanding. (ii) The provisions of this Section are for the sole benefit of the registered owners and beneficial owners of the Bonds, and nothing in this Section, express or implied, shall give any benefit or any legal or equitable right, remedy, or claim hereunder to any other person. The Issuer undertakes to provide only the financial information, operating data, financial statements, and notices which it has expressly agreed to provide pursuant to this Section and does not hereby undertake to provide any other information that may be relevant or material to a complete presentation of the Issuer's financial results, condition, or prospects or hereby undertake to update any information provided in accordance with this Section or otherwise, except as expressly provided herein. The Issuer 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. (iii) UNDER NO CIRCUMSTANCES SHALL THE ISSUER BE LIABLE TO THE REGISTERED OWNER 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 ISSUER, WHETHER NEGLIGENT OR WITHOUT FAULT ON ITS PART, OF ANY COVENANT SPECIFIED IN THIS SECTION, 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. (iv) No default by the Issuer in observing or performing its obligations under this Section shall comprise a breach of or default under this Ordinance for purposes of any Ord2017-04 24 other provision of this Ordinance. Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the duties of the Issuer under federal and state securities laws. (v) Should the Rule be amended to obligate the Issuer to make filings with or provide notices to entities other than the MSRB, the Issuer hereby agrees to undertake such obligation with respect to the Bonds in accordance with the Rule as amended. The provisions of this Section may be amended by the Issuer from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the Issuer, but only if (1) the provisions of this Section, as so amended, would have permitted an underwriter to purchase or sell Bonds in the primary offering of the Bonds in compliance with the Rule, taking into account any amendments or interpretations of the Rule since such offering as well as such changed circumstances and (2) either (a) the registered owners of a majority in aggregate principal 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 Issuer (such as nationally recognized bond counsel) determined that such amendment will not materially impair the interest of the registered owners and beneficial owners of the Bonds. The Issuer may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds. If the Issuer so amends the provisions of this Section, it shall include with any amended financial information or operating data next provided in accordance with subsection (b) of this Section an explanation, in narrative form, of the reason for the amendment and of the impact of any change in the type of financial information or operating data so provided. Section 13. METHOD OF AMENDMENT. The Issuer hereby reserves the right to amend this Ordinance subject to the following terms and conditions, to -wit: (a) The Issuer may from time to time, without the consent of any holder, except as otherwise required by paragraph (b) below, amend or supplement this Ordinance in order to (i) cure any ambiguity, defect or omission in this Ordinance that does not materially adversely affect the interests of the holders, (ii) grant additional rights or security for the benefit of the holders, (iii) add events of default as shall not be inconsistent with the provisions of this Ordinance and that shall not materially adversely affect the interests of the holders, (iv) qualify this Ordinance under the Trust Indenture Act of 1939, as amended, or corresponding provisions of federal laws from time to time in effect, or (v) make such other provisions in regard to matters or questions arising under this Ordinance as shall not be inconsistent with the provisions of this Ordinance and that shall not in the opinion of the Issuer's Bond Counsel materially adversely affect the interests of the holders. (b) Except as provided in paragraph (a) above, the holders of Bonds aggregating in principal amount 5 1 % of the aggregate principal amount of then outstanding Bonds that are the subject of a proposed amendment shall have the right from time to time to approve any amendment hereto that may be deemed necessary or desirable by the Issuer; provided, however, that without the consent of 100% of the holders in aggregate principal amount of the then Ord 2017-04 25 outstanding Bonds, nothing herein contained shall pen -nit or be construed to permit amendment of the terms and conditions of this Ordinance or in any of the Bonds so as to: (i) make any change in the maturity of any of the outstanding Bonds; (ii) reduce the rate of interest home by any of the outstanding Bonds; (iii) reduce the amount of the principal payable on any outstanding Bonds; (iv) modify the terms of payment of principal or of interest on outstanding Bonds or any of them or impose any condition with respect to such payment; or (v) change the minimum percentage of the principal amount of any series of Bonds necessary for consent to such amendment. (c) If at any time the Issuer shall desire to amend this Ordinance under this Section, the Issuer shall send by U.S. mail to each registered owner of the affected Bonds a copy of the proposed amendment. Such notice shall briefly set forth the nature of the proposed amendment and shall state that a copy thereof is on file at the office of the Issuer for inspection by all holders of such Bonds. (d) Whenever at any time within one year from the date of such notice the Issuer shall receive an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of all of the Bonds then outstanding that are required for the amendment, which instrument or instruments shall refer to the proposed amendment and that shall specifically consent to and approve such amendment, the Issuer may adopt the amendment in substantially the same form. (e) Upon the adoption of any amendatory Ordinance pursuant to the provisions of this Section, this Ordinance shall be deemed to be modified and amended in accordance with such amendatory Ordinance, and the respective rights, duties, and obligations of the Issuer and all holders of such affected Bonds shall thereafter be determined, exercised, and enforced, subject in all respects to such amendment. (f) Any consent given by the holder of a Bond pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the notice, and shall be conclusive and binding upon all future holders of the same Bond during such period. Such consent may be revoked at any time after six months from the date of such notice by the holder who gave such consent, or by a successor in title, by filing notice with the Issuer, but such revocation shall not be effective if the holders of 51% in aggregate principal amount of the affected Bonds then outstanding, have, prior to the attempted revocation, consented to and approved the amendment. For the purposes of establishing ownership of the Bonds, the Issuer shall rely solely upon the registration of the ownership of such Bonds on the registration books kept by the Paying Agent/Registrar. Section 14. APPROPRIATION. To pay the debt service coming due on the Bonds, if an y, prior to receipt of the taxes levied to pay such debt service, there is hereby appropriated from current funds on hand, which are hereby certified to be on hand and available for such purpose, an amount sufficient to pay such debt service, and such amount shall be used for no other purpose. Section 15. SEVERABILITY. If any section, article, paragraph, sentence, clause, phrase or word in this Ordinance, or application thereof to any persons or circumstances is held invalid or unconstitutional by a court of competent jurisdiction, such holding shall not affect the Ord 2017-04 26 validity of the remaining portion of this Ordinance, despite such invalidity, which remaining portions shall remain in full force and effect. Section 16. EFFECTIVE DATE. In accordance with the provisions of Texas Government Code, Section 1201.028, this Ordinance shall be effective immediately upon its adoption by the Council. PASSED, APPROVED AND ADOPTED ON FIRST AND FINAL READING THIS 6t" DAY OF FEBRUARY, 2017. �u tl Kevin M.Polland Mayor ATTEST: Melinda Welsh, TRMC • U: p City Secretary • Nam'. :'C. ••; 9,� OF t�.FP.• . Ord 2017-04 27 w OFFICES -CALL, PARKHURST & HORTON L.L.P. 600 CONGRESS AVENUE t 090 ONE AMERICAN CENTER AUSTIN. TEXAS 78701-3246 TELEPHONE: 512475-3805 FACSIMILE 512472-0871 Mayor and Members of the City Council City of Friendswood 910 S. Friendswood Drive Friendswood, Texas 77546 717 NORTH HARWOOD NINTH FLOOR OALLAS, TEXAS 75201-6587 TELEPHONE: 21475 9200 FACSIMILE 214754.9250 February 6, 2017 709 N. ST. MARY'S STREET 1525 ONE RIVERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE 210225-2984 Re: City of Friendswood, Texas, General Obligation Bonds, Series 2017 Ladies and Gentlemen: The purpose of this engagement letter is to set forth certain matters concerning the services we will perform as bond counsel to the City of Friendswood, Texas (the "City") in connection with the issuance of the City of Friendswood, Texas, General Obligation Bonds, Series 2017 (the "Obligations"). We understand that the Obligations will be authorized, issued and delivered for the purposes described in the ordinance authorizing the issuance and sale of the Obligations, and will be secured by a lien on and pledge of the City's ad valorem taxes, levied within the limits prescribed by law. SCOPE OF ENGAGEMENT In this engagement, we expect to perform the following duties: (I) Subject to the completion of proceedings to our satisfaction, render our legal opinion (the "Bond Opinion") regarding the validity and binding effect ofthe Obligations, the source ofpayment and security for the Obligations, and the excludability of interest on the Obligations from gross income for federal income tax purposes. (2) Pre are and review documents necessary or appropriate to the authorization, issuance and delivery of the Obligations, coordinate the authorization and execution of such documents, and review enabling legislation. (3) Assist the City in seeking from other governmental authorities such approvals, permissions and exemptions as we determine are necessary or appropriate in connection with the authorization, issuance and delivery of the Obligations, except that we will not be responsible for any required federal or state securities law filings. In this connection, we particularly undertake to assist the City in having the Obligations approved by the Public Finance Division of the Office of the Texas Attorney General, and, following such approval, registered by the Texas Comptroller of Public Accounts. (4) Review legal issues relating to the structure of the Obligation issues. (5) Attend meetings of the City Council as requested. Our Bond Opinion will be delivered by us on the date the Obligations are exchanged for their purchase price (the "Closing"). The City will be entitled to rely on our Bond Opinion. The Bond Opinion will be based on facts and law existing as of their date. In rendering our Bond Opinion, we will rely upon the certified proceedings and other certifications of public officials and other persons furnished to us without undertaking to verify the same by independent investigation, and we will assume continuing compliance by the City with applicable laws relating to the Obligations. During the course of this engagement, we will rely on you to provide us with complete and timely information on all developments pertaining to any aspect of the Obligations and their security. We understand that you will direct members of your staff and other employees and consultants of the City to cooperate with us in this regard. Our duties in this engagement are limited to those expressly set forth above. Unless we are separately engaged in writing to perform other services, our duties do not include any other services, including the following: (1) Review of procurement requirements, or preparation or review of requests for bids or proposals or preparation or review of construction documents. (2) Assisting in the preparation or review of financial disclosure with respect to the Obligations. (3) Preparing requests for tax rulings from the Internal Revenue Service, or no action letters from the Securities and Exchange Commission. (4) Preparing state securities law memoranda or investment surveys with respect to the Obligations. (5) Drafting state constitutional or legislative amendments. (6) Pursuing test cases or other litigation. (7) Making an investigation or expressing any view as to the creditworthiness of the City or the Obligations. (8) Representing the City in Internal Revenue Service examinations or inquiries, or Securities and Exchange Commission investigations. (9) After Closing, providing continuing advice to the City or any other party concerning any actions necessary to assure that interest paid on the Obligations will continue to be excludable from gross income for federal income tax purposes (e.g., our engagement does not include rebate calculations for the Obligations). (10) Negotiating the terms of, or opining as to, any investment contract. (11) Except as hereinafter described, assisting in the preparation or review of an official statement or any other disclosure document with respect to the Obligations, or performing an independent investigation to determine the accuracy, completeness or sufficiency of any such document or rendering advice that the official statement or other disclosure document does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. We will review those sections of the disclosure document to be disseminated in connection with the sale of the Obligations which describe the Obligations, the ordinances of the City Council authorizing the issuance of the Obligations, and the tax- exempt treatment of the interest on the Obligations for purposes of federal income taxation. (12) Addressing any other matter not specifically set forth above that is not required to render our Bond Opinion. ATTORNEY -CLIENT RELATIONSHH' Upon execution of this engagement letter, the City will be our client and an attorney -client relationship will exist between you and us. We further assume that all other parties in this transaction understand that we represent only the City in this transaction, we are not counsel to any other party, and we are not acting as an intermediary among the parties. Our services as Bond Counsel are limited to those contracted for in this letter; the City's execution of this engagement letter will constitute an acknowledgment of those limitations. Our representation of the City will not affect, however, our responsibility to render objective Bond Opinion. Our representation of the City and the attorney -client relationships created by this engagement letter will be concluded upon issuance of the Obligations. Nevertheless, subsequent to Closing, we will mail the appropriate Internal Revenue Service Form 8038-G, and prepare and distribute to the participants in the transaction a transcript of the proceedings pertaining to the Obligations. CONFLICTS As you are aware, our firm represents many political subdivisions and investment banking firms, among others, who do business with political subdivisions. It is possible that during the time that we are representing the City, one or more of our present or future clients will have transactions with the City. It is also possible that we may be asked to represent, in an unrelated matter, one or more of the entities involved in the issuance or purchase of the Obligations. We do not believe such representation, if it occurs, will adversely affect our ability to represent you as provided in this letter, either because such matters will be sufficiently different from the issuance of the Obligations so as to make such representations not adverse to our representation of you, or because the potential for such adversity is remote or minor and outweighed by the consideration that it is unlikely that advice given to the other client will be relevant to any aspect of the issuance of the Obligations. Execution of this letter will signify the City's consent to our representation of others consistent with the circumstances described in this paragraph. FIRM NOT A MUNICIPAL ADVISOR As a consequence of the adoption of Rule 15Ba1-I pursuant to the Securities Exchange Act of 1934 (the "Municipal Advisor Rule"), which has been promulgated by the Securities and Exchange Commission as a result of the enactment of the Dodd -Frank Wall Street Reform and Consumer Protection Act (the "Dodd -Frank Act"), we hereby inform the City that we are not a "Municipal Advisor" within the meaning of the Municipal Advisor Rule or the Dodd -Frank Act (collectively, the "MA Rule"). In the course of performing our services as Bond Counsel in this transaction, we may engage in analysis, discussion, negotiation, and advice tot he City regarding the legal ramifications of the structure, timing, terms, and other provisions of the financial transaction that culminates with the planned issuance of the Obligations, and such services and advice may be essential to the development of the plan of finance for the issuance of the Obligations. In turn, these services become, among other things, the basis for the transaction's basic legal documents, the preparation and delivery of the official statement or any other disclosure document that describes the material terms and provisions of the transaction, if an offering document is used in the offering of the Obligations, the preparation of the various closing certificates that embody the terms and provisions ofthis transaction and the preparation and delivery of our Bond Opinion. Moreover, legal advice and services of a traditional legal nature in the area of municipal finance inherently involve a financial advice component; but we hereby advise the City that while we have expertise with respect to the legal aspects relating to the issuance of municipal securities, we are not "financial advisors" or "financial experts" in a manner that would subject us to the provisions of the MA Rule. As Bond Counsel, we provide only legal advice, not purely financial advice that is not inherent in our legal advice to the City. The City should seek the advice of its financial advisor with respect to the financial aspects of the issuance of the Obligations. By signing this engagement letter, the City acknowledges receipt of this information, and evidences its understanding of the limitations of our role to the City as Bond Counsel with respect to the MA Rule, as discussed in this paragraph. FEES Based upon: (i) the terms, structure, size and schedule of the financing represented by the Obligations; (ii) the duties we will undertake pursuant to this engagement letter; (iii) the time we anticipate devoting to the financinga, and (iv) the responsibilities we will assume in connection therewith, our fee will be (a) $6,000 for the first $1,000,000 in net proceeds of the Obligations, plus $1 per $1,000 of net proceeds of the Obligations for all such amounts above $1,000,000. Net proceeds include any net original issue premium, less the amount ofthe underwriters' discount, plus the principal amount of the Obligations (accrued interest is excluded from net proceeds). The fee does not include client charges made or incurred on your behalf, such as election translation costs, travel costs, photocopying, deliveries, long distance telephone charges, telecopier charges, computer -assisted research and other expenses. Our fee will be billed after the Closing. If the financing is not consummated, we understand and agree that we will not be paid. f 7 DTK�7 71T At your request, papers and property furnished by you will be returned promptly upon receipt of payment for outstanding fees and client charges. Our own files, including lawyer work product, pertaining to the transaction will be retained by us. For various reasons, including the minimization of unnecessary storage expenses, we reserve the right to dispose of any documents or other materials retained by us after the termination of this engagement. (Signature page jodlowsJ If the foregoing terms are acceptable to you, please so indicate by returning the enclosed copy of this engagement letter dated and signed by an authorized officer, retaining the original for your files. We look forward to working with you. Respectfully yours, McCall, Parkhurst &Horton L.L.P. By:CL Chris Settle Accepted and Approved City of Friendswood, Texas By: -5- PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 26, 2017 In the opinion of Bond Counsel, interest on the Bonds will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described order 'TAX MATTERS" herein, including the alternative minimum tax on corporations. The Bonds will be designated by the City as "Qualified Tax -Exempt Obligations" for financial institutions. See "TAX MATTERS — Qualified Tax -Exempt Obligations for Financial Institutions." NEW ISSUE: BOOK -ENTRY -ONLY RATINGS: S&P Global Ratings. See "SALE AND DISTRIBUTION OF THE BONDS —Municipal Bond Ratings" $5,7059000" CITY OF FRIENDSWOOD, TEXAS (A home rule city of the State of Texas located within Galveston and Hams Counties) GENERAL OBLIGATION BONDS, SERIES 2017 Dated: March 1, 2017 Due: March 1, as shown below Interest Accrual Date: Delivery Date Principal of and interest on the $5,705,000* City of Friendswood, Texas, General Obligation Bonds, Series 2017 (the "Bonds") are payable by The Bank of New York Mellon Trust Company, N.A., Dallas, Texas, the initial paying agent/registrar (the "Paying Agent/Registrar"). The Bonds are initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book - Entry -Only System described herein. Beneficial ownership of the Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to the beneficial owners thereof. Principal of and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the beneficial owners of the Bonds. See "THE BONDS - Book -Entry -Only System" herein. Interest on the Bonds will accrue from the date of their initial delivery to the initial purchaser thereof named below (the "Underwriter'), and is payable on September 1 and March 1 of each year, commencing September 1, 2017, to the registered owners (initially Cede & Co.) appearing on the registration books of the Paying Agent/Registrar on the 15th day of the month preceding each interest payment date. Interest accruing on the Bonds will be calculated on the basis of a 360-day year of twelve 30-day months. See'TIM BONDS -Description." The Bonds, when issued, will constitute valid and binding obligations of the City of Friendswood. Texas (the "City") and will be payable from the proceeds of a continuing, direct annual ad valorem tax levied, within the limits presented by law, against all taxable property within the City. See 'THE BONDS - Source of Payment" The Bonds are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter 1331, Texas Government Code, as amended and an election held within the City on November 5, 2013. In addition, the Bonds will be issued pursuant to an ordinance to be approved by the City Council of the City on February 6. 2017- See "THE BONDS —Authorization of the Bonds." PRINCIPAL Maturity March 1 2018 2019 2020 2021 2022 2023 2024 Principal Amount* $185,000 190,000 190,000 285.000 405,000 420,000 4357000 AMOUNTS, MATURATES, INTEREST RATES AND PRICES (Due March 1) Initial CUSIP Interest Reoffering Nos. Rate Yield (a) 358568 (b) Maturity Principal March 1 Amount* 2025 $445,000 2026 460000 2027(c) 490,000 2028(c) 515,000 2029(c) 535,000 2030(c) 5607000 2031(c) 590,000 Initial CUSIP Interest Reoffering Nos. Rate Yield (a) 358568 (b) Preliminary, subject to change. (a) The initial yields will be established by and are the sole responsibility of the Underwriter, and may subsequently be changed (b) CUSIP numbers have been assigned to the Bonds by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association, and are included solely for the convenience of the registered owners of the Bonds. Neither the City, the Financial Advisor, nor the Underwriter are responsible for the selection or correctness of the COST numbers set forth herein. (c) The Bonds maturing on March 1, 2027* and thereafter are subject to redemption on March 1, 2026* or any date thereafter, at the option of the City, at the par value thereof plus accrued interest from the most recent interest payment date to the date of redemption. See "THE BONDS - Redemption Provisions." Proceeds of the sale of the Bonds will be used for (i) construction and improvements to City streets and (ii) payment of the costs of issuance of the Bonds. See "THE BONDS - Use of Proceeds" and "- Sources and Uses of Funds." 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 McCall, Parkhurst & Horton L.L.P., Dallas, 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." Certain legal matters will be passed upon for the Underwriter by Andrews Kurth Kenyon LLP, Houston, Texas, as counsel to the Underwriter. Initial delivery of the Bonds through DTC is expected to be on or about March 7, 2017. COASTAL SECURITIES, INC. * Preliminary, subject to change. ZI-ZoSi a?nZI u? pougop 3? uual lsgi se pue ;o sosodmd jo;;uama;s;s Is?ogo slip;o }rsd;ou air pue `o;u? pa}ssodioou?;ou aip u?anip pounquoo s>Iu?I zo uogsuuo;u? aqj pas sails qam gons `as?miaq;o pagloads ssoluR -aouamanuoo s,iapeai oq; io3 d?a?os Ymiiad6q s;o uuo; agi ui oq dsm pus Xluo sasodmd ?suopsuuojul .ro; aae uioiag pa;uosaid sossaippu ails qam of saouaialag -jos; jo sluama;s;s paiaplsuoo aq }ou pings `gons se pagpuap? ,fissasdxo ;ou io iag;agm `suogdumsse pue sojsun7sa `suovndo Its pue `sipisoi Ierr}oe a;sunxoidds ?I?m uolim fold due iag;agm o; se paiapuai si uopsivasazdai io uo?rndo ou `selna?usd ul u?aiaq uo?Iruuojui aq;;o ssaua;atdmoa io ,Sosmoas agS -0u?azaouoa apem si uolSeivasasdai iag}o so `d}upuem `d;uezen4 ou pue;oaiag} saamos Isa oI aqi u pau %Uoo ao?}suuo,;u?;o dpoq aia?dmoo ag} of `s;aadsas IIe u? `;aaCgns s?;uama;s}S Mogi0 s?g; u? paa?e;uoa uogsuuo;u? 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I ....... I ..... 1.... 11 Source of Payment .............................................a.. 11 Tax Rate Limitations 11 ............................................ Use of Proceeds...........................I........................11 Authorization of the Bonds......... ... a ..................... 11 Sources and Uses of Funds 12 . ........ a ............... a........ Amendments... .... ...... .... ...... .......... ....................... a 12 Defeasance ....................................a.......................12 FutureDebt 13 ........................................................... Other Obligations ................................ a ............ a... 13 Legal Investments in Texas .................................. 14 Remedies in the Event of Default ........................ 14 INVESTMENT AUTHORITY AND INVESTMENT OBJECTIVES OF THE CITY_.._..................................».»....».».._._...._ 14 Legal Investments... .............................................. 14 Investment Policies 16 ............................................... Current Investments 16 ...................... ...................... Additional Provisions ........................................... 16 CITY TAX DEBT__......._..........._._.....__........».»..17 Tax Supported Debt Statement ..... .......... a............ 17 Bonded Indebtedness Payable from Ad Valorem Taxes ............................................ 17 Pro -Forma Tax Supported Debt Service Schedule..... 18 ......................... ..... Estimated Overlapping Debt.. ... ... a ... 19 DebtRatios . ..... ...... ........ ................ a........ a 19 ............. FAX DATA_......._...._._.....»._.»..._...»....»._.._.....»..19 General.,,.-, ..... 4 ............ ...... I ........... ...... 19 Property Tax Code and County -Wide Appraisal District .................. .&..,................ ..19 Property Subject to Taxation by the City ............. 20 Notice and Hearing Procedures ................4........... 20 Levy and Collection of Taxes .............................. 20 Collection of Delinquent Taxes ........................... 21 Historical Analysis of Tax Collection .................. 21 Analysis of Tax Base ..................................... a...... 22 SalesTax 23 ............................................................... SELECTED FINANCIAL DATA._....»..... .»........ 24 Historical Operations of the City's GeneralFund ............................................... 24 General Fund and Debt Service Fund Balance for the Past Five Fiscal Years... ................. ........ ..... a ..... .................. 25 Pension Fund ........................................................ 25 Financial Statements ............................................. 25 ADMINISTRATION OF THE CITY.......»............» 25 Mayor and City Council ....................................... 25 Administration 26 ...................................................... Consultants................. 26 ...........----..........._............. LEGAL MATTERS.,,.,,.,,.,.,,.,. ... ... 0,,. ... .... 26 Legal Opinion....................................................... 26 No -Litigation Certificate .................. ....... .... ... a... a. 27 No Material Adverse Change ............................... 27 TAX MATTERS...»...__._.»._._...._........»........_.... 27 Opinion................................................................. 27 Federal Income Tax Accounting Treatment of Original Issue Discount....................................................... 28 Collateral Federal Income Tax Consequences .............................................. 28 Information Reporting and Backup Withholding ......... ....................... ................. 29 Future and Proposed Legislation._ ...... ............ %a... 29 State, Local and Foreign Taxes ........................ a... 29 Qualified Tax -Exempt Obligations for Financial Institutions......a............................ 29 CONTINUING DISCLOSURE OF INFORMATION. ... 30 Annual Reports... 30 Notice of Certain Events ... .................... a.............. 30 Availability of Information ..,......_ ....................... 31 Limitations and Amendments .............................. 31 Compliance With Prior Undertakings.. ..... a .......... 31 FINANCIAL ADVISOR.....» ..............».».».... ..».».32 GENERAL CONSIDERATIONS ..............»...».....». 32 Sources and Compilation of Information',,',',,..,.. 32 Forward Looking Statements .... .................... a... a.. 32 APPENDIX A — Economic and Demographic Characteristics APPENDIX B — Audited Financial Statements of the City APPENDLY C — Form of Bond Counsel Opinion aAuego olloalgns`Sseu?unlasd * suoga?psunf Bons ai suo?s?nd uo?legenb so uogelsloaz sgnoos uouo?we aq3 03 peoazmn ql?m puul Sue;o uopi4azdza3ul us se pommisuoo oq lou llsgs spuog agl;o uolilsods?p za po zo ales zo; uogeogllenb so voge4sfaz so; S3q?q?suodsaz ;o zaunelas?p s?qy 'paua;suss; as?,nuaglo zo pros `pazago aq Sew spuog aq3 go?gm Ti! uo?lo?psunC Sue;o smel sagunoas aql zapun spuog acp;o uogtog?lenb so uo?s?Aaz zo; Sl?I?q?suodsas ou saumsse Si?O aqy uogo?psunC Sue;o sloe sagunoos aql sapun pog?lenb zo paials?Aas uaaq spuog oql aneq sou `.u?azagl pou?sluoo suogdwaxa snoL1En uodn aouegas ut sexay;o lay so43 mooS aq3 sapun pogllenb so pasals?Aaz uaaq Sou aneq spuog aqy uopunaiagl popinozd suogdwaxo aq3 uodn ague?raz u? `papuawe se `££6I;o loy sag?moaS aq3 sopen uo?ssivauo0 a4uegoxg pue sagunooS oq; ql?,m polg uaaq seq spuog aql of Awlslai luawams uogtRs?faz o1N smeZ saqunaaS '31NII LNF' IV QRRNIINOOSIQ Rg CVIN `QRONRNIIn?00 dI `ONIZI'IIfiVIS HORS '.L MlVW NRdO RHI NI 'IIVAMJd RSIAI2GHIO IHDlW HDMAM IVHI RAOEIV 'IRAR'I V IV SQNOg RHI d0 ROI2Id laNaVW RHI NIVINIVW IdO R 11SVIS HOH-LIA SNOIIOVSXV2dI IOaM XO I0'I'IV-2IRA0 IVW X2IlU&X3QNR RHI `SQNOR MU d0 ONI2IRddO RHI HIIA1 NOIIORNNOO NJ -slun000e leawlSOnnl ola[ spuog aq3 ilas Sew oqm szaleap of sores pu?pnrou? `saoud ouua;;o reglm afs uegl zaglo saaud le pros pue pazago oq Sew spuog aq3 pum `ales zo; posealas an spuog aq3 sage sa3lsmzapu fI aq3 Sq aw?3 03 oua3 wog pa4uego aq Sew spuog agl;o urnlzao;o ales put Auuajjo aq3 ou?loadsaz suuol zaglo pus saaud aqy �salumsapuR ag3;o S3?l?q?suodsaz aq3 s? saaud zo spla?S nuua•.goaz oumzaouoo uogeuuo;ul -aged sanoo aq3 uo pag?cads spla?S aql le zalumzapull aql Sq apew si spuog ag3;o Suuago oggnd opg euoq e sags spuog agl;o Su?pe.il zano 104uoa ou seq Sl?O aqy •saptsalogm zo zalumsapun;o Sl?omdso aq; al $urlos uossad sml?uns so za)losq `osnogpuoq e si oqm uoszad Sue apnlom Sou quits „o?lgnd„ uual aql `asodznd srgl sod •o?lgnd aql of pros `aq of paloodxa wom zo `uaaq aneq Slunlew gaea;o spuog ag3;o 3unouze le?luelsgns e golgm ie saoud a p nugels spuog agl;o S.ian?lop;o alep aql aso;aq zo uo sal?smsapufl aql Sq pasan?lap put palnoaxa almoggsao s;o Sl?O aql Sq ldlooaz aql uodn pouoglpuoo si spuog aggro Szan?lap aqy .Liq?gmlasrzeW pus Mud -uo?leuuo;[n fans;o ssaualaldwoo so Soemooe aq3 aaluezeno lou saop salumsapvR aql lnq `smel sou?moos Issapa; zapun szolsanm o3 sa?3?l?q?suodsaz sl? 03 luensmd luawa3elS Is?og;p s?q3 w uo?levuo;v? aql pama?nos seq zalumzapull aqy luawa3e3S le?og;O salt ul uoisnroui zo; aoua3uos QV mono; oql pap?nosd smq zalumwopuR aqy •sal?jAuapurl aql Sq `awg of awq tuO4 `paouego aq Sew saaud aggnd gans pee `saoud ouuago o?lgnd qons uegl samol saoud is ssaglo pus ssareap u?elsao of pros pue pazago aq Ssw spuog aqy •posegomd an spuog Sue;i spuog ag3;o Ile osegomd of pals4?lgo oq II6n+ Sagl pus luopooasd suoR?puoo u?tyao of laaCgns azs suo?3sS?lgo s,sa3umzapuR aqy($ ;o lunoas?p s,za3umsapuR ue ssal pue $ ;o spuog aq3 uo um?wazd e snld `spuog aql ;o 3unowe ptd?ouud aql Su?aq) $ zo; S3?O aq3 wos; spuog aql asegomd of pool 'e seq („zalumsopufr„ acp) 'oul `sal*moaS lerseo0 2uglam.iapuR SQUOg RILL d0 NOLLR3I?I.LSIQ Q.�IV R'IE'S 'aznln3 aql u? paltadaz aq so anu?laoo Sruessaoau ll?m `uo?leuuo;a[ zaglo pum le?oueug legl Sq umogs s? se `aouauadxa lsed legl apew st uogeluasasdaz oN '931O ag3;o szlejp sag3o so uoulsod le?oueug aq3 u? spuazl Sumulluoo so azn3n; also?pul of papualul lou s? pue `uo?leauo;m auols?q luooaz mogs of popuolu? s? `saomos saglo pue saxel wo>3 sld?aaaz;o salgs3 ou pnjoul `aogeuuo�n;o uolle3uaswd aqy -saomos zacpo o3 pa3nqul}s Srssazdxa uogsuuo;u zo; ;daaxa `spmaaz s3? wog Sl?O aq3 Sq pap?nozd uaaq seq 3uawale3S temg;0 sng ul pa3uasasd uo?leuuglm zag3o pue Ie?oueug lIV ;oazaq a4ed zanO aq3 uo pagguap? („spuog„ aq3) LIOZ sauoS `spuog uo?leo?IgO lezaua0 *00069OL49$ s3?;o Sl?O aq3 Sq Quu@go 010, gum uo?loawioo u? („S3?O„ aq3) sexay `poomspuaud ;o 131O aq3 wog paa e3go uaaq seq `g pus y saa puaddy p pnlom yuawa3i4S re?og3O slgl m pou?sluoo uogsuuo;ul .LDIRIA3,LV,LS i2IO.LORQ02I.LAtI LiOZ S�2I�S4 (sa?luno0 sussl-1 pus uolsanls0 upll?m paleaol ssxay;o a3s3S agl;o Sl?a ams awoq y) SVXa.L 4QOOmSQAIa2I3 30 A,LID *000`90L`SS Municipal Bond Ratings In connection with the sale of the Bonds, the City has made application to S&P Global Ratings, a division of Standard & Poor's Financial Services LLC ("S&P"), for a rating on the Bonds, and a rating of "_" has been assigned. An explanation of the significance of such rating may be obtained from S&P, The rating reflects only the view of S&P, and the City makes no representation as to the appropriateness of such rating. There is no assurance that such rating will continue for any period of time or that such rating will not be revised downward or withdrawn entirely by S&P, if, in the judgment of S&P, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. [Remainder of Page Intentionally Left Blank) 'a4usgo of loo(gns Kmutumlaid :e „ � XIQNHddV„ aaS suoREsodcoa uo xei ammanuc aapuuiallu aq; nucpnloul `uTaiaq „S2IHy.LVW XF.L,: zapun paquosop siouzui aql of iooCgns `mel omiscxa sapun sasodmd m amoouc luapa; ao; amoom ssoi2 ucog algEpnloxa aq Ilya spuog aqi uo lsaialul `Iosunoo puog;o uotucdo atp ul .---.---..........- .... uotldmaxH xey —............ .........................................................................snujze2I IegolO dWS ............................................sGu!jvd „•suogtu!lsul IEtouuEgA io3 suopuoclgO idmaxH xey paglTeno — S2IH.I..LVIni XV.L,: aaS suopeollgo ldutaxa-xei pagllenb se spuog aq; olvialsop of sloadxa K;ID aqy -suollEoggO idmaxg-xiq pagllsna „wspun33o sash pue saomoS -„ puu „spaaao.td;o asfl - S(jNOg g LL:, aaS spuog otp;o aouunssl;o sisoo ail; KEd of (n) PUB siaa.gs Kllo of sluamanoidml pue uoi;onusuoo (I) .ro; pasn aq lllm spuog atp ;o OILS atp ;o spaaoold ........... ........... spaaooid;o astl „-luamKsd;o oomos - sQNOg alm, aas -KiID aip ulgllm Kyadoid alq = Ile lsate`iu `mel Kg paquosaid sipull aql uctpyA `poinal xsl maiolsn pE Ienuue laamp `outnuguoo E;o spaaaoid all mog algsKsd aq Ilya ptm Kllo atp;o suopeallgo oulpulq pus pllsn a;nlclsuoa IIlm `panssl ualm `spuog aly •••••-•-•- luamKed jo aomoS („•ma;sKs KIuo-fnuH-Moog - SQNOg alu., aaS) mmals,ts gons;o asn anuimooslp of Dic aqi 30 3legaq uo io 3iEgaq sly uo lclqu atp saaiasoi inq („ DS.(1„) KuedmoD isnzy KtollsodaQ agy;o malsKs Kluo-KRua-yooq aql asn of spualtn KlID aq.L '(„mRs03ag/l1104V putKed„ all) sexay `selleQ "YN `Kuedmoo lscuy UOIIOW viol, maN;o )Iusg aqy sl m.asfai/luaSe ouixRd Iepluc aqy ".................jB4s�ag/luaSV `oulKsd „spuog agl;o uollEzuotpnV — SQNOS 3H.L:: aaS •LTOZ `9 KmtugaH uo KlID aq; ;o lcounoo K;ID oql Kq panocdds aq of aouetmpio uu of luensmd panssc aq IIIM spuog atp `aoplppE uI '£IOZ `S IagmanoN uo Klto all aiglya plaq uoi;aala ue pus `papuauce se `apoD luauuuanorD sexay `i ££T iaidElo Klminotlaud `sexay;o apnS agl;o smul lujauao pue uopnlpsuoo oq; of lumsmd panssc am spuog aqy - --- -- - ............._........,iluoglny „ suols no d uopdmapod - S(IKOg glm, aaS •uoudmapoi3o a;ep all of a;ep ;uamKsd lsa.calul ;uaaai ;soul all ucog lsaialul pantaos snld 3oa.ta; anIuA and atg jo aoud e;u `KIID atp;o uogdo aql is `iagsaiatp aisp KUE io *9ZOZ `T goauw uo uogdmapac of loofgns am *LZOZ I gomw lags pue uo puumvui spuog aly 0004S$ 3o soldglnm IEroa;uc ul uuo; paialsbaa KIln3 uc pmssl om spuog aqy sopsualoumgo iaiiO '(„uopduosaQ— SQNOg HHy„ aas) uogdmapai loud io KlutuEm paluis pion maK goea;o I iagmaldoS pus I gomW oulpaaoons goea uo iageasatp KI[Enuuslmas pae LIOi `I .cagma;da$ uo algeXed oq Illm pus spuog atp;o salpAuapurl ail of Kianllop lsp!ul nagl;o aisp all mo.g aniom? Ilan spuog ail uo lsaialul quamaluls lElog;O slgl jo aaud �aaoa atp uo glio3 las siunome otp m pue salEp acp uo amisui llugs spuog aqy ............... •..... ........----- .....spuog aqy •ufalaq „Kilo aq;3o sonsualoEmgo olgduZoucaa pas ocmouoog — V XIQN3ddV:, pue:,I LID HILL d0 NOI6LVULSI IIYVQV„ aaS -sexa,L `/4unoD sumg m uopxod Ilsms s tplm /OnoD uoisaaleo uttprm KluEmud poleool sexo L jo aluls atp;o Kllo alai amoq pue uolslmlpgns Ieopllod z sl (,,fi?D„ oqi) sexay `poomspuaud;o Kilo aqy ....................................... ianssI aqy -uolleuuglm alaldmoo atom lo3 paleoipm am letp suot;oas of Klminopmd la;az pinols tapeac aqy alaamav4s IEIog3o snp u! aiagmasla nuusaddE sluamalsls lslaaeug puE uoclEuuqJul pal Fnop aip Kq Kla.u;ua sli uc pagllEnb sI pus tnaiaq pameluoo uopEuuo;ul uleltaa;o Kmuuuns u s; leualEm ammollo3 aqy Ijmvims .L&3maivis'IVIDIddo -Selected Financial Information - (Unaudited) 2016 Certified Net Taxable Assessed Valuation (100 % of estirnated In value) ....... $ 3,267,348,436 (a) Direct Debt Plus: The Bonds'.,,,,.,,,.,, ...... a .......... a ....... ....... .................. 5,705,000 Less: Self -Supporting Tax Debt ............................. .............. .................. .............. I... 30.240,000 (b) Total Tax Supported Debt ................... ........ .... ........................... a .............. ......... $ 39 9�5 9Q0 Estimated Overlapping Debt............................................................................................. $ 176.496.565 Direct and Estimated Overlapping Debt --- ............. ........... ................. a............. a................ $ �U 461 465 Debt Service Fund Balance (Unaudited, as of September 30, 2016)................................ .$ 200.126 Debt Ratios: Direct Tax Supported Debt ............... Direct Tax Supported and Estimated Overlapping Debt ......................... 2016 Tax Rate (per $100 of Assessed Valuation) Maintenance and Operation ........................... Debt Service ................................................ Total....................................................... Estimated Annual Debt Service Requirements: (c) Average (Fiscal Years 2017-2035)................. Maximum(2031)............................................ of2016 Per Assessed Capita Valuation (39,487) 1.07% $ 885 6.47% $5,355 ..................... ................ $ 0.4620 0.0840 ............ a...... $ 27423,619 $ 3,099,850 Tax Collections: Arithmetic Average, Tax Yeazs (2011-2015)-Current Yeaz Collections ................. - Total Collections .............................. 99.35 99.63 * Preliminary, subject to change. (a) Provided by the Galveston County Appraisal District and Hams County Appraisal District (the "Appraisal Districts") and net of exemptions. (b) Debt supported by funds provided by the Waterworks and Sewer System. (c) Includes the Bonds and excludes debt supported by the water and sewer revenues. aSuugo o; loa(gns `Czuu?unlazd alep uopdwopaz agp uo ngs?aazjjuaAy Quj isd aq; ,Sq plaq azu aoazagl;saza;u? panzaos pus aoud uo?;dwopaz agl;o luouikad acp io; spun; popinord `a;ep uo?;dwapaz oqg zage pue urog anzooe o; aseao Ilegs uoaraq; lsaza;uj pue alep uo?;dwapaz bons uo algn,isd puu onp aw000q Ilsgs (pawaapaz oq o;;oazagp;unoum led?ouud agp zo) puog gans `uan� uaaq aneq llsgs uoudwapoi gons;o oopou pue uopdwapaz zo; palp o uaaq aneq llegs (;oazagp urns Isd?ouud agl;o uo?lzod ,Cue zo) puog s 3I 'pomaapar aq o; ,S;unluw gans u?gl?M joaraq; suo?lzod zo `spuog aql poglaw uolloolos wopusr raglo zo;ol ,Cq ou?guza;ap Ilegs (uuo3 LIuo-fnu3-Xoog ul azu spuog agp ol?gm Oy(I zo) rez;s?Qa�puaAy Su?,Csd agl `pawaapoi aq o; si spuog olp;o 64un;uw e jo Ile uegp ssal 3I -f;?O agp ,Sq pa;oolos aq llegs pawaapaz aq of spuog gons;o saglim w oqp `oum ,Cne;s pawaapoi on spuog aq; 3o lls ueq; ssal3l 'uopdwapaz;o alsp agp o; a;ep notuAd lsazalu?;aaoaz;sow oqp wog;sazalul panzoou snldpaimp ;unowu ledlouud agp o; lunba aoud u le ,SgO aq;;o uopdo oql lu `zageazagp olsp ,Sue zo `*9ZOZ `I gozslnl uo `ued u? zo alogM w `,C;unlew of roud uopdwapaz leuo?;do o; loa(gns on zagnimp pue *LZOZ `I gomN uo nuua;ew spuog aqy saolslno.�d uol;dwapaH ';uawaauldaz gans ,Cus gl?M uopaauuoo u? sasuadxa zagpo pus sanzsgo ls;uaunuano4 `soxel ;o luaw,fsd omnbaz hew 4410 aqy 'ssoluueq wasp daay o; 5;?uurapul zo d;unoos ;o m4s!so�14ua4y 4mM, ,j mg pue ,Cl?O aq; 5q ;d?aaaz pue `gad; zo ssol `uo?lonlsop gans ;o oouopina ,Szolas;sgss ;o idiom zo `spuog pa;sl?lnw agp;o zapuazms uodn spuog ualols zo lsol `paloz;sop `pa;elpnw aaeldoi o; paanu seg ,SuO aqy •uo?;s;uasazd pus;sanbaz za1le s,Csp ssau?snq aazgp u?q;?M apses aq sza;sue.q lle 1eg1 pamnbaz an II?M;I •alup luaw,ied;sazalu? gans nu?paaazd;xau g;uow agl3o Ap q;SI oq1 suuaw a;sp luoui,Ced;sazalu? bus uo alge,Sed;sazalu? oql zo; („a;ea pzooag„ x1j) alsp pzooaz aqy 'a;up uo?;dwopaz s;l of zoud skup gy uap?M `(;uniew of roud uopdwapoi ro; polluo 3oazagp aopzod ,Cue zo puog ,Cus o; loadsaz gpIm `zo a;up;uawded;sara;u? zo lud?ouud Qu?Mollo;;xau aq; uo ssou?snq;o numodo aqp TFA Su?puo pue (Moloq pougop) a1sQ pz0007d ,Sue uo ssou?snq;o asolo aql g;?M nu[auaw 03 pouad ag; owmp spuog due 3o a0mgoxo zo za;suwj ,Cue o lees of pamnbaz oq lou Ipsgs m4s?oa�14ua4y Aw.Ssd aqy 'g;?,Mazagp uopaauuoo ul alge,fud aozugo p>luauuuano4 zo xsl ,Cue ranoo o; lua?og;ns ums e;o luaw,Sud amnbaz Am 641O agp;nq `za;suez; dus ro; apuw aq II?n+aozego oo?nras oN 'zea;si5DUlua2y 2umxvd agp;o oop;o;uaw,isd ledimud agp;u pa4uegoxo oq of spuog agl3o zapaarms uodn aopeuauouop pozuog;nu ,Cue u? ,C;un;uw awns agp3o spuog;o lunoum ledlouud Iunbo ue zo; algeaouegoxo on spuog aqy 'aauenss?ai pus zapuouns uodn zuzls?oag/l.uaSy nulxud oql ,Cq ;dal za;s?Aar puoq agp uo paovegaxa pue paua;suer; aq ,Ssw spuog agp `panu?;uoos?p s? wa;s,(s-Xjuo-,C.gag-Moog agp;uana agp uI •Moloq paquosap wals,SS LIuO44ua-joog agl of luensmd („Oya„) ,fuedwoO lsnzy ,Czol?sodaQ agy;o aau?wou agp 4'0O 7g opoD of ,Sluo paza;s?Saz aq II!m XIp%p?u? spuog agy 'zez;s>aall/luaAy nu?6ud agR3o spzoaaz agl uo umogs SE sranMO parals?Ew of zsr;spo'jaua4y pw6ud agp ,Sq polluw pue `a;ep notu sd;saxnul ag;;o se palsp Sloago ,iq alqu,iud oq II;M spuog aql uo lsaralul '(,,.mgs?oa-d4uoSV ou?dsd„ oql) sexay `suQuQ `•y'N `,CuedwoO;snzl, uo[l;;w Nioh m*N;o Tmg ag y;o oolUo;uaw5ud lud?ouud oq;;e olgs,Csd s? spuog agp;o red?ouud ';oazagp aldpinw .tue zo gasa 0004wo suopuu?wouop u? uuo; paza;slFaz XIIn3 ui pansi on spuog aqy 'sgluow 6up-O£ anlaM;;o asa,t.iep -09£ e;o s?seq agp uo palulnoluo aq Igm spuog aql uo Awnzon isara;ul 'uogdwapar roud zo d;pnlum jo za?lreo ag; HIM zaluearaq; I ragwa;doS ptm I TIOnW bona Pue `LIOZ `I ragwaldoS uo llluplu? alge,Csd s?;sazalul 'za;umzapun agp of ,izam op lugl?u?;o alep oql wor; onion p?M spuog agp uo lsaralu? Pue LIN `I gOnw Pa;up an spuog ably ao>;duasaQ SQNOE gH.L •u?araq pa;sa?pu? as?Mzagpo se;daaxa `(„aoueu[prO„ agl) spuog agp ou?zuoq;nu aaueu?pro aql u? swza; gans 07 pauo?sse s�'enueaw cures agp ansq ;uawal�S ls?ag3O s?gp u[ pasn suua; paz?p�?dua un�lzaO •lsanbar uodn ,u?O agp wozd poup4go aq ,iew sluaamoop gons;o sa?doO ';uawnoop gans gasa of amonjaz Xq lgamluo mace u< pagllenb are Pue saumuums ,Cluo aze u?azaq poupnuoo sluaumoop;o suopduasap IIV •sooueup sl? pue ,S;?O oqp;nogs aorluwzo•;ul urnlrao pue 42aloueug;o weld agp `spuog agp jo suopduosop ;uawals;S Iu?oMo sr a!smollo; azagL „*juour,Sed;o oomoS - SQNOg alull aoS '!yO aqp ulgll?M ,Cl.iadord algsxs; lls;sa?e& `MsI ,Sq paquasaid s;lunl om u?g1?M `pa?nal xsl wazolen pe lenuus;aar?p `puma?;uoo e3o spaaoozd aql uro.g olgeXud aq 1p,m puu X11D mp;o suopeo?lqo ou?pu?q pus pgUA a;nlpsuoo ll?M `pans? aagM `spuog aqy '(„spuog„ aql) LI OZ sauaS `spuog uopsn?lgo lel=g *000`9OL49$ sal 3o L11O oqp iq ouuago agp g;?M uopoauuoo u? („6;?O„ agp) suxay `pooMspuop3 3o Fl?O agp ,Cq oousnssi aql o; loodsaz gpyA uopswzgju? ulepoo opinozd o;araq saoTuaddy oqp pue luawalinS le1oLUO s?qy NOLLORQO2I.LNI Mandatory Redemption If principal amounts designated in the serial maturity schedule herein are combined to create Term Bonds, each such Term Bond shall be subject to mandatory sinking fund redemption commencing on March 1 of the first year which has been combined to form such Term Bond and continuing on March 1 in each year thereafter until the stated maturity date of that Term Bond. Term Bonds to be redeemed in any year by mandatory redemption shall be redeemed at par and shall be selected by lot, or other customary random selection method, from and among the Term Bonds then subject to redemption. The City, at its option, may credit against any mandatory redemption requirement Term Bonds of the maturity then subject to redemption which have been purchased and canceled by the City or have been redeemed and not theretofore applied as a credit against any mandatory redemption requirement. Notice of Redemption Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Bonds to be redeemed, in whole or in part at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar. ANY NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER RECEIVED BY THE BONDHOLDER, AND, SUBJECT TO PROVISION FOR PAYMENT OF THE REDEMPTION PRICE HAVING BEEN MADE AND THE SATISFACTION OF ANY OTHER CONDITION SPECIFIED IN THE NOTICE, INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. With respect to any optional redemption of the Bonds, unless certain prerequisites to such redemption required by the Ordinance have been met and money sufficient to pay the principal of and premium, if any, and interest on the Bonds to be redeemed has been received by the Paying Agent/Registiar prior to the giving of such notice of redemption, such notice may state that said redemption is conditional upon the satisfaction of such prerequisites and receipt of such money by the Paying Agent/Registrar on or prior to the date fixed for such redemption or upon any prerequisite set forth in such notice of redemption. If a conditional notice of redemption is given and such prerequisites to the redemption are not fulfilled, such notice will be of no force and effect, the City will not redeem such Bonds, and the Paying Agent/Registrar will give notice in the manner in which the notice of redemption was given, to the effect that such Bonds have not been redeemed. Book -Entry -Only System This section describes how ownership of the Bonds is to be transferred and how the principal of premium, if any. and interest on the Bonds are to be paid to and credited by The Depository Trust Company ('DTC), New York, New York, while the Bonds are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City, the Financial Advisor and the Underwriter believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof The City, the Financial Advisor and the Underwriter cannot and do not give any assurance that (1) DTC will distribute payments of debt service on the Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Bonds. The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of each such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ('Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book- or sluudiopmd loampul pue;oamQ3o Slgiglsuodsaz ails oq ll!m ssaumo plogouag aql of spuouLfad gons;o puawasmgsip puu `oyQ;o dlgigisuodsaz aql aq lIVA sluediopmd 3oamQ of sluamSnd gons;o luawasmgsip 4jp,4sinaU4ua5V nmdud arli io dlio agp;o dpiligisuodsar oqp si (oy(Ijo an muosoidoi pozuoglne ue dq polsonboi aq Saw se oamwou raglo gons Io) Roo 7g apao of 3saialm puu ledioupd pue spaaooid uopdwapai 3o ;uoui,ted -auip o; aural wog loojja m oq ,few su sluawannboi diolalnSai zo dio;rgels hue o; 1=a qns `dlio oql io 1=Sov pmdtd am `oyQ;o lou pue luediopmd gons;o Snligisuodsai agp oq Ill^ PUB „`aumu laaRs„ m polalswa.r 10 uuo; saaeaq ui siawopsno;o slun000a aqp so3 plaq sapunom q;lm aseo arp ui se saoRowd Smwo;sno pus suoponpsm $mpueis dq poumoA aq Ilin+ siaumo lelogouog of sluediopmd Sq sluawSed •spsooi s,oyQ uo umogs somploq aniloadsai magi rllim aouepmooe m sa;tp olgeded uo `mapsiSag puapV -0mdtd aq; 10 dno aql wog uopeuuogri pmap Quipuodsaxroo pue spugj;o;dpow s,o,l,Q uodn gun000e ,s4uvd!o4mj loanQ liparo of si oogoeid s,oyQ 'oyQ;o anpe;uosoidar pazuoglm ue dq polsonbai oq few se aamwou Imp qons io "oo V apao op apew oq Ili A spuog aqi uo sivawdtd isaaalm pue lediouud pue spaaoold uolidwapag -(Sxoid sngwwo agi of pagoep;e Su psit e m Pagiluopi) alep ps000i aqp uo pa;ipalo am spuog arp s;un000t osogm of slutdiopmd loamy osog; o; sigou omlon Io nupaasuoo s,'oo �g apao su4lsse Sxo.rd snglwuo aqy -alep pzooaz oq;.rage olgissod su uoos se Spin arli of Sxord snqumuo au drew oyQ `samp000rd rensn spi iapun -samp000id I /�W s,oyQ grim oouepi000u m lumdiopmd ;oamQ u Sq pozuorgnu ssolun spuog oql of loodsai gnm aeon so luasuoo lllm (aauiwou oy(l zaglo duu IOU) Aoo W apao .Iou oyQ zagliaN -pawaapa.r aq o; dlunpew gons m luudrogmd;oanQ gaua;o;sacra;w arl;3o;unoare agl lol Sq auiwralap of si aa.4013 s,oyQ `pawoapar omaq am Spurpew u wgprm spuog ogl;o lle ump ssal3l -o•l,Q of lugs aq llegs soopou uopdwapaZl •wasp of Spoomp papinoid aq soopou •jo swdoo pegl lsonboi pue mpsioa�puo2v gmSed aql o; sossolppt pue saweu nagl opinoid o; qsi ,few sioumo Mogauag `ani;ewalle oql ul •siaumo ltiogauag of soogou jpsueil pue mapgo of paaj2e seq lgauaq magi io3 spuog acp Qmploq aaunuou aqp Imp urepcaose o; gspm haw spuog3o siaumo laiogome `oldurm io3 sluoumoop puog ag; o; sluawpuawe pasodoid pue `sllna;ap `siopuol `suogdwapoi su qons `spuog oql of loodsoi gilm sivana lueogiuols ;o saopou;o ump of uoissnusuezl arp luouigne o; sdols uielioo z)p o; gsim Aul spuog;o sioumo lecogauag 'aump o; aural wog loaga m oq dew se sluawamnbai d.roleln.oar so dro;rpps Sue of loa[gns `[uoq; Quowe sjuawa"3uuuu dq pomoAoo oq Illm snm%mo leiogouog of slumdioimj loasipul pue sUmdiopmd loamQ Sq pua `sluudiopmd loampul o; sluediorlmd loomQ Sq `spuediopmd 3aamQ of oyQ dg suoq Tuna uoo .ragpo puu saopou;o aouedanuoo -siawoisno marp,jo 3Tugaq uo sauiplog magl;o lun000a AmdooI io; olgisuodsai mewai Ilim s;uedmpmd loa.npul Pau loamQ aqy •ssaumo leiagauag agl oq lou Saw io dew goigm `pollpasa am spuog qons sUm000e asogm of sluedlopmd loamQ acp jo dlpuapi agl dlao loagai spiooai soya `.spuog agp;o siaumo p:logouag lumoa agl;o aApalmouol ou seq oyQ -digssaumo leiogauaq m aAuego due loaga lou op aauiruou oyQ jaglo qons zo -oo W apao;o oumu acp m uopepsifas magi puu oyQ gpim spuog;o lisodap agy oyQ ;o angaluosazdoi pozuocpne ue dq polsonbai oq Suw se aweu iacpo gons io "oo T apao `aauauou drgsioulmd soya ;o aweu acp m paialsifa r am oyQ gpim sluediopmd poam(jSq polisodap spuog Ile `sia;suar; puanbosgns alnitiot; oy -panm;uoosip si spuog aq; io; walsds Spuo-)looq acp;o osn leap puana aqp m ;dooxo `spuog arl; m s;saialui dMszaumo mogl $upuasasdai salaogyzao aniaoai ;ou llin+ sioumo luppuog -szaumo laiagauag;o;legaq uo Suuou sluediopmd loampul puu 1oamQ;o syooq oql no apew sauluo Sq pagsildw000e aq of am spuog agp m slsasalui digsiaumo ;o spa;suety uopausuap aq; o;m paialuo saumo leiogauag aql goigm g4nomp luediopaed loaiipul io ;oamQ agl wog `sou ploq magp;o s;uawa;els oipouad e clam suoeeai;o slelap aPinold suopewm3 0o uailumpm aniaoaa of poloodxa `sanamoq `am siaumo leiogauag -asegomd rrarp,jo oyQ wog uoileuuguoo uallum aniooaj Wu Ilim siaumo leiogauag •spi000l ,sluLdio4md loanPul puu looa(I agp uo popiooas oq o; wnl m si („ioumo lepgauag„) puog gota;o iasugomd lemou goua;o lsaialm digsiomw aqy spi000i s,oyQ uo spuog oql lo; lipoio e aniaow lgm goigm `sluudiopmd ;Dana r 3nomll io Sq apew oq isnw wolsds oyQ aqp sapun spuog;o sasegomd woo oalP'mmm pe puno3 aq uao oyQ;noge uogewio;m aiolrt uoissiwwoo a4uegoxg pue son unoos agl q;im alg uo am sluediaipmd spr of algeogdda soln-a oS,Q aqj ,� +V V„ 3o Qupez s,zood W pmpuelS a suq oyQ-(„sluedioilmd ;oanpul„) SlioariPm so dl aiiospnm4nonpa`uaguo malo legi suogaiodioo ouuealo pue `samedwoo psnp `s)luuq `sialeop pue siaaloiq sapunoas •S•fl-uou pue 'S'fl rl;oq se gans s.raglo of algeliene osle si wa;sds oy(I agl of ssaooy •saueipjsgns papelaoi sil •jo slasn agp dq paumo si oo,ya 'saiouaSe puusalo pasaisiaai we goigm;o Ile `uopesodioo Suuealo awooul poxid pue uopuiodioo ouuaalo sopunoos lauogex `oyQ .ro; duudwoo ouiploq agl si ooya '(„ooyQ„) uopwodioo puuealo w isnly dsollsodaQ agy;o dmipisgns paumo-dllogm a si oyQ suo4eziue4co satpo ui woo puu `suope odioa ommalo `sanmdwoo ;sap sTmq `siolaap pue ssa)losq soilunoas'S'fl-uou pue'S,fl qloq opnlom spuudiop-md;oamQ -sawogilsao sopunoos;o ;uawanow p oisSgd so3 paau ag3 sa;tmuala sr gy -s;un000u ,sluediopmd loamQ uaamlaq soapold put ssa;sueq Suua DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent/Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book -entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Bonds are in the Book -Entry -Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and, (ii) except as described above, notices that are to be given to registered owners under the Ordinance will be given only to DTC. Successor Paying Ageut/Ree strar Provision is made in the Ordinance for replacing the Paying Agent/Registrar. If the City replaces the Paying AgenvRegistrar, 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, when issued, will constitute valid and binding obligations of the City and will be payable from the proceeds of a continuing, direct annual ad valorem tax levied, within the limits prescribed by law, against all taxable property within the City. Fax 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 for all purposes, nclud ng the payment of debt sere ce. The Attomey 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. Use of Proceeds Proceeds of the sale of the Bonds will be used for (i) construction and improvements to City streets and (ii) payment of the costs of issuance of the Bonds. Authorization of the Bonds The on are issued pursuant to the Constitution and general laws of the State of Texas, particularly Chapter li31, Texas Government Code, as amended, and an election held within the City on November 5, 20U" (the "Election"). In addition, the Bonds will be issued pursuant to the Ordinance to be adopted by the City Council on February 6, 2017, which will specifically authorize the sale and issuance of the Bonds. The Bonds constitute the third and final installment of the total authorization of $24,085,000 of tax bonds approved at the Election. The following table illustrates the tax bonds authorized, issued, and remaining authorized after the sale of the Bonds Purpose Fire Stations Library Park Improvements Road Amount Authorized $ 6,565,000 2,525,000 7,285,000 7,710,000 $24,085,000 Issued Authorized to Date The Bonds (a) But Unissued $ 62565,000 2,525,000 7,285,000 1,858,000 $5,852,000 $18,2337000 $5,852,000 $- (a) Preliminary, subject to change. Includes an estimated $5,705,000 par amount of the Bonds and a portion of the estimated premium in the amount of $147,000 generated on the sale of the Bonds and applied against voter authorization. 11 zl e 3o uoisinipgns paugod xaglo xo ,il;p?dramnui A4uuoo e xo ,tauaoe ue xo aluls m 3o SnOilmSilgo olgelleouou (o) pnu `;ualenmba s;i io yyy miR ssal lou uug nugux;uaugsanui paziu�ooax Xlluuorleu m ,Sq ,Clip'nb;uautisanm o; sm pa;nx axe 400uusua3ap aqp sazuogpne ,Clio agl3o ,Cpoq ouimano2 aq; alep aql uo `lugl puu ,Ciquluaumgsui xo 6oua4e acp dq pamsui xo paaluexmno illuuogipuooun axe lug; suopZ'No nuipnioui `eouaury3o sa;e;s pollun agl3o ,C;iptivaumxzsui xo bua`ou ue 3o suoilunilgo olgmlieouou (q) `eouaui 3o sapnS paliufl acg ,Sq paaluuxmn' lileuogjpuo3un axu ;epp suoi;eAggo Ampnloui `eouauty 3o salels palntn aq; 3o suozieAilgo algmlieauou `laaxip (m) :sailunoos 3o sad,(; ouvnollo3 aqp igyA omesna3ap sliumd mul alm;S luouno spuog otp se gans suoi;e4ilgo a4xegasip op algi4tla an lugl mml alulS 6q pazpoq;nu xaguaxaq xo mou suoi;uoilgo pue sailunoas ,Sun amour „sagunoOS oouusea3aQ„ IMP sapinoxd aoueuipxo agy 'amesea3ap gans xo3 pannbax lunomm agp;o ssaoxa ui s,fauoui ,CuO agl3o ;gauaq aql xo3 mrxpgppm of puu aouusea3ap gans xo3;isodop uo sXououi polsanuiun agl;sanuiax o; `papisodap 61p;utopo sauunooS aouesea3aQ xaglo aln;i;sgns op `anoqu (Z) pue (1) 3o s;uamaxmbax atp quTSpilus of ;oafgns `;qop atp p masax 61lnuotlippu sng ,Clio au •sauunoas aouuseop(l atp uo anp uagm luam,imd aniaoax of (msl algeoilddn ,Sq polyuuad uoipn;psui luioueug xaglo xo) luaae ouidud gans 3o am4u3 aql ,Sq posnuo uiaxagp ,Souaiog3nsui Xue ouipnloui spuog pasea3ap gans 30 luaux6ud aqi xo3 (mul algeogdde iq palp uuad uounlilsui Iuiouuug xaglo xo) luaoe 2ui,Ced gans of olgeimnu s;unome of poadsax grim fliIIgisuodsax xagixn3 ou aneq llim X110 aql xageaxagp pue `spuog agp xo3;uaom Am.W ag;3o sasuadxa pue uopesuodmoo `soa3 xadoxd pue ,Cmssaoau Ile pum `yuam,lEd gans a>lem o; dauom luaiolgns3o �uouxisanuiax;notpyA `f4lllquIlunn aq; omsui of sounl gons;m pum s;unoum gans ui isaxalui pum pdiouud of se amluui Iiim lugl `sailunoas ooueseoaa (Z) xo/pue luoucCud gans xjem of luaiog3ns lunoum ue ui dauoui (I) ismu m `jma it moxoso pozuoglne xaq;o xo `;uaoe oui,Ced e glim ouilisodop ,Clgeaonaxm ,Cq popinoxd si (asimxaglo xo uoilduiopax `,Clunlem pa;els3o uoseax ,Sq oq alup anp gans xaglagm) olep anp naq; o; spuog otp uo panxoou lsaxa;ui snld spuog otp 3o ;unoum pdiouud agl3o luaux,Sud uogm spuog agl3o aouesea3ap acg xo3 sapinoxd aoueuipxo aqy aauusua;aQ ;oaxatp;uampuaum atp o; Am;elan suoisinoxd xaglm3 xo; aoueuipxo aql of apem si oouaxnag luaucpuaum gans ol;uasuoo xo3 ,S.mM;oau spuog ogl3o;unoum lediouud agl3o D4u4uaoxad ummluim aql 5m&mgo (n) xo `.luaui,Sud Bons of laadsax grim uoiupuoo ,fue nuisodun xo spuog ouiptmnno uo ;saxalui xo pdiouud 3o ;uaui,ind;o sums aql AupdpPom (ni) `spuog w um;s;no ,Cum uo olgi!Xrd ledimud op 3o lunoum acp ouionpax (m) `.spuog ouipumismo ogl3o .Cum dq auxoq ;saxalui 3o a;ex otp $uionpax (g) `.spuog p' ipuels;no aq; 30 Xue30 ,Slimlum a p ui anumgo ,fum nui>lem (i) ;o osodmd atg xo3 apem aq kmi luouxpuaum ou `pa;oa33e os spuog 2uipuuls;no wip agl3o;unoure Iudiouud ui sxaploq agl3o /0013o luosuoo agi;noglim lmq; `xanamog `popinoid `1410 aqi ,Cq algexisap xo ,Cmssaoau pamaap si li 3i ooumuipxo otp of anogm pagixasap ;ou luourpuoum Xue anoxdde of aun; of anvil mox3lgoix aq; aneq llugs spuog aq;3o sxaumo3o ,Sluofmm agl;ugi sapinoxd xaquT aoueuipxo aqy sxaploq aq;3o s;saxa;ui aq;;aagu ,Slasxanpu ,Sip:ua;mm ;ou op `,Clio aql xo3 Iasuno0 puog;o uoiuido aq; tti `goigm pue 3oaxagl suoisinoxd acg Lpim ;ualsisuooui ;ou am lugl oomuipxo aq; xapun puisue suoilsonb xo sxapem of pxeSax ui suoisinoxd xag10 gans a>lem (n) xo 10033a ui mnof oun;o3 smxapa3 3o soisnoxd ouipuodsaxxoo xo papuauu se `6£6I 30 40V axnuapuim is[u,l, aqp xapun aouempxo agl Sjilmnb (Al) `sxaploq aq; 3o sisaxalui aql lame ,ilasxanpe 5llepnoui lou op lugl aoueuipxo agl3o suoisinoxd acp glim;ualsisuooui aq;ou Iregs se llne3ap 3o s;uana ppe (ni) `sxaploq agl3o;gauaq aql xo3 ,(lamas xo sigou Imuoi;ippm;umx4 (n) `sxaploq atp3o sisaxalut aql 10a33m ,ilasxanpm 6lp8ualum lou saop ing; uiaxaq; uoissimo xo jo ;pp `,Sl;npiqum ,Cue ama (i) of aaueuipx0 aqi ouiluamalddns xo Suipuaum 3o asodmd otp io3 spuog agl3o xaploq .Cue 3o luosuoo a p inoglim ooueuipxo agi puaum of lg4u ag; panxasax seg JCliO aql `aoueulpxo aqi ui � sP�33o sash Imloy sasuadxg ao�nssI xaglo $ lunoostQ s�xappmxapun :sasuadxg pond pup.4ws pue lsaxalul of lsaxalul pozilelidu03o ilsodaQ $ pima uoponnsuo0 ol;isodaQ SQNn3 30 S3sfl span33o s=inoS lelol spuog acp uo Lun uaxd lam $ spuog3o lunouiv Iudiouud :SQNfl3 30 SgD�MOS :smoilo3 se paiiddu aq Ilim spuog atp3o aius agl mox3 spaaooxd aqZ spung;o sash pum saa.znos state that have been refunded and that, on the date the governing body of the City adopts or approves the proceedings authorizing the financial arrangements, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Bonds. Because the Ordinance does not contractually limit such investments, registered owners will be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that the ratings for U.S. Treasury securities used for defeasance purposes or that for any other Defeasance Security will be maintained at any particular rating category. Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Bonds have been made as described above, all rights of the City to initiate proceedings to call the Bonds for redemption or take any other action amending the terms of the Bonds are extinguished; provided, however, that the right to call the Bonds for redemption is not extinguished if the City: (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the Bonds immediately following the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Future Debt After the sale of the Bonds, the City will have no voter authorized but unissued general obligation bonds. 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. Other Obligations The following obligations, among others, may be issued by the City: • Ad valorem tax -supported debt may be issued to finance capital improvements and to refund obligations previously issued for such purpose. A majority vote of the qualified voters is ordinarily required to authorize the issuance of ad valorem tax -supported debt, other than refunding bonds, certificates of obligation, tax anticipation notes, and public property finance contractual obligations. • Certificates of obligation may be issued for the purpose of paying contractual obligations incurred in the construction of public works or the purchase of land, materials, and other supplies or services for the City's needs and for professional services without an election except under certain circumstances. The certificates of obligation may be refunded by ad valorem tax -supported bonds without an election. In addition, the City may issue certificates of obligation with a pledge of both tax and revenues derived from the operation of the facility to be acquired, or from any other lawful source, provided that the City otherwise has the right to pledge the revenues involved. Authority for the issuance of certificates of obligation is subject to notice by publication and right of referendum by the voters. • Contractual obligations, generally to finance personal property, and tax anticipation notes payable from ad valorem taxes; may be issued for capital improvements. The contractual obligations and tax anticipation notes may be refunded by ad valorem tax -supported bonds without an election. The issuance of contractual obligations and tax anticipation notes does not require publication of notice or voter approval. Tax anticipation notes are limited to seven years amortization or less. • Revenue bonds may be issued for certain purposes which include the financing of the water, municipal drainage and sanitary sewer system, electric and gas systems, convention centers, airports and parking systems, and other economic development projects. The revenue bond indebtedness is not considered in determining the legal debt margin on ad valorem tax -supported obligations. Revenue bond indebtedness, in certain cases, can be refunded by ad valorem tax -supported bonds without an election. • In addition to voted tax debt, the City has the legal authority to issue other debt obligations which could include sales tax bonds, certificates of obligation, public property finance contractual obligations, limited tax notes, revenue bonds, lease purchase agreements, tax anticipation notes, bond anticipation notes, certificates of participation, or traditional bank loans, all without an election. 13 bi Aa1PnIou1 `sapgpluaumjlsul pue S2tau02m sq jo sojinS pall u 1 aq;3o suoppo!Igo (I) ul;sanu! of pozuoq;ne sT A1!0 atp `mpl a;p;s iopujl •aoupgo of laaCgns axe samilod;uougsanu s,,Sllo atp pue met alp1S grog •Ilouno0 jC1!0 atp 6q panojdde saToliod luaagsomn q4!m oompj000e ui pup mml oink Sq pozuotpnp se Palsanul axe spun3 ,4i0 aigelreny sluawisanul IenaZ -aouego of poa qns On salogod luougsanu s,A41D aq; pap meI a;p1s q;og •,C110 ag13o 1!ouno0 pup joSsw aq1 Xq paAoidde sa!ollod luau4sanw q;!m aouppj000p ui mpl suxa•I, Xq pazumpnp sluouxlsmul u! spun3 olgnsanul sl! slsanuT 1412) aqy I LID 3HS 30 SAAI.L0aM0 SAIIW-LS3AKI (INV [-LIHOHMV . 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Iv4oj oq of jualpnlnba si! jo „y„ uegi ssol;ou3o gull¢) m anpq spuog agl;m g lap gans q;!m luolslsuoo luawajmbai e osodun ,Spw suo!s!n!pgns Ieop!Iod gans pup papaauxm se 4apo0 luaumuano0 sexay 49SZZ jaldm40 lay ;uam;sanul spun3 oTlgnd otp iopun sou!Iapino luoagsmuT ldopp o; pamnbaj am: spxay 3o omS aq1 u! suols!n!pgns IeoplIod ;soW -almiS aql 3o somuane oTlgnd jo suoislnlpgns Ieo4lIod 3o snug ou!)Ms atp jo3 s;uoux;smm legal (q) pup saalsrig pup saue!onpg `sa!uedwoo aouemsuT jo3 s;uawisanul legal (m) am `palpjun 10 Palpj jaq;agm `spuog aql papuaum se 40po0 ivaunuano0 sexay `I OZI jaldpg0 lay sampaaojd sapunoos o!lgnd sexay otp of luensmd sexay n!s;nangsanUqlenaZ letters of credit; (2) direct obligations of the State or its agencies and instrumentalities; (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States; (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than "A" or its equivalent; (6) bonds issued, assumed or guaranteed by the State of Israel; (7) (a) certificates of deposit and share certificates meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended) (i) that are issued by or through an institution that has its main office or a branch office in Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and amount provided by law for City deposits; or (ii) where (a) the funds are invested by the City through (I) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the City as required by law or (II) a depository institution that has its main office or a branch office in the State of Texas that is selected by the City; (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City; (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker -dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 1563 3 (17 C.F.R. Section 240.156-3) as custodian for the City with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that have a defined termination date, are fully secured by a combination of cash and obligations described in clause (1) which are pledged to the City, held in the City's name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City and are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State; (9) securities lending programs if (i) the securities loaned under the program are 100 % collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) above, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than "A" or its equivalent or (c) cash invested in obligations described in clauses (1) through (6) above, clauses (11) through (13) below, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the City, held in the City's name and deposited at the time the investment is made with the City or a third party designated by the City; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State; and (iv) the agreement to lend securities has a term of one year or less; (10) 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-l" or "P-1" or the equivalent by at least one nationally recognized credit rating agency; (11) commercial paper with a stated maturity of 270 days or less that is rated at least "A-l" or "P-1" or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank; (12) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share; and (13) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than "AAA" or its equivalent. Bond proceeds may additionally be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations, including letters of credit, of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage -backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in the market index. 15 .rajoa� ou o; spmg luamaa.6e osegamdoi asianas jo ;uamisanuj oql lou;sai pue s6ep 06 uegl asoui;ou of s;uouiaajfe asegomda r asaanaz loulsal (L) `.siaor-ljo;uaugsanu? pue no�jo [E?oueu? j ja?go `samseajy agl joj fmupe.A luougsanui ag?oods op?Aoid (9) !Sorlod luaugsOAm s,,i?D oq; o; oouoiagpe pue sluougsanm uo sloquoo luamafsuem aqp jo;?pnE IEnuuu up uuojzad (5) `sluamannbai osagl of fugsaue uo?lezcuajo ssOmsnq ag; pue ,41D ag; of alge1bon uuoj E ul luamaltls uallum e sangap (o) paE `(spiEpuers ivaurisanu? angoa Cgns jo uoptloidia;ul ue sasmbai io o?rojlrod anlua s,f4lo aql jo dnaxem oq; jo s?s,SIimv ue uo luapuadop s[ uoptzuoglne sap, leq;;ua;xa ag; o;;daoxa) ,Sa?jod;uauzisanu? s, Sl?o agl Aq pazuoglnt ;ou ose leg; uopezmufio ssamsnq aql pue ,u?o agl uaam;aq palonpuoo suopoesuez ;uougsanu[ apnjoaid of poluamaldun uaaq aneq sampaoad put sloquoo olquuosea.r jvgl afpalmomloe (q) `fogod luougsanut s,A4!D agl mows pue an?aoai (e) :ol 2410 aql ql?m uopotsueR luougsanul uu m OMuo of fuuajjo sung jo an?lE;uasardaa paggenb acp annboi (4) `.l?ounoo agl pue uo?ss?unuo:) so?gig suxay agl ql?m luamalels t olg pue d?gsaoiREla7 ag; asolas?p of �Tl?o aq; o; sa?IumoOs Ilas of funlaas sung glen sanpolar jo sd?gsuoptloi ssau?snq jtuosiad gl?m siaogjo ;uaugsanu? .Cue onnbw (£) `.uopnjosai .ro aouEu?pro `iapzo `olru aA?;oadsai aq; u? )C5ajv4s luau4sanu? io Xo?lod luouusomm sll ragl?a o; aptm safuego J(uu sproaai put sa?fa;tsls luaurysanu? puE fogod;uau4sanu? sl? pomatnai sug 1[;Eg; fmlels uo?injosai io aouEu?pio `iopzo `olni t;uaumRsu? ua;lum Xq ldope (Z) `.SafajEu;s pue sa?ollod poldope sll ma?naz �Irunuue (1) :ol pa.rmbW ljjtuop?ppE s? Kl?o acp `mel ajujS aapufl SIIOISIA03d jEIIOI;Ipp�+' 86b`6Z9`9b$ 089`Ib9`94$ 86b`6Z9`9b$ ogojuod Itloy ZL9`Z55`b ZL9`Z55`b 9804Z99`17 qn'J £Ib`LLS`Z£ £Ib`LL54Z£ £I44LL9`Z£ roo(lluaugsanuj 000400546 $ 969411966 $ 000400546 $ saqunoaS luaun l;)A0D antes antes palsanul Xoog Ialiew jedjouud :smojloj se aram 9IOZ `T£ �SInI uo saouElEq;uaugsanm s��il?� aqy s;IIangsanIIi;aaazno saprjeluanmgsu? pue sa?ouaft s;l io sa;e15 Pe;mf[ agl jo suopeftjgo puE slunoaot;a lnm fauom `;?sodap jo saieag?1 as u? slsanu? ijlezauaf il?o agy ,; sluaugsanuj jefa'j„ sapun anoge poquosop mE[ a;e1S .rapun algemolp sluougsanu? Xi B apnloxa ;ou saop ,io?lod ;uou4sanuj jo;uamaltlS s,64lD aqy •mtl alels olgEo?Iddu gllm aouupi000e ui sluou4sanul amibai solo?lod s,F1?o agy -f4!D agl jo I?ounoo pup zoAw oql mozj lluoglnt uallum ssaidxa lnmpl m spun] f4lD ;sanu? Xinu uosiod o,\j wq olels (q) pue s;uatuOins "$ojugs luamisoAui paldopE (t) :ol poltjas 11 se o?jojirod luaugsoAui acp jo oouegdmoo aql (L) pup `pai?nbou sum luau4sanut jenp?n?pu? goea golgm joj dnoaf pmg palood io punj io lun000t oEp (9) `lase palsanu? jfjaleiedas goea jo a;ep ,4jJUiEur agl (5) `pouad fmiiodar acp jo pua agl le lasse polsll XjalEaedas goea jo anjtn;ayiem pue anIEA looq agl (4) `dno.ff purg palood goea jo pouad fun.mdw acp .roj lsoj;)Uq paruoot Xllnj agl pup anjtn la)uem fu[pua agl `onjeA TO)IJUm fuunufaq oq1 (£) ° lodoi aql poufts pue po adasd AIU: o[ siaogjo luougsanu[ Ilt ;eg; (Z) :, jo aq1 jo uoplsod luamisanu? agl (1) :fu?I?ejap uodai luau4sanui ue lmrgns [jugs f4jo oql jo sraogjo ;uou4sana? agl `.�jsalatnb lsuaj ly „-poAuap aq of omoom a[gEgoid agl put Mlduo jo f4ops olgegord ag; fuuap?suoo `luau4sanu? ioj ;nq `aoclelnaads ioj lou `snejje umo s,uosiad oq; jo luamafeuem ag; ul os?oiaxa pjnom aouaf?jjalu? put `uo?;aIos?p `oouaprud jo uosiad e p g; `saoutlsumono fu?jmnaid sapun `aaw pue luou*nC g;?m„ opuw aq lsnm sluamisanul f4lD `mej sexay sapull •pja?/i (9) put `o?loj>sod aq; jo uo?;eag?sian?p (5) `;uaugsanm goea jo A?I?qt;aVn:m (q) `,fl?p?nb?t (£) `tEd?ouud jo �Siajes pue uo?;EnJasa.rd (Z) `add ;uaugsanui jo fl?j?gtims (j) ouiUIaamoa sanpoa[go s1l oquosop IpAk luauralelS BaX4S ;uaugsanuj goeg 'luamgSOAUI ,spun] goea sassaippE 6lleagtoods ltgl „luamalelS aalsnS ;uau4sanuj„ paldopE 6lreuuoj E g;?m luols?suoo polsanui aq;sncu spun] 2410 I[d 'lov luounsanuj spund o?Ignd aql igyA juals?suoo sluaugsanu? Bons jo uoptpmbg agl pue spun] o?ignd g;?m pannboe s;uaugsanm u? safuEgo fupti sonuom o; sampaooid pue `s?seq luouiked snsian /iOAilap E uo `spun] jtnlnm pue spun} food ;uau4sanu? ;daoxa `suopoesuan IIE jo ;uamalljOs joj luaurannbaz e `spunj otlgnd gl?m parmboe sluour;sanaj jo ooud;a>uem oq; iolluour of spoglam `sdnoj2 pun} palood ioj pomolre ,i gwui palgf?am-zejjop Ol tsant um upmui aql �uaugsanuj renp?n?pul due jo 14ywm palels olgemollu amunxem `spun] ,Cl?D ioj s;uaugsanm pazuoglne jo;sg a sapnloa?;Eg; pue :;uamafeuem ;aaurisanut jo dl?[?gedEa pue X1?tenb ag; pne `,t;unlem `Pla?.0 `ao?;eag?sian?p ;uamgsanu? ssaappE ;Egl `.Al?pmb?I put jed?auud jo /Clajes az?sEgdura �Sjutmcrd sa?ogod;uaugsanu? uallum iapan spun] sl? ;sofa? o; pa.rmbai $? A�I?o aq; `mtj sexay .rapu jl salagod;aaagsanal than the term of the reverse purchase agreement; (8) restrict the investment in no-load mutual funds in the aggregate to no more than 15 % of the City's monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements; and (10) at least annually review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. CITY TAX DEBT Tax Supported Debt Statement 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 2016 Certified Net Taxable Assessed Valuation (100%of estimated market value) ....... $ 3,267,348,436 (a) Direct Debt: Outstanding Tax Supported Debt (as of January 1, 2017)................................ $ 5%500,000 Plus: The Bonds.................................:....................................................................a. 5,7051000 Less: Self -Supporting Tax Debt....................................................a.......................... 30.240.000 (b) Total Tax Supported Debt ..... ..... ........................ ....................... .--------------- ........ $ 349Sz5-.204 Debt Service Fund Balance (Unaudited, as of September 30, 2016)................................ $ 200126 * Preliminary, subject to change. (a) Provided by the Galveston County Appraisal Di str ct and Harris County Appraisal District (the "Appraisal Districts") and net of exemptions. (b) Debt supported by funds provided by the Waterworks and Sewer System. [Remainder of Page Intentionally Left Blank) 17 SI a4uega o;;aafgns `,Sizucmga� sanuanai lamas pue sa;em aq;.fq paicoddns;qap sapnloxa puz spuog acp sapnlaul (o) a4uega o; Too Cgns `6 zmunlaid Sp o sasodmd uouagsnlll io; sa;ei;axseui P' pa;emgsa;saza;ul (q) •sonuanas.camas pue 3a;Bm Sq pauoddns;gap sapnloxg (e) aa2ump o;;oo fgns `Kmmunla.cd * (0)6I9`£Zb`Z$.......... ....................................(S£OZ-LTOZ)s;uamac{nbaglenuuyaoexanypa;emusg b9L`Sb0`9b$ LIL`b58`I$ 000`SOL`S$ Lb0`68b`8£$ sle{oy £I5`b61 £i5`b61 5£OZ 00£`£61 00£`£6I i'£OZ I£L`96I I£L`961 ££OZ 908`b61 908`b61 Z£OZ 05846604£ 008411 0004069 0504864`Z 1£OZ 058`L604£ 0084b£ 000`0% OS0`£05`Z 0£OZ b664L604£ OOL`99 0004S£S b6Z4905`Z 6ZOZ 69£`L604£ OOL-LL 000`5I5 6991705`Z 8ZOZ SZ669604£ 0084L6 000406b 8ZI46096Z LZOZ 99VS604£ 0086911 000`09b 9S94TZS`Z 9ZO6 6194S604£ 9L9`Z£i 000`Sb17 b1764LIS`Z SZOZ I8V8604£ 9M917I 0004S£b 90£4LT9'Z bZOZ b6b`9604£ OOL`85I 0004OZfi b6L`Llgt £ZOZ 1£049604£ SLO`ILT 0004SOfi 95646I9`Z ZZOZ 9054S864Z SZ4`I8T 0004S8Z 1804619'Z IZOZ IST49684Z 009`L8I 000`06T lW81S4Z OZOZ I£b`L68`Z OOV161 0004061 I£0`9IS`Z 6IOZ bb94L684Z OSI`S6T 000458I $ V6174LI54Z 8IOZ 6L86Ll9`Z S LIi 56 $ £99`ZZS`Z $ LIOZ s;uam (q);sasa;ul *Ind e aainsaS 0£/6 aocncaS;gaQ *spuog agy :snld ;qaa pgoy ompug Po.L ;uannD C3 spuog aq; uo;sasa;m pa;emgsa pue Iediaupd aq; snldpa7soddng xey Qmpue7sOnp sCl�� aq; uo;saia;m pue p:dtouud aq; quo; s;as ou�mollo3 aqy alnpagaS aauzag;qaQ paaaoddnS xey emaog-old Estimated Overlapping Debt The following table indicates the indebtedness, defined as outstanding obligaL ons 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. Taxing Jurisdiction Clear Creek Independent School District Friendswood Independent School District Galveston County Hams County (a) Harris County Department of Education Hams County Flood Control District Hams County Hospital District Port of Houston Authority West Ranch Management District TOTAL ESTIMATED OVERLAPPING The City (b) Debt as of Overlapping December 1, 2016 Percent Amount $ 857,265,000 3.19% $ 27,346,754 977150,000 99.94 97,091,710 238,628,434 9.62 22,956,055 2,303,812,874 0,15 37455,719 7,000,000 0,15 10,500 83,075,000 0,15 124,613 62,815,000 0.15 94,223 65759947397 0.15 986,992 24,430,000 100,00 24.43Q000 $176,496,565 Total Direct and Estimated Overlapping Debt (b) 34,965,000 $211,461,565 (a) Hams County Toll Road Bonds are considered self-supporting and are not included in the amount shown for Harris County. (b) Preliminary, subject to change. Includes the Bonds and excludes debt supported by the water and sewer revenues. Debt Ratios Duect and Direct Debt (a) Overlapping Debt (a) Per 2016 Certified Net Assessed Valuation ($3,267,348,436) 1.07 % 6.47 Per Capita (39,487) $885 $5,355 (a) Preliminary, subject to change. Includes the Bonds and excludes debt supported by the water and sewer revenues. 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 Distrito The appraisal of property within the City is the responsibility of the Galveston County Appraisal District and Hams County Appraisal District (collectively, the "Appraisal Districts"). 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 oz �s1104e4?Igo IenTomTuoo pazuogpne pue sosodmd ooueualu?em `ao?nias lgap io3 pastes oq of pamnboi;unome aq; pne I fimtmf fu?paoaid oip jo se f;?D aqp uqp?m fuadoid;o uonmjen aqp uodn poseq I?ounoD 1410 oq; (q pas si uogexel;o olvi aqp `fp?D aql (q paAmow s? you les?eidde paggiao aql alep oqq cage fep q;09 aqp uo 0£ iagmaldoS;o ialel aqp aio;ag -(lquo Ieluounumo4 Jaq;oue of suo?loun3 qons Ja;s=4 of sloola 11 ssolun saxes sl? ;o uogoolloo aqg Jo; alq?suodsoi si f;?o aqy saxey Jl uolgaa11 pue fnaZ Iios Iesleidde ue uo (lsno?nandsou (liadoida sles eidde pue `suoµ?pual ueq; ialfoo!q aie goigm Slestuidde `000`I$ iano sanlen ojadoid paseaJou? 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Janagxgm `onlsn;wpeui io amen f;?nponpoid;o s?seq aqp uo posmidde s;aamannbaJ melJaa;aam ga?gm sa?uadoid gans aneq o; fldde fem pueli)quiq pue lem;lnoc>o'e3o Jaamo alquga uy '9ZL49£9`L95$ of ;unouie go?qm uogdumo pealsamoq leuoq?ppe gons polueio f410 oq; `91OZ maf xe; Jo3 �anlen TaYJem ;o /OZ o; dn;o suogdmaxa pealsamoq puquein;o uo?;do aqp sluaunuano4 leool sguuad uognlgsuoo a;els agy 1101 xel 9IOZ MIT mog 8I641,98498$ of pa;unoue suogdmaxa sueia;an palges?p pue suogdmaxa 59 Jano asaLLL '000`SZ$3o pealsamoq Iequop?sw magp3o onlen;wIlem mo g uogduam Ieum ppe ue io; (Idde o; pal;qua ale Japlo pue 59 save am oqm siafedxe; `uo?;?ppe uI fliadwd algexe;3o 0004£$30 luaLxa aql; o; (Iuo `sueua;an palges?p jo flJadoid pue `.sal?gomo;ne paumo-fllenp?n?puI Isoui `.sao?nap Maw paiamod-puyA pue Jelos `.sa;?s leouols?q pa;eun?sap !sloogos pog?lenb pue `suo?lez?uepio sno?agar `suoge?oosse ;uamdolanap glpnof 4suoquzjim9io algeluego fq paumo fliodoid un;llao `.ioanpoid aqp fq pouv o slonpoid uliq :s;oagja Ieuosiod pue `swiddns (I?me; `spoon plogosnog u?e1Jao :mel leiapa; (q uopexep maiolen pe mo4 Tdmaxa fliadoid `sasodind o?Ignd io; pasn flJadoid `suo?s?n?pgns Ieaq?Iod s;? io sexay;o 0114S aqp fq paumo fpiadoid :opnlou? fiiodoid Iduma;o sauooaleo led?ouU.1 •asn psulsnpu? io le?oiaunuoo 01 paTonap you fuadoid leuosiad alg?a,4u? Jo alq?Auun Iloi xel aqp uo opnloui o; slo?Jls?Q Iespsiddy ag; fq apem oq o; pa;oadxa s? 1Jojja ou `Janamoq `.fp?o aqp (q uogexel of loafgns = 1410 aqp ul sn;?s xe1 a q;?m (piadoid leuosiod alq?Que;gn 3o sauonawo uleliao pue fyadoud Ieuosuad alq?oue; pue Mi Ile `meI sexay fq papinoid suogdmoxo u?elzao Jo;;dooxg f1I3 aqT fq uogexey o;laafgnS fliadoid s?seq ap?m-flunoo so auoz e uo palonpuoo aq II?m sles?eiddzai iaq;agm Jo slouls?Q p:s?uiddy aqp (q paz?Ign aq lI?m sles?eiddeai;o (ouanbag legm umouX;ou s? 1l 'sJeaf aaiq; fzana aouo;seal;¢ louls?P Ies?eiddu aq; u? fliadoid leas Ile 3o Ies?eiddeoi io; op?noid Isnm veld gonS -sanlen pas?eidde aTepdn of fiiodoid;o pts?emddeai o?pouad log ueld e;uamoldun o; lo?JTsIp Iusmdde goea saimbw opoD xej, fiiadoid aqy -joins?p lesnudde oqT u? oled?oimd Tegl s;o?.qs?p uopuureloaJ pile uo Qsuoo aq; `a;on o1 papqua;? `pue slocgs?p loogos `sumo; `sa?l?o Ile pue flunoo ag;;o sa?pog ou?manoo aqp fq paloala sioloanp;o pseoq e fq pamanoo s? 1014Slp lesiuidde agJ, •Ies?eidduoi io uoqunlunaz ;o fouanba;I ;)TIT ou?uualap io spiepuels psn dde qs?IgeTso sou saop fuD agp opoD xmL fluadoid oql iapun `Jeaf goea Saxe; sn? Qugoalloo pue B'ULWI pue sales xe; pu?gsggelsa io; fl?I?q?suodsw aqp seq (11D aqp xpnoglly sapiadoud Iunp?n?pu? 3o uogenlen agll a4ualp:go `Janamoq `lou fem 1?un Qu?m y -uogdmaxo um;o TJed u? uo asogm u?;ueJB aq; so spJoaaJ Ies?eudde aqp moo (liadoid jo uo?snloxa aqp `,randoid jo fio2oleo ulwao e;o slesmidde;o Ianal aqp ouMpnlou? `pueoq malnau p;s?eudde aqp oio3aq siallem u?eliao afuallego of pal;qua we fT?D aqp se gons sl?un fu?xel uog?ppe.ul •flied fue fq palsanbau 3? `fmf e fq io ' moo ogll fq pounuualap aq 1pm uogsanb ua f iodoid agl;o amen. men ;Al `luana gons ul -ua)Ie1 s? Ind& aqp qo?qm mog iapio aq; iopun anp xin jo;unoure aql Jo `Jalwig s? Janago?gm'Jeef ioud aq; ui posodun xel;o;unoure aqp io alnds?p u? Too si legl panlonui fyiodoid oq;;o uoquod legB3o amen aqp uo anp xe; all fed Isnm iaumo fiiodoud aqp `Janamoq `alep fouonbuilop xm (ue io Pad& gons of uoud alimoo louts?p sexo'L a u? Tins ftilg fq pmoq mallAw Xreidde aqp fq uogeumualap pug e Ieadde few pieoq mmw Inmidde aqp qqA aogou polg Hang; seq oqm Jaumo kpodoid Sue `Janamoq `.f D ag; ugp?m (ljodoid algexe; IIe 3o amen aqp !?upgpuialap io; fp?I?q?suodsw alemgln aq; seg pseoq mo=i jugeidde aqZ -ieaf Sulp000id aqp 2uunp pafuego i(Imdoid aqp ;o d?gsmumo;? uanlo oq osle Isnm oocToN wJeaf xe;;uaimo al u? pos?eiddow sem fliadoid asogm io ieaf nu?paowd aqp IIoJ p:spudde aqp uo Too sum fluadoid asogm uo iaumo fliadoid aqp fq paiapuai amen oql io Jeaf xel loud aqp um p Jagn?q pasmdde st amen fycadoid asogm iaumo fluodoud goea of `algeogoeid se iageaimp uoos se io `SI few aio3aq ao?;ou ualium anf;snm JasluJddu3algO aqy •amen;a)IJem uodn paseq ueaf goea jo I Kremer jo se fluadoid 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 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 twenty percent (20%) 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. 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 right to redeem the property within two years of foreclosure, or by bankruptcy proceedings which restrain the collection of a taxpayer's debts. Historical Analysis of Tax Collection Collection Ratios - Tax Rate % of Collections Fiscal Net Per $100 of Current Yeaz Tax Assessed Assessed Adjusted Year Total Ending Year Valuation(a) Valuation Tax Levy Collection Collections 930 2006 $2,016,928,535 $0.5821 $11,740,541 9823% 99.93% 2007 2007 2,142,814,539 0.5464 12,351,183 98.73 99.94 2008 2008 2,296,51L002 0,5797 13,230,005 99.12 99.91 2009 2009 2,340,816,373 0.5797 13,482,173 9936 99.89 2010 2010 21355,799,675 0.5851 13,680,511 99.47 99.90 2011 2011 2,388,586,542 0.5902 137984,872 99,51 99.86 2012 2012 2,4337635,561 0.5970 14,4157212 99.63 99,85 2013 2013 2,504,251,452 0.5914 14,700,279 99.77 99.80 2014 2014 2,589,580,779 0.5914 15,424,947 98.93 99.70 2015 2015 2,974,5203186 0.5687 16,373,658 98.93(b) 98.93(b) 2016 2016 3,267,348,436 0.5460 17,691,957 (In Process of Collection) 2017 (a) Certified by the Galveston County Appraisal District and Harris County Appraisal District and is net of exemptions. Also, such value is further subject to change as additions, corrections, and deletions are made to the tax roll. (b) Collections as of September 30, 2016. 21 ZG aTp of sluawlsnfpn;uonbosgns of anp;uawaln;$ lnioTJ30 silp u[ =Tmoslo u&Aogs osog; wog SajjIp ,Snw antuA (n) anlnA passassy;ON 98I`OZS17L6`Z$ 6LL408946896Z$ 9£b`8b£4L9Z4£$ b£8`S066885 IOL`bLI`£LS 6bL`L56`899 s;uougsn[py pun uopdwaxg :ssorl %00'OOI £T9468b68L14£$ %00'00I L884b694Lb5`£$ %00'00I 58i`90£49£64£$ anluA possossy ssoug £O'T £Z6`LZ8 OI'T OLZ`b5T`6£ 00'0 0£L`LL Inuosiadiaq;p 9I60 099486149 8T'0 068409£49 b0'0 019456L41 /CTo;uanul p;ag bb'I IZb4£Z64Sb bi'T TZ£`S6Z`0b 9£'I L68`£iL`£S Inuoszadssmis% Si I S69685L4017 00'T OT9`6bb`S£ LI'T bb6460669b SOM11.4il Lb'0 5£94£8 t7l LZ; 0 99£4ZZb46 ZT'0 £06`9b517 slnlawyQ Z£'9 0504£b8600Z 6817 £9I4995`£LI 85'S L004915`6TZ Inc9snpuLF!oiaunuo3 8i 0 0£S4L5648 SZ 0 Ot V696`8 b9'0 Lb6`5OI`5Z gouex W uund £6'0 9L9`9Z5`6Z I6'0 bOZ`ITZ`Z£ L£'0 8b14I8b`b1 oiitwoy 0£'I SZ91OZ4T17 Si I 58b6SOZ6bb 60'T 8686L£0`£b slaysy/slorl lueanA %6L'L8 805489£406L`Z$ %ZO'68 8££`090`85I`£$ %£9'68 TOZ`TZI`8ZS`£$ Inpuap;sag f4iodojjjo o y % lunowy lunouzy % ;unowy % 1IO2IXV1VTOZ IMIxeySiOZ IMIXuy9TOZ - uopnqp;sTQ aseg xey - asng xny 3o sTs,ilnu� 'anp xe; atp3o %0Z paaoxa o;;ou `ia6ndxn;;uanbu.lap aq; uodn pasodcw �Sllnuad puouippn un wog algn6nd a.zn ,Cauioun xel;uanbmlap su Quuon so; .fauioun gans anp soa; agy .f4Io aq; anp soxu;;umbwlap halloo ol;ms aIg o; siseq louuuoo u uo Xouioun xn;;uanbuilap a pauinlal seq f3TD Oq; `„ saxny;o uoiloolloD pun ,Snarl„ xopun paquosap sagluaad pun sampaaoid Ieoal aTp of uoT;ippn ui OL6S'0$ bi65'0$ £990'0 II90'0 LO£S'0$ £0£900$ ZIOZ £TOZ - sampaooid uopoalloD xey;uanbwlaQ - bT6940$ L895'0$ TT90'0 STLO'0 £0£S'0$ ZL61710$ bIOZ SIOZ - uopngpAsTQ a;ng xuy - 09119'0$ Ob80'0 OZ9b'0$ 9IOZ Iulo.L aaTn�ag;qaQ aaunua;ulninT - Principal Taxpayers - Principal Taxpayer Type of Property Reserve at Autumn Creek Ltd Texas New Mexico Power Co. LSREF3 Bravo Houston, LLC Kroger Co. Autumn Creek Development Ltd. A-S 108 Friendswood Crossing LP H E Butt Grocery Company PS LPT Property Investors FM 528 Bay Area Blvd LP HCP Friendswood LLC HSRE Friendswood LLC Timber Creek Holdings LP G&I VI Sky Hawk LP Denbury Onshore LLC Apartrnent Complex Utility Company Real Estate Grocery Store Shopping Center Shopping Center Grocery Store Real Estate Shopping Center Assisted Living Assisted Living at Estate Apartment Complex Oil and Gas 2016 Taxable Assessed Valuation $ 27,625,898 18,019,376 14,606,974 13,101,428 7,87%910 6,859,910 6,086,480 5,826,000 5,533,556 5,425,000 (a) (a) (a) (a) 2015 Taxable Assessed Valuation $ 25,406,546 16,687,804 12,378,326 12,965,039 8,024,200 67796,870 5,950,240 (a) (a) 6,612,300 8,000,000 5,614,359 (a) (a) 2014 Taxable Assessed Valuation $ 21,110,108 14,801,749 (a) 13,641,468 7,189,780 6,796,870 8,149,920 (a) (a) 6,995,240 7,535,390 (a) . 9,683,100 6,397,460 Total Ten Principal Taxpayers $110,964,182 $108,435,684 $102,301.085 Percentage Ten Principal Taxpayers Comprise of Tax Roll 140010 3 Cr5% (a) Not a principal taxpayer in such tax year. - Tax Adequacy - Estimated Average Annual Tax Debt Service Requirements (2017-2035) .......................... $2,423,619 (a) Tax Rate of $0.079 per $100 assessed valuation against the 2016 Certified Assessed Valuation at 95% collection produces .................... $2,452,145 Estimated Maximum Annual Tax Debt Service Requirements (in the year 2031)............... $3,099,850 (a) Tax Rate of $0.100 per $100 assessed valuation against the 2016 Certified Assessed Valuation at 95%collection produces_ .............................. $32103,981 (a) Includes the Bonds and excludes debt supported by the water and sewer revenues. Preliminary, subject to change. Sales Tax Authority - The City has adopted the provisions of Article 1066c, Vemon's Texas Civil Statutes, as amended, which grants the City the power to impose and levy a 1 % sales tax. The City has also voted an additional 1/2 %sales and use tax for economic development under Article 5190.6. Vernon's Texas Civil Statutes, as amended. The City may not and has not pledged the proceeds from the sales and use tax as security for the Bonds. 23 bZ 'sluamaleTs leloueug pallpne s,,SaID :ooznoS gsazalm pus sopleuad sopnloul (q) 9IOZ `0£ =aquia;daS;o se `paylpnsun (s) 9b5'SL£'ZZ$ ZOL'£L9'IZ$ 0176'Z£O C S 008'96L`Us 88Z'I I£'bZ$ LZ£`9 c I 996498£ ££S`SSL £LL`bSh I£6`48b`I £0£`4004I I084Z00`T £b04£80`I £bS49£O`T 9L9`OSO4I OL6`ZZ9`Z £I845L94c ZLO`ZLL`Z L584LI6`Z bI0`£L64Z — -- --- L4645Z6 I494506 OZS`ZZZ`£ Obb`bbi`£ 696`ZSL`c 64£`990`Z 058`I40`Z Z54`0£0`01 ££9400040I ISO`Zbb`0T 9T 5`L9T`TT SSZ9£9`IT bL6`85Z`b $ 050`46I`b $ ZLZ`46I`b $ SIS`LZZ`5 $ IZ6`SIZ`b $ ZL£'LbL`OZ$ £00`899`IZ$ OSi b£L`ZZ$ £££`ILS`£Z$ £6Z`T98`SZ$ ££L'66 ZOO'Z6I L£8'ZL 686'45 L08'9Z£ i — — Ob64ZL Z86`98 ZOb`Z9 9L9`IZT 61764I8 b£T`9OT OLL`b9 S65`O6 b59`bZb £O54LLZ Z9Z`Sb5 60Z`89Z LOI`66Z £16490141 8IZ`bLZ`I 49b`LZ£`I Z£b`68Z`I LL£`bLL 6IZ`S66 9£b`406 L£948Z8 Z8Z`LL8 090`808 955`955`I 85Z`£85`I 5194£L941 L55`9ZL`I Z£Z`6LL`I ££6`0£6`£ 89L`8I£`b £SZ`9ZL`b 98I`T6Z`5 IL84Z5£`S 8£9`SOS`ZT$ 698`5£O`£i$ 9S6`S6£`£IS 8L0`468`£I$ Zb8`89£`bI$ £IOZ bTOZ ZIOZ STOZ (s)9I0Z 0c zagmalaaS papag zeaA lsosla samllpvadxa leloy aoin S 1go(I dspnp lendeD ,fjugl uOReazaag Poe EoPed lnamdolanaQ FgmnunnOD s JOA� allgnd pue laamdolanaQ,Clmnm UOD fla.TeS allgnd mu lvaAOO lezauaD saUfUI(ImaJx'd sanuanag Isloy sanuanag zaglp suo4nuoQ S;Uam;SQAUI UO;Sa3aTUl Islnam UOAenJalm saga PMsli=aa sorry?o;zoa ag soma saga soslga a saxsy sales (c0 soxey ,Lizadozd IezauoD sHI)NHAn spuog aql uo zsaza;ul pus ledlOuud .Sed o; p04pald azs `aaustnpzp aq; ul papinozd se saxel mazolen pe moz3 s;dlaoaz uegy za po YqD ogl;o sanuanaz Sus lsgl lTdmi of popualuljoust olge; auimollo3 aqy jo uolsnloui aqy 'smog luosg ang lsed ally zo3 pun31eamoo s,S41D acp;o sasuodxa pue sanuanaz3o;uamalels pasuapuoo s sl qurtAollo3 agy pang TeiauaiD s,Syta aq;;o suoyeaadp Tealioysig �ZF�Q'IVI�N�AiI3 Q�ZD3'IaS -s;uamamys lelousug pa;Tpns s,.Sl;� :aomoS 9IOZ `0£ zagma;daS;o se `pa;�pneun (s) L"Z£ 08T'0 (SIOZ) ILS`ZS£`S (e)9TOZ £"b£ 40Z; 0 (bIOZ) 98T`T6%S STOZ Z"Z£ 88T'0 (£IOZ) £8Z49ZL4b 4TOZ 6O£ LLT'0 (ZIOZ) 89L`81£`b £TOZ I'8Z b9I'0 (IIOZ) ££640£64£ ZIOZ 9'6Z ILI'0 (01OZ) £Z94I£0`b IIOZ 8'8Z 99I'0 (60OZ) OZO`Z88`£ OTOZ 906Z TLI'0 (80OZ) V98`006`£ 60OZ L'0£ LLI'0 (LOOZ) 556`Z6L`£ 800Z b'££ b6T'0 (900Z) ZZ9`OZ64£ LOOZ %6Z£ 66T'0$ (SOOZ) 6£9`OL94£$ 900Z and luau zsaA xsy sT iaa—� ag zey 0£-6 PaPu3 lenyod3o % ays2I xe,L yualenmbg asfl P� �IeS �al> Isosca suosue moD xey mazoleA Pd asn pus sales s,641D agl3o ,izolslq uoryoalloa scs,Slsue as sl $uT,vollo3 aqy "2[tenuus aalml;seal le llmaz oy pazcn6az sl zalloz;dmo� aql a;nlsys Xg a,Cplluom suoRaalloo xs; sales;o uoRzod s,�Cll� aqy sylmaz Ll;uazma `aa; aocnzas %Z s;o uollonpap zags `zalloRdmo� alslS aqy - lzoysM uoyaa1100 - General Fund and Debt Service Fund Balance for the Past Five Fiscal Years Fiscal Year Ended September 30 2016 (a) 2015 2014 2013 2012 General Fund $11,986,625 $13,55%674 $12,519,580 $106065160 $9,087,219 Debt Service Fund 200,126 177,670 130,147 17%828 245,752 (a) Unaudited, as of September 30, 2016. Source: City's audited financial statements. 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 2 to 1. 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 January 6, 2017, the City employed 232 full-time employees and 68 part-time and seasonal employees. All full-time employees are covered by TMRS and the City's contribution for fiscal year 2016, amounted to approximately $1,989,044. The City had an unaudited net pension benefit obligation in the amount of $654,726 as of September 30, 2016. The liability for prior service benefits will be amortized over a period of twenty-seven 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 3Q, 2015 is attached hereto in the APPENDIX B. Copies of such statements for preceding years are available, for a fee, upon request. ADMIlVISTRATION 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 Friendswood" (the "Charter") approved by the electorate October 16, 1971. The Council is elected at large on the first Saturday in May. The Mayor and six Council members serve three-year staggered terms. Members of the Council are described below: Term Expires Council Members Period Served May Occupation Kevin Holland 4 Years 2018 Chief Financial Officer Mayor Steve Rockey 4 Years 2018 Chief Operating Officer Council Member Billy J. Enochs 5 Years 2017 Consultant Council Member Jim Hill 10 Years 2018 Self -Employed Mayor Pro-Tem Mike Foreman 9 Months 2019 Business Owner Council Member John H. Scott 5 Years 2017 Operations Manager Council Member Carl Gustafson 3 Years 2019 Engineer /Project Manager Council Member 25 9Z NOIMEIRUSIQ QNV grlvs,, %jlne;a(j3o;uang agl ai sarpauia�T„ par „spanj jo sash pue soomoS„ „`suoi;aarlg0 iag;o„ „`;qoG am4n3„ „`=IsXS LiuO-,CRug-)loog„ suopdrogns acp ldooxa) „SQNOU HHL, suoildeogns pue suopdeo agl lopun luamalelS lelog30 aql ui puuedduo;suo3u emauaa i saq Tasano0 pang -spuog agl3o ,Sranllop pue ales arp uodn luaoupuoo an: saa; legal asogM `lojpwopu jl agl of 10suno0 `sexaZ `uolsnoH `dfl'l uo6ua}l cpm}T smarpuV Xq raluMzapun aql io3 uodn passed aq Illm sragem Iv5Q1 uielaa0 spuog ag;;o ,Lranilap pue ales aq; uodn;uoftluoo aie spuog aqj jo aaurnssi ag; g;im uopoauuoo ui pauopuar saoinlas jo; Iasuno0 puog pied oq of saa; IsoaT aqy -spuog ag13o aouenssi aq; gpva aopoauuoo ai J1110 aql sluosaidai Sluo pue .Cq paft�ouo uaaq nil Iasuno0 puog `spuog agl;o aouenssi oql of palelanm ssalleui ui ouni of ouriog ialiapual pus zosinpouixp sluasardar li gAnoU 'i0 XI(INHddV se pagoeur uuo; alp 6llri;us;sgns m % Iasuno0 puog„) XID aql o; Tasuno0 puog `-d-qw l uolmH V IsIntRxed `iPDOW ;o uoiuido Teoal ouinoiddr acp `pue d4i0 ag; ui duadoid olgexe; lle uodn `MeI ,Cq poquosard;lurnl aq; uiglim `parnal xs masorm ps Isnuus ue;o spaaoord aql mog alge.fed dl 0 ogl;o suoilsnllgo ZuMpuiq ,Clleoal pus pgen are spuog agl legl lama oql of sexo Lao lezaua0 XomollV acp;o uoiuido nuinoidde aql ol;oofgns si spuog agl;o tiangap oq L uoimdp lena7 sHa,LLVW riv!)g'I sexay `uo;snoH -auI `sapunaaS IelaueuTg NOg.......................................................................................................... rosinPV P=iausui3 sexa,L `ooem 'd.0--1 `II1H V umozg `ollil;ed......................................................................................... sluelun000V oilgnd paggnD sexay `selleQ .d'I'l uolzoH sg lsmgsln:d 11130aW..... losuno0 puog :molaq pogpuopi are sluellnsuoo osoq;3o TeranaS sainnpoe ,S110 iacpo pue spzom pue s)iooq sll;o 4u4ipne luapuodopul aq; rpim uoiloauuoo ui saoinras Truoissajoid urro}rad o; sluellnsuoo Tesanas paumar seq ,C110 ags sluellnsuo0 s iea�& 5 XaUIOUV 1'410 0d 4ui^e0 W uo.0 `keW `s>Iueg `sso-d MOO T lCoulow 111I0 lemolul oauriod PIomV srea i LI jai g0 aogod siouoiM Ilago-d srsa� T£ saainraS anpegsi nalPV;o m;aanQ 02p3'S xpu10 si¢ah TZ io;suipioo0;uamaeemw 6ouaalamg / Isgsr w and pLCg ,Clay srea�k Z giom oilgnd3o io4oanQ I=OG D 3lou;ed siea� T I saawaS 64pmunuo0;o lolaanQ Xouoy saurep srea C bI smoloag AIiO gstahl .x ePuHaNI srea�k 6 luamdolanaQ A41unumm03o ioloanQ / ia�eueW A410 luelsiss V uiqum peroW srae C LZ .rapeuuw f4r0 .ralloao-d ia4og panraS pouad uopisod aumN :,Aolaq pagirasap aiejjs;s anileRspnurpe acp;o s.ragmayQ 'Iiauno0 ,ui0 �4 Pannba.r so .ralrsg0 ag; iq paquasasd se sai;np lressaaaa racpo gans uuo�ad (S) pue `.suopspuaunuoaai a;eudoidde ayeur pae ,i110 agl;o spoau amlrg pue uoilipuoo leioueug agl;o posinpe Iiouno0 1410 daaX (b) `14I0 egl 30 sailini;as anile.gsiuiurpr pue saaueug ag; uo }rodar a;aldmoa s liauno0 dli0 o;;nugns pue areda.rd (£) `.uoper;siuimps s;i io; algisuodsoi aq pue 41louno0 S110 o; li;imgns `Xjren=je pnq ag; a.redaid (Z) `;uaugredop angoadsax siq ui saleuiprogns anouraz pue lu[odde of luoupzedop e;o peaq acp oziroglne Xem puu /410 agl ;o aarnias angeRsiunupe oql ui saoXoldma ioglo ire pue speaq luaunmdop ile anomar pue ;u oddV (1) :ol sai;np pus ramod aq; uanip si saneueW A57.;0 aq; �uauuuano2 j5110 arp 3o goxmq omit ysiumrpe acp;o psaq pas saogjo anz;naaxa taiga aq; sy -Silo acp;o ;uaunaanoo ag; ouisalsiulmpe pus smel aql Qupnoaxa;o sailnp agl Ep!m po2ngo si oqm `zanetmW 61i0 ag; s;uiodde pus saioilod souiuualap `slaopnq sidope `uopelsioal leool slosua Iiouno0 L110 aql 41aueg0 agl;o suoisinord iopufl uousi;simurp� OF THE BONDS —Securities Laws,' "LEGAL MATTERS - Legal Opinion" (excluding the last sentence of the first paragraph thereof), "TAX MATTERS," and "CONTINUING DISCLOSURE OF INFORMATION" (except the subcaption "Compliance With Prior Undertakings") and such firm is of the view that the information under such captions and subcaptions fairly summarizes the procedures and documents referred to therein and is correct as to matters of law. Bond Counsel has not independently verified any of the factual information contained in this Official Statement nor have they conducted an investigation of the affairs of the City for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely upon such firm's limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to, the accuracy or completeness of any of the information contained herein. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. No -Litigation Certificate The City will famish 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 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 Official Statement, as it may have been supplemented or amended through the date of sale. TAX MATTERS Opinion On the date of initial delivery of the Bonds, McCall, Parkhurst &Horton L.L.P., Dallas, Texas, Bond Counsel to the City, will render its opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof ("Existing Law"), (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. See Appendix C - Form of Bond Counsel Opinion. In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations of the City, including information and representations contained in the City's federal tax certificate, and (b) covenants of the City contained in the Bond documents relating to certain matters, including arbitrage, and the use of the proceeds of the Bonds and the property financed or refinanced therewith. Failure of the City to comply with these representations or covenants could cause the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. The Code and the regulations promulgated thereunder contain a number of requirements that must be satisfied subsequent to the issuance of the Bonds in order for interest on the Bonds to be, and to remain, excludable from gross income for federal income tax purposes. Failure to comply with such requirements may cause interest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds. The opinion of Bond Counsel is conditioned on compliance by the City with such requirements, and Bond Counsel has not been retained to monitor compliance with these requirements subsequent to the issuance of the Bonds. Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent judicial and administrative interpretation 27 8Z -suogznggo;dwaxa-xe; osegomd of ssoupolgapul panuquoo zo poimoul aneq o; pawaop oq ,Sew oqm sza,fedxei pup ilpazo aouu;sisse ulnTwazd oomansul gileaq aqi zo; Aul,C3ip;nb szaledxe; `m sigozd goupzq atp o;;oQCgns suoilezgdxoo uoiazo3 `sigozd pue souluxea o zaidegopS gum suoquodmo S umixao `ilpazo amoom puma ue pomollu slenpuipuc `s;gouoq;uawazuag peozllpg zo ,t;unoaS lelooS 3o slualdpaz TenpinTpm `saluedwoo oouumsm a;q `so mdum ooupmsul ,(;Ienseo pus F;zadozd `suognglsul Ieloupag se qons `opoo atp;o suolsinozd reloads ol;oofgns we oqm mill uugl zagio `szolsanul o; olgeogdde sl uolssnoslp Sulmoljo3 agy -llanl;oeoz;az `uogeoglpow zo aAuego of loa[gns axe golgm;o Ike `suolsloop imoo pue s2ul[w pogsllgnd `suolle[nnaz `sa;nlels ntzpslxa uo paseq sl uolssnoslp slgy -spuog atp ;o uolilsodslp zo dlgszaumo `asegomd ail taog Sulilnsaz somonbasuoo xm ataoou[ Iezapa; lezalelloo uleuao;o ,Cxetuams e sI uolssnoslp nulmol[o; agy saauanbasuoo xey awoaal [eaapag [eaaiel[oo spuog;anooslQ anssI Ieul`oup gons3o uoglsodslp zagio zo ales `uot;dwapaz `dnlszaumo `osegamd otp jo saauanbasuoo xp; volaxo; pue [eoo[ `a;e;s `Iezapa; aq; oi;oadsaz illlm pup spuog;unooslQ anssl leuppo qons jo uolllsodslp zagio zo alus `uogdwapaz uodn panzooe lsazalta 3o luataieazl aqi ;o sasodmd xei awoq n pool pup aie;s `lezapa; zo3 uo ioujuLialop oql of loodsaz q;lm szoslnpe xm um o na p i[nsuoo pinogs spuog lunooslQ anssI luulpuo;o szaumo I[V •anoqu paquosop asogl wog zaglp golgm salnz o; oulpz000e poumua;ap oq ,Seta aoud ouuago legjal ag; le puuago [milul atp ul powtIcand;ou aze golgm spuog;unoosla onssl Ieul4up;o uoglsodslp zagio zo ales `uolidtaapaz `dlgszaumo `asegomd agi;o saauanbasuoo xe; zumm lexapa; aqy -puog ;unooslQ onssl leulouo gons uo pouad lunzaou qons nuunp;sazalul;uazmo se alge,ted s;unoum aq; (q) ssal (pouad Iewooe acp;o giSuol aqi zo3 paisnfpe ,Spadozd pup pouad [enzooe gomjo asolo ag;;e pugmnodwoo;o slseq agl uo pauluualap) ju4!xww palels o; plal! aqi Xq pal[dulnm spouad zoud ul panzom iunoosgr anssI leuwuo3o;unowe aq; pue aoud anssI aq;;o tans aqi (e) of lenbo sl pouad Iewoop goua zo; slseq of Popp aq ol;unouze aqy ;oaxaq; uoglsodslp zagio zo ales `uorldwapaz aqi uodn zaumo gons Xq poz!aooaz ssol xo uleo 3o ;unoum aq; oululuua;ap ;o sasodmd zo; puog ;unooslQ anssI le n4uo qons zo; slseq s,zaumo Teglul uo of pappp sl ;unounn patuooe ail; pup (pouad gluota-xis gons gapa ulgilm ,Clgelw pup spuog ag; 3o alep atp;o sa;ep ,Cxeszanluae Imuuelwas aqi azo;aq oiep atp uo $ulpua pouad glaow-xis goea zo3 moloq paquosop se polelnoleo s;unome m);oazagl f4unipw pales aq; of Xllep panxoM sl puog;unoosTQ onssl leuld;uo gopa uo;unooslp anssc leul4uo aqi `meZ amispcg zapujl &awooul ssoso ul algepnloul sl (xaumo Telpal gons Xq plag sem puog;unooslQ onssl [eulouo qons golgm zq3 pouad atp o; olgeool[e;unooslp anssI Ipulouo atp jo uopiod ag; 6q pmmdn pa;sn(pe) zaumo qons jo spueq aq; ul puog;unooslQ onssl 1pupauo qons slseq aill;o ssaoxa ul xaamo qons 5q pozlleaz;unowe all `xanamoq `,Cl iwui Pawls o; zoud puog;unooslQ anssI IeuBuo gons jo uolitsodslp a[gexel zatpo zo alps `uolidwapaz otp;o;uana ag; uI - molaq quo;;as uolssnoslp atp aas `saauanbasuoo xp; Iexapa3 leza;elloo ulpixao;o uolssnoslp e zod pouad lenxooe aq; of algeoolle ;unooslp anssI Ieul'uo gons;o ;unoun ag;;o uopiod legl o; 1pnbo puog lunooslQ anssI Ieuloup gons of;gadsaz ii m amooul;o;m ou e ue (apoo a p3o T9 uopas ul pougap se) amoom sso� wog opnloxo of polilluo sT ouuago ollgnd le;rm aq; ul puog;unooslQ anssI leu uo gans pasegomd seq ogm zaumo cue 4mp7 Quusp g zapun -max auo paaoxo loa op gon[m spouad Tenzoop Quunp opem axe golgm pup (pouad [pug zo lelilul aqi sl ll3i pouad [enboun ,Cue puunp zo) spouad Tenxoop lenbo Suunp appw aze golgm s;uaw,ied axe sluawled 1saxalul olpouad asluouised lsazalul olpouad Ile;o iunouze all ssal spuog all uo appw oq of s;uouixud lle 3o ums aq; sueaw ,,glun;ew;e aoud uogdwapaz pa;e;s„ agy lunooslp anssI leulouo ainiUsuoo p[nom puog;unooslQ onssl Ipul2uo qons jo allgnd oql of aoud Suuago Iellpzl agl (n) pup `puog lunooslQ anssI [eulfuo goua;o „Fglxn;em;p gaud uolidwapaz Poloist, ag; (I) uaam;aq oouazagTp atp `;uana qons ul -xoo,S auo 3o ssaoxa m aq zo pouad Ienzoou oq; of [enba aq;oa ,Seta spuoq aqi uo ;saxa;ul;o luouz,Cpd otp zo; spouad azow zo auo zo poiatp ;unoum ledlouud otp uegl ssol oq ,Sew („spuog ;unoosl(I anssI leuauo„ aqi) spuog all jo salluil;ew azow zo auo zo; pled oq of aoud ouuago allgnd Ielirul agy ianoaslQ anssI Iealnlip }o;naagea.zy nauanoaaV xey awoaul lezapag •,Ciillgexe;3o uogeuluuaiap ,fue uodn pred aq lllm;sazalul leuolilPPe o�I ampagozd gans ul aiedlglimd of igou ou aneg Rew zaumo ag; pue zaFedxe; atp se ,Silo atp;eazl o; 6laTl sl aolnxaS anuanag Ipwa;ul atp sompaoozd luauno zapun `paouounuoo sl ;ipne wpuoS onuana2I Tewa;ul UE 3I 'tasunoo puog ;o uolmdo oq; ililm ooLue pinom aolnzaS onuanag leuzalul atp izipagm of se xo `spuog agl;o ilpne ue aououium Ilya aolnzaS anuanag [ewalul atp lou zo xatgagm of se uanl4 aq an samminsse ON spuog ag;3o spaaowd gilt pooueug sloaCozd atp zo spuog oq; of loodsaz g;pm /t ID aqi Xq oolnzaS onuanag 1pwalul aqi wog igonos lou sum oullw d -spuog atp;o uoglsodslp zo dlgszaumo `osegomd aqi ;o ;uatuleazl xm ag; loagp ,fIosioApv pinom golgm zauupw p m poftup oq ;ou Illm ;oazatp uol;e;azdza;ul atp zo mvq oaz;slxg qons TuEp aoupmsse ou oq upo azagy &,Cmseaxd, mpjo ;uouzuedaQ aqi ptre sunoo aqi Xq THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT BONDS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Under section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation 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. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the accrued market discount of such bonds; although for this purpose, a de minimis amount of market discount is ignored. 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., the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. Information Reporting and Backup Withholding Subject to certain exceptions, information reports describing interest income, including original issue discount, with respect to the Bonds will be sent to each registered holder and to the Internal Revenue Service. Payments of interest and principal may be subject to backup withholding under section 3406 of the Code if a recipient of the payments fails to famish to the payer such owner's social security number or other taxpayer identification number ("TIN"), furnishes an incorrect TIN, or otherwise fails to establish an exemption from the backup withholding tax. Any amounts so withheld would be allowed as a credit against the recipient's federal income tax. Special rules apply to partnerships, estates and trusts, and in certain circumstances, and in respect of Non-U.S. Holders, certifications as to foreign status and other matters may be required to be provided by partners and beneficiaries thereof. Future and Proposed Legislation Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the Federal or state level, may adversely affect the tax-exempt status of interest on the Bonds under Federal or state law and could affect the market price or marketability of the Bonds. Any such proposal could limit the value of certain deductions and exclusions, including the exclusion for tax-exempt interest. The likelihood of any such proposal being enacted cannot be predicted. Prospective purchasers of the Bonds should consult their own tax advisors regarding the foregoing matters. State, Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Qualified Tax -Exempt Obligations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt bonds is not deductible in determining the taxpayer's taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer that is a "financial institution" allocable to tax-exempt bonds, other than "private activity bonds," that are designated by a "qualified small issuer" as "qualified tax-exempt obligations." A "qualified small issuer" is any governmental issuer (together with any "on behalf of and "subordinate" issuers) who issues no more than $10,000,000 of tax-exempt Bonds during the calendar year. Section 265(b)(5) of the Code defines the term "financial institution" as any "bank" described in Section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business that is subject to federal or state supervision as a financial institution. Notwithstanding the exception to the disallowance of the deduction of interest on indebtedness related to "qualified tax-exempt bonds" provided by Section 265(b) of the Code, Section 291 of the Code provides that the allowable deduction to a "bank," as defined in Section 585(a)(2) of the Code, for interest on indebtedness incurred or continued to purchase "qualified tax-exempt obligations" shall be reduced by twenty percent (20%) as a "financial institution preference item." 29 „s;toda�l ltntaty„ japan anogt paquosap;uomoaj2e mate gjya oompj000e ui uogeuuojui reiouem3 renuue apinoid o; S4!3 aip Sq aml1E3 Sue 3o aogou Xlami; opinoid [[lm /41D atp `uoq!ppe ul (aalsnq t jo ;uamaoutqua jr paja `sanjasaj ao!njas;qap jo3 uoisrnoid ,Sue sa)rew ooueu!pi0 otp iou spuog oLp jagliaN) wIeuaTem;! `aalsnzl e;o aweu 3o afuego aql jo aalsnq Ieuogippe jo joss000ns e jo luauqu!oddt (tit) pue `.reualew ji `suua; sli of luensmd mql impo `suopot qons due o; Qugtraz luam oi2t angmgap t Jo uo!leu!uual aql jo uogoe ue gans a)lwapun o;;uawaaj4e anp!ugap e;o o;ul dz;uo ag; `ssamsnq 3o asmoo dzeurpio otp ul uegl impo `slosse sil jo Ite dllequelsgns zo Ile ;o ales aql jo d4!3 aqT pu!nlonu! uoll!smbot jo `uo! pgosuoo `jaojaw t 3o uogeummsuoo aql (ST) `Mo[aq paquasap se m000 begs goigM `Sl!O aTp;o ;uana je[!uns zo `digszaniaaaz `Saaanlosu! `doldnnlueq (ZT) `sanaego pu!lnl (I I) `teualew 3! `spuog oLp;o Tu=Sedw fu moas Sliadoid;o aces io `uognlgsgns `astalaj (OT) 'saouesea;ap (6) :szago zapua; pue `[eua;em;i `sT[eo puog (g) :reualem3! `spuog aTp;o sjaproq;o s;Tlou of suogtog!poui (L) `.spuog oLp jo snmtls = atp 3upoIle sluana IeuaTem jatgo io `spuog ogi;o snie;s xt; aq; of JOadsaj tplM suogeu!uualap zo saogou leualtw jaglo zo `(ggy-TOLS Uu03 S2dl) anssl pasodoad ;o saoiloN `di![!gexm 3o suopeugmalap [eug jo pasodoid;o aoinjaS onuanag reuzaluT aq; Sq aoutnssi otp `suo!uido )m asjanpe (g) `uuo,Ijad of amIjej nags jo `sjap!nojd d;ipmbg io ;cpajo;o uog gsgns (s) !saglnogj!p Ieiauem3 nugoogaz s;uamaomqua ;ipaza uo sH.azp palnpagosun (ti) `.sai11nay3iP It!outug nugoallaj sanjasaj aainjas;gap uo sMtlp pa[npagosun (£) `.[eua;em{i `s;tne;ap p;;jgoj ;uaujSed-uou (Z) !swoumbuilop luomSed ;saza;u! pue [ed!ouud (1) :(;uana atp;o aououn000 oq; jage sStp ssauisnq ual jo ssooxa ui;ou;nq) jauuem Slawq e ui gIISYQ a p o; spuog atp o;;aadsaj g; s;uana Qavnoiio3 agl;o due;o aa!lou opinozd lliM Slip oqZ 'g2ISNi otp of sluana a elzao;o saagou dloujq op!noid osre 111m f4l3 aqZ s;aang axei.ja3lo aagoN •anoge guo;;as se titp Dugtjado pue uogeuuo;ui reiaueug ap!nozd of poimbaz oq pinoM aspwoillo S410 aqi go!gM Sq olep lxau oql of joud gUSW oql Tp!m (pua seoX leosg Mau atg3o alep aq;;o pue) a4nego aq;3o aagou 019 IUM li `-Maf reosq s;i sa4ueg0 d413 aq;3I •aeaS Ieosg sli s02uego 5;13 aqi ssQlun `zeaS goea;o O.c zagma;doS dq papinozd oq lsnm sluamalelS xeioueu13 atq pue `zeaS gosa ui I c gozeW Sq pap nojd aq isnm eleQ ou;ejadO [enuny aqi `S[ou pjoaoy pS jagwaldaS s! pua zeMS [eosg luajmo s,Sli3 aqZ 'ZT-ZoSi aIn2I dq papiuuad se `s;uaumoop argeriene d[oggnd jat[;o urnljao aaaaza;az Sq a;etowoom Sem jo ixal IItB ai uogtwjo;u! palepdn ap!nojd dew S4T3 agy uogelnoaj jo Mel a;qs o; lutnsmd aujg 01 aw!; woij doldwa o; pamnboi aq dew d4!3 atp st sold!omid ou!Tun000t jaipo qons jo „g„ XIQN3ddV ui paquasap sardiouud -0ugun000e oql glint aouepj000e ui poxedoid oq ll!m sluamale;S leloueu13 gons Suy aalgt[lene sawooaq sluamaTe s qons uo ljodaz l!pne aql;; pue uagM `reaS Ieosg algeo!Iddt otp jo3 sluawalelS Itloueu!3 pol!pne pm pouad tpuow-ZI gons uitgyM s;uamale;S [eloueu13 pa;ipmun aig II M 1413 oql uagl `pua m/1 Ieosg gons Sue jape sgluow ZI uiglya a;oldwoo lou si s;uama;elS [e!ou=,,l gons jo;!pnt otp3I 'LIOZ jags jo u[ eulpua mo.d reosg gaga 3a pua aqi jags stpuow ZT �ll!M pap!nojd aq 111m s;uawalelS re!otnna3 gons put `(„ samuialtlS le!outm3„ atg) S4!3 agl jo sluawalels le!outug pa1!pmt op!nojd Slleuoq!Ppt II!m Sll3 atly *moo leosg gata;o pua oqT loge %puom x s u gl!M t;eQ pu;ejadO Itnuuy oip ap!nojd pue alepdn Il!M d1!3 otU '(„elta $ugttadO Itnuuy„ aTg `Slangaagoo) IVZVQ 'IVI3NVNI3 (l3133'I3S1j PU73 („sa)Cey ou!ddelzanO pa;eutgsg„ Su ptaggns atp japan ;daoxa) IVZVQ XVZ,J 1141g3Q XVZ AZI3„ ,j`s;uam;sanul laajm3 — AID 3HZ 30 S3AI133fg0 ZN3WZS3nNI QNV I S.RIOHZfIV 1N3TNI1S3ANL s5mptaq otp japun ;uawa;tlS I73!og3O snp ui popnlaui ad/Cl ltjaua4 atp 3o S4i3 aTp of loadsaj ql!M eltp Qugejado put uogtwjo;u! It!oueug angeigmnb IIt sopnlou! paltpdn oq o; uogtuuo;m aqy Vy,Mg t!n dllenuue UdSW aql of elep ou!lejado pue uoixouuojm re!oueug paltpdn ulwao op!noid II!M S4i3 aqS, sljoda2l lenuay •Qjo•gzsm•eujma•MMM It malsSs („yy�r3„) ssaoay laYmY�t red!o!unTnr antojloalg atp e!n aS.rego;o aag g2ISNr aq; wog a[ge[!ene a0. IIiM ao!;euuo;ar '(��g2lSyq��) pzeog Smp[emaln2l saqunoaS red!o!unw aqi o; `sluana pog!oods;o aogou dlauii put `drltnuut titp Qugejado pue uogeuuo3tt, [e!oueug palepdn up4mo ap!noid o; pa;to!Igo oq II!M dl!3 atp yuotuooige atp japufl spuog aTp Ad of spun3 aouenpe of pa10!lgo surewaj 11 se puol os jo; luamaaj4`t otp omosgo of pajmboi si S4!3 atLL spuog atp 3o sioumo re!ogauaq pue sioploq ogl;o lgauaq atp jo;;uawaaBB au!MoI[o3 aq; apem m[ fqD 3q1 `ooutu!pjO alp uI NOIZvNRIO3NI 30 3HRS0'I3SIQ JNIRNIZNO3 „•s aogenggo ldmaxa-xel paggenb„ aq;oa pinoM spuog aq; pat uox;t;xmxl jellop pauoguamajolt aq; S,Isges o; I!t;;gnim spuog gans uaq; paptenaisip;ou st mnima.td qans jo lunome aq;;egl aogxsod aql says; aaiUOS anuana21 leata;al aq) 3I 'Main faralaoa a aalel pinoa aawaS anuanag Ieuia;ul aq; `aanaMoq �pap.teaa xsxp sx 0004000401S 3o ssoaxa a! mnimaad;o;unomn sxmimm op e}o;uauaSed aq;;eq; apniauoa of sxseq algeuoseai a si aaagl 40004000401S spaaaxa aggnd aq; o; aaud anssi aq; }! ;eql axmig aq pings siasega.tnd lequa;oa ,suogtAi[go ldmaxa -xtl pag!Itnb„ se spuog aTp;o ;uaugeajl atp `;oalye drasjanpt pmoM leg; uogoe gons woij uiegaz of jo `amsse pinoM ltgl uoilot qons ayel of;ueuanoo II!M Y413 oq; `uo 4maisop ;etp;o oouejoggq uI •apo3 atp;o (q)SgZ uoiloas of mueam a p ugpiM suo!TeaiIgo ;dwoxa-xt; pag!renb„ se palea!sap aq llm spuog aq; jup s;oadxo Sli3 oqy For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. Availability of Information All information and documentation filing required to be made by the City will be made with the MSRB in electronic format in accordance with MSRB guidelines. Access to such filings is provided, without charge to the general public, by the MSRB at www.emma.msrb.org. Limitations and Amendments The City has agreed to update information and to provide notices of certain 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. 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 an underwriter to purchase or sell the Bonds in the offering made hereby in compliance with Rule 15c2-12, taking into account any amendments or interpretations of Rule 15c2-12 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 of the Bonds. The City may also amend or repeal the agreement if the SEC amends or repeals the applicable provisions of Rule 15c2-12 or a court of final jurisdiction determines that such provisions are invalid, and the City may amend the agreement in its discretion in any other circumstance or manner, but in either case only to the extent that its right to do so would not prevent an underwriter from purchasing the Bonds in the offering described herein in compliance with Rule 15c2-12. 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. Compliance With Prior Undertakings Except as described below, in the last five years, the City has materially complied with its undertakings made in accordance with Rule 15c2-12. The City has been obligated under prior undertakings to file its annual audits by March 31 of each year. With respect to its 2009 fiscal year audit, which was due to be filed with EMMA by March 31, 2010, the City subsequently determined that that filing was not made. Consequently, a filing of the 2009 audit was made with EMMA on October 24, 2014. The City did submit the 2009 audit to the Municipal Advisory Council of Texas (the former state information repository) ("MAC") by mail in March 2010, but the MAC reflects a posting date of April 10, 2010. The City has put certain administrative procedures in place to help ensure timely compliance with its annual disclosure obligations in the future. 31 z� poomspuau33o F,}!O 6'Me Las 210 �ySHS•yd pooK.spuau33o CIO roxl?w ;oarag a4ed;srg aq; uo pog!oods alep acp jo se;uama;elS Ie1o330 stgl anoidde pue ozuotpne �Inp II!m I!ouno0 fq!O atp `ooueulpr0 atp ul •alemooe oq o; avoid pinom juamamS re!og3O spp m popnpu! s;uama;e;s ouproot-prenuo; atp;er4 aauemsse ou oq ueo aragl `aro;araq;'pue alemooem oq pinoo suopdumsse Bons 3o fuy ' SilO a p;o rouuoo a p puo6aq are go gm;o fuem pus fro;smogs;a;paid o; arglssodun ro;rnagmp are gop4m ;o tle `suolsloap ssou!snq am;rg pue suoplpuoo lo)lmui pas `anppodmoo `olurou000 am;rg `snu!gi raglo 4uoure `o; loadsar TpjAk sluauffpn[ antonu! oulooaro; atp o; pan;rar suopdumssd -srelogjo pus sal;uotpne reluammanon zagpo pue telolpnC'anl;e!sloar pus `sro;l;admoo pue sioulmd ssamsnq `sralyddns `sumo;sna Ampntam `sallied png; ,iq ua aq o; pau!mo io ua)M suopoe pus suop!puoo pus saout4stunono riole!raar pus te4at �ayrem `f4snpu! `ssou!snq `olmou000 `rsloos ul sluamdolmop ro softego arglssod pue saleu qsa pus suopdumsse 4m,ftcapun otp;o jl4r enm arglssod am of Auperar sapun araoun pus sxsu pu pntom `sapu!eltaoun pus sKsu snouen of laaCgns ipuaragul are pue salem!isa pus suorldumsse snouen ao paseq ftuessaaau are marag s;uamalels nmYoor-preMro; aqy sluama;e;s QulYoor-pasnug3 gans at osoq; mo.g Slreua;em loglp pinoo s;ptsoi rerpoe s,f4lJ agi legl a;ou ol;uelrodun sl 11 'sluamalels 2tnx00t-preAu0j gans Niue olepdn of uope4ligo ou soumsse X41D atp pue 3oaraq a;sp agl uo Y410 oql of argerrene uousuuo;tn uo paseq are luamalslS Is!ag30 snp u! popntam sluamalsls Au oot-prs w.to3 Itd 's;uama s Sulproor-prenug3 uo oouelrar onpun ooerd ;ou prnogs srapeag aam;rg agl ou!prenar salAa;eus ro `suoq.ua;m sadog `suope;aadxa s,,44c0 a p Qmprepar s;uama;els Qu pnraul `s;uama;e;s ouproor-pre,Nro; are `leouo;slq ,Sramd ;ou ase;egi 42410 agi Xq papinord uolleuuo3u raglo iue m pue �Uamale;S Islag;O slgl ul paulin= spuama;els agy s;uamale;S nuptooZ pas,++iog spuog ag;;o - srau,No;uanbasgns ro srasegornd Iem4uo arp glln+joeRuoo e;o ued ss ro se pa;onr}suoo aq of sl napl.M u! ro �Ilero apem uaaq aneg ,Sem;etp;uama;s;s ,Cus sou;uama;e;s Istor�p slrp rarplaN uopeuuojm .ragurtd ro; sivaumaop gans o; apem sl aauara;a.r pus suolslnord gans 3o sivama;sis a;ardmoo aq o; Irodmd;ou op saueununs asagy s;uaumoop Bons 30 suolslnord atp;o Ile of laaCgns marag papnraul are sluamnoop paie!ar rarpo put: samuulpro `sa;rpe;s otp jo samurums aqy -f4lD atp usgl ratpo saomos mor} panuap uoueuuo;m otp;o ssoua;ardmoo ro Xoemooe aql of se apsm sl uolleluosardar oN 'argelrar aq o; panagaq saamos raq;o mo g pue lqlo agi mog CI emud pau z qo uaaq seq luamalelS relog30 slgl u Paule;uoo uogeuuojul aqy uopeuuojui;o uopcgdmo0 pue saarnoS SriOLLV ZT�QTSri00 'IV2Y�i30 ;uamalelS Is!ag30 slgi m uopeuuo;u! aql;o ssaurle3 ro `ssaua;ardmoo `,foemooe agi ro; )r1!I!q!suodsar aumsse o; ro uogeoguan;uapuadapm ue `ayem o; uarrelrapan lou seg pus `aKelrapun o; pa;eAligo;ou sl roslnpy !slausui3 agy spuog aq;;o ,Sranlrap pas aousnss! ag; uodn;uaouguoo s! spuog agi;o ores oql of loodsar glyA parapuar soolnras ro; aa; s,roslnpd lelouem3 aqy spuog ag;3o omunssi ag; tRIm uopoamoo m ,r4lD oql of roslnpd re!auem3 se poXotdma sl out `sal;unooS le!oueu!d BIOS C 0 4- E11EAALAIIKFORMATION REGARDING THE CITY OF FRIENDSWOOD The following information has been derived from various sources, including the Texas Municipal Reports, U.S. Census data, "Sales Management Survey of Buying Power", and City officials. While such sources are believed to be reliable, no representation is made as to the accuracy thereof. - City Economics - The City of Friendswood, Texas (the "City"), is a commercial center located 20 miles southeast of downtown Houston at the intersection of Farm to Market Road 2351 and Farm to Market Road 518 in the northeast corner of Galveston County, with a small portion in Harris County. At present, there are numerous residential subdivisions either developed or under construction within the City with homes ranging in value from approximately $325,000 to over $1,000,000, the average being approximately $383,818. ManufaMuring and Commerce Employment in Galveston County (the "County") is provided by the extensive petro-chemical industry. (Source: Texas Municipal Report.) 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. ECONOMIC AND GROWTH INDICATORS U.S. Census ofPooulation City of Friendswood Galveston 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 67444 +330.46 1085312 +42.13 1980 li,248 +105.59 16%587 +56.57 1990 18,927 +42.87 191,707 +13.04 2000 2%037 +53.42 250,158 +30.49 2010 35,805 +23.31 291,309 +16.45 (a) Source: U.S. Census Bureau. 9£I`I OZO`I 998 SbL I984LI £b£`ST ££9481 £LL68T L66`8I £9£461 68b`6I SIS`6I poomspaaug;o �3l� uoiss�unuo� aoio,�zom sexay :aomoS sa!ls!3E4S luaiu(.oTduig "9I OZ `I £ JagmonCj jo sy (z) %Sb a;e�;uauiiolduiaan £68 Pa,folduiaan bWE pa,Sojducg Lb8`6I aaw3 iogol %9'L % 8'9 %9"S % 0'S %9'S a;zg 3uaai6oiduiaun 869`TI 559`OT S£8`8 698`L bS6`S paSo�daraun I654Ibi 86b`S17I £LL4817I 89846bI 9ZZ`ISI pa.Coiduig 68Z`£ST £SI49SI 809`LSI LZL`LST OIi 09I oosodzogez ZIOZ £TOZ bIOZ SIOZ (U)9IOZ ,Clano� uolsae�e� L'9 % Z: 9 % T'S % S'b % 9'b alE2I luauz,ioiduiaun 8b8`IS8 bSL`008 SbT`b99 b56`£85 LZ6`609 pafoldmaun 9S£`O£8`II 109 060`ZI £OL`8S£`ZI OS£`b6b`ZI 068`88L`ZI paLoidtug bOZ4Z896ZI 95Z`I68`ZI IWZZO`£I b0£`SLO`£I LI8486£`£I ooio3iogeq ZTOZ bIOZ (E 9IOZ CIE STOZ sexay 3o 03E3S sous[3z3S 3 AUDTi'ED FINANCIAL STATEMENTS OF THE CITY saa�as anuEa;s?u?mp�3o ao;aa.�?Q a4a •s Spa?a .ran�nnLli �l?� layaaog •D aaao'd :y[oda� mm�ssl sln?a330 SIOZ `0£-�aginaldas papa ,Q .�sa� sxoaazl rl�I�x�� �n.n� �nlsu��xaln�o� S�X�.L QOOA�SQ1�i�RI3 30 �I.LI� INTRODUCTORY SECTION �z�uoisu�s�u x�zs s3�z ���a sixz April 157 2016 The Honorable Mayor, Members of the City Council, and the Citizens of Friendswood: The Comprehensive Annual Financial Report (CAFR) of the City of Friendswood for the fiscal year ended September 10, 2015, is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in 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 understanding of the City's financial activities have been included. The comprehensive annual financial report is presented in three sections: introductory, financial, and statistical. The introductory section includes a list of principal officials, this transmittal letter, and the City's organizational chart. The financial section includes the auditor's report on the financial statements, a Management Discussion and Analysis (MD&A), the basic financial statements, required supplementary information and combining and individual fund financial statements and schedules. The MD&A, found immediately following the report of the independent auditor, is a narrative introduction; overview and analysis required by generally accepted accounting principles (GAAP). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The statistical section includes selected financial and demographic information, generally presented on a multi -year basis. 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 a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. The City Charter requires an annual audit of the financial statements of all of the various funds of the City by independent certified public accountants. The accounting firm of Pattillo, Brown & Hill, L.L.P. has performed such an audit and their opinion has been included in this report. II szanlem aad luauzdotanaP umo;umoP puu `uollduiaxa xel110daazd yuauidolanap yOoiO„ sopnioui ;zcR luauialegla xin `uIvifaid ;uuzo Iedio?unm u nulpnioul `sanl;uaoul ssaulsnq an?1tladuzoo szaddo �I� aty sa?;Iuauie zaglo puu sadlaoslaazls ueuysopod q;Im s;uauido?anap /i-io;s I;Inui `asn-paxlui a;ouiozd of umo;umop azli�Inaz 01 sanlluooul pue sloo; Inloads panozdde ant?q szapnal AID -uare alpuuqued s,Y'l?D aq1 do luauidoianap pue ease umolumop oq1 do luouidolanapaz aoeznooua o; si snood SjID jCol y •s;uauidolanap Ieu;snpul ;toll pun `Iniozaunuoo `Minas `soogjo luuoissadozd apnlaul sla:ireui laorey -sosudza;uo tulozaunuoa do sodKI fueui sod oologo loadzad aq1 sI poomspuau3 ssauisng ' I SL`OOi$ sl auioom plogasnoq uulpaui a p pun IS8`9Zl$ si auiooul plogasnoq aouzane aqy suolllsod leuaouueuz pun Inuo?ssadoid `anllnoaxo ui �pom sluaplsazdo %OS uegl azoW -sail?used auiooul-golq `paluonpo-Ilamdo oseq ;uaplsaz;uanlldla s.poomspuau3 toleui Spoadzad sa;nglzllu osogy -QSI �taazD ream pue QSI poomspuau3 — suia;s/is loogos oggnd zouodns om1 eln taaxa XIleoluiapeoe uazpilgD •asznoo dloo dlgsuoldurego u t11m ouoln `nulduospuel tsnl pue qzed Indl;neoq sazlguad f4I0 oqy •jfuld pun `>uom `anti o; aonld loadzad aq1 sI poomspuau3 `uoloaz aiR uI a;nz auluo ;samoi aq; pun `uol;eonpa aggnd ouipuuIs;no `sa;ei xu; moi q;im ojL4unoo aq; ui an?l o; saaeld;soq oq;do auo se poz?u$oaaz 6lleuol;eu uaaq seq poomspuolz3 ,fltuniuuioD •uisunol pun `in?;az `azea q;lnaq slnalulago f4jeloods `aoedsozau apnlaul oseq oluiouooa s,eaze oLp do szo;oos zo[eW *,fume sa;nului Sti ;sn[sI aiodny In;uauuuoaza;ul gsng pue poomspuau3 uzozd anup a;nulm SI u uWm pa;eaol ale yiodny uolou?Ild Pula liodzly ,fggog -(6emjznd VSF ND 8Z5 Wd PTre `8I5 b id `I S£Z b id ganoAp poomspuau3 swoon ueo szol?sIn pue sluaplsag -851746c si uoguindod pa;nun;sa;uouno oqL -,i;uno:) swing uzaq;nos pue jiaunoD uo;sanleq uiogpou — soi;unoo om4 ssozoe ouluueds `uo;saniuq pun uo;snog umolumop uaamlaq `;suoo ding sexay ag1 zeau suxay ;snot;nos uI pa;uool si poomspuau3 `sogui azenbs IZ oulsseduioaug uoyuao7 uols.Ial.Io� rl�I�i.?�rua oruio�33v sxoz��3 •saalnzas and;ez;sluluipn Inzauaa sn llam sn s;uana Inin;ina pun sal;Inl;oe luuol;uazoaz `suza;s6s uolssluisuezl uolloailoo somas uuo;s pun �1luus tloq pue uza;s6s uolinglzlslp a;sum pa;nau atldo ooueualuleui `saolnzas uol;e;luus `om orLgsn-guI pue s;aaz;sdo aoueua;uleui `(lualpaui tauaozauia pun azij `aamlod) fades o Ignd oumpnlom soolnzas Iedioiunuldo aouei Ilud e sapinozd,i;Iz) aty suual read-aaziR aellnaasuoo znod uugl azoui ou aezas o; pa;gala asn Il0un00 pun zoiuy�I aqy •slslag uusllred-uou `aozei-;n ue uo pa;gala asn Ilouno� pue zoCey�l aqy sluaugzedap snouen do spuaq oul;ulodde sod pun `luauuuanoo f4?Z) a111 do suol;uzado Cup-o;-Xnp aq; oulaaszano puu IlounoD XIIZ) aq1 do sooulaulpzo pue salailod oq1 1no outicuuo sod alglsuodsaz si zaonunW Xl!:) aqy 41c'mazoas j44I0 puu `aopnf iudiolunN `XauiouV ,44?D `zaoeulainl X1I:) aq1 ouulq pue szaquioui aallluiuioo pun pznoq oul;uloddu `laopnq aq1 oul;dope `saaueulpzo oulsslad sod `soulTp jai ououre `alglsuodsaz aze I?ounoo pue zoXeinl aqy •szaquioW IlounoD (9) xis pue zoXuW ogldo ougslsuoo I?ounoo nuluzanoo n uI pa;sae are S11joglnu angnlslo01 Pula ourleui-logod -luauiuzanoo do uuod zaouuuy�i-I?aunoD e zapun sa;uzado 14?3 aqy I L6i ul mel sexal iopun 2C1Io olnz-ouiot u pazauugo Pau 0961 ui polezodzooul sum f4lD oqy aolaluaq ul qou sI poomspuau3 do XqIo aq1 `iiuoloo za>tena a se S68i ui pogsllqu;sg 1i.LIa alI,L 30 d'M02Id Quality Lifestyle As with any city, the goal is planning for continued quality growth to create a well-balanced community. Friendswood offers single-family residential housing in pleasant park -like settings, tucked -away from the busy stream of vehicular traffic. Friendswood is committed to attracting more local enterprises that will complement and enhance the unique community environment that has been carefully built over the past 100 years; one that has come to be cherished by residents and business owners alike. Budgeting Controls The objective of the City's budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by Council. The charter requires the City Manager to submit a proposed budget and an accompanying message to the City Council on or before August 1. The Council shall review and revise as deemed appropriate prior to general circulation for the public hearing. The Public Notice and Hearing must be posted in the city hall and published in the official newspaper. The budget must be adopted by the 15a' of September or as soon thereafter as practical. The City legally adopts annual budgets for the General, Special Revenue and Debt Service Funds. Annual and project budgets are also adopted for the Proprietary and Capital Projects Funds, respectively. The level of budgetary control; that is, the level at which expenditures cannot legally exceed the appropriated amount, is established by department within a fund. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances lapse at fiscal year end, but can be re -appropriated through a budget amendment the following fiscal year. The City Manager is authorized to transfer budgeted amounts between departments within any fund, but revisions that increase the total expenditures of any fund must be approved by Council. Multi -Year Financial Planning A Multi -Year financial plan (MYFP) was developed in 2006. Oribgn, y staff was directed to develop a plan to forecast the City's financial condition through 2020, the projected build -out date. The first version of this plan was drafted and later reduced in scope to project out five years. The MYFP is based on the City's strategic planning efforts, including the Comprehensive Land Use Plan, Vision 2020 and the Capital Improvements an. Departmental operational plans funding requirements to provide programs and services are included in the MYFP as well. Funding needs and available resources, both current and alternative revenue enhancements, are identified. Expenditures are projected based on departmental needs assessments and are organized based on "one-time" and "on- going" expenditures. In collaboration with Council, the plan is updated at least annually and serves as the basis of budget development. Relevant Financial Policies As part of the annual budget process, the City adopts Financial Management Policy Statements that establish a framework for fiscal decision making and that ensure that financial resources are available to meet the present and future needs of its citizens. These statements provide guidelines for financial planning and management, addressing every major financial function and process. iii AI saolAzas andlpz;slulutpy3o zo;oazlQ aopg •s 4ulz) `,tlazaauls zautrecu anlssat4ozd puu alglsuodsaz s ul ,i;ID au; 3o suollpzado 1ploustnd agl oul;onpuoo ul lzoddns pus lsazalul `digszapuol ztagl z03 zaasuuN ,C;lD oql pue IlounoD i4lo agl3o szaquzaui `zoXeW oq; of s>Iueq; ,Cut ssazdxo oslu I `Aulsolo ul lzodaz slll3o uollpzsdazd agl ul apput suounglz;uoa aq; zo3 uol;slaazdds azaouls iuz suq luarulzpdap all3o zaqutaut loug luautlzudaQ saolnzas andlpzlslultupy aq;3os;s an;ua aq;3o aalnzas paluolpop aq; Xq alglssod opuut sum ltodaz Iulouuug Ipnuue anlsuogazdruoo aql do uolluzsdazd oqs s;uamaflpalmou 3V •a;uogllzao zaq;ouu zoo �lllgl�lla s;l auluua;ap o; yO3rJ aq; o;;l flul�luigns azu am puu s;uauzannbaz s,utuzgozd ;uauzanalgoy ;o aluogllza:) all hoot of sonulluoo lzodaz Iuloueug Iunuue anlsuagazduroo ;uazma mo 1pg; anallaq aM •,fluo zpa,i ouo 3o polzad p zo3 pgpn sl luaulanalgoy;o olsoggioD y •sluawazlnbaz luoal olquolldde pue soldloulzd nugm000u pold000e �Iluzaua2 gloq pogsilps lzodaz slgy -lzodaz Ieloueug lunuue anisuagazduroo pozluupzo fl;uoiogja pup olqupuaz XIlspa ue pogsllgnd XIID all `luauranalgoy3o aluogllzag u popzeme aq of zapzo uI -pzpmu snoiAijsazd slq; panlaoaz suq A41D oql ;uq; zsa f aellnoasuoa q;uaeas- f;uan aq; sum slU -ill OZ `0£ zaquia;das papua moo luasg a p zoj liodaz Iploupug Iunuue anlsuogazduroo slI zoj poomspuau3 jo AID oql of nullzodow iulousuld ul aouallaoxg zo; luauzanalgoy Jo alpogllz00 p papzsms (VO3f)) uollsloossV szaot}}o aaupuld ;uatuwanof) aqy sp.►umV •sluauraogdaz uoilels 411 pup luuld za;pro gllm polppdn $ulaq sl aznl3n-4ss4ul zamas pup zalsm aqy •sluauMAozdun longs puu sluautanozdtul lied `uolluls an3 mou e `uotsuudxo uol;uls azg `Smigll agl;o uogtAouaz puu uolsuudxo opnloul slop fond zo f72lN -ureznozd luouranozduq Iulldu:) s,f4lD otp uI Paglluapl sloaCozd uo ssaznozd ;uuog!ais oN uz of Flo otp polgpuo suq spuoq anuanaz ura;sis zamas pup sXzomzalpm pup spuoq osogl 3o aouenssl aq,I, -+vv of -VV utog poslpz sum oullpz puoq uogpAllgo IpzauoO s4f4!0 aqy `bloZ uI -spuoq uollupllgo Ipzauof ul uoIlllur },Z$ panozddu SjjD aq;3o sza;oA all `CIOZ ul saAuul;Iul rofuyQ •sluauranozdun Ipllduo pun3 Oullszado/ fllllln aznitg zoj lullduo $upIzom ul opelnuinooe of pamollu oq IIIm spurg poloulsazun Ipuolllppp `soomosaz lualoUjns pazaglpn anuq spun3 asagl zagy -anzasaz XPP-06 slgl pllnq of alulnumoop of pamollp aq Illm llpnu pua-zuoX Iuosg aql zagp sputg paloulsazun ,Cuy -samllpuodxo nullpzado pollpne zua,f zoud 3o s,Cpp 06 oq pun3 zamas pup zajPAk all uI lt>lldpa nunlzom utnunulur aql sazlnbaz oslp ,ioliod luamoflaueW luloupui3 oqy •s;uauranozdml Iplldleo pun3 Ipzaua[)aznlrg zo3 olulnumoop of pamollp oq IIIm spun; paunisseun luuolllPPu `soomosaz lualog;ns pazalluo seq pun3 Ipzauog aq; za}Iy -anzasaz XuP-06 sltR pllnq of alpinumoou of pamollu oq IIIm ;Ipnp pua-zeo,i Ipasg oql zagp sputg pau�lssmm Suy •samllpuodxo nullpzado pallpnp zua,i zolzd;o sXOP 063o utnunulut u;u ooupluq pung parElsseun pun3 Iuzauaq oql utu;tnuur ,illo ag; 1pgl saztnbaz ,fallod luautaapugW lulouuuld agl `,flluulzodurt isow CITY OF FRIENDSWOOD, TEXAS PRINCIPAL OFFICIALS AS OF SEPTEMBER 307 2015 Elected Officials Position Term Expires Kevin M. Holland Mayor May 2018 Steve Rockey Council Member— Position No. 1 May 2018 Billy J. Enochs Council Member —Position No. 2 May2017 Jim Hill Council Member —Position No. 3 May 2018 Patrick J. McGinnis, MD Council Member— Position No. 4 May 2016 John H. Scott Council Member— Position No. 5 May 2017 Carl W. Gustafson Council Member— Position No. 6 May 2016 Kev Staff Position Roger C. Roecker City Manager Morad Kabiri Assistant City Manager Cindy Edge Director of Administrative Services Terry Byrd Fire Marshal/Emergency Management Coordinator Patrick Donart Director of Public Works Melinda Welsh City Secretary James Toney Director of Parks and Recreation Robert B. Wieners Police Chief Amold Polanco City Attorney James W. Woltz Judge — Municipal Court v pg�/solaai?Q annnaaxg biOZ `0£ aaquzadas papug .z�a� I�as1,3 a� zod j.podag Imomuz3 IenuaV anTsuauazduzoD s1T zo3 s�xas, poomspuaiij jo 41D o; pa}uasazd utoda� I�touVut,� ut aoualiooxj zoj �uauzanatuoV fo olvoullnD uol�zlaoss� saaai�p aaueu?3 �uauzutano� City Attorney Municipal Judge CITY OF FRIENDSWOOD Organization Chart Citizens of Friendswood Mayor and City Secretary City Council • Administration • Records Management • Elections City Manager • Administration • Economic Development • Public Information Administrative Services • Finance • Utility Billing • Municipal Court • HR/Risk Management • Information Technology Fire Marshal • Administration • Emergency Management • Investigabons/Inspections Police Department • Administration • Communications • Patrol • Criminal Investigations • Animal Control Library Services • Friendswood Public Library Boards, Committees, & Commissions Assistant City Manager Community Development • Administration • Planning • Inspections/Code Enforcement Parks and Recreation • Administration • Recreation Programs • Park Operations • Facility Operations Public Works • Administration • Streets/Sidewalks • Drainage Operations • Water Operations & Utilities • Sewer Operations & Utilities • Engineering & Capital Projects vii A'I'IF'�i0IZ1�i�,L�iI }Il�1E�'Ig Z3�Z �OF�d SIH.L FINANCIAL SECTION A'I'I�I�IOI,L�i�,Lis �IN�'Ig .L3�'I �O�d SIH.L PAI IILLO, BROWN & HILL, L. CERTIFIED PUBLIC ACCOUNTANTS a BUSINESS CONSULTANTS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor, City Council and City Manager City of Friendswood, Texas Report on the Financial Statements We have audited the accompanying fmancial statements of the governmental activities, the business -type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Friendswood, Texas, as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City of Friendswood, Texas' basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements The City of Friendswood, Texas' management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the West Ranch Management District, a discretely presented component unit of the City, which represents 100% percent of the discretely presented component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the West Ranch Management District, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of West Ranch Management District were not audited in accordance with Government Auditing Standards. R:\CO, rs -101 R'ct Fl�gh..a� G .�� �..FlGhcFlyrom nol�sm�. rx ?31bi I.G3i9 Rf0 CR.�\DE V:\LLE1". T\ esG.sa 4.-:.s TEIII'LE. TY _>a1.797�tM0 ALRrQI'GRQL"E. \\i sn,_>vG"seos Governmental Audit Quality Center -xajjeuT stTlj op joodsax 1ptm pagtpoTu IOU sT uotuldo mo -gg •ox zuauzajvjs ggVD fb zuouspuauzv un—a1pQ7ualudjnsnaN azgl of yuanbasgng apvN suozyn4z4uoD iof uoglzsumy uozsuad `IZ -oN tuauzatzaS WSVD) spmpuezS outlunOOOV jz;uaunuanoo pus ZZ roV juazualvzg ggVD fb Iuaurpuazuv uv—suozsuad dof 8uz;dodag pvzouvuzd puv $uzjunoaay °gg -oN IuomolelS (USVI)) spmpuejS nnTjunoaoy Iejuaunuanozo `ooueppTn Sutlun000e mou paldopu j�jT-o all SIOZ ul `sjuamop4s tutauuug oyp of I a;oN ul passnostp sy aldtauud nugunoaa� m aanuq� •eauaTuy do sajslS paltufl all ul papdaoau lljjrjouoo saldtou0 Autjun000r ipm omupmooe ut Papua uolp xea f all .To33oazaTp smog gsea `algeotldde axagm `pue uotltsod Ietaueug ul sanuelo antloodsax oTII pus `SIOZ `OE xaquzaldoS do ss `ssxo j, `poomspuau33o fpto alp do uopuuuodut pund $ututuulax alupaxoou alj pus `punt xofuuT goeo `Itun luouoduzoo poluosaxd 6lajaxostp aTD `satjtntlou ad SI-ssoutsnq alj `satltnljoe p:luaunuanop aqj do uotltsod Ie OUMIIT antloodsax oqj `sloodsax lutxallaw lit ui `�Ixtsd juasaxd anoqu of paxmdax sluouTaluls lutousug oqj `siollpm xagjo all do lTodax oqj puu jtpne mo uo pasuq `uoluldo mo ul suotn;dp •suotutdo I?Pns mo .Tod stsuq u aptnoxd of aleudoxdds pus juatogdns st pautejgo anal am aouaptna Itpns aTg peTlj anatlaq am sjuauxajsjs Iutaueug aTlj do uotjujuasaxd Iluzano aTg nutjunlena su llam se `Iuauxa�eueuz ,Cq apeTu saleunjsa nutlun000s meop ots do ssoualgeuosuax oLp pue Pam satotlod Sutlun000e do ssaualut.Tdozddu alj oupunlena sapnloui oslu ptpnu uv •uotutdo Ions ou ssaxdxo am `6laulpxooay -loxjuoo Ieuxajut s<<illjua agjdo ssauantjoadda all uo uotutdo ue $uTssaxdxo do osodmd all .Tod jou Inq `soomisumoito oqj nT oluudo.Tdds axe jell samp000xd jtpns uotsap of xapxo a sluamolsls Ieloueuzd aljdo uotlsluosaxd xtsd puu uotjsxedaxd s,2.jtjuo aqj of juenalax loxjuoo luuxalul sxaplsuoo iojtpne otp `sluouTssosse )Istx asoll $uplsux ul -xo-ua xo pnezd of onp xallolm `sluowoluls lutouuuij oljdo luomolsjsstuT lstxajuuzdo sj. stx aljdo juatussasse all $ulpnlout ° uauTnpnf s,xoltpne all uo puadap poloolos somp000xd oqs -sluauralejs lelauuuTd alj ul samsolostp pue sjunoum alp Inoqu aouaptna ptpne ui mgo of somp000xd nutuuodxad sanlonui jtpne TTy Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and pension and other post - employment benefit information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Friendswood, Texas' basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and the other auditors. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we do not express an opinion or provide any assurance on them. 9TOZ `SI I?-tdF� suxa,l, `oaum r •aoueljdutoa puu Sul;zodaz julouuug nano joz;uoo juuza;ul <szxaZ `poomspualz3 30 �11� aq; Auuaplsuoo ul sp.�vpub;s $upzpnyT;uazuu.raao� cpim aauepzoaae ul pauuo3zad ;Ipne ue 30 ;zud juzoa;ul ue sl uodaz ;eqy -aoueljdutoo uoJo ougiodaz julouuug zan0 Ioz;uoo jsuza;tn uo uoiucdo ue apleozd o;;ou pue `nupsa;;eq;3o s;jnsoi atp pue ooumljdwoo pue nuluodaz julouuug .iano joz;uoo Isuza;uj 3o oul;sa; zno jo odoos acp oglzosap o; sl jzodaz;aLp;o asodznd oqs .szauutu zaq;o pue `s;uauzaaznu;uezn pue s;ouz;uoo `suol;ujaaz `smej;o suolslnozd uxwoo q;jm omoildwoo s;l;o sisal zno uo pup oulycodaz Ieloueug zano joz;uoo Iuuza;ul suxas `poomspuau3;o F11D aqg 3o uol;uzapjsuoo zno uo 91OZ `ST Iudy pa;ep jzodaz mo panssl oslu anuq om `spdnpun;s zgi!pnV maurudaaog g;lm aouepzoom ul sprnpunzSouggpnFrzuawuaanog ,fq paambaH say.zodaa.caq;p MANAGEMENT' S DISCUSSION AND ANALYSIS az�uoisu�zru x�zg s3�z �o�a sixi CITY OF FRIENDSWOOD, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Friendswood, Texas ("the City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Friendswood for the fiscal year ended September A 2015. Please read this information in conjunction with the basic financial statements that follow this section. The discussion and analysis includes comparative data for 2014. FINANCIAL HIGHLIGHTS Some of the City's fmancial highlights for the fiscal year ending September 30, 2015 include: • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $119,389,122, • The City's total net position increased during the year by $4,893,184 from operations. • Unrestricted net position is $17,941,686. • Program revenues of $17,091,346 reduced the net cost of the City's functions to be fmanced from the City's general revenues to $19,203,445. OVERVIEW OF THE FINANCIAL STATEMENTS Management's Discussion and Independent Auditors' Report Summary Components of the Financial Section Basic Financial Statements Government -wide Financial Statements Fund Financial Statements Required Supplementary Information Notes to the Financial Statements Detail launslQ;uauxaDtutW goueg nsgm agl;o sa?lln?lop apnlouu sa?ltnl;oe— n?ufl;uauoduioo . axaq pauodar are uza;s Ss lamas put ralem s �nlo oqi opnlouu go?gm `saolnras asocp ro3 aa•I t Dutnlonut soolnraS — sail?nllou od,Cn-ssoutsng •sa?;In?lae ag;;o Isouz aaunucd saa3;[uuad pue saug;rnoa Isd[a?unuz `soxel osigoue4 `xti salts `xtl ,Clradord -araq paaxodar oslt an: igop s,,C;?o all uo sluauz,ied lsaxa;ui -6rergll pue (saul?n?lot ,Cilununuoo put suo?nerado ,L;gtau3 `sjlxed) saolnras X41ununuoo :(Dupoz pue Duputld pue uo?;oodsul Dutpitnq `DutraaulDuo) luouidolanap ,Cllununuoo `.(aDeuterp Pula SnaarnS) SXrom ollgnd `.(Iegsruui arg put luounpudop arg xaalunlon `oogod) 2la3us oulgnd `(Saalnxas an?;exislulutpe pue `raDeueut ,Cl?a `,Crelaraas Xn?a `Ilaunoo puu ro,ieui) ;uaunuanoD IerauaD Dulpnloui araq paaxodar axe soolnras olsuq s<�410 aq;3o ISOW — salntntnae Ieluaunuanoo •(satllelloe ad,C;-ssautsnq) saa3 rasp lDnoxgl slsoo magi;o uoluod lutaguuDls ro Ile xanooar of papualul axe lull suolloun3 uto-g (sal;lnlloe Ie;uaunuanoD) sanuanar Ie;uaunuanoDraluu pue soxtn ,Cq pauoddns /CIltdloutxd On lull S41D a pjo suollourg gslnDul;sip s;uauzalels Iulautug apim-luounuanoD aq;;o grog •s;uauta;els Lanai punt all ul pasn s? legi Ienraae paglpout utgn xalntx poglaui Iunroou ail; — smog gsto poplar 3o Dutunl ail; 3o ssalpxe$ar sm000 aDuugo gill of astir DulnlD ;uana Dut,Cuapun oql su uoos st po:podax axe uot;lsod lac ut sofutga Iiy •mo, Iuosg luooar ;soul aqi Dutmp paDutgo uoll?sod ;au s<<Ci?o ail; moq Dutmogs uotltuuojut sluosard sailln?lay 3o luauxaltiS oLLL '�Cl?� agi3o gnival Iiexano gill ssasse of rapxo ul paraplsuoo aq o; paau am;onx;stxdut s</�i?o agn3o not;Ipuoo all put astq xti AlAadord s<<il?o ail; se Bons 4srolou3 Iutauuug-uou xaglo -Duu;txolra;ap ro Dutnorduq su Xi?o ail; 3o uoll?sod Iutouuug alp xag;agm 3o rolua?pu? Irgasn u su arras tvw uolllsod lac aq; ul saseaxaap xo sosuaxaul `aural xano -uoygod tau se polzodar oouara33?P aq; glum saaxnosax 3o smogul pauadap pue sag?I?gill put saamosax ;o smognno pauojop pue slosse s,,c4lo a pp Ilu uo uolleuuodul sluosard uoll?sod;oN;o;uotuop lS oql •sputa paDutgo lax IOU nou gel gseo 31 uana ;un000e o;ul ua>Izl are sasuadxa put sanuanar s �xea�f ;uazma gill 3o IIF�-satutduzoa xolaas -alenud lsouz ,iq pasn Dullun000t oql of xelluns su gotgm `Suzlunonabso szsvq pbnigob oql Dulsn pam;dard are sluouialuls osogl -,info oq;jo uoll?puoo Ituoueut3 aql pueisxapun of raptor oq; olgeuo itli Sall?n?lot s,,ilto agl uo uotluuuojul ixodar `s;u;)Luop ns Itloueug s,dn?o ail; tit nsm3 xeoddt gollm `sali?n?;oy 3o luoLuolu;S oql pue uoll?sod ION 30 ;uauiaMS aql •fn?lug oluiouoaa ut se Cilo oql ;o uoll?sod pnoutug pue `sllnsar Dulnurado `saolnras io ;soa lnogt uountuuo;ut apinord of pauDlssu are sluouioluls asoq,L •slasst Itltdto axnlonastgul Dulpnioul °siasse Ile of Dulitlax saoueluq puu suollousuerl papnlout snuautanuns asaq,L •alogm e Su ,i;to alp ro3 uolituuo;ul arodar sluautalens Ietautug apum-;uaunuanoD all s;uauia;u;S Iutauuurg aptm-;uaacu.lanoq -sanlasuzagi s;uauzantis Ituautug ousel gill lroddns of Ilelap Ieuot;Ippe gsluzn3 0l papuanut uolltuuo;ul ,fruluauzalddns sapniaut osiu lrodax gull -sluautalens It?outug all of solou (£ pue sluauzaluns Iulouuug pun3 (Z sluouialeis Iuloueug opum-nuounuanoD (I :sluouoduio ooRRjo posuduroo arc sluautaluns Iutoueug acsuq oql -sluautalels Ittoueug olstq s,Fi?o all of uoulanporlut tit St aotnraS 01 papualu? sl sis,iieue pue uolssnaslP Slgj Fund Financial Statements A fund is a self -balancing set of accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. The City uses two fund types — governmental and proprietary. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements with the exclusion of internal service fund activity. However, unlike the government -wide financial statements, governmental funds focus on near - term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City's near -term financing requirements. Because the focus of the governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, the reader may better understand the long-term impact of the government's near -term financial decisions. Both the governmental fund balances sheet and the governmental statement of revenues, expenditures, and change sin fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eleven governmental funds. Information is presented separately in the governmental funds balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, Texas Department of Rural Affairs (TDRA) Grant Fund, and Bond Construction Fund which are considered to be major funds. The other eight funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combing statements founds in this report. Proprietary Funds The City maintains two types of proprietary funds: enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide I inancial statements. The City uses an enterprise fund to account for fits operation in water distribution and wastewater collection/treatment along with its water and wastewater impact fees, and water construction projects. Management would note that trash collection services are provided by a third part contract. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses an internal service fund to account for fleet management services. Because these services predominately benefits governmental rather than business -type functions, they have been included within the governmental activities in the government -wide financial statements. •,�}glgsll asag} a;spmbll o;pasn aq;ouusa santasuuag; s;asss ag; aauns `saomosau uag;o uuo-g papinozd aq ;snuu ;qap s?q; ,Cudaz o; popaau saomosaa ag; ;ug; pa;ou aq pinogs }? `}qap pa;slaudo }au pauodaz sl s;assu is;?duo s;l ul }uauu;sanun s,f3?:) gig gnnoglly •nulpuads am}tg zo3 olgslrenu;ou aus s;assu osoq; ,il}uonbosuoo `-suazl;?a o; saoln-uas ap?noud o; s;asse lu;lduo osatp sosn ,�J?D agy -s;asss osoq; onnbou o; pasn `ouupums;no }qop bus ssol `(s;gplz ua;sm pus ssaunoud u? uou;onusuoo `uua;sfs camas pus Jolem `am}ongssigul `;uouudunbo pus Xzaulgasul `s;uauuanoidun pus soulplunq `punt n a) s;asse lu}?duo uu s;uauu}sanul s}? s}oagai (%ZZ'i6) uol;?sod ;au s,6}I:) ag} 3o uolluod ;saBlusl aq,L -n:a,i aoud ag; o; pauuduuoo uo?;?sod Is?ousug Iluuano s�6}?� ag} u? assauaul uu s? galgm 4TUOUSU3QA02 ,Cauuuud ag; ul SIOZ `0£ uaquua;daS JO ss ZZI468£46I I$ Kq soomosaz 3o smogul pa-ua3ap pus sa?}g?qs?l paaoxa soomosau do smotl}no pazua3ap puu s;asss Voomspuau3;o ,i4?0 aq; zod -uol;?sod Islouuug sJuauuuzan023 u 30 .Io}so?put Iugasn u su auu?; 3ano an-uas ,iuuu uol;?sod ;au `aaulsea pa;ou sy uou?sod;aN Io;uauua;s;S •uo?;uuuodcn 6aeauauualddns pannbaz ag} o} sa;ou ag} ounmollod 6la;ulpauzun pa;uasazd an; s}uaura}s1s Is?aueug ag; ui uollsuuopq ag; poddns iagliug ;uq; olnpagos pus s}uouua}uls pun3 Impintpul pus ou?uuquuoo agy •sivauuals;s tucauuug a?suq ag} ia}�e puno; On usa IS� •;anpnq s?g; g;?m aauu?Iduuoa a;ugsuouuap o} I32I u? pap?nozd uaag ansg satnpagos uoslzuduuoo Cue;aopng pond ;usz� ygQ1 ag; pue pun3 IsuouOD s;l zo3;aopnq pa;uudozdde Isnuue ue s}dops ji3?o aqy 089 •oN;uauua;u;S 9SVD ;o uol;sluauuoldun oql g;?m ISg o; pappu auam `suo?;nqu}uoD 3o olnpogoS ag; pus XgjIuqu?Z uo?suod ;aN u? sanusgD 3o alnpagoS ag; `solnpogos asogL -(,,S2UU..) uua;s6s }uauuanjoU lsdlolunW suxay ag; q}lm uolsuod s.j�l?D oqj o; pa}ulaz solnpogos om; puu s}gauaq aremplsaq;uauLotduua-;sod zag;o s,,i;?:) ag; .wd ssauaozd au?pun33o olnpagos u sopnlou? ISg ag.L -(«ISZI„) uol;uuuojul ,Sue;uauualddnS pagnbag ulsyuao s;uosaud oslu;uodoi slq} `sa;ou ou?Wuduu000s puu s}uauuop4s ls?auuug ausuq ag; o; uo?;uppe ul a04uua.103ul .uag}p -s}uauua;u;s is?aueug a?suq agajo uouaas;sul ag} a.uu sa;ou agy •s;uauua}u;s tucauuug pucg aplm-;uaunuaeoA ag; ul; papleoud s;sp ag;3o ou?pus;szapun IIn3 s o} Isl;uosso sl }sq; uo?}suuodut leuo?}lppe opinoid s;uauua}s}s Islausug aq} o} sa}ou aqs s;uama}E;S IslauEu?g aq} o} sa}oN The following table reflects the condensed Statement of Net Position, CONDENSED STATEMENT OF NET POSTTION zo15 zola zols 2o1a 201s 2o1a Current and other assets$ Capital assets 24,121,182 91,797299 $ 15,885919 $ 85,049272 14.036525 $ 60947210 16465206 56244200 $ 38,157,707 151744509 $ 3Z351,115 141293,472 Total assets 115,918,481 100,935,191 74983,735 72,709,406 190.902_216 173,644597 Deferred outflows of resources 4434,725 470.752 821111 292,040 3256,836 762,792 Total assets and deferred outflows of resources 118,353 206 101,405943 75,805,846 7301,446 194,159,052 174,407389 Long-term liabilities 31,805,424 207375,437 33,769292 30,9li294 65,574,716 51288,731 Other liabilities 53167575 4,173312 3280363 2,683,837 8596,938 6,857,149 Total liabilities 37,121999 24.548,749 37,049,655 33597,131 74,171,654 58,145,880 Deferred inflows of resources 538,448 59.828 598276 Net Position: Net investment in capital assets 737611,490 65,404,791 26,628,714 24,495,816 100240204 89300,607 Restricted 1,1797764 653,496 27,468 90,395 1207,232 743,891 Unrestricted 5,901,505 1079&907 14040,181 14,81&104 1794106 25,617,011 Totalnetposition $ 80.692.759 $ 76,857194 $ 38,696363 $ 39,404315 $ 119389,122 $ 116261509 A portion of the primary government's net position, $1,207,232 or 1.01%, represents resources that are subject to external restrictions on how they may be used. These restrictions include monies accounted for in special revenue finds for which the use is legally restricted, monies restricted for debt service, and capital project funds that represent unspent bond proceeds at the fund level. The remaining balance of unrestricted net position, $17,941,686 or 15.03%, may be used to meet the City's ongoing obligations to citizens and creditors. 0 609I9Z9TT $ ZZI"68£46TI $ 9I£`bOb`6£ $ £9£6969`8£ $ 1761`LS8`9L $ 6SL769`OS $ ZLS`CZ9`17Ti 8£656b`bti 59b`59S6£ IOL'6£L`9£ LOb`L90'9L L£Z9SL`LL (I09`Sb9 ) (ILS`59L`I ) (Lbi`£L£ ) (bI9`b997, ) (b5b`cLZ ) £40`668 £Lb`89ZSII 60SI9Z9I1 ZT9`8Z6`6£ 9I£`W6£ 19846£S9L 46I`LSS`9L 'umpaa ¢op�sod;aN pa;e;sax se oaaa�aq - uopcsod gaN ;aangsr Cpe popad zoud pauodoi keaguo se &g➢�aq - ➢ogcsod ION L£9`8£9`I 48I`£68`b (OSt`iSt ) Z99`956I LSL`68L`I icS9£bL aogssod;aa rn aoueg� 8b8`65LI - may.S.iempxoexy�3 Sb8'6SZT - - - - - (bb£`66L`T ) (50MM ) bb£`66L`I SOZ9ZZT sxa3saexy L£968£9`I 9£Z££9`£ 46I`849`I 6I0`Ec61 (LSS6 ) LI£`OIL`I ➢xag,Czeu<pxoexyea pm m suer; axo;aq ➢oguod;aa m (aseazaa�/saseaza➢I 0I6`6056 09S48Z`SZ sas➢adxapgoy 9976LZ`££ L89'£TS'b£ L86£SI`6 408`017I`LZ - 98L'£LZ - bT£`OTT - ZLb`£91 sysoo oouensq poog 9b£`5bit 99VLL9 b08`17ISI Z964£Ib`I Zb5`0£9 Z17I4L95 ;qop 90I`S66L ITL`6Z9`L 90I`566L IIL`6Z9`L - 6b9'£90'L£ LZI$Z66£ b0i'8SI'TT 900`LLO'II Sb5'S06SZ IZI'IS8`SZ b£9`8TT Sbt`9II - 6£8`L b£9`SIi 90£`80T Z9S0ST 60VSZI £IL`Ob 8£I` tr 6b8`601 ILO`6L ST9`£L91 LSS9ZL`I - - ST9`£L9`I LSS el £8Z9Zei7 9814I6Z5 - - £Sc`9ZL`4 981416Z5 48Zb98`bi nVVLSSt - - b8Zb98`bI b89`bLSSt 9L cOZI ZL9`£ - - 9L£`ZOZ`T ZL9`SLZ £ 566£b8 ££9`099 566`£b8 ££9`099 006£8b`£T $ Ib0`50Z£I $ T6£`LII`TT $ 6ZObZ0`II $ 60599 c $ ZIO`S8IZ aual ouol ao;saxa;ul za,Nas p➢e zagem JSMJTZ soowas ,Cp➢na OD ;uamdolanap ,iucmmmo� S'.'xoM aggnd f4ops oggnd ;➢am➢zanon TesauaD :sasaadxa sanuanaz pgoy snoaueQaas.rw s4�a;aaagsan➢I saw oscgo�j saw Iogoapn pue sales saxin,S;zadozd :san➢anazlexauQD suogngiguoo p➢e s; B TegdeD suogncpuoo p➢e s;umO Supezado $ saawas zo} sa'ozego :san➢anax am,10ozd :san➢anax bTOZ SIOZ bTOZ STOZ bIOZ SIOZ s(e;oy sapingoy y-ssamsng sarlrng.ay Te;aaamxano� •uoilisod tau ut sanusga s,,�1iD aqT;o ,S.Ieugums z saprnoid aigz� nucmollo3 aqy uo�isod;a,� m aauigqD 566£b8 ££9`099 566`£b8 ££9`099 006£8b`£T $ Ib0`50Z£I $ T6£`LII`TT $ 6ZObZ0`II $ 60599 c $ ZIO`S8IZ aual ouol ao;saxa;ul za,Nas p➢e zagem JSMJTZ soowas ,Cp➢na OD ;uamdolanap ,iucmmmo� S'.'xoM aggnd f4ops oggnd ;➢am➢zanon TesauaD :sasaadxa sanuanaz pgoy snoaueQaas.rw s4�a;aaagsan➢I saw oscgo�j saw Iogoapn pue sales saxin,S;zadozd :san➢anazlexauQD suogngiguoo p➢e s; B TegdeD suogncpuoo p➢e s;umO Supezado $ saawas zo} sa'ozego :san➢anax am,10ozd :san➢anax bTOZ SIOZ bTOZ STOZ bIOZ SIOZ s(e;oy sapingoy y-ssamsng sarlrng.ay Te;aaamxano� •uoilisod tau ut sanusga s,,�1iD aqT;o ,S.Ieugums z saprnoid aigz� nucmollo3 aqy uo�isod;a,� m aauigqD Governmental Activities Governmental activities increased the City of Friendswood's net position by $2,936,522 from operations. Key elements of this change are as follows: • Property and sales taxes continue to be the Cny's largest revenue sources. Property tax revenue increased by $710,400 due to increased appraisals on property within the City. • Sales tax revenue remained strong during fiscal year 2015, providing a 11.95% increase for the year, from $4.7 million to $5.3 million. • Capital grants and contributions increased $2,02� �96 from prior year, primarily due to commencement of the Friendswood Link/Whispering Pines Street project. This project is being funded by the Community Development Block Grant. • Total expenses increased $1,856,244 from the prior year. The largest increases were in General Government ($820,848), and Public Safety ($527,257). Some function in the Community Development and Public works were combined resulting in an increase in Community Development ($309,213) and decreases in Public Works ($487,242). The increase in General Government were largely impacted by a $500,000 settlement paid out by the City in fiscal year 2015. Public Safety expenses increased primarily due filling vacant positions, salary adjustments and increases in Volunteer Fire Department operating costs. There were also a prior period adjustments resulting from the implementation of GASB 68, capital asset adjustments, and the reallocation of long term debt to the business -type activities that increased beginning net position by $899,043. Governmental Activities —Revenues Franchise Interest and taxes other o_ 1% Charges for 8% Operating �rantsand contribution s 2% Capital grants and contributions 11% )1 'bi9`b99`Z$ gig notllsod lau auluulnag paseazaap lug salllnllau luluaunuanoo oql uiog;gap uual-nuol3o uolluoollu aql puu `slassu Ie;idea of sluou4snfpe 689 gSvojo uol;u;uauioldutl oq; uiog SullInsaz s;uougsnfpu pouad zoud u osle azam azagy •;ueld uolleagund zaluAA, lsuoglnoS oql lu sloofozd uolsuedxo of polulaz uolsnolg Jo /ClID aql uio-g 8b846SZ41$ jo lunomu all ui lsazalul snld suollnquluoo ssaoxo 3o luomosznquuaz u panlaaaz �'4l0 aqy •suolluzado zamas puu sasugoznd zalum zo3 sasuadxa pasuazaap ;o gnsez u sum asuazoap siq; jo uollzod lsanrei oqL '%bL-£ zo £Z6`9S£$ posuazoap sosuadxg -zea�f aql ul paloallOo saalnzas zoo saArela ul oseazoul uu ,Cq lasgo sum silty ' i 8l `ObZ$ fCg sonuanaz poseazoop zeoX luauno all zo3 slun000u olglloollooun zo3 oouemollu oql of oseazoul W -%£L-0 zO 860418$ gig posuazoap sonuanaZl :smollo� su aze a�uela slgl30 sluauzala AOX 'Z99`996`i$ Alt u011lsod lau s4poomspu9lz33o CllD aql pasuazoul salllnllou odxC-ssoulsng sal;Inl;ate ad,f,I,-ssaursng %s �uawdo�anap �aylo pue;I %b Ne�gi� sasnadx� — sar;lnua� Iulaatnn.xano9 12,000,000 101000,000 81000,000 6,000,000 41000,000 2,000,000 2015 2014 a Operating revenues a Operating expenses FINANCIAL ANALYSIS OF TIIE CITY'S FUNDS As noted earlier, fund accounting used to demonstrate and ensure compliance with finance -related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of the City's net resources available for spending at the end of the year. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balance of $20,131,037. Approximately 43.52°/u of this amount ($8,760,424) is unassigned fund balance; however, $5.76 million is set aside for the 90-day operating reserve, as set forth in the City's financial policies. 13 988`bb5`£$ 3o saznllpuodxo Iullduo Cq 1as33o sum go?gm zea6 Ieosg oip nuunp spuoq ul 000496546$ 3o oouenss? otp ,Cq posnuo ,�I?zuunzd sum oseazou? sm -6l£48I I`9$ posuazou? pun3 sloQ[ozd Iel?deD agI uI aoueteq Puna SI?j agI iq pasn suiewozd luuzo of palulaz 9I6`9I0`£$ 3o saznl?puadxa puu ZIZ`LTO`£$3o sonuanaz po:podaz ,�4?D agI zua t Iuosg agI nui mQ '96Z$ Paseazaul pun3 luez9 VIQI, aql u? oouepeq pun3 saseazaulllozCed pala3pnq pee IuacuCed luauiaillas 000`00S$ aural-auo u uiog pollnsaz XIlzuuil.id osuazoui — saml?puadxa Ielol uI aseazain 098`£9L`T$ • '%89'£ �q rea,t zoud agI uzoz3 paseazaul puu nuozls pauleuiaz xel saius `saxel,flzadozd posuazoul Iloz xul 24iodozd agI of pappu sauzog mou — sonuanaz Ielol uI sasuazaul £SO`L£8$ :apnlaul s�zea,i slgl pee �Ingae pun3 Iezaua� s�zeaf ISei uaamlaq saauaza33lp ,fa�I •saznl?puadxa pun3 Iuzaua� Iulol3o %bZ nulluasazdaz `uolII?� 9L•S$ sum anzasaz nullezado s,tl?� agI `pua zea,f IV •lunoure auzes lugl3o luaozad %86.99 sluosazdaz ooueleq pun3 Ielol allgm `saznl?puadxa pun3 Iezauag Ielol3o %T8'9£ sluasazdaz aauuleq pun3 pauAisseujl •saznl?puadxa pun3 Ielol of aoueleq pun3 Iulol pue pouSissuun gloq azedwoo of In3asn oq ,ieuz 1? `,iilp?nbii s,pun3 Iuzauag agl3o aznsuoui u sy -uoili?Tu 9'£T$ Pagauaz aaueluq Puna IuIoI agl golgm `uoillp 8.8$ sum pun3 Iuzauag agl3o oouuleq PuTij pauoissuun `zea! Iuasg luazzno agl3o pua agI lV •poomspuau33o l.1?D xpjo pun3 Au?lezado3algo agI s? pun31eioual) oql 6I4`ELL7, $ 0VOW T loa[osd uoTlua;ap 6nnD pnw 56£`0££41 sloaCozd TegdeD b Vat $ iapso uo sosegoznd pounissv - %8'£T 98b`589 $ logic;uoo iapan s;oaCoidie;�de� paR?uunaJ - %b-£ b0T`SSo`L $ 9TLYSI saouempzo 63i� ibZ46L8`5 s;oafoad ieude� OS£`IhT suoi;eiado 6;a;es aggnd I49 ;a=dopnap omouoo3 L9£`S8I sa;n;e;s Tezapa3 ao/pue ales OL9`LLT aomzas;gaQ 6I1`8I5 $ s(auuega ;uacuaxanon pnE uoi;eonpa aggnd paiacc;sag - %i-S£ 409`£SS $ 8LE`I£ pnn3 ;uaneanad 49E`£Sb aigeniaaas saloN Z98`s££ $ scaa;i piedaid aigepuodsuox - %�c ti :smollo3 se pau$Issu zo `pall?uiuzoa `palaulsaz `alqupuadsuou sI £T9`OL£`TT$ ninuleuiaz ags Proprietary Funds The City proprietary funds fmancial statements provide the same type of information found ni the government -wide financial statements, but in more detail. At the end of the year, unrestricted net position was $12,040,181 for the Water and Sewer Fund. The total increase in the net position of the Water and Sewer Fund was $1,956,662 from operations. This increase was offset with a prior period adjustment of ($2,664,614) resulting from the implementation of GASB 68, adjustments to capital assets, and the allocation of long-term liabilities from the governmental activities. Other factors concerning the finances of this fund have already been addressed in the discussion of the City of Friendswood's business -type activities. Unrestricted net position of the Internal Service Fund was $269,482. The net position of the internal service fund decreased by $67,121 primarily as a result of expenditures, especially depreciation expense, exceeding the allocations to the City's participating funds. GENERAL FUND BUDGETARY HIGHLIGHTS The City made revisions to the original appropriations approved by the City Council. Budgeted revenues increased by $126,714 or 0.57% and expenditures were increased by $3,741,750 or 15.86%. Total revenues were above budget by $1,059,100. The more significant variances are detailed below: $81,521 above budget in property taxes as a result of more new construction and higher tax values than anticipated. • $706,022 above budget in sales taxes and alcohol tax due to improved economic conditions. • $163,410 above budget in franchise taxes due to growth and new fees. Total expenditures of the General Fund were $3,538,881 below the final expenditure budget. The more significant variances are detailed below: $756,812 below budget in total general government expenditures primarily a result of personnel vacancies, fuel costs, and other services. $365,600 below budget in total public safety expenditures due to vacancies in personnel and decrease in fuel costs. • $1,981,629 below budget in capital improvements. Budgeted projects that were either not started or incomplete will be reappropriated in the subsequent year. 15 vvv voZ`LS$3o uo?;snggo seal p4ldso Pus;gop PaPuoq Idol s Psq poomspuaud;o Ella oq; `zmf Isosg;uauno oq; jo pua QT{;;y riOLLF�2I.LSIAiILQQ� ,Lg�Q s;uauia;s;s Islousm3 ag; o; A a;ol I uI pa;uasazd sI I palls;ap azoy� ZLb`E6Z`Tbi $ TT9`LL6`OST $ OOZ'bbZ'9S $ ZI £'OSI'6S $ ZLZ'6b0'SS $ 66Z'L6CI6 $ slasse rygdea Teio,l SOS'95Z'9 TOS6L9'£I T££'b£9'£ bI8'L£0'9 - bLi'ZZ9'Z- L89'Tb9'L ssa.d;oxd ul U0130MIMOO 969`9TL`6I 569`91L461 969491L461 S6949IL`6I - - sAguxalem 8ZE4631469 S99`ZZb465 Sb94SZ9`IE Z004EOb`ZE E89`0WLZ E99`61 0`LZ =10MM4ul 9684LZ9`8 b68`Z6£`S TIL`L4S E66`I££ 58I`O80`8 IS64090`S luamdmbg Z£8`8LL6ZZ ZZZ6I17949Z - SSE41LE ZES`8LL`ZZ LE8`69Z`9Z sluamanoxd= pm �gurplmia 9TZ6bZL4bZ $ bE917ZT49Z $ 8T8'91L $ ELb461£ $ 86£`L0017Z $ T9T`S084SZ $ pue'T bi OZ STOZ bTOZ SIOZ bIOZ SIN >1e30.L sa[3W4oy odX Z-SSalIISRg Sa[jiAijaFl [Q3ua1uU]aAOLJ au�-xv� s� ss�ss� �sla�a saoomsal.?�x.3 3o a.I,Ia '(000`SOI$) £# uol;siS $?'I Pus `(uo?II?uz {,•I$) uogs;?I?gsga2l L#;usld za;sm `(uo?ti?Tu I'I$);uaulaoslda2i Z#;usld Z46AN k"MilluT I £$) uol;s;Ii?gsga2l;usld za;sAk >Imsq)Iaslg =SIOZ zsaIsosS 3o pua aq; ;s sswzAozd uI uogonz;suoo ui azu s;oofozd zamas pus za;sm oulmollo; aq L '000`69b$ �Sla;suTlxozdds ssm ;aafozd aq; 30 ;soo Is;oZ -;uauzaosldaZl g# uol;T;;S 8I`I ;o uol;alduioa -uo?II?uT E•C$ sem;soo;oafozd Is;os -uolIt?gsga2I S#;usld za;sAAdo uol;alduioa "000`S£Z$ �ta;suz?xozddv ssm golgm;oofozd Ougvil )Ind Ismua;uaa ogljo uoi;aldmoa "000`L61$ Y�Ia;suzlxozdds ssm ioafozd ag; jo ;soo Is;o; oq j "I S£Z b id Pus 3ImsiMosig ;s ;grill og3sz; alp do uoualducoa nulmollo3 ag; papnloul zsa,C aTI; $ulznp s;uana Is;Idso zofsw ssaznozd uI uol;aT£gsuoa pus s;Tlou za;sm `uia;s,is zamas pus sa;sm `azn;oli.T;segul `;uauzdmba pus F.TaulgasuT `s;uauzanozdTin pue s$ulplmq `pull apnlaul s;asss Is;Idsa ul;uauz;sanul OU "I19`LL6`OSI$ sl SIOZ `0£ zaquia;doS3o ss sal;Inl;os ocL,4-ssoulsnq pus Is;uauzuzanon s;I zo; (uol;s?oazdap pa;slnumoas 3o ;au) s;asss p1duo uI ;uaux;sanul s,poomspuau3 30 A41a aqj S,LaSSv'Iv,LIdva CITY OF FRIENDSWOOD'S OUTSTANDING DEBT AT YEAR-END Governmental Activities Business -Type Activities Totals 2015 2014 2015 2014 2015 2014 General obliptions $ 23,305,000 $ 18.815.000 $ 9,255,000 $ - $ 32.560,000 $ 18,815,000 Revenue bonds payable - - 24,540,000 31,830,000 24,540,000 31,830,000 Capital leases 190,494 623,407 - - 180,494 623,407 $ 23,4854494 $ 19,438,407 $ 33,795,000 $ 31,830,000 $ 57,280,494 $ 51,268,407 The City's General Obligation and Revenue Bonds bond ratings are listed below: Standard & Poor's General Obligation Bonds AA+ Revenues Bonds AA - More detailed information about the City's outstanding debt can be found in Note VII to the financial statements. ECONONIIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Friendswood continues to experience moderate growth. The City's current population is estimated to be 39,458. Friendswood is expected to reach build out with an estimated population of 57,000. The City is continuing to focus on Economic Development initiatives, including the revitalization of downtown and a large residential and commercial development called West Ranch. The West Ranch residential development is currently under way, with commercial construction scheduled to follow as the area's residential population growth. The City's largest single source of revenue in the General Fund continues to be ad valorem taxes. The adopted budget for fiscal year 2016 has a tax rate of $.5687 per $100 of taxable value. This rate consists of a maintenance and operations (M&O) tax rate of $.4972 and an interest and sinking (debt service) tax rate of $.0715. The rate was set based on a net assessed value of $2,974,520,186. This is an increase of $341,033,490 from certified taxable values for tax year 2014 in taxable value. This increase is mainly a result of new construction in the City. This additional value results in a total levy increase of $1,354,957. This City's financial management policy sets the guideline to maintain the fund balance and retained earnings of the various operating funds at levels sufficient to protect the City's creditworthiness as well as its financial position from unforeseeable emergencies, The City's second largest source of revenue in the General Fund is sales tax. The City anticipates an increase in this revenue stream from the prior year and has adjusted the budget from $4,553,543 to $4,956,193. The franchise fees budget has been increased from $1,552,315 to $1,644.011 and the budget for municipal court fines has been increased from $723,258 to $802,762. If all projections are accurate, the total General Fund unassigned fun balance net of the 90 day operating requirement ($5.3 million) is estimated to be approximately $4.9 million at September 10, 2016. 17 'LZOLL sexay `uo;snoH `009Z alms `�femaaz3;samg;nos OOZ£ `d'I'I saugdumg auoog UV o/a `poomspuau33o �1?�j agldo ?un;uauoduzoj u `;au;s?Q;uacua$eueW goueg Isam :o; n[nlrzm /�q pau?ulgo oq ueo lolgs?Q ;uauzaoeueW goueg Isom ag; zoj s;uauza;e;s Ie?aueug pans? XpluzudoS -uzoa•poomspua?.g a paa Icuuza zo `bZZ£-966-i8Z ;e a�Pd 'S �Pu?� Ilea zo `88Zi-6tiSLL sexay `poomspuaud `88ZI xog "O'd `saa?nzaS anl;uz;scu?uzpy Iau;uoa `uo?;euuodul Ieuo?;ippu paau zo Uodaz scg; ;noge suopsanb aneq no! A •sancaoaz;[ Xououz ag; zo3 filg?qulun000u s,Sj?D agI mogs of pue oouuug s<fI?� og; jo malnzano Iezauan u g;?m szol?paza puu `szolsanul `szauzolsno `suo2pp zno ap?nozd of pour?sap s? vodaz Ie?aueug aqy ,r.KUni:fovNVnl rMDKVI*ua s<a.rzD alli oruzDV.ri`I03 •sluauzanozdun IeI?dea azn;nd zo3 pa;eu$?sap azu anzasaz ou?Iezado 6up-06 ag13o ssaaxa u? spucg `�a?Iod Iuauzaneuecu to?auucn3 s�?� agI oI Iuunsznd '9IOZ rea,C Iuasg;o pug ag; Ie uogl?ul Z"L$ ag oI pa;aadxa s? `(uogl?Tu S"i$) ;uauzasnbaz ou?;uzado �iup 06 ag;;o Iau `uo?;?sod;au pun3 zamaS puu zalum •;uaazad 8Z zo `sanuanaz u? 01649014I$ 3o asuazaul ue s? qa?gm 0£t74ZL64b$ ;u pola$pnq azu sanuanaz zamaS luaozad 8 zo `sanuanaz u?Z6t`6Z9$ 3o asuazacn ue Si qo?gm L814L£b49$ le polo2pnq are sanuanaz za;em BASIC FINANCIAL STATEMENTS X'I'I�I�iOI.LI�i�.LI�iI }II�F''Ig Z3�Z �OF�d SIHZ CITY OF rIUMNDSWOOD, TEXAS STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Primary Govemment Governmental Business -type Component Activities Activities Total Unit ASSETS Cash and investments $ 21223L497 $ 10,822,289 $ 32,0531786 $ 4,186,959 Receivables (net of allowance) Taxes 1,628,292 - 1,628.292 1L622 Customer accounts 301,721 2,000,594 2,302,315 - Other 12,827 - 12,827 5 Internal balances ( 1,172,858) L171858 - - Due from other governments L297,402 - 1,297,402 - Prepaid items 338,937 40,784 379,721 56,299 Notes receivable 483TMA - 4837364 - Worldng capital deposit - 383,491 383,491 - Restricted cash and investments - 173837407 L383,407 - Capital assets Nondepreciable 3374467848 26,073,982 59752U30 6,006,988 Depreciable, net 58350,451 ` 106,330 9L456,781 431,401 Total capital assets, net 91,797,299 59,180,312 150,977,611 6,438,389 Total assets 115,9M481 74,983,735 190,902,216 1091274 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on issuance of refunding bonds 472,470 604,082 1,076,552 - Deferred outflow ofresources for pensions 1,962,255 218,029 2,180.284 - Total deferred outflows ofresomces 2,434.725 822AI l l 3,256,836 Total assets and deferred outflows of resources 118,353,206 75,805,846 194,159,052 M693,274 LIABILITIES Accounts payable 2,162,M6 794,324 2,956,690 21222 Accrued liabilities 1,281,212 155,275 1,436,487 - Accrued interest 64,580 115,899 180,479 314,037 Customer deposits 100 430r557 430,657 - Due to other governments 1197780 - 11977SO - Noncurrent liabilities: Due within on year L688.537 1,784,308 3,472,845 410,000 Due in more than one year 31,805,424 33,769,292 65,574,716 18,190,589 Total liabilities 37,121,999 37,049,655 74,171,654 18,935,848 DEFERRED INFLOWS OF RESOURCES Deferred inflow of resources for pensions 538,448 59,828 598,276 - Total deferred inflows of resources 538,448 59,828 59&276 Total liabilities and deferred inflows of resources 37,660AV 37,109,483 74,769,930 18,935.848 NET POSITION Net investment in capital assets 73,611,490 26,628,714 100,240,204 - Restricted for: Public education and government channels 518,119 518,119 Debt service 147,193 - 147,193 966,112 State and/or federal statutes 185367 - 185,367 - Economic development 641 - 641 - Public safety operations 141,350 - 141,350 - Community development Expendable 155,716 - 155,716 - Nonexpendable 31,378 - 31,378 - Capital projects - 27,468 27,468 7,611 Unrestricted 5,901.505 12,04M81 17,941,686 ( 9,216.297) Total net position $ 80,692,759 $ 38,696363 $ 119,389,122 $( 8,241574) The accompanying notes are an integral part of these financial statements. 19 'S}IIailia}E}S [EIJIIEIII[ aS2i{}30 }]Efl [E.1�}III IIE a1E S2}OII �III�IIEf1iIIO�JE 21jZ au?paa - uoR?sod laN polelsai se 4nu?au?8aq - aoglsod laN luamisnjpe pouad xoud amaac2aq - uorl?sod laN uoplsod;au uq e uegO ma11 ,Cxau?Pxoz4xa sxa;suexl pue sanuanax iuxanao Moy sxa;snexy xag1O ;sazalm os?goum3 logoale pne sales laxadoxd :saxey :sQnUOAax(maua0 ZL9'SZZ`£ ££9`099 I404SOZ'£I 16L'46Z'9£ iL9`SZZ`£ ZL9`SZZ`6 ££9'099 ZZ9`bi 660`£b Zi6`ZO9 'OZO'T 6Z0T 6Z0'OZO'i I ZIO`58I'Z 669`££ 94WON 8b9`£b8 660`061 cLZ`Oe SbVL08 $ L86'£SS'6 L86'£SI`6 408'04T'LZ ZL4`£9I Z4T`L9S L96`9ZO41 54E`698`Z 88Z`90b`I 88Z`££6`c 659`£9L`TI £b9`OI4`S $ suopnq?xlno0 s¢oRngSpnoO saau�xag sasuadxg p� P� s;�uJ xo; sao.leg0 slneuJ T !k) 2mlexad0 anuanag me>ooxd STOZ `0£ 2I�3TTidSd3S QdQ,�i� 2Pc"3�I'3Hy iI03 S3IZTAIZ�E� 30 Z�IdIud,LVZS n V Aa L U%JVAVnILLXM a 30 X,LIO 1?nn;uauodmoo pgoy loWs?Q luama&mw goml;som lintl;uanodmo0 ;uammanoo .Sxemrad [e;oy sa?3?n?loe adil-ssamsnq teloy xauas paE xa;ems :sa?3?npoe adil-ssamsng sa?lu?lae p;lnammanoo je;oy slson aanenssI pnog lgop mxal-ouol uo lsaxa;ul 6xmq?'I as as Jc4!xm ano0 luamdolanap f4junmulo0 $JISOM ai[gnd Fyajes aTlgnd lnam A&a [=Mq :saq?npae [elnaunvanaj llla M4AO'n dlemud �B ox(jjsuopound STOZ `0£ 2I�3TTidSd3S QdQ,�i� 2Pc"3�I'3Hy iI03 S3IZTAIZ�E� 30 Z�IdIud,LVZS n V Aa L U%JVAVnILLXM a 30 X,LIO 1?nn;uauodmoo pgoy loWs?Q luama&mw goml;som lintl;uanodmo0 ;uammanoo .Sxemrad [e;oy sa?3?n?loe adil-ssamsnq teloy xauas paE xa;ems :sa?3?npoe adil-ssamsng sa?lu?lae p;lnammanoo je;oy slson aanenssI pnog lgop mxal-ouol uo lsaxa;ul 6xmq?'I as as Jc4!xm ano0 luamdolanap f4junmulo0 $JISOM ai[gnd Fyajes aTlgnd lnam A&a [=Mq :saq?npae [elnaunvanaj llla M4AO'n dlemud �B ox(jjsuopound Net (Eapease) Revenue and Changes in Net Position Primary Government Governmental Business -type Component Activities Activities Total Unit - ( 7,904,800) - ( 7,904,800) - ( 3,743,189) - ( 3,74u89) - ( 561640) - ( 5627640) - ( 2,546,200) - ( 2,546200) - ( 9787646) - ( 978,646) - ( 567,142) - ( 567,142) - ( 163,472) ( 163,472) ( 21,069,487) ( 21,069,487) - 1,866,042 1,866.042 1,866,042 1,866,042 ( 21,069,487) 1,866A42 ( 19.203.445) ( 1247.887) ( L247.887) 15,574,684 - li,574,684 1,660,796 5,291,186 - 5,291,186 - 1,726,557 - 1,726,557 - 7%071 497138 128,209 4,767 108,306 7,839 116,145 - 1,226,205 ( 1,226,205) 24,006,009 ( 1,169228) 22.836,781 L665,563 - 1,25%848 1,259,848 - 2,936,522 1,956,662 47893,184 417,676 76,857,194 3924047315 116,261,509 ( 8,660250) 899,043 ( 2,664,614) ( 1,765,571) 77,756,237 36,739,701 114,495,938 ( 8,660 250) $ 80,692,759 $ 38,696,363 $ 119,389,122 $( 3,242,574) 21 zz uamalvis luiauuug aSaljj jo pud jrjtajul uu a.IE Sajou oulsuudmoan aq jL 689'80L'9Z $ I60'OL91 $ LL9'ZL8'9 s IIS'ESE'I $ OIS'ZI8'SI $ soomleq pun} pm saomosw do smoqul paua3ap `sopIligeg Ieioy LEO'IEI'OZ 9Z8169 It7V6L8`9 96Z VL9�655'£T �owj[ gpur3 leioy VZV09L'8 - - - VZT09L'8 Pan3csseun 00040004I - - - 000`0004I 3oaCoid uopuaiap ,ClpuJ pnyQ S6E`OEEI 96E`OEE`I sioaCoxd IebideD bZ04Ebb - - - 17Z04Eb4 sapio uo sos gomd _ :io; paUETssy 98vm - - - 984`989 3oeRuoo upon sioafoad p1deo :zo3 POMUMOD 9IL`95I 9IL`991 - - - Saa UTPO/7TD It7Z46L8`5 - IbZ`6L849 - - moCoid mlduD OSE`Ibi og£lvl - - - Tb9 S4E - 96Z - .Iqnj ;uamdolanap omouma L9E`S8I L9E498I - - - SOITPIS Iraapa3 ao/pm olms OL9`LLI OL9`LLI - - - wTm os lgaQ 611`8I9 - - - 61 T`8I9 Slamxego ;nanSlllaAOn pue uopeonpa oilgnd :so; 1a30Wsa2f SL£`IE 8LE`IE - - - Pur3 ivaueu d b9E`E86 - - - 49E`E8t olgeATaaai saloN Z984SEE - - - Z9848EE Small P?edald :algepuodsuoN S3aNd'lva QNflu E9Z: ZEb 5596LE - - 809176E saomosax;o s ODUT paua;ap Ieloy E9—VZEb 559'LE - - 809146E sanuanax algelTeneUfj S3maosau 30 SMorma aawaad3Q 68E'94I'9 OI9'046 9EE`E66 SIT. ESE'I 8W 858'I s pjjigeI( Imoy 6STL58'T 00W006 - 6894L56 - spun3 nipo of ana OOI - - - OOI silsodop aamoisnD 08L`6II - - - 08L46II Sluau AO2 Jagloof=(j bS1`9004I 9E9 - - 8TS4500l SaRIITgetT Pa=atl 9994I9T`Z bL6`6£ 9EE`E66 9Z5`S6E OES`ZEL algeied slmwoV S�.LI�3Vi'I 689'80C9Z I604OL9'I LL9'ZLS'9 IIS'ESE't OTS'ZIS'SI slasseIMO'L L£6`8EE SL - - Z98'SE£ siasse iaglo pm spmdaxd t9£4E84 - - - 179E4E8b olgenteoaasaloN ZOb`L6ZI 9I9486b - 8£8499L Sb64IE sivaunuanoo jaglo mog on(a IES`489 - - - IE84489 SPmg saglo mog OUG L=8 l ELSE - - bSi 6 satgeniaoai MPO TZLIOE 9564EZ - - 99L`LLZ siunoaoe lamolmD Z6Z`8Z9`I Z0I417C - - 06I4176S41 algeAlaoai sa ,L oommolte;o lau `salgeAlaaax SI£`T96`OZ $ 69L`60T`T $ LL5`ZL8`9 $ EL9`989 $ 96Z4Z6E4ZI $ SIuaURsanm PM gSPD sy3SSV SPund spmi3 uogon.psuoo IUeuj IelouoD Ieluem AOE) Ieivamuaano0 pang y�JQy Ieloy Mpo SiOZ 40£ 2I3ELQd.Ld'35 S Qlif 13 'IV,Lrt3IATrI2I3A0J ,LddHS dOI�TF"IVg SFrXaLl `QOOA1SCN31WA AO A113 CITY OF FRIENDSWOOD, TEXAS RECONCILIATION OF TAE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2015 Total fund balances - governmental funds $ 2Q,131,037 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities aze not current financial resources and therefore are not reported in the governmental funds balance sheet. 90,603,375 Interest payable on long term debt does not require current financial resources; therefore, it is not reported as a liability in the governmental funds balance sheet. ( 64,580) An internal service fund is used by management to charge the cost of certain activities, such as fleet management to individual funds. The assets and liabilities of the internal service fund are included in the governmental activities in the statement of net position. 1,188,348 Revenues earned but not available within sixty days of the year-end aze not recognized as revenue on the fund financial statements. 432,263 Loner term liabilities aze not due and payable in the current period and therefore aze not reported in the fund financial statements. These long-term liabilities at yeaz end consists of: Bonds payable ( 23 M5,000) Premiums on issuance ( L220,285) Capital leases payable ( 360,584) Net pension liability ( 7,2275897) Net OPEB obligation ( 706369) Compensated absences ( 671826) Deferred inflows and outflows of resources related to pensions aze reported in conjunction with the net pension liability and aze not reported in the City's fund financial statements. 1,423,807 Deferred losses on issuances of refunding bonds are recorded s deferred outflows of resources in the statement of net position. This is the difference between the reacquisition price and the net carrying amount of refunded bonds, net of amortization. 4724470 Net position of governmental activities $ 80,692.759 The accompanying notes are an integral part of these financial statements. tz s;uatua;uis jupuuug asaq;;o ped Ietna;ui uu ate sa;ou but fuuutaoaas aqy L£0't£t'OZ $ 97,8`I69 $ IbZ'6L8'S $ 96Z $ bL9`655'£I $ ONZ(LN3 `SgJNV'IVa QNAa 3%'L69 (3L0'6£Z ) 03S'6I56ZI 9NINNIJ3g`mNV'IVggNIId 090'SL66ZI LL64Z9I4L (Z£L`S ) 6I£481 V9 96Z 460`040`I SaDKV'IVg QNIId NI 30NVHD I3N bb9'88�TT £80'89£ 000'S59'6 - i9S'S97:t sasnpnesaamosomoneugiagloleloy 66 siasm ImIdeo;o ales mo.g spaaaoxd (LSb`81£ ) - (LSb`3t£ ) - - 3no Sia3sueJL Z9944b5`i LSb`31£ - - SOZ`9ZZ`I msm;sumy LSZ`6£ - - - LSZ`6£ SOOnoaax Oauemsul (£99`850`£ ) (£99`350`£ ) - - - lua'ne mmaso 3ulPmgai puoq of luamked 94L4949 6SZ`89Z LS4`8L£ - - aouenssi puoq uo mnmiazd 000`0bS`Z 000`0bS`Z - - - igap ouipun3ax;o aouenssl 0004565`6 - 0004S69% - - lgap palelai-Ielideo;o aou msT (sa" SaDaaoS ONIJNVN732 3mo L99� STS� I8949£S£) 96Z L94'S� sawuHINaa.xa Waoo) uaA0 saaKaAaa d0 (IJNdIJmaa) SS3JNd b68'Zb6'Z£ Z6Z'435'Z 98S'445'£ 9I6'910'£ 008`96L4c samlipuadNO peloy 6ZZ SMtL 1759'8£Z 9SS'445'£ 916'9104£ £LL'49b 6egno p1deo ZLb`£9I ZLb`£9T - - - sison aowmsi puog S98`ZI9 S93`ZT9 - - - jotpo PM mialul M3 ZLZ`T £ZSZLZ`T - - - Iedpuud :oow s;gaQ £b349£0`i - - - £43`9£O4T rmgiq L584Lt6`Z - - - L98aL164Z noPoloolPMS-Ind L176`9Z6 - - - L46`9Z6 luamdolanaP lgmnuuuoD 6b£49904Z - - - 6b£49904Z sxzom or 917£`817£`TI 0£8`OSI - - 9IS`L9T`II -�igtes oggnd 0914£4£4S Sb945II - - SIS`LZV9 luammaAO'n Ielaua9 quon D 53u uic N3dX3 LZi;L08'8Z LLb'01VZ 5OZ68 ZIVL106£ £££'ILS'£Z SOnnOAOJ leloy L£86ZL - - - L£8ZL snoanellaasiyQ 5Z£'6b£ £b£'Z9Z - - Z86`98 suogeuoQ L464GL 9L9`b 9OZ8 96Z OLL179 souimea ivamisannl 08649£S`£ S58`ISZ - 9I649I04£ 60Z`S9Z Telaaamxanowalnl 49Z`64£`I Z£8465 - - Z£b`63Z41 S003 PM slimwad LSS`L06 5LZ`0£ - - ZSZ4LL8 samBOJIOJ pue sauig L99`9ZCI - - - L9949ZL`i sawn asigoueag 98I16Z`9 - - - 98I`IR'9 sexellogoap;pueSgFs 4L54964491 $ 9644I09`1 $ - $ - $ 8LO$684£i $ somnjryadoid sjAmaAd2I spmid spmid siaaload luE1J [elaua0 IeluammanOD Teivamulano0 yeildeD ydQy lelol �q10 SIOZ 40£ tI3gNI3IddS QdQNd ?IVdA gHI 2I03 SQNR3 'IVZN3IUNii'3A00 Sd,'JNV'IVg QNIId NI SdONVHO QNV SaufmQNddXd 4Sdf1NdAaH JO INaWaIVIS SVXPAS. `QOOAIScmiva AO A113 CITY OF FRIENDSWOOD, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITUI AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2015 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances - total governmental funds S 7,152,977 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital outlays reported in the current period. 7,644,794 Depreciation is not recognized as an expenditure in governmental funds since it does not require the use of current financial resources. The effect of recording current year depreciation is to decrease net assets. ( 3,057,901) The internal service fund is used by management to charge the cost of fleet management to individual funds. The change in net position of the internal service fund is included in the governmental activities in the statement of net position. ( 67,121) The issuance of long term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the premiums and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Issuance of bonds ( 13,0817746) Repayment of principal on long-temr debt 1272,87.3 Bond refunding 3,058,663 Amortization of: Premium on bond issuance 103,287 Loss on refunding ( 61.945) Current year changes in certain loner term liabilities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Compensated absences liability 123,925 Retamage payable ( 275,058) Net pension liability 175,863 Net OPEB obligation ( 63324) Interest payable on long-term debt is accrued in the government -wide financial statements, whereas in the fund financial statements, interest expenditures are reported when due. 47384 Revenues from property taxes and fines that do not provide current financial resources are not reported as revenues in the funds. 71301 Change in net position of governmental activities $ 2,936,522 The accompanying notes are an integral part of these financial statements. 25 rI'I'IF�NOI.L�i�.L�II x�Zg Z3�7 ��JF�d SIHZ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION - PROPRIETARY FUNDS SEPTEMBER 307 2015 ASSETS Current assets Cash and investments Accounts receivable, net of allowance Customer accounts Due from other funds Prepaids and other assets Restricted cash and investments Total current assets Noncurrent assets Working capital deposit Capital assets Land Construction in progress Water rights Machinery and equipment Buildings and improvements Water and sewer system Accumulated depreciation Net capital assets Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURECES Deferred loss on issuance of refunding bonds Deferred outflow of resources for pensions Total deferred outflows of resources Total assets and deferred outflows of resources 26 Business Type Activities Enterprise Fund Water and Sewer $ 10,822,289 �,000,594 1,172,858 40,784 1 383A07 15AI9,932 383,491 319,473 6.037,814 19,716,695 1,1955559 589,624 63,267,248 31,946,101) 59,180,312 59,563,803 74,983,735 604,082 218,029 822,111 75,505,846 Governmental Activities Internal Service $ 270,182 270,182 2,867,477 ( 1,948,611) 918,866 918,866 1,189,048 1,189,048 �z�uorsu�s.�u xx�zg i3�z �o�a sixs CITY OF FRIENDSWOOD, TEXAS STATEMENT OF NET POSITION -PROPRIETARY FUNDS SEPTEMBER 30, 20I5 LIABILITIES Current liabilities Accounts payable Accrued liabilities Accrued interest Deposits Compensated absences Bonds and other loner term debt payable Total current liabilities Noncurrent liabilities Compensated absences Net pension liability Net OPEB obligation Bonds and other long-term debt payable Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURECES Deferred inflow of resources for pensions Total deferred inflows of resources Total liabilities and deferred inflows of resources NET POSITION Net investment in capital assets Restricted for capital projects Unrestricted Total net position Business -Type Activities Enterprise Fund Water and Sewer Governmental Activities Internal Service $ 794324 $ 700 I55X5 115,899 430,557 14308 1,770,000 3,280363 700 72,309 - 803,100 124,796 32,769,087 33,769,292 37,049,655 700 59,828 59,828 37,109.483 700 26,628,714 918,866 27,468 12,040,181 269,482 $ 38,696363 $ LI88348 The notes to the basic financial statements are an integral part of this statement. 27 �i'I'I�110IZ1�T�Z�ii �II�iF''Ig Z3�Z �O�d SIHZ CITY OF FRIENDSWOOD, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, ZO15 Business -Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service OPERATING REVENUES Charges for services $ 11,020,029 $ 359325 Total operating revenues 11,020,029 359,125 OPERATING EXPENSES Personnel services 1,675.139 - Sewer operations 1,755,070 Water purchases 1,070,000 - Repairs and maintenance 560,443 - Supplies 1383988 7,751 Other services and charges 810,410 Depreciation 1,6194661 415,732 Total operating expenses 7,629,711 4231483 Operating income (loss) 3,390,318 ( 64,M) NONOPERATING REVENUES (EXPENSES) Investment income 49J38 1,124 Gain (loss) on disposal of capital assets 7,839 ( M87) Bond issuance costs ( 110,314) - Interest expense ( 1,40,962) - Totalnonoperatingrevenues(expenses) ( 1,467,299) ( 2,763) Income (loss) before transfers and extraordinary item 1,9231019 ( 67,121) Transfers out ( 1,226,,205) - Extraordinary item 1,259,848 - Change in net position 1,956,662 ( 675121) Net position, beginning 39,404,315 L255,469 Prior period adjustment ( 2,664,614) - Net position, beginning - as restated 36,739,701 1.255A69 Net position, ending $ 38,696363 $ 1,188,348 The notes to the basic financial statements are an integral part of this statement. m �z�uozsuas.�[ xt.��g saaz ao�a sixi CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Business -Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service OPERATING ACTIVITIES Cash received from customers S 115206,856 S - Receipts from interfund charges for fleet management - 059,340 Cash payments to suppliers for goods and services ( 1,659,535) ( 7,051) Cash payments to employees for services ( 3 201,351) Net cash provided by operating activities 6345,970 0524289 NONCAPITAL FINANCING ACTIVITIES Cash paid to other funds - Transfers to other funds ( 1,226205) Net cash used by noncapital financing activities ( L4994063) CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from es elof capital assets 7,839 9,346 Acquisition and construction of capital assets ( 2,502,409) ( 408,085) Repayment of debt ( 1,855,000) Interest paid on debt ( 1,430,173) Net cash used in capital and related financing activities ( 5,779,743) ( 398,739) INVESTING ACTIVITIES Investment income 49,138 1,124 Net cash provided by investing activities 49138 1,124 Net change in cash and cash equivalents ( 8831698) ( 45326) CASH AND CASH EQUIVALENTS, BEGINNING I M89,394 015,508 CASH AND CASH EQUIVALENTS, ENDING S 12,205,696 S 270,182 29 �z�uoizu�st�u x�zg i��� ��va sixi CITY OF FRIENDSWOOD, TEXAS STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2015 Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation Extraordinary item Change in assets, deferred inflows and outflows, and liabilities Decrease (increase) in customer receivable Decrease (increase) in prepaid$ and other assets Decrease (increase) in working capital deposit Decrease (increase) in deferred outflow for pensions Increase (decrease) in accounts payable Increase (decrease) in other liabilities Increase (decrease) in customer deposits Increase (decrease) deferred inflows for pensions Increase (decrease) in net OPEB obligation Increase (decrease) in net pension liability Increase (decrease) in compensated absences Net cash provided by operating activities SCHEDULE OF NON -CASH CAPITAL AND RELATED FINANCING ACTIVITIES Refunding debt issued Business -Type Activities Governmental Enterprise Fund Activities Water and Sewer Internal Service $ 3,390,318 $( 64,358) 1,619,661 415,732 1:259,848 - 131,652 215 ( 414) ( 80,295) ( 62,653) ( 45.579) 700 47A50 55,175 59,828 11,258 ( 16,716) ( 234163) $ 6,345,970 $ 352,289 The notes to the basic financial statements are an integral part of this statement. 30 �z�uoisu�iru x�vzg ia�z �o�a szxs CITY OF FRIENDSWOOD, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2015 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Friendswood, Texas ("the City") was incorporated on October 15, 1960. The City charter provides for a City County -City manager form of government. The Mayor and six Council members are elected from the City at large serving three-year terms. The City Council is the principal legislative body of the City. The City Manager is appointed by a majority vote of the City Council and is responsible to the Council for the administration of all the affairs of the City. The City Manager is responsible for law enforcement, appointment and removal of department directors and employees, supervision and control of all City departments, and preparation of the annual budget. The Major resides at meetings of the City Council and can vote. The City provides the following services: public safety, streets, parks and recreation, library, water and sewer, sanitation, planning and zoning, building inspection, code enforcement, and general administrative services. Financial Reporting Entity The City is an independent political subdivision of the State of Texas governed by an elected six - member Council and Mayor and is considered a primary government. As required by generally accepted accounting principles, these financial statements have been prepared based on considerations regarding the potential for inclusion of other entities, organizations, or functions as part of the City's financial reporting entity. Based on these considerations, the West Ranch Management District has been included in the City's reporting entity as a discretely presented component unit. Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not considered a part of any other governmental or other type of reporting entity. Consideration regarding the potential for inclusion of other entities, organizations, or functions in the City's financial reporting entity is based on criteria prescribed by general accepted accounting principles. These same criteria are evaluated in considering whether the City is a part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered 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 it is financial independent of other state and local governments. Additional prescribed criteria under generally accepted accounting principles include considerations pertaining to organizations for which the primary government is financially accountable; and considerations pertaining to other organizations for which the nature and significance of the relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. 31 zs onp si ;uauUCzd uagm lluo popxooax axu `s;uauxa$pn[ puu sunulo pus soouosqu palssuodwoo o; pa;ulax saxn;Ipuodxo ss Ilom su `soxn;tpuodxo aotnxas ;qop `xanamog oui;un000s Isnzoou xapun su `paxmoul si XlIltgstl u uogm popxooax ale Xjjujouao saxn;ipuodxg -pouad Iuosg;uouno oq;3o puo ag; jo step 09 uRlIm pomltoo p alquitunu oq o; anuanax paxaptsuoa ;uaunuanoD all `osodmd stq; xo3 -pouad ;ua-uno aq;3o sat;IilquIl �fsd o; xaguaxaq; q$nouo uoos xo pouad;uaum aq; utq;Im olgpoolloo am iaq; uagm olgvltvnv oq o; paxaplsuoo are sonuanag -aigsitens pus olgEinseaui g;oq axe Xoq; se uoos su PazluDooax axu sanuanag Buzjunoaav fo stsvq Imao3v pa�poue oq; pus snoof luaruainsbazu saoanosad ?IIUOUOaa ag; Dutsn pauodax on s;uauxa;u;s IutauuUTJ aptm-;uaunuanoD aqy nauanoaa�3o szsug�snao3;aaaiaxnsuay�l •s;uauca;s;s Istousug pucy aq; ut suumloa a;uredos se pouodax axe spulg astxdxa;uo Iunptnlput xofM pus spun3 Iu;uaunuanoD Iunptnlput iofrw -spun3 Smopdoxd pus spulg Iu;uaunuanoD xo3 poptnoxd axe s;uotuop;s Istoueug a;sxedoS •anuanax Ivdauaa su Pua;sul pauodax azu anuanax urexDoxd ;unouxu popntoul Apodoxd ;ou su[a;t xag;o pus saxuy quauIgos xo uot;oulg xelnotuud u jo s;uomoiTnbax lmIdso xo suot;sxado aq; out;aow o; p;owg �aputnoxd saDalinud xo `sootnxas `spoon uiog ;gauaq fl;oaxtp xo `osn `osugomd ogm sumotidde xo sxaulo;sno o; saDxugo (I sopnlout anuaaad zun odd quou:aas Io not;oun3 ogtaads u q;Im algsguuapt ,iuuata axe ;uq; osoq; axu sasuadxa 7aa q(g -anuanax umigoxd �q ;asgo axu ;uoui2as xo uoi;ourg uantD u ;o sosuadxo ;oaxtp ag; gatgm o; aaxDap aq; sa;u-gsuoulap saulnl�ou �o ;uaula;u;s aqy -alqu;un000s Iutausug st ;uaunuaeoD �Cxuurtxd aq; gotgm xo; s;tun luauoduloa a;uxudas ,�lluDal utuuao wing lla;sxudas Pauodax sl Iu;uaunuanoD 6xeuxud aq; astma>It'-I uoddns xo3 saDxugo pue saaj uo ;ua;xa ;uuogluats u o; 61ax gatgm `sat;Int;au od,Cj-ssoutsnq wog J�Ia;uxudos pauodax axu anuanax Iu;uounxxanoDxa;ul pue soxu; ,fq pauoddns axe �Ijeuuou golgm `sar7gar�av Iv7uaurzuano� s;uaula;u;s asagz wing panoulax uaaq suq 24lnl;ou pun3-Ia;ut;o;oajla oq; `ued;soul oq; xo3 gtun ;uouoduloo s;I puu ;uaunu)noD Cmunxd aq; 3o sal;IAI;ou Ilu uo not;uuuo;ut uodax (saulAl;ou;o ;uauzalu;s aq; pus uotltsod ;au;o ;uauza;u;s aq; `•a•I) s;uaula;u;s Iulouuur� aptm-;uauxuxanoD aqy ant;u;aasaxd;o slsug -aog3o and;ux;slululpu s}otx;slQ aq;;s paututgo aq Fuul;uauoduloo ag; ulos� s;uauxa;uis Iutauuulg a;aldulo� •saousnsst ;qap iuu aeoxddu ;snuz Ilauno� �t� asnuoag ;otx;stQ aq; xo3 alqu;unoaas ,�IIuIouv u3 sl /Clio aqy •ItounoD f4I0 ag; /�q pa;utoddu suosxad3o pasoduxoo sxo;ooga3o paeog e ,iq paDsum are;otx;stQ aq;do sxtsjju aqy -;otx;stQ oq; utq;Im oxej1om otignd agt pue;uouL< olduxa aDumoouo puu a;ouloxd o; pa;uaxo sum ;atx;stQ aqy •f4Iluna Isluaunloxlnug uo uolssluzuloo suxay ag; 3o uotstnxadns Dutnut;uoo oq; o; ;oofgns st puu `apoD ;uaunuanoD Iuoo7 suxay aq;3o SL£ xazdugD pue apoD xa;um ssxay ag;;o tiS PuR 0 sxa;dugD `opoD smut ImoZ;olx;slQ IuloodS ssxay `L£8£ sxa;dugD gllm oompxoom ui sa;uxado ;outslQ aqy •tis xa;dsgD `apoo xa;u & ssxay ag; g;Im aauepxoaas ul `SOOZ `LI aunf anl;oajJa `suxay3o a;u;S ag;;o WMEISID07 q,6L ag;;;ay uu Xq pappu uol;n;t;suoD suxay ag;3o IAX 010111V `69 uol;aaS xapun pa;uaxo sum 'tun ;uauodmoo pa;uasaxd ,fla;axostp u `(jotx;st(I ag;) ;otx;slQ ;uouxaDuueW goue�j ;soM agy Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and, accordingly, have been recognized as revenue of the current fiscal period. All of revenue items are considered to be measureable and available only when cash is received by the City. The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all fmancial resources of the general government, except those required to be accounted for in another fund. The TDRA Grant Fund is used to account for receipts and expenditures related to the Texas Community Development Block Grant awarded to the City in fiscal year 2009-2010. The Bond Construction Fund is used to account for the construction of public facilities, and park, street and drainage improvements that are funded by the proceeds from Permeant Improvement Bonds. Other governmental funds is a summarization of all the non -major governmental funds. The City reports the following major enterprise fund: The Water and Sewer Fund is used to account for the activities of the City's water and wastewater operations. Additionally, the City reports the following fund type: The Internal Service Fund is used to account for fleet management services provided to other departments of the City on a cost reimbursement basis. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are charges between the City's water and sewer function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the carious functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and providing the delivering goods in connection with a proprietary f ind's principal ongoing operations. The principal operating revenues of the Water and Sewer enterprise fund and of the City's internal service fund are charges to customers for sales and services. Operating expenses for the enterprise fund and internal service fund include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. 33 t£ zsaA zspualso juanbasgns ogj;o I ,Czunzga3 uo ,CjTadozd uo uall alquaozo;ua us gjlm juanbulop auz000q pus painal Onfagj golgm ul sea,C Iuosg aqj of algsotlddu On saxuj gonS •iSjunoo uojsanluo Xq pajoolloo pus polllq On saxuj,Cjzadozd s<<Cjlo oql• •suoljdwaxo ssal anisn pasrezdds jo %001 ju passasss pue onlun jaIuuuT ju joujslQ Iusrezddy xp 6q pagsligsjso ale sanlun posiszddy • ua6 zupualuo jugj 3o I YCzenuu f 3o ss sonlsn passassu sjoujsl(I Issiszddy agj;o slsuq agj uo zagojoo ul Xllenuue painal azs soxuj Cjxodozd s<fjlo oily szojou; juauljzad zagjo pue `sassol IsalzojsI oououodxo jsud uo posuq olqunlooaz sjun000u opszj zoj aouemollu uu sojsunjso juauuDsuBw sjun000s algljoallooun zo3 aousmolle u723o jau umogs On salgsnlaoaz xuj ijzadoid pus opszj [IV «saouulug Fuzajul„ su SIUQUI9114S IT?I MUTJ aplm-juauuuanoD aqj ul pajzodaz aze saijlnljou od;ij-ssaulsnq PUB saljlnljos IsjuaunuanoD aqj uaamjaq DTnpusjsjno saouelvg lunplsaz WV «spuTg zagjo Luog/oj anp„ se pajzodaz azu spuTg uaamjaq sooueluq Dulpuujsjno zagjo IIv -(,,sueol puTgzajuT do uoljzod juazmo agj `-a-l) ,spurg za po umg/oj anp„ zagjla su of poua3az azs zsaS luosg aqj 3o pua aqj le ouipusjsjno sjuouio2mm Duimouoq/Dulpua13o anljsjuasoidaz azu Imp spuTg uaamjaq iCjlnlTOV salqu�fud pQu saiquntaaag •uoljlsmbos 3o ajsp aqj UTog ssal zo sgjuouT aazgj ;o salj URM IsulDlzo gjlm sjuauzjsanul uuaj-jzogs pus `sjlsodop puuuiop `pusg uo gsuo aq of pazaplsuoo azs sjuaiunlnbo gsuo pus gsso s,,Cjlo aqZ •soouuluq pun3 anljujuasazdaz .gagj uo paseq puxg IsnpinTpul angoodsaz gosa of XlgjuoLu pajsoolle azs osuodxa jsazajuT puu omooui jsazajul •aiquFud sjun000u puTgzajul ss pajoagaz azs pus paglssuloaz are saouuisg Cjmba OAT UDaN •sjuauTajujs lulouuug agj ul ,sjuOwjsoAui puu gsuo„ ss pajuosazd sl jun000u gsuo palood aqj ul Sl!nbo anljlsod s.pung gong -SID 91113o spun; liu zo3 jun000s sjuamjsanul puu gsuo polood u surejulsuT S41D oqt saDuugo ajuz jsazajul jaNzsM gjlm l MA jou saop oniun s.juougsanul aqj jsgj st=w ,,Duljudioljzuduou„ uuaj aqZ •asegomd;o ounj ju ssol zo zua f auo do uuaj DululuuTaz s anuq golgm sjuauTjsanul of sza3az «uuaj-jzogs„ uTzaj aq 1, -amen zagDlq e saajuszsnD golgm sjsixo joszjuoo IuDal u ssolun anp;n zls3 js pajzodaz azs sjuamjsanul zagjo IIV -onptn ns3 jr jzodaz ijjuuogjais sl juounsanui us 3o anise .n03 aqj 3l `zanamog •amseow possq-jsoo u OuTsn sjoszjuoo juougsanul Duluzua-jsazajul Duwltdloljzsduou jzodaz of pus jsoo pazljzouTe ju sjaszjuoa juauTjsanTn Duluzeo-jsazajul Duljsdloljzsd uuaj-jzogs pus sjuouzjsanui jalmm Souom jzodaz of sl Xollod lezauaD s<<Cjlo all `IC "oN juouTajujS $SV9 gjlm aouepz000s ui 'stood juouumui pus suoijnjgsul Isloueug gjlm sjlsodap uo gsuo sapnloul pajaujso-a •osn ogloods zod pajoujsaz sjassu azu sjuouusanui pus gsuo pojoujsag -suoljuDllgo juounuanoD •S•fl zagjo pue sajou Xmsuazj `slllq ,Cznssazj juounuanoD -S-fl3o XIUFeW jslsuoo sjuauzjsanUl zagjo •(ssslo ssxal) food juaugsanul spun] olignd paDuum iflajsnud s pus `(loodxay) jun000s food juamjsanui spun; olignd paDsusuT-ajujs s ul sjuauTjsanul uuaj-jzogs `suoljnjijsul islousug gjlm sjlsodap `pueq uo gsuo opnloul sjuauijsanTn pus gsuo sjuaaysanaI pas gsuo Property taxes are prorated between operations and debt service based on rates adopted for the year of the levy. For the current year, the City levied property taxes of $0.5914 per $100 of assessed valuation that were prorated between operations and debt service in the amounts of $0.5303 and $0.0611, respectively. The resulting tax levies were approximately $12.9 and $1.6 million for operations and debt service, respectively, based on a total taxable valuation of approximately $2.6 billion for the 2014 tax year. West Ranch Management District bond resolutions require that the District levy and collect an ad valorem debt service tax sufficient to pay interest and principal on bonds when due. During the year ended July 31, 2015, the District levied an ad valorem debt service tax at the rate of $0.3800 per $100 of assessed valuation, which resulted in tax levy of $769,931 on the taxable valuation of approximately $202.4 million for the 2014 tax year. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. The City applies the consumption method in accounting for prepaid items in the governmental funds. Restricted Assets Certain proceeds of the City's enterprise fund revenues bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Contract with West Ranch Management District The District approved a contract with the City effective August 15, 2005, as amended. Under the terms of the contract, the District is to pay for construction of water distribution, sanitary sewer, drainage, transportation, education and recreation facilities to serve the District. The District shall be the owner of the system until the system is completed, approved by the City and conveyed to it, at which time ownership will vest in the City. The District will own and operate detention facilities to serve the District. Pursuant to the contract, the District shall have a security interest therein until all bonds issued by the District are retired. Capital Assets Capital assets, which include property, plant, equipment, infrastructure, and water rights, are reported in the applicable governmental or business -type activities columns in the government - wide financial statements. The City defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated historical cost if actual historical cost is not available. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. 35 9£ •s;uacuas;az puu suopmEtsaz aa,ioldujo;lnsaz e se `aldarexa zo3 `paznpuut anuq Saq; 3I �luo spun3 IupuauuuanoD oq; ut patiodaz sl spunoure osagp zo3 /4111qult y •spuoumlups lutouuug purg ,izupatzdozd pue opim-;uaunuaeoD agp ul pazmoui uagm ponzoou si ,fed aeeol Mots puu uolpuoun IIV •;uauiag;az zo uot;uuDisaz uodn pled Igun `s;unoum ululloo o; do pa;elnum"e zo uaye; aq zaq;Ia iuiu golgm `aneol :tots puu not;uoun urea soasoldwo s,,i4!D aqj saaaasq� pa;esaaduzo� pouad lent"e iup 09 agp ulgllm -�plD al; ,iq pa;oalloo ;ou aze ,fag; osnuoaq alqullene pazapisuoo ;ou azu;ugp sanuanaz sluosazdaz `sonuanaz olqulluneun toll slgy •Dul;un000e 3o sisuq Iunroou pagipotu aqp zapun �zola;uo slip ul Dulpzodaz zo3 sagllunb ;eq; uza;I auo suq oslu fjlD agy -a;up ;uaummsuau[ oq; 3o su pauluua;ap szaquzauz JIB 3o sank Dululuuzaz aDuzanu pa;uun;sa ag; zaeo paztUDooaz puu paua3ap sI `oouauadxa uoisuod lun;oe pue pa;oadxa ui aouaza33ip aq; `utapl silty •2ugun000u3o sisuq luruoou IIn3 alp zapun cjoDa;eo silt; ul Dulpzodaz zo3 sogtlunb peq; ura;l 3o add auo Sluo seq YC4l0 oqy omit pegp Igun (onuanaz) soomosaz 3o mogul uu sa poziv000az oq you IItm os pue (s)pouad amen; u o; sagddu pulp uot;Isod ;au 3o uotpisinbou uu s;uasazdaz `saomosaz 3o smogut pazza3op `;uauzalo ;uoura;ups lutouuug a;uzedos silt' •saomosaz 3o smogut pamojop zo3 uol;oas a;uzedos u ;zodaz saun;auros titm pools aouuleq zo pue uoulsod Iulounug 3o ;uxwpups alp `sautitqutt o; uogtPPu ul •pouad zea,f aeg pasolo e zano pazttcoure puu pazza3ap sl aouazagip stay — s;assu uolsuad uo sDutuzuo len;oe pue pa;oafozd ui oouaza33lQ -zua,f Iuosg Dulmollo3 al; ul pazlu400az puu paua3ap aze suoi;nqu;uoo asogL — apup ;uouzamseauz za{;u suolinqu;uoo uoisuad •pgap Dutpun3az zo papun3az agp3o a3tl aq;3o za;zogs aq;zano pazgzoute puu pazza3ap st;unouie slit' aaud uoJIslnbouaz %I puu pgap papun3az3o anlun out Luea al; ul aauazaJJip aq; uToz3 s;Insaz Dutpun3az uo aazugo pazza3ap y —;qop Dutpunjaz uo soOngo pazza3aQ -6.zoDapuo sil; ul Duluodaz zo3 ,i3Hunb pulp suzapt Dulmollo3 al; salt �pl� agy uagp Itpun (am;ipuadxa/asuadxa) saamosaz3o moll.;" uu su paztuooaaz aq;ou tllm os puu (s)pouad am4n3 u o; saildde ;eqp uoulsod pau 3o uoipdumsuoo u s;uosazdaz `saomosaz 3o smog;no pazza3ap ;uauzala ;uauza;ups Iutaueug apuzudas slit' vszoinosai 3o smog;no pazza3ap zo3 uogoas a;uzedas e pzodaz sauulomos Ittm;gags ooueleq zo/puu uoiptsod 1e1oueug3o;uamoll?Js alp `s;asse o; uoglppe ul saa.�nosag3o smo�aUsmoll�np pa.ua3aQ •szea�C Sb op O t 3o sand In3asn papeuzl;sa zaeo pog;aur aug-pgDlezps aq; Dulsn papuloazdap azu s;asse Iupideo s�polz;slQ puauiaDuuulnl gauu�l ;saw aqy sieaX OS-Ob uiaIs,Ss zaMas pue zaTUAA, szeaS OS-Ob e.m;anzpseguI sluax Op - 5 ;uamdmbo pue 6zau¢IorW smox OS-oz spuzamoidmt pue sftTppnEj saett In3asn DulmoIIo3 aq; zano pozl;aut autl-;gDluz;s aq; Dutsn pa;ulaazdap st ;uauzdinba pue puuld `6pzadozd s,Spl� agy Long Term Obligations In the government -wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costa re expenses in the period incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs during the current period. The face amount of debt issued is reported as other financial sources. Premiums received in debt issuances are reported as other financial sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt services expenditures. Pensions For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Fund Balances and Net Position Government -Wide Financial Statements: In accordance with GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position on the Statement of Net Position includes the following categories: Net investment in capital assets —the component unit of net position that reports the difference between capital assets less both the accumulated depreciation and the outstanding balance of debt, net of premiums and discounts, that is directly attributable to the acquisition, construction or improvement of these capital assets. Restricted —Net position is reported a restricted when there are limitations imposed on its use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. 37 S£ -sam;Ipuadxa uol;urado pa;lpne rea,S loud 3o s�iep 06 3o umunuluz e ;u aaueleq pun3 IerauaA paunlsseun acp uilucaui o; ani- s Ilan ,S;TD arty, -salouaorauza olgeaasaro3un uro-g `uol;Isod leloueug s;l se Ilam su `ssaulgnrom;lparo s,Xllo aq;;oa;ord on;ualog3ns slanal;u poup4uleuz aq IIIm ooueleq pun; Iurauaa paunissuun s,/glo agn Fgaragm ,follod ooueleq pun3 umuzrulur u pogsllgenso seq S3l0 aqy 'atgeiz-ene are suol;eaglssela aaueleq pun3 pa;ou;samn osorg 3o Sm ul s;unouzu gaigm zo3 sosodmd io3 pounou[ are samnlpuodxo uogm snunoure parinlssuun ua; pue s;unoure p aissu Sq pomollo3 `nsig poonpar are saouuluq pun3 pa;nlunuoa 40rouuag;rm3 •aoueleq pun3 pa;ounsarun uaq; Isn3 oompq pun3 pa;olr;sar asn o; 6ollod s,fqIZ) agn sI nI `asn zo3 algellunu aru saoueluq pun3 pa;algsaxun pue panal.rlsaz gnoq uagAy -sasodmd ogloods osoq;.zo3 parwlssu ro `poplunuoo `pa;aunsar snunouze paaoxo sarrglpuodxa 3l pun3 lu;uaunuanoa /iuu ro3 saauuluq anlnuoau opnlaul osle 6euz aauuluq pun3 parznIssuun sauoAa;ua pauouuauz anoge ragpo ag; ulg;lm poglssulo uaaq nou seq golgm pun3 IerauaA acp ulgnlm ooueleq pun3 anlnlsod Iunplsar sopnloul — pau8issvu12 -saoumqumouo ro3 pau$lsse s;unoum papnloul aoueleq pun3 pauolsse s<<SnlD ag; `SIOZ `0£ iaquzandoS ny OSollod aouelrq pun3 s.2CgD ag; o; nuunsmd `ra�leuulnl �4I0 arg ro IlounoZ) ,CuD oqn Xq pounissu oq ueo oouuluq pun3 •osodmd relnol;red .zo3 posn oq o; Flo aq; Xq posodun-llos are imp snunouze aauuluq pun3 sapnlaul — pau�gssyr -Ilaunoo S410 agn ,Sq sossud uoi;nlosar o; ;umsmd povodax st aoueleq pun; pannlunuoo -,Snuoq;nu oul:leuz uolslaap 3o Ianal nsogalq oq;3o oulnaauz undo uu m uoi;oe leuuo3 gnnorq; /�4l3 agn /tq posodun Xlluuranul are nog; sasodmd ogloads io3 poulu-gsuoo axe ;u p s;unoure ooueleq pun3 sapnloul — pantu moo •s;uer� a;ens pue Iurapa3 raggo puu `soomulpro iS;lo `surur.5ord uouonrnsuoo `ngop uua;-nuol 3o ;uouzazl;az sapnlaul uol;uoglssulo slgy •uol;elslnal nuclquua zo uolslnozd luuolnrglnsuoO on anp pa;aunsar s;unouru ro sro;Ipara se gans `srapinord /Sq posoduzl are golgm sosodmd aglaads io3 poulernsuoo are nurl; snunoure ooueluq pun3 sapnloul — payazUsa?j -pun3 nuauuuuad s<f110 arp3o aauuluq pun3 agn pue suzanl pludard sapnlaul uolneaglssula slgy -naunu[ nda�l aq nsnuz `suosuar lergaurnuoa ro Ienal ro3 `ro `uuo3 alqupuads ul ;ou ragnla are fogn osneooq ;uads aq ;ouueo ;eqn snunoure sapnlaul — algnpuads-uoAr :smollo3 su saauuleq pun3 le;uaunuanop saglssela S1ID aqn `suognu6(aQ adrC,l pun,3 pnyuazuuzatio� pub ounzodad aaunlbg pun,3 `l,S •o�I;uauzanunS gSF�LJ illlm aauuproaae ul s;uauza;e;S lulauuui3 pun3 le;uauzuranorJ •aeoge suol;eaglssula ag; 30 !ue ul paazodar ;ou sl ;eq; sal;lllqull puu snasse ag; uaam;aq aauara33IP ag; — pa;arnsaru� Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ materially from those estimates. II. DEPOSITS AND INVESTMENTS Under provisions of state and local statutes, the City's investment policies, and provisions of the City's depository contracts with an area financial institution, the City is authorized to place available deposits and investments in the following: 1. Obligations of the U.S., it's agencies and instrumentalities; 2. Certificates of Deposit issued by state and national banks or savings or loan associations domiciled in this state that are guaranteed or incurred by the Federal Deposit Insurance Corporation or collateralized in accordance with Section 2256.010, the Texas Government Code, in face amounts not to exceed $100.000; 3. No-load money market mutual funds; and 4. TexPool, Lone State Investment Pool and Texas Class. The City Council has adopted a written investment policy regarding the investments of its funds as defined by the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government Code). The investments of the City are in compliance with the Council's investment policies. The City did not have any derivative investment products during the current year. All significant legal and contractual provisions for investments were complied with during the year. Deposits and investments as of September 30, 2015 are classified in the accompanying financial statements as follows: Governmental acfivities $ 21,231,497 Business -type activities 12,205,696 $ 3354371193 39 m -sagunoas uual-yiogs ut /iIumt iud spun3 uotlezado Isanut pue suotll?ndo Outo$uo zod sluauiaztnbaz gseo laauz of aznleui satgl lunoos Iuos otto3liod Iuaugsanut aql Ouunlonzls Xq sonten zre3 ut sauttaap of axnsodxa slt sa3eueui 4D aql `6otiod luaugsanut slt gltm aouepz000u ut -xs;g 0JVY zsaMUl uutpolsno se sanxas `yN `suxay tuug oare3 stta 11 pue xoluzlstutuTpu uiexooxd stood oLp se sanxas -dxoD sootnxaS iolsoAul iajuminD oqy •sluedtotlzed food cq paloata aze ogm `saalsnxldo preoq xaquiauT L e iq pauzanon st Iood agy •Ioy Iuaugsanut spun3 oggnd suxay agl of luensxnd 9661 ut pags1zgelso sum gotgm Iood IuaugsanuT SSUID sexay ut slsanut AItD agy loy luaugsanuT spun3 ottgnd sexay agido sluauiaztnbaz agl of Iuunsxnd polutodde sxaquioui do posoduioo si toodxay;o preoq aostnpU oqy -zaptogazegs pue xoloaxtp `xaogJo Ojos St zaitogduioo ajeiS sexay agj gaTgm zod £OI-bOb uoUaaS -uuy apoD IuauzuzanoD sexay of luunsxnd pozuoglnu Xuuduuoo Ismn Osodxnd poltui?I e st pue Ioo jxay 3o aalsnzl si («Isnzy agl) jiuuduioD Isnzy `outdOONOjLS Qnsvaij sexay agy -joy luougsanul spun3 oilgnd suxay Oql pue 16L xaldegD •uuy apoD luauuuanoq suxay `Iay uotluzad000 tuooualul aip xapun paluaxo sum gotgm `(tooczxay) Iood luaugsanut luaunuanot) Iuao7 sexay ut sisanut J�41D agy •salez la�ireui palonb uo pasuq panp:n are gotgm `saregs Iood agl�o anion agl se auies agl axe stood asagl ut sluauilsanut s< SItD agy-Ob6130 lay WuduuoD luougsanul agl3o LuZ atnu scDHS Otp gitm luaisisuoo zauuuui u ut aluxado `soop pue `IITm 7z lugl ,�ottod u sug ssojotpanau Inq `6ueduioo luougsanui ue su (:)gS) uoisstunuoD a$uegoxg pue satltxnoaS agl gltm pazalstaax IOU st gotgm ouo st Iood a`Itt-LuZ y *stood a>itt-LuZ axe stood luouilsanut s,SI!D agy SSZ`SZS`bZ $ o?Io�yod �;oy 9ZL`I IO`I I sau?maa$ 6auapy •$•n <E;oy LLS ZL840006Z �fi 3?pax� nue3 lzxapa3 ZIL 9££`SOS`b xuegueoZ auioH �exapa3 bb8 8I S4S0S4b uouexodJOD 05aixoW MOrl MOH Papad sa?;?maa$ faua4y -S• l Ob £86`8££6Z Ioodxay i9 9bS`LLI`ii $ sset�sexay (s eQ) ?m;eyQ anleA x?e3 apexany pa;i�?a� iIIF]IIiI.�F1\111 :sluaugsanui nutmotto3 agl Pug �It� agi `STOZ `0£ zaquialdaS3o sy SSZ`8ZS`bZ s;uaugsanui 8£6`806`8 $ suo?yuPsulle?aumgcgims;?soda(i :$111motto3 agl3o Istsuoo SiOZ 40£ xaquialdas;o su sluaugsanui pue sltsodaQ Custodial Credit Risk. In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned. State statutes require that all deposits in financial institutions be fully collateralized by U.S. Government obligations or its agencies and instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a fair value of not less than the principal amount of deposits. As of September 30, 2015, all of the City's cash deposits with financial institutions were collateralized with securities held by the pledging financial institution in the City's name. Credit Risk. It is the City's policy to limit its investments to investment types with an investment quality rating not less than A or its equivalent by a nationally recognized statistical rating organization. The City's investments as of September 30, 2015, were rated as follows: Investment Type Rating Ratino- Agency Texas Class AAAm Standard & Poor's TexPool AAAm Standard & Poor's U.S. Agency Secwities Federal Home Loan Mortgage Corporation Aaa Moody's Investor Service Federal Home Loan Bank Aaa Moody's Investor Service Federal Farm Credit Bank Aaa Moody's Investor Service Federal National Mortgage Association Aaa Moody's Investor Service III. ACCOUNTS RELIEVABLE AND DEFERRED INFLOWS OF RESOURCES Receivables as of September 30, 2015 for the City's individual major funds, nonmajor funds in the aggregate and the Internal Service Fund including the applicable allowances for uncollectible accounts, are as follows: Receivables: Property taxes Penalties and interest Sales taxes Franchise taxes Customer accounts Cowl fines hatergovemmental Other Gross receivables Less: allowance for imcollectibles Net receivables Governmental Fiords Proprietary T'DRA Water and General Grant Nonmajor Sewer Total $ 24Z803 $ - $ 44310 $ - $ 2877113 96307 - - - 96307 955,061 - - - 955,061 378,145 - - - 378,145 199574 - 31,404 2250375 2,481,753 602,561 - 3,573 - 606134 31,948 766,838 498e616 - 1297,402 9254 9254 2,515,65 766,838 577,903 2250,775 65111,169 ( 602,496) ( 17,656) ( 250,181) ( 870333) $ l913,157 $ 766,838 $ 560247 $ 2000594 $ 5240,836 41 Zti '�A�o3?TT�?s asu sa�zz ysaza�u? p?nogs aseazou? o; uo?ado us q�cm %i 3o a;sz �saza�u[ iz'TIM uz las f4?0 aqy '0004S9$ 3o juouLitd ieug z q;?m `smoi xis Ism3 oqj zo3 zeaF zad 0004ZL$ p?sdaz aq pinom ,�4?D oq; azagm luougsuda(I azi3 z091union poomspua?z3 oql Xgazagm juomooi�e ;ugw,Fedaz a qz?m paizoddns sc oszgamd s?qy '179£4£8b$ zo3 }uou=doa QJTJ zaa;union poomspuau3 aq; zoJ NOM4 amTJ z jo osegomd aqj panozddu i?ounoZ) f4?D aqy `SiOZ `I ounf u0 �'I�AI���2I S�,LO�? •AI £9Z`Z£fi $ spund le;uauuuanorJ Te;oy SS9`LE spund zoCemuoN Te;oy ZSS`£ saug LMOD 8 i S`O I ;saia;um pue sai;Teuod xe; F;iodoid S8S6EZ saxe;,f;xadozd;uanbugaQ spund zoCewuoN 809`46£ pun3 Teiaua� Te;oy oa�tlaasI Z i S`OZ T saug ) moo 61i`bL ;soia;uT pue sa;;Teuod xe;,t;zadoid t98498i $ saxe;d;iadoid;uanbugaQ Puna Ieiau09 saomosou jo smogul paua;aQ smoiio; se azam spucg it?luaunuanoo aqy ul paTzodaz sanuanaz aigsi?znsun zo3 saamosaz ;o smo�uT pazza�ap �o s�uauoduzoa sno?zen aq; `zEaf TEasg }uazma aqT 3o pua aqy �y •pouad �uazzna aqT 3o sa?l?I?ge?i apspmb?i ol a?gsi?zns ag ol pazap?suoa ;ou s? Imp anuanaz zo3 saigsn?aoaz qz?m uo?zoauuoo u? soomosaz 3o smogu? poua;ap pauodaz spun3 Ianuauzuzano0 V. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2015 was as follows: Governmental Activities Capital assets not being depreciated Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated Buildings and improvements Machinery and equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation Buildings and improvements Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets bema depreciation, net Government activfies capial assets, net Beginning Reclassifications/ Ending Balance Increases Decreases Adjustments Balance $ 24,007,398 $ 1219283 $ - $ 578,430 $ 25,505,161 2,622,174 6,194213 ( 1,174700) 7641487 26,629,572 3S,S1S,112 16,992,645 67,671399 ]23,182,U6 7413,496 ( 1,174,700) 573,480 33,446,S4S 6500 30,640 2695A3 41,150,535 632,625 ( 16,028) ( 2,745,014) 14,864228 1,079967 73 68,751,444 639,1?5 1,094,579 ( 49b53) 124,566„Z07 ( li,739,250) ( 72Q,L53) - 1,473,740 ( 14980,698) ( 8,9L,460) ( 1,204,075) 67,146 246,112 ( 93803,277) ( 40,110716) ( 1,549.400) ( 71,665) ( 41.r1781) ( 64,762,456) ( 3,471633) 67,146 1,653,187 ( 66515J56) 53,41R700 ( 2,S34,SOS) 1,161,775 1,603534 58350.451 $ 85,0492"P_ $ 4,578988 $( 12975) $ ? 182,014 $ 91.797299 43 IOb`T£b - 'ZS ) L9b`£Sb - 886900`9 $ rr L`0� LbI`Zbb L'Oi ) OZETb ) - L9b`£8b aautlug saseaioaQ saseaiavT aautl¢g oulpug /suogtatysstlaag SwaIOag Zi£`OSI`65 $ 59rES07. $ - $ LbL7,8S $ OOZ`bbZ95 $ 0£f 90I`£E OIL`OSb`Z QOI'9b61£ ) IZb'£OYI (94Zb9S`OE ) (BtibLS ) (9I9`£9S ) 9Zl`SLS`I (6EZ8IZ ) (aftoz ) I£b%SO`59 6Sc`Lt£`I SttL9tE9 S6L'S06Z 655`56I`I (££I'Sti`Z ) bZ9`685 V&685 Z86EL0`9Z (StE`L6£ ) EL'OZ5[ ) 95E'9LI`ZE (199'6I9'[ ) (19S'6Z4'IE ) (EZI`L551 ) (508`c£L`8Z ) SZ6S6 Lit909`E9 - OSb`I9£`09 SZ686 L9L`bbZ`E £Sb`£Ob`Z bbS`L90`bZ 5699IL`6I - - - 569`9IL`6I aautltg sivau4snCpy sas¢aioaQ saseaiaui aout�tg oulpug /suo4ta<psselaag wmiu�ag iau `slasse Itydua S7lm ivauodwoo lau `palu!oaidop Swaq nom r"dto MoL saqUouj ❑opncpsq) put uo4anpoid ialuAM :uonuoaidap paiufnunoot ssaZ sogpat; uogncpsip puu uononpoid MvAk poiaoaidap owaq suss¢ ligdvD P�'I pait[oaidap &naq iou siosst Iegdto ilurl luauodwoQ iau `stasse ltydta saq<nnae adLi-ssau<sng iau `paiaoaidap omaq siassu ltydw ltioL ❑ogtaaidap uopanunaot ItioL walsfs camas put ia1tA� niawdnba,U=govW smawanwdun put sompluig : iopaowdap paianumaat ssaZ palaowdop a";wN suss¢ Ivoto TWJ. maisks Samos pus iaitA� mamdnba put ,Wtm{aeyS s7u2wanoidm put sampgng paiaoaidap aq suss¢pw.dBD pawpajdap twzq iou suss lwdto ImoL sso,foid m uogonumoD slOM MELL Put-i palaoaidap omaq 1ou suss¢ IWy D sa_q!AgaV A4-ssamsng Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities General government $ 171,900 Public safety 503,823 Public works 11891J66 Community services 490,412 Capital assets held by the City's internal service fund are charged to the various functions based on their usage 415,732 Total deprecation expense -governmental activities $ 3,473.633 Business -type activities Water and sewer $ 1,619.661 Total deprecation expense -business-type activities $ 1,619,661 VI. INTERFLTND BALANCES AND ACTIVITIES Interfund balances at September 30, 2015 consisted of the following individual fund balances that are scheduled to be repaid within one year: Due to Fund Due from Fund Amount Purpose General TDRA Grant $ 684,831 Balance of fund expenditures funded by the General Fund pending reimbursements Water and Sewer TDRA Grant 272,858 Water and Sewer Fund providing cash to fund purchase of SCADA equipment. Water and Sewer Nonmajor 900000 Return of excess amount previously governmental transferred, upon decrease in City's obligation under grant award $ 1,857,689 During the year ended September 30, 2015, transfers between funds occurred as described below: Transfer In Transfers Out Amount Purpose Debt Service (nonmajor) Capital Projects General Water and Sewer $ 318,457 Bond proceeds 1,226,205 Budgeted annual transfer for indirect water and sewer costs by the General Fund $ 1,544,662 000`O65`bZ - 0/08"b-0/00'Z SZOZ 000`OZItI WaISAS JamZS Puu s$10nv01M 60OZ - FOOIS`o[ 00060£0`bi - 0/0 5 - %0'17 I£OZ o00`58ZbZ 2tupmjay pm anuanag w3lsfS 10Ma S Put syVO� Ak 90OZ spuog anuanag 00Tc9t6 000`50£`z 0/00"£ - %0 z 0£OZ 000`565`6 OmpP Sax uogt8H4o hlaua9 SIOZ 0065656 - 0060Z8`S 000`OSL`Z 0/00"b-0/00"Z 8<OZ 000`5o8`s ompmgag uo4s�ggo hlouoqbIOZ - 00096L %5'£ -%0'Z 9ZOZ 000`09b`5 o�upunga2l uogt 'qqo Iwauaj ZIOZ %cL"b-%OI smPurgza Put IM6Z 000`ows luamanaldmI luautussad EOIOZ - $ 0WOL67Z $ %5L'b-%061 5£OZ 000`008`6 $ luamanoldug luaauauad Yom spuog uoqunggo lwuao SagLAgoy saqugotl a141I1saralul ! tw lmouaV onssl Ium5uo put sauaS adCZ-mm.sng Itivaunuanoo Ium3 =SIOZ p� zaqula;das ;t sat;Int;ot adi;-ssautsnq pue t�+uaunuanoD aq; o; suot;taotit Dutpuodsazzoo ztag; puu Duipue;s;no uoilvih o 3o sa;togtlzao puu `spuoq anuanaz put xt; uoi;tuiquzoo spuoq uot;uDggo tuzauaD s<2�3t:) ay; 3o suuol xp sozutununs atnpogos Dutmotto3 oqy uoT;tng4O3o sa;tagtyia� Put aigUSE d spuog -suotsinozd asoq; zapun snot;tinoaz xu; auzoout ;sazaTut put antiTigre o; pa;ttaz 986T 3o apo� anuaeag Ituza;ul au;3o suotsinozd au; oz;aafgns azu uoilefitgo 3o sa;togpioo put `spuoq anuanaz put xu; uouuutquloo `spuoq uoiw2itgo tezauaq aauz;Iq.�� iu.xapa3 -sat;Int;ou add tu;uaunuanoD aq o; pazapisuoo azu �t� ag;;o suot;uDtigo uua� Duol zatgo tty -sat;Int;ou add-ssautsnq su papzoaaz uaaq aeug anuanaz ula;s�is zamas put za;um uloz3 predaz oq o; popua;ut are ;utp suoi;uDitgo ;qaQ qu=dinba pue ijzadoid uo suag zo `anuanaz ula;s/is zamas puu za;um `anuanaz xu; azn;tg zaq;ta Xq paznoos azu suoi;uDitgo;gop asagy -sasuat to;idua pue `spuoq anuanaz `uoi;uDitgo 3o sa;uogtuao `spuoq uoi;taggo ItzauaD opntaui s;uoumusut osogs •sat;Int;au ad/4-ssautsnq puu tu;uauuuanoD zg3;uouidmbo put satTutor; tu;iduo zoftuz;onz;suoo zo/pue annbat o; zapzo ut s;uaumz;sut;gap uua;-$uo13o Xjatztn t sonssi ,�4tD aqy sgaa rnix2[i-9uoz -un Annual debt service requirements for the City's bonds and certificates of obligation are as follows: Year Ending Govemmental Activities Business -Type Activities September 30, Principal Interest Principal Interest Total 2016 $ 1,390,000 $ 67LO19 $ 1,770,000 $ 1,424,684 $ 5,255,703 2017 1,430.000 641,688 1,840,000 1,360,071 5,271,759 2018 1,465,000 609,894 1,910,000 1,2289,606 5,274500 2019 1,495,000 576,806 17980,000 1,215,759 5267,565 2020 1,530,000 542= 2,065,000 1,131J85 5,2%466 2021-2025 8,410,000 1,953,681 9,645,000 47397,789 24,406A70 2026-2030 6,715,000 66%622 112565,000 2,134,516 21,084138 2031 -2035 870.000 106,275 31020,000 M,250 4307,525 $ 23305,000 $ 5,771266 $ 33,795,000 $ 131264,860 $ 76,136,126 Advance Refunding On November 3, 2014, the City issued $8.805 million in Series 2014 General Obligation Refunding Bonds with an average interest rate of 2.474 percent to refund $2.995 million of outstanding Series 2005 Permanent Irnprovement and Refunding Bonds and refund $6.085 million of outstanding Series 2006 Waterworks and Sewer System Revenue and Refunding Bonds (the Refunded Bonds) with an average interest rate of 4.795 percent. The net proceeds of $9.588 million (after payment of $152,690 in underwriting fees and other issuance costs) were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the Refunded Bonds. As a result, the Refunded Bonds are considered to be defeased and the liability for those bonds has been removed from the government -wide statement of position. The refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of M.1,309. This difference, reported in the accompanying financial statements as a deferred outflow of resources, is being charged to operations through the year 2028. The City completed the advance refunding to reduce its total debt service payments over the next 14 years by $1,509,749 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $1,254,977. Defeasance of Bonds The City defeased certain bonds by placing the proceeds of new bonds in an irrevocable trust to provide future debt service payments on the old bonds. Accordingly, the trust account assets and liabilities for the defeased bonds are not included in the City's financial statements. On September 30, 2015, $6,085,000 of bonds considered defeased are still outstanding. 47 b8S`09£ $ ZSb`OZ ) 9£0`i8£ m saseal Ieycdeo sapun suoc�It4O uocuod;saza;u[ :ssa7 904£9 6IOZ 9S0`£9 8IOZ 9S0`£9 LIN 89816I $ 9IOZ uoIjeFIIQO `0£ zaqumj oS asea7 nulpug zeal Te;oy :Iuauzdmba pup Sim uauuz sTq� uo anp sluauz�ipd aspat azntnd 30 �izuutums u st �uTnnoIIo3 aqS. £9Z`LbT4I $ 6LL`L65 ) Zb0`97L`I $ saulni;ayaa �umzanorJ W;oy uol�aaidap pa;emumoae :ssa� ;uomdmba pue .fzau[gaeyl :sassy :smotto3 su azp s�uauzaa.wu aspat asacp q$nozgl pazcnbap slassp aut -s�uaugzudap azg pup aattod `sxzom attgnd zo3 juauzdinbo pup ,Wuigouuz asuuoznd of zapzo uc siuomooi3u rival tuitduo olu[ pazaluo suit f4lD auy sasuaZ Iu;IduD .japan suor;pDggp Changes in Long -Term Liabilities Long-term liability activities of the primary government for the year ended September 30, 2015, was as follows: Ba>anee Ba>anee Dne Beginning End of Within Gae of You Locrease Decrease Adjustments Year Year ;ovensetental activities General obligation bonds S IS.S15,000 $ 12,435,000 S( 4.005,000) S( 3940,000) S 23305.000 S 1390,000 Premn® on bond issuance 676.826 646.746 ( 103287) - 1220285 - Capital lease obligation 623407 - ( 262,823) - 3605S4 180.090 Net pension obligation 643.444 - ( 643.444) - - - Net pensionliability 7378339 3,025208 ( 3,175.650) - 7227,897 Net OPEB obligation 756.183 72,100 ( 8376) ( 113538) 706369 - Compensatedabsences 797,751 709998 ( &33923) 673,S26 118447 Total govemmemal activities 29,690950 16,889,052 ( 9,032,503) ( 4.053,538) 335493961 1,688,537 Bus a s-type activities Revenue bonds 31,930,000 - ( 72W.000) - 24540,000 1240,000 General obligation bonds - 5965,000 ( 650,000) 3940.000 9255.000 530,000 Discount on bond issuance ( 49955) - 2,498 - ( 47.457) - Premiumonbond waance 260,379 668.414 ( 137249) - 791544 - Netpensionliabdity 819.816 336,134 ( 352.550) - 803.100 Net OPEB obligation - 12,TA ( 1,4S0) 1133538 124.796 Compensated absences 109.780 687062 ( 91225) 86,617 1430E Total business -type activities 32970.020 7,050348 ( 8520306) 4,053,538 35553,600 1.784308 Total primary government $ 62660970 S 2.3939.400 S( 17552,509) $ - S 69.047561 S 3,4P_S45 The compensated absences, net pension liability, and net OPEB obligation attributable to the governmental activities will be liquidated primarily by the General Fund, West Ranch Management District The following schedule summarizes the terms of the West Ranch Management District's general obligation bonds at July 31, 2015: Series Amounts Outstanding Juty 31, 2015 Interest Interest Range of Callable * Or any date thereafter, callable at par plus accrued interest To the date of redemption. os -salllllqull uual-$uol Se luauialels Iplaueug aip ul popzooaz uaaq anuq Slunouie asagL -sates puoq aming 3o spoomid oql um-g ,qulena IeluauiuozTnug uo UOISsiuzuioD sexo L oql Xq panozddu lualxa oql of `lsazalu! snld `slunouiu osogl zo3 szadolanap agl osmqunaz of paaz$e suq lolzls!Q agZ -sosuodxo nullezado ioj louls!Q oql of 00040b$ poouunpe seg louts!Q oql jo zadolaeap u `,flleuolllppv -19846OLS aze sloafozd palalduioo zoj slsoo olgesmquilaz saleunlso nom5uo s joulsia OT41 -lauls!Q Dill JO3lugaq uo soll!Ign punoifzapun polonznsuoo aeug loulsla agl jo szadoloAoa 000'OIb $ 685009'8I $ (809`£I6 )$ bOZ810'£ $ £6656b'9I $ 000`Oib iea� aup cugyM anQ I98'60L 0060b (655`i65 ) 8L9'68I ZbL'III'I 000`Ob 000 099 - (ZLZ`69£ $ 000`095`LI $ (000`0£E 000`099 - (bLb`99 ) (6bL`OI£ ) )$ 000`mt $ 000`55945I $ ieai aseaiaaQ aseaiaui iea�;o ;o pug a , 4 QEI aaue!eg aoutma anm Nauodmoo Ieioy aado�anap of anQ saausnpu tado[anaQ aaou uo¢udloque puog aauenssi puoq uo Nnoos(I spuoq uogaggo Ieiaaa0 i!afi iaauedmoD :SM01103 SE SEM `SIQZ I £ Ctnp papua zua C agl zoo laulslQ luauiaauueF gauuQ lsa111 agl3o S1Tellau �1lltqull uual-$uo7 -lunoure zo aluz of su uolluliunt lnogliM `uoiluxul of loatgns loulslQ agl uIg1IM ,Sl-iadozd llu uodn patnal xuT uiazolun pu uu;o spaaaozd agl uzog alqu�fud azu spuoq s �lalzlslQ agZ LbL`Zb£`6Z $ £LZ OOI`T £Z6`95b`S 6£T`Obb`S S06`99L`S SOI`TZ8`9 8LZ`091`I 8£Z`SSI`T TbS`£SI`I bb8`Sbi`T I054Zb14T $ L7L`Z8L`T T $ £L6 SZ £Z6`9I8 6£ I`OLL` I 506` I I S`Z SOI`IZI`£ 8LZ 089 8£Z`S69 TbS`80L bb8`0ZL I05`Z£L $ 000`09S`LI $ 000`SLO`I 000`0b9`b 000`OL9`£ 000`SSi £ 000`OOL`Z 000`08b 000`09b 000`Sbb 000`5Zb 000`0Ib $ IbOZ ObOZ-9£OZ S£OZ-I£OZ 0£OZ - 9ZOZ SZOZ - I ZOZ OZOZ 6T0Z 8IN LIN 9TOZ TeioS. ;sazalul lE I� `I Qulpug leaf, :smollo; se azu spuoq s jal-RsIQ agl zo3 sluauzannbaz aolnzas lgap lunuuy VIIL PLEDGED REVENUES On August 21, 20065 the City issued $24,285,000 in Waterworks and Sewer System Revenue and Refunding Bonds, Series 2006. Additionally, on July 6, 2009, the City issued $12,120,000 in Waterworks and Sewer System Revenue Bonds, Series 2009. These bonds represent special obligations of the City and are payable solely from a first lien on and pledge of the net revenues of the City's waterworks and sanitary sewer system. The proceeds of the bonds were and are to be used to finance sanitary sewer and waterworks system extensions and improvements, and to refund certain outstanding obligations of the City. At September 30, 2015, the remaining principal and interest on the series 2006 bonds was $14,030,000 and $5,295,372 respectively. At September 30, 2015, the remaining principal and interest on the series 2009 bonds was $10,510,000 and $5,517,788 respectively. Principal and interest payments for the fiscal year were $860,000 and $659,244 for the series 2006 bonds and $ 345,000 and 494,278 for the series 2009 bonds. Water and Sewer revenues for the current year were $11,020,029. The outstanding revenue bonds have a final maturity of March 1, 2030 for the series 2006 bonds and March 1, 2034 for the series 2009 bonds. IX. CONSTRUCTION COMNIITMENTS AND ENCUMBRANCES Construction Commitments The City has active construction projects as of September 30, 2015. At year end the City's commitments with contractors are as follows: Remaining Project Commitment Governmental Funds Library expansion $ 2,317,846 Friendswood Link/Whispering Pines 1,018,799 Basketball pavilion 12,104 Firestation 4 remodel and new firestation 113,761 Streets - round I engineering 30,201 3,492,711 Enterprise fund Blackhawk W WTP rehab 33,886 Friendswood Link/Whispering Pines - 582,251 Lift station #3 replacement 14,622 Lift station #18 81,750 Water Plant #2 Replacement 674,013 Water Plant #7 Rehab 314,380 L700,902 Total $ 5,193,613 The remaining commitment amounts of $5,193,613 were encumbered at year end. The encumbrances and related appropriation lapse at the end of the fiscal year, but they are re - appropriated and become a part of the subsequent year's budget because performance under the executory contract is expected in the next year. 51 zs S2JKJ nuiusanon solnluis a;uls aql ut olgnitnne suoildo oql uiglim `,jtD agl jo ipoq nuiusanon aql Xq poldopu are suoisinosd lgouag -sigouoq q;nap puu `l4111gnstp `;uauzalilo-I soptnoid Shy papinoca s;gauag -S2TI�Iy ui aludiailsud of pasinbas asu F�li� agl3o saa�iolduia alglnlla IIF� -$.�o-s.�zu7-nanana In pauinago aq uea lugl (g,��) sodas Iuiauucn3 Iunuuu anisuagasduzoa alquliunu Sloggnd u sonssi S2ML -apoD anuanag Iuusalul aql JO (n)I017 suoi;aaS sapun ueld poggunb -xei u si ueld uoisuod lgauoq pougap s<S2IIU -suxay 3o olu;S agl uo luopuadap z�Itnosg lou si SIUU `Pseog oql slutoddn `oluuoS agl3o luasuoa puu aalnpu aql glim 410usan09 aq; ganogRly saalsnsy 3o pseog saquioui-xis u gllm uzalsXS agl 3o luotuo5eum puu uoiluslsiuiuzpn InsauoA oql would IoV Shy aqy -suxay 3o olulS oql ui saa,iolduza ludioiunux so3 uzals is luauzasilas sa6olduza-aldillnui ioua$u uu su (joy S2IW,L oq;) apoD luauuuanoq suxay 48 olill `sJ ai;I;gnS `joy S2ML aql glim oouups000e ui pazaisiuiuzpu pue suxay do alulS aql 6q poluaso /touanu ue st S2Ru '(S�Iwy) utalsIis luauioJTjo l ludioiunW suxay oql Xq pasalsluiuipn ueld uoisuod igouoq paugop pugiiq `Sio;ngiuuoo luiof `luuoiUpquou ail ui sueld 098 3o ouo sn solndioilred S41D aqy 6Z9`8S£ 8LL`bZ0` I snor;duasaQ nu[d s��izoa uo>suaa zr3��g Qa�u3aa •ix s�assu pa;aiaisaz (eloy spaoq 600Z - uollonstsao� spuoq 900Z - uo[3onRsuo� :sivauusanul PUB gsuo :smollo3 su ase putg asudsalua aql ui slunoaau lasso palarslsas agldo saaunlnq aqy 56b`Z£ bSS`996`£ 858`ZSZ 6ib`£LL`I ss,�ss� aas.�Ixrsax •x spun] Ie;uataacano� so(zamoN pun3 uol;onasuo� puog Puna 3uelo V-9cli Puna IEzauaO smollo3 see asam real luasg lxau aq; ui sopuae n ,ig aaunuuo�sad uodn pasouoq aq of palaadxa saauusqumaua 3o;unoun; aql `pua semi ly saanuigmnang U retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the City -financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. A summary of plan provisions for the City are as follows: Employee deposit rate Matching ratio (City to employee) Years required for vesting Service retirement eligibility Updated Service Credit Annuity Increase to retirees Employees covered by benefzt terms 20 yeazs to any age, 5 years at age 60 and above 100%; Repeating 50% of CPI; Repeating At the December 31, 2014 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiazies currently receiving benefits 95 Inactive employees entitled to but not yet receiving benefits 97 Active employees 194 386 Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the City matching percentages are with 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the state law governing TMRS, the contributions rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the City were 15.76% and 15.79% in calendar years 2014 and 2015, respectively. The City's contributions to TMRS for the year ended September 30, 2015, were $1,960,652, and were equal to the required contributions. E� tiS 'S2INi.L3o spaau $ulputt� uuaT-Auol puu uuaT-Izogs agT ,14sl;zs oT xapxo ul `au;ooul 3o uol;onpoxd agT su Ilam se uolTuloaxddu linlduo gloq uo slsugduza ue gTlm siszq umTax IuloT u uo paauum axe slossu weld •soolstuy3o pzuog S2JKL oqT Xq popuauze oq Seui pue pagsllquTsa sl s;assu polsanul;o uolTeoolle aqT oT pzuoax ul logod s,uuld uolsuad oqy -%O*L sl sluauz;sanul uuld uolsuad uo umTax 3o a;uz paloodxo uuaT-3uol ail L •uolTunlee bTOZ agT zo3 apuut azam sa�uugo IeuolTlppe oX -,illunuuu pomomaz aze suolTdumssy •pogTaut Tsoo IeuenToe (Myg) IeuuoM a2v !4ug aqT oT anuego u gTlm nuolu `uolTunieA £IOZ `I £ zaqui000G agT ul pasn Tszg azam suolTdumssu osagy '£TOZ `i£ xaqutaoaQ polap oqT pup 41IOZ ganomp 60OZ agT Suuanoo XPMS uolTuolTsanul aouauadxg A41TwoW e uo pasuq polvpdn azam solm osugomd STlnuuu puu solo SiIluTzouz TuauzanTaz -;sod X TluaH -uolTunieA OIOZ `I£ zaquzaoaQ agT ul pasn Tsnij 460OZ `i£ zaquzaoaQ gpnoxgT 90OZ 41 /Cmnuef polxad aqT zo3 sem S�IWL uI Cpr4s ooualzadxa oily •salpn;s aouauadxg Iuuunmou 3o s;Insax ail; uo poseq azam uol;enlen bIOZ `I£ zaqu;aoaQ ail; ul pasn suolTdumssu jle um4oy -sTuaugsnCpu Tgnlis gTlm pasn sl algey �1ltuytoy�l aazlTag palgeslQ OOOZd2I TouITsIP-zapuan agT `sTuuTmuuu palquslp xod •sTuautanoxdug ,STlluazouz amTrg zoj Tun000u oT gg aluos fq slsuq leuolTuzauaA / lJjm u uo poloaCozd axe saTez agy '%£OI �q Palldillnur saTux aluuza3 PUB %60I 6q PaIIdill u; sa;uz aluuz gTlm olgey ICTIluuoLNi 1i1111uag paulgL OD OOOZd2d TaulTslp-xapuaa agT uo poseq azam sauulogouaq pue soanla.i `sxagwou; anl;ou zo3 sa;uz A4!j TzoW •olgeT paTulax-oolnxas u uo posuq azam sosuaxoul cirIuS uoi;e0w 2uipniour `asuadxa ;uaut;sanm usjd uolsuad;o;au `/ 0'L uoi;egtu2uipnioui%00'ZT o; %OS'£ xea.S iad %0'£ uxn;ax;o a;ez;uaui;sanuI gyr.o� ��oz,Sed I�xanp uoi;euul :suolTdumssu IulzunTou Aulmollo3 agT Aulsn pauluua;ap sem uolTunlee IuuunTou bT OZ `I £ xaqutaoaQ agT ul �Ellqu17 uolsuad IeToy oily :snot;duznssn IngevnjayJ 'aTeP Tuq;3o su uolTenlen leuen;ou ue ,Cq pauluuaTap sum �jlllqut7 uolsuad TaN agT aTulnoleo oT pasn ('Id.I,) �Illqut7 uolsuad Iinoy agT pue bIOZ i£ zaquzaoa(j;o su pomseaut sum ('Idt) A4IIIquI'I uolsuad TaN s,6Tlo agy f ililqul'I uolsuad;aN The longterm expected rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates return for each major assets class are summarized in the following table: Long -Tern Expected Target Rate of Return Asset Class Allocation (Arithmetic) Domestic Equity 17.5 % 4.80% International Equity 17.5% 6.05% Core Fixed Income 30.0 % 1.50 % Non -Core Fixed Income 10.0 % 3.50 % Real Return 5.0 % 1.75 % Real Estate 10.0 % 5 25 % Absolute Return 5.0% 4.25% Private Equity 5.0% 8.50% Total 100.0 Discount Rate The discount rate used to measure the Total Pension Liability was 7.0%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statue. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all period of projected benefit payments to determine the Total Pension Liability. IZ6`98L`I$3o asuadxa uotsuad poziizno=i F41D oql SIOZ 0£ iaquio;daS papua zsaoip io,d suotsuad o; pa;sia� sawnosag;o smoUuI pa.1.10;a(l pus saainosag;o smot,;;no paIIa;aQ pus asuadxd uotsuad •o.to•stuq•nanant is;aura;ul aq; uo pauiu;qo aq fuui yiodaz ags'uoda.i leiaueug Shy panssi ila;usedas u ui olguliunu si uol;iso j joX SxeionPi3 s,ueld uotsuad aip inogs uoiluumpi paltulaQ uor;tsod ,tam finganpr,3 un1d ua�suad SSL`ZSL $ 966`0£0`8 $ OZ6`898`9I $ �?I?geil uo?suad iau s,.ci?� (% 0"8) aima lunoos?Q (%0'L) ale2I Tunoos?c (%0-9) a;eg;unoos?Q u? aseaioul %I u? aseazoaa %I :a;ui;uazma oq; uuq; (%0.8) aagniq-anu;uooiad-I 3o (%0-9) iomol ;uiod-aos;uoa.iad-I si ;uq; a;ui ;unoosip u nuisn pa;Ulnolso =m ;i 3i oq pinom ,iTitiquil uotsuad ;au s,24t0 vp ;Uqm su Ilam ss `%o0'L 3o a;uz ;unoosip oql ouisn polulnoluo 4,i4to oq; 3o Sjiliquil uotsuad ;au aq; s;uosoid Auimollo3 aq.L L£8'£98'L $ SSL'OOi LS $ ZZ9`b90`59 $ 6STL9I ) OOS'8Z5'£ Z9b`Z 6b6`6Z (6b6`6Z ) - (II£`S00`Z ) (II£`S00`Z ) (Zb848984Z ) Zb8`898`Z (86946Z8 ) 86946Z8 (ZSL`L98`I ) Z8L`L98`T (£6049£L ) (£6069£L ) Z6£`b80`b Z6£`b80`b £S£`8I0`Z SST`86T`8 $ S8L`£bI`OS $ Ob6`Ib£`8S $ fi?I?ge?Z uoil?sod lax /uI?qe?'I uo?suad;am fm?onma UEId uo?suad iu}oy (aseaiaa(j) aseaioul bIOZ/I£/ZI ie aaueleE sa�uego lax saouegojagio asuadxa an?;ezjsnz?cnpy suo?inq?iluoo aa,folduia;o spim3ai nu?pn?am `s;uauLSed tgauag auioau?;uaugsanu?ION aa5o?duia - suo?mgpuoD iaiio?duio - suo?InquluoC) oouop)dxa punloe pue paioodxo uoavgoq oouaiajj?a Tsaiaiul IsooaopUa$ :Jezx zip ao; saouegQ £ I OZ/ I £/Z I le ooueleg rC�gggng7 uotsuad zap ayz ug saouvy,� At September 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Resources Differences between expected and actual economic experience $ - Difference between projected and actual investment earnings 512,978 Contributions subsequent to the measurement date 116671306 Inflows of Resources 598,276 Total $ 2,180,284 $ 598,276 $1,667,306 reported as deferred outflows of resources related to pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expenses as follows: For the Year Ended September 30, 2016 2017 ( 9,572) 2018 ( 9,572) 2019 ( 91574) 2020 ( 47,008) Total $( 85,298) Subsequent Event Pursuant to TMRS policy of conducting experience studies every four years, the TMRS Boazd at their July 31, 2015 meeting determined that they would be changing certain actuarial assumptions including reducing the long term expected rate of return from the current 7% to 6.75% and changing the inflation assumption from 3% to 2.5%. Reduction of expected investment return and related discount rate will increase projected pension liabilities. Reducing the inflation assumption reduces liabilities as future annuity levels and future cost of living adjustments are not projected to be a large as originally projected. While the actual impact on the City's valuation for December 31, 2015 is not known the City does expect some downward pressure on its funded status and upward pressure on its 2017 actuarially determined contribution (ADC) due to this change. 57 m saa foldma and;au se amss auig azs usld ogl;o suolllpuoo pus suuol IIV -urld aql uo anT;az suTIRWi aa,foldma paulaz aTp ss Auol ss ueld s,aalolduio pomloi agI uo ulumaz ,ium o ull and iu pazanoa sguapuodop XUV quouu,Soldma 3o ,Cup Isul oql uo peq aa,ioldma aql uuld luluop oql ure;az of alq?olio sl aa6oidma iulnlaz oqd, uu[d IuluaQ -saa,Soldma and;as ss auses aql azu usld oTli3o suoil?puoo pus suuol IIV 'uId agl uo andlau sulsmaz aa,Soldma pazilaz agl su �uoi su uuld s,aafoidma pazllaz oLp uo ulumaz bum amll lsgl is pazanoa sluopuodop ,Sub' quauu,Soldma do ,Cup Isel agl uo pug aa,Soldma oTp weld lsolpaui oql ulslaz of aigloga si ooSolduio Aumlaz ag,I uuid Iua?PaI�i •usld aTll of papps aq Iouuua sluapuadap mau `paiiozua-az aq zanau uua Iuapuadap lugl ling $uipuulszapun oLp gl?m luopuodop ,fuu uo anuzanoa nuliiaaueo 3o uoildo oq; suq aa,Soldma $uullaz agl `uoilaala anVzanoa3O amll ail ly •sueld poloofaz oql ul Ilozua-az of olgl4llo zanau sl aqs/ag `sueld agl3o ,fue loofaz aa,foldma nTnnlaz ag; pinons pazanoa sl aaSoidma pazllaz agl ssaiun a$szanoa z03 alglAlla ou we sluapuadaQ W't7JQnOa zo3 aiglOiia on luouu/Soidma do olsp lsol s,aa,foidma aug uo pazanoa sluopuadap bus pus saa,foidwo amll-IIn3 luouumzad s;nud?ara.xsd nsid 'aig?A?Ia aauo g puu v shed azualF YNL ul It of pazmbaz lou azu saazi+a4a suuld Tgluag aazilaz zod atq?2IIa lou aze lau we suollipuoo luamazllaz Iuuuou azojoq nuliuumuol sooSoldmg -aau ,Sus It ootnzas;o szua,i oZ anuq zo oolnzas;o smo,f s gllm aau;o szuaF og oq lsnm aa,Soldma nuimlaz oql, cc l?I?q?n?IH;r3anag;aauuaa?lag -lzodaz lulauuug aiquilunu �Iluallgnd s anssl you saop uuid nlivan aazilaz ans aa2oldma agl3o Tlgsap uodn zo Iuauiisd mnimazd pannbaz atp Ilmgns of sllu3 as-ngaz aqg gluom ag13o Seep Isul aq; uo sluapuadop Ilu pus aazi;az agl uo Q2elano3oousznsui doss IIIm,SIIo an) -,410 aup Ile luauz,foidma angas mo.g ,fllaazlp paigo.i pus sluauT,iud s;gouaq uolsuod SgMj flq;uoui am?la3?I panlaaaz sl onm uosiod u su pam3ap sl aazTlaz y-anuzanoa zlagl Tplm poluloosss lsoo uunlmazd otp nul,iud zo3 olglsuodsaz ose saazllag -sluopuodop zTanl zanoa oils ism saazllaz olq?n?IH -oluz saafoidma s,fil?;1 oql of iunbo oluz umlmazd las u lu sigouaq oouemsul apinozd azu saazllaz alq?nll3-saazilaz iod uuld igouoq paugap aausznsul uolsln puu `iuluap `ivalpom za,foidma-mauls u pagsilqulso seq IlounoD ,Sl?D oql, aoucanoD aanuansal aa.z?;ag SATOISAIHd hIF�HS, 2IH13.L0 S.LI3gT�IHg .LhI31AiA0'IdL1id S,SOd 'IIX Vision Plan The retiring employee is eligible to retain the vision plan the employee had on the last day of employment. Any dependents covered at that time may remain on the retired employee's plan as long as the retired employee remains active on the plan. All terms and conditions of the plan are the same as active employees. Premiums Paid All premiums are 100% paid monthly by the retiree. The City does not contribute to any of the plans once an employee retires. Funding Policy and Annual OPEB Cost The City's annual other post -employment benefits (OPEB) cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of accrual that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize the unfunded actuarial liability (or funding excesses) over a period not to exceed thirty years. The City's annual OPEB cost he fiscal year ending September 30, 2015 is as follows: Annual required contribution $ 82,337 Interest on OPEB obligation 34,028 AdjustmenttoARC ( 31,527) Annual OPEB cost (expense) end of year 84,838 Net estimated employer contributions ( 9,856) Increase in net OPEB obligation 74,982 Net OPEB obligtion - bed nning ofyear 756,183 Net OPEB obligation - end of year $ 831,165 City historical data is as follows: Annual Fiscal OPEB Year Cost 2013 $ 85,843 2014 887587 2015 84,838 Actual Percentage Net OPEB Contribution of OPEB Obligation Made Cost Contributed at September 30 16,309 19.0% 18,135 20.0% 9,856 11.6% 59 685,731 756,183 831,165 %00'£ s.Tea,i 0£ 3o pouad undo ue iano IIoLSed;o luaaxad Iana7 PogioYQ iso� 3?pax� iiun paiaa. a %00'£ sasuadxado;au `% 5-b 09 alex gyhoj�i IIoixud polllam uolluzl7xouly poglam isoo le mmov saWx puaxT 1300 a.ieaglluag a;ei uolleuul umT.ax3o alEx;uauusanuT smojjo; su axam suo?Idumsse puu spoglauz IueagjTi�?S •slasse 3o anjen ju?xuniae aqi pue sa?�jjjgejj panxaae jejxunpae uj ,Cp??jlujon uxxal-;soils aonpax oI pauaisop am Iugi suo?idumssu pue spogpom 6ojd= put anTToodsxad uzzal nuoj e Iaagax suojpejnojeo juixenpay -pucod Iugj op saa6ojduio s,STIZ) oqj puu di?D agp uaampaq sisoo sigauaq Suizegs do uiouud aqi puu apep uoi njeA all; Ie aaxo; a? sigauaq 3o sod fp agp opnjou? pue 4?D oqj ,iq pooisxapun su uejd agp uo posuq axe sigauaq gpjeaq;o suo?poofoxd -�?jjqucj panxaau papuigun agp3o uojuod e azjuouze of se jjam su sioquiam pa.Tanoa fq pouiea nu?aq sigauaq do Isoo aqp xanoa op poinduioo s? Dgy ,ijxuaii aqy •siuouLW paped?o?Iuu asaTjl xo3 Aujpun3 a?Iuui ISICs u xo3 sapjnoxd uagi poipow p?pam p?un pa;oafoxd aqj, •papoafoxd are spuouiSvd axnitg paiud?o?pue aqp `suo?idumssu ju?xunpoe jo pas e pue sumlwT id gijuaq iuosaxd aqp. `sigauaq uujd aqp D'Uls fj -uejd oxen gpjeag = pas sc,Cp?D OT xo3 My 9SV9 oqj aiujnojeo oI posn s? pogpaui isoo jeuenpae I?pain I?ufj papoofoxd aqZ suo?;dnxnss� ins spoq;ayQ jsrasn;ate -sigauag3o ,Cpjjjgejj panxaae je?xuttpau aqp op aA?Iejax aunt JOAO Du?seaxaap xo aujsuaxauT sl space uejd;o anjeA jeuettpau aqi xagpogm Inoqe uo?Iuuuoju? puaxl xua,C-jijnui spuosoid `sivauiapuis ju?ouuug aqp of saiou aqp oujmojjo3 uo?ieuixojuj lieivamolddnS pomnbaW su pa;uasoid `ssa-tooxd $inpun33o ajnpagos ally -%9I-S s? jjox,fud paxanoa jettuue oI ,Cpjjjqu13 paniaau jujxunloe papundun ag13o ojlux aqI `uojlenjeA Iuaaax Isouz aqI 3o sy •fiIOZ `I£ xaquiaaaQ ie ZS£`ib9$ �q siassu jujxunlou nujpaaaxa ,Cljjjqujj jejxunioe paleTujpsa se qi?m papun-j %0 si uejd mo gijuaq aa.npai s,SIID agp `szaiauiexed D'Upjodoa alp npun Ilol/ki paianoD ('lyyf1) oueu xITTTgen 3o onleA uoimnTeA paianoD3°% 'IyypaPunsufl PaPM3 Paniaay letJM43y lullmlay e se qwfl TeaXgnlad (9) W (b) (£) (Z) (I) smojjoJ se s? `apep uojlunjun ivaaax Isouz agI `bTOZ `T£ xaquiaaaQ 3o se sj, roN ivauialelS gSdrJ xapun `uujd axua gijuaq aaxiiax s,ii?� aqi 3o snpe;s PaP�3 aT?.L ssacaoid nucpung pus sn;e;S nmpung Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status and the annual required contributions of the City's retiree health care plan are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Supplemental Death Benefits Fund Plan Descriptions The City also participates in the cost sharing multiple -employer defined benefit group -tern life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group - term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provide a lump -sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other host-emnlovment benefit" or OPEB. Contributions The City contributes to the SDBF at a contractually required rate as determined by the annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre -fund retiree term life insurance during employee's entire careers. The City's contributions to the TMRS SDBF for the years ended September 30, 2015, 2014, and 2013 were $24,187, $20,884, and $19,708, respectively, which equaled the required contributions each year. XIII.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 encompasses obtaining property and liability insurance through Texas Municipal League (TML), an Intergovernmental Risk Pool. 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 TML is limited to payment of premiums. During the year ended September 30, 2015, the City paid premiums to TML for provision of various liability, property and casualty insurance. The City has various deductible amounts ranging from $500 to $5,000 on various policies. At year-end, the City did not have any significant open claims. !il Z9 lueld agl le panozddu pus paglluapl slaafozd Ielldea zo3 %5gJ7 ZS of salenbo iugl `poomspua?z3 zo j -Iueld agI ul X7loeduo posegomd z?agl uodn poseq sluedlopmd le;o 64?I?glsuodsaz aIp oq llegs pueq zaglo aqI uo samlcpuodxo lel?duo •salouanu?luoo zaglo pus s-Iledaz zo; sanzasaz olgsuossaz;o aausualuleul pus uolleaza oql pue Iueld agl;o ooueualu?euI aill sopnloul slgy -smog Iunlou uodn posuq 14?I?ou3 Iuouquaz;, zalumalsem 1Imleinoelg aql Iu figluoui pazznoul (loa.npul pus loa-up) sasuadxa pue sisoo Isuo?Iuzado;o azugs nagl !ud slued?olusd Ile pue CI?0 agl `Xluoglny IssodslQ olssAk IsuoD;Ino gI?m louzluoo agl;o ued s sy �llaudeo sI?;o QiJy�I £58'b zO %S9fi'ZS $ulneg zaumo SluofbLu aql sI poomspuau3 -,fluoglny IesodslQ alsuA� Isuoo;Ing Sq pou[slureul pue polezado sI pue (QoyN) 6ep zad suollea uotll?uI SZ'6 30 ,Slloedeo u suq Iueld agZ -poomspuau3 3o ,4?0 agI pue uolsnog ;0 43 `I a[IN `Ioozq,Cug `SS QfIW nlnnzas lueld Iuou4uazl zalumalsem Iuuolaaz u sI puu s0861 Xlzeo oql ul polonzlsuoo sum S41I?oe3 Iuoulleaz,I zalemalsem �fmugXoulg aqy •fllllae3 luau4uazl, zalumals% leuolAag Xmeq)laelg aqI Ianzlsuoa ol,fl?zolllny IusodslQ alseAk IsuoD;lnq gllm Iuauzaaz$e us olul palaluo ,SI?j aqI `bL6I `ZI zaglu000a uo .fig?au3 Inam;saay .�alemalsu� Isno?nag zlmegyasig •Iauzluoa s?gl ,iq paleaza sI a.znluan lulof io d?gszauued oN `zaloezego Smionpg u;o sI salued ogI;o d?gsuo?lelaz oqy -S69`9?L`6T$3o a;II allugapul us gllm,illaudea zalum pasugamd suq ?D agI SIOZ O£ zaqulaldaS;o sy oolonul Ixou agl uo snu?ll?q sno?nazd sisnfpu pue suolltO pmsnogl ouo zad lsoo agI solslnoleaaz `papua isnf ma mb oqi zo; sasuadxa oouuualu?euI pue uo?lezodo Ielol agI sainduloo uolsnog ;o ,fI?o agI `zauunb goea ;o pua agI IV •slsoo lenlou;o azegs ulez ozd s,fl?D agI sounl panlaoaz zalum;o suollun Ienlou agI zo; s?seq 6lgluoul u uo pall?q s? X41D agy -066I `S1 zagoloo uo lueld agI uloz; zalum Su?nlaoaz uenaq Xq!D agy •Iuaazad ££•I sI slsoa uollanzlsuoa olndumd lenlae agl;o azegs uluz ozd s�,SI?� age -Iueld uopeagund zale� lseaglnoS su umolnl lueld uopuaglmd zalum u nulucululuuz pue $u?Iszado `uoponzlsuoo zo; uolsnolq;o CII0 agl TIM Iauzluoa e olul pazalua suq L1I0 agy Inuld nogsag?.�na �alu� IsuaglnoS hiIIZAi03 QKV S.LriTAi,LIIKLQ0D "AIX -sivapuadap nags puu sanlasulagl zanoa oI oulsooga saa,foldula zo; uzncuzazd 6lgluocu agl3o %OL s6ud ,Uzi agZ •,Cluo anszaeoo Iunpinlpul $ulsoogo saa,Colduza;o Lunimazd flgjuoLu agl;o %06 sCud F.l?o agy -usld aouumsul Iuluap pue glleoq u,iq pazanoo azam XI?D agl;o saafoldula `SIOZ `o£ zaqulaldoS papua moo aql $uunQ •papzoaaz slunoule aqI uzog ,Cllueag?unls anuega Iou pinom uollssuaduzoa �sza�lzom uo pled slunoure agl panggaq ,SI?� agI `STOZ O£ zaqulaldaS pua-zea6Iy *rIK, Xq pallpnu uagm anuego of ioofgns sI uo?Iesuodmoo sza�lzoA� •'INI.I, ganozgl saaSoldula sII uo aauemsul uollesuaduzoa ,szaIzom sap?nozd oslu ,Cl?o age, Federal and State Programs The City recognizes grant monies received as reimbursement for costs incurred in certain federal and state programs it administers as revenue. Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Litigation The City is a defendant in various lawsuits. The outcome and the impact of these lawsuits is not presently determinable. XV. PRIOR PERIOD ADNSTMENTS At September 30, 2015, the City reported prior period adjustments for the following items: Fund Level Statement of Revenues, E%penses and Changes in Government -wide Net Position - Statement of Activities Proprietary Funds Governmental Business -type Water and Activities Activities Sewer Net position at September 30, 2014 as previously reported $ 76,85J,194 $ 39,404,315 $ 39,404a15 Capital assets adjustments 2,182,014 2,053364 2,053,364 Allocation of net OPEB obligation to enterprise fund 113,538 ( 113538) ( 113.538) Allocation of bonds to fund repaying debt 3.940,000 ( 3,940.000) ( 3,940,000) Recording of net pension liability - GASB Statement No. 68 implementation ( 57979,953) ( 664,440) ( 664,440) Elinunation ofnet pension obligation as of September 30, 2014 643.444 - - Net position at September 30, 2014, as restated S 77,756237 S 36,739,701 S 36.7391701 63 •Ta?zTs?Q agT aj m sToaCozd uo?TonzTsuoo oosu?szp pup zamas zaTpm aoupug oT p?os azam spuoq all 0%9684£ 3o aTez TsalaTul anlTaaa au T000`S9`$ 3o Tuouag1u? spuoyuoZuJJn aS pans? `dT?O aqT 3o T?un Tuauoduzoo e `Tours?Q Tuouza2meW goueg TsaAk `STOZ `T Tsnony u0 gazeW 3o CT?znTeu[ Isug e aneq IJIM PM %0"b — 0'Z cuoz3 ou?ouez saTez TsazaTuj anew spuoq asags pun3 anzasaz e oT T?sodap e pun3 oT pue smolsSs zamas pue zaTsm s<<iT?O agT oT sTuauianozduiT pue suocsuaTxa ayeui oT pasn aq II?m spuoq asagT 3o spaaooid aqs -91OZ sauaS `spuog anuanag utaTsXS zamaS pup sxzomzaTem u? 000`9£L49$ pans? /tT?O aqT 49IOZ `T fzpnzgoj u0 T £OZ `I gazpyg3o ,STunTsui Ieug s aeeq II?m P� %0'S — 0'Z uiog ou?ouez saTpz TsazaTu[ aneq spuoq asags suocTe}s an3 ST?O oT sTuauianozdun pup uo?TanzTsuoa zo3 pup sxzpd zo3 puul jo aspgomd aqT pue sXzm fTcO oT sTuauianozdun pup uo?Tongsuoo zo3 Puu 90OZ sauaS spuog ou?pungag pup onuanag uzaTs.KS zamaS pus sxzomzQjVM ou?puplslno agT3o 0004SbI4£I$ pun3a.i oT pansi azam spuoq asogy 491OZ sauaS `spuog ocnpun3ag pus Tuauzanozdug Tuaueuuad uo?TsoHQO I12zaua0 30 000`960`6I$ Panss' CT[O aqT `91OZ `I jfzpnzga3 u0 S7XaAa.LKaIlaaSffIIS 'IIAX -uiaT? ,izeucpzopzTxa ue se pag?sseTa uaaq spg T? `azo3azagT `aauazznaao u? 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Tuauzasmqunaz s?qy •gtig`I£L$ PaIeTOT SIOZ 48Z )�mnjgad Pui3 900Z `T �Inf uaamTaq suo?TnquTuoo asogT uo pauma TsazaTu? pup 00048ZS$ azam poomspuau3 3o AT?O aqT Xq apm suo?Tngl4uoo ssaoxg -uo?suedxg ueld u0?Teogund zaTsm TseagTnoS aqT oT uo?TnquTuoa s.poomspua?z3 3o ST?O aqT oT paTeiaz sc Tuauiasmqugaz sI'll 68fi8` 9Z`I$ P00mspua?z33o PTO aqT pasmqunaz uoTsn0H3o f3D agT `SIOZ `Z IudV u0 Wa .LI A2iF isIQiIOF 2I,LXa 'IAX APPENDIX C FORM OF BOND COUNSEL OPINION woomle6alydwwmm 1786Z'SZZ'OLZ d OSZ6'VSL'blZ d LL807LVOM d 008Z'SZZ'OLZ 1 OOZ6'bSL'VLZ 1 SO8£•8Lb'ZLS 1 SOZ8L sexal'oiuoluy ues LOZSLOL8L sexai •upsnV SZSL a1InS'laellS s,NeW'1S ON OOL 006 al!nS'pooN 4uoN LLL OOBL almS'•anV SSaJ6u00 Dog sasodand xel awooul eaapa} ao} saaunno aql }o awooul ssoa9 aql woa} algepnloxa Si spuog aql uo lsaaalul aql legl 'nnolaq passnoslp se ldaoxa 'NOINIdO 2in0 N3Hxdn3 SI lI palels ulaaagl suol�lalsai aql of loafgns pue ulajagl papinaad se aoueulpaO puog aql puawe of lq$lJ aql a3ANMU SVH ?3nSSI ]Hi („aoueulpap puog„ aql) panssl uaaq aneq spuog ayl golgm of luensand 'janssl aql }o punoo %1!J aql Aq paidope aoueulpao aql ul papinad se noel Aq pagposaid silwll aql ulglpm'asodmd guns ao} pa9pald pue palnai uaaq aneq spuog aql }o ledloulud pue uo 'Aue }l 'lsajalul aql }o luawAed aql .a0} apinoid of lualol}}ns saxel WGJOlen pe leyl pue'ianssl aql }o suolle9ggo leloads 9ulpulq Alle9al pue pgen alnl!lsuoo uollajoslp lelolpn( }o asloaaxa aql 1lLwad golgnn Allnba }o saldloulad leaaua9 Aq pue 'Allejaua9 slg9u ,sjollpajo 9ulloa}}e sjallew jellwls jaglo pue uollezlue9aoaa 'Aoldna�ueq pue Allunwwl leluawuaano9 0l 9ulleIaa aanssl aql of apeolldde snnel Aq pallwll aq Aew se ldaoxa `spuog aql legl pue'nnel yllnn aouepa000e ul `paaanljap Alnp uaM aq aney �II ajo}ajagl aSueyoxa ul panssl spuog 'uolleolluaglne anp 9ulwnsse'legl pue paJanllap Alnp uaaq aneq uoluldo slgl gIIM Alluaaanouoo paaanllap spuog aql pue panssl pue pazuoglne uaaq aneq spuog aql leyl NOINIdO ?n0 SI jI `NOIIVNIWVX3 QIVS NO 43SV9 •(Z-1 aagwnN puog) spuog palnoaxa aql }o auo 9ulpnpul spuog aql }o aouenssl aql of 9ullelaa pue 9ulzlaoglne sluawnilsul luauljjad aaglo pue'janssj agl}o s9ulpaaooad pal}Iliao }o ldljosuejl e pue 'sexai }o alelS aql}o smel pue uollnlllsuo:) aql }o suolslnoid luaul:Lad pue algeoljdde aql 43NIWVX3 3AVH 3M 'spuog agl}o lxal aql ul palels suoll!puoo pue swaal agl g1lM aouepa000e ul 11e 'spuog aql }o swaal aql ql!M aouepa000e ul /lunlew of aolad pawaapaj ssalun '9uunlew 'spuog aql }o yxal aql ul palels se salep aql uo algeAed pue salea aql le'spuog aql }o lxal aqi ul paI}loads salep aql woa} lsaaalul ieaq golgm'spuog aql }o �llpllen pue A;!Ie9al aql '(olul paulluexa aney any'(„spuog„ aql) anoge paglaosap spuog aql }o aanssl aql„ ianssI„ sexa aql) i 'pooMspualag }o AIIJ aql ao} 13SNnOO oNO9 SV �` dO 1NnOW f/ 1tld10Nlad 31tl93N9�J�J 3Hj NI LTOZ 531N3$ `SONGS NOI1ti9118Q 1tl213N3Q StlX3J_ `OOOMS4N31Na d0 A.LIa -mo/ ao sjonftq sa6unyo �oua�nw ou 6u�wnssn 'spuo8 ay7�o tianpap ay; uodn �asuno� puog'•d•7.7 uo�o%/ g lsin y-Yfnd /10DolN Aq paaanPp aq pma w-jof 5u.imopof aql AlIDguo4sgns ur uoiuldo uV Iasuno:) puo8io uoluidp;o wjo3 pasodad underthe statutes, regulations, published rulings, and court decisions existing on the date of this opinion. We are further of the opinion that the Bonds are not "specified private activity bonds" and that, accordingly, interest on the Bonds will not be included as an individual or corporate alternative minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, we express no opinion as to any other federal, state, or local tax consequences of acquiring, carrying, owning, or disposing of the Bonds. EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or ocal tax consequences of acquiring, carrying, owning, or disposing of the Bonds. OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"),- rather, such opinions represent our legal judgment based upon our review of existing law and in reliance upon the representations and covenants referenced above that we deem relevant to such opinions. The Service has an ongoing audit program to determine compliance with rules that relate to whether interest on state or local obligations is includable in gross ncome for federal income tax purposes. No assurance can be given whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance with its current published procedures the Service is likely to treat the Issuer as the taxpayer. We observe that the Issuer has covenanted not to take any action, or omit to take any action within its control, that if taken or omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for federal income tax purposes. WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due forthe principal of and interest on the Bonds, nor as to anysuch insurance policies issued in the future. OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for the Issuer, and, in that capacity, we have been engaged by the Issuer for the sole purpose of rendering our opinions 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 from gross income of the interest on the Bonds for federal income tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment based upon a review of existing legal authorities that we deem relevant to render such opinions and are not a guarantee of a result. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer, or the disclosure thereof in www mphlegal.com wo:)-je6ajydw-rnmm E7] `�Iln}aaadsab •linsaa e }o aalueaen3 e lou aye pue suoluldo gons aapuaa of luenala� waap ann legs sall!aoglne le3a� �ullslxa }o nnalnaJ e uodn paseq luawSpnf IeOaj ino luasaadai SNOINNO EJNI093WJ 3Hl •ulajayl paglaosap se pal!wll uaaq sey spuog ayl}o ales agl gl!n� uolloauuoo ul asn ao} paaedaad luawalels lelol}}O s,janssi aql glen uolloauuoo ul aloj ino •ianssl ayl ulg11M A:padoid aIgexel }o uollenlen passasse pue '}o ssaupalgapul Sulpuelslno luaaano ay} of se aanssl agl}o slelol}}o Aq palnoaxa saleo!}!laao uo Alalos pallaj aneq pue spuog agl}o A1lllgela�Jew aql of loadsaj pm luawwoo ou axew pue uoluldo ou ssaadxa aM aolajagl loadsaa gl!n\ Al!I!glsuodsaa Aue pawnsse lou aney pue 'spuog aql }o ales aql ql!/n uolloauuoo � 3 � U U U U 0 0 0 0 0 0 0 0 oa m co oa � m as c� .a �a o x a � o F~ a H o cc con 3 n a3 3 x a w p as C zn u o Y owa o u o O cc°3 Uw r �rA �� o o o � � t y i q ti o o c Q R a q w U ai C4 a GA Pa _ bo O lc m C; . N N M cz CQ CS R C6 U U 4 w � % r; C ti 231 ti ti ti ff 0 w >; a w®®®E w'©®®®® A Nam am oON Namman �©N ©®®® r ©®®®® �©®®® ■Mama ti mamas w®®®®®®m® ©®®® C M©®®® This form should be completed and forwarded to the City Manager's Office as soon as possible prior to the first date that the item is expected to be placed on the Friendswood City Council agenda. Date requested for City Council consideration: 02.06.17 Date Submitted: 01.31.17 Dept. Clearances: cse Prepared by: Katina Hampton Subject: City of Friendswood General Obligation Permanent Improvement Bonds, Series 2017 Originating Department: Administrative Services City Attorney Review: Yes Proceeding: Ordinances Degree of importance: Critical ❑ Significant ® Elective ❑ Expenditure Required: N/A Amount Budgeted: N/A Appropriation Required:N/A Source of Funds: N/A FINANCE APPROVAL: fbPi RCR Roger C. Roecker City Manager SUMMARY /ORIGINATING CAUSE In November 2013, the voters approved $24,085,000 in general obligation bonds. In order to effectively manage the bond projects, the projects were divided into three proposed issuances: Round one ($6,655,000), Round 2 ($8,580,000) and Round 3 ($5,850,000) GENERAL OBLIGATION BONDS, SERIES 2017 On January 9, 2017, Council approved the Schedule of Events for the issuance of the City of Friendswood General Obligation Bonds, Series 2017. These bonds will fund Round 3 of the bond prog2m ($5,855,000). During this meeting, Council approved the issuance schedule to include the balance of the funds for streets Improvements. The program includes the following projects: ➢ Streets Improvements ($5.855 million) • Blackhawk Boulevard • Woodlawn Drive The posted ordinance, prepared by Bond Counsel and reviewed 6y our City Attorney, is in draft form. On February 6th, the bonds will be priced in the market. At that time, the terms of the bonds will be added to the ordinance. Bond Counsel will deliver the final ordinance prior to the February 6th City Council Meeting. 5even1 of the documents included as attachments are in draft form and will be completed prior to the Council Meeting. The bonds will be secured by a pledge of ad valorem tax levied for this purpose. We are pleased to inform Council that the Cit/s AA+ rating for General Obligation bonds has been re -affirmed by Standard and Pcars (S&P). According to S&P's definitions, this rating means the City has a very strong capacity to meet its financial commitments. John Robuck, our Financial Advisor, (Senior Vice President —Texas Public Finance, BOSC) will be in attendance to share the result of the bond pricing. s3uang;o a�npaya5 LTOZ sai�as spuog 09-3uawa3e3S leio�;p euiwi�a�g Ja33al luawa a u3lasuno:) puog aaueuipap S1N3WHotllltl - s3uawnoop pa3e[al pue aaueuipJo ayl;o [enmdde spuawwooa3 gels 'LTOZ '9 Nenagaj ;o vaaM ay3 auunp uo duiapd puoq ;o ivawssasse s,�osinpy �eioueuij s�ll!J ayl uo paseg SNOI1tlON3WWO038 O sToz ui valon Aq panadde sha(ad ayl;o uoila�dwoo a�gaua piM LTOZ sauas'spuog uoile2p901�auag ay;;o aouenss� A11Nf1WWOo 011133Naa / SaONgnO38NOo lN3NIWWI Michelle A. Perez From: Katina R. Hampton Sent: Wednesday, February 01, 2017 2:00 PM To: Michelle A. Perez Subject: RE: 2017 G.O. Bond Issuance - Agenda Item Documentation Hi Michelle, Yes, Arnold approved the ordinance. I will forward his email to you in just a moment. I see that he only copied Melinda on his approval email. Thanks for double checking. Katina Hampton, MBA, CGFO Deputy Director of Administrative Services Finance City of Friendswood 910 S. Friendswood Drive Friendswood, TX 77546 Phone: (281) 9963221 Fax: (281) 482-6491 E-mail: khamotonC@friendswood.com This e-mail contains the thoughts and opinions of Katina Hampton and does not represent official City policy. From: Michelle A. Perez Sent: Wednesday, February 01, 2017 1:56 PM To: Katina R. Hampton Subject: RE: 2017 G.O. Bond Issuance - Agenda Item Documentation Hi Katina, has the ordinance been approved by Arnold? Michelle Perez, TRMC Deputy City Secretary City Secretary's Office 910 S. Friendswood Dr. Friendswood, Tx 77546 281-996-3270 Phone 281-482-1634 Fax This e-mail contains thoughts and opinions o£ Michelle Perez and does not represent offldal aty policy" **Please note that any correspondence, such as e-mail or letters, sent to City staff or City officials may become a public record and made available for Public/media review.' **ATTENTION PUBLIC OFFICIALS!! A "Reply to All" of this e-mail could lead to violations of the Texas Open Meetings Act Please reply only to the sender.' Be helpful. When you see a person without a smile, give them yours — Zig Ziglar. Ao!Iod �3D le1o!}}o;uasaada�;ou saop pue uo3dweH eu!;eX }o suo!u!do pue siy�noyi ay; su!e;uoo pew -a s!yl woopoonnspuau} uol wey�l :Ilew-d I6b9-Z817 (T8Z) :Xed IZZ£-966 (18Z) :auogd 9bSLL Xi `poonnspualad anud poonnspuauj •SOT6 poonnspuauj }o /�}IO aaueuld sa�lAJaS anlle„slulwpV }o JoIaaa10 d Alnda 0190 1'd8W `uoldweH eulie)l `s�lueyl papaau sl avow �ulyl/�ue �l nnou� sn Tal aseald uapio} epua�e pSV ay} o� panes aae Iltl •za�aew ay; ul paoiad aae spuoq ay; uaynn 43g �Genagad p;un pa�aldwoo aq;ou Ilion pue �ewao; �}eap ul aae swab aye;o le.!anaS sjuan310 alnpayaS �uawa}e1S lelol}}p /ueulwliaad ay luawa8eOu3 lasuno0 puoa aoueulpjo wjoj IV - epua8e 3ulTaaw Ilouno0 Ll!J LT/9/Z ay} uo papnloul aouenssl puoa uol}e�llg0 leaauag LTOZ aye o� paTelaa sTuawroop �ulnnopo} aye aae payoel�y 'pe;Iuluaow poop uolTeTuawnooa wa;I epua6y - aouenssI puo8 'O'9 LTOZ :paSqnS ulge�l pe�oW :a6p3 l�pw� :off jau�lnej D epual5 •gslaM epullaW :zaaad 'V allaWIN :ol WV 9I:11 LIOZ'To A.aenagaj'AepsaupaM quas uo;dweH •b eul;e)i :moa3 Michelle A. Perez From: Katina R. Hampton Sent: Wednesday, February 01, 2017 2:01 PM To: Michelle A. Perez Subject: FW: GO 2017 Bond Ordinance Attachments: Ord. 2017-XX Friendswood GO 2017--Bond Ordinance (v.1).doc Hi Michelle, Please see the email below from Arnold approving the ordinance. Thanks, Katina Hampton, MBA, CGFO Deputy Director of Administrative Services Finance City of Friendswood 910 S. Friendswood Drive Friendswood, TX 77546 Phone: (281) 996-3221 Fax: (281) 482-6491 E-mail: khamoton@friendswood.com This e-mail contains the thoughts and opinions of Katina Hampton and does not represent official City policy. From: Arnold Polanco Sent: Thursday, January 26, 2017 4:05 PM To: Cindy Edge Cc: Katina R. Hampton; Melinda Welsh; Glenda C. Faulkner Subject: RE: GO 2017 Bond Ordinance Cindy: the ordinance is approved as to form, and reformatted for CSO. Arnold G. Polanco City Attorney City of Friendswood, Texas 910 S. Friendswood Dr. Friendswood, Texas 77546 Tel: (281) 996-3250 Email: aoolanco@friendswood.com 1 •pod �1l� lelol}}o �uasaada� 4ou saop pue a�P3 /�pui� �o suolwdo pue s4y�noy4 aq4 sule4uon pewa slgy 46b9-Z8b-48Z :xe3 bZZE-966-48Z�auoNd woo•poonnspuau; a pao :I!ew3 9b9LL sexal`poonnspuau3 anua poonnspuau3 S 046 poomspuau310 AI!O saaIAJaS angej;siulwpy;o Jo;aaJia OjJO `a6p3 •S APUM •lasunou puoq Aq pajedaad aoueuipao puo8 aauewPaO Puo9 LTOZ 09 ::pafgnS uo;dwell •a eul�e� :00 oouelod PlouaH :ol Wd bZ�T LTOZ'SZ /uenue['AepsaupaM :;uaS a6p3 Apu10 :woa3 ,�; xapuas atj; o; 6luo �ildax aseald �y sSugaay�l uadp sexay a�;o suoRzloln o; peat pinoo Ileac -a slq};o „lly o; �fldaZl„ y i iSlt/IJL-1�0 JI19fld NOLLN3.LLb** n�acnaz eipauc/aggn l ioj algeltene apeiu pue pzonz Dijgnd e aucoaaq .feiu sleloigo y11.0 10;; s A41D 04 juas'sza4al zo Ireuc-a se q,ns'aouapuodsauoo hue 4mp a;ou aseald„ MAY BE VIEWED IN ITS ENTIRETY IN THE CITY SECRETARY'S OFFICE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF FRIENDSWOOD TEXAS GENERAL OBLIGATION BONDS SERIES 2017: PROVIDING FOR THE PAYMENT OF SAID BONDS: APPROVING THE OFFICIAL STATEMENT• PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT. I MELINDA WELSH, CITY SECRETARY OF THE CITY OF FRIENDSWOOD, TEXAS, DO HEREBY CERTIFY THAT ON FEBRUARY 012 20 77, PROPOSED ORDINANCE NO. T2017-04, WAS POSTED AT THE CITY HALL, PUBLIC LIBRARY BULLETIN BOARD AND DISTRIBUTED TO MAYOR AND COUNCILMEMBERS AND MADE AVAILABLE TO THE PUBLIC FOR REVIEW. ATTEST: MELIlVDA WELSH, TRMC CITY SECRETARY DATE: 02/Ol/17 TIlVIE• 5.00 PM FIRST READING: 02/06/17 MAY BE VIEWED IN ITS ENTIRETY IN THE CITY SECRETARY'S OFFICE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF FRIENDSWOOD TEXAS GENERAL OBLIGATION BONDS, SERIES 2017, PROVIDING FOR THE PAYMENT OF SAID BONDS; APPROVING THE OFFICIAL STATEMENT; PROVIDING AN EFFECTIVE DATE; AND ENACTING OTHER PROVISIONS RELATING TO THE SUBJECT. I MELINDA WELSH, CITY SECRETARY OF THE CITY OF FRIENDSWOOD, TEXAS, DO HEREBY CERTIFY THAT ON FEBRUARY 01, 2017, PROPOSED ORDINANCE NO. T2017-04, WAS POSTED AT THE CITY HALL, PUBLIC LIBRARY BULLETIN BOARD AND DISTRIBUTED TO MAYOR AND COUNCILMEMBERS AND MADE AVAILABLE TO THE PUBLIC FOR REVIEW. ATTEST: MELINDA WELSH, TRMC CITY SECRETARY DATE: 02/Ol/17 TIlVIE: 5:00 PM FIRST READING: 02/06/17 -CALL, PARKHURST & HORTON L.L_P, 600 CONGRESS AVENUE 1290 ONE AMERICAN CENTER AUSTIN, TEXAS 78701-3248 TELEPH0NE:512 47&3805 FACSIMILE 512472-OSTI Mayor and Members of the City Council City of Friendswood 910 S. Friendswood Drive Friendswood, Texas 77546 717 NORTH HAR W OOD NINTH FLOOR DALLAS, TEXAS 75201-6587 TELEPHONE: 214754-92V0 FACSIMILE 2147S4-9260 February 6, 2017 700 N. ST. MARY'S STREET 1525 ONE RI VERWALK PLACE SAN ANTONIO, TEXAS 78205-3503 TELEPHONE: 210 225-2800 FACSIMILE Z10�5-2994 Re: City ofFriendswood, Texas, General Obligation Bonds, Series 2017 Ladies and Gentlemen: The purpose of this engagement letter is to set forth certain matters concerning the services we will perform as bond counsel to the City of Friendswood, Texas (the "City") in connection with the issuance of the City of Friendswood, Texas, General Obligation Bonds, Series 2017 (the "Obligations"). We understand that the Obligations will be authorized, issued and delivered for the purposes described in the ordinance authorizing the issuance and sale of the Obligations, and will be secured by a lien on and pledge of the City's ad valorem taxes, levied within the limits prescribed by law, SCOPE OF ENGAGEMENT In this engagement, we expect to perform the following duties: (1) Subject to the completion of proceedings to our satisfaction, render our legal opinion (the "Bond Opinion") regarding the validity and binding effect ofthe Obligations, the source of payment and security for the Obligations, and the excludability of interest on the Obligations from gross income for federal income tax purposes. (2) Prepare and review documents necessary or appropriate to the authorization, issuance and delivery of the Obligations, coordinate the authorization and execution of such documents, and review enabling legislation. (3) Assist the City in seeking from other governmental authorities such approvals, permissions and exemptions as we determine are necessary or appropriate in connection with the authorization, issuance and delivery of the Obligations, except that we will not be responsible for any required federal or state securities law filings. In this connection, we particularly undertake to assist the City in having the Obligations approved by the Public Finance Division of the Office of the Texas Attorney General, and, following such approval, registered by the Texas Comptroller of Public Accounts. (4) Review legal issues relating to the structure of the Obligation issues. (5) Attend meetings of the City Council as requested. Our Bond Opinion will be delivered by us on the date the Obligations are exchanged for their purchase price (the "Closing"). The City will be entitled to rely an our Bond Opinion. The Bond Opinion will be based on facts and law existing as of their date. In rendering our Bond Opinion, we will rely upon the certified proceedings and other certifications of public officials and other persons famished to us without undertaking to verify the same by independent investigation, and we will assume continuing compliance by the City with applicable laws relating to the Obligations. During the course of this engagement, we will rely on you to provide us with complete and timely information on all developments pertaining to any aspect of the Obligations and their security. We understand that you will direct members of your staff and other employees and consultants of the City to cooperate with us in this regard. Our duties in this engagement are limited to those expressly set forth above. Unless we are separately engaged in writing to perform other services, our duties do not include any other services, including the following: (1) Review of procurement requirements, or preparation or review of requests for bids or proposals or preparation or review of construction documents. (2) Assisting in the preparation or review of financial disclosure with respect to the Obligations. (3) Preparing requests for tax rulings from the Internal Revenue Service, or no action letters from the Securities and Exchange Commission. (4) Preparing state securities law memoranda or investment surveys with respect to the Obligations. (5) Drafting state constitutional or legislative amendments. (6) Pursuing test cases or other litigation. (7) Making an investigation or expressing any view as to the creditworthiness of the City or the Obligations. (8) Representing the City in Internal Revenue Service examinations or inquiries, or Securities and Exchange Commission investigations. (9) After Closing, providing continuing advice to the City or any other party concerning any actions necessary to assure that interest paid on the Obligations will continue to be excludable from gross income for federal income tax purposes (e.g., our engagement does not include rebate calculations for the Obligations). (10) Negotiating the terms of, or opining as to, any investment contract. (11) Exceptas hereinafter described, assisting in the preparation orreviewof an official statement or any other disclosure document with respect to the Obligations, or performing an independent investigation to determine the accuracy, completeness or sufficiency of any such document or rendering advice that the official statement or other disclosure document does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. We will review those sections of the disclosure document to be disseminated in connection with the sale of the Obligations which describe the Obligations, the ordinances of the City Council authorizing the issuance of the Obligations, and the tax- exempt treatment of the interest on the Obligations for purposes of federal income taxation. (12) Addressing any other matter not specifically set forth above that is not required to render our Bond Opinion. -2- ATTORNEY -CLIENT RELATIONSHIP Upon execution of this engagement letter, the City will be our client and an attorney -client relationship will exist between you and us. We further assume that all other parties in this transaction understand that we represent only the City in this transaction, we are not counsel to any other party, and we are not acting as an intermediary among the parties. Our services as Bond Counsel are limited to those contracted for in this letter; the City's execution of this engagement letter will constitute an acknowledgment of those limitations. Our representation of the City will not affect, however, our responsibility to render objective Bond Opinion. Our representation of the City and the attorney -client relationships created by this engagement letter will be concluded upon issuance of the Obligations. Nevertheless, subsequent to Closing, we will mail the appropriate Internal Revenue Service Form 8038-G, and prepare and distribute to the participants in the transaction a transcript of the proceedings pertaining to the Obligations. CONFLICTS As you are aware, our firm represents many political subdivisions and investment banking firms, among others, who do business with political subdivisions. It is possible that during the time that we are representing the City, one or more of our present or future clients will have transactions with the City. It is also possible that we may be asked to represent, in an unrelated matter, one or more of the entities involved in the issuance or purchase of the Obligations. We do not believe such representation, if it occurs, will adversely affect our ability to represent you as provided in this letter, either because such matters will be sufficiently different from the issuance of the Obligations so as to make such representations not adverse to our representation of you, or because the potential for such adversity is remote or minor and outweighed by the consideration that it is unlikely that advice given to the other client will be relevant to any aspect of the issuance of the Obligations. Execution of this letter will signify the City's consent to our representation of others consistent with the circumstances described in this paragraph. FIRM NOT A MUNICIPAL ADVISOR As a consequence of the adoption of Rule I SBal-1 pursuant to the Securities Exchange Act of 1934 (the "Municipal Advisor Rule"), which has been promulgated by the Securities and Exchange Commission as a result of the enactment of the Dodd -Frank Wall Street Reform and Consumer Protection Act (the "Dodd -Frank Act"), we hereby inform the City that we are not a "Municipal Advisor" within the meaning of the Municipal Advisor Rule or the Dodd -Frank Act (collectively, the "MA Rule"). In the course of performing our services as Bond Counsel in this transaction, we may engage in analysis, discussion, negotiation, and advice tot he City regarding the legal ramifications of the structure, timing, terms, and other provisions ofthe financial transaction that culminates with the planned issuance ofthe Obligations, and such services and advice may be essential to the development of the plan of finance for the issuance of the Obligations. In turn, these services become, among other things, the basis for the transaction's basic legal documents, the preparation and delivery of the official statement or any other disclosure document that describes the material terms and provisions of the transaction, if an offering document is used in the offering of the Obligations, the preparation of the various closing certificates that embody the terms and provisions of this transaction and the preparation and delivery of our Bond Opinion. Moreover, legal advice and services of a traditional legal nature in the area of municipal finance inherently involve a financial advice component; but we hereby advise the City that while we have expertise with respect to the legal aspects relating to the issuance of municipal securities, we are not "financial advisors" or "financial experts" in a manner that would subject us to the provisions of the MA Rule. As Bond Counsel, we provide only legal advice, not purely financial advice that is not inherent in our legal advice to the City. The City should seek the advice of its financial advisor with respect to the financial aspects of the issuance of the Obligations. By signing this -3 engagement letter, the City acknowledges receipt of this information, and evidences its understanding of the limitations of our role to the City as Bond Counsel with respect to the MA Rule, as discussed in this paragraph. FEES Based upon: (i) the terms, structure, size and schedule of the financing represented by the Obligations; (ii) the duties we will undertake pursuant to this engagement letter; (iii) the time we anticipate devoting to the financing; and (iv) the responsibilities we will assume in connection therewith, our fee will be (a) $6,000 for the first $1,000,000 in net proceeds of the Obligations, plus $1 per $1,000 of net proceeds of the Obligations for all such amounts above $1,000,000. Net proceeds include any net original issue premium, less the amount of the underwriters' discount, plus the principal amount of the Obligations (accrued interest is excluded from net proceeds). The fee does not include client charges made or incurred on your behalf, such as election translation costs, travel costs, photocopying, deliveries, long distance telephone charges, telecopier charges, computer -assisted research and other expenses. Our fee will be billed after the Closing. If the financing is not consummated, we understand and agree that we will not be paid. At your request, papers and property furnished by you will be returned promptly upon receipt of payment for outstanding fees and client charges. Our own files, including lawyer work product, pertaining to the transaction will be retained by us. For various reasons, including the minimization of unnecessary storage expenses, we reserve the right to dispose of any documents or other materials retained by us after the termination of this engagement. (Signature page follows) -4- If the foregoing terms are acceptable to you, please so indicate by returning the enclosed copy of this engagement letter dated and signed by an authorized officer, retaining the original for your files. We look forward to working with you. Respectfully yours, McCall, Pazkhurst &Horton L.L.P. By: Chris Settle Accepted and Approved City of Friendswood, Texas By: Ma or Feb 1 6, 2017 -5-