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03 Prelim. Official Statement roposed Date 08-07-01 08-10-0f 08-10-01 08-14-01 08-16-01 08-17-01 08-17-01 08-20-01 08-21-01 08-24-01 08-27-01 08-31-01 09-04-01 09-18-01 09-26-01 CITY OF PARIS, TEXAS $6,000,000 TAX AND REVENUE REFUNDING BONDS, SERIES 2001 Schedule of Events AUG 1,5 2001 CITY A'i'TO~ PAl/IS, TEXA~ Action SWS Securities (SWS) submission of Official Statement Request for Information (RFI) to District officials. SWS receives completed RFI and related issue documents from the District Commence preparation of initial Preliminary Official Statement (POS) and Notice of Sale (NOS) Submit initial draft of POS/NOS to all parties for review SWS receives comments on POS from all parties Mail POS/NOS to Moody's and bond insurance companies Release POS/NOS for printing and distribution to potential bidders SWS to order CUSIP numbers, arrange for Parity bidding and post POS/NOS to SWS website Send Information to the Municipal Advisory Council for ~ublication in Bond Reporter Calendar and Conditions of Scheduled Sales Receive Moody's bond rating and notices of qualification for insurance Special Council meeting to open bids and adopt the Ordinance authorizing the issuance of the Bonds '7/)~ Submit transcript of proceedings to Attorney General for approval Print and distribute Final Official Statement SWS to notifiJ all parties of closing/delivery instructions Payment for and delivery of the Bonds August 10, 2001 NEW ISSUE-BOOK-ENTRY-ONLY Ratings: Moody's:" (See 'BOND INSURANCE' and "OTHER PERTINENT INFORMATION -Ratings" herein) PRELIMINARY OFFICIAL STATEMENT Dated: August 17, 2001 In the opinion of Bond Counsel. interest on the Bonds will be excludable from gross income for federal income tax purposes under statutes, regulations, published rulings, and court decisions existing on the date hereof, subject to the matters described under 'TAX MA TTERS~ herein, including the alternative minimum tax on corporations.) The City has desiqnated the Bonds as 'Qua#fied Tax-Exempt Obtiqations" See ~TAX MATTERS - Qualified Tax-Exempt Obligations for Institutions" herein. $5,190,000' CITY OF PARIS, TEXAS (Lamar County) TAX AND REVENUE REFUNDING BONDS SERIES 2001 Dated Date: September 15, 1998 Due: December 15, as shown below Th~ ~.R '1~{3 (30(3* CRv of Pars tthe 'City" or 'Issuer'') Texas Tax and Revenue Refunding Bonds, Series 2001 (the "Bonds") are _r _.;,__v, ..... _. ' ' ' · " ent being issued pursuant to the Constitut on and general laws of the State of Texas (the State ), mclud~ng V.T.C.A. Governm Code, Chapters 1207 and 1331, as amended, the City's Home Rule Charter and an ordinance adopted by the City Council (the 'Ordinance"). (See"THE BONDS -Authority for Issuance" herein.) The Bonds are direct and general obligations of the issuer payable from an annual ad valorem tax levied against all taxable prope~bJ in the City, within the lira. ts prescr bed by law, and further secured, by a pledge of.surplus net revenues_ derived, frOmentthe- operat on of the Issuer s combined Waterworks and Sewer System (the System). (See THE BONDS Security for Paym herein.) nterest on the Bonds will accrue from the dated date as shown above and will be payable June 15 and December 15 of each year, commenc ng June 15 2002, and w be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Bonds will be issued as fully registered ob igat ons in bookz~ntry.f, orm only and when issued will be registered in the name of Cede. & Co., as nominee of.The Depos tory Trust Company ( DTC ) New York New York. OTC will act as securities depository (the Securities Depository ). Book-entry nterests n the Bonds will be made available f.or purchase in the principal amount of $5,000 or any integra mu t p e thereof. Purchasers of the Bonds ("Beneficial Owners ) will not receive physical delivery of cert ficates representing their interest in the Bonds purchased. So long as DTC or its nominee is the registered owner of the Bonds the pr nc pa of and nterest on the Bonds will be payable by The Bank of New York, New York, New York, as Paying Agent/Registrar to ...... the Securities Depository, wh ch w n turn remit such principal and interest to its Participants, which.will in turn remit such pnnclpal and nterest to the Beneficial Owners ofthe Bonds. (See BOOK-ENTRY-ONLY SYSTEM heramn.) Proceeds from the sale of the Bonds, together with a cash contribution from the City, are being used to refund the 2001 through 2011 maturities of the City's Tax and Revenue Refunding Bonds, Series 1991 to achieve debt service savings, and to pay the cost of issuance of the Bonds. (See 'PLAN OF FINANCING - Purpose' herein.) The ssuer reserves the right at ts so e opt on to redeem the Bonds maturing on and after December 15, 2010, on December 15 2009, or any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, at the re~iemption price of par plus accrued interest as further described herein. (See "THE BONDS - Redemption Provisions" herein.) Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be issued by Financial Guaranty Insurance Company ("Financial Guaranty") concurrently with the delivery of the Bonds~ See "BOND INSURANCE" herein. ~ Financial Guaranty In~surance F~C. Company Stated Principal Rate Maturity Amoun~ (%) 2002 $435,000 2003 450,000 2004 465,000 2005 485,000 STATED MATURITY SCHEDULE* (Due December 15) Yield Stated (%) Maturity 2007 2008 2009 2010 Principal Rate Yield Amoun~ (%) (%) $525,000 545,000 565,000 595,000 2006 505,000 2011 620,000 The Bonds are offered for del/very, when. as and if issued and received by the initiel purchasers (the ~Purchasers") and subje, ct to tho approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by McCall, Par~<hurst & Herren L.L.P., Bond Counsel. Dallas. Texas. The legal opinion of Bond Counsel will be printed on. or attached to, the Bonds. Certain matters will be passed upon for the Underwdter by .. Dallas. Texas, as counsel to the Underwriter. It is expected that the Bonds will be available for de~/ve~y through DTC on or about September 26.200t FIRST SOUTHWEST COMPANY Preliminary, subject to change CITY OF PARIS, TEXAS 135 First Street SE Pads, Texas 75460 (903) 785-7511 Name Michael J. Pilaster Richard Manning John F. Bell John Carter Kevln gray Joe Mccarthy Benny Plata ELECTED OFFICIALS Date First Date Term Title Elected (May) Expires (May) Mayor 1999 2003 Mayor Pro Tern 1999 2003 Council Member 1999 2003 Council Member 2000 2002 Council Member 1998 2002 Council Member 2000 2002 Council Member 2000 2002 ADMINISTRATION Occupation Electrician Machinist Real Estate Developer Optometrist Manufacturing Products Worker Manufacturing Products Supervisor Manufacturing Maintenance Worker Length of Service Name Position With the City Michael E. Malone City Manager 14 yrs W. E. Anderson Director of Finance 16 yrs Larry Schenk City Attorney 1.5 yrs Mattie Cunningham City Clerk 26 yrs Bond Counsel Financial Advisor Independent Auditor CONSULTANTS AND ADVISORS McCall, Parkhurst & Horton, L.L.P. Dallas, Texas SWS Securities, Inc. Dallas, Texas McClanahan and Holmes, PLLC Pads, Texas For Additional Information Please Contact: W.E. Anderson Director of Finance City of Pads, Texas 135 First Street SE Paris, Texas 75460 (903) 785-7511 (ext 241) Mr. Dan Almon Senior V~ce President SWS Securities, Inc. 1201 Elm Street, Suite 3500 Dallas, Texas 75270 (214) 859-9452 (Phone) 2 USE OF iNFORMATION IN THE OFFICIAL STATEMENT For purposes of compliance with Rule 15c2-12 of the Securities Exchange Commissi,o,n (!.he "Rule"), this document constitutes a preliminan/official statement of the issuer with respect to the Bonds that has been deemed final by the Issuer as of its date except for the omission of no more than the information permittedby the Rule. No dealer broker salesman, or other person has been authorized to give any information, or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Issuer. This Official Statement ~s 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 soli~:itation i~ .not qualified to do so or to any person to whom it is unlawfut to make such offer or so icitat on Any nformafion or expression of oplmon herein contained are sub ec~ to change without notice, and neither the de ivery of this Offic a Statement nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the ssuer or other matters described herein since the date hereof. THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH APPLICABLE SECURIT~ES LAW PROVISIONS OF THE JURiSDICTiONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, iF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. TABLE OF CONTENTS ELECTED OFFICIALS ............................................................. 2 ADMINISTRATION ................................................................... 2 CONSULTANTS AND ADVISORS ........................................... 2 USE OF INFORMATION iN THE OFFICIAL STATEMENT......3 TABLE OF CONTENTS ........................................................... 3 SELECTED DATA FROM THE OFFICIAL STATEMENT ......... 4 INTRODUCTORY STATEMENT .............................................. 5 PLAN OF FINANCING ............................................................. 5 Purpose ........................................................................... 5 Refunded Bonds .............................................................. 5 THE BONDS ............................................................................. 5 General Description ......................................................... 5 Authority for Issuance ...................................................... 6 Security for Payment ....................................................... 6 Redemption Provisions .................................................... 6 Limitation on Transfer or Exchange of Bonds .................. 7 Payment Record .............................................................. 7 Leoality ............................................................................ 7 De'~easance ...................................................................... 7 Default and Remedies ..................................................... 7 REGISTRATION, TRANSFER AND EXCHANGE .................... 8 Paying Agent/Registrar .................................................... 8 Record Date ..................................................................... 8 Future Registration .......................................................... 8 Limitation on Transferability ............................................. 8 Replacement Bonds ........................................................ 9 BOND INSURANCE ................................................................. 9 BOOK-ENTRY-ONLY SYSTEM ...............................................9 Use of Cer[ain Terms in Other Sections of this Official Statement ................................................................... 11 THE SYSTEM ......................................................................... 11 Water Supply ................................................................. 11 Water Treatment ........................................ ; ................... 11 Water Storage and Distribution ...................................... 11 Sewer Facilities .............................................................. 12 INVESTMENT POLICIES ....................................................... 12 Investment Authority and Policies .................................. 12 Legal Investments .......................................................... 12 investment Strategy ....................................................... 12 Investment Reports ........................................................ 13 Authorized / Suitable Investments ................................. 13 Schedule of Refunded Bonds Financial information of the Issuer Current Investments ...................................................... 13 RETIREMENT PLANS ........................................................... 14 Texas Mu,nic~al Retirement System ............................. 14 Firefighter s ~elief and Retirement Fund ....................... 14 AD VALOREM TAX PROCEDURES ...................................... 15 Property Tax Code and Countywide Appraisal District.. 15 Property Subject to Taxation by the Issuer .................... 15 Effective Tax Rate and Rollback Tax Rate .................... 16 Levy and Collection of Taxes ........................................ 16 Penalties and Interest .................................................... 16 Tax Rate Limitations ...................................................... 17 Issuer's Rights in the Event of Tax Delinquencies ........ 17 CITY APPLICATION OF THE PROPERTY TAX CODE ........ 17 ADDITIONAL TAX COLLECTIONS ........................................ 18 Municipal Sales Tax Collections .................................... 18 Optional Sales Tax ........................................................ 18 TAX MATTERS ...................................................................... 18 Opinion .......................................................................... 18 Collateral Federal Income Tax Consequences ............. 18 Federal income Tax Accounting Treatment of Original Issue Discount ............................................................ 19 Qualified Tax-Exempt Obligations ................................. 20 State, Local and Foreign Taxes ..................................... 20 CONTINUING DISCLOSURE OF INFORMATION ................ 20 Annual Reports .............................................................. 20 Material Event Notices ................................................... 21 Availability of Information from NRMSIR, MSRB and SID ....................................................................... 21 Limitations and Amendments ........................................ 21 Compliance with Prior ~reements ............................... 21 OTHER P_RIIRENT IRFOR...ATION ................................... 2.1 Legal Mattor$ ................................................................. 2'1 Registration and Qualification of Bonds for Sale ........... 22 Litigation ........................................................................ 22 Legal Investments and Eligibility to Secure Public Funds in Texas ........................................................... 22 Ratings .......................................................................... 22 Financial Advisor ........................................................... 22 Underwriting.. .................................................................. 23 Concluding~tatement ................................................... 23 General Information Regarding the City of Pads and Lamar County, Texas Form of Legal Opinion of Bond Counsel The Issuer's General Purpose Audited Financial Statements for the Year Ended September 30, 2000 Municipal Bond Insurance Specimen Schedule I Appendix A Appendix B Appendix C Appendix D Appendix E The cover page, subsequent pages hereof and appendices attached hereto, are part of this Official Statement. 3 SELECTED DATA FROM THE OFFICIAL STATEMENT The selected data is subject in all respects to the more complete information and definitions contained or incoq~orated in this Official Statement. The offedng of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this page from this Official Statement or to othe/wise use it without the entire Ofiicial Statement. The Issuer The City of Paris, Texas (the "City" or UlssueK') is located in Lamar County and is the County seat and principal commemial center of the County. The City operates under a Council/Manager form of government, with the City Council comprised of seven members including the Mayor. All seven Council members are elected by district for two-year staggered terms. (See Appendix B - "General Information Regarding the City of Paris and Lamar County, Texas" herein.) The Bonds The Bonds are being issued pursuant to the Constitution and general laws of the State of Texas (the "State"), V.T.C.A. Government Code, Chapters 1207 and 1331, as amended, the City's Home Rule Charter and an ordinance adopted by the City Council (the "Ordinance"). (See "THE BONDS - Authority for Issuance" herein.) Security for Payment The Bonds are direct and general obligations of the issuer payable from an annual ad valorem tax levied against all taxable property in the City1 within the limits prescribed by law, and further secured by a pledge of surplus net ~evenues derived from the operation of the Issuer's combined Waterworks and Sewer System (the "System), (See "THE BONDS - Security for Payment" herein.) Paying AgentJRegistrar The initial Paying Agent/Registrar is The Bank of New York, New York, New York. Redemption Provisions of The Issuer reserves the right at its sole option to redeem the Bonds maturing on and the Bonds after December 15, 2010, on December 15, 2009, or any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, at the redemption price of par plus accrued interest as further described herein. (See "THE BONDS - Redemption Provisions" herein.) Tax Matters in the opinion of Bond Counsel, the interest on the Bonds will be excludable from gross income for federal tax purposes under statutes, regulations, published rulings and court decisions existing on the date thereof, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. (See "TAX MATTERS" and "Appendix C - Form of Opinion of Bond Counsel" herein.) Qualified Tax-Exempt The Issuer will designate the Bonds as "Qualified Tax-Exempt Obligations" for financial Obligations institutions. (See "TAX MATTERS - Qualified Tax-Exempt Obligations" herein.) Use of Bond Proceeds Proceeds from the sale of the Bonds, together with a cash contribution from the City are being used to refund the 2001 through 2011 maturities of the City's Tax and Revenue Refunding Bonds, Sedes 1991 to achieve debt service savings, and to pay the cost of issuance of the Bonds. (See "PLAN OF FINANCING - Purpose" herein.) Bond Insurance Payment of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be issued by Financial Guaranty Insurance Company ("Financial Guaranty") concurrently with the delivery of the Bonds. See "BOND INSURANCE" herein. Book-Entry-Only System The Issuer intends to utilize the Book-Entry-Only System of The Depository Trust Company, New York, New York relating to the method and timing of payment and the method and transfer relating to the Bonds. (See *BOOK-ENTRY-ONLY SYSTEM" herein.) Ratings it is anticipated that Moody's Investors Service, Inc. ("Moody's") will assigned a rating of "Aaa" to the Bonds with the understanding that, concurrently with the delivery of the Bonds, a municipal bond insurance policy will be issued by Financial Guaranty Insurance Company. The City currentJy has an underlying Moody's rating of "A2" on its general obligation debt and the City has made applications for an underlying on the Sedes 2001 bonds. (See "BOND INSURANCE" and "OTHER PERTINENT INFORMATION - Ratings" herein.) Payment Record The City has never defaulted. Delivery When issued, anticipated on or about September 26, 2001. Legality Delivery of the Bonds is subject to the approval by the Attorney General of the State of Texas and the rendering of an opinion as to legality by McCall, Parkhuret & Horton, L.L.P., Bond Counsel, Dallas, Texas. 4 INTRODUCTORY STATEMENT This Official Statement provides certain information in connect[on with the issuance by the City of Paris, Texas (the ~City" or ~lssuer") of its $5,190,000' Tax and Revenue Refunding Bonds, Series 2001 (the 'Bonds") identified on the cover page hereof. The Issuer is a political subdivision of the State of Texas (the "State") and operates under the statutes and the Constitution of the State of Texas and the Issuer's Home Rule Charter. The Bonds are being issued pursuant to the Constitution and general laws of the State, including V.T.C.A., Government Code, Chapters 1207 and 1331, as amended, the City's Home Rule Charter and an ordinance (the "Ordinance") adopted by the City Council, (See "THE BONDS - Authority for Issuance" herein.) Unless otherwise indicated, capitalized terms used in this Official Statement have the same meanings assigned to such terms in the Ordinance. Included in this Official Statement are descriptions of the Bonds and certain information about the Issuer and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE QUALIFIED IN THEIR ENTIRETY BY REPERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be obtained from the Issuer or the Financial Advisor. PLAN OF FINANCING Purpose The proceeds of the Bonds, together with a cash contribution from the City, ara being used to refund the 2001 through 2011 maturities of the City's Tax and Revenue Refunding Bonds, Series 1991 (the "Refunded Bonds") in order to achieve debt service savings (see "Schedule I - Schedule of Refunded Bonds') and to pay the costs of issuance for the Bonds. Refunded Bonds The Refunded Bonds, and interest due thereon, are to be paid from funds deposited with The Bank of New York, New York, New York (the "Escrow Agent") or its successor. The Ordinance approves and authorizes the execution of an escrow agreement (the "Escrow Agreement") between the Issuer and the Escrow Agent. The Ordinance further provides that, from a portion of the proceeds of the sale of the Bonds and other lawfully available funds of the Issuer, if any, the Issuer will deposit with the Escrow Agent the amount sufficient to accomplish the discharge and final payment of the Refunded Bonds. Such amount will be held by the Escrow Agent in an escrow account (the "Escrow Fund") and used to purchase direct obligations of the United States of America (the "Escrowed Securities"). By the deposit of the Escrowed Securities and cash with the Escrow Agent pursuant to the Escrow Agraement, the City will have effected the defeasance of the Refunded Bonds pursuant to the terms of V.T.C.A.. Government Code, Chapters 1207 and 1331, as amended, and the Ordinance authorizing the issuance of the Refunded Bonds, It is the opinion of Bond Counsel that, as a result of such defeasance, the Refunded Bonds will no longer be deemed outstanding obligations under the ordinances authorizing their issuance, but will be payable solely from the funds and Escrowed Securities deposited in escrow and will not be considered debt of the City for purposes of taxation or applying any limitation on the city's ability to issue debt or for any other purpose. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of additional funds in the amount required to pay the principal of and interest on the Refunded Bonds should, for any reason, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund be insufficient to make such payments. THE BONDS General Description The Bonds will be dated September 15, 2001. The Bonds are stated to mature on December 15 in the years and in the principal amounts set forth on the cover page heraof. The Bonds shall bear interest from their dated date on the unpaid principal amounts, and the amount of interest to be paid each payment period shall be computed on the basis of a 360-day year of twelve 30-day months. Interast on the Bonds will be payable on June 15 and December 15 of each year commencing June 15, 2002, Principal is payable at maturity, upon presentation and surrender of the Bonds, at the designated office of the Paying Agent/Registrar, initially The Bank of New York, New York, New York, or its successor, interest on the Bonds is payable to the ragistered owner on the Record Date (as defined herein) appearing on the registration and transfer books of the Paying Agent/Registrar and shall be paid by check mailed on or before each interest payment date by the Paying Agent/Registrar to the address appearing on the Paying Agent/Registrar's books or by such other method acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the registered owner. The bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof for any one stated maturity. · Preliminary, subject to change 5 If the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the Paying Agent/Registrar is located are authorized to close or the United States Post Office is not open for business, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. Initially. the Bonds will be registered and delivered only to Cede & Co., the nominee of The Depositor,/Trust Company ("DTC") pursuant to the Book-Entry-Only System described below. No physical delivery of the Bonds will be made to the beneficial owners. Principal of, premium, if any. and interest on the Bonds will be payable by the Paying Agent/Registrar to Cede & Co.. which will distribute the amounts paid to the participating members of DTC for subsequent payment to the beneficial owners of the Bonds. See "BOOK-ENTRY-ONLY SYSTEM' below for a more complete description of such system. Authority for Issuance The Bonds are being issued pursuant to the Constitution and general laws of the State, including V.T.C.A., Government Code, Chapters 1207 and 1331, as amended, the City's Home Rule Charter and the Ordinance. Security for Payment The Bonds are direct and general obligations of the City payable from an annual ad valorem tax levied against all taxable property in the City, within the limits prescribed by law, and further secured by a and pledge of surplus net revenues derived from the operation of the City's combined Waterworks and Sewer System (the "System). Redemption Provisions The Issuer reserves the right, at its sole option, to redeem the Bonds maturing on and after December 15, 2010, on December 15, 2009, or any date thereafter, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and, if within a stated maturity, selected at random and by lot by the Paying Agent/Registrar), at the par value thereof plus accrued interest to the date fixed for redemption. The election of the Issuer to redeem Bonds, identifying the stated maturity or maturities and the amount thereof to be redeemed, shall be entered in the minutes of the City Council, and a copy thereof shall be delivered to the Paying Agent/Registrar, If less than all of the Bonds within a stated maturity are to be redeemed, the particular Bonds to be redeemed shall be selected at random and by lot by the Paying Agent/Registrar. if less than all of the Bonds subject to redemption are to be redeemed, the City shall determine the amounts of each maturity or maturities to be redeemed and shall direct the Paying Agent/Registrar to select by lot the Bonds, or portions thereof, within such maturity or maturities to be redeemed. Not less than thirty (30) days prior to a redemption date for the Bonds, the City shall cause a notice of such redemption to be sent by United States mail, first-class postage prepaid, to the registered owners of each Bond or a portion thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar on the day such notice of redemption is mailed. ANY NOTICE OF REDEMPTION SO MAILED TO THE REGISTERED OWNERS WiLL BE DEEMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER ONE OR MORE OF THE REGISTERED OWNERS FAILED TO RECEIVE SUCH NOTICE. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Bonds or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Bonds or portion thereof which are to be redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. 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 Order or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any DTC participant or indirect participant to notify the beneficial owner, will 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 by the Issuer 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 Order and will not be conducted by the Issuer or the Paying Agent/Registrar. Neither the Issuer 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.) Limitation on Transfer or Exchange of Bonds The Paying AgentJRegistrar is not required to transfer or exchange any Bond during the period commencing with the close of business on any Record Date immediately preceding a principal or interest payment date for such Bonds and ending with the opening of business on the next following principal or interest payment date; or with respect to any Bond or portion calted for redemption prior to maturity, within 30 days pdor to its redemption date. Payment Record The City has never defaulted on the payment of its general obligation or revenue indebtedness. Legality The Bonds are offered when, as and if issued,'subject to the approval by the Attorney General of the State of Texas and the rendering of an opinion as to legality by McCall, Parkhurst & Horton L,L.P., Dallas, Texas. The legal opinion of Bond Counsel will accompany the global Bonds to be deposited with DTC or will be printed on the Bonds should the Book-Entry-Only System be discontinued. A form of the legal opinion of Bond Counsel appears in Appendix C attached hereto. The Ordinance provides for the defeasance of the Bonds when the payment of the principal of and premium, if any, on the Bonds, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent, in trust (1) money sufficient to make such payment or (2) Defeasance Securities, to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment, of sufficient money to make such payment, and all necessary and proper fees, compensation and expenses of the paying agent for the Bonds. The Ordinance provides that "Defeasance Securities" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United Sates of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (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 ara rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent. The City has additionally reserved the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Defeasance Securities for the Defeasance Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the City moneys in excess of the amount required for such defeasance. Upon such deposit as described above, such Bonds shall no longer be regarded to be outstanding or unpaid. 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 proceeding providing for the firm banking and financial arrangements, expressly reserves the right to call the Bonds for redemption; (ii) gives notice of the reservation of that right to the owners of the Bonds immediately fotlowing the making of the firm banking and financial arrangements; and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Default and Remedies If the Issuer defaults in the payment of the principal of or interest on any of the Bonds when due or defaults in the observance or performance of any of the covenants, conditions, or obligations set forth in the Ordinance, any registered owner is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the Issuer to make such payment or observance and perform such covenant, obligations, or condition. Such right is in addition to any other rights the registered owners of the Bonds may be provided by the laws of the State of Texas. The Ordinance does not specifically provide for the appointment of a trustee to protect and enforce the interests of the registered owners or for acceleration of the stated maturities of the Bonds in the event of default. Consequently, the remedy of mandamus may have to be relied upon from year to year. Under Texas law, no judgment obtained against the Issuer may be enforced by direct levy and execution against the Issuer's property. Further, the registered owners of the Bonds may not themselves foreclose on taxable property within the issuer to collect any unpaid taxes to pay the principal of and interest on the Bonds. The enforceability of the rights and remedies of the registered owners may be further limited by laws relating to bankruptcy, reorganization, or other similar laws of general application affecting the dghts of creditors of political subdivisions such as the Issuer. Specifically, during the pendency of a bankruptcy proceeding the remedy for mandamus may not be available unless authorized by the bankruptcy judge. REGISTRATION, TRANSFER AND EXCHANGE Paying Agent/Registrar The initial Paying Agent/Registrar is The Bank of New York, New York, New York. In the Ordinance, the Issuer retains the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the Issuer, 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 at the sole discretion of the Issuer, shall be a national or state banking institution, trust company or other entity authorized to serve as a Paying Agent/Registrar. Upon a change in the Paying Agent/Registrar for the Bonds, the Issuer agrees to promptly cause written notice thereof to be sent to each ragisterad owner of the Bonds by United States mail, first-class, postage prepaid. The Bonds will be issued in fully registered form in multiples of $5,000 for any one stated maturity, and principal and semiannual interest will be paid by the Paying Agent/Registrar. interest will be paid by check or draft mailed on each interest payment date by the Paying Agent/Registrar to the registered owner at the last known address as it appears on the Paying Agent/Registrar's books or by such other method, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the registered owner. Principal will be paid to the registered owner at stated matudty upon presentation to the Paying Agent/Registrar. if the date for the payment of the principal of or interest on the Bonds shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the Paying Agent/Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. Record Data The record date ("Record Date") for interest payable to the registered owner of a Bond on any interest payment date means the last business day of the month next preceding such 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 from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the "Special Payment Date" which shall be 15 days after the Special Record Date) shall be sent at least five 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 registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Future Registration The Bonds are initially to be issued utilizing the Book-Entry. Only System of the Depository Trust Company, New York, New York. In the event such Book-Entry-Only System should be discontinued, printed certificates will be delivered to the holders of the Bonds and thereafter the Bonds may be transferred, registered, and assigned on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A Bond may be assigned by the execution of an assignment form on the Bond or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Bond or Bonds will be delivered by the Paying Agent/Registrar in lieu of the Bonds being transferred or exchanged at the designated office of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner at the registered owner's request, risk and expense. New Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the registered owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Bonds registered and delivered in an exchange or transfer shall be in denominations of $5,000 for any one stated maturity or any integral multiple thereof and for a like aggregate principal amount and rate of interest as the Bond or Bonds surrendered for exchange or transfer. (See "BOOK- ENTRY-ONLY SYSTEM" herein for a description of the system to be initially utilized in regard to ownership and transferability of the Bonds.) Limitation on Transferability Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Bond called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Bond. Replacement Bonds In the Ordinance, provision is made for the replacement of mutilated, destroyed, lost, or stolen Bonds upon surrender of the mutilated Bonds to the Paying Agent/Registrar, or the receipt of satisfactory evidence of destruction, loss, or theft, and the receipt by the Issuer and Paying Agent/Registrar of security or indemnity as may be required by either of them to hold them harmless. The Issuer may require payment of taxes, governmental charges, and other expenses in connection with any such replacement. BONDINSURANCE Concurrently with the issuance of the Bonds, Financial Guaranty Insurance Company* ("Financial Guaranty") will issue its Municipal Bond New Issue Insurance Policy for the Bonds (the "Policy"). The Policy unconditionally guarantees the payment of that portion of the principal [(or accreted value in the case of capital appreciation bonds)] of and interest on the Bonds which has become due for payment, but shall be unpaid by reason of nonpayment by the issuer of the Bonds (the "Issuer"). Financial Guaranty will make such payments to State Street Bank and Trust Company, N.A., or its successor as its agent (the "Fiscal Agent"), on the later of the date on which such principal [(or accreted value in the case of capital appreciation bonds)] and interest is due or on the business day next following the day on which Financial Guaranty shall have received telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from an owner of Bonds or the Paying Agent of the nonpayment of such amount by the Issuer. The Fiscal Agent will disburse such amount due on any Bond to its owner upon receipt by the Fiscal Agent of evidence satisfactory to the Fiscal Agent of the owner's right to receive payment of the principal [(or accreted value in the case of capital appreciation bonds)] and interest due for payment and evidence, including any appropriate instruments of assignment, that all of such owner's dghts to payment of such principal [(or accreted value in the case of capital appreciation bonds)] and interest shall be vested in Financial Guaranty. The term "nonpayment" in respect of a Bond includes any payment of principal [(or accreted value in the case of capital appreciation bonds)] or interest made to an owner of a Bond which has been recovered from such owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with a final, nonappea[able order of a court having competent jurisdiction. The Policy is non-cancellable and the premium will be fully paid at the time of delivery of the Bonds. The Policy covers failure to pay principal [(or accreted value in the case of capital appreciation bonds)] of the Bonds on their respective stated matudty dates or dates on which the same shall have been duly called for mandatory sinking fund redemption, and not on any other date on which the Bonds may have been otherwise called for redemption, accelerated or advanced in maturity, and covers the failure to pay an installment of interest on the stated date for its payment. This Official Statement contains a section regarding the ratings assigned to the Bonds and reference should be made to such section for a discussion of such ratings and the basis for their assignment to the Bonds. Reference should be made to the description of the Issuer for a discussion of the ratings, if any, assigned to such entity's outstanding parity debt that is not secured by credit enhancement. The Policy is not covered by the Property/Casualty Insurance Security Fund specified in Article 76 of the New York Insurance Law. Financial Guaranty is a wholly-owned subsidiary of FCIC Corporation (the "Corporation"), a Delaware holding company. The Corporation is a subsidiary of General Electric Capital Corporation ("GE Capital"). Neither the Corporation nor GE Capital is obligated to pay the debts of or the claims against Financial Guaranty. Financial Guaranty is a monoline financial guaranty insurer domiciled in the State of New York and subject to regulation by the State of New York insurance Department. As of March 31, 2001, the total capital and surplus of Financial Guaranty was approximately $1.132 billion. Financial Guaranty prepares financial statements on the basis of both statutory accounting principles and generally accepted accounting principles. Copies of such financial statements may be obtained by writing to Financial Guaranty at 115 Broadway, New York, New York 10006, Attention: Communications Department (telephone number: 212-312-3000) or to the New York State Insurance Department at 25 Beaver Street, New York, New York 10004-2319, Attention: Financial Condition Property/Casualty Bureau (telephone number: 212-480-5187). BOOK-ENTRY-ONLY SYSTEM The Depository Trust Company ("DTC"), New York, New York, 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). One fully-registered security will be issued for each matudty of the Bonds, as set forth on the cover page hereof, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC 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 securities that its participants (~Parficipants") deposit with DTC. DTC also 9 facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electrenic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities Bonds. 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 Exchange, Inc., the American Stock Exchange, Inc., and the National Association 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 custodial 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 Commission. 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 confirmations from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as pedodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's par[nership nominee, Cede & Co. The deposit of the Bonds 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 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 Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct participants, by Direct Participants to Indirect Participants, and by Direct Participants and thdirect 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 shall be sent to Cede & Co. 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 issue to be redeemed. Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the omnibus Proxy). Principal and interest payments on the Bonds will be made to 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 has 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 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 AgentJRegistrar or the issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the Issuer, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect tot he Bonds at any time by giving reasonable notice to the Issuer or the Paying agent/Registrar. Under such circumstance, in the event that a successor securities depository is not obtained, printed certificates for the Bonds or both are required to be furnished and delivered. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository) for the Bonds. In that event, printed certificates for the Bonds will be furnished and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer and the Underwriters take no responsibility for the accuracy thereof. Information conceming DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the Issuer or the Underwriters. So long as Cede & Co. is the registered owner of the Bonds, the Issuer will have no obligation or responsibility to the DTC Participants or indirect Participants, or the persons for which they act as nominees, with respect to payment to or providing of notice to such Participants, or the persons for which they act as nominees. 10 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, notices that are to be given to registered owners under the Bond Ordinance wilt be given only to DTC. THE SYSTEM The City's waterworks and sewer systems (the "System") are described below. Water Supply The City's water supply consists entirely of surface water supplied from two lakes (Lake Crook and Pat Mayse Lake) near the City. The City also owns a third lake, Lake Gibbons, which is used only for recreation. Lake Crook, which is owned by the City, is located on Pine Ceek approximately 3.5 miles northwest of the City. This lake was built in 1922-23 and is still used for water supply. Pat Mayse was built in 1964 and is 9.5 miles northwest of the City. Lake Crook is adjacent to the water treatment plant and has a surface area of 890 acres at over-flow with an estimated storage capacity of 6,800 acre-feet. Under an agreement entered into with the Army Corps of Engineers on January 14, 1965 and amended on June 15, 1978, the City acquired the conservation storage right to utilize 100 percent of the storage space in the project known as Lake Pat Mayse on Sanders Creek. This total storage space is estimated to contain 109,600 acre-feet or 43,800 acre-feet of present water supply and 65,800 acre-feet designated as future water supply. The interest rate set forth for the payments by the City on both the present supply contracts and the future supply is 3.137% per annum. Payments by the City at the present for the 43,800 acre-feet of present water supply are $49,826 annually. These payments began April 1, 1978 and continue until April 1, 2019; and from April 1, 2020 to April 1, 2027, the payments are reduced to $25,211 per year. Payments of interest on the future water supply began to accrue against the City at the end of the 10 year interest free period on September 30, 1977. The City has allowed the interest to accrue and compound as added costs to the project. The initial allocation of costs of the project for this future supply was $1,925,722. A total of $1,686,321 in interest is estimated to have been accumulated at May 31, 1998 (See Notes to the Financial Statements - IV.A. in Appendix D). It is estimated that by the year 2000, the annual interest on the accumulated amount will average an effective interest rate of 6.38% on the original cost allocation, Present City officials estimate that when the compounded interest reaches a point where funds can be obtained in the open market at a rate less than the compounded rate on this project that the City will begin making its interest payments on an annual basis. In addition to the payments for the City's water supply under this agreement, the City is obligated to pay 9.46% of the operations and maintenance costs and 4.22% of the major replacement costs of the project. The City's portion of these costs presently range from $30,000 to $35,000 per year. The City has established a reserve fund (the "Pat Mayse Reserve Fund") into which it I making payments to accrue against the interest accrual for the future supply an to make the payments for the maintenance and operations payments the City is required to pay. At May 31, 1998, this Pat Mayse Reserve Fund contained the sum of $1,726,917. Payments made hereunder constitute operating expenses of the System. Water Treatment Water filtration capacity is provided by one water treatment plant with a present capacity of 36 million gallons per day nominal capacity. Present average daily use is 12.8 million gallons. Water Storage and Distribution Storage facilities are composed of two elevated storage tanks (a 0.5 million gallon tank and a 1.0 million gallon tank); three ground storage tanks (two 2.0 million gallon tanks and one 4.0 million gallon tank) and two booster pump stations; and two clear wells (a 2.0 million gallon well and a 0.5 million gallon well at the Water Treatment Plant). Total storage is 11.5 million gallons, of which approximately 8.5 million gallons is usable. At the present average daily flow of 12.8 million gallons daily (MDG), this would give the City about 16 hours of supply until dry. This time frame is reduced if fire protection reserves are maintained. Water is distributed from the 8.0 million gallon ground storage facility using two booster pump stations with a total of six pumps through approximately 190 miles of waterlines of various types and sizes, all with attendant valves, hydrants, and meters to approximately 10,000 connections. 11 Sewer Facilities Sewer treatment is provided by one wastewater treatment plant with a permitted capacity of 7.25 million gallons per day and 9,9 million gallons per day peak capacity. Present average daily flow is approximately 4.7 million gallons, Peak flows are controlled by use of flow equalization basins. Peak flows using this method have been controlled to approximately 8.6 million gallons per day. The sewer collection system is composed of approximately 190 miles of collection lines with approximately 10,000 connections (taps) onto the system and 18 pumping stations. All pumping stations are equipped with a state-of-the-art computerized alarm and data acquisition system. The master pumping stations is considered part of the treatment plant and has alarms that connect directly to the plant. INVESTMENT POLICIES The City invests funds in instruments authorized by Texas law in accordance with investment policies approved by the Council of the City. Both state law and the City's investment policies are subject to change. Investment Authority and Policies The Issuer invests its investable funds in securities and investments prescribed by the Texas Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended (the "investment Act"). The Investment Act requires that the Issuer establish an investment policy to ensure that Issuer funds are invested only in accordance with State law. The Issuer's investments are managed by its Assistant City Manger / Director of Finance, who reports to the City Council. The Investment Act requires that investments be made with judgment and care, under prevailing circumstances that a person of prudence, discretion and intelligence would exercise in the management of his or her own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. The investment Act requires that investment policies be written, that they primarily emphasize safety of principal and liquidity, and that they address investment diversification, yield and maturity and the quality and capability of investment management. The Issuer's investment policies meet these criteria. Unless otherwise authorized by law, a person may not deposit, withdraw, invest, transfer, or manage in any other manner entity funds without express written authority of the governing body, chief executive officer, or chief financial officer of the investing entity. Legal Investments The Investment Act and other state laws provides that political subdivisions in the State may invest in (i) obligations of the United States or its agencies and instrumentalities, (ii) direct obligations of the State or its agencies, (iii) other obligations unconditionally guaranteed or insured by or backed by the full faith and credit of the State, the United States or its agencies and instrumentalities, (iv) obligations of states and political subdivisions of any state which are rated as to investment quality at least "A" or its equivalent, (v) certificates of deposit issued by state and national banks or savings and loan associations domiciled in the State, (vi) prime domestic banker's acceptances, (vii) commemial paper with a stated maturity of 270 days or less that meets certain rating criteria, (viii) fully collateral[zed repurchase agreements having a defined termination date which are secured by obligations described in clause (i) that are pledged to the issuer and deposited with a third party, (ix) no load money market mutual funds which are regulated by the Federal Securities and Exchange Commission with a dollar weighted average stated maturity of 90 days or less and whose objectives include seeking to maintain a stable asset value of $1.00 per share and (x) an eligible public funds investment pool, (xi) obligations issued, assumed, or guaranteed by the State of Israel, and (xii) a qualified common trust fund or comparable investment device that is owned or administered by a Texas-domiciled bank and consists exclusively of obligations described above. The Issuer may invest in such obligations directly or through government investment pools that invest solely in such obligations. Investment Strategy It is the policy of the City of Paris to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity and conforming to all state and local statutes governing the investment of public funds. Investment strategies for operating funds have as their primary objective to assure that anticipated flows are matched with adequate investment liquidity. The secondary objective is to create a portfolio structure which will experience minimal volatility during economic cycles. This may be accomplished by purchasing high quality, short to medium securities which will complement each other in a laddered maturity structure. The dollar weighted average maturity target will be 365 days or less. investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Securities pumhased shall not have a stated final maturity which exceeds the debt service payment date. 12 Investment strategies for debt service reserve funds shall have as the pdmary objective the ability to generate a dependable revenue stream to the appropriate debt service fund from securities with a Iow degree of volatility. Securities should be of high quality and consistent with bond ordinance requirements. Short to medium maturities generally meet these requirements. Investment strategies for special projects or specie[ purpose funds will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of securities held should not exceed the estimated project or purpose completion date. Investment Reports Not less than quarterly, the investment officer shall prepare and submit to the governing body of the entity a written report of investment transactions for all funds for the preceding reporting period. The report must: (1) describe in detail the investment position of the entity on the date of the report; (2) be prepared jointly by all investment officers of the entity; (3) be signed by each investment officer of the entity; (4) contain a summary of each pooled fund group that states the: beginning market value for the reporting period; additions and changes to the market value dudng the pedod; and ending market value for the pedod; (5) state the book value and market value separately of each invested asset at the beginning and end of the reporting pedod by the type of asset and fund type invested; (6) state the maturity date of each separately invested asset that has a maturity date; (7) state the account or fund or pooled group fund for which each individual investment was acquired; and (8) state the compliance of the investment portfolio government as it relates to: (al the investment strategy expressed in the investment policy; and (bi relevant provisions of the state law. The report shall be presented not less than quarterly to the governing body and the chief executive officer of the entity within a reasonable time after the end of the period. Authorized I Suitable Investments The City is empowered by statute to invest in the Types of securities authorized by Chapter 2256 of the Government Code. Current Investments As of June 30, 2001, the Issuer's funds were invested as shown on the following page. State law does not require the Issuer to periodically mark its investments to market price, and the Issuer does not do so, other than annually upon the conclusion of each fiscal year, for the purpose of compliance with applicable accounting policies concerning the contents of the Issuer's audited financial statements. Given the nature of its investments, the Issuer does not believe that the market value of its investments differ materially from book value. The Issuer's Current Investments as of June 30, 2001 are as follows: Fund and Investment Type Certificate of Obliqation 1993 Interest & Sinking Fund Federal National Mortgage Association General Fund Account Federal National Mortgage Association Federal Home Loan Mortgage Corporation Government National Mortgage Association Interest & Sinking Fund 1997 Federal National Mortgage Association Pat Mayse Dam Reserve Fund Federal Home Loan Mortgage Corporation Federal National Mortgage Association Government National Mortgage Association Federal Home Loan Bank Refundinq Bonds interest & Sinkinq Fund Federal National Mortgage Association Tax & Revenue CO's 2000 Interest & Sinkinq Fund Federal National Mortgage Association Percentage Amount of Portfolio 195,000.00 1.19% 566,328.53 3.45% 143,208.08 0.87% 423,997.48 2.59% 258,000.00 1.57% 1,647,933.90 10.05% 172,387.44 1.05% 937.39 0.01% 25,427.90 0.16% 370,000.00 2.26% 299,000.00 1.82% 13 Current investments Continued: Fund and Investment Tvl3e Water Contract Fund Federal Home Loan Mortgage Corporation Water & Sewer Continqency Fund Federal Home Loan Mortgage Corporation Federal National Mortgage Association Water & Sewer Interest & Sinking 1992 Federal National Mortgage Association Water & Sewer interest & Sinkinq 1994 Federal National Mortgage Association Water & Sewer Interest & Sinking 2000 Federal National Mortgage Association Water & Sewer Revenue Bonds Reserve Fund (Series 1992} Federal Home Loan Mortgage Corporation Government National Mortgage Association II Federal National Mortgage Association Water & Sewer Revenue 2000 Construction Fund Federal National Mortgage Association Federal Home Loan Mortgage Corporation Government National Mortgage Association Il Tax & Revenue CO's 2000 Construction Fund Federal National Mortgage Association Federal Home Loan Mortgage Corporation Percentage Amount of Portfolio 323,387.58 1.97% 540,089.04 3.29% 95,907.86 0.58% 261,000.00 1.59% 187,000.00 1.14% 50,000.00 0.30% 125,288.25 0.76% 9,833.81 0.06% 1,287,843.57 7.85% 2,564,333.90 15.64% 3,329,286.46 20.30% 269,132.45 1.64% 1,378,200.60 8.40% 1,874,418.08 11.43% $16,397,942.33 100.00% RETIREMENT PLANS Texas Municipal Retirement System The City provides pension benefits for all of its full-time employees through a nontraditional, joint contributory, defined contribution plan in the state-wide Texas Municipal Retirement System (TMRS), one of over 731 administered by TMRS, an agent multiple-employer public employee retirement system. The City employees also participate in the U.S. Social Security program. Benefits depend upon the sum of the employees' contributions to the plan, with interest, and the city-financed monetary credits, with interest. Members can retire at ages 60 and above with 10 or more years of service or with 20 or more years of service regardless of age. A member is vested after 10 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. The contribution rate for employee members is 5%, and the City's matching ratio is currently two to one, both as adopted by the governing body of the city. The City's contributions for fiscal year 1999 were based on an annual covered payroll of $8,904,790. Both the city and the covered employees made the required contributions, for an annual pension cost for fiscal year 1999 of $797,758. Firefighter~s Relief and Retirement Fund The Paris Firefighter's Relief and Retirement Fund, a single-employer defined benefit pension plan, is established under the authority of the Texas Local flrefighter's Retirement Act. All active flrefighters of the City of Paris, Texas, are covered by the fund. A member is eligible for service retirement on either (a) the date that the member has both attained age 55 and completed 20 years of service or (b) the date as of which the sum of the member's age and years of service first equals 82, provided the member has completed 20 years of service. 14 The City contributes ten percent of each member's total pay including regular, longevity, and overtime pay but excluding lump sum distribution for unused sick leave or vacation). Fund members contribute to the fund at a rate of nine percent of pay. The City's annual required contribution to the plan for fiscal year 2000 was based on a payroll of $1,909,354 and amounted to $199,937. Covered employees made contributions of $ 171,843. For more complete information regarding the City's retirement plans, see Note IV-G, pages 32-38 of the Notes to the City's 2000 General Purpose Financial Statements contained herein as Appendix E. ADVALOREM TAX PROCEDURES Property Tax Code and Countywide Appraisal District The Texas Property Tax Code (the "Code") provides for countywide appraisal and equalization of taxable property values and establishes in each county of the State an appraisal district and an appraisal review board responsible for appraising property for all taxable units within the county. The Lamar County Appraisal District (the "Appraisal District") is responsible for appraising property within the City, generally, as of January I of each year. Excluding agricultural and open-space land, which may be taxed on the basis of productive capacity, the Appraisal District is required under the Property Tax Code to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any assessment ratios. In determining market value of property, different methods of appraisal may be used, including the cost method of appraisal, the income method of appraisal and market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property, or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. The appraisal values set by the Appraisal District are subject to review and change by the Appraisal Review Board (the "Appraisal Review Board") consisting of three members, which are appointed by the Board of Directors of the Appraisal District. Such appraisal rolls, as approved by the Appraisal Review Board, are used by the City in establishing its tax roll and tax rate. The Appraisal District is required to review the value of property within the Appraisal District al least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Property Subject to Taxation by the Issuer Reference is made to the V.T.C.A., Property Tax Cede, for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes, Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open-space lands at productivity value, and the exemption of certain personal property from ad valorem taxation. Homestead Exemptions: Under Section l-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant: (1) an exemption of not less than $3,000 of market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision; (2) an exemption of up to 20% of the market value of residence homesteads. The minimum exemption under this provision is $5,000. In the case of residence homestead exemptions granted under Section l-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. Disabled/Deceased Veterans Exemption: State law and Section 2, Article VHI, mandate an addltional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. Agricultural/Open-Land Exemption: Article VIII provides that eligible owners of both agricultural land (Section l-d) and open- space land (Section 1-d-1), including open-space land devoted to farm or ranch purposes or open-space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness Personal Property Exemption: Nonbusiness personal property, such as automobiles or light trucks, is exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. 15 Freeport Exemption: Article VIII, Section 1-], provides for ~freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Tax Increment Financinq Zone and Tax Abatements: The City and other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creatlon of the zone. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City, in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. Effective Tax Rate and Rollback Tax Rate By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tax rate". The City Council may not adopt a tax rate that exceeds the prior year's levy until it has held a public hearing on the proposed increase following notice to the taxpayers and otherwise complied with the Property Tax Code. Beginning January 1, 2000, the Property Tax Code was amended to provide that the City Council shall be prohibited from adopting a tax rate that exceeds the lower of the rollback tax rate of 108 percent (%) of the effective tax rate until a public hearing is held on the proposed tax rate following a notice of such public hearing (including the requirement that notice be posted on the City's website if the City owns, operates or controls an internet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. ~Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. ~Roltback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that wil{ produce this year's debt service from this year's values (unadjusted) divided by the anticipated tax collection rate. Reference is made to the Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. Levy and Collection of Taxes The Issuer is responsible for the levy and collection of its taxes unless it elects to transfer such functions to another governmental entity. Property within the City is generally assessed as of January 1 of each year based upon the valuation of property within the City as of the preceding January 1. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Oil and gas reserves are assessed on the basis of a valuation process, which uses an average of the daily price of oil and gas for the pdor year. Taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following year. The Tax Code makes provision for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February 1 of each year and final installment due on August 1. Penalties and Interest Charges for penalty and interest On the unpaid balance of delinquent taxes are made as follows: Month Penalty Interest Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July(a) 12 6 18 After July, penalty remains at 12% and interest increases at the rate of 1% each month, in addition, if an account is delinquent in July, a 15% attomey's collection fee is added to the total tax penalty and interest charge. Under ce~fain circumstances, taxes, which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. 16 In genera[, property subject to the City's lien may be so[d, in whole or in parcels, pumuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to proper~y and obtaining secured creditor status un[ess, in either case, an order lifting the stay is obtained from the bankruptcy court. [n many cases post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court, The Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), enacted on August 9, 1989, contains certain provisions which affect the time for protesting proper~y valuations, the fixing of tax liens and the collection of penalties and interest on delinquent taxes on real property owned by the FDIC and the RTC. Under FIRREA, real property held by the FDIC or RTC is still subject to ad valorem taxation, but (i) no real property of the FDIC or RTC is subject to foreclosure or sale without the consent of the FDIC or RTC and no involuntary lien will attach to such property, (ii) the FDiC or RTC is not liable for any penalties or fines, including those arising from the failure to pay any real property tax when due and (iii) notwithstanding the failure of a person to challenge an appraisal in accordance with State law, such value will be determined as of the period for which such tax is imposed. Tax Rate Limitations Imposed by Article Xl, Section 5 of the Texas Constitution applicable to cities of more than 5,000 population: $2.50 per $100 assessed valuation. The City operates under a Home Rule Charter, which adopts the Constitutional provisions. Issuer's Rights in the Event of Tax Delinquencies Taxes levied by the Issuer are a persona[ obligation of the owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and each local taxing unit, including the Issuer, having power to tax the property. The Issuer's tax lien is on a parity with tax liens of such other taxing units. A tax lien on rea[ proper~y takes priority over the claim of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien; however, whether a lien of the United States is on a parity with or takes priority over a tax lien of the Issuer is determined by applicable federal law. Personal property, under certain circumstances, is subject to seizure and sale for the payment of delinquent taxes, penalty, and interest. At any time after taxes on property become delinquent, the Issuer may file suit to foreclose the lien securing payment of the tax, to enforce persona[ liability for the tax, or both. In filing a suit to foreclose a tax lien on rea[ property, the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem property within two (2) years after the purchaser's deed issued at the foreclosure sale is filed in the City records) or by bankruptcy proceedings which restrict the collection of taxpayer debts. Federal bankruptcy law provides that an automatic stay of actions by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order liffdng the stay is obtained from the bankruptcy court. In many cases, post- petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF THE PROPERTY TAX CODE The City grants an exemption of $17,000 to the market value of the residence homestead of persons 65 years of age or older and the disabled. See Appendix A - Table 10 for a listing of the amounts of these exemptions. The City does not grant an additional exemption of 20% of the market value of residence homesteads, minimum exemption of $5,000. The City taxes only business persona[ property. The City does not permit split payments and does not allow discounts, The City currently grants the freeport exemption. Pursuant to City action taken on December 11, 1989, the City elected not to continue to tax Article VIII, Section 1-j (~freeport") exempt property. 17 The City has entered into abatement agreements with the following companies and has adopted criteria therefor, which is a prerequisite to the execution of abatement agreements. Additional information concerning the City's abatement policy and agreements may be obtained from the City. Company Name Abatement Abatement Beqinninq Date Expiration Date Paris Warehouse 107 Lamar Power Partners, LP Campbell Soup Company (PACE) Turner International Piping The Earthgrains Company 1-1-99 12-31-03 1-1-99 12-31-05 1-1-00 12-31-06 1-1-00 12-31-06 1-1-01 12-31-07 ADDITIONAL TAX COLLECTIONS Municipal Sales Tax Collections The City has adopted the provisions of Article 1065c, Section 9, Vernon's Texas Civil Statutes, which provides for the maximum levy of a one percent sales tax which may be used by the City for any lawful purpose except that the City may not pledge any of the anticipated sales tax revenue to secure the payment of obligations or other indebtedness. Net collections on a calendar year basis are shown in Table 15 of Appendix A. Optional Sales Tax The Tax Code provides certain cities and counties the option of assessing a maximum one-half percent (1/2%) sales tax on retail sates of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the amount of the estimated sales tax revenues to be generated in the current year. Further the Tax Code provides certain cities the option of assessing a maximum one-half percent (I/2%) sales tax on retail sa[es of taxable items for economic development purposes, if approved by a majority of the voters in a local option election. On registered voters of the City approved the imposition of a %% additional sales tax for property tax reduction and a ¼% additional sales tax for economic development purposes, Levy of the additional sales taxes began on October 1, 1993, and the City received its first payment in December 1993. TAX MATTERS Opinion On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel, will render their opinion that, in accordance with statutes, regulations, published rulings and court decisions existing on the date thereof, (1) interest on the Bonds for federal income tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not be treated as "specified private activity bonds" the interest on which would be included as an alternative minimum tax preference item under Section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax consequences of the purchase, ownership or disposition of the Bonds. (See Appendix C - "Form of Legal Opinion of Bond Counsel ~ herein.) in rendering their opinion, Bond Counsel will rely upon (a) the Issuer's federal tax certificate, and (b) covenants of the Issuer with respect to arbitrage, the application of the proceeds to be received from the issuance and sale of the Bonds and certain other matters. Failure of the Issuer to comply with these representations or covenants could cause the interest on the Bonds to become includable in gross income retroactively to the date of issuance of the Bonds. The law upon which Bond Counsel has based their opinion is subject to change by the United States Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the purchase, ownership or disposition of the Bonds. Collateral Federal Income Tax Consequences The following discussion is a summary of certain collateral federal income tax consequences resulting from the purchase, ownership or disposition of the Bonds, This discussion is based on existing statutes, regulations, published rulings and court decisions, all of which are subject to change or modification, retroactively. 18 The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as financial institutions, property and casualty insurance companies, life insurance companies, owners of an interest in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with Subchapter C earnings and profits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase tax-exempt obligations. INVESTORS, INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAX-EXEMPT OBLIGATIONS BEFORE DETERMINING WHETHER TO PURCHASE THE BONDS. Interest on the Bonds will be includable as an adjustment for "adjusted current earnings" to calculate the alternative minimum tax imposed on corporations by section 55 of the Code. Section 55 of the Code imposes a tax equal to 20 percent for corporations, or 26 percent for non-corporate taxpayers (28 percent for taxable income exceeding $175,000), of the taxpayer's "alternative minimum taxable income," if the amount of such alternative minimum tax is greater than the taxpayer's regular income tax for the taxable year. Interest on the Bonds may be subject to the "branch profits tax" imposed on the effectively-cannected earnings and profits of a foreign corporation doing business in the United States. Under Section 6012 of the Code, holders of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued during each taxable year on their returns of federal income taxation. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount certificates" to the extent such gain does not exceed the accrued market discount of such Bonds; although for this purpose, a de minimis amount of market discount is ignored. A lmarket discount certificate" is one which is acquired by the holder at a purchase price which is less than the stated redemption price at maturity or, in the case of a Bond issued at an original issue discount, the 'revised issue price* (i.e. the issue price plus accrued original issue discount). The "accrued market discount" is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. Federal Income Tax Accounting Treatment of Original Issue Discount The initial public offering price to be paid for one or more maturities of the Bonds (the IOriginal Issue Discount Bonds"), as stated on the cover of the Official Statement, may be less than the principal amount thereof or one or more periods for the payment of interest on the Bonds may not be equal to the accrual period or be in excess of one year. In such event, the difference between (i) the "stated redemption price at the maturity" of each Original Issue Discount Bond, and (ii) the initial offering price to the public of such Original Issue Discount Bond would constitute original issue discount. The ~stated redemption price at maturity" means the sum of all payments to be made on the Bonds less the amount of all periodic interest payments. Periodic interest payments are payments which are made during equal accrual periods (or during any unequal period if it is the initial or final period) and which are made during accrual periods, which do not exceed one year. Under existing law, any owner who has purchased such Original Issue Discount Bond in the initial public offering is entitled to exclude from gross income (as defined in Section 61 of the Code) an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the accrual period. For a discussion of certain collateral federal tax consequences, see discussion set forth above. In the event of the redemption, sale or other taxable disposition of such Original issue Discount Bond pdor to stated maturity, however, the amount realized by such owner in excess of the basis of such Original issue 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 Original Issue Discount Bond was held by such initial owner) is includable in gross income. Under ex[sting law, the original issue discount on each Original Issue Discount Bond is accrued daily to the stated maturity thereof (in amounts calculated as described below for each six-month period ending on the date before the semiannual anniversary dates of the date of the Bonds and ratably within each six-month period) and the accrued amount is added to an initial owner's basis for such Original Issue Discount Bond for purposes of determining the amount of gain or loss recognized by such owner upon the redemption, sale or other disposition thereof. The amount to be added to basis for each accrual period is equal to (a) the sum of the issue price and the amount of original issue discount accrued in prior periods multiplied by the yield to stated maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) less (b) the amounts payable as current interest during such accrual period on such Bond. 19 The federal income tax consequences of the purchase, ownership, sale or other disposition of Original Issue Discount Bonds which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. All owners of Odginal Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state and local income tax purposes of interest accrued upon redemption, sale or other disposition of such Original Issue Discount Bonds and with respect to the federal, state, local and foreign tax consequences of the purchase, ownership, sale or other disposition of such Original Issue Discount Bonds. Qualified Tax-Exempt Obligations Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a "financial institution," on indebtedness incurred or continued to purchase or carry tax-exempt obligations is not deductible by such taxpayer in determining taxable income. Section 265(b) of the Code provides an exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a "financial institution" allocable to tax-exempt obligations, other than "private activity bonds," which are designated by an issuer as "qualified tax-exempt obligations." Section 265(b)(5) of the Code defines the term "financial institution" as referring to any corporation described in section 585(a)(2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business which is subject to federal or state supervision as a financial institution. The issuer expects to designate the Bonds as "qualified tax-exempt obligations" within the meaning of section 265(b) of the Code. in furtherance of that designation, the Issuer will covenant to take such action which would assure, or to refrain from such act[on which would adversely affect, the treatment of the Bonds as "qualified tax-exempt obligations." Potential purchasers should be aware that if the issue price to the public (or, in the case of discount bonds, the amount payable at maturity) exceeds $10,000,000 during the same calendar year, then such obligations might fail to satisfy the $~10,000,000 limitation and the obligations would not be "qualified tax-exempt obligations." State, Local and Foreign Taxes Investors should consult their own tax advisors concerning the tax implications of the purchase, ownership or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the Issuer has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The Issuer is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds, Under the agreement, the Issuer 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. AnnualReports The Issuer 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 Issuer of the general type disclosed in Tables 1, 2, 11, 12, 13, 22, 23, 24, 25 and 26 in Appendix A and the Issuer's audited financial report as shown in Appendix D. The issuer will update and provide this information within six months after the end of each fiscal year ending in and after 2001. The Issuer 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 Issuer 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 information will include audited financial statements for the Issuer, if the Issuer commissions an audit and it is completed by the required fime. If audited financial statements are not provided by that time, the Issuer will provide unaudited financial statements for the applicable year to each NRMSIR and any SID, and will file the annual audit report when and if the same becomes available. Any such financial statements will be prepared in accordance with the accounting principles described in the Issuer's annual financial statements or such other accounting principles as the Issuer may be required to employ from time to time pursuant to state law or regulation. The Issuer's current fiscal year end is September 30. Accordingly, it must provide updated information by March 30 in each year, unless the issuer changes its fiscal year. If the Issuer changes its fiscal year, it will notify each NRMSIR and any SJD of the change. 20 Material Event Notices The Issuer will also provide timely notices of certain events to certain information vendors. The Issuer 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 secudng repayment of the Bonds; and (11) rating changes. Neither the Bonds nor the Ordinance make any provision for debt service reserves or liquidity enhancement. In addition, the issuer will provide timely notice of any failure by the Issuer to provide information, data, or financial statements in accordance w~th its agreement described above under "Annual Reports." The Issuer 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 NRMSIR, MSRB and SID The Issuer has agreed to provide the foregoing information only to NRMSIRs, the MSRB and any SID. 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. The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID, and has been qualified as a SID by the staff of the SEC. The address of the Municipal Advisory Council is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone number is 512/476-6947. Limitations and Amendments The Issuer has agreed to update information and to provide notices of material events only as described above. The Issuer 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 Issuer 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 Issuer 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 of Bonds may seek a writ of mandamus to compel the Issuer to comply with its agreement. The Issuer 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 Issuer, 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, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and either the holders of a majority in aggregate principal amount of the outstanding Bonds consent to such amendment or any person unaffiliated with the Issuer (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the beneficial owners of the Bonds. The issuer may also repeal or amend these provisions 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, only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds in the primary offering of the Bonds giving effect to (a) such provisions as so amended and (b) any amendments or interpretations of the Rule. If the Issuer amends its agreement, it must include with the next financial information 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 information and data provided. Compliance with Prior Agreements The City has complied with all continuing disclosure agreements made by it in accordance with the Rule. OTHER PERTINENT INFORMATION Legal Matters Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approving opinion of the Attorney General of the State of Texas and McCall, Parkhurst & Horton EL.P, Bond Counsel, whose opinion will accompany the Bonds. In its capacity as Bond Counsel, McCall, Parkhurst & Horton L.L.P. has reviewed the information appearing in this Official Statement under the captions bPLAN OF FINANCING," "THE BONDS," "TAX MATTERS,' "CONTINUING DISCLOSURE OF INFORMATION" and "OTHER PERTINENT INFORMATION - Registret]on and Qualification of Bonds for Sale, Legal Matters, and The Bonds as Legal Investments in Texas" to determine whether such information fairly summarizes the material and documents referred to therein and is correct as to matters of law. Such firm has not, however, independently verified any of the 21 factual information contained in this Official Statement nor has it conducted an investigation of the affairs of the Issuer for the purpose of passing upon the accuracy or completeness of this Official Statement. No person is entitled to rely upon such firm's limited participation as an assumption of responsibility for, or an expression of opinion of any kind with regard to the accuracy or completeness of any of the information contained herein. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of the Bonds are contingent on the sale and delivery of the Bonds. The legal opinion of Bond Counsel will be printed on printed Bonds or will accompany the global Bonds deposited with DTC and the form of such opinion is attached hereto as Appendix C. Certain legal matters will be passed upon for the Underwriters by Dallas, Texas, counsel for the Underwriters. The legal opinions to be delivered concurrently with the deliveP/ of the Bonds express the professional judgment of the respective attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Registration and Qualification of Bonds for Sale The sale of the Bonds has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Bonds been qualified under the securities acts of any jurisdiction. The Issuer assumes no responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds 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 provisions. Litigation The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the City" counsel that resolution of these matters will not have a material adverse effect on the financial condition of the City. Legal Investments and Eligibility to Secure Public Funds in Texas Section 9 of the Bond Procedures Act provides that obligations such as the Bonds "shall constitute negotiable instruments, and are investment securities governed by Chapter 8, Texas Uniform Commercial Code. notwithstanding any provisions of law er court decision to the contrary, and are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan associations, insurance companies, fiduciaries, and trustees, and for the sinking fund of cities, towns, villages, school districts, and other political subdivisions or public agencies of the State of Texas." Texas law further provides that the Bonds are eligible to secure deposits of any public funds of the State of Texas, its agencies and political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the Issuer has been made of the laws in other states to determine whether the Bonds are legal investments for various institutions in those states, Ratings It is anticipated that Moody's Investors Service, Inc. ("Moody's") will assigned a rating of "Aaa" to the Bonds with the understanding that, concurrently with the delivery of the Bonds, a municipal bond insurance policy will be issued by Financial Guaranty insurance Company ("Financial Guaranty"). The Issuer currently has an underlying Moody's rating of "A2" on its general obligation debt and the City has made application for an underlying rating on the Series 2001 Bonds.. An explanation of the significance of such ratings may be obtained from Moody's. A rating by Moody's reflects only the view of such company at the time the rating is given, and the Issuer makes no representations as to the appropriateness of the rating. There is no assurance that such a rating will continue for any given period of time, or that it will not be revised downward or withdrawn entirely by Moody's if, in the judgment of Moody's, circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse effect on the market price of the Bonds. Financial Advisor SWS Securities is employed as a Financial Advisor to the Issuer in connection with the issuance of the Bonds. ~n this capacity, the Financial Advisor has compiled certain data relating to the Bonds and has assisted in drafting this Official Statement. The Financial Advisor has not independently vedfied any of the data contained herein or conducted a detailed investigation of the affairs of the Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for Financial Advfsor are contingent upon the issuance, sale and delivery of the Bonds. 22 Underwriting The Underwriter has agreed, subject tO certain conditions, to purchase the Bonds from the Issuer at a price of $__ (representing the par amount of the Bonds of $ , less (plus) original issue discount (premium) of $ , tess an Underwriter's discount of $ ), plus accrued interest on the Bonds to the date of initial delivery of the Bonds to the Underwriter. The Underwriter's obligation is subject to certain conditions precedent. The Underwriter will be obligated to purchase all of the Bonds, if the Bonds are purchased. The Bonds may be offered and sold to certain dealers and others at pdces lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriter. Concluding Statement This Official Statement has been prepared using information received from the City and other sources which is considered to be reliable. 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. This Official Statement has been approved by the City Council of the Issuer for distribution in accordance with the provisions of the Securities and Exchange Commission's rule codified at 17 C.F.R. Section 240.15c2-12. THE CITY OF PARIS, TEXAS Mayor A']-rEST: City of Paris, Texas /s/ City Secretary City of Paris, Texas 23 SCHEDULE I SCHEDULE OF REFUNDED BONDS Tax and Revnue Re. riding Bonds Sedes 1991 Maturities Original Amount to Being Issue Amount (l) be Refunded Refunded Redemption Date $ 16,110,000 (a) $ 5,755,000 2001-2011 12-15-01@par ia~ P~rti~n$ of the 2~2 ~ 2~1l mafu~ties were defeased by the Tax & Revenue Refunding B~nds~ Sedes1998~ APPENDIX A Financial information of the Issuer (q-his appendix contains quantitative financial information and operating data with respect to the Issuer. The information is only a partial representation and does not purpor[ to be complete. For further and more complete information, reference should be made to the original documents, which can be obtained from various sources, as noted.) FINANCIAL INFORMATION OF THE ISSUER ASSESSED VALUATION 2001 Actual Market Value of Taxable Property Less Exemptions: Local, Optional Over-65 and/or Disabled Homestead Exemptions Disabled and Deceased Veterans' Exemptions Productivity Loss House Bill 366 Freeport Pollution Control Abatement Loss Cap Loss (10%) 2001 Net Taxable Assessed Valuation (100% of Actual)(=) $37,884,154 2,434,420 16,330,910 74,618,660 19,689,590 385,639,930 549,592 TABLE 1 $ 1,555,307,967 ~dj See "AD VALOREM TAX PROCEDURES" and "CITY APPLICATION OF THE PROPERTY TAX CODE" in the Official Statement for a description of the Issuer's taxation procedures. Source: Lamar County Appraisal District 537.147,256 $ 1.019,160,711 GENERAL OBLIGATION BONDED DEBT (As of March 1, 2000) General Obligation Debt Outstanding: Tax and Revenue Refunding Certificates of Obligation. Series 1991 (These bonds are being fully defeased) Certificates of Obligation, Series 1993 Certificates of Obligation, Series 1994 Tax and Revenue Refunding Bonds, Series 1998 Tax and Revenue Certificates of Obligation, Series 2000 Tax and Revenue Refunding Bonds, Series 2001 Total Gross General Obligation Debt Outstanding: Less: Self-Supporting General Obligation Debt Tax and Revenue Refunding Certificates of Obligation, Series 1991(100%) Certificates of Obligation, Series 1994 (100%) Tax and Revenue Refunding Bonds, Series 1998 (100%) Tax and Revenue Refunding Bonds, Series 2001 (100%) Total Self-Supporting General Obligation Debt Total Net General Obligation Debt Outstanding: General Obligation Interest and Sinking Fund Balance as of 7-31 Ratio of Net General Obligation Debt to 2001 Net Assessed Valuation 2001 Net Assessed Valuation(b) Preliminary, subject to change. See "AD VALOREM TAX PROCEDURES" and "CITY APPLICATION OF THE PROPERTY TAX CODE" in the Official Statement for a description of the Issuers taxation procedures. Population: 1980- 25,498; 1990-24,699;2000-25,898 Current (Estimate)- 25,925 Per Capita 2001 Net Assessed Valuation - $39,312 Per Capita Gross General Obligation Debt - $974 Per Capita Net General Obligation Debt - $579 A-1 TABLE 2 0 3,900,000 4,425,000 5,810,000 5,915,000 5,190,000 25,240,000 0 4,425,000 5,810.000 5,190,000 $ 10,235,000 $ 15,005,000 $ 403,888 1.47% $ 1,019,160.711 OTHER OBLIGATIONS - CAPITAL LEASES AND NOTES PAYABLE Capital Lease Obligations: The City has lease agreements as lessee for financing the acquisition of equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception. The following is a schedule of the future minimum lease payments under these capital leases, and the present value .of the net minimum lease payments at September 30, 2000. TABLE 3 Year Ending Sept 30 General Obli.qation Water and Sewer 2001 $ 98,555 $ 36,228 2002 83,093 20,855 2003 38,177 15,731 2004 18,465 15,731 2005 12,311 6,555 Total minimum lease payments $ 250,601 $ 95,100 Less: amount representing interest (22,064) (9,397) Present value of future minimum lease payments $ 228,537 $ 85,703 COMPUTATION OF WATERWORKS AND SEWER SYSTEM SELF-SUPPORTING DEBT TABLE 4 Net System Revenues Available, Fiscal Year End September 30, 2000 Less: 2001 Annual Debt Service Requirements on Outstanding Revenue Bonds Balance Available for System General Obligation Bonds Estimated System General Obligation Debt for Fiscal Year Ended September 30, 2001 Balance Available for Other Purposes Percentage of System General Obligation Debt Self-Suppor[ing 5,131,3~7 2,168,268 2,963,130 ,802,364 1,160,766 100% A-2 ESTIMATED GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS Less: The Bonds{b} Fiscal Year Current Total Refunded 30-Sep Debt Service(.) Bonds Principal Interest Total Less: Self- Combined Supporting Debt Service Debt(c) TABLE 5 Net General Obligation Debt ServiceId) 2001 $ 2,865,441 2002 2.715,093 2003 2,771.265 2004 2,786,051 2005 2,778.938 2006 2,778.811 2007 2.777.250 2008 2,783,3O6 2009 2,777,151 2010 2,775,020 2011 2,777,455 2012 2,787.643 2013 1,371,146 2014 1,375,439 2015 966,495 2016 507,791 2017 509,919 2018 510,591 20t9 510,150 2020 508,613 $ - $ - $ $ 1,802,364 1,068.408 149,102 875,732 680.373 435,000 193,039 1,803,889 881,941 450,000 180,075 1.813.949 681,670 465,000 154,854 1,811,748 684,370 485.000 147,981 1.813,149 684,835 505,000 129,535 1,810,645 682,900 525,000 109,440 1,818,565 683,613 545,000 87,768 1,863,019 682,050 565,000 64,730 1,811.776 683,050 595,000 40,073 1,884,499 681,450 620,000 13,640 1,868.759 453,438 456.025 457,238 $ - $ 2,865.441 149,102 1,795.787 628,039 2,718,931 630,075 2,734,185 629.854 2.727,121 632,981 2,727,423 634,535 2.726,950 634.440 2.734,845 632.768 2.728,316 629,730 2,722,700 635,073 2,729,478 633,640 2,739,833 1,371,146 1,375,439 966,495 507,791 509.919 510.591 510,150 508,613 1,063,078 920,055 915.043 920,236 915,374 914,274 916,305 916,280 863.298 910,924 864.979 871,074 917,709 919,414 509,258 507,791 509,919 510,591 510,150 508,613 $ 39.633.576 ~; 7.894.659 ~ 5~190,000 $ 1.280~236 Includes self-supporting debt. Prelimine~y, subject to change. Includes the Bonds. Excludes the Sedes 1991Bondsandallself-suppo~ingdebtservice. ~ 6~470,236 $ 38.209.153 ~ 22~324~792 $ 15.884.361 TAX ADEQUACY (Includes Self-supporting Debt) TABLE 6 2001 Assessed Valuation Maximum Annual Debt Service Requirements - Fiscal Year Ending 9-30-01 Indicated Maximum Interest and Sinking Fond Tax Rate Indicated Maximum Interest and Sinking Fund Tax Levy at 97% Collections I~ Includes general obligation self-supporting debt. Note: Above computation is exclusive of investment earnings, delinquent tax collections and penalties and interest on delinquent tax collections. $ 1.019.150,711 $ 2,865,441 $ 0.28985 $ 2,865,516 The City has historically paid debt service requirements on its general obligation waterworks and sewer systems (the "System") debt from Surplus Revenues of the System and intends to continue to do so in the future. However, in the event the Surplus Revenues are not on deposit or budgeted for deposit in the Interest and Sinking Fund in advance of the time when ad valorem taxes are scheduled to be levied, then the City is obligated to levy and collect an ad valorem tax sufficient to pay principal of and interest on such System debt and the outstanding general obligation bonds. TAX ADEQUACY (Excludes Self-Supporting Debt) 2001 Assessed Valuation Maximum Annual Debt Service Requirements - Fiscal Year Ending 9-30-01 Indicated Maximum Interest and Sinking Fund Tax Rate indicated Maximum Interest and Sinking Fund Tax Levy at 97% Collections m Excludesgeneralobligationself. supportingdebt. IVole : Above computat/o/2 i$ exclusive o£ investment earnings, delinquent tax collections and penalties and interest on delinquent tax cellect/ons. A-3 TABLE 7 $ 1,019,160,711 $ 1,063,078 $ 0.10754 $ 1,063,244 INTEREST AND SINKING FuND MANAGEMENT INDEX TABLE 8 Interest and Sinking Fund Balance, Fiscal Year Ended September 30, 2000 2000-2001 Interest and Sinking Fund Tax Levy at 97% Collections Produce Total Available for Debt Servicela) $ 379,275 900,064 $ 1,279,339 Less: General Obligation Debt Service Requirements, Fiscal Year Ending 9-30-01(~) Estimated Surplus at Fiscal Year Ending 9-30-01(¢) 1,063,078 $ 216,261 Portion of debt service requirements met through surplus revenues of the Waterworks and Sewer System. Excludes self-supporting general obligation debt. Does not include delinquent tax collections, penalties and interest on delinquent tax collections or investment earnings. TAX AND REVENUE BONDS PRINCIPAL REPAYMENT SCHEDULE (As of September 1, 2001 Includes the Bonds) PHncipal Repayment Schedule Fiscal Year Outstanding Series 2001 ndinq 9~0 Bonds(') Bonds 2002 $ 235,000 $ 2003 1,075,000 435,000 2004 1,150,000 450,000 2005 1,200,000 465,000 2006 1,260,000 485,000 2007 1,325,000 505,000 2008 1,400,000 525,000 2009 1,470,000 545,000 2010 1,545,000 565,000 2011 1,630,000 595,000 2012 2,430,000 620,000 2013 1,110,000 2014 1,175,000 2015 820,000 2016 395,000 2017 420,000 2018 445,000 2019 470,000 2020 495,000 $ 20,050,000 $ 5,190,000 Excludes the Refunded Bonds and includes self-supporting debt. TABLE 9 Bonds Percent of Unpaid at Principal Total End of Year Retired I%) 235,000 25,005,000 0.93% 1,510,000 23,495,000 6.91% 1,600,000 21,895,000 13.25% 1,665,000 20,230,000 19.85% 1,745,000 18,485,000 26.76% 1,830,000 16,655,000 34,01% 1,925,000 14,730,000 41.64% 2,015,000 12,715,000 49.62% 2,110,000 10,605,000 57.98% 2,225,000 8,380,000 66.80% 3,050,000 5,330,000 78.88% 1,110,000 4,220,000 83.28% 1,175,000 3,045,000 87.94% 820,000 2,225,000 91.18% 395,000 1,830,000 92.75% 420,000 1,410,000 94.41% 445,000 965,000 96.18% 470,000 495,000 98.04% 495,000 100.00% $ 25,240,000 A-4 E PRINCIPAL TAXPAYERS 2001 TABLE t I % of Total 2001 2001 Net Taxable Assessed Name Tree of Pro~ertv Assessed Valuation Valuation Kimbedy Clark Corporalion Disposable Diaper Manufacturing $121,120,300 11.88% Campbell Soup Food Manufacturing 63,786,220 6.26% Tenaska Iii Utility 61,755,100 6.06% TXU Electric Electric Utility 17,862,320 1.75% Earthgrains Company. The Food Manufacturing 14~123,610 1.39% Campbell Soup Supply Commercial Warehouse 11,598,680 1.14% Southwestern Bell Telephone Co. Telephone Utility 9,920,730 0.97% Paris Packaging, Inc. Paper Carton Manufacturing 9,540,200 0.94% Walmart Stores Discount Retail Sales 8,032,450 0.79% 7,179.430 0.70% Total ~324,919,040 31.88% Based on a 2001 NetTaxableAssessedValuationof $ 1,019,160,711 Source: Lerner County Appraisal DistriCt PROPERTY TAX RATES AND COLLECTIONS TABLE 12 Tax Net Taxable Tax Tax % Collections Year Year Assessed Valuation Rate Levy Current Total Ended 1991-92 $ 610,010,404 $ 0.50840 $3,108,333 94.80 97.75 9-30-92 1992-93 614,341,130 0.54110 3,308,974 95.73 100.99 9-30-93 1993-94 673,589,509 0.46893 2,955,580 96.23 99.09 9-30-94 1994-95 726,920,016 O. 51770 3,754,165 96.22 101.48 9-30-95 1995-96 735,020,241 0.51770 3,805,200 96.24 101.29 9-30-96 1996-97 748,740,556 0.51770 3,866,349 95.83 101.16 9-30-97 1997-98 854,171,590 0.55342 4,724,497 96.28 96.28 9-30-98 1998-99 870,416,703 0.55342 4,712,257 96.66 101.58 9-30-99 1999-00 910,117,503 0.58598 5,332,833 95,07 99.54 9-30-00 2000-01 1,001,837,075 0.61000 6,073,017 96.01 ih) 98.03 [b) 9-30-01 ('~ See "AD VALOREM TAX' PROCEDURES" and "CITY APPLICATION OF THE PROPERTY TAX CODE"in the Official Statement for a description of the Issuer's taxation procedures. ~ Current year ccilectione as of July 31, 2001 Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Lamer County Appraisal District, and the City's 1999 Comprehensive Annual Financial Repcrt. TAX RATE DISTRIBUTION 2000 t999 1998 1897 '1996 1995 1994 General Fun $0.51738 $0.54132 $0.50543 $0.50543 $0.46290 $0.46190 $0.42780 I & S Fund 0.09262 0.04466 0,04799 0.04799 0.05480 0.05580 0.08990 TOTAL $0.61000 $0.58598 $0.55342 $0.55342 $0.51770 $0.51770 $0.51770 Sources; Texas Municipal Report published by the Municipal Advisory Council of Texas and the Lamar County Apparels District. TABLE 13 A-6 TAXABLE ASSESSED VALUATION FOR TAX YEARS '1991-1999 Net Taxable Change From PreCeding Year Year Assessed Valuation Amount t$1 percent 1991-92 $ 610,010,404 (8,824,029) (1.58%) 1992-93 614,341,130 4.330.726 0.71% 1693-94 673.589,509 59,248,379 9.64% t994-95 726,920,016 53,330,507 7.02% 1995-96 735,020,241 8,100,225 1.11% 1596-97 746,740,556 13,720.315 1.87% 1997-98 854,171,590 105.431.{334 14.08% 1998-99 870.416,703 16.245,113 1.90% 1099-00 9t0,117.503 39,700,800 4.56% Sources: Texas Municipal Repot published by the Municipal Advisory Council of Texas and the Hopkins Coubty Appraisal Distdct MUNICIPAL SALES TAX TABLE 14 TABLE 15 The issuer has adopted the provision Of Chapter 321, as amended, Texas Tax Code. In addition, some issuers am subject to a I~opetty ($) Equivaiont of Calendar Total 1.00% 0.25% 0.20% % of Ad Valorem Ad Valorem Year Collepted City Prod Tax Red ED_._~C Tax Law Tax Rate 1992 $ 2,503,908 $ 2,503,908 $ $ 80.55% 0.41 1993 2,861,216 2,764,256 48.480 I*l 48,480 {') 85.55% 0,47 1994 4,554,211 3,036,141 759,035 759,035 154.09% 0.72 1995 4,631,307 3,087,538 771,885 77%886 123.36% 0.64 t996 4,742,190 3.161.460 790,365 790,365 124.62% 0.65 1997 4,803.682 3,262,455 815,614 815,614 125.57% 0.66 1995 4.97%047 3.314.031 528,508 828,508 105.22% 0.58 1999 5,818.743 3,679,162 919.791 919,751 117.11% 0.65 2000 5,991,044 3,994,029 998.507 998,5ti7 112.34% 0.66 2001[b) 3.779.886 2.519,924 829,981 629,981 62.24% 0.38 Source: State Comptroller's Office of the State of Texas and information for the Issuer. OVERLAPPING DEBT DATA AND INFORMATION (As of September 1, 2~01) Taxlna Entity Chism Independent School Distdbt Lamar County No~th Lamar Independent SchOol District Paris Independent School Disbfict Paris Junior College District Praideland Independent School Disthct Tolal Gross Ovedapping Debt Paris, City Total Direct and OveHappJng Debt Ratio bt Direct and Overlapping Debt to 2001 Assessed Valuation Ratio ot Direct and Overlapping Debt to 2001 ACtUal Value Per Capita Direct and Overlapping Debt TABLE 16 % Amount Gross Debt Overlaoo~n~ OverlauDinu $ 8,159.364 6.30% $ ti14,040 3,902,795 61.29% 2,392,023 10,705.000 29.76% 3,185,808 11,254,996 95.12% 10,705,752 t95,000 97,10% 189,345 $ 16,986.968 25.240,000 25,240,000 100.00% $ Indicates le~s than 1% Note: The above figures show Gross General Obligation Debt for Paris, Texas. The Issuer's Net General Obligation Debt Is $15,005,000 Calculations on the basis of Net General Oblioat[an Debt would chance the above fiaures as follows: Total Direct an0 Overlapping Net Debt 42,226,968 Ratio of Direct and Ovedapping Net Debt to 2001 Asse~.~ed Valuation Ratio of Direct and Overlapping Net Debt to 2001 Actual Value Per Capita Direct and Overlapping Net Debt Sources: Latest Texas Municipal Re~oft published by the MunicJpal Advi$ory Council of Texas A-7 3.14% 2,06% $1,234 ASSESSED VALUATION AND TAX RATE OF OVERLAPPING ENTITIES TABLE 17 Governmental Entity Chism Independent School District Lamar County North Lamar Independent School District Paris Independent School Distdct Paris Junior College District Prairie]and Independent School District 2000 Net Taxable 2000 Assessed Valuation % of Actual Tax Rate $ 379,587,324 la) 100% $ 1.2700 1,640,096,317 100% 0.3536 582,555,343 100% 1.3326 486,031,190 100% 1.5340 1,035,231,063 100% 0.1637 89,646,760 100% 1.2600 ~ Large A V increase due to new power plant. Source: Latest Texas Municipal Report published by the Municipal Advisory Council of Texas and Lamar County Appraisal District AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS OF DIRECT AND OVERLAPPING GOVERNMENTAL ENTITIES -None- TABLE 18 FUND BALANCES (As of July 31, 2001 General Fund Special Revenue Fund Cspftal Projects Fund GO Interest and Sinking Fund Internal Service fund Agency Fund Series 2000 Tax and Revenue Construction Fund Enterprise Funds Water and Sewer Sub-Fund Revenue Bond Interest and Sinking Sub-Fund Water Contract Fund Pay Mayse Reserve Fund Contingency Fund Revenue Bond Reserve Fund Series 1997 Water & Sewer Revenue Bonds Construction Fund Series 2000 Water & Sewer Revenue Bonds Construction Fund Total TABLE 19 $ 2,217,671 317,471 233,076 403,888 500,000 2,023,401 5,224,470 610,446 1,772,381 456,729 2,009,130 683,362 1,848,281 10,085,803 226,678 $ 28,612,787 REVENUE BOND DEBT DATA (As of September 1, 2001) Revenue Bond Debt Outstanding: Waterworks and Sewer System Revenue Bonds, Series 1992 Waterworks and Sewer System Revenue Bonds, Series 1997 Waterworks and Sewer System Revenue Refunding Bonds, Series 1998 Waterworks and Sewer System Revenue Bonds, Sedes 2000 Total Gross Revenue Debt Note: Does not include general obligation se/f-supporting debt TABLE 20 $ 435,000 4,460,000 6,g05,000 9,465.000 $ 21,265,000 A-8 GENERAL FUND COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES AND ANALYSTS OF CHANGES IN FUND BALANCES TABLE 20 Fiscal Year Ended September 30 2000 1999 1998 1997 1996 Ad Valorem Taxes $ 4.913,965 $ 4,363,735 $ 4,267,676 $ 3,424.410 $ 3.344,316 Municipal Sales Tax 4.996,289 4,460,650 4,174,891 4,023,734 3,909,119 Hotel Occupancy Tax 357,438 295.252 264,998 241,822 233,587 Franchise and Gross Receipts Tax 2,093,284 2.057,459 2.012,816 2,038,208 1,942,610 Licenses and Permits 53,451 68,658 47.147 44,869 52.063 Fines and Fees 452,700 445,958 466,837 394,670 353,668 Use of Money and Property 337.661 249,090 264,967 309,966 236,273 General Government 13.916 14,144 13,625 18.010 13,798 Public Safety 1,800 1,080 720 1,080 2,012 Streets and Highways 73,577 56,958 70.678 68,776 73,271 Sanitation 1,547,223 1.482,995 1.354.255 1,424,201 1,369,074 Health 1,567,331 1,622,654 1,853.508 1,942,037 1,836.184 Intergovernmental Revenue 1,026,441 1,228,946 1,289.185 489,451 363,848 Miscellaneous Revenues 270,242 376,831 294,390 297.825 196,439 Total Revenues $ 17.705,318 $ 16,724,410 $ 16,375,693 $ 14,719,059 $ 13,926,262 Expenditures: Current General Government $ 1,385,883 $ 1,345,190 $ 1,219.225 $ 1,032,637 $ 1,025,528 Finance 422,957 383,940 378,454 358,300 339,591 Public Safety 7,222,622 6,589,460 6,229,627 5,948,522 5.605,497 Public Works 5,012,723 4,628,530 4,253,474 3,829,365 3.597,541 Health Department 692,659 730,590 814,514 785,453 781,462 Emergency Medical Service 1,228,246 1.178.788 1.126,949 1,060,228 992,079 Library Service 544,431 534,648 492.427 436,853 409,977 Cox Field 147,088 137,353 88,709 84,540 91.201 Miscellaneous 15,459 14,088 14,703 13,535 13,854 Capital Outlay 1,480,085 1,684,575 1,880,573 1,305,115 803,951 Debt Service Principal Retirement 97.781 108,220 93,583 78,623 94,826 Interest and Fiscal Charges 17,527 17.995 18,786 12,010 13,235 Total Expenditures $ 18,267,461 $ 17.353,377 $ 16.611.024 $ 14,945,181 $ 13,768.542 Excess (Deficit) of Revenues Over Expenditures $ (562,143) $ (628,967_) $ (235,331) $ (226.122) $ 157,720 Other Financing Sources (Uses): Operating Transfers in (Out) Capital Lease Proceeds Total Other Financing Sources (Uses) 1.036.825 $ 1,036,825 $ 1,026,780 $ 276,780 $ 988,911 68,967 99.845 $ 1,105,792 $ 1.036,825 $ 1,126,625 $ 276,780 $ 988.911 Increase (Decrease) in Reserve for Inventory 52,951 9,480 (7,397) 17,963 Fund Balance - Beginning of Year Residual Equity Transfers In (Out) 5,917,889 $ 6,278,051 $ 5,394,154 $ 5,325,533 $ (10,000) (777,500) Fund Balance - End of Year (25,191) 4,204,093 $ 6,504,489 $ 5,917,889 $ 6,278.051. $ 5,394,154 $ 5,325.533 Source: The Issuer's Comprehensive Annual Financial Reports. A-9 REVENUE BONDS AUTHORIZED BUT UNISSUED Data of Authorization Purpose 8-14-56 WW & SS 9-21-65 Sewer System Amount Issued Author~ed To Data Unissued $ 2,300,000 $ 2,100,000 $ 200,000 200,000 100,000 100,000 Totals $ 2,500,000 $ 2,200,000. $ 300,000 TABLE 21 WATERWORKS AND SEWER SYSTEM OPERATING STATEMENT TABLE 22 Operating Revenues {,I 2000 Water Sales and Taps $ 6,135,469 Sewer Charges and Taps 3,986,201 industrial Charges 157,235 Other 325,368. Total Revenues $ 10,604,273 Fiscal Year Ended September 30 1999 1998 1997 1996 $ 5,849,178 $ 5,848,536 $ 5,313,812 $ 5,498,351 3,445,993 3,172,916 3,273,016 3,357,068 79,741 113,934 90,679 92,672 185,335 465,567 594,914 418,022 $ 9,560,247 $ 9,598,953 $ 9,272,421 $ 9,366,113 Net Revenue Available for Debt Service 5,472,876 5,163,027 5,257,572 5,006,067 4,857,118 $ 5,131,397 $ 4,397,220 $ 4,341,381 $ 4,266,354 $ 4,508,995 Annual Revenue Bond Requirements $ 1,215,815 $ 1,154,340 $ 1,245,887 $ 884,241 $ 887,879 Coverage of Annual Revenue Bond Requirements 4.22 x 3.81 3,48 x 4.82 x 5.08 x Annual Requirements on all Bonds Paid from System Revenues $ 3,021,520 $ 2,905,122 $ 3,141,450 $ 2,783,199 $ 2,786,782 Coverage of Annual Requirements on all Bonds Paid from System Revenues 1.70 x 1.51 x 1.38 x 1.53 x 1.62 x Customer Count: 2000-2001 Est.(b) Water 9,986 9,987 9,905 Sewer 9,509 9,504 9,444 9,902 9,786 9,714 9,423 9,357 9,287 Does not include Sanitation billing Fee oh $ 81,412 Current year customer count estimate is as of July 31, 2001. $ 77,935 $ 72,571 $ 72,214 $ 72,057 WATER RATES (Rates Effective January 1, 2000) Residential Class TABLE 23 Meter Size (Inches) 5/8" - 3/4" 1" and Larger Base Cost and Additional Cubic Foot Charge (Per Cubic Foot) $5.91 for first 200 Cubic Feet $29.57 for fist 1,000 Cubic Feet Commercial I Industrial Class Service in Excess of Base (For Each Additional 100 Cubic Feet) $2.15 / 100 Cubic Feet $2.15/100 Cubic Feet Metar Size (Inches) 5/8" - 3/4" 1"- 2" Larger than 1" Base Cost and Additional Cubic Foot Charge {Per Cubic Foot) $6.99 for first 200 Cubic Feet $29.57 for fist 1,000 Cubic Feat $106.91 for fist 3,000 Cubic Feet Source; The Issuer's 2000 Comprehensive Annual Financial Report and other information from the Issuer A-10 Service in Excess of Base (For Each Additional 100 Cubic Feet) $2.15 / 100 Cubic Feet $1.70 / 100 Cubic Feet $1.70/100 Cubic Feet PRINCIPAL WATER CUSTOMERS - 2000-2001 Name of Customer Campbell Soup Company Lamar County Water Supply Tenaska Ill Kimberly Clark Merico Earthgrains Christus St. Joseph Hospital Paris Housing Authority Marvin-Jennings-Clardy Water Corp. Paris Junior College Sesaco Corporation Product Soups/Juices/Sauces Water Erectricity Disposable Diapers Snack Cakes/Breads Medical Care Multi Family Housing Water Higher Education Sesame Seed Products Totals 2000-2001 Average Monthly Consumotlon iCu Ft.) 13,243,669 10,673,625 4,135,877 1,610,983 525,208 313,761 286,438 236,389 164,787 130,030 31,320,767 TABLE 24 2000-2001 Average Monthly Bill $ 90,878.29 62,122,63 35,492.68 27,136.72 10,654.87 46,942.31 6,166,45 3,878.96 2,917.36 2,238.85 $ 288,430.12 SEWER RATES (Rates Effective January 1, 2000) Meter Size (Inches) 5/8" - 3/4" 1" and Larger Residential Class Base Cost (Per Cubic Foot) $6.31 for first 200 Cubic Feet $34.89 for fist 1,000 Cubic Feet TABLE 25 Service in Excess of Base (For Each Additional 100 Cubic Feet) $3.10 / 100 Cubic Feet $3.10 / 100 Cubic Feet Meter Size (Inches) 5/8" - 3/4" 1"-2" Larger than 1" Commercial Industrial Class Base Cost (Per Cubic Foot) $9.39 for first 200 Cubic Feet $29,07 for fist 1,000 Cubic Feet $54.74 for fist 2,000 Cubic Feet Service in Excess of Base (For Each Additional 100 Cubic Feet) $3.27 / 100 Cubic Feet $3.27 / 100 Cubic Feet $3.271100 Cubic Feet PRINCIPAL SEWER CUSTOMERS - 2000-2001 Name of Customer. Merico Earthgrains Kimberly-Clark Paris Housing Authority Christus St. Joseph Hospital North Amedcan Phillips Lighting Co. Paris Junior College Westgate Apartments Paris Nursing Home McCuistion Medical Center Sesaco Corporation TABLE 26 Sources: The Issuer's Comprehensive Annual Financial Reports and other information from the Issuer A-11 2000-2001 2000-2001 Average Monthly Average Product Consumption (Cu Ft.) Monthly Bill Snack Cakes/Breads 777,033 $ 18,720.43 Disposable Diapers 434,434 14,195.33 Multifamily Housing 287,065 9,379.69 Medical Care 283,075 9,358.81 Electrical Components 152,581 4,978.75 Higher Education 141,365 9,452.21 Multifamily Housing 108,755 3,835.22 Long Term Care 103,347 3,378.65 Medical Care 101,419 3,302.12 Sesame Seed Products 98,244 3,206.36 Totals 2,487,320 $ 79,817.58 APPENDIX R General Information Regarding the City of Paris and Lamar County, Texas GENERAL INFORMATION REGARDING THE CITY OF PARIS AND LAMAR COUNTY, TEXAS Location The City of Paris, Texas (the 'City"), located some 105 miles northeast of Dallas, is the county seat of Lamar County (the "County"). It is in the center of an eleven-county area and is the hub of retail trade, manufacturing, farming, medical care, and other economic segments in this part of Texas. The City's location on U,S. Highways 271 and 82, Texas State Highways 19 and 24, and Interstate Highway 30 (only 38 miles away) makes it conveniently accessible to all parts of the State as well as the Southwest market. Government The City was incorporated in 1836 with the current charter adopted in November of 1948. The City operates under a Council/Manager form of government, with seven council members elected from single member districts. The Mayor is elected by the Council itself to serve as moderator of the group. The Council Members serve two-year staggered terms. The Mayor and Council appoint the City Manager, the City Attorney and the Municipal Judge. The City is a Home Rule City with all powers granted to home rule cities by the constitution and laws of the State of Texas. The Council enacts legislation, adopts budgets, and determines policies of the city of Paris. The City Manager executes the laws and administers the government of the City. Population The City's 2000 Census figure of 25,498 is a 4.4% increase over the 1990 Census figure. The City's current population estimate is 25,925. Census City of Lamar Repo~ Paris County 2000 25,898 48,499 1990 24,699 43,949 1980 25,498 42,156 Sources: United States Bureau of the Census, and the City of Pads B-1 History Few American cities have been able to preserve their built environment and st the same time expand as modem communities. The City is among those fortunate few, not only surviving but preserving its civic character through fires, tornadoes, the Depression of the '30s and the urban movement of the '40s and '50s - any of which could have closed the books on its municipal vitality. Paris is what it is today because of the Red River. Although traveling on the Red was uncertain and risky, it was done with regularity. This land, some 894 square miles in area, would soon become Lamar County. The land held permanent residents by 1837, when Claiborne Chisum bought a large tract, which today lies in West Paris. Unlike Dallas and Fort Worth, for instance, the men who conceived and planned the original town had lived in the vicinity for years. Early leaders such as the Wright family, the Chisum family, and Epps Gibson, knew about the soils, the surroundings, and even the weather. The Red River was the border between the Republic of Texas and the United States, and it also formed the boundary between the Anglo colony in Texas and the Choctaw and Chickasaw Nations. From its outset Paris benefited from the commerce, which flowed across the river and the services the indian Nations required. This huge market at its front door made the early progress of Paris easier, it didn't have to struggle to survive. Within a decade of its founding Paris had outstripped the older, more firmly entrenched Clarksville, to the east; and for a ten-year period after 1889, Paris was also the legal headquarters with the U.S. District Court for the Choctaw and Chickasaw Nations and westward in non-Indian Oklahoma. The U.S. courthouse in Paris was not only one of the most imposing structures in North Texas, [t was among the busiest in the Southwest, handling all Indian trials and lawsuits which were not based on tribal law. Nine men were hanged in its courtyard during that decade. With agriculture leading the way, the City and County prospered through the 1920s, and survived the 1930s. World War II shrank the County's population in the 1940s as many went to war, and a lot of those that returned settled near the larger Texas cities. The 1950s saw the industrialization of Texas jump into high gear, and many more Lamar County residents staked their claims in Dallas, Houston and other cities that had industry jobs aplenty. However, industry was also beginning to look at Paris. Westinghouse opened a plant in 1951. One year later, Babcock & Wilcox started up their facility. 1954 found the establishment of Hollywood-Vassarette, as well as UARCO, which began printing two years later. The 1960s found things booming. 1962 found Superior Switchboard entering the production lines as well as Campbell Soup, the country's largest employer, beginning operation in 1964. The 1970s noted the establishment of Southwestern Foundry, a subsidiary of Stockham Valves & Fittings; and two operating divisions of Merico Inc., a subsidiary of the baking conglomerate, Campbell Taggart and now Anheuser-Busch. In the 1980s Kimberly-Clark and Paris Industries, a division of General Foam Plastics Corporation, chose Paris for new plant s, In 1988, Kimberly-Clark chose Paris for a 300,000 square foot expansion and in 1992 added an additional 60,000 square feet. Also in 1988 TENASKA chose Paris for a co-generating power plant. During 1989, Campbell Soup added a 75,000 square foot distribution center and constructed a 225,000 square foot manufacturing expansion to their facility, which was completed and on line in February 1991. During 1992-1993 Rogers-Wade, a commercial display cabinet company expanded over 60,000 square. Paris is a city that has never tried to be another Dallas, or St. Louis, the cultural meccas of other days. It hasn't tried to imitate other places. Because of its location, it was and still is a self-contained city, with its own markets and patterns of economic growth. Paris, today, is generally recognized around the Southwest as being a unique city, a city with its own personality. Economy: The total retail marketing area served by Paris merchants is an approximate 50-mile radius around the City. As residents of this region come to Paris for much of their employment, medical, governmental, and educational needs, they are also attracted to Paris for retail merchandise and servicas. J.C. Penney, Sears, Wa[mart, K-mart, Balk, and Beall's are several of the nation's top retailers with stores in Paris. Other major food supermarkets, along with a wide selection of local and chain retailers and food outlets, combine to offer Paris shoppers good selection in merchandise and gifts. Six shopping areas are located throughout Paris, with easy access provided by Loop 286 around Paris and numerous major thoroughfares within the City. The Paris Economic Development Corporation is working hand in hand with the Lamar County Chamber of Commerce to recruit new bus[ness to the area as well as to support existing businesses. Business development during fiscal year 2000 included Kimberly-Clark distribution center expansion, Earthgrans' 35,000 square foot expansion, the beginning of Florida Power and Light power plant operations and a new Lansing Grain transloading facility. B-2 Major Employers: Employer Campbell Soup Company Kimberly-Clark Corporation Christus St, Joseph's Health System Merico - Earth Grains TCIM Turner International Piping McCuistion Regional Medical Center Paris Industries We-Pack Logistics, Inc, Buster Paving Company Paris Packaging Rodgers-Wade Manufacturing Philips Lighting 2001 Product. Employees Soups/Juices/Sauces 1,200 Disposable Diapers 925 Medical Care 750 Snack Cakes/Breads 660 Telemarketing Services 600 Pipe Products 520 Medical Care 475 Artificial Trees/Pools 300 Custom Packaging 276 Asphalt Products 265 Paper Cartons 172 Wood Cabinets 140 Lamp Bases 109 City Attractions Sam Bell Maxey House is a State Historic Structure and the Histodc Home of Confederate General Sam Bell Maxey. It was restored by the Texas Parks and V~ldlife Department and is open to the public. Eiffel Tower - "Second Largest Eiffel Tower in the Second Largest Paris". Paris's newest sight to behold is located at the comer of Jefferson Road and South Collegiate Drive, next to the Love Civic Center. This Eiffel Tower, standing slightly over 65 feet, represents a remarkable community effort. Constructed by the Boiler Makers Local #902 and utirizing materials donated by Babcock & Wilcox Company, the tower stands as the impetus for Paris, being designated 1995 Best Pit Stop by the Great North American Race. A. M. and Welma Aikin Regional Archives is located on the campus of Paris Junior College and contains the local historical amhives for Lamar, Red River, Delta and Fannin Counties. This building also contains an office replica of Senator Aikin, as it appeared in the State Capitol in Austin, and many items relating to the Senator's 46-year career in the state legislature. Senator Aikin is known as the father of modern education in Texas. Chisum Burial Site marks the place where John Chisum, a Texas and New Mexico cattle baron, was interred in 1884 following his illness and death in Eureka Springs, Arkansas. Hayden Museum of American Art consists of four galleries, the largest of which houses the permanent collection of graphic art, archival photography and American chairs. This collection includes examples from every art period, and American master painters are generously represented. The pieces are arranged chronologically to present a complete history of the American art scene from Folk Art to Modem and Contemporary Art. Other City attractions include the Dragon Athletic Hall of Fame, Scott Roden House, Paris Union Station Railroad Depot and Wise House. The Love Civic Center, a joint project ofthe City and the County, is a multipurpose center suitable for a variety of activities and events. Financial Services; All providers of financial services in Paris and Lamar County are committed to the economic growth of this area through commemiai and industrial development. Paris is served by six commercial banks, two savings & loan associations, and has access to mortgage bankers, and other creative financing services. B-3 Medical Services: Paris is a regional medical center, serving patients in Nodheast Texas and Southeast Oklahoma. Two major medical centers, McCuisfion Regional Medical Center and CHRISTUS St. Joseph's Health System. The medical centers are supported by over 100 physicians representing 34 medical specialties. Facilities in Paris are complimented by 423 acute care beds, 19 general psychiatric beds and 19 geropsychiatdc beds. CHRISTUS St. Joseph's Health System is a 212-bed acute care facility that is part ofthe Incarnate Word. Founded in 1911, St. Joseph's continues to serve Paris, Lamar County, and Southeastern Oklahoma not only with traditional acute- care services, but also with special programs as well. These include the St. Joseph's Cancer Center, Heart Center, Watson W. Wise Dialysis Center, St. Joseph's Home Health Services, the Ella C. McFadden Hospice, Cardiac Rehabilitation (including physical and occupational therapy, hearing, speech pathology, and social services), a 20-bed Behavioral Medicine Center, outpatient services and day surgery. McCuistion Regional Medical Center serves Northeast Texas and Southeast Oklahoma. With 210 beds and a modern 70-acre campus, McCu[stion provides a range of services and programs including: Regional maternity Center, an intensive care unit with all-private rooms, 24-hour emergency care with on-site physician coverage, a comprehensive cardiac rehabilitation and fitness center, magnetic resonance imaging (MRI) diagnostic testing, cardiology service, computerized axial tomagraphy or CT scanning (CAT), Angiogrephy, Nuclear Medicine, Ultrasonagraphy, health fairs and community outreach services like the mobile health clinic, the Women's Pavilion, and Home Health/Hospice care. St. Joseph's Heart Center offers a comprehensive heart program including cardiac diagnostics, catheterization, balloon angioplasty (for opening clogging arteries) and open-heart surgery. St. Joseph's heart doctors make their permanent homes in Paris, resulting in an emergency team on standby 24 hours a day, seven days a week. St. Joseph's achieves excellence in heart care by utilizing the latest in cardiac emergency medicine, including the region's only balloon angioplasty lab for interrupting heart attacks in progress. Dr. L.P. McCuistion formed the Sanitarium of Paris in 1912 and The Sanitarium opened its original 50-bed hospital in 1914. That facility later expanded to 100-beds and remained under the active leadership of Dr. McCuistion until his death in 1947. Through a generous bequest of his estate a new facility was built at the current location in 1968. Continuing its expansion in 1977, the hospital grew from the original 137-beds to 210 beds. The Paris Regional Cancer Center offers comprehensive outpatient cancer care to the Northeast Texas area, as well as to Southwestern Oklahoma. Built in 1992, the 20,000 square foot center provides chemotherapy and radiation therapy services under one roof. The staff includes two medical oncologists, and one a medical/radiation oncologist. The Paris Regional Cancer Center is part of Texas Oncology, P.A. Texas Oncology, P.A., is the largest private practice group of oncelogists in the United States, with over 60 physicians practicing throughout the state of Texas. Education: PUBLIC SCHOOLS: Five Independent School Districts operate in and adjacent to the City of Paris. These school districts have five high schools, four middle schools, and ten elementary schools. Over 650 students graduate annually from the districts. The districts also offer a Head Start Program, an Even Start adult program, as well as a Pre-Kindergarten through Kindergarten program. Special education classes include: classes for the deaf, visually handicapped, for severely handicapped children, etc. Classes are also available for 'gifted' children. Vocational programs at the secondary level include auto mechanics, auto body repair, health occupations, construction trades, office education, agriculture, home economics and cosmetology. The City also has three private schools. PARIS JUNIOR COLLEGE (PJC): Established in 1924, PJC is a comprehensive community college meeting the educational and cultural needs of Paris and the Northeast Texas Area. PJC, with an enrollment of over 3,000 full and part-time students, offers quality general education to fulfill the first two years of work for the Bachelor's Degree in most major fields, Continuing Education: A wide variety of non-credit courses for upgrading job skills, personal development, recreation or enrichment are offered through PJC's Continuing Education Division. Offerings typically include instruction in basic computer, various kinds of software, sign language, defensive driving, small business and entrepreneurship, CPR, fishing, photography, piano, guitar, and a very popular children's summer enrichment program. Customized Training for Business and Industry: In an effort to serve new and existing companies and to promote economic growth and development of Pads and Northeast Texas, the college welcomes opportunities to provide training tailored to the specific requirements of a particular employer. Instruction may be provided on-site or in college facilities with length, content, and location of the program determined by the employer for whom the training is designed. B-4 TEXAS A&M UNIVERSITY - COMMERCE (TAMU-C): TAMU-C is located 40 minutes southwest of Paris, The university has a student population of approximately 7,800 students. TAMU-C offers more than 100 major fields of study through 32 academic departments and offers 50 Master Degree programs and 13 Ph.D. programs. The University has a national reputation in the ~erd of journalism and graphic arts. OTHER COLLEGES AND UNIVERSITIES: Within a two-hour drive of Paris, residents have access to over a dozen other institutions of higher learning in the Dallas/Ft. Wo~h, Sherman, Denton, Tyler and Texarkana areas. LAMAR COUNTY Lamar County was created in 1840 from Red River County. The northeast Texas county has an economy based on manufacturing and agribusiness. The Texas Almanac designates beef, dairy cattle, hay, wheat, cotton, soybeans and peanuts as the principal sources of agricultural income. The 2000 census for the county was 48,499, an increase of 10.4% since 1990. Labor Force Statistics City of Paris Lamar County June June June June 2001 2000 2001 2000 Civilian Labor Force 11,417 11,624 21,442 22,705 Total Employed 10,580 10,697 20,028 21,560 Total Unemployed 837 927 1,414 1,145 % Unemployed 7.3% 8.0% 6.6% 5.0% State of Texas United States June June June June 2001 2000 2001 2000 Civilian Labor Force 10,728,400 10,422,600 142,685,000 141,425,000 Total Employed 10,153,800 9,970,600 135,923,000 135,601,000 Total Unemployed 574,600 452,000 6,762,000 5,824,000 % Unemployed 5.4% 4.3% 4.7% 4.1% Soume: Texas Workforce Commission, Labor Market lnforrnation Department. Estimated Total Retail Sales Statistics -$000's Estimated Total Year Lamar CounW 1992 $314,202 1993 338,576 1994 353,805 1995 361,674 1996 399,056 1997 421,129 1998 434,757 1999 455,086 2000 658,888 Effective Buyinglncome(EBI) Lamar County Year Total Effective Median Buying Income Household ($000) EB~I 1992 $511,518 $24,552 1993 535,494 25,346 1994 572,151 26,954 1995 599,192 28,213 1996 548,269 25,163 1997 580,300 26,498 1998 604,374 27,177 1999 635,245 27,702 2000 676,355 28,999 Source: Sa/es & Marketing Magazine, Survey of Buying Power 1992-2000. Figures represent estimates as of January 1 of the year noted. B-5 APPENDIX C Form of Legal Opinion of Bond Counsel APPENDIX D Issuer's General Purpose Financial Statements For Fiscal Year Ended September 30, 2000 (Independent Auditor's Report, General Financial Statements and Notes to the Financial Statements - not intended to be a complete statement of the Issuer's financial condition. Reference is made to the complete Annual Financial Report for further information.) APPENDIX E Municipal Bond Insurance Specimen