HomeMy WebLinkAbout028087 ORD - 02/24/2009CERTIFICATE OF CITY SECRETARY
THE STATE OF TEXAS
COUNTY OF NUECES
CITY OF CORPUS CHRISTI
THE UNDERSIGNED HEREBY CERTIFIES that:
1. On the 24th day of February, 2009, the City Council (the Council) of the City of
Corpus Christi, Texas (the City) convened in regular session at its regular meeting place at the
City Hall (the Meeting), the duly constituted members of the Council being as follows:
Henry Garrett Mayor
Bill Kelly Councilmember
John Marez Councilmember
Priscilla Leal Councihnember
Michael McCutchon Councihnember
Larry Elizondo, Sr. Councilmember
Melody Cooper Councilmember
Mike Hummell Councilmember
Nelda Martinez Councilmember
and all of such persons were present at the Meeting, except the following: Oh
thus constituting a quorum. Among other business considered at the Meeting, the attached
Ordinance (the Ordinance) entitled:
80476181.1
AN ORDINANCE BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS AUTHORIZING THE ISSUANCE OF
"CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE
IMPROVEMENT BONDS, SERIES 2009" IN A PRINCIPAL AMOUNT
NOT TO EXCEED $98,000,000 PURSUANT TO THE DELEGATION
PROVISIONS HEREOF; PROVIDING THE TERMS, CONDITIONS,
AND SPECIFICATIONS FOR SUCH BONDS, INCLUDING THE
APPROVAL AND DISTRIBUTION OF AN OFFICIAL STATEMENT
PERTAINING THERETO; MAKING PROVISIONS FOR THE
PAYMENT AND SECURITY THEREOF ON A PARITY WITH
CERTAIN CURRENTLY OUTSTANDING OBLIGATIONS;
STIPULATING THE TERMS AND CONDITIONS FOR THE
ISSUANCE OF ADDITIONAL REVENUE BONDS ON A PARITY
THEREWITH; AUTHORIZING THE EXECUTION OF A PAYING
AGENT/REGISTRAR AGREEMENT AND A BOND PURCHASE
AGREEMENT; COMPLYING WITH THE REQUIREMENTS OF THE
DEPOSITORY TRUST COMPANY; DELEGATING THE
028087
AUTHORITY TO THE MAYOR AND CERTAIN MEMBERS OF THE
CITY STAFF TO EXECUTE CERTAIN DOCUMENTS RELATING TO
THE SALE OF THE BONDS; ENACTING OTHER PROVISIONS
INCIDENT AND RELATED TO THE SUBJECT AND PURPOSE OF
THIS ORDINANCE; AND PROVIDING AN EFFECTIVE DATE
was introduced and submitted to the Council for passage and adoption. After presentation and
due consideration of the Ordinance, a motion was made by Councilmember that
the Ordinance be finally passed and adopted in accordance with the City's Home Rule Charter.
The motion was seconded by Councilmember and carried by the following
vote:
voted "For" 'F/ voted "Against" abstained
all as shown in the official Minutes of the Council for the Meeting.
2. The attached Ordinance is a true and correct copy of the original on file in the
official records of the City; the duly qualified and acting members of the Council of the City on
the date of the Meeting are those persons shown above, and, according to the records of my
office, each member of the Council was given actual notice of the time, place, and purpose of the
Meeting and had actual notice that the Ordinance would be considered; and the Meeting and
deliberation of the aforesaid public business, including the subject of the Ordinance, was posted
and given in advance thereof in compliance with the provisions of Chapter 551, as amended,
Texas Government Code.
IN WITNESS WHEREOF, I have signed my name officially and affixed the seal of the
City, this 24`h day of February, 2009.
(SEAL)
80476181.1
City Secretary, City of Corpus Christi, Texas
028087
2
FINAL
ORDINANCE NO. 028087
AN ORDINANCE BY THE CITY COUNCIL OF THE CITY OF CORPUS
CHRISTI, TEXAS AUTHORIZING THE ISSUANCE OF "CITY OF
CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE
IMPROVEMENT BONDS, SERIES 2009" IN A PRINCIPAL AMOUNT
NOT TO EXCEED $98,000,000 PURSUANT TO THE DELEGATION
PROVISIONS HEREOF; PROVIDING THE TERMS, CONDITIONS, AND
SPECIFICATIONS FOR SUCH BONDS, INCLUDING THE APPROVAL
AND DISTRIBUTION OF AN OFFICIAL STATEMENT PERTAINING
THERETO; MAKING PROVISIONS FOR THE PAYMENT AND
SECURITY THEREOF ON A PARITY WITH CERTAIN CURRENTLY
OUTSTANDING OBLIGATIONS; STIPULATING THE TERMS AND
CONDITIONS FOR THE ISSUANCE OF ADDITIONAL REVENUE
BONDS ON A PARITY THEREWITH; AUTHORIZING THE
EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT AND
A BOND PURCHASE AGREEMENT; COMPLYING WITH THE
REQUIREMENTS OF THE DEPOSITORY TRUST COMPANY;
DELEGATING THE AUTHORITY TO THE MAYOR AND CERTAIN
MEMBERS OF THE CITY STAFF TO EXECUTE CERTAIN
DOCUMENTS RELATING TO THE SALE OF THE BONDS; ENACTING
OTHER PROVISIONS INCIDENT AND RELATED TO THE SUBJECT
AND PURPOSE OF THIS ORDINANCE; AND PROVIDING AN
EFFECTIVE DATE
WHEREAS, the City of Corpus Christi, Texas (the "City" or the "Issuer"), a "home -rule"
city operating under a home -rule charter adopted pursuant to Section 5 of Article XI of the Texas
Constitution, with a population according to the latest federal decennial census of in excess of
50,000, has heretofore issued its City of Corpus Christi, Texas Utility System Revenue
Refunding Bonds, Series 1990 (the "Series 1990 Bonds"), its City of Corpus Christi, Texas
Utility System Revenue Bonds, Series 1994 (the "Series 1994 Bonds"), its City of' Corpus
Christi, Texas Utility System Revenue Bonds, Series 1994-A (the "Series 1994-A Bonds"), its
City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1995 (the "Series 1995
Bonds"), its City of Corpus Christi, Texas Utility System Revenue Bonds, Series 1995-A (the
"Series 1995-A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding
and Improvement Bonds, Series 1999 (the "Series 1999 Bonds"), its City of Corpus Christi,
Texas Utility System Revenue Refunding and Improvement Bonds, Series 1999-A (the "Series
1999-A Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds,
Series 2000 (the "Series 2000 Bonds"), its City of Corpus Christi, Texas Utility System Revenue
Refunding Bonds, Series 2000-A (the "Series 2000-A Bonds"), its City of Corpus Christi, Texas
Utility System Revenue Refunding and Improvement Bonds, Series 2002 (the "Series 2002
Bonds"), its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series
2003 (the "Series 2003 Bonds"), its City of Corpus Christi, Texas Utility System Revenue
80470964.4
028087
Refunding and Improvement Bonds, Series 2004 (the "Series 2004 Bonds"), its City of Corpus
Christi, Texas Utility System Revenue Refunding Bonds, Series 2005 (the "Series 2005 Bonds"),
its City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2005A (the
"Series 2005A Bonds"), and its City of Corpus Christi, Texas Utility System Revenue Refunding
and Improvement Bonds, Series 2006 (the "Series 2006 Bonds"); and
WHEREAS, the Series 1990 Bonds, the Series 1994 Bonds, the Series 1994-A Bonds,
the Series 1995 Bonds and the Series 1995-A Bonds are no longer Outstanding (as hereinafter
defined); and
WHEREAS, the Series 1999 Bonds, the Series 1999-A Bonds, the Series 2000 Bonds,
the Series 2000-A Bonds, the Series 2002 Bonds, the Series 2003 Bonds, the Series 2004 Bonds,
the Series 2005 Bonds, the Series 2005A Bonds and the Series 2006 Bonds are sometimes
collectively referred to herein as the "Previously Issued Priority Bonds"; and
WHEREAS, the City has established an interim financing program pursuant to which the
City has authorized the issuance of commercial paper notes designated "City of Corpus Christi,
Texas Utility System Commercial Paper Notes, Series B", to be issued from time to time in an
aggregate principal amount not to exceed $75,000,000 at any one time Outstanding (the "Series
B Commercial Paper Notes"), under which there currently exists no Outstanding obligations; and
WHEREAS, the City deems it appropriate and in its best interest to issue the hereinafter
authorized revenue bonds for the primary purpose of acquiring, purchasing, constructing,
improving, repairing, extending, equipping, and renovating the City's combined waterworks
system (including storm sewer and drainage), wastewater disposal system, and gas system (as
hereinafter described and defined more thoroughly as the "System"); and
WHEREAS, in the ordinance authorizing the issuance of the Series 1990 Bonds (the
"Base Ordinance"), the City reserved the right to issue revenue bonds on a parity with the Series
1990 Bonds; and
WHEREAS, because of fluctuating conditions in the municipal bond market, the City
Council has determined to delegate to the Authorized Representatives (as hereinafter defined) the
authority to effect the sale of the revenue bonds hereinafter authorized for the purposes set forth
in this Ordinance, subject to the parameters hereinafter described; and
WHEREAS, the revenue bonds hereinafter authorized are to be issued and delivered
pursuant to the laws of the State of Texas, including specifically Chapters 1371 and 1502, Texas
Government Code, as amended ("Chapter 1371" and "Chapter 1502", respectively, and
collectively, the "Act"), and the terms of the Base Ordinance and this Ordinance (as hereinafter
defined), for the purposes set forth in this Ordinance; now, therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI,
TEXAS:
SECTION 1: Bonds Authorized. In order to provide funds for the purposes of
(i) acquiring, purchasing, constructing, improving, repairing, extending, equipping, and
renovating the System and (ii) paying the costs of issuance relating thereto, the City Council (the
80470964.4
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"Governing Body") of the City, acting pursuant to the laws of the State of Texas, particularly the
Act, has determined that there shall be issued and there is hereby ordered to be issued a series of
revenue bonds to be designated "City of Corpus Christi, Texas Utility System Revenue
Improvement Bonds, Series 2009", in the principal sum of NINETY SIX MILLION FOUR
HUNDRED NINETY THOUSAND AND NO/100 DOLLARS ($96,490,000) (the "Bonds").
SECTION 2: Sale of Bonds.
A. Negotiated Sale; Authorization of Purchase Contract; and Approval of Official
Statement. The Bonds authorized by this Ordinance are hereby sold by the City to The Frost
National Bank, as the authorized representative of a group of underwriters (the "Purchasers"), in
accordance with the provisions of a Bond Purchase Agreement, dated March 13, 2009 (the
"Purchase Contract"), attached hereto as Exhibit A and incorporated herein by reference as a part
of this Ordinance for all purposes. The Initial Bonds (as hereinafter defined) shall be registered
in the name of The Frost National Bank. An Authorized Representative is hereby authorized and
directed to execute the Purchase Contract for and on behalf of the City and as the act and deed of
the Governing Body, and in regard to the approval and execution of the Purchase Contract, the
Governing Body hereby finds, determines, and declares that the representations, warranties, and
agreements of the City contained in the Purchase Contract are true and correct in all material
respects and shall be honored by the City. Delivery of the Bonds to the Purchasers shall occur as
soon as practicable after the adoption of this Ordinance, upon payment therefor in accordance
with the terms of the Purchase Contract.
Furthermore, the City hereby ratifies, confirms, and approves in all respects (i) the City's
prior determination that the Preliminary Official Statement was, as of its date, "deemed final" in
accordance with the Rule (as hereinafter defined) and (ii) the use and distribution of the
Preliminary Official Statement by the Purchasers in connection with the public offering and sale
of the Bonds. The final Official Statement, being a modification and amendment of the
Preliminary Official Statement to reflect the terms of sale, attached as Exhibit B hereto (together
with such changes approved by an Authorized Representative), shall be and is hereby in all
respects approved and the Purchasers are hereby authorized to use and distribute the final
Official Statement, dated March 13, 2009, in the reoffering, sale and delivery of the Bonds to the
public. The Mayor and/or City Secretary are further authorized and directed to manually execute
and deliver for and on behalf of the City copies of the Official Statement in final form as may be
required by the Purchasers, and such final Official Statement in the form and content manually
executed by said officials shall be deemed to be approved by the Governing Body and constitute
the Official Statement authorized for distribution and use by the Purchasers.
B. Delegation of Authority to Authorized Representatives. As authorized by Chapter
1371, the Mayor of the City, the City Manager of the City, and the Interim Assistant City
Manager for Administrative Services (each of the foregoing, individually, an "Authorized
Representative") are hereby authorized, appointed, and designated as the officers of the City
authorized to individually act on behalf of the City in selling and delivering the Bonds authorized
herein and carrying out the procedures specified in this Ordinance, including approval of the
aggregate principal amount of each maturity of the Bonds, the redemption provisions therefor,
and the rate of interest to be borne on the principal amount of each such maturity. Each
Authorized Representative, acting for and on behalf of the City, is authorized to execute the
80470964.4
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Approval Certificate attached hereto as Schedule I. The Bonds shall be issued in the principal
amount not to exceed $98,000,000; the maximum maturity of the Bonds will be July 15, 2039;
and the net effective per annum interest rate shall not exceed a rate greater than 7% per annum
calculated in a manner consistent with the provisions of Chapter 1204, as amended, Texas
Government Code. Lastly, each Authorized Representative is authorized to select the bond
insurer and surety bond provider, if any, with respect to the Bonds. The execution of the
Approval Certificate shall evidence the sale date of the Bonds by the City to the Purchasers in
accordance with the provisions of Chapter 1371. It is further provided, however, that
notwithstanding the foregoing provisions, the Bonds shall not be delivered unless prior to their
initial delivery, the Bonds have been rated by a nationally recognized rating agency for
municipal securities in one of the four highest rating categories for long term obligations, as
required by Chapter 1371. Upon execution of the Approval Certificate, Bond Counsel is
authorized to complete this Ordinance to reflect such final terms.
SECTION 3: Dated Date Denomination, and Stated Maturities; Redemption Option.
The Bonds shall be issued as fully registered obligations, without coupons, totaling $96,490,000
in aggregate principal amount and be dated March 1, 2009.
A. Denominations, and Stated Maturities. The Bonds shall be issued in denominations
of Five Thousand Dollars ($5,000) or any integral multiple (within a stated maturity) thereof
(each, an "Authorized Denomination"), shall be lettered "R" and numbered consecutively from
One (1) upward. The Bonds herein authorized to be issued shall bear interest on the unpaid
principal amounts from the Bond Date or from the most recent interest payment date to which
interest has been duly paid or provided and principal shall become due and payable on July 15 in
each of the years and in amounts in accordance with the following schedule. Said interest shall
be payable to the registered owner of any such Bond in the manner provided and on the dates
stated in the FORM OF BOND attached to this Ordinance as Exhibit C.
Stated Maturities Principal Amounts ($) Interest Rates (%)
2011 1,730,000 2.500
2012 1,775,000 3.000
2013 1,825,000 3.000
2014 1,880,000 3.500
2015 1,945,000 4.000
2016 2,025,000 4.000
2017 2,105,000 4.000
2018 2,190,000 4.000
2019 2,280,000 4.750
2020 2,385,000 4.750
2021 2,500,000 4.375
2022 2,610,000 4.500
2023 2,725,000 4.625
2024 2,850,000 5.000
2025 2,995,000 5.250
2026 3,150,000 5.000
2027 3,310,000 5.000
80470964.4
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Stated Maturities Principal Amounts ($) Interest Rates (%)
**** **** ****
2029 7,130,000 5.250
**** **** ****
2033 16,650,000 5.250
**** **** ****
2039 32,430,000 5.375
B. Redemption Provisions.
(1) Mandatory Redemption of Bonds. The Bonds stated to mature on July 15,
2029, July 15, 2033, and July 15, 2039 are referred to herein as the "Term Bonds". The
Term Bonds are subject to mandatory sinking fund redemption prior to their stated
maturities from money required to be deposited in the Debt Service Fund for such
purpose and shall be redeemed in part, by lot or other customary method, at the principal
amount thereof plus accrued interest to the date of redemption in the following principal
amounts on July 15 in each of the years as set forth below:
Term Bonds Stated to Term Bonds Stated to
Mature on July 15 2029 Mature on July 15, 2033
Principal Principal
Year Amount ($) Year Amount ($)
2028 3,475,000 2030 3,850,000
2029 3,655,000* 2031 4,050,000
2032 4,265,000
2033 4,485,000*
Term Bonds Stated to
Mature on July 15, 2039
Principal
Year Amount ($)
2034 4,725,000
2035 4,975,000
2036 5,245,000
2037 5,525,000
2038 5,825,000
2039 6,135,000*
* stated maturity
The principal amount of a Term Bond required to be redeemed pursuant to the
operation of such mandatory redemption provisions shall be reduced, at the option of the
City, by the principal amount of any Term Bonds of such stated maturity which, at least
50 days prior to the mandatory redemption date (1) shall have been defeased or acquired
80470964.4
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by the City and delivered to the Paying Agent/Registrar for cancellation, (2) shall have
been purchased and canceled by the Paying Agent/Registrar at the request of the City
with money in the Debt Service Fund (but not the Reserve Fund), or (3) shall have been
redeemed pursuant to the optional redemption provisions set forth below and not
theretofore credited against a mandatory redemption requirement.
(2) Optional Redemption. The City reserves the right to redeem the Bonds
stated to mature on and after July 15, 2019, in whole or in part, on July 15, 2018, or on
any date thereafter, in such order of stated maturity as the City shall determine and by lot
or other customary method within a stated maturity at the redemption price of par plus
accrued interest to the date of redemption.
(3) Notice of Redemption. At least thirty (30) days prior to the date any such
Bonds are to be redeemed, a notice of redemption, authorized by appropriate resolution
passed by the Governing Body, shall be given in the manner set forth below. A written
notice of such redemption shall be given to the registered owner of each Bond or a
portion thereof being called for redemption by depositing such notice in the United States
mail, first class postage prepaid, addressed to each such registered owner at his address
shown on the Registration Books (as hereinafter defined) kept by the Paying
Agent/Registrar. By the date fixed for any such redemption, due provision shall be made
by the City with the Paying Agent/Registrar for the payment of the required redemption
price for the Bonds or the portions thereof which are to be so redeemed, plus accrued
interest thereon to the date fixed for redemption. If such written notice of redemption is
given, and if due provision for such payment is made, all as provided above, the Bonds,
or the portions thereof which are to be so redeemed, thereby automatically shall be
redeemed prior to their scheduled maturities, shall not bear interest after the date fixed for
their redemption, and shall not be regarded as being Outstanding except for the right of
the registered owner to receive the redemption price plus accrued interest to the date
fixed for redemption from the Paying Agent/Registrar out of the funds provided for such
payment. The Paying Agent/Registrar shall record in the Registration Books all such
redemptions of principal of the Bonds or any portion thereof. If a portion of any Bonds
shall be redeemed, a substitute Bond or Bonds having the same stated maturity date,
bearing interest at the same interest rate, in any denomination or denominations in any
integral multiple of $5,000, at the written request of the registered owner, and in an
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 City,
all as provided in this Ordinance.
SECTION 4: Interest. The Bonds shall bear interest calculated on the basis of a 360 -day
year composed of twelve 30 -day months from the dates specified in the FORM OF BOND to
their respective dates of maturity or prior redemption at the rates set forth in the Purchase
Contract. Interest on the Bonds shall be payable on the dates as set forth in the Table appearing
in Section 3, until the maturity or prior redemption of the Bonds.
80470964.4
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SECTION 5: Characteristics of the Bonds.
A. Registration, Transfer, Conversion and Exchange. Authentication; Initial Bond. The
City shall keep or cause to be kept at the designated trust office in Dallas, Texas (the
"Designated Trust Office") of The Bank of New York Mellon Trust Company, N.A. (the
"Paying Agent/Registrar") books or records for the registration of the transfer, conversion and
exchange of the Bonds (the "Registration Books"), and the City 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
City and the Paying Agent/Registrar may prescribe; and the Paying Agent/Registrar shall make
such registrations, transfers, conversions and exchanges as herein provided. The execution of a
"Paying Agent/Registrar Agreement", in substantially the form attached to this Ordinance as
Exhibit D, is hereby authorized. 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 City 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 City 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 provided and with the effect stated in the
FORM OF BOND. Each substitute Bond shall bear a letter and/or number to distinguish it from
each other Bond. Each Bond may be exchanged for fully registered bonds in the manner set
forth herein. Each Bond issued and delivered pursuant to this Ordinance, to the extent of the
unredeemed principal amount thereof, may, upon surrender thereof at the Designated Trust
Office of the Paying Agent/Registrar, together with a written request therefor duly executed by
the registered owner or the assignee or assignees thereof, or its or their duly authorized attorneys
or representatives, with guarantee of signatures satisfactory to the Paying Agent/Registrar, at the
option of the registered owner or such assignee or assignees, as appropriate, be exchanged for
fully registered bonds, without interest coupons, in the form prescribed in the FORM OF BOND,
in any Authorized Denomination (subject to the requirement hereinafter stated that each
substitute bond shall have a single stated maturity date), as requested in writing by such
registered owner or such assignee or assignees, in an aggregate principal amount equal to the
unredeemed principal amount of any Bond or Bonds so surrendered, and payable to the
appropriate registered owner, assignee, or assignees, as the case may be. If a portion of any
Bond shall be redeemed prior to its scheduled maturity as provided herein, a substitute bond or
bonds having the same maturity date, bearing interest at the same rate, in any Authorized
Denomination at the request of the registered owner, and in an aggregate principal amount equal
to the unredeemed portion thereof, will be issued to the registered owner upon surrender of such
partially redeemed Bond for cancellation. If any Bond or portion thereof is assigned and
transferred, each Bond issued in exchange therefor shall have the same principal maturity date
and bear interest at the same rate as the Bond for which it is being exchanged. Each substitute
Bond shall bear a letter and/or number to distinguish it from each other Bond.
80470964.4
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The Paying Agent/Registrar shall exchange or replace Bonds as provided herein, and
each fully registered substitute Bond or Bonds delivered in exchange for or replacement of any
Bond or portion thereof as permitted or required by any provision of this Ordinance shall
constitute one of the Bonds for all purposes of this Ordinance, and may again be exchanged or
replaced. It is specifically provided, however, that any Bond delivered in exchange for or
replacement of another Bond prior to the first scheduled interest payment date on the Bonds (as
stated on the face thereof) shall be dated the same date as such Bond, but each substitute Bond so
delivered on or after such first scheduled interest payment date shall be dated as of the interest
payment date preceding the date on which such substitute Bond is delivered, unless such
substitute Bond is delivered on an interest payment date, in which case it shall be dated as of
such date of delivery; provided further, however, that if at the time of delivery of any substitute
Bond the interest on the Bond for which it is being exchanged has not been paid, then such
substitute Bond shall be dated as of the date to which such interest has been paid in full.
On each substitute Bond issued in exchange for or replacement of any Bond or Bonds
issued under this Ordinance there shall be printed thereon a Paying Agent/Registrar's
Authentication Certificate, in the form set forth in the FORM OF BOND (the "Authentication
Certificate"). An authorized representative of the Paying Agent/Registrar shall, before the
delivery of any such Bond, date and manually sign the Authentication Certificate, and no such
Bond shall be deemed to be issued or Outstanding unless the Authentication Certificate is so ex-
ecuted. 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 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 Chapter 1206, as amended, 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 the Authentication Certificate, 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 (as hereinafter defined), and registered by the Comptroller of Public Accounts (as
hereinafter defined).
The Bonds shall be issued initially either (i) as a fully registered Bond in the total
aggregate principal amount of $96,490,000 with principal installments to become due and
payable as provided in Subsection 3.A, and numbered T-1, or (ii) as one (1) fully registered
Bond for each year of stated maturity in the applicable principal amount, interest rate, and
denomination and to be numbered consecutively from T-1 and upward (the "Initial Bonds") and,
in either case, the Initial Bonds shall be registered in the name of the Purchasers or their
designee. The Initial Bonds shall be the Bonds submitted to the Attorney General for approval
and certified and registered by the Comptroller of Public Accounts. At any time after the
delivery of the Initial Bonds to the Purchasers, the Paying Agent/Registrar, upon written
instructions from the Purchasers, or their designee, shall cancel the Initial Bonds and exchange
therefor definitive Bonds of authorized denominations, stated maturities, principal amounts, and
bearing applicable interest rates for transfer and delivery to the registered owners named and at
the addresses identified therefor, all in accordance with and pursuant to such written instructions
80470964.4
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from the Purchasers, or their designee, and such other information and documentation as the
Paying Agent/Registrar may reasonably require.
B. Payment of Bonds and Interest. The City hereby further appoints the Paying
Agent/Registrar to act as the paying agent for paying the principal of, premium, if any, 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 City and the Paying Agent/Registrar with respect to
the Bonds.
C. In General. 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 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 which shall be payable, and (viii) shall be administered and the Paying
Agent/Registrar and the City 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. The Initial Bonds are 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 or Bonds issued under this Ordinance the Paying Agent/Registrar shall execute the
Authentication Certificate.
D. Substitute Paying Agent/Registrar. The City covenants to maintain and provide a
Paying Agent/Registrar at all times until the Bonds are paid, and any successor Paying
Agent/Registrar shall be a bank, trust company, financial institution, or other entity duly
qualified and legally authorized to serve as and perform the duties and services of Paying
Agent/Registrar. Upon any change (which shall be at the sole discretion of the City) in the
Paying Agent/Registrar for the Bonds, the City agrees to promptly cause a written notice thereof
to be sent to each registered owner of the Bonds by United States mail, first class postage
prepaid, which notice shall also give the address of the new Paying Agent/Registrar. In addition,
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 City. 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.
E. Book Entry Only System. The Bonds issued in exchange for the Initial Bonds shall
be initially issued in the form of a separate single fully registered Bond for each Stated Maturity
of the Bonds. Upon initial issuance, the ownership of each such Bond shall be registered in the
name of Cede & Co., as nominee of The Depository Trust Company, New York, New York
("DTC"), and except as provided in Subsection F hereof, all of the Outstanding Bonds shall be
registered in the name of Cede & Co., as nominee of DTC. 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
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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. 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, premium, if any, 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, premium, if any, 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, premium, if any, 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 evidencing the obligation of the Issuer to
make payments of principal, premium, if any, and interest pursuant to this Ordinance. 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 (as defined in the FORM OF BOND), the words "Cede & Co." in
this Ordinance shall refer to such new nominee of DTC.
F. Successor Securities Depository. 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 in the form attached hereto as Exhibit E and made a part hereof for all
purposes (the "Representation Letter") 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 17(a) 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.
G. DTC Letter of Representations. 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, premium, if any, and interest on such
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Bond and all notices with respect to such Bond shall be made and given, respectively, in the
manner provided in the Representation Letter.
SECTION 6: Form of Bonds. The form of all Bonds, including the form of the
Authentication Certificate, the form of Assignment, and the form of the Comptroller's
Registration Certificate (to be attached only to the Initial Bonds) shall be, respectively,
substantially in the form attached hereto as Exhibit C, with such appropriate variations,
omissions, or insertions as are permitted or required by this Ordinance.
SECTION 7: Definitions. For all purposes of this Ordinance, except as otherwise
expressly provided or unless the context otherwise require, the terms defined in this Section have
the meanings assigned to them in this Section, and certain terms used in Sections 23, 32, and 34
of this Ordinance have the meanings assigned to them in such respective Sections.
(1) The term "Account" shall mean any account created, established and
maintained under the terms of any ordinance authorizing the issuance of Priority Bonds.
(2) The term "Accountant" shall mean a nationally recognized independent
certified public accountant, or an independent firm of certified public accountants.
(3) The term "Additional Priority Bonds" shall mean the additional revenue
bonds which the City reserves the right to issue in the future on a parity with the
Previously Issued Priority Bonds and the Bonds, as provided in the Base Ordinance and
this Ordinance.
(4) The term "Amortization Installment" shall mean the amount of money
which is required to be deposited into the Mandatory Redemption Account for retirement
of Term Bonds (whether at maturity or by mandatory redemption and including
redemption premium, if any).
(5) The term "Attorney General" shall mean the Office of the Attorney
General of the State of Texas.
(6) The term "Authorized Denomination" shall have the meaning given such
term in Section 3 of this Ordinance.
(7) The term "Average Annual Principal and Interest Requirements" shall
mean that amount equal to the average annual principal and interest requirements
(including Amortization Installments) of all Priority Bonds Outstanding. With respect to
Additional Priority Bonds that bear interest at a rate which is not established at the time
of issuance at a single numerical rate for each maturity of such series, Average Annual
Principal and Interest Requirements shall be calculated by (i) assuming that the interest
rate for every 12 -month period on such bonds is equal to 9.20% or (ii) using the highest
numerical rate borne over the preceding 24 month period by such bonds, whichever is
greater; provided, however, that if such bonds have not borne interest at a variable rate
for such 24 month period, such rate shall be assumed to be 9.20% until such time as
bonds have been Outstanding for a 24 month period. In making such determinations, it
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shall be assumed that the principal of such bonds is amortized such that annual debt
service is substantially level over the remaining stated life of such bonds.
(8) The term "Base Ordinance" shall mean the ordinance authorizing the
issuance of the Series 1990 Bonds.
(9) The term "Bonds" shall have the meaning given such term in Section 1 of
this Ordinance.
(10) The term "Capital Additions" shall mean a reservoir or other water storage
facilities, a wastewater treatment plant or an interest therein, a gas distribution system or
an interest therein and associated transmission facilities with respect to each and any
combination thereof, which shall become a part of the System.
(11) The term "Capital Improvements" shall mean any capital extensions,
improvements and betterments to the System other than Capital Additions.
(12) The term "Capitalized Interest Account" shall mean the Account by that
name which may be created within the Debt Service Fund.
(13) The terms "City" and "Issuer" shall have the meaning given such terms in
the preamble of this Ordinance.
(14) The term "Closing Date" shall mean the date of physical delivery of the
Initial Bonds in exchange for the payment in full by the Purchasers.
(15) The term "Comptroller of Public Accounts" shall mean the Office of the
Comptroller of Public Accounts of the State of Texas.
(16) The term "Construction Fund" shall mean the fund so designated in
Section 13 of this Ordinance.
(17) The term "Credit Facility" shall mean a policy of municipal bond
insurance, a debt service reserve fund policy or surety bond or a letter or line of credit
issued by a Credit Facility Provider in support of any Priority Bonds or Subordinated
Obligations.
(18) The term "Credit Facility Provider" shall mean (i) with respect to any
Credit Facility consisting of a policy of municipal bond insurance or a surety bond, an
issuer of policies of insurance insuring the timely payment of debt service on
governmental obligations such as the Priority Bonds, provided that a Rating Agency
having an outstanding rating on the Priority Bonds would rate the Priority Bonds fully
insured by a standard policy issued by the issuer in its highest generic rating category for
such obligations; and (ii) with respect to any Credit Facility consisting of a letter or line
of credit, any financial institution, provided that a Rating Agency having an outstanding
rating on the Priority Bonds would rate the Priority Bonds in its two highest generic
rating categories for such obligations if the letter or line of credit proposed to be issued
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by such financial institution secured the timely payment of the entire principal amount of
the series of Priority Bonds and the interest thereon.
(19) The term "Debt Service Fund" shall have the meaning given such term in
Section 10 of this Ordinance.
(20) The term "DTC" shall have the meaning given such term in Section 5 to
this Ordinance.
(21) The term "Eligible Investments" shall mean those investments in which
the City is authorized by law, including, but not limited to, the Public Funds Investment
Act of 1987 (Chapter 2256, as amended, Texas Government Code), to purchase, sell and
invest its funds and funds under its control, and with respect to the investment of
proceeds of any Priority Bonds, guaranteed investment contracts fully collateralized by
Government Obligations.
(22) The term "Engineer of Record" shall mean the independent engineer or
firm at the time employed by the City to perform and carry out the duties imposed on
such engineer or firm by this Ordinance and having a favorable reputation nationally for
skill and experience in the engineering of water, sanitary sewer and/or gas systems of
comparable size and character as those forming parts of the System.
(23) The term "Fund" shall mean any fund created, established and maintained
under the terms of any ordinance authorizing the issuance of Priority Bonds.
(24) The term "Government Obligations" shall mean (i) with respect to any
Previously Issued Priority Bonds, direct obligations of the United States of America,
including obligations the principal of and interest on which are unconditionally
guaranteed by the United States of America and (ii) with respect to the Bonds and any
Additional Priority Bonds hereafter issued by the City, (1) direct noncallable obligations
of the United States, including obligations that are unconditionally guaranteed by, the
United States of America, or (2) noncallable obligations of an agency or instrumentality
of the United States, including obligations that are unconditionally guaranteed or insured
by the agency or instrumentality and that, on the date the governing body of the issuer
adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated
as to investment quality by a nationally recognized investment rating firm not less than
"AAA" or its equivalent, or (3) noncallable obligations of a state or an agency or a
county, municipality, or other political subdivision of a state that have been refunded and
that, on the date the governing body of the issuer adopts or approves the proceedings
authorizing the issuance of refunding bonds, are rated as to investment quality by a
nationally recognized investment rating firm not less than "AAA" or its equivalent;
provided, however, that in the event the term "Government Obligations" shall be used in
such a manner other than with respect to the defeasance of Priority Bonds pursuant to
Section 18 of this Ordinance, its meaning shall be consistent with that specified in
clause (i) above until such time as there are no longer Outstanding any Previously Issued
Priority Bonds and, thereafter, it shall have the meaning ascribed thereto in clause (ii).
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(25) The term "Gross Revenues" shall mean all revenues, income, and receipts
derived or received by the City from the operation and ownership of the System,
including the interest income from the investment or deposit of money in any Fund
created or confirmed by this Ordinance or maintained by the City in connection with the
System, other than those amounts subject to payment to the United States of America as
rebate pursuant to section 148 of the Code.
(26) The term "Insurer" shall mean Assured Guaranty Corp.
(27) The term "Policy" shall mean the financial guaranty insurance policy
relating to the Bonds issued by the Insurer.
(28) The term "Mandatory Redemption Account" shall mean the Account by
that name within the Debt Service Fund and established, if at all, by an ordinance
authorizing the issuance of Priority Bonds.
(29) The terms "Net Revenues of the System" and "Net Revenues" shall mean
all Gross Revenues less Operating Expenses.
(30) The term "Operating Expenses" shall mean the expenses of operation and
maintenance of the System, including all salaries, labor, materials, repairs, and extensions
necessary to render efficient service; provided, however, that only such repairs and
extensions, as in the judgment of the City, reasonably and fairly exercised by the passage
of appropriate ordinances, are necessary to render adequate service, or such as might be
necessary to meet some physical accident or condition which would otherwise impair any
Priority Bonds. Operating Expenses shall include the purchase of water, sewer and gas
services as received from other entities and the expenses related thereto, and, to the extent
permitted by law, Operating Expenses may include payments made on or in respect of
obtaining and maintaining any Credit Facility. Depreciation, and payments from the
System Fund to other funds established in this Ordinance, shall never be considered as
expenses of operation and maintenance.
(31) The term "Outstanding" shall mean, as of the date of determination, all
Priority Bonds theretofore issued and delivered except:
(a) those Priority Bonds theretofore canceled by the respective paying
agents for such Priority Bonds or delivered to such paying agents for cancellation;
(b) those Priority Bonds for which payment has been duly provided by
the City by the irrevocable deposit with the respective paying agents for such
Priority Bonds of money in the amount necessary to fully pay principal of,
premium, if any, and interest thereon to maturity or redemption, if any, as the case
may be, provided that, if such Priority Bonds are to be redeemed, notice of
redemption thereof shall have been duly given pursuant to the ordinance
authorizing the issuance of such Priority Bonds, irrevocably provided to be given
to the satisfaction of such paying agents, or waived;
80470964.4 -14-
(c) those Priority Bonds that have been mutilated, destroyed, lost, or
stolen and for which replacement bonds have been registered and delivered in lieu
thereof; and
(d) those Priority Bonds for which the payment of principal thereof,
premium, if any, and interest thereon to Stated Maturity re redemption has been
duly provided for by the City by the deposit in trust of money or Government
Obligations, or both.
(32) The term "Paying Agent/Registrar" shall mean the financial institution
specified in Section 5(a) of this Ordinance, or its herein -permitted successors and assigns.
(33) The term "Pledged Revenues" shall mean
(a) the Net Revenues, plus
(b) any additional revenues, income, receipts, or other resources,
including, without limitation, any grants, donations, or income received or to be
received from the United States Government, or any other public or private
source, whether pursuant to an agreement or otherwise, which hereafter are
pledged to the payment of the Priority Bonds.
(34) The term "Previously Issued Priority Bonds" shall have the meaning given
said term in the preamble to this Ordinance.
(35) The term "Priority Bonds" shall mean the Previously Issued Priority
Bonds, the Bonds, and any Additional Priority Bonds.
(36) The term "Prudent Utility Practice" shall mean any of the practices,
methods and acts, in the exercise of reasonable judgment, in the light of the facts,
including but not limited to the practices, methods and acts engaged in or approved by a
significant portion of the public utility industry prior thereto, known at the time the
decision was made, would have been expected to accomplish the desired result at the
lowest reasonable cost consistent with reliability, safety and expedition. It is recognized
that Prudent Utility Practice is not intended to be limited to the optimum practice, method
or act at the exclusion of all others, but rather is a spectrum of possible practices, methods
or acts which could have been expected to accomplish the desired result at the lowest
reasonable cost consistent with reliability, safety and expedition. In the case of any
facility included in the System which is owned in common with one or more other
entities, the term "Prudent Utility Practice", as applied to such facility, shall have the
meaning set forth in the agreement governing the operation of such facility.
(37) The term "Purchase Contract" shall have the meaning given such term in
Section 2 of this Ordinance;
(38) The term "Purchasers" shall have the meaning given such term in
Section 2 of this Ordinance.
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(39) The term "Rating Agency" shall mean any nationally recognized securities
rating agency which has assigned a rating to the Priority Bonds.
(40) The term "Required Amount" shall have the meaning given such term in
Section 11 of this Ordinance.
(41) The term "Reserve Fund" shall have the meaning given such term in
Section 11 of this Ordinance.
(42) The term "Reserve Fund Obligations" shall mean cash, Eligible
Investments, any Credit Facility, or any combination of the foregoing.
(43) The term "Series 1990 Bonds" shall mean the $64,660,000 City of Corpus
Christi, Texas Utility System Revenue Refunding Bonds, Series 1990, authorized by the
ordinance adopted by the City on November 15, 1990; the term "Series 1999 Bonds"
shall mean the $47,740,000 City of Corpus Christi, Texas Utility System Revenue
Refunding and Improvement Bonds Series 1999, authorized by the ordinance adopted by
the City on May 11, 1999; the term "Series 1999-A Bonds" shall mean the $15,750,000
City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement
Bonds, Series 1999-A, authorized by the ordinance adopted by the City on April 20,
1999; the term "Series 2000 Bonds" shall mean the $34,740,000 City of Corpus Christi,
Texas Utility System Revenue Refunding Bonds, Series 2000, authorized by the
ordinance adopted by the City on May 11, 1999 (as amended by ordinance adopted on
June 15, 1999); the term "Series 2000-A Bonds" shall mean the $42,520,000 City of
Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000-A,
authorized by the ordinance adopted by the City on September 19, 2000; the term "Series
2002 Bonds" shall mean the $92,330,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 2002, authorized by the ordinance
adopted by the City on August 20, 2002; the term "Series 2003 Bonds" shall mean the
$28,870,000 City of' Corpus Christi, Texas Utility System Revenue Refunding Bonds,
Series 2003, authorized by the ordinance adopted by the City on March 25, 2003; the
term "Series 2004 Bonds" shall mean the $50,000,000 City of Corpus Christi, Texas
Utility System Revenue Refunding and Improvement Bonds, Series 2004, authorized by
the ordinance adopted by the City on July 13, 2004; the term "Series 2005 Bonds" shall
mean the $70,390,000 City of Corpus Christi, Texas Utility System Revenue Refunding
Bonds, Series 2005, authorized by the ordinance adopted by the City on December 21,
2004; the term "Series 2005A Bonds" shall mean the $68,325,000 City of' Corpus Christi,
Texas Utility System Revenue Refunding Bonds, Series 2005A, authorized by the
ordinance adopted by the City on August 30, 2005; and the term "Series 2006 Bonds"
shall mean the $84,415,000 City of Corpus Christi, Texas Utility System Revenue
Refunding and Improvement Bonds, Series 2006, authorized by the ordinance adopted by
the City on September 26, 2006.
(44) The term "Subordinated Obligations" shall mean any bonds, notes, or
other obligations issued pursuant to law payable in whole or in part from the Pledged
Revenues but subordinate to the Priority Bonds, which includes the Series B Commercial
Paper Notes.
80470964.4 -16-
(45) The term "System" shall mean and include the City's existing combined
waterworks system, wastewater disposal system and gas system, together with all future
extensions, improvements, enlargements, and additions thereto, including, to the extent
permitted by law, storm sewer and drainage within the waterworks system, and all
replacements thereof; provided that, notwithstanding the foregoing, and to the extent now
or hereafter authorized or permitted by law, the term System shall not include any
waterworks, wastewater or gas facilities which are declared by the City not to be a part of
the System and which are hereafter acquired or constructed by the City with the proceeds
from the issuance of "Special Facilities Bonds", which are hereby defined as being
special revenue obligations of the City which are not secured by or payable from the
Pledged Revenues, but which are secured by and payable solely from special contract
revenues, or payments received from the City or any other legal entity, or any
combination thereof, in connection with such facilities; and such revenues or payments
shall not be considered as or constitute Gross Revenues of the System, unless and to the
extent otherwise provided in the ordinance or ordinances authorizing the issuance of such
"Special Facilities Bonds".
(46) The term "System Fund" shall have the meaning given such term in
Section 9 of this Ordinance.
(47) The term "Term Bonds" shall have the meaning given such term in
Section 3 of this Ordinance.
(48) The term "Value of Investment Securities" and words of like import shall
mean the amortized value thereof; provided, however, that all United States of America,
United States Treasury Obligations --State and Local Government Series shall be valued
at par and those obligations which are redeemable at the option of the holder shall be
valued at the price at which such obligations are then redeemable. The computations
made under this paragraph shall include accrued interest on the investment securities paid
as a part of the purchase price thereof and not collected. For the purposes of this
definition, "amortized value", when used with respect to a security purchased at par,
means the purchase price of such security.
(49) The term "Year" shall mean the regular fiscal year used by the City in
connection with the operation of the System, which may be any twelve consecutive
months period established by the City, currently being the period of time beginning on
August 1 and ending on July 31.
SECTION 8: Pledge.
A. Pledged Revenues. The Priority Bonds are and shall be secured by and payable from
a first lien on and pledge of the Pledged Revenues including such revenues within the System
Fund and the Funds hereinafter created in this Ordinance; and the Pledged Revenues are further
pledged to the establishment and maintenance of the Debt Service Fund and the Reserve Fund as
hereinafter provided. The Priority Bonds are and will be secured by and payable only from the
Pledged Revenues, and are not secured by or payable from a mortgage or deed of trust on any
properties, whether real, personal, or mixed, constituting the System.
80470964.4
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B. Security Interest. Chapter 1208, as amended, Texas Government Code, applies to the
issuance of the Bonds and the pledge of the Pledged Revenues granted by the City under
Subsection A of this Section, and such pledge is therefore valid, effective, and perfected. If
Texas law is amended at any time while the Bonds are Outstanding and unpaid such that the
pledge of the Pledged Revenues granted by the City is to be subject to the filing requirements of
Chapter 9, as amended, Texas Business & Commerce Code, then in order to preserve to the
registered owners of the Bonds the perfection of the security interest in said pledge, the City
agrees to take such measures as it determines are reasonable and necessary under Texas law to
comply with the applicable provisions of Chapter 9, as amended, Texas Business & Commerce
Code and enable a filing to perfect the security interest in said pledge to occur.
SECTION 9: System Fund. There has heretofore been created and established and there
shall be maintained on the books of the City, and accounted for separate and apart from all other
funds of the City, a special fund entitled the "City of Corpus Christi Utility System Fund" (the
"System Fund"). All Gross Revenues shall be credited to the System Fund immediately upon
receipt. All Operating Expenses shall be paid from such Gross Revenues credited to the System
Fund as a first charge against same.
SECTION 10: Debt Service Fund.
A. Debt Service Fund Established. For the sole purpose of paying the principal amount
of, premium, if any, Amortization Installments, if any, and interest on all Priority Bonds, there
has heretofore been created and established and there shall be maintained on the books of the
City a separate fund entitled the "City of Corpus Christi Utility System Revenue Bonds Debt
Service Fund" (the "Debt Service Fund"). Money in the Debt Service Fund shall be deposited
and maintained in an official depository bank of the City.
B. Capitalized Interest Account. Within the Debt Service Fund there may hereafter be
established a Capitalized Interest Account. The proceeds of Priority Bonds representing
capitalized interest may be deposited into the Capitalized Interest Account. On or before the day
next preceding any interest payment date of Priority Bonds or other obligations for which any
interest has been capitalized, the City shall use the money in the Capitalized Interest Account to
pay such interest on such Priority Bonds or other obligations to the extent of the amounts therein
representing such capitalized interest.
C. Mandatory Redemption Account. Within the Debt Service Fund there has heretofore
been established the Mandatory Redemption Account. Amortization Installments shall be
deposited to the credit of the Mandatory Redemption Account and be used to retire the principal
amount of Term Bonds in the manner described in any ordinance, including this Ordinance,
authorizing the issuance of Term Bonds.
D. Surplus Proceeds. Effective at such time as the Previously Issued Priority Bonds are
no longer Outstanding, the City may transfer excess amounts held in the Debt Service Fund to
any fund or funds established for the payment of or security for the Priority Bonds (including any
escrow established for the final payment of any such obligations pursuant to Chapter 1207, as
amended, Texas Government Code) or use such excess amount for any lawful purpose now or
80470964.4
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hereafter provided by law; provided, however, to the extent that such excess amount represents
bond proceeds, then such amount must remain in the Debt Service Fund.
SECTION 11: Reserve Fund.
A. Reserve Fund Established. There has heretofore been created and established and
there shall be maintained on the books of the City a separate fund entitled the "City of Corpus
Christi Utility System Revenue Bonds Reserve Fund" (the "Reserve Fund"). There shall be
deposited into the Reserve Fund any Reserve Fund Obligations so designated by the City.
Reserve Fund Obligations in the Reserve Fund shall be deposited and maintained in an official
depository bank of the City. Reserve Fund Obligations in the Reserve Fund shall be used solely
for the purpose of retiring the last of any Priority Bonds as they become due or paying principal
of and interest on any Priority Bonds when and to the extent the amounts in the Debt Service
Fund are insufficient for such purpose. The Reserve Fund shall be maintained in an amount
equal to the Average Annual Principal and Interest Requirements of the Outstanding Priority
Bonds (the "Required Amount"). The City may, at its option, withdraw and transfer to the
System Fund, all surplus in the Reserve Fund over the Required Amount.
B. Credit Facility. The City may replace or substitute a Credit Facility for cash or
Eligible Investments on deposit in the Reserve Fund or in substitution for or replacement of any
existing Credit Facility. Upon such replacement or substitution, cash or Eligible Investments on
deposit in the Reserve Fund which, taken together with the face amount of any existing Credit
Facilities, are in excess of the Required Amount may be withdrawn by the City, at its option, and
transferred to the System Fund; provided, however, that the face amount of any Credit Facility
may be reduced at the option of the City in lieu of such transfer.
C. Withdrawals. If the City is required to make a withdrawal from the Reserve Fund for
any of the purposes described in this Section, the City shall promptly notify any applicable
Credit Facility Provider of the necessity for a withdrawal from the Reserve Fund for any such
purposes, and shall make such withdrawal FIRST from available money or Eligible Investments
then on deposit in the Reserve Fund, and NEXT from a drawing under any Credit Facility to the
extent of such deficiency.
D. Deficiencies. In the event of a deficiency in the Reserve Fund, or in the event that on
the date of termination or expiration of any Credit Facility there is not on deposit in the Reserve
Fund sufficient Reserve Fund Obligations, all in an aggregate amount at least equal to the
Required Amount, then the City shall satisfy the Required Amount by depositing Reserve Fund
Obligations into the Reserve Fund in monthly installments of not less than 1/60 of the Required
Amount made on or before the 10th day of each month following such termination or expiration.
E. Redemption; Defeasance. In the event of the redemption or defeasance of any
Priority Bonds, any Reserve Fund Obligations on deposit in the Reserve Fund in excess of the
Required Amount may be withdrawn and transferred, at the option of the City, to the System
Fund, as a result of (i) the redemption of any Priority Bonds, or (ii) funds for the payment of any
Priority Bonds having been deposited irrevocably with the paying agent or place of payment
therefor in the manner described in any ordinance authorizing the issuance of Priority Bonds, the
80470964.4
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result of such deposit being that such Priority Bonds no longer are deemed to be Outstanding
under the terms of any such ordinance.
F. Reimbursement of Credit Facility Provider. In the event there is a draw upon a Credit
Facility, the City shall reimburse the Credit Facility Provider for such draw, in accordance with
the terms of any agreement pursuant to which the Credit Facility is issued, from Pledged
Revenues; provided, however, such reimbursement from Pledged Revenues shall be subordinate
and junior in right of payment to the payment of principal of and premium, if any, and interest on
the Priority Bonds.
G. Additional Priority Bonds. Upon the issuance of Additional Priority Bonds the
money in the Reserve Fund shall be increased to the newly -established Required Amount in
accordance with the provisions of Section 20B of this Ordinance.
SECTION 12: Subordinated Obligations Funds and Accounts. The City hereafter may
create, establish and maintain on the books of the City separate funds and accounts from which
money can be withdrawn to pay the principal of and interest on Subordinated Obligations which
hereafter may be issued.
SECTION 13: Construction Fund. The City hereby creates and establishes and shall
maintain on the books of the City a separate fund to be entitled the "Series 2009 Utility System
Revenue Bonds Construction Fund" (the "Construction Fund") for use by the City for payment
of all lawful costs associated with the acquisition, improvement and extension of the System as
hereinbefore provided. There shall be deposited to the Construction Fund those proceeds from
the sale of the Bonds specified in Section 28 of this Ordinance. Upon payment of all such costs,
any money remaining on deposit in said Fund shall be transferred to the Debt Service Fund.
Amounts so deposited to the Debt Service Fund shall be used in the manner described in
Subsection 22P of this Ordinance.
SECTION 14: Investments. Money in any Fund established pursuant to this Ordinance
may, at the option of the City, be placed or invested in Eligible Investments. Money in the
Reserve Fund shall not be invested in securities with an average aggregate weighted maturity of
greater than seven years. If money in a Fund herein established are permitted to be invested, the
value of any such Fund shall be established by adding the money therein to the Value of
Investment Securities. The value of each such Fund shall be established annually during the last
month of each Year, and in addition thereto and with respect to the Reserve Fund, value shall be
established within thirty days prior to the issuance of Priority Bonds and at the time or times
withdrawals are made therefrom. Such investments shall be sold promptly when necessary to
prevent any default in connection with the Priority Bonds. Earnings derived from the investment
of money on deposit in the various Funds and Accounts created hereunder shall be credited to the
Fund or Account from which money used to acquire such investment shall have come.
SECTION 15: Funds Secured. Money in the System Fund and all Funds created by this
Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for
securing funds of the City.
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SECTION 16: Flow Of Funds. All money in the System Fund not required for paying
Operating Expenses during each month shall be applied by the City, on or before the 10th day of
the following month, commencing during the months and in the order of priority with respect to
the Funds and Accounts that such applications are hereinafter set forth in this Section.
A. Debt Service Fund. To the credit of the Debt Service Fund, in the following order of
priority, to -wit:
(1) such amounts, deposited in approximately equal monthly installments,
commencing during the month in which the Priority Bonds are delivered, or the month
thereafter if delivery is made after the 10th day thereof, as will be sufficient, together
with other amounts, if any, in the Debt Service Fund available for such purpose
(including specifically money on deposit in the Capitalized Interest Account, if any,
dedicated thereto), to pay the interest scheduled to come due on Priority Bonds on the
next succeeding interest payment date;
(2) such amounts, deposited in approximately equal monthly installments,
commencing during the month which shall be the later to occur of (i) the twelfth month
before the first maturity date of Priority Bonds or (ii) the month in which Priority Bonds
are delivered, or the month thereafter if delivery is made after the 10th day thereof, as
will be sufficient, together with other amounts, if any, in the Debt Service Fund available
for such purpose, to pay the principal scheduled to mature on Priority Bonds on the next
succeeding principal payment date; and
(3) Amortization Installments, in such amounts and on such dates as set forth
in any ordinance authorizing a series of Priority Bonds which contain Term Bonds within
such series, to pay scheduled principal amounts of Priority Bonds which constitute Term
Bonds to be redeemed in accordance with the terms of said ordinance.
B. Reserve Fund. To the credit of the Reserve Fund, such amounts, deposited in
approximately equal monthly installments, commencing during the month in which the Priority
Bonds are delivered, or the month thereafter if delivery is made after the 10th day thereof, equal
to not less than 1/60 of the Required Amount, until such time as such amounts together with
other amounts, if any, in the Reserve Fund, equal the Required Amount. When and so long as
the Reserve Fund Obligations in the Reserve Fund are not less than the Required Amount, no
deposits need be made to the credit of the Reserve Fund. When and if the Reserve Fund at any
time contains less than the Required Amount due to any cause or condition other than the
issuance of Additional Priority Bonds then, subject and subordinate to making the required
deposits to the credit of the Debt Service Fund, commencing with the month during which such
deficiency occurs, such deficiency shall be made up from the next available Pledged Revenues or
from any other sources available for such purpose. Reimbursements to a Credit Facility Provider
made in accordance with the terms of Subsection 11F of this Ordinance shall constitute the
making up of a deficiency to the extent that such reimbursements result in the reinstatement, in
whole or in part, as the case may be, of the amount of the Credit Facility. If the Reserve Fund
contains less than the Required Amount due to the issuance of Additional Priority Bonds,
deposits shall be made to the Reserve Fund commencing during the month and in the amounts
required by Subsection 20B of this Ordinance, unless a Credit Facility is deposited in the
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Reserve Fund in an amount necessary to cause the sum of money and the value of Investment
Securities and any other Credit Facilities in the Reserve Fund to equal the Required Amount.
C. Surplus. The balance of any money remaining in the System Fund following such
transfers may be used by the City for payment of other obligations of the System, including, but
not limited to, Subordinated Obligations, and for any other lawful purpose; provided, however,
that transfers made for purposes other than for payment of obligations of the System shall be
made only at the end of the Year.
SECTION 17: Deficiencies. If on any occasion there shall not be sufficient Pledged
Revenues to make the deposits and other applications of money required by Section 16 with
respect to the various Funds as provided therein, any such deficiencies shall be made up (in the
order that each such Fund is provided for in Section 16) as soon as possible from the next
available Pledged Revenues, or from any other sources available for such purpose. The
foregoing notwithstanding, however, if any deficiency in the Reserve Fund occurs as a result of
withdrawals therefrom or decreases in the market value of Eligible Investments on deposit
therein, such deficiency will be made up from the next available Pledged Revenues within
twelve months from the date of such deficiency is determined, with such deposits to the Reserve
Fund to be made in not more than twelve substantially equal monthly payments.
SECTION 18: Payment of Bonds. On or before the first scheduled interest payment date,
and on or before each interest payment date and principal payment date thereafter while any of
the Priority Bonds are Outstanding and unpaid, the City shall make available to the paying agent
therefor, out of the Debt Service Fund (and the other Funds, if necessary, in the order of priority
set forth herein) money sufficient to pay such interest on and such principal amount of the
Priority Bonds, as shall become due and mature on such dates, respectively, at maturity or by
redemption prior to maturity. The bond registrar for each series of Priority Bonds shall destroy
all paid Priority Bonds and furnish the City with an appropriate certificate of cancellation or
destruction.
SECTION 19: Final Deposits; Government Obligations.
A. Defeasance. Any Priority Bond shall be deemed to be paid, retired and no longer
Outstanding within the meaning of this Ordinance when payment of the principal amount of,
redemption premium, if any, on such Priority Bond, plus interest thereon to the due date thereof
(whether such due date be by reason of maturity, upon redemption, or otherwise) either (i) shall
have been made in accordance with the terms thereof or (ii) shall have been provided for by
irrevocably depositing with, or making available to, a paying agent (or escrow agent) therefor, in
trust and irrevocably set aside exclusively for such payment, in accordance with the terms and
conditions of an agreement between the City and said paying agent (or escrow agent), (1) money
sufficient to make such payment or (2) Government Obligations, certified by an independent
public accounting firm of national reputation, to mature as to principal and interest in such
amounts and at such times as will insure the availability, without reinvestment, of sufficient
money to make such payment, and all necessary and proper fees, compensation, and expenses of
such paying agent pertaining to the Priority Bonds with respect to which such deposit is made
shall have been paid or the payment thereof provided for (and irrevocable instructions shall have
been given by the City to the paying agent of such bonds to give notice of such redemption in the
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manner required by the ordinance or ordinances authorizing the issuance of such bonds) to the
satisfaction of such paying agent. Such paying agent shall give notice to each registered owner
of any Priority Bond that such deposit as described above has been made, in the same manner as
described in Section 3B of this Ordinance. In addition, in connection with a defeasance, such
paying agent shall give notice of redemption, if necessary, to the registered owners of any
Priority Bonds in the manner described in such Priority Bonds and as directed in the redemption
instructions delivered by the City to such paying agent. At such time as a Priority Bond shall be
deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the
benefit of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled
to payment solely from such money or Government Obligations.
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 (i) or (ii) above shall not be irrevocable,
provided that: (1) in the proceedings providing for such defeasance, the City 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 defeasance; (3) directs that
notice of the reservation be included in any redemption notices that it authorizes; and (4) at the
time of the redemption, satisfies the conditions of (i) or (ii) above with respect to such defeased
debt as though it was being defeased at the time of the exercise of the option to redeem the
defeased Bonds, after taking the redemption into account in determining the sufficiency of the
provisions made for the payment of the defeased Bonds.
B. Government Obligations. Any money so deposited with a paying agent (or escrow
agent) may, at the direction of the City, also be invested in Government Obligations, maturing in
the amounts and times as hereinbefore set forth, and all income from all Government Obligations
in the hands of the paying agent (or escrow agent) pursuant to this Section which is not required
for the payment of the principal of such Priority Bonds, the redemption premium, if any,
therefor, and interest thereon, with respect to which such money has been so deposited, shall be
remitted to the City for deposit into the System Fund.
C. Payment of Priority Bonds. Except as provided in Subsection B of this Section, all
money or Government Obligations set aside and held in trust pursuant to the provisions of this
Section for the payment of the principal of such Priority Bonds, the redemption premium, if any,
therefor, and interest thereon, shall be applied solely to and used solely for the payment of such
Priority Bonds, such redemption premium, if any, and interest thereon.
SECTION 20: Issuance of Additional Priority Bonds.
A. Reservation of Right to Issue Additional Priority Bonds. Subject to the provisions
hereinafter appearing as conditions precedent which must first be satisfied, the City reserves the
right to issue, from time to time as needed, Additional Priority Bonds for any lawful purpose
relating to the System. Such Additional Priority Bonds may be issued in such form and manner
as now or hereafter authorized by the laws of the State of Texas for the issuance of evidences of
indebtedness or other instruments, and should new methods or financing techniques be
developed that differ from those now available and in normal use, the City reserves the right to
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employ the same in its financing arrangements provided only that the same conditions precedent
herein required for the authorization and issuance of Additional Priority Bonds are satisfied.
B. Debt Service Fund and Reserve Fund: Funding Reserve Fund. The Debt Service
Fund and the Reserve Fund confirmed by this Ordinance shall secure and be used to pay all
Additional Priority Bonds hereafter issued. Upon the issuance and delivery of Additional Priority
Bonds, the additional amount required to be deposited in the Reserve Fund shall be so
accumulated by the deposit in the Reserve Fund of all or any part of said required additional
amount in cash immediately after the delivery of such Additional Priority Bonds, or, at the
option of the City, (i) by the deposit of said required additional amount (or any balance of said
required additional amount not deposited in cash as permitted above) in approximately equal
monthly installments, made on or before the 10th day of each month following the delivery of
such Additional Priority Bonds, of not less than 1/60th of said required additional amount (or
1/60th of the balance of said required additional amount not deposited in cash as permitted
above) or (ii) by the deposit of a Credit Facility which, in whole or in combination with deposits
described in clause (i) above, is sufficient to satisfy the required additional amount to be on
deposit in the Reserve Fund.
C. Calculations. All calculations of Average Annual Principal and Interest
Requirements made pursuant to this Section shall be made as of and from the date of the
Additional Priority Bonds then proposed to be issued.
SECTION 21: Further Requirements for Additional Priority Bonds.
A. Conditions Precedent for Issuance of Additional Priority Bonds - General. As a
condition precedent to the issuance of any Additional Priority Bonds, the City Manager (or other
officer of the City then having the responsibility for the financial affairs of the City) shall have
executed a certificate stating (i) that the City is not then in default as to any covenant, obligation
or agreement contained in any ordinance or other proceeding relating to any obligations of the
City payable from and secured by a lien on and pledge of the Pledged Revenues and (ii) that the
amounts on deposit in all Funds or Accounts created and established for the payment and
security of all Outstanding obligations payable from and secured by a lien on and pledge of the
Pledged Revenues are the amounts then required to be deposited therein. Such certificate shall
be dated on or before the date of delivery of such Additional Priority Bonds, but such certificate
shall not be dated prior to the date an ordinance is passed authorizing the issuance of such
Additional Priority Bonds.
B. Conditions Precedent for Issuance of Additional Priority Bonds - Capital
Improvements and for any other Lawful Purpose except for Capital Additions or for Refunding.
The City covenants and agrees that Additional Priority Bonds will not be issued for the purpose
of financing Capital Improvements, or for any other lawful purpose (except for Capital Additions
or for refunding, which are to be issued in accordance with the provisions of Subsection C, D
or E of this Section) unless and until the conditions precedent in Subsection A above have been
satisfied and, in addition thereto, the City has secured a certificate or opinion of the Accountant
to the effect that, according to the books and records of the City, the Net Earnings (as hereinafter
defined) for the preceding Year or for 12 consecutive months out of the 15 months immediately
preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at
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least equal to 1.25 times the Average Annual Principal and Interest Requirements for all
Outstanding Priority Bonds after giving effect to the Additional Priority Bonds then proposed.
The foregoing notwithstanding, the City covenants and agrees that Additional Priority Bonds
may not be issued for the purpose of financing Capital Improvements when other Outstanding
Priority Bonds which have been issued for the purpose of financing Capital Additions and for
which capitalized interest for such other Priority Bonds has been provided for at least the twelve
months subsequent to the date of issuance of the Additional Priority Bonds then proposed to be
issued, unless the conditions precedent in Subsection A above have been satisfied and, in
addition thereto, the City has either (1) complied with the relevant conditions in this Subsection
as set forth above, or (2) if the relevant conditions of this Subsection B as set forth above cannot
be satisfied, the City has satisfied the conditions precedent in Subsection C(i) and (ii) of this
Section (but, for purposes of such clauses, the term Capital Improvements shall be substituted for
the term Capital Additions where the term Capital Additions appears therein to the extent
necessary to give recognition to the fact that Capital Improvements, rather than Capital
Additions, are then to be financed) and has secured a certificate or opinion of the Accountant to
the effect that, according to the books and records of the City, the Net Earnings for the preceding
Year or for 12 consecutive months out of the 15 months immediately preceding the month the
ordinance authorizing the Additional Priority Bonds is adopted are at least equal to 1.25 times
the Average Annual Principal and Interest Requirements for all Outstanding Priority Bonds
(other than any Priority Bonds issued for Capital Additions for which capitalized interest has
been provided for at least the twelve months subsequent to the date of issuance of the Additional
Priority Bonds proposed to be issued) after giving effect to the Priority Bonds then proposed.
C. Conditions Precedent for Issuance of Additional Priority Bonds - Capital Additions:
Initial Issue. The City covenants and agrees that Additional Priority Bonds will not be issued for
the purpose of financing Capital Additions, unless the same conditions precedent specified in
Subsection A above have been satisfied and, in addition thereto, either the relevant conditions
precedent specified in Subsection B above are satisfied or, in the alternative, the City shall have
obtained: (i) from the Engineer of Record a comprehensive Engineering Report for each Capital
Addition to be financed, which report shall (A) contain (1) detailed estimates of the cost of
acquiring and constructing the Capital Addition, (2) the estimated date the acquisition and
construction of the Capital Addition will be completed and commercially operative, and (3) a
detailed analysis of the impact of the Capital Addition on the financial operations of the system
for which the Capital Addition is to be integrated and to the System as a whole during the
construction thereof and for at least five Years after the date the Capital Addition becomes
commercially operative, and (B) conclude that (1) the Capital Addition is necessary and will
substantially increase the capacity, or is needed to replace existing facilities, to meet current and
projected demands for the service or product to be provided thereby, and (2) the estimated cost
of providing the service or product from the Capital Addition will be reasonable in comparison
with projected costs for furnishing such service or product from other reasonably available
sources; and (ii) a certificate of the Engineer of Record to the effect that, based on the
Engineering Report prepared for each Capital Addition, the projected Net Earnings for each of
the five Years subsequent to the date the Capital Addition becomes commercially operative (as
estimated in the Engineering Report) will be equal to at least 1.25 times the Average Annual
Principal and Interest Requirements for Priority Bonds then Outstanding or incurred and all
Priority Bonds estimated to be issued, if any, for all Capital Improvements and for all Capital
Additions then in progress or then being initiated, during the period from the date the first series
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of obligations for the Capital Additions is to be delivered through the fifth Year subsequent to
the date the Capital Addition is estimated to become commercially operative.
D. Completion Issues. Once a Capital Addition has been initiated by meeting the
conditions precedent specified in Subsection C(i) and (ii) above and the initial Priority Bonds
issued therefor are delivered, the City reserves the right to issue Additional Priority Bonds to
finance the remaining costs of such Capital Addition in such amounts as may be necessary to
complete the acquisition and construction thereof and make the same commercially operative
without satisfaction of any condition precedent under Subsection C(i) and (ii) or Subsection B of
this Section but subject to satisfaction of the following conditions precedent: (i) the City makes
a forecast (the "Forecast") of the operations of the System demonstrating the System's ability to
pay all obligations, payable from the Pledged Revenues of the System to be Outstanding after the
issuance of the Additional Priority Bonds then being issued for the period (the "Forecast Period")
of each ensuing Year through the fifth Year subsequent to the latest estimated date such Capital
Addition is expected to be commercially operative; and (ii) the Engineer of Record reviews such
Forecast and executes a certificate to the effect that (A) such Forecast is reasonable, and based
thereon (and such other factors deemed to be relevant), the Pledged Revenues of the System will
be adequate to pay all the obligations, payable from the Pledged Revenues of the System to be
Outstanding after the issuance of the Additional Priority Bonds then being issued for the Forecast
Period and (B) the proceeds from the sale of such Additional Priority Bonds are estimated to be
sufficient to complete such acquisition and construction.
E. Refunding Issues. The City reserves the right to issue refunding bonds to refund all
or any part of the Outstanding Priority Bonds (pursuant to any law then available), upon such
terms and conditions as the governing body of the City may deem to be in the best interest of the
City and its inhabitants, and if less than all such Outstanding Priority Bonds are refunded, the
conditions precedent prescribed in Subsection A and B of this Section shall be satisfied and the
Accountant's certificate or opinion required by Subsection B shall give effect to the issuance of
the proposed refunding bonds (and shall not give effect to the Priority Bonds being refunded
following their cancellation or provision being made for their payment). In addition, the City
reserves the right to refund all or any part of any other obligations of the System, upon such
terms and conditions as the Governing Body of the City may deem to be in the best interest of
the City and its inhabitants, provided that the conditions prescribed in Subsection A and B of this
Section shall be satisfied. No Accountant's certificate otherwise required by Subsection B will be
required for refunding bonds, after giving effect to such proposed refunding, if there is no
increase in debt service for any Year in which there will be debt service on Priority Bonds
Outstanding both before and after such refunding.
F. Computations; Reports. With reference to Priority Bonds anticipated and estimated
to be issued or incurred, the Average Annual Principal and Interest Requirements therefor shall
be those reasonably estimated and computed by the City's Director of Financial Services (or
other officer of the City then having the primary responsibility for the financial affairs of the
City). In the preparation of the Engineering Report required in Subsection C(i) above, the
Engineer of Record may rely on other experts or professionals, including those in the
employment of the City, provided such Engineering Report discloses the extent of such reliance
and concludes it is reasonable so to rely. In connection with the issuance of Priority Bonds for
Capital Additions, the certificate of the City's Director of Financial Services and Engineer of
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Record, together with the Engineering Report for the initial issue and the Forecast for a
subsequent issue, shall be conclusive evidence and the only evidence required to show
compliance with the provisions and requirements and this clause of this Section.
G. Combination Issues. Priority Bonds for Capital Additions may be combined in a
single issue with Priority Bonds for Capital Improvements or for any lawfirl purpose provided
the conditions precedent set forth in Subsection B through E are complied with as the same
relate to the appropriate purpose.
H. Subordinated Obligations. The City may, at any time and from time to time, for any
lawful purpose, issue Subordinated Obligations, the principal of and redemption premium, if any,
and interest on which is payable from and secured by a pledge of and lien on the Pledged
Revenues junior and subordinate to the lien and pledge created hereby for the security of the
Priority Bonds and the payments required to be made hereunder into the Debt Service Fund and
the Reserve Fund; provided, however, that any such pledge and lien securing the Subordinated
Obligations shall be, and shall be expressed to be, subordinate in all respects to the pledge of and
lien on the Pledged Revenues as security for the Priority Bonds; and provided father that any
default with respect to the issuance of Subordinated Obligations will not be deemed a default
with respect to the Priority Bonds.
I. Definition of Net Earnings. As used in this Section, the term "Net Earnings" shall
mean the Gross Revenues of the System after deducting the Operating Expenses of the System,
but not expenditures which, under standard accounting practice, should be charged to capital
expenditures.
J. Determination of Net Earnings. In making a determination of Net Earnings for any of
the purposes described in this Section, the Accountant may take into consideration a change in
the rates and charges for services and facilities afforded by the System that became effective at
least 60 days prior to the last day of the period for which Net Earnings are determined and, for
purposes of satisfying any of the Net Earnings test described above, make a pro forma
determination of the Net Earnings of the System for the period of time covered by the
Accountant's certification or opinion based on such change in rates and charges being in effect
for the entire period covered by the Accountant's certificate or opinion.
SECTION 22: General Covenants. The City further covenants and agrees that in
accordance with and to the extent required or permitted by law:
A. Performance. It will faithfully perform at all times any and all covenants,
undertakings, stipulations, and provisions contained in this Ordinance, and each ordinance
authorizing the issuance of Additional Priority Bonds; it will promptly pay or cause to be paid
the principal amount of and interest on every Priority Bond, on the dates and in the places and
manner prescribed in such ordinances and such Priority Bonds; and it will, at the time and in the
manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the
System Fund and the Funds herein created; and any registered owner of any Priority Bond may
require the City, its officials and employees to carry out, respect or enforce the covenants and
obligations of this Ordinance, or any ordinance authorizing the issuance of Priority Bonds, by all
legal and equitable means, including specifically, but without limitation, the use and filing of
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mandamus proceedings, in any court of competent jurisdiction, against the City, its officials and
employees.
B. City's Legal Authority. It is a duly created and existing home rule city of the State of
Texas, and is duly authorized under the laws of the State of Texas to issue the Bonds; that all
action on its part for the issuance of the Bonds has been duly and effectively taken, and that the
Bonds in the hands of the owners thereof' are and will be valid and enforceable special
obligations of the City in accordance with their terms.
C. Acquisition and Construction; Operation and Maintenance. (I) It shall use its best
efforts in accordance with Prudent Utility Practice to acquire and construct, or cause to be
acquired and constructed, any Capital Additions or Capital Improvements, in accordance with
the plans and specifications therefor, as modified from time to time, with due diligence and in a
sound and economical manner; and (2) it shall at all times use its best efforts to operate or cause
to be operated the System properly and in an efficient manner, consistent with Prudent Utility
Practice, and shall use its best efforts to maintain, preserve, reconstruct and keep the same or
cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances
and every part and parcel thereof, in good repair, working order and condition, and shall from
time to time make, or use its best efforts to cause to be made, all necessary and proper repairs,
replacement and renewals so that at all times the operation of the System may be properly and
advantageously conducted.
D. Title. It has or will obtain lawful title, whether such title is in fee or lesser interest, to
the lands, buildings, structures and facilities constituting the System, that it warrants that it will
defend the title to all the aforesaid lands, buildings, structures and facilities, and every part
thereof, for the benefit of the owners of the Priority Bonds, against the claims and demands of all
persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to the payment
of the Priority Bonds in the manner prescribed herein, and has lawfully exercised such rights.
E. Liens. It will from time to time and before the same become delinquent pay and
discharge all taxes, assessments and governmental charges, if any, which shall be lawfully
imposed upon it, or the System; it will pay all lawful claims for rents, royalties, labor, materials
and supplies which if unpaid might by law become a lien or charge thereon, the lien of which
would be prior to or interfere with the liens hereof, so that the priority of the liens granted
hereunder shall be fully preserved in the manner provided herein, and it will not create or suffer
to be created any mechanic's, laborer's, materialman's or other lien or charge which might or
could be prior to the liens hereof, or do or suffer any matter or thing whereby the liens hereof
might or could be impaired; provided however, that no such tax, assessment or charge, and that
no such claims which might be used as the basis of a mechanic's, laborer's, materialman's or
other lien or charge, shall be required to be paid so long as the validity of the same shall be
contested in good faith by the City.
F. No Free Service. No free service or service otherwise than in accordance with the
established rate schedule shall be furnished, directly or indirectly, by the System to any person,
firm, corporation or other entity, other than the City. No part of the salary of any official or
employee of the City or his replacement shall be paid from Pledged Revenues unless and only to
the extent the duties and performances of such official or employee or his replacement appertain
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directly to the System. To the extent the City receives the services of the System, such services
shall be accounted for according to the established rate schedule.
G. Further Encumbrance. It will not additionally encumber the Pledged Revenues in any
manner, except as permitted in this Ordinance in connection with Priority Bonds, unless said
encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants and
agreements of this Ordinance; but the right of the City to issue Subordinated Obligations payable
in whole or in part from a subordinate lien on the Pledged Revenues is specifically recognized
and retained.
H. Sale, Lease or Disposal of Property. No part of the System shall be sold, leased,
mortgaged, demolished, removed or otherwise disposed of, except as follows:
(1) To the extent permitted by law, the City may sell or exchange at any time
and from time to time any property or facilities constituting part of the System only if (A)
it shall determine such property or facilities are not useful in the operation of the System,
or (B) the proceeds of such sale are $250,000 or less, or it shall have received a certificate
executed by the Engineer of Record and the City Manager stating, in their opinion, that
the fair market value of the property or facilities exchanged is $250,000 or less, or (C) if
such proceeds or fair market value exceeds $250,000 it shall have received a certificate
executed by the Engineer of Record and the City Manager stating (i) that system within
the System of which the property or facilities comprises a part thereof and (ii) in their
opinion, that the sale or exchange of such property or facilities will not impair the ability
of the City to comply during the current or any future Year with the provisions of
Subsection K of this Section. The proceeds of any such sale or exchange not used to
acquire other property necessary or desirable for the safe or efficient operation of the
System shall forthwith, at the option of the City (i) be used to redeem or purchase Priority
Bonds, or (ii) otherwise be used to provide for the payment of Priority Bonds. The
foregoing notwithstanding, if such property or facilities sold or exchanged constituted
property or facilities comprising all or a part of a system within the System, the
acquisition, improvement or extension of such system having not been financed by the
City in any manner with the proceeds of Priority Bonds, or with the proceeds of
obligations which were refunded in whole or in part with the proceeds of Priority Bonds,
then the City may utilize the proceeds of such sale or exchange for any lawful purpose;
and
(2) To the extent permitted by law, the City may lease or make contracts or
grant licenses for the operation of, or make arrangements for the use of, or grant
easements or other rights with respect to, any part of the System, provided that any such
lease, contract, license, arrangement, easement or right (A) does not impede the operation
by the City of the System and (B) does not in any manner impair or adversely affect the
rights or security of the owners of the Priority Bonds under this Ordinance; and provided,
further, that if the depreciated cost of the property to be covered by any such lease,
contract, license, arrangement, easement or other right is in excess of $500,000, the City
shall have received a certificate executed by the Engineer of Record and the City
Manager that the action of the City with respect thereto does not result in a breach of the
conditions under this clause (2). Any payments received by the City under or in
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connection with any such lease, contract, license, arrangement, easement or right in
respect of the System or any part thereof shall constitute Gross Revenues.
I. Books, Records and Accounts. It shall keep proper books, records and accounts
separate and apart from all other records and accounts, in which complete and correct entries
shall be made of all transactions relating to the System and the City shall cause said books and
accounts to be audited annually as of the close of each Year by the Accountant.
J. Insurance.
(1) Except as otherwise permitted in clause (2) below, it shall cause to be
insured such parts of the System as would usually be insured by corporations operating
like properties, with a responsible insurance company or companies, against risks,
accidents or casualties against which and to the extent insurance is usually carried by
corporations operating like properties, including, to the extent reasonably obtainable, fire
and extended coverage insurance, insurance against damage by floods, and use and
occupancy insurance. Public liability and property damage insurance shall also be
carried unless the City Attorney gives a written opinion to the effect that the City is not
liable for claims which would be protected by such insurance. At any time while any
contractor engaged in construction work shall be fully responsible therefor, the City shall
not be required to carry insurance on the work being constructed if the contractor is
required to carry appropriate insurance. All such policies shall be open to the inspection
of the bondholders and their representatives at all reasonable times.
(2) In lieu of obtaining policies for insurance as provided above, the City may
self -insure against risks, accidents, claims or casualties described in clause (1) above.
(3) The annual audit hereinafter required shall contain a section commenting
on whether or not the City has complied with the requirements of this Section with
respect to the maintenance of insurance, and listing the areas of insurance for which the
City is self-insuring, all policies carried, and whether or not all insurance premiums upon
the insurance policies to which reference is hereinbefore made have been paid.
K. Rate Covenant. It will fix, establish, maintain and collect such rates, charges and fees
for the use and availability of the System at all times as are necessary to produce Gross Revenues
and other Pledged Revenues equal to the greater of amounts determined in accordance with
clauses (1) or (2) below, to -wit, amounts sufficient: (1) (A) to pay all current Operating Expenses
of the System, and (B) to produce Net Revenues for each Year at least equal to 1.25 times the
Average Annual Principal and Interest Requirements of all then Outstanding Priority Bonds; or
(2) to pay the sum of (A) all current Operating Expenses, (B) the Average Annual Principal and
Interest Requirements on the then Outstanding Priority Bonds, (C) deposits to the Reserve Fund
required for the Priority Bonds, and (D) amounts required to pay all other obligations of the
System reasonably anticipated to be paid from Gross Revenues during the current Year. The
calculation of Average Annual Principal and Interest Requirements on all Outstanding Priority
Bonds shall be net of capitalized interest for such Priority Bonds only if the money in a
Capitalized Interest Account received from proceeds of such Priority Bonds held in cash or are
invested in Government Obligations. The foregoing notwithstanding, such rates, charges and
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fees shall be fixed, established, maintained and collected at a level sufficient to enable the City to
pay debt service on Priority Bonds during the current Year.
L. Audits. After the close of each Year while any Priority Bonds are Outstanding, an
audit will be made of the books and accounts relating to the System and the Pledged Revenues
by the Accountant. As soon as practicable after the close of each such Year, and when said audit
has been completed and made available to the City, a copy of' such audit for the preceding year
shall be mailed to any holder of the then Outstanding Priority Bonds who shall so request in
writing. Such annual audit reports shall be open to the inspection of the registered owners of' the
Priority Bonds and their agents and representatives at all reasonable times.
M. Governmental Agencies. It will comply with all of the terms and conditions of any
and all franchises, permits and authorizations applicable to or necessary with respect to the
System, and which have been obtained from any governmental agency; and the City has or will
obtain and keep in full force and effect all franchises, permits, authorization and other
requirements applicable to or necessary with respect to the acquisition, construction, equipment,
operation and maintenance of the System.
N. No Competition. To the extent it legally may, it will not grant any franchise or permit
for the acquisition, construction or operation of any competing facilities which might be used as
a substitute for the System's facilities, and, to the extent that it legally may, the City will prohibit
any such competing facilities.
O. Rights of Inspection. The Engineer of Record or any registered owner of $100,000 in
aggregate principal amount of the Priority Bonds then Outstanding shall have the right at all
reasonable times to inspect the System and all records, accounts and data of the City relating
thereto, and upon request the City shall furnish to the Engineer of Record or such registered
owner, as the case may be, such financial statements, reports and other information relating to
the City and the System as the Engineer of Record or such registered owner may from time to
time reasonably request.
P. Surplus Bond Proceeds. It shall deposit any surplus proceeds from the Bonds
remaining after the acquisition and completion of the System improvements to the credit of the
Debt Service Fund, to the extent any such surplus proceeds are not otherwise required to be
rebated to the United States of America in accordance with the provisions of Section 23 hereof,
to pay debt service on the Bonds.
Q. Variable Rate Obligations. For so long as the Policy (as hereinafter defined) remains
in effect, not more than 26.9% of the aggregate principal amount of all Priority Bonds at any one
time outstanding shall be comprised of obligations bearing interest at a variable rate (including
commercial paper); provided, however, that this limitation specifically excludes any
Subordinated Obligations (including the Series B Commercial Paper Notes).
SECTION 23: Covenants Regarding Tax -Exemption.
A. Definitions. When used in this Section, the following terms have the following
meanings:
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"Closing Date" shall mean the date of physical delivery of the Initial Bonds in exchange
for the payment of the agreed purchase price for the Bonds.
"Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any,
effective on or before the Closing Date.
"Computation Date" has the meaning set forth in section 1.148-1(b) of the Regulations.
"Gross Proceeds" means any proceeds as defined in section 1.148-1(b) of the
Regulations, and any replacement proceeds as defined in section 1.148-1(c) of the Regulations,
of the Bonds.
"Investment" has the meaning set forth in section 1.148-1(b) of the Regulations.
"Nonpurpose Investment" means any investment property, as defined in section 148(b) of
the Code, in which Gross Proceeds of the Bonds are invested and which is not acquired to carry
out the governmental purposes of the Bonds.
"Rebate Amount" has the meaning set forth in section 1.148-1(b) of the Regulations.
"Regulations" means any proposed, temporary, or final Income Tax Regulations issued
pursuant to sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code
of 1954, which are applicable to the Bonds. Any reference to any specific Regulation shall also
mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to
supplement, amend or replace the specific Regulation referenced.
"Yield" of
1) any Investment has the meaning set forth in section 1.148-5 of the
Regulations; and
2) the Bonds has the meaning set forth in section 1.148-4 of the Regulations.
B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of,
or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction
or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a
manner which if made or omitted, respectively, would cause the interest on any Bond to become
includable in the "gross income", as defined in section 61 of the Code, of the owner thereof for
federal income tax purposes. Without limiting the generality of the foregoing, unless and until
the City receives a written opinion of counsel nationally recognized in the field of municipal
bond law to the effect that failure to comply with such covenant will not adversely affect the
exemption from federal income tax of the interest on any Bond, the City shall comply with each
of the specific covenants in this Section.
C. No Private Use or Private Payments. Except to the extent that it will not cause the
Bonds to become "private activity bonds" within the meaning of section 141 of the Code and the
Regulations and rulings thereunder, the City shall at all times prior to the last stated maturity of
Bonds:
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(1) exclusively own, operate and possess all property the acquisition,
construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Bonds, and not use or permit the use of such Gross
Proceeds (including all contractual arrangements such as take, take or pay, certain
requirements and other similar output contracts or arrangements with terms different than
those applicable to the general public) or any property acquired, constructed or improved
with such Gross Proceeds in any activity carried on by any person or entity (including the
United States or any agency, department and instrumentality thereof) other than a state or
local government, unless such use is solely as a member of the general public; and
(2) not directly or indirectly impose or accept any charge or other payment by
any person or entity who is treated as using Gross Proceeds of the Bonds or any property
the acquisition, construction or improvement of which is to be financed or refinanced
directly or indirectly with such Gross Proceeds, other than taxes of' general application
within the City or interest earned on investments acquired with such Gross Proceeds
pending application for their intended purposes.
(3) not allow any "nonqualified amount" (as defined in section 141(b)(8) of
the Code) of the Bonds to exceed the excess of (i) $15,000,000 over (ii) the aggregate
nonqualified amounts with respect to all prior tax-exempt bonds, five percent or more of
the proceeds of which are or will be used with respect to any facility financed by the
Bonds (or any other facility which is part of the same project as a facility financed by
the), all within the meaning of section 141(6)(4) of the Code; and
(4) not allow more than the lesser of (i) $5,000,000 or (ii) five percent of the
proceeds of the Bonds to acquire nongovernmental output property, as defined in section
141(d)(2) of the Code, except if 95 percent or more of the output from such facility will
be consumed in a "qualified service area" (as defined in section 141(d)(3 of the Code) of
the City or in a "qualified annexed area" (as defined in section 141(d)(3) of the Code) of
the City.
D. No Private Loan. Except to the extent that it will not cause the Bonds to become
"private activity bonds" within the meaning of section 141 of the Code and the Regulations and
rulings thereunder, the City shall not use Gross Proceeds of the Bonds to make or finance loans
to any person or entity other than a state or local government.
E. Not to Invest at Higher Yield. Except to the extent that it will not cause the Bonds to
become "arbitrage bonds" within the meaning of section 148 of the Code and the Regulations
and rulings thereunder, the City shall not at any time prior to the final stated maturity of the
Bonds directly or indirectly invest Gross Proceeds in any Investment, if as a result of such
investment the Yield of any Investment acquired with Gross Proceeds, whether then held or
previously disposed of, materially exceeds the Yield of the Bonds.
F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the
Code and the Regulations and rulings thereunder, the City shall not take or omit to take any
action which would cause the Bonds to be federally guaranteed within the meaning of section
149(b) of the Code and the Regulations and rulings thereunder.
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G. Information Report. The City shall timely file the information required by section
149(e) of the Code with the Secretary of the Treasury on Form 8038 G or such other form and in
such place as the Secretary may prescribe.
H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(0
of the Code and the Regulations and rulings thereunder:
(1) The City shall account for all Gross Proceeds (including all receipts,
expenditures and investments thereof) on its books of account separately and apart from
all other funds (and receipts, expenditures and investments thereof) and shall retain all
records of accounting for at least six years after the day on which the last Outstanding
Bond is discharged. However, to the extent permitted by law, the City may commingle
Gross Proceeds with other money of the City, provided that the City separately accounts
for each receipt and expenditure of Gross Proceeds and the obligations acquired
therewith.
(2) Not less frequently than each Computation Date, the City shall calculate
the Rebate Amount in accordance with rules set forth in section 148(0 of the Code and
the Regulations and rulings thereunder. The City shall maintain such calculations with its
official transcript of proceedings relating to the issuance of the Bonds until six years after
the final Computation Date.
(3) As additional consideration for the purchase of the Bonds by the
Purchasers and the loan of the money represented thereby and in order to induce such
purchase by measures designed to insure the excludability of the interest thereon from the
gross income of the owners thereof for federal income tax purposes, the City shall pay to
the United States out of the Debt Service Fund or its general fund, as permitted by
applicable Texas statute, regulation or opinion of the Attorney General of the State of
Texas, any Rebate Amount in the manner and on or before the dates specified in section
148(0 of the Code and the Regulation and rulings thereunder. In all cases, the rebate
payments shall be made at the times, in the installments, to the place and in the manner as
is or may be required by section 148(f) of the Code and the Regulations and rulings
thereunder, and shall be accompanied by Form 8038-T or such other forms and
information as is or may be required by section 148(0 of the Code and the Regulations
and rulings thereunder.
(4) The City shall exercise reasonable diligence to assure that no errors are
made in the calculations and payments required by paragraphs (2) and (3), and if an error
is made, to discover and promptly correct such error within a reasonable amount of time
thereafter (and in all events within one hundred eighty (180) days after discovery of the
error), including payment to the United States of any additional Rebate Amount owed to
it, interest thereon, and any penalty imposed under section 1.148 3(h) of the Regulations.
I. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the
Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the
earlier of the stated maturity or final payment of the Bonds, enter into any transaction that
reduces the amount required to be paid to the United States pursuant to Subsection H of this
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Section because such transaction results in a smaller profit or a larger loss than would have
resulted if the transaction had been at arm's length and had the Yield of the Bonds not been
relevant to either party.
J. Bonds Not Hedge Bonds.
(1) The City reasonably expects to spend at least 85% of the spendable
proceeds of the Bonds within three years after the issue of such Bonds.
(2) Not more than 50% of' the proceeds of the Bonds will be invested in
Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years
or more.
K. Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City
Manager, any Assistant City Manager, and the City's Director of Financial Services, either or
any combination of the foregoing, to make such elections in the Certificate as to Tax Exemption
or similar or other appropriate certificate, form, or document permitted or required pursuant to
the provisions of the Code, or Regulations as they deem necessary or appropriate in connection
with the Bonds, and other transactions related to any Priority Bonds. Such elections shall be
deemed to be made on the Closing Date.
SECTION 24: Taxable Obligations. The provisions of Section 23 of this Ordinance
notwithstanding, the City reserves the ability to issue Additional Priority Bonds in a manner such
that such obligations are not obligations described in section 103(a) of the Code or are
obligations which constitute "private activity bonds" within the meaning of section 141 of the
Code.
SECTION 25: Amendment of Ordinance.
A. Approval by Registered Owners. The registered owners of a majority in aggregate
principal amount of the Priority Bonds then Outstanding shall have the right from time to time to
approve any amendment to this Ordinance which may be deemed necessary or desirable by the
City; provided, however, that without the consent of the registered owners of all of the Priority
Bonds at the time Outstanding, nothing herein contained shall permit or be construed to permit
the amendment of the terms and conditions in this Ordinance or in the Priority Bonds so as to:
(1)
(2)
(3)
Bonds;
make any change in the maturity of any of the Outstanding Priority Bonds;
reduce the rate of interest borne by any of the Outstanding Priority Bonds;
reduce the amount of the principal payable on the Outstanding Priority
(4) modify the terms of payment of principal of, premium, if any, or interest
on the Outstanding Priority Bonds or impose any conditions with respect to such
payment;
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(5) affect the rights of the registered owners of less than all of the Priority
Bonds then Outstanding;
(6) amend this Subsection A of this Section; or
(7) change the minimum percentage of the principal amount of Priority Bonds
necessary for consent to any amendment;
unless such amendment or amendments be approved by the registered owners of all of the
Priority Bonds then Outstanding.
B. Notice. If at any time the City shall desire to amend the Ordinance under this
Section, the City shall cause notice of the proposed amendment to be published in a financial
newspaper or journal published in The City of New York, New York, and a newspaper of
general circulation in the City, once during each calendar week for at least two successive
calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and
shall state that a copy thereof is on file at the principal office of the Paying Agent/Registrar for
inspection by all holders of Priority Bonds. Such publication is not required, however, if notice
in writing is given to each registered owner of Priority Bonds.
C. Consent Obtained. Whenever at any time not less than 30 days, and within one year,
from the date of the first publication of said notice or other service of written notice, the City
shall receive an instrument or instruments executed by the registered owners of at least a
majority in aggregate principal amount of the Priority Bonds then Outstanding, which instrument
or instruments shall refer to the proposed amendment described in said notice and which
specifically consent to and approve such amendment in substantially the form of the copy thereof
on file with the Paying Agent/Registrar, the Governing Body may pass the amendatory ordinance
in substantially the same form.
D. Amendatory Ordinance. Upon the passage of any amendatory ordinance pursuant to
the provisions of this Section, this Ordinance shall be deemed to be amended in accordance with
such amendatory ordinance, and the respective rights, duties and obligations under this
Ordinance of the City and all the registered owners of then Outstanding Priority Bonds and all
future Priority Bonds shall thereafter be determined, exercised and enforced hereunder, subject in
all respects to such amendments.
E. Consent Irrevocable for Six Months. Any consent given by the registered owner of a
Priority Bond pursuant to the provisions of this Section shall be irrevocable for a period of six
months from the date of the first publication of the notice provided for in this Section, and shall
be conclusive and binding upon all future registered owners of the same Priority Bond during
such period. Such consent may be revoked at any time after six months from the date of the first
publication of such notice by the registered owner who gave such consent, or by a successor in
title, by filing notice thereof with the Paying Agent/Registrar and the City, but such revocation
shall not be effective if the registered owners of at least a majority in aggregate principal amount
of the then Outstanding Priority Bonds as in this Section defined have, prior to the attempted
revocation, consented to and approved the amendment.
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F. Amendments without Consent. The foregoing provisions of this Section
notwithstanding, the City, by action of the Governing Body may amend this Ordinance for any
one or more of the following purposes:
(1) to add to the covenants and agreements of the City in this Ordinance
contained, other covenants and agreements thereafter to be observed, grant additional
rights or remedies to the registered owners of the Priority Bonds or to surrender, restrict
or limit any right or power herein reserved to or conferred upon the City;
(2) to make such provisions for the purpose of curing any ambiguity, or
curing, correcting or supplementing any defective provision contained in this Ordinance,
or in regard to clarifying matters or questions arising under this Ordinance, as are
necessary or desirable and not contrary to or inconsistent with this Ordinance and which
shall not adversely affect the interests of the registered owners of the Priority Bonds then
Outstanding;
(3) to modify any of the provisions of this Ordinance in any other respect
whatever, provided that (i) such modification shall be, and be expressed to be, effective
only after all Bonds and each series of Additional Priority Bonds Outstanding at the date
of the adoption of such modification shall cease to be Outstanding, and (ii) such
modification shall be specifically referred to in the text of all Priority Bonds issued after
the date of the adoption of such modification;
(4) to make such amendments to this Ordinance as may be required, in the
opinion of nationally recognized bond counsel acceptable to the City, to ensure
compliance with sections 103 and 141 through 150 of the Code and the regulations
promulgated thereunder and applicable thereto;
(5) to make such changes, modifications or amendments as may be necessary
or desirable in order to allow the owners of the Priority Bonds to thereafter avail
themselves of a book -entry system for payments, transfers and other matters relating to
the Priority Bonds, which changes, modifications or amendments are not contrary to or
inconsistent with other provisions of this Ordinance and which shall not adversely affect
the interests of the owners of the Priority Bonds;
(6) to make such changes, modifications or amendments as are permitted by
Section 32D of this Ordinance;
(7) to make such changes, modifications or amendments as may be necessary
or desirable in order to obtain or maintain the granting of a rating on the Priority Bonds
by a Rating Agency or to obtain or maintain a Credit Facility, or to obtain the approval of
the Bonds from the Attorney General of the State of Texas; and
(8) to make such changes, modifications or amendments as may be necessary
or desirable, which shall not adversely affect the interests of the owners of the Priority
Bonds, in order, to the extent permitted by law, to facilitate the economic and practical
utilization of interest rate swap agreements, foreign currency exchange agreements, or
similar type of agreements with respect to the Priority Bonds.
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Notice of any such amendment may be published by the City in the manner described in
Subsection B of this Section; provided, however, that the publication of such notice shall not
constitute a condition precedent to the adoption of such amendatory ordinance and the failure to
publish such notice shall not adversely affect the implementation of such amendment as adopted
pursuant to such amendatory ordinance.
SECTION 26: Damaged, Mutilated, Lost, Stolen, or Destroyed Bonds.
A. Substitute Bonds. In the event any Outstanding Bond 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. Application for replacement of damaged, mutilated,
lost, stolen, or destroyed Bonds shall be made to the Paying Agent/Registrar. In every case of
loss, theft, or destruction of a Bond, the applicant for a replacement bond shall furnish to the City
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 applicant shall furnish to the City 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 applicant shall surrender
to the Paying Agent/Registrar for cancellation the Bond so damaged or mutilated.
C. Payment upon Maturity. Notwithstanding the foregoing provisions of this Section, in
the event any such Bond shall have matured, and no default has occurred which is then
continuing in the payment of the principal of, redemption premium, if any, or interest on the
Bond, the City 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. Cost of Replacement Bonds. Prior to the issuance of any replacement Bond, the
Paying Agent/Registrar shall charge the 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 City 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 Replacement Bonds. In accordance with Chapter 1206, as amended,
Texas Government Code, this Section of this Ordinance shall constitute authority for the
issuance of any such replacement Bond without necessity of further action by the Governing
Body 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
Subsection 5A of this Ordinance for Bonds issued in exchange for other Bonds.
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SECTION 27: Approval and Registration of Bonds. The City Manager of the City is
hereby authorized to have control of the Bonds and all necessary records and proceedings
pertaining to the Bonds pending their delivery and their investigation, examination and approval
by the Attorney General, and their registration by the Comptroller of Public Accounts. Upon
registration of the Bonds, the Comptroller of Public Accounts (or a deputy designated in writing
to act therefor) shall manually sign the Comptroller's Registration Certificate accompanying the
Bonds, and the seal of said Comptroller shall be impressed, or placed in facsimile, on each such
certificate.
SECTION 28: Use of Proceeds. Proceeds from the sale of the Bonds shall be applied as
follows:
(1) Accrued interest received from the Purchasers shall be deposited into the
Debt Service Fund.
(2) Certain proceeds of the Bonds in the amount of $3,196,293.15 shall be
deposited into the Reserve Fund on the Closing Date constituting a portion of the
Required Amount attributable to the Bonds.
(3) Certain of the proceeds derived from the sale of the Bonds shall be (i)
deposited into the Construction Fund to pay the costs of issuance on the Bonds or to pay
the construction costs, if any, of the projects to be reimbursed or financed with the
proceeds of the Bonds. Interest earned on the proceeds of the Bonds deposited into the
Construction Fund pending payment of costs of issuance or completion of the projects
financed with such proceeds shall be accounted for, maintained, deposited, and expended
as required by applicable law. Thereafter, such amount shall be immediately expended in
accordance with Subsection 10D hereof.
SECTION 29: 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":
(1) the failure to make payment of the principal of, premium, if any, or
interest on any of the Bonds when the same becomes due and payable; or
(2) 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.
(1) 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, or any official, officer or
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employee of the City in their official capacity, 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.
(2) 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.
(1) 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.
(2) The exercise of any remedy herein conferred or reserved shall not be
deemed a waiver of any other available remedy.
(3) 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 Governing Body.
(4) None of the members of the Governing Body, nor any other official or
officer, agent, or employee of the City, shall be charged personally by the registered
owners with any liability, or be held personally liable to the registered owners under any
term or provision of this Ordinance, or because of any Event of Default or alleged Event
of Default under this Ordinance.
SECTION 30: Further Proceedings. The Mayor, the City Manager, any Assistant City
Manager, the City Secretary, and the Director of Financial Services, and all other officers,
employees and agents of the City, and each of them, 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 City all such instruments, whether herein mentioned, as may be necessary or
desirable in order to carry out the terms and provisions of this Ordinance and the Bonds,
including, but not limited to, conforming documents to receive the approval of the Texas
Attorney General and to receive a rating from any Rating Agency, the printing of a statement
relating to the insuring of the Bonds by a municipal bond insurance company, and the
Representation Letter.
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SECTION 31: Bond Insurance and Debt Service Reserve Fund Insurance Policies. An
Authorized Representative is authorized, in connection with effecting the sale of the Bonds, to
obtain from a municipal bond insurance company so designated in the Approval Certificate a
municipal bond insurance policy (as hereinafter defined and described as the "Policy") and a
debt service reserve fund (or surety) policy (the "Surety Policy") in support of the Bonds. To
that end, should an Authorized Representative exercise such authority and commit the City to
obtain either a Policy or a Surety Policy, or both, for so long as either or both policies are in
effect, the requirements of the provider(s) relating to the issuance of said policies are
incorporated by reference into this Ordinance and made a part hereof for all purposes (and this
Ordinance may be modified so that such provisions shall be included herein), notwithstanding
any other provision of this Ordinance to the contrary. For purposes of this Ordinance, the
Required Amount shall include the debt service on the Bonds as well as the Outstanding
Previously Issued Priority Bonds. An Authorized Representative shall have the authority to
execute any documents to effect the issuance of said policies by the provider(s) thereof,
including, without limitation, any agreement to be delivered in connection with either or both of
the Policy and/or the Surety Policy in substantially the form previously approved by the City
Council in connection with Previously Issued Priority Bonds, or with respect to a Policy relating
to the Bonds, an agreement in substantially the form attached hereto as Exhibit F.
SECTION 32: Continuing Disclosure Undertaking.
A. Definitions. As used in this Section, the following terms have the meanings ascribed
to such terms below:
(1) "MSRB" means the Municipal Securities Rulemaking Board.
(2) "NRMSIR" means each person whom the SEC or its staff has determined
to be a nationally recognized municipal securities information repository within the
meaning of the Rule from time to time.
(3)
(4)
"Rule" means SEC Rule 15c2 12, as amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
(5) "SID" means any person designated by the State of Texas or an authorized
department, officer, or agency thereof as, and determined by the SEC or its staff to be, a
state information depository within the meaning of the Rule from time to time.
B. Annual Reports. The City shall provide annually to each NRMSIR and any SID,
within six months after the end of each fiscal year ending in or after 2009, financial information
and operating data with respect to the City of the general type included in the final Official
Statement authorized by Section 2 of this Ordinance being the information described in
Exhibit G hereto. Prior to July 1, 2009, the information will be available to holders of Bonds
only if the holders comply with the procedures and pay the charges established by such
information vendors or obtain the information through securities brokers who do so. Effective
July 1, 2009, all such information must be filed with MSRB pursuant to its Electronic Municipal
Market Access (EMMA) System, rather than the current NRMSIRs and the SID. The MSRB
intends to make the information available to the public without charge and investors will be able
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to access continuing disclosure information with the MSRB at wwww.emma.msrb.org. Any
financial statements so to be provided shall be (i) prepared in accordance with the accounting
principles described in Exhibit G hereto, or such other accounting principles as the City may be
required to employ from time to time pursuant to state law or regulation and (ii) audited, if the
City commissions an audit of such statements and the audit is completed within the period during
which they must be provided. If the audit of such financial statements is not complete within
such period, then the City shall provide unaudited statements within such period and audited
financial statements for the applicable Year to each NRMSIR and any SID, when and if the audit
report on such statements becomes available.
If the City changes the Year's beginning and ending dates, it will notify each NRMSIR
and any SID of the change (and of the date of the new fiscal Year end) prior to the next date by
which the City otherwise would be required to provide financial information and operating data
pursuant to this Section.
The financial information and operating data to be provided pursuant to this Section may
be set forth in full in one or more documents or may be included by specific reference to any
document (including an official statement or other offering document, if it is available from the
MSRB) that theretofore has been provided to each NRMSIR and any SID or filed with the SEC.
C. Material Event Notices. The City shall notify any SID and either each NRMSIR or
the MSRB, in a timely manner, of any of the following events with respect to the Bonds, if such
event is material within the meaning of the federal securities laws:
(1) principal and interest payment delinquencies;
(2) non-payment related defaults;
(3) unscheduled draws on debt service reserves reflecting financial
difficulties;
(4) unscheduled draws on credit enhancements reflecting financial
difficulties;
(5) substitution of credit or liquidity providers, or their failure to perform;
(6) adverse tax opinions or events affecting the tax-exempt status of the
Bonds;
and
80470964.4
modifications to rights of holders of the Bonds;
bond calls;
defeasances;
release, substitution, or sale of property securing repayment of the Bonds;
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(11) rating changes.
The City shall notify any SID and either each NRMSIR or the MSRB, in a timely
manner, of any failure by the City to provide financial information or operating data in
accordance with this Section by the time required by this Section.
D. Limitations, Disclaimers, and Amendments. The City shall be obligated to observe
and perform the covenants specified in this Section for so long as, but only for so long as, the
City remains an "obligated person" with respect to the Bonds within the meaning of the Rule,
except that the City in any event will give notice of any deposit made in accordance with the
laws of the State of Texas that causes the Bonds to be no longer Outstanding.
The provisions of this Section are for the sole benefit of the holders 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 City
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 City'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 City does not make any representation or warranty conceming such
information or its usefulness to a decision to invest in or sell Bonds at any future date.
UNDER NO CIRCUMSTANCES SHALL THE CITY BE LIABLE TO THE HOLDER
OR BENEFICIAL OWNER OF ANY BOND OR ANY OTHER PERSON, IN CONTRACT OR
TORT, FOR DAMAGES RESULTING IN WHOLE OR IN PART FROM ANY BREACH BY
THE CITY, WHETHER NEGLIGENT OR WITH 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.
No default by the City in observing or performing its obligations under this Section shall
constitute a breach of or default under the Ordinance for purposes of any other provision of this
Ordinance.
Nothing in this Section is intended or shall act to disclaim, waive, or otherwise limit the
duties of the City under federal and state securities laws.
The provisions of this Section may be amended by the City from time to time to adapt to
changed circumstances that arise from a change in legal requirements, a change in law, or a
change in the identity, nature, status, or type of operations of the City, but only if (1) the
provisions 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 to the date of such amendment, as well as such
changed circumstances, and (2) either (a) the holders of a majority in aggregate principal amount
(or any greater amount required by any other provision of this Ordinance that authorizes such an
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amendment) of the Outstanding Bonds consent to such amendment or (b) a person that is
unaffiliated with the City (such as nationally recognized bond counsel) determines that such
amendment will not materially impair the interests of the holders and beneficial owners of the
Bonds. The City may also repeal or amend the provisions of this Section if the SEC amends or
repeals the applicable provisions of the Rule or any court of final jurisdiction enters judgment
that such provisions of the Rule are invalid, and the City also may amend the provisions of this
Section in its discretion in any other manner or circumstance, but in either case only if and to the
extent that the provisions of this sentence would not have prevented an underwriter from
lawfully purchasing or selling Bonds in the primary offering of the Bonds, giving effect to (a)
such provisions as so amended and (b) any amendments or interpretations of the Rule. If the
City so amends the provisions of this Section, the City shall include with any amended financial
information or operating data next provided in accordance with this Section an explanation, in
narrative form, of the reasons for the amendment and of the impact of any change in the type of
financial information or operating data so provided.
SECTION 33: Allocation of, and Limitation on, Expenditures for the Project. The City
covenants to account for on its books and records the expenditure of proceeds from the sale of
the Bonds and any investment earnings thereon to be used for the improvement and extension of
the System (referred to herein as a "Project") by allocating proceeds to expenditures within 18
months of the later of the date that (a) the expenditure on a Project is made or (b) each such
Project is completed. The foregoing notwithstanding, the City shall not expend such proceeds or
investment earnings more than 60 days after the later of (a) the fifth anniversary of the date of
delivery of the Bonds or (b) the date the Bonds are retired, unless the City obtains an opinion of
nationally -recognized bond counsel substantially to the effect that such expenditure will not
adversely affect the tax-exempt status of the Bonds. For purposes of this Section, the City shall
not be obligated to comply with this covenant if it obtains an opinion of nationally -recognized
bond counsel to the effect that such failure to comply will not adversely affect the excludability
for federal income tax purposes from gross income of the interest.
SECTION 34: Insurer Provisions.
A. Notices and Other Information.
(1) Any notice that is required to be given to the bondholders, any NRMSIR,
or any SID pursuant to the Rule or to the Paying Agent/Registrar pursuant to the
financing documents of the Issuer to be delivered in connection with the issuance of the
Bonds (the "Financing Documents") shall also be provided to the Insurer simultaneously
with the sending of such notices. In addition, all information furnished by the Issuer
pursuant to Section 32 hereof shall also be provided to the Insurer, simultaneously with
the furnishing of such information.
(2) All demands, notices and other information required to be given to the
Insurer under the Financing Documents shall be in writing and shall be mailed by
registered or certified mail or personally delivered or telecopied to the recipient as
follows:
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(3)
Assured Guaranty Corp.
1325 Avenue of the Americas
New York, New York 10019
Attention: Risk Management Department
(Re: Policy No. D-2009-378)
Telecopy No.: (212) 581-6268
Confirmation: (212) 974-0100
Email: riskmanagementdept@assuredguaranty.com
(In each case in which notice or other communication refers to an event of
default, a claim on the Policy or any event with respect to which a failure
on the part of the Insurer to respond shall be deemed to constitute consent
or acceptance, then such demand, notice or other communication shall be
marked to indicate "URGENT MATERIAL ENCLOSED" and shall also
be sent to the attention of the General Counsel at the same address and
telecopy above or at generalcounsel@assuredguaranty.com.)
The Insurer shall have the right to receive such additional information as it
may reasonably request.
(4) The Issuer will permit the Insurer to discuss the affairs, finances and
accounts of the Issuer or any information the Insurer may reasonably request regarding
the security for the Bonds with appropriate officers of the Issuer, and will use
commercially reasonable best efforts to enable the Insurer to have access to the facilities,
books and records of the Issuer on any business day upon reasonable prior notice.
(5) The Paying Agent/Registrar shall notify the Insurer of any failure of the
Issuer to provide notices, certificates and other information under the Ordinance.
B. Defeasance. In the event that the principal and/or interest due on the Bonds shall be
paid by the Insurer pursuant to the Policy, the Bonds shall remain outstanding for all purposes,
not be defeased or otherwise satisfied and not be considered paid by the Issuer, and the
assignment and pledge of the trust estate and all covenants, agreements and other obligations of
the Issuer to the registered owners shall continue to exist and shall run to the benefit of the
Insurer, and the Insurer shall be subrogated to the rights of such registered owners, including,
without limitation, any rights that such owners may have in respect of securities law violations
arising from the offer and sale of the Bonds.
In addition, and for so long as the Policy remains in effect, a defeasance of the Bonds pursuant to
Section 19 shall not be effective until the Issuer has delivered to the Insurer, in connection with
such defeasance, the following items:
(1) An opinion of nationally recognized bond counsel to the effect that (i) that
the defeasance will not adversely impact the exclusion from gross income for federal
income tax purposes of interest on the Bonds and (ii) that the Bonds are no longer
Outstanding;
80470964.4
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(2) An escrow agreement, along with an opinion of counsel regarding the
validity and enforceability of the escrow agreement, which escrow agreement shall
provide that:
(a) Any substitution of securities shall require a verification by an
independent certified public accountant and the prior written consent of the
Insurer.
(b) The Issuer will not exercise any optional redemption of Bonds
secured by the escrow agreement, or any other redemption other than mandatory
sinking fund redemptions unless (i) the right to make any such redemption has
been expressly reserved in the escrow agreement and such reservation has been
disclosed in detail in the official statement for the refunding bonds, and (ii) as a
condition of any such redemption there shall be provided to the Insurer a
verification of an independent certified public accountant as to the sufficiency of
escrow receipts without reinvestment to meet the escrow requirements remaining
following such redemption.
C. Paying Agent/Registrar.
(1) The Insurer shall receive prior written notice of any name change of the
Paying Agent/Registrar or the removal or resignation of the Paying Agent/Registrar.
(2) No removal or resignation of the Paying Agent/Registrar shall take effect
until a successor, acceptable to the Insurer, shall be appointed.
(3) The Paying Agent/Registrar may be removed at any time, at the Insurer's
request, for any breach of its obligations under the Financing Documents.
(4) Notwithstanding any other provision of any Financing Document, in
determining whether the rights of bondholders will be adversely affected by any action
taken pursuant to the terms and provisions thereof, the Paying Agent/Registrar shall
consider the effect on the Bondholders as if there were no Policy.
D. Amendments and Supplements. With respect to amendments or supplements to the
Ordinance which do not require the consent of the bondholders, the Insurer must be given prior
written notice of any such amendments or supplements. With respect to amendments or
supplements to the Ordinance which do require the consent of the bondholders, the Insurer's
prior written consent is also required. Copies of any amendments or supplements to the
Ordinance which are consented to by the Insurer shall be sent to the rating agencies that have
assigned a rating to the Bonds.
E. The Insurer as Third Party Beneficiary. The Insurer is explicitly recognized as being
a third party beneficiary under this Ordinance and may enforce any right, remedy or claim
conferred, given or granted hereunder.
F. Control Rights. The Insurer shall be deemed to be the holder of all of the Bonds for
purposes of (a) exercising all remedies and directing the Paying Agent/Registrar to take actions
80470964.4
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or for any other purposes following an Event of Default, and (b) granting any consent, waiver,
direction or approval or taking any action permitted by or required under this Ordinance to be
granted or taken by the holders of such Bonds.
G. Consent Rights of the Insurer.
(1) Any provision of this Ordinance expressly recognizing or granting rights
in or to the Insurer may not be amended in any manner that affects the rights of the
Insurer hereunder without the prior written consent of the Insurer.
(2) Wherever this Ordinance requires the consent of Bondholders, the
Insurer's consent shall also be required.
(3) Any reorganization or liquidation plan with respect to the Issuer must be
acceptable to the Insurer. In the event of any reorganization or liquidation, the Insurer
shall have the right to vote on behalf of all Bondholders who hold Bonds guaranteed by
the Insurer, absent a default by the Insurer under the Policy.
(4) Anything in this Ordinance to the contrary notwithstanding, upon the
occurrence and continuance of an Event of Default, the Insurer shall be entitled to control
and direct the enforcement of all rights and remedies granted to the Bondholders or the
Paying Agent/Registrar for the benefit of the Bondholders under this Ordinance.
H. Reimbursement Obligations. The Issuer hereby agrees to pay or reimburse the
Insurer (i) all amounts paid by the Insurer under the terms of the Policy, and (ii) to the extent
permitted by law, any and all charges, fees, costs and expenses of attorneys, accountants,
consultants and auditors and reasonable costs of investigations, in connection with (A) any
accounts established to facilitate payments under the Policy, (B) the administration, enforcement,
defense or preservation of any rights in respect of this Ordinance, including defending,
monitoring or participating in any litigation or proceeding (including any bankruptcy proceeding
in respect of the Issuer or any affiliate thereof) relating to this Ordinance or any other Financing
Document or the transaction described in the Financing Documents, (iii) the foreclosure against,
sale or other disposition of any collateral securing any obligations under this Ordinance or any
other Financing Document, or the pursuit of any remedies under this Ordinance or any other
Financing Document, to the extent such costs and expenses are not recovered from such
foreclosure, sale or other disposition, or (iv) any amendment, waiver or other action with respect
to, or related to, this Ordinance or any other Financing Document; costs and expenses shall
include a reasonable allocation of compensation and overhead attributable to time of employees
of the Insurer spent in connection with the actions described in clauses (ii) - (iv) above. In
addition, the Insurer reserves the right to charge a reasonable fee as a condition to executing any
amendment, waiver or consent proposed in respect of this Ordinance or any other Financing
Document. The Issuer will pay interest on the amounts owed in this paragraph from the date of'
any payment due or paid, at the per annum rate of interest publicly announced from time to time
by JP Morgan Chase Bank, National Association at its principal office in New York, New York
as its prime lending rate (any change in such prime rate of interest to be effective on the date
such change is announced by JPMorgan Chase Bank, National Association) plus three percent
(3%) per annum (the "Reimbursement Rate"), subject to the limitations set forth in Chapter
80470964.4
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1204, as amended, Texas Government Code. The Reimbursement Rate shall be calculated on
the basis of the actual number of days elapsed over a 360 -day year. In the event JPMorgan
Chase Bank ceases to announce its prime rate publicly, the prime rate shall be the publicly
announced prime rate or base lending rate of such national bank, as the Insurer shall specify.
I. Payment Procedure Under the Policy.
(1) At Least two (2) Business Days prior to each payment date on the Bonds,
the Paying Agent/Registrar will determine whether there will be sufficient funds to pay
all principal of and interest on the Bonds due on the related payment date and shall
immediately notify the Insurer or its designee on the same Business Day by telephone or
electronic mail, confirmed in writing by registered or certified mail, of the amount of any
deficiency. Such notice shall specify the amount of the anticipated deficiency, the Bonds
to which such deficiency is applicable and whether such Bonds will be deficient as to
principal or interest or both. If the deficiency is made up in whole or in part prior to or
on the payment date, the Paying Agent/Registrar shall so notify the Insurer or its
designee.
(2) The Paying Agent/Registrar shall, after giving notice to the Insurer as
provided above, make available to the Insurer and, at the Insurer's direction, to any Fiscal
Agent, the registration books of the Issuer maintained by the Paying Agent/Registrar and
all records relating to the funds maintained under this Ordinance.
(3) The Paying Agent/Registrar shall provide the Insurer and any Fiscal Agent
with a list of registered owners of Bonds entitled to receive principal or interest payments
from the Insurer under the terms of the Policy, and shall make arrangements with the
Insurer, the Fiscal Agent or another designee of the Insurer to (i) mail checks or drafts to
the registered owners of Bonds entitled to receive full or partial interest payments from
the Insurer and (ii) pay principal upon Bonds surrendered to the Insurer, the Fiscal Agent
or another designee of the Insurer by the registered owners of Bonds entitled to receive
full or partial principal payments from the Insurer.
(4) The Paying Agent/Registrar shall, at the time it provides notice to the
Insurer of any deficiency pursuant to Clause (1) above, notify registered owners of Bonds
entitled to receive the payment of principal thereof or interest thereon from the Insurer (i)
as to such deficiency and its entitlement to receive principal or interest, as applicable, (ii)
that the Insurer will remit to them all or a part of the interest payments due on the related
payment date upon proof of its entitlement thereto and delivery to the Insurer or any
Fiscal Agent, in form satisfactory to the Insurer, of an appropriate assignment of the
registered owner's right to payment, (iii) that, if they are entitled to receive partial
payment of principal from the Insurer, they must surrender the related Bonds for payment
first to the Paying Agent/Registrar, which will note on such Bonds the portion of the
principal paid by the Paying Agent/Registrar and second to the Insurer or its designee,
together with an appropriate assignment, in form satisfactory to the Insurer, to permit
ownership of such Bonds to be registered in the name of the Insurer, which will then pay
the unpaid portion of principal, and (iv) that, if they are entitled to receive full payment of
principal from the Insurer, they must surrender the related Bonds for payment to the
80470964.4 -48-
Insurer or its designee, rather than the Paying Agent/Registrar, together with an
appropriate assignment, in form satisfactory to the Insurer, to permit ownership of such
Bonds to be registered in the name of the Insurer.
(5) In addition, if the Paying Agent/Registrar has notice that any holder of the
Bonds has been required to disgorge payments of principal of or interest on the Bonds
previously Due for Payment pursuant to a final non -appealable order by a court of
competent jurisdiction that such payment constitutes an avoidable preference to such
holder within the meaning of any applicable bankruptcy laws, then the Paying
Agent/Registrar shall notify the Insurer or its designee of such fact by telephone or
electronic notice, confirmed in writing by registered or certified mail.
(6) The Paying Agent/Registrar will be hereby irrevocably designated,
appointed, directed and authorized to act as attomey-in-fact for holders of the Bonds as
follows
(a) If and to the extent there is a deficiency in amounts required to pay
interest on the Bonds, the Paying Agent/Registrar shall (i) execute and deliver to
the Insurer, in form satisfactory to the Insurer, an instrument appointing the
Insurer as agent for such holders in any legal proceeding related to the payment of
such interest and an assignment to the Insurer of the claims for interest to which
such deficiency relates and which are paid by the Insurer, (ii) receive as designee
of the respective holders (and not as Paying Agent/Registrar) in accordance with
the tenor of the Policy payment from the Insurer with respect to the claims for
interest so assigned, and (iii) disburse the same to such respective holders; and
(b) If and to the extent of a deficiency in amounts required to pay
principal of the Bonds, the Paying Agent/Registrar shall (i) execute and deliver to
the Insurer, in form satisfactory to the Insurer, an instrument appointing the
Insurer as agent for such holder in any legal proceeding related to the payment of
such principal and an assignment to the Insurer of the Bond surrendered to the
Insurer in an amount equal to the principal amount thereof as has not previously
been paid or for which money is not held by the Paying Agent/Registrar and
available for such payment (but such assignment shall be delivered only if
payment from the Insurer is received), (ii) receive as designee of the respective
holders (and not as Paying Agent/Registrar) in accordance with the tenor of the
Policy payment therefore from the Insurer, and (iii) disburse the same to such
holders.
(7) Payments with respect to claims for interest on and principal of Bonds
disbursed by the Paying Agent/Registrar from proceeds of the Policy shall not be
considered to discharge the obligation of the Issuer with respect to such Bonds, and the
Insurer shall become the owner of such unpaid Bond and claims for the interest in
accordance with the tenor of the assignment made to it under the provisions of this
subsection or otherwise.
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(8) Irrespective of whether any such assignment is executed and delivered, the
Issuer and the Paying Agent/Registrar hereby agree for the benefit of The Insurer that:
(a) they recognize that to the extent the Insurer makes payments
directly or indirectly (e.g., by paying through the Paying Agent/Registrar), on
account of principal of or interest on the Bonds, the Insurer will be subrogated to
the rights of such holders to receive the amount of such principal and interest
from the Issuer, with interest thereon as provided and solely from the sources
stated in this Ordinance and the Bonds; and
(b) they will accordingly pay to the Insurer the amount of such
principal and interest, with interest thereon as provided in this Ordinance and the
Bonds, but only from the sources and in the manner provided herein for the
payment of principal of and interest on the Bonds to holders, and will otherwise
treat the Insurer as the owner of such rights to the amount of' such principal and
interest.
(9) The Insurer shall be entitled to pay principal of or interest on the Bonds
that shall become Due for Payment but shall be unpaid by reason of Nonpayment and any
amounts due on the Bonds in accordance with the Ordinance, whether or not the Insurer
has received a Notice of Nonpayment or a claim upon the Policy.
(10) In addition, the Insurer shall, to the extent it makes any payment of
principal of or interest on the Bonds, become subrogated to the rights of the recipients of
such payments in accordance with the terms of the Policy, and to evidence such
subrogation (i) in the case of claims for interest, the Paying Agent/Registrar shall note the
Insurer's rights as subrogee on the Registration Books upon receipt of proof of payment
of interest thereon to the registered owners of the Bonds, and (ii) in the case of claims for
principal, the Paying Agent/Registrar shall note The Insurer's rights as subrogee on the
Registration Books upon surrender of the Bonds, together with receipt of proof of
payment of principal thereof.
J. Defined Terms. The capitalized terms used in this Section shall be defined and have
the respective meanings as hereinafter provided:
(1) The term "Business Day" shall mean any day (i) other than a Saturday or
Sunday, (ii) a day on which the offices of the Paying Agent/Registrar or the Insurer are
closed, or (iii) any day on which banking institutions are authorized or required by law,
executive order, or governmental decree to be closed in New York, New York or the
states of Maryland or New York.
(2) The term "Due for Payment" shall have the meaning given such term in
the Policy.
(3) The term "Fiscal Agent" shall have the meaning given such term in the
Policy.
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(4) The term "Insurer" shall mean Assured Guaranty Corp.
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(5) The term "Nonpayment" shall have the meaning given such term in the
Policy.
(6) The term "Notice" shall have the meaning given such term in the Policy.
(7) The term "Policy" shall mean the financial guaranty insurance policy
relating to the Bonds issued by the Insurer.
SECTION 35: Miscellaneous Provisions.
A. Preamble. The preamble to this Ordinance shall be considered an integral part of this
Ordinance, and is herein incorporated as part of the body of this Ordinance for all purposes.
B. Immediate Effect. This Ordinance shall be effective immediately from and after its
passage in accordance with the provisions of Section 1201.028, as amended, Texas Government
Code.
C. Open Meeting. It is hereby officially found and determined that the meeting at which
this Ordinance was passed was open to the public, and public notice of the time, place and
purpose of said meeting was given, all as required by Chapter 551, as amended, Texas
Government Code.
D. Rules of Construction. The words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Ordinance as a whole and not to any particular Section or
other subdivision. Except where the context otherwise requires, terms defined in this Ordinance
to impart the singular number shall be considered to include the plural number and vice versa.
References to any named person means that party and its successors and assigns. References to
any constitutional, statutory or regulatory provision means such provision as it exists on the date
this Ordinance is adopted by the City and any future amendments thereto or successor provisions
thereof. Any reference to the payment of principal in this Ordinance shall be deemed to include
the payment of any mandatory sinking fund redemption payments as may be described herein.
References to any officer of the City (e.g., City Manager) means the person currently serving in
such capacity on a temporary, interim or permanent basis. Any reference to FORM OF BOND
shall refer to the form attached to this Ordinance as Exhibit C.
E. Inconsistent Provisions. All orders and resolutions, or parts thereof, which are in
conflict or inconsistent with any provision of this Ordinance are hereby repealed and declared to
be inapplicable, and the provisions of this Ordinance shall be and remain controlling as to the
matters prescribed herein.
80470964.4
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SCHEDULE
APPROVAL CERTIFICATE
80470964.4 S -I -I
APPROVAL CERTIFICATE
A. I, the undersigned, City Manager of the City of Corpus Christi, Texas, pursuant to
Section 2 of the Ordinance authorizing the issuance of' obligations designated as "City of Corpus
Christi, Texas Utility System Revenue Improvement Bonds, Series 2009" (the "Bonds") do
hereby approve the following terms of the Bonds:
(i)
the total principal amount of the Bonds is $96,490,000.00;
(ii) the purchase price for the Bonds is $95,147,000.65 (representing the par
amount of the Bonds, less a net original issue discount of $795,218.55, less the
Underwriters' discount of $547,780.80), plus accrued interest in the amount of
$407,856.13;
(iii) the interest rates, yields, and maturity schedule for the Bonds are as set
forth below:
Stated Maturities
(July 15)
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
****
2029
****
2033
****
2039
85029497.1
Principal Amounts ($)
1,730,000
1,775,000
1,825,000
1,880,000
1,945,000
2,025,000
2,105,000
2,190,000
2,280,000
2,385,000
2,500,000
2,610,000
2,725,000
2,850,000
2,995,000
3,150,000
3,310,000
****
7,130,000
****
16,650,000
****
32,430,000
Interest Rates (%) Yields (%)
2.500 2.000
3.000 2.250
3.000 2.620
3.500 3.020
4.000 3.270
4.000 3.530
4.000 3.720
4.000 3.890
4.750 4.110
4.750 4.320
4.375 4.510
4.500 4.650
4.625 4.800
5.000 4.930
5.250 5.020
5.000 5.125
5.000 5.200
**** ****
5.250 5.330
**** ****
5.250 5.440
**** ****
5.375 5.510
(iv) the Bonds are subject to redemption as set forth below:
Mandatory Redemption of Bonds. The Bonds stated to mature on July 15, 2029,
July 15, 2033, and July 15, 2039 are referred to herein as the "Term Bonds". The Term
Bonds are subject to mandatory sinking fund redemption prior to their stated maturities
from money required to be deposited in the Debt Service Fund for such purpose and shall
be redeemed in part, by lot or other customary method, at the principal amount thereof
plus accrued interest to the date of redemption in the following principal amounts on July
15 in each of the years as set forth below:
Term Bonds Stated to Term Bonds Stated to
Mature on July 15, 2029 Mature on July 15, 2033
Year
2028
2029
Principal
Amount ($)
3,475,000
3,655,000*
Term Bonds Stated to
Mature on July 15, 2039
Year
2034
2035
2036
2037
2038
2039
* stated maturity
Principal
Amount ($)
4,725,000
4,975,000
5,245,000
5,525,000
5,825,000
6,135,000*
Year
2030
2031
2032
2033
Principal
Amount ($)
3,850,000
4,050,000
4,265,000
4,485,000*
The principal amount of a Term Bond required to be redeemed pursuant to the
operation of such mandatory redemption provisions shall be reduced, at the option of the
City, by the principal amount of any Term Bonds of such stated maturity which, at least
50 days prior to the mandatory redemption date (1) shall have been defeased or acquired
by the City and delivered to the Paying Agent/Registrar for cancellation, (2) shall have
been purchased and canceled by the Paying Agent/Registrar at the request of the City
with money in the Debt Service Fund (but not the Reserve Fund), or (3) shall have been
redeemed pursuant to the optional redemption provisions set forth below and not
theretofore credited against a mandatory redemption requirement.
85029497.1
-2-
Optional Redemption. The City reserves the right to redeem the Bonds stated to
mature on and after July 15, 2019, in whole or in part, on July 15, 2018, or on any date
thereafter, in such order of stated maturity as the City shall determine and by lot or other
customary method within a stated maturity at the redemption price of par plus accrued
interest to the date of redemption.
(v) a municipal bond insurance policy for the Bonds has been obtained from
Assured Guaranty Corp.; and
(vi) a surety policy satisfying a portion of the increase in the Required Amount
attributable to the issuance of the Bonds has been obtained from Assured Guaranty Corp.
B. Capitalized terms utilized herein and not defined shall have the meanings ascribed
in the ordinance adopted by the City Council of the City on February 24, 2009 authorizing the
issuance of the Bonds.
85029497.1
[The remainder of this page intentionally left blank.]
-3-
EXECUTED AND DELIVERED
85029497.1
MAR 1 R 7009
CITY OF CORPUS CHRISTI, TEXAS
S-1
80470964.4
EXHIBIT A
PURCHASE CONTRACT
A-1
BOND PURCHASE AGREEMENT
RELATING TO
$96,490,000
CITY OF CORPUS CHRISTI, TEXAS
UTILITY SYSTEM REVENUE IMPROVEMENT BONDS,
SERIES 2009
March 13, 2009
Mayor and Members of the City Council
City of Corpus Christi, Texas
1201 Leopard
Corpus Christi, Texas 78401
Ladies and Gentlemen:
The undersigned (the "Representative"), acting for and on behalf of ourselves and the
other underwriters named on the signature page hereof (the undersigned and such other
underwriters are collectively referred to herein as the "Underwriters"), offer to enter into this
Bond Purchase Agreement (this "Bond Purchase Agreement") with the City of Corpus Christi,
Texas (the "City" or the "Issuer") which, upon your acceptance of this offer, will be binding
upon the Issuer and the Underwriters. The Underwriters have designated the Representative to
act as their representative, and the Representative hereby represents that it has been duly
authorized to execute this Bond Purchase Agreement for and on behalf of the Underwriters. All
actions which may be taken hereunder by the Underwriters may be taken by the Representative.
Terms not otherwise defined herein shall have the same meanings as set forth in the ordinance
(the "Ordinance") approved by the City Council of the Issuer (the "City Council") on February
24 2009, authorizing the issuance of the Series 2009 Bonds defined and described below.
Simultaneously with the authorization of the Ordinance, the City Council of the Issuer delegated
its authority, pursuant to Chapter 1371, as amended, Texas Government Code, to the Mayor, the
City Manager, or the Interim Assistant City Manager for Administrative Services of the Issuer to
execute an Approval Certificate with respect to the issuance of the Issuer's proposed Series 2009
Bonds, and to authorize the execution of this Bond Purchase Agreement relating to the Series
2009 Bonds.
1. PURCHASE AND SALE OF THE SERIES 2009 Borms. (a) Upon the terms and
conditions, and in reliance upon the representations, warranties, and covenants herein, the
Underwriters hereby, jointly and severally, agree to purchase from the Issuer, and the Issuer
hereby agrees to sell to the Underwriters, all (but not less than all) of $96,490,000 City of Corpus
Christi, Texas Utility System Revenue Improvement Bonds, Series 2009 (the "Series 2009
Bonds"), at the price of $95,147,000.65 (the "Purchase Price of the Series 2009 Bonds", which
represents the principal amount of the Series 2009 Bonds, less a net original issue discount of
$795,218.55, less an underwriting discount of $547,780.80), plus accrued interest on the Series
2009 Bonds from their date to the date of the Closing (hereinafter defined).
(b) The proceeds of the Series 2009 Bonds are being used for (i) improving and
extending the System and (ii) paying the costs of issuance.
2. PUBLIC OFFERING. The Underwriters agree to make a bona fide public offering of all
of the Series 2009 Bonds at the offering prices set forth on the inside cover page of the Final
Official Statement described below. On or before Closing, the Representative shall execute the
Issue Price Certificate prepared by Bond Counsel (hereinafter defined) verifying the initial
offering prices to the public at which the entire amount of each stated maturity of the Series 2009
Bonds were offered to the public.
3. OFFICIAL STATEMENT. (a) The Issuer agrees to deliver to the Underwriters at such
addresses as the Underwriters shall specify, as many copies of the Official Statement relating to
the Series 2009 Bonds, dated March 13, 2009 (the "Final Official Statement"), as the
Underwriters shall reasonably request in order to comply with paragraph (b)(4) of Rule 15c2-12
of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the
"Rule"), and with Rule G-32, and all other applicable rules, of the Municipal Securities
Rulemaking Board. The Issuer agrees to deliver such Final Official Statements within seven
business days after the execution of this Bond Purchase Agreement.
(b) The Issuer hereby authorizes and approves the Preliminary Official Statement, dated
March 5, 2009, and the Final Official Statement (the Final Official Statement, the Preliminary
Official Statement, and any amendments or supplements that may be authorized for use with
respect to the Series 2009 Bonds are herein referred to collectively as the (the "Official
Statement"), consents to their distribution and use by the Underwriters, and authorizes the
execution (or a conformed copy thereof) of the Final Official Statement by a duly authorized
officer of the Issuer. The Issuer hereby represents and warrants that the Preliminary Official
Statement delivered (in an electronic format) to the Underwriters prior to the date of this Bond
Purchase Agreement was deemed final by the Issuer as of the date thereof, except for the
omission of such information which is dependent upon the final pricing of the Series 2009 Bonds
for completion, all as permitted to be excluded by the Rule.
(c) The Representative shall give notice to the Issuer on the date after which no
participating underwriter, as such term is defined in the Rule, remains obligated to deliver Final
Official Statements pursuant to paragraph (b)(4)(iii) of the Rule. Unless written notice to the
contrary is provided by the Representative to the Issuer, the Issuer may assume such date to be
the Closing.
(d) The Issuer has agreed in the Ordinance to provide certain periodic information and
notices of material events in accordance with the Rule as described in the Official Statement
under "CONTINUING DISCLOSURE OF INFORMATION." The Underwriters' obligation to
accept and pay for the Series 2009 Bonds is conditioned upon delivery to the Underwriters or
2
their agent of a certified copy of the Ordinance containing the agreements described under such
heading.
4. GOOD FAITH DEPOSIT. In connection with the execution of this Bond Purchase
Agreement, the Representative will deliver to the Issuer a corporate check of the Representative
payable to the Issuer in an amount equal to $1,929,800 as security for the performance by the
Underwriters of their obligations to accept and pay for the Series 2009 Bonds at the Closing in
accordance with the provisions of this Bond Purchase Agreement. Such check shall be held by
the Issuer uncashed until the Closing. At the Closing, such check shall be returned to the
Underwriters upon receipt by or on behalf of the Issuer of the Purchase Price for the Series 2009
Bonds. In the event the Issuer does not accept this offer, or upon its failure to deliver the Series
2009 Bonds at the Closing, or if it shall be unable to satisfy the conditions to the obligations of
the Underwriters contained in this Bond Purchase Agreement, or if such obligations shall be
terminated for any reason permitted by this Bond Purchase Agreement, such check shall be
immediately returned to the Representative. In the event that the Underwriters fail (other than
for a reason permitted under this Bond Purchase Agreement) to accept and pay for the Series
2009 Bonds at the Closing, such check shall be retained and may be cashed by the Issuer as and
for full liquidated damages for such failure for any and all defaults hereunder on the part of the
Underwriters, and the cashing of such check and retention of such proceeds shall constitute a full
release and discharge of all claims and rights hereunder against the Underwriters, and the Issuer
shall have no further action for damages, specific performance or any other legal or equitable
relief against the Underwriters. The Representative hereby agrees not to stop or cause payment
on said check to be stopped unless the Issuer has materially breached any of the terms of this
Bond Purchase Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer represents and
warrants to the Underwriters that:
(a) The Issuer is a home rule city operating as such under the Constitution and laws of the
State of Texas (the "State"), and the Issuer is authorized by the provisions of Chapters 1502 and
1371, Texas Government Code, as amended (collectively, the "Act"), among other things, (i) to
issue the Series 2009 Bonds for the purposes described herein and (ii) to secure the Series 2009
Bonds in the manner described in the Ordinance and as described in the Final Official Statement.
(b) The Issuer has the full legal right, power, and authority (i) to adopt the Ordinance
authorizing the issuance of and awarding the sale of the Series 2009 Bonds pursuant to the
Approval Certificate; (ii) to enter into this Bond Purchase Agreement; (iii) to issue, sell, and
deliver the Series 2009 Bonds to the Underwriters as provided herein; and (iv) to carry out and
consummate all other transactions described in each of the aforesaid documents, and the Issuer
has complied with all provisions of applicable law, including the Act, in all matters relating to
such transactions.
(c) The Issuer has duly authorized (i) the execution and delivery of the Series 2009 Bonds
and the execution, delivery, and due performance of this Bond Purchase Agreement; (ii) the
distribution and use of the Preliminary Official Statement, in an electronic format, and
execution, delivery, and distribution of the Final Official Statement; and (iii) the taking of any
3
and all such actions as may be required on the part of the Issuer to carry out, give effect to, and
consummate the transactions described in such instruments. Subject to the provisions of Section
6(a) hereof, all consents or approvals necessary to be obtained by the Issuer in connection with
the foregoing have been received or will be received prior to the Closing, and the consents or
approvals so received are still in full force and effect. The Issuer shall timely cause a transcript
of proceedings to be filed with the Attorney General of the State of Texas (the "Attorney
General") in form and substance consistent with the administrative rules of the Public Finance
Division of the Texas Attorney General, which will permit the review of such transcript and the
approval of the Series 2009 Bonds by the Texas Attorney General, and the registration of the
Series 2009 Bonds by the Comptroller of Public Accounts of the State of Texas (the
"Comptroller") as required by Section 8(b)(8) and (9) hereof, but subject to the discretion of the
Texas Attomey General with respect to the issuance of his approving opinion.
(d) (i) The Ordinance has been duly adopted by the Issuer, is in full force and effect, and
constitutes the legal, valid, and binding obligation of the Issuer; (ii) this Bond Purchase
Agreement, when executed and delivered, will constitute legal, valid, and binding special
obligations of the Issuer; and (iii) the Ordinance and this Bond Purchase Agreement are
enforceable against the Issuer in accordance with their respective terms, except as enforceability
thereof may be limited by principles of sovereign immunity and by bankruptcy, insolvency, or
other laws affecting creditors' rights generally, or by general principles of equity which permit
the exercise of judicial discretion.
(e) When delivered to the Underwriters, the Series 2009 Bonds will have been duly
authorized, executed, authenticated, issued, and delivered and will constitute legal, valid, and
binding special obligations of the Issuer in conformity with the laws of the State of Texas,
including the Act, and will be entitled to the benefit and security of the Ordinance.
(0 The information contained in the Preliminary Official Statement (except for
information contained therein under the headings or subheadings "BONDHOLDERS'
REMEDIES", "BOOK -ENTRY -ONLY SYSTEM", "BOND INSURANCE", "RATINGS",
"TAX MATTERS", "FINANCIAL ADVISOR", "UNDERWRITING", and "APPENDIX D —
FORM OF OPINION OF BOND COUNSEL," as to which no view is expressed) is, and, as of
the date of Closing such information in the Final Official Statement (except for information
contained therein under the headings or subheadings "BONDHOLDERS' REMEDIES",
"BOOK -ENTRY -ONLY SYSTEM", "BOND INSURANCE", "RATINGS", "TAX
MATTERS", "FINANCIAL ADVISOR", "UNDERWRITING", and "APPENDIX D — FORM
OF OPINION OF BOND COUNSEL," as to which no view is expressed) will be, true and
correct in all material respects, and the Preliminary Official Statement does not (except for
information contained therein under the headings or subheadings "BONDHOLDERS'
REMEDIES", "BOOK -ENTRY -ONLY SYSTEM", "BOND INSURANCE", "RATINGS",
"TAX MATTERS", "FINANCIAL ADVISOR", "UNDERWRITING", and "APPENDIX D —
FORM OF OPINION OF BOND COUNSEL," as to which no view is expressed), and the Final
Official Statement will not (except for information contained therein under the headings or
subheadings "BONDHOLDERS' REMEDIES", "BOOK -ENTRY -ONLY SYSTEM", "BOND
INSURANCE", "RATINGS", "TAX MATTERS", "FINANCIAL ADVISOR",
"UNDERWRITING", and "APPENDIX D — FORM OF OPINION OF BOND COUNSEL," as
4
to which no view is expressed), contain any untrue statement of a material fact, or omit to state
any material fact, necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(g) If, at any time prior to the earlier of (i) receipt of notice from the Representative
pursuant to Section 3(c) hereof that Final Official Statements are no longer required to be
delivered under the Rule or (ii) 25 days after the Closing, any event occurs with respect to the
Issuer as a result of which the Preliminary Official Statement or the Final Official Statement as
then amended or supplemented might include an untrue statement of a material fact, or omit to
state any material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the Issuer shall promptly notify the Underwriters
in writing of such event. Any information supplied by the Issuer for inclusion in any
amendments or supplements to the Preliminary Official Statement or the Final Official Statement
will not contain any untrue or misleading statement of a material fact relating to the Issuer or
omit to state any material fact relating to the Issuer necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) Neither the adoption of the Ordinance, the execution and delivery of this Bond
Purchase Agreement, and the Series 2009 Bonds, nor the consummation of the transactions
described herein or therein or the compliance with the provisions hereof or thereof will conflict
with, or constitute on the part of the Issuer a violation of, or a material breach of or default under,
(i) any statute, indenture, mortgage, commitment, note, or other agreement or instrument to
which the Issuer is a party or by which it is bound; (ii) any provision of the Texas Constitution;
or (iii) any existing law, rule, regulation, ordinance, judgment, order, or decree to which the
Issuer (or the members of the City Council, , or any of its officers in their respective capacities as
such) is subject.
(i) Except as may be disclosed in the Official Statement, the Issuer is not, in any material
respect that would adversely affect the validity or marketability of the Series 2009 Bonds, in
material breach of or default under any applicable law or administrative regulation of the State of
Texas or any department, division, agency, or instrumentality thereof, or of the United States or
any agency or instrumentality thereof or any applicable judgment or decree or any loan
agreement, note, resolution, certificate, agreement, or other instrument to which the Issuer is a
party or is otherwise subject; and except as described in the Official Statement, the Issuer has not
entered into any contract or arrangement of any kind which might give rise to any lien or
encumbrance on the Net Revenues pledged to the payment of the Series 2009 Bonds superior to
or on a parity with the pledge securing the payment of the Series 2009 Bonds.
(j) Except as is specifically disclosed in the Official Statement, there is no action, suit,
proceeding, inquiry, or investigation, at law or in equity, before or by any court, public board, or
body, pending, or, to the best knowledge of the Issuer, threatened, which in any way questions
the powers of the Issuer referred to in paragraph (b) above, or the validity of any proceeding
taken by the Issuer in connection with the issuance of the Series 2009 Bonds, or wherein an
unfavorable decision, ruling, or finding could materially adversely affect the transactions
described in this Bond Purchase Agreement or of any other document or instrument required or
described in this financing, or which, in any way, could adversely affect the validity or
5
enforceability of the Ordinance, the Series 2009 Bonds, or this Bond Purchase Agreement or, to
the knowledge of the Issuer, which in any way questions the exclusion from gross income of the
recipients thereof of the interest on the Series 2009 Bonds for federal income tax purposes.
(k) Any certificate signed by an official of the Issuer and delivered to the Underwriters
shall be deemed a representation and warranty by the Issuer, as appropriate, to the Underwriters
as to the truth of the statements therein contained.
(1) The Issuer has not been notified of any listing or proposed listing by the Internal
Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be
relied upon.
(m) The Issuer will not knowingly take or omit to take any action, which action or
omission will in any way cause the proceeds from the sale of the Series 2009 Bonds be applied in
a manner other than as provided in the Ordinance.
(n) Except as may otherwise be disclosed in the Official Statement, the Issuer has
complied in all material aspects with all previous continuing disclosure undertakings in written
contracts or agreements entered into by the Issuer as specified in paragraph (b)(5)(i) of the Rule
within the last five years.
(o) To the best of the knowledge of the Issuer, the financial statements of the System
included in APPENDIX B to the Final Official Statement present fairly the financial position and
the results of operations of the System at the respective dates and for the respective periods
indicated therein, in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods presented.
(p) As of the date of the Closing, there will not be any material adverse change in the
financial position, results of operations, or condition, financial or otherwise, of the City's
combined waterworks, storm water, wastewater disposal, and gas systems (the "System") from
that described in the Final Official Statement, other than in the ordinary course of the System's
business.
6. COVENANTS OF THE ISSUER. The Issuer covenants with the Underwriters as follows:
(a) The Issuer will cooperate, at no expense to the Issuer, with the Underwriters in
qualifying the Series 2009 Bonds for offer and sale under the securities or Blue Sky laws of such
jurisdictions of the United States as the Representative may request; provided, however, that the
Issuer shall not be required to consent to suit or to service of process in any jurisdiction. The
Issuer consents to the use by the Underwriters in the course of their compliance with the
securities or Blue Sky laws of the various jurisdictions of the documents relating to the Series
2009 Bonds, subject to the right of the Issuer to withdraw such consent for cause by written
notice to the Representative.
(b) Prior to the earlier of (i) receipt of notice from the Representative pursuant to Section
3(c) hereof that Final Official Statements are no longer required under the Rule or (ii) 25 days
6
after the Closing, the Issuer shall provide the Representative with such information regarding its
current financial condition and ongoing operations as the Issuer shall deem material and such
other information concerning the Issuer as the Representative may reasonably request.
7. CLOSING. At or before 10:00 a.m., Corpus Christi, Texas time on April 2, 2009 or at
such other time and/or date as shall have been mutually agreed upon by the Issuer and the
Underwriters, the Issuer will deliver, or cause to be delivered, to the Underwriters, the Series
2009 Bonds together with the other documents hereinafter mentioned and, provided the
Underwriters have made arrangements with The Depository Trust Company, New York, New
York ("DTC"), for the Series 2009 Bonds to be book -entry -only securities, the Issuer shall take
appropriate steps to provide DTC, or its designated agent, with one definitive bond for each year
of maturity of the Series 2009 Bonds, and the Underwriters will accept such delivery and pay the
Purchase Price of the Series 2009 Bonds by making a federal funds wire transfer in immediately
available funds to The Bank of New York Mellon Trust Company, National Association, Dallas,
Texas (the "Paying Agent/Registrar") for the account of the Issuer. Upon receipt of such
payment and at the Closing, the Issuer immediately shall return to the Representative the good
faith check described in Section 4 hereof.
The activities relating to the final execution and delivery of the Series 2009 Bonds and
the payment therefor and the delivery of the certificates, opinions, and other instruments as
described in Section 8 of this Bond Purchase Agreement shall occur at such place in Corpus
Christi, Texas, or such other place as shall have been mutually agreed upon by the Issuer and the
Underwriters. The payment for the Series 2009 Bonds and simultaneous delivery of the Series
2009 Bonds to the Underwriters is herein referred to as the "Closing."
8. CLOSING CONDITIONS. The obligations of the Underwriters to purchase the Series
2009 Bonds shall be subject (a) to the performance by the Issuer of its obligations to be
performed hereunder at and prior to the Closing, (b) to the accuracy of the representations and
warranties of the Issuer herein as of the date hereof and as of the time of the Closing, and (c) to
the following conditions, including the delivery by the Issuer of such documents as are
enumerated herein in form and substance satisfactory to Bond Counsel (named below) and Law
Offices of William T. Avila, P.C., Corpus Christi, Texas, as counsel to the Underwriters
("Underwriters' Counsel"):
(a) At the time of Closing, (i) the Official Statement, this Bond Purchase Agreement, and
the Ordinance shall be in full force and effect and shall not have been amended, modified,
repealed, or supplemented from the date hereof except as may have been agreed to in writing by
the Underwriters; (ii) the proceeds of the sale of the Series 2009 Bonds shall be deposited and
applied as described in the Ordinance; (iii) the Issuer shall have duly adopted and there shall be
in full force and effect such ordinances or resolutions as, in the opinions of Fulbright & Jaworski
L.L.P., San Antonio, Texas, as Bond Counsel ("Bond Counsel"), shall be necessary in
connection with the transactions described herein, and (iv) there shall not have occurred any
change or any development involving a prospective change, in the condition, financial or
otherwise, or in the earnings or operations of the System from that set forth in the Official
Statement that, in the reasonable judgment of the Representative, is material and adverse and that
makes it, in the reasonable judgment of the Representative, impracticable or inadvisable to
market the Series 2009 Bonds on the terms and in the manner described in the Official
Statement.
(b) At or prior to the Closing, the Representative shall receive one copy of the following
documents in such number of counterparts as shall be mutually agreeable to the Underwriters
Counsel and Bond Counsel:
(1) The Ordinance (containing the agreement to provide continuing disclosure of
information as described in the Official Statement), the Approval Certificate, and the Paying
Agent/Registrar Agreement, dated as of February 24, 2009, between the Issuer and The Bank of
New York Mellon Trust Company, National Association, Dallas, Texas, with such supplements
or amendments to any of the foregoing documents as may have been agreed to by the
Representative;
(2) Final opinion of Bond Counsel dated the date of Closing, in substantially the form set
forth as APPENDIX D in the Official Statement;
(3) A letter of Bond Counsel addressed to the Underwriters and dated the date of Closing,
to the effect that Bond Counsel's final opinions referred to in Section 8(b)(2) hereof may be
relied upon by the Underwriters to the same extent as if such opinions were addressed to the
Underwriters;
(4) A supplemental opinion of Bond Counsel addressed to the Underwriters and dated the
date of Closing, in substantially the form set forth in Exhibit B hereto;
(5) An opinion of the City Attorney of the Issuer substantially in the form of Exhibit C
attached hereto;
(6) A certificate signed by an authorized officer of the Issuer as prepared by Bond
Counsel setting forth facts, estimates, and circumstances in existence on the date of Closing,
which facts, estimates, and circumstances shall be sufficiently set forth therein to support the
conclusion that it is not expected that the proceeds of the Series 2009 Bonds will be used in a
manner or that the Issuer will take any action or omit to take any action that would cause the
Series 2009 Bonds to be "arbitrage bonds," with the meaning of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations, temporary regulations, and proposed
regulations promulgated under the Code, and stating that to the best knowledge and belief of
such officer there are no other facts, estimates, or circumstances that would materially affect
such expectations;
hereto;
Bonds;
(7) An opinion of Underwriters' Counsel in substantially the form set forth in Exhibit D
(8) The approving opinion of the Texas Attorney General with respect to the Series 2009
8
(9) The registration certificate of the Texas Comptroller of Public Accounts with respect
to the Series 2009 Bonds;
(10) A conformed copy of the Final Official Statement, and each supplement or
amendment thereto, if any, as may have been agreed to by the Representative;
(11) Letters from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Services, a Division of the McGraw-Hill Companies, Inc. ("S&P"), and Fitch Ratings
("Fitch") to the effect that the Series 2009 Bonds have been assigned ratings of "Aa2," "AAA,"
and "AAA," respectively, based upon the Bond Insurance Policy (as defined below) of Assured
Guaranty Corp., which ratings shall be in effect as of the date of Closing;
(12) A certificate, in form and substance satisfactory to the Issuer, Bond Counsel, the
Representative, and Underwriters Counsel, of the Issuer or any duly authorized officer or official
of the Issuer, dated as of the Closing, to the effect that: (i) each of the Issuer's representations,
warranties, and covenants contained herein are true and correct as of the Closing; (ii) the Issuer
has authorized, by all action necessary under the Act and the laws and Constitution of the State,
the adoption of the Ordinance, and the execution, delivery, and due performance of the Series
2009 Bonds, and this Bond Purchase Agreement; (iii) except as disclosed in the Official
Statement, no litigation is pending, or to the knowledge of the officer or official of.the Issuer
signing the certificate threatened, to restrain or enjoin the issuance or sale of the Series 2009
Bonds or in any way affecting any authority for or the validity of the Ordinance, the Series 2009
Bonds, or this Bond Purchase Agreement; (iv) the Series 2009 Bonds, and this Bond Purchase
Agreement, as executed by the Issuer, are in the form or in substantially the form approved for
such execution by appropriate proceedings of the Issuer; (v) since July 31, 2008 there has not
been any material adverse change in the properties, financial position, or results of operations of
the System, whether or not arising from transactions in the ordinary course of business, other
than as set forth in the Official Statement; (vi) the information contained in the Official
Statement (except for information contained therein under the headings or subheadings
"BONDHOLDERS' REMEDIES", "BOOK -ENTRY -ONLY SYSTEM", "BOND
INSURANCE", "RATINGS", 'TAX MATTERS," "FINANCIAL ADVISOR",
"UNDERWRITING", and "APPENDIX D — FORM OF OPINION OF BOND COUNSEL," as
to which no view is expressed) is true and correct in all material respects and does not contain
any untrue or incorrect statement of a material fact and does not omit to state a material fact
necessary in order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; (vii) since the date of the Official Statement and the
statistical information contained therein, there has been no material adverse change in the
utilization of the System and no material adverse change in the governmental rules or regulations
under which the System operate; and (viii) all agreements or conditions to be performed or
complied with by the Issuer under this Bond Purchase Agreement on or prior to the Closing Date
have been performed or complied with;
(13) A certificate, dated the Closing Date, of the Issuer as to the receipt of payment for
the Series 2009 Bonds;
9
(14) Evidence acceptable to the Underwriters' Counsel that a policy of bond insurance
(the "Insurance Policy") has been issued by Assured Guaranty Corp. (the "Bond Insurer"), which
unconditionally and irrevocably guarantees the full, complete, and timely payment of the Series
2009 Bonds, together with standard closing certificates of the Bond Insurer;
(15) The opinion of Bond Insurer's Counsel, dated the Closing Date, and addressed to
the Issuer and the Underwriters, as to (i) the due incorporation and valid existence of the Bond
Insurer, (ii) the validity and enforceability of the Insurance Policy, and (iii) that the information
relating to the Bond Insurer appearing under the caption "BOND INSURANCE" in the Official
Statement does not contain any untrue statement of a material fact or omit to state a material fact
necessary tom make the statements therein in the light of the circumstances under which they
were made, not misleading; and
(16) Such additional legal opinions, certificates, proceedings, instruments, and other
documents as Underwriters' Counsel or Bond Counsel may reasonably request to evidence
compliance by the Issuer with legal requirements, the truth and accuracy, as of the time of
Closing, of the representations of the Issuer herein contained, and the due performance or
satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all
conditions then to be satisfied by the Issuer.
If the Issuer shall be unable to satisfy the conditions to the obligations of the
Underwriters contained in this Bond Purchase Agreement, or if the obligations of the
Underwriters to purchase and accept delivery of the Series 2009 Bonds shall be terminated for
any reason permitted by this Bond Purchase Agreement, the good faith check described in
Section 4 hereof shall be returned to the Representative, this Bond Purchase Agreement shall
terminate, and neither the Underwriters nor the Issuer shall be under further obligation
hereunder.
9. CANCELLATION RIGHTS. The Underwriters shall have the right to cancel their
obligations to purchase the Series 2009 Bonds if between the date hereof and the date of Closing:
(a) the House of Representatives or the Senate of the Congress of the United States, or a
committee of either, shall have pending before it, or shall have passed or been recommended
favorably, legislation introduced after the date hereof, which Legislation, if enacted in its form
introduced or as amended, would have the purpose or effect of imposing federal income taxation
upon revenues or other income of the general character to be derived by the Issuer, or by any
similar body, or upon interest received on obligations of the general character of the Series 2009
Bonds, to be includable in gross income for purposes of federal income taxation, and such
legislation, in the Representative's reasonable opinion, materially adversely affects the market
price of the Series 2009 Bonds; or
(b) a decision with respect to legislation shall be reached by a committee of the House of
Representatives or the Senate of the Congress of the United States, or legislation shall be
favorably reported by such a committee or be introduced, by amendment or otherwise, in or be
passed by the House of Representatives or the Senate, or recommended to the Congress of the
United States for passage by the President of the United States, or be enacted, or a decision by a
10
federal court of the United States or the United States Tax Court shall have been rendered, or a
ruling, release, order, regulation or official statement by or on behalf of the United States
Treasury Department, the Internal Revenue Service, or other governmental agency shall have
been made or proposed to be made having the purpose or effect, or any other action or event
shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting
the federal income tax consequences of owning the Series 2009 Bonds or of any of the
transactions described in connection herewith, including causing interest on the Series 2009
Bonds to be included in gross income for purposes of federal income taxation, or imposing
federal income taxation upon revenues or other income of the general character to be derived by
the Issuer, or by any similar body, or upon interest received on obligations of the general
character of the Series 2009 Bonds, which, in the reasonable opinion of the Representative,
materially adversely affects the market price of, or market for, the Series 2009 Bonds; or
(c) legislation shall have been enacted, or actively considered for enactment with an
effective date prior to the Closing, or a decision by a court of the United States shall have been
rendered, the effect of which is that the Series 2009 Bonds, including any underlying obligations,
or the Ordinance, as the case may be, is not exempt from the registration, qualification, or other
requirements of the Securities Act of 1933, as amended and as then in effect, the Securities
Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as
amended and as then in effect; or
(d) a stop order, ruling, regulation, or official statement by the United States Securities
and Exchange Commission, or any other governmental agency having jurisdiction of the subject
matter, shall have been issued or made, or any other event occurs, the effect of which is that the
issuance, offering, or sale of the Series 2009 Bonds, including any underlying obligations, or the
execution and effectiveness of the Ordinance as described herein or by the Official Statement is,
or would be, in violation of any provision of the federal securities laws, including the Securities
Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended
and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or
(e) any event shall have occurred or any information shall have become known to the
Underwriters which causes the Representative to reasonably believe that the Official Statement,
as then amended or supplemented, includes an untrue statement of a material fact, or omits to
state any material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and such omission, in the Representative's
reasonable opinion, materially adversely affects the market price of the Series 2009 Bonds; or
(f) there shall have occurred a (i) material outbreak of hostilities (including, without
limitation, an act of terrorism) or (ii) new material other national or international calamity or
crisis, or any material adverse change in the financial, political or economic conditions affecting
the United States, including, but not limited to, an escalation of hostilities that existed prior to the
date hereof or (iii) a financial crisis, the effect of which on the financial markets of the United
States is such as, in the reasonable judgment of the Representative, would materially adversely
affect the market for, or market price of, the Series 2009 Bonds; or
11
(g) there shall be in force a general suspension of trading on the New York Stock
Exchange, the effect of which on the financial markets of the United States is such, in the
reasonable judgment of the Representative, would materially adversely affect the market for, or
market price of, the Series 2009 Bonds; or
(h) a general banking moratorium shall have been declared by Federal, New York, or
State authorities; or
(i) any proceeding shall be pending or threatened by the United States Securities and
Exchange Commission against the Issuer; or
(j) additional material restrictions not in force as of the date hereof shall have been
imposed upon trading in securities generally by any governmental authority or by any national
securities exchange; or
(k) the New York Stock Exchange or other national securities exchange, or any
governmental authority, shall impose, as to the Series 2009 Bonds or obligations of the general
character of the Series 2009 Bonds, any material restrictions not now in force, or increase
materially those now in force, with respect to the extension of credit by, or the charge to the net
capital requirements of, underwriters; or
(1) a material disruption in securities settlement, payment or clearance services in the
United States shall have occurred.
With respect to the conditions described in subparagraphs (j) and (k) above, the
Representative is not aware of any current, pending or proposed law or government inquiry or
investigation as of the date of execution of this Bond Purchase Agreement which would permit
the Underwriters to invoke their termination rights thereunder.
10. ISSUER OBLIGATIONS SUBJECT TO PERFORMANCE BY UNDERWRITERS. The
obligations of the Issuer hereunder are subject to the performance by the Underwriters of their
obligations hereunder.
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Unless
otherwise set forth herein, all representations, warranties, and agreements of the Issuer shall
remain operative and in full force and effect, regardless of any investigations made by or on
behalf of the Underwriters or the Issuer and shall survive the Closing.
12. EXPENSES. The Issuer will pay or cause to be paid all reasonable expenses incident
to the performance of its obligations under this Bond Purchase Agreement, including, but not
limited to, mailing or delivery of the Series 2009 Bonds; costs of printing the Series 2009 Bonds,
the Preliminary Official Statement and Final Official Statement, any amendment or supplement
to the Preliminary Official Statement or the Final Official Statement, and this Bond Purchase
Agreement; fees and disbursements of Bond Counsel; any fees charged by investment rating
agencies for the rating of the Series 2009 Bonds; any municipal bond insurance or surety bond
premiums; any paying agent fees; fees related to the Attorney General's review of the transcript
12
of proceedings related to the Series 2009 Bonds; any fees and expenses of the Issuer's
independent certified public accountants; and fees and expenses of the Financial Advisors to the
Issuer. The Underwriters shall pay all advertising expenses in connection with the public
offering of the Series 2009 Bonds and all other expenses incurred by them, including any "blue
sky" and legal investment memorandum preparation, in connection with their public offering and
distribution of the Series 2009 Bonds, including the fees and disbursements of Underwriters'
Counsel. The Underwriters shall not be responsible for travel, lodging, meal, entertainment or
deal memento expenses for officials, officers or employees of the Issuer, unless such expenses
have been incurred by the Underwriters at their discretion.
13. OTHER TRANSACTIONS BY UNDERWRITERS AND ISSUER. The Underwriters or their
affiliates may from time to time, in their individual capacity and separate and apart from the
transactions contemplated hereby and the compensation provided for herein, sell securities to,
provide derivative products to, engage in swaps with, and enter into other transactions with the
Issuer, or their agents acting in their behalf, and shall be entitled to retain any compensation or
profits inuring to the Underwriters or their affiliates in connection therewith as approved by the
Issuer.
14. NOTICES. Any notice or other communication to be given to the Issuer under this
Bond Purchase Agreement may be given by delivering the same in writing at its address set forth
above (with an additional copy to the City Manager) and any notice or other communication to
be given to the Underwriters under this Bond Purchase Agreement may be given by delivering
the same in writing to. The Frost National Bank, 100 West Houston, San Antonio, Texas 78205,
Attention: Rogelio Rodriguez, Vice President.
15. No RECOURSE AGAINST ISSUER INDIVIDUALS. No recourse shall be had for
payment of the principal of or interest on any Series 2009 Bonds or for any claim based thereon,
against any official or employee of the Issuer or any person executing any Series 2009 Bonds.
16. FIDUCIARY Dun. The Issuer aclmowledges that in connection with the offering of
the Series 2009 Bonds (a) the Underwriters have acted at anus length, are not an agent of, and
owe no fiduciary duties to, the Issuer and (b) the Underwriters may have interests that differ
from those of the Issuer.
17. PARTIES IN INTEREST. This Bond Purchase Agreement is made solely for the benefit
of the Issuer and the Underwriters (including the successors or assigns of the Underwriters) and
no other person, including any purchaser of the Series 2009 Bonds, shall acquire or have any
right hereunder or by virtue hereof.
18. EFFECTIVENESS. This Bond Purchase Agreement shall become effective upon the
acceptance hereof by the Issuer and shall be valid and enforceable at the time of such acceptance.
19. CHOICE OF LAW. This Bond Purchase Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the United States of America.
13
20. SEYERABIInTY. If any provision of this Bond Purchase Agreement shall be held or
deemed to be or shall, in fact, be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions because it conflicts with
any provisions of any Constitution, statute, rule of public policy, or any other reason, such
circumstances shall not have the effect of rendering the provision in question invalid, inoperative
or unenforceable in any other case or circumstance, or of rendering any other provision or
provisions of this Bond Purchase Agreement invalid, inoperative or unenforceable to any extent
whatever.
21. SECTION HEADINGS. Section headings have been inserted in this Bond Purchase
Agreement as a matter of convenience of reference only, and it is agreed that such section
headings are not a part of this Bond Purchase Agreement and will not be used in the
interpretation of any provisions of this Bond Purchase Agreement.
22. ENTIRE AGREEMENT. This Bond Purchase Agreement, together with any
contemporaneous written agreements and any prior written agreements (to the extent not
superseded by this Bond Purchase Agreement) that relate to the offering of the Series 2009
Bonds, represents the entire agreement between the Issuer and the Underwriters with respect to
the preparation of the Official Statement, and the conduct of the offering, and the purchase and
sale of the Series 2009 Bonds.
SIGNATURE TO FOLLOW
[The remainder of this page intentionally left blank.]
14
23. COUNTERPARTS. This Bond Purchase Agreement may be executed in several
counterparts, each of which shall be regarded as an original and all of which shall constitute one
and the same document. This Bond Purchase Agreement shall become effective upon the
execution of the acceptance hereof by the officially authorized and designated officers of the
Issuer shown below and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
THE FROST NATIONAL BANK
RBC CAPITAL MARKETS CORPORATION
ESTRADA HINOJOSA & CO., INC.
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
SOUTHWEST SECURITES
WELLS FARGO BROKERAGE SERVICES LLC
THE FROST NATIONAL BANK
As Representative
By:
Title: 5\1 P
Accepted and agreed to as
of the date first written above:
CITY OF CORPUS CHRISTI, TEXAS
By: Angel R. Escobar
Title: City Manager
APPROVED:
By: Mary Kay Fischer
Title: City Attorney
[SIGNATURE PAGE TO THE BOND PURCHASE AGREEMENT]
23. COUNTERPARTS. This Bond Purchase Agreement may be executed in several counterparts,
each of which shall be regarded as an original and all of which shall constitute one and the same
document. This Bond Purchase Agreement shall become effective upon the execution of the
acceptance hereof by the officially authorized and designated officers of the Issuer shown below
and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
THE FROST NATIONAL BANK
RBC CAPITAL MARKETS CORPORATION
ESTRADA HINOJOSA & CO., INC.
SIEBERT, BRANDFORD, SHANK & CO., L.L.C.
SOUTHWEST SECURITES
WELLS FARGO BROKERAGE SERVICES LLC
THE FROST NATIONAL BANK
As Representative
By:
Title:
Accepted and agreed to as
of the date first written above:
CITY OF CORPUS CHRISTI, TEXAS
raws-
By: fi E. gel R. Escobar
Title:
City Manager
APPROVED:
By: ary
JAAda,..
Fischer
Title: City Attorney
[SIGNATURE PAGE TO THE BOND PURCHASE AGREEMENT]
EXHIBIT A
$96,490,000
City of Corpus Christi, Texas
Utility System Revenue Improvement Bonds,
Series 2009
Dated March 1, 2009 (Interest to accrue from this Dated Date)
Maturity Date
(July 15)
Amount
Rate
Yield
Price
2011
1,730,000
2.500
2.000
101.110
2012
1,775,000
3.000
2.250
102.360
2013
1,825,000
3.000
2.620
101.528
2014
1,880,000
3.500
3.020
102.325
2015
1,945,000
4.000
3.270
104.113
2016
2,025,000
4.000
3.530
102.992
2017
2,105,000
4.000
3.720
101.976
2018
2,190,000
4.000
3.890
100.845
2019
2,280,000
4.750
4.110
104.893
2020
2,385,000
4.750
4.320
103.254
2021
2,500,000
4.375
4.510
98.731
2022
2,610,000
4.500
4.650
98.519
2023
2,725,000
4.625
4.800
98.198
2024
2,850,000
5.000
4.930
100.509
2025
2,995,000
5.250
5.020
101.682
2026
3,150,000
5.000
5.125
98.570
2027
3,310,000
5.000
5.200
97.650
****
****
****
****
****
2029
7,130,000
5.250
5.330
99.006
****
****
****
****
****
2033
16,650,000
5.250
5.440
97.447
****
****
****
****
****
2039
32,430,000
5.375
5.510.
98.013
Optional Redemption. The Series 2009 Bonds maturing on and after July 15, 2019, are subject
to optional redemption by the City, in whole or in part, prior to stated maturity, on July 15; 2018
and on any date thereafter, at a redemption price equal to the par value thereof plus accrued
interest to the date fixed for redemption.
EXHIBIT B
[LETTERHEAD OF BOND COUNSEL]
April 2, 2009
The Frost National Bank,
as Representative of the Underwriters named
in the Bond Purchase Agreement described below
100 West Houston Street
San Antonio, Texas 78205
City of Corpus Christi, Texas
City Hall
1201 Leopard
Corpus Christi, Texas 78401
Re: $96,490,000 City of Corpus Christi, Texas Utility System Revenue Improvement
Bonds, Series 2009
Ladies and Gentlemen:
This opinion is being rendered pursuant to the Bond Purchase Agreement, dated
March 13, 2009 (the "Bond Purchase Agreement"), between The Frost National Bank, as
Representative of the Underwriters named in the Bond Purchase Agreement (the
"Underwriters"), and the City of Corpus Christi, Texas (the "City") relating to the issuance, sale
and delivery by the City to the Underwriters of the captioned bonds (the "Series 2009 Bonds").
Except as otherwise defined herein, the terms defined in the Bond Purchase Agreement are used
in this opinion with the meanings assigned to them in the Bond Purchase Agreement.
We have acted as Bond Counsel to the City in accordance with the issuance, sale and
delivery of the Series 2009 Bonds to the Underwriters. In our capacity as Bond Counsel, we
have examined a transcript of certain materials and proceedings pertaining to the Series 2009
Bonds, including certain certified and original proceedings of the City and customary
certificates, opinions, and other documents executed by officers, agents, and representatives of
the City, and others. In our capacity as Bond Counsel, we have also attended meetings of the
City and have participated in conferences from time to time with representatives of the City, the
Financial Advisors of the City, the Underwriters, and Underwriters' Counsel relative to the
Preliminary Official Statement and the Final Official Statement.
In our capacity as Bond Counsel, we have reviewed the following:
(a)
(b)
(c)
a certified copy of the Ordinance, including the Approval Certificate;
an executed counterpart of the Bond Purchase Agreement;
an executed counterpart of the Paying Agent/Registrar Agreement dated as of
February 24, 2009 between the City and The Bank of New York Mellon Trust
Company, National Association, Dallas, Texas, as paying agent/registrar;
(d) a copy of the Preliminary Official Statement dated March 5, 2009 and a copy of
the Final Official Statement dated March 13, 2009 (the "Official Statement");
such other agreements, documents, certificates, opinions, letters, and other papers
as we have deemed necessary or appropriate in rendering the opinions set forth
below; and
(g)
(h)
Chapters 1502 and 1371, as amended, Texas Government Code and such other
provisions of the Constitution and laws of the State of Texas and the United States
of America as we believe necessary to enable us to render the opinions herein
contained.
In our examination, we have assumed the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, we are of the opinion that, under applicable laws of the United
States of America and the State of Texas in force and effect on the date hereof:
1. The offering and sale of the Series 2009 Bonds need not be registered under the
Securities Act of 1933, as amended;
2. No filing is required under the Trust Indenture Act of 1939, as amended, in
connection with the Series 2009 Bonds or the Ordinance;
3. The statements in the Official Statement, insofar as they describe the Series 2009
Bonds and the ordinance (except for any financial, technical, or statistical data therein), under the
captions "PURPOSE AND PLAN OF FINANCING", "PURPOSE OF THE BONDS",
"SECURITY FOR THE BONDS", "THE BONDS" "CONTINUING DISCLOSURE OF
INFORMATION" (except matters discussed under the subcaption "Compliance with Prior
Undertakings", as to which no opinion is expressed), "LEGAL PROCEEDINGS" (except for the
last sentence of the first paragraph thereof as to which no opinion is expressed), "TAX
MATTERS," "LEGAL INVESTMENTS IN TEXAS," "REGISTRATION AND
QUALIFICATIONS OF BONDS FOR SALE," "APPENDIX A SELECECTED
PROVISIONS OF THE ORDINANCE," and "APPENDIX D — FORM OF OPINION OF
BOND COUNSEL" are accurate and fair descriptions of the laws and legal issues addressed
therein and, with respect to the Series 2009 Bonds, such information conforms to the Ordinance.
We express no opinion and make no comment with respect to the sufficiency of
the security for or the marketability of the Series 2009 Bonds. We express no opinion
concerning any effect on the foregoing opinions which may result from changes in law effected
after the date hereof.
In our capacity as Bond Counsel we have delivered on this date the opinion in
substantially the form set forth in Appendix D of the Official Statement. The Underwriters may
rely on such opinion as if it were addressed to the Underwriters.
B-2
In rendering this opinion, we have not represented any of the Underwriters nor rendered
any advice to the Underwriters in connection with the Bond Purchase Agreement or the
transactions contemplated thereby, other than set forth therein. This opinion may not be relied
upon by any other person or by you in any other context, without our prior written consent. This
opinion is not to be used, circulated, quoted, or otherwise referred to for any other purpose.
Very truly yours,
B-3
EXHIBIT C
[LETTERHEAD OF THE CITY ATTORNEY]
April 2, 2009
The Frost National Bank,
as Representative of the Underwriters named in
the Bond Purchase Agreement described below
100 West Houston Street
San Antonio, Texas 78205
City of Corpus Christi, Texas
City Hall
1201 Leopard
Corpus Christi, Texas 78401
Re:
Law Offices of William T. Avila, P.C.
111 Soledad Street, Suite 1875
San Antonio, Texas 78205
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Assured Guaranty Corp.
1325 Avenue of the Americas
New York, New York 10019
$96,490,000 City of Corpus Christi, Texas Utility System Revenue Improvement
Bonds, Series 2009
Ladies and Gentlemen:
I am the City Attorney to the City of Corpus Christi, Texas (the "City") and have acted as
such in connection with the issuance of the captioned Series 2009 Bonds (the "Series 2009
Bonds") pursuant to an ordinance duly adopted by the City Council of the City of Corpus Christi,
Texas on February 24, 2009 (the "Bond Ordinance"). Capitalized terms not otherwise defined in
this letter have the meanings assigned in the Bond Purchase Agreement.
In my capacity as City Attorney to the City, I or my designated attomeys have reviewed
the following:
1. The Bond Ordinance, including the Approval Certificate, as adopted by the
City Council;
2. An executed counterpart of the Bond Purchase Agreement, dated
March 13, 2009 (the "Bond Purchase Agreement"), between the City and the
Underwriters named in such Bond Purchase Agreement, including the Approval
Certificate;
3. Executed counterparts of the Paying Agent/Registrar Agreement (the
"Agreement"), as prepared by the City's Bond Counsel;
4. A conformed copy of the Official Statement dated March 13, 2009 (the
"Official Statement");
C-1
5. Such other agreements, documents, certificates, opinions, letters and other
papers as I have deemed necessary or appropriate in rendering the opinions set forth
below; and
6. Chapters 1502 and 1371, Texas Government Code, as amended (the "Act"),
and such other provisions of the Constitution and laws of the State of Texas and the
United States of America as I believe necessary to enable me to render the opinions
herein contained.
In making my review, I, or my designated attorneys, have assumed the authenticity of all
documents and agreements submitted to me as originals, conformity to the originals of all
documents and agreements submitted to me as certified or photostatic copies, the authenticity of
the originals of such latter documents and agreements, and the accuracy of the statements
contained in such documents.
Based upon the foregoing, it is my opinion that:
1. The City has duly adopted and enacted the Bond Ordinance in accordance with the
Act; the City has full legal right, power and authority to enter into the Bond Purchase
Agreement, and the Agreement, to adopt the Bond Ordinance, and to issue, sell and deliver the
Series 2009 Bonds to the Underwriters as provided in such Bond Purchase Agreement; the City
has duly authorized and approved the execution and the delivery of, and the performance by the
City of the obligations contained in, the Series 2009 Bonds, the Bond Purchase Agreement, the
Agreement and the Bond Ordinance, and all other transactions contemplated by the Official
Statement; the City has complied with, and is in compliance with Texas law in all respects
regarding the sale, issuance and delivery of the Series 2009 Bonds, including the provisions
relating to its obligations under the Act, the Bond Ordinance, the Series 2009 Bonds, and the
Bond Purchase Agreement, and assuming the due authorization, execution, and delivery by the
other contracting parties of the Agreement, the Bond Purchase Agreement, and the Bond
Ordinance constitute valid, legal and binding agreements of the City, enforceable in accordance
with their respective terms, subject to principles of sovereign immunity and bankruptcy,
insolvency, reorganization or other laws relating to or affecting the rights of creditors generally
and general equitable principles;
2. The City is a body politic and corporate, duly incorporated and existing under the laws
of the State of Texas, is a political subdivision thereof, and has good right and lawful authority to
operate, maintain and improve the System and to fix and establish rates and other charges in
respect thereof and collect revenues therefrom, as required by the Bond Ordinance, and to
perform all of its obligations under the Bond Ordinance;
3. Except for permits and similar authorizations under the securities or blue sky laws of
certain jurisdictions, no consent, waiver or any other action of any person, board or body, public
or private, is required as of the date hereof for the City to adopt the Bond Ordinance or issue the
Series 2009 Bonds, or to enter into the Bond Purchase Agreement, or to perform its obligations
under any of the foregoing other than those which have been duly and validly obtained and are in
full force and effect;
4. Based on reasonable inquiry made of the responsible City employees and public
officials, the City is not, to the best of my knowledge, in material breach of or in default under
C-2
any applicable constitutional provision, law or administrative regulation of the State of Texas or
the United States relating to the System, or any applicable judgment or decree or any trust
agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to
which the City is a party or is otherwise subject and, to the best of my knowledge after due
inquiry, no event has occurred and is continuing which, with the passage of time or the giving of
notice, or both, would constitute such a default by the City under any of the foregoing; and the
execution and delivery of the Bond Purchase Agreement, the Series 2009 Bonds, the Agreement,
and the adoption of the Bond Ordinance and compliance with the provisions of each of such
agreements or instruments do not conflict with or constitute a material breach of or default under
any applicable constitutional provision, law or administrative regulation of the State of Texas or
the United States or any applicable judgment or decree or, to the best of my knowledge, any trust
agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to
which the City is a party or is otherwise subject; and
5. Except as disclosed in the Official Statement, no litigation is pending, or, to my
knowledge, threatened, in any court (a) in any way challenging the titles of the Mayor or any of
the other members of the City Council of the City to their respective offices, or (b) seeking to
restrain or enjoin the issuance or delivery of any of the Series 2009 Bonds, or the collection of a
material amount of revenues pledged or to be pledged to pay the principal of and interest on the
Series 2009 Bonds, or in any way contesting or affecting the validity or enforceability of the
Series 2009 Bonds, the Bond Ordinance, the Bond Purchase Agreement, or the Agreement or the
collection of a material amount of revenues or the pledge thereof, or contesting the powers of the
City or any authority for the issuance of the Series 2009 Bonds, or the adoption of the Bond
Ordinance, or contesting or affecting in any way the ability of the City to establish rates and
charges for the use of the System, except as disclosed in the Official Statement.
In addition, without having undertaken to determine independently the accuracy and
completeness of the statements contained in the Official Statement, nothing has come to my
attention which would lead me to believe that the Official Statement (excluding therefrom the
financial and statistical data and forecasts included therein) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The opinions herein are expressed as of the date hereof. I consent to the reference to this
opinion in the Official Statement.
Very truly yours,
Mary Kay Fischer
City Attorney for the City of Corpus Christi, Texas
C-3
EXHIBIT D
[LETTERHEAD OF UNDERWRITERS' COUNSEL]
April 2, 2009
The Frost National Bank,
as Representative of the Underwriters named in
the Bond Purchase Agreement described below
10 West Houston Street
San Antonio, Texas 78205
Re: $96,490,000 City of Corpus Christi, Texas Utility System Revenue Improvement
Bonds, Series 2009
Ladies and Gentlemen:
We have acted as counsel to you as the Underwriters (the "Underwriters") the captioned
Series 2009 Bonds (the "Series 2009 Bonds") issued under and pursuant to an ordinance (the
"Ordinance") of the City of Corpus Christi, Texas (the "City") authorizing the issuance of the
Series 2009 Bonds, which Series 2009 Bonds you are purchasing pursuant to a Bond Purchase
Agreement, dated March 13, 2009 (the "Bond Purchase Agreement") between the Underwriters
and the City.
In connection with the rendering of this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of documents, opinions, certificates,
instruments and records as we have considered necessary or appropriate for purposes of
rendering the opinions hereinafter expressed. In addition, we have made such investigations of
law and facts as we have deemed appropriate or necessary as a basis for these opinions. We
have not been requested to and are not expressing any opinion or views on the authorization,
execution, issuance, delivery or validity of, or tax exemption with respect to, the Series 2009
Bonds. We have assumed but have not independently verified that the signatures on all
documents and certificates that we have examined are genuine and that the Series 2009 Bonds
conform to the specimen copies thereof that we have examined.
Based upon the foregoing, we are of the opinion that:
(1) the Series 2009 Bonds are not required to be registered under the Securities Act of
1933, as amended; and
(2) the Ordinance is not required to be qualified under the Trust Indenture Act of 1939, as
amended.
In addition, based , upon (i) our understanding of the Securities and Exchange
Commission ("SEC") Rule 15c2-12 (the "Rule") and interpretive guidance published by the SEC
D-1
relating thereto, (ii) our review of the continuing disclosure undertaking of the Issuer contained
in the Ordinance, and (iii) the inclusion in the Official Statement of' a description of the specifics
of such undertaking, and in reliance on the opinion of Bond Counsel that the Ordinance has been
duly adopted by the Issuer and constitutes a valid and legally binding obligation of the Issuer
enforceable in accordance with its terms, we have no reason to believe that such undertaking
does not meet the requirement of paragraph (b)(5)(i) of the Rule and, accordingly, we advise you
that such undertaking provides a suitable basis for you, as the Underwriters, and any other
broker, dealer, or municipal securities dealer acting as a Participating Underwriter (as defined in
the Rule) in connection with the offering of the Series 2009 Bonds, to make a reasonable
determination that the Issuer has met the qualifications of paragraph (b)(5)(i) of the Rule.
Because the primary purpose of our professional engagement as your counsel was not to
establish factual matters, and because of the wholly or partially nonlegal character of many of the
determinations involved in the preparation of the Official Statement dated March 5, 2009 (the
"Official Statement") that describes the Issuer, the System and the Series 2009 Bonds and
because the information in the Official Statement under the headings "BOOK -ENTRY -ONLY
SYSTEM," 'TAX MATTERS," "CONTINUING DISCLOSURE INFORMATION —
Compliance with Prior Undertakings" and the Appendices thereto were prepared by others who
have been engaged to review or provide such information, we are not passing on and do not
assume any responsibility for the information contained under such headings and in the
appendices, and, except as set forth in the last sentence of this paragraph, we are not passing on
and do not assume any responsibility for the accuracy, completeness or fairness of other
statements contained in the Official Statement (including any appendices, schedules and exhibits
thereto) and we make no representation that we have independently verified the accuracy,
completeness or fairness of such statements. In the course of our participation in the preparation
of the Official Statement as your counsel, we had discussions with representatives of' the Issuer,
including its Financial Advisors and Bond Counsel, regarding the contents of the Official
Statement. In the course of such activities, no facts came to our attention which would lead us to
believe that the Official Statement (except for the financial statements and other financial and
statistical data contained therein, the information set forth under the headings "BOOK -ENTRY -
ONLY SYSTEM," "TAX MATTERS," "CONTINUING DISCLOSURE INFORMATION —
Compliance with Prior Undertakings" and the Appendices thereto, as to which we express no
opinion), as of its date contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
This letter is furnished by us for your sole benefit and no other person or entity shall be
entitled to rely upon this opinion without our express written consent.
Very truly yours,
D-2
80470964.4
EXHIBIT B
OFFICIAL STATEMENT
B-1
OFFICIAL STATEMENT DATED MARCH 13, 2009
NEW ISSUE - Book -Entry -Only
Ratings: Moody's: "Aa2"
S&P:"AAA"
Fitch: "AAA"
(See "BOND INSURANCE"
and "RATINGS" herein)
In the opinion of Bond Counsel, assuming continuing compliance by the City after the date of initial delivery of the Bonds (defined below)
with certain covenants contained in the Ordinance (defined below) and subject to the matters set forth under "TAX MATTERS" herein,
interest on the Bonds for federal income tax purposes under existing statutes, regulations, published rulings, and court decisions (1) will be
excludable from the gross income of the owners thereof pursuant to section 103 of the Internal Revenue Code of 1986, as amended to the
date of initial delivery of the Bonds, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof
See "TAX MATTERS" herein.
$96,490,000
City of Corpus Christi, Texas
(A political subdivision of the State of Texas located in Nueces and San Patricio Counties)
Utility System Revenue Improvement Bonds, Series 2009
Dated: March 1, 2009 Due: July 15, as shown on following page
The City of Corpus Christi, Texas Utility System Revenue Improvement Bonds, Series 2009 (the "Bonds") will be issued by the City of
Corpus Christi, Texas (the "City") pursuant to the laws of the State of Texas, including Chapters 1371 and 1502, Texas Government Code, as
amended, the City's Home Rule Charter, and an ordinance adopted by the City Council on February 24, 2009 (the "Ordinance"). In the
Ordinance the City Council delegated the authority to the Mayor, City Manager, and the Interim Assistant City Manager for Administrative
Services to execute a Pricing Certificate relating to the sale of the Bonds, which was executed on March 13, 2009 by the City Manager.
The Bonds are special obligations of the City, payable as to principal, interest and redemption premium, if any, solely from and are legally
and ratably secured by a first lien on and pledge of the Pledged Revenues, (as herein defined), derived by the City from its ownership and
operation of its combined water, wastewater, storm water, and gas utility systems (the "City's Combined System"). The Bonds do not
constitute an indebtedness or general obligation of the City and are not payable from funds raised or to be raised by taxation by the
City or any other political subdivision of the State of Texas.
Interest on the Bonds will accrue from the dated date of the Bonds and will be payable on January 15 and July 15 of each year, commencing
July 15, 2009, until maturity or prior redemption, and will be calculated on the basis of a 360 -day year of twelve 30 -day months. The
definitive Bonds will be issued as fully registered obligations in book -entry -only form and, when issued, will be registered in the name of
Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York. DTC will act as securities depository for the
Bonds for so long as the Bonds are maintained in DTC's book -entry only system. Book -entry interests in the Bonds will be made available
for purchase in the principal amount of $5,000 or any integral multiple thereof. Purchasers of the Bonds (the 'Beneficial Owners") will not
receive physical delivery of certificates representing their interest in the Bonds purchased. So long as DTC or its nominee is the registered
owner of the Bonds, the principal of and interest on the Bonds will be payable by The Bank of New York Mellon Trust Company, N.A.,
Dallas, Texas, as Paying Agent/Registrar, to the securities depository, which will in tum remit such principal and interest to its participants,
as, and if issued and received by the initial purchasers thereof named below (the "Underwriters") and which will in turn remit such principal
and interest to the Beneficial Owners of the Bonds. See "BOOK -ENTRY -ONLY SYSTEM" herein. Proceeds from the sale of the Bonds
will be used for (1) acquiring, purchasing, constructing, improving, repairing, extending, equipping, and renovating the System and (2)
paying the costs of issuance relating to the Bonds. See "PURPOSE OF THE BONDS" herein.
ASSURED
GUARANTY
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed
under an insurance policy to be issued concurrently with the delivery of the Bonds by Assured
Guaranty Corp. See "BOND INSURANCE" herein.
SEE FOLLOWING PAGE FOR STATED MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES,
INITIAL YIELDS, CUSIP NUMBERS, AND REDEMPTION PROVISIONS
The Bonds are offeredfor delivery, when as, and if issued and received by the initial purchases thereof named below (the "Underwriters"),
subject to the approving opinions of the Attorney General of the State of Texas and Fulbright & Jaworski L.L.P., Bond Counsel for the City.
See "LEGAL PROCEEDINGS" and "TAX MATTERS" herein. Certain legal matters will be passed upon for the City by the City Attorney
and for the Underwriters by their counsel, the Law Offices of William Z Avila, P.C. 11 is anticipated that definitive Bonds will be tendered
for delivery through the services of DTC on or about April 2, 2009.
FROST BANK
ESTRADA HINOJOSA & COMPANY, INC. RBC CAPITAL MARKETS SIEBERT BRANDFORD
SOUTHWEST SECURITIES
WELLS FARGO BROKERAGE SERVICES, LLC
$96,490,000
City of Corpus Christi, Texas
(A political subdivision of the State of Texas located in Nueces and San Patricio Counties)
Utility System Revenue Improvement Bonds, Series 2009
CUSIP No. Prefix(I): 220245
$40,280,000 Serial Bonds
Stated Stated
Maturity Principal Interest Initial CUSIP No. Maturity Principal Interest Initial CUSIP No.
(July 15) Amount ($) Rate (%) Yield (%) Suffixal (July 15) Amount ($) Rate (%) Yield (%) Suffix())
2011 1,730,000 2.500 2.000 NY6 2020 2,385,000 4.750 4.320(2) PHI
2012 1,775,000 3.000 2.250 NZ3 2021 2,500,000 4.375 4.510 PJ7
2013 1,825,000 3.000 2.620 PA6 2022 2,610,000 4.500 4.650 PK4
2014 1,880,000 3.500 3.020 PB4 2023 2,725,000 4.625 4.800 PL2
2015 1,945,000 4.000 3.270 PC2 2024 2,850,000 5.000 4.930(2) PMO
2016 2,025,000 4.000 3.530 PDO 2025 2,995,000 5.250 5.020(2) PN8
2017 2,105,000 4.000 3.720 PE8 2026 3,150,000 5.000 5.125 PP3
2018 2,190,000 4.000 3.890 PF5 2027 3,310,000 5.000 5.200 PQl
2019 2,280,000 4.750 4.110(2) PG3
(Accrued interest from March 1, 2009 to be added)
$56,210,000 Term Bonds
$ 7,130,000 5.250% Term Bonds due July 15, 2029 Priced to Yield 5.330% CUSIP No. Suffix01: PR9
$16,650,000 5.250% Term Bonds due July 15, 2033 Priced to Yield 5.440% CUSIP No. Sufftx1Il: PS7
$32,430,000 5.375% Term Bonds due July 15, 2039 Priced to Yield 5.510% CUSIP No. Sufftxto: PT5
(Accrued interest from March I, 2009 to be added)
Redemption. The Bonds stated to mature on and after July 15, 2019, are subject to redemption, at the option of the City, in
whole or in part, on July 15, 2018 or any date thereafter, at the price of par plus accrued interest to the date fixed for redemption.
See "THE BONDS -Optional Redemption" herein. Those Bonds that are structured as Term Bonds (defined herein) will be
subject to mandatory sinking fund redemption. See "THE BONDS -Mandatory Redemption" herein.
iu
CUSIP numbers have been assigned to the Bonds by Standard & Poor's CUSIP Service Bureau, a Division of The McGraw Hill Companies,
Inc., and are included solely for the convenience of owners of the Bonds. This date is not intended to create a database and does not serve in
any as a substinae for the CUSIP Services. None of the City, the Financial Advisor, nor the Underwriters shall be responsible for the
selection or correctness of the CUSIP numbers set forth herein.
Yield calculated based on the presumption that the Bonds denoted and sold at a premium will be redeemed on July 15, 2018, the first
optional redemption date for the Bonds.
USE OF INFORMATION IN OFFICIAL STATEMENT
This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an offer to sell or the
solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful to make such offer, solicitation or sale.
No dealer, broker, salesman or other person has been authorized to give any information, or to make any representations other than
those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon
as having been authorized by the City, the Financial Advisor, or the Underwriters.
This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which
such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are
subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since
the date hereof.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL
STATEMENT. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN
ACCORDANCE WITH THEIR RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS
APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT
GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION,
QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW
PROVISIONS OF THE JURISDICTIONS IN WHICH THESE BONDS HAVE BEEN REGISTERED, QUALIFIED, OR
EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The agreements of the City and others related to the Bonds are contained solely in the contracts described herein. Neither this
Official Statement nor any other statement made in connection with the offer or sale of the Bonds is to be construed as constituting
an agreement with the purchasers of the Bonds. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT,
INCLUDING ALL APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN
INFORMED INVESTMENT DECISION.
None of the City, the Financial Advisor, nor the Underwriters make any representation or warranty with respect to the information
contained in this Official Statement regarding the Depository Trust Company or its Book -Entry -Only System or with respect to any
description of the affairs of the Insurer or its municipal bond insurance policy included herein under the caption "BOND
INSURANCE".
Wells Fargo Brokerage Services, LLC ("WFBS") is a registered broker/dealer and Member of FINRA and SIPC. WFBS is a
brokerage affiliate of Wells Fargo & Company. WFBS is solely responsible for its contractual obligations and commitments.
Nondeposit investment products offered by WFBS are not FDIC insured, are subject to investment risk, including loss of principal,
and are not guaranteed by a bank unless otherwise specified.
From time to time, Wells Fargo Bank, N.A. and other banks and companies affiliated with WFBS may lend money to an issuer of
securities or debt that are underwritten or dealt in by WFBS. Within the prospectus or other documentation provided with each such
underwriting or placement there will be a disclosure of any material lending relationship by an affiliate of WFBS with such an
issuer and whether the proceeds of such an issuance of such debt securities will be used by the issuer to repay any outstanding
indebtedness of any WFBS affiliate.
From time to time, WFBS may participate in a primary or secondary distribution of securities bought or sold by a purchaser of
Bonds. WFBS and its affiliates may also act as an investment advisor to issuers whose securities may be sold to a purchaser of
those Bonds.
Assured Guaranty Corp. makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition,
Assured Guaranty Corp. has not independently verified, makes no representation regarding, and does not accept any responsibility
for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom,
other than with respect to the accuracy of the information regarding Assured Guaranty Corp. supplied by Assured Guaranty Corp.
and presented under the headings "BOND INSURANCE" and "SECURITY FOR THE BONDS — The Reserve Fund Insurance
Policy", and "Appendix E — Specimen Financial Guaranty Insurance Policy".
iii
TABLE OF CONTENTS
$40,280,000 SERIAL BONDS
USE OF INFORMATION IN OFFICIAL STATEMENT iii
CITY ADMINISTRATION
INTRODUCTION
PLAN OF FINANCING 1
CITY'S COMBINED SYSTEM CAPITAL IMPROVEMENT
PLAN 1
PURPOSE OF THE BONDS 2
SECURITY FOR THE BONDS 2
Creation of City's Combined System 2
Pledge of Pledged Revenues 2
Perfection of Security for the Bonds 3
Flow of Funds 3
Reserve Fund 3
The Reserve Fund Insurance Policy 4
Rate Covenant 4
Additional Bonds 5
Subordinated Obligations and Special Facilities
Bonds 6
BONDHOLDERS' REMEDIES 6
THE BONDS 7
Description 7
Optional Redemption 7
Mandatory Redemption 8
Notice of Redemption 8
Defeasance 9
Paying Agent/Registrar 9
Successor Paying Agent/Registrar 10
Record Date for Interest Payment 10
Ownership 10
Transfers and Exchanges 10
Replacement Bonds 11
SOURCES AND USES OF FUNDS 11
BOOK -ENTRY -ONLY SYSTEM 11
Use of Certain Terms in Other Sections of this
Official Statement 13
BOND INSURANCE 13
The Insurance Policy 13
The Insurer 14
CITY'S COMBINED SYSTEM 15
Description of City's Water System 15
Description of City's Storm water Drainage
System 19
Description of City's Wastewater System 19
Description of City's Gas System 21
City's Combined System Management and
Employees 21
CITY'S COMBINED SYSTEM OPERATIONS 23
City Water System Statistics 23
Wastewater System Statistics 27
CITY'S COMBINED SYSTEM RATES 29
Ratemaking 29
City's Charter Amendment Regarding Rates 30
Billings and Collections 31
Recent and Future Changes in Rate Structure 31
Rate Increases 31
Water Rates 31
Wastewater Rates 33
City's Gas Rates 34
CITY'S COMBINED SYSTEM FINANCIAL
INFORMATION 35
Payment Record 35
Obligations Payable from City's Combined System
Revenues 36
Subordinated Obligations 36
City's Combined System Debt Service
Requirements 38
INVESTMENT POLICY 40
City Investments 40
Revenues and Expenses of the City's Combined
System; Net Revenues Available for Debt
Service; Coverage Ratios 43
Combined Utility System Net Revenue Available
for Debt 43
City's Management Discussion and Analysis 43
LITIGATION AND REGULATION 46
City Claims and Litigation 46
Environmental Regulations 47
LEGAL INVESTMENTS IN TEXAS 49
REGISTRATION AND QUALIFICATION OF BONDS FOR
SALE 49
RATINGS 49
TAX MATTERS 50
Opinion 50
Ancillary Tax Consequences 50
Tax Accounting Treatment of Discount Bonds 50
Tax Accounting Treatment of Premium Bonds 51
LEGAL PROCEEDINGS 51
INDEPENDENT ACCOUNTANTS 52
FINANCIAL ADVISOR 52
UNDERWRITING 52
NO -LITIGATION CERTIFICATE 52
GENERAL INFORMATION 53
CONTINUING DISCLOSURE OF INFORMATION 53
Annual Reports 53
Material Event Notices 54
Availability of Information from NRMSIRs
and SID 54
Limitations and Amendments 54
Compliance with Prior Undertakings 55
FORWARD LOOKING STATEMENTS 55
GASB 34 STATEMENT 55
MISCELLANEOUS 55
AUTHORIZATION OF THE OFFICIAL STATEMENT 56
APPENDIX A SELECTED PROVISIONS OF THE ORDINANCE A-1
APPENDIX B CERTAIN AUDITED FINANCIAL STATEMENT B -I
APPENDIX C CERTAIN INFORMATION RELATING TO THE CITY OF CORPUS CHRISTI C-1
APPENDIX D FORM OF OPINION OF BOND COUNSEL D -I
APPENDIX E SPECIMEN MUNICIPAL BOND INSURANCE POLICY E -I
iv
City of Corpus Christi, Texas
1201 Leopard
Corpus Christi, Texas 78401
(361) 880-3105
CITY ADMINISTRATION
ELECTED OFFICIALS
Mayor
Henry Garrett
Council Members
Bill Kelly, District 1
John Marez, District 2
Priscilla Leal, District 3
Michael McCutchon, District 4
Larry Elizondo, Sr., District 5
Melody Cooper, At Large
Mike Hummell, At Large
Nelda Martinez, At Large
CERTAIN APPOINTED OFFICIALS
Name Position
Angel R. Escobar
Oscar R. Martinez
Margie C. Rose
Juan "Johnny" Perales
Cindy O'Brien
Constance P. Sanchez
Mary Kay Fischer
Armando Chapa
City Manager
Assistant City Manager for Public Works
Assistant City Manager for Community Services
Interim Assistant City Manager for Development Services
Interim Assistant City Manager for Administrative Services
Interim Director of Financial Services
City Attorney
City Secretary
CONSULTANTS AND ADVISORS
Bond Counsel
Independent Certified Public Accountants
Financial Advisors
Fulbright & Jaworski L.L.P., San Antonio, Texas
Collier, Johnson & Woods, P.C., Corpus Christi, Texas
M. E. Allison & Co., Inc., San Antonio, Texas
For additional information regarding the City, please contact:
Ms. Constance P. Sanchez
City of Corpus Christi, Texas
1201 Leopard
Corpus Christi, Texas 78401
(361) 826-3227
Fax (361) 880-3601
constancep@cctexas.com
Mr. Mark A. Seal
M.E. Allison & Co., Inc.
950 East Basse Road, Second Floor
or San Antonio, Texas 78209
(210) 930-4000
Fax (210) 930-4001
mseal@meallison.com
v
[This page intentionally left blank.]
OFFICIAL STATEMENT
$96,490,000
City of Corpus Christi, Texas
Utility System Revenue Improvement Bonds, Series 2009
INTRODUCTION
This Official Statement (including the cover page and appendices hereto) of the City of Corpus Christi, Texas (the
"City") provides certain information in connection with the issuance by the City of its Utility System Revenue
Improvement Bonds, Series 2009 (the "Bonds"). The Bonds are authorized to be issued pursuant to the laws of the
State of Texas, including specifically Chapters 1371 and 1502, Texas Government Code, as amended, and an
ordinance adopted by the City Council of the City on February 24, 2009 (the "Ordinance"). In the Ordinance, the
City Council delegated the authority to the Mayor, the City Manager, and the Interim Assistant City Manager for
Administrative Services to execute a Pricing Certificate relating to the sale of the Bonds, which was executed on
March 13, 2009 by the City Manager.
This Official Statement does not purport to be comprehensive or definitive. All statements made herein with respect
to the Ordinance are qualified in their entirety by reference to such document, and statements made herein with
respect to the Bonds are qualified in their entirety by reference to the forms thereof and information with respect
thereto included in the Ordinance, copies of which are available upon request from the City's Financial Advisor,
Mark Seal, M. E. Allison & Co., Inc., 950 East Basse Road, Second Floor, San Antonio, Texas 78209, telephone
(210) 930-4000, or from Constance P. Sanchez, Interim Director of Financial Services, City of Corpus Christi, 1201
Leopard, Corpus Christi, Texas 78401, telephone (361) 826-3227, by electronic mail or upon payment of reasonable
copying, handling, mailing and delivery charges. Certain capitalized terms used herein and not defined have the
meanings set forth in Appendix A to this Official Statement.
This Official Statement speaks only as to its date, and the information contained herein is subject to change. Copies
of the Final Official Statement pertaining to the Bonds will be deposited with the Municipal Securities Rulemaking
Board, 1900 Duke Street, Suite 600, Alexandria, Virginia 22314. See "CONTINUING DISCLOSURE OF
INFORMATION" for a description of the City's undertaking to provide certain information on a continuing basis.
PLAN OF FINANCING
In 1990, the City established by ordinance (the "1990 Ordinance") a unified water, wastewater, and gas utility
system (the "City's Combined System"). Pursuant to the terms of the 1990 Ordinance, the City issued its Utility
System Revenue Refunding Bonds, Series 1990 (the "Series 1990 Bonds"). Under the terms of the 1990 Ordinance,
the City reserved the right to issue additional bonds on a parity with the Series 1990 Bonds, and currently there are
outstanding several such issues of parity bonds (the "Priority Bonds"). The Priority Bonds have been issued
pursuant to the provisions of certain bond ordinances (collectively, the "Bond Ordinance"). Upon the delivery of the
Bonds, the principal amount of the Priority Bonds currently outstanding will be $453,550,000. Prior to the
establishment of the City's Combined System, each utility system of the City was operated as a separate enterprise
fund, and the City still maintains internal records to account for each of those utility systems as separate enterprise
funds. Pursuant to an ordinance adopted by the City Council on April 29, 2008, the City, as permitted by the
provisions of the Bond Ordinance, authorized the inclusion of a storm water drainage utility system as a part of the
City's Combined System.
On March 25, 2003, the City Council adopted an ordinance establishing a tax-exempt commercial paper program
(the "Commercial Paper Notes") for the benefit of the City's Combined System authorizing notes to be issued in the
maximum principal amount at any one time outstanding not to exceed 575,000,000. As of the date hereof, the City
has 5-0- in Commercial Paper Notes outstanding. See "CITY'S COMBINED SYSTEM FINANCIAL
INFORMATION - Subordinated Obligations"
CITY'S COMBINED SYSTEM CAPITAL IMPROVEMENT PLAN
The City recently adopted the Capital Budget and Capital Improvement Planning Guide for its 2008/2009 fiscal
year. The following section sets forth the expected projects and funding sources for the next three (3) years.
FY 2009 ($) FY 2010 ($) FY 2011 ($) Total ($)
Projects:
Water Projects 20,295,000 31,194,000 32,239,000 83,728,000
Storm water Projects 22,731,000 24,923,000 15,979,000 63,633,000
Wastewater Projects 33,391,000 40,436,000 40,028,000 113,855,000
Gas Projects 3,562,000 3,024,000 1,351,000 7,937,000
TOTAL 79,979,000 99,577,000 89,597,000 269,153,000
Funding:
Revenue Bonds 79,804,000 98,017,000 89,597,000 267,418,000
Choke Canyon Trust Fund 175,000 1,560,000 0 1,735,000
79,979,000 99,577,000 89,597,000 269,153,000
The City's ability to finance the planned capital improvements depends upon its ability to increase rates sufficiently
to support the issuance of revenue bonds and generation of surplus City's Combined System revenues necessary to
finance such improvements.
PURPOSE OF THE BONDS
Proceeds from the sale of the Bonds will be used for (1) acquiring, purchasing, constructing, improving, repairing,
extending, equipping, and renovating the System, and (2) paying the costs of issuance relating to the Bonds.
SECURITY FOR THE BONDS
Creation of City's Combined System
Pursuant to the 1990 Ordinance, the City has created a single combined utility system comprised of the City's water
system, wastewater disposal system and gas system, together with all future extensions, improvements,
enlargements and additions thereto, including, to the extent permitted by law, storm water sewer and drainage, and
all replacements thereof as the City's combined water, wastewater, storm water, and gas utility systems. To date,
the City has not established a rate schedule for this storm water drainage utility system and it has agreed that upon
implementation, that these revenues will be separately identified, segregated, and accounted for as a component part
of the City's Combined System. The City's Combined System shall not include any water, wastewater, storm water,
or gas facilities which are declared by the City not to be part of the City's Combined System and which are financed
with Special Facilities Bonds. The City does not have any currently outstanding Special Facilities Bonds.
Pledge of Pledged Revenues
The Bonds are special obligations of the City issued on parity with the Previously Issued Priority Bonds which,
together with any Additional Priority Bonds hereafter issued, are payable solely from and secured by a first lien on
the Pledged Revenues including such revenues within the System Fund and the other funds created by the
Ordinance; and the Pledged Revenues are further pledged to the establishment and maintenance of the Debt Service
Fund and the Reserve Fund as provided in the Ordinance. The Pledged Revenues are comprised of Net Revenues of
the City's Combined System and any other additional revenues, income, receipts and other resources that may
hereafter be pledged to the Priority Bonds. The term Net Revenues means the Gross Revenues of the City's
Combined System less the Operating Expenses of the City's Combined System. Gross Revenues include all
revenues, income and receipts derived or received by the City from the operation and ownership of the City's
Combined System including certain interest income. Operating Expenses include the expenses of operation and
maintenance of the City's Combined System, including all salaries, labor and materials and certain expenses of
repairs and extensions, and include the purchase of water, sewer, storm water, and gas services from other entities
and the expenses related thereto. Such expenses include contract payments to the Nucces River Authority for its
Water Supply Revenue Bonds, Series 1997, its Water Supply Facilities Revenue Refunding Bonds, Series 2003, and
its Water Supply Facilities Revenue Refunding Bonds (City of Corpus Christi Lake Texana Project), Series 2005, of
which $96,550,000 in aggregate principal amount are outstanding, and include contract payments to the Lavaca-
Navidad River Authority for its Water Supply Facilities Revenue Bonds, Series 1997 and its Water Supply Facilities
Revenue Refunding Bonds (City of Corpus Christi Lake Texana Project), Series 2005, of which $5,515,000 are
outstanding and to cover the City's obligation under a water purchase contract in the amount of $99,944,240 (see
"CITY'S COMBINED SYSTEM FINANCIAL INFORMATION - Obligations Payable From City's Combined
System Revenues"). However, depreciation and payments to the Debt Service Fund and Reserve Fund shall never
be considered Operating Expenses. See Appendix A for a more complete definition of these defined terms.
The Bonds are not secured by or payable from a mortgage or deed of trust on any properties, whether real, personal
or mixed, constituting the City's Combined System. The Bonds do not constitute an indebtedness or general
obligation of the City, are not payable from any funds raised or to be raised by taxation and Owners of the
Bonds shall never have the right to demand payment thereof from the levy of ad valorem taxes or from any
other source not pledged to the payment of the Bonds.
Perfection of Security for the Bonds
Chapter 1208, as amended, Texas Government Code, applies to the issuance of the Bonds and the pledge of the
Pledged Revenues, and such pledge is therefore valid, effective and perfected. Should Texas law be amended while
the Bonds are outstanding and unpaid, the result of such amendment being that the pledge of the Pledged Revenues
is to be subject to the filing requirements of Chapter 9, Texas Business and Commerce Code, in order to preserve to
the registered owners of the Bonds a security interest in such pledge, the City has agreed in the Ordinance to take
such measures as it determines is reasonable and necessary to enable a filing of a security interest in said pledge to
occur.
Flow of Funds
The Ordinance provides that Gross Revenues of the City's Combined System shall be credited to the System Fund
upon receipt, and amounts in the System Fund shall be used to pay Operating Expenses as a first charge against
Gross Revenues. All amounts remaining in the System Fund thereafter shall be applied, on or before the 10th day of
each month, as follows:
(a) First, to make required transfers into the Debt Service Fund in such amounts, in approximately
equal monthly installments, as will be sufficient to pay interest on Priority Bonds on the next
interest payment date, principal on Priority Bonds on the next succeeding principal payment date,
and Amortization Installments in such amounts and times as may be required in any ordinance
authorizing the issuance of Priority Bonds.
(b) Second, to make required transfers into the Reserve Fund to maintain or establish the Required
Amount therein or make up any deficiency; and
Third, for the payment of other City's Combined System obligations, including Subordinated
Obligations, or, at the end of any Fiscal Year, for any other lawful purpose.
(c)
(See "Selected Provisions of the Ordinance - Flow of Funds - Debt Service Fund" in Appendix A.)
Article IV, Section 3 of the City Charter of the City prohibits any transfer of the Net Revenues to any other purpose
except for any utility required debt service.
Reserve Fund
Under the Ordinance, the City is required to maintain a Reserve Fund for the outstanding Previously Issued Priority
Bonds, the Bonds, and each series of Additional Priority Bonds. Following the issuance of each series of Additional
Priority Bonds, unless the Reserve Fund contains the Required Amount, the City agrees to transfer monthly into the
Reserve Fund an amount equal to one -sixtieth (I/60th) of the Average Annual Principal and Interest Requirements
on all outstanding Priority Bonds until the aggregate amount accumulated therein is at least equal to such Average
Annual Principal and Interest Requirements. Amounts in such Reserve Fund shall be used to pay the principal of
and interest on the Priority Bonds at any time when there is not sufficient money available in the Debt Service Fund
for such purposes. The City may substitute a Credit Facility in lieu of cash or Eligible Investments for all or any
part of the Required Amount to be maintained in the Reserve Fund. Deficiencies in the Reserve Fund resulting from
withdrawals or decreases in market value of Eligible Investments are to be made up from the next available Pledged
Revenues within twelve months. The City currently has on deposit in the Reserve Fund both cash and Credit
Facilities to satisfy funding the Required Amount. To satisfy the portion of the Required Amount attributable to the
Bonds, the City will deposit both cash and a Reserve Fund Insurance Policy (defined herein) provided by Assured
Guaranty (defined herein) to the Reserve Fund (see "SECURITY FOR THE BONDS — The Reserve Fund Insurance
Policy").
The Reserve Fund Insurance Policy
Assured Guaranty has made a commitment to issue a financial guaranty insurance policy for deposit to the Reserve
Fund with respect to the Bonds (the "Reserve Fund Insurance Policy"), effective as of the date of issuance of such
Bonds. Under the terms of the Reserve Fund Insurance Policy, Assured Guaranty will unconditionally and
irrevocably guarantee to pay that portion of the scheduled principal and interest on the Bonds that becomes due for
payment but shall be unpaid by reason of nonpayment by the City (the "Insured Payments").
Assured Guaranty will pay each portion of an Insured Payment that is due for payment and unpaid by reason of
nonpayment by the City to the Paying Agent/Registrar, as beneficiary of the Reserve Fund Insurance Policy on
behalf of the holders of the Bonds on the later to occur of (i) the date such scheduled principal or Interest becomes
due for payment or (11) the business day next following the day on which Assured Guaranty receives a demand for
payment therefor in accordance with the terms of the Reserve Fund insurance Policy.
No payment shall be made under the Reserve Fund Insurance Policy in excess of one-half the average annual Debt
Service on the Bonds (the "Reserve Fund Insurance Policy Limit"). Pursuant to the terms of the Reserve Fund
Insurance Policy, the amount available at any particular time to be paid to the Paying Agent/Registrar shall
automatically be reduced to the extent of any payment made by Assured Guaranty under the Reserve Fund Insurance
Policy, provided, that, to the extent of the reimbursement of such payment to Assured Guaranty, the amount
available under the Reserve Fund Insurance Policy shall be reinstated in full or in part, in an amount not to exceed
the Reserve Fund Insurance Policy Limit (as defined in the Reserve Fund Insurance Policy).
The Reserve Fund Insurance Policy does not insure against nonpayment caused by the insolvency or negligence of
the Paying Agent/Registrar.
The Reserve Fund Insurance Policy is not covered by any insurance or guaranty fund established under New York,
California, Connecticut or Florida insurance law.
Rate Covenant
The City has covenanted that it will fix, establish, maintain and collect rates and charges for the use and availability
of the City's Combined System at all times as are necessary to produce Gross Revenues and other Pledged Revenues
in each Fiscal Year equal to the GREATER of either:
A. Amounts sufficient:
(1) to pay all current Operating Expenses plus
(2) to produce Net Revenues for each Fiscal Year at least equal to 1.25 tunes the Average Annual Principal and
Interest Requirements on all Priority Bonds then outstanding; or
B. Amounts sufficient to pay the sum of
(1) all current Operating Expenses;
(2) the Average Annual Principal and Interest Requirements on the then outstanding Priority Bonds;
(3) required deposits to the Reserve Fund for the Priority Bonds; and
(4) amounts required to pay all other obligations of the City's Combined System reasonably anticipated to be
paid from Gross Revenues during the current Fiscal Year.
The foregoing notwithstanding, such rates, charges and fees shall be fixed, established, maintained and collected at a
level sufficient to enable the City to pay debt service on Priority Bonds during the current Year.
(See "Selected Provisions of the Ordinance - General Covenants - Rate Covenant" in Appendix A.)
Additional Bonds
The City has reserved the right to issue one or more series of Additional Priority Bonds for any lawful purpose. See
"CITY'S COMBINED SYSTEM CAPITAL IMPROVEMENT PLAN" for projected issuance of Additional Priority
Bonds. No Additional Priority Bonds may be issued unless each of the applicable following requirements are
satisfied:
A. For All Additional Priority Bonds.
(1) Any additional amounts required to be deposited into the Reserve Fund to attain the Required Amount shall
either be deposited in cash or by means of a Credit Facility upon the delivery of such Additional Priority
Bonds or, at the option of the City, by the deposit of such required additional amount in approximately
equal monthly installments of not less than one -sixtieth (1/60th) of the required additional amount; and
(2) The City Manager (or other City officer having responsibility for the City's financial affairs) shall certify
that the City is not in default as to any covenant, obligation or agreement contained in any ordinance or
other proceeding relating to any obligations of the City payable from and secured by a lien on and pledge
of the Pledged Revenues and the amounts on deposit in all Funds or accounts for all obligations payable
from Pledged Revenues or the amounts then required to be deposited therein.
B. For Additional Priority Bonds For Capital Improvements.
(1) The City shall secure a certificate or opinion of an Accountant to the effect that, according to the books and
records of the City, the Net Eamings for the preceding Year or for 12 consecutive months out of the 15
months immediately preceding the month the ordinance authorizing the Additional Priority Bonds is
adopted are at least equal to 1.25 times the Average Annual Principal and Interest Requirements for all
Priority Bonds after giving effect to the issuance of the Additional Priority Bonds to be issued; or
(2) If the City has outstanding Priority Bonds which were issued for Capital Additions and for which
capitalized interest has been provided for at least 12 months subsequent to the date of issuance of the
Additional Priority Bonds proposed to be issued, the City may (A) satisfy the requirements of Clause C
below, but for such purposes substitute the term Capital Improvements for Capital Additions where the
term Capital Additions appears therein to the extent necessary to give recognition that Capital
Improvements, rather than Capital Additions, are to be financed, and (B) secure the certificate described in
Clause B(l) above with respect to all Priority Bonds other than Priority Bonds issued for Capital Additions
for which capitalized interest has been provided for at least 12 months subsequent to the date of issuance of
the Additional Priority Bonds proposed to be issued.
C. For Additional Priority Bonds For Capital Additions.
(I)
The Engineer of Record shall provide a comprehensive Engineering Report for each Capital Addition to be
financed and that report shall (a) contain detailed estimates of the cost of acquiring and constructing the
Capital Addition, the estimated date of its completion and commercial operation, a detailed analysis of the
financial operations of the system into which the Capital Addition is to be integrated and the City's
Combined System as a whole for the period during the construction and for at least five years after the date
the Capital Addition is estimated to become commercially operative and (b) conclude that the Capital
Addition is necessary and will substantially increase the capacity, or is needed to replace existing facilities,
to meet current and projected demand for the service or product to be provided and the estimated cost of
providing the service or product from the Capital Addition will be reasonable in comparison with projected
costs for furnishing such service or product from other reasonably available sources; and
(2) The Engineer of Record shall provide a certificate to the effect that, based on the Engineering Report
prepared for each Capital Addition, the projected Net Earnings for each of the five years subsequent to the
estimated date the Capital Addition becomes commercially operative will be equal to at least 1.25 times the
Average Annual Principal and Interest Requirements for Priority Bonds then outstanding or incurred and
all Priority Bonds estimated to be issued for all Capital improvements and for all Capital Additions then in
progress or being initiated during the period through the fifth year subsequent to the date the Capital
Addition is estimated to become commercially operative.
Once a Capital Addition has been initiated by meeting the conditions set forth in Clauses C(1) and (2) above, and the
initial Priority Bonds issued are delivered, the City reserves the right to issue additional Priority Bonds to finance the
remaining costs of such Capital Addition in such amounts as necessary to complete the acquisition and construction
thereof and make the same commercially operative without satisfaction of any of the requirements contained in
Clauses C(1) and (2) above provided that the City prepares a forecast of the operations of the City's Combined
System demonstrating the City's Combined System's ability to pay all obligations payable from the Pledged
Revenues to be outstanding after the issuance of such Additional Priority Bonds issued during the five years
subsequent to the latest estimated date such Capital Addition is expected to be commercially operative and the
Engineer of Record reviews such forecast and executes a certificate to the effect that (i) it is reasonable and based
thereon (and such other factors deemed to be relevant) the Pledged Revenues of the City's Combined System will be
adequate to pay all the obligations payable from Pledged Revenues to be outstanding after the issuance of the
Additional Priority Bonds then being issued for the forecast period and (ii) the proceeds from the sale of such
Additional Priority Bonds are estimated to be sufficient to complete such acquisition and construction.
The City, at its option, may issue Additional Parity Bonds for Capital Additions without satisfying the requirements
described in Clause C above if it satisfies the relevant conditions precedent specified in Clause B above.
D. Certain Refunding Bonds.
The requirements in Clauses B or C above shall not apply to issuance of any series of Additional Priority Bonds for
refunding any outstanding Priority Bonds that will not have the result of increasing the debt service in any year in
which there will be debt service on outstanding Priority Bonds both before and after such refunding. The Bonds are
being issued, to finance Capital Improvements and the City therefore must satisfy the test described in Clause B(I)
above as a condition to the issuance of the Bonds.
Subordinated Obligations and Special Facilities Bonds
The City also reserves the right to issue, for any lawful purpose, obligations secured by liens on all or part of the
Pledged Revenues that are junior and subordinate to the lien on Pledged Revenues securing payment of Priority
Bonds. In this regard, the City has established the commercial paper program for the benefit of the City's Combined
System, and the City has authorized the issuance from time to time of Commercial Paper Notes in an amount at any
one time outstanding not to exceed $75,000,000. Currently, the City has $-0- in Commercial Paper Notes
outstanding. The City also reserves the right to issue Special Facilities Bonds secured by liens on and pledges of
revenues and proceeds derived from Special Facilities, which shall not be considered Gross Revenues of the City's
Combined System.
BONDHOLDERS' REMEDIES
If the City defaults in the payment of principal, interest, or redemption price on the Bonds when due, or if it fails to
make payments into any fund or funds created in the Ordinance, or defaults in the observation or performance of any
other covenants, conditions, or obligations set for in the Ordinance, the registered owners may seek a writ of
mandamus to compel City officials to carry out their legally imposed duties with respect to the Bonds, if there is no
other available remedy at law to compel performance of the Bonds or Ordinance and the City's obligations are not
uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles, so rests with the
discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Bonds in the
event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The
Ordinance does not provide for the appointment of a trustee to represent the interest of the bondholders upon any
failure of the City to perform in accordance with the terms of the Ordinance, or upon any other condition and
accordingly all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be
financed by, the registered owners. On June 30, 2006, the Texas Supreme Court ruled in Tooke v. City of Alexia,
197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by
statute in "clear and unambiguous" language. Because it is unclear whether the Texas legislature has effectively
waived the City's sovereign immunity from a suit for money damages, bondholders may not be able to bring such a
suit against the City for breach of the Bonds or the Ordinance. Chapter 1371, as amended, Texas Government Code
("Chapter 1371"), which pertains to the issuance of public securities by issuers such as the City, permits the City to
waive sovereign immunity in the proceedings authorizing the issuance of the Bonds. Notwithstanding its reliance
upon the provisions of Chapter 1371 in connection with the issuance of the Bonds (as further described under the
caption "INTRODUCTION"), the City has not waived the defense of sovereign immunity with respect thereto.
Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against
the City's property. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S.
Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented
by a specifically pledged source of revenues, such as the Pledged Revenues, such provision is subject to judicial
construction. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court
approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought
protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability
to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in
Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary
powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will
note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified with respect to the
customary rights of debtors relative to their creditors.
THE BONDS
Description
The Bonds will be dated March 1, 2009 (the "Dated Date") and will be issued in principal denominations of $5,000
or any integral multiple thereof. The Bonds will bear interest from the Dated Date at the rates shown on the inside
cover page of this Official Statement. Interest on the Bonds will be calculated on the basis of a 360 -day year of
twelve 30 -day months and is payable semiannually on January 15 and July 15 of each year, commencing July 15,
2009, until maturity or prior redemption. The Bonds will mature on July 15 in the years and in the principal
amounts set forth on the inside cover page of this Official Statement.
Interest on the Bonds is payable to the registered owners appearing on the bond registration books of the Paying
Agent/Registrar on the Record Date (identified below) and such interest shall be paid by the Paying Agent/Registrar
(i) by check mailed by the Paying Agent/Registrar on or before the interest payment date to the registered owners of
record as of the Record Date or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by,
and at the expense and risk of, the registered owner. The principal of and interest on the Bonds shall be payable at
the corporate office of the Paying Agent/Registrar in Dallas, Texas (the "Designated Trust Office") upon
presentation and surrender of the Bonds.
If the date for any payment due on any Bond is a Saturday, Sunday, legal holiday, or day on which banking
institutions in the city in which the designated 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 which
is not such a day. The payment on such date shall have the same force and effect as if made on the original date
payment was due.
Initially, the Bonds will be registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -
Entry -Only System described herein. No physical delivery of the Bonds will be made to the owners thereof.
Notwithstanding the foregoing, as long as the Bonds are held in the Book -Entry -Only System, principal of, premium
(if any), and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co., which will make
distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial
owners of the Bonds (see "BOOK -ENTRY -ONLY SYSTEM" herein).
Optional Redemption
The Bonds maturing on and after July 15, 2019 are subject to redemption, at the option of the City, at the par value
thereof plus accrued interest, in whole or in part, in the principal amount of $5,000 or any integral multiple thereof
on July 15, 2018, and on any date thereafter. The years of maturity of the Bonds called for redemption shall be
selected by the City. If less than all of the Bonds are redeemed within a stated maturity at any time, the Bonds to be
redeemed shall be selected by the Paying Agent/Registrar at random and by lot or other customary method in
multiples of $5,000 within any stated maturity.
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Mandatory Redemption
The Bonds stated to mature on July 15, 2029, July 15, 2033, and July 15, 2039 (such Bonds, collectively, the "Term
Bonds") are subject to mandatory sinking fund redemption prior to their stated maturities in part, by lot or other
customary method, at the principal amount thereof plus accrued interest to the date of redemption in the following
principal amounts on July 15 in each of the years as set forth below:
Term Bonds Stated to Mature on July 15, 2029 Term Bonds Stated to Mature on July 15, 2033
Principal Principal
Year Amount ($) Year Amount ($)
2028 3,475,000 2030 3,850,000
2029 3,655,000* 2031 4,050,000
2032 4,265,000
2033 4,485,000*
Term Bonds Stated to Mature on July 15 2039
Principal
Year Amount ($)
2034 4,725,000
2035 4,975,000
2036 5,245,000
2037 5,525,000
2038 5,825,000
2039 6,135,000*
* stated maturity
The principal amount of a Term Bond required to be redeemed pursuant to the operation of such mandatory
redemption provisions shall be reduced, at the option of the City, by the principal amount of any Term Bonds of
such stated maturity which, at least 50 days prior to the mandatory redemption date (1) shall have been defeased or
acquired by the City and delivered to the Paying Agent/Registrar for cancellation, (2) shall have been purchased and
canceled by the Paying Agent/Registrar at the request of the City with money in the Debt Service Fund (but not the
Reserve Fund), or (3) shall have been redeemed pursuant to the optional redemption provisions set forth above and
not theretofore credited against a 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 each registered owner of a Bond to be redeemed, in whole or in
part, at the address of the Holder appearing on the registration books relating to the Bonds kept by the Paying
Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY
NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY
GIVEN IRRESPECTIVE OF WHETHER ONE OR MORE BONDHOLDERS FAILED TO RECEIVE SUCH
NOTICE.
All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be
redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be
redeemed, (iii) state the redemption price, (iv) state the Bonds, or the portion of the principal amount thereof to be
redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion
of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and
(v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall
be made at the designated corporate trust office of the Paying Agent/Registrar only upon presentation and surrender
thereof by the registered owner. If a Bond is subject by its terms to redemption and has been called for redemption
and notice of redemption thereof has been duly given or waived as provided in the Ordinance, such Bond (or the
principal amount thereof to be redeemed) so called for redemption shall become due and payable, and on the
redemption date designated in such notice, interest on said Bond (or the principal amount thereof to be redeemed)
called for redemption shall cease to accrue and such Bond shall not be deemed to be Outstanding.
The Paying Agent/Registrar and the City, so long as a Book -Entry -Only System is used for the Bonds, will send any
notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Bonds
only to DTC (hereinafter defined). Any failure by DTC to advise any DTC participant, or of any DTC participant or
indirect participant to notify the beneficial owner, shall not affect the validity of the redemption of the Bonds called
for redemption or any other action premised on any such notice. Redemption of portions of the Bonds held by the
City will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement,
through its Book -Entry -Only System, a redemption of such Bonds held for the account of DTC participants in
accordance with its rules or other agreements with DTC participants and then DTC participants and indirect
participants may implement a redemption of such Bonds from the beneficial owners. Any such selection of Bonds
to be redeemed will not be governed by the Ordinance and will not be conducted by the City or the Paying
Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any responsibility to DTC participants,
indirect participants or the persons for whom DTC participants act as nominees, with respect to the payments on the
Bonds or the providing of notice to DTC participants, indirect participants, or beneficial owners of the selection of
portions of the Bonds for redemption. See "BOOK -ENTRY -ONLY SYSTEM" herein.
Defeasance
The Ordinance provides that any Bond will be deemed paid and shall no longer be considered to be outstanding
within the meaning of the Ordinance when payment of principal of and interest on such Bond to its stated maturity
or redemption has been made or provided for by depositing with a paying agent, in trust, any combination of
(1) money in an amount sufficient to make such payment and/or (2) Government Securities having such maturities
and interest payment dates and bearing such interest as will, without further investment or reinvestment of either the
principal amount thereof or the interest earnings therefrom, be sufficient to make such payment. The Ordinance
provides that "Government Securities" means (A) direct, noncallable obligations of the United States of America,
including obligations that are unconditionally guaranteed by the United States of America, (B) noncallable
obligations of any agency or instrumentality of the United States of America, including obligations that are
unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by
a nationally recognized investment rating first no less than "AAA" or its equivalent, and (C) noncallable obligations
of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and
that are rated as to investment quality by a nationally recognized investment rating firm not less than "AAA" or its
equivalent.
Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid for
purposes of applying any limitation or indebtedness. Ager firm banking and financial arrangements for the
discharge and final payment 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 tenns of the Bonds are
extinguished; provided, however, the City has reserved the option, to be exercised at the time of the defeasance of
the Bonds, to call for redemption at an earlier date those Bonds which have been defeased to their maturity date, if
the City (i) in the proceedings providing for the finn 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 staking of the firm banking and financial arrangements, and (iii) directs that notice of the
reservation be included in any redemption notices that it authorizes.
Paying Agent/Registrar
The principal of the Bonds will be paid to the registered owner at maturity or prior redemption upon presentation to
the Paying Agent/Registrar, which initially is The Bank of New York Mellon Trust Company, N.A., at the
Designated Trust Office. Interest on the Bonds will be paid to registered owners shown on the records of the Paying
Agent/Registrar on the Record Date (see "THE BONDS - Record Date for Interest Payment"), and such interest will
be paid by check sent by United States mail, first-class postage prepaid, to the address of such registered owner
appearing on the registration books of the Paying Agent/Registrar or by such other customary banking arrangements
acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered owner.
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Successor Paying Agent/Registrar
The City reserves the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the
City, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same
capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar selected by the City shall
be a bank, a trust company, financial institution, or other entity duly qualified and legally authorized to serve and
perform the duties of Paying Agent/Registrar for the Bonds. Upon a change in the Paying Agent/Registrar for the
Bonds, the City shall promptly cause a written notice thereof to be sent to each registered owner of the Bonds by
United States mail, first-class postage prepaid, which notice shall give the address of the new Paying
Agent/Registrar.
Record Date for Interest Payment
The record date ("Record Date") for determining the registered owner entitled to the receive payment of interest on
a Bond on any interest payment date is the last business day of the month next preceding each interest payment date.
In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date
for such interest payment (a "Special Record Date") will be established by the Paying Agent/Registrar, if and when
funds for the payment of such interest have been received. 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 of a Bond appearing on the Register at the close of business on the last business day next
preceding the date of mailing of such notice.
Ownership
The City, the Paying Agent/Registrar, and any other person may treat the person in whose name any Bond is
registered as the absolute owner of such Bond for the purpose of making and receiving payment of the principal
thereof and premium, if any, thereon, and for the further purpose of making and receiving payment of the interest
thereon, and for all other purposes, whether or not such Bond is overdue. Neither the City nor the Paying
Agent/Registrar shall be bound by any notice or knowledge to the contrary. All payments made to the person
deemed to be the owner of any Bond in accordance with the Ordinance shall be valid and effective and shall
discharge the liability of the City and the Paying Agent/Registrar for such Bond to the extent of the sums paid.
Transfers and Exchanges
So long as any Bonds remain outstanding, the Paying Agent/Registrar shall keep the registration books at the
Designated Trust Office in which, subject to such reasonable regulations as it may prescribe, the Paying
Agent/Registrar shall provide for the registration and transfer of the Bonds in accordance with the terms of the
Ordinance.
Each Bond shall be transferable only upon the presentation and surrender thereof at the Designated Trust Office of
the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an assignment duly executed by the
owner or his authorized representative in a form satisfactory to the Paying Agent/Registrar. Upon due presentation
and surrender of a Bond for transfer, the Paying Agent/Registrar is required to authenticate and deliver in exchange
therefor, under such reasonable regulations as the Paying Agent/Registrar may prescribe, a new Bond or Bonds,
registered in the name of the transferee or transferees, in authorized denominations and of the same maturity, in the
principal amount of $5,000 or any integral multiple thereof, and bearing interest at the same rate as the Bond or
Bonds so presented and surrendered.
All Bonds shall be exchangeable upon the presentation and surrender thereof at the Designated Trust Office of the
Paying Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in any authorized
denomination, in such aggregate principal amount as discussed above equal to the unpaid principal amount of the
Bond delivered in accordance with the Ordinance and shall be entitled to the benefits and security of the Ordinance
to the same extent as the Bond or Bonds in lieu of which such Bond is delivered.
The Paying Agent/Registrar may require the owner of any Bond to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with the transfer or exchange of such Bond. Any
reasonable standard or customary fee or charge of the Paying Agent/Registrar for a conversion or exchange shall be
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paid by the one requesting such conversion or exchange, except that the City shall pay such fee or charge in the case
of the conversion or exchange of an assigned and transferred Bond.
Replacement Bonds
If any Bond is mutilated, destroyed, stolen or lost, a new Bond of like kind and in the same amount as the Bond so
mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Bond, such new Bond will be delivered
only upon surrender and cancellation of such mutilated Bond. In the case of any Bond issued in lieu of and in
substitution for a Bond which has been destroyed, stolen, or lost, such new Bond will be delivered only (a) upon
filing with the City and the Paying Agent/Registrar evidence satisfactory to establish to the City and the Paying
Agent/Registrar that such Bond has been destroyed, stolen or lost and proof of the ownership thereof, and (b) upon
furnishing the City and the Paying Agent/Registrar with Bond or indemnity satisfactory to them. The person
requesting the authentication and delivery of a new Bond must comply with such other reasonable regulations as the
Paying Agent/Registrar may prescribe and pay such expenses as the Paying Agent/Registrar may incur in connection
therewith.
SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds will be applied as follows:
Sources of Funds
Principal Amount of Bonds
Net Original Issue Discount
Accrued Interest
Total Sources of Funds
Uses of Funds
Deposit to Project Fund
Deposit to Debt Service Fund
Deposit to Reserve Fund
Issuance Expenses, including Bond Insurance and Surety Bond Premiums and Contingency
Underwriters' Discount
Total Uses of Funds
BOOK -ENTRY -ONLY SYSTEM
$ 96,490,000.00
(795,218.55)
407,856.13
$ 96,102,637.58
$ 90,000,000.00
407,856.13
3,196,293.15
1,950,707.50
547,780.80
$ 96,102,637.58
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, New York, New York
("DTC) while the Bonds are registered in its nominee name. The information in this section concerning DTC and
the Book Entry Only System has been provided by DTC for use in disclosure documents such as this Official
Statement. The City believes the source of such information to be reliable, but takes no responsibility for the
accuracy or completeness thereof
The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Bonds,
or redemption or other notices, to DTC Participants, (2) DTC Participants or others will 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 United States 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 maturity of such issue, 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 -
entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement
of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The
Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities
Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC
is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both
U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on
file with the United States Securities and Exchange Commission. More information about DTC can be found at
www.dtcc.com and www.dtc.org.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of
DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of
DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,
which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a
credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in Bonds, except in the event that use of the book -entry system for the Bonds is discontinued.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect
Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Redemption notices will be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless
authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts Bonds arc credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, principal, and interest payments on the Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the
Paying Agent/Registrar, on the payment date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Paying Agent/Registrar, or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds,
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principal, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized
representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such
payments to Direct Participants will be the responsibility of DTC; and disbursement of such payments to the
Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as 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, Bonds are required to be printed and delivered. The City may decide to discontinue use
of the system of book -entry -only transfers through DTC (or a successor securities depository). In that event, Bonds
will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book -entry system has been obtained from DTC, 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 Direct or Indirect 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, payment or notices
that are to be given to registered owners under the Ordinance will be given only to DTC.
BOND INSURANCE
The following information is not complete and reference is made to Appendix E for a specimen of the financial
guaranty insurance policy (the "Policy") of Assured Guaranty Corp. ("Assured Guaranty" or the "Insurer").
The Insurance Policy
Assured Guaranty has made a commitment to issue the Policy relating to the Bonds, effective as of the date of
issuance of such Bonds. Under the terms of the Policy, Assured Guaranty will unconditionally and irrevocably
guarantee to pay that portion of principal of and interest on the Bonds that becomes Due for Payment but shall be
unpaid by reason of Nonpayment (the "Insured Payments"). Insured Payments shall not include any additional
amounts owing by the Issuer solely as a result of the failure by the Paying Agent/Registrar to pay such amount when
due and payable, including without limitation any such additional amounts as may be attributable to penalties -or to
interest accruing at a default rate, to amounts payable in respect of indemnification, or to any other additional
amounts payable by the Trustee or the Paying Agent by reason of such failure. The Policy is non -cancelable for any
reason, including without limitation the non-payment of premium.
"Due for Payment" means, when referring to the principal of the Bonds, the stated maturity date thereof, or the date
on which such Bonds shall have been duly called for mandatory sinking fund redemption, and does not refer to any
earlier date on which payment is due by reason of a call for redemption (other than by mandatory sinking fund
redemption), acceleration or other advancement of maturity (unless Assured Guaranty in its sole discretion elects to
make any principal payment, in whole or in part, on such earlier date) and, when referring to interest on such Bonds,
means the stated dates for payment of interest.
"Nonpayment" means the failure of the Issuer to have provided sufficient funds to the Paying Agent/Registrar for
payment in full of all principal and interest Due for Payment on the Bonds. It is further understood that the term
Nonpayment in respect of a Bond also includes any amount previously distributed to the Holder (as such term is
defined in the Policy) of such Bond in respect of any Insured Payment by or on behalf of the Issuer, which amount
has been recovered from such Holder pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction that such payment constitutes an avoidable preference
with respect to such Holder. Nonpayment does not include nonpayment of principal or interest caused by the failure
of the Paying Agent/Registrar to pay such amount when due and payable.
Assured Guaranty will pay each portion of an Insured Payment that is Due for Payment and unpaid by reason of
Nonpayment, on the later to occur of (i) the date such principal or interest becomes Due for Payment, or (ii) the
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business day next following the day on which Assured Guaranty shall have received a completed notice of
Nonpayment therefor in accordance with the terms of the Policy.
Assured Guaranty shall be fully subrogated to the rights of the Holders of the Bonds to receive payments in respect
of the Insured Payments to the extent of any payment by Assured Guaranty under the Policy.
The Policy is not covered by any insurance or guaranty fund established under New York, California, Connecticut or
Florida insurance law.
The Insurer
Assured Guaranty is a Maryland -domiciled insurance company regulated by the Maryland Insurance Administration
and licensed to conduct financial guaranty insurance business in all fifty states of the United States, the District of
Columbia and Puerto Rico. Assured Guaranty commenced operations in 1988. Assured Guaranty is a wholly
owned, indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda -based holding company whose shares are
publicly traded and are listed on the New York Stock Exchange under the symbol "AGO." AGL, through its
operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, structured
finance and mortgage markets. Neither AGL nor any of its shareholders is obligated to pay any debts of Assured
Guaranty or any claims under any insurance policy issued by Assured Guaranty.
Assured Guaranty is subject to insurance laws and regulations in Maryland and in New York (and in other
jurisdictions in which it is licensed) that, among other things, (i) limit Assured Guaranty's business to financial
guaranty insurance and related lines, (ii) prescribe minimum solvency requirements, including capital and surplus
requirements, (iii) limit classes and concentrations of investments, (iv) regulate the amount of both the aggregate
and individual risks that may be insured, (v) limit the payment of dividends by Assured Guaranty, (vi) require the
maintenance of contingency reserves, and (vii) govern changes in control and transactions among affiliates. Certain
state laws to which Assured Guaranty is subject also require the approval of policy rates and forms.
Assured Guaranty's financial strength is rated "AAA" (stable) by Standard & Poor's, a division of The McGraw-
Hill Companies, Inc., "AAA" (stable) by Fitch, Inc. and "Aa2" (stable) by Moody's Investors Service, Inc. Each
rating of Assured Guaranty should be evaluated independently. An explanation of the significance of the above
ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell
or hold any security, and such ratings are subject to revision or withdrawal at any time by the rating agencies. Any
downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of any
security guaranteed by Assured Guaranty. Assured Guaranty does not guaranty the market price of the securities it
guarantees, nor does it guaranty that the ratings on such securities will not be revised or withdrawn.
A. Recent Developments
On November 14, 2008, AGL announced that it had entered into a definitive agreement to purchase Financial
Security Assurance Holdings Ltd. ("FSA"), the parent of financial guaranty insurance company Financial Security
Assurance, Inc. For more information regarding the proposed acquisition by AGL of FSA, see the Annual Report
on Form 10-K filed by AGL with the Securities and Exchange Commission (the "SEC") on February 26, 2009.
B. Capitalization of Assured Guaranty Corp.
As of December 31, 2008, Assured Guaranty had total admitted assets of $1,803,146,295 (unaudited), total liabilities
of $1,425,012,944 (unaudited), total surplus of $378,133,351 (unaudited) and total statutory capital (surplus plus
contingency reserves) of $1,090,288,113 (unaudited) determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. As of December 31, 2007, Assured Guaranty had total
admitted assets of $1,361,538,502 (audited), total liabilities of $961,967,238 (audited), total surplus of $399,571,264
(audited) and total statutory capital (surplus plus contingency reserves) of $982,045,695 (audited) determined in
accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. The
Maryland Insurance Administration recognizes only statutory accounting practices for determining and reporting the
financial condition and results of operations of an insurance company, for determining its solvency under the
Maryland Insurance Code, and for determining whether its financial condition warrants the payment of a dividend to
its stockholders. No consideration is given by the Maryland Insurance Administration to financial statements
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prepared in accordance with accounting principles generally accepted in the United States in making such
determinations.
C. Incorporation of Certain Documents by Reference
The portions of the following documents relating to Assured Guaranty are hereby incorporated by reference into this
Official Statement and shall be deemed to be a part hereof:
The Annual Report on Form 10-K of AGL for the fiscal year ended December 31, 2008 (which was filed by AGL
with the SEC on February 26, 2009); and
All consolidated financial statements of Assured Guaranty and all other information relating to Assured Guaranty
included in documents filed by AGL with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, subsequent to the date of this Official Statement and prior to the termination of
the offering of the Bonds shall be deemed to be incorporated by reference into this Official Statement and to be a
part hereof from the respective dates of filing such consolidated financial statements.
Any statement contained in a document incorporated herein by reference or contained herein under the heading
"BOND INSURANCE -The Insurer" shall be modified or superseded for purposes of this Official Statement to the
extent that a statement contained herein or in any subsequently filed document which is incorporated by reference
herein also modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Official Statement.
Copies of the consolidated financial statements of Assured Guaranty incorporated by reference herein and of the
statutory financial statements filed by Assured Guaranty with the Maryland Insurance Administration are available
upon request by contacting Assured Guaranty at 1325 Avenue of the Americas, New York, New York 10019 or by
calling Assured Guaranty at (212) 974-0100. In addition, the information regarding Assured Guaranty that is
incorporated by reference in this Official Statement that has been filed by AGL with the SEC is available to the
public over the Internet at the SEC's web site at http://www.sec.gov and at AGL's web site at
http://www.assuredguaranty.com, from the SEC's Public Reference Room at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the office of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
Assured Guaranty makes no representation regarding the Bonds or the advisability of investing in the Bonds. In
addition, Assured Guaranty has not independently verified, makes no representation regarding, and does not accept
any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding Assured
Guaranty supplied by Assured Guaranty and presented under the headings "BOND INSURANCE" and "SECURITY
FOR THE BONDS — The Reserve Fund Insurance Policy".
CITY'S COMBINED SYSTEM
The City's Combined System was established by the 1990 Ordinance as a combined utility system which now
includes the City's existing water, wastewater, storm water, and gas systems. The following is a description of the
three original components, plus the storm water drainage utility system, of the City's Combined System. The City
has also included a description of its Storm water Drainage System as the City Council pursuant to an ordinance
adopted on April 29, 2008 authorized the inclusion of its storm water drainage utility system to be a component part
of the City's Combined System.
Description of City's Water System
Service Area. The City's water system serves not only the City of Corpus Christi, but also provides water to
several municipalities, water districts, and industries within a 70 -mile radius of the City. The service arca is a
relatively dry region of South Texas bordering on the Gulf of Mexico, with heaviest rainfall and stream flow in the
spring and fall.
Water Supply. The City's water supply is drawn from the Nueces River Basin, the Lavaca River Basin and the
Colorado River Basin.
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The Nueces River Basin has three principal rivers: the Atascosa River, the Frio River and the Nueces River. The
Atascosa and Frio Rivers join the Nueces River above the City of Three Rivers and are impounded by the Wesley E.
Seale Dam (Lake Corpus Christi Reservoir). The Frio River, which is above the confluence of the Atascosa and
Frio Rivers, is impounded by Choke Canyon Dam (Choke Canyon Reservoir). Lake Corpus Christi Reservoir was
completed in 1958 and has a surface area of 18,256 acres with a storage capacity of 257,260 acre-feet at 94 feet
MSL (mean sea level). Choke Canyon Reservoir was completed in 1982 and has a surface area of 25,733 acres with
a storage capacity of 695,271 acre-feet at 220.5 feet MSL.
For planning purposes, the Nueces River Basin is treated as a single hydrologic unit. The Nueces River Basin
covers 16,950 square miles.
The City is the largest water right holder in the Nueces River Basin and the largest user of water from the Lake
Corpus Christi/Choke Canyon Reservoir water supply system.
When Choke Canyon Reservoir was being developed in the 1970's, it was estimated that the combined firm annual
yield of the Choke Canyon/Lake Corpus Christi Reservoir system would be enough supply to meet the region's
needs through the year 2030. However, by 1990, a water supply planning study for the Nueces River Basin
determined that the firm annual yield was significantly less than originally estimated and that additional water
supplies would be necessary much sooner than had previously been expected.
These findings led to a regional water supply planning study in 1991 that investigated potential water transfers from
the Lavaca River Basin and the Colorado River Basin. The study recommended that the City acquire additional
water supplies from Lake Texana, on the Navidad River in the Lavaca River Basin, and from the Garwood Irrigation
Company (Colorado River) in the Colorado River Basin. In 1992, the City entered into purchase options with the
Lavaca-Navidad River Authority ("LNRA") for an annual purchase of water from Lake Texana and with the
Garwood Irrigation Company for the purchase of senior water rights in the Colorado River.
At the same time, the City began a comprehensive, regional water supply planning study designed to determine the
long-term water needs of the Corpus Christi service area and to detennine the most feasible water supply options
available to meet those needs. This study was part of the Trans -Texas Water Program, which had been conceived by
the Texas Water Development Board ("TWDB") as a means of planning for the long-term water supply needs of
several major metropolitan areas it had identified as potentially having water shortages within the not too distant
future. The cities participating in the Trans -Texas Water Program included Houston, San Antonio, Corpus Christi,
and Austin.
Phase II of the Trans -Texas Water Program Study for the Corpus Christi Service Area was completed in November,
1995, before the full impact of the drought discussed below was known. It estimated that the then firm annual yield
of 181,106 acre feet per year for the Choke Canyon/Lake Corpus Christi Reservoir system would meet the demands
in the service area until approximately 2008 and that by the year 2050 the region would need an additional 91,000
acre feet per year of water supply to meet its municipal and industrial water needs.
The Trans -Texas study investigated 22 water supply alternatives, eventually recommending an integrated water
supply plan that incorporated both developments of additional water supplies and reduction in water demand
through water conservation measures. Two of the options recommended for immediate implementation were
accelerated water conservation and a modified Fresh Water Inflow Operating Plan for the Nueces Estuary, which
was implemented under the Texas Commission on Environmental Quality (formerly known as the Texas Natural
Resource Conservation Commission) ("TCEQ") Agreed Order of April 1995. The other two primary water supply
options recommended for implementation in the near term were the transfers of water to the City from Lake Texana
and the Garwood Irrigation Company water rights in the Colorado River.
In December 1993, the City entered into the LNRA Contract to purchase up to 41,840 acre-feet of water from Lake
Texana. In addition, the City exercised its option to purchase from the Garwood Irrigation Company 35,000 acre-
feet per year of senior water rights from the Colorado River. This purchase was contingent upon Garwood's
amendment of its water right to allow the transfer and use of this water in the Corpus Christi service area. Garwood
filed an application with the TCEQ for an amendment which was granted on October 7, 1998. The City paid the
Garwood Irrigation Company the full purchase price of $15,750,000 less option payments and other expenses paid
to Garwood through the date of the amendment. In the FY 1998-99 Capital Budget, City Council authorized
payment with a loan of $14 million dollars from the debt reserve of the Choke Canyon Fund to the Public Law Trust
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Fund. This loan was repaid at the actual interest rate earned by the Tnist Fund in three annual payments, of which
the final payment was made on July 31, 2001. The Lake Corpus Christi/Choke Canyon Reservoir system with Lake
Texana and Colorado River Water has a year 2050 system firm yield of 241,700 -acre feet.
The Corpus Christi region experienced a severe drought, which, in fact, may be the new drought of record, starting
in 1993 and ending in 2002.
Due to the severity of the drought in 1996 the City decided to build the pipeline from Lake Texana to Corpus Christi
immediately rather than wait until the years 2005-2007, as originally anticipated. The City entered into agreements
with the Nueces River Authority ("NRA") and the Port of Corpus Christi Authority (the "Port") to build a 101 mile
water delivery system that would transport water from Lake Texana to the City's O. N. Stevens Water Treatment
Plant. Under these agreements, the City guaranteed repayment of bonds sold by NRA to fund the pipeline design,
right-of-way acquisition, and pipeline construction. NRA engaged the Port to manage the entire project. Upon
completion of this project, the City would operate and maintain the pipeline.
Under this regional partnership arrangement, a 101 mile, 64 inch pipeline of concrete/steel pressure pipe with an
ultimate capacity of 107,800 acre feet per year was designed, manufactured, and installed within approximately two
years. All 15,000 plus joints of pipe were laid within one twelve month period. The route involved nine major
stream crossings, two of which were done by directional drilling. One of the crossings currently stands as the
longest and largest diameter directional boring successfully completed in the United States. Three pump stations
were constructed, a primary pump station at Lake Texana and two booster stations along the route.
On September 29, 1998, the Lake Texana to Corpus Christi pipeline was dedicated as the Mary Rhodes Pipeline in
honor of the late Mary Rhodes who, as Mayor of the City, championed the project during her tenure in office and
died shortly after the first joints of pipe were laid in June of 1997. Work to acquire a route and permit a pipeline to
convey the Colorado River water to the Mary Rhodes Pipeline is in its preliminary stages.
The City has acquired 12,000 acre-feet of interruptible water from the LNRA. "Interruptible" water is water that is
available from that system beyond the system firm yield. It is estimated that 4,500 acre-feet will be available 87%
of the time based on historical data, while 7,500 acre-feet has a 70% availability. The interruptible contracts will
track the original contract for the firm 41,840 acre-feet of water. The base term ends in 2035 with an option to the
City for a 50 year extension.
The City is also pursuing the possible acquisition of an additional 10,592 acre-feet of firm yield from the LNRA
system and is also investigating the use of groundwater along the Mary Rhodes Pipeline.
City's Drought Contingency Plan and Impact. In 2001 the TCEQ Agreed Order that defines the operation of the
two reservoir system in regards to Bay & Estuary inflows was further refined to include the ability on the part of the
City to go to reduced inflow requirements upon reaching 30% and 40% storage capacities. At the 40% storage
capacity the City can reduce required inflows to 1,200 acre-feet target by implementing a prohibition against
watering lawns between the hours of 10 a.m. and 6 p.m. At a 30% storage capacity, the City can reduce Bay &
Estuary Inflow targets to zero by implementing a rule that keeps the time of day prohibition and also includes a
prohibition against lawn watering any more often than five days. These changes were made in exchange for the City
implementing a construction project consisting of a Nueces River Overflow Channel and a pipeline to divert water
to a specified location within the Rincon Bayou area. The Rincon Bayou is an area that is being brought back into a
condition that will allow it to again function as a nursery area for aquatic species.
Water Production and Distribution. "Raw" water is processed at the O.N. Stevens Water Treatment Plant located
in the northwest end of Corpus Christi. The plant is currently rated at 167 million gallons per day ("MGD")
production capacity. To ensure that the Plant can operate during electrical outage periods, the City has on-line at the
Plant the ability to generate 6 megawatts of electricity.
The City has four ground storage reservoir pump stations and four elevated storage tanks with a total distribution
system storage of 63.15 million gallons. The elevated storage tanks are used to provide emergency storage and to
absorb peak demand loads.
The water distribution system has approximately 1,445 miles of pipe ranging in size from 2 inches to 60 inches.
- 17 -
Water Customers. The City of Corpus Christi is a regional water supplier in that in addition to the "raw" water
used by the City for its own customers, the City sells "raw" water and "treated" water on a wholesale basis.
Approximately 125,000 acre-feet of raw water is diverted on an annual basis by all customers (City included).
The City sells "raw" water to the Alice Water Authority (City of Alice), the Beeville Water Supply District (City of
Beeville), the City of Mathis, Flint Hills Resources Refinery (formerly Koch Refinery), and Hoechst -Celanese.
The City sells "treated" water to the South Texas Water Authority (Cities of Kingsville, Bishop, Agua Dulce,
Banquete, Driscoll and Ricardo), Nueces County Water Control & Improvement District Number 4 (City of Port
Aransas) and the Violet Water Supply Corporation.
The City sells "raw" and "treated" water to the San Patricio Municipal Water District (Cities of Odem, Taft,
Gregory, Portland, Ingleside, and Rockport).
Such "treated" and "raw" wholesale water sales are generally provided pursuant to long term contracts for "treated"
water and perpetual contracts for "raw" water.
Re -Engineering. Vast changes have recently been undertaken by the Water Department ranging from
organizational changes effected through re-engineering to improvements in technology, plant, and infrastructure.
Consequently, Water Department managed costs are currently equivalent to costs incurred in 1995-96, prior to
adjustment for inflation.
In addition sixty-two positions have been eliminated over the past three years. Staffing ranged from a high of 232 in
the 1999-2000 fiscal year to 170 in the 2004-2005 fiscal year. Vacancies, in addition to other reductions and a
continued investment in infrastructure and technology, reduced controllable operation and maintenance costs. These
reductions reflect a new understanding of competitive business practices, and represent an important first step in
identifying operations and maintenance cost saving opportunities. Other potential budget reductions are anticipated
as the Water Department continues to improve operating efficiency and maintenance performance.
In addition, as part of the re-engineering program, the Water Department piloted a new computerized Work
Management Program (or computerized maintenance management system). This new work management system is
part of a three -pronged strategy to improve productivity: 1) new organizational strategies, including work force
cross -training; 2) new business practices, including more systematic work planning and scheduling; and 3) new
technology, including a computerized Work Management System.
The new Work Management System was installed at the O.N. Stevens Water Treatment Plant, Wesley Seale Dam,
and Choke Canyon Reservoir during April 2002. Private sector companies operating public utilities commonly use
such systems. During the Fall of 2003, implementation was completed for the Water Distribution activity. The
Work Management System portion of the reengineering effort is complete.
System Improvements. The Wesley E. Seale Dam, which impounds Lake Corpus Christi Reservoir, has gone
through two major rehabilitation projects. In 1995 all of the Spillway Crest Gates were rehabilitated and were
strengthened to be able handle the Probable Maximum Flood (PMF) event, and in 2001, a project to ensure that the
dam had the proper stability safety factor was completed. Existing emergency generator sets have recently been
replaced to give reliable emergency power to the dam.
The Bureau of Reclamation, which designed and built the Choke Canyon Dam, conducts periodic inspections. The
City is in the process of implementing the recommendations enumerated in the Bureau's latest inspection report.
The Bureau has given the Choke Canyon Dam an excellent rating.
The City completed several projects in 2001 that enhanced the ability of the O.N. Stevens Water Treatment Plant to
produce drinking water that meets not only today's requirements but also upcoming requirements. Some of these
projects included the total renovation of the filtration portion of the process and the rehabilitation of half of the
basins in which the sedimentation process occurs. Pending projects include a total renovation of the filter backwash
system and the revamping of the existing SCADA system, a more efficient control of the production process and the
distribution process.
- 18 -
In the Distribution System, the Water Department has embarked on a Transmission Main project that will go from
the O. N. Stevens Water Treatment Plant to Padre/Mustang Island. The initial phase included the installation of 60
inch, 54 inch, and 48 inch diameter pipes to a pump station recently constructed in the Southside of Corpus Christi
and a portion of a 42 inch diameter pipe leaving the pump station. The 60 inch portion of the Project, which is 8.5
miles in length, is complete, as well as the 54 inch and 48 inch portions. The entire project was targeted for
completion by 2008. The total length will be well over 40 miles.
In addition to the Pump Station constructed on the Southside, two existing pump stations (Caldwell and Savage
Lane) have been replaced by the North Navigation Pump Station on the Westside. The pump station located on
Padre Island is being totally rehabilitated and replaced by a new pump station. Other improvements to the Padre
Island area include a new elevated storage tank and a 500,000 gallon Aquifer Storage and Recovery (ASR) project
designed to off -set seasonal peak water demand on the Padre Island.
Description of City's Storm water Drainage System
Service Area. The storm water drainage system service area is located within the City limits.
Storm water Collection System. Corpus Christi's storm water collection system consists of approximately 100
miles of major open drainage ditches, 765 miles of minor roadside ditches, 18,300 inlets, 6,000 manholes, 1,800
miles of curb and gutter, 2 storm water pump stations, 5 storm surge protection levee gates, 44 flap gates (primary
and secondary), 107 bridges, 1,800 acres of drainage and street right-of-way, and 1,000 miles of underground drain
pipes. The drainage pipes range from 12-72 inches and consist mainly of reinforced concrete pipe (RCP), and
smaller quantities of corrugated metal pipe (CMP), and PVC. The City's Storm water Department staff has
maintenance/repair and operations responsibilities for the drainage system. Maintenance includes mowing of
approximately 1,800 acres of drainage and street right-of-way, ditch grading, erosion repair, cleaning of inlets and
catch basins, removing debris from ditches, repairing/replacing curb and gutter, headwalls, wing walls and other
concrete components, bridge repairs, and maintenance and operation of pump stations' pumps, engines, and
auxiliary equipment.
Environmental Requirements. In 1995, the City, along with its co -permittees Del Mar College, Texas A&M
University -Corpus Christi, the Port, and the Texas Department of Transportation - Corpus Christi, was issued a
five-year National Pollutant Discharge Elimination System (NPDES) permit to allow discharge of storm water
runoff from the Municipal Separate Storm Sewer System (MS4) into the waters of the United States. The City has
submitted an application for the renewal of MS4 permit to the TCEQ. Storm water Department staff administers
several storm water quality management programs under the NPDES permit including Wet Weather Monitoring,
Improper Disposal Inspection, and Construction Site Inspection. Staff also responds to hazardous material spills
within the City by providing back-up to and coordinating efforts with the City's Fire Department's Hazardous
Material Response Team to minimize the impact to the environment.
System Improvements. Major infrastructure improvements are identified in the City's FY 2006-2016 short -and
long-range Storm water Drainage Capital Improvement Plan (CIP) plan. Drainage system improvement projects
include earthen and concrete -lined channels enhancements, right-of-way acquisitions, rehabilitation/replacement of
drainage system appurtenants, system capacity enhancements, storm water quality management projects,
construction of storm water pump stations, curb and gutter replacement, and bridge rehabilitation/replacement. One
major CIP project is the Storm water Master Plan. The objective of this project is to create a comprehensive master
plan that establishes policies, identifies priorities, and sets standards for drainages and future infrastructure
development.
Description of City's Wastewater System
Service Area. The wastewater system service area is located primarily within the City limits.
Wastewater Customers. Currently, the wastewater system has approximately 82,711 customers. Inside City
Limits Single Family Residential wastewater customers pay for wastewater service based on their average winter
consumption of water. This winter average will be used for one full year with the next year's rates being adjusted to
recover the average of the prior three years' revenue from these customers, thus eliminating revenue Fluctuations due
to changes in water consumption.
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Wastewater Collection System. Corpus Christi's wastewater collection system consists of over 1,262 miles of
gravity mains interwoven with approximately 85 miles of force mains, 17,430 manholes, and 96 lift stations. The
collection system provides service to approximately 82,711 customers in a 137 square mile area. The collection
system consists of a myriad of clay, fiberglass, cast and/or ductile iron, asbestos cement and reinforced concrete, and
PVC lines ranging in size from 2.5 inch diameter (for force mains) to 60 inch diameter (for trunk mains). City
wastewater employees assume the responsibility of maintenance, repair and rehabilitation for every aspect of the
wastewater collection system except for that portion on private property. On an annual basis, wastewater staff with
the assistance of service contractors responds to nearly 12,390 customer calls, install over 400 clean -outs, repair,
replace or rehabilitate about 220 manholes, CCTV inspects 50 miles of mains, and clean over 1.2 million feet of
wastewater mains.
Wastewater Treatment. The City owns and operates six wastewater treatment plants with a combined treatment
capacity of 44.7 MGD (million gallons/day). Five of the treatment plants utilize the activated sludge process with
the sixth using a two stage trickling filter system. Each of these plants is in compliance with applicable State and
Federal law.
System Improvements. In FY 2007-2008, the average aggregated daily flow at the City's wastewater treatment
plant averaged 30.6 MGD (million gallons per day), which is 68% of the aggregate permitted capacity of all the
treatment plants. The City is negotiating the purchase of a site for a new wastewater treatment plant to replace the
existing Broadway wastewater treatment plant. The new plant is scheduled to be constructed on the existing site by
2010-2012. Currently, the Wastewater Department has fully implemented a Computerized Maintenance
Management System (CMMS), as another method to improve the efficiency of the maintenance and repair effort of
the work force. As of January 2003, all data is collected in this Maximo/GIS work management system to assist in
addressing Capacity Management, Operations, and Maintenance (CMOM) regulations anticipated to be added to
wastewater discharge permits. During the past two years, the Wastewater Department has accepted over 25 miles of
new collection infrastructure from accelerated subdivision growth.
Other major projects, which the City will commence in the near future, that will benefit the environment and
improve service to rate payers include:
• Collection system rehabilitation and enhancement projects to reduce Inflow/Infiltration (I/1) flows and,
restore capacity as a multi-year program;
• Construct facilities required to increase the rated treatment capacity of the Greenwood Wastewater
Treatment Plant from 8 MGD to 12 MGD;
• Process improvements at the Oso Wastewater Treatment Plant to increase efficiency of treatment, and
ensure environmental compliance, including electrical systems upgrades, final clarifier rehabilitation, and
emergency power generation;
• Multiple lift station/force main upgrades to provide for continuing capacity to accommodate growth of the
community [Marina T -heads, Buckingham, Kennedy, McBride, Lens, Cimarron, and North Clarkwood Lift
Stations];
• Replacing the lift station and adjacent infrastructure around the Broadway plant, to upgrade for the
expansion of the convention center, new baseball stadium and downtown growth;
• Developing a number of sub -basin Wastewater Master Plans to update, supplement or replace the 20 year
old documents.
Re -Engineering. The Wastewater Department initiated organizational changes to make improvements in
operational efficiency.
Fifty-one positions have been eliminated over the past five years. Staffing ranged from a high of 228 in the 1999-
2000 fiscal year to 177 in the 2005-2006 fiscal year. Various cost control strategies, including continued investment
in infrastructure and technology, have kept controllable operation and maintenance costs level for over six years.
- 20 -
The Wastewater Department has implemented CMMS, as another method to improve the efficiency of the
maintenance and repair efforts of the work force. All plants, lift stations and Collection System activities are using
this work management system.
The Collection System heavily supports land development through review of system design unified development
code to facilitate development plan acceptance.
Wastewater Department staff also plays a significant role in reviewing proposed development requirements,
proposed system extension design, and development of new and/or revised unified development codes, as required
to facilitate review and acceptance of private development.
Description of City's Gas System
Service Area. The gas system serves the City as well as a few areas immediately outside the City limits. The
service territory covers about 180 square miles and extends 40 miles from northwest Calallen to Padre Island. Most
of the growth in the last five years has been in the northwest and south sections of the City and on Padre Island.
Gas Customers. As of July 31, 2008, the gas system is serving 54,537 active customers of which about 95% are
residential and the balance are commercial and industrial accounts. Residential sales account for about 50% of total
revenue. The City's rate structure for all gas customers allows the City to pass through to its customers all costs of
gas purchased by adding the cost of gas to the cost of service.
Gas Supply. The gas system currently receives 100% of its supply from one source, National Energy and Trade,
L.L.C. About 85% of this supply is delivered to the City through two principal city gate stations into the Corpus
Christi System; the remainder flows through three smaller purchase points to serve the Annaville/Calallen System,
the Padre Island System and the North Beach System. Total gas load requirements vary from about 5 MMCFD in
summer to about 37 MMCFD in the winter with peaks near 80 MMCFD during sustained freezes. The gas supply
for the Corpus Christi System is taken from National Energy and Trade's South Shore Pipeline. This line extends
along the west and south sides of the City from the Leopard Street/Corn Products area to the Barney Davis C.P. & L.
Power Plant in Flour Bluff. The City is obligated to pay only for gas actually delivered at a cost based on a
benchmark price, adjusted daily in proportion to a published index. The existing gas purchase contract became
effective July 1, 2006, and will continue in force until June 30, 2011.
Gas Distribution. The gas system consists of about 1129 miles of coated steel mains of various sizes up to 16 -inch,
all under cathodic protection and about 162 miles of polyethylene mains. The Gas Department normally installs 10
to 15 miles of main each year including the replacement of 1 to 3 miles of main. There are 93 pressure regulating
stations that maintain proper gas supply and pressure to 31 separate districts.
System Improvements. The City anticipates construction over the next three years of approximately 67,500 feet of
transmission main which will connect the Corpus Christi System with the Annaville/Calallen System. This will
enhance the City's deliverability of natural gas to the Annaville/Calallen System through the existing Corpus Christi
System and supply points already in place.
City's Combined System Management and Employees
Management. The Water, Wastewater, Storni water, and Gas, Departments are all under the supervision of the
Assistant City Manager for Public Work and Utilities.
Gustavo Gonzalez, P.E. - Water Director
Mr. Gonzalez holds a Bachelor of Science degree in Civil Engineering from Texas A & M University and is a
licensed Professional Engineer. Mr. Gonzalez has worked for the City of Corpus Christi in the Water Department
for one year. Previously, he was employed as a Vice President of operations for the San Antonio Water System, and
then went to work in the private sector as a consulting engineer. He retired as a Lieutenant Colonel from the Army
Reserve in 2007 with 27 years of service. During that period, he was deployed to Bosnia-Herzgovina and
Afghanistan.
-21 -
Foster Crowell - Director of Wastewater Services
Mr. Crowell holds a Bachelor of Arts degree in Political Science from the University of Texas/Pan American at
Edinburg. He holds a Class "A" water license and a Class "A" wastewater license from the Texas Commission on
Environmental Quality. Mr. Crowell has 39 years of municipal public works experience, including 29 years with
the City of Corpus Christi Wastewater Department. Prior to his appointment as Director of Wastewater Services in
April 1999, he served as the Assistant Wastewater Superintendent since January 1980. Previously, he worked for
the cities of Kingsville and Raymondville, Texas. Throughout his career, he has been active in professional/industry
organizations at the local, state, and national level, and served on numerous boards and committees. He currently
serves on the State Board, Water Environment Association of Texas, as a director.
Valerie H. Gray, P.E. - Director of Storm water Operations
Ms. Gray holds a Bachelor of Science degree in Civil Engineering from the University of Notre Dame in Indiana
and is a Registered Professional Engineer. After graduation from the University of Notre Dame, she worked for
Texaco USA. She has been with the City for 21 years and worked in the Housing and Community Development and
the Traffic Engineering Departments before transferring to the Water Department where she fulfilled the
responsibilities of Water Construction and Water Distribution Superintendents. Ms. Gray was promoted to Director
of Storm water Operations in 1995.
Deborah A. Marroquin, P.E. - Gas Superintendent
Ms. Marroquin holds a Bachelor of Science degree in Natural Gas Engineering from Texas A&I University and is a
Registered Professional Engineer. Ms. Marroquin has worked for the City for 21 years, her prior experience
includes working for Exxon Co., USA, as a Reservoir Engineer. After gaining experience in several activities in the
Gas Department, she worked in the City Manager's Office, was acting Budget Director and currently assists with
projects. Ms. Marroquin was promoted to Director of Gas Operations in January 1995.
Employees. As of July 31, 2008, the number of budgeted employees of the Gas, Water, Storm Water and
Wastewater Divisions were as follows:
Gas Department
Water Department
Wastewater Department
Storm water Department
136 employees
66 employees
162 employees
77 employees
No Labor Unions. The employees of the City' Combined System are not organized as a collective bargaining unit
and under current State law have no legal authority to so organize.
Employee Pension Plan and Benefits. The City's employees participate in the Texas Municipal Retirement
System. This plan, the contributions made to this plan, and the City's unfunded pension fund liability are further
described in Note 9 in Appendix B hereof.
Post -Employment Health Care Benefits.
GASB Statement No, 45; Accounting and Financia/ Reporting by Employers for Postemployment Benefits Other
than Pensions (OPEB), established new accounting standards for postretirement benefits. The new standard does not
require funding of OPEB expense, but any difference between the annual required contribution (ARC) and the
amount funded during the year is required to be recorded in the employer's financial statement as an increase (or
decrease) in the net OPEB obligation. The effective date for implementation of GASB 45 by the City of Corpus
Christi is August 1, 2007, Accordingly, the City did obtain an actuarial valuation in accordance with GASB 45
standards as of August 1, 2007, and discloses the following:
Plan Description and Funding Policy
Employees who retire from the City of Corpus Christi, and eligible dependents and survivors, arc eligible to
continue to participate in the City's health insurance programs at the "blended" employee group rate which is
detennined annually by the City of Corpus Christi and approved by the City Council. Retirees have 31 days to elect
- 22 -
to enroll in the City's self-funded health insurance plan (Citicare, Citicare Public Safety, and Citicare-Fire) in which
they were participating at the time of retirement unless otherwise stated in a plan document or collective bargaining
agreement. As of July 31, 2008, a total of 562 eligible retirees and dependents were participating in the City's group
health program detailed as follows:
Citicare 304
Citicare Public Safety 135
Citicare Fire 117
Pending election 6
Total 562
The City provides no funding for any portion of the premiums after retirement. However, the City recognizes that
there is an "implicit subsidy" arising as a result of the blended rate premium since retiree health care costs, on
average, are higher than active employee healthcare costs. The plan is not accounted for as a trust fund as an
irrevocable trust has not been established to fund the plan, The plan does not issue a separate financial report.
Annual OPEB Cost and Net OPEB Obligation
The City's annual other post -employment benefit (OPEB) cost is calculated based on the annual required
contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB
Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal
costs each year and to amortize any unfunded actuarial liabilities over a period not to exceed 30 years. The City's
annual OPEB cost for each plan for the current year is as follows:
Citicare Public
Citicare ($) Safety ($) Citicare Fire ($) Total ($)
Annual required contribution 3,109,043 1,502,603 1,853,004 6,464,650
Interest on net OPEB obligation --- --- --- ---
Annual OPEB cost 3,109,043 1,502,603 1,853,004 6,464,650
Contributions made (pay-as-you-go basis) 628,619 455 812 541,837 1,626,268
Increase in net OPEB obligation 2,480,424 1,046,791 1,311,167 4,838,382
Net OPEB obligation - beginning of year --- --- --- ---
Net OPEB obligation - end of year 2,480,424 1,046,791 1,311,167 4,838,382
CITY'S COMBINED SYSTEM OPERATIONS
City Water System Statistics
The following table sets forth the volume of treated and untreated water sold by the City through the City's
Combined System to various types of customers in each of the City's most recent five fiscal years:
Table 1
Water Sales (in Million Gallons)
(Fiscal Years Ended July 31)
2004 2005 2006 2007j4t 2008
TREATED WATER
Inside City
Residential 0) 5,677 6,445 7,295 6,267 6,926
Commercial(?) 4,429 4,863 5,227 4,461 4,967
Industrial 769 891 856 797 768
Other (3) 1,344 901 1,062 204 895
Subtotal 12,219 13,100 14,440 11,729 13,556
Outside City Retail
Residential(1)
Commercial(?)
9 10 9 8 7
512 526 553 637 602
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Water Sales (in Million Gallons)
(Fiscal Years Ended July 31)
2004 2005 2006 2007(4) 2008
Industrial 7,637 7,971 8,107 7,229 7,453
Other (3) 1 2 2 0 2
Subtotal 8,159 8,509 8,671 7,874 8,064
Outside City Wholesale
Total Treated Water
UNTREATED WATER
TOTAL
()
(2)
(3)
(4)
2,146
2,116 2,329
2,329 2,066
22,524 23,725 25,440 21,932 23,686
10,699 11,933 13,432 10,559 10,996
33,223 35,658 38,872 32,491 34,682
Includes one and two family residences.
Includes Multifamily (over two family) residential.
Includes hospitals, schools, churches, municipal and other governmental uses.
The City received 20 inches of rainfall in July, 2007. That significantly reduced the amount of water sales in 2007.
The following table sets forth the total revenues from sales of treated and untreated water made to various
types of customers through the City's Combined System in each of the City's most recent five fiscal years:
TREATED WATER
Inside City
Water Sales (In Dollars)(4)
(Fiscal Years Ended July 31)
2004 ($) 2005 ($) 2006 ($)
2007 ($) (r)
Table 2
2008 ($)
Residential(I) 19,578,988 23,184,566 27,319,581 24,663,645 27,110,928
Cotnmercial121 11,192,159 13,466,454 14,972,250 14,682,916 15,773,225
Industrial 1,377,505 1,676,672 1,648,847 1,531,722 1,635,226
Other (3) 2,422,121 1,871,185 2,157,998 1,888,962 2,241,596
Subtotal 34,570,773 40,198,877 46,098,676 42,767,245 46,760,975
Outside City
Retail
Residential(1) 51,369 61,082 60,800 52,310 52,118
Commercial(2) 1,672,036 1,916,637 2,072,308 2,427,229 2,429,184
Industrial 15,826,479 17,304,567 17,712,195 16,679,866 19,368,983
Other 3) 7,528 9,860 12,093 10,509 14,120
Subtotal 17,557,412 19,292,146 19,857,396 19,169,914 21,864,405
Outside City Wholesale 3,542,226 3,650,949 4,108,677 3,870,334 3,927,324
Total Treated Water 55,670,411 63,141,972 70,064,749 65,807,493 72,552,704
UNTREATED WATER") 9,421,481 11,315,672 12,007,127 9,318,916 10,505,130
TOTAL 65,091,892 74,457,644 82,071,876 75,126,409 83,057,834
ui
Includes one and two family residences.
Includes multifamily (over two family) residential.
Includes hospitals, schools, churches, municipal and other governmental use
Prepared from City's Combined System records on a cash basis and therefore will not agree with the financial statements in Appendix B
which are prepared on an accrual basis.
The City received 20 inches of rainfall in July, 2007. That significantly reduced the amount of water sales in 2007.
- 24 -
The following table sets forth the number of the City's Combined System water customers of each type for
treated and untreated water at the end of each of the City's most recent five fiscal years:
Number of Water Customers (Fiscal Years Ended July 31)
TREATED WATER 2004 2005 2006 2007 2008
Inside City
Residential (I) 75,114 75,353 77,761 76,735 78,124
Commercial() 7,026 6,976 7,135 6,701 7,183
Industrial 4 3 3 4 22
Other(') 538 1,118 1,129 2,262 1,112
Subtotal 82,682 83,450 86,028 85,701 86,441
Outside City Retail
Residential () 83 87 83 82 79
Commercial(?) 148 144 146 143 143
Industrial 20 15 16 19 22
Other (3) 2 2 2 2 2
Subtotal 253 248 247 246 246
Outside City Wholesale 3 3 3 3 3
Total Treated Water 82,938 83,701 86,278 85,950 86,690
UNTREATED WATER 6 6 6 6 6
TOTAL 82,944 83,707 86,284 85,956 86,696
Table 3
Includes one and two family residences.
Includes multifamily (over two family) residential, and commercial.
Includes hospitals, schools, churches, municipal and other governmental use. In some cases, individual governmental entities may have
multiple accounts as a result of multiple facilities.
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The following table sets forth the largest retail and wholesale purchasers of treated and untreated water
from the City's Combined System as of the end of its two most recent fiscal years:
Largest Water Customers (Based on Revenues)
(Fiscal Year Ended July 31)
Table 4
2007 (8) 2008 (8)
Retail Treated Water
Valero Refining Company (5580 Up River Road) 5,043,145 5,211,258
Lyondell (formerly Equistar; formerly Oxy)° 4,020,355 4,211,798
Citgo Refining (East) 2,935,157 2,908,798
Valero Refining (formerly Coastal States Petroleum) 1,160,740 1,995,118
Flint Hills Resources Refining - East Plant (formerly Koch) 1,322,438 2,235,295
Flint Hills Resources Refining - West Plant (formerly Koch) 1,024,120 1,027,603
Citgo Refining (West) 871,350 878,733
Valero Refining (5445 Up River Road) 715,142 619,470
Public Works (Naval Air Station Corpus Christi) 597,696 544,708
Javalena Refining 568,862 563,991
Total 18,259,005 20,196,772
Wholesale Treated Water
San Patricio Municipal Water District 2,035,452 1,075,881
South Texas Water Authority 941,130 10,167,596
Nueces County Water Control District No. 4 977,717 805,677
Total 3,954,299 12,049,154
Wholesale Untreated Water
San Patricio Municipal Water District 5,685,946 8,213,203
Beeville Water Supply District 992,344 748,136
Alice Water Authority 659,162 1,344,975
City of Mathis 162,432 3,525,308
Various Industrial Customers(2) 1,946,177 960,760
Total 9,446,061 14,792,382
111
On January 6, 2009, Lyondell Chemical Company ("Lyondell") filed for bankruptcy reorganization under Chapter 11 of the United States
Bankruptcy Code. One of the City's largest taxpayers, Equistar Chemicals LP (`Equistar"), an operator of a petroleum refinery, is a
subsidiary of Lyondell, and is also included in the Chapter 11 bankruptcy filing. The City is assessing the financial impact of this event.
While the City is reviewing its options for fiscal year 2010, it anticipates receiving payment of the Equistar delinquent taxes, as Equistar has
recently consolidated operations at other Gulf Coast refineries to the Corpus Christi location, but the City cannot predict when it will
receive payment of the 2008 taxes, or the impact of the bankruptcy filing on future tax years, or any adverse consequences from the national
rating agencies.
Flint Hills Resources, Celanese.
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The following table sets forth selected statistics relevant to the capacity and operations of the City's Water
Supply System in each of its most recent five fiscal years:
Table 5
Water System Statistics
(Fiscal Years Ended July 31)
2004 2005 2006 2007 2008
Rainfall (inches) (I) 40.89 23.46 34.98 43.42 27.41
Water Supply:
System Firm Yield in acre feet 183,160 183,160 216,000 216,000 216,000
System Demand in acre feet 112,254 124,908 127,411 102,614 104,239
Water Production:
Rated Capacity in Million Gallons per Day 167 167 167 167 167
Maximum Daily Demand in Million Gallons per Day 99 105 105 98 109
Water Distribution:
Unaccounted for Percentage (%) 9.0 9.0 12.0 13.0 9.06
Per Capita Consumption in Gallons Per Day(�) 123 115 121 114 121
111 Rainfall measured at Corpus Christi International Airport as of July 31 of each year. This measurement does not reflect rainfall elsewhere
in the Nueces River Basin Watershed.
121 This represents treated water uses minus industrial uses and wholesale treated water sales.
Wastewater System Statistics
The following table sets forth the largest users of wastewater from the City's Combined System as of the
end of its two most recent fiscal years:
Table 6
Ten Largest Wastewater Customers
(Fiscal Years Ended July 31)
2007 ($) 2008 ($)
Sam Kane Meat Packing Co. 646,459 625,845
Texas A & M University - Corpus Christi 106,340 119,704
TRT Development Company - Omni Bayfront Hotel 92,570 111,414
The Shores Apartments 63,642 67,023
The Wharf Apartments 52,496 64,542
Spohn South Hospital 50,764 81,711
Walnut Ridge Apts. 53,806 63,172
TRT Development - Omni Marina Hotel 50,381 71,854
Nueces County Courthouse 47,038 68,133
Driscoll Children's Hospital 44,703 52,466
[The remainder of this page intentionally left blank.)
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The following table sets forth the number of residential and commercial wastewater customers from the
City's Combined System as of the end of its five most recent fiscal years:
Inside City
Outside City
TOTAL
Table 7
Number of Wastewater Customers
(Fiscal Years Ended July 31)
2004 2005 2006 2007 2008
Residential 72,131 72,464 74,482 73,672 75,090
Commercial 6,631 6,615 6,993 7,404 6,702
Residential 4 4 4 2 1
Commercial (I) 22 23 22 15 21
78,788
79,106 81,501
(I) Includes multi -family (over two families) residential, commercial, industrial, and public agencies.
81,903 81,814
The following table sets forth the amount of wastewater that was treated at each of the City's Wastewater
Facilities as of the end of its most recent five fiscal years.
Table 8
Wastewater Treated (Millions of Gallons)
Fiscal Years Ended July 31
2004 2005 2006 2007 2008
Plant
Broadway 1,683 1,531 1,508 1,669 1,724
Oso 4,588 4,299 4,201 4,719 4,275
Greenwood 2,026 2,182 2,183 2,380 2,369
Allison 1,230 1,071 1,089 1,165 955
Laguna Madre 775 699 631 777 717
Whitecap 477 468 417 461 476
Total 10,780 10,252 10,029 11,171 10,516
Daily Average (MGD) 29.5 28.1 27.5 31.0 28.8
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- 28 -
System:
City Gas System Statistics
The following table sets forth the most recent annual gas purchases and sales from the City's Combined
Annual Gas Purchases and Sales
(Fiscal Years Ended July 31)
2007 2008
Average Day Mcf 9,463 8,779
Maximum Day Mcf 37,887 28,180
Purchases Mcf 3,454,105 3,201,268
Sales Mcf 3,350,085 3,101,913
Lost & Unaccounted-for Gas % 3.01% 3.20%
Table 9
The following table sets forth the number of gas customers for the City's Combined System as of the end of
its two most recent fiscal years:
Gas Customers
(Fiscal Years Ended July 31)
2007 2008
Residential 52,042 51,813
Commercial 2,599 2,474
Hospitals, Schools, & Churches 366 238
Industrial Customers 2 2
Active Customers 55,009 54,537
Table 10
The following table sets forth the largest gas customers for the City's Combined System as of the end of its
two most recent fiscal years:
Table 11
Ten Largest Gas Customers
(Fiscal Years Ended July 31)
2007 ($) 2008 (S)
Public Works (NAS) 1,755,613 1,551,305
Spohn Hospital Shoreline 677,846 680,370
Driscoll Children's Hospital 538,556 569,587
Bay Area Medical Center 323,117 473,080
H.E. Butt Grocery 406,784 419,552
Spohn Memorial hospital 311,065 328,400
Sam Kane Meat Packing Co. 1,739,239 1,831,131
H. E. Butt Bakery 266,354 339,563
TAMUCC - Central Plant 231,732 194,946
Spohn Hospital South 236,661 227,781
Total 6,486,967 6,615,715
CITY'S COMBINED SYSTEM RATES
Ratemaking
The City Council of the City has the power to establish and increase rates for service provided by the City's
Combined System, subject to some contractual limitations and subject to the limited regulatory jurisdiction
discussed below. In setting water, wastewater and gas rates, the City is bound by the legal requirement that such
rates must be reasonable, equal, and uniform and that no free service may be allowed, except at the discretion of the
- 29 -
City Council for certain public buildings and facilities operated by the City. By law, the City must charge and
collect rates sufficient to pay all operating, maintenance, depreciation, replacement, betterment, and interest charges
of the Combined Utility System and to maintain an interest and sinking fund sufficient to pay any bonds or notes
issued to purchase, construct, or improve the Combined Utility System or any outstanding indebtedness of the
Combined Utility System.
Rates for sales of water to other political subdivisions on a wholesale basis, and certain appeals of rates for outside -
City customers, are subject to the jurisdiction of the Texas Commission on Environmental Quality ("TCEQ"). By
law, however, the TCEQ may not fix a rate which is less than the amount required to meet the debt service and bond
coverage requirements of the City's water facilities. Certain disputes as to sales of surface water may also be
subject to the jurisdiction of the TCEQ. Gas rates are subject to appeal to the Texas Railroad Commission.
In setting rates, the City Council of the City must consider, among other things, the current federal guidelines
regarding user charges and certain charges required of federal construction grant recipients under the Clean Water
Act. Usage of the City's wastewater facilities is not metered for rate purposes. Instead, wastewater rates are based
upon water usage for all customers except Single Family Residential Inside City Limits customers. Those
customers' wastewater rates are based upon winter water usage, and the overall rate is adjusted annually to
compensate for increases or decreases in average winter consumption.
The magnitude and frequency of rate increases will depend upon factors such as the rate at which Combined Utility
System and maintenance and operating expenses increase in the future, the interest rate on Combined Utility System
revenue bonds sold to meet the Combined Utility System future capital requirements, the extent to which Combined
Utility System revenue bonds are used to meet those capital requirements, the volume of water and gas sold, and
future changes in environmental requirements.
City's Charter Amendment Regarding Rates
On January 19, 1991, the residents of the City voted to approve an amendment to the City Charter of the City, the
effect of which would be to limit the amount of rate increase for each utility service operated by the City in any
fiscal year to six percent over the rate charged the preceding year. The amendment further provides that a higher
rate may be adopted on a temporary basis for the next fiscal year if all members of the City Council declare an
emergency. In 1996, the City Council approved the billing of raw water cost increases by the purported 6% per
annum charter limit.
In 1995, the City contracted with the Nueces River Authority ("NRA") for the financing, acquisition, and
construction of the Lake Texana Pipeline. In that contract (the "NRA Contract") the City covenanted "to fix and
collect such rates and charges for services to be supplied by the City's Combined Utility System as will produce
revenues at all times during the term of the NRA Contract in an amount at least equal to (i) all of the expenses of
operation and maintenance of the City's Combined Utility System, including specifically its payments under the
NRA Contract an the contracts specified in Table 20 hereof, and (ii) all other amounts as required by law and the
provisions of the ordinances or resolutions authorizing the City Priority Bonds or other obligations now or hereafter
outstanding payable, in whole or in part, from the revenues of the City's Combined Utility System, including the
amounts required to pay all principals of and interest on such Priority Bonds and other obligations". The NRA filed
a bond validation suit to validate the NRA Contract and its bonds. Ex Parte Nueces River Authority, No. 96 -11-
20066 -CV, 38°i District Court, Uvalde County, Texas. In its Final Judgment issued December 31, 1996, validating
the NRA Bonds and the NRA Contract, the Court held: "7. IT IS FURTHER ORDERED, ADJUDGED AND
DECREED that Article IX, Section I0(a) of Corpus Christi's City Charter [the rate cap provision] is invalid and
void because it is inconsistent and in conflict with State law in violation of Article XII, Section 5 of the Texas
Constitution, including but not limited to Articles 1111-1118, Texas Revised Civil Statutes, and Sections 13.139,
13.182, 13.183, and 13.250(a) of the Texas Water Code; because it constitutes illegal arbitrary ratemaking, because
it violates the duty of a public utility to provide adequate service at fair and sufficient rates; and because it
unconstitutionally impairs obligations of the City of Corpus Christ[i], said impairment being in violation of Article I,
section 10, cl. 1 of the United States Constitution. ***10. IT IS FURTHER ORDERED, ADJUDGED AND
DECREED that the NRA Contract requires the City of Corpus Christi to fix and collect such rates and charges for
services to be supplied by the City's Combined Utility System as will produce revenues at all times during the term
of the NRA Contract sufficient to pay all expenses of operation and maintenance of the City's Combined Utility
System and principal and interest of the Priority Bonds, and nothing in the City Charter, including but not limited to
- 30 -
Article IX, Section 10(a) and Article 1, Section 4, or in State law, limits or restricts the ability of the City Council of
the City of Corpus Christi to fix reasonable, equal, and uniform rates for the City's Combined Utility System
sufficient to pay all operating and maintenance expenses of the City's Combined Utility System and to pay principal
and interest on the Priority Bonds."
Billings and Collections
Users are billed monthly based on metered water and gas consumption. A bill is payable 21 days after the date on
which the statement of account was mailed, and late payments incur a 5% penalty if paid after the next bill date. If a
user fails to make payment on or before the 218' day after the bill is mailed, the City sends a second written notice
regarding disconnecting for non-payment and restating the amount owed.
Approximately 45 days after the initial bill is mailed, a City field representative is dispatched to the user's address to
cut off City services. A user may be required to post a cash deposit, or in some cases, a surety bond in lieu of a cash
deposit for continued service if the user demonstrates a history of delinquency. The deposit is based on an average
of two months consumption. If a user liable for Combined System charges leaves the premises to which such
charges are applicable, the user will not be furnished service by the Combined System at a new premises occupied
by such user until all charges are paid.
Recent and Future Changes in Rate Structure
Prior to January 1, 1997, costs of raw water, water treatment, water distribution, and administrative costs were
recovered through graduated block rates for each category of customer. Beginning January 1, 1997, retail water
customers are charged raw water charges in addition to posted block rates fixed to recover costs of treatment,
distribution, and billing. The raw water charges are calculated annually based on projected raw water costs,
projected total consumption, and an annual "true up" adjustment. Raw water costs include all expenses associated
with developing, acquiring, or delivering raw water. Therefore all costs associated with raw water are "passed
through" to water customers with this charge.
A Cost of Service based rate model for water was adopted effective August 1, 2008, which bases rates for different
classes of customers on the cost of system components serving that customer class. Among other changes, the new
rates eliminate declining block rates and remove all storm water support from outside -City water rates. In April,
2008, City Council approved an ordinance establishing a Storm water Utility which is a component of the Combined
Utility System. The Storm water Utility is supported by inside -City water rates during FY2008-2009. Impervious
cover data by parcel is currently being developed for use in setting up stone water fees to be implemented next
fiscal year, subject to adoption by the City Council.
Rate Increases
When water charges were split between raw water costs and cost of service block rates, the posted cost of service
block rates were reduced to provide substantially the same aggregate annual revenue from each class of customer as
under prior rates before changes in raw water costs. However, the separate raw water charge is intended to permit
increased raw water costs associated with financing and operating the Nueces River Authority Pipeline Project and
other future water projects to be allocated among the City water customers in proportion to their water usage. To
fund all Combined Utility System projects currently in the 2009 Capital budget and Capital Improvement Planning
Guide, future rate increases will be required as noted on the financial Projections table.
Water Rates
Current Rates. The raw water rate for FY2008-2009 is $0.899 per 1000 gallons for rate paying customers and
$1.068 for contract customers.
Posted retail cost of service block rates arc composed of a fixed minimum charge based on meter size and an
additional charge based on consumption. The posted cost of service block rates (excluding raw water charges) are
set forth in the following table:
-31 -
Table 12
Retail Posted Cost of Service Water Rate
Inside Outside
Minimum Monthly Charge Meter Size Inches City Limits City Limits
5/8 x 3/4 (Residential) $8,550 $10,260
5/8 x 3/4 (Commercial) 12,330 14,800
1 18,500 22,200
I % 30,840 37,000
2 61,670 74,000
3 98,670 118,410
4 197,340 236,810
6 308,350 370,020
8 and larger 616,700 740,040
Large Volume
First 10,000,000 Gallons 16,028,000 16,744,00
Over 10,000,000 Gallons 1,647 1,506
Residential Customers
First 2,000 gallons Minimum Minimum
Next 4,000 gallons $2.795 $1.501
Next 4,000 gallons 3.493 1.876
Next 5,000 gallons 4.017 2.157
Next 15,000 gallons 4.891 2.626
Next 20,000 gallons 5.939 3.189
Next 50,000 gallons 6.463 3.471
Over 100,000 gallons 6.987 3.752
Cost Per Cost Per
Commercial/Industrial 1 000 Gallons 1 000 Gallons
First 2,000 gallons Minimum Minimum
Over 2,000 gallons $3.493 $1.876
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- 32 -
Wastewater Rates
Current Rates. Wastewater rates, which are based upon water consumption during the winter months for Single
Family Residential customers and upon current water consumption for all other customers, are summarized in the
following table (for customers with 250 parts per million or less of biochemical oxygen demand, and 250 parts per
million or less of suspended solids).
(Effective August 1, 2008)
Class Inside City Limits
One family minimum $18.226/month
for first 2,000 gallons
One family maximum $102.958/month
up to 25,000 gallons
Commercial minimum $26.862/month
for first 2,000 gallons
Outside City Limits
$23.599/month
for first 2,000 gallons
$199.181/month
up to 25,000 gallons
$33.578/month
for first 2,000 gallons
Table 13
The charges in addition to the above minimums, as well as the charge for all other wastewater users, will be
computed as dollars per one thousand (1,000) gallons of water used as follows:
Inside City Limits
One Family Residential
Commercial
Outside City Limits
One Family Residential
Commercial
Cost per 1,000 Gallons
3.684
2.856
7.634
5.718
Table 14
Additional charges for customers with 250 parts per million or more of biochemical oxygen demand or 250 parts per
million or more of total suspended solids are $0.2784 per pound and $0.1999 per pound respectively.
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- 33 -
City's Gas Rates
Current Rates. Gas rates are based on consumption in thousand cubic feet (MCF). Gas rates are summarized in
the following table.
Residential Customer Rates
(Effective August 1, 2008)
Winter (Mid -November through Mid -April)
Meter Charge
First 1 Mcf per month or less
Next 2 Mcf per month
Next 7 Mcf per month
Next 5 Mcf per month
Next 35 Mcf per month
All over 50 Mcf per month
Minimum Monthly Bill
Summer (Mid -April through Mid -November)
Meter Charge
First 1 Mcf per month or less
Next 2 Mcf per month
Next 5 Mcf per month
Next 2 Mcf per month
Next 28 Mcf per month
All over 38 Mcf per month
Minimum Monthly Bill
Seasonal
Meter Charge
First
Next
Next
Next
All over
Minimum Monthly Bill
Winter
Meter Charge
First
Next
Next
Next
Next
Next
Next
Next
Next
Next
All over
Minimum Monthly Bill
Rates Partial Year Customers
1 Mcf per month or less
2 Mcf per month
7 Mcf per month
30 Mcf per month
40 Mcf per month
Commercial Customer Rates
(Effective August 1, 2008)
1 Mcf per month or less
2 Mcf per month
7 Mcf per month
40 Mcf per month
50 Mcf per month
100 Mcf per month
100 Mcf per month
700 Mcf per month
1000 Mcf per month
13000 Mcf per month
15000 Mcf per month
- 34 -
Inside Outside
City Limits ($) City Limits ($)
1.000 1.250
9.260 11.426
5.195 5.824
3.003 3.319
2.621 3.132
2.833 3.132
2.014 2.184
10.260 12.676
1.000 1.250
9.260 11.426
5.195 5.824
3.003 3.319
1.507 1.656
1.469 1.656
1.339 1.424
10.260 12.676
1.000
15.384
13.912
6.605
2.833
2.014
16.384
1.250
18.479
15.892
7.489
3.132
2.184
19.729
Table 15
Inside Outside
City Limits ($) City Limits (S)
12.020 15.020
9.260 11.426
5.195 5.824
4.853 5.469
4.668 5.257
2.014 2.184
1.679 1.803
1.466 1.572
1.403 1.485
1.212 1.212
1.090 1.090
1.044 1.044
21.280 26.446
Incentive Air Conditioning Summer Rate
The incentive summer rate is limited to customers using an annual average of less than 15,000 cubic feet per month.
These customers have gas operated air cooling and/or air conditioning equipment and their average consumption in
the seven summer months exceeds the average use consumption in the five winter months.
Table 16
Cost of Service per MCF
(Effective August 1, 2008)
Inside Outside
City Limits ($) City Limits ($)
Meter Charge 12.020 15.020
First 1 Mcf per month or less 9.259 11.426
Next 2 Mcf per month 5.194 5.824
Next 7 Mcf per month 4.853 5.469
Next 40 Mcf per month 3.551 3.993
Next 150 Mcf per month 1.507 1.656
Next 300 Mcf per month 1.403 1.485
Next 500 Mcf per month 1.212 1.276
Next 14000 Mcf per month 1.09 1.131
All over 15000 Mcf per month 1.044 1.044
Minimum Monthly Bill 21.279 26.446
Table 17
Purchased Gas Adjustment
The City adjusts its gas rates monthly to take into account changes in the cost of gas from the supplier. The pass-
through cost of gas is adjusted for pressure base, gas lost, and unaccounted-for factors. Commercial customers who
use over 15,000 cubic feet in one month and who receive gas from the City at the same pressure which the City
receives it (14.65 psi) shall be billed 2.05% less per Mcf than the normal rates.
Interruptions
Deliveries of gas to commercial and industrial customers may be interrupted or curtailed in the event of shortage in
order to conserve gas for residential and other human need customers.
CITY'S COMBINED SYSTEM FINANCIAL INFORMATION
Payment Record
The City has not defaulted in the payment of the principal of, or interest on, its indebtedness within the last 66 years
nor has the City issued any refunding securities for the purpose of preventing a default in the payment of the
principal of, or interest on, its indebtedness within this period.
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- 35 -
Obligations Payable from City's Combined System Revenues
Table 18
The following sets forth the total outstanding revenue obligations as of July 31, 2008 payable from the City's
Combined System revenues, adjusted to include the Bonds.
Contract Revenue Bonds and Obligations (payable as an operating expense of the City's Combined System):
LNRA Contract (I) $99,944,240
Nueces River Authority, Series 1997 3,020,000
Lavaca-Navidad River Authority, Series 1997 470,000
Nueces River Authority, Series 2003 945,000
Nueces River Authority, Series 2005 92,585,000
Lavaca-Navidad River Authority, Series 2005 5,045,000 $202,009,240
The Combined System Revenue Bonds payable from net revenues of the Combined System (the "Priority Bonds"):
Series 1999 Bonds $ 8,355,000
Series 1999-A Bonds 10,100,000
Series 2000 Bonds 10,825,000
Series 2000-A Bonds 5,885,000
Series 2002 Bonds 43,500,000
Series 2003 Bonds 23,035,000
Series 2004 Bonds 43,345,000
Series 2005 Bonds 70,185,000
Series 2005A Bonds 61,890,000
Series 2006 Bonds 79,940,000
The Bonds 96 490 000
$453,550,000
Certificates of Obligation payable from surplus revenues of the City's Combined System (Texas Military
Value Revolving Loan Program):
Series 2007 Bonds $4,569,305
Subordinated Obligations:
United States Dept. of the Interior Choke Canyon Agreement t2t $ 66,073,868
Total — All Payable from City's Combined System Revenues $726,202,413
Charges for water under the LNRA Contract are based on a formula contained in the LNRA Contract which includes a percentage of the
operating and maintenance expenses of Lake Texana and a percentage of the debt service on the bonds associated with construction of this
reservoir. The City has recorded on its books a liability in the amount of $99,944,240 for the present value (computed at 3.5%) of (he debt
service payments only.
Under an agreement with the United States Department of the Interior (Bureau of Reclamation), the City has agreed to pay such amount out
of swplus revenues with interest at 5.115%, subject to certain deferrals, in installments through 2044. (See "Subordinated Obligations
below).
Subordinated Obligations
As of July 31, 2008, the amount owed to the United States Department of the Interior (Bureau of Reclamation) for
the City's remaining share of the costs of the Choke Canyon Reservoir Project is $66,073,868 (of which
$52,611,653 are allocable to water supply construction costs, $13,431,553 to recreation costs, and $30,662 to fish
and wildlife costs). Such amounts for water supply are payable over a term of 50 years to 2044, in each case with
interest at 5.116% per annum. See "Debt Service Requirements Payable from Combined System Revenues" and
Note 17 in Appendix A for the repayment schedule. As of July 31, 2008 the City had accumulated out of the City's
Combined System surplus revenues $25,064,500 as a reserve for this contract obligation.
- 36 -
On March 1, 2003, the City Council approved a $75,000,000 commercial paper program for a term of seven years to
provide interim funding of Utility System capital projects. On September 1, 2005, the City sold $70,000,000 in
commercial paper with a maturity of January 17, 2006, interest rate of 2.850%. The City issued Utility System
Revenue Improvement Bonds to pay off the commercial paper on October 1, 2005. On July 28, 2006, the City sold
$17,000,000 in commercial paper with a maturity November 2, 2006, interest rate of 3.620%. As of July 31, 2006,
$17,000,000 remained outstanding. The City issued Utility System Revenue Improvement Bonds to pay off the
commercial paper on October 1, 2006. Money was held in escrow until the commercial paper matured. No
commercial paper notes are currently outstanding.
The Commercial Paper notes are supported by a bank line of credit in the amount of $80,547,945 by Westdeutsche
Landesbank Girozentrale (the "Bank"). Pursuant to the agreement under which the bank letter of credit was issued,
the payment of obligations of the City to the Bank would constitute an obligation payable from a lien on and pledge
of the revenues of the Combined System subordinate to the Priority Bonds and the obligations under the contracts
described in the preceding paragraph.
[The remainder of this page intentionally left blank.]
- 37 -
tie
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- 39 -
See notes on the following page.
UI
(41
Is
Payable as a maintenance and operating expense of the Water or Combined Utility System.
l'ayable as a maintenance and operation expense of the Combined Utility System and extends until 2035 with annual debt service payments
between 2029 and 2035 of approximately $6,500,000 through $7,100,000. These payments are included in the $165,631,594. Contingent
LNRA Contract expenses that are not reflected in these amounts include: (a) any bonds issued by LNRA to refinance the LNRA Federal
Contract or to acquire the Texas Water Development Board's interest in Lake Texana, and (b) expenses of operating and maintaining Lake
Texana and the LNRA Facilities payable by the City under the LNRA Contract.
Payable as a maintenance and operating expense of the Water Utility System.
Payable from Pledged Net Revenues of the Combined Utility System.
Contract with the U.S. Department of Interior -Bureau of Reclamation (the "Federal Contract"). Payment of this obligation is subordinate to
the Priority Bonds. The payment schedule extends until 2044 with annual payments of $4,995,163 through 2028, $4,208,976 for the year
ending 2029, $827,934 from 2030 through 2043 and one payment of $612,475 for 2044. These payments are included in the $121,310,950
total. See "COMBINED UTILITY SYSTEM FINANCIAL INFORMATION - Subordinated Obligations Debt Service Requirements"
herein. This schedule does not include any Commercial Paper Notes.
On October 18, 1996, the Federal Emergency Drought Relief Act of 1996 became law. The law, in order to provide emergency drought
relief, defers all principal and interest payments for Choke Canyon Reservoir Project, without penalty or accrued interest, for a 5 year period
beginning with the date of enactment of the Act. A total of$22,833,870 in principal and interest payments were deferred by the law.
The City is also authorized to issue revenue bonds for certain purposes. The authorized purposes include the
financing of the water system, wastewater disposal system, gas system, solid waste system, transportation system,
civic center, airport and parks. Revenue bond indebtedness is not considered in determining the legal debt margin
for ad valorem tax supported bonds.
INVESTMENT POLICY
City Investments
Available City funds, including revenues of the City's Combined System, are invested as authorized by Texas law
and in accordance with investment policies approved by the City Council. Both State law and the City's investment
policies are subject to change.
Legal Investments. Under Texas law, the City is authorized to invest in (1) obligations, including letters of credit,
of the United States or Its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies
and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality
of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United
States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or
backed by the full faith and credit of the State of Texas or the United States or their respective agencies and
instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions or any state
rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent,
(6) certificates of deposit meeting the requirements of Chapter 2256, Texas Government Code (the "Public Funds
Investment Act") that are issued by or through an institution that either has its main office or a branch office in the
State of Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit
Union Share Insurance Fund, or are secured as to principal by obligations described in clauses (1) through (5) and
clause (13) or in any other manner and amount provided by law for City deposits, (7) fully collateralized repurchase
agreements that have a defined termination date, are fully secured by obligations described in clause (1) and
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 or a financial institution doing business in the State
of Texas, (8) bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the
accepting bank or its parent are rated at least A-1 or P -I or the equivalent by at least one nationally recognized credit
rating agency, (9) commercial paper that is rated at (east A -I 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 in -evocable letter of credit issued by a U.S. or state bank, (10) no-load money market mutual funds registered
with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average
portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset
value of SI for each share, (11) no-load mutual fund registered with the United States Securities and Exchange
Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations
described in the preceding clauses and clause (13), 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, (12) public funds
- 40 -
investment pools that have an advisory board which includes participants in the pool 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 or no lower than investment grade with a weighted average maturity no greater than 90 days, and
(13) bonds issued, assumed or guaranteed by the State of Israel. Texas law also permits the City to invest bond
proceeds in a guaranteed investment contract subject to the limitations set forth in the Public Funds Investment Act.
Entities such as the City may enter into securities lending programs if (i) the securities loaned under the program are
100% collateralized, a loan made under the program allows for termination at any time and a loan made under the
program is either secured by (a) obligations that are described in clauses (1) through (5) and clause (13) 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 (5) and clause (13) above, clause (9) above and clauses (10) and (11) above, or an authorized
investment pool; (ii) securities held as collateral under a loan are pledged to such investing entity or a third party
designated such investing entity; (iii) a loan made under the program is placed through either a primary government
securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend
securities has a term of one year or less.
The City may invest in such obligations directly or through government investment pools that invest solely in such
obligations provided that the pool are rated no lower than AAA or AAA, or an equivalent by at least one nationally
recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment
represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security
collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the
underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated
final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is
determined by an index that adjusts opposite to the changes in a market index.
Investment Policies. Under Texas law, the City is required to invest its funds in accordance under written
investment policies that primarily emphasize safety of principal and liquidity; that address investment
diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of
authorized investments for City funds, maximum allowable stated maturity of any individual investment and the
maximum average dollar -weighted maturity allowed for pool fund groups. All City funds must be invested
consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each funds'
investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of
investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment,
(5) diversification of the portfolio, and (6) yield.
Under Texas law, City investments must be made "with judgment and care, under prevailing circumstances, that a
person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not
for speculation, but for investment, considering the probable safety of capital and the probable income to be
derived." At least quarterly the investment officers of the City must submit to the City Council an investment report
detailing (1) the investment position of the City, (2) that all investment officers jointly prepared and signed the
report, (3) the beginning market value, any additions and changes to market value and the ending value of each
pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of
the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund
group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it
relates to (a) adopted investment strategy statements and (b) state law. No person may invest City funds without
express written authority from the City Council.
Additional Provisions. Under Texas law, the City is additionally required to (1) annually review its adopted
policies and strategies, (2) require any investment officers' with personal business relationships or relative with
fines seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics
Commission and the City Council, (3) require the registered principal of firms seeking to sell securities to the City to
(a) receive and review the City's investment policy, (b) acknowledge that reasonable controls and procedures have
been implemented to preclude imprudent investment activities, and (c) deliver a written statement attesting to these
requirements, (4) perform an annual audit of the management controls on investments and adherence to the City's
investment policy, (5) provide specific investment training for the Treasurer, Chief Financial Officer and investment
officers, (6) restrict reverse repurchase agreements to not more than 90 days and restrict the investments of reverse
-41-
repurchase agreement funds to no greater than the term of the reverse repurchase agreement, (7) restrict the
investment in non -money market mutual funds of any portion of bond proceeds, reserves and funds held for debt
service and to no more than 15% of the entity's monthly average fund balance, excluding bond proceeds and
reserves and other funds held for debt service, and (8) require local government investment pools to conform to the
new disclosure, rating, net asset value, yield calculation, and advisory board requirements.
City policies require investments in accordance with applicable state law. All investments which are authorized by
State statute, with the exception of bankers' acceptances, commercial paper, collateralized mortgage obligations,
reverse repurchase agreements, no-load money market mutual funds, no-load mutual funds, and bonds issued,
assumed or guaranteed by the State of Israel, are acceptable for investment purposes under the City's Statement of
Investment Policy. The City generally invests in obligations of the United States or its agencies and
instrumentalities.
Under Texas law, the City may contract with an investment management firm registered under the Investment
Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the
investment and management of its public funds or other funds under its control for a term up to two years, but the
City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City
must do so by order, ordinance or resolution. The City has not contracted with, and has no present intention of
contracting with, any such investment management firm or the State Securities Board to provide such services.
Current Investments*. As of December 31, 2008, the following percentages by investment type applied to the
City's investable funds, which had an aggregate par value of $270,504,812, a market value of $271,381,058 and a
book value of $270,504,812.
Table 21
City Portfolio
Par Value:
Money Market $ 6,823,546
Local Government Investment Pool 128,307,227
Bank Certificate of Deposit 10,374,039
U. S. Agencies 125,000,000
Total 5270.594, 122
Market Value
Book Value
$271,381,058
270,504,812
Market to Book Ratio 100.32%
Weighted Average Maturity 107 days
Portfolio by Account Type (Par Value)
Money Market 2.52%
Local Government investment Pool 47.43%
Bank Certificate of Deposit 3.84%
U.S. Agencies 46.21%
Total 100.00%
* Unaudited.
As of such date, the market value of such investments (as determined by the City by reference to published
quotations, dealer bids, and comparable information) was approximately 100% of book value. No funds of the City
are invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other
instrument, index, or commodity.
- 42 -
Revenues and Expenses of the City's Combined System; Net Revenues Available for Debt Service; Coverage
Ratios
Table 22
The following schedule sets forth the revenues and expenses (excluding interest expense on the Priority Bonds) of
the City's Combined System on a cash basis for its fiscal years ended July31, 2004, through 2008, determined
without regard to depreciation, certain capital outlays and certain accruals. The City's Financial Statements
contained in Appendix B are prepared in accordance with generally accepted accounting principles, on an accrual
basis, and therefore do not reconcile with the following data. The table also sets forth the extent to which net
revenues of the City's Combined System were available for payment of debt service on the Priority Bonds compared
against actual average debt service requirements on the Priority Bonds.
Combined Utility System Net Revenue Available for Debt
Operating Revenues:
Water System
Wastewater System
Gas System
Total Operating Revenues
Operating Expenses:
Water System
Wastewater System
Gas System
Total Operating Expenses
Combined Net Operating Revenues
Combined Non -Operating Revenue
Net Revenue Available for Debt Service
Current Debt Service
Current Debt Service Coverage
Rate Covenant Test:
Average Annual Debt Service
Average Debt Service Coverage
FISCAL YEAR ENDING JULY 31
2004 2005 2006 2007 2008
$ 68,709,704 $ 78,474,456
33,193,541 36,357,928
30 627 086 33 846 439
$ 84,606,452
39,288,543
40 295 857
$ 77,344,002
40,779,842
41 457 307
$ 87,357,168
43,817,922
43 218 322
'.132530331$148.678.823 $164.190.852 $159.581.151 $174.393.412
$ 52,985,820 $ 52,698,485 $ 59,711,075 $ 57,907,398 $ 65,034,152
20,686,128 28,804,444 27,328,525 26,151,190 28,520,554
29,739,450 33,609,859 37 250 191 36 319 859 37 384 379
$103.411.398 5115112,782 5124.289.791 $120.378.447 $130.929085
$ 29,118,933 $ 33,566,034 $ 39.901.061 $ 39,202,705 $ 43,454,327
861 003 1,427,247 5.880.308 8 412 540 9,438,437
29 9. 79.936 34.993.281 45,231,330 47 615,245 52A92.783
$ 25,539,049 $ 29,220,886 $ 33,349,432 $ 39,243,273 $ 40,848,573 -
1.17 1.20 1.37
1.21 1.29
$ 18,892,850 $ 20,866,480 $ 24,807,294 $ 28,737,325 $ 28,064,478
1.59 1.68 1.85 1.66 1.88
City's Management Discussion and Analysis
Based On the historical calculation of Net Revenue Available for Debt shown in the above table, total operating
revenues between fiscal year 2004 and 2008 increased by $41.9 million, Annual cost of service rate increases of
2%-6% were largely responsible for the increase. The combined non-operating revenue is net of non-operating
expenses and is comprised largely of interest earnings on investments.
The City's Comprehensive Annual Financial Report for fiscal year 2008 reports Combined Utilities System
operating revenues of $174.0 million, operating income of $27.3 million, and income before transfers of $13.4
million with income after transfers of $6.5 million, Compared to the 2007 fiscal year, the Systems operating
revenues were up by $14.8 million, the operating income was up by $4.3 million and the net income after transfers
was $6.5 million, a decrease of $2.1 million, The major causes of these results were:
• Fluctuations in income are largely attributed to weather conditions 2007 was a very wet and overcast
year as compared to 2006 when the City had a dry year, 2008 was a more moderate year,
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• Water operating expenses were increased due to personnel and other expenses incurred in response to a
boilwater notice issued in August 2007,
• The City sold its Wifi network during FY2007, incurring a one-time loss of $2.4 million. During FY2008,
the buyer transferred the system back to the City, and this reacquisition was recorded in the internal service
fund (Municipal Infonnation Systems) that will maintain the system.
[The remainder of this page intentionally left blank.]
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City's Combined System
Financial Projections
Fiscal Year Ending July 31
2009 2010 2011 2012
Table 23
2013
Estimated Revenues
Base Operating Revenue $157,031 $165,289 $173,682 $184,510 $195,941
Other Operating Revenue 39,110 41,273 43,547 45,955 48,481
Non -Operating Revenue 6 447 7 697 7 734 7 768 7 810
Total Estimated Revenues 202588 214259 224963 $238,233 $252,232
Operating Expenses
Department Operating Expenses $127,978 $132,652 $138,043 $143,898 $150,055
Interfund Transfers 5,673 5,787 5,902 6,020 6,141
Contract Debt Service 9,664 8,674 8,682 8,684 8,682
Total Operating Expenses $143,315 $ 14713 $152627 $158,602 $164878
Net Revenues Available for Debt Service $ 59,273 $ 67 146 $ 72 336 $ 79.631 $ 87,354
Other Non -Operating Expenses (1)
Increase (Decrease) to Appropriable Fund
Balance
Combined Appropriable for Operations
Construction/Capital Outlay Expense
Ending Appropriable Fund Balance
5 764 5 439 5 902 6 020
$ 53,509 $ 61,707 $ 66,434 $ 73,611
$ 43,755 $ 42 805 $ 44,401 $ 44.884
3 676 3 781 3 912 4 047
$ 40 079 $ 39 024 $ 40,489 $ 40 837
6 141
$ 81,213
$ 45,485
4187
$ 41 298
Ending Appropriable Fund Balance as a
Percent of Operating Expenses 30.5% 29.1% 29.1% 28.3% 27.6%
Days of Operating Expense 112 96 95 91 87
Current Debt Service $ 41,240 $ 41,241 $ 36,229 $ 36,072 $ 36,074
New Priority Bonds $ 6,347 $ 12 778 $ 19 598 $ 27,784 $ 35,276
Total Priority Debt
Current Debt Service Coverage
$ 47,587 $ 54,019
1.25 1.24
$ 55,827
1.30 -
$ 63,856
1.25
$ 71,350
1.22
Rate Covenant Test:
Average Debt Service $ 36,484 $ 42,301 $ 47,664 $ 53,035 $ 57,474
Average Debt Service Coverage 1.64% 1.59% 1.52% 1.50% 1.52%
Water Bill Increases
ICL Residential 7,000 gals -25.0 2.7 6.6 5.8
ICL Commercial 50,000 gals -40.0 1.4 3.1 3.0
OCL Large Volume 100,000,000 gals 1.1 30.0 3.5 4.2
Wastewater Rate Increase 9.0% 7.0% 6.0% 7.0%
Gas Rate Increase 2.0% 2.0% 2.0% 2.0%
Storm water revenue projections01 $22,155,471 $24,738,782 $27,30,648 $29,164,509
Storm water rate increase 11.7% 10.4% 6.8%
11' Prior to fiscal year 2010, Stonn water is supported by Water revenues.
- 45 -
The foregoing projections are based on a number of assumptions and estimates, including the assumptions
described below, all of which the City's Combined System management considers reasonable:
• Rate Increases: Wastewater rates and Gas cost -of -service rates are projected to increase as outlined in the
schedule. With implementation of the full cost -of -service rate model in FY2008-2009, across-the-board water rate
increases are no longer the rule. As costs shift between areas of the system, especially capital project costs, water
rates will shift among customer classes, Sample bill increases are included in the schedule above, which assumes
that the Storm water utility becomes self-supporting through implementation of a Storm water Fee beginning in
FY2010.
• Pass-through Charges: Charges are sufficient to cover the cost of water, operating expenses and debt
service for both the Lake Texana and Garwood water rights purchase and pipelines as well as an allocable portion of
outstanding City's Combined Utility System debt service.
• Operating Expenses: Departmental operating expenses include all salaries escalated at 3% per year,
electricity escalated at 5%, natural gas purchases at 3%, and all other operating expenses at 3.7% per year. Interfund
transfers are expected to increase at 2% per year, and Contract Debt is based on actual payment schedules.
• Combined Utility System CIP: Capital Improvement Program projects are funded from a combination of
the City's Combined Utility System Revenue Bonds, commercial paper, and pay-as-you-go financing. The projects
include the drainage, wastewater, water and gas CIP projects and construction draw schedules from the Adopted FY
2009 Capital Budget and Capital Improvement Planning Guide, plus utility costs associated with Street projects
approved in the Bond 2008 election.
• Bond Reserve Fund: Reserve Fund for the Bonds funded with bond insurer surety policy (assumed
premium of 1.5% of Bond Reserve Fund requirement). Reserve Fund for LNRA Bonds funded from bond proceeds.
• Debt Amortization: 30 years for NRA Bonds and all other 20 years.
• Bond Interest Rate: Estimated interest rate for future bonds is 5.5%.
Realization of the foregoing projections will be dependent upon a number of factors and is subject to certain risks
discussed herein. If expenses increase at a faster pace than assumed or if revenues do not increase as assumed, the
City could realize substantially less of the Combined Utility System net revenues than projected. Actual revenues
could be less than projected if there is less demand for water or gas than anticipated as a result of conservation or
reduced growth, or if the City is unable to obtain, transport and treat sufficient water to meet demand, or if the City
Council fails to increase utility rates as assumed, among other conditions. Actual expenses could be more than
projected if additional environmental regulations are enacted, or costs of materials or labor increase at a greater pace
than projected, or unanticipated liabilities payable from Combined Utility System revenue are incurred.
Accordingly, there can be no assurance that projected financial results of operations will be realized, and inclusion
of such projections herein should not be interpreted as a representation to the contrary.
LITIGATION AND REGULATION
City Claims and Litigation
The City is a defendant in various tort claims and lawsuits involving general liability, automobile liability, and
various contractual matters. The status of such litigation ranges from early discovery stage to various levels of
appeal of judgments both for and against the City. The City intends to defend vigorously against the lawsuits;
including the pursuit of all appeals; however, no prediction can be made as of the date hereof, with respect to the
liability of the City for such claims or the outcome of such suits.
In the opinion of the City Attorney, it is improbable that the lawsuits now outstanding against the City could become
final in a timely manner so as to have a material adverse financial impact upon the City. The City provides the
following information related to certain lawsuits impacting the City's Combined System:
1. Nueces County Water Control and Improvement District No. 4 (located in Port Aransas) has filed
a petition challenging the City's wholesale water rate. The challenge is based on alleged flaws in
the City's rate methodology in calculating its costs of service. The challenge is also based on
- 46 -
disputes over the application of provisions in the City's wholesale water contract with the district
and how a fund set up to pay for future capital improvements for the benefit of the district are
handled. The City, and it rate consultant, HDR Engineering, Inc., believes its rate methodology is
proper, and is being properly applied to the district. Mediation of the dispute between the City and
the district is scheduled. The Texas Commission on Environmental Quality proceedings have
been delayed waiting the results of this mediation.
2. San Patricio Municipal Water District and South Texas Water Authority vs. City of Corpus
Christi. The case involves a claim by two of the City's wholesale water customers that the City
improperly billed the districts for drainage charges in violation of the Texas Municipal Drainage
Utility System Act through its water rates. The City has challenged the court's jurisdiction to
consider this matter, since it is a water rate appeal within the exclusive jurisdiction of the Texas
Commission on Environmental Quality, and is barred by the statute of limitations since it was not
filed within the period authorized for water rate appeals.
On the date of delivery of the Bonds to the Underwriters, the City will execute and deliver to the Underwriters a
certificate to the effect that, except as disclosed herein, no litigation of any nature has been filed or is pending, as of
that date, to restrain or enjoin the issuance or delivery of the Bonds or which would affect the provisions made for
their payment or security or in any manner question the validity of the Bonds.
Environmental Regulations
The City is subject to the environmental regulations of the State and the United States in the operation of its water,
wastewater, storm water and gas systems. These regulations are subject to change, and the City is required to expend
substantial funds to meet the requirements of such regulatory authorities.
Safe Drinking Water Act. In August 1996, amendments to the Federal Safe Drinking Water Act were signed into
law. These amendments require the United States Environmental Protection Agency ("EPA") to regulate a wide
variety of contaminants that may be present in drinking water, including volatile organic chemicals, other synthetic
organic chemicals, inorganic chemicals, microbiological contaminants, and radionucleide contaminants. The list of
contaminants to be regulated is so lengthy that the amendments require EPA to establish a schedule for developing
regulations regarding the contaminants. There are several phases in EPA's regulatory timetables that are to be
undertaken over the next few years. The initial impact of the amendments to the water system has been minimal, as
the City has been able to comply with regulations promulgated to date. The hill impact is difficult to project at this
time, and would be dependent upon what maximum contaminant levels may be set for some future parameters and
enhanced surface water treatment rules. Many of these parameters, such as waterborne pathogens, radionucleides
and infection by-products contaminants, may require treatment changes that have not as yet been established by the
EPA.
Continued changes in rules and regulations will continue to cause process modifications, which will increase the
cost of the maintenance and operation of the City's drinking water treatment and distribution facilities. These
modifications and upgrades will require increased capital expenditures, which may be financed by the issuance of
additional revenue bonds.
Nueces Estuary Fresh Water Inflow Requirements. When the State granted the City and the Nueces River
Authority a right to store and divert State waters in Choke Canyon Reservoir, it included a special provision in the
water rights permit requiring that the Choke Canyon/Lake Corpus Christi Reservoir system be operated so as to
provide no less than 151,000 acre-feet per year of fresh water inflow to the Nueces Estuary in order to maintain the
ecological health of that estuary. This provision was later incorporated into the Certificate of Adjudication No. 21-
3214 for Choke Canyon Reservoir. In 1990, the State issued the first of a series of orders governing the City's
reservoir system operations in order to satisfy these fresh water inflow requirements. The effect of these orders,
combined with the drought of 1982-1984, was to significantly diminish the firm annual yield of the reservoir system.
Under the 1992 Interim Order, reservoir system yield was estimated to be approximately 168,000 acre-feet per year.
The City eventually negotiated a new operating plan governing the fresh water inflow requirements, and in May
1995, TCEQ approved an Agreed Order that now provides for a firm annual yield of 181,000 acre-feet per year
while satisfying the fresh water inflow needs of the Nueces Estuary. Any future increase in fresh water inflow
requirements could reduce the amount of water available for sale by the City's Combined System. The 1995 TCEQ
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Agreed Order was further refined on April 4, 2001, to allow a more automatic transition from inflow requirements
within the 1995 TCEQ Agreed Order. These changes will have a positive impact on the system firm yield. See
"CITY'S COMBINED UTILITY SYSTEM - Description of City's Water System".
Federal and State Regulation of the Wastewater Facilities. The Federal Clean Water Act and the Texas Water
Code regulate the Wastewater System's operations. All discharges of pollutants into the nation's navigable waters
must comply with the Clean Water Act, The Clean Water Act allows municipal wastewater treatment plants to
discharge treated effluent to the extent allowed in permits issued by the EPA pursuant to the National Pollutant
Discharge Elimination System NPDES program, a national program established by the Clean Water Act for issuing,
revoking, monitoring, and enforcing wastewater discharge permits. The Clean Water Act authorized the EPA to
delegate NPDES permit responsibility to state or interstate agencies after certain prerequisites have been met by the
relevant agencies. The EPA has delegated its NPDES authority to the TCEQ. The City no longer obtains duplicative
wastewater discharge permits from TCEQ and EPA. The Texas Pollution Discharge Elimination System TPDES
permits issued by the TCEQ are the only permits required.
The TCEQ wastewater discharge permits are issued under authority granted by the Texas Water Code, TPDES
permits set limits on the type and quantity of wastewater discharge, in accordance with State and Federal laws and
regulations, The Clean Water Act requires municipal wastewater treatment plants to meet secondary treatment
effluent limitations as defined in EPA regulations. The Clean Water Act also requires that municipal plants meet
any effluent limitations established by State or Federal laws or regulations, which are more stringent than secondary
treatment. Under the Clean Water Act, states must identify any bodies of water for which more stringent effluent
standards are needed to achieve water quality pollutant standards identified by the EPA. The Clean Water Act
allows municipalities to apply for extensions of applicable deadlines for secondary or additional treatment.
Status of Discharge Permits for City's Wastewater Treatment Plants. The Oso, Greenwood, Broadway, Laguna
Madre, Allison, and Whitecap wastewater treatment plants have been issued TPDES discharge permits by the
TCEQ. An occasional upset may cause permit violations, but generally all six plants are in compliance with their
respective discharge permits.
Potential Penalties for the City's Wastewater System's Violations. The failure by the City to achieve compliance
with the Clean Water Act could result in either a private plaintiff or the EPA instituting a civil action for injunctive
relief and civil penalties of up to $27,500 per day. In addition, the EPA has the power to issue administrative orders
compelling compliance with its regulations and the applicable permits. The EPA can also bring criminal actions for
recovery of penalties of up to $50,000 per day for willful or negligent violations of permit conditions or discharge
without a permit. Violations of permits or administrative orders may result in the disqualification of a municipality
for eligibility for federal assistance to finance capital improvements pursuant to the Clean Water Act. Even though
the City is operating under TPDES permits, we will still be liable for penalties from EPA under the Clean Water
Act.
Under State law, penalties for violation of State wastewater discharge permits or orders of the TCEQ can be a
maximum of $10,000 per day per violation. The Executive Director of the TCEQ also has authority to levy
administrative penalties of up to $10,000 per day for violation of rules, orders or pennits. Orders resulting from a
civil action could require the imposition of additional user or service charges or the issuance of additional bonds to
finance the improvements required to ameliorate a condition that niay have caused the violation of a TCEQ permit.
On April 16, 2008, the City of Corpus Christi Wastewater Department received an official TCEQ Agreed Order
Assessing Administrative Penalties and Requiring Certain Actions as a result of collection system overflows in the
Oso and Greenwood WWTP areas. The TCEQ agreed to the administrative penalty assessed in the Agreed Order
with the condition that the City shall perform and comply with the Supplemental Environmental Project (SEP)
Agreement. The total amount for the SEP was $42,810 payable to Coastal Bend Bays and Estuaries Program, Inc.'s
Colonial Waterbird Rookery Island Enhancement Project.
On October 8, 2008, the City of Corpus Christi Wastewater Department received an official TCEQ Agreed Order
Assessing Administrative Penalties and Requiring Certain Actions as a result of collection system overflows in the
City service area. The TCEQ agreed to the administrative penalty assessed in the Agreed Order with the condition
that the City shall perform and comply with the Supplemental Environmental Project (SEP) Agreement, The total
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amount for the SEP was $14,544 payable to Coastal Bend Bays and Estuaries Program, Inc.'s Colonial Waterbird
Rookery Island Enhancement Project,
The City also agreed to continue to give priority to capital improvement projects to help reduce violations in the
collection system.
LEGAL INVESTMENTS IN TEXAS
Section 1201.041 of the Public Securities Procedures Act (Chapter 1201, Texas Government Code) provides that the
Bonds are negotiable instruments governed by Chapter 8, Texas Business and Commerce Code, and are legal and
authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities
or other political subdivisions or public agencies of the State of Texas. With respect to investment in the Bonds by
municipalities or other political subdivisions or public agencies of the State of Texas, the Public Funds Investment
Act requires that the Bonds be assigned a rating of at least "A" or its equivalent as to investment quality by a
national rating agency. See "RATINGS" herein. In addition, various provisions of the Texas Finance Code provide
that, subject to a prudent investor standard, the Bonds are legal investments for state banks, savings banks, trust
companies with at least $1 million of capital, and savings and loan associations. The Bonds are eligible to secure
deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those
deposits to the extent of their market value.
The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such
institutions or entities or which might limit the suitability of the Bonds for any of the foregoing purposes or limit the
authority of such institutions or entities to purchase or invest in the Bonds for such purposes. The City has made no
review of laws in other states to determine whether the Bonds are legal investments for various institutions in those
states.
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE
The sale of the Bonds has not been registered under the Securities Act of 1933, as amended, in reliance upon
exemptions provided in such Act; the Bonds have not been qualified under the Securities Act of Texas in reliance
upon exemptions contained therein; nor have the Bonds been qualified under the securities acts of any other
jurisdiction. The City assumes no responsibility for qualification of the Bonds under the securities laws of any
jurisdiction in which they may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of
responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of
any kind with regard to the availability of any exemption from securities registration or qualification provisions.
RATINGS
The Bonds have been rated by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Rating Services, a
Division of The McGraw-Hill Companies, Inc. ("S&P"), and Fitch Ratings ("Fitch") "Aa2", "AAA", and "AAA"
respectively, based on Assured Guaranty's Financial Guaranty Insurance Policy, and "A2", "A+", and "A+",
respectively, without regard to credit enhancement. See "BOND INSURANCE" herein. The underlying,
unenhanced revenue debt ratings from Moody's and S&P were reaffirmed in connection with the issuance of the
Bonds. The City's underlying, unenhanced revenue debt rating was lowered on March 2, 2009 from "AA-" to "A+"
by Fitch. (See CONTINUING DISCLOSURE OF INFORMATION — Compliance With Prior Undertakings"
herein.)
An explanation of the significance of such ratings may be obtained from the company furnishing the rating. The City
fiirnished the rating agencies certain information which is not included in this Official Statement. The rating reflects
only the view of such organization at the time such rating was given, and the City makes no representation as to the
appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that
it will not be revised downward or withdrawn entirely by such rating company, if in the sole judgment of such rating
company, circumstances so warrant. Any such downward revision or withdrawal of rating may have an adverse
effect on the market price of the Bonds.
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TAX MATTERS
Opinion
The delivery of the Bonds is subject to the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, to the effect that
interest on the Bonds for federal income tax purposes (1) is excludable from the gross income, as defined in section
61 of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), of the owners thereof
pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not
be included in computing the alternative minimum taxable income of the owners thereof. The statute, regulations,
rulings, and court decisions on which such opinion is based are subject to change. A form of Bond Counsel's
opinion appears in Appendix D hereto.
In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the City made
in certificates pertaining to the use, expenditure, and investment of the proceeds of the Bonds and will assume
continuing compliance by the City with the provisions of the Ordinance subsequent to the issuance of the Bonds.
The Ordinance contains covenants by the City with respect to, among other matters, the use of the proceeds of the
Bonds and the facilities financed therewith by persons other than state or local governmental units, the manner in
which the proceeds of the Bonds are to be invested, the periodic calculation and payment to the United States
Treasury of arbitrage "profits" from the investment of the proceeds, and the reporting of certain information to the
United States Treasury. Failure to comply with any of these covenants may cause interest on the Bonds to be
includable in the gross income of the owners thereof from the date of the issuance of the Bonds.
Except as described above, Bond Counsel will express no other opinion with respect to any other federal, state or
local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest
on, or the acquisition or disposition of, the Bonds. Bond Counsel's opinion is not a guarantee of a result, but
represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court
decisions and the representations and covenants of the City described above. No ruling has been sought from the
Internal Revenue Service (the "IRS") with respect to the matters addressed in the opinion of Bond Counsel, and
Bond Counsel's opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-exempt
status of the interest on municipal obligations. If an audit of the Bonds is commenced, under current procedures the
IRS is likely to treat the City as the "taxpayer," and the owners of the Bonds would have no right to participate in
the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the
City may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit
of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless
of its ultimate outcome.
Ancillary Tax Consequences
Prospective purchasers of the Bonds should be aware that the ownership of tax-exempt obligations such as the
Bonds may result in collateral federal tax consequences to, among others, financial institutions, property and
casualty insurance companies, life insurance companies, certain foreign corporations doing business in the United
States, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT (a "financial asset
securitization investment trust"), individual recipients of Social Security or Railroad Retirement benefits, individuals
otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt
obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these
consequences to their particular circumstances.
Tax Accounting Treatment of Discount Bonds
The initial public offering price to be paid for certain Bonds may be less than the amount payable on such Bonds at
maturity (the "Discount Bonds"). An amount equal to the difference between the initial public offering price of a
Discount Bond (assuming that a substantial amount of the Discount Bonds of that maturity are sold to the public at
such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such
Discount Bonds. A portion of such original issue discount, allocable to the holding period of a Discount Bond by
the initial purchaser, will be treated as interest for federal income tax purposes, excludable from gross income on the
same terms and conditions as those for other interest on the Bonds. Such interest is considered to be accrued
actuarially in accordance with the constant interest method over the life of a Discount Bond, taking into account the
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semiannual compounding of accrued interest, at the yield to maturity on such Discount Bond and generally will be
allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest
actually received by the initial purchaser during his taxable year.
However, such accrued interest may be required to be taken into account in determining the alternative minimum
taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by
section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing
business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual
of such interest may result in certain other collateral federal income tax consequences to, among others, financial
institutions, property and casualty insurance companies, life insurance companies, S corporations with subchapter C
earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad
Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be
deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain
expenses allocable to, tax-exempt obligations.
In the event of the sale or other taxable disposition of a Discount Bond prior to maturity, the amount realized by
such owner in excess of the basis of such Discount Bond in the hands of such owner (adjusted upward by the portion
of the original issue discount allocable to the period for which such Discount Bond was held) is includable in gross
income.
Owners of Discount Bonds should consult with their own tax advisors with respect to the determination for federal
income tax purposes of accrued interest upon disposition of Discount Bonds and with respect to the state and local
tax consequences of owning Discount Bonds. It is possible that, under applicable provisions governing
determination of state and local income taxes, accrued interest on the Discount Bonds may be deemed to be received
in the year of accrual even though there will not be a corresponding cash payment.
Tax Accounting Treatment of Premium Bonds
The initial public offering price to be paid for certain Bonds may be greater than the stated redemption price on such
Bonds at maturity (the "Premium Bonds"). An amount equal to the difference between the initial public offering
price of a Premium Bond (assuming that a substantial amount of the Premium Bonds of that maturity are sold to the
public at such price) and its stated redemption price at maturity constitutes premium to the initial purchaser of such
Premium Bonds. The basis for federal income tax purposes of a Premium Bond in the hands of such initial
purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is
allowed as a result of such reduction in basis for amortizable bond premium with respect to the Premium Bonds.
Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized
for federal income tax purposes upon a sale or other taxable disposition of a Premium Bond. The amount of
premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to
maturity.
Purchasers of the Premium Bonds should consult with their own tax advisors with respect to the determination of
amortizable bond premium on Premium Bonds for federal income tax purposes and with respect to the state and
local tax consequences of owning and disposing of Premium Bonds.
LEGAL PROCEEDINGS
The City will furnish a complete transcript of proceedings incident to the authorization and issuance of the Bonds,
including the approving legal opinions of the Attorney General of the State of Texas to the effect that the Initial
Bonds are valid and binding special obligations of the City, and based upon examination of such transcript of
proceedings, the legal opinions of Bond Counsel to the effect that the Bonds issued in compliance with the
provisions of the Ordinance are valid and legally binding special obligations of the City and the interest on such
Bonds is exempt from federal income taxation under existing statutes, published rulings, regulations, and court
decisions (see "TAX MATTERS"). Though it represents the Financial Advisor and the Underwriters from time to
time in matters unrelated to the issuance of the Bonds, Bond Counsel has been engaged by and only represents the
City in connection with the issuance of the Bonds. Bond Counsel was not requested to participate, and did not take
part, in the preparation of the Official Statement, and such firm has not assumed any responsibility with respect
thereto or undertaken independently to verify any of the information contained therein, except that, in its capacity as
Bond Counsel, such firm has reviewed the information describing the Bonds in the Official Statement under the
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captions "SECURITY FOR THE BONDS," "THE BONDS," "LEGAL INVESTMENTS IN TEXAS,"
"REGISTRATION AND QUALIFICATION OF BONDS FOR SALE" "TAX MATTERS," "CONTINUING
DISCLOSURE OF INFORMATION" (except the subcaption "Compliance with Prior Undertakings" as to which no
opinion is expressed), and Appendix A and is of the opinion that the information relating to the Bonds and the
Ordinance is a fair and accurate summary of the information purported to be shown therein and is correct as to
matters of law. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the
Bonds is contingent on the sale and delivery of the Bonds. The legal opinion of Bond Counsel will accompany the
Bonds deposited with DTC or will be printed on the definitive Bonds in the event of the discontinuance of the Book -
Entry -Only System. In connection with the transactions described in the Official Statement, Bond Counsel
represents only the City. Certain legal matters relating to the City will be passed upon by the City Attorney of the
City of Corpus Christi. Certain legal matters will be passed upon for the Underwriters by the Law Offices of
William T. Avila, P.C., Texas.
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.
INDEPENDENT ACCOUNTANTS
This Official Statement includes the combined financial statements of the City for the fiscal year ended July 31,
2008. These combined financial statements have been examined by Collier, Johnson & Woods, P.C., Independent
Certified Public Accountants, as stated in their report set forth in Exhibit C to this Official Statement. The City has
not requested Collier, Johnson & Woods, P.C., to reissue its audited financial statements and Collier, Johnson &
Woods, P.C., has not performed any procedures in connection with this Official Statement.
FINANCIAL ADVISOR
M. E. Allison & Co. Inc. (the "Financial Advisor") is employed by the City as independent financial advisor in
connection with the issuance of the Bonds and, in such capacity, has assisted the City in the preparation of
documents. The financial advisor's fee for services rendered with respect to the Bonds is contingent upon the sale
and delivery of the Bonds. The Financial Advisor has read and participated in the drafting of this Official
Statement, but has not independently verified any of the information set forth herein.
The Financial Advisor has reviewed the information in this Official Statement in accordance with its responsibilities
to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances
of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information.
UNDERWRITING
The Frost National Bank, as representative of the Underwriters, has agreed, subject to certain conditions, to purchase
the Bonds from the City at the prices indicated on the inside front cover hereof, less an Underwriters' discount of
$547,780.80, plus accrued interest on the Bonds from their Dated Date to their date of initial delivery to the
Underwriters. The Underwriters' obligation is subject to certain conditions precedent. The Underwriters will be
obligated to purchase all of the Bonds if any Bonds are purchased. The Bonds may be offered and sold to certain
dealers and others at prices lower than such public offering prices, and such public prices may be changed, from
time to time, by the Underwriters.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters
have reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to
investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the
Underwriters do not guarantee the accuracy or completeness of such information.
NO -LITIGATION CERTIFICATE
At the time of delivery of the Bonds, the City will execute and deliver a certificate dated as of the date of delivery to
the effect that no litigation has been filed or is then pending to restrain or enjoin the issuance or delivery of the
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Bonds, or which would affect the provisions made for payment of the principal of and interest on the Bonds or in
any manner question the validity of the Bonds.
GENERAL INFORMATION
The descriptions herein do not purport to be complete and all such descriptions or references are qualified in their
entirety by reference to the complete form of the Ordinance or other documents or source they summarize.
Statements made herein involving estimates or projections, whether or not expressly identified as such, should not
be construed to be statements of fact or as representations that such estimates or projections will ever be attained or
will approximate actual results. Any summaries or excerpts of constitutional provisions, statutes, ordinances, or
other documents do not purport to be complete statements of same and are made subject to all of the provisions
thereof. Reference should be made to such original sources in all respects.
For additional information with respect to the financial condition of the City, a copy of the July 31, 2008
Comprehensive Annual Financial Report of the City of Corpus Christi, Texas is available upon written request
addressed to the Office of the Director of Financial Services, City of Corpus Christi, Corpus Christi, Texas 78469-
9277 or can also be found on the City's website at www.cctexas.com.
The Bonds are payable solely from the Pledged Revenues as described herein. The inclusion in the Appendices
hereto of financial and other information with respect to other funds, assets or resources of the City is in no way
intended to imply that any other revenues or money of the City are pledged to pay the principal of and interest on the
Bonds.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreements for the benefit of the holders and beneficial owners of
the Bonds. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay
the Bonds. Under the agreement, the City will be obligated to provide certain updated financial information and
operating data annually, and timely notice of specified material events, to certain information vendors. This
information will be available to securities brokers and others who subscribe to receive the information from the
vendors.
Annual Reports
The City will provide certain updated financial information and operating data to certain information vendors
annually. The information to be updated includes all quantitative financial information and operating data with
respect to the City of the general type included in this Official Statement ("Financial Information") in Tables 1
through 25 and in Appendix B. The City will update and provide this information within six months after the end of
each fiscal year ending in or after 2009. The City will provide the updated information to each nationally
recognized municipal securities information repository ("NRMSIR") and to any state information depository
("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and
Exchange Commission (the "SEC").
The City may provide updated information in full text or may incorporate by reference certain other publicly
available documents, as permitted by SEC Rule 15c2-12 (the "Rule"). The updated infonnation will include audited
financial statements, if the City commissions an audit and it is completed by the required time. If audited financial
statements are not available by the required bine, the City will provide unaudited financial statements by the
required time, and will provide audited financial statements when and if the audit report becomes available. Any
such financial statements will be prepared in accordance with the accounting principles described in Appendix B,
the Ordinance or such other accounting principles as the City may be required to employ from time to time pursuant
to state law or regulation.
The City's current fiscal year end is July 31. Accordingly, it must provide updated information by January 31 of the
following year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify each
NRMSIR and any SID of the change.
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Material Event Notices
The City will also provide timely notices of certain events to certain information vendors. The City will provide
notice of any of the following events with respect to the Bonds, if such event is material to a decision to purchase or
sell Bonds: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled
draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements
reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform;
(6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders
of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of
the Bonds; and (11) rating changes. Neither the Bonds nor the Ordinance make any provision for liquidity
enhancement. In addition, the City will provide timely notice of any failure by the City to provide information, data,
or financial statements in accordance with its agreement described above under "Annual Reports". The City will
provide each notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities
Rulemaking Board ("MSRB").
Availability of Information from NRMSIRs and SID
The City has agreed to provide the information only to NRMSIRs and the SID. Prior to July 1, 2009, the
information will be available to holders of Bonds only if the holders comply with the procedures and pay the charges
established by such information vendors or obtain the information through securities brokers who do so. Effective
July 1, 2009, all such information must be filed with the MSRB pursuant to its Electronic Municipal Market Access
(EMMA) System, rather than the current NRMSIRs and the SID. The MSRB intends to make the information
available to the public without charge and investors will be able to access continuing disclosure information with the
MSRB at www.emma.msrb.org.
The Municipal Advisory Council of Texas (the "MAC") has been designated by the State of Texas and approved by
the SEC staff as a qualified SID. The address of the MAC is 600 West 8th Street, Post Office Box 2177, Austin,
Texas 78768-2177, and its telephone number is 512/476-6947. The MAC has also received SEC approval to
operate, and has begun to operate, a "central post office" for information filings made by municipal issuers, such as
the City. A municipal issuer may submit its information filings with the central post office, which then transmits
such information to the NRMSIRs and the appropriate SID for filing. This central post office can be accessed and
utilized at www.DisclosureUSA.org ("DisclosureUSA"). The City may utilize DisclosureUSA for the filing of
information relating to the Bonds.
Limitations and Amendments
The City has agreed to update information and to provide notices of material events only as described above. The
City has not agreed to provide other information that may be relevant or material to a complete presentation of its
financial results of operations, condition, or prospects or agreed to update any information that is provided, except as
described above. The City makes no representation or warranty concerning such information or concerning its
usefulness to a decision to invest in or sell Bonds at any future date. The City disclaims any contractual or tort
liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from
any statement made pursuant to its agreement, although holders or registered owners of Bonds may seek a writ of
mandamus to compel the City to comply with its agreement.
The City may amend its continuing disclosure agreement 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
the agreement, as amended, would have permitted an underwriter to purchase or sell Bonds in the offering described
herein in compliance with the Rule and either the holders of a majority in aggregate principal amount of the
outstanding Bonds consent or any person unaffiliated with the City (such as nationally recognized bond counsel)
determines that the amendment will not materially impair the interests of the holders or beneficial owners of the
Bonds. If the City amends its agreement, it must include with the next financial infommation and operating data
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 infonnation and data
provided. The City 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
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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, respectively, in the primary offering of the Bonds.
Compliance with Prior Undertakings
During the last five years, the City has complied in all material respects with continuing disclosure agreements made
by it in accordance with the Rule.
On March 2, 2009, Fitch downgraded the City's unenhanced tax revenue debt rating from "AA-" to "A+". On
March 5, 2009, the City filed a material event notice disclosing this rating downgrade with the NRMSIRs and SID
through DisclosureUSA.com.
FORWARD LOOKING STATEMENTS
The statements contained in this Official Statement, and in any other information provided by the City, that are not
purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes,
intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking
statements. All forward-looking statements included in this Official Statement are based on information available to
the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. It is
important to note that the City's actual results could differ materially from those in such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and estimates and are
inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible
invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic,
business, industry, market, legal and regulatory circumstances and conditions and actions taken or omitted to be
taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and
other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect
to, among other things, future economic, competitive, and market conditions and future business decisions, all of
which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of
such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements
included in this Official Statement would prove to be accurate.
GASB 34 STATEMENT
In June 1999, the Governmental Accounting Standards Board ("GASB") issued Statement No. 34, `Basi. Financial
Statements - and Management's Discussion and Analysis - for State and Local Governments" ("GASB 34"). The
objective of GASB 34 is to enhance the clarity and usefulness of the general-purpose external financial reports of
state and local governments to its citizenry, legislature and oversight bodies, and investors and creditors. The City
implemented GASB 34 beginning with its fiscal year ending July 31, 2002. While adoption of GASB 34 altered the
presentation of the City's financial information, City management believes that the adoption of GASB 34 did not
have any material adverse impact on the City's financial position, results of operation, or cash flows.
MISCELLANEOUS
All information contained in this Official Statement is subject, in all respects, to the complete body of information
contained in the original sources thereof and no guaranty, warranty or other representation is made concerning the
accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to
whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not
expressly identified as such, should not be considered statements of fact.
No person has been authorized to give any information or to make any representations other than those contained in
this Official Statement, and if given or made, such other information or representations must not be relied upon as
having been authorized by the City. This Official Statement does not constitute an offer to sell or solicitation of an
offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer of
solicitation.
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AUTHORIZATION OF THE OFFICIAL STATEMENT
The Official Statement will be approved as to form and content and the use thereof in the offering of the Bonds will
be authorized, ratified and approved by the City Council on the date of sale, and the Underwriters will be furnished,
upon request, at the time of payment for and the delivery of the Bonds, a certified copy of such approval, duly
executed by the proper officials of the City.
The Ordinance will also approve the form and content of this Official Statement, and any addenda, supplement or
amendment thereto issued on behalf of the City, and authorize its further use in the reoffering of the Bonds by the
Underwriters.
This Official Statement has been approved by the City Council of the City for distribution in accordance with the
provisions of the United States Securities and Exchange Commission's rule codified at 17 C.F.R.
Section 240.15c2-12..
ATTEST:
/s/ Armando Chapa
City Secretary
By: /s/ Henry Garrett
- [The remainder of this page intentionally left blank.]
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Mayor
APPENDIX A
SELECTED PROVISIONS OF THE ORDINANCE
The following are excerpts of certain sections of the Ordinance. Reference is hereby made to the
Ordinance, which contains a more complete description of the terms and conditions relating to the Bonds.
SECTION 7: Definitions. For all purposes of this Ordinance, except as otherwise expressly provided or unless
the context otherwise require, the terms defined in this Section have the meanings assigned to them in this Section,
and certain terms used in Sections 23, 32, and 34 of this Ordinance have the meanings assigned to them in such
respective Sections.
(1) The term "Account" shall mean any account created, established and maintained under the terms
of any ordinance authorizing the issuance of Priority Bonds.
(2) The term "Accountant" shall mean a nationally recognized independent certified public
accountant, or an independent firm of certified public accountants.
(3) The term "Additional Priority Bonds" shall mean the additional revenue bonds which the City
reserves the right to issue in the future on a parity with the Previously Issued Priority Bonds and the Bonds,
as provided in the Base Ordinance and this Ordinance.
(4) The term "Amortization Installment" shall mean the amount of money which is required to be
deposited into the Mandatory Redemption Account for retirement of Term Bonds (whether at maturity or
by mandatory redemption and including redemption premium, if any).
(5) The term "Attorney General" shall mean the Office of the Attorney General of the State of Texas.
(6) The term "Authorized Denomination" shall have the meaning given such term in Section 3 of this
Ordinance.
(7) The term "Average Annual Principal and Interest Requirements" shall mean that amount equal to
the average annual principal and interest requirements (including Amortization Installments) of all Priority
Bonds Outstanding. With respect to Additional Priority Bonds that bear interest at a rate which is not
established at the time of issuance at a single numerical rate for each maturity of such series, Average
Annual Principal and Interest Requirements shall be calculated by (i) assuming that the interest rate for
every 12 -month period on such bonds is equal to 9.20% or (ii) using the highest numerical rate borne over
the preceding 24 month period by such bonds, whichever is greater; provided, however, that if such bonds
have not borne interest at a variable rate for such 24 month period, such rate shall be assumed to be 9.20%
until such time as bonds have been Outstanding for a 24 month period. In making such determinations, it
shall be assumed that the principal of such bonds is amortized such that annual debt service is substantially
level over the remaining stated life of such bonds.
(8) The tern "Base Ordinance" shall mean the ordinance authorizing the issuance of the Series 1990
Bonds.
(9) The term "Bonds" shall have the meaning given such term in Section 1 of this Ordinance.
(10) The tenn "Capital Additions" shall mean a reservoir or other water storage facilities, a wastewater
treatment plant or an interest therein, a gas distribution system or an interest therein and associated
transmission facilities with respect to each and any combination thereof, which shall become a part of the
System.
(11) The term "Capital Improvements" shall mean any capital extensions, improvements and
betterments to the System other than Capital Additions.
(12) The term "Capitalized Interest Account" shall mean the Account by that name which may be
created within the Debt Service Fund.
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(13) The terms "City" and "Issuer" shall have the meaning given such terms in the preamble of this
Ordinance.
(14) The term "Closing Date" shall mean the date of physical delivery of the Initial Bonds in exchange
for the payment in full by the Purchasers.
(15) The term "Comptroller of Public Accounts" shall mean the Office of the Comptroller of Public
Accounts of the State of Texas.
(16) The term "Construction Fund" shall mean the fund so designated in Section 13 of this Ordinance.
(17) The term "Credit Facility" shall mean a policy of municipal bond insurance, a debt service reserve
fund policy or surety bond or a letter or line of credit issued by a Credit Facility Provider in support of any
Priority Bonds or Subordinated Obligations.
(18) The term "Credit Facility Provider" shall mean (i) with respect to any Credit Facility consisting of
a policy of municipal bond insurance or a surety bond, an issuer of policies of insurance insuring the timely
payment of debt service on governmental obligations such as the Priority Bonds, provided that a Rating
Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds fully insured by a
standard policy issued by the issuer in its highest generic rating category for such obligations; and (ii) with
respect to any Credit Facility consisting of a letter or line of credit, any financial institution, provided that a
Rating Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds in its two
highest generic rating categories for such obligations if the letter or line of credit proposed to be issued by
such financial institution secured the timely payment of the entire principal amount of the series of Priority
Bonds and the interest thereon.
(19) The term "Debt Service Fund" shall have the meaning given such tern in Section 10 of this
Ordinance.
(20) The tern "DTC" shall have the meaning given such term in Section 5 to this Ordinance.
(21) The tern "Eligible Investments" shall mean those investments in which the City is authorized by
law, including, but not limited to, the Public Funds Investment Act of 1987 (Chapter 2256, as amended,
Texas Government Code), to purchase, sell and invest its funds and funds under its control, and with
respect to the investment of proceeds of any Priority Bonds, guaranteed investment contracts fully
collateralized by Government Obligations.
(22) The term "Engineer of Record" shall mean the independent engineer or firm at the time employed
by the City to perform and carry out the duties imposed on such engineer or firm by this Ordinance and
having a favorable reputation nationally for skill and experience in the engineering of water, sanitary sewer
and/or gas systems of comparable size and character as those forming parts of the System.
(23) The term "Fund" shall mean any fund created, established and maintained under the terms of any
ordinance authorizing the issuance of Priority Bonds.
(24) The term "Government Obligations" shall mean (i) with respect to any Previously Issued Priority
Bonds, direct obligations of the United States of America, including obligations the principal of and interest
on which are unconditionally guaranteed by the United States of America and (ii) with respect to the Bonds
and any Additional Priority Bonds hereafter issued by the City, (1) direct noncallable obligations of the
United States, including obligations that are unconditionally guaranteed by, the United States of America,
or (2) noncallable obligations of an agency or instrumentality of the United States, including obligations
that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the
governing body of the issuer adopts or approves the proceedings authorizing the issuance of refunding
bonds, are rated as to investment quality by a nationally recognized investment rating firm not less than
"AAA" or its equivalent, or (3) noncallable obligations of a state or an agency or a county, municipality, or
other political subdivision of a state that have been refunded and that, on the date the governing body of the
issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated as to
investment quality by a nationally rccognized investment rating firm not less than "AAA" or its equivalent;
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provided, however, that in the event the term "Government Obligations" shall be used in such a manner
other than with respect to the defeasance of Priority Bonds pursuant to Section 18 of this Ordinance, its
meaning shall be consistent with that specified in clause (i) above until such time as there are no longer
Outstanding any Previously Issued Priority Bonds and, thereafter, it shall have the meaning ascribed thereto
in clause (ii).
(25) The tern "Gross Revenues" shall mean all revenues, income, and receipts derived or received by
the City from the operation and ownership of the System, including the interest income from the investment
or deposit of money in any Fund created or confirmed by this Ordinance or maintained by the City in
connection with the System, other than those amounts subject to payment to the United States of America
as rebate pursuant to section 148 of the Code.
(26) The term "Insurer" shall mean Assured Guaranty Corp.
(27) The term "Policy" shall mean the financial guaranty insurance policy relating to the Bonds issued
by the Insurer.
(28) The term "Mandatory Redemption Account" shall mean the Account by that name within the Debt
Service Fund and established, if at all, by an ordinance authorizing the issuance of Priority Bonds.
(29) The terms "Net Revenues of the System" and "Net Revenues" shall mean all Gross Revenues less
Operating Expenses.
(30) The term "Operating Expenses" shall mean the expenses of operation and maintenance of the
System, including all salaries, labor, materials, repairs, and extensions necessary to render efficient service;
provided, however, that only such repairs and extensions, as in the judgment of the City, reasonably and
fairly exercised by the passage of appropriate ordinances, are necessary to render adequate service, or such
as might be necessary to meet some physical accident or condition which would otherwise impair any
Priority Bonds. Operating Expenses shall include the purchase of water, sewer and gas services as received
from other entities and the expenses related thereto, and, to the extent permitted by law, Operating
Expenses may include payments made on or in respect of obtaining and maintaining any Credit Facility.
Depreciation, and payments from the System Fund to other funds established in this Ordinance, shall never
be considered as expenses of operation and maintenance.
(31) - The term "Outstanding" shall mean, as of the date of determination,' all Priority Bonds theretofore
issued and delivered except:
(a) those Priority Bonds theretofore canceled by the respective paying agents for such
Priority Bonds or delivered to such paying agents for cancellation;
(b) those Priority Bonds for which payment has been duly provided by the City by the
irrevocable deposit with the respective paying agents for such Priority Bonds of money in the
amount necessary to fully pay principal of, premium, if any, and interest thereon to maturity or
redemption, if any, as the case may be, provided that, if such Priority Bonds are to be redeemed,
notice of redemption thereof shall have been duly given pursuant to the ordinance authorizing the
issuance of such Priority Bonds, irrevocably provided to be given to the satisfaction of such
paying agents, or waived;
(c) those Priority Bonds that have been mutilated, destroyed, lost, or stolen and for which
replacement bonds have been registered and delivered in lieu thereof; and
(d) those Priority Bonds for which the payment of principal thereof, premium, if any, and
interest thereon to Stated Maturity re redemption has been duly provided for by the City by the
deposit in trust of money or Government Obligations, or both.
(32) The term "Paying Agent/Registrar" shall mean the financial institution specified in Section 5(a) of
this Ordinance, or its herein -permitted successors and assigns.
(33) The tern "Pledged Revenues" shall mean
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(a) the Net Revenues, plus
(b) any additional revenues, income, receipts, or other resources, including, without
limitation, any grants, donations, or income received or to be received from the United States
Government, or any other public or private source, whether pursuant to an agreement or otherwise,
which hereafter are pledged to the payment of the Priority Bonds.
(34) The term "Previously Issued Priority Bonds" shall have the meaning given said term in the
preamble to this Ordinance.
(35) The term "Priority Bonds" shall mean the Previously Issued Priority Bonds, the Bonds, and any
Additional Priority Bonds.
(36) The term "Prudent Utility Practice" shall mean any of the practices, methods and acts, in the
exercise of reasonable judgment, in the light of the facts, including but not limited to the practices, methods
and acts engaged in or approved by a significant portion of the public utility industry prior thereto, known
at the time the decision was made, would have been expected to accomplish the desired result at the lowest
reasonable cost consistent with reliability, safety and expedition. It is recognized that Prudent Utility
Practice is not intended to be limited to the optimum practice, method or act at the exclusion of all others,
but rather is a spectrum of possible practices, methods or acts which could have been expected to
accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition.
In the case of any facility included in the System which is owned in common with one or more other
entities, the term "Prudent Utility Practice", as applied to such facility, shall have the meaning set forth in
the agreement governing the operation of such facility.
(37) The term "Purchase Contract" shall have the meaning given such term in Section 2 of this
Ordinance;
(38) The tenn "Purchasers" shall have the meaning given such term in Section 2 of this Ordinance.
(39) The term "Rating Agency" shall mean any nationally recognized securities rating agency which
has assigned a rating to the Priority Bonds.
(40) The tenn "Required Amount" shall have the meaning given such tern in Section 11 of this
Ordinance.
(41) The term "Reserve Fund" shall have the meaning given such term in Section 11 of this Ordinance.
(42) The term "Reserve Fund Obligations" shall mean cash, Eligible Investments, any Credit Facility,
or any combination of the foregoing.
(43) The term "Series 1990 Bonds" shall mean the $64,660,000 City of Corpus Christi, Texas Utility
System Revenue Refunding Bonds, Series 1990, authorized by the ordinance adopted by the City on
November 15, 1990; the term "Series 1999 Bonds" shall mean the $47,740,000 City of Corpus Christi,
Texas Utility System Revenue Refunding and Improvement Bonds Series 1999, authorized by the
ordinance adopted by the City on May 11, 1999; the term "Series 1999-A Bonds" shall mean the
$15,750,000 City of Corpus Christi, Texas Utility System Revenue Refunding and Improvement Bonds,
Series 1999-A, authorized by the ordinance adopted by the City on April 20, 1999; the term "Series 2000
Bonds" shall mean the $34,740,000 City of Corpus Christi, Texas Utility System Revenue Refunding
Bonds, Series 2000, authorized by the ordinance adopted by the City on May 11, 1999 (as amended by
ordinance adopted on June 15, 1999); the tenn "Series 2000-A Bonds" shall mean the $42,520,000 City of
Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2000-A, authorized by the
ordinance adopted by the City on September 19, 2000; the term "Series 2002 Bonds" shall mean the
$92,330,000 City of Corpus Christi, Texas Utility System Revenue Refunding and hnprovement Bonds,
Series 2002, authorized by the ordinance adopted by the City on August 20, 2002; the terns "Series 2003
Bonds" shall mean the $28,870,000 City of Corpus Christi, Texas Utility System Revenue Refunding
Bonds, Series 2003, authorized by the ordinance adopted by the City on March 25, 2003; the term "Series
2004 Bonds" shall mean the $50,000,000 City of Corpus Christi, Texas Utility System Revenue Refunding
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and Improvement Bonds, Series 2004, authorized by the ordinance adopted by the City on July 13, 2004;
the term "Series 2005 Bonds" shall mean the $70,390,000 City of Corpus Christi, Texas Utility System
Revenue Refunding Bonds, Series 2005, authorized by the ordinance adopted by the City on December 21,
2004; the tenni "Series 2005A Bonds" shall mean the $68,325,000 City of Corpus Christi, Texas Utility
System Revenue Refunding Bonds, Series 2005A, authorized by the ordinance adopted by the City on
August 30, 2005; and the term "Series 2006 Bonds" shall mean the $84,415,000 City of Corpus Christi,
Texas Utility System Revenue Refunding and Improvement Bonds, Series 2006, authorized by the
ordinance adopted by the City on September 26, 2006.
(44) The term "Subordinated Obligations" shall mean any bonds, notes, or other obligations issued
pursuant to law payable in whole or in part from the Pledged Revenues but subordinate to the Priority
Bonds, which includes the Series B Commercial Paper Notes.
(45) The tern "System" shall mean and include the City's existing combined waterworks system,
wastewater disposal system and gas system, together with all future extensions, improvements,
enlargements, and additions thereto, including, to the extent permitted by law, storm sewer and drainage
within the waterworks system, and all replacements thereof; provided that, notwithstanding the foregoing,
and to the extent now or hereafter authorized or permitted by law, the term System shall not include any
waterworks, wastewater or gas facilities which are declared by the City not to be a part of the System and
which are hereafter acquired or constructed by the City with the proceeds from the issuance of "Special
Facilities Bonds", which are hereby defined as being special revenue obligations of the City which are not
secured by or payable from the Pledged Revenues, but which are secured by and payable solely from
special contract revenues, or payments received from the City or any other legal entity, or any combination
thereof, in connection with such facilities; and such revenues or payments shall not be considered as or
constitute Gross Revenues of the System, unless and to the extent otherwise provided in the ordinance or
ordinances authorizing the issuance of such "Special Facilities Bonds".
(46) The term "System Fund" shall have the meaning given such term in Section 9 of this Ordinance.
(47) The term "Term Bonds" shall have the meaning given such term in Section 3 of this Ordinance.
(48) The tern "Value of Investment Securities" and words of like import shall mean the amortized
value thereof; provided, however, that all United States of America, United States Treasury Obligations --
State and Local Govemment Series shall be valued at par and those obligations which are redeemable at the
option of the holder shall be valued at the price at which such obligations are then redeemable. The
computations made under this paragraph shall include accrued interest on the investment securities paid as
a part of the purchase price thereof and not collected. For the purposes of this definition, "amortized
value", when used with respect to a security purchased at par, means the purchase price of such security.
(49) The tem "Year" shall mean the regular fiscal year used by the City in connection with the
operation of the System, which may be any twelve consecutive months period established by the City,
currently being the period of time beginning on August 1 and ending on July 31.
SECTION 8: Pledge.
A. Pledged Revenues. The Priority Bonds are and shall be secured by and payable from a first lien on and
pledge of the Pledged Revenues including such revenues within the System Fund and the Funds hereinafter created
in this Ordinance; and the Pledged Revenues arc further pledged to the establishment and maintenance of the Debt
Service Fund and the Reserve Fund as hereinafter provided. The Priority Bonds are and will be secured by and
payable only from the Pledged Revenues, and are not secured by or payable from a mortgage or deed of tnist on any
properties, whether real, personal, or mixed, constituting the System.
B. Security Interest. Chapter 1208, as amended, Texas Government Code, applies to the issuance of the
Bonds and the pledge of the Pledged Revenues granted by the City under Subsection A of this Section, and such
pledge is therefore valid, effective, and perfected. If Texas law is amended at any time while the Bonds are
Outstanding and unpaid such that the pledge of the Pledged Revenues granted by the City is to be subject to the
filing requirements of Chapter 9, as amended, Texas Business & Commerce Code, then in order to preserve to the
registered owners of the Bonds the perfection of the security interest in said pledge, the City agrees to take such
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measures as it determines are reasonable and necessary under Texas law to comply with the applicable provisions of
Chapter 9, as amended, Texas Business & Commerce Code and enable a filing to perfect the security interest in said
pledge to occur.
SECTION 9: System Fund. There has heretofore been created and established and there shall be maintained on
the books of the City, and accounted for separate and apart from all other funds of the City, a special fund entitled
the "City of Corpus Christi Utility System Fund" (the "System Fund"). All Gross Revenues shall be credited to the
System Fund immediately upon receipt. All Operating Expenses shall be paid from such Gross Revenues credited to
the System Fund as a first charge against same.
SECTION 10: Debt Service Fund.
A. Debt Service Fund Established. For the sole purpose of paying the principal amount of, premium, if any,
Amortization Installments, if any, and interest on all Priority Bonds, there has heretofore been created and
established and there shall be maintained on the books of the City a separate fund entitled the "City of Corpus
Christi Utility System Revenue Bonds Debt Service Fund" (the "Debt Service Fund"). Money in the Debt Service
Fund shall be deposited and maintained in an official depository bank of the City.
B. Capitalized Interest Account. Within the Debt Service Fund there may hereafter be established a
Capitalized Interest Account. The proceeds of Priority Bonds representing capitalized interest may be deposited into
the Capitalized Interest Account. On or before the day next preceding any interest payment date of Priority Bonds or
other obligations for which any interest has been capitalized, the City shall use the money in the Capitalized Interest
Account to pay such interest on such Priority Bonds or other obligations to the extent of the amounts therein
representing such capitalized interest.
C. Mandatory Redemption Account. Within the Debt Service Fund there has heretofore been established the
Mandatory Redemption Account. Amortization Installments shall be deposited to the credit of the Mandatory
Redemption Account and be used to retire the principal amount of Term Bonds in the manner described in any
ordinance, including this Ordinance, authorizing the issuance of Term Bonds.
D. Surplus Proceeds. Effective at such time as the Previously Issued Priority Bonds are no longer
Outstanding, the City may transfer excess amounts held in the Debt Service Fund to any fund or funds established
for the payment of or security for the Priority Bonds (including any escrow established for the final payment of any
such obligations pursuant to Chapter 1207, as amended, Texas Government Code) or use such excess amount for
any lawful purpose now or hereafter provided by law; provided, however, to the extent that such excess amount
represents bond proceeds, then such amount must remain in the Debt Service Fund.
SECTION 11: Reserve Fund.
A. Reserve Fund Established. There has heretofore been created and established and there shall be maintained
on the books of the City a separate fund entitled the "City of Corpus Christi Utility System Revenue Bonds Reserve
Fund" (the "Reserve Fund"). There shall be deposited into the Reserve Fund any Reserve Fund Obligations so
designated by the City. Reserve Fund Obligations in the Reserve Fund shall be deposited and maintained in an
official depository bank of the City. Reserve Fund Obligations in the Reserve Fund shall be used solely for the
purpose of retiring the last of any Priority Bonds as they become due or paying principal of and interest on any
Priority Bonds when and to the extent the amounts in the Debt Service Fund are insufficient for such purpose. The
Reserve Fund shall be maintained in an amount equal to the Average Annual Principal and Interest Requirements of
the Outstanding Priority Bonds (the "Required Amount"). The City may, at its option, withdraw and transfer to the
System Fund, all surplus in the Reserve Fund over the Required Amount.
B. Credit Facility. The City may replace or substitute a Credit Facility for cash or Eligible Investments on
deposit in the Reserve Fund or in substitution for or replacement of any existing Credit Facility. Upon such
replacement or substitution, cash or Eligible Investments on deposit in the Reserve Fund which, taken together with
the face amount of any existing Credit Facilities, are in excess of the Required Amount may be withdrawn by the
City, at its option, and transferred to the System Fund; provided, however, that the face amount of any Credit
Facility may be reduced at the option of the City in lieu of such transfer.
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C. Withdrawals. If the City is required to make a withdrawal from the Reserve Fund for any of the purposes
described in this Section, the City shall promptly notify any applicable Credit Facility Provider of the necessity for
a withdrawal from the Reserve Fund for any such purposes, and shall make such withdrawal FIRST from available
money or Eligible Investments then on deposit in the Reserve Fund, and NEXT from a drawing under any Credit
Facility to the extent of such deficiency.
D. Deficiencies. In the event of a deficiency in the Reserve Fund, or in the event that on the date of
termination or expiration of any Credit Facility there is not on deposit in the Reserve Fund sufficient Reserve Fund
Obligations, all in an aggregate amount at least equal to the Required Amount, then the City shall satisfy the
Required Amount by depositing Reserve Fund Obligations into the Reserve Fund in monthly installments of not less
than 1/60 of the Required Amount made on or before the 10th day of each month following such termination or
expiration.
E. Redemption; Defeasance. In the event of the redemption or defeasance of any Priority Bonds, any Reserve
Fund Obligations on deposit in the Reserve Fund in excess of the Required Amount may be withdrawn and
transferred, at the option of the City, to the System Fund, as a result of (i) the redemption of any Priority Bonds, or
01) funds for the payment of any Priority Bonds having been deposited irrevocably with the paying agent or place of
payment therefor in the manner described in any ordinance authorizing the issuance of Priority Bonds, the result of
such deposit being that such Priority Bonds no longer are deemed to be Outstanding under the terms of any such
ordinance.
F. Reitnbursement of Credit Facility Provider. In the event there is a draw upon a Credit Facility, the City
shall reimburse the Credit Facility Provider for such draw, in accordance with the terms of any agreement pursuant
to which the Credit Facility is issued, from Pledged Revenues; provided, however, such reimbursement from
Pledged Revenues shall be subordinate and junior in right of payment to the payment of principal of and premium, if
any, and interest on the Priority Bonds.
G. Additional Priority Bonds. Upon the issuance of Additional Priority Bonds the money in the Reserve Fund
shall be increased to the newly -established Required Amount in accordance with the provisions of Section 20B of
this Ordinance.
SECTION 12: Subordinated Obligations Funds and Accounts. The City hereafter may create, establish and
maintain on the books of the City separate funds and accounts from which money can be withdrawn to pay the
principal of and interest on Subordinated Obligations which hereafter may be issued.
SECTION 13: Construction Fund. The City hereby creates and establishes and shall maintain on the books of the
City a separate fund to be entitled the "Series 2009 Utility System Revenue Bonds Construction Fund" (the
"Construction Fund") for use by the City for payment of all lawful costs associated with the acquisition,
improvement and extension of the System as hereinbefore provided. There shall be deposited to the Construction
Fund those proceeds from the sale of the Bonds specified in Section 28 of this Ordinance. Upon payment of all such
costs, any money remaining on deposit in said Fund shall be transferred to the Debt Service Fund. Amounts so
deposited to the Debt Service Fund shall be used in the manner described in Subsection 22P of this Ordinance.
SECTION 14: Investments. Money in any Fund established pursuant to this Ordinance may, at the option of the
City, be placed or invested in Eligible Investments. Money in the Reserve Fund shall not be invested in securities
with an average aggregate weighted maturity of greater than seven years. If stoney in a Fund herein established are
permitted to be invested, the value of any such Fund shall be established by adding the money therein to the Value
of Investment Securities. The value of each such Fund shall be established annually during the last month of each
Year, and in addition thereto and with respect to the Reserve Fund, value shall be established within thirty days prior
to the issuance of Priority Bonds and at the time or tines withdrawals are made therefrom. Such investments shall
be sold promptly when necessary to prevent any default in connection with the Priority Bonds. Earnings derived
from the investment of money on deposit in the various Funds and Accounts created hereunder shall be credited to
the Fund or Account from which money used to acquire such investment shall have come.
SECTION 15: Funds Secured. Money in the System Fund and all Funds created by this Ordinance, to the extent
not invested, shall be secured in the manner prescribed by law for securing funds of the City.
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SECTION 16: Flow Of Funds. All money in the System Fund not required for paying Operating Expenses
during each month shall be applied by the City, on or before the 10th day of the following month, commencing
during the months and in the order of priority with respect to the Funds and Accounts that such applications are
hereinafter set forth in this Section.
A. Debt Service Fund. To the credit of the Debt Service Fund, in the following order of priority, to -wit:
(1) such amounts, deposited in approximately equal monthly installments, commencing during the
month in which the Priority Bonds are delivered, or the month thereafter if delivery is made after the 10th
day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service Fund available
for such purpose (including specifically money on deposit in the Capitalized Interest Account, if any,
dedicated thereto), to pay the interest scheduled to come due on Priority Bonds on the next succeeding
interest payment date;
(2) such amounts, deposited in approximately equal monthly installments, commencing during the
month which shall be the later to occur of (i) the twelfth month before the first maturity date of Priority
Bonds or (ii) the month in which Priority Bonds are delivered, or the month thereafter if delivery is made
after the 10th day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service
Fund available for such purpose, to pay the principal scheduled to mature on Priority Bonds on the next
succeeding principal payment date; and
(3) Amortization Installments, in such amounts and on such dates as set forth in any ordinance
authorizing a series of Priority Bonds which contain Term Bonds within such series, to pay scheduled
principal amounts of Priority Bonds which constitute Term Bonds to be redeemed in accordance with the
terms of said ordinance.
B. Reserve Fund. To the credit of the Reserve Fund, such amounts, deposited in approximately equal monthly
installments, commencing during the month in which the Priority Bonds are delivered, or the month thereafter if
delivery is made after the 10th day thereof, equal to not less than 1/60 of the Required Amount, until such time as
such amounts together with other amounts, if any, in the Reserve Fund, equal the Required Amount. When and so
long as the Reserve Fund Obligations in the Reserve Fund are not less than the Required Amount, no deposits need
be made to the credit of the Reserve Fund. When and if the Reserve Fund at any time contains less than the Required
Amount due to any cause or condition other than the issuance of Additional Priority Bonds then, subject and
subordinate to making the required deposits to the credit of the Debt Service Fund, commencing with the month
during which such deficiency occurs, such deficiency shall be made up from the next available Pledged Revenues or
from any other sources available for such purpose. Reimbursements to a Credit Facility Provider made in
accordance with the terms of Subsection 11F of this Ordinance shall constitute the making up of a deficiency to the
extent that such reimbursements result in the reinstatement, in whole or in part, as the case may be, of the amount of
the Credit Facility. If the Reserve Fund contains less than the Required Amount due to the issuance of Additional
Priority Bonds, deposits shall be made to the Reserve Fund commencing during the month and in the amounts
required by Subsection 20B of this Ordinance, unless a Credit Facility is deposited in the Reserve Fund in an
amount necessary to cause the sum of money and the value of Investment Securities and any other Credit Facilities
in the Reserve Fund to equal the Required Amount.
C. Surplus. The balance of any money remaining in the System Fund following such transfers may be used by
the City for payment of other obligations of the System, including, but not limited to, Subordinated Obligations, and
for any other lawful purpose; provided, however, that transfers made for purposes other than for payment of
obligations of the System shall be made only at the end of the Year.
SECTION 17: Deficiencies. If on any occasion there shall not be sufficient Pledged Revenues to make the
deposits and other applications of money required by Section 16 with respect to the various Funds as provided
therein, any such deficiencies shall be made up (in the order that each such Fund is provided for in Section 16) as
soon as possible from the next available Pledged Revenues, or from any other sources available for such purpose.
The foregoing notwithstanding, however, if any deficiency in the Reserve Fund occurs as a result of withdrawals
therefrom or decreases in the market value of Eligible Investments on deposit therein, such deficiency will be made
up from the next available Pledged Revenues within twelve months from the date of such deficiency is determined,
with such deposits to the Reserve Fund to be made in not more than twelve substantially equal monthly payments.
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SECTION 18: Payment of Bonds. On or before the first scheduled interest payment date, and on or before each
interest payment date and principal payment date thereafter while any of the Priority Bonds are Outstanding and
unpaid, the City shall make available to the paying agent therefor, out of the Debt Service Fund (and the other
Funds, if necessary, in the order of priority set forth herein) money sufficient to pay such interest on and such
principal amount of the Priority Bonds, as shall become due and mature on such dates, respectively, at maturity or
by redemption prior to maturity. The bond registrar for each series of Priority Bonds shall destroy all paid Priority
Bonds and furnish the City with an appropriate certificate of cancellation or destruction.
SECTION 19: Final Deposits; Government Obligations.
A. Defeasance. Any Priority Bond shall be deemed to be paid, retired and no longer Outstanding within the
meaning of this Ordinance when payment of the principal amount of, redemption premium, if any, on such Priority
Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, upon
redemption, or otherwise) either (i) shall have been made in accordance with the terms thereof or (ii) shall have been
provided for by irrevocably depositing with, or making available to, a paying agent (or escrow agent) therefor, in
trust and irrevocably set aside exclusively for such payment, in accordance with the terms and conditions of an
agreement between the City and said paying agent (or escrow agent), (1) money sufficient to make such payment or
(2) Government Obligations, certified by an independent public accounting firm of national reputation, to mature as
to principal and interest in such amounts and at such times as will insure the availability, without reinvestment, of
sufficient money to make such payment, and all necessary and proper fees, compensation, and expenses of such
paying agent pertaining to the Priority Bonds with respect to which such deposit is made shall have been paid or the
payment thereof provided for (and irrevocable instructions shall have been given by the City to the paying agent of
such bonds to give notice of such redemption in the manner required by the ordinance or ordinances authorizing the
issuance of such bonds) to the satisfaction of such paying agent. Such paying agent shall give notice to each
registered owner of any Priority Bond that such deposit as described above has been made, in the same manner as
described in Section 3B of this Ordinance. In addition, in connection with a defeasance, such paying agent shall give
notice of redemption, if necessary, to the registered owners of any Priority Bonds in the manner described in such
Priority Bonds and as directed in the redemption instructions delivered by the City to such paying agent. At such
time as a Priority Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured by or
entitled to the benefit of this Ordinance or a lien on and pledge of the Pledged Revenues, and shall be entitled to
payment solely from such money or Government Obligations.
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 (i)
or (ii) above shall not be irrevocable, provided that: (1) in the proceedings providing for such defeasance, the City
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 defeasance; (3) directs that notice of the
reservation be included in any redemption notices that it authorizes; and (4) at the time of the redemption, satisfies
the conditions of (i) or (ii) above with respect to such defeased debt as though it was being defeased at the time of
the exercise of the option to redeem the defeased Bonds, after taking the redemption into account in determining the
sufficiency of the provisions made for the payment of the defeased Bonds.
B. Government Obligations. Any money so deposited with a paying agent (or escrow agent) may, at the
direction of the City, also be invested in Government Obligations, maturing in the amounts and times as
hereinbefore set forth, and all income from all Government Obligations in the hands of the paying agent (or escrow
agent) pursuant to this Section which is not required for the payment of the principal of such Priority Bonds, the
redemption premium, if any, therefor, and interest thereon, with respect to which such money has been so deposited,
shall be remitted to the City for deposit into the System Fund.
C. Payment of Priority Bonds. Except as provided in Subsection B of this Section, all money or Government
Obligations set aside and held in trust pursuant to the provisions of this Section for the payment of the principal of
such Priority Bonds, the redemption premium, if any, therefor, and interest thereon, shall be applied solely to and
used solely for the payment of such Priority Bonds, such redemption premium, if any, and interest thereon.
SECTION 20: Issuance of Additional Priority Bonds.
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A. Reservation of Right to Issue Additional Priority Bonds. Subject to the provisions hereinafter appearing as
conditions precedent which must first be satisfied, the City reserves the right to issue, from time to time as needed,
Additional Priority Bonds for any lawful purpose relating to the System. Such Additional Priority Bonds may be
issued in such form and manner as now or hereafter authorized by the laws of the State of Texas for the issuance of
evidences of indebtedness or other instruments, and should new methods or financing techniques be developed that
differ from those now available and in normal use, the City reserves the right to employ the same in its financing
arrangements provided only that the same conditions precedent herein required for the authorization and issuance of
Additional Priority Bonds are satisfied.
B. Debt Service Fund and Reserve Fund; Funding Reserve Fund. The Debt Service Fund and the Reserve
Fund confirmed by this Ordinance shall secure and be used to pay all Additional Priority Bonds hereafter issued.
Upon the issuance and delivery of Additional Priority Bonds, the additional amount required to be deposited in the
Reserve Fund shall be so accumulated by the deposit in the Reserve Fund of all or any part of said required
additional amount in cash immediately after the delivery of such Additional Priority Bonds, or, at the option of the
City, (i) by the deposit of said required additional amount (or any balance of said required additional amount not
deposited in cash as permitted above) in approximately equal monthly installments, made on or before the 10th day
of each month following the delivery of such Additional Priority Bonds, of not less than 1/60th of said required
additional amount (or 1/60th of the balance of said required additional amount not deposited in cash as permitted
above) or (ii) by the deposit of a Credit Facility which, in whole or in combination with deposits described in clause
(i) above, is sufficient to satisfy the required additional amount to be on deposit in the Reserve Fund.
C. Calculations. All calculations of Average Annual Principal and Interest Requirements made pursuant to
this Section shall be made as of and from the date of the Additional Priority Bonds then proposed to be issued.
SECTION 21: Further Requirements for Additional Priority Bonds.
A. Conditions Precedent for Issuance of Additional Priority Bonds - General. As a condition precedent to the
issuance of any Additional Priority Bonds, the City Manager (or other officer of the City then having the
responsibility for the financial affairs of the City) shall have executed a certificate stating (i) that the City is not then
in default as to any covenant, obligation or agreement contained in any ordinance or other proceeding relating to any
obligations of the City payable from and secured by a lien on and pledge of the Pledged Revenues and (ii) that the
amounts on deposit in all Funds or Accounts created and established for the payment and security of all Outstanding
obligations payable from and secured by a lien on and pledge of the Pledged Revenues are the amounts then
required to be deposited therein. Such certificate shall be dated on or before the date of delivery of such Additional
Priority Bonds, but such certificate shall not be dated prior to the date an ordinance is passed authorizing the
issuance of such Additional Priority Bonds.
B. Conditions Precedent for Issuance of Additional Priority Bonds - Capital Improvements and for any other
Lawful Purpose except for Capital Additions or for Refunding. The City covenants and agrees that Additional
Priority Bonds will not be issued for the purpose of financing Capital Improvements, or for any other lawful purpose
(except for Capital Additions or for refunding, which are to be issued in accordance with the provisions of
Subsection C, D or E of this Section) unless and until the conditions precedent in Subsection A above have been
satisfied and, in addition thereto, the City has secured a certificate or opinion of the Accountant to the effect that,
according to the books and records of the City, the Net Earnings (as hereinafter defined) for the preceding Year or
for 12 consecutive months out of the 15 months immediately preceding the month the ordinance authorizing the
Additional Priority Bonds is adopted are at least equal to 1.25 times the Average Annual Principal and Interest
Requirements for all Outstanding Priority Bonds after giving effect to the Additional Priority Bonds then proposed.
The foregoing notwithstanding, the City covenants and agrees that Additional Priority Bonds may not be issued for
the purpose of financing Capital Improvements when other Outstanding Priority Bonds which have been issued for
the purpose of financing Capital Additions and for which capitalized interest for such other Priority Bonds has been
provided for at least the twelve months subsequent to the date of issuance of the Additional Priority Bonds then
proposed to be issued, unless the conditions precedent in Subsection A above have been satisfied and, in addition
thereto, the City has either (1) complied with the relevant conditions in this Subsection as set forth above, or (2) if
the relevant conditions of this Subsection B as set forth above cannot be satisfied, the City has satisfied the
conditions precedent in Subsection C(i) and (ii) of this Section (but, for purposes of such clauses, the term Capital
Improvements shall be substituted for the term Capital Additions where the term Capital Additions appears therein
to the extent necessary to give recognition to the fact that Capital Improvements, rather than Capital Additions, are
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then to be financed) and has secured a certificate or opinion of the Accountant to the effect that, according to the
books and records of the City, the Net Earnings for the preceding Year or for 12 consecutive months out of the 15
months immediately preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at
least equal to 1.25 times the Average Annual Principal and Interest Requirements for all Outstanding Priority Bonds
(other than any Priority Bonds issued for Capital Additions for which capitalized interest has been provided for at
least the twelve months subsequent to the date of issuance of the Additional Priority Bonds proposed to be issued)
after giving effect to the Priority Bonds then proposed.
C. Conditions Precedent for Issuance of Additional Priority Bonds - Capital Additions: Initial Issue. The City
covenants and agrees that Additional Priority Bonds will not be issued for the purpose of financing Capital
Additions, unless the same conditions precedent specified in Subsection A above have been satisfied and, in addition
thereto, either the relevant conditions precedent specified in Subsection B above are satisfied or, in the alternative,
the City shall have obtained: (1) from the Engineer of Record a comprehensive Engineering Report for each Capital
Addition to be financed, which report shall (A) contain (1) detailed estimates of the cost of acquiring and
constructing the Capital Addition, (2) the estimated date the acquisition and construction of the Capital Addition will
be completed and commercially operative, and (3) a detailed analysis of the impact of the Capital Addition on the
financial operations of the system for which the Capital Addition is to be integrated and to the System as a whole
during the construction thereof and for at least five Years after the date the Capital Addition becomes commercially
operative, and (B) conclude that (1) the Capital Addition is necessary and will substantially increase the capacity, or
is needed to replace existing facilities, to meet current and projected demands for the service or product to be
provided thereby, and (2) the estimated cost of providing the service or product from the Capital Addition will be
reasonable in comparison with projected costs for furnishing such service or product from other reasonably available
sources; and (ii) a certificate of the Engineer of Record to the effect that, based on the Engineering Report prepared
for each Capital Addition, the projected Net Earnings for each of the five Years subsequent to the date the Capital
Addition becomes commercially operative (as estimated in the Engineering Report) will be equal to at least 1.25
times the Average Annual Principal and Interest Requirements for Priority Bonds then Outstanding or incurred and
all Priority Bonds estimated to be issued, if any, for all Capital Improvements and for all Capital Additions then in
progress or then being initiated, during the period from the date the first series of obligations for the Capital
Additions is to be delivered through the fifth Year subsequent to the date the Capital Addition is estimated to
become commercially operative.
D. Completion Issues. Once a Capital Addition has been initiated by meeting the conditions precedent
specified in Subsection C(i) and (ii) above and the initial Priority Bonds issued therefor are delivered, the City
reserves the right to issue Additional Priority Bonds to finance theremainingcosts of such Capital Addition in such
amounts as may be necessary to complete the acquisition and construction thereof and make the same commercially
operative without satisfaction of any condition precedent under Subsection C(i) and (ii) or Subsection B of this
Section but subject to satisfaction of the following conditions precedent: (i) the City makes a forecast (the
"Forecast") of the operations of the System demonstrating the System's ability to pay all obligations, payable from
the Pledged Revenues of the System to be Outstanding after the issuance of the Additional Priority Bonds then being
issued for the period (the "Forecast Period") of each ensuing Year through the fifth Year subsequent to the latest
estimated date such Capital Addition is expected to be commercially operative; and (ii) the Engineer of Record
reviews such Forecast and executes a certificate to the effect that (A) such Forecast is reasonable, and based thereon
(and such other factors deemed to be relevant), the Pledged Revenues of the System will be adequate to pay all the
obligations, payable from the Pledged Revenues of the System to be Outstanding after the issuance of the Additional
Priority Bonds then being issued for the Forecast Period and (B) the proceeds from the sale of such Additional
Priority Bonds are estimated to be sufficient to complete such acquisition and construction.
E. Refunding Issues. The City reserves the right to issue refunding bonds to refund all or any part of the
Outstanding Priority Bonds (pursuant to any law then available), upon such terms and conditions as the governing
body of the City may deem to be in the best interest of the City and its inhabitants, and if less than all such
Outstanding Priority Bonds are refunded, the conditions precedent prescribed in Subsection A and B of this Section
shall be satisfied and the Accountant's certificate or opinion required by Subsection B shall give effect to the
issuance of the proposed refunding bonds (and shall not give effect to the Priority Bonds being refunded following
their cancellation or provision being made for their payment). In addition, the City reserves the right to refund all or
any part of any other obligations of the System, upon such terms and conditions as the Governing Body of the City
may deem to be in the best interest of the City and its inhabitants, provided that the conditions prescribed in
Subsection A and B of this Section shall be satisfied. No Accountant's certificate otherwise required by Subsection
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B will be required for refunding bonds, after giving effect to such proposed refunding, if there is no increase in debt
service for any Year in which there will be debt service on Priority Bonds Outstanding both before and after such
refunding.
F. Computations; Reports. With reference to Priority Bonds anticipated and estimated to be issued or
incurred, the Average Annual Principal and Interest Requirements therefor shall be those reasonably estimated and
computed by the City's Director of Financial Services (or other officer of the City then having the primary
responsibility for the financial affairs of the City). In the preparation of the Engineering Report required in
Subsection C(i) above, the Engineer of Record may rely on other experts or professionals, including those in the
employment of the City, provided such Engineering Report discloses the extent of such reliance and concludes it is
reasonable so to rely. In connection with the issuance of Priority Bonds for Capital Additions, the certificate of the
City's Director of Financial Services and Engineer of Record, together with the Engineering Report for the initial
issue and the Forecast for a subsequent issue, shall be conclusive evidence and the only evidence required to show
compliance with the provisions and requirements and this clause of this Section.
G. Combination Issues. Priority Bonds for Capital Additions may be combined in a single issue with Priority
Bonds for Capital Improvements or for any lawful purpose provided the conditions precedent set forth in Subsection
B through E are complied with as the same relate to the appropriate purpose.
H. Subordinated Obligations. The City may, at any time and from time to time, for any lawful purpose, issue
Subordinated Obligations, the principal of and redemption premium, if any, and interest on which is payable from
and secured by a pledge of and lien on the Pledged Revenues junior and subordinate to the lien and pledge created
hereby for the security of the Priority Bonds and the payments required to be made hereunder into the Debt Service
Fund and the Reserve Fund; provided, however, that any such pledge and lien securing the Subordinated Obligations
shall be, and shall be expressed to be, subordinate in all respects to the pledge of and lien on the Pledged Revenues
as security for the Priority Bonds; and provided further that any default with respect to the issuance of Subordinated
Obligations will not be deemed a default with respect to the Priority Bonds.
I. Definition of Net Earnings. As used in this Section, the term "Net Earnings" shall mean the Gross
Revenues of the System after deducting the Operating Expenses of the System, but not expenditures which, under
standard accounting practice, should be charged to capital expenditures.
J. Determination of Net Earnings. In making a determination of Net Earnings for any of the purposes
described in this Section, the Accountant may take into consideration a change in the rates and charges for services
rand facilities afforded by the System that became effective at least 60 days prior to the last day of the period for
which Net Earnings are determined and, for purposes of satisfying any of the Net Eamings test described above,
make a pro forma determination of the Net Earnings of the System for the period of time covered by the
Accountant's certification or opinion based on such change in rates and charges being in effect for the entire period
covered by the Accountant's certificate or opinion.
SECTION 22: General Covenants. The City further covenants and agrees that in accordance with and to the
extent required or permitted by law:
A. Performance. It will faithfully perform at all times any and all covenants, undertakings, stipulations, and
provisions contained in this Ordinance, and each ordinance authorizing the issuance of Additional Priority Bonds; it
will promptly pay or cause to be paid the principal amount of and interest on every Priority Bond, on the dates and
in the places and manner prescribed in such ordinances and such Priority Bonds; and it will, at the time and in the
manner prescribed, deposit or cause to be deposited the amounts required to be deposited into the System Fund and
the Funds herein created; and any registered owner of any Priority Bond may require the City, its officials and
employees to carry out, respect or enforce the covenants and obligations of this Ordinance, or any ordinance
authorizing the issuance of Priority Bonds, by all legal and equitable means, including specifically, but without
limitation, the use and filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its
officials and employees.
B. City's Legal Authority. It is a duly created and existing home rule city of the State of Texas, and is duly
authorized under the laws of the State of Texas to issue the Bonds; that all action on its part for the issuance of the
Bonds has been duly and effectively taken, and that the Bonds in the hands of the owners thereof are and will be
valid and enforceable special obligations of the City in accordance with their terms.
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C. Acquisition and Construction; Operation and Maintenance. (1) It shall use its best efforts in accordance
with Prudent Utility Practice to acquire and construct, or cause to be acquired and constructed, any Capital
Additions or Capital Improvements, in accordance with the plans and specifications therefor, as modified from time
to time, with due diligence and in a sound and economical manner; and (2) it shall at all times use its best efforts to
operate or cause to be operated the System properly and in an efficient manner, consistent with Prudent Utility
Practice, and shall use its best efforts to maintain, preserve, reconstruct and keep the same or cause the same to be so
maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good
repair, working order and condition, and shall from time to time make, or use its best efforts to cause to be made, all
necessary and proper repairs, replacement and renewals so that at all times the operation of the System may be
properly and advantageously conducted.
D. Title. It has or will obtain lawful title, whether such title is in fee or lesser interest, to the lands, buildings,
structures and facilities constituting the System, that it warrants that it will defend the title to all the aforesaid lands,
buildings, structures and facilities, and every part thereof, for the benefit of the owners of the Priority Bonds, against
the claims and demands of all persons whomsoever, that it is lawfully qualified to pledge the Pledged Revenues to
the payment of the Priority Bonds in the manner prescribed herein, and has lawfully exercised such rights.
E. Liens. It will from time to time and before the same become delinquent pay and discharge all taxes,
assessments and governmental charges, if any, which shall be lawfully imposed upon it, or the System; it will pay all
lawful claims for rents, royalties, labor, materials and supplies which if unpaid might by law become a lien or charge
thereon, the lien of which would be prior to or interfere with the liens hereof, so that the priority of the liens granted
hereunder shall be fully preserved in the manner provided herein, and it will not create or suffer to be created any
mechanic's, laborer's, materialman's or other lien or charge which might or could be prior to the liens hereof, or do
or suffer any matter or thing whereby the liens hereof might or could be impaired; provided however, that no such
tax, assessment or charge, and that no such claims which might be used as the basis of a mechanic's, laborer's,
materialman's or other lien or charge, shall be required to be paid so long as the validity of the same shall be
contested in good faith by the City.
F. No Free Service. No free service or service otherwise than in accordance with the established rate schedule
shall be furnished, directly or indirectly, by the System to any person, firm, corporation or other entity, other than
the City. No part of the salary of any official or employee of the City or his replacement shall be paid from Pledged
Revenues unless and only to the extent the duties and performances of such official or employee or his replacement
appertain directly to the System. To the extent the City receives the services of the System, such services shall be
accounted for according to rhe established rate schedule.
G. Further Encumbrance. It will not additionally encumber the Pledged Revenues in any manner, except as
permitted in this Ordinance in connection with Priority Bonds, unless said encumbrance is made junior and
subordinate in all respects to the liens, pledges, covenants and agreements of this Ordinance; but the right of the City
to issue Subordinated Obligations payable in whole or in part from a subordinate lien on the Pledged Revenues is
specifically recognized and retained.
H. Sale, Lease or Disposal of Property. No part of the System shall be sold, leased, mortgaged, demolished,
removed or otherwise disposed of, except as follows:
(1) To the extent permitted by law, the City may sell or exchange at any time and from time to time
any property or facilities constituting part of the System only if (A) it shall determine such property or
facilities are not useful in the operation of the System, or (B) the proceeds of such sale are $250,000 or less,
or it shall have received a certificate executed by the Engineer of Record and the City Manager stating, in
their opinion, that the fair market value of the property or facilities exchanged is $250,000 or less, or (C) if
such proceeds or fair market value exceeds $250,000 it shall have received a certificate executed by the
Engineer of Record and the City Manager stating (i) that system within the System of which the property or
facilities comprises a part thereof and (ii) in their opinion, that the sale or exchange of such property or
facilities will not impair the ability of the City to comply during the current or any future Year with the
provisions of Subsection K of this Section. The proceeds of any such sale or exchange not used to acquire
other property necessary or desirable for the safe or efficient operation of the System shall forthwith, at the
option of the City (i) be used to redeem or purchase Priority Bonds, or (ii) otherwise be used to provide for
the payment of Priority Bonds. The foregoing notwithstanding, if such property or facilities sold or
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exchanged constituted property or facilities comprising all or a part of a system within the System, the
acquisition, improvement or extension of such system having not been financed by the City in any manner
with the proceeds of Priority Bonds, or with the proceeds of obligations which were refunded in whole or in
part with the proceeds of Priority Bonds, then the City may utilize the proceeds of such sale or exchange
for any lawful purpose; and
(2) To the extent permitted by law, the City may lease or make contracts or grant licenses for the
operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any
part of the System, provided that any such lease, contract, license, arrangement, easement or right (A) does
not impede the operation by the City of the System and (B) does not in any manner impair or adversely
affect the rights or security of the owners of the Priority Bonds under this Ordinance; and provided, further,
that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement,
easement or other right is in excess of $500,000, the City shall have received a certificate executed by the
Engineer of Record and the City Manager that the action of the City with respect thereto does not result in a
breach of the conditions under this clause (2). Any payments received by the City under or in connection
with any such lease, contract, license, arrangement, easement or right in respect of the System or any part
thereof shall constitute Gross Revenues.
I. Books, Records and Accounts. It shall keep proper books, records and accounts separate and apart from all
other records and accounts, in which complete and correct entries shall be made of all transactions relating to the
System and the City shall cause said books and accounts to be audited annually as of the close of each Year by the
Accountant.
J. Insurance.
(1) Except as otherwise permitted in clause (2) below, it shall cause to be insured such parts of the
System as would usually be insured by corporations operating like properties, with a responsible insurance
company or companies, against risks, accidents or casualties against which and to the extent insurance is
usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire
and extended coverage insurance, insurance against damage by floods, and use and occupancy insurance.
Public liability and property damage insurance shall also be carried unless the City Attorney gives a written
opinion to the effect that the City is not liable for claims which would be protected by such insurance. At
any time while any contractor engaged in construction work shall be fully responsible therefor, the City
shall not be required to carry insurance on the work being constructed if the contractor is required to carry
appropriate insurance. All such policies shall be open to the inspection of the bondholders and their
representatives at all reasonable times.
(2) In lieu of obtaining policies for insurance as provided above, the City may self -insure against
risks, accidents, claims or casualties described in clause (I) above.
(3) The annual audit hereinafter required shall contain a section commenting on whether or not the
City has complied with the requirements of this Section with respect to the maintenance of insurance, and
listing the areas of insurance for which the City is self-insuring, all policies carried, and whether or not all
insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid.
K. Rate Covenant. It will fix, establish, maintain and collect such rates, charges and fees for the use and
availability of the System at all tunes as are necessary to produce Gross Revenues and other Pledged Revenues
equal to the greater of amounts determined in accordance with clauses (1) or (2) below, to -wit, amounts sufficient:
(1) (A) to pay all current Operating Expenses of the System, and (B) to produce Net Revenues for each Year at least
equal to 1.25 times the Average Annual Principal and Interest Requirements of all then Outstanding Priority Bonds;
or (2) to pay the sum of (A) all current Operating Expenses, (B) the Average Annual Principal and Interest
Requirements on the then Outstanding Priority Bonds, (C) deposits to the Reserve Fund required for the Priority
Bonds, and (D) amounts required to pay all other obligations of the System reasonably anticipated to be paid from
Gross Revenues during the current Year. The calculation of Average Annual Principal and Interest Requirements on
all Outstanding Priority Bonds shall be net of capitalized interest for such Priority Bonds only if the money in a
Capitalized Interest Account received from proceeds of such Priority Bonds held in cash or are invested in
Government Obligations. The foregoing notwithstanding, such rates, charges and fees shall be fixed, established,
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maintained and collected at a level sufficient to enable the City to pay debt service on Priority Bonds during the
current Year.
L. Audits. After the close of each Year while any Priority Bonds are Outstanding, an audit will be made of the
books and accounts relating to the System and the Pledged Revenues by the Accountant. As soon as practicable
after the close of each such Year, and when said audit has been completed and made available to the City, a copy of
such audit for the preceding year shall be mailed to any holder of the then Outstanding Priority Bonds who shall so
request in writing. Such annual audit reports shall be open to the inspection of the registered owners of the Priority
Bonds and their agents and representatives at all reasonable times.
M. Governmental Agencies. It will comply with all of the tenns and conditions of any and all franchises,
permits and authorizations applicable to or necessary with respect to the System, and which have been obtained
from any governmental agency; and the City has or will obtain and keep in full force and effect all franchises,
permits, authorization and other requirements applicable to or necessary with respect to the acquisition, construction,
equipment, operation and maintenance of the System.
N. No Competition. To the extent it legally may, it will not grant any franchise or permit for the acquisition,
construction or operation of any competing facilities which might be used as a substitute for the System's facilities,
and, to the extent that it legally may, the City will prohibit any such competing facilities.
O. Rights of Inspection. The Engineer of Record or any registered owner of $100,000 in aggregate principal
amount of the Priority Bonds then Outstanding shall have the right at all reasonable times to inspect the System and
all records, accounts and data of the City relating thereto, and upon request the City shall furnish to the Engineer of
Record or such registered owner, as the case may be, such financial statements, reports and other information
relating to the City and the System as the Engineer of Record or such registered owner may from time to time
reasonably request.
P. Surplus Bond Proceeds. It shall deposit any surplus proceeds from the Bonds remaining after the
acquisition and completion of the System improvements to the credit of the Debt Service Fund, to the extent any
such surplus proceeds are not otherwise required to be rebated to the United States of America in accordance with
the provisions of Section 23 hereof, to pay debt service on the Bonds.
Q. Variable Rate Obligations. For so long as the Policy (as hereinafter defined) remains in effect, not more
than 26.9% of the aggregate principal amount of all Priority Bonds at any one time outstanding shall be comprised
of obligations bearing interest at a variable rate (including commercial paper); provided, however; that this
limitation specifically excludes any Subordinated Obligations (including the Series B Commercial Paper Notes).
SECTION 23: Covenants Regarding Tax -Exemption.
A. Definitions. When used in this Section, the following terms have the following meanings:
"Closing Date" shall mean the date of physical delivery of the Initial Bonds in exchange for the payment of the
agreed purchase price for the Bonds.
"Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the
Closing Date.
"Computation Date" has the meaning set forth in section 1.148-1(b) of the Regulations.
"Gross Proceeds" means any proceeds as defined in section 1.148-1(b) of the Regulations, and any replacement
proceeds as defined in section 1.148-1(c) of the Regulations, of the Bonds.
"Investment" has the meaning set forth in section 1.148-1(b) of the Regulations.
"Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross
Proceeds of the Bonds are invested and which is not acquired to carry out the governmental purposes of the Bonds.
"Rebate Amount" has the meaning set forth in section 1.148-1(b) of the Regulations.
A-15
"Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to sections 103 and
141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Bonds.
Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income
Tax Regulation designed to supplement, amend or replace the specific Regulation referenced.
"Yield" of
1) any Investment has the meaning set forth in section 1.148-5 of the Regulations; and
2) the Bonds has the meaning set forth in section 1.148-4 of the Regulations.
B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross
Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be
financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would
cause the interest on any Bond to become includable in the "gross income", as defined in section 61 of the Code, of
the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until
the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect
that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the
interest on any Bond, the City shall comply with each of the specific covenants in this Section.
C. No Private Use or Private Payments. Except to the extent that it will not cause the Bonds to become
"private activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings thereunder,
the City shall at all times prior to the last stated maturity of Bonds:
(1) exclusively own, operate and possess all property the acquisition, construction or improvement of
which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds, and not use
or permit the use of such Gross Proceeds (including all contractual arrangements such as take, take or pay,
certain requirements and other similar output contracts or arrangements with terms different than those
applicable to the general public) or any property acquired, constructed or improved with such Gross
Proceeds in any activity carried on by any person or entity (including the United States or any agency,
department and instrumentality thereof) other than a state or local government, unless such use is solely as
a member of the general public; and
(2) not directly or indirectly impose or accept any charge or other payment by any person or entity
who is treated as using Gross Proceeds of the Bonds or any property the acquisition, construction or
improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other
than taxes of general application within the City or interest earned on investments acquired with such Gross
Proceeds pending application for their intended purposes.
(3) not allow any "nonqualified amount" (as defined in section 141(6)(8) of the Code) of the Bonds to
exceed the excess of (i) $15,000,000 over (ii) the aggregate nonqualified amounts with respect to all prior
tax-exempt bonds, five percent or more of the proceeds of which are or will be used with respect to any
facility financed by the Bonds (or any other facility which is part of the same project as a facility financed
by the), all within the meaning of section 141(b)(4) of the Code; and
(4) not allow more than the lesser of (i) $5,000,000 or (ii) five percent of the proceeds of the Bonds to
acquire nongovernmental output property, as defined in section 141(d)(2) of the Code, except if 95 percent
or more of the output from such facility will be consumed in a "qualified service arca" (as defined in
section 141(d)(3 of the Code) of the City or in a "qualified annexed area" (as defined in section 141(d)(3)
of the Code) of the City.
D. No Private Loan. Except to the extent that it will not cause the Bonds to become "private activity bonds"
within the meaning of section 141 of the Code and the Regulations and rulings thereunder, the City shall not use
Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government.
E. Not to Invest at Higher Yield. Except to the extent that it will not cause the Bonds to become "arbitrage
bonds" within the meaning of section 148 of the Code and the Regulations and rulings thereunder, the City shall not
at any time prior to the final stated maturity of the Bonds directly or indirectly invest Gross Proceeds in any
A-16
Investment, if as a result of such investment the Yield of any Investment acquired with Gross Proceeds, whether
then held or previously disposed of, materially exceeds the Yield of the Bonds.
F. Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the
Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Bonds
to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings
thereunder.
G. Information Report. The City shall timely file the information required by section 149(e) of the Code with
the Secretary of the Treasury on Form 8038 G or such other form and in such place as the Secretary may prescribe.
H. Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the
Regulations and rulings thereunder:
(1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments
thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and
investments thereof) and shall retain all records of accounting for at least six years after the day on which
the last Outstanding Bond is discharged. However, to the extent permitted by law, the City may
commingle Gross Proceeds with other money of the City, provided that the City separately accounts for
each receipt and expenditure of Gross Proceeds and the obligations acquired therewith.
(2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in
accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder.
The City shall maintain such calculations with its official transcript of proceedings relating to the issuance
of the Bonds until six years after the final Computation Date.
(3) As additional consideration for the purchase of the Bonds by the Purchasers and the loan of the
money represented thereby and in order to induce such purchase by measures designed to insure the
excludability of the interest thereon from the gross income of the owners thereof for federal income tax
purposes, the City shall pay to the United States out of the Debt Service Fund or its general fund, as
permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas,
any Rebate Amount in the manner and on or before the dates specified in section 148(f) of the Code and the
Regulation and rulings thereunder. In all cases, the rebate payments shall be made at the times, in the
installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the
Regulations and rulings thereunder, and shall be-aceompanied by Form 8038-T or such other forms and
information as is or may be required by section 148(1) of the Code and the Regulations and rulings
thereunder.
(4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations
and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct
such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180)
days after discovery of the error), including payment to the United States of any additional Rebate Amount
owed to it, interest thereon, and any penalty imposed under section 1.148 3(h) of the Regulations.
1. Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the
Regulations and rulings thereunder, the City shall not, at any bine prior to the earlier of the stated maturity or final
payment of the Bonds, enter into any transaction that reduces the amount required to be paid to the United States
pursuant to Subsection H of this Section because such transaction results in a smaller profit or a larger loss than
would have resulted if the transaction had been at arm's length and had the Yield of the Bonds not been relevant to
either party.
1. Bonds Not Hedge Bonds.
(1) The City reasonably expects to spend at least 85% of the spendable proceeds of the Bonds within
three years after the issue of such Bonds.
(2) Not more than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments
having a substantially guaranteed Yield for a period of 4 years or more.
A-17
K. Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem, City Manager, any Assistant
City Manager, and the City's Director of Financial Services, either or any combination of the foregoing, to make
such elections in the Certificate as to Tax Exemption or similar or other appropriate certificate, form, or document
permitted or required pursuant to the provisions of the Code, or Regulations as they deem necessary or appropriate
in connection with the Bonds, and other transactions related to any Priority Bonds. Such elections shall be deemed
to be made on the Closing Date.
SECTION 24: Taxable Obligations. The provisions of Section 23 of this Ordinance notwithstanding, the City
reserves the ability to issue Additional Priority Bonds in a manner such that such obligations are not obligations
described in section 103(a) of the Code or are obligations which constitute "private activity bonds" within the
meaning of section 141 of the Code.
SECTION 25: Amendment of Ordinance.
A. Approval by Registered Owners. The registered owners of a majority in aggregate principal amount of the
Priority Bonds then Outstanding shall have the right from time to time to approve any amendment to this Ordinance
which may be deemed necessary or desirable by the City; provided, however, that without the consent of the
registered owners of all of the Priority Bonds at the time Outstanding, nothing herein contained shall permit or be
construed to permit the amendment of the terms and conditions in this Ordinance or in the Priority Bonds so as to:
(I)
(2)
(3)
make any change in the maturity of any of the Outstanding Priority Bonds;
reduce the rate of interest borne by any of the Outstanding Priority Bonds;
reduce the amount of the principal payable on the Outstanding Priority Bonds;
(4) modify the terms of payment of principal of, premium, if any, or interest on the Outstanding
Priority Bonds or impose any conditions with respect to such payment;
(5) affect the rights of the registered owners of less than all of the Priority Bonds then Outstanding;
(6) amend this Subsection A of this Section; or
(7) change the minimum percentage of the principal amount of Priority Bonds necessary for consent
to any amendment;
unless such amendment or amendments be approved by the registered owners of all of the Priority Bonds then
Outstanding.
B. Notice. If at any time the City shall desire to amend the Ordinance under this Section, the City shall cause
notice of the proposed amendment to be published in a financial newspaper or journal published in The City of New
York, New York, and a newspaper of general circulation in the City, once during each calendar week for at least two
successive calendar weeks. Such notice shall briefly set forth the nature of the proposed amendment and shall state
that a copy thereof is on file at the principal office of the Paying Agent/Registrar for inspection by all holders of
Priority Bonds. Such publication is not required, however, if notice in writing is given to each registered owner of
Priority Bonds.
C. Consent Obtained. Whenever at any time not less than 30 days, and within one year, from the date of the
first publication of said notice or other service of written notice, the City shall receive an instrument or instruments
executed by the registered owners of at least a majority in aggregate principal amount of the Priority Bonds then
Outstanding, which instrument or instruments shall refer to the proposed amendment described in said notice and
which specifically consent to and approve such amendment in substantially the form of the copy thereof on file with
the Paying Agent/Registrar, the Governing Body may pass the amendatory ordinance in substantially the same form.
D. Amendatory Ordinance. Upon the passage of any amendatory ordinance pursuant to the provisions of this
Section, this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the
respective rights, duties and obligations under this Ordinance of the City and all the registered owners of then
Outstanding Priority Bonds and all future Priority Bonds shall thereafter be determined, exercised and enforced
hereunder, subject in all respects to such amendments.
A-18
E. Consent Irrevocable for Six Months. Any consent given by the registered owner of a Priority Bond
pursuant to the provisions of this Section shall be irrevocable for a period of six months from the date of the first
publication of the notice provided for in this Section, and shall be conclusive and binding upon all future registered
owners of the same Priority Bond during such period. Such consent may be revoked at any time after six months
from the date of the first publication of such notice by the registered owner who gave such consent, or by a
successor in title, by filing notice thereof with the Paying Agent/Registrar and the City, but such revocation shall not
be effective if the registered owners of at least a majority in aggregate principal amount of the then Outstanding
Priority Bonds as in this Section defined have, prior to the attempted revocation, consented to and approved the
amendment.
F. Amendments without Consent. The foregoing provisions of this Section notwithstanding, the City, by
action of the Governing Body may amend this Ordinance for any one or more of the following purposes:
(1) to add to the covenants and agreements of the City in this Ordinance contained, other covenants
and agreements thereafter to be observed, grant additional rights or remedies to the registered owners of the
Priority Bonds or to surrender, restrict or limit any right or power herein reserved to or conferred upon the
City;
(2) to make such provisions for the purpose of curing any ambiguity, or curing, correcting or
supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters or
questions arising under this Ordinance, as are necessary or desirable and not contrary to or inconsistent
with this Ordinance and which shall not adversely affect the interests of the registered owners of the
Priority Bonds then Outstanding;
(3) to modify any of the provisions of this Ordinance in any other respect whatever, provided that (i)
such modification shall be, and be expressed to be, effective only after all Bonds and each series of
Additional Priority Bonds Outstanding at the date of the adoption of such modification shall cease to be
Outstanding, and (ii) such modification shall be specifically referred to in the text of all Priority Bonds
issued after the date of the adoption of such modification;
(4) to make such amendments to this Ordinance as may be required, in the opinion of nationally
recognized bond counsel acceptable to the City, to ensure compliance with sections 103 and 141 through
150 of the Code and the regulations promulgated thereunder and applicable thereto;
(5) to make such changes, modifications or amendments as may be necessary or desirable in order to
allow the owners of the Priority Bonds to thereafter avail themselves of a book -entry system for payments,
transfers and other matters relating to the Priority Bonds, which changes, modifications or amendments are
not contrary to or inconsistent with other provisions of this Ordinance and which shall not adversely affect
the interests of the owners of the Priority Bonds;
(6) to make such changes, modifications or amendments as are permitted by Section 32D of this
Ordinance;
(7) to make such changes, modifications or amendments as may be necessary or desirable in order to
obtain or maintain the granting of a rating on the Priority Bonds by a Rating Agency or to obtain or
maintain a Credit Facility, or to obtain the approval of the Bonds from the Attorney General of the State of
Texas; and
(8) to make such changes, modifications or amendments as may be necessary or desirable, which shall
not adversely affect the interests of the owners of the Priority Bonds, in order, to the extent permitted by
law, to facilitate the economic and practical utilization of interest rate swap agreements, foreign currency
exchange agreements, or similar type of agreements with respect to the Priority Bonds.
Notice of any such amendment may be published by the City in the manner described in Subsection B of this
Section; provided, however, that the publication of such notice shall not constitute a condition precedent to the
adoption of such amendatory ordinance and the failure to publish such notice shall not adversely affect the
implementation of such amendment as adopted pursuant to such amendatory ordinance.
A-19
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A-20
APPENDIX B
CERTAIN AUDITED FINANCIAL STATEMENT
The information contained in this appendix consists of certain audited Financial Statements of the City of Corpus
Christi, Texas for the fiscal year ended July 31, 2008 and is not intended to be a complete statement of the City's
financial condition. Reference is made to the complete report for further information.
B -I
[This page intentionally left blank]
B-2
City of Corpus Christi, Texas
Comprehensive Annual Financial Report
For the Fiscal Year Ended July 31, 2008
Prepared by the staff of the Financial Services Department
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OVERVIEW OF THE FINANCIAL STATEMENTS
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APPENDIX C
CERTAIN INFORMATION RELATING TO THE CITY OF CORPUS CHRISTI
C -I
[This page intentionally left blank.]
C-2
The following information has been provided by the City from sources it believes to be reliable.
Information contained herein regarding industries and other private institutions in the Corpus Christi area
are for general background purposes only.
INFORMATION CONCERNING THE CITY OF CORPUS CHRISTI
Population and Location
Corpus Christi is now the eighth largest city in the State of Texas with a population of 297,447 based on
the City's 2008 estimate. The geographic location of the City on the Gulf of Mexico and the Intercoastal
Waterway gives it one of the most strategic locations in the Southwest and has been important to its
economic development.
Additional general information concerning the City's population and economy can be found under the
caption "Economic and Demographic Characteristics" in the City's financial information contained in
Appendix B.
Area
The area of the City has increased through annexation as the City's population and industry grew. The
City has had numerous annexations and now contains approximately 504 square miles, which is broken
down to approximately 150 square miles of land and 354 square miles of water. While the area covered
by water contains no population and does not require normal city services, it does produce considerable
revenues from oil and gas properties located therein.
Form of Government and Administration
The City was incorporated in 1852. In 1909, the City was organized under a City Charter and operated as
a general law city until 1926 when a Home Rule Charter with a commission form of govemment was
adopted: The Charter was amended in 1945 and the present Council -Manager form of government was
adopted.
The City Council consists of the Mayor and eight Council Members elected for two year terms. The
Mayor and three Council Members are elected at large and five Council Members from single member
districts. These nine officials are listed elsewhere in this document.
The City Manager is appointed by the City Council and is the Chief Administrative and Executive Officer
of the City. The Director of Financial Services is appointed by the City Manager and is charged with the
administration of fiscal affairs of the City.
By an initiative submitted in accordance with provisions of the City Charter, on November 5, 2002, the
voters in the City considered a proposition that would have amended the City Charter to make the Mayor
of the City the chief administrative and executive officer of the City. The citizens of the City voted to
reject this proposed amendment to the City Charter.
The City Council fixes the annual tax rate based on a budget prepared under the direction of the City
Manager.
The names, years of services, experience, and background of certain appointed officials are as follows:
C-3
Management
Angel R. Escobar, City Manager
Angel R. Escobar was appointed City Manager on November 11, 2008 after being appointed Interim City
Manager on September 1, 2008. Prior to that time, he served as Interim Assistant City Manager of
Public Works for one year until being named City Manager. Mr. Escobar also served as Director of
Engineering Services from 1999 — 2007 after holding the position of Assistant Director. Before joining
the City of Corpus Christi in 1989, Mr. Escobar was Partner and Senior Project Engineer/Consultant with
the engineering firm of Smith & Russo Engineers/Architect. Mr. Escobar is experienced in all phases of
civil engineering, public works and public administration, capital improvement programming, capital
budget administration, design, construction and field administration. Mr. Escobar is credited for initiating
programs to promote minority participation in City public works projects and maintained project records
to document minority participation in compliance with City Council policies. Most recently, Mr. Escobar
has accomplished the outsourcing of 100 percent of the studies and architectural and engineering design
efforts for the City of Corpus Christi. Mr. Escobar is registered as a Professional Engineer and
Professional Surveyor. He has his Bachelor of Science in Engineering from Texas A & I University and
is a retired Command Sergeant Major from the U. S. Army Reserve.
Oscar R. Martinez, Assistant City Manager for Public Works
Oscar R. Martinez was appointed Assistant City Manager for Public Works in September 2008. As
Assistant City Manager, he is responsible for overseeing Engineering, Environmental Services, Gas,
General Services, Storm water, Streets, Solid Waste Services, Wastewater, and Water. Prior to that time,
Mr. Martinez was appointed in October 2004 as Assistant City Manager for Administrative Services.
Mr. Martinez previously served as Assistant Budget Director for the City of Corpus Christi in the mid -
80's. Prior to his recent employment with the City of Corpus Christi, he served over 14 years in
workforce development as President/CEO of Work -Force 1, President/CEO of Workforce Network, Inc.,
Director at the Greater Corpus Christi Business Alliance, and Vice President of Workforce Development
Corporation. Mr. Martinez has also been a teacher for the Corpus Christi ISD as well as the Dallas ISD.
Mr. Martinez has a Master of Arts Public Administration from St. Mary's University in San Antonio,
Texas and a Bachelor of Arts Political Science/Business Administration from Texas A&I University in
Kingsville, Texas. He has served on several Boards including United Way, Committee on Educational
Excellence, Corpus Christi Chamber of Commerce Education and Workforce Committee, Coastal Bend
American Red Cross, Equality in Education Council, Corpus Christi Technical Education Advisory
Council, and the Human Investment System Council, just to name a few.
Margie C. Rose, Assistant City Manager for Community Services
Margie C. Rose was appointed Assistant City Manager for Community Services in April 2002, having
previously worked in local government for more than 20 years. Ms. Rose is responsible for the
departments of Development Services, Convention Facilities, Health, Human Relations, Neighborhood
Services and Park and Recreation, Libraries and Museum.
In her prior positions, Ms. Rose served as Purchasing Director, Director of Administrative Services,
Director of Department of Public Services, Assistant City Manager and City Manager for the City of
Inkster, Michigan. She also served as Deputy Director of Parks for the County of Wayne, Michigan. Ms.
Rose served on various professional committees including the Michigan Municipal League Finance and
Taxation Committee, International City/County Management Planning Committee and the Michigan City
Management Workplace Diversity Committee. Ms. Rose received her BBA (Accounting) degree in 1984
and her MPA in 1991, both from Eastern Michigan University.
C-4
Juan "Johnny" Perales, P.E., Assistant City Manager for Development Services
Juan Perales, Jr., P.E., was appointed Interim Assistant City Manager for Development Services on
January 23, 2009. In this role, Mr. Perales is responsible for Department of Development Services, and
oversees all planning, development, and permitting activities for the City of Corpus Christi. Mr. Perales
had served as Deputy Director for the Department since January 29, 2007. In other assignments with the
City of Corpus Christi, he served as a Project Engineer and later Major Projects Engineer with the
Department of Engineering Services between 1991 and 1996. From 1996 to 2007, he served as Facilities
Superintendent and later Assistant Director for the City's Wastewater Department. Mr. Perales is a
licensed engineer in the State of Texas, having graduated from the University of Texas with a degree in
Civil Engineering.
Cindy O'Brien, CPA, Interim Assistant City Manager for Administrative Services
Cindy O'Brien was appointed Interim Assistant City Manager for Administrative Services in September
2008. In that role, Ms. O'Brien is responsible for overseeing the Finance, Budget, Municipal Information
Systems, Human Resources, Community Development, Municipal Court -Administration, and E -
Government Departments. Prior to that time, Ms. O'Brien was appointed Chief Financial Officer for the
City in February 2007 after having served as Director of Financial Services for four years and after
serving in the Office of Management and Budget for two years. There, she served, first as Assistant
Director, then as Acting Director before her current appointment. Prior to her position in Management
and Budget, Ms. O'Brien served for over seventeen years in the Finance Department, holding various
positions including Chief Accountant. Ms. O'Brien is a Certified Public Accountant and holds a B. B. A.
degree from Sam Houston State University where she majored in Accounting. She is a member of the
Government Finance Officers Association, national and state organizations, as well as the Government
Treasurers Organization of Texas.
Constance P. Sanchez, CPA, CPM, Interim Director of Financial Services
Constance P. Sanchez was appointed Interim Director of Financial Services in September 2008. In that
role, Ms. Sanchez is responsible -for all areas of financial management, including financial reporting,
accounting, budgeting, treasury, revenue and collections, purchasing, and the utility business office which
includes billing, field services, and customer services for the City of Corpus Christi. Before that time, she
was appointed Assistant City Auditor, Auditor, Chief Accountant, Assistant Director of Financial
Services, and most recently Deputy Director of Financial Services. Prior to her 17 years with the City,
Ms. Sanchez was an auditor with KPMG Peat Marwick for three years. Ms. Sanchez is a member of the
American Institute of Certified Public Accountants (AICPA), the Texas Society of Certified Public
Accountants (TSCPA), and a member of the Government Finance Officers Association of Texas. Ms.
Sanchez, a life-long citizen of Corpus Christi, was valedictorian of her high school class. She received an
Associates of Arts degree in Business Administration from Del Mar College and a Bachelor of Business
Administration degree — magna cum laude, from Corpus Christi State University. Ms. Sanchez is a
Certified Public Accountant and a Certified Public Manager.
Certain Governmental Services Provided by the City
Public Safety ... The City provides police protection, fire protection, building inspection, street lighting
and traffic signals, and civil defense. Law enforcement and civil defense is provided through the Police
Department. The City's Fire Department operates 16 fire stations throughout the City and the Emergency
Medical Service.
C-5
Public Services . In addition to operating its water, wastewater disposal, and gas systems, the City also
provides garbage collection and disposal and maintenance of streets and storm drainage areas.
Community Enrichment ... The City has a main library and four branches which are equipped with
over 413,308 volumes. The City owns and maintains approximately 190 parks containing over 1,581
acres. The City also owns extensive recreational facilities including 139 playgrounds, a marina with 580
yacht basin slips, 4 municipal beaches, 2 public golf courses, 10 swimming pools, 49 tennis courts, a
number of baseball and softball diamonds, 5 recreational centers, and 8 senior citizen centers. In addition,
the City owns an auditorium, a coliseum, Harbor Playhouse, the Corpus Christi Museum, the
Multicultural Center, the Water Garden, and a Community Convention facility.
Airport and Transit System ... The City owns the Corpus Christi International Airport situated on
2,428 acres. The Regional Transportation Authority operates the regional transportation system which
provides passenger bus and paratransit service within the area and seasonal services including a passenger
ferry connecting several tourist attractions.
Health ... The City maintains preventive health services through health facilities within the community.
The City does not have the responsibility of maintaining hospitals, a school system, or a higher education
system, and does not expend any funds in providing welfare.
THE CITY'S FINANCIAL PROCEDURES
Audit and Financial Reporting
The City Charter requires an annual audit to be made of the books of accounts, records, and transactions
of the City by a Certified Public Accountant. The fiscal year of the City begins the first day of August of
each year and ends with the thirty-first day of July of the following year. The Government Finance
Officers Association of the United States (the "GFOA") first awarded the City its Certificate of
Conformance, later termed the Certificate of Achievement for Excellence in Financial Reporting, for its
annual financial report for 1957. The City was awarded the same recognition for its 1970, 1975, 1978,
1979, 1983, and 1984 through 2007 financial reports.
Budget Procedures
State laws and the City Charter require the preparation and filing of an annual budget. The City Manager
submits a proposed budget to the City Council at least sixty days prior to the beginning of the fiscal year
which estimates revenues and expenses for the next year. The proposed expenditures will not exceed
estimated revenues. The City Council shall adopt a balanced budget prior to the beginning of the fiscal
year. If the City Council fails to adopt a budget by the beginning of the fiscal year, the amounts
appropriated for current operations for the current fiscal year are deemed the adopted budget for the
ensuing fiscal year on a month-to-month basis until such time as the City Council adopts a budget for the
ensuing year.
Significant Accounting Policies
The City prepares its financial statements in accordance with the generally accepted accounting principles
for local governmental units as prescribed by the Governmental Accounting Standards Board and the
American Institute of Certified Public Accountants. A summary of significant accounting policies of the
City are set out in the Notes to Financial Statements for the fiscal year ended July 31, 2008 located
referenced elsewhere in the financial section of the Official Statement.
C-6
Population
The revised 2000 United States Census population for Corpus Christi is 277,454, which is approximately
eight percent greater than the population reported in 1990. The table shows the history of population from
1920 to 2000:
Population Percent of Increase Over
United States Census Figures for 1920 - 1990 Preceding Census
1920 10,522 27%
1930 27,541 162%
1940 57,301 108%
1950 108,053 89%
1960 167,690 55%
1970 204,525 22%
1980 232,134 13%
1990 257,543 11%
2000 277,454 8%
Corpus Christi Standard Metropolitan Statistical Area (SMSA) consists of Nueces and San Patricio
Counties, and, according to the 2000 United States Census, had a population of 380,783. It is estimated
that the population in the SMSA will exceed 403,000 in the next ten years.
Trade Area and Location
Corpus Christi's trade area consists of five counties, Nueces, San Patricio, Aransas, Jim Wells, and
Kleberg. Each of the counties maintains a solid and diversified economic base which contributes material
support to Corpus Christi due to its location as a trade center and shipping point.
The land is generally flat with strong mineral deposits, rich soil, excellent climate, and a growing season
of approximately 300 days. Grain sorghum and cotton are the principal agricultural crops. The region
also has a strong supply of livestock including beef, dairy cattle, hogs, and poultry.
The oil and gas industry is a major factor in the growth and economic stability within the trade area.
Mineral values vary depending on world market and demand. This industry also provides a secondary
market for petro by-products and chemicals.
The trade area's principal outlet for agricultural and petroleum products is the Port of Corpus Christi,
which has served the area for over seventy ycars. The rebuilt grain elevator, completed in 1983, has
added to the Port's capacity to handle various agricultural products. In 2004, the Port handled a volume
of 86.4 million tons of cargo, including 74.2 million tons of petroleum products.
Corpus Christi has one of the most strategically located waterways in the Southwest, with deep water
transportation to the Gulf of Mexico and barge traffic all along the Texas Coast via the Intracoastal
waterway. The nearest other port is in Brownsville, 160 miles to the south; nearest retail and wholesale
outlet is San Antonio, 145 miles to the northwest; and the nearest heavy industry competition is Houston,
210 miles to the northeast.
C-7
Business
Corpus Christi continues to grow as a regional center for a 12 -county area. Several new businesses were
attracted to the City in the past year, including Graduate Loan Services, a financial call center, Gateway
Shipping, a stevedore company, and Combex Westhem LLC, a modular home manufacturer. The Padre
Island Drive shopping corridor also added a number of new restaurants and other retail businesses. Retail
sales grew by 9.8% as measured by sales subject to sales tax.
Recent capital investments underway by the public and not-for-profit sectors is estimated at $488 million,
while private investments topped $1 billion. Most recently, Toyota has announced its intention to
construct a major international auto manufacturing center in south San Antonio, Texas, a short distance
away from Corpus Christi. This facility may have use for the Port of Corpus Christi facilities, thus
having the effect, if so used, of contributing to the local economy.
Several major construction and transportation projects are in various stages of planning or construction.
A $46 million airport renovation project has been completed. The Texas Department of Transportation
has two projects under construction. The $45 million elevation of the JFK Causeway, of which the City
is funding $4 million, will provide a safe evacuation route from Padre and Mustang Islands and provide
environmental benefits. The $36 million current phase of the extension of the Crosstown Expressway
will connect Downtown and the Southside of town with a continuous freeway. A $30 million project on
Padre Island will re -open Packery Channel, creating a route for pleasure and fishing boats between the
Laguna Madre and the Gulf of Mexico. A large tourist development of condos, restaurants, and retail
establishments is in the planning phase. The City's portion of the cost of dredging Packery Channel is
funded through Tax Increment Financing.
The Texas State Aquarium has recently concluded a $14 million expansion which allows exhibition of
dolphins that cannot be returned to their natural habitat. A $30 million multipurpose arena to be
constructed by the City in the downtown area opened in November 2004. Whataburger Field, a newly
opened baseball stadium, that houses a AA major league affiliate baseball team was opened on April 17,
2005.
Industry
Corpus Christi industry provides a diversified product market including metal fabrication, chemical
processing, farm and ranch equipment, oil field equipment, cement, food processing, electronic,
petrochemical products, fishing and seafood products and more. The diversification is primarily due to the
commitment of City leadership.
The Port of Corpus Christi Authority opened the area to world markets in 1926. Today, it is the seventh
largest port in the United States. The Port's channel stretches over 30 miles and links the City of Corpus
Christi with the Gulf of Mexico. Deeper channels have for decades allowed Corpus Christi to be a
competitive port for bulk commodities requiring large, deep draft vessels. It is the terminus of network of
oil and gas pipelines throughout Southwest Texas and extending into West Texas. The Authority has two
major projects, the Joe Fulton International Trade Corridor and the Channel Improvement Project, that
will require significant funding in the future. These projects will be funded from federal and state
assistance, revenue bonds and the Authority's unrestricted net assets.
Joe Fulton International Trade Corridor
This corridor encompasses an 11.5 -mile road and rail project that will significantly improve access to
more than 2,000 acres of land along the North side of the channel for existing and future development.
C-8
The corridor will connect two major highway components- US Highway 181 and Interstate Highway 37 -
thus, establishing efficient intermodal links between highway, marine, and rail transportation systems.
Most important, it is anticipated that the corridor will generate future economic development
opportunities for South Texas.
Construction began in 2004 and was completed in October, 2007.
Channel Improvement Project
In 2003, the Authority completed the feasibility phase of the Channel Improvement Project and is
currently awaiting authorization through the Water Resources Development Act (WRDA) to begin the
project. The project will include deepening the Corpus Christi Ship Channel from 45 to 52 foot, adding
barge shelves on both sides of the ship channel and extending the La Quinta Channel to serve the
proposed La Quinta Trade Gateway project. Although the project is still pending WRDA authorization,
the engineering and design phase is underway and costs are shared 25% from the Authority and 75% from
federal funds. Upon authorization of the project, the improvements will be constructed in seven contracts
beginning in 2007 and ending in 2013. Total improvements will cost approximately $150 million.
The Port is constantly upgrading and expanding facilities to better serve south Texas industry and
shippers. In 2005, major capital expenditures include Gulf Compress Cotton Warehouses, Joe Fulton
International Trade Corridor, security enhancements, vessel traffic information system, waterfront site
development, water taxi and southside military Rail Yard for a total of $37,898,615.
Tourism and Convention Business
Corpus Christi continues to be a favorite vacation spot for visitors, as reflected by the ranking of the sixth
most popular tourist destination in Texas. Nearly seven million visitors visited Corpus Christi during the
two year period 2007-2008 spending on the average, approximately $1 billion per year. Visitors stayed
longer in Corpus Christi than in other areas of the State - an average of 2.3 days in Corpus Christi
compared to 2.1 days in all of Texas. The number one reason visitors flock to the area has always been to
enjoy miles of blazing white beaches along Mustang and Padre Islands, the longest barrier island in nature
fronting on the Gulf of Mexico. The opposite side of the barrier provides a shoreline for Corpus Christi
Bay, Laguna Madre, and the various bays and bayous north of the Coastal Bend which is ideal for outdoor
recreation.
Tourist facilities located within the City include: a multi-purpose arena at the American Bank Center,
Whataburger Field which houses a AA major league affiliate baseball team, the Texas State Aquarium,
the USS Lexington Museum, the Museum of Science and History, the South Texas Art Museum, the
Asian Cultures Museum, the Multicultural Center/Heritage Park complex, and the Concrete Street
Amphitheater. The Corpus Christi area is also a renowned location for water sports, including
windsurfing and kiteboarding, and serves as a host to the annual U.S. Open Windsurfing Regatta and
international power and sail boat races and the Texas International Boat Show.
International Flavor
The City of Corpus Christi is a member of Sister Cities International. Through Sister Cities International,
Corpus Christi has established affiliations with Keelung, Taiwan; Veracruz, Mexico; Yokosuka, Japan;
Agen, France; and Toledo, Spain. The City and nearby neighbor, Monterrey, Mexico, have established a
Partner in Trade affiliation that emphasizes business and cultural opportunities for cooperative ventures.
C-9
Yokosuka, Japan sends up and coming city employees to Corpus Christi for overseas' training in public
service and an exchange that teaches the different facets of volunteerism in Japan. In addition to
establishing a "Partner in Trade" with Monterrey, the City has established closer ties with cousins in 23
countries including Austria, Belgium France, Spain, Italy, and others.
Proximity to San Antonio
Corpus Christi continues to benefit from tourist attractions in San Antonio. San Antonio is located 2.5
hours by automobile north of Corpus Christi with easy access by Interstate 37, and Corpus Christi is
favorably viewed as an attractive one -day trip by San Antonio visitors. With Corpus Christi's growing
list of attractions, which include the Texas State Aquarium, the U.S.S. Lexington Museum on the Bay,
and the Las Carabelas Columbus ship exhibit, visitors may be tempted to stay a little longer.
Foreign Trade Zone
The Port of Corpus Christi Authority operates one of the largest Foreign -Trade Zones (FTZ) in the United
States. The Zone includes an Industrial Park near the Airport, two full service public warehouses near the
Airport, all Port properties (7,000) acres that are available for storage and/or industrial activity, three bulk
fuel terminals, six refinery subzones, two metal fabrication (offshore oil platforms and towers) subzones,
and two minerals processing subzones. The Port's FTZ department is a full service Grantee assisting
clients with applications, FTZ training, interpretation of Customs regulations, and interface with Customs
officials.
Corpus Christi Enterprise Zone
The City of Corpus Christi has a State of Texas approved Enterprise Zone to assist in economic
development activities. The Enterprise Zone contains approximately 14 square miles. In the 8 -year
existence of the Enterprise Zone, over $2.5 billion of State of Texas approved Enterprise Zones projects
have begun within the Enterprise Zone. While numerous State benefits for companies locating in the
Enterprise Zone are available, the City also provides incentives for companies locating within the
Enterprise Zone. -
Private Utilities
Telecommunications and electrical service are available from several providers.
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C-10
Construction
The Table below indicates the amount of new construction activity in Corpus Christi and the number of
permits issued for all purposes.
Year
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
Building Permits
Number of Permits
5,984
5,845
4,761
5,207
4,565
4,012
5,781
5,989
5,693
5,118
Value
$ 142,154,244
152,987,779
149,264,763
154,763,863
333,016,517"
295,084,882
387,122,147
450,750,242
503,027,247
343,865,608
(11 Based upon the construction of several large commercial projects, including shopping malls.
Employment
The following table indicates the total civilian employment in the Corpus Christi MSA for the period
December 2008 as compared to the prior periods of November 2007 and December 2007:
Civilian Labor Force
Unemployment
Percent Unemployment
Total Employment
December 2008 November 2007 December 2007
200,600
11,000
5.5%
189,600
201,100
10,700
5.3%
190,400
The following table shows certain nonagricultural wage and salary employment in the
MSA for the period December 2009 as compared to the prior periods of November 2008
2007:
Natural Resource & Mining
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehouse & Public Utilities
Information
Financial Activities
Professional & Business Services
Education & Health Services
Leisure & Hospitality
Other Services
Government
Total
December 2008* November 2007
21,000
10,900
5,700
22,200
5,300
2,400
8,300
16,400
27,600
21,000
6,300
32,700
179,800
*Estimates for the current month are preliminary
Source: Texas Workforce Commission, Labor Market Review, February 2006.
C -I1
21,200
10,900
5,700
21,600
5,300
2,400
8,300
16,400
27,500
21,100
6,300
32,900
179,600
197,300
8,700
4.4%
188.600
Corpus Christi
and December
December 2007
20,900
11,000
5,700
20,600
5,300
2,400
8,300
16,000
26,900
20,600
6,300
32,500
177,500
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C-12
APPENDIX D
FORM OPINION OF BOND COUNSEL
D -I
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D-2
FULBRIGHT & JAWORSKI L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP
300 CONVENT STREET. SUITE 2200
SAN ANTONIO. TEXAS 78205-3792
WWW.FULBRIGHT.COM
TELEPHONE: (210) 224-8878
FACSIMILE' (210) 270-7208
FINAL
IN REGARD to the authorization and issuance of the "City of Corpus Christi, Texas Utility
System Revenue Improvement Bonds, Series 2009" (the Bonds), dated March 1, 2009, in the aggregate
principal amount of $96,490,000 we have reviewed the legality and validity of the issuance thereof by the
City of Corpus Christi, Texas (the City). The Bonds are issuable in fully registered form only, in
denominations of 55,000 or any integral multiple thereof, and have Stated Maturities of July 15 in each of
the years 2011 through 2027, July 15, 2029, July 15, 2033, and July 15, 2039, unless optionally or
mandatorily redeemed prior to Stated Maturity in accordance with the terms stated on the face of the
Bonds. Interest on the Bonds accrues from the dates, at the rates, in the manner, and is payable on the
dates, all as provided in the ordinance (the Ordinance) authorizing the issuance of the Bonds.
WE HAVE SERVED AS BOND COUNSEL for the City solely to pass upon the legality and
validity of the issuance of the Bonds under the laws of the State of Texas and with respect to the
exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax
purposes and for no other purpose. 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 City or the City's combined utlilty system and have not assumed any
responsibility with respect to the financial condition or capabilities of the City or the disclosure thereof in
connection with the sale of the Bonds. We express no opinion and make no comment with respect to the
sufficiency of the security for or the marketability of the Bonds. Our role in connection with the City's
Official Statement prepared for use in connection with the sale of the Bonds has been limited as described
therein.
WE HAVE EXAMINED the applicable and pertinent laws of the State of Texas and the United
States of America. In rendering the opinions herein we rely upon (1) original or certified copies of the
proceedings of the City Council of the City in connection with the issuance of the Bonds, including the
Ordinance; (2) customary certifications and opinions of officials of the City; (3) certificates executed by
officers of the City relating to the expected use and investment of proceeds of the Bonds and certain other
funds of the City, and to certain other facts within the knowledge and control of the City; and (4) such
other documentation, including an examination of the Bond executed and delivered initially by the City,
which we found to be in due form and properly executed, and such matters of law as we deem relevant to
the matters discussed below. In such examination, we have assumed the authenticity of all documents
submitted to us as originals, the conformity to original copies of all documents submitted to us as certified
copies, and the accuracy of the statements and information contained in such certificates. We express no
opinion concerning any effect on the following opinions which may result from changes in law effected
after the date hereof.
BASED ON OUR EXAMINATION, IT IS OUR OPINION that the Bonds have been duly
authorized and issued in conformity with the laws of the State of Texas now in force and that the Bonds
are valid and legally binding special obligations of the City enforceable in accordance with the terms and
conditions described therein, except to the extent that the enforceability thereof may be affected by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights or the
D-3
Legal Opinion of Fulbright & Jaworski L.L.P. in connection with the authorization and issuance of
"CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM REVENUE IMPROVEMENT
BONDS, SERIES 2009"
exercise of judicial discretion in accordance with general principles of equity. The Bonds are payable
from and equally and ratably secured solely by a first and prior lien on and pledge of the Pledged
Revenues (as defined in the Ordinance), on a parity with the currently outstanding Previously Issued
Priority Bonds (as defined in the Ordinance), derived from the operation of the System. In the Ordinance,
the City retains the right to issue Additional Priority Bonds (as defined in the Ordinance), and bonds or
other evidences of indebtedness whose lien on and pledge of the Pledged Revenues shall be subordinate
and inferior to that possessed by the Priority Bonds without limitation as to principal amount but subject
to any terms, conditions, or restrictions as may be applicable thereto under law or otherwise. The Bonds
do not constitute a legal or equitable pledge, charge, lien, or encumbrance upon any property of the City
or the System, except with respect to the Pledged Revenues. The holder of the Bonds shall never have the
right to demand payment of the Bonds out of any funds raised or to be raised by taxation.
IT IS FURTHER OUR OPINION THAT, assuming continuing compliance after the date hereof
by the City with the provisions of the Ordinance and in reliance upon the certificate of the financial
advisors and upon the representations and certifications of the City made in a certificate of even date
herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, under existing
statutes, regulations, published rulings, and court decisions (1) interest on the Bonds will be excludable
from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the
date hereof (the Code), of the owners thereof for federal income tax purposes, pursuant to section 103 of
the Code, and (2) interest on the Bonds will not be included in computing the alternative minimum
taxable income of the owners thereof.
WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax
consequences under present law or any proposed legislation resulting from the receipt or accrual of
interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as
the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life
insurance companies, property and casualty insurance companies, certain foreign corporations doing
business in the United States, S corporations with subchapter C earnings and profits, owners of an interest
in a financial asset securitization investment trust, individual recipients of Social Security or Railroad
Retirement Benefits, individuals otherwise qualifying for the earned income credit, and taxpayers who
may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or
incurred certain expenses allocable to, tax-exempt obligations.
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; rather, such opinions
represent our legal judgment based upon our review of existing law that we deem relevant to such
opinions and in reliance upon the representations and covenants referenced above.
D-4
APPENDIX E
SPECIMEN OF MUNICIPAL BOND INSURANCE POLICY
E-1
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E-2
ASSURED
GUARANTY
'.. ENDURING FINANCIAL STRENGTH
Financial Guaranty Insurance Policy
Issuer.
Obllgadons
Assured Guaranty Corp., a Maryland corporation ("
and on the teens and subject to the ondkions of this Policy (wh'
irrevocably agmes to pay to the trustee. (the 'Trustee") or the pay
documentation providing for the issuance of and searing
Payments which shall became Due for Payment but sha
Policy No.:
Premktnc
E
Assured Guaranty will make such Insure
applicable principal or interest becomes Due for
Guaranty shall have Received a completed
does not in any instance conform to the to
shall promptly give notice to the Trustee�r
submit an amended Notice of Nonp. nen Th
upon receipt by the Trustee or th
such payments, and (ii) evide
rights te payment of such pd
such disbursement Assure
receipt of payment of
thereunder, indudinabout
the Trustee or the ' eying
the extent of such
nt of the Premium
unconditionally and
igations (as set fodh in the
at portion of the Insured
to 'e •1te. . th.
(i a sI : s
If. •liceo •np
o- sha
ce•[. SU
en
cta
n the later to occur of (i) the date
awing the day on which Assured
t by Assured Guaranty is incomplete or
med not Received, and Assured Guaranty
notice, the Trustee or the Paying Agent may
arse the Insured Payments to the Holders only
to it of (i) evidence of the Holder's right to receive
instruments of assignment, that all of the Holder's
n vest in Assured Guaranty. Upon and to the extent of
Iden .f r Obligations, any appurtenant coupon thereto and right to
eon, , d sha I be fully subrogated to all of the Holder's right, title and interest
paymen in respect of the Obligations. Payment by Assured Guaranty to
Ba.asba discharge the obligation of Assured Guaranty under this Policy to
le by ssured anty for any reason. The Premium on this Policy is not refundable for any
against sof prepayment premium or other acceleration payment which at any time may
yahoo, nth:. ran at the sole option of Assured Guaranty, nor against any risk other than
Excedified by any endorsementhereto, the following [onus shall have the meanings specified
for al purposes of thi •ori . " vo • - • Payment" means any amount previously distributed to a Holder in respect of any Insured
Payment by or on eh. •f th- Issuer, which amount has been recovered from such Holder pursuant to the United States
Bankruptcy Code in : ecordance with a final, nonappealable order of a court having competent jurisdiction that arch paynhent.
constitutes an avoidab . ..-nice with respect to such Holder. 'Business Day" means any day other than (1) a Saturday or
Sunday, (ii) any day on which the offices of the Trustee, the Paying Agent or Assured Guaranty are closed, or (iii) any day on which
banking institutions are authorized or required by law, executive order or governmental decree to be dosed in the City of New York
or ire the State of Maryland. 'Due for Payment" means (i) when referring to the principal of an Obligation, the stated maturity date
thereof, or the date on which such Obligation shall have been duly called for mandatary sinking fund redemption, and does not refer
to any earlier date on which payment is due by reason of a call For redemption (other than by mandatory sinking had redemption),
acceleration or other advancement of maturely (unless Assured Guaranty in its sole discretion elects to make any principal payment
in whole or in part, on such eadier date) and (i) when referring to interest on an Obligation, the stated date for payment of such
interest. 'Holder" means, in respect of any Obligation, the person or entity who, at the time of Nonpayment, is entitled under Me
teens of such Obligation to payment of principal or interest thereunder, except that Holder shall not include the Issuer or any person
or entity whose direct or indirect obigatcn constitutes the underlying security fur the Obligations. 'insured Payments" means that
portion of the principal of and interest on the Obligations that shall become Due for Payment but shall be unpaid by reason of
Nonpayment Insured Payments shall not include any additional amounts owing by the Issuer solely as a insult of the fallure by the
Trustee or the Paying Agent to pay such amount when due and payable, including without limitation any such additional amounts as
may be attributable to penalties or to interest accruing at a default rate. to amounts payable in respect of indemnification, or to any
other additional amounts payable by the Trustee or the Paying Agent by reason of such failure. 'Nonpayment" means, in respect of
an Obligation, the failure of the Issuer to have provided sufficient lands to the Trustee or the Paying Agent for payment in full of all
principal and interest Due for Payment on such Obligation. It is further understood that the term 'Nonpayment" in respect of an
Obligation includes any Avoided Payment. Receipt" or 'Received" means actual receipt or notice of or, if notice is given by
overnight or other delivery service, or by certified or registered United States mail, by a delivery receipt signed by a person
authorized to accept delivery on behalf of the person to whom the notice was given. Notices to Assured Guaranty may be nailed by
registered mai or personally delivered or telecopied to it at 1325 Avenue of the Americas, New York, New York 10019, Telephone
Number (212) 974-0100, Facsimile Number (212) 5813268, Attention: Risk Management Department - Public Finance
Surveillance, with a copy to the General Counsel, er to such other address as shall be specified by Assured Guaranty to the Trustee
Page 1 d2
Form IW -FG (05107)
E-3
or the Paying Agent in writing. A Notice of Nonpayment will be deemed to be Received by Assured Guaranty on a given Business
Day it it is Received prior to 12:00 noon (New York City time) on such Business Day; otherwise it will be deemed Received on the
next Business Day- Term' means the period from and including the Effective Date until the earlier of (i) the maturity date for the
Obligations. or (ii) the date on which the Issuer has made all payments required to be made on the Obligations.
At any time during the Term of this Policy, Assured Guaranty may appoint a fiscal agent (the 'Fiscal Agent) for purposes
of this Policy by written notice to the Trustee or the Paying Agent, specifying the name and notice address of such Fiscal Agent.
From and after the date of Receipt of such notice by the Trustee or the Paying Agent, copies of all notices . • documents required
to be delivered to Assured Guaranty pursuant to this Policy shall be delivered simultaneously to the Fis
Guaranty. All payments required to be made by Assured Guaranty under this Policy may be made directly
by the Fiscal Agent on behalf of Assured Guaranty. The Fiscal Agent Is the agent of Assured Gu
shell in no event be Roble to the Trustee or the Paying Agent for any acts of the Fiscal Agent a
deposit, or cause to be deposited, sufficient funds to make payments due under this Policy.
al
To the fullest extent permitted by applicable law, Assured Guaranty hereby
Holders only. all rights and defenses of any kind (including. without limitation, the defens
other circumstance that would have the effect of discharging a surety, guarantor or
available to Assured Guaranty to deny or avoid payment of its obligations u
provisions hereof. Nothing in this paragraph will be construed (i) to waive, limit or
reserves, Assured Guaranty's rights and remedies. Including, without limits'
(basad on contractual rights. securities law violations, fraud or other tau
whether directly or acquired as a subrogee. assignee or otherwise. su
Agent, in accordance with the express provisions hereof. and/or (ii
have been previously paid or that are not otherwise due in accorden
This Policy (which includes each endorsement h
to the subject matter hereof, and may not be modified. alta
limitedon, any modifioadon thereto or amendment Maeof
INSURANCE SECURITY FUND SPECIFIED IN AR
by, and shall be construed in accordance with,1
IN WITNESS WHEREOF, Assured
its duly authorized office,. and to become effect
(SEAL)
Page 2 of 2
Form NY -FG (0507)
lo) se
ed or
affect
OF
ate
or
'th l
in
n.
es of a
nt
a
er t
erwis
ht • a
a• 'ns
a •a
n •, re
r•' -le :.flh
As
n •nly, :ndr
failure , urs
nt and to Assured
red Guaranty or
Fiscal Agent
Guaranty to
vas, in
of frau
r pe on' la
!icy accor
ir, and
ny
• ers•, entit
to a Trust
anty o
re
d b
CYI.
HE NEW YO
New
any
uaran
an
d th
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se the bane
em: in facto
eq `t) -- t may
Wit
ran
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of the
ny
nc:
ured G
n•T ing • s
agr. - nt • i
R
IN
E-4
e •ass
xpressly
°ovaries
each case,
or the Paying
y amounts that
d Guaranty with respect
hument, including, without
HE PROPERTY/CASUALTY
W. This Policy will be governed
a - • with its corporate seal, to be signed by
ty by virtue of such signature.
URED GUARANTY CORP.
By:
[Insert Authorized Signatory Name(
(Insert Authorized Signatory Tide)
Signature attested to by:
Counsel
M. E. Allison & Co., Inc.
INVESTMENT BANKERS
950 E. Basse Rd., 2nd Floor
San Antonio, TX 78209-1831
Financial Advisor
A. FORM OF DEFINITIVE BOND.
REGISTERED
NO.
EXHIBIT C
REGISTERED PRINCIPAL
AMOUNT
United States of America
State of Texas
Counties of Nueces and San Patricio
CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM
REVENUE IMPROVEMENT BOND SERIES 2009
Bond Date:
March 1, 2009
Interest Rate:
Stated Maturity: CUSIP No.:
ON THE MATURITY DATE SPECIFIED ABOVE, THE CITY OF CORPUS
CHRISTI, IN NUECES AND SAN PATRICIO COUNTIES, TEXAS (the "Issuer"), hereby
promises to pay to , or to the registered assignee hereof (either being
hereinafter called the "registered owner") the principal amount of
DOLLARS and to pay interest thereon from the
Bond Date specified above, on July 15, 2009 and semiannually on each January 15 and July 15
thereafter to the maturity date specified above, or the date of redemption prior to maturity, at the
interest rate per annum specified above; except that if the Paying Agent/Registrar's
Authentication Certificate appearing on the face of this Bond is dated later than July 15, 2009,
such interest is payable semiannually on each January 15 and July 15 following such date.
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 designated trust office
in Dallas, Texas (the "Designated Trust Office") of The Bank of New York Mellon Trust
Company, N.A., 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 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 last business day of the month next preceding each such date (the "Record Date") on the
Registration Books kept by the Paying Agent/Registrar, as hereinafter described. 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 Designated Trust Office of the Paying Agent/Registrar. The
Issuer covenants with the registered owner of this Bond that on or before each principal payment
80470964.4
C-1
date, interest payment date, and accrued interest payment date for this Bond it will make
available to the Paying Agent/Registrar, from the "Debt Service 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
Designated Trust Office of the Paying Agent/Registrar is located are authorized by law or
executive order to close, or the United States Postal Service is not open for business, then the
date for such payment shall be the next succeeding day which is not such a Saturday, Sunday,
legal holiday, or day on which banking institutions are authorized to close, or the United States
Postal Service is not open for business; 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 of like tenor and effect except as to number,
principal amount, interest rate, maturity, and right of prior redemption, dated as of the Bond Date
specified above, aggregating $96,490,000 (herein sometimes called the "Bonds"), issued for the
purposes of acquiring, purchasing, constructing, improving, repairing, extending, equipping, and
renovating the City's combined waterwork system, wastewater disposal system and gas system
(collectively, the "System"), and to pay the costs of issuing the Bonds.
THE OUTSTANDING BONDS maturing on and after July 15, 2019 may be redeemed
prior to their scheduled maturities, at the option of the Issuer, in whole, or in part on July 15,
2018, or on any date thereafter, at the redemption price of par plus accrued interest thereon to the
date fixed for redemption. The Bonds or portions thereof redeemed within a maturity shall be
selected by lot or other customary random method selected by the Paying Agent/Registrar
(provided that a portion of a Bond may be redeemed only in an integral multiple of $5,000);
provided, further, that during any period in which ownership of the Bonds is determined only by
a book entry at a securities depository for the Bonds, if fewer than all of the Bonds of the same
maturity and bearing the same interest rate are to be redeemed, the particular Bonds of such
maturity and bearing such interest rate shall be selected in accordance with the arrangements
between the City and the securities depository.
THE BONDS are also subject to mandatory redemption in part by lot pursuant to the
terms of the Ordinance, on July 15, 2029, July 15, 2033, and July 15, 2039 in the following years
and in the following amounts, at a price equal to the principal amount thereof and accrued and
unpaid interest to the date of redemption, without premium:
Term Bonds Stated to Term Bonds Stated to
Mature on July 15, 2029 Mature on July 15, 2033
80470964.4
Principal Principal
Year Amount ($) Year Amount ($)
2028 3,475,000 2030 3,850,000
2029 3,655,000* 2031 4,050,000
2032 4,265,000
2033 4,485,000*
C-2
Term Bonds Stated to
Mature on July 15. 2039
Principal
Year Amount ($)
2034 4,725,000
2035 4,975,000
2036 5,245,000
2037 5,525,000
2038 5,825,000
2039 6,135,000*
* stated maturity
TO THE EXTENT, however, that Bonds subject to sinking fund redemption have been
previously purchased or called for redemption in part and otherwise than from a sinking fund
redemption payment, each annual sinking fund payment for such Bond shall be reduced by the
amount obtained by multiplying the principal amount of Bonds so purchased or redeemed by the
ratio which each remaining annual sinking fund redemption payment for such Bonds bears to the
total remaining sinking fund payments, and by rounding each such payment to the nearest $5,000
integral; provided, that during any period in which ownership of the Bonds is determined only by
a book entry at a securities depository for the Bonds, the particular Bonds to be called for
mandatory redemption shall be selected in accordance with the arrangements between the City
and the securities depository.
AT LEAST thirty (30) days prior to the date any such Bonds are to be redeemed, a notice
of redemption, authorized by appropriate resolution passed by the Governing Body, shall be
given in the manner set forth below. A written notice of such redemption shall be given to the
registered owner of each Bond or a portion thereof being called for redemption by depositing
such notice in the United States mail, first class postage prepaid, addressed to each such
registered owner at his address shown on the Registration Books kept by the Paying
Agent/Registrar. By the date fixed for any such redemption due provision shall be made by the
City with the Paying Agent/Registrar for the payment of the required redemption price for the
Bonds or the portions thereof which are to be so redeemed, plus accrued interest thereon to the
date fixed for redemption. If such written notice of redemption is given, and if due provision for
such payment is made, all as provided above, the Bonds, or the portions thereof which are to be
so redeemed, thereby automatically shall be redeemed prior to their scheduled maturities, shall
not bear interest after the date fixed for their redemption, and shall not be regarded as being
Outstanding except for the right of the registered owner to receive the redemption price plus
accrued interest to the date fixed for redemption from the Paying Agent/Registrar out of the
funds provided for such payment. The Paying Agent/Registrar shall record in the Registration
Books all such redemptions of principal of the Bonds or any portion thereof. If a portion of any
Bonds shall be redeemed, a substitute Bond or Bonds having the same stated maturity date,
bearing interest at the same interest rate, in any denomination or denominations in any integral
80470964.4
C-3
multiple of $5,000, at the written request of the registered owner, and in an 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 City, all as provided in the Ordinance.
ALL BONDS OF THIS SERIES are issuable solely as fully registered bonds, without
interest coupons, in an Authorized Denomination. 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 amount of fully registered Bonds,
without interest coupons, payable to the appropriate registered owner, assignee or assignees, as
the case may be, having any Authorized Denomination or Denominations as requested in writing
by the appropriate registered owner, assignee or assignees, as the case may be, upon surrender of
this Bond to the Paying Agent/Registrar at its Designated Trust Office 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 authorized denomination 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 one requesting such conversion and exchange shall pay the Paying
Agent/Registrar's reasonable standard or customary fees and charges for converting and
exchanging any Bond or portion thereof. 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 foregoing notwithstanding, in the case of the conversion and exchange of an
assigned and transferred Bond or Bonds or any portion or portions thereof, such fees and charges
of the Paying Agent/Registrar will be paid by the Issuer. The Paying Agent/Registrar shall not
be required (i) to make any such transfer, conversion or exchange during the period beginning at
the opening of business 30 days before the day of the first mailing of a notice of redemption and
ending at the close of business on the day of such mailing, or (ii) to transfer, convert or exchange
any Bonds so selected for redemption when such redemption is scheduled to occur within 30
calendar days; provided, however, such limitation of transfer shall not be applicable to an
exchange by the registered owner of an unredeemed balance of a Bond called for redemption in
part.
WHENEVER the beneficial ownership of this Bond is determined by a book entry at a
securities depository for the Bonds, the foregoing requirements of holding, delivering or
transferring this Bond shall be modified to require the appropriate person or entity to meet the
requirements of the securities depository as to registering or transferring the book entry to
produce the same effect.
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, whose
80470964.4
C-4
qualifications substantially are similar to the previous Paying Agent/Registrar it is replacing, and
promptly will cause written notice thereof to be mailed to the registered owners of the 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 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.
THE BONDS are special obligations of the Issuer payable solely from and equally
secured, together with the currently Outstanding Previously Issued Priority Bonds, by a first lien
on and pledge of the Pledged Revenues of the System. The Issuer has reserved the right, subject
to the restrictions stated, and adopted by reference, in the Bond Ordinance, to issue Additional
Priority Bonds which also may be made payable from, and secured by a first lien on and pledge
of, the aforesaid Pledged Revenues, as well as Subordinated Obligations payable from a junior
and inferior lien on and pledge of the Pledged Revenues. For a more complete description and
identification of the revenues and funds pledged to the payment of the Bonds, and other
obligations of the Issuer secured by and payable from the same source or sources as the Bonds,
reference is hereby made to the Bond Ordinance.
THE ISSUER has reserved the right, subject to the restrictions stated, and adopted by
reference, in the Bond Ordinance, to amend the Bond Ordinance; and under some (but not all)
circumstances amendments must be approved by the owners of a majority in aggregate principal
amount of the Outstanding Priority Bonds.
THE REGISTERED OWNER HEREOF shall never have the right to demand payment of
this Bond out of any funds raised or to be raised by taxation.
IT IS HEREBY certified and covenanted that this Bond has been duly and validly
authorized, issued and delivered; and 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. Capitalized term
used in this Bond without definition shall have the respective means ascribed to them in the
Bond Ordinance.
80470964.4
C-5
IN WITNESS WHEREOF, this Bond has been signed with the imprinted or lithographed
facsimile signature of the Mayor of said Issuer, attested by the imprinted or lithographed
facsimile signature of the City Secretary, and the official seal of said Issuer has been duly affixed
to, printed, lithographed or impressed on this Bond.
ATTEST:
City Secretary
(SEAL)
80470964.4
CITY OF CORPUS CHRISTI, TEXAS
Mayor
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C-6
B. FORM OF COMPTROLLER'S REGISTRATION CERTIFICATE TO APPEAR ON
INITIAL BONDS ONLY.
REGISTRATION CERTIFICATE OF
COMPTROLLER OF PUBLIC ACCOUNTS
OFFICE OF THE COMPTROLLER OF
PUBLIC ACCOUNTS
§ REGISTER NO.
THE STATE OF TEXAS §
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 duly registered by the Comptroller
of Public Accounts of the State of Texas.
WITNESS my signature and seal of office this
Comptroller of Public Accounts
of the State of Texas
(SEAL)
C. FORM OF REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR.
REGIS IRATION CERTIFICATE OF PAYING AGENT/REGISTRAR
This Bond has been duly issued and registered under the provisions of the
within -mentioned Ordinance; the Bond or Bonds of the above entitled and designated series
originally delivered having been approved by the Attorney General of the State of Texas and
registered by the Comptroller of Public Accounts, as shown by the records of the Paying
Agent/Registrar.
Registered this date:
80470964.4
C-7
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A, as Paying
Agent/Registrar
By:
Authorized Signature
D. FORM OF ASSIGNMENT.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto
(Print or typewrite name, address, and zip code of transferee):
(Social Security or other identifying number):
the within Bond and all rights thereunder, and hereby irrevocably constitutes and
appoints attorney to transfer the within Bond on the books kept
for registration thereof, with full power of substitution in the premises.
DATED:
NOTICE: The signature on this assignment must
correspond with the name of the registered owner as it
appears on the face of the within Bond in every particular.
Signature guaranteed:
80470964.4
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C-8
E. FORM OF INITIAL BOND(S).
The Initial Bond(s) shall be in the form set forth in paragraph (a) of this Section, except
that the form of the single fully registered Initial Bond shall be modified as follows:
(i) immediately under the name of the Bond, the headings "Interest Rate
" and "Stated Maturity " shall both be completed "as shown below";
and
(ii) the first paragraph shall read as follows:
A. ON THE MATURITY DATES SPECIFIED BELOW, THE CITY OF CORPUS
CHRISTI, IN NUECES AND SAN PATRICIO COUNTIES, TEXAS (the "Issuer"), hereby
promises to pay to , or the registered assignee hereof (either being hereinafter
called the "registered owner") on July 15 of the years and in the Principal Amounts specified
below and to pay interest thereon, from the Bond Date specified above, or from the most recent
interest payment date to which interest has been paid or duly provided, at the rates of interest per
annum specified in accordance with the following schedule:
Stated Maturities
Principal Amounts ($)
Interest Rates (%)
(Information to be inserted from schedules in Section 2.
said interest being payable initially on July 15, 2009, and semiannually thereafter on each
January 15 and July 15.
F. INSURANCE LEGEND.
If bond insurance is obtained by the City for any Bond, the appropriate definitive Bonds
and the Initial Bonds shall bear an appropriate legend as provided by the insurer.
80470964.4
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C-9
80470964.4
EXHIBIT D
PAYING AGENT/REGISTRAR AGREEMENT
D-1
PAYING AGENT/REGISTRAR AGREEMENT
THIS PAYING AGENT/REGISTRAR AGREEMENT entered into as of' February 24,
2009 (this "Agreement") is between the City of Corpus Christi, Texas (the "Issuer") and The
Bank of New York Mellon Trust Company, N.A., Dallas, Texas, a national banking association
duly organized and existing under the laws of the United States of' America and authorized to
transact business in the State of Texas (the "Bank").
RECITALS OF THE ISSUER
The Issuer has duly authorized and provided for the issuance of its "CITY OF CORPUS
CHRISTI, TEXAS UTILITY SYSTEM REVENUE IMPROVEMENT BONDS, SERIES 2009",
in the aggregate principal amount of $96,490,000 (the "Securities"), dated March 1, 2009 to be
issued as registered securities without coupons;
All things necessary to make the Securities the valid obligations of the Issuer, in
accordance with their terms, will be taken upon the issuance and delivery thereof;
The Issuer is desirous that the Bank act as the Paying Agent of the Issuer in paying the
principal, premium (if any) and interest on the Securities, in accordance with the terms thereof,
and that the Bank act as Registrar for the Securities;
The Issuer has duly authorized the execution and delivery of this Agreement; and all
things necessary to make this Agreement the valid agreement of the Issuer, in accordance with its
terms, have been done.
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE ONE
APPOINTMENT OF BANK AS
PAYING AGENT AND REGISTRAR
Section 1.01 Appointment.
The Issuer hereby appoints the Bank to act as Paying Agent with respect to the Securities
in order to pay, when due, the principal, premium (if any), and interest on all or any of the
Securities to the Holders of the Securities.
The Issuer hereby appoints the Bank as Registrar with respect to the Securities.
The Bank hereby accepts its appointment, and agrees to act, as the Paying Agent and the
Registrar.
As compensation for the Bank's services as Paying Agent/Registrar, the Issuer hereby
agrees to pay the Bank the fees and amounts set forth in Annex A hereto for the first year of this
Agreement and thereafter the fees and amounts set forth in the Bank's current fee schedule then
in effect for services as Paying Agent/Registrar for political subdivisions, which shall be
80476190.1
supplied to the Issuer on or before ninety (90) days prior to the close of the Fiscal Year of the
Issuer and which shall be effective upon the first day of the following Fiscal Year. The Issuer
covenants to provide notice to the Bank upon any change in the Issuer's Fiscal Year within ten
(10) business days of the governing body of the Issuer's decision to change the Fiscal Year of the
Issuer.
In addition, the Issuer agrees to reimburse the Bank upon its request for all reasonable
expenses, disbursements, and advances incurred or made by the Bank in accordance with any of
the provisions hereof (including the reasonable compensation and the expenses and
disbursements of its agents and counsel).
ARTICLE TWO
DEFINITIONS
Section 2.01 Definitions.
For all purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires, the following terms, whenever the same appears herein without
qualifying language, are defined to mean as follows:
Acceleration Date of any Security means the date on and after which the principal
or any or all installments of interest, or both, are due and payable on any Security which
has become accelerated pursuant to the terms of the Security.
Bank Office means the corporate trust office of the Bank set forth on the signature
page of this agreement. The Bank will notify the Issuer, in writing, of any change in
location of the Bank Office.
Bond Ordinance means the resolution, order, or ordinance of the governing body
of the Issuer pursuant to which the Securities are issued, certified by the City Secretary or
Assistant City Secretary or any other officer of the Issuer, and delivered to the Bank.
Fiscal Year means the fiscal year of the Issuer, which currently begins on
August 1 and ends on July 31 of each year.
Holder and Security Holder each means a Person in whose name a Security is
registered in the Security Register.
Issuer Request and Issuer Order means a written request or order signed in the
name of the Issuer by the Mayor or the City Secretary or Assistant City Secretary of the
City Council of the Issuer delivered to the Bank.
Legal Holiday means a day on which the Bank is required or authorized to be
closed.
Person means any individual, corporation, partnership, joint venture, association,
joint stock company, trust, unincorporated organization or government or any agency or
political subdivision of a government.
80476190.1
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Redemption Date when used with respect to any Security to be redeemed means
the date fixed for such redemption pursuant to the terms of the Bond Ordinance.
Responsible Officer when used with respect to the Bank means the Chairman or
Vice -Chairman of the Board of Directors, the Chairman or Vice -Chairman of the
Executive Committee of the Board of Directors, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, the Cashier,
any Assistant Cashier, any Trust Officer or Assistant Trust Officer, or any other officer of
the Bank customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
Security Register means a register maintained by the Bank on behalf of the Issuer
providing for the registration of Securities and of transfers of Securities.
Stated Maturity means the date specified in the Bond Ordinance as the fixed date
on which the principal of a Security is scheduled to be due and payable.
Section 2.02 Other Definitions.
The terms "Bank", "Issuer", and "Securities" have the meanings assigned to them in the
opening paragraph of this Agreement or in the recitals of the Issuer.
The term "Paying Agent/Registrar" refers to the Bank in the performance of the duties
and functions of this Agreement.
ARTICLE THREE
PAYING AGENT
Section 3.01 Duties of Paving Agent.
As Paying Agent, the Bank shall, provided adequate collected funds have been provided
to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of
each Security at its Stated Maturity, Redemption Date, if any, or Acceleration Date, to the
Holder upon surrender of the Security to the Bank at the Bank Office.
As Paying Agent, the Bank shall, provided adequate collected funds have been provided
to it for such purpose by or on behalf of the Issuer, pay on behalf of the Issuer the principal of
and interest on each Security when due, by computing the amount of interest to be paid each
Holder preparing the checks and mailing the checks on the payment date, to the Holders of the
Securities on the Record Date, addressed to their address appearing on the Security Register.
Section 3.02 Payment Dates.
The Issuer hereby instructs the Bank to pay the principal of and interest on the Securities
at the dates specified in the Bond Ordinance.
80476190.1
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ARTICLE FOUR
REGISTRAR
Section 4.01 Transfer and Exchange.
The Issuer shall keep at the Bank Office a register (the "Security Register") in which,
subject to such reasonable written regulations as the Issuer may prescribe (which regulations
shall be furnished the Bank herewith or subsequent hereto by Issuer Order), the Issuer shall
provide for the registration of the Securities and for transfers of Securities. The Bank is hereby
appointed Registrar for the purpose of registering Securities and transfers of Securities as herein
provided. The Bank agrees to maintain the Security Register while it is Registrar.
Every Security surrendered for transfer or exchange shall be duly endorsed or be
accompanied by a written instrument of transfer, the signature on which has been guaranteed by
an officer of a federal or state bank or a member of the National Association of Securities
Dealers, in form satisfactory to the Bank, duly executed by the Holder thereof, or his agent, duly
authorized in writing.
Registrar may request any supporting documentation it feels necessary to effect a re -
registration.
Section 4.02 Form of Security Register.
The Bank as Registrar will maintain the records of the Security Register in accordance
with the Bank's general practices and procedures in effect from time to time. The Bank shall not
be obligated to maintain such Register in any form other than those which the Bank has currently
available and currently utilizes at the time.
The Securities Register may be maintained in written form or in any other form capable
of being converted into written form within a reasonable time.
Section 4.03 List of Security Holders.
The Bank will provide the Issuer at any time requested by the Issuer, upon payment of
any required fee, a copy of the information contained in the Security Register. The Issuer may
also inspect the information in the Security Register at any time the Bank is customarily open for
business, provided that reasonable time is allowed the Bank to provide an up-to-date listing or to
convert the information into written form.
The Bank will not release or disclose the content of the Security Register to any person
other than to, or at the written request of, an authorized officer or employee of the Issuer, except
upon receipt of a subpoena, court order, or as required by law. Upon receipt of a subpoena or
court order the Bank will notify the Issuer so that the Issuer may contest the subpoena or court
order.
80476190.1
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Section 4.04 Return of Canceled Securities.
The Bank will, at such reasonable intervals as it determines, surrender to the Issuer
Securities in lieu of which or in exchange for which other Securities have been issued or which
have been paid or provide a certificate of destruction relating thereto.
Section 4.05 Transaction Information to Issuer.
The Bank will, within a reasonable time after receipt of written request from the Issuer,
furnish the Issuer information as to the Securities it has paid pursuant to Section 3.01 and
Securities it has delivered upon the transfer or exchange of any Securities pursuant to Section
4.01.
ARTICLE FIVE
THE BANK
Section 5.01 Duties of Bank.
The Bank undertakes to perform the duties set forth herein and in the Bond Ordinance
and agrees to use reasonable care in the performance thereof.
The Bank is also authorized to transfer funds relating to the closing and initial delivery of
the Securities in the manner disclosed in the closing memorandum approved by the Issuer as
prepared by the Issuer's financial advisor or other agent. The Bank may act on a facsimile or e-
mail transmission of the closing memorandum acknowledged by the financial advisor or the
Issuer as the final closing memorandum. The Bank shall not be liable for any losses, costs or
expenses arising directly or indirectly from the Bank's reliance upon and compliance with such
instructions.
Section 5.02 Reliance on Documents, Etc.
(a) The Bank may conclusively rely, as to the truth of the statements and correctness
of the opinions expressed therein, on certificates or opinions furnished to the Bank.
(b) The Bank shall not be liable for any error of judgment made in good faith by the
Responsible Officer, unless it shall be proved that the Bank was negligent in ascertaining the
pertinent facts.
(c) No provisions of this Agreement shall require the Bank to expend or risk its own
funds or otherwise incur any financial liability for performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing the
repayment of such funds or adequate indemnity satisfactory to it against such risks or liability is
not assured to it.
(d) The Bank may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note, security, or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties. Without limiting the generality
80476190.1
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of the foregoing statement, the Bank need not examine the ownership of any Securities but is
protected in acting upon receipt of Securities containing an endorsement or instruction of transfer
or power of transfer which appears on its face to be signed by the Holder or an agent of the
Holder. The Bank shall not be bound to make any investigation into the facts or matters stated in
a resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note, security or other paper or document supplied by the Issuer.
(e) The Bank may consult with counsel, and the written advice of such counsel or any
opinion of counsel shall be full and complete authorization and protection with respect to any
action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(f) The Bank may exercise any of the powers hereunder and perform any duties
hereunder either directly or by or through agents or attorneys of the Bank.
Section 5.03 Recitals of Issuer.
The recitals contained herein and in the Securities shall be taken as the statements of the
Issuer, and the Bank assumes no responsibility for their correctness.
The Bank shall in no event be liable to the Issuer, any Holder or Holders of any Security,
or any other Person for any amount due on any Security from its own funds.
Section 5.04 May Hold Securities.
The Bank, in its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Issuer with the same rights it would have if it were
not the Paying Agent/Registrar or any other agent.
Section 5.05 Money Held by Bank.
A paying agent account shall at all times be kept and maintained by the Bank for the
receipt, safekeeping, and disbursement of money received from the Issuer hereunder for the
payment of the Securities, and money deposited to the credit of such account until paid to the
Holders of the Securities shall be continuously collateralized by securities or obligations which
qualify and are eligible under the laws of the State of Texas to secure and be pledged as
collateral for paying agent accounts to the extent such money is not insured by the Federal
Deposit Insurance Corporation.
The Bank shall be under no liability for interest on any money received by it hereunder.
Any money deposited with the Bank for the payment of the principal, premium (if any),
or interest on any Security and remaining unclaimed for four years after final maturity of the
Security has become due and payable will be held by the Bank and disposed of only in
accordance with Title 6 of the Texas Property Code (Unclaimed Property).
The Bank will comply with the reporting provisions of Chapter 74 of the Texas Property
Code with respect to property that is presumed abandoned under Chapter 72 or Chapter 75 of the
Texas Property Code or inactive under Chapter 73 of the Texas Property Code.
80476190.1
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Section 5.06 Indemnification.
The Issuer agrees, to the extent it legally may, to indemnify the Bank for, and hold it
harmless against, any loss, liability, or expense incurred without negligence or bad faith on its
part arising out of' or in connection with its acceptance or administration of its duties hereunder,
including the cost and expense (including its counsel fees) of defending itself against any claim
or liability in connection with the exercise or performance of any of its powers or duties under
this Agreement. The foregoing indemnities in this paragraph shall survive the resignation or
substitution of the Bank or the termination of this Agreement.
Section 5.07 Interpleader.
The Issuer and the Bank agree that the Bank may seek adjudication of any adverse claim,
demands or controversy over its person as well as funds on deposit, in either a Federal or State
District Court located in the State and County or Counties where either the Bank (Texas offices
only) or the Issuer is located, waive personal service of any process, and agree that service of
process by certified or registered mail, return receipt requested, to the address set forth in Section
6.03 of this Agreement shall constitute adequate service. The Issuer and the Bank further agree
that the Bank has the right to file a Bill of Interpleader in any court of competent jurisdiction in
the State of Texas to determine the rights of any Person claiming interest herein.
Section 5.08 Depository Trust Company.
It is hereby represented and warranted that, in the event the Securities are otherwise
qualified and accepted for "Depository Trust Company" services or equivalent depository trust
services by other organizations, the Bank has the capability and, to the extent within its control,
will comply with the "Operational Arrangements", promulgated from time to time by The
Depository Trust Company, which establishes requirements for securities to be eligible for the
timeliness of payments and funds availability, transfer turnaround time, and notification of
redemptions and calls.
ARTICLE SIX
MISCELLANEOUS PROVISIONS
Section 6.01 Amendment.
This Agreement may be amended only by an agreement in writing signed by both of the
parties hereof.
Section 6.02 Assignment.
This Agreement may not be assigned by either party without the prior written consent of
the other.
Section 6.03 Notices.
Any request, demand, authorization, direction, notice, consent, waiver or other document
provided or permitted hereby to be given or furnished to the Issuer or the Bank shall be mailed or
80476190.1
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delivered to the Issuer or the Bank, respectively, at the addresses shown on the signature page of
this Agreement.
Section 6.04 Effect of Headings.
The Article and Section headings herein are for convenience only and shall not affect the
construction hereof.
Section 6.05 Successors and Assigns.
All covenants and agreements herein by the Issuer shall bind its successors and assigns,
whether so expressed or not.
Section 6.06 Severability.
In case any provision herein, or application thereof, shall be invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining provisions or
applications shall not in any way be affected or impaired thereby.
Section 6.07 Benefits of Agreement.
Nothing herein, express or implied, shall give to any Person, other than the parties hereto
and their successors hereunder, any benefit or any legal or equitable right, remedy, or claim
hereunder.
Section 6.08 Entire Agreement.
This Agreement and the Bond Resolution constitute the entire agreement between the
parties hereto relative to the Bank acting as Paying Agent/Registrar for the Securities, and if any
conflict exists between this Agreement and the Bond Resolution, the Bond Resolution shall
govern.
Section 6.09 Counterparts.
The Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same Agreement.
Section 6.10 Termination.
This Agreement will terminate on the date of final payment by the Bank issuing its
checks for the final payment of principal of and interest on the Securities.
This Agreement may be earlier terminated upon 60 days written notice by either party;
provided, however, that this Agreement may not be terminated (i) by the Bank until a successor
Paying Agent/Registrar that is a national or state banking institution and a corporation or
association organized and existing under the laws of the United States of America or of any state
which possesses trust powers and is subject to supervision or examination by a federal or state
regulatory agency has been appointed by the Issuer and has accepted such appointment, or (ii) at
80476190.1
-8-
any time during which such termination might, in the judgment of the Issuer, disrupt, delay, or
otherwise adversely affect the payment of the principal, premium, if any, or interest on the
Securities. Prior to terminating this Agreement, the Issuer may reasonably require the Bank to
show that such termination will not occur during a period described in (ii) above.
The provisions of Section 1.02 of Article Five shall survive and remain in full force and
effect following the termination of this Agreement.
Section 6.11 Governing Law.
This Agreement shall be construed in accordance with and govemed by the laws of the
State of Texas and the United States of America.
80476190.1
[The remainder of this page intentionally left blank]
-9-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
(CITY SEAL)
ATTEST:
Title: City Secretary
Attest:
Title:
80476190.1
CITY OF CORPUS CHRISTI, TEXAS
By: 7j4ilit
Title: Mayor
Address: P.O. Box 9277
Corpus Christi, Texas 78469
THE BANK OF NEW YORK ME
TRUST COMPANY, N.A.
By:
Title:
Add ro : 2001 Bryan Street, 8th Floor
Dallas, Texas 75201
S-1
Eta tt‘ac-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
(CITY SEAL)
ATTEST:
Jitle<City Secretary
80476190.1
CITY OF CORPUS CHRISTI, TEXAS
By:
Title: Ma
Address. .O. Box 9277
Corpus Christi, Texas 78469
. rtvb ous ya9cA_
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A.
By: �
Title: alANT VICE PRESIDENT
Address: 2001 Bryan Street, 8th Floor
Dallas, Texas 75201
S-1
80476190.1
Annex A
Paying Agent/Registrar Fee Schedule
A-1
THE BANK OF NEW YORK MELLON
The Bank of New York Mellon Trust Company. N.A.
Fee Schedule
City of Corpus Christi, Texas Utility System
Revenue Improvement Bonds, Series 2009
Acceptance Fee None
A one-time charge covering the Bank Officer's review of governing documents, communication with members
of the closing party, including representatives of the issuer, investment banker(s) and attorney(s), establishment
of procedures and controls, set-up of trust accounts and tickler suspense items and the receipt and
disbursement/investment of bond proceeds. This fee is payable on the closing date.
Annual Paying Agent Administration Fee
$500
An annual charge covering the normal paying agent duties related to account administration and bondholder
services. Our pricing is based on the assumption that the bonds are DTC-eligible/book-entry only. if the bonds
are certificated or physical, then we will have to charge an additional $1000 per year as a paying agent. This
fee is payable annually, in advance.
OR
One-time, Upfront Paying Agent
Administration Fee $4,500
A one-time charge covering the normal duties and responsibilities related to account administration. This fee is
payable on the closing date.
Extraordinary Services!Misc Fees: At Appraisal
The charges for performing extraordinary or other services not contemplated at the time of the execution of the
transaction or not specifically covered elsewhere in this schedule will be commensurate with the service to be
provided and may be charged in BNYMTC's sole discretion. If it is contemplated that the Trustee hold and/or
value collateral or enter into any investment contract, forward purchase or similar or other agreement,
additional acceptance, administration and counsel review fees will be applicable to the agreement governing
such services. If the bonds are converted to certificated form, additional annual fees will be charged for any
applicable tender agent and/or registrar/paying agent services. Additional information will be provided at such
time. Should this transaction terminate prior to closing, all out-of-pocket expenses incurred, including legal
fees, will be billed at cost. If all outstanding bonds of a series are defeased or called in full prior to their
maturity, a termination fee may be assessed at that time.
These extraordinary services may include, but are not limited to, supplemental agreements, consent operations,
unusual releases, tender processing, sinking fund redemptions, failed remarketing processing, the preparation
of special or interim reports, custody of collateral, a one-time fee to be charged upon termination of an
engagement. Counsel, accountants, special agents and others will be charged at the actual amount of fees and
expenses billed, C filing fees, money market sweep fees, auditor confirmation fees, wire transfer fees,
2001 Bryan — 6" Floor Dallas, TX 75201
THE BANK OF NEW YORK MELLON
The Bank of New York Mellon Trust Company. N.A.
transaction fees to settle third -party trades and reconcilement fees to balance trust account balances to third -
party investment provider statements
Annual fees include one standard audit confirmation per year without charge. Standard audit confirmations
include the final maturity date, principal paid, principal outstanding, interest cycle, interest paid, cash and asset
information, interest rate, and asset statement information. Non-standard audit confirmation requests may be
assessed an additional fee.
Periodic tenders, sinking fund, optional or extraordinary call redemptions will be assessed at $300 per event.
The fee for non-interest bearing balances left uninvested with the Bank will be 10 basis points for the quarter,
based on quarter -end spot balance levels, in excess of $250,000 (held in the U.S. offices of the Bank).
Terms and Disclosures
Terms of Proposal
Final acceptance of the appointment under the Indenture is subject to approval of authorized officers of BNYM
and full review and execution of all documentation related hereto. Please note that if this transaction does not
close, you will be responsible for paying any expenses incurred, including Counsel Fees. We reserve the right
to terminate this offer if we do not enter into final written documents within three months from the date this
document is first transmitted to you. Fees may be subject to adjustment during the life of the engagement.
Customer Notice Required by the USA Patriot Act
To help the US government fight the funding of terrorism and money laundering activities, US Federal law
requires all financial institutions to obtain, verify, and record information that identifies each person (whether
an individual or organization) for which a relationship is established.
What this means to you: When you establish a relationship with BNY, we will ask you to provide certain
information (and documents) that will help us to identify you. We will ask for your organization's name,
physical address, tax identification or other government registration number and other information that will
help us to identify you. We may also ask for a Certificate of Incorporation or similar document or other
pertinent identifying documentation for your type of organization.
We thank you for your assistance.
2001 Bryan - 8th Floor Dallas, TX 75201
80470964.4
EXHIBIT E
DTC LETTER OF REPRESENTATIONS
E-1
Blanket Issuer Letter of Representations
rro be Cornptelect by Issuer]
City of Corpus Christi, Tx
(Nun erlover;
Attention: Underwriting Department — Eligibility
The Depository Trust Company
55 Water Street; 50th Floor
New York, NY 10041-0099
April 7, 1998
lone;
Ladies and Ceodemeo:
This letter sets forth our understanding with respect to all issues (the 'Securities) that Issuer
shall request be made eligible for deposit.by The Depository Trust Company ('DTC).
To Induce DTC to accept the Securities as eligible for deposit at DTC, and to act In accordance
with DTCs Rules with respect to the Securities. issuer represents to DTC that Issuer will comply
with the requirements stated is DTCs Operational Mrangemeats, as they may be amended fivers
time to time.
Note
Schedule A contour statements that DTC behaves
accaaatly loathe DTC, the method elan boa -
tatty binsfess of savvmtoa 3,olbotcd tbmu h UTC and
certain related rotten
Very truly yours.
City of corpus Christi, TIC
U a6mued Ofaer'enorma)
Jorge Cruz-AEDO, Direc for of Finance
Myatt' Tek)
1201 Leopard St.
Daeet Aar
Corpus Christi, TX 78401
Coat)
wel
Maw Number)
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK -ENTRY -ONLY ISSUANCE
(Prepared by DTC --bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC'), New York, NY will act as securities depository for the
securities (the 'Se auifes"). The Securities will be issued as fully -registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). One fully -registered Security certificate will be
issued for (each issue of] the Securities. [each] in the aggregate principal amount of such issue, and will
be deposited with DTC. [lf, however; the aggregate principal amount of [any] issue exceeds. $200
minion, one certificate will be issued with respect to each 3200 million of principal amount and an
additional certificate will be issued with respect to any remainingpris.dyal amotmt of such issue.]
2. DTC is a Sntited-propose taut company organized under the New York Banldng law. a "banking
organization within the meaning of the New York Bathing taw, a member of the Federal Reserve
System, a'dearing corporation wit in the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 14A of the Securities Exchange Act of
1934 DTC holds securities that its participants ('Participants') deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers and pledges, is deposited
securities through electronic computerized book -entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the New York Stock
Etcbange, Inc., the American Stock Exchange, Inc.. and the National A:sodation of Securities Dealers,
Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks,
and trust companies that clear through or maintain a camas' relationship with a Direct Participant
either directly or indirectly ('Indirect Participants'). The Rules applicable to DTC and its Participants
are on file with the Securities and Exchange Cnmmieeinn
3. Purchases of Securities under the DTC system must be made by or through Direct Participants,
which will receive a sit for the Securities on DTCl records. The ownership interest of each actual
purchaser of each Security (Beneficial Owner") is in tum to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners Will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the eraumcdon.Tnnsfers of ownership interests in the
Securities are to be accomplished by entries made on the books of Participants acting on bebaff of
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests
in Securities, exceptha the event that use of the book -entry system for the Securities is discontinued
4. To facilitate subsequent transfers, an Securities deposited by Participants with DTC are registered
in the name of DTCs partnership nominee, Cede & Co. The deposit of' Securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Securities; DTC records reflect only ire identity of
the Direct Participants to whose accounts such Securities are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
S. Conveyance of notices and other communications by DTC to Direct Participants, by Direct
participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
(6. Redemption notices shall be sent to Cede & Co. ff less than aB of the Securities within an issue are
being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Putidpantin such Issue to be redeemed)
7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual
procedures, DTC mails an Omnibus Flury to the Issuer as soon as possible after the record date.•The
Omnibus Proxy assigns Cede & consenting or voting rights to those Direct Participants to whose
amounts the Secsmities are credited on the record date (identified in a listing attached to the Omnibus
Proty).
8. Principal and interest payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on payable date in accordance with their respective holdings shown on
DTC's records unless DTC bas reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the amormes of customers in bearer forma registered in
'strut name,' and will be the responsibility of such Participant and not of DTC, the Agent, or die
Issuer. subject to any statutory or regulatory requirements as may be in effect from time to tlnie.
Payment of principal and test to DTC is the responsibility of the Issuer or the Agent, disbursement
of such payments to Direct Participants shall be the responsthility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
j9. A Beneficial Owner sbaf give notice to elect to have its Securities purchased or tendered, through
ter Participant to tie Minden/Remarketing] Agent, and shall effect delivery °Isle* Securities by causing
the Direct participant to transfer the Participant's bntcest in the Securities, on DTCes records, to the
(Tenderliternarketingl Agent The requirement for physical delivery of Securities in connection wills a
demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in
the Securities sue transferred by Direct Participants on DTC's records.] '
10. DTC may discontinue providing its services as securities depository with respect to the Securities
at any time by giving reasonable notice to the Issuer or the Agent. Under such dmurnstaaas, in the
event that a successor securities depository is not obtained, Security certificates are required to be
printed and delivered
11. The Issuer may deride to discontinue use of the system of book-entry transfers through DTC (or
a successor securities depository). In that event, Security certificates will be printed and delivered
12. The infonmdon in this section concerning DTC and DTCs book-entry system has been obtained
from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the
eccurac thereof.
80470964.4
EXHIBIT F
REIMBURSEMENT AGREEMENT
F-1
EXECUTION COPY
REIMBURSEMENT AGREEMENT
(RESERVE FUND SURETY)
This AGREEMENT (this "Agreement") is made as of April 2, 2009 by and between
ASSURED GUARANTY CORP., a Maryland insurance corporation (together with its
successors and assigns, "Assured Guaranty"), and the City of Corpus Christi, Texas, together
with its successors and assigns, the "Issuer").
WITNESSETH:
WHEREAS, the Issuer will issue the Obligations (as hereinafter defined) pursuant to the
terms of the Authorizing Resolution (as hereinafter defined);
WHEREAS, pursuant to the terms of the Financing Agreement (as hereinafter defined)
the Issuer has agreed to make certain payments with respect to the Obligations;
WHEREAS, the Issuer has requested that Assured Guaranty, subject to the terms and
conditions set forth in the Commitment, issue its Policy (as hereinafter defined) pursuant to
which Assured Guaranty will guarantee certain payments by the Issuer subject to the terms and
conditions of the Policy;
WHEREAS, as consideration for Assured Guaranty issuing the Policy, the Issuer has
agreed to (i) cause to be paid to Assured Guaranty a premium as provided in the Commitment,
(ii) reimburse Assured Guaranty for any payment made by Assured Guaranty under the Policy,
and (iii) indemnify Assured Guaranty for certain amounts as more fully set forth herein;
WHEREAS, the Issuer acknowledges and agrees that execution and delivery of this
agreement is a requirement of Assured Guaranty and an element of the consideration for issuance
of the Policy;
NOW, THEREFORE, in consideration of the premises and of the agreements herein
contained and of the execution of the Policy, the Issuer and Assured Guaranty agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Except as otherwise defined herein, the following words and
phrases shall have the following meanings:
"Agreement" shall mean this Reimbursement Agreement dated April 2, 2009 between
Assured Guaranty and the Issuer, as such agreement may be amended or supplemented.
"Assured Guaranty" shall have the meaning set forth in the first paragraph of this
Agreement.
4841-9578-7522.4
"Authorizing Resolution" shall mean the Ordinance authorizing the issuance of the
Obligations approved by the Issuer's governing body on February 24, 2009, as amended or
supplemented from time to time.
"Available Funds" shall mean the Pledged Revenues, as defined in the Authorizing
Resolution.
"Bond Purchase Agreement" shall mean the Bond Purchase Agreement dated as of
March 13, 2009 by and between the Issuer and the Underwriter's named herein.
"Commitment" shall mean the commitment of Assured Guaranty to issue the Policy dated
March 9, 2009.
"Continuing Disclosure Agreement" shall mean the continuing disclosure undertaking of'
the Issuer included in the Authorizing Resolution.
"Debt Service Payments" shall mean those payments required to be made by or on behalf
of the Issuer, which will be applied to payment of principal of and interest on the Obligations.
"Demand for Payment" shall mean the certificate submitted to Assured Guaranty for
payment under the Policy substantially in the form attached to the Policy.
"Event of Default" shall have the meaning given that term in Section 5.01 hereof.
"Financing Documents" shall mean the Authorizing Resolution, the Bond Purchase
Agreement, this Agreement, and the Continuing Disclosure Agreement as such documents are
amended from time to time.
"Global Requirement Amount" shall have the meaning ascribed to such term as set forth
in the Authorizing Resolution, but only as such term relates to the Obligations.
"Obligations" shall mean the $96,490,000 City of Corpus Christi, Texas Utility System
Revenue Improvement Bonds, Series 2009.
"Official Statement" shall mean the Official Statement dated March 13, 2009 relating to
the Obligations.
"Owners" shall mean the registered owner of any Obligation as indicated in the books
maintained by the Paying Agent for such purpose.
"Paying Agent" shall mean The Bank of New York Mellon Trust Company, N.A., or any
successor thereto.
"Policy" shall mean financial guaranty insurance policy no. D-2009-378 issued by
Assured Guaranty guaranteeing, subject to the terms and limitations thereof, the Debt Service
Payments.
2
"Policy Coverage" shall mean the amount available at any particular time to be paid
under the terms of the Policy, which amount shall never exceed the Policy Limit.
"Policy Limit" shall mean the Reserve Account Requirement, provided that such amount
shall not exceed the amount set forth in the Policy.
"Policy Payment" shall mean an amount equal to the Debt Service Payment required to
be made by the Issuer pursuant to the Authorizing Resolution less (i) that portion of the Debt
Service Payment paid by or on behalf of the Issuer, and (ii) other funds legally available for
payment to the Owners, all as certified in a Demand for Payment.
"Reimbursement Rate" shall mean the lesser of the per annum rate of interest (i), publicly
announced from time to time by JP Morgan Chase Bank, National Association at its principal
office in New York, New York as its prime lending rate (any change in such prime rate of
interest to be effective on the date such change is announced by JP Morgan Chase Bank,
National Association) plus three percent (3%) per annum and (ii) the maximum rate of interest
permitted to be charged pursuant to Chapter 1204, as amended, Texas Government Code. The
Reimbursement Rate shall be calculated on the basis of the actual number of days elapsed over a
360 -day year. In the event JP Morgan Chase Bank ceases to announce its prime rate publicly,
the prime rate shall be the publicly announced prime rate or base lending rate of such national
bank as Assured Guaranty shall specify.
"Reserve Account Requirement" shall have the meaning ascribed to such term as set forth
in the Authorizing Resolution, but only as such term relates to the Obligations.
"State" shall mean the State of Texas.
Section 1.02. Generic Terms. The term "hereof' or "herein" unless otherwise modified
by more specific reference, shall refer to this Agreement. Unless otherwise specified, the term
"Article" or "Section" shall refer to an Article or Section of this Agreement.
ARTICLE II
THE POLICY
Section 2.01. The Policy. Assured Guaranty will issue the Policy in accordance with
and subject to the terms and conditions of the Commitment. The maximum liability of Assured
Guaranty under the Policy and the coverage and term thereof shall be subject to and limited by
the terms and conditions of the Policy.
Section 2.02. Premium. In consideration of Assured Guaranty agreeing to issue the
Policy, the Issuer hereby agrees to cause to be paid to Assured Guaranty the premium set forth in
the Commitment. The premium on the Policy is not refundable for any reason.
Section 2.03. Policy Limit. Payments under the Policy will reduce the Policy Coverage
to the extent of such payment.
3
Section 2.04. Settlement. Assured Guaranty shall have the exclusive right to settle and
determine any claim, liability, suit or judgment relating to the Policy. Any such decision by
Assured Guaranty shall be final and binding upon the Issuer for all purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Due Organization and Qualification. The Issuer is municipal
corporation and political subdivision of the State
Section 3.02. Power and Authority. The Issuer has full corporate power and authority
to execute and deliver this Agreement and the Financing Documents. The execution and
delivery of this Agreement and the Financing Documents have been duly authorized by the
Issuer, and all necessary approvals for the execution, delivery and performance of this
Agreement and the Financing Documents have been obtained by the Issuer.
Section 3.03. Non -contravention. The execution and delivery of this Agreement and the
Financing Documents, the consummation of the transactions contemplated by this Agreement
and the Financing Documents, and the fulfillment of or compliance with the terms and
conditions of this Agreement and the Financing Documents, does not conflict with or result in
any breach or violation of any of the terms, conditions or provisions of any applicable laws,
including regulations, or any material agreement, organizational document or instrument to
which it is now a party or by which it is bound, or constitute a default under any of the foregoing
which breach or default would materially and adversely affect the consummation of the
transactions contemplated by this Agreement.
Section 3.04. Conditions Required for Delivery of the Policy. The Issuer shall provide
or cause to be provided to Assured Guaranty prior to the issuance of the Policy (i) conformed
copies of this Agreement and the Financing Documents, (ii) certifications of the Issuer, as
requested by Assured Guaranty, if any, and (iii) such opinions of legal counsel to the Issuer
evidencing necessary or appropriate corporate action taken by the Issuer, and such other
documents as may reasonably be requested by Assured Guaranty (including documents
evidencing any required approvals of the transactions contemplated by this Agreement and the
Financing Documents).
ARTICLE IV
REIMBURSEMENT; INDEMNIFICATION; PAYMENTS
Section 4.01. Reimbursement for Payments Under the Policy and Expenses;
Indemnification; Payment.
(a) The Issuer will reimburse Assured Guaranty, from Available Funds,
without demand or notice by Assured Guaranty to the Issuer, or any other person, to the
extent of each Policy Payment with interest on each Policy Payment from and including
the date made to the date of the reimbursement at the lesser of the Reimbursement Rate
4
or the maximum rate of interest permitted by then applicable law. Such reimbursement
shall be made not later than 12 months after any Policy Payment.
(b) The Issuer will pay all other amounts required to be paid to Assured
Guaranty pursuant to the terms of this Agreement or in connection with the transactions
contemplated by the Financing Documents, this Agreement, or the Policy, from Available
Funds, within five business days of receipt of written notice from Assured Guaranty of
the amounts so owed.
(c) The Issuer will pay or reimburse Assured Guaranty, to the extent
permitted by law, and solely from Available Funds, any and all charges, fees, costs,
losses, liabilities and expenses which Assured Guaranty in fact pays or incurs, including,
but not limited to, fees and expenses of attorneys, accountants, consultants and auditors
and reasonable costs of investigations, in connection with (i) any accounts established to
facilitate payments under the Policy, (ii) the administration, enforcement, defense or
preservation of any rights in respect of this Agreement or any Financing Document
including defending, monitoring or participating in any litigation or proceeding
(including any bankruptcy proceeding in respect of the Issuer, or any affiliate thereof)
relating to this Agreement or any other Financing Document, any party to this Agreement
or any other Financing Document or the transaction contemplated by the Financing
Documents, (iii) the foreclosure against, sale or other disposition of any collateral
securing any obligations under this Agreement or any other Financing Document, if any,
or the pursuit of any remedies under any other Financing Document, to the extent such
costs and expenses are not recovered from such foreclosure, sale or other disposition, (iv)
any amendment, waiver or other action with respect to, or related to this Agreement, the
Policy or any other Financing Document whether or not executed or completed, or (v)
any action taken by Assured Guaranty to cure a default or termination or similar event (or
to mitigate the effect thereof) under any Financing Document; costs and expenses shall
include a reasonable allocation of compensation and overhead attributable to time of
employees of Assured Guaranty spent in connection with the actions described in clauses
(ii) -(v) above. Assured Guaranty reserves the right to charge a reasonable fee as a
condition to executing any amendment, waiver or consent proposed in respect of this
Agreement or any other Financing Document.
(d) The Issuer will pay interest on the amounts owed in clauses (a), (b), and
(c), of this Section 4.01 from the date of any payment due or paid as described in clauses
(a) or (c), and from the date of receipt of written notice from Assured Guaranty, as
provided in clause (b), in each case at the Reimbursement Rate. If the interest provisions
of this clause (d) shall result in an effective rate of interest which, for any period, exceeds
the limit of the usury or any other laws applicable to the indebtedness created herein
(which includes clause (ii) of the definition of Reimbursement Rate), then all sums in
excess of those lawfully collectible as interest for the period in question shall, without
further agreement or notice between or by any party hereto, be applied as additional
interest for any later periods of time when amounts are outstanding hereunder to the
extent that interest otherwise due hereunder for such periods plus such additional interest
would not exceed the limit of the usury or such other laws, and any excess shall be
applied upon principal immediately upon receipt of such moneys by Assured Guaranty,
with the same force and effect as if the Issuer had specifically designated such extra sums
to be so applied and Assured Guaranty had agreed to accept such extra payment(s) as
additional interest for such later periods. In no event shall any agreed -to or actual
exaction as consideration for the indebtedness created herein exceed the limits imposed
or provided by the law applicable to this transaction for the use or detention of money or
for forbearance in seeking its collection.
Section 4.02. Allocation of Payments. Assured Guaranty and the Issuer hereby agree
that each payment received by Assured Guaranty from or on behalf of the Issuer as a
reimbursement to Assured Guaranty as required by Section 4.01 hereof shall be applied by
Assured Guaranty as follows: (i) first, toward repayment of the aggregate Policy Payments made
by Assured Guaranty and not yet repaid; payment of which will reinstate all or a portion of the
Policy Coverage to the extent of such repayment (but not to exceed the Policy Limit), and (ii)
second, upon reinstatement of the Policy Coverage to the Policy Limit, toward other amounts as
determined by Assured Guaranty in its sole discretion, including, without limitation, any interest
payable with respect to any Policy Payments then due to Assured Guaranty.
Section 4.03. Security for Payments. To the extent, but only to the extent, that, the
Authorizing Resolution or any other Financing Document or related indenture, trust agreement,
ordinance, resolution, mortgage, security agreement or any similar instrument, if any, pledges to
the Issuer, the Owners or any trustee therefore or to any holder of any other obligations of the
Issuer secured on a parity basis with the Obligations, or grants a security interest or lien in or on
any collateral, property, revenue or other payments ("Collateral and Revenues") in order to
secure the Obligations or such parity obligations or provide a source of payment for the
Obligations or such parity obligations, the Issuer hereby grants to Assured Guaranty a security
interest in or lien on, as the case may be, and pledges to Assured Guaranty all such Collateral and
Revenues as security for payment of all amounts due hereunder, under the Authorizing
Resolution and under any other Financing Document, (A) which security interest, lien and/or
pledge created or granted under this Section 4.03 shall be subordinate only to (i) the interests of
the Owners or owners of such parity obligations and any trustee therefor in such Collateral and
Revenues, and (ii) the interests of any grantee of any other previously granted security interest
in, lien on and/or pledge of such Collateral and Revenue, and (B) which security interest, lien
and/or pledge created or granted under this Section 4.03 shall be on a parity with any security
interest in, lien on and/or pledge of such Collateral and Revenue hereafter granted to any
provider of any letter of credit, surety bond or financial guaranty insurance policy issued to fund
a reserve account to the reserve requirement with respect to any parity obligations hereafter
issued pursuant to the Authorizing Resolution. The Issuer agrees that it will, from time to time,
execute, acknowledge and deliver any instruments as may be necessary or appropriate as shall be
requested by Assured Guaranty to perfect or protect the security interests granted hereby.
Section 4.04. Payments. All payments made to Assured Guaranty under this
Agreement shall be paid in lawful currency of the United States in immediately available funds
to Assured Guaranty Corp., 1325 Avenue of the Americas, New York, New York 10019,
Attention: Accounting Department, or at such other place as shall be designated by Assured
Guaranty.
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Section 4.05. Unconditional Obligation. The obligations of the Issuer to pay all
amounts due under this Agreement shall be an absolute and unconditional obligation of the
Issuer and will be paid or performed strictly in accordance with this Agreement, irrespective of:
(a) (i) any lack of validity or enforceability of or any amendment or other
modifications of, or waiver with respect to the Obligations or any Financing Document,
or (ii) any amendment or other modification of, or waiver with respect to the Policy;
(b) any exchange, release or non -perfection of any security interest in
property securing the Obligations, this Agreement or any Financing Documents;
(c) whether or not such Obligations are contingent or matured, disputed or
undisputed, liquidated or unliquidated;
(d) any amendment, modification or waiver of or any consent to departure
from this Agreement, the Policy or all or any of the Financing Documents;
(e) the existence of any claim, setoff, defense (other than the defense of
payment in full), reduction, abatement or other right which the Issuer may have at any
time against the Paying Agent or any other person or entity other than Assured Guaranty,
whether in connection with this Agreement, the transactions contemplated herein or in
the Financing Documents or any unrelated transactions;
(f) any statement or any other document presented under or in connection
with the Policy or the Commitment proving in any and all respects invalid, inaccurate,
insufficient, fraudulent or forged or any statement therein being untrue or inaccurate in
any respect; or
(g) any payment by Assured Guaranty under the Policy against presentation of
a certificate or other document which does not strictly comply with the terms of the
Policy.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The following events shall constitute Events of
Default hereunder:
(a) The Issuer shall fail to pay to Assured Guaranty any amount payable under
Article IV hereof; or
(b) Any representation or warranty made by the Issuer hereunder or under the
Financing Documents or in any report, certificate, financial statement or other instrument
provided in connection with the Commitment, the Policy or this Agreement shall have
been or is untrue in any material respect; or
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(c) Except as otherwise provided in this Section 5.01, the Issuer shall fail to
perform any of its other obligations hereunder or under any other Financing Document;
or
(d) The occurrence and continuation of an event of default under any
Financing Document; or
(e) The Issuer shall (i) voluntarily commence any proceeding or file any
petition seeking relief under the United States Bankruptcy Code or any other Federal,
state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of; or
fail to controvert in a timely and appropriate manner, any such proceeding or the filing of
any such petition, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for such party or for a substantial part of its
property, (iv) file an answer admitting the material allegations of a petition fled against it
in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its inability or fail generally to pay its debts as they
become due or (vii) take action for the purpose of effecting any of the foregoing; or
(f) An involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Issuer,
or of a substantial part of its property, under the United States Bankruptcy Code or any
other Federal, state or foreign bankruptcy, insolvency or similar law or (ii) the
appointment of a receiver, trustee, custodian, sequestrator or similar official for the Issuer
or for a substantial part of its property, and such proceeding or petition shall continue
undismissed for sixty (60) days or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for thirty (30) days.
Section 5.02. Remedies. Whenever an Event of Default referred to in Section 5.01
hereof shall have happened and be continuing, Assured Guaranty may take whatever action at
law or in equity as may appear necessary or desirable in Assured Guaranty's judgment to collect
the amounts then due and thereafter to become due hereunder or to enforce performance of any
obligation of the Issuer to Assured Guaranty hereunder or under any Financing Document.
Section 5.03. No Remedy Exclusive. Unless otherwise expressly provided, no remedy
herein conferred upon or reserved to Assured Guaranty is intended to be exclusive of any other
available remedy, but each remedy shall be cumulative and shall be in addition to other remedies
given under this Agreement or any Financing Document or existing at law or in equity. No delay
or failure to exercise any right or power occurring under this Agreement or any Financing
Document upon the happening of any Event of Default set forth in Section 5.01 hereof or an
event of default under any Financing Document shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient.
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ARTICLE VI
MISCELLANEOUS
Section 6.01. Interest Computations. All computations of premium, interest and fees
due hereunder shall be made on the basis of the actual number of days elapsed over a year of 360
days.
Section 6.02. Exercise of Rights. No failure or delay on the part of Assured Guaranty
to exercise any right, power or privilege under this Agreement and no course of dealing between
Assured Guaranty and the Issuer or any other party shall operate as a waiver of any such right,
power or privilege, nor shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein expressly provided are cumulative and not exclusive
of any rights or remedies which Assured Guaranty would otherwise have pursuant to law or
equity. No notice to or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances, or constitute a waiver of the right of
the other party to any other or further action in any circumstances without notice or demand.
Section 6.03. Amendments and Waivers. This Agreement may only be amended,
modified, waived, supplemented, discharged or terminated only by written instruments signed by
the parties hereto. The Issuer hereby agrees that Assured Guaranty may issue a substitute or
replacement for the Policy to cure any ambiguity or omission in the Policy which does not
materially change the terms of the Policy nor adversely affect the rights of the Owners, and this
Agreement shall apply to such substituted Policy. So long as the Policy is in effect, the Issuer
agrees not to amend or supplement any Financing Document so as to adversely affect the rights
of Assured Guaranty without the prior written consent of Assured Guaranty.
Section 6.04. Successors and Assigns; Descriptive Headings.
(a) This Agreement shall bind, and the benefits thereof shall inure to, the
Issuer and Assured Guaranty and their respective successors and assigns; provided, that
the Issuer may not transfer or assign any or all of its rights and obligations hereunder
without the prior written consent of Assured Guaranty.
(b) The descriptive headings of the various provisions of this Agreement are
inserted for convenience of reference only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
Section 6.05. Waiver. The Issuer waives any defense that this Agreement was executed
subsequent to the date of the Policy, admitting and covenanting that such Policy was executed
pursuant to their request and in reliance on their promise to execute this Agreement.
Section 6.06. Notices, Requests, Demands. Except as otherwise expressly provided
herein, all written notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been given or made when actually received, or in the case
of telex or telecopier notice sent over a telex or a telecopier machine owned or operated by a
9
party hereto, when sent, addressed as specified below or at such other address as any of the
parties may hereafter specified in writing to the others:
If to the Issuer:
If to Assured Guaranty:
City of Corpus Christi, Texas
1201 Leopard Street
Corpus Christi, Texas 78401-2120
Attention: City Attorney
Facsimile No.: (361) 826-3239
Telephone No.: (361) 826-3360
Assured Guaranty Corp
1325 Avenue of the Americas
New York, New York 10019
Attention: Risk Management, Public Finance
Surveillance
Facsimile No.: (212) 581-3268
Telephone No.: (212) 974-0100
E-mail: RiskManagementDept@assuredguaranty.com
Policy No.: D-2009-379
(in each case in which notice or other communication to Assured Guaranty refers to an
event of default, a claim on the Policy or any other event with respect to which failure on
the part of Assured Guaranty to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication shall also be sent to the
attention of the General Counsel via facsimile at facsimile number (212) 581-3268 and
shall be marked to indicate "URGENT MATERIAL ENCLOSED").
Section 6.07. Survival of Representations and Warranties. All representations,
warranties and obligations contained herein shall survive the execution and delivery of this
Agreement and the Policy.
Section 6.08. Governing Law. THIS AGREEMENT AND ANY DISPUTES OR
CONTROVERIES ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW, WITHOUT
REGARD TO CHOICE OF LAW RULES.
Section 6.09. Consent to Jurisdiction. To the extent permitted by applicable law, the
parties hereto shall not seek and hereby waive the right to any review of the judgment of any
such court by any court of any other nation or jurisdiction which may be called upon to grant an
enforcement of such judgment.
Section 6.10. Counterparts. This Agreement may be executed in counterparts by the
parties hereto and such counterparts shall constitute one and the same instrument, each of which
shall be deemed to be an original instrument.
Section 6.11. Further Assurances. Assured Guaranty and the Issuer agree that they
will, from time to time, execute, acknowledge and deliver, or cause to be executed,
10
acknowledged and delivered, such supplements hereto (including any financing statements, if
applicable) and such further instruments as may be required by law or as shall reasonably be
requested by Assured Guaranty for carrying out the intention of or facilitating the performance of
this Agreement.
Section 6.12. Severability. In the event any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such
holding shall not invalidate or make unenforceable any other provision hereof. The parties
hereto further agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.
Section 6.13. Survival of Obligations. Notwithstanding anything to the contrary
contained in this Agreement, the obligation of the Issuer to pay all amounts due hereunder and
the rights of Assured Guaranty to pursue all remedies shall survive the expiration, termination or
substitution of the Policy and this Agreement.
Section 6.14. Information and Reporting. The Issuer covenants to provide to Assured
Guaranty, promptly upon request, any information regarding the Obligations, the Financing
Documents or the financial condition and operations of the Issuer as reasonably requested by
Assured Guaranty.
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IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
tog')
Approved as to form:
Lisa Agw
Assistant ttorney
C*tv-A
For City Attomey
12
CITY OF CORPUS CHRISTI, TEXAS
By: C-e—vt 0 ' -vim
Name: Cindy O%Brien
Title: Interim Assistant City Manager of
Administrative Services
ASSURED GUARANTY CORP.
By:
Name: John Trahan
Title: Managing Director
IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
CITY OF CORPUS CHRISTI, TEXAS
By:
Name: Constance P. Sanchez
Title: Interim Director of Financial Services
ASSURED GUARANTY CORP.
B
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John Trahan
Managing Director
EXHIBIT G
DESCRIPTION OF ANNUAL FINANCIAL INFORMATION
The following information is referred to in Section 32 of this Ordinance.
Annual Financial Statements and Operating Data
The financial information and operating data with respect to the City to be provided
annually in accordance with such Section for each Year ending in and after 2009 are as specified
(and included in the Appendix or under the headings of the Official Statement referred to) below:
Tables 1 through 25 contained in the Official Statement; and the Audited Financial
Statement of the City, as set forth in Appendix B to the Official Statement.
Accounting Principles
The accounting principles referred to in such Section are the accounting principles
described in the notes to the financial statements referred to above.
80470964.4
G-1