2006B60-Bond (2)
ORDINANCE
NO'06-B-60
AN ORDINANCE AUTHORIZING THE ISSUANCE OF "CITY OF
SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE
REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007";
PROVIDING FOR THE PAYMENT OF SAID CERTIFICATES BY THE
LEVY OF AN AD VALOREM TAX UPON ALL TAXABLE PROPERTY
WITHIN THE CITY AND FURTHER SECURING SAID CERTIFICATES
BY A LIEN ON AND PLEDGE OF THE PLEDGED REVENUES OF THE
SYSTEM; PROVIDING THE TERMS AND CONDITIONS OF SAID
CERTIFICATES AND RESOLVING OTHER MATTERS INCIDENT AND
RELATING TO THE ISSUANCE, PAYMENT, SECURITY, SALE, AND
DELIVERY OF SAID CERTIFICATES; AUTHORIZING THE
EXECUTION OF A PAYING AGENT/REGISTRAR AGREEMENT AND
A PURCHASE AND INVESTMENT LETTER; COMPLYING WITH THE
REQUIREMENTS OF THE LETTER OF REPRESENTATIONS WITH
THE DEPOSITORY TRUST COMPANY; AND PROVIDING AN
EFFECTIVE DATE
WHEREAS, the City Council of the City of Schertz, Texas (the City) has caused notice
to be given of its intention to issue certificates of obligation in the maximum principal amount of
$9,940,000 for the purpose of paying contractual obligations of the City to be incurred for
making permanent public improvements and for other public purposes, to-wit: (1) constructing,
acquiring, purchasing, renovating, equipping, enlarging, and improving the City's utility system,
(2) constructing street, curb, and sidewalk improvements (including utilities repair, replacement,
and relocation) and drainage incidental thereto, (3) purchasing vehicles and equipment for the
City's Public Works Department, (4) the purchase of EMS vehicles and equipment, (5) the
purchase of City-wide communication equipment, (6) the purchase of materials, supplies,
equipment, land, and rights-of-way for authorized needs and purposes relating to the utility
system improvements, street improvements, and drainage improvements, and (7) the payment of
professional services related to the construction and financing of the aforementioned projects.
This notice has been duly published in a newspaper hereby found and determined to be of
general circulation in the City, once a week for two (2) consecutive weeks, the date of the first
publication of such notice being not less than fifteen (15) days prior to the tentative date stated
therein for the passage of the ordinance authorizing the issuance of such certificates of
obligation; and
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WHEREAS, no petition protesting the issuance of the certificates of obligation described
in this notice, signed by at least 5% of the qualified electors of the City, has been presented to or
filed with the City Secretary prior to the date tentatively set in such notice for the passage of this
ordinance; and
WHEREAS, the City Council hereby finds and determines that certificates of obligation
in the principal amount of $9,915,000 described in such notice should be issued and sold at this
time; now, therefore,
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS
THAT:
SECTION 1. Authorization - Desil!llation - Princinal Amount - Purnose. The
certificates of obligation of the City shall be and are hereby authorized to be issued in the
aggregate principal amount of NINE MILLION NINE HUNDRED FIFTEEN THOUSAND
AND NO/I 00 DOLLARS ($9,915,000), to be designated and bear the title of "CITY OF
SCHERTZ, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE
CERTIFICATES OF OBLIGATION, SERIES 2007" (the Certificates), for the purpose of
paying contractual obligations of the City to be incurred for making permanent public
improvements and for other public purposes, to-wit: (1) constructing, acquiring, purchasing,
renovating, equipping, enlarging, and improving the City's utility system, (2) constructing street,
curb, and sidewalk improvements (including utilities repair, replacement, and relocation) and
drainage incidental thereto, (3) purchasing vehicles and equipment for the City's Public Works
Department, (4) the purchase of EMS vehicles and equipment, (5) the purchase of City-wide
communication equipment, (6) the purchase of materials, supplies, equipment, land, and rights-
of-way for authorized needs and purposes relating to the utility system improvements, street
improvements, and drainage improvements, and (7) the payment of professional services related
to the construction and financing of the aforementioned projects, pursuant to the authority
conferred by and in conformity with the laws of the State of Texas, particularly Chapter 1502, as
amended, Texas Government Code, the Certificate of Obligation Act of 1971, as amended,
Texas Local Government Code Section 271.041 through Section 271.065 and the City's Home
Rule Charter.
SECTION 2. Fullv Re<ristered Obli!!ations - Authorized Denominations - Stated
Maturities - Interest Rates - Dated Date. The Certificates are issuable in fully registered form
only; shall be dated January I, 2007 (the Certificate Date) and shall generally be in
denominations of $100,000 or any integral multiple of $5,000 in excess thereof, and the
Certificates shall become due and payable on February I in each of the years and in principal
amount (the Stated Maturities) and bear interest on the unpaid principal amounts from the
Closing Date, or from the most recent Interest Payment Date (hereinafter defined) to which
interest has been paid or duly provided for, to the earlier of redemption or Stated Maturity, at the
per annum rates, while Outstanding, in accordance with the following schedule:
Years of
Stated Maturit'!
2007
2008
Principal
Amounts ($)
410,000
595,000
Interest
Rates (%)
4.01
4.01
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Years of
Stated Maturity
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Principal
Amounts ($)
615,000
640,000
670,000
555,000
580,000
605,000
630,000
655,000
330,000
340,000
355,000
370,000
385,000
400,000
420,000
435,000
455,000
470,000
Interest
Rates (%)
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
4.01
SECTION 3. PaYment of Certificates - Pavinl! Al!ent/Rel!istrar. The principal of,
premium, if any, and interest on the Certificates, due and payable by reason of Stated Maturity,
redemption, or otherwise, shall be payable in any coin or currency of the United States of
America which at the time of payment is legal tender for the payment of public and private debts,
and such payment of principal of and interest on the Certificates shall be without exchange or
collection charges to the Holder (as hereinafter defined) of the Certificates.
The Certificates shall bear interest at the per annum rates shown above in Section 2,
computed on the basis of a 360-day year of twelve 30-day months, and interest thereon shall be
payable semiannually on February 1 and August 1 of each year (the Interest Payment Date)
commencing August 1,2007, while the Certificates are Outstanding.
The selection and appointment of JPMorgan Chase Bank, National Association, San
Antonio, Texas, to serve as the initial Paying Agent/Registrar for the Certificates is hereby
"pp<v led and confirmed, and the City agrees and covenants to cause to be kept and maintained at
the corporate trust or other office of the Paying Agent/Registrar books and records (the Security
Register) for the registration, payment and transfer of the Certificates, all as provided herein, in
accordance with the terms and provisions of a Paying Agent/Registrar Agreement, attached, in
substantially final form, as Exhibit A hereto, and such reasonable rules and regulations as the
Paying Agent/Registrar and City may prescribe. The City covenants to maintain and provide a
Paying Agent/Registrar at all times while the Certificates are Outstanding, and any successor
Paying Agent/Registrar shall be (i) a national or state banking institution or (ii) an association or
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a corporation organized and doing business under the laws of the United States of America or of
any state, authorized under such laws to exercise trust powers. Such Paying Agent/Registrar
shall be subject to supervision or examination by federal or state authority and authorized by law
to serve as a Paying Agent/Registrar.
The City reserves the right to appoint a successor Paying Agent/Registrar upon providing
the previous Paying Agent/Registrar with a certified copy of a resolution or ordinance
terminating such agency. Additionally, the City agrees to promptly cause a written notice of this
substitution to be sent to each Holder of the Certificates by United States mail, first-class postage
prepaid, which notice shall also give the address of the new Paying Agent/Registrar.
Both principal of, premium, if any, and interest on the Certificates, due and payable by
reason of Stated Maturity, redemption, or otherwise, shall be payable only to the registered
owner of the Certificates appearing on the Security Register (the Holder or Holders) maintained
on behalf of the City by the Paying Agent/Registrar as hereinafter provided (i) on the Record
Date (hereinafter defined) for purposes of payment of interest thereon, and (ii) on the date of
surrender of the Certificates for purposes of receiving payment of principal thereof upon
redemption of the Certificates or at the Certificates' Stated Maturity. The City and the Paying
Agent/Registrar, and any agent of either, shall treat the Holder as the owner of a Certificate for
purposes of receiving payment and all other purposes whatsoever, and neither the City nor the
Paying Agent/Registrar, or any agent of either, shall be affected by notice to the contrary.
Principal of and premium, if any, on the Certificates shall be payable only upon
presentation and surrender of the Certificates to the Paying Agent/Registrar at its corporate trust
or other office. Interest on the Certificates shall be paid to the Holder whose name appears in the
Security Register at the close of business on the fifteenth day of the month next preceding an
Interest Payment Date for the Certificates (the Record Date) and shall be paid (i) by check sent
by United States mail, first-class postage prepaid, by the Paying Agent/Registrar, to the address
of the Holder appearing in the Security Register or (ii) by such other method, acceptable to the
Paying Agent/Registrar, requested in writing by the Holder at the Holder's risk and expense.
If the date for the payment of the principal of, premium, if any, or interest on the
Certificates shall be a Saturday, Sunday, a legal holiday, or a day on which banking institutions
in the city where the corporate trust or other office of the Paying Agent/Registrar is located are
authorized by law or executive order to close, then the date for such payment shall be the next
succeeding day which is not such a day. The payment on such date shall have the same force
and effect as if made on the original date any such payment on the Certificates was due.
In the event of a non-payment of interest on a scheduled payment date, and for thirty (30)
days thereafter, a new record date for such interest payment (a Special Record Date) will be
established by the Paying Agent/Registrar, if and when funds for the payment of such interest
have been received from the City. Notice of the Special Record Date and of the scheduled
payment date of the past due interest (the Special Payment Date - which shall be fifteen (15)
days after the Special Record Date) shall be sent at least five (5) business days prior to the
Special Record Date by United States mail, first-class postage prepaid, to the address of each
Holder of a Certificate appearing on the Security Register at the close of business on the last
business day next preceding the date of mailing of such notice.
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SECTION 4. Redemntiof\.
A. Ontional Redemntion. The Certificates having Stated Maturities on and after
February I, 2018 shall be subject to redemption prior to Stated Maturity, at the option of the
City, on February I, 2017, or on any date thereafter, as a whole or in part, in principal amounts
of $5,000 or any integral multiple thereof (and if within a Stated Maturity selected at random and
by lot by the Paying Agent/Registrar), at the redemption price of par plus accrued interest to the
date of redemption.
B. Exercise of Redemntion Ontion. At least forty-five (45) days prior to a date set
for the redemption of Certificates (unless a shorter notification period shall be satisfactory to the
Paying Agent/Registrar), the City shall notify the Paying Agent/Registrar of its decision to
exercise the right to redeem Certificates, the principal amount of each Stated Maturity to be
redeemed, and the date set for the redemption thereof. The decision of the City to exercise the
right to redeem Certificates shall be entered in the minutes ofthe governing body of the City.
C. Selection of Certificates for Redemntion. If less than all Outstanding Certificates
of the same Stated Maturity are to be redeemed on a redemption date, the Paying Agent/Registrar
shall select at random and by lot the Certificates to be redeemed, provided that if less than the
entire principal amount of a Certificate is to be redeemed, the Paying Agent/Registrar shall treat
such Certificate then subject to redemption as representing the number of Certificates
Outstanding which is obtained by dividing the principal amount of such Certificate by $5,000.
D. Notice of Redemntion. Not less than thirty (30) days prior to a redemption date
for the Certificates, a notice of redemption shall be sent by United States mail, first-class postage
prepaid, in the name of the City and at the City's expense, by the Paying Agent/Registrar to each
Holder of a Certificate to be redeemed, in whole or in part, at the address of the Holder appearing
on the Security Register at the close of business on the business day next preceding the date of
mailing such notice, and any notice of redemption so mailed shall be conclusively presumed to
have been duly given irrespective of whether received by the Holder.
All notices of redemption shall (i) specify the date of redemption for the Certificates,
(ii) identify the Certificates 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 that the Certificates, 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 Certificates, or the
principal amount thereof to be redeemed, shall be made at the corporate trust or other office of
the Paying Agent/Registrar only upon presentation and surrender thereof by the Holder. If a
Certificate 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 herein provided, such Certificate (or the
principal amount thereof to be redeemed) so called for redemption shall become due and
payable, and if money sufficient for the payment of such Certificates (or of the principal amount
thereof to be redeemed) at the then applicable redemption price is held for the purpose of such
payment by the Paying Agent/Registrar, then on the redemption date designated in such notice,
interest on said Certificates (or the principal amount thereof to be redeemed) called for
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redemption shall cease to accrue, and such Certificates shall not be deemed to be Outstanding in
accordance with the provisions of this Ordinance. This notice may also be published once in a
financial publication, journal, or reporter of general circulation among securities dealers in the
City of New York, New York (including, but not limited to, The Bond Buyer and The Wall Street
Journal), or in the State of Texas (including, but not limited to, The Texas Bond Reporter).
Additionally, this notice may also be sent by the City to any registered securities depository and
to any national information service that disseminates redemption notices.
If a Certificate is subject by its terms to redemption and has been called for redemption
and notice of redemption thereof has been duly given as hereinabove provided, such Certificate
(or the principal amount thereof to be redeemed) so called for redemption shall become due and
payable, and if money sufficient for the payment of such Certificates (or of the principal amount
thereof to be redeemed) at the then applicable redemption price is held for the purpose of such
payment by the Paying Agent/Registrar, then on the redemption date designated in such notice,
interest on the Certificates (or the principal amount thereof to be redeemed) called for
redemption shall cease to accrue and such Certificates shall not be deemed to be Outstanding in
accordance with the provisions of this Ordinance.
E. Transfer/Exchanl!e of Certificates. Neither the City nor the Paying
Agent/Registrar shall be required (I) to transfer or exchange any Certificate during a period
beginning forty-five (45) days prior to the date fixed for redemption of the Certificates or (2) to
transfer or exchange any Certificate selected for redemption; provided, however, such limitation
of transfer shall not be applicable to an exchange by the Holder of the unredeemed balance of a
Certificate which is subject to redemption in part.
SECTION 5. Execution - Rel!istration. The Certificates shall be executed on behalf of
the City by its Mayor under the seal of the City reproduced or impressed thereon and attested by
its City Secretary. The signature of either of said officers on the Certificates may be manual or
facsimile. Certificates bearing the manual or facsimile signatures of individuals who were, at the
time of the Certificate Date, the proper officers of the City shall bind the City, notwithstanding
that such individuals or either of them shall cease to hold such offices prior to the delivery of the
Certificates to the Purchasers (hereinafter defined), all as authorized and provided in Chapter
1201, as amended, Texas Government Code.
No Certificate shall be entitled to any right or benefit under this Ordinance, or be valid or
obligatory for any purpose, unless there appears on such Certificate either a certificate of
registration substantially in the form provided in Section 8C, executed by the Comptroller of
Public Accounts of the State of Texas or his duly authorized agent by manual signature, or a
certificate of registration substantially in the form provided in Section 8D, executed by the
Paying Agent/Registrar by manual signature, and either such certificate upon any Certificate
shall be conclusive evidence, and the only evidence, that such Certificate has been duly certified
or registered and delivered.
SECTION 6. Re<ristration - Transfer - Exchanl!e of Certificates - Predecessor
Certificate~. The Paying Agent/Registrar shall obtain, record, and maintain in the Security
Register the name and address of every owner of the Certificates, or if appropriate, the nominee
thereof. Any Certificate may, in accordance with its terms and the terms hereof, be transferred
45852430.2
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or exchanged for Certificates of other authorized denominations upon the Security Register by
the Holder, in person or by his duly authorized agent, upon surrender of such Certificate to the
Paying Agent/Registrar for cancellation, accompanied by a written instrument of transfer or
request for exchange duly executed by the Holder or by his duly authorized agent, in form
satisfactory to the Paying Agent/Registrar.
Upon surrender for transfer of any Certificate at the cu.pu."te trust or other office of the
Paying Agent/Registrar, the City shall execute and the Paying Agent/Registrar shall register and
deliver, in the name of the designated transferee or transferees, one or more new Certificates of
authorized denomination and having the same Stated Maturity and of a like interest rate and
aggregate principal amount as the Certificate or Certificates surrendered for transfer.
At the option of the Holder, Certificates may be exchanged for other Certificates of
authorized denominations and having the same Stated Maturity, bearing the same rate of interest
and of like aggregate principal amount as the Certificates surrendered for exchange upon
surrender of the Certificates to be exchanged at the corporate trust or other office of the Paying
Agent/Registrar. Whenever any Certificates are so surrendered for exchange, the City shall
execute, and the Paying Agent/Registrar shall register and deliver, the Certificates to the Holder
requesting the exchange.
All Certificates issued upon any transfer or exchange of Certificates shall be delivered at
the corporate trust or other office of the Paying Agent/Registrar, or be sent by registered mail to
the Holder at his request, risk, and expense, and upon the delivery thereof, the same shall be the
valid and binding obligations of the City, evidencing the same obligation to pay, and entitled to
the same benefits under this Ordinance, as the Certificates surrendered upon such transfer or
exchange.
All transfers or exchanges of Certificates pursuant to this Section shall be made without
expense or service charge to the Holder, except as otherwise herein provided, and except that the
Paying Agent/Registrar shall require payment by the Holder requesting such transfer or exchange
of any tax or other governmental charges required to be paid with respect to such transfer or
exchange.
Certificates canceled by reason of an exchange or transfer pursuant to the provisions
hereof are hereby defined to be Predecessor Certificates, evidencing all or a portion, as the case
may be, of the same debt evidenced by the new Certificate or Certificates registered and
delivered in the exchange or transfer therefor. Additionally, the term Predecessor Certificates
shall include any Certificate registered and delivered pursuant to Section 25 in lieu of a
mutilated, lost, destroyed, or stolen Certificate which shall be deemed to evidence the same
obligation as the mutilated, lost, destroyed, or stolen Certificate.
SECTION 7. Initial Certificate( s). The Certificates herein authorized shall be issued
initially either (i) as a single fully registered certificate in the total principal amount of
$9,915,000 with principal installments to become due and payable as provided in Section 2 and
numbered T-I, or (ii) as one (I) fully registered Certificate for each year of Stated Maturity in
the applicable principal amount and denomination and to be numbered consecutively from T-I
and upward (the Initial Certificate(s)) and, in either case, the Initial Certificate(s) shall be
45852430.2
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registered in the name of the Purchasers or the designee thereof. The Initial Certificate(s) shall
be the Certificates submitted to the Office of the Attorney General of the State of Texas for
approval, certified and registered by the Office of the Comptroller of Public Accounts of the
State of Texas and delivered to the Purchasers. Any time after the delivery of the Initial
Certificate(s), the Paying Agent/Registrar shall cancel the Initial Certificate(s) delivered
hereunder and exchange therefor definitive Certificates of authorized denominations, Stated
Maturities, principal amounts and bearing applicable interest rates for transfer and delivery to the
Holders named at the addresses identified therefor; all pursuant to and in accordance with such
written instructions from the Purchasers, or the designee thereof, and such other information and
documentation as the Paying Agent/Registrar may reasonably require.
SECTION 8. Forms.
A. Forms Generallv. The Certificates, the Registration Certificate of the Comptroller
of Public Accounts of the State of Texas, the Registration Certificate of the Paying
Agent/Registrar, and the form of Assignment to be printed on each of the Certificates shall be
substantially in the forms set forth in this Section with such appropriate insertions, omissions,
substitutions, and other variations as are permitted or required by this Ordinance and may have
such letters, numbers, or other marks of identification (including insurance legends in the event
the Certificates, or any Stated Maturities thereof, are insured and identifying numbers and letters
of the Committee on Uniform Securities Identification Procedures of the American Bankers
Association) and such legends and endorsements (including any reproduction of an opinion of
counsel) thereon as may, consistent herewith, be established by the City or determined by the
officers executing the Certificates as evidenced by their execution thereof. Any portion of the
text of any Certificate may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Certificate.
The definitive Certificates shall be printed, lithographed, or engraved, produced by any
combination of these methods, or produced in any other similar manner, all as determined by the
officers executing the Certificates as evidenced by their execution thereof, but the Initial
Certificate(s) submitted to the Attorney General of Texas may be typewritten or photocopied or
otherwise reproduced.
[The remainder of this page intentionally left blank.]
45852430.2
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B. Form of Definitive Certificate.
REGISTERED
NO.
REGISTERED
PRINCIPAL AMOUNT
$
United States of America
State of Texas
Counties ofBexar, Comal and Guadalupe
CITY OF SCHERTZ, TEXAS
COMBINATION TAX AND LIMITED PLEDGE REVENUE
CERTIFICATE OF OBLIGATION, SERIES 2007
Certificate Date:
January I, 2007
REGISTERED OWNER:
Interest Rate:
Stated Maturity:
CUSIP No.
PRINCIPAL AMOUNT:
The City of Schertz, Texas (the City), a body cu. pu."te and municipal corporation in the
Counties of Bexar, Comal and Guadalupe, State of Texas, for value received, acknowledges
itself indebted to and hereby promises to pay to the order of the Registered Owner specified
above, or the registered assigns thereof, on the Stated Maturity date specified above, the
Principal Amount specified above (or so much thereof as shall not have been paid upon prior
redemption) and to pay interest on the unpaid Principal Amount hereof from the Closing Date, or
from the most recent interest payment date to which interest has been paid or duly provided for
until such Principal Amount has become due and payment thereof has been made or duly
provided for, to the earlier of redemption or Stated Maturity, at the per annum rate of interest
specified above computed on the basis of a 360-day year of twelve 30-day months; such interest
being payable on February I and August I of each year commencing August 1,2007.
Principal and premium, if any, on this Certificate shall be payable to the Registered
Owner hereof (the Holder), upon presentation and surrender (provided, however, with respect to
principal payments prior to the final Stated Maturity, the Certificates need not be surrendered to
the Paying Agent/Registrar, who will merely document this payment on an internal ledger
maintained by the Paying Agent/Registrar, at the corporate trust or other office of the Paying
Agent/Registrar executing the registration certificate appearing hereon or a successor thereof.
Interest shall be payable to the Holder of this Certificate (or one or more Predecessor
Certificates, as defined in the Ordinance hereinafter referenced) whose name appears on the
Security Register maintained by the Paying Agent/Registrar at the close of business on the
Record Date, which is the fifteenth day of the month next preceding each interest payment date.
All payments of principal of and interest on this Certificate shall be in any coin or currency of
the United States of America which at the time of payment is legal tender for the payment of
public and private debts. Interest shall be paid by the Paying Agent/Registrar by check sent on
the appropriate date of payment by United States mail, first-class postage prepaid, to the Holder
45852430.2
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hereof at the address appearing in the Security Register or by such other method, acceptable to
the Paying Agent/Registrar, requested by the Holder hereof at the Holder's risk and expense.
This Certificate is one of the series specified in its title issued in the aggregate principal
amount of $9,91 5,000 (the Certificates) pursuant to an Ordinance adopted by the governing body
of the City (the Ordinance), for the purpose of paying contractual obligations of the City to be
incurred for making permanent public improvements and for other public purposes, to-wit:
(1) constructing, acquiring, purchasing, renovating, equipping, enlarging, and improving the
City's utility system, (2) constructing street, curb, and sidewalk improvements (including utilities
repair, replacement, and relocation) and drainage incidental thereto, (3) purchasing vehicles and
equipment for the City's Public Works Department, (4) the purchase of EMS vehicles and
equipment, (5) the purchase of City-wide communication equipment, (6) the purchase of
materials, supplies, equipment, land, and rights-of-way for authorized needs and purposes
relating to the utility system improvements, street improvements, and drainage improvements,
and (7) the payment of professional services related to the construction and financing of the
aforementioned projects, under and in strict conformity with the laws of the State of Texas,
particularly Chapter 1502, as amended, Texas Government Code, the Certificate of Obligation
Act of 1971, as amended, Texas Local Government Code, Section 271.041 through 271.065 and
the City's Home Rule Charter.
The Certificates stated to mature on and after February 1, 2018 may be redeemed prior to
their Stated Maturities, at the option of the City, on February 1,2017, or on any date thereafter,
in whole or in part, in principal amounts of $5,000 or any integral multiple thereof (and if within
a Stated Maturity selected at random and by lot by the Paying Agent/Registrar) at the redemption
price of par plus accrued interest to the date of redemption; provided, however, that at least thirty
(30) days prior written notice shall be sent to the Holder of the Certificates to be redeemed by
United States mail, first-class postage prepaid, and subject to the terms and provisions relating
thereto contained in the Ordinance. If this Certificate is subject to redemption prior to Stated
Maturity and is in a denomination in excess of $5,000, portions of the principal sum hereof in
installments of $5,000 or any integral multiple thereof may be redeemed, and, if less than all of
the principal sum hereof is to be redeemed, there shall be issued, without charge therefor, to the
Holder hereof, upon the surrender of this Certificate to the Paying Agent/Registrar at its
corporate trust office, a new Certificate or Certificates of like Stated Maturity and interest rate in
any authorized denominations provided in the Ordinance for the then unredeemed balance of the
principal sum hereof.
If this Certificate (or any portion of the principal sum hereof) shall have been duly called
for redemption and notice of such redemption duly given, then upon such redemption date this
Certificate (or the portion of the principal sum hereof to be redeemed) shall become due and
payable, and, if the money for the payment of the redemption price and the interest accrued on
the principal amount to be redeemed to the date of redemption is held for the purpose of such
payment by the Paying Agent/Registrar, interest shall cease to accrue and be payable hereon
from and after the redemption date on the principal amount hereof to be redeemed. If this
Certificate is called for redemption, in whole or in part, the City or the Paying Agent/Registrar
shall not be required to issue, transfer, or exchange this Certificate within forty-five (45) days of
the date fixed for redemption; provided, however, such limitation of transfer shall not be
45852430.2
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applicable to an exchange by the Holder of the umedeemed balance hereof in the event of its
redemption in part.
The Certificates of this series are payable from the proceeds of an ad valorem tax levied
upon all taxable property within the City, within the limitations prescribed by law, and are
further payable from and secured by a lien on and pledge of the Pledged Revenues (identified
and defined in the Ordinance), being a limited amount of the Net Revenues derived from the
operation of the City's combined utility system (the System), such lien on and pledge of the
limited amount of Net Revenues being subordinate and inferior to the lien on and pledge of such
Net Revenues securing payment of the currently outstanding Prior Lien Obligations and
Subordinate Lien Obligations and any Additional Prior Lien Obligations, Junior Lien
Obligations, or Additional Subordinate Lien Obligations hereafter issued by the City. The City
previously authorized the issuance of the currently outstanding Limited Pledge Obligations
(identified and defined in the Ordinance) which are payable, in part, from and secured by a lien
on and pledge ofa limited amount of the Net Revenues of the System in the manner provided in
the ordinances authorizing the issuance of the Limited Pledge Obligations. In the Ordinance, the
City reserves and retains the right to issue Additional Prior Lien Obligations, Junior Lien
Obligations, Additional Subordinate Lien Obligations, and Additional Limited Pledge
Obligations (all as identified and defined in the Ordinance), while the Certificates are
Outstanding, without limitation as to principal amount but subject to any terms, conditions or
restrictions as may be applicable thereto under law or otherwise.
Reference is hereby made to the Ordinance, copies of which are on file in the corporate
trust or other office of the Paying Agent/Registrar, and to all of the provisions of which the
Holder by his acceptance hereof hereby assents, for definitions of terms; the description of and
the nature and extent of the tax levied and the revenues pledged for the payment of the
Certificates; the terms and conditions under which the City may issue Additional Prior Lien
Obligations, Junior Lien Obligations, Additional Subordinate Lien Obligations, and Additional
Limited Pledge Obligations; the terms and conditions relating to the transfer or exchange of the
Certificates; the conditions upon which the Ordinance may be amended or supplemented with or
without the consent of the Holder; the rights, duties, and obligations of the City and the Paying
Agent/Registrar; the terms and provisions upon which this Certificate may be redeemed or
discharged at or prior to the Stated Maturity thereof, and deemed to be no longer Outstanding
thereunder; and for the other terms and provisions specified in the Ordinance. Capitalized terms
used herein have the same meanings assigned in the Ordinance.
This Certificate, subject to certain limitations contained in the Ordinance, may be
transferred on the Security Register upon presentation and surrender at the corporate trust or
other office of the Paying Agent/Registrar, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Paying Agent/Registrar duly executed by the
Holder hereof, or his duly authorized agent, and thereupon one or more new fully registered
Certificates of the same Stated Maturity, of authorized denominations, bearing the same rate of
interest, and of the same aggregate principal amount will be issued to the designated transferee or
transferees.
The City and the Paying Agent/Registrar, and any agent of either, shall treat the Holder
hereof whose name appears on the Security Register (i) on the Record Date as the owner hereof
45852430.2
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for purposes of receiving payment of interest hereon, (ii) on the date of surrender of this
Certificate as the owner hereof for purposes of receiving payment of principal hereof at its Stated
Maturity or its redemption, in whole or in part, and (iii) on any other date as the owner hereof for
all other purposes, and neither the City nor the Paying Agent/Registrar, or any such agent of
either, shall be affected by notice to the contrary. In the event of a non-payment of interest on a
scheduled payment date, and for thirty (30) days thereafter, a new record date for such interest
payment (a Special Record Date) will be established by the Paying Agent/Registrar, if and when
funds for the payment of such interest have been received from the City. Notice of the Special
Record Date and of the scheduled payment date of the past due interest (the Special Payment
Date - which shall be fifteen (15) days after the Special Record Date) shall be sent at least five
(5) business days prior to the Special Record Date by United States mail, first-class postage
prepaid, to the address of each Holder appearing on the Security Register at the close of business
on the last business day next preceding the date of mailing of such notice.
It is hereby certified, covenanted, and represented that all acts, conditions, and things
required to be performed, exist, and be done precedent to the issuance of this Certificate in order
to render the same a legal, valid, and binding obligation of the City have been p..Auuued, exist,
and have been done, in regular and due time, form, and manner, as required by law, and that
issuance of the Certificates does not exceed any constitutional or statutory limitation. In case any
provision in this Certificate or any application thereof shall be deemed invalid, illegal, or
unenforceable, the validity, legality, and enforceability of the remaining provisions and
applications shall not in any way be affected or impaired thereby. The terms and provisions of
this Certificate and the Ordinance shall be construed in accordance with and shall be governed
by the laws ofthe State of Texas.
IN WITNESS WHEREOF, the City has caused this Certificate to be duly executed under
its official seal.
CITY OF SCHERTZ, TEXAS
By
Mayor
ATTEST:
City Secretary
(CITY SEAL)
45852430.2
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C. :t'Form of Rel!istration Certificate ofComntroller of Public Accounts to Annear on
Initial Certificate(s) Onlv.
REGISTRATION CERTIFICATE OF
COMPTROLLER OF PUBLIC ACCOUNTS
OFFICE OF THE COMPTROLLER OF
PUBLIC ACCOUNTS
9
9
9 REGISTER NO.
9
THE STATE OF TEXAS
I HEREBY CERTIFY that this Certificate has been examined, certified as to validity and
approved by the Attorney General of the State of Texas, and duly registered by the Comptroller
of Public Accounts of the State of Texas.
WITNESS my signature and seal of office this
Comptroller of Public Accounts
of the State of Texas
(SEAL)
*NOTE TO PRINTER: Not to appear on printed Certificates.
D. Form of Certificate of Pavinl! Al!ent/Rel!istrar to Annear on Definitive
Certificates Onlv.
REGISTRATION CERTIFICATE OF PAYING AGENT/REGISTRAR
This Certificate has been duly issued under the provisions of the within-mentioned
Ordinance; the Certificate or Certificates of the above-entitled and designated series originally
delivered having been approved by the Attorney General of the State of Texas and registered by
the Comptroller of Public Accounts, as shown by the records of the Paying Agent/Registrar.
Registered this date:
JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION
as Paying Agent/Registrar
By:
Authorized Signature
*NOTE TO PRINTER: Print on Definitive Certificates.
45852430.2
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E. Form of Assil!Dment.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns, and transfers unto
(Print or typewrite name, address, and zip code of transferee):
(Social Security or other identifying number):
the within Certificate and all rights thereunder, and hereby irrevocably constitutes and appoints
attorney to transfer the within Certificate on the books kept for
registration thereof, with full power of substitution in the premises.
DATED:
NOTICE: The signature on this assignment must
correspond with the name of the registered owner as it
appears on the face of the within Certificate in every
particular.
Signature guaranteed:
F. The Initial Certificate(s) shall he in the form set forth in naral!fanh B of this
Section. excent that the form of a sinl!le fullv re<ristered Initial Certificate shall he modified aq
follows:
(i) immediately under the name of the Certificate(s) the headings "Interest Rate and
"Stated Maturity shall both be completed "as shown below";
(ii) the first two paragraphs shall read as follows:
Registered Owner:
Principal Amount:
The City of Schertz, Texas (the City), a body corporate and municipal corporation in the
Counties of Bexar, Comal and Guadalupe, State of Texas, for value received, acknowledges
itself indebted to and hereby promises to pay to the order of the Registered Owner named above,
or the registered assigns thereof, the Principal Amount specified above stated to mature on the
first day of February in each of the years and in principal amounts and bearing interest at per
annum rates in accordance with the following schedule:
45852430.2
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Years of
Stated Maturitv
Principal
Amounts ($)
Interest
Rates (%)
(Information to be inserted
from schedule in Section 2 hereof)
(or so much thereof as shall not have been paid upon prior redemption) and to pay interest on the
unpaid Principal Amounts hereof from the Closing Date (being January 17, 2007), or from the
most recent interest payment date to which interest has been paid or duly provided for, to the
earlier of redemption or Stated Maturity, at the per annum rates of interest specified above,
computed on the basis of a 360-day year of twelve 30-day months; such interest being payable
on February I and August I of each year, commencing August I, 2007.
Principal of this Certificate shall be payable to the Registered Owner hereof (the Holder),
upon its presentation and surrender, at the corporate trust or other office of JPMorgan Chase
Bank, National Association, San Antonio, Texas (the Paying Agent/Registrar). Interest shall be
payable to the Holder of this Certificate whose name appears on the Security Register maintained
by the Paying Agent/Registrar at the close of business on the Record Date, which is the fifteenth
day of the month next preceding each interest payment date. All payments of principal of and
interest on this Certificate shall be in any coin or currency of the United States of America which
at the time of payment is legal tender for the payment of public and private debts. Interest shall
be paid by the Paying Agent/Registrar by check sent on or prior to the appropriate date of
payment by United States mail, first-class postage prepaid, to the Holder hereof at the address
appearing in the Security Register or by such other method, acceptable to the Paying
Agent/Registrar, requested by, and at the risk and expense of, the Holder hereof.
G. Insurance Lel!end. Ifbond insurance is obtained by the City or the Purchasers for
the Certificates, the Definitive Certificates and the Initial Certificate(s) shall bear an appropriate
legend as provided by the insurer.
SECTION 9. Definitions. For all purposes of this Ordinance (as defined below), except
as otherwise expressly provided or unless the context otherwise requires: (i) the terms defined in
this Section have the meanings assigned to them in this Section, and certain terms used in
Sections 27 and 44 of this Ordinance have the meanings assigned to them in Sections 27 and 44
of this Ordinance, and all such terms, include the plural as well as the singular; (ii) all rd.......uces
in this Ordinance to designated "Sections" and other subdivisions are to the designated Sections
and other subdivisions of this Ordinance as originally adopted; and (iii) the words "herein",
"hereof, and "hereunder" and other words of similar import refer to this Ordinance as a whole
and not to any particular Section or other subdivision.
A. The term Additional Limited Pledge Obligations shall mean (i) any bonds, notes,
warrants, certificates of obligation or other evidences of indebtedness hereafter issued by the
City payable wholly or in part from a pledge of and lien on Net Revenues of the System which
pledge of revenues is limited pursuant to Section 1502.052, as amended, Texas Government
Code, all as further provided in Section 20 of this Ordinance, and (ii) any obligations issued to
refund the foregoing as determined by the City Council in accordance with any applicable law.
45852430.2
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B. The term Additional Prior Lien Obligations shall mean (i) any bonds, notes,
warrants, certificates of obligation or any similar obligations hereafter issued by the City that are
payable wholly or in part from and equally and ratably secured by a prior and first lien on and
pledge of the Net Revenues of the System, all as further provided in Section 20 of this
Ordinance, and (ii) any obligations issued to refund the foregoing that are payable from and
equally and ratably secured by a prior and first lien on and pledge of the Net Revenues of the
System as determined by the City Council in accordance with any applicable law.
C. The term Additional Subordinate Lien Obligations shall mean (i) any bonds,
notes, warrants, certificates of obligation, or any similar obligations hereafter issued by the City
that are payable, in whole or in part, from and equally and ratably secured by a lien on and
pledge of the Net Revenues of the System, such pledge being subordinate and inferior to the lien
on and pledge of the Net Revenues of the System that are or may be pledged to the payment of
the currently outstanding Prior Lien Obligations or any Additional Prior Lien Obligations or
Junior Lien Obligations hereafter issued by the City, but prior and superior to the lien on and
pledge of the limited amount ofthe Net Revenues securing the payment of the Certificates or any
Additional Limited Pledge Obligations hereafter issued by the City, all as further provided in
Section 20 of this Ordinance and (ii) obligations hereafter issued to refund any of the foregoing
that are payable from and equally and ratably secured by a subordinate and inferior lien on and
pledge of the Net Revenues as determined by the City Council in accordance with any applicable
law.
D. The term Authorized Officials shall mean the Mayor, City Secretary, and/or the
City Manager.
E. The term Certificates shall mean the $9,915,000 "CITY OF SCHERTZ, TEXAS
COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF
OBLIGATION, SERIES 2007" authorized by this Ordinance.
F. The term Certificate Fund shall mean the special Fund created and established by
the provisions of Section 10 of this Ordinance.
G. The term City shall mean the City of Schertz, located in Bexar, Comal and
Guadalupe Counties, Texas and, where al'p."p.:ate, the City Council of the City.
H. The term Closing Date shall mean the date of physical delivery of the Initial
Certificates in exchange for the payment of the agreed purchase price for the Certificates.
1. The term Collection Date shall mean, when reference is being made to the levy
and collection of annual ad valorem taxes, the date the annual ad valorem taxes levied each year
by the City become delinquent.
J. The term Debt Service Requirement shall mean, as of any particular date of
computation, with respect to any obligations and with respect to any period, the aggregate of the
amounts to be paid or set aside by the City as of such date or in such period for the payment of
the principal of, premium, if any, and interest (to the extent not capitalized) on such obligations;
assuming, in the case of obligations without a fixed numerical rate, that such obligations bear
interest at the maximum rate permitted by the terms thereof and further assuming in the case of
45852430.2
-16-
obligations required to be redeemed or prepaid as to principal prior to Stated Maturity, the
principal amounts thereof will be redeemed prior to Stated Maturity in accordance with the
mandatory redemption provisions applicable thereto.
K. The term Depository shall mean an official depository bank of the City.
L. The term Fiscal Year shall mean the annual financial accounting period for the
System now ending on September 30th of each year; provided, however, the City Council may
change such annual financial accounting period to end on another date if such change is found
and determined to be necessary for accounting purposes or is required by applicable law.
M. The term Government Securities, as used herein, shall mean (i) direct noncallable
obligations of the United States, including obligations that are unconditionally guaranteed by, the
United States of America; (ii) noncallable obligations of an agency or instrumentality of the
United States, including obligations that are unconditionally guaranteed or insured by the agency
or instrumentality and that, on the date the governing body of the issuer adopts or "pp.u les the
proceedings authorizing the issuance of refunding bonds, are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or its equivalent; or
(iii) noncallable obligations of a state or an agency or a county, municipality, or other political
subdivision of a state that have been refunded and that, on the date the governing body of the
issuer adopts or approves the proceedings authorizing the issuance of refunding bonds, are rated
as to investment quality by a nationally recognized investment rating firm not less than AAA or
its equivalent.
N. The term Gross Revenues for any period shall mean all revenue during such
period in respect or on account of the operation or ownership of the System, excluding
refundable meter deposits, restricted gifts, and grants in aid of construction, but including
earnings and income derived from the investment or deposit of money in any special fund or
account (except the Certificate Fund) created and established for the payment or security of the
Certificates.
O. The term Holder or Holders shall mean the registered owner, whose name
appears in the Security Register, for any Certificate.
P. The term Interest Payment Date shall mean the date semiannual interest is
payable on the Certificates, being February I and August I of each year, commencing August I,
2007, while any of the Certificates remain Outstanding.
Q. The term Junior Lien Obligations shall mean (i) any bonds, notes, warrants,
certificates of obligation or any similar obligations hereafter issued by the City that are payable
wholly or in part from and equally and ratably secured by a junior and inferior lien on and pledge
of the Net Revenues of the System, all as further provided in Section 20 of this Ordinance, and
(ii) obligations hereafter issued to refund any of the foregoing that are payable from and equally
and ratably secured by a junior and inferior lien on and pledge of the Net Revenues as
determined by the City Council in accordance with any applicable law.
R. The term Limited Pledge Obligations shall mean (i) the Certificates and the
currently outstanding and unpaid certificates of obligation payable from ad valorem taxes and
45852430.2
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additionally payable from and secured by a lien on and pledge of a limited amount of the Net
Revenues of the System and designated as follows:
(1) "City of Schertz, Texas Combination Tax and Limited Pledge Revenue
Certificates of Obligation, Series 2004," dated May 15, 2004, in the original principal
amount of $7,750,000,
(2) "City of Schertz, Texas Combination Tax and Limited Pledge Revenue
Certificates of Obligation, Series 2003," dated March I, 2003, in the original principal
amount of$3,360,000,
(3) "City of Schertz, Texas Combination Tax and Limited Pledge Revenue
Certificates of Obligation, Series 2001," dated August 1,2001, in the original principal
amount of $4,500,000;
and (ii) obligations hereafter issued to refund any of the foregoing as determined by the City
Council in accordance with any applicable law.
S. The term Maintenance and Operating Expenses shall mean all current expenses
of operating and maintaining the System not paid from the proceeds of the Certificates, including
(1) the cost of all salaries, labor, materials, repairs, and extensions necessary to render efficient
service, but only if, in the case of repairs and extensions, they are, in the judgment of the City
Council (reasonably and fairly exercised), necessary to maintain operation of the System and
render adequate service to the City and the inhabitants thereof, or are necessary to meet some
physical accident or condition which would otherwise impair obligations payable from Net
Revenues, (2) payments to pension, retirement, health, hospitalization, and other employee
benefit funds for employees of the City engaged in the operation or maintenance of the System,
(3) payments under contracts for the purchase of water supply, treatment of sewage, or other
materials, goods, or services for the System to the extent authorized by law and the provisions of
such contract, (4) payments to auditors, attorneys, and other consultants incurred in complying
with the obligations of the City hereunder, and (5) any legal liability of the City arising out of the
operation, maintenance, or condition of the System, but excluding any allowance for
depreciation, property retirement, depletion, obsolescence, and other items not requiring an
outlay of cash and any interest on the Certificates or other bonds, notes, warrants, or similar
obligations of the City payable from Net Revenues.
T. The term Net Revenues for any period shall mean the Gross Revenues of the
System less the Maintenance and Operating Expenses of the System.
u. The term Ordinance shall mean this ordinance as finally passed and adopted by
the City Council of the City.
V. The term Outstanding when used in this Ordinance with respect to Certificates
shall mean, as of the date of determination, all Certificates issued and delivered under this
Ordinance, except:
(1) those Certificates canceled by the Paying Agent/Registrar or delivered to
the Paying Agent/Registrar for cancellation;
45852430.2
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(2) those Certificates for which payment has been duly provided by the City
in accordance with the provisions of Section 29 of this Ordinance; and
(3) those Certificates that have been mutilated, destroyed, lost, or stolen and
replacement Certificates have been registered and delivered in lieu thereof as provided in
Section 25 of this Ordinance.
w. The term Pledged Revenues shall mean, while the Certificates remain
Outstanding, an amount of Net Revenues not in excess of $1,000. The Pledged Revenues shall
be deposited, allocated, and expended in accordance with Section 10 of this Ordinance.
X. The term Pledged Revenue Amount shall mean the total amount, not to exceed
$1,000 while the Certificates are Outstanding, of Net Revenues that may be transferred in whole
or in part by the City in any given Fiscal Year (however, any amounts transferred prior to the
final maturity date of the Certificates may not exceed the total amount of $1,000) to the
Certificate Fund.
Y. The term Prior Lien Obligations shall mean (i) the outstanding and unpaid
obligations of the City payable, in whole or in part, from and secured by a prior and first lien on
and pledge of the Net Revenues of the System and described as follows:
"City of Schertz, Texas Utility System Revenue and Refunding
Bonds, Series 2001", dated April I, 2001, in the original principal
amount of$5,550,000;
and (ii) obligations hereafter issued to refund any of the foregoing that are payable from and
equally and ratably secured by a prior and first lien on and pledge of the Net Revenues of the
System as determined by the City Council in accordance with any applicable law.
Z. The term Purchasers shall mean the initial purchaser or purchasers of the
Certificates named in Section 26 of this Ordinance.
AA. The term Stated Maturity shall mean the annual principal payments of the
Certificates payable on February I of each year the Certificates are Outstanding as set forth in
Section 2 ofthis Ordinance.
BB. The term Subordinate Lien Obligations shall mean (i) the outstanding and unpaid
indebtedness of the City payable, in whole or in part, from and secured by a subordinate and
inferior lien on and pledge of the Net Revenues of the System and described as follows:
"City of Schertz, Texas, Combination Tax and Subordinate Lien
Revenue Certificates of Obligation, Series 2005", dated May I,
2005, in the original principal amount of $3,200,000;
and (ii) obligations hereafter issued to refund any of the foregoing that are payable from and
equally and ratably secured by a subordinate and inferior lien on and pledge of the Net Revenues
as determined by the City Council in accordance with any applicable law.
45852430.2
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CC. The term System shall mean all properties, facilities and plants currently owned,
operated, and maintained by the City for the supply, treatment, and transmission of treated
potable water, for the collection and treatment of wastewater, together will all future extensions,
improvements, replacements and additions thereto, whether situated within or without the limits
of the City and the City expressly reserves the right at its sole discretion to include additional
utility, telecommunications, technology, or similar enterprise services as components of the
System; provided, however, that notwithstanding the foregoing, and to the extent now or
hereafter authorized or permitted by law, the term System shall not mean to include facilities of
any kind which are declared not to be a part of the System and which are acquired or constructed
by or on behalf of the City with the proceeds from the issuance of Special Facilities Bonds,
which are hereby defined as being special revenue obligations of the City which are not payable
from Net Revenues but which are payable from and equally and ratably secured by other liens on
and pledges of any revenues, sources or payments, not pledged to the payment of the Bonds
Similarly Secured including, but not limited to, special contract revenues or payments received
from any other legal entity in connection with such facilities.
SECTION 10. Certificate Fund - Investments. For the purpose of paying the interest on
and to provide a sinking fund for the payment, redemption, and retirement of the Certificates,
there shall be and is hereby created a special fund to be designated "COMBINATION TAX
AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2007,
INTEREST AND SINKING FUND" (the Certificate Fund), which fund shall be kept and
maintained at the Depository, and money deposited in such fund shall be used for no other
purpose and shall be maintained as provided in Section 27. Authorized Officials of the City are
hereby authorized and directed to make withdrawals from said fund sufficient to pay the
principal of and interest on the Certificates as the same become due and payable and shall cause
to be transferred to the Paying Agent/Registrar from money on deposit in the Certificate Fund an
amount sufficient to pay the amount of principal and/or interest falling due on the Certificates,
such transfer of funds to the Paying Agent/Registrar to be made in such manner as will cause
immediately available funds to be deposited with the Paying Agent/Registrar on or before the
last business day next preceding each interest and principal payment date for the Certificates.
The City, at its sole discretion, may deposit the Pledged Revenue Amount to the
Certificate Fund. The Pledged Revenue Amount, if deposited, shall be expended annually to pay
principal of and interest on the Certificates as the same become due and payable. This Pledged
Revenue Amount shall be accounted for and transferred to the Paying Agent/Registrar in
accordance with the provisions of the previous paragraph of this Section.
Pending the transfer of funds to the Paying Agent/Registrar, money in any fund
established by this Ordinance may, at the option of the City, be placed in time deposits,
certificates of deposit, guaranteed investment contracts, or similar contractual agreements as
permitted by the provisions of the Public Funds Investment Act, as amended, Chapter 2256,
Texas Government Code, secured (to the extent not insured by the Federal Deposit Insurance
Corporation) by obligations of the type hereinafter described, or be invested, as authorized by
any law, including investments held in book-entry form, in securities, including, but not limited
to, direct obligations of the United States of America, obligations guaranteed or insured by the
United States of America, which, in the opinion of the Attorney General of the United States, are
backed by its full faith and credit or represent its general obligations, or invested in indirect
45852430.2
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obligations of the United States of America, including, but not limited to, evidences of
indebtedness issued, insured or guaranteed by such governmental agencies as the Federal Land
Banks, Federal Intermediate Credit Banks, Banks for Cooperatives, Federal Home Loan Banks,
Government National Mortgage Association, Farmers Home Administration, Federal Home
Loan Mortgage Association, or Federal Housing Association; provided that all such deposits and
investments shall be made in such a manner that the money required to be expended from such
fund will be available at the proper time or times. All interest and income derived from deposits
and investments in any fund established pursuant to the provisions of this Ordinance shall be
credited to, and any losses debited to, such fund. All such investments shall be sold promptly
when necessary to prevent any default in connection with the Certificates.
SECTION II. Tax. Levv. To provide for the payment of the Debt Service Requirements
on the Certificates being (i) the interest on the Certificates and (ii) a sinking fund for their
redemption at Stated Maturity or a sinking fund of 2% (whichever amount shall be the greater),
there shall be and there is hereby levied for the current year and each succeeding year thereafter
while the Certificates or any interest thereon shall remain Outstanding, a sufficient tax, within
the limitations prescribed by law, on each one hundred dollars valuation of taxable property in
the City, adequate to pay such Debt Service Requirements, full allowance being made for
delinquencies and costs of collection; said tax shall be assessed and collected each year and
applied to the payment of the Debt Service Requirements, and the same shall not be diverted to
any other purpose. The taxes so levied and collected shall be paid into the Certificate Fund and
are thereafter pledged to the payment of the Certificates. The City Council hereby declares its
purpose and intent to provide and levy a tax legally and fully sufficient to pay such Debt Service
Requirements, it having been determined that the existing and available taxing authority of the
City for such purpose is adequate to permit a legally sufficient tax in consideration of all other
outstanding indebtedness and other obligations of the City.
The amount of taxes to be provided annually for the payment of the principal of and
interest on the Certificates shall be determined and accomplished in the following manner:
A. Prior to the date the City Council establishes the annual tax rate and passes an
ordinance levying ad valorem taxes each year, the City Council shall determine:
(1) the amount of Debt Service Requirements to become due and payable on
the Certificates between the Collection Date for the taxes then to be levied and the
Collection Date for the taxes to be levied during the next succeeding calendar year;
(2) the amount on deposit in the Certificate Fund after (a) deducting therefrom
the total amount of Debt Service Requirements to become due on Certificates prior to the
Collection Date for the ad valorem taxes to be levied and (b) adding thereto the amount
of the Pledged Revenues, if any, to be app.up.;ated and allocated during such year to pay
such Debt Service Requirements, if any, prior to the Collection Date for the ad valorem
taxes to be levied; and
(3) the amount of Pledged Revenues, if any, to be app."p.;ated and to be set
aside for the payment of the Debt Service Requirements on the Certificates between the
45852430.2
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Collection Date for the taxes then to be levied and the Collection Date for the taxes to be
levied during the next succeeding Fiscal Year.
B. The amount of taxes to be levied annually each year to pay the Debt Service
Requirements on the Certificates shall be the amount established in paragraph (I) above less the
sum total of the amounts established in paragraphs (2) and (3), after taking into consideration
delinquencies and costs of collecting such annual taxes.
SECTION 12. Pledl!e of Revenues. The City hereby covenants and agrees that, subject
to (i) any prior lien on and pledge of the Net Revenues of the System to the payment and security
of the currently outstanding Prior Lien Obligations and Subordinate Lien Obligations and any
Additional Prior Lien Obligations, Junior Lien Obligations, or Additional Subordinate Lien
Obligations hereafter issued by the City and (ii) the lien and pledge of a limited amount of the
Net Revenues to the payment and security of the currently outstanding Limited Pledge
Obligations, the Pledged Revenues are hereby irrevocably pledged to the payment of the
principal of and interest on the Certificates and the pledge of Pledged Revenues herein made for
the payment of the Certificates shall constitute a lien on the Pledged Revenues in accordance
with the terms and provisions hereof and be valid and binding without any physical delivery
thereof or further act by the City.
SECTION 13. Svstem Fund. The City hereby covenants and agrees that all Gross
Revenues derived from the operation of the System shall be kept separate and apart from all
other funds, accounts and money of the City and shall be deposited as collected into the "CITY
OF SCHERTZ, TEXAS UTILITY SYSTEM FUND" (the System Fund). All money deposited
in the System Fund shall be pledged and appropriated to the extent required for the following
purposes and in the order of priority shown:
45852430.2
.
First: to the payment of the reasonable and proper Maintenance and Operating
Expenses of the System required by statute or ordinances authorizing the issuance
of any indebtedness of the City to be a first charge on and claim against the Gross
Revenues of the System;
.
Second: To the payment of the amounts that must be deposited in the special
funds and accounts created and established for the payment, security, and benefit
of the currently outstanding Prior Lien Obligations and any Additional Prior Lien
Obligations hereafter issued by the City;
.
Third: To the payment of the amounts that must be deposited in the special funds
and accounts created and established for the payment, security, and benefit of any
Junior Lien Obligations hereafter issued by the City;
.
Fourth: To the payment of the amounts that must be deposited in the special
funds and accounts created and established for the payment, security, and benefit
of the currently outstanding Subordinate Lien Obligations and any Additional
Subordinate Lien Obligations hereafter issued by the City; and
-22-
. Fifth: To the payment of the amounts that may be deposited in the special funds
and accounts established for the payment of the currently outstanding Limited
Pledge Obligations, the Certificates, and any Additional Limited Pledge
Obligations hereafter issued by the City.
Any Net Revenues remaining in the System Fund after satisfying the foregoing
payments, or making adequate and sufficient provision for the payment, security and benefit
thereof, may be appropriated and used for any other City purpose now or hereafter permitted by
law.
SECTION 14. Denosits to Certificate Fund - Sumlus Certificate Proceeds. The City
hereby covenants and agrees to cause to be deposited in the Certificate Fund prior to a principal
and interest payment date for the Certificates, from the Pledged Revenues in the System Fund,
after the deduction of all payments required to be made to the special funds or accounts created
for the payment, security, and benefit of (i) the currently outstanding Prior Lien Obligations and
Subordinate Lien Obligations and any Additional Prior Lien Obligations, Junior Lien
Obligations, or Additional Subordinate Lien Obligations hereafter issued by the City and (ii) the
currently outstanding Limited Pledge Obligations, any amounts budgeted to be paid therefrom in
such Fiscal Year.
Accrued interest, if any, received from the Purchasers of the Certificates shall be
deposited to the Certificate Fund and ad valorem taxes levied and collected for the benefit of the
Certificates shall be deposited to the Certificate Fund. In addition, any surplus proceeds,
including investment income therefrom, from the sale of the Certificates not expended for
authorized purposes shall be deposited in the Certificate Fund, and such amounts so deposited
shall reduce the sums otherwise required to be deposited in said fund from ad valorem taxes.
SECTION 15. Securitv of Funds. All money on deposit in the funds for which this
Ordinance makes provision (except any portion thereof as may be at any time properly invested
as provided herein) shall be secured in the manner and to the fullest extent required by the laws
of Texas for the security of public funds, and money on deposit in such funds shall be used only
for the purposes permitted by this Ordinance.
SECTION 16. Maintenance of Svstem - Insurance. The City covenants and agrees that
while the Certificates remain Outstanding it will maintain and operate the System with all
possible efficiency and maintain casualty and other insurance (including a system of self-
insurance) on the properties of the System and its operations of a kind and in such amounts
customarily carried by municipal corporations in the State of Texas engaged in a similar type of
business and that it will faithfully and punctually perform all duties with reference to the System
required by the laws of the State of Texas. All money received from losses under such insurance
policies, other than public liability policies, are held for the benefit of the holders of the
Certificates until and unless the proceeds are paid out in making good the loss or damage in
respect of which such proceeds are received, either by replacing the property destroyed or
repairing the property damaged, and adequate provision for making good such loss or damage
must be made within ninety (90) days after the date of loss. The payment of premiums for all
insurance policies required under the provisions hereof shall be considered Maintenance and
Operating Expenses. Nothing in this Ordinance shall be construed as requiring the City to
45852430.2
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expend any funds which are derived from sources other than the operation of the System but
nothing herein shall be construed as preventing the City from doing so.
SECTION 17. Rates and Charl!es. The City hereby covenants and agrees with the
Holders of the Certificates that rates and charges for utility services afforded by the System will
be established and maintained to provide Gross Revenues sufficient at all times:
A. to pay all operating, maintenance, depreciation, replacement, betterment, and
other costs incurred in the maintenance and operation of the System, including, but not limited
to, Maintenance and Operating Expenses;
B. to produce Net Revenues sufficient, together with any other lawfully available
funds, to pay (i) the interest on and principal of the currently outstanding Prior Lien Obligations
and any Additional Prior Lien Obligations as the same becomes due and payable and the
amounts required to be deposited in any special fund created and established for the payment,
security, and benefit thereof; (ii) the interest on and principal of any Junior Lien Obligations
hereafter issued by the City as the same becomes due and payable and the amounts required to be
deposited in any special fund created and established for the payment, security, and benefit
thereof; (iii) the interest on and principal of the currently outstanding Subordinate Lien
Obligations and any Additional Subordinate Lien Obligations hereafter issued by the City as the
same becomes due and payable and the amounts required to be deposited in any special fund
created and established for the payment, security, and benefit thereof, and (iv) the amounts that
may be deposited in the special funds established for the payment of the currently outstanding
Limited Pledge Obligations, the Certificates, or any Additional Limited Pledge Obligations
hereafter issued by the City; and
C. to pay other legally incurred indebtedness payable from the Net Revenues of the
System and/or secured by a lien on the System or the Net Revenues thereof.
SECTION 18. Records and Accounts - Annual Audit. The City further covenants and
agrees that so long as any of the Certificates remain Outstanding it will keep and maintain
separate and complete records and accounts pertaining to the operations of the System in which
complete and correct entries shall be made of all transactions relating thereto, as provided by
Chapter 1502, as amended, Texas Government Code, or other applicable law. The Holders of
the Certificates or any duly authorized agent or agents of the Holders shall have the right to
inspect the System and all properties comprising the same. The City further agrees that,
following the close of each Fiscal Year, it will cause an audit of such books and accounts to be
made by an independent firm of Certified Public Accountants. Copies of each annual audit shall
be furnished to the Executive Director of the Municipal Advisory Council of Texas at his office
in Austin, Texas, and, upon written request, to the Purchasers of the Certificates and any
subsequent holder thereof. Expenses incurred in making the annual audit of the operations of the
System are to be regarded as Maintenance and Operating Expenses.
SECTION 19. Remedies in Event of Default. In addition to all the rights and remedies
provided by the laws of the State of Texas, the City covenants and agrees particularly that in the
event the City (a) defaults in the payments to be made to the Certificate Fund, or (b) defaults in
the observance or performance of any other of the covenants, conditions, or obligations set forth
45852430.2
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in this Ordinance, the Holders of any of the Certificates shall be entitled to seek a writ of
mandamus issued by a court of proper jurisdiction compelling and requiring the governing body
of the City and other officers of the City to observe and perform any covenant, condition, or
obligation prescribed in this Ordinance.
No delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver of any such default or
acquiescence therein, and every such right and power may be exercised from time to time and as
often as may be deemed expedient. The specific remedies herein provided shall be cumulative of
all other existing remedies and the specification of such remedies shall not be deemed to be
exclusive.
SECTION 20. Issuance of Additional Prior Lien Oblil!ations. Junior Lien Oblil!ations,
Additional Subordinate Lien Oblil!ations. and Additional Limited Pledl!e Oblil!ation~. The City
hereby ...^p.....sly reserves the right to hereafter issue bonds, notes, warrants, certificates of
obligation, or similar obligations, payable, wholly or in part, as app.up.:ate, from and secured by
a pledge of and lien on the Net Revenues of the System with the following priorities, without
limitation as to principal amount, but subject to any terms, conditions, or restrictions applicable
thereto under existing ordinances, laws, or otherwise:
A. Additional Prior Lien Obligations payable from and equally and ratably secured,
together with the currently outstanding Prior Lien Obligations, by a first and prior lien on and
pledge of the Net Revenues of the System;
B. Junior Lien Obligations payable from and equally and ratably secured by a lien on
and pledge of the Net Revenues that is junior and inferior to the lien on and pledge thereof
securing the payment of the currently outstanding Prior Lien Obligations and any Additional
Prior Lien Obligations hereafter issued by the City, but prior and superior to the lien on and
pledge of the Net Revenues securing, in part, the payment of the currently outstanding
Subordinate Lien Obligations, the Certificates, and any Additional Subordinate Lien Obligations
or Additional Limited Pledge Obligations hereafter issued by the City; and
C. Additional Subordinate Lien Obligations payable from and equally and ratably
secured by a lien on and pledge of the Net Revenues that is subordinate and inferior to the lien
on and pledge thereof securing the payment of the currently outstanding Prior Lien Obligations
and any Additional Prior Lien Obligations or Junior Lien Obligations hereafter issued by the
City, but prior and superior to the lien on and pledge of the Net Revenues securing, in part, the
payment of the currently outstanding Limited Pledge Obligations, the Certificates, and any
Additional Limited Pledge Obligations hereafter issued by the City; and
D. Additional Limited Pledge Obligations secured by a lien on and pledge of a
limited amount of the Net Revenues in accordance with the provisions of the following
paragraph.
Additional Prior Lien Obligations, Junior Lien Obligations, or Additional Subordinate
Lien Obligations, if issued, may be payable, in whole or in part, from Net Revenues (without
impairment of the obligation of contract with the Holders of the currently outstanding Limited
45852430.2
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Pledge Obligations or the Certificates) upon such terms and conditions as the City Council may
determine. Additional Limited Pledge Obligations, if issued and payable, in whole or in part,
from Pledged Revenues (defined in the same or similar terms as provided in Section 9 of this
Ordinance or in the ordinances authorizing the issuance of the Limited Pledge Obligations), shall
not in any event be construed to be payable from the Pledged Revenues authorized by this
Ordinance or in the ordinances authorizing the issuance of the Limited Pledge Obligations to be
budgeted and appropriated for the payment of the Certificates or the ordinances authorizing the
issuance of the currently outstanding Limited Pledge Obligations, as appropriate. However, the
lien on and pledge of the limited amount of Net Revenues securing, in part, the payment of any
Additional Limited Pledge Obligations shall be subordinate and inferior to the pledge of and lien
on the Net Revenues securing the payment of the currently outstanding Prior Lien Obligations
and Subordinate Lien Obligations and any Additional Prior Lien Obligations, Junior Lien
Obligations, or Additional Subordinate Lien Obligations hereafter issued by the City.
SECTION 21. Snecial Covenants. The City hereby further covenants that:
A. it has the lawful power to pledge the Pledged Revenues supporting the
Certificates and has lawfully exercised said powers under the laws of the State of Texas,
including power existing under Chapter 1502, as amended, Texas Government Code, the
Certificate of Obligation Act of 1971, as amended, Texas Local Government Code, Section
271.041 through Section 271.065, and the City's Home Rule Charter;
B. other than for the payment of the currently outstanding Prior Lien Obligations,
Subordinate Lien Obligations, Limited Pledge Obligations, and the Certificates, the Net
Revenues of the System have not in any manner been pledged to the payment of any debt or
obligation of the City or of the System;
C. as long as any Certificates or any interest thereon remain Outstanding, the City
will not sell, lease or encumber (except in the manner provided in Section 20 of this Ordinance)
the System or any substantial part thereof, provided that this covenant shall not be construed to
prohibit the sale of such machinery, or other properties or equipment which has become obsolete
or otherwise unsuited to the efficient operation of the System.
D. to the extent that it legally may, the City further covenants and agrees that, so
long as any of the Certificates, or any interest thereon, are Outstanding, no franchise shall be
granted for the installation or operation of any competing utility systems other than those owned
by the City, and the operation of any such systems by anyone other than the City is hereby
prohibited; and
E. no free service of the System shall be allowed, and should the City or any of its
agents or instrumentalities make use of the services and facilities of the System, payment of the
reasonable value thereof shall be made by the City out of funds from sources other than the
revenues and income of the System.
SECTION 22. Annlication of the Covenants and Avreements of anv Additional Prior
Lien Oblil!ations. Junior Lien Oblil!ations. or Additional Subordinate Lien Oblil!ations. It is the
intention of the City Council and accordingly hereby recognized and stipulated that the
45852430.2
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provlSlons, agreements, and covenants contained herein bearing upon the management and
operations of the System, and the administration and application of Gross Revenues derived from
the operation thereof, shall to the extent possible be harmonized with like provisions,
agreements, and covenants contained in the ordinances authorizing the issuance of the currently
outstanding Prior Lien Obligations and Subordinate Lien Obligations and any Additional Prior
Lien Obligations, Junior Lien Obligations, or Additional Subordinate Lien Obligations hereafter
issued by the City, and to the extent of any irreconcilable conflict between the provisions
contained herein and in the ordinances authorizing the issuance of the currently outstanding Prior
Lien Obligations and Subordinate Lien Obligations, the provisions, agreements and covenants
contained therein shall prevail to the extent of such conflict and be applicable to this Ordinance,
especially the priority of rights and benefits conferred thereby to the holders of the currently
outstanding Prior Lien Obligations and Subordinate Lien Obligations. It is expressly recognized
that prior to the issuance of any Additional Prior Lien Obligations, Junior Lien Obligations, or
Additional Subordinate Lien Obligations, the City must comply with each of the conditions
precedent contained in the ordinances authorizing the issuance of the currently outstanding Prior
Lien Obligations, Subordinate Lien Obligations, the Limited Pledge Obligations, and the
Certificates, as appropriate.
SECTION 23. Notices to Holders. Waiver. Wherever this Ordinance provides for notice
to Holders of any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and sent by United States mail, first-class postage prepaid, to
the address of each Holder as it appears in the Security Register.
In any case where notice to Holders is given by mail, neither the failure to mail such
notice to any particular Holders, nor any defect in any notice so mailed, shall affect the
sufficiency of such notice with respect to all other Holders. Where this Ordinance provides for
notice in any manner, such notice may be waived in writing by the Holder entitled to receive
such notice, either before or after the event with respect to which such notice is given, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the
Paying Agent/Registrar, but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
SECTION 24. Cancellation. All Certificates surrendered for payment, transfer,
redemption, exchange, or replacement, if surrendered to the Paying Agent/Registrar, shall be
pwmp;Jy canceled by it and, if surrendered to the City, shall be delivered to the Paying
Agent/Registrar and, if not already canceled, shall be promptly canceled by the Paying
Agent/Registrar. The City may at any time deliver to the Paying Agent/Registrar for
cancellation any Certificates previously certified or registered and delivered which the City may
have acquired in any manner whatsoever, and all Certificates so delivered shall be promptly
canceled by the Paying Agent/Registrar. All canceled Certificates held by the Paying
Agent/Registrar shall be destroyed as directed by the City.
SECTION 25. Mutilated. Destroved. Lost. and Stolen Certificates. If (1) any mutilated
Certificate is surrendered to the Paying Agent/Registrar, or the City and the Paying
Agent/Registrar receive evidence to their satisfaction of the destruction, loss, or theft of any
Certificate, and (2) there is delivered to the City and the Paying Agent/Registrar such security or
indemnity as may be required to save each of them harmless, then, in the absence of notice to the
45852430.2
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City or the Paying Agent/Registrar that such Certificate has been acquired by a bona fide
purchaser, the City shall execute and, upon its request, the Paying Agent/Registrar shall register
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost, or stolen Certificate,
a new Certificate of the same Stated Maturity and interest rate and of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost, or stolen Certificate has become or is about to
become due and payable, the City in its discretion may, instead of issuing a new Certificate, pay
such Certificate.
Upon the issuance of any new Certificate or payment in lieu thereof, under this Section,
the City may require payment by the Holder of a sum sufficient to cover any tax or other
governmental charge imposed in relation thereto and any other expenses (including attorney's
fees and the fees and expenses of the Paying Agent/Registrar) connected therewith.
Every new Certificate issued pursuant to this Section in lieu of any mutilated, destroyed,
lost, or stolen Certificate shall constitute a replacement of the prior obligation of the City,
whether or not the mutilated, destroyed, lost, or stolen Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this Ordinance equally and
ratably with all other Outstanding Certificates.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement and payment of mutilated, destroyed,
lost, or stolen Certificates.
SECTION 26. Sale of the Certificates: Authorization of a Purchase and Investment Letter
Aonroval: Use of Certificate Proceeds. The Certificates authorized by this Ordinance are hereby
sold by the City to JPMorgan Chase Bank, National Association, San Antonio, Texas, or its
assigns (the Purchasers, and having all the rights, benefits, and obligations of a Holder), in
accordance with the provisions of the Purchase and Investment Letter, dated December 19, 2006
(the Purchase Contract), attached hereto as Exhibit B and incorporated hereby by reference as a
part of this Ordinance for all purposes. The Initial Certificate shall be registered in the name of
JPMorgan Chase Bank, National Association. The Mayor is hereby authorized and directed to
execute the Purchase Contract for and on behalf of the City and as the act and deed of the City
Council, and in regard to the approval and execution of the Purchase Contract, the City Council
hereby finds, determines and declares that the representations, warranties, and agreements of the
City contained in the Purchase Contract are true and correct in all material respects and shall be
honored by the City. Delivery of the Certificates to the Purchasers shall occur as soon as
practicable after the adoption of this Ordinance, upon payment therefor in accordance with the
terms ofthe Purchase Contract.
Proceeds from the sale of the Certificates shall be applied as follows:
(I) Accrued interest, if any, received from the Purchasers shall be deposited
into the Certificate Fund.
(2) The balance of the proceeds derived from the sale of the Certificates
(excluding certain costs of issuance) shall be deposited into the special construction
45852430.2
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account or accounts created for the projects to be constructed with the proceeds of the
Certificates. This special construction account shall be established and maintained at the
Depository and shall be invested in accordance with the provisions of Section 10 of this
Ordinance. Interest earned on the proceeds of the Certificates pending completion of
construction of the projects financed with such proceeds shall be accounted for,
maintained, deposited, and expended as permitted by the provisions of Chapter 1201, as
amended, Texas Government Code, or as required by any other applicable law.
Thereafter, such amounts shall be expended in accordance with Section 14 of this
Ordinance.
SECTION 27. Covenants to Maintain Tax-Exemnt Status.
A. Definitions. When used in this Section, the following terms have the following
meanings:
"Code" means the Internal Revenue Code of 1986, as amended by all legislation,
if any, effective on or before the Closing Date.
"Computation Date" has the meaning set forth in Section 1.148-1 (b) of the
Regulations.
"Gross Proceeds" means any proceeds as defined in Section 1.148-1 (b) of the
Regulations, and any replacement proceeds as defined in Section 1.148-1 (c) of the
Regulations, of the Certificates.
"Investment" has the meaning set forth in Section 1.148-1 (b) of the Regulations.
"Nonpurpose Investment" means any investment property, as defined in
section 148(b) of the Code, in which Gross Proceeds of the Certificates are invested and
which is not acquired to carry out the governmental purposes of the Certificates.
"Rebate Amount" has the meaning set forth in Section 1.148-1 (b) of the
Regulations.
"Regulations" means any proposed, temporary, or final Income Tax Regulations
issued pursuant to Sections I 03 and 141 through 150 of the Code, and I 03 of the Internal
Revenue Code of 1954, which are applicable to the Certificates. Any reference to any
specific Regulation shall also mean, as appropriate, any proposed, temporary or final
Income Tax Regulation designed to supplement, amend or replace the specific Regulation
referenced.
"Yield" of
(1) any Investment has the meaning set forth in Section 1.148-5 of the
Regulations; and
(2) the Certificates has the meaning set forth in Section 1.148-4 of the
Regulations.
45852430.2 -29-
B. Not to Cause Interest to Become Taxable. The City shall not use, permit the use
of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition,
construction or improvement of which is to be financed directly or indirectly with Gross
Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any
Certificate to become includable in the gross income, as defined in section 61 of the Code, of the
owner thereof for federal income tax purposes. Without limiting the generality of the foregoing,
unless and until the City receives a written opinion of counsel nationally recognized in the field
of municipal bond law to the effect that failure to comply with such covenant will not adversely
affect the exemption from federal income tax of the interest on any Certificate, the City shall
comply with each ofthe specific covenants in this Section.
C. No Private Use or Private PaYments. Except to the extent that it will not cause the
Certificates to become "private activity bonds" within the meaning of section 141 of the Code
and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated
Maturity of Certificates:
(1) exclusively own, operate and possess all property the acquisition,
construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Certificates, and not use or permit the use of such
Gross Proceeds (including all contractual arrangements with terms different than those
applicable to the general public) or any property acquired, constructed or improved with
such Gross Proceeds in any activity carried on by any person or entity (including the
United States or any agency, department and instrumentality thereof) other than a state or
local government, unless such use is solely as a member of the general public; and
(2) not directly or indirectly impose or accept any charge or other payment by
any person or entity who is treated as using Gross Proceeds of the Certificates or any
property the acquisition, construction or improvement of which is to be financed or
refinanced directly or indirectly with such Gross Proceeds, other than taxes of general
application within the City or interest earned on investments acquired with such Gross
Proceeds pending application for their intended purposes.
D. No Private Loan. Except as would not cause the Certificates to become "private
activity bonds" within the meaning of section 141 of the Code and the Regulations and rulings
thereunder, the City shall not use Gross Proceeds of the Certificates to make or finance loans to
any person or entity other than a state or local government. For purposes of the foregoing
covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if- (I) property
acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or
entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or
service from such property is committed to such person or entity under a take-or-pay, output or
similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of
such Gross Proceeds or any property acquired, constructed or improved with such Gross
Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan.
E. Not to Invest at Hil!her Yield. Except as would not cause the Certificates to
become "arbitrage bonds" within the meaning of section 148 of the Code and the Regulations
and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the
45852430.2
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Certificates directly or indirectly invest Gross Proceeds in any Investment, if as a result of such
investment the Yield of any Investment acquired with Gross Proceeds, whether then held or
previously disposed of, materially exceeds the Yield of the Certificates.
F. Not Federallv Guaranteed. Except to the extent permitted by section 149(b) of the
Code and the Regulations and rulings thereunder, the City shall not take or omit to take any
action which would cause the Certificates to be federally guaranteed within the meaning of
section 149(b) of the Code and the Regulations and rulings thereunder.
G. Information Renort. The City shall timely file the information required by section
149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in
such place as the Secretary may prescribe.
H. Rebate of Arbitral!e Profits. Except to the extent otherwise provided in section
148(f) of the Code and the Regulations and rulings thereunder:
(I) The City shall account for all Gross Proceeds (including all receipts,
expenditures and investments thereof) on its books of account separately and apart from
all other funds (and receipts, expenditures and investments thereof) and shall retain all
records of accounting for at least six years after the day on which the last Outstanding
Certificate is discharged. However, to the extent permitted by law, the City may
commingle Gross Proceeds ofthe Certificates with other money of the City, provided that
the City separately accounts for each receipt and expenditure of Gross Proceeds and the
obligations acquired therewith.
(2) Not less frequently than each Computation Date, the City shall calculate
the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and
the Regulations and rulings thereunder. The City shall maintain such calculations with its
official transcript of proceedings relating to the issuance of the Certificates until six years
after the final Computation Date.
(3) As additional consideration for the purchase of the Certificates by the
Purchasers and the loan of the money represented thereby and in order to induce such
purchase by measures designed to insure the excludability of the interest thereon from the
gross income of the owners thereof for federal income tax purposes, the City shall pay to
the United States out of the Certificate Fund or its general fund, as permitted by
applicable Texas statute, regulation or opinion of the Attorney General of the State of
Texas, the amount that when added to the future value of previous rebate payments made
for the Certificates equals (i) in the case of a Final Computation Date as defined in
Section 1.148-3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate
Amount on such date; and (ii) in the case of any other Computation Date, ninety percent
(90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be
made at the times, in the installments, to the place and in the manner as is or may be
required by section 148( f) of the Code and the Regulations and rulings thereunder, and
shall be accompanied by Form 8038-T or such other forms and information as is or may
be required by Section 148(f) of the Code and the Regulations and rulings thereunder.
45852430.2
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(4) The City shall exercise reasonable diligence to assure that no errors are
made in the calculations and payments required by paragraphs (2) and (3), and if an error
is made, to discover and promptly correct such error within a reasonable amount of time
thereafter (and in all events within one hundred eighty (180) days after discovery of the
error), including payment to the United States of any additional Rebate Amount owed to
it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations.
1. Not to Divert Arbitral!e Profits. Except to the extent permitted by section 148 of
the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the
earlier of the Stated Maturity or final payment of the Certificates, enter into any transaction that
reduces the amount required to be paid to the United States pursuant to Subsection H of this
Section because such transaction results in a smaller profit or a larger loss than would have
resulted if the transaction had been at arm's length and had the Yield of the Certificates not been
relevant to either party.
J. Certificates Not Hedl!e Bond~.
(I) The City reasonably expects to spend at least 85% of the spendable
proceeds of the Certificates within three years after such Certificates are issued.
(2) Not more than 50% of the proceeds of the Certificates will be invested in
Nonpurpose Investments having a substantially guaranteed Yield for a period of 4 years
or more.
K. Elections. The City hereby directs and authorizes the Mayor, Mayor Pro Tem,
City Manager, City Secretary, or City Attorney, either or any combination of them, to make
elections permitted or required pursuant to the provisions of the Code or the Regulations, as they
deem necessary or appropriate in connection with the Certificates, in the Certificate as to Tax
Exemption or similar or other appwy.:ate certificate, form or document. Such elections shall be
deemed to be made on the Closing Date.
SECTION 28. Control and Custodv of Certificates. The Mayor of the City shall be and is
hereby authorized to take and have charge of all necessary orders and records pending
investigation by the Attorney General of the State of Texas and shall take and have charge and
control of the Certificates pending their approval by the Attorney General, the registration
thereof by the Comptroller of Public Accounts and the delivery of the Certificates to the
Purchasers.
Furthermore, the Mayor, Mayor Pro Tem, City Manager, City Secretary, or City
Attorney, either or all, are hereby authorized and directed to furnish and execute such documents
relating to the City and its financial affairs as may be necessary for the issuance of the
Certificates, the approval of the Attorney General and their registration by the Comptroller of
Public Accounts and, together with the City's financial advisor, bond counsel, and the Paying
Agent/Registrar, make the necessary arrangements for the delivery of the Initial Certificate to the
Purchasers and the initial exchange thereoffor definitive Certificates.
SECTION 29. Satisfaction of Oblieation of Citv. If the City shall payor cause to be
paid, or there shall otherwise be paid to the Holders, the principal of, premium, if any, and
45852430.2
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interest on the Certificates, at the times and in the manner stipulated in this Ordinance, then the
pledge of taxes levied and the lien on and pledge of the Pledged Revenues under this Ordinance
and all covenants, agreements, and other obligations of the City to the Holders shall thereupon
cease, terminate, and be discharged and satisfied.
Certificates, or any principal amount(s) thereof, shall be deemed to have been paid within
the meaning and with the effect expressed above in this Section when (i) money sufficient to pay
in full such Certificates or the principal amount(s) thereof at Stated Maturity or to the redemption
date therefor, together with all interest due thereon, shall have been irrevocably deposited with
and held in trust by the Paying Agent/Registrar, or an authorized escrow agent, or
(ii) Government Securities shall have been irrevocably deposited in trust with the Paying
Agent/Registrar, or an authorized escrow agent, which Government Securities have been
certified by an independent accounting firm to mature as to principal and interest in such
amounts and at such times as will insure the availability, without reinvestment, of sufficient
money, together with any money deposited therewith, if any, to pay when due the principal of
and interest on such Certificates, or the principal amount(s) thereof, on and prior to the Stated
Maturity thereof or (if notice of redemption has been duly given or waived or if irrevocable
arrangements therefor acceptable to the Paying Agent/Registrar have been made) the redemption
date thereof. The City covenants that no deposit of money or Government Securities will be
made under this Section and no use made of any such deposit which would cause the Certificates
to be treated as arbitrage bonds within the meaning of section 148 of the Code (as defined in
Section 27 hereof).
Any money so deposited with the Paying Agent/Registrar, and all income from
Government Securities held in trust by the Paying Agent/Registrar, or an authorized escrow
agent, pursuant to this Section which is not required for the payment of the Certificates, or any
principal amount(s) thereof, or interest thereon with respect to which such money has been so
deposited shall be remitted to the City or deposited as directed by the City. Furthermore, any
money held by the Paying Agent/Registrar for the payment of the principal of and interest on the
Certificates and remaining unclaimed for a period of three (3) years after the Stated Maturity of
the Certificates, or applicable redemption date, such money was deposited and is held in trust to
pay shall upon the request of the City be remitted to the City against a written receipt therefor,
subject to the unclaimed property laws of the State of Texas.
Notwithstanding any other provision of this Ordinance to the contrary, it is hereby
provided that any determination not to redeem defeased Certificates that is made in conjunction
with the payment arrangements specified in subsection (i) or (ii) above shall not be irrevocable,
provided that: (I) in the proceedings providing for such defeasance, the City expressly reserves
the right to call the defeased Certificates for redemption; (2) gives notice of the reservation of
that right to the owners of the defeased Certificates immediately following the defeasance;
(3) directs that notice of the reservation be included in any redemption notices that it authorizes;
and (4) at the time of the redemption, satisfies the conditions of (i) or (ii) above with respect to
such defeased debt as though it was being defeased at the time of the exercise of the option to
redeem the defeased Certificates, after taking the redemption into account in determining the
sufficiency ofthe provisions made for the payment of the defeased Certificates.
45852430.2
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SECTION 30. Printed Oninion. The Purchasers' obligation to accept delivery of the
Certificates is subject to their being furnished a final opinion of Fulbright & Jaworski L.L.P.,
Bond Counsel, approving certain legal matters as to the Certificates, said opinion to be dated and
delivered as of the date of initial delivery and payment for such Certificates. Printing of a true
and correct copy of said opinion on the reverse side of each of said Certificates, with appropriate
certificate pertaining thereto executed by facsimile signature of the City Secretary of the City is
hereby approved and authorized.
SECTION 31. CUSIP Numbers. CUSIP numbers may be printed or typed on the
definitive Certificates. It is expressly provided, however, that the presence or absence of CUSIP
numbers on the definitive Certificates shall be of no significance or effect as regards the legality
thereof, and neither the City nor bond counsel are to be held responsible for CUSIP numbers
incorrectly printed or typed on the definitive Certificates.
SECTION 32. Effect of Headinl!s. The Section headings herein are for convenience only
and shall not affect the construction hereof.
SECTION 33. Ordinance a Contract. Amendments - Outstandinl! Certificates. The City
acknowledges that the covenants and obligations of the City herein contained are a material
inducement to the purchase of the Certificates. This Ordinance shall constitute a contract with
the Holders from time to time, binding on the City and its successors and assigns, and it shall not
be amended or repealed by the City so long as any Certificate remains Outstanding except as
permitted in this Section. The City may, without the consent of or notice to any Holders, from
time to time and at any time, amend this Ordinance in any manner not detrimental to the interests
of the Holders, including the curing of any ambiguity, inconsistency, or formal defect or
omission herein. In addition, the City may, with the written consent of Holders holding a
majority in aggregate principal amount of the Certificates then Outstanding affected thereby,
amend, add to, or rescind any of the provisions of this Ordinance; provided that, without the
consent of all Holders of Outstanding Certificates, no such amendment, addition, or rescission
shall (I) extend the time or times of payment of the principal of and interest on the Certificates,
reduce the principal amount thereof or the rate of interest thereon, or in any other way modify the
terms of payment of the principal of, the redemption price therefor, or interest on the Certificates,
(2) give any preference to any Certificate over any other Certificate, or (3) reduce the aggregate
principal amount of Certificates required for consent to any such amendment, addition, or
rescission.
SECTION 34. Benefits of Ordinance. Nothing in this Ordinance, expressed or implied, is
intended or shall be construed to confer upon any person other than the City, Bond Counsel,
Paying Agent/Registrar, and the Holders, any right, remedy, or claim, legal or equitable, under or
by reason of this Ordinance or any provision hereof, this Ordinance and all its provisions being
intended to be and being for the sole and exclusive benefit of the City, Bond Counsel, Paying
Agent/Registrar, and the Holders.
SECTION 35. Inconsistent Provisions. All ordinances and resolutions, or parts thereof,
which are in conflict or inconsistent with any provision of this Ordinance are hereby repealed to
the extent of such conflict, and the provisions of this Ordinance shall be and remain controlling
as to the matters ordained herein.
45852430.2
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SECTION 36. Governinl!: Law. This Ordinance shall be construed and enforced in
accordance with the laws of the State of Texas and the United States of America.
SECTION 37. Severability. If any provision of this Ordinance or the application thereof
to any person or circumstance shall be held to be invalid, the remainder of this Ordinance and the
application of such provision to other persons and circumstances shall nevertheless be valid, and
the City Council hereby declares that this Ordinance would have been enacted without such
invalid provision.
SECTION 38. Construction of Terms. If appropriate in the context of this Ordinance,
words of the singular number shall be considered to include the plural, words of the plural
number shall be considered to include the singular, and words of the masculine, feminine or
neuter gender shall be considered to include the other genders.
SECTION 39. Incorooration of Preamble Recitals. The recitals contained in the
preamble hereof are hereby found to be true, and such recitals are hereby made a part of this
Ordinance for all purposes and are adopted as a part of the judgment and findings of the City
Council of the City.
SECTION 40. Authorization ofPavinl! Al!ent/Rel!istrar Al!reement. The City Council of
the City hereby finds and determines that it is in the best interest of the City to authorize the
execution of a Paying Agent/Registrar Agreement concerning the payment, exchange, and
transferability of the Certificates. A copy of the Paying Agent/Registrar Agreement is attached
hereto, in substantially final form, as Exhibit A and is incorporated by reference to the provisions
of this Ordinance.
SECTION 41. Public Meeting. It is officially found, determined, and declared that the
meeting at which this Ordinance 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
Ordinance, was given, all as required by Chapter 551, as amended, Texas Government Code.
SECTION 42. Unavailabilitv of Authorized Publication. If, because of the temporary or
permanent suspension of any newspaper, journal, or other publication, or, for any reason,
publication of notice cannot be made meeting any requirements herein established, any notice
required to be published by the provisions of this Ordinance shall be given in such other manner
and at such time or times as in the judgment of the City or of the Paying Agent/Registrar shall
most effectively approximate such required publication and the giving of such notice in such
manner shall for all purposes of this Ordinance be deemed to be in compliance with the
requirements for publication thereof.
SECTION 43. No Recourse Al!ainst City Officials. No recourse shall be had for the
payment of principal of, premium, if any, or interest on any Certificate or for any claim based
thereon or on this Ordinance against any official of the City or any person executing any
Certificate.
45852430.2
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SECTION 44. Continuinl! Disclosure Undertakinl!;.
Definitions. As used in this Section, the following terms have the meanings ascribed to
such terms below:
Rule means SEC Rule 15c2-12, as amended from time to time.
SEC means the United States Securities and Exchange Commission.
The Certificates are being sold pursuant to a private placement with the Purchasers, in
denominations of generally $100,000 or any integral multiple of $5,000 in excess thereof, and
therefore SEC Rule 15c2-12 is not applicable to the offering of the Certificates. Accordingly, no
contract to provide continuing disclosure information after the issuance of the Certificates has
been made by the City with investors.
SECTION 45. Book-Entrv Onlv Svstem.
The Certificates may initially be registered so as to participate in a securities depository
system (the DTC System) with the Depository Trust Company, New York, New York, or any
successor entity thereto (DTC), as set forth herein. Each Stated Maturity of the Certificates shall
be issued (following cancellation of the Initial Certificates described in Section 7) in the form of
a separate single definitive Certificate. Upon issuance to a Holder other than the initial
Purchaser, the ownership of each such Certificate shall be registered in the name of Cede & Co.,
as the nominee of DTC, and all of the Outstanding Certificates shall be registered in the name of
Cede & Co., as the nominee ofDTC. The City and the Paying Agent/Registrar are authorized to
execute, deliver, and take the actions set forth in such letters to or agreements with DTC as shall
be necessary to effectuate the DTC System, including the Letter of Representations attached
hereto as Exhibit C (the Representation Letter).
With respect to the Certificates registered in the name of Cede & Co., as nominee of
DTC, the City and the Paying Agent/Registrar shall have no responsibility or obligation to any
broker-dealer, bank, or other financial institution for which DTC holds the Certificates from time
to time as securities depository (a Depository Participant) or to any person on behalf of whom
such a Depository Participant holds an interest in the Certificates (an Indirect Participant).
Without limiting the immediately preceding sentence, the City and the Paying Agent/Registrar
shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC,
Cede & Co., or any Depository Participant with respect to any ownership interest in the
Certificates, (ii) the delivery to any Depository Participant or any other person, other than a
registered owner of the Certificates, as shown on the Security Register, of any notice with
respect to the Certificates, including any notice of redemption, or (iii) the delivery to any
Depository Participant or any Indirect Participant or any other Person, other than a Holder of a
Certificate, of any amount with respect to principal of, premium, if any, or interest on the
Certificates. While in the DTC System, no person other than Cede & Co., or any successor
thereto, as nominee for DTC, shall receive a Certificate evidencing the obligation of the City to
make payments of principal, premium, if any, and interest pursuant to this Ordinance. Upon
delivery by DTC to the Paying Agent/Registrar of written notice to the effect that DTC has
determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in
45852430.2
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this Ordinance with respect to interest checks or drafts being mailed to the Holder, the word
"Cede & Co." in this Ordinance shall refer to such new nominee of DTC.
In the event that (a) the City determines that DTC is incapable of discharging its
responsibilities described herein and in the Representation Letter, (b) the Representation Letter
shall be terminated for any reason, or (c) DTC or the City determines that it is in the best interest
of the beneficial owners of the Certificates that they be able to obtain certificated Certificates, the
City shall notify the Paying Agent/Registrar, DTC, and the Depository Participants of the
availability within a reasonable period of time through DTC of bond certificates, and the
Certificates shall no longer be restricted to being registered in the name of Cede & Co., as
nominee ofDTC. At that time, the City may determine that the Certificates shall be registered in
the name of and deposited with a successor depository operating a securities depository system,
as may be acceptable to the City, or such depository's agent or designee, and if the City and the
Paying Agent/Registrar do not select such alternate securities depository system then the
Certificates may be registered in whatever name or names the Holders of Certificates transferring
or exchanging the Certificates shall designate, in accordance with the provisions hereof.
Notwithstanding any other provision of this Ordinance to the contrary, so long as any
Certificate is registered in the name of Cede & Co., as nominee of DTC, all payments with
respect to principal of, premium, if any, and interest on such Certificate and all notices with
respect to such Certificate shall be made and given, respectively, in the manner provided in the
Representation Letter.
SECTION 46. Further Procedures. The officers and employees of the City are hereby
authorized, empowered and directed from time to time and at any time to do and perform all such
acts and things and to execute, acknowledge and deliver in the name and under the corporate seal
and on behalf of the City all such instruments, whether or not herein mentioned, as may be
necessary or desirable in order to carry out the terms and provisions of this Ordinance, the initial
sale and delivery of the Certificates, the Purchase Contract, and the Paying Agent/Registrar
Agreement. In addition, prior to the initial delivery of the Certificates, the Mayor or the City
Manager and Bond Counsel are hereby authorized and directed to approve any technical changes
or corrections to this Ordinance or to any of the instruments authorized and approved by this
Ordinance necessary in order to (i) correct any ambiguity or mistake or properly or more
completely document the transactions contemplated and approved by this Ordinance, (ii) obtain a
rating from any of the national bond rating agencies, or (iii) obtain the approval of the
Certificates by the Texas Attorney General's office. In case any officer of the City whose
signature shall appear on any certificate shall cease to be such officer before the delivery of such
certificate, such signature shall nevertheless be valid and sufficient for all purposes the same as if
such officer had remained in office until such delivery.
SECTION 47. Accountinl! Renorts. Notwithstanding the provisions of Section 44 of this
Ordinance, the City shall provide annually to JPMorgan Chase Bank, National Association, San
Antonio, Texas for so long as it is the holder of the Certificates, within nine months after the end
of each fiscal year ending in or after 2007, financial information and operating data with respect
to the City; provided that such financial statements so to be provided shall be (1) prepared in
accordance with the generally accepted accounting principles, or such other accounting
principles as the City may be required to employ from time to time pursuant to Texas law or
45852430.2
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regulations, and (2) audited, if the City commissions an audit of such statements and the audit is
completed within the period during which they must be provided. If the audit of such financial
statements is not complete within such period, then the City shall provide (I) unaudited financial
statements for the applicable fiscal year within nine months after the end of such fiscal year, and
(2) audited financial statements for the applicable fiscal year to JPMorgan Chase Bank, National
Association when and if the audit report on such statements become available.
(b) Effective Date. Pursuant to the provisions of Section 1201.028, as amended,
Texas Government Code, this Ordinance shall be effective immediately upon adoption,
notwithstanding any provision in the City's Home Rule Charter to the contrary concerning a
multiple reading requirement for the adoption of ordinances.
[The remainder of this page intentionally left blank.]
45852430.2
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PASSED AND ADOPTED on the 19th day of December, 2006.
ATTEST:
~~
(CITY SEAL)
EXHIBIT A - Paying Agent/Registrar Agreement
EXHIBIT B - Purchase and Investment Letter
EXHIBIT C - DTC Letter of Representations
45852430.2
Mayor
S-I
ERTZ, TEXAS
;:tdl
EXHIBIT A
PAYING AGENTIREGISTRAR AGREEMENT
SEE TAB NO.
45852430.2
A-I
EXHIBIT B
PURCHASE AND INVESTMENT LETTER
SEE TAB NO.
45852430.2
B-1
EXHIBIT C
DTC LETTER OF REPRESENTATIONS
SEE TAB NO.
45852430.2
C-I
STATE OF TEXAS
PII~.!t! NOTfCE
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Before me, the undersigned authority, on this day personally appeared Helen 1. IJ;~~~:,=
by me duly sworn, says on oath that she is Publisher of the Commercial Recorder, ~."'!" LI,I,. ~"""'"
general circulation in the City of San Antonio, in the State and County aforesaid, ar ri):,~':!:.""";~~=
Ordinance No. 06-6-60 here to attached has been published in every issue of s'lnll_"'..\e ,", I ",.,.Ih
the following days, to wit: l.l!iItlIr'!lIlilIIIi: ' ,'." . ,...
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Affidavit of Publisher
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COUNTY OF BEXAR
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