city of corpus christi, texas rbc dain rauscher banc of

Table of Contents
OFFICIAL STATEMENT DATED MAY 30, 2003
In the opinion of McCall, Parkhurst & Horton L.L.P., 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 thereof, subject to the matters described under “TAX MATTERS” herein, including the alternative minimum tax on
corporations.
NEW ISSUE - BOOK-ENTRY-ONLY
See “RATINGS”: Moody’s “Applied For”
S&P “Applied For”
Fitch “Applied For”
(See “BOND INSURANCE”
and “RATINGS” herein)
$28,870,000
CITY OF CORPUS CHRISTI, TEXAS
Utility System Revenue
Refunding Bonds, Series 2003
Dated: May 15, 2003
Due: July 15, as shown on following page
The City of Corpus Christi, Texas Utility System Revenue Refunding Bonds, Series 2003 (the “Bonds”) will be issued by the City of
Corpus Christi, Texas (the “City” or the “Issuer”) pursuant to the laws of the State of Texas, including Chapter 1207, Texas Government
Code, as amended, the City’s Home Rule Charter, and an ordinance adopted by the City Council on March 25, 2003 (the “Ordinance”).
In the Ordinance the City Council delegated the authority to the City Manager to execute a Purchase Contract relating to the sale of the
Bonds. This Purchase Contract was executed by the City Manager and the Underwriters, acting through their duly acting representative,
on May 30, 2003.
The Bonds are special obligations of the City, payable as to principal, interest and redemption premium, if any, solely from and are
legally and ratably secured by a first lien on and pledge of the Pledged Revenues, as herein defined. The Bonds do not constitute an
indebtedness or general obligation of the City and are not payable from funds raised or to be raised by taxation by the City or
any other political subdivision of the State of Texas.
Interest on the Bonds will accrue from the dated date of the Bonds and will be payable on January 15 and July 15 of each year,
commencing January 15, 2004, and will be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Bonds will
be issued as fully registered obligations in book-entry form only and when issued will be registered in the name of Cede & Co., as
nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds for so
long as the Bonds are maintained in DTC’s book-entry only system. Book-entry interests in the Bonds will be made available for
purchase in the principal amount of $5,000 or any integral multiple thereof. Purchasers of the Bonds (the “Beneficial Owners”) will not
receive physical delivery of certificates representing their interest in the Bonds purchased. So long as DTC or its nominee is the
registered owner of the Bonds, the principal of and interest on the Bonds will be payable by JPMorgan Chase Bank, Dallas, Texas, as
Paying Agent/Registrar, to the securities depository, which will in turn remit such principal and interest to its participants, which will in
turn remit such principal and interest to the Beneficial Owners of the Bonds. (See “BOOK-ENTRY-ONLY SYSTEM” herein.) Proceeds
from the sale of the Bonds will be used for (1) discharging and refunding certain of the City’s currently outstanding revenue bonds (the
“Refunded Bonds”) and (2) paying the costs of issuance relating to the Bonds. (See “PURPOSE OF THE BONDS” herein.)
The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued
concurrently with the delivery of the Bonds by FINANCIAL SECURITY ASSURANCE INC. See “BOND INSURANCE”.
SEE FOLLOWING PAGE FOR STATED MATURITIES, PRINCIPAL AMOUNTS,
REDEMPTION PROVISIONS, INTEREST RATES, AND YIELDS
The Bonds are offered for delivery, when issued, subject to the opinions of the Attorney General of the State of Texas and McCall,
Parkhurst & Horton L.L.P., Dallas, Texas, Bond Counsel for the City (see “LEGAL PROCEEDINGS” and “TAX MATTERS”). Certain
legal matters will be passed upon for the City by the City Attorney and for the Underwriters by Fulbright & Jaworski L.L.P., San
Antonio, Texas. It is anticipated that definitive Bonds will be tendered for delivery through the services of DTC on or about June 24,
2003.
RBC DAIN RAUSCHER
BANC OF AMERICA SECURITIES LLC
$28,870,000
City of Corpus Christi, Texas
Utility System Revenue Refunding Bonds, Series 2003
Stated Maturity Schedule
(Due July 15)
Stated
Maturity
Amount ($)
Rate (%)
Yield/
Price (%)
CUSIP No. (1)
Stated
Maturity
Amount ($)
Rate (%)
Yield/
Price (%)
CUSIP No. (1)
2005
540,000
2.00
1.30
220245JK1
2011
3,420,000
4.00
3.07
220245JR6
2006
1,280,000
2.25
1.57
220245JL9
2012
3,550,000
5.00
3.21
220245JS4
2007
1,975,000
2.50
1.97
220245JM7
2013
4,560,000
5.00
3.34
220245JT2
2008
2,040,000
2.75
2.27
220245JN5
2014
4,815,000
5.00
3.46
220245JU9
2009
2,100,000
3.00
2.55
220245JP0
2015
3,415,000
5.00
3.58
220245JV7
2010
1,175,000
3.25
2.84
220245JQ8
(Accrued interest from May 15, 2003 to be added)
Optional Redemption. The Bonds stated to mature on and after July 15, 2014, are subject to redemption, at the option of the City, in
whole or in part, on July 15, 2013 and any date thereafter, at par plus accrued interest to the date fixed for redemption. See “THE
BONDS-Optional Redemption” herein.
(1) CUSIP numbers have been assigned to the Bonds by Standard & Poor’s CUSIP Service Bureau, a division of the
McGraw Hill Companies, Inc., and are included solely for the convenience of owners of the Bonds. Neither the City, the
Financial Advisors, nor the Underwriters shall be responsible for the selection or correctness of the CUSIP numbers set
forth herein.
-ii45321211.2
USE OF INFORMATION IN OFFICIAL STATEMENT
This Official Statement, which includes the cover page and the Appendices hereto, does not constitute an
offer to sell or the solicitation of an offer to buy in any jurisdiction to any person to whom it is unlawful
to make such offer, solicitation or sale.
No dealer, broker, salesman or other person has been authorized to give any information, or to make any
representations other than those contained in this Official Statement, and, if given or made, such other
information or representations must not be relied upon as having been authorized by the City, the
Financial Advisor, or the Underwriters.
This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer
to buy in any state in which such offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such
offer or solicitation. Any information and expressions of opinion herein contained are subject to change
without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of the City or
other matters described herein since the date hereof.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN
THIS OFFICIAL STATEMENT. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION
IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH THEIR RESPONSIBILITIES TO
INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND
CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT
GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
THE BONDS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE
COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE
REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH
APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE
SECURITIES HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE
REGARDED AS A RECOMMENDATION THEREOF.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
The agreements of the City and others related to the Bonds are contained solely in the contracts described
herein. Neither this Official Statement nor any other statement made in connection with the offer or sale
of the Bonds is to be construed as constituting an agreement with the purchasers of the Bonds.
INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL
APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN
INFORMED INVESTMENT DECISION.
Neither the City, the Financial Advisor, nor the Underwriters make any representation or warranty with
respect to the information contained in this Official Statement regarding the Depository Trust Company
or its Book-Entry-Only System.
Other than with respect to information concerning Financial Security Assurance Inc. (“Financial
Security”) contained under the caption “BOND INSURANCE” and Exhibit E “Specimen Municipal
Bond Insurance Policy” herein, none of the information in this Official Statement has been supplied or
-iii45321211.2
verified by Financial Security and Financial Security makes no representation or warranty, express or
implied, as to (i) the accuracy or completeness of such information; (ii) the validity of the Bonds; or
(iii) the tax exempt status of the interest on the Bonds.
[The remainder of this page intentionally left blank.]
-iv45321211.2
TABLE OF CONTENTS
USE OF INFORMATION IN OFFICIAL STATEMENT ......................................................................................... iii
CITY ADMINISTRATION ....................................................................................................................................... vi
INTRODUCTION ....................................................................................................................................................... 1
PURPOSE AND PLAN OF FINANCING.................................................................................................................. 1
CITY’S COMBINED SYSTEM CAPITAL IMPROVEMENT PLAN ...................................................................... 2
PURPOSE OF THE BONDS ...................................................................................................................................... 2
SECURITY FOR THE BONDS.................................................................................................................................. 3
BONDHOLDERS’ REMEDIES ................................................................................................................................. 8
BOND INSURANCE .................................................................................................................................................. 8
THE BONDS............................................................................................................................................................... 9
SOURCES AND USES OF FUNDS......................................................................................................................... 12
BOOK-ENTRY-ONLY SYSTEM ............................................................................................................................ 12
CITY’S COMBINED SYSTEM ............................................................................................................................... 15
CITY’S COMBINED SYSTEM OPERATIONS...................................................................................................... 25
CITY’S COMBINED SYSTEM RATES.................................................................................................................. 32
CITY’S COMBINED SYSTEM FINANCIAL INFORMATION ............................................................................ 39
LITIGATION AND REGULATION ........................................................................................................................ 52
GASB 34 STATEMENT........................................................................................................................................... 54
LEGAL INVESTMENTS IN TEXAS ...................................................................................................................... 54
REGISTRATION AND QUALIFICATION OF BONDS FOR SALE..................................................................... 55
RATINGS.................................................................................................................................................................. 55
TAX MATTERS ....................................................................................................................................................... 55
LEGAL PROCEEDINGS.......................................................................................................................................... 58
FINANCIAL STATEMENTS................................................................................................................................... 59
FINANCIAL ADVISOR ........................................................................................................................................... 59
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL CALCULATIONS ........................................ 59
UNDERWRITING .................................................................................................................................................... 59
NO-LITIGATION CERTIFICATE ........................................................................................................................... 60
GENERAL INFORMATION.................................................................................................................................... 60
CONTINUING DISCLOSURE OF INFORMATION.............................................................................................. 60
FORWARD LOOKING STATEMENTS ................................................................................................................. 62
MISCELLANEOUS.................................................................................................................................................. 62
AUTHORIZATION OF THE OFFICIAL STATEMENT ........................................................................................ 63
SELECTED PROVISIONS OF THE ORDINANCE.............................................................................................. A-1
CERTAIN AUDITED FINANCIAL INFORMATION .......................................................................................... B-1
CERTAIN INFORMATION RELATING TO THE CITY OF CORPUS CHRISTI .............................................. C-1
OPINION OF BOND COUNSEL ........................................................................................................................... D-1
SPECIMEN MUNICIPAL BOND INSURANCE POLICY ....................................................................................E-1
-v45321211.2
City of Corpus Christi, Texas
1201 Leopard
Corpus Christi, Texas 78401
(361) 880-3105
CITY ADMINISTRATION
ELECTED OFFICIALS
Mayor
Samuel L. Neal, Jr.
Council Members
Bill Kelly, District 1
Javier D. Colmenero, District 2
Jesse Noyola, District 3
Mark Scott, District 4
Rex A. Kinnison, District 5
Brent Chesney, At Large
Henry Garrett, At Large
Melody Cooper, At Large
CERTAIN APPOINTED OFFICIALS
George K. Noe
Vacant
Ronald E. Massey
Jorge G. Cruz-Aedo
Margie C. Rose
Lee Ann Dumbauld
Mark L. McDaniel
Constance P. Sanchez
Jay Reining
Armando Chapa
City Manager
Deputy City Manager
Assistant City Manager
Assistant City Manager
Assistant City Manager
Director of Financial Services
Director of Management and Budget
Acting Assistant Director of Financial Services
Acting City Attorney
City Secretary
CONSULTANTS AND ADVISORS
Bond Counsel
McCall, Parkhurst & Horton L.L.P., Dallas, Texas
Paying Agent
JPMorgan Chase Bank, Dallas, Texas
Independent Certified
Public Accountants
Collier, Johnson & Woods, P.C., Corpus Christi, Texas
Financial Advisors
M. E. Allison & Co., Inc., San Antonio, Texas
-vi45321211.2
OFFICIAL STATEMENT
$28,870,000
City of Corpus Christi, Texas
Utility System Revenue Refunding Bonds, Series 2003
INTRODUCTION
This Official Statement (including the cover page and appendices hereto) of the City of Corpus
Christi, Texas (the “City”) provides certain information in connection with the issuance by the City of its
Utility System Revenue Refunding Bonds, Series 2003 (the “Bonds”). The Bonds are authorized to be
issued pursuant to the laws of the State of Texas, including specifically Chapter 1207, Texas Government
Code, as amended, and an ordinance adopted by the City Council of the City (the “Ordinance”) on
March 25, 2003. This Official Statement does not purport to be comprehensive or definitive. All
statements made herein with respect to the Ordinance are qualified in their entirety by reference to such
document, and statements made herein with respect to the Bonds are qualified in their entirety by
reference to the forms thereof and information with respect thereto included in the Ordinance, copies of
which are available upon request from the City’s Financial Advisor, Mark A. Seal, M. E. Allison & Co.,
Inc., 950 East Basse Road, Second Floor, San Antonio, Texas 78209, telephone (210) 930-4000, or from
Lee Ann Dumbauld, Director of Financial Services, City of Corpus Christi, 1201 Leopard, Corpus
Christi, Texas 78401, telephone (361) 880-3610, by electronic mail or upon payment of reasonable
copying, handling, mailing and delivery charges. Certain capitalized terms used herein and not defined
have the meanings set forth in Appendix A to this Official Statement.
This Official Statement speaks only as to its date, and the information contained herein is subject
to change. Copies of the Final Official Statement and the Escrow Agreement pertaining to the Bonds will
be deposited with the Municipal Securities Rulemaking Board, 1900 Duke Street, Suite 600, Alexandria,
Virginia 22314. See “CONTINUING DISCLOSURE OF INFORMATION” for a description of the
City’s undertaking to provide certain information on a continuing basis.
PURPOSE AND PLAN OF FINANCING
In 1990, the City established by ordinance (the “1990 Ordinance”) a unified water, wastewater,
and gas utility system (the “City’s Combined System”). Pursuant to the terms of the 1990 Ordinance, the
City issued its Utility System Revenue Refunding Bonds, Series 1990 (the “Series 1990 Bonds”). Under
the terms of the 1990 Ordinance, the City reserved the right to issue additional bonds on a parity with the
Series 1990 Bonds, and currently there are outstanding nine such issues of parity bonds, its Utility System
Revenue Bonds, Series 1994 (the “Series 1994 Bonds”), Series 1994-A (the “Series 1994-A Bonds”),
Series 1995 Bonds (the “Series 1995 Bonds”), Series 1995-A (the “Series 1995-A Bonds”), Series 1999
Bonds (the “Series 1999 Bonds”), Series 1999-A Bonds (the “Series 1999-A Bonds”) and its Utility
System Revenue Refunding Bonds, Series 2000 (the “Series 2000 Bonds”), its Utility System Revenue
Refunding Bonds, Series 2000-A (the “Series 2000-A Bonds”), and its Utility System Revenue Refunding
and Improvement Bonds, Series 2002 (the “Series 2002 Bonds”). The Series 1990 Bonds are no longer
outstanding. The Series 1994 Bonds, the Series 1994-A Bonds, the Series 1995 Bonds, the Series 1995-A
Bonds, the Series 1999 Bonds, the Series 1999-A Bonds, the Series 2000 Bonds, the Series 2000-A
Bonds, the Series 2002 Bonds, and the Series 2003 Bonds are herein defined as the “Previously Issued
Priority Bonds”. The principal amount of the Previously Issued Priority Bonds currently outstanding is
$262,770,000. See “Table 20”, herein. Previously each utility system was operated as a separate
enterprise fund and the City still maintains internal records to account for each of those utility systems as
separate enterprise funds.
-145321211.2
In 1997 the City established a tax-exempt commercial paper program (the “Commercial Paper
Notes”) for the benefit of the City’s Combined System in the maximum amount of $50,000,000. The
City has established a new commercial paper program for the City’s Combined System that has increased
the amount of Commercial Paper Notes that may at anytime and from time to time be outstanding from
$50,000,000 to $75,000,000. See “CITY’S COMBINED SYSTEM FINANCIAL INFORMATION –
Subordinated Obligations”.
The City has recently adopted a five year Capital Improvement Program. The following table
sets forth the projects and proposed funding sources:
CITY’S COMBINED SYSTEM CAPITAL IMPROVEMENT PLAN
In order to meet utility needs and to comply with applicable governmental and environmental
regulations, the City periodically evaluates and forecasts the City’s Combined System capabilities and
develops a plan to accommodate future requirements in a timely manner. As part of the annual capital
improvement planning process, on July 20, 1999, the City Council approved a capital improvement plan
(the “Plan”) for the City’s water, wastewater and storm water systems. The estimated cost of
improvements included in the Plan, together with the anticipated method of financing the costs, as
adjusted by the City administration, are summarized in the following table.
FY 2002-03
FY 2003-04
FY 2004-05
FY 2005-06
FY2006-07
TOTAL
$69,481,891
8,780,000
17,338,109
$0
0
0
0
$ 22,571.333
2,250,000
28,702,833
1,017,793
$ 27,851,875
8,013,750
22,703,125
806,500
$23,051,875
8,013,750
22,703,125
806,500
$142,956,974
27,057,500
91,447,192
2,630,793
TOTAL
$95,600,000
$0
$54,541,959
$59,375,250
$54,575,250
$264,092,459
Funding:
Revenue Bonds
$95,600,000
$0
$54,541,959
$59,375,250
$54,575,250
$264,092,459
Projects:
Water Projects
Stormwater Projects
Wastewater Project
Gas Projects
The City’s ability to finance the planned capital improvements depends upon its ability to increase rates
sufficiently to support the issuance of revenue bonds and generation of surplus City’s Combined System
revenues necessary to finance such improvements. See “CITY’S COMBINED SYSTEM RATES--City’s
Charter Amendment Regarding Rates”.
PURPOSE OF THE BONDS
General
Proceeds from the sale of the Bonds will be used for (1) discharging and refunding certain of the City’s
currently outstanding revenue bonds (the “Refunded Bonds”) as disclosed in Schedule I and (2) paying
the costs of issuance relating to the Bonds.
Refunded Bonds
The Refunded Bonds, and interest due thereon, are to be paid on the scheduled payment dates from funds
to be deposited with JPMorgan Chase Bank, Dallas, Texas (the “Escrow Agent”) pursuant to an Escrow
Agreement dated as of the date hereof (the “Escrow Agreement”) between the City and the Escrow Agent
(see “Schedule I” herein).
-245321211.2
The Ordinance provides that the City will deposit certain proceeds of the sale of the Bonds along with
other lawfully available funds of the City, if any, with the Escrow Agent in the amount necessary to
accomplish the discharge and final payment of the Refunded Bonds. Such funds will be held by the
Escrow Agent in an escrow fund (the “Escrow Fund”) irrevocably pledged to the payment of principal of
and interest on the Refunded Bonds and will be used to purchase direct obligations of the United States of
America (the “Federal Securities”).
Simultaneously with the issuance of the Bonds, the City will give irrevocable instructions to provide
notice, if any, to the owners of the Refunded Bonds that the Refunded Bonds will be redeemed prior to
stated maturity on the first optional redemption date, on which date money will be made available to
redeem the Refunded Bonds from money held under the Escrow Agreement.
Grant Thornton LLP, Minneapolis, Minnesota, certified public accountants, will verify at the time of
delivery of the Bonds to the Underwriters that the Federal Securities will mature and pay interest, without
reinvestment, at such times and in such amounts which, together with uninvested funds, if any, in the
Escrow Fund, will be sufficient to pay, when due, the principal of and interest on the Refunded Bonds.
Such maturing principal of and interest on the Federal Securities will not be available to pay the debt
service requirements on the Bonds.
By the deposit of the Federal Securities and cash with the Escrow Agent pursuant to the Escrow
Agreement, the City will have affected the defeasance of the Refunded Bonds pursuant to the terms of the
ordinances authorizing the issuance of the Refunded Bonds. As a result of such defeasance, the Refunded
Bonds will no longer be payable from the Net Revenues, but will be payable solely from the principal of
and interest on the Federal Securities and cash on deposit in the Escrow Fund and held for such purpose
by the Escrow Agent, and that the Refunded Bonds will be defeased and are not to be included in or
considered to be indebtedness of the City for the purpose of a limitation or indebtedness or for any other
purpose.
SECURITY FOR THE BONDS
Creation of City’s Combined System
Pursuant to the 1990 Ordinance, the City has created a single combined utility system comprised of the
City’s water system, wastewater disposal system and gas system, together with all future extensions,
improvements, enlargements and additions thereto, including, to the extent permitted by law, stormwater
sewer and drainage, and all replacements thereof. The City’s Combined System shall not include any
water, wastewater or gas facilities which are declared by the City not to be part of the City’s Combined
System and which are financed with Special Facilities Bonds. The City does not have any currently
outstanding Special Facilities Bonds.
Pledge of Pledged Revenues
The Bonds are special obligations of the City issued on a parity with the Previously Issued Priority Bonds
which, together with any Additional Priority Bonds hereafter issued, are payable solely from and secured
by a first lien on the Pledged Revenues including such revenues within the System Fund and the other
funds created by the Ordinance; and the Pledged Revenues are further pledged to the establishment and
maintenance of the Debt Service Fund and the Reserve Fund as provided in the Ordinance. The Pledged
Revenues are comprised of Net Revenues of the City’s Combined System and any other additional
revenues, income, receipts and other resources that may hereafter be pledged to the Priority Bonds. The
term Net Revenues means the Gross Revenues of the City’s Combined System less the Operating
Expenses of the City’s Combined System. Gross Revenues include all revenues, income and receipts
-345321211.2
derived or received by the City from the operation and ownership of the City’s Combined System
including certain interest income. Operating Expenses include the expenses of operation and maintenance
of the City’s Combined System, including all salaries, labor and materials and certain expenses of repairs
and extensions, and include the purchase of water, sewer and gas services from other entities and the
expenses related thereto (including the contract payments to the Nueces River Authority for its Water
Supply Revenue Bonds, Series 1979, its Water Supply Revenue Refunding Bonds, Series 1994, and its
Water Supply Facilities Revenue Bonds, Series 1997, of which $115,975,000 in aggregate principal
amount are outstanding, and including the contract payments to the Lavaca-Navidad River Authority for
its Water Supply Facilities Revenue Bonds, Series 1997 of which $7,680,000 are outstanding and to cover
the City’s obligations in the amount of $106,446,712; see “Obligations Payable From System
Revenues”), but depreciation and payments to the Debt Service Fund and Reserve Fund shall never be
considered Operating Expenses. See Appendix A for a more complete definition of these defined terms.
The Bonds are not secured by or payable from a mortgage or deed of trust on any properties, whether real,
personal or mixed, constituting the City’s Combined System. The Bonds do not constitute an
indebtedness or general obligation of the City, are not payable from any funds raised or to be
raised by taxation and Owners of the Bonds shall never have the right to demand payment thereof
from the levy of ad valorem taxes or from any other source not pledged to the payment of the
Bonds.
Perfection of Security for the Bonds
Chapter 1208, as amended, Texas Government Code, applies to the issuance of the Bonds and the pledge
of the Pledged Revenues, and such pledge is therefore, valid, effective and perfected. Should Texas law
be amended while the Bonds are outstanding and unpaid, the result of such amendment being that the
pledge of the Pledged Revenues is to be subject to the filing requirements of the Uniform Commercial
Code (which, in Texas, are set forth in Chapter 9, Texas Business and Commerce Code), in order to
preserve to the registered owners of the Bonds a security interest in such pledge, the City has agreed in
the Ordinance to take such measures as it determines is reasonable and necessary to enable a filing of a
security interest in said pledge to occur.
Flow of Funds
The Ordinance provides that Gross Revenues of the City’s Combined System shall be credited to the
System Fund upon receipt, and amounts in the System Fund shall be used to pay Operating Expenses as a
first charge against Gross Revenues. All amounts remaining in the System Fund shall be applied, on or
before the 10th day of each month, as follows:
(a) First, to make required transfers into the Debt Service Fund in such amounts, in approximately equal
monthly installments, as will be sufficient to pay interest on Priority Bonds on the next interest payment
date, principal on Priority Bonds on the next succeeding principal payment date, and Amortization
Installments in such amounts and times as may be required in any ordinance authorizing the issuance of
Priority Bonds.
(b) Second, to make required transfers into the Reserve Fund to maintain or establish the Required
Amount therein or make up any deficiency; and
(c) Third, for the payment of other City’s Combined System obligations, including Subordinated
Obligations, or, at the end of any Fiscal Year, for any other lawful purpose.
(See “Selected Provisions of the Ordinance - Flow of Funds - Debt Service Fund” in Appendix A.)
-445321211.2
Bond Reserve Fund
Under the Ordinance, the City is required to maintain a Reserve Fund for the outstanding Previously
Issued Priority Bonds, the Bonds, and each series of Additional Priority Bonds. Following the issuance of
each series of Additional Priority Bonds, unless the Reserve Fund contains the Required Amount, the City
agrees to transfer monthly into the Reserve Fund an amount equal to one-sixtieth (1/60th) of the Average
Annual Principal and Interest Requirements on all outstanding Priority Bonds until the aggregate amount
accumulated therein is at least equal to such Average Annual Principal and Interest Requirements.
Amounts in such Reserve Fund shall be used to pay the principal of and interest on the Priority Bonds at
any time when there is not sufficient money available in the Debt Service Fund for such purposes. The
City may substitute a Credit Facility in lieu of cash or Eligible Investments for all or any part of the
Required Amount to be maintained in the Reserve Fund. Deficiencies in the Reserve Fund resulting from
withdrawals or decreases in market value of Eligible Investments are to be made up from the next
available Pledged Revenues within twelve months. The City currently has on deposit in the Reserve Fund
both cash and surety bond policies to satisfy funding the Required Amount. The City anticipates
purchasing a debt service reserve fund surety policy from Financial Security Assurance Inc., which
constitutes a Credit Facility, to fund a portion of the Required Amount resulting from the issuance of the
Bonds.
Rate Covenant
The City has covenanted that it will fix, establish, maintain and collect rates and charges for the use and
availability of the City’s Combined System at all times as are necessary to produce Gross Revenues and
other Pledged Revenues in each Fiscal Year equal to the GREATER of either:
(A) Amounts sufficient:
(1) to pay all current Operating Expenses plus
(2) to produce Net Revenues for each Fiscal Year at least equal to 1.25 times the Average
Annual Principal and Interest Requirements on all Priority Bonds then outstanding; or
(B) Amounts sufficient to pay the sum of:
(1) all current Operating Expenses;
(2) the Average Annual Principal and Interest Requirements on the then outstanding Priority
Bonds;
(3) required deposits to the Reserve Fund for the Priority Bonds; and
(4) amounts required to pay all other obligations of the City’s Combined System reasonably
anticipated to be paid from Gross Revenues during the current Fiscal Year.
The foregoing notwithstanding, such rates, charges and fees shall be fixed, established, maintained and
collected at a level sufficient to enable the City to pay debt service on Priority Bonds during the current
Year.
(See “Selected Provisions of the Ordinance - General Covenants - Rate Covenant” in Appendix A.)
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An amendment to the City Charter of the City approved by residents of the City in 1991 purporting to
limit the amount of rate increases in any fiscal year was declared void by a District Court in Uvalde
County, Texas in 1996. See “CITY’S COMBINED SYSTEM RATES - City Charter Amendment
Regarding Rates Ruled Void”.
Additional Bonds
The City has reserved the right to issue one or more series of Additional Priority Bonds for any lawful
purpose. See “System Capital Improvement Plan” for projected issuance of additional bonds. No
Additional Priority Bonds may be issued unless each of the applicable following requirements are
satisfied:
A. For All Additional Priority Bonds.
(1) Any additional amounts required to be deposited into the Reserve Fund to attain the Required
Amount shall either be deposited in cash or by means of a Credit Facility upon the delivery of
such Additional Priority Bonds or, at the option of the City, by the deposit of such required
additional amount in approximately equal monthly installments of not less than one-sixtieth of the
required additional amount; and
(2) The City Manager (or other City officer having responsibility for the City’s financial affairs)
shall certify that the City is not in default as to any covenant, obligation or agreement contained
in any ordinance or other proceeding relating to any obligations of the City payable from and
secured by a lien on and pledge of the Pledged Revenues and the amounts on deposit in all Funds
or accounts for all obligations payable from Pledged Revenues or the amounts then required to be
deposited therein.
B. For Additional Priority Bonds For Capital Improvements.
(1) The City shall secure a certificate or opinion of an Accountant to the effect that, according to
the books and records of the City, the Net Earnings for the preceding Year or for 12 consecutive
months out of the 15 months immediately preceding the month the ordinance authorizing the
Additional Priority Bonds is adopted are at least equal to 1.25 times the Average Annual Principal
and Interest Requirements for all Priority Bonds after giving effect to the issuance of the
Additional Priority Bonds to be issued; or
(2) If the City has outstanding Priority Bonds which were issued for Capital Additions and for
which capitalized interest has been provided for at least 12 months subsequent to the date of
issuance of the Additional Priority Bonds proposed to be issued, the City may (A) satisfy the
requirements of clause C below, but for such purposes substitute the term Capital Improvements
for Capital Additions where the term Capital Additions appears therein to the extent necessary to
give recognition that Capital Improvements, rather than Capital Additions, are to be financed, and
(B) secure the certificate described in clause B(1) above with respect to all Priority Bonds other
than Priority Bonds issued for Capital Additions for which capitalized interest has been provided
for at least 12 months subsequent to the date of issuance of the Additional Priority Bonds
proposed to be issued.
C. For Additional Priority Bonds For Capital Additions.
(1) The Engineer of Record shall provide a comprehensive Engineering Report for each Capital
Addition to be financed which report shall (a) contain detailed estimates of the cost of acquiring
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and constructing the Capital Addition, the estimated date of its completion and commercial
operation, a detailed analysis of the financial operations of the system into which the Capital
Addition is to be integrated and the City’s Combined System as a whole for the period during the
construction and for at least five years after the date the Capital Addition is estimated to become
commercially operative and (b) conclude that the Capital Addition is necessary and will
substantially increase the capacity, or is needed to replace existing facilities, to meet current and
projected demand for the service or product to be provided and the estimated cost of providing
the service or product from the Capital Addition will be reasonable in comparison with projected
costs for furnishing such service or product from other reasonably available sources; and
(2) The Engineer of Record shall provide a certificate to the effect that, based on the Engineering
Report prepared for each Capital Addition, the projected Net Earnings for each of the five years
subsequent to the estimated date the Capital Addition becomes commercially operative will be
equal to at least 1.25 times the Average Annual Principal and Interest Requirements for Priority
Bonds then outstanding or incurred and all Priority Bonds estimated to be issued for all Capital
Improvements and for all Capital Additions then in progress or being initiated during the period
through the fifth year subsequent to the date the Capital Addition is estimated to become
commercially operative.
Once a Capital Addition has been initiated by meeting the conditions set forth in clauses C(1) and (2)
above, and the initial Priority Bonds issued therefor are delivered, the City reserves the right to issue
additional Priority Bonds to finance the remaining costs of such Capital Addition in such amounts as may
be necessary to complete the acquisition and construction thereof and make the same commercially
operative without satisfaction of any of the requirements contained in clauses C(1) and (2) above
provided that the City prepares a forecast of the operations of the City’s Combined System demonstrating
the City’s Combined System’s ability to pay all obligations payable from the Pledged Revenues to be
outstanding after the issuance of such Additional Priority Bonds issued during the five years subsequent
to the latest estimated date such Capital Addition is expected to be commercially operative and the
Engineer of Record reviews such forecast and executes a certificate to the effect that (i) it is reasonable
and based thereon (and such other factors deemed to be relevant) the Pledged Revenues of the City’s
Combined System will be adequate to pay all the obligations payable from Pledged Revenues to be
outstanding after the issuance of the Additional Priority Bonds then being issued for the forecast period
and (ii) the proceeds from the sale of such Additional Priority Bonds are estimated to be sufficient to
complete such acquisition and construction.
The City, at its option, may issue Additional Parity Bonds for Capital Additions without satisfying the
requirements described in clause C above if it satisfies the relevant conditions precedent specified in
clause B above.
Certain Refunding Bonds. The requirements in B or C above shall not apply to issuance of any series of
Additional Priority Bonds for refunding any outstanding Priority Bonds that will not have the result of
increasing the debt service in any year in which there will be debt service on outstanding Priority Bonds
both before and after such refunding. The Bonds are being issued to refund outstanding Priority Bonds,
and therefore the tests described in clauses B and C above do not apply to the issuance of the Bonds.
Subordinated Obligations and Special Facilities Bonds
The City also reserves the right to issue, for any lawful purpose, obligations secured by liens on all or part
of the Pledged Revenues that are junior and subordinate to the lien on Pledged Revenues securing
payment of Priority Bonds. In this regard, the City has established the commercial paper program for the
benefit of the City’s Combined System, and the City has authorized the issuance from time to time of
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Commercial Paper Notes in an amount at any one time outstanding not to exceed $75,000,000. The City
also reserves the right to issue Special Facilities Bonds secured by liens on and pledges of revenues and
proceeds derived from Special Facilities, which shall not be considered Gross Revenues of the City’s
Combined System.
BONDHOLDERS’ REMEDIES
If the City defaults on payment of principal or interest on any Bonds, or the performance of any duty or
covenant provided by law or in the Ordinance, owners of such Bonds may pursue all legal remedies
afforded by the Constitution and the laws of the State of Texas. Although the payment of principal and
interest on such Bonds is secured by a lien on and pledge of Pledged Revenues as collected and received,
such lien and pledge attaches at any time only to so much of the Pledged Revenues as are then necessary
to make the required deposits to the appropriate funds of the City’s Combined System and any amounts
then remaining may be used by the City for any lawful purpose.
The Ordinance makes no provision for the appointment of a trustee to protect the rights of owners of any
Bonds, nor does it provide for acceleration of maturity of any Bonds or foreclosure on Pledged Revenues
or possession of Pledged Revenues by a trustee or agent for owners of any Bonds, or operation of the
City’s Combined System by an independent third party in the event of default.
No lien has been created on the physical properties comprising the City’s Combined System to secure
payment of principal of or interest on the Bonds. Moreover, in the event of default, the owners of the
Bonds have no right or claim under the laws of the State against the City’s Combined System, or the
City’s Combined System or any property of the City other than their right to payment from Pledged
Revenues collected and certain Funds maintained pursuant to the Ordinance. Accordingly, the only
practical remedy in the event of default may be a mandamus or mandatory injunction proceeding to
compel the City to increase rates and charges or perform its other obligations under the Ordinance. Such
remedy may need to be enforced on a periodic basis because the maturity of such Bonds is not subject to
acceleration. In addition, even if rates and charges are increased, the amount of revenues generated
would depend on usage of the City’s Combined System by third parties, which is beyond the control of
the City.
Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy
Code (“Chapter 9”). Although Chapter 9 provides for the recognition of a security interest represented by
a specifically pledged source of revenues (such as the Pledged Revenues), such provision is subject to
judicial construction. Chapter 9 also includes an automatic stay provision that would prohibit, without
Bankruptcy Court, approval, the prosecution of any other legal action by creditors or bondholders of an
entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9
protection from creditors, the ability to enforce any remedies under the Ordinance would be subject to the
approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court
instead of other federal or state courts); and the Bankruptcy Code provides for broad discretionary powers
of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel
will note that all opinions relative to the enforceability of the Ordinance and the Bonds are qualified with
respect to the customary rights of debtors relative to their creditors.
BOND INSURANCE
The following information has been furnished by Financial Security Assurance Inc. for the use in the
Official Statement. Such information has not been independently verified by the City, the Financial
Advisors, or the Underwriters and is not guaranteed as to completeness or accuracy by the City, the
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Financial Advisors or the Underwriters and is not to be construed as a representation of the City, the
Financial Advisors or the Underwriters.
Bond Insurance Policy
Concurrently with the issuance of the Bonds, Financial Security Assurance Inc. ("Financial Security")
will issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the
scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the
Policy included as Exhibit E to this Official Statement.
The Policy is not covered by any insurance security or guaranty fund established under New York,
California, Connecticut or Florida insurance law.
Financial Security Assurance Inc.
Financial Security is a New York domiciled insurance company and a wholly owned subsidiary of
Financial Security Assurance Holdings Ltd. ("Holdings"). Holdings is an indirect subsidiary of Dexia,
S.A., a publicly held Belgian corporation. Dexia, S.A., through its bank subsidiaries, is primarily
engaged in the business of public finance in France, Belgium and other European countries. No
shareholder of Holdings or Financial Security is liable for the obligations of Financial Security.
At March 31, 2003, Financial Security's total policyholders' surplus and contingency reserves were
approximately $1,932,647,000 and its total unearned premium reserve was approximately $1,077,095,000
in accordance with statutory accounting practices. At March 31, 2003, Financial Security's total
shareholders' equity was approximately $2,043,103,000 and its total net unearned premium reserve was
approximately $904,700,000 in accordance with generally accepted accounting principles.
The financial statements included as exhibits to the annual and quarterly reports filed by Holdings with
the Securities and Exchange Commission are hereby incorporated herein by reference. Also incorporated
herein by reference are any such financial statements so filed from the date of this Official Statement until
the termination of the offering of the Bonds. Copies of materials incorporated by reference will be
provided upon request to Financial Security Assurance Inc.: 350 Park Avenue, New York, New York
10022, Attention: Communications Department (telephone (212) 826-0100).
The Policy does not protect investors against changes in market value of the Bonds, which market value
may be impaired as a result of changes in prevailing interest rates, changes in applicable ratings or other
causes. Financial Security makes no representation regarding the Bonds or the advisability of investing in
the Bonds. Financial Security makes no representation regarding the Official Statement, nor has it
participated in the preparation thereof, except that Financial Security has provided to the Issuer the
information presented under this caption for inclusion in the Official Statement.
THE BONDS
Description
The Bonds will be dated May 15, 2003, will bear interest from the dated date thereof at the rates shown
on the inside cover page of this Official Statement payable semiannually on January 15 and July 15 of
each year, commencing January 15, 2004, and will mature on July 15 in the years and in the principal
amounts set forth on the inside cover page of this Official Statement.
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The Bonds will be issued as fully registered obligations in denominations of $5,000 principal amount or
any integral multiple thereof.
Interest on the Bonds is payable by check mailed by the Paying Agent/Registrar on or before the interest
payment date to the registered owners of record as of the last business day of the month next preceding
the interest payment date. The principal of and interest on the Bonds shall be payable at the corporate
office of the Paying Agent/Registrar in Dallas, Texas (the “Designated Trust Office”) upon presentation
and surrender of the Bonds.
Optional Redemption
The Bonds maturing on and after July 15, 2014 are subject to redemption, at the option of the City, at the
par value thereof plus accrued interest, in whole or in part, in the principal amount of $5,000 or any
integral multiple thereof on July 15, 2013, and on any date thereafter. The years of maturity of the Bonds
called for redemption shall be selected by the City. If less than all of the Bonds are redeemed within a
stated maturity at any time, the Bonds to be redeemed shall be selected by the Paying Agent/Registrar at
random and by lot or other customary method in multiples of $5,000 within any stated maturity.
Notice of Redemption
At least 30 days prior to the date fixed for any such redemption, (a) a written notice of such redemption
shall be given to the registered owner of each Bond or a portion thereof being called for redemption by
depositing such notice in the United States mail, first-class postage prepaid, addressed to each such
registered owner at his address shown on the registration books maintained by the Paying Agent/Registrar
and (b) notice of such redemption shall be published one (1) time in a financial journal or publication of
general circulation in the United States of America carrying as a regular feature notices of municipal
bonds called for redemption, provided, however, that the failure to send, mail, or receive such notice
described in (a) above, or any defect therein or in the sending or mailing thereof, shall not affect the
validity or effectiveness of the proceedings for the redemption of any Bond, and the Bond Ordinance
provides that the publication of notice as described in (b) above shall be the only notice actually required
in connection with or as a prerequisite to the redemption of any Bonds.
All notices of redemption shall (i) specify the date of redemption for the Bonds (ii) identify the Bonds to
be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount
thereof to be redeemed, (iii) state the redemption price, (iv) state the Bonds, or the portion of the principal
amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the
interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue
from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or
the principal amount thereof to be redeemed, shall be made at the designated corporate trust office of the
Paying Agent/Registrar only upon presentation and surrender thereof by the registered owner. If a Bond
is subject by its terms to redemption and has been called for redemption and notice of redemption thereof
has been duly given or waived as provided in the Bond Ordinance such Bond (or the principal amount
thereof to be redeemed) so called for redemption shall become due and payable, and on the redemption
date designated in such notice, interest on said Bond (or the principal amount thereof to be redeemed)
called for redemption shall cease to accrue and such Bond shall not be deemed to be Outstanding.
The Paying Agent/Registrar and the City, so long as a Book-Entry-Only System is used for the Bonds,
will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with
respect to the Bonds only to DTC (hereinafter defined). Any failure by DTC to advise any DTC
participant, or of any DTC participant or indirect participant to notify the beneficial owner, shall not
affect the validity of the redemption of the Bonds called for redemption or any other action premised on
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any such notice. Redemption of portions of the Bonds held by the City will reduce the outstanding
principal amount of such Bonds held by DTC. In such event, DTC may implement, through its BookEntry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance
with its rules or other agreements with DTC participants and then DTC participants and indirect
participants may implement a redemption of such Bonds from the beneficial owners. Any such selection
of Bonds to be redeemed will not be governed by the Ordinance and will not be conducted by the City or
the Paying Agent/Registrar. Neither the City nor the Paying Agent/Registrar will have any responsibility
to DTC participants, indirect participants or the persons for whom DTC participants act as nominees, with
respect to the payments on the Bonds or the providing of notice to DTC participants, indirect participants,
or beneficial owners of the selection of portions of the Bonds for redemption. See “BOOK-ENTRYONLY SYSTEM” herein.
Paying Agent/Registrar
The principal of the Bonds will be paid to the registered owner at maturity or prior redemption upon
presentation to the Paying Agent/Registrar, which initially is JPMorgan Chase Bank, at its offices located
in Dallas, Texas. Interest on the Bonds will be paid to registered owners shown on the records of the
Paying Agent/Registrar on the Record Date (see “Record Date for Interest Payment” herein), and such
interest will be paid by check sent by mail to the address of such registered owner appearing on the
registration books of the Paying Agent/Registrar or by such other customary banking arrangements
acceptable to the Paying Agent/Registrar requested by, and at the risk and expense of, the registered
owner.
Successor Paying Agent/Registrar
The City reserves the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is
replaced by the City, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar’s
records and act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying
Agent/Registrar selected by the City shall be a bank, a trust company, financial institution, or other entity
duly qualified and legally authorized to serve and perform the duties of Paying Agent/Registrar for the
Bonds. Upon a change in the Paying Agent/Registrar for the Bonds, the City shall promptly cause a
written notice thereof to be sent to each registered owner of the Bonds by United States mail, first-class
postage prepaid, which notice shall give the address of the new Paying Agent/Registrar.
Ownership
The City, the Paying Agent/Registrar, and any other person may treat the person in whose name any Bond
is registered as the absolute owner of such Bond for the purpose of making and receiving payment of the
principal thereof and premium, if any, thereon, and for the further purpose of making and receiving
payment of the interest thereon, and for all other purposes, whether or not such Bond is overdue. Neither
the City nor the Paying Agent/Registrar shall be bound by any notice or knowledge to the contrary. All
payments made to the person deemed to be the owner of any Bond in accordance with the Ordinance shall
be valid and effective and shall discharge the liability of the City and the Paying Agent/Registrar for such
Bond to the extent of the sums paid.
Transfers and Exchanges
So long as any Bonds remain outstanding, the Paying Agent/Registrar shall keep the registration books at
the Designated Trust Office in which, subject to such reasonable regulations as it may prescribe, the
Paying Agent/Registrar shall provide for the registration and transfer of the Bonds in accordance with the
terms of the Ordinance.
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Each Bond shall be transferable only upon the presentation and surrender thereof at the Designated Trust
Office of the Paying Agent/Registrar, duly endorsed for transfer, or accompanied by an assignment duly
executed by the owner or his authorized representative in a form satisfactory to the Paying
Agent/Registrar. Upon due presentation and surrender of a Bond for transfer, the Paying Agent/Registrar
is required to authenticate and deliver in exchange therefor, under such reasonable regulations as the
Paying Agent/Registrar may prescribe, a new Bond or Bonds, registered in the name of the transferee or
transferees, in authorized denominations and of the same maturity, in the principal amount of $5,000 or
any integral multiple thereof, and bearing interest at the same rate as the Bond or Bonds so presented and
surrendered.
All Bonds shall be exchangeable upon the presentation and surrender thereof at the Designated Trust
Office of the Paying Agent/Registrar for a Bond or Bonds of the same maturity and interest rate and in
any authorized denomination, in such aggregate principal amount as discussed above equal to the unpaid
principal amount of the Bond delivered in accordance with the Ordinance and shall be entitled to the
benefits and security of the Ordinance to the same extent as the Bond or Bonds in lieu of which such
Bond is delivered.
The Paying Agent/Registrar may require the owner of any Bond to pay a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with the transfer or exchange of such
Bond. Any reasonable standard or customary fee or charge of the Paying Agent/Registrar for a
conversion or exchange shall be paid by the one requesting such conversion or exchange, except that the
City shall pay such fee or charge in the case of the conversion or exchange of an assigned and transferred
Bond.
SOURCES AND USES OF FUNDS
The proceeds from the sale of the Bonds, exclusive of accrued interest, will be applied as follows:
Sources of Funds
Principal Amount of Bonds
Original Issue Premium
City Cash Contribution
Total Sources of Funds
Uses of Funds
Deposit to Escrow Fund
Issuance Expenses and Contingency Amount
Underwriters’ Discount
Bond Insurance and Surety Policy Premiums
Total Uses of Funds
$28,870,000.00
2,599,167.30
540,000.00
$32,009,167.30
$31,468,265.95
186,412.62
180,437.50
174,051.23
$32,009,167.30
BOOK-ENTRY-ONLY SYSTEM
This section describes how ownership of the Bonds is to be transferred and how the principal of
and interest on the Bonds are to be paid to and credited by The Depository Trust Company (“DTC”), New
York, New York, while the Bonds are registered in its nominee’s name. The information in this section
concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure
documents such as this Official Statement. The City, the Financial Advisor and the Underwriters believe
the source of such information to be reliable, but take no responsibility for the accuracy or completeness
thereof.
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The City cannot and does not give any assurance that (1) DTC will distribute payments of debt
service on the Bonds, or redemption or other notices, to DTC Participants, (2) DTC Participants or others
will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Bonds),
or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3)
DTC will serve and act in the manner described in this Official Statement. The current rules applicable to
DTC are on file with the Securities and Exchange Commission, and the current procedures of DTC to be
followed in dealing with DTC Participants are on file with DTC.
DTC, the world's largest depository, is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues
of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments
from over 85 countries that its participants ("Direct Participants") deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants'
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust
& Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC
and Members of the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC,
MBSCC, and EMCC, also subsidiaries of DTCC), as well as 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 both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard &
Poor's highest rating: AAA. The DTC Rules applicable to its participants are on file with the Securities
and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants,
which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual
purchaser of the Bonds ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are
registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be
requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration
in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.
DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be
the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain
steps to augment the transmission to them of notices of significant events with respect to the Bonds, such
as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example,
Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit
has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may
wish to provide their names and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue 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. (nor any other DTC nominee) will consent or vote with respect to
the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its
usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice
is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail
information from the City or the Paying Agent/Registrar, on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case with securities held for the
accounts of customers in bearer form or registered in "street name," and will be the responsibility of such
Participant and not of DTC (nor its nominee), the Paying Agent/Registrar or the City, subject to any
statutory or regulatory requirements as may be in effect from time to time. Payment of redemption
proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be
requested by an authorized representative of DTC) is the responsibility of the City, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Bonds purchased or tendered, through its
Participant, to the Paying Agent/Registrar, and shall effect delivery of such Bonds by causing the Direct
Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Paying
Agent/Registrar. The requirement for physical delivery of Bonds in connection with an optional tender or
a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by
Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Paying
Agent/Registrar's DTC account.
DTC may discontinue providing its services as securities depository with respect to the Bonds at
any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor
depository is not obtained, Bonds are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Bonds will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system has been obtained
from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy
thereof.
So long as Cede & Co. is the registered owner of the Bonds, the City 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.
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 Ordinance will be given only to DTC.
CITY’S COMBINED SYSTEM
The City’s Combined System was established by the 1990 Ordinance as a combined utility system which
includes the City’s existing water, wastewater, and gas systems. The following is a description of the
three components of the City’s Combined System. The City has also included a description of its Storm
Water Drainage System. This system’s operations are not included in the Pledged Revenues securing the
Bonds or the Previously Issued Priority Bonds, but is under the supervision of the Water System.
Description of City’s Water System
Service Area. The City’s water system serves not only the City of Corpus Christi, but also provides
water to several municipalities, water districts, and industries within a 70-mile radius of the City. The
service area is a relatively dry region of South Texas bordering on the Gulf of Mexico, with heaviest
rainfall and stream flow in the spring and fall.
Water Supply. The City’s water supply is drawn from the Nueces River Basin, the Lavaca River Basin
and the Colorado River Basin.
The Nueces River Basin has three principal rivers: the Atascosa River, the Frio River and the Nueces
River. The Atascosa and Frio Rivers join the Nueces River above the City of Three Rivers and are
impounded by the Wesley E. Seale Dam (Lake Corpus Christi Reservoir). The Frio River, which is
above the confluence of the Atascosa and Frio Rivers, is impounded by Choke Canyon Dam (Choke
Canyon Reservoir). Lake Corpus Christi Reservoir was completed in 1958 and has a surface area of
19,251 acres with a storage capacity of 241,241 acre-feet at 94 feet MSL (mean sea level). Choke
Canyon Reservoir was completed in 1982 and has a surface area of 25,733 acres with a storage capacity
of 695,271 acre-feet at 220.5 feet MSL.
For planning purposes, the Nueces River Basin is treated as a single hydrologic unit. The Nueces River
Basin covers 16,950 square miles.
The City is the largest water right holder in the Nueces River Basin and the largest user of water from the
Lake Corpus Christi/Choke Canyon Reservoir water supply system.
When Choke Canyon Reservoir was being developed in the 1970's, it was estimated that the combined
firm annual yield of the Choke Canyon/Lake Corpus Christi Reservoir system would be enough supply to
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meet the region’s needs through the year 2030. However, by 1990, a water supply planning study for the
Nueces River Basin determined that the firm annual yield was significantly less than originally estimated
and that additional water supplies would be necessary much sooner than had previously been expected.
These findings led to a regional water supply planning study in 1991 that investigated potential water
transfers from the Lavaca River Basin and the Colorado River Basin. The study recommended that the
City acquire additional water supplies from Lake Texana, on the Navidad River in the Lavaca River
Basin, and from the Garwood Irrigation Company (Colorado River) in the Colorado River Basin. In
1992, the City entered into purchase options with the Lavaca-Navidad River Authority (“LNRA”) for an
annual purchase of water from Lake Texana and with the Garwood Irrigation Company for the purchase
of senior water rights in the Colorado River.
At the same time, the City began a comprehensive, regional water supply planning study designed to
determine the long-term water needs of the Corpus Christi service area and to determine the most feasible
water supply options available to meet those needs. This study was part of the Trans-Texas Water
Program, which had been conceived by the Texas Water Development Board (“TWDB”) as a means of
planning for the long-term water supply needs of several major metropolitan areas it had identified as
potentially having water shortages within the not too distant future. The cities participating in the TransTexas Water Program included Houston, San Antonio, Corpus Christi, and Austin.
Phase II of the Trans-Texas Water Program Study for the Corpus Christi Service Area was completed in
November, 1995, before the full impact of the current drought was known. It estimated that the then firm
annual yield of 181,106 acre feet per year for the Choke Canyon/Lake Corpus Christi Reservoir system
would meet the demands in the service area until approximately 2008 and that by the year 2050 the region
would need an additional 91,000 acre feet per year of water supply to meet its municipal and industrial
water needs.
The Trans-Texas study investigated 22 water supply alternatives, eventually recommending an integrated
water supply plan that incorporated both developments of additional water supplies and reduction in water
demand through water conservation measures. Two of the options recommended for immediate
implementation were accelerated water conservation and a modified Fresh Water Inflow Operating Plan
for the Nueces Estuary, which was implemented under the Texas Commission on Environmental Quality,
formerly known as the Texas Natural Resource Conservation Commission (“TCEQ”) Agreed Order of
April, 1995. The other two primary water supply options recommended for implementation in the near
term were the transfers of water from Lake Texana and the Garwood Irrigation Company water rights in
the Colorado River.
In December 1993, the City entered into the LNRA Contract to purchase up to 41,840 acre-feet of water
from Lake Texana. In addition, the City exercised its option to purchase from the Garwood Irrigation
Company 35,000 acre-feet per year of senior water rights from the Colorado River. This purchase was
contingent upon Garwood’s amendment of its water right to allow the transfer and use of this water in the
Corpus Christi service area. Garwood filed an application with the TCEQ for an amendment which was
granted on October 7, 1998. The City paid the Garwood Irrigation Company the full purchase price of
$15,750,000 less option payments and other expenses paid to Garwood through the date of the
amendment. In the FY 1998-99 Capital Budget, City Council authorized payment with a loan of $14
million dollars from the debt reserve of the Choke Canyon Fund to the Public Law Trust Fund. This loan
was repaid at the actual interest rate earned by the Trust Fund in three annual payments, of which the final
payment was made on July 31, 2001. The Lake Corpus Christi/Choke Canyon Reservoir system with
Lake Texana and Colorado River Water has a year 2050 system firm yield of 241,700-acre feet.
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The Corpus Christi region experienced a severe drought, which, in fact, may be the new drought of record
starting in 1993 and ending in 2002.
Due to the severity of the drought in 1996 the City decided to build the pipeline from Lake Texana to
Corpus Christi immediately rather than wait until the years 2005-2007, as originally anticipated. The City
entered into agreements with the Nueces River Authority (“NRA”) and the Port of Corpus Christi
Authority (“Port”) to build a 101 mile water delivery system that would transport water from Lake
Texana to the City’s O. N. Stevens Water Treatment Plant. Under these agreements, the City guaranteed
repayment of bonds sold by NRA to fund the pipeline design, right-of-way acquisition, and pipeline
construction. NRA engaged the Port to manage the entire project. Upon completion of the project, the
City would operate and maintain the pipeline.
Under this regional partnership arrangement, a 101 mile, 64” pipeline of concrete/steel pressure pipe with
an ultimate capacity of 107,800 acre feet per year was designed, manufactured, and installed within
approximately two years. All 15,000 plus joints of pipe were laid within one twelve month period. The
route involved nine major stream crossings, two of which were done by directional drilling. One of the
crossings currently stands as the longest and largest diameter directional boring successfully completed in
the United States. Three pump stations were constructed, a primary pump station at Lake Texana and two
booster stations along the route.
On September 29, 1998, the Lake Texana to Corpus Christi pipeline was dedicated as the Mary Rhodes
Pipeline in honor of the late Mary Rhodes who, as Mayor of the City, championed the project during her
tenure in office and died shortly after the first joints of pipe were laid in June of 1997. Work to acquire a
route and permit a pipeline to convey the Colorado River water to the Mary Rhodes Pipeline is in its
preliminary stages.
On July 24, 2001 the City Council approved Resolution 024535 for the “interruptible” water supply
contract (4,500 acre-feet) between the LNRA and the City. TCEQ has approved an additional 7,500 acrefeet of interruptible water from the LNRA; City Council is expected to grant final approval of its
acquisition in the near future. The City also is pursuing the possible acquisition of an additional 10,000
acre-feet of water from the LNRA system. “Interruptible” water is water that is available from that
system beyond the system firm yield. It is estimated that the 4,500 acre-feet will be available 87% of the
time based on historical data, while the 7,500 acre-feet has a 70% availability. The interruptible contracts
will track the original contract for the firm 41,840 acre-feet of water. The base term ends in 2035 with an
option to the City for a 50-year extension.
City’s Drought Contingency Plan and Impact. In 2001 the TCEQ Agreed Order that defines the
operation of the two reservoir system in regards to Bay & Estuary inflows was further refined to include
the ability on the part of the City to go to reduced inflow requirements upon reaching 30% and 40%
storage capacities. At the 40% storage capacity the City can reduce required inflows to 1,200 acre-feet
target by implementing a prohibition against watering lawns between the hours of 10 a.m. and 6 p.m. At
a 30% storage capacity, the City can reduce Bay & Estuary Inflow targets to zero by implementing a rule
that keeps the time of day prohibition and also includes a prohibition against lawn watering any more
often than five days. These changes were made in exchange for the City implementing a construction
project consisting of a Nueces River Overflow Channel and a pipeline to divert water to a specified
location within the Rincon Bayou area. The Rincon Bayou is an area that is being brought back into a
condition that will allow it to again function as a nursery area for aquatic species.
Water Production and Distribution. “Raw” water is processed at the O.N. Stevens Water Treatment
Plant located in the northwest end of Corpus Christi. The plant is currently rated at 167 million gallons
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per day (“MGD”) production capacity. To ensure that the Plant can operate during electrical outage
periods, the City has on-line at the Plant the ability to generate 6 megawatts of electricity.
The City has five ground storage reservoir pump stations and four elevated storage tanks with a total
distribution system storage of 63.15 million gallons. The elevated storage tanks are used to provide
emergency storage and to absorb peak demand loads.
The water distribution system has approximately 1,445 miles of pipe ranging size from 2” to 60”.
Water Customers. The City of Corpus Christi is a regional water supplier in that in addition to the
“raw” water used by the City for its own customers, the City sells “raw” water and “treated” water on a
wholesa1e basis. Approximately 125,000 acre-feet of raw water is diverted on an annual basis by all
customers (City included).
The City sells “raw” water to the Alice Water Authority (City of Alice), the Beeville Water Supply
District (City of Beeville), the City of Mathis, Flint Hills Resources Refinery (formerly Koch Refinery),
and Hoechst-Celanese.
The City sells “treated” water to the South Texas Water Authority (Cities of Kingsville, Bishop, Agua
Dulce, Banquete, Driscoll and Ricardo), Nueces County Water Control & Improvement District Number
4 (City of Port Aransas) and the Violet Water Supply Corporation.
The City sells “raw” and “treated” water to the San Patricio Municipal Water District (Cities of Odem,
Taft, Gregory, Portland, Ingleside, and Rockport).
Such “treated” and “raw” wholesale water sales are generally provided pursuant to long term contracts for
“treated” water and perpetual contracts for “raw” water.
Re-Engineering. Vast changes have recently been undertaken by the Water Department ranging from
organizational changes effected through re-engineering to improvements in technology, plant, and
infrastructure.
Fifty-nine positions have been eliminated over the past two years. Staffing ranged from a high of 232 in
the 1999-2000 fiscal year to 173 in the 2002-2003 fiscal year. Vacancies, in addition to other reductions
and a continued investment in infrastructure and technology, reduced controllable operation and
maintenance costs. These reductions reflect a new understanding of competitive business practices, and
represent an important first step in identifying operations and maintenance cost saving opportunities.
Other potential budget reductions are anticipated as the Water Department continues to improve operating
efficiency and maintenance performance.
In addition, as part of the re-engineering program, the Water Department piloted a new computerized
Work Management Program (or computerized maintenance management system). This new work
management system is part of a three-pronged strategy to improve productivity: 1) new organizational
strategies, including work force cross-training; 2) new business practices, including more systematic work
planning and scheduling; and 3) new technology, including a computerized Work Management System.
The new Work Management System was installed at the O.N. Stevens Water Treatment Plant, Wesley
Seale Dam, and Choke Canyon Reservoir during April 2002. Private sector companies operating public
utilities commonly use such systems. During the fall of 2002, implementation will begin for the Water
Distribution activity.
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System Improvements. The Wesley E. Seale Dam, which impounds Lake Corpus Christi Reservoir, has
gone through two major rehabilitation projects. In 1995 all of the Spillway Crest Gates were rehabilitated
and were strengthened to be able handle the Probable Maximum Flood (PMF) event, and in 2001, a
project to ensure that the dam had the proper stability safety factor was completed. Existing emergency
generator sets have recently been replaced to give reliable emergency power to the dam.
The Bureau of Reclamation, which designed and built the Choke Canyon Dam, conducts periodic
inspections. The City is in the process of implementing the recommendations enumerated in the Bureau’s
latest inspection report. The Bureau has given the Choke Canyon Dam an excellent rating.
The City completed several projects in 2001 that enhanced the ability of the O.N. Stevens Water
Treatment Plant to produce drinking water that meets not only today’s requirements but also upcoming
requirements. Some of these projects included the total renovation of the filtration portion of the process
and the rehabilitation of half of the basins in which the sedimentation process occurs. Pending projects
include a total renovation of the filter backwash system and the revamping of the existing SCADA
system, a more efficient control of the production process and the distribution process.
In the Distribution System, the Water Department has embarked on a Transmission Main project. The
initial phase will include the installation of 60", 54" and 48" diameter pipes to a pump station recently
constructed in the Southside of Corpus Christi. The 60" portion of the Project, which is 8.5 miles in
length, is complete. Design is ongoing on the 54" and 48" portions with completion estimated in
December 2003. Upon the final completion of this Transmission Main Project there will be an additional
Transmission Main System from the O.N. Stevens Water Treatment Plant to the Flour Bluff area. Total
length of this project is approximately 40 miles.
In addition to the Pump Station constructed in the Southside, two existing pump stations will be replaced
by one pump station in the Westside of Corpus Christi.
Description of City’s Storm Water Drainage System
Service Area. The storm water drainage system service area is located within the City limits.
Storm Water Collection System. Corpus Christi’s storm water collection system consists of
approximately 100 miles of major open drainage ditches, approximately 765 miles of minor roadside
ditches, and approximately 1,000 miles of underground storm drainage pipe. The drainage pipe ranges in
size from 12” to 72” and consists primarily of concrete and smaller quantities of PVC and corrugated
metals. Large concrete box culverts also exist throughout the system. This system also includes
approximately 17,000 inlets, three storm water pump stations, 23 storm drain flap gates and five storm
surge protection levee gates. City storm water forces assume the responsibility of maintenance and
rehabilitation for the system. Maintenance includes mowing approximately 2,500 acres of right-of-way
adjacent to the ditches, ditch grading, erosion repair and removal of flow restrictions.
Environmental Requirements. In 1995, the City, along with its co-permittees (Port of Corpus Christi
Authority; Corpus Christi Junior College District; Texas A&M University-Corpus Christi; and Texas
Department of Transportation-Corpus Christi) was issued a five-year National Pollutant Discharge
Elimination System (NPDES) permit to allow discharge of storm water from the municipal separate storm
sewer system (MS4) to the waters of the United States. The City has submitted an application for the
renewal of MS4 permit to the TCEQ. Storm Water staff administers several storm water quality
management programs under the permit including Wet Weather Monitoring, Improper Disposal
Inspection, and Construction Site Inspection. Staff also responds to hazardous material spills within the
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City by providing back-up to and coordinating efforts with the City’s Fire Department’s Hazardous
Material Response Team to minimize the impact to the environment.
System Improvements. Major infrastructure improvements are identified in the City’s FY 2002-2004
and long-range Drainage Capital Improvement Plan. Drainage system improvement projects include
channel enhancements, increased system capacity projects, storm water quality improvement projects,
implementation plans, curb and gutter replacement projects, and bridge rehabilitation/replacement
projects. One major capital project in progress is the Storm Water Master Plan due for completion in
August 2003. The project will revise current drainage standards, produce a storm water design, criteria
manual, and develop an updated and complete drainage master plan for the entire City.
Description of City’s Wastewater System
Service Area. The wastewater system service area is located primarily within the City limits.
Wastewater Customers. Currently, the wastewater system has approximately 76,000 customers. Inside
City Limits Single Family Residential wastewater customers pay for wastewater service based on their
average winter consumption of water. This winter average will be used for one full year with the next
year’s rates being adjusted to recover the average of the prior three years’ revenue from these customers,
thus eliminating revenue fluctuations due to changes in water consumption.
Wastewater Collection System. Corpus Christi’s wastewater collection system consists of over 1,243
miles of gravity mains interwoven with approximately 58 miles of force mains, 15,000 manholes, and 94
lift stations. The collection system provides service to over 76,000 customers in a 137 square mile area.
The collection system consists of a myriad of clay, fiberglass, ductile iron, asbestos cement and reinforced
concrete, and PVC lines ranging in size from 2.5” diameter (for force mains) to 60” diameter (for trunk
mains). City wastewater employees assume the responsibility of maintenance, repair and rehabilitation
for every aspect of the wastewater collection system except for that portion on private property. On an
annual basis, wastewater forces respond to 23,800 calls, install over 400 clean-outs, repair, replace or
rehabilitate about 220 manholes, and clean over 1.2 million feet of wastewater mains.
Wastewater Treatment. The City owns and operates six wastewater treatment plants with a combined
treatment capacity of 44.7 MGD (million gallons/day). Five of the treatment plants utilize the activated
sludge process with the sixth using a two stage trickling filter system. Each of these plants is in
compliance with applicable State and Federal law.
System Improvements. In FY 2001-2002, the average aggregated daily flow at the City’s wastewater
treatment plant averaged 28.4 MGD (million gallons per day), which is 63.9% of the aggregate permitted
capacity of all the treatment plants. The City also completed the Greenwood Water Recycling Plant
expansion (6 MGD to 8 MGD) at the end of 2001. The City has awarded a site selection contract for the
new wastewater treatment plant to replace the Broadway wastewater treatment plant. The new plant is
scheduled to be constructed in the refinery district by 2010. Currently the Wastewater Department is
implementing the Computerized Maintenance Management System (CMMS), as another method to
improve the efficiency of the maintenance and repair effort of the work force. As of January 2003, all
plants and lift stations are using this work management system to address Computer Management
Operations Maintenance (CMOM) regulations to be added to wastewater discharge permits. Collection
line systems will soon be added to this system.
Other major projects which the City will commence in the near future that will benefit the environment
and improve service to rate payers include:
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•
the rehabilitation of some of the major trunk mains and force mains;
•
odor abatement at the treatment plant and major lift stations which will reduce the
emission of hydrogen sulfide and other noxious gases into the atmosphere [Allison and Arcadia
Lift Stations];
•
collection system rehabilitation and enhancement projects in two plants’ service areas to
reduce Inflow/Infiltration (I/I) flows, as a continuation of a multi-year program [Laguna Madre
and Broadway Service Areas];
•
process improvements at three of the plants to increase efficiency of treatment, ensuring
environmental compliance [air at Laguna Madre, Allison biosolids and filter bridges at Oso];
•
multiple lift station/force main upgrades to provide for continuing capacity to
accommodate growth of the community [T/L heads, Buckingham Lift Station, Kennedy Lift
Station];
•
diversions of flows from one service area to another, in accordance with the Facilities
Implementation Plan, to better balance the treatment capacities of the plants, while eliminating
need for three lift stations [Carolyn Heights Diversion];
•
replacing the antiquated trickling filter Broadway plant in the Central Business District
with a new, activated sludge plant, complete with state-of-the-art odor control facilities located in
the City’s Port/Industrial District;
•
developing a City-wide Wastewater Master Plan to replace the 20 year old document,
proceeding on a service area by service area basis until completed;
•
providing permanent liquid disinfection facilities at four plants, eliminating the hazard
potential for release of toxic chlorine gas from compressed vessels to comply with the Clean Air
Act.
Description of City’s Gas System
Service Area. The gas system serves the City as well as a few areas immediately outside the City limits.
The service territory covers about 180 square miles and extends 40 miles from northwest Calallen to
Padre Island. Most of the growth in the last five years has been in the northwest and south sections of the
City and on Padre Island.
Gas Customers. As of July 31, 2002, the gas system is serving 55,959 active customers of which about
94% are residential and the balance are commercial and industrial accounts. Residential sales account for
about 55% of total revenue. The City’s rate structure for all gas customers allows the City to pass through
to its customers all costs of gas purchased by adding the cost of gas to the cost of service.
Gas Supply. The gas system currently receives 100% of its supply from one source, National Energy and
Trade, L.L.C. About 85% of this supply is delivered to the City through three principal city gate stations
into the Corpus Christi System; the remainder flows through four smaller purchase points to serve the
Annaville/Calallen System, the Padre Island System and the Country Creek/King Estates System. Total
gas load requirements vary from about 6 MMCFD in summer to about 46 MMCFD in the winter with
peaks near 80 MMCFD during sustained freezes. The gas supply for the Corpus Christi System is taken
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from National Energy and Trade’s South Shore Pipeline. This line extends along the west and south sides
of the City from the Leopard Street/Corn Products area to the Barney Davis C.P. & L. Power Plant in
Flour Bluff. The City is obligated to pay only for gas actually delivered at a cost based on a benchmark
price, adjusted each month in proportion to a published index. The existing gas purchase contract became
effective July 1, 2001, and will continue in force until June 30, 2006.
Gas Distribution. The gas system consists of about 1125 miles of coated steel mains of various sizes up
to 16-inch, all under cathodic protection and about 125 miles of polyethylene mains. The Gas
Department normally installs 10 to 15 miles of main each year including the replacement of 1 to 3 miles
of main. There are 94 pressure regulating stations that maintain proper gas supply and pressure to 34
separate districts. The amount of loss-and-unaccounted-for gas for this system has been less than 0.20%
of total purchase for the last five years. In the 1960’s, the City acquired two other gas distribution
systems operating within its service area. The resulting debt was retired within several years, and the City
gas distribution system has continued to operate on a debt-free basis since then.
System Improvements. Last year over 4,300 feet of 16-inch and 12-inch transmission main was
installed. In 2002-2003, installation of 20,000 feet of 16-inch transmission main is proposed. Subsequent
construction over the next three years of approximately 67,500 feet of transmission main will connect the
Corpus Christi System with the Annaville/Calallen System. This will enhance the City’s deliverability of
natural gas to the Annaville/Calallen System through the existing Corpus Christi System and supply
points already in place. In addition, the strategically located high pressure main extension will place the
City in proximity to other alternative gas suppliers and will enhance the City’s future gas supply
negotiations.
City’s Combined System Management and Employees
Management. The Water, Wastewater, Storm Water, and Gas Departments are all under the supervision
of the Assistant City Manager for Public Work and Utilities.
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Ronald E. Massey - Assistant City Manager for Public Works and Utilities
Mr. Massey was appointed as Assistant City Manager for Public Works and Utilities in September 1999.
In this position, he oversees the Water, Wastewater, Storm Water, Gas, Maintenance Services, Street
Services, Solid Waste, and Engineering Services Departments and the Corpus Christi Metropolitan
Planning Organization. Prior to this appointment, Mr. Massey was the Director of Public Works for the
Town of Franklin, Massachusetts, for six years and served as an installation manager with the US Army
for ten years. He received a Bachelor of Science in Chemistry from the University of Dayton and a
Master of Science in Management from the University of Central Texas.
Eduardo Garaña, P.E. - Water Superintendent
Mr. Garaña holds a Bachelor of Science degree in Civil Engineering from the University of Texas at
Austin and a Master of Business Administration from Corpus Christi State University. He is a registered
professional engineer and holds a Class “A” water license. Mr. Garaña has worked for the City in the
Water Department for 22 years, eight years as Assistant Water Superintendent and the last five years as
Water Superintendent. Previously, he worked for the Texas Highway Department, Mobil Oil
Corporation, and Maverick Engineering Company. Mr. Garaña was promoted to Water Superintendent in
February, 1997.
Foster Crowell - Wastewater Superintendent
Mr. Crowell holds a Bachelor of Arts degree in Government from the University of Texas/Pan American
at Edinburg. He holds a Class “A” water license and a Class “A” wastewater license from the Texas
Natural Resource Conservation Commission. Mr. Crowell has 32 years of municipal public works
experience, including 22 years from the City of Corpus Christi Wastewater Department. Prior to his
appointment as Wastewater Superintendent, he served as the Assistant Wastewater Superintendent since
January, 1980. Previously, he worked for the cities of Kingsville and Raymondville, Texas. Mr. Crowell
was promoted to Wastewater Superintendent in April, 1999.
Valerie H. Gray, P.E. - Storm Water Superintendent
Ms. Gray holds a Bachelor of Science degree in Civil Engineering from the University of Notre Dame in
Indiana and is a Registered Professional Engineer. Ms. Gray has worked for the City for 17 years. Her
prior experience includes working for Texaco, U.S.A.. Ms. Gray worked in the Housing and Community
Development and Traffic Engineering Departments before moving to the Water Department, fulfilling the
responsibilities of Water Construction and Water Distribution Superintendent positions. Ms. Gray was
promoted to Storm Water Superintendent in 1995.
Deborah A. Marroquin, P.E. - Gas Superintendent
Ms. Marroquin holds a Bachelor of Science degree in Natural Gas Engineering from Texas A&I
University and is a Registered Professional Engineer. Ms. Marroquin has worked for the City for 17
years, her prior experience includes working for Exxon Co., USA, as a Reservoir Engineer. After gaining
experience in several activities in the Gas Department, she worked in the City Manager’s Office for 6
months. Ms. Marroquin was promoted to Gas Superintendent in January, 1995.
Employees. As of July 31, 2002, the number of budgeted employees of the Gas, Water, Storm Water and
Wastewater Divisions were as follows:
Gas Department 148 employees
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Water Department 173 employees
Wastewater Department 178 employees
Storm Water Department 85 employees
No Labor Unions. The employees of the City’ Combined System are not organized as a collective
bargaining unit and under current State law have no legal authority to so organize.
Employee Pension Plan and Benefits. The City’s employees participate in the Texas Municipal
Retirement System. This plan, the contributions made to this plan, and the City’s unfunded pension
fund liability are further described in Note 9 in Appendix B hereof.
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CITY’S COMBINED SYSTEM OPERATIONS
City Water System Statistics
The following table sets forth the volume of treated and untreated water sold by the City through its
Combined System to various types of customers in each of the City’s most recent five fiscal years:
Table 1
Water Sales (in Million Gallons)
(Fiscal Years Ended July 31)
1998
1999
2000
2001
2002
TREATED WATER
Inside City
Residential (1)
Commercial(2)
Industrial
Other (3)
Subtotal
6,708
4,569
2,161
648
14,086
8,752
5,431
2,249
1,828
18,260
7,382
4,658
2,161
657
14,858
6,591
4,473
1,741
654
13,459
6,443
4,523
1,076
1,386
14,028
Outside City
Residential(1)
Commercial(2)
Industrial
Other (3)
Subtotal
8
580
8,795
3
9,386
8
340
9,100
5
9,453
8
355
7,946
2
8,311
9
528
8,500
2
9,039
9
509
8,045
3
8,566
Outside City Wholesale
2,229
2,131
2,303
2,572
2,465
Total Treated Water
25,701
29,844
25,472
25,070
25,059
10,244
35,945
10,167
40,011
11,867
37,339
11,948
37,018
12,433
37,492
UNTREATED WATER
TOTAL
(1)
Includes one and two family residences.
(2)
Includes Multifamily (over two family) residential.
(3)
Includes hospitals, schools, churches, municipal and other governmental uses. In some cases,
individual governmental entities may have multiple accounts as a result of multiple facilities.
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The following table sets forth the total revenues from sales of treated and untreated water made to
various types of customers through the City’s Combined System in each of the City’s most recent five
fiscal years:
Water Sales (In Dollars)(4)
(Fiscal Years Ended July 31)
TREATED WATER
1999
1998
2000
Table 2
2001
2002
Inside City
Residential(1)
Commercial(2)
Industrial
Other (3)
Subtotal
$15,207,076 $15,956,849
7,776,460
9,359,751
1,074,072
2,346,284
1,814,500
1,343,290
25,872,108 29,006,174
$17,887,478 $18,560,191 $19,052,662
10,311,987
9,774,157 10,070,574
2,960,778
2,325,929
2,023,717
1,437,528
1,572,992
1,447,537
32,597,771 32,233,269 32,594,490
Outside City
Retail
Residential(1)
Commercial(2)
Industrial
Other (3)
Subtotal
Outside City
Wholesale
Total Treated Water
UNTREATED
WATER
TOTAL
36,903
978,461
10,400,350
12,215
11,427,929
34,419
2,108,268
11,958,128
16,649
14,117,464
42,648
1,171,887
14,195,515
11,084
15,421,134
49,089
1,574,371
13,878,879
11,914
15,514,253
47,975
1,577,174
14,062,875
16,578
15,704,602
1,986,629
2,470,658
2,895,602
3,203,636
3,336,644
39,286,666
45,594,296
50,914,507
50,951,158
51,635,736
3,242,745
5,502,150
8,250,136
7,417,420
7,840,737
$42,529,411 $51,096,446
$59,164,643 $58,368,578 $59,476,473
(1)
Includes one and two family residences.
(2)
Includes multifamily (over two family) residential and commercial.
(3)
Includes hospitals, schools, churches, municipal and other governmental use. In some cases,
individual governmental entities may have multiple accounts as a result of multiple facilities.
(4)
Prepared from City’s Combined System records on a cash basis and therefore will not agree with
the financial statements in Appendix B which are prepared on an accrual basis.
-2645321211.2
The following table sets forth the number of the City’s Combined System water customers of each type
for treated and untreated water at the end of each of the City’s most recent five fiscal years:
Table 3
Number of Water Customers
(Fiscal Years Ended July 31)
TREATED WATER
Inside City
Residential (1)
Commercial(2)
Industrial
Other (3)
Subtotal
Outside City
Retail
Residential (1)
Commercial(2)
Industrial
Other (3)
Subtotal
Outside City Wholesale
Total Treated Water
UNTREATED WATER
TOTAL
1998
1999
2000
2001
2002
70,605
7,991
4
506
79,106
69,770
6,792
4
1,136
77,702
70,397
6,848
4
1,153
78,402
69,832
6,492
4
1,098
77,426
70,085
6,588
4
1,466
78,143
107
155
22
2
286
3
79,395
7
79,402
91
150
22
0
263
3
77,968
7
77,975
94
148
25
0
267
3
78,672
7
78,679
93
148
14
2
257
3
77,686
7
77,693
83
141
20
2
246
3
78,392
7
78,399
(1)
Includes one and two family residences.
(2)
Includes multifamily (over two family) residential, and commercial.
(3)
Includes hospitals, schools, churches, municipal and other governmental use. In some cases,
individual governmental entities may have multiple accounts as a result of multiple facilities.
-2745321211.2
The following table sets forth the largest retail and wholesale purchasers of treated and untreated
water from the City’s Combined System as of the end of its two most recent fiscal years:
Largest Water Customers (Based on Revenues)
(Fiscal Year Ended July 31)
2001
Table 4
2002
Retail Treated Water
Valero Refining Company
Equistar (formerly Oxy)
Citgo Refining (East)
Flint Hills Resources Refining – East Plant (formerly Koch)
Valero Refining (formerly Coastal States Petrol)
Central Power and Light
Flint Hills Resources Refining – West Plant (formerly Koch)
Citgo Refining & Chemical (West)
Public Works (NAS)
Sam Kane
Total
$3,946,818
2,719,656
2,260,335
1,268,308
1,246,417
1,246,201
740,576
611,222
546,378
331,067
$14,916,978
$3,956,025
2,742,671
2,374,279
1,356,840
1,261,342
838,364
805,491
632,462
544,257
311,206
$14,822,937
Wholesale Treated Water
San Patricio Municipal Water District
South Texas Water Authority
Nueces County Water Control District No. 4
Total
$1,921,289
739,848
542,500
$3,203,637
$1,929,988
776,588
630,068
$3,336,644
Wholesale Untreated Water
San Patricio Municipal Water District
Beeville Water Supply District
Alice Water Authority
City of Mathis
Choke Canyon Water System
Various Industrial Customers(1)
Total
$4,237,010
320,612
634,185
70,291
1,462
2,153,860
$7,417,420
$4,321,432
667,819
510,696
171,157
0
2,170,634
$7,841,738
(1) Flint Hills Resources, Celanese.
-2845321211.2
The following table sets forth selected statistics relevant to the capacity and operations of the
City’s Water Supply System in each of its most recent five fiscal years:
Selected Water Operating Statistics
(Fiscal Years Ended July 31)
Rainfall (inches) (1)
Water Supply:
System Firm Yield in acre feet
System Demand in acre feet
Water Production:
Rated Capacity in Million Gallons per Day
Maximum Daily Demand in Million Gallons
per Day
Water Distribution:
Unaccounted for Percentage (%)
Per Capita Consumption in Gallons Per Day(2)
Table 5
1998
24.73
1999
29.28
2000
26.76
2001
32.00
2002
31.39
181,106
117,999
181,106
114,663
199,600
119,233
251,100
115,237
183,160
117,315
167
108
167
100
167
111
167
111
167
105
7.0
125
7.0
125
5.5
118
5.2
148
11.0
120
(1) Rainfall measured at Corpus Christi International Airport as of July 31 of each year.
measurement does not reflect rainfall elsewhere in the Nueces River Basin Watershed.
This
(2) This represents treated water uses minus industrial uses and wholesale treated water sales.
City Wastewater System Statistics
The following table sets forth the largest users of wastewater from the City’s Combined System
as of the end of its two most recent fiscal years:
Table 6
Ten Largest Wastewater Customers
(Fiscal Years Ended July 31)
Sam Kane Beef Processors, Inc.
El Paso Field Services
TRT Development Company – Omni Bayfront
Texas A & M University
Spohn Memorial
Bay Area Med Center
Humana Hospital
Spohn Hospital South
Celanese Chemicals
AOF II LP
Total
-2945321211.2
2001
$335,630
32,204
74,911
80,379
43,224
50,629
43,612
22,580
27,401
38,787
$749,357
2002
$336,335
103,017
77,934
76,008
52,585
49,139
47,311
43,917
37,604
37,669
$861,519
The following table sets forth the number of residential and commercial wastewater customers
from the City’s Combined System as of the end of its five most recent fiscal years:
Table 7
Number of Wastewater Customers
(Fiscal Years Ended July 31)
1998
1999
68,524
7,658
67,554
6,519
2
14
76,198
2
20
74,095
2000
2001
2002
67,315
7,155
69,819
6,555
69,152
6,465
2
20
74,492
3
21
76,398
4
23
75,644
Inside City
Residential
Commercial (1)
Outside City
Residential
Commercial (1)
TOTAL
(1) Includes multi-family (over two families) residential, commercial, industrial, and public agencies.
The following table sets forth the amount of wastewater that was treated at each of the City’s Wastewater
Facilities as of the end of its most recent five fiscal years.
Table 8
Wastewater Treated
(Millions of gallons)
Fiscal Years Ended July 31
1998
1999
2000
2001
2002
1,519
4,515
1,432
1,057
735
345
9,603
1,692
4,638
1,389
1,084
659
427
9,889
1,646
4,523
1,382
1,138
620
452
9,761
1,702
4,419
1,525
1,206
582
455
9,889
2,119
4,308
1,715
1,057
646
528
10,373
26.3
27.1
26.6
27.1
28.4
Plant
Broadway
Oso
Greenwood
Allison
Laguna Madre
Whitecap
Total
Daily Average (MGD)
-3045321211.2
City Gas System Statistics
The following table sets forth the most recent annual gas purchases and sales from the City’s Combined
System:
Table 9
Annual Gas Purchases and Sales
(Fiscal Years Ended July 31)
Average Day
Maximum Day
Purchases
Sales
Lost & Unaccounted-for Gas
Mcf
Mcf
Mcf
Mcf
%
2001
10,595
40,695
3,877,822
3,847,615
0.778%
2002
9,566
35,296
3,491,830
3,413,154
2.3%
The following table sets forth the number of gas customers for the City’s Combined System as of the end
of its two most recent fiscal years:
Table 10
Gas Customers
(Fiscal Years Ended July 31)
Residential
Commercial
Hospitals, Schools, & Churches
Industrial Customers
Active Customers
-3145321211.2
2001
52,881
2,634
366
1
55,882
2002
51,498
2,695
362
1
54,556
The following table sets forth the largest gas customers for the City’s Combined System as of the end of
its two most recent fiscal years:
Table 11
Ten Largest Gas Customers
(Fiscal Years Ended July 31)
2001
$2,022,758
411,823
372,695
323,117
263,016
230,455
92,826
173,033
168,900
203,506
$4,262,130
Public Works (NAS)
Spohn Hospital Shoreline
Driscoll Children’s Hospital
Bay Area Medical Center
Spohn Memorial Hospital
Corpus Christi International Airport
H. E. Butt Grocery
Spohn Memorial Hospital South
H. E. Butt Bakery
Del Mar College
Total
2002
$922,305
268,268
225,749
189,582
169,652
149,287
131,588
122,715
112,923
92,015
$2,384,083
CITY’S COMBINED SYSTEM RATES
Ratemaking
The City Council of the City has the power to establish and increase rates for service provided by the
City’s Combined System, subject to some contractual limitations and subject to the limited regulatory
jurisdiction discussed below. In setting water, wastewater and gas rates, the City is bound by the legal
requirement that such rates must be reasonable, equal, and uniform and that no free service may be
allowed, except at the discretion of the City Council for certain public buildings and facilities operated by
the City. By law, the City must charge and collect rates sufficient to pay all operating, maintenance,
depreciation, replacement, betterment, and interest charges of the City’s Combined System and to
maintain an interest and sinking fund sufficient to pay any bonds or notes issued to purchase, construct, or
improve the City’s Combined System or any outstanding indebtedness of the City’s Combined System.
Rates for sales of water to other political subdivisions on a wholesale basis, and certain appeals of rates
for outside-City customers, are subject to TCEQ jurisdiction. By law, however, the TCEQ may not fix a
rate which is less than the amount required to meet the debt service and bond coverage requirements of
the City’s water facilities. Certain disputes as to sales of surface water may also be subject to the
jurisdiction of the TCEQ. Gas rates are subject to appeal to the Texas Railroad Commission.
In setting rates, the City Council of the City must consider, among other things, the current federal
guidelines regarding user charges and certain charges required of federal construction grant recipients
under the Clean Water Act. Usage of the City’s wastewater facilities is not metered for rate purposes.
Instead, wastewater rates are based upon water usage for all customers except Single Family Residential
Inside City Limits customers. Those customer’s wastewater rates are based upon winter water usage, and
-3245321211.2
the overall rate is adjusted annually to compensate for increases or decreases in average winter
consumption.
The magnitude and frequency of rate increases will depend upon factors such as the rate at which City’s
Combined System and maintenance and operating expenses increase in the future, the interest rate on
City’s Combined System revenue bonds sold to meet the City’s Combined System future capital
requirements, the extent to which City’s Combined System revenue bonds are used to meet those capital
requirements, the volume of water and gas sold, and future changes in environmental requirements.
City Charter Amendment Regarding Rates Ruled Void
On January 19, 1991, the residents of the City voted to approve an amendment to the City Charter of the
City, the effect of which would be to limit the amount of rate increase for each utility service operated by
the City in any fiscal year to six percent over the rate charged the preceding year. The amendment further
provides that a higher rate may be adopted on a temporary basis for the next fiscal year if all members of
the City Council declare an emergency. In 1996, the City Council approved the billing of raw water costs
on a “pass through” basis, much as costs of natural gas are billed, without limiting billed raw water cost
increases by the purported 6% per annum Home Rule Charter limit.
In 1996, the City contracted with the Nueces River Authority (“NRA”) for the financing, acquisition and
construction of the Lake Texana Pipeline. In that contract (the “NRA Contract”) the City covenanted “to
fix and collect such rates and charges for services to be supplied by the City’s Combined System as will
produce revenues at all times during the term of the NRA Contract in an amount at least equal to (i) all of
the expenses of operation and maintenance of the City’s Combined System, including specifically its
payments under the NRA Contract and the contracts specified in Table 20 hereof, and (ii) all other
amounts as required by law and the provisions of the ordinances or resolutions authorizing the City
Priority Bonds or other obligations now or hereafter outstanding payable, in whole or in part, from the
revenues of the City’s Combined System, including the amounts required to pay all principal of and
interest on such Priority Bonds and other obligations.” The NRA filed a bond validation suit to validate
the NRA Contract and its bonds. Ex Parte Nueces River Authority, No. 96-11-20066-CV, 38th District
Court, Uvalde County, Texas. In its Final Judgment issued December 31, 1996, validating the NRA
Bonds and the NRA Contract, the Court held: “7. IT IS FURTHER ORDERED, ADJUDGED AND
DECREED that Article IX, Section 10(a) of Corpus Christi’s City Charter [the rate cap provision] is
invalid and void because it is inconsistent and in conflict with State law in violation of Article XI, Section
5 of the Texas Constitution, including but not limited to Articles 1111-1118, Texas Revised Civil Statutes
(now codified as Chapter 1502, Texas Government Code), and Sections 13.139, 13.182, 13.183, and
13.250(a) of the Texas Water Code; because it constitutes illegal arbitrary ratemaking, because it violates
the duty of a public utility to provide adequate service at fair and sufficient rates; and because it
unconstitutionally impairs obligations of the City of Corpus Christi [list of obligations], said impairment
being in violation of Article I, Section 16 and Article XI, Section 5 of the Texas Constitution and Article
I, section 10, cl. 1 of the United States Constitution. * * *10. IT IS FURTHER ORDERED, ADJUDGED
AND DECREED that the NRA Contract requires the City Council of the City of Corpus Christi to fix and
collect such rates and charges for services to be supplied by the City’s Combined System as will produce
revenues at all times during the term of the NRA Contract sufficient to pay all expenses of operation and
maintenance of the City’s Combined System and principal and interest on the Priority Bonds, and nothing
in the City Charter, including but not limited to Article IX, Section 10(a) and Article I, Section 4, or in
State law, limits or restricts the ability of the City Council of the City of Corpus Christi to fix reasonable,
equal and uniform rates for the City’s Combined System sufficient to pay all operating and maintenance
expenses of the City’s Combined System and to pay principal and interest on the Priority Bonds”.
-3345321211.2
City’s Water Rates
Recent Changes in Rate Structure. Prior to January 1, 1997, costs of raw water, water treatment, water
distribution, and administrative costs were recovered through graduated posted block rates for each
category of customer.
Beginning January 1, 1997, retail water customers are charged raw water charges in addition to posted
block rates fixed to recover costs of treatment, distribution, and billing. The raw water charges are
calculated annually based on projected raw water costs, projected total consumption, and an annual “true
up” adjustment. Prior to FY 2002, the raw water charge was calculated monthly and fluctuated wildly
due to consumption variations. The change to an annual calculation has remedied these monthly
flucuations. Raw water costs include all expenses associated with developing, acquiring, or delivering
raw water. Therefore all costs associated with raw water are “passed through” to water customers with
this charge. The City is currently renegotiating its wholesale raw and treated water contracts to pass
through substantially similar raw water costs.
Rate Increases. When water charges were split between raw water costs and cost of service block rates,
the posted cost of service block rates were reduced to provide substantially the same aggregate annual
revenue from each class of customer as under prior rates before changes in raw water costs. However, the
separate raw water charge is intended to permit increased raw water costs associated with financing and
operating the Nueces River Authority Pipeline Project to be allocated among the City water customers in
proportion to their water usage. In addition, in late 1993, the City Council authorized an increase in
posted cost of service block rates for water on the average of approximately 6% per annum effective
January 1, 1994 and each August 1 in the years 1994 through 1998. To fund all City’s Combined System
projects currently in the 2002-2004 and long range Capital Improvement Planning Guide, future rate
increases will be required. In July 2002, the City Council approved a rate ordinance which includes a 5%
increase for Water, Wastewater and Gas for FY 2002-2003. A 5% per year increase is anticipated for FY
2003-2004, with 1% of that designated for Storm Water capital improvement projects.
Current Rates. The raw water rate for FY 2003 is projected to be $0.728 per 1000 gallons for rate
paying customers, and $0.751 for contract customers. However, prior to adoption of the new rate, it will
be recalculated using final FY 2002 numbers, and may be somewhat lower than projected.
[The remainder of this page intentionally left blank.]
-3445321211.2
Posted retail cost of service block rates are composed of a fixed minimum charge based on meter size and
an additional charge based on consumption. The posted cost of service block rates (excluding raw water
charges) are set forth in the following table:
Retail Posted Cost of Service Water Rate
Minimum Monthly Charge
Meter Size Inches
5/8 x 3/4 (Residential)
5/8 x 3/4 (Commercial)
1
1½
2
3
4
6
8 and larger
Large Volume - (any size)
Inside City Limits
$5.778
8.338
13.306
22.354
34.780
124.790
142.371
213.913
321.303
10,832.169
Monthly Water Consumption Charge Residential
First
2,000 gallons
Next
13,000 gallons
Next
15,000 gallons
Next
20,000 gallons
Over
50,000 gallons
Commercial/Industrial
First
Next
Next
Next
Over
2,000 gallons
13,000 gallons
85,000 gallons
900,000 gallons
1,000,000 gallons
Cost Per
1000 Gallons(1)
Minimum
$1.999
2.819
3.450
4.186
Cost Per
1000 Gallons(1)
Minimum
$1.999
1.778
1.351
1.059
____________________________
(1)Inside city limits.
(2)Outside city limits.
-3545321211.2
Table 12
Outside City Limits
$12.266
17.403
27.303
45.414
70.250
250.273
285.453
428.553
643.329
18,074.557
Cost Per
1000 Gallons(2)
Minimum
$4.186
4.186
4.186
4.186
Cost Per
1000 Gallons(2)
Minimum
$4.357
3.912
3.039
1.659
City’s Wastewater Rates
Rate Increases. To fund all City’s Combined System projects currently in the 2002-2004 and long range
Capital Improvement Planning Guide, future rate increases will be required. In July 2002, the City
Council approved a rate ordinance which includes a 5% increase for Water, Wastewater, and Gas for FY
2002-03.
Current Rates. Wastewater rates are based on winter water consumption for Single Family Residential
Inside City Limits customers, and monthly water consumption for all other customers. The rates are
summarized in the following table (for customers with 250 parts per million or less of biochemical
oxygen demand, and 250 parts per million or less of suspended solids):
Class
Inside City Limits
Table 13
Outside City Limits
One family minimum
$12.790/month
For first 2,000 Gallons
$25.581/month
For first 2,000 Gallons
One family maximum
$72.271/month
Up to 25,000 Gallons
$144.485/month
Up to 25,000 Gallons
Commercial minimum
$19.438/month
For first 2,000 Gallons
$38.877/month
For first 2,000 Gallons
The charges in addition to the above minimums, as well as the charge for all other sewer users, will be
computed as dollars per one thousand (1,000) gallons of water used as follows:
Table 14
Inside City Limits
Cost per 1,000 Gallons
One Family Residential
Commercial
$2.586
$2.069
Outside City Limits
One Family Residential
Commercial
$5.173
$4.140
Additional charges for customers with 250 parts per million or more of biochemical oxygen demand or
250 parts per million or more of total suspended solids are $0.2238 per pound and $0.1608 per pound,
respectively.
City’s Gas Rates
Rate Increases. To fund all City’s Combined System projects currently in the 2002-2004 and long range
Capital Improvement Planning Guide, future rate increases will be required. In July 2002, the City
Council approved a rate ordinance, which includes a 5% increase for Water, Wastewater, and Gas for FY
2002-2003.
-3645321211.2
Current Rates. Gas rates are based on consumption in thousand cubic feet (MCF). Gas rates are
summarized in the following table:
Residential Customer Rates
Table 15
Winter (November through April)
First
1 Mcf per month or less
Next
2 Mcf per month
Next
7 Mcf per month
Next
40 Mcf per month
All over
50 Mcf
Minimum Monthly Bill
Inside
City Limits
$7.441
4.175
2.415
2.278
1.620
7.441
Outside
City Limits
$9.182
4.681
2.668
2.517
1.756
9.182
Summer (April through November)
First
1 Mcf per month or less
Next
2 Mcf per month
Next
5 Mcf per month
Next
30 Mcf per month
All over
38 Mcf
Minimum Monthly Bill
$7.441
4.175
2.415
1.213
1.078
7.441
$9.182
4.681
2.668
1.332
1.146
9.182
Seasonal Rates
Partial Year Customers
First
Next
Next
Next
All over
Minimum Monthly Bill
1 Mcf per month or less
2 Mcf per month
7 Mcf per month
30 Mcf per month
40 Mcf
-3745321211.2
Inside
City Limits
$12.361
11.179
5.308
2.278
1.620
12.361
Table 16
Outside
City Limits
$14.849
12.769
6.018
2.517
1.756
14.849
Commercial Customer Rates
Winter
First
Next
Next
Next
Next
Next
Next
Next
Next
Next
All over
Minimum Monthly Bill
1 Mcf per month or less
2 Mcf per month
7 Mcf per month
40 Mcf per month
50 Mcf per month
100 Mcf per month
100 Mcf per month
700 Mcf per month
1000 Mcf per month
13000 Mcf per month
15000 Mcf
Inside
City Limits
$7.441
4.175
3.901
3.752
1.620
1.350
1.180
1.129
0.976
0.877
0.841
7.441
Table 17
Outside
City Limits
$9.182
4.681
4.396
4.226
1.756
1.450
1.265
1.195
0.976
0.877
0.841
9.182
Incentive Air Conditioning Summer Rate
The incentive summer rate is limited to customers using an annual average of less than 15,000 cubic feet
per month. These customers have gas operated air cooling and/or air conditioning equipment and their
average consumption in the seven summer months exceeds the average use consumption in the five
winter months.
First
Next
Next
Next
Next
Next
Next
Next
All over
Minimum Monthly Bill
Cost of Service per MCF
Inside
City Limits
1 Mcf per month or less
$7.440
2 Mcf per month
4.174
7 Mcf per month
3.901
40 Mcf per month
2.854
150 Mcf per month
1.213
300 Mcf per month
1.129
500 Mcf per month
0.976
14000 Mcf per month
0.877
15000 Mcf per month
0.841
7.440
Purchased Gas Adjustment
Table 18
Outside
City Limits
$9.182
4.681
4.396
3.209
1.332
1.195
1.027
0.910
0.841
9.182
Table 19
The City adjusts its gas rates monthly to take into account changes in the cost of gas from the supplier.
The pass-through cost of gas is adjusted for pressure base, gas lost, and unaccounted-for factors.
Commercial customers who use over 15,000 cubic feet in one month and who receive gas from the City at
-3845321211.2
the same pressure which the City receives it (14.65 psi) shall be billed 2.05% less per Mcf than the
normal rates.
Interruptions
Deliveries of gas to commercial and industrial customers may be interrupted or curtailed in the event of
shortage in order to conserve gas for residential and other human need customers.
City’s Billings and Collection
Users are billed monthly based on metered water and gas consumption. A bill is payable 15 days after the
date on which the statement of account was mailed.
If a user fails to make payment by the second day after the due date, a $5 penalty is incurred, and the City
sends a second written notice to the customer restating the amount owed and setting forth the procedure
by which the user can discuss any dispute over the propriety of the charge with a customer service
representative.
Approximately one week after the second delinquent bill is due, a City field representative is dispatched
to the user’s address to cut off City services. A user may be required to post a cash deposit, or in some
cases, a surety bond or a letter of credit may be used in lieu of a cash deposit for continued service if the
user demonstrates a history of delinquency. The deposit is based on an average of two months
consumption. If a user liable for City’s Combined System charges leaves the premises to which such
charges are applicable, the user will not be furnished service by the City’s Combined System at new
premises occupied by such user until all charges are paid.
CITY’S COMBINED SYSTEM FINANCIAL INFORMATION
Payment Record
The City has not defaulted in the payment of the principal of, or interest on, its indebtedness within the
last 65 years nor has the City issued any refunding securities for the purpose of preventing a default in the
payment of the principal of, or interest on, its indebtedness within this period.
Obligations Payable from City’s Combined System Revenues
Table 20
The following sets forth the total outstanding revenue obligations as of January 1, 2003 payable from the
City’s Combined System revenues and excludes the Refunded Bonds and includes the Bonds.
Contract Revenue Bonds and Obligations (payable as an operating expense of the City’s Combined
System):
Nueces River Authority, Series 1979 and 1994
Nueces River Authority, Series 1997
LNRA Contract (1)
Lavaca-Navidad River Authority, Series 1997
-3945321211.2
$5,705,000
110,270,000
106,446,712
7,680,000
$230,101,712
City’s Combined System Revenue Bonds, net of the Refunded Bonds, payable from Net Revenues of the
City’s Combined System (the “Priority Bonds”):
Series 1994 Bonds
Series 1994-A Bonds
Series 1995 Bonds
Series 1995-A Bonds
Series 1999 Bonds
Series 1999-A Bonds
Series 2000 Bonds
Series 2000-A Bonds
Series 2002 Bonds
The Bonds
$995,000
770,000
1,925,000
5,045,000
43,810,000
14,075,000
34,740,000
40,210,000
92,330,000
28,870,000
$262,770,000
(1) Charges for water under the LNRA Contract are based on a formula contained in the LNRA Contract
which includes a percentage of the operating and maintenance expenses of Lake Texana and a percentage
of the debt service on the bonds associated with construction of this reservoir. The City has recorded on
its books a liability in the amount of $106,446,712 for the present value (computed at 3.5%) of the debt
service payments only.
Subordinated Obligations:
United States Dept. of the Interior Choke Canyon Agreement(2)
$72,639,147
Total — All Payable from City’s Combined System Revenues
$565,510,859
(2) Under an agreement with the United States Department of the Interior (Bureau of Reclamation), the
City has agreed to pay such amount out of surplus water revenues with interest at 5.116%, subject to
certain deferrals, in installments through 2044. (See “Subordinated Obligations” below.)
Subordinated Obligations
Table 21
On March 25, 2003, the Corpus Christi City Council authorized a seven-year-tax-exempt commercial
paper program, pursuant to which the City may issue its Commercial Paper Notes, Series B (the
“Commercial Paper Notes”), for improvements to the City’s Combined System, limited at any one time
and from time to time to $75,000,000 of commercial paper outstanding. The Commercial Paper Notes are
supported by a Revolving Credit Agreement issued by WESTLB AG, acting through its New York
branch (the “Bank”). Should the City effect a loan from the Bank the terms of the Revolving Credit
Agreement provide for the payment of obligations of the City to the Bank would constitute an obligation
payable from a lien on and pledge of the Pledged Revenues of the City’s Combined System subordinate
to the Priority Bonds and the obligations under the contracts described in the preceding paragraph. The
Revolving Credit Agreement, in the amount of $80,547,945.21, extends through April 22, 2008, and has
been issued in support of the Commercial Paper Notes. Any advances for payment of Commercial Paper
Notes under the Revolving Credit Agreement would be secured by a subordinate lien on the Pledged
Revenues. The City has not incurred an advance that has been converted into a loan under the terms of
the aforesaid agreement.
As of July 31, 2002, the amount owed to the United States Department of the Interior (Bureau of
Reclamation) for the City’s remaining share of the costs of the Choke Canyon Reservoir Project is
$72,639,147 (of which $58,472,973 are allocable to water supply construction costs, $14,133,912 to
-4045321211.2
recreation costs and $32,262 to fish and wildlife costs). Such amounts for water supply are payable over
a term of 40 years to 2029 and amounts for recreation and fish and wildlife over a term of 50 years to
2044, in each case with interest at 5.116% per annum. See “Debt Service Requirements Payable from
City’s Combined System Revenues” and Note 17 in Appendix B for the repayment schedule. As of July
31, 2002, the City had accumulated out of the City’s Combined System surplus revenues $27,699,426 as
a reserve for this contract obligation. On October 19, 1996, the Federal Emergency Drought Relief Act of
1996 became law. This law, in order to provide emergency drought relief to the City, deferred the
payment of all principal and interest payments by the City for Choke Canyon Dam without penalty or
accrued interest for a five (5) year period of time commencing on October 19, 1996. On June 13, 2002,
the City, NRA and the United States Department of the Interior (Bureau of Reclamation) executed a letter
agreement whereunder it was agreed that the City’s payments under the aforesaid contract obligations
were subordinate to the Priority Bonds and obligations incurred in connection with any commercial paper
program for the benefit of the City’s Combined System.
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City’s Combined System Debt Service Requirements
Debt Service Schedule
Fiscal
Year
Ending
7/31
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total
Utility System Revenue Debt
Prior to New Issue
Principal
$12,990,000
13,205,000
13,345,000
13,235,000
13,155,000
13,800,000
14,475,000
16,155,000
9,635,000
10,130,000
9,845,000
10,325,000
10,860,000
11,425,000
12,015,000
12,650,000
13,315,000
9,750,000
6,630,000
6,960,000
$233,900,000
Interest
$11,849,862
10,933,976
10,381,899
9,773,374
9,184,741
8,543,941
7,888,279
7,215,109
6,409,971
5,916,999
5,397,611
4,912,181
4,378,848
3,817,108
3,221,995
2,588,485
1,920,613
1,217,250
679,500
348,000
$116,579,741
Total
$24,839,862
24,138,976
23,726,899
23,008,374
22,339,741
22,343,941
22,363,279
23,370,109
16,044,971
16,046,999
15,242,611
15,237,181
15,238,848
15,242,108
15,236,995
15,238,485
15,235,613
10,967,250
7,309,500
7,308,000
$350.479.741
Table 22
Series 2003 Revenue Refunding Bonds
Principal
Interest
$540,000
1,280,000
1,975,000
2,040,000
2,100,000
1,175,000
3,420,000
3,550,000
4,560,000
4,815,000
3,415,000
$1,400,073
1,200,063
1,189,263
1,160,463
1,111,088
1,054,988
991,988
953,800
817,000
639,500
411,500
170,750
$1,400,073
1,740,063
2,469,263
3,135,463
3,151,088
3,154,988
2,166,988
4,373,800
4,367,000
5,199,500
5,226,500
3,585,750
__________
$28,870,000
_________
$11,100,473
__________
$39,970,473
-4245321211.2
Total
Total Utility System Debt
Following New Issue
Principal
$12,990,000
13,205,000
13,885,000
14,515,000
15,130,000
15,840,000
16,575,000
17,330,000
13,055,000
13,680,000
14,405,000
15,140,000
14,275,000
11,425,000
12,015,000
12,650,000
13,315,000
9,750,000
6,630,000
6,960,000
$262,770,000
Interest
$11,849,862
12,334,049
11,581,961
10,962,636
10,345,204
9,655,029
8,943,266
8,207,096
7,363,771
6,733,999
6,037,111
5,323,681
4,549,598
3,817,108
3,221,995
2,588,485
1,920,613
1,217,250
679,500
348,000
$127,680,213
Total
$24,839,862
25,539,049
25,466,961
25,477,636
25,475,204
25,495,029
25,518,266
25,537,096
20,418,771
20,413,999
20,442,111
20,463,681
18,824,598
15,242,108
15,236,995
15,238,485
15,235,613
10,967,250
7,309,500
7,308,000
$390,450,213
Debt Service Requirements Payable From City’s Combined System Revenues
Table 23
Contract Revenue Obligations
Fiscal
Year Outstanding
NRA
Ending
Bonds(1)
7/31
NRA
Pipeline
Bonds(1)
LNRA
Contract(2)
LNRA
Bonds(3)
2003
$
0 $8,170,175 $4,494,170
$756,655
2004
984,465
8,168,975
4,655,131
760,680
2005
988,695
8,170,875
4,712,346
758,430
2006
995,195
8,171,275
4,770,803
760,100
2007
992,815
8,172,975
4,830,529
760,420
2008
992,500
8,170,375
4,891,550
759,350
2009
997,500
8,173,288
4,953,896
756,850
2010
8,169,737
5,017,595
757,762
2011
8,173,050
5,082,676
756,775
2012
8,172,438
5,149,170
758,175
2013
8,172,637
5,217,106
757,925
2014
8,173,125
5,286,517
756,025
2015
8,173,375
5,357,433
757,475
2016
8,172,863
5,429,889
757,000
2017
8,171,062
5,503,917
759,600
2018
8,172,450
5,579,551
2019
8,169,275
5,656,827
2020
8,171,800
5,735,780
2021
8,173,925
5,816,445
2022
8,169,825
5,898,861
2023
8,168,950
5,983,065
2024
8,170,200
6,069,097
2025
8,172,475
6,156,995
2026
8,169,675
6,246,801
2027
8,012,418
6,338,556
2028
6,432,302
2029-33
33,640,464
2034-38
14,187,101
2039-43
2044 _________ __________ __________ __________
Total
$5,951,170 $204,127,218 $189,094,573 $11,373,222
Total
Outstanding Subordinate
Contract
Priority Obligations(5)
Revenue
Obligations(1) Bonds(4)
$13,421,000 $24,839,862
14,569,251 25,539,049
14,630,346 25,466,961
14,697,373 25,477,636
14,756,739 25,475,204
14,813,775 25,495,029
14,881,534 25,518,266
13,945,094 25,537,096
14,012,501 20,418,771
14,079,783 20,413,999
14,147,668 20,442,111
14,215,667 20,463,681
14,288,283 18,824,598
14,359,752 15,242,108
14,434,579 15,236,995
13,752,001 15,238,485
13,826,102 15,235,613
13,907,580 10,967,250
13,990,370
7,309,500
14,068,686
7,308,000
14,152,015
14,239,297
14,329,470
14,416,476
14,350,974
6,432,302
33,640,464
14,187,101
__________ __________
Grand
Total
$4,125,741 $42,386,603
4,425,542 44,533,842
4,695,363 44,792,670
4,995,163 45,170,172
4,995,163 45,227,106
4,995,163 45,303,967
4,995,163 45,394,963
4,995,163 44,477,353
4,995,163 39,426,435
4,995,163 39,488,945
4,995,163 39,584,942
4,995,163 39,674,511
4,995,163 38,108,044
4,995,163 34,597,023
4,995,163 34,666,737
4,995,163 33,985,649
4,995,163 34,056,878
4,995,163 29,869,993
4,995,163 26,295,033
4,995,163 26,371,849
4,995,163 19,147,178
4,995,163 19,234,460
4,995,163 19,324,633
4,995,163 19,411,639
4,995,163 19,346,137
4,995,163 11,427,465
7,520,712 41,161,176
4,139,670 18,326,771
4,139,670
4,139,670
612,475
612,475
$410,546,183 $390,450,213 $144,547,922 $945,544,318
See notes on the following page.
On October 18, 1996, the Federal Emergency Drought Relief Act of 1996 became law. The law, in order
to provide emergency drought relief, defers all principal and interest payments for Choke Canyon
Reservoir Project, without penalty or accrued interest, for a 5 year period beginning with the date of
enactment of the Act. A total of $22,833,870 in principal and interest payments were deferred by the law.
(1) Payable as a maintenance and operating expense of the System.
-4345321211.2
(2) Payable as a maintenance and operation expense of the City’s Combined System and extends until
2035 with annual debt service payments between 2029 and 2035 of approximately $6,800,000. These
payments are included in the $189,094,573 total. Contingent LNRA Contract expenses are not reflected
in these amounts include: (2) any bonds issued by LNRA to refinance the LNRA Federal Contract or to
acquire the Texas Water Development Board’s interest in Lake Texana, and (b) expenses of operating and
maintaining Lake Texana and the LNRA Facilities payable by the City under the LNRA Contract.
(3) Payable as a maintenance and operating expense of the City’s water and wastewater utility systems.
(4) Payable from Pledged Net Revenues of the City’s Combined System. Excludes the Refunded Bonds
and includes the Bonds.
(5) Contract with the U.S. Department of Interior-Bureau of Reclamation (the “Federal Contract”).
Payment of this obligation is subordinate to the Priority Bonds and the Commercial Paper Program. The
payment schedule extends until 2044 with annual payments of $4,995,163 through 2028, $4,028,976 for
the year ending 2029, and $827,934 from 2030 through 2043 and $612,475 for 2044. These payments are
included in the $144,547,922 total. See “CITY’S COMBINED SYSTEM FINANCIAL INFORMATION
- Subordinated Obligations” herein. There currently are no Commercial Paper Notes outstanding.
City Investments
Available City funds, including revenues of the City’s Combined System, are invested as authorized by
Texas law and in accordance with investment policies approved by the City Council. Both State law and
the City’s investment policies are subject to change.
Legal Investments. Under Texas law, the City is authorized to invest in (1) obligations, including letters
of credit, of the United States or its agencies and instrumentalities, (2) direct obligations of the State of
Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a
federal agency or instrumentality of the United States, the underlying security for which is guaranteed by
an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on
which are unconditionally guaranteed or insured by, or backed by the full faith and credit of the State of
Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states,
agencies, counties, cities, and other political subdivisions or any state rated as to investment quality by a
nationally recognized investment rating firm not less than A or its equivalent, (6) certificates of deposit
and share certificates issued by a state of national bank, a savings bank or by a state or federal credit
union domiciled in the State of Texas that are guaranteed or insured by the Federal Deposit Insurance
Corporation or the National Credit Union Share Insurance Fund, or are secured as to principal by
obligations described in clauses (1) through (5) and clause (13) or in any other manner and amount
provided by law for City deposits, (7) fully collateralized repurchase agreements that have a defined
termination date, are fully secured by obligations described in clause (1), and are placed through a
primary government securities dealer or a financial institution doing business in the State of Texas,
(8) bankers’ acceptances with the remaining term of 270 days or less, if the short-term obligations of the
accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally
recognized credit rating agency, (9) commercial paper that is rated at least A-1 or P-1 or the equivalent by
either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating
agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank,
(10) no-load money market mutual funds registered with and regulated by the Securities and Exchange
Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their
investment objectives the maintenance of a stable net asset value of $1 for each share, (11) no-load
mutual fund registered with the Securities and Exchange Commission that: have an average weighted
maturity of less than two years; invest exclusively in obligations described in the preceding clauses and
clause (13), and are continuously rated as to investment quality by at least one nationally recognized
investment rating firm of not less than AAA or its equivalent, (12) public funds investment pools that
-4445321211.2
have an advisory board which includes participants in the pool and are continuously rated as to
investment quality by at least one nationally recognized investment rating firm of not less than AAA or its
equivalent or no lower than investment grade with a weighted average maturity no greater than 90 days,
and (13) bonds issued, assumed or guaranteed by the State of Israel. Texas law also permits the City to
invest bond proceeds in a guaranteed investment contract subject to the limitations set forth in Chapter
2256, as amended, Texas Government Code.
The City may invest in such obligations directly or through government investment pools that invest
solely in such obligations provided that the pool are rated no lower than AAA or AAAm or an equivalent
by at least one nationally recognized rating service. The City is specifically prohibited from investing in:
(1) obligations whose payment represents the coupon payments on the outstanding principal balance of
the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment
represents the principal stream of cash flow from the underlying mortgage-backed security and bears no
interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years;
and (4) collateralized mortgage obligations the interest rate of which is determined by an index that
adjusts opposite to the changes in a market index.
Investment Policies. Under Texas law, the City is required to invest its funds in accordance under
written investment policies that primarily emphasize safety of principal and liquidity; that address
investment diversification, yield, maturity, and the quality and capability of investment management; and
that includes a list of authorized investments for City funds, maximum allowable stated maturity of any
individual investment and the maximum average dollar-weighted maturity allowed for pool fund groups.
All City funds must be invested consistent with a formally adopted “Investment Strategy Statement” that
specifically addresses each funds’ investment. Each Investment Strategy Statement will describe its
objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal,
(3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield.
Under Texas law, City investments must be made “with judgment and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence would exercise in the management
of the person’s own affairs, not for speculation, but for investment, considering the probable safety of
capital and the probable income to be derived.” At least quarterly the investment officers of the City must
submit to the City Council an investment report detailing (1) the investment position of the City, (2) that
all investment officers jointly prepared and signed the report, (3) the beginning market value, any
additions and changes to market value and the ending value of each pooled fund group, (4) the book value
and market value of each separately listed asset at the beginning and end of the reporting period, (5) the
maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which
each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates
to (a) adopted investment strategy statements and (b) state law. No person may invest City funds without
express written authority from the City Council.
Additional Provisions. Under Texas law the City is additionally required to (1) annually review its
adopted policies and strategies, (2) require any investment officers’ with personal business relationships
or relative with firms seeking to see securities to the entity to disclose the relationship and file a statement
with the Texas Ethics Commission and the City Council, (3) require the registered principal of firms
seeking to sell securities to the City to (a) receive and review the City’s investment policy,
(b) acknowledge that reasonable controls and procedures have been implemented to preclude imprudent
investment activities, and (c) deliver a written statement attesting to these requirements, (4) perform an
annual audit of the management controls on investments and adherence to the City’s investment policy,
(5) provide specific investment training for the Treasurer, Chief Financial Officer and investment officers,
(6) restrict reverse repurchase agreements to not more than 90 days and restrict the investments of reverse
repurchase agreement funds to no greater than the term of the reverse repurchase agreement, (7) restrict
the investment in non-money market mutual funds of any portion of bond proceeds, reserves and funds
-4545321211.2
held for debt service and to no more than 15% of the entity’s monthly average fund balance, excluding
bond proceeds and reserves and other funds held for debt service, and (8) require local government
investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory
board requirements.
City policies require investments in accordance with applicable state law. All investments which are
authorized by State statute, with the exception of bankers’ acceptances, commercial paper, collateralized
mortgage obligations, reverse repurchase agreements, no-load money market mutual funds, no-load
mutual funds, and bonds issued, assumed or guaranteed by the State of Israel, are acceptable for
investment purposes under the City’s Statement of Investment Policy. The City generally invests in
obligations of the United States or its agencies and instrumentalities.
Under Texas law, the City may contract with an investment management firm registered under the
Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to
provide for the investment and management of its public funds or other funds under its control for a term
up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or
extend such a contract, the City must do so by order, ordinance or resolution. The City has not contracted
with, and has no present intention of contracting with, any such investment management firm or the State
Securities Board to provide such services.
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-4645321211.2
Current Investments. As of January 31, 2003, the following percentages by investment type applied to
the City’s investable funds, which had an aggregate par value of $447,348,618, a market value of
$445,630,305 and a book value of $445,032,485
Table 24
Par Value:
Money Market
Local Govt. Inv. Pool
Repurchase Agreement
Flex Repurchase Agreements(1)
U. S. Treasuries
U. S. Agencies
Total
Market Value
Book Value
Market to Book Ratio
Weighted Average Maturity
Portfolio by Account Type (Par Value)
Money Market
Local Govt. Inv. Pool
Repurchase Agreement
Flex Repurchase Agreements(1)
U.S. Treasuries
U.S. Agencies
Total
City Portfolio
Lake Texana Project
$3,157,297
40,455,493
45,844,728
75,000,000
18,750,000
264,141,000
$447,348,518
$1,820,986
$445,630,305
445,032,485
128 days
0.71%
9.04%
16.76%
10.25%
16.76%
4.19%
59.05%
100%
__________
$1,802,986
$1,820,986
1,820,986
100.00%
1 day
100%
100%
(1) Only bond proceeds invested in these investments.
As of such date, the market value of such investments (as determined by the City by reference to
published quotations, dealer bids, and comparable information) was approximately 100% of book value.
No funds of the City are invested in derivative securities, i.e., securities whose rate of return is determined
by reference to some other instrument, index, or commodity.
-4745321211.2
Revenues and Expenses of the City’s Combined System; Net Revenues Available for Debt Service;
Coverage Ratios
Table 25
The following schedule sets forth the revenues and expenses (excluding interest expense on the Priority
Bonds) of the City’s Combined System on a cash basis for its fiscal years ended July 31, 1997 through
2001, determined without regard to depreciation, certain capital outlays and certain accruals. The City’s
Financial Statements contained in Appendix B are prepared in accordance with generally accepted
accounting principles, on an accrual basis, and therefore do not reconcile with the following data. The
table also sets forth the extent to which net revenues of the City’s Combined System were available for
payment of debt service on the Priority Bonds compared against actual average debt service requirements
on the Priority Bonds.
2002
2001
2000
1999
1998
Operating Revenues:
Water System
Wastewater System
Gas System
Total Operating Revenues
$59,462,552
28,905,898
22,163,774
110,532,224
$59,968,319
29,672,301
34,548,138
124,188,758
$61,999,498
29,371,751
21,055,733
112,426,982
$51,096,446
26,013,280
18,674,551
95,784,277
$42,179,008
24,947,810
20,216,153
87,342,971
Operating Expenses: (1)
Water System
Wastewater System
Gas System
Total Operating Expenses
43,419,365
17,505,110
19,470,041
80,394,516
40,066,168
19,552,435
33,645,136
93,263,739
35,721,378
15,307,432
19,571,441
70,600,251
33,907,228
14,595,288
18,105,892
66,608,408
22,067,984
14,027,290
18,793,548
54,888,822
Combined Net Operating Income
30,137,708
30,925,019
41,826,731
29,175,869
32,454,149
4,844,168
14,214,514
9,465,794
7,767,553
2,071,749
$34,981,876
$45,139,533
$51,292,525
$36,943,422
$34,525,898
17,937,086
1.95
$17,251,516
2.62
$14,329,474
3.58
$11,175,048
3.31
$11,401,588
3.03
$13,687,670
2.56
$14,078,333
3.21
$11,009,026
4.66
$11,312,458
3.27
$11,192,056
3.08
Combined Non-Operating Revenue (2)
Net Revenue Available for Debt Service
Current Debt Service (3)
Current Debt Service Coverage
Rate Covenant Test:
Average Annual Debt Service
Average Debt Service Coverage
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(1)
Excludes interest on Priority Bonds, depreciation, and amortization of water rights, and fish and
wildlife rights. Includes compensated absences.
(2)
Net of payments under existing City Contracts with the LNRA and NRA that are attributable to
the debt service requirements on certain outstanding LNRA and NRA bonds and therefore will not
reconcile with the City’s audited financial statements.
(3)
Actual Debt Service paid on Priority Bonds does not include accruals and therefore will not agree
with City’s audited financial statements.
City’s Management Discussion and Analysis
The following discussion and analysis is based on historical operating results shown in Table 25
above.
The operational results of the City’s Combined System for the periods covering fiscal years 1997
to 2001 indicate that total revenues have increased annually. 6% annual rate increases were implemented
for all utilities in fiscal years 1997 through 1999; in FY2001, 0% increases for Water and Wastewater and
2% for Gas were implemented; and in FY2002, a 2% increase was implemented in all utilities.
In addition, beginning in fiscal year 1997, the City Council approved a Raw Water Cost
Adjustment in which operating and capital costs associated with development, acquisition, and delivery of
raw water are passed through to consumers. Costs of building and operating the Mayor Mary Rhodes
Pipeline, which carries water from Lake Texana, and costs of Lake Texana water rights, have contributed
to increased water revenues and operating expenses.
Fluctuations in gas revenues and operating expenses are largely due to changes in the cost of gas,
which is passed through to consumers as a Purchase Gas Adjustment. It reached a high of
$10.085/MMBTU in January, 2001, and has been declining since.
The combined non-operating revenue is net of non-operating expenses and is comprised largely
of interest earnings on investment.
Projected Financial Results of Operation of City’s Combined System
The following table sets forth revenues and expenses of the City’s Combined System, as well as
annual debt service payable from net revenues of the City’s Combined System and coverage of such debt
service, projected by management of the City’s Combined System for the current and each of the City’s
next four fiscal years:
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Financial Projections
(In Thousands of Dollars)
Fiscal Year Ending July 31,
2003
Estimated Revenues
Base Operating Revenues
2004
2005
2006
2007
$80,170,263
$86,662,748
$91,448,905
$96,276,446
$101,361,038
Pass Through Revenues
50,057,273
55,118,442
52,303,173
53,360,761
54,882,987
Non-Operating Revenues
2,487,472
2,000,556
2,633,221
2,998,094
3,359,266
$132,715,008
$143,781,746
$146,385,299
$152,635,301
$159,603,291
Total Estimated Revenues
Operating Expenses
Base Operating Expenses
44,927,260
46,896,291
49,238,186
50,799,937
52,705,701
Gas Purchases
22,162,758
22,228,244
23,011,211
23,825,916
24,695,188
Raw Water & Pipeline Expenses
9,324,973
10,542,873
10,458,807
10,736,042
11,031,711
NRA & LNRA Contract Debt Service
9,899,175
9,914,120
9,918,000
9,926,570
9,926,210
5,715,530
6,147,026
6,233,541
5,990,560
6,080,555
Total Operating Expenses
$92,029,696
$95,728,554
$98,859,745
$101,279,025
$104,439,365
Net Revenues Available for Debt Service
$40,685,312
$48,053,192
$47,525,554
$51,356,276
$55,163,926
Pro-Form Debt Service
$25,564,730
$25,588,708
$30,875,306
$34,535,309
$37,599,438
1.59
1.88
1.54
1.49
1.47
$19,527,346
$27,233,431
$28,756,295
$31,106,585
$34,115,487
2.08
1.76
1.65
1.65
1.62
Other Non-Debt Operating Expenses
Current Debt Service Coverage
Rate Covenant Test
Average Debt Service
Average Debt Service Coverage
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The foregoing projections are based on a number of assumptions and estimates, including the
assumptions described below, all of which the City’s Combined System management considers
reasonable:
•
Rate Increases: In July 2002, the City Council approved a rate ordinance setting the rate
increases for FY 2002-2003 at 5% for water, wastewater, and gas. For FY 2004-2005, an annual increase
of 4.75% is projected and, FY 2005-2006 an annual increase of 4.50% is projected.
•
Pass Through Charges: Charges are sufficient to cover the cost of water, operating expenses
and debt service for both the Lake Texana and Garwood water rights purchase and pipelines as well as an
allocable portion of outstanding City’s Combined System debt service. Created pass through charge for
existing raw water facilities beginning in 1997 and beginning in 1999 for new raw water facilities
including the Project and the LNRA Facilities sufficient to cover cost of water, operating expenses and
debt service.
•
Operating Expenses: Base Operating Expenses include salaries escalated at 3.0% per year, and
all other non-water operating expenses escalated at 2.5% per year. Raw Water and Pipeline Expenses
include raw water-affiliated salaries escalated at 3.0% per year, and all raw water facilities operating
expenditures at actual costs or escalated at 2.5% per year.
•
City’s Combined System CIP: CIP projects funds from a combination of the City’s Combined
System Revenue Bonds, commercial paper, and pay-as-you-go financing. The projects include the
drainage, wastewater and water CIP projects and construction draw schedules in the Proposed FY 2003
Capital Budget and Capital Improvement Planning guide.
•
NRA Debt: $110,270,000 - Series 1997 Bonds.
•
LNRA Debt: $7,680,000 - Series 1997 Bonds.
•
Bond Reserve Fund: Reserve Fund for the Bonds funded with bond insurer surety policy
(assumed premium of 1.5% of Bond Reserve Fund requirement). Reserve Fund for LNRA Bonds funded
from bond proceeds. Reserve Fund for the Priority Bonds funded over five years from cash.
•
Debt Amortization: 30 years for NRA Bonds and all others 20 years.
•
Bond Interest Rate: Actual interest rates for outstanding Bonds, 5.00% for fiscal year ending
July 31, 2003, 5.50% for fiscal year ending July 31, 2004, and 6.00% for all other years.
•
Reinvestment Rate: 2.5% for 2003, 3.00% for 2004, 3.5% for 2005, 4.00% for 2006, 5.00% for
2007 and thereafter on outstanding fund balances.
Realization of the foregoing projections will be dependent upon a number of factors and is
subject to certain risks, including those risks discussed under “BONDHOLDERS’ REMEDIES.” If
expenses increase at a faster pace than assumed or if revenues do not increase as assumed, the City could
realize substantially less City’s Combined System net revenues than projected. Actual revenues could be
less than projected if there is less demand for water or gas than anticipated as a result of conservation or
reduced growth, or if the City is unable to obtain, transport, and treat sufficient water to meet demand, or
if the City Council fails to increase utility rates as assumed, among other conditions. Actual expenses
could be more than projected if additional environmental regulations are enacted, or costs of materials or
labor increase at a greater pace than projected, or unanticipated liabilities payable from the City’s
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Combined System revenues are incurred. Accordingly, there can be no assurance that projected financial
results of operations will be realized, and inclusion of such projections herein should not be interpreted as
a representation to the contrary.
LITIGATION AND REGULATION
City’s Combined System Claims and Litigation
The City is a defendant in various tort claims and lawsuits with respect to the City’s Combined
System involving general liability, automobile liability, and various contractual matters. In the opinion of
the City’s management and the City Attorney’s office, the outcome of the pending litigation will not have
a material adverse effect on the City’s Combined System financial position or operations.
Purporting to act under the City Charter initiative and referendum provision, five citizens
requested City Council reconsideration of Ordinance No. 022832, which made minor changes to the
cost-of-water pass-through ordinance adopted by the City. With respect to ordinances to which the
initiative and referendum apply, if the City Council failed to reconsider, the City Secretary would issue
petitions and if sufficient signatures were timely collected an election would be held. It is the opinion of
the City Attorney that utility system rate ordinances, including No. 022832, are not subject to the
referendum provisions of the City Charter. This position was upheld with respect to the underlying rate
ordinance in the bond validation lawsuit described above under “CITY’S COMBINED SYSTEM
RATES—City Charter Amendment Regarding Rates Ruled Void.”
Environmental Regulations
The City is subject to the environmental regulations of the State and the United States in the
operation of its water, wastewater, storm water and gas systems. These regulations are subject to change,
and the City is required to expend substantial funds to meet the requirements of such regulatory
authorities.
Safe Drinking Water Act. In August 1996, amendments to the Federal Safe Drinking Water Act
were signed into law. These amendments require the United States Environmental Protection Agency
(“EPA”) to regulate a wide variety of contaminants that may be present in drinking water, including
volatile organic chemicals, other synthetic organic chemicals, inorganic chemicals, microbiological
contaminants, and radionucleide contaminants. The list of contaminants to be regulated is so lengthy that
the amendments require EPA to establish a schedule for developing regulations regarding the
contaminants. There are several phases in EPA’s regulatory timetables that are to be undertaken over the
next few years. The initial impact of the amendments to the water system has been minimal, as the City
has been able to comply with regulations promulgated to date. The full impact is difficult to project at this
time, and would be dependent upon what maximum contaminant levels may be set for some future
parameters and enhanced surface water treatment rules. Many of these parameters, such as waterborne
pathogens, radionucleides and infection by-products contaminants, may require treatment changes that
have not as yet been established by the EPA.
Continued changes in rules and regulations will continue to cause process modifications, which
will increase the cost of the maintenance and operation of the City’s drinking water treatment and
distribution facilities. These modifications and upgrades will require increased capital expenditures,
which may be financed by the issuance of additional revenue bonds.
Nueces Estuary Fresh Water Inflow Requirements. When the State granted the City and the
Nueces River Authority a right to store and divert State waters in Choke Canyon Reservoir, it included a
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special provision in the water rights permit requiring that the Choke Canyon/Lake Corpus Christi
Reservoir system be operated so as to provide no less than 151,000 acre-feet per year of fresh water
inflow to the Nueces Estuary in order to maintain the ecological health of that estuary. This provision
was later incorporated into the Certificate of Adjudication No. 21-3214 for Choke Canyon Reservoir. In
1990, the State issued the first of a series of orders governing the City’s reservoir system operations in
order to satisfy these fresh water inflow requirements. The effect of these orders, combined with the
drought of 1982-1984, was to significantly diminish the firm annual yield of the reservoir system. Under
the 1992 Interim Order, reservoir system yield was estimated to be approximately 168,000 acre-feet per
year. The City eventually negotiated a new operating plan governing the fresh water inflow requirements,
and in May 1995, TCEQ approved an Agreed Order that now provides for a firm annual yield of 181,000
acre-feet per year while satisfying the fresh water inflow needs of the Nueces Estuary. Any future
increase in fresh water inflow requirements could reduce the amount of water available for sale by the
City’s Combined System. The 1995 TCEQ Agreed Order was further refined on April 4, 2001, to allow a
more automatic transition from inflow requirements within the 1995 TCEQ Agreed Order. These
changes will have a positive impact on the system firm yield. See “CITY’S COMBINED SYSTEM –
Description of City’s Water System”.
Federal and State Regulation of the Wastewater Facilities. The Federal Clean Water Act and
the Texas Water Code regulate the Wastewater System’s operations. All discharges of pollutants into the
nation’s navigable waters must comply with the Clean Water Act. The Clean Water Act allows
municipal wastewater treatment plants to discharge treated effluent to the extent allowed in permits issued
by the EPA pursuant to the National Pollutant Discharge Elimination System (the “NPDES”) program, a
national program established by the Clean Water Act for issuing, revoking, monitoring, and enforcing
wastewater discharge permits. The Clean Water Act authorized the EPA to delegate the EPA’s NPDES
permit responsibility to State or interstate agencies after certain prerequisites have been met by the
relevant agencies. The EPA has delegated its NPDES authority to the TCEQ. The City will no longer
need to obtain a duplicative wastewater discharge permit from TCEQ and EPA. The Texas Pollution
Discharge Elimination System (“TPDES”) permits issued by the TCEQ will be the only new permits
required.
TPDES permits set limits on the type and quantity of wastewater discharge, in accordance with
State and federal laws and regulations. The Clean Water Act requires municipal wastewater treatment
plants to meet secondary treatment effluent limitations (as defined in EPA regulations). The Clean Water
Act also requires that municipal plants meet any effluent limitations established by State or federal laws
or regulations, which are more stringent than secondary treatment. Under the Clean Water Act, states
must identify any bodies of water for which more stringent effluent standards are needed to achieve water
quality pollutant standards identified by the EPA. The Clean Water Act allows municipalities to apply for
extensions of applicable deadlines for secondary or additional treatment.
The TCEQ’s wastewater discharge permits are issued under authority granted to the TCEQ by the
Texas Water Code.
Status of Discharge Permits for City’s Wastewater Treatment Plants. The Oso, Greenwood,
Broadway, Laguna Madre and Whitecap wastewater treatment plants have been issued TPDES discharge
permits by the TCEQ. The Allison Plant still has NPDES permit by EPA and the TCEQ. An occasional
upset may cause permit violations, but generally all six plants are in compliance with their respective
discharge permits. Currently the City is waiting for a response from TCEQ on the proposed new TPDES
draft permit for the Allison wastewater treatment plant.
Potential Penalties for the City’s Wastewater System’s Violations. The failure by the City to
achieve compliance with the Clean Water Act could result in either a private plaintiff or the EPA
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instituting a civil action for injunctive relief and civil penalties of up to $27,500 per day. In addition, the
EPA has the power to issue administrative orders compelling compliance with its regulations and the
applicable permits. The EPA can also bring criminal actions for recovery of penalties of up to $50,000
per day for willful or negligent violations of permit conditions or discharge without a permit. Violations
of permits or administrative orders may result in the disqualification of a municipality from eligibility for
federal assistance to finance capital improvements pursuant to the Clean Water Act. Even though the
City will be operating under TPDES permits, we will still be liable for penalties from EPA under the
Clean Water Act.
Under State law, penalties for violation of State wastewater discharge permits or orders of the
TCEQ can be a maximum of $10,000 per day per violation. The Executive Director of the TCEQ also
has authority to levy administrative penalties of up to $10,000 per day for violation of rules, orders or
permits. Orders resulting from a civil action could require the imposition of additional user or service
charges or the issuance of additional bonds to finance the improvements required to ameliorate a
condition that may have caused the violation of a TCEQ permit.
GASB 34 STATEMENT
In June 1999, the Governmental Accounting Standards Board (“GASB”) issued Statement No.
34, “Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local
Governments” (“GASB 34”). The objective of GASB 34 is to enhance the clarity and usefulness of the
general-purpose external financial reports of state and local governments to its citizenry, legislature and
oversight bodies, and investors and creditors. The City is required to implement GASB 34 being with its
fiscal year ending July 31, 2002. While adoption of GASB 34 will alter the presentation of the City’s
financial information, City management does not believe that adoption of GASB 34 will have any
material adverse impact on the City’s financial position, results of operation, or cash flows. The financial
information of the City contained in Appendix B to this Official Statement has been prepared in
accordance with GASB 34.
LEGAL INVESTMENTS IN TEXAS
Section 1201.041 of the Public Securities Procedures Act (Chapter 1201, Texas Government
Code) provides that the Bonds are negotiable instruments governed by Chapter 8, Texas Business and
Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and
trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of
the State of Texas. With respect to investment in the Bonds by municipalities or other political
subdivisions or public agencies of the State of Texas, the Public Funds Investment Act, Chapter 2256,
Texas Government Code, requires that the Bonds be assigned a rating of “A” or its equivalent as to
investment quality by a national rating agency. See “RATINGS” herein. In addition, various provisions
of the Texas Finance Code provide that, subject to a prudent investor standard, the Bonds are legal
investments for state banks, savings banks, trust companies with at least $1 million of capital, and savings
and loan associations. The Bonds are eligible to secure deposits of any public funds of the State, its
agencies, and its political subdivisions, and are legal security for those deposits to the extent of their
market value.
The City has made no investigation of other laws, rules, regulations or investment criteria which
might apply to such institutions or entities or which might limit the suitability of the Bonds for any of the
foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Bonds
for such purposes. The City has made no review of laws in other states to determine whether the Bonds
are legal investments for various institutions in those states.
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REGISTRATION AND QUALIFICATION OF BONDS FOR SALE
The sale of the Bonds has not been registered under the Securities Act of 1933, as amended, in
reliance upon exemptions provided in such Act; the Bonds have not been qualified under the Securities
Act of Texas in reliance upon exemptions contained therein; nor have the Bonds been qualified under the
securities acts of any other jurisdiction. The City assumes no responsibility for qualification of the Bonds
under the securities laws of any jurisdiction in which they may be sold, assigned, pledged, hypothecated
or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of
the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any
exemption from securities registration or qualification provisions.
RATINGS
Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s Ratings Service, A Division of
the McGraw Hill Companies (“S&P”), and Fitch Ratings (“Fitch”) have rated the Bonds “Aaa”, “AAA”,
and “AAA”, respectively, based upon the simultaneous delivery of a municipal bond insurance policy by
Financial Security Assurance Inc. See “BOND INSURANCE” herein. The City’s unenhanced revenue
bond ratings are “A2”, “A+”, and “AA-”, respectively. An explanation of the significance of such a
rating may be obtained from Moody’s, S&P, or Fitch. The rating of the Bonds by Moody’s, S&P, or
Fitch reflects the view of said company at the time the rating is given, and the City makes no
representations as to the appropriateness of the rating. There is no assurance that the rating will continue
for any given period of time, or that the rating will not be revised downward or withdrawn entirely by
Moody’s, S&P, or Fitch, if in the judgment of Moody’s, S&P, or Fitch circumstances so warrant. Any
such downward revision or withdrawal of the rating may have an adverse effect on the market price of the
obligations.
An explanation of the significance of such ratings may be obtained from the company furnishing
the rating. The City furnished the rating agencies certain information which is not included in this Official
Statement. The rating reflects only the view of such organization at the time such rating was given, and
the City makes no representation as to the appropriateness of the rating. There is no assurance that such
rating will continue for any given period of time or that it will not be revised downward or withdrawn
entirely by such rating company, if in the sole judgment of such rating company, circumstances so
warrant. Any such downward revision or withdrawal of rating may have an adverse effect on the market
price of the Bonds.
TAX MATTERS
Opinion
On the date of initial delivery of the Bonds, McCall, Parkhurst & Horton L.L.P., Dallas, Texas,
Bond Counsel, will render its opinion that, in accordance with statutes, regulations, published rulings and
court decisions existing on the date thereof ("Existing Law"), (1) interest on the Bonds for federal income
tax purposes will be excludable from the "gross income" of the holders thereof and (2) the Bonds will not
be treated as "specified private activity bonds" the interest on which would be included as an alternative
minimum tax preference item under section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code").
Except as stated above, Bond Counsel will express no opinion as to any other federal, state or local tax
consequences of the purchase, ownership or disposition of the Bonds. See Appendix D -- Form of
Opinion of Bond Counsel.
In rendering its opinion, Bond Counsel will rely upon (a) certain information and representations
of the City, including information and representations contained in the City's federal tax certificate,
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(b) covenants of the City contained in the Bond documents relating to certain matters, including arbitrage
and the use of the proceeds of the Bonds and the property financed or refinanced therewith, and (c) the
verification report prepared by Grant Thornton LLP, Minneapolis, Minnesota, certified public
accountants. Although it is expected that the Bonds will qualify as tax-exempt obligations for federal
income tax purposes as of the date of issuance , the tax-exempt status of the Bonds could be affected by
future events. However, future events beyond the control of the City, as well as the failure to observe the
aforementioned representations or covenants, could cause the interest on the Bonds to become taxable
retroactively to the date of issuance.
Bond Counsel's opinion represents its legal judgment based upon its review of Existing Law and
the reliance on the aforementioned information, representations and covenants. Bond Counsel's opinion
is not a guarantee of a result. The Existing Law is subject to change by the Congress and to subsequent
judicial and administrative interpretation by the courts and the Department of the Treasury. There can be
no assurance that such Existing 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.
A ruling was not sought from the Internal Revenue Service by the City with respect to the Bonds
or the property financed or refinanced, with the proceeds of the Bonds. No assurances can be given as to
whether or not the Internal Revenue Service will commence an audit of the Bonds, or as to whether the
Internal Revenue Service would agree with the opinion of Bond Counsel. If an audit is commenced,
under current procedures the Internal Revenue Service is likely to treat the City as the taxpayer and the
Bondholders may have no right to participate in such procedure. No additional interest will be paid upon
any determination of taxability.
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 "Original
Issue Discount Bonds") 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 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 below.
In the event of the redemption, sale or other taxable disposition of such Original Issue Discount
Bond prior 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 Existing 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
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each such 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 Original Issue Discount Bond.
The federal income tax consequences of the purchase, ownership, redemption, 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 Original Issue Discount Bonds should consult their own tax advisors with respect to the determination
for federal, state and local income tax purposes of the treatment 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, redemption, sale or other disposition of such
Original Issue Discount 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
Law which is subject to change or modification, retroactively.
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 interests in a FASIT, individual recipients of Social Security or Railroad
Retirement benefits, individuals allowed an earned income credit, 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.
THE DISCUSSION CONTAINED HEREIN MAY NOT BE EXHAUSTIVE. INVESTORS,
INCLUDING THOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF THE CODE, SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX TREATMENT WHICH MAY BE
ANTICIPATED TO RESULT FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF TAXEXEMPT 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 noncorporate 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 by section 884 of the
Code on the effectively-connected 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.
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Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the
disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market
discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of
issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the
accrued market discount of such bonds; although for this purpose, a de minimis amount of market
discount is ignored. A "market discount bond" is one which is acquired by the holder at a purchase price
which is less than the stated redemption price at maturity or, in the case of a bond issued at an original
issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The
"accrued market discount" is the amount which bears the same ratio to the market discount as the number
of days during which the holder holds the obligation bears to the number of days between the acquisition
date and the final maturity date.
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.
LEGAL PROCEEDINGS
The City will furnish a complete transcript of proceedings incident to the authorization and
issuance of the Bonds, including the approving legal opinions of the Attorney General of the State of
Texas to the effect that the Initial Bonds are valid and binding special obligations of the City, and based
upon examination of such transcript of proceedings, the legal opinions of Bond Counsel to the effect that
the Bonds issued in compliance with the provisions of the Ordinance are valid and legally binding special
obligations of the City and the interest on such Bonds is exempt from federal income taxation under
existing statutes, published rulings, regulations, and court decisions (see “TAX MATTERS”). Bond
Counsel was not requested to participate, and did not take part, in the preparation of the Official
Statement, and such firm has not assumed any responsibility with respect thereto or undertaken
independently to verify any of the information contained therein, except that, in its capacity as Bond
Counsel, such firm has reviewed the information describing the Bonds in the Official Statement under the
captions “SECURITY FOR THE BONDS,” “THE BONDS,” “LEGAL INVESTMENTS IN TEXAS,”
“REGISTRATION AND QUALIFICATION OF BONDS FOR SALE,” “TAX MATTERS,”
“CONTINUING DISCLOSURE OF INFORMATION” (except the subcaption “Compliance with Prior
Undertakings” as to which no opinion is expressed), and Appendix A and is of the opinion that the
information relating to the Bonds and the Ordinance is a fair and accurate summary of the information
purported to be shown therein and is correct as to matters of law. The legal fees to be paid Bond Counsel
for services rendered in connection with the issuance of the Bonds is contingent on the sale and delivery
of the Bonds. The legal opinion of Bond Counsel will accompany the Bonds deposited with DTC or will
be printed on the definitive Bonds in the event of the discontinuance of the Book-Entry-Only System. In
connection with the transactions described in the Official Statement, Bond Counsel represents only the
City. Certain legal matters relating to the City will be passed upon by the City Attorney of the City of
Corpus Christi.
Certain legal matters will be passed upon for the Underwriters by
Fulbright & Jaworski L.L.P.
The various legal opinions to be delivered concurrently with the delivery of the Bonds express the
professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed
therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the
expression of professional judgment, of the transaction opined upon, or of the future performance of the
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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.
FINANCIAL STATEMENTS
Certain audited financial statements of the City and the auditor’s opinion thereon for the year
ended July 31, 2002 are included in Appendix B.
FINANCIAL ADVISOR
M. E. Allison & Co. Inc. (the “Financial Advisor”) is employed by the City as independent
financial advisor in connection with the issuance of the Bonds and, in such capacity, has assisted the City
in the preparation of documents. The financial advisor’s fee for services rendered with respect to the
Bonds is contingent upon the sale and delivery of the Bonds. The Financial Advisor has read and
participated in the drafting of this Official Statement, but has not independently verified any of the
information set forth herein.
The Financial Advisors have reviewed the information in this Official Statement in accordance
with their responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Financial Advisors do not guarantee the accuracy or
completeness of such information.
VERIFICATION OF ARITHMETICAL AND MATHEMATICAL CALCULATIONS
Grant Thornton LLP, Minneapolis, Minnesota, a firm of independent certified public accountants,
upon delivery of the Bonds, will deliver to the City its report indicating that they have examined the
mathematical accuracy of computations prepared by the Underwriters relating to (a) the sufficiency of the
anticipated receipts from the Federal Securities and on the Bonds and (b) the yields of the Federal
Securities and the Bonds.
The report of Grant Thornton LLP will include the statement that the scope of their engagement
was limited to verifying the mathematical accuracy of the computations contained in such schedules
provided to them and that they have no obligation to update their report because of events occurring, or
data or information coming to their attention, subsequent to the date of their report. The report of Grant
Thornton LLP will be relied upon by Bond Counsel in rendering their opinion with respect to the
exclusion of interest on the Bonds for federal income tax purposes and with respect to the defeasance of
the Refunded Bonds.
UNDERWRITING
The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the City
at an underwriting discount of $180,437.50. The Underwriters’ obligation is subject to certain conditions
precedent. The Underwriters will be obligated to purchase all of the Bonds if any Bonds are purchased.
The Bonds may be offered and sold to certain dealers and others at prices lower than such public offering
prices, and such public prices may be changed, from time to time, by the Underwriters.
The Underwriters have provided the following sentence for inclusion in this Official Statement.
The Underwriters have reviewed the information in this Official Statement in accordance with, and as part
of, its responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of
such information.
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NO-LITIGATION CERTIFICATE
At the time of delivery of the Bonds, the City will execute and deliver a certificate dated as of the
date of delivery to the effect that no litigation has been filed or is then pending to restrain or enjoin the
issuance or delivery of the Bonds, or which would affect the provisions made for payment of the principal
of and interest on the Bonds or in any manner question the validity of the Bonds.
GENERAL INFORMATION
The descriptions herein do not purport to be complete and all such descriptions or references are
qualified in their entirety by reference to the complete form of the Ordinance or other documents or
source they summarize. Statements made herein involving estimates or projections, whether or not
expressly identified as such, should not be construed to be statements of fact or as representations that
such estimates or projections will ever be attained or will approximate actual results. Any summaries or
excerpts of constitutional provisions, statutes, ordinances, or other documents do not purport to be
complete statements of same and are made subject to all of the provisions thereof. Reference should be
made to such original sources in all respects.
For additional information with respect to the financial condition of the City, a copy of the
July 31, 2002 Comprehensive Annual Financial Report of the City of Corpus Christi, Texas is available
upon written request addressed to the Office of the Director of Financial Services, City of Corpus Christi,
Corpus Christi, Texas 78469-9277.
The Bonds are payable solely from the Pledged Revenues as described herein. The inclusion in
the Appendices hereto of financial and other information with respect to other funds, assets or resources
of the City is in no way intended to imply that any other revenues or money of the City are pledged to pay
the principal of and interest on the Bonds.
CONTINUING DISCLOSURE OF INFORMATION
In the Ordinance, the City has made the following agreements for the benefit of the holders and
beneficial owners of the Bonds. The City is required to observe the agreement for so long as it remains
obligated to advance funds to pay the Bonds. Under the agreement, the City will be obligated to provide
certain updated financial information and operating data annually, and timely notice of specified material
events, to certain information vendors. This information will be available to securities brokers and others
who subscribe to receive the information from the vendors.
Annual Reports
The City will provide certain updated financial information and operating data to certain
information vendors annually. The information to be updated includes all quantitative financial
information and operating data with respect to the City of the general type included in this Official
Statement (“Financial Information”) in Tables 1 through 25 and in Appendix B. The City will update and
provide this information within six months after the end of each fiscal year ending in or after 2003. The
City will provide the updated information to each nationally recognized municipal securities information
repository (“NRMSIR”) and to any state information depository (“SID”) that is designated by the State of
Texas and approved by the staff of the United States Securities and Exchange Commission (the “SEC”).
The City may provide updated information in full text or may incorporate by reference certain
other publicly available documents, as permitted by SEC Rule 15c2-12. The updated information will
include audited financial statements, if the City commissions an audit and it is completed by the required
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time. If audited financial statements are not available by the required time, the City will provide
unaudited financial statements by the required time, and will provide audited financial statements when
and if the audit report becomes available. Any such financial statements will be prepared in accordance
with the accounting principles described in Appendix B, the Ordinance or such other accounting
principles as the City may be required to employ from time to time pursuant to state law or regulation.
The City’s current fiscal year end is July 31. Accordingly, it must provide updated information
by January 31 of the following year, unless the City changes its fiscal year. If the City changes its fiscal
year, it will notify each NRMSIR and any SID of the change.
Material Event Notices
The City will also provide timely notices of certain events to certain information vendors. The
City will provide notice of any of the following events with respect to the Bonds, if such event is material
to a decision to purchase or sell Bonds: (1) principal and interest payment delinquencies; (2) non-payment
related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties;
(4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or
liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt
status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances;
(10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes.
Neither the Bonds nor the Ordinance make any provision for liquidity enhancement. In addition, the City
will provide timely notice of any failure by the City to provide information, data, or financial statements
in accordance with its agreement described above under “Annual Reports”. The City will provide each
notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities
Rulemaking Board (“MSRB”).
Availability of Information from NRMSIRs and SID
The City has agreed to provide the foregoing information only to NRMSIRs 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 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 City has agreed to update information and to provide notices of material events only as
described above. The City has not agreed to provide other information that may be relevant or material to
a complete presentation of its financial results of operations, condition, or prospects or agreed to update
any information that is provided, except as described above. The City makes no representation or
warranty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds
at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in
part from any breach of its continuing disclosure agreement or from any statement made pursuant to its
agreement, although holders or registered owners of Bonds may seek a writ of mandamus to compel the
City to comply with its agreement.
The City may amend its continuing disclosure agreement to adapt to changed circumstances that
arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or
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type of operations of the City, if the agreement, as amended, would have permitted an underwriter to
purchase or sell Bonds in the offering described herein in compliance with the Rule and either the holders
of a majority in aggregate principal amount of the outstanding Bonds consent or any person unaffiliated
with the City (such as nationally recognized bond counsel) determines that the amendment will not
materially impair the interests of the holders or beneficial owners of the Bonds. If the City amends its
agreement, it must include with the next financial 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.
The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC
amends or repeals the applicable provision of the SEC Rule 15c2-12 or a court of final jurisdiction enters
judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of
this sentence would not prevent an underwriter from lawfully purchasing or selling Bonds, respectively,
in the primary offering of the Bonds.
Compliance with Prior Undertakings
The City has complied in all material respects with continuing disclosure agreements made by it
in accordance with SEC Rule 15c2-12.
FORWARD LOOKING STATEMENTS
The statements contained in this Official Statement, and in any other information provided by the
City, that are not purely historical, are forward-looking statements, including statements regarding the
City’s expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue
reliance on forward-looking statements. All forward-looking statements included in this Official
Statement are based on information available to the City on the date hereof, and the City assumes no
obligation to update any such forward-looking statements. It is important to note that the City’s actual
results could differ materially from those in such forward-looking statements.
The forward-looking statements herein are necessarily based on various assumptions and
estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties
relating to the possible invalidity of the underlying assumptions and estimates and possible changes or
developments in social, economic, business, industry, market, legal and regulatory circumstances and
conditions and actions taken or omitted to be taken by third parties, including customers, suppliers,
business partners and competitors, and legislative, judicial and other governmental authorities and
officials. Assumptions related to the foregoing involve judgments with respect to, among other things,
future economic, competitive, and market conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of
such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Official Statement would prove to be accurate.
MISCELLANEOUS
All information contained in this Official Statement is subject, in all respects, to the complete
body of information contained in the original sources thereof and no guaranty, warranty or other
representation is made concerning the accuracy or completeness of the information herein. In particular,
no opinion or representation is rendered as to whether any projection will approximate actual results, and
all opinions, estimates and assumptions, whether or not expressly identified as such, should not be
considered statements of fact.
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No person has been authorized to give any information or to make any representations other than
those contained in this Official Statement, and if given or made, such other information or representations
must not be relied upon as having been authorized by the City. This Official Statement does not
constitute an offer to sell or solicitation of an offer to buy in any state in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer of solicitation.
AUTHORIZATION OF THE OFFICIAL STATEMENT
The Official Statement will be approved as to form and content and the use thereof in the offering
of the Bonds will be authorized, ratified and approved by the City Council on the date of sale, and the
Underwriters will be furnished, upon request, at the time of payment for and the delivery of the Bonds, a
certified copy of such approval, duly executed by the proper officials of the City.
The Ordinance will also approve the form and content of this Official Statement, and any
addenda, supplement or amendment thereto issued on behalf of the City, and authorize its further use in
the reoffering of the Bonds by the Underwriters.
This Official Statement has been approved by the City Council of the City for distribution in
accordance with the provisions of the Securities and Exchange Commission’s rule codified at 17 C.F.R.
Section 240.15c2-12.
By:
ATTEST:
/s/ Armando Chapa
City Secretary
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/s/ Samuel L. Neal, Jr.
Mayor
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45299010.3
SCHEDULE I
Bond
Maturity Date
Interest Rate (%)
Par Amount ($)
Call Date
Call Price
July 15, 2004
July 15, 2004
100%
100%
Utility System Revenue Bonds, Series 1994:
SERIALS
07/15/2013
07/15/2014
5.250
5.250
840,000
890,000
Utility System Revenue Bonds, Series 1994A:
SERIALS
07/15/2005
07/15/2006
07/15/2007
07/15/2008
07/15/2009
07/15/2010
07/15/2011
07/15/2012
07/15/2013
07/15/2014
4.600
4.700
4.800
4.900
4.950
5.000
5.050
5.100
5.150
5.150
410,000
435,000
455,000
480,000
505,000
530,000
560,000
590,000
620,000
655,000
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
July 15, 2004
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Utility System Revenue Bonds, Series 1995:
SERIALS
07/15/2006
07/15/2011
07/15/2012
07/15/2013
07/15/2014
07/15/2015
5.300
5.400
5.200
5.200
5.200
5.200
725,000
950,000
1,000,000
1,050,000
1,125,000
1,180,000
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
100%
100%
100%
100%
100%
100%
1,430,000
1,505,000
1,580,000
665,000
1,950,000
2,040,000
2,135,000
2,240,000
2,345,000
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
July 15, 2005
100%
100%
100%
100%
100%
100%
100%
100%
100%
Utility System Revenue Bonds, Series 1995A:
SERIALS
07/15/2007
07/15/2008
07/15/2009
07/15/2010
07/15/2011
07/15/2012
07/15/2013
07/15/2014
07/15/2015
4.550
4.650
4.750
4.850
4.950
5.000
5.050
5.100
5.100
Schedule-145321211.2
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45299010.3
APPENDIX A
SELECTED PROVISIONS OF THE ORDINANCE
The following are excerpts of certain sections of the Ordinance. Reference is hereby made to the
Ordinance, which contains a more complete description of the terms and conditions relating to the Bonds.
Section 7. DEFINITIONS. As used in the Ordinance (and this Official Statement), the following
terms shall have the meanings set forth below, unless the text hereof specifically indicates otherwise:
“Account” shall mean any account created, established and maintained under the terms of any
ordinance authorizing the issuance of Priority Bonds.
“Accountant” shall mean a nationally recognized independent certified public accountant, or an
independent firm of certified public accountants.
“Additional Priority Bonds” shall mean the additional revenue bonds which the City reserves the
right to issue in the future on a parity with the Previously Issued Priority Bonds and the Bonds, as provided
in the Ordinance.
“Amortization Installment” shall mean the amount of money which is required to be deposited into
the Mandatory Redemption Account for retirement of Term Bonds (whether at maturity, or by mandatory
redemption and including redemption premium, if any).
“Average Annual Principal and Interest Requirements” shall mean that amount equal to the average
annual principal and interest requirements (including Amortization Installments) of all Priority Bonds
outstanding. With respect to Additional Priority Bonds that bear interest at a rate which is not established
at the time of issuance at a single numerical rate for each maturity of such series, Average Annual Principal
and Interest Requirements shall be calculated by (i) assuming that the interest rate for every 12-month
period on such bonds is equal to 9.20% or (ii) using the highest numerical rate borne over the preceding 24
month period by such bonds, whichever is greater; provided, that if such bonds have not borne interest at a
variable rate for such 24 month period, such rate shall be assumed to be 9.20% until such time as bonds
have been outstanding for a 24 month period. In making such determinations, it shall be assumed that the
principal of such bonds is amortized such that annual debt service is substantially level over the remaining
stated life of such bonds.
“Bond Insurer” means any insurance company insuring payment of municipal bonds and other
similar obligations if such bond or obligations so insured by it are eligible for a rating by a Credit Rating
Agency, at the time of the delivery of a Municipal Bond Insurance Policy, in one of its two highest rating
categories.
“Bonds” shall mean the Series 2003 Bonds.
“Capital Additions” shall mean a reservoir or other water storage facilities, a wastewater treatment
plant or an interest therein, a gas distribution system or an interest therein and associated transmission
facilities with respect to each and any combination thereof, which shall become a part of the System.
“Capital Improvements” shall mean any capital extensions, improvements and betterments to the
System other than Capital Additions.
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45321211.2
“Capitalized Interest Account” shall mean the Account by that name which may be created within
the Debt Service Fund.
“Code” shall mean the Internal Revenue Code of 1986, and any amendments thereto.
“Credit Facility” shall mean a policy of municipal bond insurance, a surety bond or a letter or line
of credit issued by a Credit Facility Provider in support of any Priority Bonds or Subordinate Lien Bonds.
“Credit Facility Provider” shall mean (i) with respect to any Credit Facility consisting of a policy
of municipal bond insurance or a surety bond, an issuer of policies of insurance insuring the timely
payment of debt service on governmental obligations such as the Priority Bonds, provided that a Rating
Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds fully insured by a
standard policy issued by the issuer in its highest generic rating category for such obligations; and (ii) with
respect to any Credit Facility consisting of a letter or line of credit, any financial institution, provided that a
Rating Agency having an outstanding rating on the Priority Bonds would rate the Priority Bonds in its two
highest generic rating categories for such obligations if the letter or line of credit proposed to be issued by
such bank secured the timely payment of the entire principal amount of the series of Priority Bonds and the
interest thereon.
“Debt Service Fund” shall mean the debt service fund established pursuant to the Ordinance to
provide for the payment of debt service on the Priority Bonds.
“Eligible Investments” shall mean those investments in which the City is authorized by law,
including, but not limited to, the Public Funds Investment Act of 1987 (Chapter 2256, Texas Government
Code), as amended, to purchase, sell and invest its funds and funds under its control; and provided further
that Eligible Investments shall specifically include, with respect to the investment of proceeds of any
Priority Bonds, guaranteed investment contracts fully collateralized by Government Obligations.
“Engineer of Record” shall mean the independent engineer or firm at the time employed by the
City to perform and carry out the duties imposed on such engineer or firm by the Ordinance and having a
favorable reputation nationally for skill and experience in the engineering of water, sanitary sewer and/or
gas systems of comparable size and character as those forming parts of the System.
“Fund” shall mean any fund created, established and maintained under the terms of any ordinance
authorizing the issuance of Priority Bonds.
“Government Obligations” shall mean direct obligations of the United States of America, including
obligations the principal of and interest on which are unconditionally guaranteed by the United States of
America.
“Gross Revenues” shall mean all revenues, income, and receipts derived or received by the City
from the operation and ownership of the System, including the interest income from the investment or
deposit of money in any Fund created by the Ordinance or maintained by the City in connection with the
System, other than those amounts subject to payment to the United States of America as rebate pursuant to
section 148 of the Code.
“Mandatory Redemption Account” shall mean the Account by that name created within the Debt
Service Fund and established by an ordinance authorizing the issuance of Priority Bonds.
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45321211.2
“Net Earnings” shall mean Gross Revenues of the System after deducting the Operating Expenses
of the System, but not expenditures which, under standard accounting practice, should be charged to capital
expenditures.
“Net Revenues of the System” and “Net Revenues” shall mean all Gross Revenues less Operating
Expenses.
“Operating Expenses” shall mean the expenses of operation and maintenance of the System,
including all salaries, labor, materials, repairs, and extensions necessary to render efficient service,
provided, however, that only such repairs and extensions, as in the judgment of the City, reasonably and
fairly exercised by the passage of appropriate ordinances, are necessary to render adequate service, or such
as might be necessary to meet some physical accident or condition which would otherwise impair any
Priority Bonds. Operating Expenses shall include the purchase of water, sewer and gas services as received
from other entities and the expenses related thereto, and, to the extent permitted by law, Operating
Expenses may include payments made on or in respect of obtaining and maintaining any Credit Facility.
Depreciation, and payments from the System Fund to other funds established in the Ordinance, shall never
be considered as expenses of operation and maintenance.
“Paying Agent/Registrar” shall mean the JPMorgan Chase Bank, Dallas, Texas, or its herein
permitted successors and assigns.
“Pledged Revenues” shall mean:
(1) the Net Revenues, plus
(2) any additional revenues, income, receipts, or other resources, including, without limitation, any
grants, donations, or income received or to be received from the United States Government, or any other
public or private source, whether pursuant to an agreement or otherwise, which hereafter are pledged to the
payment of the Priority Bonds.
“Previously Issued Priority Bonds” shall mean the Series 1994 Bonds, the Series 1994-A Bonds,
the Series 1995 Bonds, the Series 1995-A Bonds, the Series 1999 Bonds, the Series 1999-A Bonds, the
Series 2000 Bonds, the Series 2000-A Bonds, and the Series 2002 Bonds.
“Priority Bonds” shall mean the Previously Issued Priority Bonds, the Bonds, and any Additional
Priority Bonds.
“Prudent Utility Practice” shall mean any of the practices, methods and acts, in the exercise of
reasonable judgment, in the light of the facts, including but not limited to the practices, methods and acts
engaged in or approved by a significant portion of the public utility industry prior thereto, known at the
time the decision was made, would have been expected to accomplish the desired result at the lowest
reasonable cost consistent with reliability, safety and expedition. it is recognized that Prudent Utility
Practice is not intended to be limited to the optimum practice, method or act at the exclusion of all others,
but rather is a spectrum of possible practices, methods or acts which could have been expected to
accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition.
In the case of any facility included in the System which is owned in common with one or more other
entities, the term “Prudent Utility Practice”, as applied to such facility, shall have the meaning set forth in
the agreement governing the operation of such facility.
“Rating Agency” shall mean any nationally recognized securities rating agency which has assigned
a rating to the Priority Bonds.
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45321211.2
“Required Amount” shall mean the Average Annual Principal and Interest Requirements on the
Outstanding Priority Bonds.
“Reserve Fund” shall mean the fund so designated in the Ordinance to provide a reserve for the
payment of debt service on the Priority Bonds.
“Reserve Fund Obligations” shall mean cash, Eligible Investments, any Credit Facility, or any
combination of the foregoing.
“Series 1994 Bonds” shall mean the $11,140,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 1994, authorized by an ordinance adopted by the City
on April 26, 1994.
“Series 1994-A Bonds” shall mean the $8,520,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 1994-A, authorized by an ordinance adopted by the
City on June 14, 1994.
“Series 1995 Bonds” shall mean the $14,730,000 City of Corpus Christi, Texas Utility System
Revenue Improvement Bonds, Series 1995, authorized by an ordinance adopted by the City on June 20,
1995.
“Series 1995-A Bonds” shall mean the $27,640,000 City of Corpus Christi, Texas Utility System
Revenue Improvement Bonds, Series 1995-A, authorized by an ordinance adopted by the City on July 25,
1995.
“Series 1999 Bonds” shall mean the $47,740,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 1999, authorized by an ordinance adopted by the City
on May 11, 1999.
“Series 1999-A Bonds” shall mean the $15,750,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 1999-A, authorized by an ordinance adopted by the
City on April 20, 1999.
“Series 2000 Bonds” shall mean the $50,000,000 City of Corpus Christi, Texas Utility System
Revenue Refunding Bonds, Series 2000, authorized by an ordinance adopted by the City on May 11, 1999.
“Series 2000-A Bonds” shall mean the $42,520,000 City of Corpus Christi, Texas Utility System
Revenue Refunding Bonds, Series 2000-A, authorized by an ordinance adopted by the City on September
19, 2000.
“Series 2002 Bonds” shall mean the $127,295,000 City of Corpus Christi, Texas Utility System
Revenue Refunding and Improvement Bonds, Series 2002, authorized by an ordinance adopted by the City
on August 21, 2002.
“Series 2003 Bonds” shall mean the $28,870,000 City of Corpus Christi, Texas Utility System
Revenue Refunding Bonds, Series 2003, authorized by the Ordinance.
“Special Facilities Bonds” shall mean special revenue obligations of the City which are not secured
by or payable from the Pledged Revenues, but which are secured by and payable solely from special
contract revenues, or payments received from the City or any other legal entity, or any combination thereof,
in connection with such facilities; and such revenues or payments shall not be considered as or constitute
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45321211.2
Gross Revenues of the City’s Combined System, unless and to the extent otherwise provided in the
ordinance or ordinances authorizing the issuance of such Special Facilities Bonds.
“Subordinated Obligations” shall mean any bonds, notes, or other obligations issued pursuant to
law payable in whole or in part from the Pledged Revenues and subordinate to the Priority Bonds.
“System” shall mean and include the City’s existing combined waterworks system, wastewater
disposal system and gas system, together with all future extensions, improvements, enlargements, and
additions thereto, including to the extent permitted by law, storm sewer and drainage, and all replacements
thereof; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or
permitted by law, the term System shall not include any waterworks, wastewater or gas facilities which are
declared by the city not to be a part of the System and which are hereafter acquired or constructed by the
City with the proceeds from the issuance of Special Facilities Bonds.
“System Fund” shall mean the fund so designated in the Ordinance to which shall be credited the
Gross Revenues.
“Term Bonds” shall mean those Priority Bonds designated by the ordinance authorizing the
issuance thereof which shall be subject to retirement of the Mandatory Redemption Account.
“Value of Investment Securities” and words of like import shall mean the amortized value thereof,
provided, however, that all United States of America, United States Treasury Obligations--State and Local
Government Series shall be valued at par and those obligations which are redeemable at the option of the
holder shall be valued at the price at which such obligations are then redeemable. The computations made
under this paragraph shall include accrued interest on the investment securities paid as a part of the
purchase price thereof and not collected. For the purposes of this definition “amortized value”, when used
with respect to a security purchased at par means the purchase price of such security.
“Year” shall mean the regular fiscal year used by the City in connection with the operation of the
System, which may be any twelve consecutive months period established by the City.
Section 8. PLEDGE. (a) That the Priority Bonds are and shall be secured by and payable from a
first lien on and pledge of the Pledged Revenues including such revenues within the System Fund and the
Funds hereinafter created in this Ordinance; and the Pledged Revenues are further pledged to the
establishment and maintenance of the Debt Service Fund and the Reserve Fund as hereinafter provided.
The Priority Bonds are and will be secured by and payable only from the Pledged Revenues, and are not
secured by or payable from a mortgage or deed of trust on any properties, whether real, personal, or mixed,
constituting the System.
(b) Chapter 1208, Texas Government Code, applies to the issuance of the Bonds and the pledge of
the Pledged Revenues granted by the City under subsection (a) of this Section, and such pledge is therefore
valid, effective, and perfected. If Texas law is amended at any time while the Bonds are outstanding and
unpaid such that the pledge of the Pledged Revenues granted by the City is to be subject to the filing
requirements of Chapter 9, Texas Business & Commerce Code, then in order to preserve to the registered
owners of the Bonds the perfection of the security interest in said pledge, the City agrees to take such
measures as it determines are reasonable and necessary under Texas law to comply with the applicable
provisions of Chapter 9, Texas Business & Commerce Code and enable a filing to perfect the security
interest in said pledge to occur.
Section 9. SYSTEM FUND. That there has heretofore been created and established and there
shall be maintained on the books of the City, and accounted for separate and apart from all other funds of
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the City, a special fund entitled the “City of Corpus Christi Utility System Fund” (the “System Fund”). All
Gross Revenues shall be credited to the System Fund immediately upon receipt. All Operating Expenses
shall be paid from such Gross Revenues credited to the System Fund as a first charge against same.
Section 10. DEBT SERVICE FUND. (a) That for the sole purpose of paying the principal
amount of, premium, if any, Amortization Installments, if any, and interest on all Priority Bonds, there
created and established and there shall be maintained on the books of the City a separate fund entitled the
“City of Corpus Christi Utility System Revenue Bonds Debt Service Fund” (hereinafter called the “Debt
Service Fund”). Monies in the Debt Service Fund shall be deposited and maintained in an official
depository bank of the City.
(c) That within the Debt Service Fund there has been established the Mandatory Redemption
Account. Amortization Installments shall be deposited to the credit of the Mandatory Redemption Account
and be used to retire the principal amount of Term Bonds in the manner described in any ordinance
authorizing the issuance of Term Bonds, described in any ordinance authorizing the issuance of the Term
Bonds.
Section 11. RESERVE FUND. (a) That there created and established and there shall be
maintained on the books of the City a separate fund entitled the “City of Corpus Christi Utility System
Revenue Bonds Reserve Fund” (hereinafter called the “Reserve Fund”). There shall be deposited into the
Reserve Fund any Reserve Fund Obligations so designated by the City. Reserve Fund Obligations in the
Reserve Fund shall be deposited and maintained in an official depository bank of the City. Reserve Fund
Obligations in the Reserve Fund shall be used solely for the purpose of retiring the last of any Priority
Bonds as they become due or paying principal of and interest on any Priority Bonds when and to the extent
the amounts in the Debt Service Fund are insufficient for such purpose. The Reserve Fund shall be
maintained in an amount equal to the Average Annual Principal and Interest Requirements of the
outstanding Priority Bonds (the “Required Amount”). The City may, at its option, withdraw and transfer to
the System Fund, all surplus in the Reserve Fund over the Required Amount.
(b) The City may replace or substitute a Credit Facility for cash or Eligible Investments on deposit
in the Reserve Fund or in substitution for or replacement of any existing Credit Facility. Upon such
replacement or substitution, cash or Eligible Investments on deposit in the Reserve Fund which, taken
together with the face amount of any existing Credit Facilities, are in excess of the Required Amount may
be withdrawn by the City, at its option, and transferred to the System Fund; provided that the face amount
of any Credit Facility may be reduced at the option of the City in lieu of such transfer.
(c) If the City is required to make a withdrawal from the Reserve Fund for any of the purposes
described in this Section, the City shall promptly notify any applicable Credit Facility Provider of the
necessity for a withdrawal from the Reserve Fund for any such purposes, and shall make such withdrawal
FIRST from available moneys or Eligible Investments then on deposit in the Reserve Fund, and NEXT
from a drawing under any Credit Facility to the extent of such deficiency.
(d) In the event of a deficiency in the Reserve Fund, or in the event that on the date of termination
or expiration of any Credit Facility there is not on deposit in the Reserve Fund sufficient Reserve Fund
Obligations, all in an aggregate amount at least equal to the Required Amount, then the City shall satisfy
the Required Amount by depositing Reserve Fund Obligations into the Reserve Fund in monthly
installments of not less than 1/60 of the Required Amount made on or before the 10th day of each month
following such termination or expiration.
(e) In the event of the redemption or defeasance of any Priority Bonds, any Reserve Fund
Obligations on deposit in the Reserve Fund in excess of the Required Amount may be withdrawn and
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transferred, at the option of the City, to the System Fund, as a result of (i) the redemption of any Priority
Bonds, or (ii) funds for the payment of any Priority Bonds having been deposited irrevocably with the
paying agent or place of payment therefor in the manner described in any ordinance authorizing the
issuance of Priority Bonds, the result of such deposit being that such Priority Bonds no longer are deemed
to be outstanding under the terms of any such ordinance.
(f) In the event there is a draw upon the Credit Facility, the City shall reimburse the Credit Facility
Provider for such draw, in accordance with the terms of any agreement pursuant to which the Credit
Facility is issued, from Pledged Revenues, however, such reimbursement from Pledged Revenues shall be
subordinate and junior in right of payment to the payment of principal of and premium, if any, and interest
on the Priority Bonds.
(g) Upon the issuance of Additional Priority Bonds the monies in the Reserve Fund shall be
increased to the newly-established Required Amount in accordance with the provisions of Section 20(b) of
this Ordinance.
Section 14. INVESTMENTS. That money in any Fund established pursuant to this Ordinance
may, at the option of the City, be placed or invested in Eligible Investments. Money in the Reserve Fund
shall not be invested in securities maturing later than the final maturity of the Priority Bonds. If monies in
a Fund herein established are permitted to be invested the value of any such Fund shall be established by
adding the monies therein to the Value of Investment Securities. The value of each such Fund shall be
established annually during the last month of each Year and in addition thereto, with respect to the Reserve
Fund, value shall be established within thirty days prior to the issuance of Priority Bonds and at the time or
times withdrawals are made therefrom. Such investments shall be sold promptly when necessary to prevent
any default in connection with the Priority Bonds. Earnings derived from the investment of moneys on
deposit in the various Funds and Accounts created hereunder shall be credited to the Fund or Account from
which moneys used to acquire such investment shall have come.
Section 15. FUNDS SECURED. That monies in the System Fund and all Funds created by this
Ordinance, to the extent not invested, shall be secured in the manner prescribed by law for securing funds
of the City.
Section 16. FLOW OF FUNDS. That all monies in the System Fund not required for paying
Operating Expenses during each month shall be applied by the City, on or before the 10th day of the
following month, commencing during the months and in the order of priority with respect to the Funds and
Accounts that such applications are hereinafter set forth in this Section.
(a)
Debt Service Fund - To the credit of the Debt Service Fund, in the following order of
priority, to-wit:
(1) such amounts, deposited in approximately equal monthly installments, commencing during the
month in which the Priority Bonds are delivered, or the month thereafter if delivery is made after the 10th
day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service Fund available
for such purpose (including specifically moneys on deposit in the Capitalized Interest Account dedicated
thereto), to pay the interest scheduled to come due on Priority Bonds on the next succeeding interest
payment date;
(2) such amounts, deposited in approximately equal monthly installments, commencing during the
month which shall be the later to occur of, (i) the twelfth month before the first maturity date of Priority
Bonds, or (ii) the month in which Priority Bonds are delivered, or the month thereafter if delivery is made
after the 10th day thereof, as will be sufficient, together with other amounts, if any, in the Debt Service
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Fund available for such purpose, to pay the principal scheduled to mature on Priority Bonds on the next
succeeding principal payment date; and
(3) Amortization Installments, in such amounts and on such dates as set forth in any ordinance
authorizing a series of Priority Bonds which contain Term Bonds within such Series, to pay scheduled
principal amounts of Priority Bonds which constitute Term Bonds to be redeemed in accordance with the
terms of said ordinance;
(b)
Reserve Fund.
To the credit of the Reserve Fund, such amounts, deposited in
approximately equal monthly installments, commencing during the month in which the Priority Bonds are
delivered, or the month thereafter if delivery is made after the 10th day thereof, equal to not less than 1/60
of the Required Amount, until such time as such amounts together with other amounts, if any, in the
Reserve Fund, equal the Required Amount. When and so long as the Reserve Fund Obligations in the
Reserve Fund are not less than the Required Amount, no deposits need be made to the credit of the
Reserve Fund. When and if the Reserve Fund at any time contains less than the Required Amount due to
any cause or condition other than the issuance of Additional Priority Bonds then, subject and subordinate to
making the required deposits to the credit of the Debt Service Fund, commencing with the month during
which such deficiency occurs, such deficiency shall be made up from the next available Pledged Revenues
or from any other sources available for such purpose. Reimbursements to a Credit Facility Provider made in
accordance with the terms of Section 11(f) of this Ordinance shall constitute the making up of a deficiency
to the extent that such reimbursements result in the reinstatement, in whole or in part, as the case may be, of
the amount of the Credit Facility. If the Reserve Fund contains less than the Required Amount due to the
issuance of Additional Priority Bonds deposits shall be made to the Reserve Fund commencing during the
month and in the amounts required by Section 20(b) of this Ordinance, unless a Credit Facility is deposited
in the Reserve Fund in an amount necessary to cause the sum of money and the value of Investment
Securities and any other Credit Facilities in the Reserve Fund to equal the Required Amount.
(c)
Surplus. The balance of any monies remaining in the System Fund following such
transfers may be used by the City for payment of other obligations of the System, including, but not limited
to, Subordinated Obligations, and for any other lawful purpose; provided that transfers made for purposes
other than for payment of obligations of the System shall be made only at the end of the Year.
Section 17. DEFICIENCIES. That if on any occasion there shall not be sufficient Pledged
Revenues to make the deposits and other applications of monies required by Section 17 with respect to the
various Funds as provided therein, any such deficiencies shall be made up (in the order that each such Fund
is provided for in Section 16) as soon as possible from the next available Pledged Revenues, or from any
other sources available for such purpose. The foregoing notwithstanding, however, if any deficiency in the
Reserve Fund occurs as a result of withdrawals therefrom or decreases in the market value of Eligible
Investments on deposit therein, such deficiency will be made up from the next available Pledged Revenues
within twelve months from the date of such deficiency is determined, with such deposits to the Reserve
Fund to be made in not more than twelve substantially equal monthly payments.
Section 18. PAYMENT OF BONDS. That on or before the first scheduled interest payment date,
and on or before each interest payment date and principal payment date thereafter while any of the Priority
Bonds are outstanding and unpaid, the City shall make available to the paying agent therefor, out of the
Debt Service Fund (and the other Funds, if necessary, in the order of priority set forth herein) monies
sufficient to pay such interest on and such principal amount of the Priority Bonds, as shall become due and
mature on such dates, respectively, at maturity or by redemption prior to maturity. The bond registrar for
each series of Priority Bonds shall destroy all paid Priority Bonds and furnish the City with an appropriate
Bond of cancellation or destruction.
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Section 19. FINAL DEPOSITS; GOVERNMENT OBLIGATIONS. (a) That any Priority Bond
shall be deemed to be paid, retired and no longer outstanding within the meaning of this Ordinance when
payment of the principal amount of, redemption premium, if any, on such Priority Bond, plus interest
thereon to the due date thereof (whether such due date be by reason of maturity, upon redemption, or
otherwise) either (i) shall have been made in accordance with the terms thereof or (ii) shall have been
provided for by irrevocably depositing with, or making available to, a paying agent (or escrow agent)
therefor, in trust and irrevocably set aside exclusively for such payment, in accordance with the terms and
conditions of an agreement between the City and said paying agent (or escrow agent), (1) money sufficient
to make such payment or (2) except as otherwise provided in this Ordinance, Government Obligations,
certified by an independent public accounting firm of national reputation, to mature as to principal and
interest in such amounts and at such times as will insure the availability, without reinvestment, of sufficient
money to make such payment, and all necessary and proper fees, compensation, and expenses of such
paying agent pertaining to the Priority Bonds with respect to which such deposit is made shall have been
paid or the payment thereof provided for (and irrevocable instructions shall have been given by the City to
such paying agent of such bonds to give notice of such redemption in the manner required by the ordinance
or ordinances authorizing the issuance of such bonds) to the satisfaction of such paying agent. Such paying
agent shall give notice to each registered owner of any Priority Bond that such deposit as described above
has been made, in the same manner as described in Section 3 of this Ordinance. In addition, in connection
with a defeasance, such paying agent shall give notice of redemption, if necessary, to the registered owners
of any Priority Bonds in the manner described in such Priority Bonds and as directed in the redemption
instructions delivered by the City to such paying agent. At such time as a Priority Bond shall be deemed to
be paid hereunder, as aforesaid, it shall no longer be secured by or entitled to the benefit of this Ordinance
or a lien on and pledge of the Pledged Revenues, and shall be entitled to payment solely from such money
or Government Obligations.
(b) That any moneys so deposited with a paying agent (or escrow agent) may, at the direction of
the City, also be invested in Government Obligations, maturing in the amounts and times as hereinbefore
set forth, and all income from all Government Obligations in the hands of the paying agent pursuant to this
Section which is not required for the payment of the Priority Bonds, the redemption premium, if any, and
interest thereon, with respect to which such money has been so deposited, shall be remitted to the City for
deposit into the System Fund.
(c) Except as provided in clause (b) of this Section, all money or Government Obligations set aside
and held in trust pursuant to the provisions of this Section for the payment of Priority Bonds, the
redemption premium, if any, and interest thereon, shall be applied solely to and used solely for the payment
of such Priority Bonds, the redemption premium, if any, and interest thereon.
Section 20. ISSUANCE OF ADDITIONAL PRIORITY BONDS. (a) That subject to the
provisions hereinafter appearing as conditions precedent which must first be satisfied, the City reserves the
right to issue, from time to time as needed, Additional Priority Bonds for any lawful purpose relating to the
System. Such Additional Priority Bonds may be issued in such form and manner as now or hereafter
authorized by the laws of the State of Texas for the issuance of evidences of indebtedness or other
instruments, and should new methods or financing techniques be developed that differ from those now
available and in normal use, the City reserves the right to employ the same in its financing arrangements
provided only that the same conditions precedent herein required for the authorization and issuance of
Additional Priority Bonds are satisfied.
(b) That the Debt Service Fund and the Reserve Fund established by this Ordinance shall secure
and be used to pay all Additional Priority Bonds hereafter issued. Upon the issuance and delivery of
Additional Priority Bonds, the additional amount required to be deposited in the Reserve Fund shall be so
accumulated by the deposit in the Reserve Fund of all or any part of said required additional amount in cash
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immediately after the delivery of such Additional Priority Bonds, or, at the option of the City, (i) by the
deposit of said required additional amount (or any balance of said required additional amount not deposited
in cash as permitted above) in approximately equal monthly installments, made on or before the 10th day of
each month following the delivery of such Additional Priority Bonds, of not less than 1/60 of said required
additional amount (or 1/60 of the balance of said required additional amount not deposited in cash as
permitted above) or (ii) by the deposit of a Credit Facility which, in whole or in combination with deposits
described in clause (i) above, is sufficient to satisfy the required additional amount to be on deposit in the
Reserve Fund.
(c) That all calculations of Average Annual Principal and Interest Requirements made pursuant to
this Section shall be made as of and from the date of the Additional Priority Bonds then proposed to be
issued.
Section 21.
FURTHER REQUIREMENTS FOR ADDITIONAL PRIORITY BONDS.
(a) Conditions precedent for Issuance of Additional Priority Bonds - General. That as a condition
precedent to the issuance of any Additional Priority Bonds, the City Manager (or other officer of the City
then having the responsibility for the financial affairs of the City) shall have executed a certificate stating
(i) that the City is not then in default as to any covenant, obligation or agreement contained in any
ordinance or other proceeding relating to any obligations of the City payable from and secured by a lien on
and pledge of the Pledged Revenues, and (ii) that the amounts on deposit in all Funds or Accounts created
and established for the payment and security of all outstanding obligations payable from and secured by a
lien on and pledge of the Pledged Revenues are the amounts then required to be deposited therein. Such
certificate shall be dated on or before the date of delivery of such Additional Priority Bonds, but such
certificate shall not be dated prior to the date an ordinance is passed authorizing the issuance of such
Additional Priority Bonds.
(b) Conditions Precedent for Issuance of Additional Priority Bonds - Capital Improvements and
for any other lawful purpose except for Capital Additions or for refunding. The City covenants and agrees
that Additional Priority Bonds will not be issued for the purpose of financing Capital Improvements, or for
any other lawful purpose (except for Capital Additions or for refunding, which are to be issued in
accordance with the provisions of clauses (c), (d) or (e) of this Section) unless and until the conditions
precedent in clause (a) above have been satisfied and, in addition thereto, the City has secured a certificate
or opinion of the Accountant to the effect that, according to the books and records of the City, the Net
Earnings (hereinafter defined) for the preceding Year or for 12 consecutive months out of the 15 months
immediately preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at
least equal to 1.25 times the Average Annual Principal and Interest Requirements for all outstanding
Priority Bonds after giving effect to the Additional Priority Bonds then proposed.
The foregoing notwithstanding, the City covenants and agrees that Additional Priority Bonds may
not be issued for the purpose of financing Capital Improvements when other outstanding Priority Bonds
which have been issued for the purpose of financing Capital Additions and for which capitalized interest
for such other Priority Bonds has been provided for at least the twelve months subsequent to the date of
issuance of the Additional Priority Bonds then proposed to be issued, unless the conditions precedent in
clause (a) above have been satisfied and, in addition thereto, the City has either (1) complied with the
relevant conditions in this clause as set forth above, or (2) if the relevant conditions of this clause (b) as set
forth above cannot be satisfied, the City has satisfied the conditions precedent in clauses (c)(i) and (c)(ii) of
this Section (but, for purposes of such clauses, the term Capital Improvements shall be substituted for the
term Capital Additions where the term Capital Additions appears therein to the extent necessary to give
recognition to the fact that Capital Improvements, rather than Capital Additions, are then to be financed)
and has secured a Bond or opinion of the Accountant to the effect that, according to the books and records
of the City, the Net Earnings for the preceding Year or for 12 consecutive months out of the 15 months
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immediately preceding the month the ordinance authorizing the Additional Priority Bonds is adopted are at
least equal to 1.25 times the Average Annual Principal and Interest Requirements for all outstanding
Priority Bonds (other than any Priority Bonds issued for Capital Additions for which capitalized interest
has been provided for at least the twelve months subsequent to the date of issuance of the Additional
Priority Bonds proposed to be issued) after giving effect to the Priority Bonds then proposed.
(c) Conditions Precedent for Issuance of Additional Priority Bonds - Capital Additions: Initial
Issue. The City covenants and agrees that Additional Priority Bonds will not be issued for the purpose of
financing Capital Additions, unless the same conditions precedent specified in clause (a) above have been
satisfied and, in addition thereto, either the relevant conditions precedent specified in clause (b) above are
satisfied or, in the alternative, the City shall have obtained:
(i) from the Engineer of Record a comprehensive Engineering Report for each Capital Addition to
be financed, which report shall (A) contain (1) detailed estimates of the cost of acquiring and constructing
the Capital Addition, (2) the estimated date the acquisition and construction of the Capital Addition will be
completed and commercially operative, and (3) a detailed analysis of the impact of the Capital Addition on
the financial operations of the system for which the Capital Addition is to be integrated and to the System
as a whole during the construction thereof and for at least five Years after the date the Capital Addition
becomes commercially operative, and (B) conclude that (1) the Capital Addition is necessary and will
substantially increase the capacity, or is needed to replace existing facilities, to meet current and projected
demands for the service or product to be provided thereby, and (2) the estimated cost of providing the
service or product from the Capital Addition will be reasonable in comparison with projected costs for
furnishing such service or product from other reasonably available sources; and
(ii) a certificate of the Engineer of Record to the effect that, based on the Engineering Report
prepared for each Capital Addition, the projected Net Earnings for each of the five years subsequent to the
date the Capital Addition becomes commercially operative (as estimated in the Engineering Report) will be
equal to at least 1.25 times the Average Annual Principal and Interest Requirements for Priority Bonds then
outstanding or incurred and all Priority Bonds estimated to be issued, if any, for all Capital Improvements
and for all Capital Additions then in progress or then being initiated, during the period from the date the
first series of obligations for the Capital Additions is to be delivered through the fifth year subsequent to
the date the Capital Addition is estimated to become commercially operative.
(d) Completion Issues. Once a Capital Addition has been initiated by meeting the conditions
precedent specified in clauses (c)(i) and (c)(ii) above and the initial Priority Bonds issued therefor are
delivered, the City reserves the right to issue Additional Priority Bonds, to finance the remaining costs of
such Capital Addition in such amounts as may be necessary to complete the acquisition and construction
thereof and make the same commercially operative without satisfaction of any condition precedent under
clauses (c)(i) and (c)(ii) or clause (b) of this Section but subject to satisfaction of the following conditions
precedent:
(i) the City makes a forecast (the “Forecast”) of the operations of the System demonstrating the
System’s ability to pay all obligations, payable from the Pledged Revenues of the System to be outstanding
after the issuance of the Additional Priority Bonds then being issued for the period (the “Forecast Period”)
of each ensuing year through the fifth year subsequent to the latest estimated date such Capital Addition is
expected to be commercially operative; and
(ii) the Engineer of Record reviews such Forecast and executes a Certificate to the effect that (A)
such Forecast is reasonable, and based thereon (and such other factors deemed to be relevant), the Pledged
Revenues of the System will be adequate to pay all the obligations, payable from the Pledged Revenues of
the System to be outstanding after the issuance of the Additional Priority Bonds then being issued for the
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Forecast Period and (B) the proceeds from the sale of such Additional Priority Bonds are estimated to be
sufficient to complete such acquisition and construction.
(e) Refunding Issues. The City reserves the right to issue refunding bonds to refund all or any part
of the outstanding Priority Bonds (pursuant to any law then available), upon such terms and conditions as
the governing body of the City may deem to be in the best interest of the City and its inhabitants, and if less
than all such outstanding Priority Bonds are refunded, the conditions precedent prescribed in clauses (a)
and (b) of this Section shall be satisfied and the Accountant’s certificate or opinion required by clause (b)
shall give effect to the issuance of the proposed refunding bonds (and shall not give effect to the Priority
Bonds being refunded following their cancellation or provision being made for their payment). In addition,
the City reserves the right to refund all or any part of any other obligations of the System, upon such terms
and conditions as the governing body of the City may deem to be in the best interest of the City and its
inhabitants, provided that the conditions prescribed in clauses (a) and (b) of this Section shall be satisfied.
No Accountant’s certificate otherwise required by clause (b) will be required for refunding bonds, after
giving effect to such proposed refunding, if there is no increase in debt service for any Year in which there
will be debt service on Priority Bonds outstanding both before and after such refunding.
(f) Computations; Reports. With reference to Priority Bonds anticipated and estimated to be issued
or incurred, the Average Annual Principal and Interest Requirements therefor shall be those reasonably
estimated and computed by the City’s Director of Financial Services (or other officer of the City then
having the primary responsibility for the financial affairs of the City). In the preparation of the Engineering
Report required in clause (c)(i) above, the Engineer of Record may rely on other experts or professionals,
including those in the employment of the City, provided such Engineering Report discloses the extent of
such reliance and concludes it is reasonable so to rely. In connection with the issuance of Priority Bonds
for Capital Additions, the Certificate of the City’s Director of Financial Services and Engineer of Record,
together with the Engineering Report for the initial issue and the Forecast for a subsequent issue, shall be
conclusive evidence and the only evidence required to show compliance with the provisions and
requirements and this clause of this Section.
(g) Combination Issues. Priority Bonds for Capital Additions may be combined in a single issue
with Priority Bonds for Capital Improvements or for any lawful purpose provided the conditions precedent
set forth in clauses (b) through (e) are complied with as the same relate to the appropriate purpose.
(h) Subordinated Obligations. The City may, at any time and from time to time, for any lawful
purpose, issue Subordinated Obligations, the principal of and redemption premium, if any, and interest on
which is payable from and secured by a pledge of and lien on the Pledged Revenues junior and subordinate
to the lien and pledge created hereby for the security of the Priority Bonds and the payments required to be
made hereunder into the Debt Service Fund and the Reserve Fund; provided, however, that any such pledge
and lien securing the Subordinated Obligations shall be, and shall be expressed to be, subordinate in all
respects to the pledge of and lien on the Pledged Revenues as security for the Priority Bonds; and provided
further that any default with respect to the issuance of Subordinated Obligations will not be deemed a
default with respect to the Priority Bonds.
(i) Definition of Net Earnings. As used in this Section, the term “Net Earnings” shall mean the
Gross Revenues of the System after deducting the Operating Expenses of the System, but not expenditures
which, under standard accounting practice, should be charged to capital expenditures.
(j) Determination of Net Earnings. In making a determination of Net Earnings for any of the
purposes described in this Section, the Accountant may take into consideration a change in the rates and
charges for services and facilities afforded by the System that became effective at least 60 days prior to the
last day of the period for which Net Earnings are determined and, for purposes of satisfying any of the Net
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Earnings test described above, make a pro forma determination of the Net Earnings of the System for the
period of time covered by the Accountant’s certification or opinion based on such change in rates and
charges being in effect for the entire period covered by the Accountant’s certificate or opinion.
Section 22. GENERAL COVENANTS. That the City further covenants and agrees that in
accordance with and to the extent required or permitted by law:
(a) PERFORMANCE. It will faithfully perform at all times any and all covenants, undertakings,
stipulations, and provisions contained in this Ordinance, and each ordinance authorizing the issuance of
Additional Priority Bonds; it will promptly pay or cause to be paid the principal amount of and interest on
every Priority Bond, on the dates and in the places and manner prescribed in such ordinances and such
Priority Bonds; and it will, at the time and in the manner prescribed, deposit or cause to be deposited the
amounts required to be deposited into the System Fund and the Funds herein created; and any registered
owner of any Priority Bond may require the City, its officials and employees to carry out, respect or
enforce the covenants and obligations of this Ordinance, or any ordinance authorizing the issuance of
Priority Bonds, by all legal and equitable means, including specifically, but without limitation, the use and
filing of mandamus proceedings, in any court of competent jurisdiction, against the City, its officials and
employees.
(b) CITY’S LEGAL AUTHORITY. It is a duly created and existing home rule city of the State of
Texas, and is duly authorized under the laws of the State of Texas to issue the Bonds; that all action on its
part for the issuance of the Bonds has been duly and effectively taken, and that the Bonds in the hands of
the owners thereof are and will be valid and enforceable special obligations of the City in accordance with
their terms.
(c) ACQUISITION AND CONSTRUCTION; OPERATION AND MAINTENANCE. (1) It shall
use its best efforts in accordance with Prudent Utility Practice to acquire and construct, or cause to be
acquired and constructed, any Capital Additions or Capital Improvements, in accordance with the plans and
specifications therefor, as modified from time to time with due diligence and in a sound and economical
manner; and (2) it shall at all times use its best efforts to operate or cause to be operated the System
properly and in an efficient manner, consistent with Prudent Utility Practice, and shall use its best efforts to
maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved,
reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working
order and condition, and shall from time to time make, or use its best efforts to cause to be made, all
necessary and proper repairs, replacement and renewals so that at all times the operation of the System may
be properly and advantageously conducted.
(d) TITLE. It has or will obtain lawful title, whether such title is in fee or lesser interest, to the
lands, buildings, structures and facilities constituting the System, that it warrants that it will defend the title
to all the aforesaid lands, buildings, structures and facilities, and every part thereof, for the benefit of the
owners of the Priority Bonds, against the claims and demands of all persons whomsoever, that it is lawfully
qualified to pledge the Pledged Revenues to the payment of the Priority Bonds in the manner prescribed
herein, and has lawfully exercised such rights.
(e) LIENS. It will from time to time and before the same become delinquent pay and discharge all
taxes, assessments and governmental charges, if any, which shall be lawfully imposed upon it, or the
System; it will pay all lawful claims for rents, royalties, labor, materials and supplies which if unpaid might
by law become a lien or charge thereon, the lien of which would be prior to or interfere with the liens
hereof, so that the priority of the liens granted hereunder shall be fully preserved in the manner provided
herein, and it will not create or suffer to be created any mechanic’s, laborer’s, materialman’s or other lien
or charge which might or could be prior to the liens hereof, or do or suffer any matter or thing whereby the
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liens hereof might or could be impaired; provided however, that no such tax, assessment or charge, and that
no such claims which might be used as the basis of a mechanic’s, laborer’s, materialman’s or other lien or
charge, shall be required to be paid so long as the validity of the same shall be contested in good faith by
the City.
(f) NO FREE SERVICE. No free service or service otherwise than in accordance with the
established rate schedule shall be furnished, directly or indirectly, by the System to any person, firm,
corporation or other entity, other than the City. No part of the salary of any official or employee of the City
or his replacement shall be paid from Pledged Revenues unless and only to the extent the duties and
performances of such official or employee or his replacement appertain directly to the System. To the
extent the City receives the services of the System, such services shall be accounted for according to the
established rate schedule.
(g) FURTHER ENCUMBRANCE. It will not additionally encumber the Pledged Revenues in any
manner, except as permitted in this Ordinance in connection with Priority Bonds, unless said encumbrance
is made junior and subordinate in all respects to the liens, pledges, covenants and agreements of this
Ordinance; but the right of the City to issue Subordinated Obligations payable in whole or in part from a
subordinate lien on the Pledged Revenues is specifically recognized and retained.
(h) SALE, LEASE OR DISPOSAL OF PROPERTY. No part of the System shall be sold, leased,
mortgaged, demolished, removed or otherwise disposed of, except as follows:
(1) To the extent permitted by law, the City may sell or exchange at any time and from time to
time any property or facilities constituting part of the System only if (A) it shall determine such property or
facilities are not useful in the operation of the System, or (B) the proceeds of such sale are $250,000 or less,
or it shall have received a certificate executed by the Engineer of Record and the City Manager stating, in
their opinion, that the fair market value of the property or facilities exchanged is $250,000 or less, or (C) if
such proceeds or fair market value exceeds $250,000 it shall have received a certificate executed by the
Engineer of Record and the City Manager stating (i) that system within the System of which the property or
facilities comprises a part thereof and (ii) in their opinion, that the sale or exchange of such property or
facilities will not impair the ability of the City to comply during the current or any future Year with the
provisions of clause (k) of this Section. The proceeds of any such sale or exchange not used to acquire
other property necessary or desirable for the safe or efficient operation of the System shall forthwith, at the
option of the City (i) be used to redeem or purchase Priority Bonds, or (ii) otherwise be used to provide for
the payment of Priority Bonds. The foregoing notwithstanding, if such property or facilities sold or
exchanged constituted property or facilities comprising all or a part of a system within the System, the
acquisition, improvement or extension of such system having not been financed by the City in any manner
with the proceeds of Priority Bonds, or with the proceeds of obligations which were refunded in whole or in
part with the proceeds of Priority Bonds, then the City may utilize the proceeds of such sale or exchange
for any lawful purpose;
(2) To the extent permitted by law, the City may lease or make contracts or grant licenses for the
operation of, or make arrangements for the use of, or grant easements or other rights with respect to, any
part of the System, provided that any such lease, contract, license, arrangement, easement or right (A) does
not impede the operation by the City of the System and (B) does not in any manner impair or adversely
affect the rights or security of the owners of the Priority Bonds under this Ordinance; and provided, further,
that if the depreciated cost of the property to be covered by any such lease, contract, license, arrangement,
easement or other right is in excess of $500,000, the City shall have received a certificate executed by the
Engineer of Record and the City Manager that the action of the City with respect thereto does not result in a
breach of the conditions under this clause (2). Any payments received by the City under or in connection
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with any such lease, contract, license, arrangement, easement or right in respect of the System or any part
thereof shall constitute Gross Revenues.
(i) BOOKS, RECORDS AND ACCOUNTS. It shall keep proper books, records and accounts
separate and apart from all other records and accounts, in which complete and correct entries shall be made
of all transactions relating to the System and the City shall cause said books and accounts to be audited
annually as of the close of each Year by the Accountant.
(j) INSURANCE. (1) Except as otherwise permitted in clause (2) below, it shall cause to be
insured such parts of the System as would usually be insured by corporations operating like properties, with
a responsible insurance company or companies, against risks, accidents or casualties against which and to
the extent insurance is usually carried by corporations operating like properties, including, to the extent
reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use
and occupancy insurance. Public liability and property damage insurance shall also be carried unless the
City Attorney gives a written opinion to the effect that the City is not liable for claims which would be
protected by such insurance. At any time while any contractor engaged in construction work shall be fully
responsible therefor, the City shall not be required to carry insurance on the work being constructed if the
contractor is required to carry appropriate insurance. All such policies shall be open to the inspection of the
bondholders and their representatives at all reasonable times.
(2) In lieu of obtaining policies for insurance as provided above, the City may self-insure against
risks, accidents, claims or casualties described in clause (1) above.
(3) The annual audit hereinafter required shall contain a section commenting on whether or not the
City has complied with the requirements of this Section with respect to the maintenance of insurance, and
listing the areas of insurance for which the City is self-insuring, all policies carried, and whether or not all
insurance premiums upon the insurance policies to which reference is hereinbefore made have been paid.
(k) RATE COVENANT. It will fix, establish, maintain and collect such rates, charges and fees for
the use and availability of the System at all times as are necessary to produce Gross Revenues and other
Pledged Revenues equal to the greater of amounts determined in accordance with clauses (1) or (2) below,
to-wit, amounts sufficient (1) (A) to pay all current Operating Expenses of the System, and (B) to produce
Net Revenues for each Year at least equal to 1.25 times the Average Annual Principal and Interest
Requirements of all then outstanding Priority Bonds; or (2) to pay the sum of (A) all current Operating
Expenses, (B) the Average Annual Principal and Interest Requirements on the then outstanding Priority
Bonds, (C) required deposits to the Reserve Fund required for the Priority Bonds, and (D) amounts required
to pay all other obligations of the System reasonably anticipated to be paid from Gross Revenues during the
current Year. The calculation of Average Annual Principal and Interest Requirements on all outstanding
Priority Bonds shall be net of capitalized interest for such Priority Bonds only if the moneys in the
Capitalized Interest Account received from proceeds of such Priority Bonds are invested in Government
Obligations. The foregoing notwithstanding, such rates, charges and fees shall be fixed, established,
maintained and collected at a level sufficient to enable the City to pay debt service on Priority Bonds
during the current Year.
(l) AUDITS. After the close of each year while any Priority Bonds are outstanding, an audit will
be made of the books and accounts relating to the System and the Pledged Revenues by the Accountant.
As soon as practicable after the close of each such year, and when said audit has been completed and made
available to the City, a copy of such audit for the preceding year shall be mailed to any holder of the then
outstanding Priority Bonds who shall so request in writing. Such annual audit reports shall be open to the
inspection of the registered owners of the Priority Bonds and their agents and representatives at all
reasonable times.
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(m) GOVERNMENTAL AGENCIES. It will comply with all of the terms and conditions of any
and all franchises, permits and authorizations applicable to or necessary with respect to the System, and
which have been obtained from any governmental agency; and the City has or will obtain and keep in full
force and effect all franchises, permits, authorization and other requirements applicable to or necessary
with respect to the acquisition, construction, equipment, operation and maintenance of the System.
(n) NO COMPETITION. To the extent it legally may, it will not grant any franchise or permit for
the acquisition, construction or operation of any competing facilities which might be used as a substitute for
the System’s facilities, and, to the extent that it legally may, the City will prohibit any such competing
facilities.
(o) RIGHTS OF INSPECTION. The Engineer of Record or any registered owner of $100,000 in
aggregate principal amount of the Priority Bonds then outstanding shall have the right at all reasonable
times to inspect the System and all records, accounts and data of the City relating thereto, and upon request
the City shall furnish to the Engineer of Record or such registered owner, as the case may be, such financial
statements, reports and other information relating to the City and the System as the Engineer of Record or
such registered owner may from time to time reasonably request.
Section 26. AMENDMENT OF ORDINANCE. (a) That the registered owners of a majority in
aggregate principal amount of the Priority Bonds then outstanding shall have the right from time to time to
approve any amendment to this Ordinance which may be deemed necessary or desirable by the City,
provided, however, that without the consent of the registered owners of all of the Priority Bonds at the time
outstanding, nothing herein contained shall permit or be construed to permit the amendment of the terms
and conditions in this Ordinance or in the Priority Bonds so as to:
(1)
Make any change in the maturity of any of the outstanding Priority Bonds;
(2)
Reduce the rate of interest borne by any of the outstanding Priority Bonds;
(3)
Reduce the amount of the principal payable on the outstanding Priority Bonds;
(4)
Modify the terms of payment of principal of, premium, if any, or interest on the
outstanding Priority Bonds or impose any conditions with respect to such payment;
(5)
outstanding;
(6)
Affect the rights of the registered owners of less than all of the Priority Bonds then
Amend this clause (a) of this Section; or
(7)
Change the minimum percentage of the principal amount of Priority Bonds necessary for
consent to any amendment;
unless such amendment or amendments be approved by the registered owners of all of the Priority
Bonds then outstanding.
(b) That if at any time the City shall desire to amend the Ordinance under this Section, the City
shall cause notice of the proposed amendment to be published in a financial newspaper or journal published
in The City of New York, New York, and a newspaper of general circulation in the City, once during each
calendar week for at least two successive calendar weeks. Such notice shall briefly set forth the nature of
the proposed amendment and shall state that a copy thereof is on file at the principal office of the Paying
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Agent/Registrar for inspection by all holders of Priority Bonds. Such publication is not required, however,
if notice in writing is given to each registered owner of Priority Bonds.
(c) That whenever at any time not less than 30 days, and within one year, from the date of the first
publication of said notice or other service of written notice the City shall receive an instrument or
instruments executed by the registered owners of at least a majority in aggregate principal amount of the
Priority Bonds then outstanding, which instrument or instruments shall refer to the proposed amendment
described in said notice and which specifically consent to and approve such amendment in substantially the
form of the copy thereof on file with the Paying Agent/Registrar, the governing body of the City may pass
the amendatory ordinance in substantially the same form.
(d) That upon the passage of any amendatory ordinance pursuant to the provisions of this Section,
this Ordinance shall be deemed to be amended in accordance with such amendatory ordinance, and the
respective rights, duties and obligations under this Ordinance of the City and all the registered owners of
then outstanding Priority Bonds and all future Priority Bonds shall thereafter be determined, exercised and
enforced hereunder, subject in all respects to such amendments.
(e) That any consent given by the registered owner of a Priority Bond pursuant to the provisions of
this Section shall be irrevocable for a period of six months from the date of the first publication of the
notice provided for in this Section, and shall be conclusive and binding upon all future registered owners of
the same Priority Bond during such period. Such consent may be revoked at any time after six months
from the date of the first publication of such notice by the registered owner who gave such consent, or by a
successor in title, by filing notice thereof with the Paying Agent/Registrar and the City, but such revocation
shall not be effective if the registered owners of at least a majority in aggregate principal amount of the
then outstanding Priority Bonds as in this Section defined have, prior to the attempted revocation,
consented to and approved the amendment.
(f) The foregoing provisions of this Section notwithstanding, the City by action of the City Council
may amend this Ordinance for any one or more of the following purposes:
(1) To add to the covenants and agreements of the City in this Ordinance contained, other
covenants and agreements thereafter to be observed, grant additional rights or remedies to the registered
owners of the Priority Bonds or to surrender, restrict or limit any right or power herein reserved to or
conferred upon the City;
(2) To make such provisions for the purpose of curing any ambiguity, or curing, correcting or
supplementing any defective provision contained in this Ordinance, or in regard to clarifying matters or
questions arising under this Ordinance, as are necessary or desirable and not contrary to or inconsistent
with this Ordinance and which shall not adversely affect the interests of the registered owners of the
Priority Bonds then outstanding;
(3) To modify any of the provisions of this Ordinance in any other respect whatever, provided that
(i) such modification shall be, and be expressed to be, effective only after all Bonds and each series of
Additional Priority Bonds outstanding at the date of the adoption of such modification shall cease to be
outstanding, and (ii) such modification shall be specifically referred to in the text of all Priority Bonds
issued after the date of the adoption of such modification;
(4) To make such amendments to this Ordinance as may be required, in the opinion of nationally
recognized bond counsel acceptable to the City, to ensure compliance with sections 103 and 141 through
150 of the Code and the regulations promulgated thereunder and applicable thereto;
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(5) To make such changes, modifications or amendments as may be necessary or desirable in order
to allow the owners of the Priority Bonds to thereafter avail themselves of a book-entry system for
payments, transfers and other matters relating to the Priority Bonds, which changes, modifications or
amendments are not contrary to or inconsistent with other provisions of this Ordinance and which shall not
adversely affect the interests of the owners of the Priority Bonds;
(6) To make such changes, modifications, or amendments as are permitted by Section 29(c)(v) of
this Ordinance (with respect to the City’s continuing disclosure obligation under Rule 15c2-12);
(7) To make such changes, modifications or amendments as may be necessary or desirable in order
to obtain or maintain the granting of a rating on the Priority Bonds by a Rating Agency or to obtain or
maintain a Credit Facility; and
(8) To make such changes, modifications or amendments as may be necessary or desirable, which
shall not adversely affect the interests of the owners of the Priority Bonds, in order, to the extent permitted
by law, to facilitate the economic and practical utilization of interest rate swap agreements, foreign
currency exchange agreements, or similar type of agreements with respect to the Priority Bonds.
Notice of any such amendment may be published by the City in the manner described in clause (b)
of this Section; provided, however, that the publication of such notice shall not constitute a condition
precedent to the adoption of such amendatory ordinance and the failure to publish such notice shall not
adversely affect the implementation of such amendment as adopted pursuant to such amendatory ordinance.
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APPENDIX B
CERTAIN AUDITED FINANCIAL STATEMENT
The information contained in this appendix consists of certain audited Financial Statements of the City of
Corpus Christi, Texas for the fiscal year ended July 31, 2002 and is not intended to be a complete statement
of the City’s financial condition. Reference is made to the complete report for further information.
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APPENDIX C
CERTAIN INFORMATION RELATING TO THE
CITY OF CORPUS CHRISTI
Population and Location
Corpus Christi is now the eighth largest city in the State of Texas with a population of 277,454 based on
the revised 2000 Census. The geographic location of the City on the Gulf of Mexico and the Intercoastal
Waterway gives it one of the most strategic locations in the Southwest and has been important to its
economic development.
Additional general information concerning the City’s population and economy can be found under the
caption “Economic and Demographic Characteristics.”
Area
The area of the City has increased through annexation as the City’s population and industry grew. The
City has had numerous annexations and now contains approximately 504 square miles, which is broken
down to approximately 150 square miles of land and 354 square miles of water. While the area covered
by water contains no population and does not require normal city services, it does produce considerable
revenues from oil and gas properties located therein.
Form of Government and Administration
The City was incorporated in 1852. In 1909, the City was organized under a City Charter and operated as
a general law city until 1926 when a Home Rule Charter with a commission form of government was
adopted. The Charter was amended in 1945 and the present Council-Manager form of government was
adopted.
The City Council consists of the Mayor and eight Council Members elected for two year terms. The
Mayor and three Council Members are elected at large and five Council Members from single member
districts. These nine officials are listed elsewhere in this document.
The City Manager is appointed by the City Council and is the Chief Administrative and Executive
Officer. The Director of Financial Services is appointed by the City Manager and is charged with the
administration of fiscal affairs.
By an initiative submitted in accordance with provisions of the City Charter, on November 5, 2002, the
voters in the City considered a proposition that would have amended the City Charter to make the Mayor
of the City the chief administrative and executive officer of the City. The citizens of the City voted to
reject this proposed amendment to the City Charter.
The City Council fixes the annual tax rate based on a budget prepared under the direction of the City
Manager.
The names, years of services, experience, and background of certain appointed officials are as follows:
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Management
George K. Noe, City Manager
George K. Noe was appointed City Manager in April 2003 and previously served as the Deputy City
Manager since October 1999. In that role, he was responsible for day-to-day operations of the City
including the direct supervision of the Human Resources Department, E Government Services
Department, Municipal Information Systems Department, Office of Management and Budget, and
Convention Facilities Department as well as the supervision of the three Assistant City Managers. He
was also responsible for management of major projects and oversees the City’s team in collective
bargaining with the police and fire employee groups. Prior to his appointment, Mr. Noe served as the
City Manager of College Station, Texas for over four years. Mr. Noe’s 24 year city management career
also includes fourteen years service with the City of San Antonio, Texas, three years as City Manager in
Kingsville, Texas, and three years as Deputy City Manager in Fort Collins, Colorado. Mr. Noe has a
Bachelor of Arts degree from St. Mary’s University in San Antonio, Texas. He also participated in the
public sector labor relations training program sponsored by the U.S. Conference of Mayor’s Labor
Management Relations Service.
Ronald E. Massey, Assistant City Manager, Public Works and Utilities
Ronald F. Massey was appointed as Assistant City Manager for Public Works and Utilities in September
1999. In this position, he oversees the Water, Wastewater, Storm Water, Gas, Maintenance Services,
Street Services, Solid Waste, and Engineering Services Departments and the Corpus Christi Metropolitan
Planning Organization. Prior to this appointment, Mr. Massey was the Director of Public Works for the
Town of Franklin, Massachusetts, for six years and served as an installation manager with the US Army
for ten years. He received a Bachelor of Science in Chemistry from the University of Dayton and a
Master of Science in Management from the University of Central Texas.
Jorge G. Cruz-Aedo, Assistant City Manager
Jorge G. Cruz-Aedo was appointed as Assistant City Manager on March 20, 2000. Mr. Cruz-Aedo
previously served as the Director of Financial Services of the City from February 1997 until April 1998
when he left to become Director of Finance for the City of Houston, Texas, serving in that position from
April 1998 until March 2000. He also served as the Director of Management Services for the City of
Peoria, Arizona, from 1992 until 1997, where he also served on the Executive Board of the Peoria
Economic Development Group. He was Secretary- Treasurer for the Arizona Finance Officers
Association and chaired the Local Government Investment Pool Advisory Board for the State of Arizona.
He formerly served as the Director of Finance for the City of Temple, Texas (1979 to 1991) and as City
Treasurer for the City of San Marcos, Texas (1977 to 1979). He served as President for the Government
Finance Officers Association of Texas. He graduated from Southwest Texas State University with a
Bachelors Degree in Business Administration (Accounting) in 1977, and is a Certified Governmental
Finance Officer (1988) and a Certified Government Financial Manager (1996).
Margie C. Rose, Assistant City Manager
Margie C. Rose joined the City on April 15, 2002, having previously worked in local government for
more than 20 years. She served as Purchasing Director, Director of Administrative Services, Director of
Department of Public Services, Assistant City Manager and City Manager for the City of Inkster,
Michigan. She also served as Deputy Director of Parks for the County of Wayne, Michigan. Rose served
on various professional committees including the Michigan Municipal League Finance and Taxation
Committee, International City/County Management Planning Committee and the Michigan City
Management Workplace Diversity Committee. Rose received her BBA (Accounting) degree in 1984 and
her MPA in 1991, both from Eastern Michigan University.
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Lee Ann Dumbauld, Director of Financial Services
Lee Ann Dumbauld was appointed as the Director of Financial Services on April 15, 2002. Prior to
joining the City, she served as the CFO/Deputy City Manager for Richmond, Virginia (2000 – 2001).
She served as the Director of Finance and Information Technology from 1995 to 2000 for the City of
Greenville, South Carolina; and served for the year of 1999 as Greenville’s City Manager. She has also
served as the Director of Administration for the City of Jackson, Mississippi (1991 – 1994) and as the
Deputy State Treasurer of Mississippi (1988 – 1991). Ms. Dumbauld is a Ph.D. candidate at Mississippi
State University and holds a Master of Business Administration degree from Millsaps College and a
Bachelor of Arts degree in Finance from the University of Illinois, Urbana, Illinois.
Certain Governmental Services Provided by the City
Public Safety . . . The City provides police protection, fire protection, building inspection, street lighting
and traffic signals, and civil defense. Law enforcement and civil defense is provided through the Police
Department. The City’s Fire Department operates 15 fire stations throughout the City and the Emergency
Medical Service.
Public Services . . . In addition to operating its water, wastewater disposal, and gas systems, the City also
provides garbage collection and disposal and maintenance of streets and storm drainage areas.
Community Enrichment . . . The City has a main library and four branches which are equipped with
over 490,256 volumes. The City owns and maintains approximately 190 parks containing over 1,581
developed acres. The City also owns extensive recreational facilities including 139 playgrounds, a marina
with 570 yacht basin slips, 3 municipal beaches, 2 public golf courses, 9 swimming pools, 54 tennis
courts, 11 baseball and softball diamonds, 5 recreational centers, and 8 senior citizen centers. In addition,
the City owns an auditorium, a coliseum, Harbor Playhouse, the Corpus Christi Museum, the
Multicultural Center, the Water Garden, and a Community Convention facility.
Airport and Transit System . . . The City owns the Corpus Christi International Airport situated on
2,571 acres. The Regional Transportation Authority operates the regional transportation system which
provides passenger bus and paratransit service within the area and seasonal services including a passenger
ferry connecting several tourist attractions.
Health . . . The City maintains preventive health services through health facilities within the community.
The City does not have the responsibility of maintaining hospitals, a school system, or a higher education
system, and does not expend any funds in providing welfare.
THE CITY’S FINANCIAL PROCEDURES
Audit and Financial Reporting
The City Charter requires an annual audit to be made of the books of accounts, records, and transactions
of the City by a Certified Public Accountant. The fiscal year of the City begins the first day of August of
each year and ends with the thirty-first day of July of the following year. The Government Finance
Officers Association of the United States (the “GFOA”) first awarded the City its Certificate of
Conformance, later termed the Certificate of Achievement for Excellence in Financial Reporting, for its
annual financial report for 1957. The City was awarded the same recognition for its 1970, 1975, 1978,
1979, and 1983 through 2001 financial reports.
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Budget Procedures
State laws and the City Charter require the preparation and filing of an annual budget. The City Manager
submits a proposed budget to the City Council at least sixty days prior to the beginning of the fiscal year
which estimates revenues and expenses for the next year. The proposed expenditures will not exceed
estimated revenues. The City Council shall adopt a balanced budget prior to the beginning of the fiscal
year. If the City Council fails to adopt a budget by the beginning of the fiscal year, the amounts
appropriated for current operations for the current fiscal year are deemed the adopted budget for the
ensuing fiscal year on a month-to-month basis until such time as the City Council adopts a budget for the
ensuing year.
Significant Accounting Policies
The City prepares its financial statements in accordance with the generally accepted accounting principles
for local governmental units as prescribed by the Governmental Accounting Standards Board and the
American Institute of Certified Public Accountants. A summary of significant accounting policies of the
City are set out in the Notes to Financial Statements for the year ended July 31, 2002, located elsewhere
in the financial section of the Official Statement.
Population
The revised 2000 United States Census population for Corpus Christi is 277,454, which is approximately
eight percent greater than the population reported in 1990. The table shows the history of population from
1920 to 2000:
Population
United States Census Figures for 1920 – 1990
Percent of Increase Over
Preceding Census
1920 ....................................................10,522
1930 ....................................................27,541
1940 ....................................................57,301
1950 ..................................................108,053
1960 ..................................................167,690
1970 ..................................................204,525
1980 ..................................................232,134
1990 ..................................................257,543
2000 ..................................................277,454
27%
162%
108%
89%
55%
22%
13%
11%
8%
Corpus Christi Standard Metropolitan Statistical Area (SMSA) consists of Nueces and San Patricio
Counties, and, according to the 2000 United States Census, had a population of 380,783. It is estimated
that the population in the SMSA will exceed 403,000 in the next ten years.
Trade Area and Location
Corpus Christi’s trade area consists of five counties, Nueces, San Patricio, Aransas, Jim Wells, and
Kleberg. Each of the counties maintains a solid and diversified economic base which contributes material
support to Corpus Christi due to its location as a trade center and shipping point.
The land is generally flat with strong mineral deposits, rich soil, excellent climate, and a growing season
of approximately 300 days. Grain sorghum and cotton are the principal agricultural crops. The region
also has a strong supply of livestock including beef, dairy cattle, hogs, and poultry.
The oil and gas industry is a major factor in the growth and economic stability within the trade area.
Mineral values vary depending on world market and demand. This industry also provides a secondary
market for petro by-products and chemicals.
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The trade area’s principal outlet for agricultural and petroleum products is the Port of Corpus Christi,
which has served the area for over seventy years. The rebuilt grain elevator, completed in 1983, has
added to the Port’s capacity to handle various agricultural products. In 2001, the Port handled a volume
of 87.0 million tons of cargo, including 75.5 million tons of petroleum products.
Corpus Christi has one of the most strategically located waterways in the Southwest, with deep water
transportation to the Gulf of Mexico and barge traffic all along the Texas Coast via the Intracoastal
waterway. The nearest other port is in Brownsville, 160 miles to the south; nearest retail and wholesale
outlet is San Antonio, 145 miles to the northwest; and the nearest heavy industry competition is Houston,
210 miles to the northeast.
Business
Recent capital investments underway by the public and not-for-profit sectors is estimated at $488 million,
while private investments topped $1 billion. Most recently, Toyota has announced its intention to
construct a major international auto manufacturing center in south San Antonio, Texas, a short distance
away from Corpus Christi. This facility may have use for the Port of Corpus Christi facilities, thus
contributing to the local economy.
Several major construction and transportation projects are in various stages of planning or construction.
A $46 million airport renovation project has been completed. The Texas Department of Transportation
has two projects under construction. The $45 million elevation of the JFK Causeway, of which the City
is funding $4 million, will provide a safe evacuation route from Padre and Mustang Islands and provide
environmental benefits. The $36 million current phase of the extension of the Crosstown Expressway
will connect Downtown and the Southside of town with a continuous freeway. A $30 million project on
Padre Island will re-open Packery Channel, creating a route for pleasure and fishing boats between the
Laguna Madre and the Gulf of Mexico. A large tourist development of condos, restaurants, and retail
establishments is in the planning phase. The City’s portion of the cost of dredging Packery Channel is
funded through Tax Increment Financing.
The Texas State Aquarium has recently concluded a $14 million expansion which allows exhibition of
dolphins that can not be returned to their natural habitat. A $30 million Arena to be constructed by the
City in the downtown area is in the design phase. It is funded through a portion of a designated sales tax.
Also in November 2002 the voters approved a designated sales tax to build a minor league baseball
stadium, fund affordable housing and create jobs through business retention/expansion and recruitment
incentives.
Industry
Corpus Christi industry provides a diversified product market including metal fabrication, chemical
processing, farm and ranch equipment, oil field equipment, cement, food processing, electronic,
petrochemical products, fishing and seafood products, and more.
The diversification is primarily due to the commitment of City leadership. The Port of Corpus Christi
Authority opened the area to world markets in 1926. Today, it is the fifth largest port in the United States
and one of the top twenty worldwide. The Port’s channel stretches over 30 miles across the Corpus
Christi Bay and is comprised of four divisions: the Inner Harbor, Harbor Island, Port Ingleside, and La
Quinta.
According to a study conducted by Martin O’Connel Associates in 1995, seaport activity at the Authority
generates more than 31,000 jobs. Of the 31,000 jobs, 9,460 are directly associated with marine cargo
activities, while 8,288 jobs are induced by Port activity, and 13,048 jobs are indirectly related to Port
activity. In addition to jobs, Port activity generated more than $1.1 billion in personal income, of that
total $544.4 million is direct personal income.
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Deeper channels have for decades allowed Corpus Christi to be a competitive port for bulk commodities
requiring large, deep draft vessels. It is the terminus of a network of oil and gas pipelines throughout
Southwest Texas and extending into West Texas. The Port is presently working on a Corpus Christi Ship
Channel deepening and widening program. The Port is currently seeking WRDA authorization. The Port
has plans to deepen the channel from 45 to 52 ft, widen the Corpus Christi Ship Channel across Corpus
Christi and Redfish Bays to 530 feet, add 200 feet wide barge shelves along both sides of the channel
across Corpus Christi Bay, and extend La Quinta Channel approximately 7400 feet at a depth of 39 feet.
Port facilities include over 6,000 linear feet of wharf frontage consisting of 2 grain elevators, 2 dry bulk
cargo terminals, 11 oil docks, 7 general cargo docks, and an open pavilion suitable for cruise ships. In
addition, there are 19 private oil docks and 12 dry cargo docks owned and operated by major industries.
There is also a public cotton warehouse with over 1.3 million square feet of covered storage located next
to the south side general cargo docks that is now leased to Gulf Compress as of July 2002, and a 100,000
square foot refrigerated warehouse.
The Port is constantly upgrading and expanding facilities to better serve South Texas industry and
shippers. In 2002, major capital expenditures include general capital improvements, oil dock upgrades, a
channel improvement feasibility study, vessel traffic information system, water taxi, security
enhancements, and the Joe Fulton Trade Corridor. For the year 2002, expenditures will total
approximately $7 million.
Other major projects include the development of a road and rail corridor known as the Joe Fulton
International Trade Corridor; a military layberth project, and perhaps one of the Port’s most visionary
projects, La Quinta Trade Gateway. La Quinta is the development of 1100 acres in San Patricio County
into a major container terminal. The growing North-South trade demands that a new trade gateway
emerge in the Western Gulf. La Quinta’s location, access, and market potential make it an ideal site.
Tourism and Convention Business
Corpus Christi continues to be a favorite vacation spot for visitors, as reflected by the ranking of the sixth
most popular tourist destination in Texas. In 2000, nearly five million visitors spent more than $670
million in the Corpus Christi area, averaging more than $60 per person every day. Visitors stayed longer
in Corpus Christi than in other areas of the State - an average of 2.3 days in Corpus Christi compared to
2.1 days in all of Texas. The number one reason visitors flock to the area has always been to enjoy miles
of blazing white beaches along Mustang and Padre Islands, the longest barrier island in nature fronting on
the Gulf of Mexico. The opposite side of the barrier provides a shoreline for Corpus Christi Bay, Laguna
Madre, and the various bays and bayous north of the Coastal Bend which is ideal for outdoor recreation.
Tourist facilities established within the City include the Texas State Aquarium, the USS Lexington
Museum, the Museum of Science and History, and the Heritage Park area. Also, a new 15,000 seat
capacity Concrete Street amphitheater opened March 2001. The Corpus Christi area is a renowned
location for windsurfing and kiteboarding, and hosts the annual U.S. Open Windsurfing Ragatta.
International Flavor
The City of Corpus Christi is a member of Sister Cities International. Through Sister Cities International,
Corpus Christi has established affiliations with Keelung, Taiwan; Veracruz, Mexico; Yokosuka, Japan;
Agen, France; and Toledo, Spain. The City and nearby neighbor, Monterrey, Mexico, have established a
Partner in Trade affiliation that emphasizes business and cultural opportunities for cooperative ventures.
Yokosuka, Japan sends up and coming city employees to Corpus Christi for overseas’ training in public
service and an exchange that teaches the different facets of volunteerism in Japan. In addition to
establishing a “Partner in Trade” with Monterrey, the City has established closer ties with cousins in 23
countries including Austria, Belgium France, Spain, Italy, and others.
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Proximity to San Antonio
Corpus Christi continues to benefit from tourist attractions in San Antonio. San Antonio is located 2.5
hours by automobile north of Corpus Christi with easy access by Interstate 37, and Corpus Christi is
favorably viewed as an attractive one-day trip by San Antonio visitors. With Corpus Christi’s growing
list of attractions, which include the Texas State Aquarium, the U.S.S. Lexington Museum on the Bay,
and the Las Carabelas Columbus ship exhibit, visitors may be tempted to stay a little longer.
Foreign Trade Zone
The Port of Corpus Christi Authority operates one of the largest Foreign-Trade Zones (FTZ) in the United
States. The Zone includes an Industrial Park near the Airport, two full service public warehouses near the
Airport, all Port properties (7,000) acres that are available for storage and/or industrial activity, three bulk
fuel terminals, six refinery subzones, two metal fabrication (offshore oil platforms and towers) subzones,
and two minerals processing subzones. The Port’s FTZ department is a full service Grantee assisting
clients with applications, FTZ training, interpretation of Customs regulations, and interface with Customs
officials.
Corpus Christi Enterprise Zone
The City of Corpus Christi has a State of Texas approved Enterprise Zone to assist in economic
development activities. The Enterprise Zone contains approximately 14 square miles. In the 8-year
existence of the Enterprise Zone, over $2.5 billion of State of Texas approved Enterprise Zones projects
have begun within the Enterprise Zone. While numerous State benefits for companies locating in the
Enterprise Zone are available, the City also provides incentives for companies locating within the
Enterprise Zone.
Private Utilities
Telecommunications and electrical service are available from several providers.
Construction
The Table below indicates the amount of new construction activity in Corpus Christi and the number of
permits issued for all purposes.
Year
1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
Building Permits
Number of Permits
5,301
5,922
5,854
6,458
5,860
5,669
5,984
5,845
4,761
5,207
Value
$123,034,053
119,524,554
135,560,815
157,530,114
171,581,105
178,025,561
142,154,244
152,987,779
149,264,763
154,763,863
Employment
The following table indicates the total civilian employment in the Corpus Christi MSA for the period
January 2003 as compared to the prior periods of December 2002 and January 2002:
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January 2003
December 2002
January 2001
Civilian Labor Force
Unemployment
179,600
11,300
178,700
9,900
175,100
11,100
Percent Unemployment
Total Employment
6.3%
168,300
5.5%
168,800
6.3%
164,000
The following table shows certain nonagricultural wage and salary employment in the Corpus Christi
MSA for the period January 2003 as compared to the prior periods of December 2002 and January 2001:
January 2003
Natural Resource & Mining
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehouse &
Public Utilities
Information
Financial Activities
Professional & Business
Services
Education & Health Services
Leisure & Hospitality
Other Services
Government
Total
December 2002
2,700
14,200
11,400
5,000
18,300
5,400
2,700
14,400
11,500
5,100
19,000
5,400
2,300
13,500
12,000
5,000
17,700
5,300
2,800
7,000
15,300
2,800
7,200
15,300
2,900
7,100
15,300
24,100
17,000
6,400
30,400
160,000
24,500
16,800
6,400
31,200
162,300
23,700
16,000
6,600
31,000
158,400
Source: Texas Workforce Commission, Labor Market Information, February 2003.
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January 2002
APPENDIX D
OPINION OF BOND COUNSEL
An opinion in substantially the following form will be delivered by
McCall, Parkhurst & Horton L.L.P.,
Bond Counsel, upon the delivery of the Bonds,
assuming no material changes in facts or law.
CITY OF CORPUS CHRISTI, TEXAS UTILITY SYSTEM
REVENUE REFUNDING BONDS, SERIES 2003,
IN THE PRINCIPAL AMOUNT OF $28,870,000
AS BOND COUNSEL for the City of Corpus Christi, Texas (the "City"), the issuer of the bonds
described above (the "Bonds"), we have examined into the legality and validity of the Bonds, which Bonds
are issued in the aggregate principal amount of $28,870,000. The Bonds bear interest from their dated date
and mature on the dates specified on the face of the Bonds, and are subject to redemption prior to maturity
on the dates and in the manner specified in the Bonds, all in accordance with the ordinance of the City
authorizing the issuance of the Bonds (the "Ordinance"). Terms used herein and not otherwise defined
shall have the meaning given in the Ordinance.
WE HAVE EXAMINED the Constitution and Statutes of the State of Texas, the City Charter of
the City, certified copies of the proceedings of the City Council of the City, and other proofs authorizing
and relating to the issuance of the Bonds, including one of the executed Bonds (Bond Number R-1); we do
not, however, express any opinion with regard to the statement of insurance printed on each of the Bonds.
IN OUR OPINION, the Ordinance was duly adopted by the City and is enforceable against the
Issuer in accordance with its terms, and the Bonds have been authorized and issued in accordance with law,
and constitute valid and legally binding special obligations of the City; and, except as may be limited by
laws applicable to the City relating to bankruptcy, reorganization, and other similar matters affecting
creditors' rights, that the interest on and principal of the Bonds, together with outstanding parity bonds, are
payable from, and secured by a first lien on and pledge of, the Pledged Revenues, which include the Net
Revenues of the System. All such revenue bonds are secured ratably by such pledge of revenues in such
manner that no one Bond shall have priority of lien over any other Bond so secured. The holder or holders
of the Bonds shall never have the right to demand payment out of money raised or to be raised by taxation.
THE CITY reserves the right, subject to the restrictions stated, and adopted by reference, in the
Ordinance, to issue additional parity revenue bonds in all things on a parity with the Bonds and payable
from and equally secured by a first lien on and pledge of the Pledged Revenues.
IT IS FURTHER OUR OPINION, except as discussed below, that the interest on the Bonds is
excludable from the gross income of the owners for federal income tax purposes under the statutes,
regulations, published rulings, and court decisions existing on the date of this opinion. We are further of
the opinion that the Bonds are not "specified private activity bonds" and that, accordingly, interest on the
Bonds will not be included as an individual or corporate alternative minimum tax preference item under
section 57(a)(5) of the Internal Revenue Code of 1986 (the "Code"). In expressing the aforementioned
opinions, we have relied on, certain representations, the accuracy of which we have not independently
verified, and assume compliance with certain covenants, regarding the use and investment of the proceeds
45321211.2
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of the Bonds and the use of the property financed therewith. In addition, we have relied upon the report of
Grant Thornton, LLP, independent certified public accountants, with respect to certain arithmetical and
mathematical computations relating to the Bonds and the obligations refunded with the proceeds of the
Bonds. We call your attention to the fact that if such representations are determined to be inaccurate or
upon a failure by the City to comply with such covenants, interest on the Bonds may become includable in
gross income retroactively to the date of issuance of the Bonds.
WE CALL YOUR ATTENTION TO THE FACT that the interest on tax-exempt obligations, such
as the Bonds, is (a) included in a corporation's alternative minimum taxable income for purposes of
determining the alternative minimum tax imposed on corporations by section 55 of the Code, (b) subject to
the branch profits tax imposed on foreign corporations by section 884 of the Code, and (c) included in the
passive investment income of an S corporation and subject to the tax imposed by section 1375 of the Code.
EXCEPT AS STATED ABOVE, we express no opinion as to any other federal, state, or local tax
consequences of acquiring, carrying, owning, or disposing of the Bonds.
WE EXPRESS NO OPINION as to any insurance policies issued with respect to the payments due
for the principal of and interest on the Bonds, nor as to any such insurance policies issued in the future.
OUR SOLE ENGAGEMENT in connection with the issuance of the Bonds is as Bond Counsel for
the City, and, in that capacity, we have been engaged by the City for the sole purpose of rendering an
opinion with respect to the legality and validity of the Bonds under the Constitution and laws of the State of
Texas, and with respect to the exclusion from gross income of the interest on the Bonds for federal income
tax purposes, and for no other reason or purpose. The foregoing opinions represent our legal judgment
based upon a review of existing legal authorities that we deem relevant to render such opinions and are not
a guarantee of a result. We have not been requested to investigate or verify, and have not independently
investigated or verified any records, data, or other material relating to the financial condition or capabilities
of the City, or the disclosure thereof in connection with the sale of the Bonds, and have not assumed any
responsibility with respect thereto. We express no opinion and make no comment with respect to the
marketability of the Bonds and have relied solely on certificates executed by officials of the City as to the
availability and sufficiency of the Pledged Revenues. Our role in connection with the City's Official
Statement prepared for use in connection with the sale of the Bonds has been limited as described therein.
OUR OPINIONS ARE BASED ON EXISTING LAW, which is subject to change. Such opinions
are further based on our knowledge of facts as of the date hereof. We assume no duty to update or
supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or
to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions
are not a guarantee of result and are not binding on the Internal Revenue Service (the "Service"); rather,
such opinions represent our legal judgment based upon our review of existing law and in reliance upon the
representations and covenants referenced above that we deem relevant to such opinions. The Service has
an ongoing audit program to determine compliance with rules that relate to whether interest on state or
local obligations is includable in gross income for federal income tax purposes. No assurance can be given
whether or not the Service will commence an audit of the Bonds. If an audit is commenced, in accordance
with its current published procedures the Service is likely to treat the City as the taxpayer. We observe that
the City has covenanted not to take any action, or omit to take any action within its control, that if taken or
omitted, respectively, may result in the treatment of interest on the Bonds as includable in gross income for
federal income tax purposes.
Respectfully,
45321211.2
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APPENDIX E
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
45321211.2
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45299010.3
M. E. ALLISON & CO., INC.
950 East Basse Road, Second Floor
San Antonio, Texas 78209
Financial Advisor
45321211.2