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2003R22- PRIOR LAWFUL EXPENDITURE FUNDS 03-/2-;Ld- A RESOLUTION RELATING TO ESTABLISHING THE CITY'S INTENTION TO REIMBURSE ITSELF FOR THE PRIOR LAWFUL EXPENDITURE OF FUNDS FROM THE PROCEEDS OF OBLIGATIONS TO BE ISSUED BY THE CITY FOR AUTHORIZED PURPOSES; AUTHORIZING MATTERS INCIDENT AND RELATED THERETO; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City Council (the Governing Body) of the City of Schertz, Texas (the Issuer) has entered into or will enter into various contracts pertaining to the expenditure of lawfully available funds of the Issuer to finance the costs associated with (i) acquiring, purchasing, constructing, improving, renovating, enlarging, or equipping the City's municipal complex and the purchase of materials, supplies, equipment, machinery, land, rights-of-way for authorized needs and purposes relating to the municipal complex (the Construction Costs); (ii) the payment of various engineering costs, including design testing, design engineering, and construction inspection related to the Construction Costs (the Engineering Costs), (iii) the payment of various architectural costs, including preparation of plans and specifications and various other plans and drawings related to the Construction Costs (the Architectural Costs), and (iv) the payment of various administrative costs, including the fees of bond counsel, financial advisor, other professionals, and bond printer (the Administrative Costs) (the Construction Costs, Engineering Costs, the Architectural Costs, and Administrative Costs collectively constitute costs of the project (the Project)); and WHEREAS, the provisions of Section 1201.042, as amended, Texas Government Code provide that the proceeds from the sale of obligations issued to finance the acquisition, construction, equipping, or furnishing of any project or facilities, such as the Project, may be used to reimburse the Issuer, for costs attributable to such project or facilities paid or incurred before the date of issuance of such obligations; and WHEREAS, the United States Department of Treasury (the Department) released Regulation Section 1.150-2 (the Regulations) which establishes when the proceeds of obligations are spent and therefore are no longer subject to various federal income tax restrictions contained in the Internal Revenue Code of 1986, as amended (the Code); and WHEREAS, the Issuer intends to reimburse itself, within eighteen months from the later of the date of expenditure or the date the property financed is placed in service (but in no event more than three years after the original expenditures is paid), for the prior lawful capital expenditure of funds from the proceeds of one or more series of tax-exempt obligations (the Obligations) that the Issuer currently contemplates issuing in an approximate amount of $2,000,000 to finance a portion of the costs of the Project; and WHEREAS, under the Regulations, to fund such reimbursement with proceeds of the Obligations, the Issuer must declare its expectation ultimately to make such reimbursement before making the expenditures; and WHEREAS, the Issuer hereby finds and determines that the reimbursement for the prior expenditure of funds of the Issuer is not inconsistent with the Issuer's budgetary and financial circumstances; and 20060188.1 WHEREAS, the Governing Body hereby finds and determines that the adoption of this Resolution is in the best interests of the citizens of the Issuer; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS THAT: SECTION 1: This Resolution is a declaration of intent to establish the Issuer's reasonable, official intent under section 1.150-2 of the Regulations to reimburse itself from certain of the proceeds of the Obligations for any capital expenditures previously incurred (not more than 60 days prior to the date hereof) with respect to the Project from the Issuer's General Fund, SECTION 2: The Issuer intends to issue the Obligations and allocate within 30 days after the date of issue of the Obligations the proceeds therefrom to reimburse the Issuer for prior lawful expenditures with respect to the Project in a manner to comply with the Regulations. SECTION 3: The reimbursement expenditure will be a type properly chargeable to a capital account (or would be so chargeable with a proper election) under general Federal income tax principles. SECTION 4: The Issuer intends to otherwise comply with all the requirements contained in the Regulations. SECTION 5: This Resolution may be relied upon by the appropriate officials at the Office of the Attorney General for the State of Texas and establishes compliance by the Issuer with the requirements of Texas law and the Regulations. SECTION 6: With respect to the proceeds of the Obligations allocated to reimburse the Issuer for prior expenditures, the Issuer shall not employ an abusive device under Treasury Regulation Section 1.148-10, including using within one year of the reimbursement allocation, the funds corresponding to the proceeds of the Obligations in a manner that results in the creation of replacement proceeds, as defined in Treasury Regulation Section 1.148-1, of the Obligations or another issuer of tax-exempt obligations. SECTION 7: The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the Governing Body. SECTION 8: All orders and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. SECTION 9: This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 10: If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application -2- 20060188.1 of such provision to other persons and circumstances shall nevertheless be valid, and the Governing Body hereby declares that this Resolution would have been enacted without such invalid provision, SECTION 11: It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended, Texas Government Code. SECTION 12: This Resolution shall be in force and effect from and after its final passage, and it is so resolved, [The remainder of this page intentionally left blank) -3- 20060188.1 PASSED, ADOPTED AND APPROVED on this the ~Uday of lid, 2003. CITY OF SC ERTZ, TEXAS ATTEST: ~~ City Secretary (CITY SEAL) 20060188.1 .~ Mayor -4- PASSED, ADOPTED AND APPROVED on this the 21st day of October, 2003. ATTEST: ~!l~~ CIty ecretary (CITY SEAL) -4- 45371876.1 OCT-17-2003 FRI 02:17 PH SOUTHWEST SECURITIES FAX NO. 2102268288 P. 01 SOUTHWEST SECURITIES 711 NAVARRO, SUITE 490 SAN ANTONIO, TEXAS 78205 (210) 226-8677 (210) 226-8299 FAX FACSIMILE TRANSMITTAL SHEET J'ROM: RE' o UltGENT 0 F'UR REVIEW o PLEASe: COMMENT 0 PLEASE REPLY o AS REQUE~rED NOTI':S; COMJ\JliN7S: kc --- ,,- G DISCLOSUIU! THE I N F 0 l(l"li'. II 0 ~ CON T ^ I NED I NTH I S TTL\ N S MITT A LIS 0 In ..\I NED FRO M S () U R C. E S llELlEVED TO BE ReLIABLe. ilOWEVliR. SOU'J"HWt:ST SECLJRlTIE~ DOES NOT Gl.'ARJ\NTEf liS ;\CCUR1\CY. PRICES, YIELDS ",ND AV;\IL"IlIJ.l'ty ,\l\13 SUl1JECT '1'0 CHANG ,;:, OCT-17-2003 FRI 02:17 PM SOUTHWEST SECURITIES FAX NO. 2102268299 P. 02 Fulbright & Jaworski I.Lp. A Registered Limited Liability Partnership 300 Convent Street, Suite 2200 San Antonio, Texas 78205.3792 W'WW. fulbrightcom wkuhn@fulbrlght.com direct dial: (210) 270-7131 telephone: facsimlle: (210) 224-5575 (210) 270-7205 October 17, 2003 Mr. Mark McLiney Southwest Securities 711 Navarro, Suite 490 San Antonio, Texas 78205 BY HAND DELIVERY AND BY EMAIL Re: City of Schertz, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2003 Dear Mark: J enclose the following documents pertaining to the captioned financing: 1. Reimbursement Resolution (one original and six signature pages); and 2. City Secretary's Certificate p~rtaining to this Resolution (two originals and six signature pages). Please retum properly executed and sealed copies of each of these documents to me at your earliest convenience. I also enclose as Exhibit A to this letter the agenda item to be utilized in preparing the agenda for the October 21, 2003 meeting of the City Council. Thank you for ensuring that this agenda item is posted in accordance with the provisions of the Texas Open Meetings Act. Thank you, in advance, for yoU! prompt attention to this matter. If I can provide any additional assistance concerning this matter, please do not hesitate to contact me. Very truly yours, W. J etIrey Kuhn WJK/tmg Enclosure cc: Ms. Lisa G. Adelman (Finn) Mr. Erwin Caban (Finn) 45nl8771 A.l.l:;tirl " D&II2J& . Hong K.::mg " HO<..l~toT"l . Londo,.. " lO::l Angetle.~ " tw1in(l9tiPQlIo "Mul"\iCi'l. N~ Vor,." " S..n Arnooio " Vo,/&orungto/'\ DC OCT-17-2003 FRI 02: 18 PM SOUTHWEST SECURITIES FAX NO. 2102268299 P. 04 A RESOLUTION RELATING TO ESTABLISHING THE CITY'S INTENTION TO REIMBURSE ITSELF FOR THE PRIOR LAWFUL EXPENDITURE OF FUNDS FROM THE PROCEEDS OF OBLIGATIONS TO BE ISSUED BY THE CITY FOR AUTHORlZED PURPOSES; AUTHORIZING MA TIERS INCIDENT AND RELATED THERETO; AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City Council (the Governing Body) of the City of Schertz, Texas (the Issuer) has entered into or will enter into various contracts pertaining to the expenditure of lawfully available funds of the Issuer to tlnance the costs associated with (i) acquiring, purchasing, constructing, improving, renovating, enlarging, or equipping the City's municipal complex and the purchase of materials, supplies, equipment, machinery, land, rights-of-way for authorized needs and purposes relating to the municipal complex, public works purposes, and public safety purposes (the Construction Costs); (ii) the payment of various engineering costs, including design testing, design engineering, and construction inspection related to the Construction Costs (the Engineering Costs), (iii) the payment of various archit~ctural costs, including preparation of plans and specitications and various other plans and drawings relat~d to the Construction Costs (the Architectural COSES), and (iv) the payment of various administrative costs, including the fees of bond counsel, financial advisor, other professionals, and bond printer (the Administrative COSES) [the Construction Costs, Engineering Costs, the Architectural Costs, and Administrative Costs collectively constitute costs of the project (the ProJect)); and WHEREAS, the provisions of Section 1201.042, as amended, Texas Government Code (formerly Section 7(b) of Texas Revised Civil Statutes Annotated Article 71 7k-6, as amended) provide that the proceeds from the sale of obligations issued to finance the acquisition, construction, equipping, or furnishing of any project or facilities, such as the Project, may be used to reimburse the issuer, for costs attributable to such project or faci lities paid or incurred before the date of issuance of such obligations; and WHEREAS, the United States Department of Treasury (the DeparTment) released Regulation Section 1.150-2 (the Regulations) which establishes when the proceeds of obligations are spent and therefore are no longer subject to various federal incom~ tax restrictions contained in the Internal Revenue Code of 1986, as amended (the Code); and WHEREAS, the Issuer intends to reimburse itself, within eighteen months from the later of the date of expenditure or the date the property financed is placed in service (but in no event more than three years after the original expenditures is paid), for the prior lawiul capital expenditure of funds from the proceeds of one or more series of tax-exempt obligations (the Obligations) that the Issuer currently contemplates issuing in an approximate amount of $2,500,000 to tlnanc.; a portion of the costs of the Project; and WHEREAS, under the Regulations, to fund such reimbursement with proceeds of the Obligations. the Issuer must declare its expectation ultimately to make such reimbursement before making the ~xpenditures; and 4537Jf(76,1 OCT-17-2003 FRI 02: 19 PM SOUTHWEST SECURITIES FAX NO. 2102268299 P. 06 SECTION 9: This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. SECTION 10: If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circwnstances shall nevertheless be valid, and the Governing Body hereby declares that this Resolution would have been enacted without such invalid provision. SECTION 11: It is officially fOWld, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, as amended: Texas Government Code. SECTION 12: This Resolution shall be in force and effect from and after its tlnal passage, and it is so resolved. {[he remainder o/This page intentionally left blank} -3- ;!:i371876.J OCT-17-2003 FRI 02:18 PM SOUTHWEST SECURITIES FAX NO, 2102268299 P. 05 WHEREAS, the Issuer hereby finds and determines that the reimbursement for the prior expenditure of fWlds of the Issuer is nOl inconsistent with the Issuer's budgetary and financial circumstances; and WHEREAS, the Governing Body hereby finds and determines that the adoption of this Resolution is in the best interests of the citizens of the Issuer; nov.:, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS THAT: SECTION l: This Resolution is a declaration of intent to establish the Issuer's reasonable, official intent under section 1.150-2 of the Regulations to reimburse itself from certain of the proceeds of the Obligations for any capital expenditures previously incurred (not more than 60 days prior to the date hereof) v.ith respect to the Project from the Issuer's General Fund. SECTION 2: The Issuer intends to issue the Obligations and allocate within 30 days after the date of issue of the Obligations the proceeds therefrom to reimburse the Issuer for prior lawful expenditures with respect to the Project in a manner to comply with the Regulations. SECTION 3: The reimbursement expenditure will be a type properly chargeable to a capital accown (or would be so chargeable with a proper election) under general Federal income tax. principles. SECTION 4: The Issuer intends to otherwise comply with all tbe requirements contained in the Regulations. SECTION 5: This Resolution may be relied upon by the appropriate officials at the Office of the Attorney General for the State of Texas and establishes compliance by the Issuer with the requirements of Texas law and the Regulations. SECTION 6: With respect to the proceeds of the Obligations allocated to r~imburse the Issuer for prior expenditures, the Issuer shall not employ an abusive devic~ under Treasury Regulation Section 1.148-10, including using Vlithin one year of the reimbursement allocation, the ftUlds corresponding to the proceeds of the Obligations in a manner that results in the creation of replacement proceeds, as defined in Treasury Regulation Section 1.148-1, of the Obligations or another issuer of tax-exempt obligations. SECTION 7: The recitals contained in the preamble hereof are hereby fOlmd to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the Governing Body. SECTION 8: All orders and resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. -2- 45371!:7tl.1 OCT-17-2003 FRI 02:19 PM SOUTHWEST SECURITIES FAX NO, 2102268299 P. 07 PASSED, ADOPTED AND APPROVED on this the 21 5t day of October, 2003. CITY OF SCHERTZ, TEXAS ATTEST: Mayor City Secretary (CITY SEAL) -4- 4537l876.1 OCT-17-2003 FRI 02: 18 PM SOUTHWEST SECURITIES FAX NO. 2102268298 P. 03 EXHIBIT A CONSIDERA TION AND APPROVAL OF A RESOLUTION RELATING TO ESTABLISHING THE CITY'S INTENTION TO REIMBURSE ITSELF FOR THE PRIOR LAWFUL EXPENDITURE OF FUNDS FROM THE PROCEEDS OF OBLIGATIONS TO BE ISSUED BY THE CITY FOR AUTHORIZED PURPOSES; AUTHORIZING MATTERS INCIDENT AND RELATED THERETO; AND PROVIDING AN EFFECTIVE DATE 45371877.1