The URL can be used to link to this page

Tax and Waterworks and Sewer System (Limited Pledge) Revenue COs, Series 2015City of Southlake, Texas FirstSouthwest 4* CONTACT Jim Sabonis, Managing Director jim.sabonis@firstsw.com Phone:214-953-4195 Fax:214-953-4050 SOUTHLAKE, TEXAS TAX AND WATERWORKS AND SEWER SYSTEM LIMITED PLEDGE REVENUE COS, SERIES 2015 TABLE OF CONTENTS TAB PRELIMINARY OFFICIAL STATEMENT AND NOTICE OF SALE ......................................... RATINGREPORTS........................................................................................................... 2 S&P MARKET REVIEW AND COMMENTARY..................................................................................... 3 SUMMARY OF BIDS AND DEBT SERVICE SCHEDULE........................................................... 4 5OUTHLAKE CITY OF SOUTHLAKE, TEXAS 10 $3,525,000" Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 As of March 25, 2015 Mar-15 S M T W Th F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Apr-15 S M T W Th F S 1 1 2 3 4 5 10 11 12 17 18 19 A2829 24 25 26 May-11 6 S M T W Th F S 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Jun-15 S M T W Th F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Date Holiday Holiday Event Responsible Party Completed First Southwest sends information request for preparation of offering document and continuing disclosure reports FA Tuesday, 03117115 Presentation of Series 2015 CIP Bond Funding Status to City Council City Staff City Council Approves Resolution to Authorize Notice of Intent to issue Certificates of Obligation City Council Friday, 03/20/15 City send information for preparation of Preliminary Offical Statement and Continuing Disclosure Reports FA Sunday, 03122115 First Publication of Notice of Intent to issue Certificates of Obligation City Staff Wednesday, 03/25/15 First Southwest distributes 1st draft of Preliminary Official Statement ("POS") and Notice of Sale ("NOS") for comments FA Sunday, 03/29115 Second Publication of Notice of intent to issue Certificates of Obligation City Staff Wednesday, 04/1/15 Deadline to provide comments on 1st draft of POS and NOS City Staff, BC Thursday, 04/2/15 First Southwest distributes POS to Rating Agencies and for 2nd round of comments FA 4113 - 4117 Credit rating conference calls/meetings City Staff, FA Thursday, 04/23/15 Deadline to provide comments on 2nd draft of POS and NOS All parties Friday, 04/24/15 Deadline to provide ratings and rating reports S&P, Fitch Monday, 04/27/15 POS and NOS posted on i-deal FA Tuesday, 06/5/15 Pricing of Certificates of Obligation, Series 2015 at Time TBD UWs, FA City Council approves Ordinance authorizing the issuance of the Certificates of Obligation, Series 2015 City Council Thursday, 05/14/15 Distribution of Final Official Statement FA Before Closing Attorney General Approves Sale BC Tuesday, 06/2/15 Closing of Debt Issue and delivery of funds to the City UW, BC, PA 'Preliminary, subject to change. Denotes the Not to Exceed Amount for the Notice of Intent purposes. Key Actions to be Taken by City Council Key Actions to be Taken by City Staff Public Finance Department FirstSouthwesl CITY OF SOUTHLAKE, TEXAS TAX AND WATERWORKS AND SEWER SYSTEM (LIMITED PLEDGE) REVENUE COS, S2015 ISSUER City of Southlake Telephone: (817) 748-8042 Sharen Jackson Far: (817) 748-8048 1400 Main Street, Suite 440 Email: Southlake, TX 76092 siackson r'ci.southlake.tx.us FINANCIAL ADVISOR First Southwest Company, LLC Telephone: (214) 953-4195 (Jim) Jim Sabonis, Andre Ayala (214) 953-4184 (Andre) & Penny Brooker (214)953-4189 (Penny) 325 North St. Paul, Suite 800 Fax: (214) 953-4050 Dallas, TX 75201 Email: iim.sabonis dfirstsw.com andre.avala afirstsw.com ennv.brookerO' firstsw. com BOND COUNSEL Norton Rose Fulbright LLP Telephone: (214) 855-8068 (Bob) Bob Dransfield. Jenny Hackler (214) 855-8025 (Jenny) 2200 Ross Avenue, Suite 2800 Far: (214) 855-8200 Dallas, TX 75201 Email: robert.dranstie l d,,amortonrosefulbriQht.com iennv.hackler a,nortonrosefulbriQht.com INITIAL PURCHASER TBD Telephone: Email: PAYING AGENT The Bank of New York Mellon Trust Company, N.A. Telephone: (214) 468-6411 Stephen McPherson Email: 2001 Bryan Street 111 Floor stephen.mcpherson(a bnvmellon.com Dallas, TX 75201 RATING AGENCY Standard and Poor's Telephone: (214) 765-5878 (Ann) Ann Richardson and Brian Marshall 500 North Akard Street, Suite 3200 Email: Dallas. TX 75201 ann.richardson2s_t_andardandnoors.com brian.marshall r standardandpoors.com PRELIMINARY OFFICIAL STATEMENT Rating: J S&P: "AAA" FirstSouthwest Dated April 28, 2015 (see OTHER INFORMATION - C .n Ratings" herein) NEW ISSUE - Book -Entry -Only � _ S U :6 c3 In the opinion of Bond Counsel, interest on the Certificates will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. THE CERTIFICATES TYILL BE DESIGNATED AS "QUALIFIED TAX-EXEMPT OBLIGATIONS" FOR FINANCIAL INSTITUTIONS $3,200,000* CITY OF SOUTHLAKE, TEXAS (Tarrant and Denton Counties) TAX AND WATERWORKS AND SEWER SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015 Dated Date: May 1, 2015 Interest accrues from date of delivery Due: February 15, as shown on page 2 PAYMENT TERMS... Interest on the $3,200,000* City of Southlake, Texas, Tax and Waterworks and Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 (the "Certificates' or "Obligations") will accrue from the date of delivery (anticipated to be June 2, 2015), and will be payable February 15 and August 15 of each year commencing February 15, 2016, until maturity or prior redemption, and will be calculated on the basis of a 360-day year consisting of twelve 30-day months. The definitive Certificates will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry - Only System described herein. Beneficial ownership of the Certificates may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Certificates will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Certificates (see "THE OBLIGATIONS - Book -Entry -Only System" herein). The initial Paying Agent/Registrar is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas (see "THE OBLIGATIONS - Paying Agent/Registrar"). AUTHORITY FOR ISSUANCE ... The Certificates are issued pursuant to the City's Home Rule Charter, the Constitution and general laws of the State of Texas (the "State"), particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and constitute direct obligations of the City of Southlake, Texas, (the "City"), payable from a combination of (i) the levy and collection of an annual ad valorem tax, within the limits prescribed by law, on all taxable property within the City, and (ii) a limited pledge (not to exceed $1,000) of the Net Revenues from the operation of the City's combined Waterworks and Sewer System, as provided in the ordinance authorizing the Certificates (the `Certificate Ordinance") (see "THE OBLIGATIONS — Authority for Issuance of the Certificates"). PURPOSE... Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: (a) improvements and extensions to the City's combined Waterworks and Sewer System, including the purchase of land, rights -of -way, and equipment therefor and (b) improvements to the City's municipal service center and (ii) professional services rendered in relation to such projects and the financing thereof. CUSIP PREFIX: 844424 MATURITY SCHEDULE & 9 DIGIT CUSIP See Schedule on Page 2 LEGALITY ... The Certificates are offered for delivery when, as and if issued and received by the Initial Purchaser (defined herein) and subject to the approving opinion of the Attorney General of Texas and the opinion of Norton Rose Fulbright US LLP, Bond Counsel, Dallas, Texas, (see Appendix C, "Form of Bond Counsel's Opinion"). DELIVERY... It is expected that the Certificates will be available for delivery through DTC on June 2, 2015. BIDS DUE TUESDAY, MAY 5, 2015 AT 11:30 AM, CDT * Preliminary, subject to change. r � s s MATURITY SCHEDULE* Price Principal 15-Feb Interest or CUSIP Amount Maturity Rate Yield Suffix( � � $ 100.000 2016 125,000 2017 125,000 2018 130.000 2019 130,000 2020 135.000 2021 1401,000 2022 140,000 2023 145,000 2024 150,000 2025 CUSIP Prefix: 844424 (1) Price Principal 15-Feb Interest or Amount Maturity Rate Yield $ 155,000 2026 160,000 2027 170,000 2028 175,000 2029 185,000 2030 190,000 2031 200,000 2032 205,000 2033 215,000 2034 225,000 2035 (Interest to accrue from the date of delivery.) CUSIP Suffix( l ) (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data set forth herein is provided by CUSIP Global Services managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP services. Neither the City, the Financial Advisor nor the Initial Purchaser shall be responsible for the selection or correctness of the CUSIP numbers set forth herein. OPTIONAL REDEMPTION ... The City reserves the right, at its option, to redeem Certificates having stated maturities on or after February 15, 2026, in whole or in part, in principal amounts of $5,000, or any integral multiple thereof, on February 15, 2025, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS — Optional Redemption of the Obligations"). * Preliminary, subject to change. 2 For purposes of comphance with Rude l5c2-12 of the Securities and Exchange Commission, as amended (the "Rule") and in effect on the date ofllus Prelm nary Official Statement, this document constitutes a Prehmman Qffcial Slalenienl of tie Ctt}' that liar heen deenied 'final" hY the City as of its date excep fir the onussion of no more than the nifrtrmation pernnlled by the Rule. No dealer, broker, .salesman or other person has been authorized br the Cifi or the Initial Purchaser to give ant' information, or to make ahn'representations other than those contained in this Prelmnnary Official Statement, and, {fgmen or made, such other information or representations must not be relied upon as having been authorized by the Cih or the Initial Purchaser. This Prelmuniny Official. Statement does not constoule an offer to sell Obligations in am -jurisdiction to ant person to whom it is unlmi ful to make such offer in such juresdicnon. Certain information set forth herein has been obtained from the Chy and other sources which are believed to be reliable but is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Financial Advisor. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Preliminan, Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the C'io, or otter matters described herein since the date hereof. See "CONTINUING DISCLOSURE OF INFORM4TION"for a description of the Chi is undertaking to provide certain information on a continuing basic IN CONNECTION WITH THE OFFERING OF THE OBLIGATIONS, THE INITIAL PURCHASER AIAY OV ER -ALLOT OR EFFECT TRANSACTION.$ WILICH STABILIZE OR AMINMINTHE MARKET PRICES OFTHE OBLIGATIONSATALEI TLABO EI'IATWHiCHMIGHTOTHERWISEPREIALLINTHEOPENA-1ARKF_T SUCH STABILIZING, IF COAAIENCED, A14Y BE DISCONTINUED AT ANY TIME. THE OBLIGATIONS ARE E.VEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAI"T: NOT BEEN REGISTERED THEREW7TH. THE REGISTRATION, QUALIFICATION, OR EXEMPTIONOF THE OBLIGA770NS INACCORDANCE 07TH APPLICABLE SECURITIES LAW PRO17SIONS OF THE JI URISDICTION IN WHICH THE OBLIGA7IONS HAI E BEEN REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RFCOA4AfENDA77ON THEREOF NONE THE CITY, THE INITIAL PURCHASER, OR THE FINANCIAL ADVISOR MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS PRELIMINARY OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY, AS SUCH INFORMATION HAS BEEN PRO FIDED BY THE DEPOSITORY TRUST COMPANE THIS PRELIMINARY OFFICIAL STATEMENT CONTAINS "FORWARD -LOOKING" STATEMENTS WITHIN THE MEANING OF SECTION 11E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS MAY INFOLV E KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEAIENTS TO BE DIFFERENT FROM FUTURE RESULTS, PERFORMANCE, AND ACHIEVEMENTS EXPRESSED OR IMPLIED B Y SUCH FORWARD -LOOKING STATEMENTS. INI ESTORS ARE CAUTIONED THAT THE ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD -LOOKING STATEMENTS. The agreements of the City and others related to the Obligations are contained solely in the contracts described herein. Neither this Preliminary Official Statement nor any other statement made in connection with the offer or sale ofthe Obligations is to be construed as constituting an agreement with the purchasers of the Obligations. INVESTORS SHOULD READ THE ENTIRE PRELIMINARY OFFICIAL STATEMENT, INCLUDING THE SCHEDULEAND ALL APPENDICESA TTA CHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. TABLE OF CONTENTS PRELIMINARY OFFICIAL STATEMENT SUMMARY CITY OFFICIALS, STAFF AND CONSULTANTS......... ELECTED OFFICIALS ................. .. ................... .... SELECTED ADMINISTRATIVE STAFF .......__ ............... CONSULTANTS AND ADVISORS .................................. INTRODUCTION PLAN OF FINANCING..................................................................... 9 THEOBLIGATIONS...................................................................... 12 TAXINFORMATION..................................................................... 17 TABLE 1 - VALUATION, EXEMPTIONS AND GENERAL OBLIGATION DEBT ........ ............... ............. 21 TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY.............................................................. 20 TABLE 3 - VALUATION AND GENERAL OBLIGATION DEBT HISTORY................................................................... 23 TABLE 4 - TAX RATE, LEVY AND COLLECTION HISTORY........ 23 TABLE 5 - TEN LARGEST TAXPAYERS ........................ .......... 22 TABLE 6 - TA.X ADEQUACY .................................................. 24 TABLE 7 - ESTIMATED OVERLAPPING DEBT ... ...................... 23 DEBT INFORMATION................................................................... 24 TABLE 8 - PRO -FORMA GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS ................ ................. ................... 24 TABLE 9 - INTEREST AND SINKING FUND BUDGET PROJECTION ................................................ 25 TABLE 10 - COMPUTATION OF SELF SUPPORTING DEBT.................................. .................. .. ........ 25 TABLE I 1 - AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS................................................................. 27 TABLE 12 - OTHER OBLIGATIONS .................... ................ 26 FINANCIAL INFORMATION....................................................... 29 TABLE 13 - CHANGE IN NET ASSETS ........ .............. ..... 29 TABLE 1 3A - GENERAL FUND REVENUES AND EXPENDITURES ......................... ....................... 30 TABLE 14 - MUNICIPAL SALES TAX HISTORY ..... .................. 31 TABLE 15 -CURRENT INVESTMENTS ....... ............................... 33 TAXMATTERS............................................................................... 34 CONTINUING DISCLOSURE OF INFORMATION ................... 36 OTHER INFORMATION................................................................37 RATINGS................................................. .............................. 37 LITIGATION................. ............... ...... .............. . ......37 REGISTRATION AND QUALIFICATION OF OBLIGATIONS FORSALE .... ....................................................... 37 LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS ..................... ....... .............. . ......37 LEGAL OPINION AND NO LITIGATION CERTIFICATE .................38 FINANCIAL ADVISOR .......................................... ..........38 INITIAL PURCHASER FOR THE BONDS ........................ ............. 38 INITIAL PURCHASER FOR THE CERTIFICATES ........... ............... 38 FORWARD -LOOKING STATEMETNS DISCLAIMER .............. ....39 CERTIFICATE OF THE OFFICIAL STATEMENT ................. ......39 APPENDICES GENERAL INFORMATION REGARDING THE CITY A EXCERPTS FROM THE ANNUAL FINANCIAL REPORT ....... ....... B FORM OF BOND COUNSELS OPINION ................................. ... C The cover pages hereof, this page, the schedule and the appendices included herein and any addenda, supplement or amendment hereto, are part of the Preliminary Official Statement. PRELIMINARY OFFICIAL STATEMENT SUMMARY This summary is subject in all respects to the more complete information and definitions contained or incorporated in this Preliminary Official Statement. The offering of the Obligations to potential investors is made only by means of this entire Preliminary Official Statement. No person is authorized to detach this summary from this Preliminary Official Statement or to otherwise use it without the entire Preliminary Official Statement. THE CITY ..................................... The City of Southlake, Texas (the "City") is a political subdivision and municipal corporation of the State of Texas (the "State"), located in Tarrant and Denton Counties, Texas. The City covers approximately 23 square miles (see "INTRODUCTION - Description of the City"). THE CERTIFICATES ...................... The Certificates are issued as $3,200,000* Tax and Waterworks and Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 (the "Certificates"). The Certificates are issued as serial certificates maturing February 15 in each of the years 2016 through 2035, inclusive (see "THE OBLIGATIONS - Description of the Obligations"). PAYMENT OF INTEREST ON THE CERTIFICATES ................. Interest on the Certificates accrues from the date of delivery (anticipated to be June 2, 2015), and is payable February 15 and August 15 of each year, commencing February 15, 2016, until maturity or prior redemption (see "THE OBLIGATIONS - Description of the Obligations"). AUTHORITY FOR ISSUANCE OF THE CERTIFICATES ................. The Certificates are issued pursuant to the City's Home Rule Charter, the Constitution and general laws of the State, including particularly Subchapter C of Chapter 271, Texas Local Government Code, as amended, and an ordinance passed by the City Council (the "Certificate Ordinance") (see "THE OBLIGATIONS - Authority for Issuance of the Certificates"). SECURITY FOR THE CERTIFICATES .............................. The Certificates constitute direct obligations of the City, payable from a combination of (i) the levy and collection of an annual ad valorem tax, within the limits prescribed by law, on all taxable property located within the City, and (ii) a limited pledge (not to exceed $1,000) of the Net Revenues from the operation of the City's combined Waterworks and Sewer System, as provided in the Certificate Ordinance (see "THE OBLIGATIONS — Security and Source of Payment of the Certificates"). OPTIONAL REDEMPTION FOR THE OBLIGATIONS ....................... The City reserves the right, at its option, to redeem Obligations having stated maturities on or after February 15, 2026, in whole or in part, in principal amounts of $5,000, or any integral multiple thereof, on February 15, 2025, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption (see "THE OBLIGATIONS — Optional Redemption of the Obligations"). TAX EXEMPTION .......................... In the opinion of Bond Counsel, the interest on the Obligations will be excludable from gross income for federal income tax purposes under existing law, subject to the matters described under the caption "TAX MATTERS", including the alternative minimum tax on corporations. QUALIFIED TAX EXEMPT OBLIGATIONS ............................... The City will designate the Obligations as "Qualified Tax -Exempt Obligations" for financial institutions. (See "TAX MATTERS - Qualified Tax -Exempt Obligations for Financial Institutions" herein.) USE OF PROCEEDS FOR THE CERTIFICATES .............................. Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: (a) improvements and extensions to the City's combined Waterworks and Sewer System, including the purchase of land, rights -of -way, and equipment therefor and (b) improvements to the City's municipal service center and (ii) professional services rendered in relation to such projects and the financing thereof. RATINGS FOR THE OBLIGATIONS ............................... The Obligations have been rated "AAA" by Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P"), without regard to credit enhancement (see "OTHER INFORMATION - Rating"). 6 * Preliminary, subject to change. BOOK -ENTRY -ONLY SYSTEM ........................................ The definitive Obligations will be initially registered and delivered only to Cede & Co., the nominee of DTC pursuant to the Book -Entry -Only System described herein. Beneficial ownership of the Obligations may be acquired in denominations of $5,000 or integral multiples thereof within a maturity. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS - Book -Entry -Only System"). PAYMENT RECORD ...................... The City has never defaulted in payment of its general obligation tax debt. SELECTED FINANCIAL INFORMATION G.O. Ratio of Fiscal Taxable Tax Debt G.O. Tax Debt G.O. Tax Year Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population(l) Valuational Per Capita of Year Valuation Capita 2011 27,184 $ 5,533,423.835 (') $ 201554 $ 158,245,000 2.86% $ 5,821 2012 27,045 5,582,797,777 (4) 206,426 156,395,000 2.80% 5,783 2013 27,045 5,749,713,593 (51 212,598 153,820,000 2.68% 5,688 2014 27,500 5,800,769.814 (6) 210.937 144,995.000 2.50% 5,273 2015 27,833 6,161,479,056 17) 221,373 130,055,000 (9) 2.11% (9) 4,673 (9) (1) Source: City officials. (2) As reported by the Denton and Tarrant County Appraisal Districts on City's annual State Property Tax Board Reports: subject to change during the ensuing year. (3) Includes taxable incremental value of approximately $280,986,280 that is not available for payment of the City's general obligation debt. (4) Includes taxable incremental value of approximately $280,411,181 that is not available for payment of the City's general obligation debt. (5) Includes taxable incremental value of approximately $290,288,909 that is not available for payment of the City's general obligation debt. (6) Includes taxable incremental value of approximately $331,409,142 that is not available for payment of the City's general obligation debt. (7) Includes taxable incremental value of approximately $347,428,074 that is not available for payment of the City's general obligation debt. (8) Includes self-supporting debt. See "Table 10 — Computation of Self -Supporting Debt". (9) Projected, subject to change. Includes the Certificates. GENERAL FUND CONSOLIDATED STATEMENT SUMMARY Fiscal Years Ended September 30, 2014 2013 2012 2011 2010 Beginning Balance $ 20,782,522 $19,959.607 $17,048,465 $18,146,566 $15,355.085 Total Revenue 40,906,497 37,649,893 35,277.026 33,664,841 33,289,293 Total Expenditures 34.237,219 34.994,648 30,829,622 31,200,189 29,383,174 Net Transfers/Other Uses (2,888,387) (1,932.330) (1,536,262) (3,562,753) (1,114,638) Net Funds Available 3,780,891 822,915 2,911,142 17,048,465 18,146.566 Equity Transfer/Prior Period Adjustment - - - - - Ending Balance $ 24,563,413 $ 20,782.522 $19,959,607 $17,048A65 $18,146.566 For additional information regarding the City, please contact: Sharen Jackson, CPA Chief Financial Officer si acksonn,ci.south lake. tx.us City of Southlake Administrative Offices 1400 Main Street, Suite 440 Southlake, Texas 76092 (817)481-1713 James S. Sabonis Managing Director or iim.sabonis(a)firstsw.com First Southwest Company, LLC 325 North Saint Paul, Suite 800 Dallas, Texas 75201 (214)953-4195 7 CITY OFFICIALS, STAFF AND CONSULTANTS ELECTED OFFICIALS Length of Term City Council Service Expires Occupation John Terrell 5 Years May-15 Executive Mayor Shahid Shafi l Year May-17 General Surgeon Councilmember Carolyn Morris 12 Years May-15 Educator Councilmember Brandon Bledsoe 5 Years May-16 Executive Deputy Mayor Pro Tem Randy Williamson 2 Year May-16 Executive Councilmember Laura Hill 2 Year May-16 Business Owner Mayor Pro Tern Gary Fawks 1 Year May-17 Executive Councilmember SELECTED ADMINISTRATIVE STAFF Length of Name Position Service Shana Yelverton City Manager 20 Years Sharen Jackson Chief Financial Officer 15 Years Robert H. Price Director of Public Works 8 Years CONSULTANTS AND ADVISORS Auditors................................................................................................................................................. Weaver and Tidwell. L.L.P. Dallas, Texas BondCounsel.................................................................................................................................... Norton Rose Fulbright US LLP Dallas, Texas Financial Advisor..............................................................................................................................First Southwest Company, LLC Dallas, Texas 8 PRELIMINARY" OFFICIAL STATEMENT RELATING TO $3,200,000* CITY OF SOUTHLAKE, TEXAS TAX AND WATERWORKS AND SEWER SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015 INTRODUCTION This Preliminary Official Statement, which includes the Schedule and Appendices hereto, provides certain information regarding the issuance of the $3,200,000* City of Southlake. Texas, Tax and Waterworks and Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015. Capitalized terms used in this Preliminary Official Statement have the same meanings assigned to such terms in the ordinance to be adopted on the date of sale of the Obligations which will authorize the issuance of the Obligations (the "Ordinance"), except as otherwise indicated herein. There follows in this Preliminary Official Statement descriptions of the Obligations and certain information regarding the City of Southlake, Texas (the "City") and its finances. All descriptions of documents contained herein are only summaries and are qualified in their entirety by reference to such document. Copies of such documents may be obtained from the City's Financial Advisor, First Southwest Company, LLC, Dallas, Texas. DESCRIPTION of THE CITY... The City is a political subdivision and municipal corporation of the State of Texas (the "State"), duly organized and existing under the laws of the State, including the City's Home Rule Charter. The City Charter was adopted at an election held in the City for that purpose on April 4, 1987, and said Charter has not been amended since the date of its adoption except for elections held January 19, 1991, January 21, 1995, May 2, 1998, May 5, 2001 and November 6, 2007. The City operates under a Council/Manager form of government with a City Council comprised of the Mayor and six Councilmembers who are elected for staggered three-year terms. The City Council formulates operating policy for the City while the City Manager is the chief administration officer. Some of the services that the City provides are: public safety (police and fire protection), highways and streets, water and sanitary sewer utilities, culture -recreation, public improvements, planning and zoning, and general administrative services. The 2010 Census population for the City was 26,575, while the estimated 2015 population is 27,833. The City covers approximately 23 square miles. PLAN OF FINANCING PURPOSE FOR THE CERTIFICATES... Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations to be incurred for (i) the construction of public works, to wit: (a) improvements and extensions to the City's combined Waterworks and Sewer System, including the purchase of land, rights -of -way, and equipment therefor and (b) improvements to the City's municipal service center and (ii) professional services rendered in relation to such projects and the financing thereof. SOURCES AND USES OF CERTIFICATE PROCEEDS ... The proceeds from the sale of the Certificates are expected to be expended as follows: SOURCES OF FUNDS: Par Amount of Certificates Net Premium TOTAL ISSUES: $ - USES OF FUNDS: Deposit to Project Fund Costs of Issuance - TOTAL USES: $ - * Preliminary, subject to change. THE OBLIGATIONS DESCRIPTION OF THE OBLIGATIONS... The Obligations are dated May 1, 2015 (the "Dated Date"), and mature on February 15 in each of the years and in the amounts shown on page 2 hereof. Interest will accrue from the date of delivery of the Obligations (anticipated to be June 2, 2015), will be computed on the basis of a 360-day year of twelve 30-day months, and will be payable on February 15 and August 15 of each year commencing February 15, 2016, until maturity or prior redemption. The definitive Obligations will be issued only in fully registered form in any integral multiple of $5,000 for any one maturity and will be initially registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ("DTC") pursuant to the Book -Entry - Only System described herein. No physical delivery of the Obligations will be made to the beneficial owners thereof. Principal of, premium, if any, and interest on the Obligations will be payable by the Paying Agent/Registrar to Cede & Co., which will make distribution of the amounts so paid to the participating members of DTC for subsequent payment to the beneficial owners of the Obligations (see "THE OBLIGATIONS - Book -Entry -Only System"). AUTHORITY" FOR ISSUANCE OF THE CERTIFICATES ... The Certificates are being issued pursuant to the City's Home Rule Charter, the Constitution and general laws of the State, particularly Subchapter C of Chapter 271, Texas Local Government, as amended, and an ordinance passed by City Council (the "Certificate Ordinance" or the "Ordinance"). SECURITY AND SOURCE OF PAYMENT OF THE CERTIFICATES... The Certificates are payable from the proceeds of an annual ad valorem tax levied, within the limits prescribed by law, on all taxable property located within the City and from a limited pledge of the Net Revenues (as defined in the Certificate Ordinance) of the City's combined Waterworks and Sewer System (the "System"), such pledge is limited to an amount of $1,000 and is subject to the prior lien on and pledge of the Net Revenues of the System to the payment and security of Prior Lien Obligations (as defined and identified in the Certificate Ordinance) and is on a parity in all respects with any existing liens on and pledges of the Net Revenues of the System to the payment and security of Previously Issued Certificates (as defined in the Certificate Ordinance). In the Certificate Ordinance, the City reserves and retains the right to issue Prior Lien Obligations without limitation as to principal amount but subject to any applicable terms, conditions or restrictions under law or otherwise as well as the right to issue additional obligations payable from the same sources as are the Certificates and, together with the Certificates and Previously Issued Certificates, equally and ratably secured by a parity lien on and pledge of the surplus Net Revenues of the System. TAx RATE LIMITATION... All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing annual ad valorem tax sufficient to provide for the payment of principal of and interest on all ad valorem tax debt within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and provides for a maximum ad valorem tax rate of $2.50 per $100 Taxable Assessed Valuation for all City purposes. The Home Rule Charter of the City allows the constitutionally authorized maximum tax rate of $2.50 per $100 Taxable Assessed Valuation. Administratively, the Attorney General of the State of Texas will permit allocation of the $1.50 of the $2.50 maximum tax rate for all general obligation debt service, as calculated at the time of issuance. OPTIONAL REDEMPTION OF THE OBLIGATIONS ... The City reserves the right, at its option, to redeem Obligations having stated maturities on or after February 15, 2026, in whole or in part, in principal amounts of $5,000, or any integral multiple thereof, on February 15, 2025, or any date thereafter, at the par value thereof plus accrued interest to the date of redemption. If less than all of the Obligations are to be redeemed, the City may select the maturities of such Obligations to be redeemed. If less than all of the Obligation of any maturity is to be redeemed, the Paying Agent/Registrar (or DTC while the Obligations are in Book -Entry -Only form) shall determine by lot the Obligation, or portions thereof, within such maturity to be redeemed. If an Obligation (or any portion of the principal sum thereof) shall have been called for redemption and notice of such redemption shall have been given, such Obligation (or the principal amount thereof to be redeemed) shall become due and payable on such redemption date and interest thereon shall cease to accrue from and after the redemption date, provided funds for the payment of the redemption price and accrued interest thereon are held by the Paying Agent/Registrar on the redemption date. NOTICE OF REDEMPTION... Not less than 30 days prior to a redemption date for the Obligations, the City shall cause a notice of redemption to be sent by United States mail, first class, postage prepaid, to the registered owners of the Obligations to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN, WHETHER OR NOT THE REGISTERED OWNER RECEIVES SUCH NOTICE. NOTICE HAVING BEEN SO GIVEN, THE OBLIGATIONS CALLED FOR REDEMPTION SHALL BECOME DUE AND PAYABLE ON THE SPECIFIED REDEMPTION DATE, AND NOTWITHSTANDING THAT ANY CERTIFICATE OR PORTION THEREOF HAS NOT BEEN SURRENDERED FOR PAYMENT, INTEREST ON SUCH CERTIFICATE OR PORTION THEREOF SHALL CEASE TO ACCRUE. With respect to any optional redemption of the Obligations, unless moneys sufficient to pay the principal of and premium, if any, and interest on the Obligations to be redeemed shall have been received by the Paying Agent/Registrar prior to the giving of such notice of redemption, such notice may, at the option of the City, state that said redemption is conditional upon the receipt of such moneys by the Paying Agent/Registrar on or prior to the date fixed for such redemption, or upon the satisfaction of any prerequisites set forth in such notice of redemption; and, if sufficient moneys are not received, such notice shall be of no force and effect, the 10 City shall not redeem such Obligations and the Paying Agent/Registrar shall give notice, in the manner in which the notice of redemption was given, to the effect that the Obligations have not been redeemed. DEFEASANCE ... The Ordinance provides for the defeasance of the Obligations when the payment of the principal of and premium, if any, on the Obligations, plus interest thereon to the due date thereof (whether such due date be by reason of maturity, redemption, or otherwise), is provided by irrevocably depositing with a paying agent or other authorized escrow agent, in trust (1) money sufficient to make such payment or (2) Government Securities, certified by an independent public accounting firm of national reputation to mature as to principal and interest in such amounts and at such times to insure the availability, without reinvestment. of sufficient money, together with monies deposited therewith, if any, to make such payment. The Ordinance provides that "Government Obligations" means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that are rated, on the date of their acquisition or purchase by the City, as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that have been refunded and that are rated, on the date of their acquisition or purchase by the City, as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and (d) any other then authorized securities or obligations that may be used to defease obligations such as the Obligations under the then applicable laws of the State of Texas. The City has the right, subject to satisfying the requirements of (1) and (2) above, to substitute other Government Securities for the Government Securities originally deposited, to reinvest the uninvested moneys on deposit for such defeasance and to withdraw for the benefit of the City moneys in excess of the amount required for such defeasance. There is no assurance that the current law will not be changed in a manner which would permit investments other than those described above to be made with amounts deposited to defease the Obligations. Because the Ordinance does not contractually limit such investments, registered owners may be deemed to have consented to defeasance with such other investments, notwithstanding the fact that such investments may not be of the same investment quality as those currently permitted under State law. There is no assurance that the ratings for U.S. Treasury securities used as Government Securities or for any other Government Security will be maintained at any particular rating category. Upon making such deposit in the manner described, such defeased obligations shall no longer be deemed outstanding obligations secured by the Ordinance, but will be payable only from the funds and Government Securities deposited into escrow and will not be considered debt of the City for purposes of taxation or applying any limitation on the City's ability to issue debt for any other purpose. If any of such Obligations are to be redeemed prior to their dates of maturity, provision must have been made for giving notice of redemption as provided in the Ordinance. Upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment or redemption of the Obligations have been made as described above, all rights of the City to initiate proceedings to call the Obligations for redemption, or take any other action amending the terms of the Obligations, are extinguished; provided, however, that the right to call the Obligations for redemption is not extinguished if the City: (i) in the proceedings providing for firm banking and financial arrangements, expressly reserves the right to call the Obligations for redemption; (ii) gives notice of the reservation of that right to the owners of the Obligations immediately following the making of the firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. BOOK -ENTRY -ONLY SYSTEM... This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by DTC while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book -Entry -Only System has been provided by DTC for use in disclosure documents such as this Preliminary Official Statement. The City believes the source of such information to be reliable, but takes no responsibility for the accuracy or completeness thereof. The City cannot and does not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or redemption or other notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the Obligations), or redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Preliminary Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission, and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully -registered certificate will be issued for each maturity, of the Obligations in the aggregate principal amount of each such maturity and will be deposited with DTC. DTC, the world's largest depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, is the holding company of DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly("Indirect Participants"). DTC has a Standard & Poor's rating of. AA+. The DTC Rules applicable to its Direct and Indirect Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Obligations under the DTC system must be made by or through direct Participants, which will receive a credit for such purchases on DTC's records. The ownership interest of each actual purchaser of each Obligation ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interest in the Obligations are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Obligations, except in the event that use of the book -entry system described herein is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other nominee effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Paying Agent/Registrar and request that copies of notices be provided directly to them. Redemption notices relating to the Obligations shall be sent to DTC. If less than all of the Obligations within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Obligations unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the Record Date (hereinafter defined). The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Obligations are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, principal and interest payments on the Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the City or the Paying Agent/Registrar on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Paying Agent/Registrar or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds. principal and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 12 DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the City. Under such circumstances, in the event that a successor securities depository is not obtained, Obligations are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Obligation certificates will be printed and delivered. So long as Cede & Co. is the registered owner of the Obligations, the City will have no obligation or responsibility to the Direct Participants or Indirect Participants, or the persons for which they act as nominees, with respect to the payment to or providing of notice to such Direct Participants, Indirect Participants or the persons for which they act as nominees. Use of Certain Terms in Other Sections of this Preliminary Official Statement. In reading this Preliminary Official Statement it should be understood that while the Obligations are in the Book -Entry -Only System, references in other sections of this Preliminary Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book -Entry -Only System, and (ii) except as described above, notices that are to be given to registered owners under the applicable Ordinance will be given only to DTC. Information concerning DTC and the Book -Entry System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by the City, the Financial Advisor or the Initial Purchaser. PAYING AGENT/REGISTRAR... The initial Paying Agent/Registrar for the Obligations is The Bank of New York Mellon Trust Company, N.A., Dallas, Texas. In the Ordinance, the City retains the right to replace the Paying Agent/Registrar. The City covenants to maintain and provide a Paying Agent/Registrar at all times until the Obligations are duly paid and any successor Paying Agent/Registrar shall be a commercial bank, trust company, financial institution or other entity duly qualified and legally authorized to serve as and perform the duties and services of Paying Agent/Registrar. Upon any change in the Paying Agent/Registrar for the Obligations, the City agrees to promptly cause a written notice thereof to be sent to each registered owner of such Obligations by United States mail, first class, postage prepaid, which notice shall also give the address of the new Paying Agent/Regi strar. Principal of the Obligations will be payable to the registered owner at maturity or prior redemption upon presentation at the principal office of the Paying Agent/Registrar. Interest on the Obligations shall be paid to the registered owners appearing on the registration books of the Paying Agent/Registrar at the close of business on the Record Date (see "THE OBLIGATIONS — Record Date for Interest Payment' herein), and such interest shall be paid (i) by check sent by United States Mail, first class postage prepaid to the address of the registered owner recorded in the registration books of the Paying Agent/Registrar, or (ii) by such other method, acceptable to the Paying Agent/Registrar, requested by, and at the risk and expense of. the registered owner. If the date for the payment of the principal of or interest on the Obligations shall be a Saturday. Sunday, legal holiday or day when banking institutions in the city where 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 Saturday, Sunday, legal holiday or day when banking institutions are authorized to close; and payment on such date shall have the same force and effect as if made on the original date payment was due. So long as Cede & Co. is the registered owner of the Obligations, payments of principal and interest on the Obligations will be made as described in "THE OBLIGATIONS - Book -Entry -Only System" herein. TRANSFER, EXCHANGE AND REGISTRATION. . . In the event the Book -Entry -Only System should be discontinued, printed Obligation certificates will be delivered to the registered owners of the Obligations and thereafter the Obligations may be transferred and exchanged on the registration books of the Paying Agent/Registrar only upon presentation and surrender of such printed certificates to the Paying Agent/Registrar and such transfer or exchange shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration, exchange and transfer. Obligations may be assigned by the execution of an assignment form on the respective Obligations or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. New Obligations will be delivered by the Paying Agent/Registrar, in lieu of the Obligations being transferred or exchanged, at the principal office of the Paying Agent/Registrar, or sent by United States mail, first class, postage prepaid, to the new registered owner or his designee. To the extent possible, new Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three business days after the receipt of the Obligations to be canceled, and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent. in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in denominations of $5,000 or integral multiples thereof for any one maturity and for a like aggregate principal amount as the Obligations surrendered for exchange or transfer. See "THE OBLIGATIONS - Book -Entry -Only System" for a description of the system to be utilized initially in regard to ownership and transferability of the Obligations. Neither the City nor the Paying Agent/Registrar shall be required to transfer or exchange any Obligation called for redemption, in whole or in part, within 45 days of the date fixed for redemption, provided, however, such limitation on transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Obligation. RECORD DATE FOR INTEREST PAYINIENT... The record date (the "Record Date") for the interest payable on the Obligations on any interest payment date means the close of business on the last business day of the month next proceeding each interest payment date for the Obligations. 13 In the event of a non-payment of interest on a scheduled payment date, and for 30 days thereafter, a new record date for such interest payment (the "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 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner of an Obligation appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. MUTILATED, DESTROYED, LOST AND STOLEN OBLIGATIONS... If any Obligation is mutilated, destroyed, stolen or lost, a new Obligation in the same principal amount as the Obligation so mutilated, destroyed, stolen or lost will be issued. In the case of a mutilated Obligation, such new Obligation will be delivered only upon surrender and cancellation of such mutilated Obligation. In the case of any Obligation issued in lieu of and substitution for any Obligation which has been destroyed, stolen or lost, such new Obligation will be delivered only (a) upon filing with the Paying Agent/Registrar evidence satisfactory to the Paying Agent/Registrar to the effect that such Obligation has been destroyed, stolen or lost and authenticity of ownership thereof, and (b) upon furnishing the Paying Agent/Registrar with indemnity satisfactory to hold the City and the Paying Agent/Registrar harmless. The person requesting the authentication and delivery of a new Obligation must pay such expenses as the Paying Agent/Registrar may incur in connection therewith. OBLIGATIONHOLDERS' REMEDIES... The Ordinance does not specify events of default with respect to the Obligations. If the City defaults in the payment of principal or interest on the Obligations or redemption price when due, or if it fails to make payments into any fund or funds created in the Ordinance, or defaults in the observation or performance of any other covenants, conditions or obligations set forth in the Ordinance, the registered owners may seek a writ of mandamus to compel City officials to carry out their legally imposed duties with respect to the Obligations if there is no other available remedy at law to compel performance of the Obligations or the Ordinance and the City's obligations are not uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles and rests with the discretion of the court, but may not be arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinance does not provide for the appointment of a trustee to represent the interest of the holders of the Obligations upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon any other condition and, accordingly, all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners. The Texas Supreme Court has ruled in Tooke v. City of Alexia, 197 S.W. 3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in "clear and unambiguous" language. Because it is unclear whether the Texas legislature has effectively waived the City's sovereign immunity from a suit for money damages, holders of the Obligations may not be able to bring such a suit against the City for breach of the Obligations or the Ordinance covenants. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City's property. Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ("Chapter 9"). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or holders of the Obligations of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinion of Bond Counsel will note that all opinions relative to the enforceability of the Ordinance and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors. AMENDNIENTS ... The City may amend the Ordinance without the consent of or notice to any registered owner in any manner not detrimental to the interest of the registered owners, including the curing of any ambiguity, inconsistency, formal defect, or omission therein. In addition, the City may, with the written consent of the holders of a majority in aggregate principal amount of the respective Obligations then outstanding and affected thereby, amend, add to, or rescind an), of the provisions of the Ordinance; except that, without the consent of the registered owners of all of the respective Obligations then outstanding, no such amendment, addition, or rescission may (1) extend the time or times of payment of the principal of, premium, if any, and interest on the Obligations, reduce the principal amount thereof, the redemption price, or the rate of interest thereon, or in any other way modify the terms of the payment of the principal of, premium, if any, or interest on the Obligations; (2) give any preference to any Obligation over any other Obligation, or (3) reduce the aggregate principal amount of the Obligations required to be held by the registered owners for consent to any such amendment, addition, or rescission. TAX INFORMATION AD VALOREM TAx LAW... The appraisal of property within the City is the responsibility of the Tarrant Appraisal District and the Denton Central Appraisal District (the "Appraisal Districts"). Excluding agricultural and open -space land, which may be taxed on the basis of productive capacity, the Appraisal Districts are required under Title I of the Texas Tax Code (the "Property Tax Code") to appraise all property within the Appraisal District on the basis of 100% of its market value and is prohibited from applying any 14 assessment ratios. In determining market value of property, different methods of appraisal may be used including the cost method of appraisal, the income method of appraisal and the market data comparison method of appraisal, and the method considered most appropriate by the chief appraiser is to be used. State law requires the appraised value of a residence homestead to be based solely on the property's value as a residence homestead regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a residence homestead for a tax year to an amount that would not exceed the lesser of (1) the property's market value in the most recent tax year in which the market value was determined by the appraisal district or (2) the sum of (a) 10% of the property's appraised value in the preceding tax year, plus (b) the property's appraised value the preceding tax year, plus (c) the market value of all new improvements to the property. The value placed upon property by the Appraisal Districts is subject to review by the Appraisal Review Board, consisting of members appointed by the Board of Directors of each Appraisal District. The Appraisal Districts are required to review the value of property within each Appraisal District at least every three years. The City may require annual review at its own expense, and is entitled to challenge the determination of appraised value of property within the City by petition filed with the Appraisal Review Board. Reference is made to the Property Tax Code for identification of property subject to taxation; property exempt or which may be exempted from taxation, if claimed; the appraisal of property for ad valorem taxation purposes; and the procedures and limitations applicable to the levy and collection of ad valorem taxes. Article VIII of the State Constitution ("Article VIII") and State law provide for certain exemptions from property taxes, the valuation of agricultural and open -space lands at productivity value and the exemption of certain personal property from ad valorem taxation. Under Section 1-b, Article VIII, and State law, the governing body of a political subdivision, at its option, may grant either or both of the following exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. Once authorized, such exemption may be repealed or decreased or increased in amount (i) by the governing body of the political subdivision or (ii) by a favorable vote of a majority of the qualified voters at an election called by the governing body of the political subdivision, which election must be called upon receipt of a petition signed by at least 20% of the number of qualified voters who voted in the preceding election of the political subdivision. In the case of a decrease, the amount of the exemption may not be reduced to less than $3,000 of the market value. The surviving spouse of an individual who qualifies for the foregoing exemption for the residence homestead of a person 65 or older (but not the disabled) is entitled to an exemption for the same property in an amount equal to that of the exemption for which the deceased spouse qualified if (i) the deceased spouse died in a year in which the deceased spouse qualified for the exemption, (ii) the surviving spouse was at least 55 years of age at the time of the death of the individual's spouse and (iii) the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse. In addition to any other exemptions provided by the Property Tax Code, the governing body of a political subdivision, at its option, may grant an exemption of up to 20% of the market value of residence homesteads, with a minimum exemption of $5.000. In the case of residence homestead exemptions granted under Section I-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have been previously pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. Under Article VIII and State law, the governing body of a county, municipality or junior college district, may freeze the total amount of ad valorem taxes levied on the residence homestead of a disabled person or persons 65 years of age or older to the amount of taxes imposed in the year such residence qualified for such exemption. Also, upon receipt of a petition signed by five percent of the registered voters of the county, municipality or junior college district, an election must be held to determine by majority vote whether to establish such a limitation on taxes paid on residence homesteads of persons 65 years of age or who are disabled. Upon providing for such exemption, such freeze on ad valorem taxes is transferable to a different residence homestead. Also, a surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as the property was the residence homestead of the surviving spouse when the deceased spouse died and remains the residence homestead of the surviving spouse and the spouse was at least 55 years of age at the time of the death of the individual's spouse. If improvements (other than maintenance, repairs or improvements required to comply with governmental requirements) are made to the property. the value of the improvements is taxed at the then current tax rate, and the total amount of taxes imposed is increased to reflect the new improvements with the new amount of taxes then serving as the ceiling on taxes for the following years. Once established, the tax rate limitation may not be repealed or rescinded. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000; provided, however, a disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100 percent disability compensation due to a service -connected disability and a rating of 100 percent disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran's residence homestead. Additionally, effective January 1, 2012, subject to certain conditions, the surviving spouse of a disabled veteran who is entitled to an exemption for the full value of the veteran's 15 residence homestead is also entitled to an exemption from taxation of the total appraised value of the same property to which the disabled veteran's exemption applied. Article VIII provides that eligible owners of both agricultural land (Section 1-d) and open -space land (Section 1-d-1), including open -space land devoted to farm or ranch purposes or open -space land devoted to timber production, may elect to have such property appraised for property taxation on the basis of its productive capacity. The same land may not be qualified under both Section 1-d and 1-d-1. Nonbusiness personal property, such as automobiles or light trucks, is exempt from ad valorem taxation unless the governing body of a political subdivision elects to tax this property. Boats owned as nonbusiness property are exempt from ad valorem taxation. Article VIII, Section 1 j, provides for "freeport property" to be exempted from ad valorem taxation. Freeport property is defined as goods detained in Texas for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Notwithstanding such exemption, counties, school districts, junior college districts and cities may tax such tangible personal property provided official action to tax the same was taken before April 1, 1990. Decisions to continue to tax may be reversed in the future; decisions to exempt freeport property are not subject to reversal. Article VIII, Section 1-n of the Texas Constitution provides for the exemption from taxation of "goods -in -transit." Section 11.253 of the Tax Code defines "goods -in -transit" as personal property acquired or imported into Texas and transported to another location in the State or outside of the State within 175 days of the date the property was acquired or imported into Texas. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out board motor, heavy equipment and manufactured housing inventory. Section 11.253 of the Tax Code permits local governmental entities, on a local option basis, to take official action by January I of the year preceding a tax year, after holding a public hearing, to tax goods -in -transit during the following year. A taxpayer may receive only one of the freeport exemptions or one of the goods -in -transit exemptions, but not both, for items of personal property. The City and the other taxing bodies within its territory may agree to jointly create tax increment financing zones, under which the tax values on property in the zone are "frozen" at the value of the property at the time of creation of the zone. To date, the City has created one tax increment financing district ("TIFD") within the boundaries of the City (see "Tax Increment Financing Zones" below). The difference between any increase in the assessed valuation of taxable real property in the TIFD in excess of the base value of taxable real property in the TIFD is known as the "Incremental Value", and during the existence of the TIFD, taxes levied by the City against the Incremental Value in the TIFD are restricted to paying project and financing costs within the TIFD and are not available for the payment of other obligations of the City, including the Certificates. The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City in turn agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City is also authorized, pursuant to Chapter 380, Texas Local Government Code, as amended ("Chapter 380"), to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City. In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes; provided, however, that no obligations secured by ad valorem taxes may be issued for such purposes unless approved by the voters of the City. The City may contract with the federal government, the State, another political subdivision, a nonprofit organization, or any other entity, including private entities, for the administration of such program. EFFECTIVE TAx RATE AND ROLLBACK TAx RATE ... By each September 1 or as soon thereafter as practicable, the City Council adopts a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditure, and (2) a rate for debt service. Under the Property Tax Code, the City must annually calculate and publicize its "effective tax rate" and "rollback tar rate". A tax rate cannot be adopted by the City Council that exceeds the lower of the rollback tax rate or the effective tax rate until two public hearings are held on the proposed tax rate following a notice of such public hearings (including the requirement that notice be posted on the City's website if the City owns, operates or controls an intemet website and public notice be given by television if the City has free access to a television channel) and the City Council has otherwise complied with the legal requirements for the adoption of such tax rate. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the City by petition may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. "Effective tax rate" means the rate that will produce last year's total tax levy (adjusted) from this year's total taxable values (adjusted). "Adjusted" means lost values are not included in the calculation of last year's taxes and new values are not included in this year's taxable values. "Rollback tax rate" means the rate that will produce last year's maintenance and operation tax levy (adjusted) from this year's values (adjusted) multiplied by 1.08 plus a rate that will produce this year's debt service from this year's values (unadjusted) divided by 16 the anticipated tax collection rate. The Property Tax Code provides that certain cities and counties in the State may submit a proposition to the voters to authorize an additional one-half cent sales tax on retail sales of taxable items. If the additional tax is levied, the effective tax rate and the rollback tax rate calculations are required to be offset by the revenue that will be generated by the sales tax in the current year. Reference is made to the Property Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. PROPERTY ASSESSMENT AND TAX PAYMENT... Property within the City is generally assessed as of January 1 of each year. Business inventory may, at the option of the taxpayer, be assessed as of September 1. Effective January 1, 2012, oil and gas reserves are assessed on the basis of a valuation process which uses pricing information contained in the most recently published Early Release Overview of the Annual Energy Outlook published by the United States Energy Information Administration, as well as appraisal formulas developed by the State Comptroller of Public Accounts. Taxes become due October 1 of the same year, and become delinquent on February 1 of the following year. Taxpayers 65 years old or older are permitted by State law to pay taxes on homesteads in four installments with the first due on February I of each year and the final installment due on August 1. The Property Tax Code also makes provision for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. PENALTIES AND INTEREST") ... Charges for penalty and interest on the unpaid balance of delinquent taxes are made as follows: Cumulative Cumulative Month Penalty Interest(l) Total February 6% 1% 7% March 7 2 9 April 8 3 11 May 9 4 13 June 10 5 15 July 12 6 18 (1) Interest continues to accrue after July 1 at the rate of 1 % per month until paid. After July, penalty remains at 12%, and interest increases at the rate of one -percent (1%) for each month or portion of a month the tax remains unpaid. A delinquent tax continues to incur interest as long as the tax remains unpaid, regardless of whether a judgment for the delinquent tax has been rendered. The purpose of imposing such interest is to compensate the taxing unit for revenue lost because of the delinquency. In addition, if an account is delinquent in July, an attorney's collection fee of up to 20% may be added to the total tax penalty and interest charge. Under certain circumstances, taxes which become delinquent on the homestead of a taxpayer 65 years old or older incur a penalty of 8% per annum with no additional penalties or interest assessed. In general, property subject to the City's lien may be sold, in whole or in parcels, pursuant to court order to collect the amounts due. Federal law does not allow for the collection of penalty and interest against an estate in bankruptcy. Federal bankruptcy law provides that an automatic stay of action by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post -petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases post -petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. CITY APPLICATION OF TAX CODE ... The City grants an exemption to the market value of the residence homestead of persons 65 years of age or older of $75,000, the disabled are also granted an exemption of $75,000. The City has not granted an additional exemption of 20% of the market value of residence homesteads, minimum exemption of $5,000. See Table 1 for a listing of the amounts of the exemptions described above. Ad valorem taxes are not levied by the City against the exempt value of residence homesteads for the payment of debt. The City has adopted the tax freeze for citizens who are disabled or are 65 years of age or older, which became a local option and subject to local referendum on January 1, 2004. 17 The City does not tax nonbusiness personal property; and Tarrant County collects taxes for the City. The City does not permit split payments of taxes, and discounts for early payment of taxes are not allowed. The City does tax Freeport property. The City does not tax Goods -in -Transit. The City does not collect the additional one-half cent sales tax for reduction of ad valorem taxes. The City has adopted a tar abatement policy, and reviews applications for abatements on a case by case basis. TAX INCREMENT FINANCE ZONES... The City has established the Tax Increment Financing Reinvestment Zone Number One, comprised of approximately 408 acres in an area of the City bounded by East Highland Street, North Kimball Avenue, East Southlake Boulevard (F.M. 1709) and North Carroll Avenue. The tax increment base for the Reinvestment Zone Number One established on January 1, 1997 is $23,267,804. Taxes assessed and collected against the base value in the Reinvestment Zone may be used for general fund purposes. However, taxes assessed and collected against the assessed valuation of real property in the Reinvestment Zone in excess of the tax increment base ("Tax Increment Revenues") are restricted to pay or finance projects within the Reinvestment Zone. The Incremental 2014/15 Taxable Assessed Value for the Reinvestment Zone Number One is $347,428,074. The Tax Increment Revenues are not available to pay the Obligations. [The remainder of this page left blank intentionally] 18 TABLE 1 — ASSESSED VALUATION AND EXEMPTION 2014/15 Market Valuation Established by Tarrant and Denton County Appraisal Districts (excluding totally exempt property) $6,482,925,560 Less Exemp I ions/Reduct ions at 100%Mark-et Value: Over 65 82,319,979 Disabled Persons 2,700,000 Disabled Veterans 8,517,146 10% Cap 477,960 Pollution Control 42,709 Prorated Absolute 124,830 Agricultural Use Reductions 100,638.278 Nominal Value - Freeport Inventory 6,297,113 Homestead 120,328,489 Other - Abatements - 321,446.504 2014/15 Taxable Assessed Valuation(') $6,161,479,056 General Obligation Debt Payable from Ad Valorem Taxes (as of 4/15/2015) $ 1261,855,000 The Certificates (2) 3,200,000 Total General Obligation Debt Payable from Ad Valorem Taxes $ 130,055,000 Less: Self Supporting Debt 13) Water and Sewer System Debt $ 42,143,941 Tax Increment Financing Debt 8,591,347 Crime Control Prevention District Debt 4,475,000 Southlake Parks Development Corporation Debt 15,325.000 The Certificates (W&S System Debt) (2) 3,200,000 $ 73,735,288 Net General Obligation Debt Payable from Ad Valorem Taxes $ 53,119,712 General Obligation Interest and Sinking Fund (as of 2/15/2015) $ 10,448,259 Ratio General Obligation Tax Debt to Taxable Assessed Valuation 0.86% 2015 Estimated Population - 271,833 Per Capita Taxable Assessed Valuation - $221,373 Per Capita Net General Obligation Debt Payable from Ad Valorem Taxes - $1,909 (1) Includes the 2013/14 taxable incremental value of approximately $347,428,074 that is not available for debt service on the Obligations. (2) Preliminary, subject to change. (3) Excludes the Trinity River Authority Contract Revenue Bonds. See Table 12 — Other Obligations for more detail. T TABLE 2 - TAXABLE ASSESSED VALUATIONS BY CATEGORY 2015 2014 2013 % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single -Family $ 4,664,508,900 71.95% $ 4,358,695,950 72.71 % $ 4,226,111,230 71.04% Real, Residential, Multi -Family 2,177,400 0.03% 2,482,100 0.04% 2,382,000 0.04% Real, Vacant Lots/fracts 160,005,368 247% 129,835,125 2.17% 114,327,744 1.92% Real, Acreage (Land Only) 64,317,521 0.99% 93,915,024 1.57% 122,072,709 2.05% Real, Farm and Ranch Improvements 13,783,283 021% 10,817,510 0.18% 15,292,236 0.26% Real, Commercial 1,141,329,011 1761% 1,018,718,559 16.99% 976,500,556 16.41% Real, Industrial 2,302,091 0 04% 2,446,545 0.04% 4,010,725 0.07% Real and Tangible Personal, Utilities 49,238,503 0 76% 46,504,595 0 78% 171,791,733 2.89% Tangible Personal, Commercial 308,508,568 4.76% 268,377,323 4.48% 248,420,419 4.18% Tangible Personal, Industrial 9,487,984 0 15% 8,640,798 0 14% 9,073,542 0.15% Tangible Personal, Mobile Homes 388,060 0 01% 458,583 0 01% 456,230 0.01% Real Property, Inventory 66,878,871 1.03% 53,474,009 0.89% 58,543,078 0 98% Total Appraised Value Before Exemptions $ 6,482,925,560 100.00% $ 5,994,366,121 100.00% $ 5,948,982,202 100 00% Adjustments - - - Less: Total Exemptions/Reductions 321,446,504 193,596,307 199,268,609 Taxable Assessed Value $ 6,161,479,056 ii $ 5,800,769,814 12) $ 5,749,713,593 13) Taxable Appraised Value for Fiscal Year Ended September 30, 2012 2011 2010 % of % of % of Category Amount Total Amount Total Amount Total Real, Residential, Single -Family $ 4,111,842,519 70.67% $4,041,884,577 70.00% $ 3,796,919,716 67.59% Real, Residential, Multi -Family 2,229,300 0.04% 2,725,400 0.05% 4,301,802 0.08% Real, Vacant Lots/Tracts 120,473,667 2.07% 116,941,275 2.03% 125,532,640 2.23% Real, Acreage (Land Only) 127,106,917 2.18% 141,033,979 2.44% 163,885,713 2.92% Real, Farm and Ranch Improvements 14,697,528 0.25% 14,353,827 0.25% 15,770,400 0.28% Real, Commercial 945,126,317 16.24% 948,832,777 16.43% 974,756,220 17.35% Real, Industrial 5,554,282 0.10% 5,438,678 0.09% 5,695,756 0.10% Real and Tangible Personal, Utilities 180,608,841 3.10% 152,592,936 2.64% 153,209,530 2.73% Tangible Personal, Commercial 233,190,394 4.01% 245,849,455 4.26% 258,063,120 4.59% Tangible Personal, Industrial 11,281,402 0.19% 10,260,247 0.18% 10,492,452 0.19% Tangible Personal, Mobile Homes 480,925 0.01% 244,293 0.00% 409,447 0.01% Real Property, Inventory 65,452,258 1.12% 93,649,485 1.620io 108,702,397 1.93% Total Appraised Value Before Exemptions $ 5,818,044,350 100.00% $ 5,773,806,929 100.00% $ 5,617,739,193 100.00% Adjustments - - - Less: Total Exemptions/Reductions 235,246,573 240,383,094 254,860,399 Taxable Assessed Value $ 5,582,797,777 14) $ 5,533,423,835 IS) $ 5,362,878394 (6) (1) Includes taxable incremental value of approximately $347,428,074 that is not available for payment of the City's general obligation debt. (2) Includes taxable incremental value of approximately $331,409,142 that is not available for payment of the City's general obligation debt. (3) Includes taxable incremental value of approximately $290,288,909 that is not available for payment of the City's general obligation debt. (4) Includes taxable incremental value of approximately $280,411,181 that is not available for payment of the City's general obligation debt. (5) Includes taxable incremental value of approximately $280,986,280 that is not available for payment of the City's general obligation debt. (6) Includes taxable incremental value of approximately $298,861,976 that is not available for payment of the City's general obligation debt. Note: Valuations shown are certified taxable assessed values reported by the Appraisal Districts to the State Comptroller of Public Accounts. Certified values are subject to change throughout the year as contested values are resolved and the Appraisal Districts update records. 20 TABLE 3 — VALUATION AND GENERAL OBLIGATION DEBT HISTORY G.O. Ratio of Fiscal Taxable Tax Debt G.O. Tax Debt G.O. Tax Year Taxable Assessed Outstanding to Taxable Debt Ended Estimated Assessed Valuation at End Assessed Per 9/30 Population(i) Valuation(`) Per Capita of Year Valuation Capita 2011 27,184 $ 5,533,423,835 c31 $ 203,554 $ 158,245,000 2.86% $ 5,821 2012 27.045 5,582,797,777 14) 206,426 156,395,000 2.80% 5,783 2013 27,045 5,749,713,593 (s1 212.598 153,820,000 2.68% 5,688 2014 27,500 5,800,769,814 161 210,937 144,995,000 2.50% 5,273 2015 27,833 6,161,479,056 221.373 130,055,000 (9) 2.11% (9) 4.673 (91 (1) Source: City officials. (2) As reported by the Appraisal Districts on City's annual State Property Tax Board Reports; subject to change during the ensuing year. (3) Includes taxable incremental value of approximately $280,986,280 that is not available for payment of the City's general obligation debt. (4) Includes taxable incremental value of approximately $280,411,181 that is not available for payment of the City's general obligation debt. (5) Includes taxable incremental value of approximately $290,288,909 that is not available for payment of the City's general obligation debt. (6) Includes taxable incremental value of approximately $331,409,142 that is not available for payment of the City's general obligation debt. (7) Includes taxable incremental value of approximately $347,428,074 that is not available for payment of the City's general obligation debt. (8) Includes self-supporting debt. See "Table 10 — Computation of Self -Supporting Debt". (9) Projected. Preliminary, subject to change. Includes the Certificates. TABLE 4—TAx RATE, LEVY AND COLLECTION HISTORY Interest Year and Ended Tax General Sinking % Current % Total 9/30 Rate Fund Fund Tax Levy (1) Collections Collections 2011 $ 0.4620 $ 0.3320 $ 0.1300 $ 24,173,302 99.22% 99.88% 2012 0.4620 0.3200 0.1300 25,792,526 99.25% 99.99% 2013 0.4620 0.3200 0.1300 26,563,677 99.48% 101.08% 2014 0.4620 0.3420 0.1200 26,945,723 99.70% 101.28% 2015 0.4620 0.3420 0.1200 28,466,033 90.91% (21 91.10% 12) (1) Includes levy on taxable incremental values, such tax levy is not available for the City's general use. (2) Collections as of February, 2015. [The remainder of this page left blank intentionally] 21 TABLE 5 - TEN LARGEST TAXPAYERS Name of Taxpayer Verizon Wireless Texas, LLC Town Square Ventures LP Slts Grand Avenue LP Southlake Land Holdings LP Wyndham Properties Ltd. Carroll/1709 Ltd. Sabre Headquarters LLC H & C Southlake Hilton LLC Forest Park Medical Ctr. At Inland Western SLake Corners K Nature of Pronertv Telecommunications Real Estate Real Estate Land/Improvements Real Estate Land/Improvements Technology Hotel Medical Complex Land/Improvements 2014/2015 Taxable Assessed Valuation $ 172,818,555 141,692,722 80,996,312 56,153,054 54.803,383 50.236,877 45.538,856 31,208,142 29,435,986 22,492,599 $ 685,376,486 % of Total Taxable Assessed Valuation 2.80% 2.30% 1.31% 0.91% 0.89% 0.82% 0.74% 0.51% 0.48% 0.3 7% 11.12% GENERAL OBLIGATION DEBT LIMITATION... No general obligation debt limitation is imposed on the City under current State law or the City's Home Rule Charter (see "THE OBLIGATIONS - Tax Rate Limitation"). TABLE 6 - TAx ADEQUACY Net Principal and Interest Requirements, 2015 $ 8,210,334 $0.1441 Tax Rate at 98%Collections Produces $ 8.210,487 Average Net Principal and Interest Requirements, 2015-2030 $ 4,735,593 $0.0831 Tax Rate at 98%Collections Produces $ 4,735,986 Maximum Net Principal and Interest Requirements, 2015 $ 8,210,334 $0.1441 Tax Rate at 98% Collections Produces $ 8,210,487 (1) Calculated based on the Net Taxable Assessed Valuation after adjustment for Tax Increment Reinvestment Zone 41. [The remainder of this page left blank intentionally] 22 TABLE 7 - ESTIMATED OVERLAPPING DEBT Expenditures of the various taxing entities within the territory of the City are paid out of ad valorem taxes levied by such entities on properties within the City. Such entities are independent of the City and may incur borrowings to finance their expenditures. This statement of direct and estimated overlapping ad valorem tax debt ("Tax Debt") was developed from information contained in "Texas Municipal Reports" published by the Municipal Advisory Council of Texas. Except for the amounts relating to the City, the City has not independently verified the accuracy or completeness of such information, and no person should rely upon such information as being accurate or complete. Furthermore, certain of the entities listed may have issued additional Tax Debt since the date hereof, and such entities may have programs requiring the issuance of substantial amounts of additional Tax Debt, the amount of which cannot be determined. The following table reflects the estimated share of overlapping Tax Debt of the City. City's Overlapping Taxable Total Estimated G.O. Assessed Tax G.O. Tax Debt % Tax Debt Taxing Jurisdiction Value(l) Rate(l) As of4/15/2015(') Applicable(l) as of4/15/2015 City ofSouthlake $ 6,161,479,056 $ 0.4620 $ 130,055,000 (2) 100.00% $ 130,055,000 Carroll ISD 6,274,504,723 1.4000 218,077,749 86.88% 189,465,948 Denton County 63,594,441,842 0.2720 613,455,000 0.21% 1,288,256 Grapevine-Colleyville ISD 11,460,736,105 1.3201 338,573,481 1.57% 5,315,604 Keller ISD 12,950,447,900 1.5400 805,963,986 2.42% 19,504,328 Northwest ISD 11,465,914,042 1.4530 721,008,319 0.67% 4,830,756 Tarrant County 132,971,955,288 0.2640 317,820,000 4.18% 13,284,876 Tarrant County Hospital District 133,230,920,130 0.2279 23,440,000 4.18% 979,792 Tarrant County Junior College District 133,754,637,419 0.1500 - 4.18% - Total Direct and Overlapping G. O. Tax Debt $ 364,724,560 Ratio of Direct and Overlapping G. O. Tax Debt to Taxable Assessed Valuation 5.92% Per Cap it a Overlapping G. O. Tax Debt $ 13,104 (1) As reported by the Municipal Advisory Council of Texas (2) Includes the Certificates. Preliminary, subject to change. [The remainder of this page left blank intentionally] 23 DEBT INFORMATION TABLE 8 -PRO-FORMA GENERAL OBLIGATION DEBT .SERVICE REQUIREMENTS Fiscal Year Ending Outstanding Debt Service The Certificates") 9/30 Principal Interest Total D/S Principal Interest Total D/S 2015 $ 18,140,000 $ 5,099,252 $ 23,239,252 $ - $ - $ - 2016 17,115,000 4,371,783 21,486,783 100,000 129,772 229,772 2017 17,030,000 3,749,908 20,779,908 125,000 105,475 230,475 2018 14,455,000 3,177,083 17,632,083 125,000 102,975 227,975 2019 9,285,000 2,760,620 12,045,620 130,000 100,425 230,425 2020 7,750,000 2,467,145 10,217,145 130,000 97,500 227,500 2021 7,465,000 2,183,417 9,648,417 135,000 94,188 229,188 2022 7,135,000 1,896,008 9,031,008 140,000 90,750 230,750 2023 7,405,000 1,615,576 9,020,576 140,000 86,900 226,900 2024 7,530,000 1,341,867 8,871,867 145,000 82,625 227,625 2025 6,950,000 1,073,111 8,023,111 150,000 77,825 227,825 2026 7,210,000 810,520 8,020,520 155,000 72,100 227,100 2027 4,210,000 593,254 4,803,254 160,000 65,800 225,800 2028 4,380,000 419,233 4,799,233 170,000 59,200 229,200 2029 3,470,000 261,344 3,731,344 175,000 52,300 227,300 2030 2,300,000 149,222 2,449,222 185,000 45,100 230,100 2031 1,435,000 81,513 1,516,513 190,000 37,600 227,600 2032 995,000 40,991 1,035,991 200,000 29,800 229,800 2033 445,000 17,628 462,628 205,000 21,700 226,700 2034 290,000 5,075 295,075 215,000 13,300 228,300 2035 - - - 225,000 4,500 229,500 $144,995,000 $32,114,548 $ 177,109,548 $3,200,000 $1,369,835 $4,569,835 (1) Preliminary, subject to change. Net Effective Interest Rate calculated at 3.00%. (2) Includes the Certificates. Total General Obligation Debt Service Less: Self -Supporting Debt Service W&S Fund TIRZ #1 CCPD Debt Service12) Debt Service Debt Service SPDC Debt Service Net General Obligation Debt Service % of Principal Retired $ 23,239,252 $ 6,451,262 $ 3,258,668 $4,017,900 $ 1,301,088 $ 8,210,334 21,716,555 6,584,362 3,180,766 2,589,900 1,306,363 8,055,164 21,010,383 6,482,647 3,189,243 2,045,100 1,304,763 7,988,630 17,860,058 5,990,228 3,258,926 - 1,302,988 7,307,916 12,276,045 4,542,718 - 1,299,988 6,433,339 51.62% 10,444,645 3,751,532 1,300,675 5,392,438 9,877,604 3,285,911 1,300,313 5,291,381 9,261,758 2,890,826 1,303,388 5,067,544 9,247,476 2,880,890 1,303,988 5,062,599 9,099,492 2,836,167 1,302,463 4,960,862 7725% 8,250,936 2,654,861 1,299,388 4,296,687 8,247,620 2,646,976 1,304,338 4,296,306 5,029,054 2,526,514 1,302,172 1,200,369 5,028,433 2,523,820 1,302,850 1,201,762 3,958,644 1,969,801 1,301,269 687,575 95.49% 2,679,322 1,505,141 857,594 316,588 1,744,113 1,116,713 627,400 - 1,265,791 874,775 391,016 689,328 689,328 - 523,375 523,375 99.85% 229,500 229,500 100.00% $181,679,382 $ 62,957,346 $12,887,603 $ 8,652,900 $ 21,412,038 $ 75,769,496 24 TABLE 9 — INTEREST AND SINKING FUND BUDGET PROJECTION() Net Debt Service Requirements, Fiscal Year Ending 9/30/15 $ 8,210,334 Interest and Sinking Fund, Fiscal Year Ending 9/30/14 10,477,887 Budgeted Interest and Sinking Fund Tax Levy 6,902,970 Administrative Expenses 18.000 Estimated Investment Income 20,000 $ 17,418,857 Estimated Balance, Fiscal Year Ending 9/30/15 $ 9,208,523 (1) Preliminary, subject to change. TABLE 10 — COMPUTATION OF SELF-SUPPORTING DEBT (" Net System Revenue Available Fiscal Year 2014'3) Less. Requirements for Revenue Bonds Balance Available for Other Purposes Self-supporting Tax Debt Requirements for fiscal year 2015 Percentage of Self-supporting Tax Debt Requirements to be paid from sources shown Water and Sewer TIRZITIF(2) SPDC CCPD $ 7,344,724 $ 3,412,520 $ 6,087,122 $ 5,896,424 - - 1,583,200 $ 7,344,724 $ 3,412,520 $ 4,503,922 $ 5,896,424 $ 6,451,262 `" $ 3,258,668 100% 100% $ 1,301,088 $4,017,900 100% 100% (1) The City considers the general obligation debt listed below to be self-supporting and payable from Net Revenues of the System, available revenues from the TIF Fund, the available revenues of the Southlake Parks Development Corporation ("SPDC"), or available revenues of the Crime Control & Prevention District ("CCPD") as indicated above. However, with the exception of certain limited pledges of System revenues in connection with prior certificates of obligation issues (which may or may not have been fully satisfied), the revenues described above are not pledged to the payment of such general obligation debt. The transfers of System revenues to make debt service payments on the City's general obligation debt is discretionary and may be discontinued by the City, in whole or in part, at any time. The transfers of other revenues may be provided for by contract with the TIF, SPDC, and CCPD. In the event the City chooses to discontinue such transfer of System revenues, or should any of the revenues described above be insufficient or otherwise unavailable to pay debt service on such general obligation debt, the City will be required to levy ad valorem taxes or to appropriate other lawfully available funds of the City in amounts sufficient to pay the debt service on such general obligation debt. (2) As of September 30, 2014 the Tax Increment Financing District had a Fund Balance of $4,422,565 of which $4.117,158 were cash and cash equivalents. (3) Net Revenue after operating expenditures; and capital outlay in the case of the TIF Fund. (4) Does not include the Certificates. First debt service payment on the Certificates is in Fiscal Year 2016. TABLE 11 —AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS Purpose Amount Date Amount Previously Unissued Authorized Authorized Issued Balance Street Improvements (intersections) 5/1/1999 $ 17,300,000 $ 10,508,179 $ 6,791,821 Street Improvements (design enhancements) 5/1/1999 2.150,000 1.560,000 590,000 Park Improvements (hike and bike trails) 5/1/1999 4,730,000 2,230,000 2.500,000 $ 24,180,000 $ 14,298,179 $ 9,881,821 ANTICIPATED ISSUANCE OF GENERAL OBLIGATION DEBT. . . The City does not anticipate the issuance of additional general obligation debt within the next twelve months. 25 TABLE 12 — OTHER OBLIGATIONS Trinity River Authority Contract Revenue BondsM Fiscal Year Ending 9/30 Principal Interest Total D/S 2015 $ 350,000 $ 46.250 $ 396.250 2016 365.000 28,375 393.375 2017 385,000 9,625 394,625 $ 1,100.000 $ 84,250 $ 1,184,250 (1) Includes the Denton Creek Wastewater Pressure Interceptor System Revenue Refunding Bonds, Series 2001. PENSION FUND... The City provides pension benefits for all of its full-time employees through the Texas Municipal Retirement System ("TMRS"), a State-wide administered pension plan. The City makes annual contributions to the plan equal to the amounts accrued for pension expense. In addition to providing pension benefits through the Texas Municipal Retirement System, the City has opted to provide eligible retired employees with the following post -employment benefits: The City contributes $125/month toward retiree medical insurance or $225/month for retiree and dependent. Retirees are eligible for city medical insurance until they reach Medicare age or have other insurance available. The City recognizes its share of the costs of providing these benefits when paid, on a "pay-as-you-go" basis. These payments are budgeted annually. The amount budgeted for the fiscal year ending September 30, 2014 is $19,600. The appropriation for the fiscal year ending September 30, 2013 was $10,175. As of September 30, 2013, there were approximately 4 participants eligible to receive such benefits. Commencing in fiscal 2009, the City implemented the GASB Statement No. 45 "Accounting and Financial Reporting by Employers for Post -employment Benefits Other Than Pensions." The City has performed an actuarial valuation of its post -retirement benefit liability. The City established an irrevocable trust for future post retirement benefits. For fiscal year ending September 30, 2014, the City invested $125,000 in the trust. (For more detailed information concerning the retirement plan, see Appendix B, "Excerpts from the City's Annual Financial Report" - Note #8.) [The remainder of this page left blank intentionally] 26 FINANCIAL INFORMATION TABLE 13 — CHANGE IN NET ASSETS Fiscal Years Ended September 30, 2014 2013 2012 2011 2010 Revenues. Program Revenues: Charges for Services $ 31,896,576 $ 30,926,027 $ 30,352,107 $ 29,462,242 $ 6,811,321 Operating Grants and Contributions 443,157 639,230 200,434 532,100 688,803 Capital Grants and Contributions 7,947,282 4,226,319 1,733,012 3,742,891 5,994,206 General Revenues: Taxes 62,563,693 57,151,241 53,841,399 53,321,732 52,515,389 Interest on Investments 584,076 55,337 278,934 382,428 414,852 Gain (Loss) on Sales of Fixed Assets 99,109 89,923 91,134 26,741 21,465 Miscellaneous 646,534 873,595 474,492 701,365 428,804 Transfers - - - - 596,093 Total Revenues $104,180,427 $ 93,961,672 $ 86,971,512 $ 88,169,499 $ 67,470,933 Exp crises: General Government $ 13,417,904 $ 12,892,140 $ 13,277,006 $ 13,754,530 $ 11,814,836 Public Safety 18,245,617 18,425,878 15,891,911 15,144,172 14,885,499 Public Works 8,870,998 8,528,331 6,399,819 6,279,687 5,767,688 Culture and Recreation 8,948,841 8,829,394 8,158,291 7,897,173 7,287,434 Intergovernmental - - - - - Interest on Long -Tenn Debt 5,097,036 6,747,628 5,865,798 5,638,272 6,515,269 Water and Sewer 25,030,426 22,119,518 22,530,688 20,724,651 - Total Expenses $ 79,610,822 $ 77,542,889 $ 72,123,513 $ 69,438,485 $ 46,270,726 Increase in Net Assets 24,569,605 16,418,783 14,847,999 18,731,014 21,200,207 Net Assets -Beginning of Year 479,107,321 462,688,538 447,840,539 429,109,525 (�) 324,038,419 Cumulative effect of change in accounting principle (2,337,337) - - - - NetAssets-Endof Year $501,339,589 $479,107,321 $462,688,538 $447,840,539 $345,238,626 [The remainder of this page left blank intentionally] 27 TABLE 13A — GENERAL FUND REVENUES AND EXPENDITURE HISTORY Fiscal Years Ended September 30, 2014 2013 2012 2011 2010 Revenues: Taxes $ 34,620.395 $ 31,705,886 $ 29.731,625 $ 29,052,838 $ 28,395,556 Licenses and Permits 2,411.851 2,070,146 2,111,754 1,265,609 1,453,823 Charges for Services 1,778,003 1,876,302 1,805,022 1,660.154 1,535,363 Fines and Forfeitures 1,330,324 1,397,101 1,119.050 1,170,708 1,032,817 Other Revenues 765,924 600,458 509,575 515,532 871,734 Total Revenues $ 40.906,497 $ 37,649,893 $ 35,277,026 $ 33,664.841 $ 33,289,293 Expenditures: City Administration $ 8,036,963 $ 8,034,790 $ 7,188,993 $ 7,369,100 $ 7,062,597 Police Department 5,875,416 5,808,421 5,621,650 5,520,833 5,430,771 Fire Department 7,550,397 6,849,567 5,597,946 5,215,401 5,062,613 Building Department 909,420 854.804 816,771 862.832 793.608 Streets and Drainage 1.671,514 1,685,890 1,776,764 1,608,693 1.439,925 Municipal Court 586,020 582,436 559,154 729.549 656,109 Parks 4,256,617 4,579,615 4,297,051 5,566,561 4,051,304 Public Works Department 2,589,186 3,543,818 2,176,991 1,944.128 2,097,798 Public Safety Support 1.213,567 1,513,616 1,516,999 1,498,584 1,607,951 Community Development 1,548,119 1,441,691 1,277,303 884.508 1,180,498 Total Expenditures $ 34,237,219 $34,894,648 $ 30,829,622 $ 3L200,189 $ 29,383,174 Excess (deficiency) of Revenues Over Expenditures $ 6.669,278 $ 2,755,245 $ 4,447,404 $ 2,464,652 $ 3,906,119 Sale of Vehicles $ - $ - Bond Proceeds - - - Budgeted Transfers In 1,601,613 1,982,670 1,463,738 1,570,247 920.362 Budgeted Transfers Out (4,490,000) (3,915,000) (3,000,000) (5,133.000) (2,035,000) Total Other Sources (Uses) $ (2,888,387) $ (1,932,330) $ (1,536,262) $ (3,562,753) $ (1,114,638) Net Increase (Decrease) $ 3,780.891 $ 822.915 $ 2,911,142 $ (1,098.101) $ 2,791,481 Beginning Fund Balance 20,782,522 19,959,607 17.048,465 18,146,566 15,355,085 Equity Transfer/Prior Period Adjustment Ending Fund Balance $ 24,563,413 $ 20,782,522 $ 19.959,607 $ 17,048,465 $ 18,146,566 [The remainder of this page left blank intentionalltiJ 28 TABLE 14 - MUNICIPAL SALES TAX HISTORY The City has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the Obligations. Collections and enforcements are effected through the offices of the State Comptroller of Public Accounts, who remits the proceeds of the tax, after deduction of a 2% service fee, to the City monthly. Fiscal Equivalent Year % of of Ended 1% City Ad Valorem Ad Valorem Per 9/30 Collections Tax Levy Tax Rate Capita 2011 $ 9,417,344 38.96% $ 0.1702 $346.43 2012 10,115,518 39.22% 12) 0.1812 374.03 2013 11,303,173 42.55% 0.1966 417.94 2014 12,987,221 48.20% 141 0.2239 472.26 2015 9,217,787 (61 32.38% 0.1496 331.18 (1) Includes taxable incremental value of approximately $280,986,280 that is not available for the City's general use. (2) Includes taxable incremental value of approximately $280,411,181 that is not available for the City's general use. (3) Includes taxable incremental value of approximately $290,288,909 that is not available for the City's general use. (4) Includes taxable incremental value of approximately $331,409,142 that is not available for the City's general use. (5) Includes taxable incremental value of approximately $347,428,074 that is not available for the City's general use. (6) Partial collections through April, 2015. As reported by the Texas Comptroller of Public Accounts. FINANCIAL POLICIES BASIS OF ACCOUNTING... All governmental funds and agency funds are accounted for using the modified accrual basis of accounting. Under the modified accrual basis, revenues are recognized when they become measurable and available as net current assets. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. The exception to this general rule is that principal and interest on general long-term debt is recognized when due. The more significant revenues which are treated as susceptible to accrual under the modified accrual basis are property taxes, intergovernmental revenues, charges for services, and interest. Other revenue sources are not considered measurable and available, and are not treated as susceptible to accrual. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned and their expenses are recognized when they are incurred. GENERAL FUND BALANCE ... The City's goal is to maintain surplus and unencumbered funds equal to 15%-25% of expenditures in the General Fund. This allows the City to avoid interim borrowing pending tax receipts. USE OF CERTIFICATE PROCEEDS ... The City's policy is to use Certificate proceeds for capital expenditures related to the purposes specified in the Certificate Ordinance and for no other purpose. Such revenues are never to be used to fund City operations. BUDGETARY PROCEDURES... The City Charter establishes the fiscal year as the twelve-month period beginning October 1. The departments submit to the City Manager a budget of estimated expenditures for the ensuing fiscal year by the first of July. The City Manager subsequently submits a budget of estimated expenditures and revenues to the City Council by August 1. The City Council then holds a public hearing on the budget. The Council shall then make any changes in the budget as it deems advisable and shall adopt a budget prior to September 30. FUND INVESTMENTS... The City investment policy parallels State law which governs investment of public funds. The City generally restricts investments to direct obligations of the United States Government and to insured or collateralized bank certificates of deposits. Both state law and the City's investment policies are subject to change. 29 INVESTMENTS The City invests its investable funds in investments authorized by State law in accordance with investment policies approved by the City Council of the City. Both State law and the City's investment policies are subject to change. LEGAL INVESTMENTS... Under State law, the City is authorized to invest in investments meeting the requirements of the Texas Public Funds Investment Act (Chapter 2256, Texas Government Code, as amended, the "PFIA"), which may include: (1) obligations of the United States or its agencies and instrumentalities, including letters of credit, (2) direct obligations of the State or its agencies and instrumentalities: (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States: (4) other obligations, the principal and interest of which is guaranteed or insured by or backed by the full faith and credit of, the State or the United States or their respective agencies and instrumentalities; (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent: (6) bonds issued, assumed or guaranteed by the State of Israel; (7) certificates of deposit or share certificates (i) that are issued by an institution that has its main office of a branch office in the State of Texas and are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, or their respective successors, and are secured as to principal by obligations described in clauses (1) through (6) or in any other manner and provided for by law for City deposits, or (ii) where (a) the funds are invested by the City through (A) a broker that has its main office or a branch office in the State of Texas and is selected from a list adopted by the City as required by law, or (B) a depository institution that has its main office or branch office in the State of Texas that is selected by the City, (b) the broker or the depository institution selected by the City arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located, for the account of the City, (c) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States, and (d) the City appoints the depository institution selected under (a) above, a custodian as described by Section 2257.041(d) of the Texas Government Code, or a clearing broker -dealer registered with the Securities and Exchange Commission and operating pursuant to Securities and Exchange Commission Rule 15c3-3 (17 C.F.R. Section 240.15c3-3) as custodian for the City with respect to the certificates of deposit; (8) fully collateralized repurchase agreements that (i) have a defined termination date, (ii) are fully secured by a combination of cash and obligations described in clause (1) above, (iii) require the securities being purchased by the City or cash held by the City to be pledged to the City, held in the City's name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City, and (iv) are placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the State of Texas; (9) certain bankers' acceptances with the remaining term of 270 days or less, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (10) commercial paper with a stated maturity of 270 days or less that is rated at least A- 1 or P-1 or the equivalent by either (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (11) no-load money market mutual funds registered with and regulated by the Securities and Exchange Commission that have a dollar weighted average stated maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, and (12) no-load mutual funds registered with the Securities and Exchange Commission that have an average weighted maturity of less than two years, invest exclusively in obligations described in the this paragraph, and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent. If specifically authorized in the authorizing document, bond proceeds may be invested in guaranteed investment contracts that have a defined termination date and are secured by obligations of the United States or its agencies and instrumentalities in an amount at least equal to the amount of bond proceeds invested under such contract, other than the prohibited obligations described in the next succeeding paragraph. The City may also be eligible to invest its funds in additional investments authorized by the Public Funds Investment Act as the same may be amended from time to time. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pools are rated no lower than AAA or AAA-m or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage -backed security collateral and pays no principal: (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage -backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years: and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Governmental bodies in the State are also authorized to implement securities lending programs if (i) the securities loaned under the program are 100% collateralized, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (6) of the first paragraph under this subcaption, (b) irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm not less than "A" or its equivalent, or (c) cash invested in obligations that are described in clauses (1) through (6) and (10) through (12) of the first paragraph under this subcaption, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to the governmental body, held in the name of the governmental body and deposited at the time the investment is made with the City or a third party designated by the City: (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. 30 INVESTMENT POLICIES... Under State law, the City is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management: and that includes a list of authorized investments for City funds, maximum allowable stated maturity of any individual investment and the maximum average dollar -weighted maturity allowed for pooled fund groups, methods to monitor the market price of investments acquired with public funds, a requirement for settlement of all transactions, except investment pool funds and mutual funds, on a delivery versus payment basis, and procedures to monitor rating changes in investments acquired with public funds and the liquidation of such investments consistent with the PFIA. All City funds must be invested consistent with a formally adopted "Investment Strategy Statement" that specifically addresses each fund's investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under State law, City investments must be made "with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived." At least quarterly the investment officers of the City shall submit an investment report detailing: (1) the investment position of the City on the date of the report, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, the ending market value, and the fully accrued interest of of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest City funds without express written authority from the City Council. ADDITIONAL PROVISIONS ... Under State law the City is additionally required to: (1) annually review its adopted policies and strategies; (2) adopt a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution; (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the City to: (a) receive and review the City's investment policy. (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the City and the business organization that are not authorized by the City's investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio and requires an interpretation of subjective investment standards) and (c) deliver a written statement in a form acceptable to the City and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the City's investment policy; (6) provide specific investment training for the City's designated Investment Officer; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (9) require local government investment pools to conform to the new disclosure, rating, net asset value. yield calculation, and advisory board requirements, and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. TABLE 15 - CURRENT INVESTMENTS As of December 31, 2014 the City's investable funds were invested in the following categories: Book M arket Type of Investment Value Percent Value Percent U.S. Government Agency Securities $ 37,030,113 35.28% $ 36,842,100 35.17% TexPool & TexStar & Lone Star 54,066,964 51.51% 54,066,964 51,61% Other 5,715,387 5.45% 5,702,087 5.44% Certificates of Deposit 8,147.804 7.76% 8,147,804 7.78% Totals $ 104,960,268 100.00% $ 104,758.955 100.00% 31 TAX MATTERS TAX EXEMPTION ...The delivery of the Obligations is subject to the opinion of Bond Counsel to the effect that interest on the Obligations for federal income tax purposes (1) will be excludable from gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of such opinion (the "Code"), pursuant to section 103 of the Code and existing regulations, published rulings, and court decisions, and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. A form of bond counsel's opinion is reproduced as Appendix C. The statutes, regulations, rulings, and court decisions on which such opinion is based are subject to change. Interest on the Obligations owned by a corporation will be included in such corporation's adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust, a real estate mortgage investment conduit, or a financial asset securitization investment trust ("FASIT"). A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by Section 55 of the Code will be computed. In rendering the foregoing opinions, Bond Counsel will rely upon representations and certifications of the City made in a certificate dated the date of delivery of the Obligations pertaining to the use, expenditure, and investment of the proceeds of the Obligations and will assume continuing compliance by the City with the provisions of the Ordinance subsequent to the issuance of the Obligations. The Ordinance contains covenants by the City with respect to, among other matters, the use of the proceeds of the Obligations and the facilities financed therewith by persons other than state or local governmental units, the manner in which the proceeds of the Obligations are to be invested, the periodic calculation and payment to the United States Treasury of arbitrage "profits" from the investment of proceeds, and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Obligations to be includable in the gross income of the owners thereof from the date of the issuance of the Obligations. Bond Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Service (the "IRS") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the IRS. The IRS has an ongoing program of auditing the tax-exempt status of the interest on tax-exempt obligations. If an audit of the Obligations is commenced, under current procedures the IRS is likely to treat the City as the "taxpayer," and the owners of the Obligations would have no right to participate in the audit process. In responding to or defending an audit of the tat -exempt status of the interest on the Obligations, the City may have different or conflicting interests from the owners of the Obligations. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit, regardless of its ultimate outcome. Except as described above, Bond Counsel expresses no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Obligations. Prospective purchasers of the Obligations should be aware that the ownership of tax-exempt obligations such as the Obligations may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tat credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. Existing law may change to reduce or eliminate the benefit to owners of the Obligations of the exclusion of interest on the Obligations from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Obligations. Prospective purchasers of the Obligations should consult with their own tax advisors with respect to any proposed or future changes in tax law. TAX ACCOUNTING TREATMENT OF DISCOUNT AND PREMIUM ON CERTAIN OBLIGATIONS ... The initial public offering price of certain Obligations (the "Discount Obligations") may be less than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Discount Obligation (assuming that a substantial amount of the Obligations of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Obligation. A portion of such original issue discount allocable to the holding period of such Discount Obligation by the initial purchaser will, upon the disposition of such Discount Obligation (including by reason of its payment at maturity), be treated as interest excludable from gross income, rather than as taxable gain, for federal income tax purposes, on the same terms and conditions as those for other interest on the Obligations described above under "Tax Exemption." Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Obligation, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Obligation and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during the tax year. 32 However, such interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation's alternative minimum tax imposed by Section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, S corporations with subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, owners of an interest in a FASIT, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. Moreover, in the event of the redemption, sale or other taxable disposition of a Discount Obligation by the initial owner prior to maturity, the amount realized by such owner in excess of the basis of such Discount Obligation in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Obligation was held) is includable in gross income. Owners of Discount Obligations should consult with their own tax advisors with respect to the determination of accrued original issue discount on Discount Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Discount Obligations. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on Discount Obligations may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. The initial public offering price of certain Obligations (the "Premium Obligations") may be greater than the amount payable on such Obligations at maturity. An amount equal to the difference between the initial public offering price of a Premium Obligation (assuming that a substantial amount of the Obligations of that maturity are sold to the public at such price) and the amount payable at maturity constitutes premium to the initial purchaser of such Premium Obligations. The basis for federal income tax purposes of a Premium Obligation in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Obligation. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser's yield to maturity. Purchasers of the Premium Obligations should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Obligations. QUALIFIED TAX-EXEMPT OBLIGATIONS FOR FINANCIAL INSTITUTIONS . . . Section 265 of the Code provides, in general, that interest expense to acquire or carry tax-exempt obligations is not deductible from the gross income of the owner of such obligations. In addition, section 265 of the Code generally disallows 100% of any deduction for interest expense which is incurred by `financial institutions" described in such section and is allocable, as computed in such section, to tax-exempt interest on obligations acquired after August 7, 1986. Section 265(b) of the Code provides an exception to this interest disallowance rule for interest expense allocable to tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) bonds) which are designated by an issuer as "qualified tax-exempt obligations." An issuer may designate obligations as "qualified tax-exempt obligations" only if the amount of the issue of which they are a part, when added to the amount of all other tax-exempt obligations (other than private activity bonds that are not qualified 501(c)(3) obligations and other than certain refunding bonds) issued or reasonably anticipated to be issued by the issuer during the same calendar year, does not exceed $10,000,000. The City will designate the Obligations as "qualified tax-exempt obligations" and will certify its expectation that the above - described $10,000,000 ceiling will not be exceeded. Accordingly, it is anticipated that financial institutions which purchase the Obligations will not be subject to the 100% disallowance of interest expense allocable to interest on the Obligations under section 265(b) of the Code. However, the deduction for interest expense incurred by a financial institution which is allocable to the interest on the Obligations will be reduced by 20% pursuant to section 291 of the Code. CONTINUING DISCLOSURE OF INFORMATION In the Ordinance, the City has made the following agreement for the benefit of the holders and beneficial owners of the Obligations. The City is required, pursuant to the Securities and Exchange Commission's Rule 15c2-12, to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under the agreement, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the "MSRB"), through its Electronic Municipal Market Access ("EMMA") system. Investors may access continuing disclosure information filed with the MSRB at www.emma.msrb.org. ANNUAL REPORTS ... The City will provide certain updated financial information and operating data to the MSRB annually. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general 33 type included in this Official Statement under Tables numbered 1 through 6 and 8 through 15 and in Appendix B. The City will update and provide this information within six months after the end of each fiscal year ending in or after 2015. The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB's internet web site or filed with the SEC as permitted by the Rule. The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time, and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix B or such other accounting principles as the City may be required to employ from time to time pursuant to state law or regulation. The City's current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will notify the MSRB of the change. NOTICE OF CERTAIN EVENTS ... The City will also provide the following to the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of ten (10) business days after the occurrence of the event, notice of any of the following events with respect to the Obligations: (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed of final determinations of taxability, Notices of Proposed Issue (IRS Form 5702-TEB) or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations; (7) modifications to rights of holders of the Obligations, if material; (8) bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar event of the City; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional paying agent/registrar or the change of name of a paying agent/registrar, if material. In addition, the City will provide to the MSRB, in a timely manner, notice of any failure by the City to provide the required annual financial information described above under "Annual Reports" and any notices of events in accordance with this section. For these purposes, any event described in (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. AVAILABILITY OF INFORMATION... The City has agreed to provide the foregoing financial and operating information only as described above. Investors may access continuing disclosure information filed with the MSRB free of charge at www.emma.msrb.org. LiMITATIONs AND AMENDMENTS ... The City has agreed to update information and to provide notices of material events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders of Obligations may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement from time to time to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if (i) the agreement, as amended, would have permitted an Initial Purchaser to purchase or sell Obligations in the offering described herein in compliance with the Rule, taking into account any amendments or interpretations of the Rule to the date of such amendment, as well as such changed circumstances, and (ii) either (a) the holders of a majority in aggregate principal amount of the respective outstanding Obligations consent to the amendment or (b) any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Obligations. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provisions of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an Initial Purchaser from lawfully purchasing or selling Obligations in the primary offering of the Obligations. If the City so amends its continuing disclosure agreement, it has agreed to include with the next financial information and operating data provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. 34 COMPLIANCE WITH PRIOR UNDERTAKINGS... During the last five years, the City has complied in all material respects with all continuing disclosure agreements made by it in accordance with the Rule. OTHER INFORMATION RATING The Obligations have been rated "AAA" by Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business ("S&P") without regard to credit enhancement. The rating reflects only the respective view of such organization and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by any or more of such rating company, if in the judgment of any or more company, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Obligations. LITIGATION It is the opinion of the City Attorney and City Staff that there is no pending litigation against the City that would have a material adverse financial impact upon the City or its operations. REGISTRATION AND QUALIFICATION OF OBLIGATIONS FOR SALE The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Obligations have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Obligations been qualified under the securities acts of any jurisdiction. The City assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. LEGAL INVESTMENTS AND ELIGIBILITY TO SECURE PUBLIC FUNDS IN TEXAS Section 1201.041 of the Public Security Procedures Act (Chapter 1201, Texas Government Code) provides that the Obligations are negotiable instruments and investment securities governed by Chapter 8, Texas Business and Commerce Code, and are legal and authorized investments for insurance companies, fiduciaries, and trustees, and for the sinking funds of municipalities or other political subdivisions or public agencies of the State. With respect to investment in the Obligations by municipalities or other political subdivisions or public agencies of the State, the Public Funds Investment Act, Chapter 2256, Texas Government Code, requires that the Certificates be assigned a rating of not less than "A" or its equivalent as to investment quality by a national rating agency (see "OTHER INFORMATION - Ratings" herein). In addition, various provisions of the Texas Finance Code provide that, subject to a prudent investor standard, the Obligations are legal investments for state banks, savings banks, trust companies with capital of one million dollars or more, and savings and loan associations. The Obligations are eligible to secure deposits of any public funds of the State, its agencies, and its political subdivisions, and are legal security for those deposits to the extent of their market value. No review by the City has been made of the laws in other states to determine whether the Obligations are legal investments for various institutions in those states. No representation is made that the Obligations will be acceptable to public entities to secure their deposits or acceptable to such institutions for investment purposes. The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to any such persons or entities or which might otherwise limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such persons or entities to purchase or invest in the Obligations for such purposes. LEGAL OPINIONS AND NO LITIGATION CERTIFICATE The City will furnish a complete transcript of proceedings had incident to the authorization and issuance of the Obligations including the unqualified approving legal opinion of the Attorney General of Texas approving the Initial Obligations and to the effect that the Obligations are valid and legally binding obligations of the City payable from the proceeds of an annual ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the City, and the limited pledge of the Net Revenues of the System provided in the Ordinance, and the approving legal opinion of Norton Rose Fulbright US LLP, Bond Counsel, to like effect and to the effect that the interest on the Obligations will be excludable from gross income for federal income tax purposes under Section 103(a) of the Code, subject to the matters described under "TAX MATTERS" herein, including the alternative minimum tax on corporations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations will also be furnished. The form of Bond Counsel's opinion is attached hereto as Appendix C. The legal fee to be paid Bond Counsel for services rendered in connection with the issuance of the Obligations is contingent upon the sale and delivery of the Obligations. The legal opinion of Bond Counsel will accompany 35 the Obligations deposited with DTC or will be printed on the definitive Obligations in the event of the discontinuance of the Book - Entry -Only System. Bond Counsel was engaged by, and only represents, the City. Except as noted below, Bond Counsel did not take part in the preparation of the Official Notice of Sale and Bidding Instructions, the Official Bid Form and the Preliminary Official Statement, and such firm has not assumed any responsibility with respect thereto or undertaken independently to verify any of the information contained herein except that in its capacity as Bond Counsel, such firm has reviewed the information appearing under captions "PLAN OF FINANCING" (except under the subcaption "Sources and Uses of Certificate Proceeds'"), "THE OBLIGATIONS" (except under the subcaptions "Book -Entry -Only System," and `Obligationholders' Remedies"), "TAX MATTERS," "CONTINUING DISCLOSURE OF INFORMATION" (except under the subcaption "Compliance With Prior Undertakings") and the subcaptions "Legal Opinions and No Litigation Certificate" (except for the last sentence of the first paragraph thereof), "Registration and Qualification of Obligations for Sale" and "Legal Investments And Eligibility To Secure Public Funds In Texas," under the caption "OTHER INFORMATION" and such firm is of the opinion that the information relating to the Obligations and legal matters contained under such captions and subcaptions is an accurate and fair description of the laws and legal issues addressed therein and, with respect to the Obligations, such information conforms to the Ordinance. The legal opinion to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. AUTHENTICITY OF FINANCIAL DATA AND OTHER INFORMATION The financial data and other information contained herein have been obtained from City records, audited financial statements and other sources which are believed to be reliable. There is no guarantee that any of the assumptions or estimates contained herein will be realized. All of the summaries of the statutes, documents and resolutions contained in this Official Statement are made subject to all of the provisions of such statutes, documents and resolutions. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. Reference is made to original documents in all respects. FINANCIAL ADVISOR First Southwest Company, LLC is employed as Financial Advisor to the City in connection with the issuance of the Obligations. The Financial Advisor's fee for services rendered with respect to the sale of the Obligations is contingent upon the issuance and delivery of the Obligations. First Southwest Company, LLC, in its capacity as Financial Advisor, does not assume any responsibility for the information, covenants and representations contained in any of the legal documents with respect to the federal income tax status of the Obligations, or the possible impact of any present, pending or future actions taken by any legislative or judicial bodies. The Financial Advisor to the City has provided the following sentence for inclusion in this Preliminary Official Statement. The Financial Advisor has reviewed the information in this Preliminary Official Statement in accordance with, and as part of, its responsibilities to the City and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. INITIAL PURCHASER FOR THE CERTIFICATES After requesting competitive bids for the Certificates, the City accepted the bid of (the "Initial Purchaser") to purchase the Certificates at the interest rates shown on page 2 of the Official Statement at a price of (%) of par plus a cash premium (if any) of $ . The Initial Purchaser can give no assurance that any trading market will be developed for the Certificates after their sale by the City to the Initial Purchaser. The City has no control over the price at which the Certificates are subsequently sold and the initial yield at which the Certificates will be priced and reoffered will be established by and will be the responsibility of the Initial Purchaser. FORWARD -LOOKING STATEMENTS DISCLAIMER The statements contained in this Preliminary Official Statement, and in any other information provided by the City, that are not purely historical, are forward -looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward -looking statements. All forward -looking statements included in this Preliminary Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update an), such forward -looking statements. The City's actual results could differ materially from those discussed in such forward -looking statements. The forward -looking statements included herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying 36 assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial, and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward -looking statements included in this Preliminary Official Statement will prove to be accurate. CERTIFICATION OF THE OFFICIAL STATEMENT At the time of payment for and delivery of the Obligations, the City will furnish a certificate, executed by a proper officer, acting in their official capacity, to the effect that to the best of his or her knowledge and belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Obligations and the acceptance of the best bid therefor, and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. The Ordinance authorizing the issuance of the Obligations will also approve the form and content of this Official Statement, and any addenda, supplement or amendment thereto, and authorize its further use in the reoffering of the Obligations by the Initial Purchaser(s). ATTEST: City Secretary City of Southlake. Texas Mayor City of Southlake, Texas 37 ISSUE PRICE CERTIFICATE The undersigned hereby certifies with respect to the sale of CITY OF SOUTHLAKE, TEXAS, TAX AND WATERWORKS AND SEWER SYSTEM (LIMITED PLEDGE) REVENUE CERTIFICATES OF OBLIGATIONS, SERIES 2015 (the "Certificates"), issued in aggregate principal amount of $ , as follows: 1. The undersigned is the underwriter or the manager of the syndicate of underwriters which has purchased the Certificates from the City of Southlake, Texas (the "Issuer") at competitive sale. 2. The undersigned and/or one or more other members of the underwriting syndicate, if any, have made a bona fide offering to the public of all of the Certificates of each maturity at the respective prices set forth below. 3. The initial offering price (expressed as a percentage of principal amount or yield and exclusive of accrued interest) for the Certificates of each maturity at which a substantial amount (at least 10%) of the Certificates of such maturity was sold to the public is as set forth below. Principal Amount Year of Maturing Maturitv 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Offering Price %/Yield Principal Amount Year of Maturine Maturitv 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Offering Price /Yield d. The term "public," as used herein, means persons other than bondhouses, brokers, dealers, and similar persons or organizations acting in the capacity of underwriters or wholesalers. 5. The offering prices described above reflect current market prices at the time of such sales. 6. The undersigned and/or one or more other members of the underwriting syndicate, as the case may be, (have)(have not) purchased bond insurance for the Certificates. The bond insurance, if any, has been purchased from (the "Insurer") for a premium cost of $ (net of any nonguarantee cost, e.g., rating agency fees). The amount of such cost is set forth in the Insurer's commitment and is separately stated from all other fees or charges payable to the Insurer. The premium does not exceed a reasonable charge for the transfer of credit risk taking into account payments charged by guarantors in comparable transactions (including transactions in which a guarantor has no involvement other than as a guarantor). The present value of the debt service savings expected to be realized as a result of such insurance, discounted at a rate equal to the yield on the Certificates which results after recovery of the insurance premium, exceeds the present value of the bond insurance premium. 7. The undersigned understands that the statements made herein will be relied upon by the Issuer in its effort to comply with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the excludability of interest on the Certificates from the gross income of their owners. EXECUTED and DELIVERED this day of 2015. By (Name of Underwriter or Manager) (Title) w Summary Southlake Texas; General Obligation Primary Credit Analyst Ann M Richardson, Dallas (214) 765-5878; ann.richardson@standardandpoors.com Secondary Contact Brian J Marshall, Dallas (1) 214-871-1414; brian.marshall@standardandpoors.com Table Of Contents Rationale Outlook Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 23, 2015 1 1395268 1302177082 Southlake Texas; General Obligation US$3.225 mil Tax and Waterworks and Swr Sys (Ltd Pledge) Rev Certs of Obl ser 2015 dtd 05/01/2015 due 02/15/2035 ong Term Rating AAA/Stable New Southlake go rfdg bnds ser 2014 dtd 05/01/2014 due 02/15/2026 ong Term Rating AAA/Stable Affirmed Southlake GO ong Term Rating AAA/Stable Affirmed Southlake GO ong Term Rating AAA/Stable Affirmed Southlake GO Unenhanced Rating AAA(SPUR)/Stable Affirmed Many issues are enhanced by bond insurance. Rationale Standard & Poor's Ratings Services assigned its 'AAA' long-term rating to Southlake, Texas' series 2015 tax and waterworks and sewer system revenue certificates of obligation. At the same time, Standard & Poor's affirmed its 'AAA' long-term rating and underlying rating (SPUR) on the city's previously issued GO debt. The outlook is stable. We understand that officials will use certificate proceeds to fund the construction of various public works projects. The certificates constitute direct obligations of the city, payable from a combination of levy and collection of annual ad valorem tax and a limited pledge of the net revenues from the city's combined waterworks and sewer system. The rating reflects our view of Southlake's: • Very strong economy, with access to a broad and diverse metropolitan statistical area (MSA); • Very strong management, with strong financial policies; • Very strong budgetary performance, with operating surpluses in the general fund and at the total governmental fund level; • Very strong budgetary flexibility, with an available fund balance in fiscal 2014 of 72% of operating expenditures; • Very strong liquidity, with total government available cash of 1.8x total governmental fund expenditures and 6.7x governmental debt service, and access to external liquidity we consider exceptional; • Weak debt and contingent liability position, with debt service carrying charges of 27.3% and net direct debt that is 153.9% of total governmental fund revenue, but rapid amortization with 72.8% of debt scheduled to be retired in 10 years; and • Strong institutional framework score. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 23, 2015 2 13952681 302177082 Summary: Southlake Texas; General Obligation Very strong economy We consider Southlake's economy very strong. Southlake, with an estimated population of 27,833, is located in Denton and Tarrant counties in the Dallas -Fort Worth -Arlington, Texas metropolitan statistical area (MSA), which we consider to be broad and diverse. The city has a projected per capita effective buying income of 289% of the U.S. level, which we view as extremely high and a positive credit factor and per capita market value of $221,373. Overall, the city's market value grew by 6.2% over the past year to $6.2 billion in 2015. The weight -averaged unemployment rate of the counties was 6.0% in 2013. Growth projections indicate the city will achieve build out with a population of about 35,000, which city officials estimate will occur between 2025 and 2030. Population growth has triggered retail and commercial construction along several thoroughfares, which, in addition to new home development, has contributed to Southlake's steady assessed valuation (AV) growth. Very strong management We view the city's management as very strong, with strong financial policies and practices under our Financial Management Assessment methodology, indicating financial practices are strong, well embedded, and likely sustainable. Management uses historical trends, departmental needs, and statistical information to forecast revenue and expenditures. Management has developed an informal long-term financial plan and a formal five-year capital improvement plan with identified funding sources. Officials monitor the budget monthly and make adjustments midyear. The city has a written, in-depth, and conservative investment policy, and makes quarterly updates to the governing body. Debt management guidelines outline when city officials can issue debt. A formal reserve policy targets reserves of at least 25% of operating expenditures for emergencies. Very strong budgetary performance Southlake's budgetary performance is very strong in our opinion, with operating surpluses of 21% in the general fund and 18.4% across all governmental funds in fiscal 2014. After adjusting for one-time capital expenses and recurring revenue sources, we believe Southlake will experience similar results in fiscal 2015 given the continuous residential and commercial growth in the city. The city also benefits from the retail sales, which comprised about 30% of general fund revenues in fiscal 2014 and have demonstrated stable growth in past years. Very strong budgetary flexibility Southlake's budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2014 of 72% of operating expenditures, or $24.5 million. We expect the available fund balance will remain above 30% of expenditures for the current and next fiscal years, which we view as a positive credit factor. Since 2006, the city has been designating funds for strategic initiatives. The source of these funds is reserves in excess of 25% of general fund expenditures. The funds are used for one-time high impact projects involving infrastructure maintenance, community enhancement, and capital acquisition, and are reported as assigned fund balance in the general fund. In fiscal 2014, Southlake assigned about $7.9 million to its strategic initiatives, which we believe will be WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 23, 2015 3 13952681 302177082 Summary: Southlake Texas; General Obligation used to fund future capital projects. Despite any use of these assigned funds, we believe the city's reserves will remain very strong over the next two years. Very strong liquidity In our opinion, Southlake's liquidity is very strong, with total government available cash of 1.8x total governmental fund expenditures and 6.7x governmental debt service in 2014. In our view, the city has exceptional access to external liquidity if necessary. Weak debt and contingent liability profile In our view, Southlake's debt and contingent liability profile is weak. Total governmental fund debt service is 27.3% of total governmental fund expenditures, and net direct debt is 153.9% of total governmental fund revenue. Approximately 72.8% of the direct debt is scheduled to be repaid within 10 years, which is in our view a positive credit factor. Southlake's combined pension and other postemployment benefits contributions totaled 3.9% of total governmental fund expenditures in 2014. The city made its full annual required pension contribution in 2014. Strong institutional framework We view the institutional framework score for Texas municipalities as strong. Outlook The stable outlook reflects our view of Southlake's very strong budgetary flexibility and very strong budgetary performance, which is supported by strong management. The 'AAA' rating also reflects the city's very strong economy that, in addition to Southlake's access to the Dallas -Fort Worth MSA, reflects very strong income levels. We do not expect to change the rating in the next two years because we believe Southlake will maintain very strong reserve levels, and will continue to have at least balanced operations. Although we view it as unlikely within the two-year outlook, we could take a rating action if additional debt issuances were to significantly increase fixed -cost carrying charges to a level we viewed as elevated and unmanageable and finances materially decreased. Related Criteria And Research Related Criteria • Ratings Above The Sovereign: Corporate And Government Ratings —Methodology And Assumptions Nov. 19 2013 • USPF Criteria: Local Government GO Ratings Methodology And Assumptions, Sept. 12, 2013 • USPF Criteria: Limited -Tax GO Debt, Jan. 10, 2002 Related Research • Institutional Framework Overview: Texas Local Governments • S&P Public Finance Local GO Criteria: How We Adjust Data For Analytic Consistency, Sept. 12, 2013 Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 23, 2015 4 13952681 302177082 the Ratings search box located in the left column. W W W. STANDARDANDPOORS. COM/RATINGSDIRECT Summary: Soutblake Texas; General Obligation APRIL 23, 2015 5 13952681 302177082 Copyright © 2015 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved. No content (including ratings, credit -related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third -party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit -related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT APRIL 23, 2015 6 1396268 1302177082 Texas City and County Market Commentary FirstSoui hwest APRIL 27 - MAY" 1, 2015 May 1st and it could not have come at a better time. Municipals and April did not "get along" very well as yields moved higher by 1- to-25 basis points along the curve. The last week in April has been the icing on the cake with the FOMC not raising rates and the prospect of any rate increase appearing to be in the distant future. The fundamentals for a rate hike are not in place for a rate hike and on the economic front, numbers continue to be mixed. On the surface the Fed's inaction and the mixed economic numbers should bode well for tax -exempts and Treasuries. Perfect storm for the status quo as we have become accustomed to this historically low rate environment. Well, as one would have guessed, tax -exempts traded off this week along with our Treasury brethren. Municipals are higher in yield as measured by our benchmark 10yr AAA MMD scale at 2.12% or up 12 basis points and the 30yr posted a 3.05% or up 15 basis points for the week. The tone of the market continues to be defensive with most underwriters not looking to take down bonds. Transactions are getting priced to go and the underwriter is hoping to get 1X subscribed and hopefully move on to the next transaction. If you get trapped in this environment with a transaction, you find yourself chasing orders and are seemingly a world away in price. This comes during a week where the consensus was, given the lighter -than -normal calendar, it would give market participants an opportunity to shed some of the overhang that had been underwritten over the past two weeks. The downward slide started on Monday and seemed to pick up steam as the week wore on. One has to wonder if this week was any indication of what's to come with slightly over $8 billion set to price this coming week. Participants will be looking for leadership in the form of stability as underwriters will keep their hands and feet inside the moving vehicle and keep their seatbelts securely fastened. Selected Recent Texas City and County Sales �� 1 Yr 3 Yr 6 Yr .. 10 Yr '. 20 Yr : 26 Yr 30 Yr New Braunfels GO LT Aa2/AA-/NR 4127 $29,260 T/E 0.35% 1,10% 1.65% 2.53% 3.55% - - Spring Valley Village GO LT NR/AAA/NR 4/28 $13,475 T/E 0.30% 1.00% 1.45% 2.35% 3.40% Pflllgerville GO LT - Al/AA/NR 4128 $25,150 T/E 0.59% 1.36% 1.86% 2.73% 3.78% 3.53% 4.10% Laredo GO LT Aa2/AA/NR 4/29 $64,740 T/E - 1.11% 1.67% 2.57% Tax Exempt Yield Curve Bank Qualified vs. Not Bank Qualified Pricing Insured "A " Underl,ving as of May 1, 2015 5.00 4.00 3.00 2.00 1.00 0.00T- ti°^6h�# 1�� ti4�4 4'6 P ti°p�ry ti°°� 4-Year History of Weekly Floating Rate Index (SIFMA) vs. 20-Year Fixed Rate (BBI) and Bond Buyer 25-Bond Revenue Bond Index (RBI) Source: Thomson Reuters and The Bond Buyer 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 4 a 4 4 'These graphs depict historical interest rates and their respective relationships. Future interest rates are dependent upon many factors such as, but not limited to, interest rate trends, tax rates, supply, changes in laws, rules and regulations, as well as changes in credit quality and rating agency considerations. The effect of such changes in such assumptions may be material and could affect the projected results. These results should be viewed with these potential changes in mind as well as the understanding that there may be interruptions in the short term market or no market may exist at all. Texas City and County Market Commentary 4 M1. APRIL 27 - MA1' 1, 2015 Commercial Paper Pool Comparison 0.50% as of May 1, 2015 0.40% 0.30% 0.20% 0.10% 0.00% 120% 1.05% 0.90 % 075% Ho % 045% 030% 015% o 00 % ■ LOGIC i TexPool Prime n Lone Star Corporate Overnight ■ MBIA Texas Class 7-Days 1 Month 3 Months 6 Months 1 Year 3 Year Yields on Collateralized Investment Agreements* 3 6 9 12 18 24 36 Weighted Average Life (Months) 'Collateralized guaranteed investment contracts consists of United States Treasury securities and AAA -rated agency securities. Government Investment Pool Average Rate Summary 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% Market Movers Source Bloombere 7-Days 1 Month 3 Months 6 Months 1 Year 3 Year 4/28 1 Consumer Confidence Index 102.5 95.2 4/29 GDP Annualized QoQ 1.00% 0,20% 4/29 Personal Consumption 1.80% 1.90% 4/29 FOMC Rate Decision (Upper Bound) 0.25% 0.25% 4/30 Employment Cost Index 0.60% 0.70% 4/30 Personal income 0.20% 0.00% 4/30 Personal Spending 0.50% 0.70% 5/1 ISM Manufacturing 52 51.5 5/1 ISM Prices Paid 42 40.5 5/1 U. of Mich. Sentiment 96 95.9 5/6 ADP Employment Change 190K -- 5/6 Nonfarm Productivity -1.90% - 5/6 Unit Labor Costs 4.10% 5/8 Change in Nonfarm Payrolls 230K - 5/8 Change in Private Payrolls 223K 5/8 Change in Manufact. Payrolls 5K - 5/8 Unemployment Rate 5.40% 5/8 Average Hourly Earnings MoM 0.20% 5/8 Average Hourly Earnings YoY 2.30% 5/8 I Average Weekly Hours All Employees 1 34.5 Interest Rates for Short Term Debt Issues Contact as of May 1, 2015 Jack Addams Days 7 30 1 60 1 90 120 1 150 1 180 1 210 240 360 Direct: 214/953-4102 Taxable(LISOR) (Bloomberg) 0.14% 0.18% 0.23% 0.27% -- -- 0.40% - 0.69% Toll Free: 800.678.3792 Tax -Exempt MIG1 0.11% 0.09% 0.10% 0.10% 0.10% 0.10% 0.12% 0.14% 0.16% 0.23% jack.addams@firstsw.com (Thomson/Reuters) FirstSW.com Disclosure: This paper is intended for issuers for educational and informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute FirstSouthwest views as of the date of the report and are subject to change without notice. This paper represents historical Information only and is not an indication of future performance. 2 Texas City and County Market Commentary FirstSouthwest APRIL 27 - MAY 1, 2015 There's little agreement on exactly when the Fed begins raising the overnight funds rate. It could be as soon as June or late as a year from now. Quite a bit hinges on whether the recent slowdown in the economy is due to temporary factors or a bigger underlying problem. Last Wednesday, the initial reading of first quarter economic growth was released. At +0.2%, annualized GDP for the quarter turned out to be quite a bit weaker than the +1.0% median forecast, and well below the +5.0% third quarter and +2.2% fourth quarter advances. Personal consumption, the biggest component of GDP, declined from a +4.4% growth rate to +1.9%, with spending on services was much higher than spending on goods. Business investment fell by -3.4%, while residential spending rose by just +1.3%. Exports dropped -7.2% as dollar strength continued to hamstring foreign buyers of U.S. goods, and government spending fell by -0.8% as state and local governments tightened their belts yet again. Interestingly, business inventories were positive contributors. If inventory build-up is excluded, real final sales tumbled -0.5%. The fact that inventory accumulation added +0.7 to overall GDP in the first quarter, suggests the expected second quarter rebound might not be as solid as most had assumed. The Fed met last week in the third scheduled FOMC meeting of the year. On Wednesday afternoon, Fed officials emerged with a less positive assessment of the economy than they'd taken six weeks ago. The Official Statement indicated that Fed officials believe the U.S. economy slowed during the winter, "the pace of job gains moderated" and household spending "declined." All of these comments were variations on what they'd declared in March. They also reiterated (again) that these were transitory factors, and that future economic activity would likely expand at a moderate pace, while inflation would revert back to the 2% target when the price of crude oil and imported goods move higher. The possibility of a June hike is still technically in play as the committee didn't specifically say otherwise, although recent weakness in the economy suggests September 171h is a better bet. In fact, the majority of economists seem to be targeting this date. Of course, tightening in four -and -a -half months will depend on the strength of the subsequent rebound. There are a number of economists expecting the first increase won't be for another year. With the last GDP reading at just +0.2%, this isn't hard to imagine. The April employment report will be released this Friday. After the disappointing March report, investors are watching to see if job growth returns to the healthier pace that had prevailed for much of the past year. Last Thursday, initial jobless claims for the week ending April 25th fell to 262k, the lowest number of unemployment workers filing for first-time benefits in 15 years. Historically, this indicates a healthy labor market and hints at a solid jobs report for March. Also on Thursday, the national purchasing managers' survey was released. The ISM factory index for April remained at a 22-month low of 51.5 as a strong dollar continued to hinder exports. On a positive note, the new orders index and the production index (both considered to be leading indicators) rose in April, suggesting that the overall index could move higher in the near future. Unfortunately, the counterbalance to this was the employment index which fell to the lowest level since September 2009. Signs of improvement in the European economy nudged foreign bond yields higher and U.S. yields followed the same path as the 10-year Treasury -note yield rose above 2% for the first time in six weeks. PARITY Result Screen Page 1 of I _.._.__,___.„,.,, 1 _.,,....,. , - P 11:48:57 a.m. CDST 1 Bid Results Upcoming Calendar II Overview '11I Compare �1 Summary Southlake $3,200,000 Tax And Waterworks and Sewer System (Limited Pledged) Revenue Certificates of Obligation, Series 2015 The following bids were submitted using PARITY and displayed ranked by lowest TIC. Click on the name of each bidder to see the respective bids. Bid Award* Bidder Name TIC Raymond James & Associates, Inc. 2.Q16928 11 Robert W. Baird & Co., Inc. 2.720214 SAMCO Capital Markets 2.798351 FTN Financial Capital Markets 2.827256 Fidelity Capital Markets 3.105570 *Awarding the Bonds to a specific bidder will provide you with the Reoffering Prices and Yields. 1981-2002 i-Deal LLC. All rights reserved. Trademarks https: //www.newi s suehome. i-deal. com/Parity/asp/main. asp?frame=content&page=parityRes... 5/5/2015 PARITY Bid Form Page 1 of 2 j Upcoming Calendar -j Overview li Result Ij Excel _1 Raymond James & Associates, Inc. - Dallas, TX's Bid -42ARrI Southlake $3,200,000 Tax And Waterworks and Sewer System (Limited Pledged) Revenue Certificates of Obligation, Series 2015 For the aggregate principal amount of $3,200,000.00, we will pay you $3,360,150.80, plus accrued interest from the date of issue to the date of delivery. The Bonds are to bear interest at the following rate(s): Maturity Date Amount $ Coupon % 02/15/2016 100M 4.0000 02/15/2017 125M 4.0000 02/15/2018 125M 4.0000 02/15/2019 130M 4.0000 02/15/2020 130M 4.0000 22/15/2021 02/15/2022 275M 3.7500 02/15/2023 02/15/2024 285M 3.6250 02/15/2025 02/15/2026 02/15/2027 465M 2.7500 02/15/2028 02/15/2029 345M 2.7500 02/15/2030 02/15/2031 375M 3.0000 02/15/2032 02/15/2033 405M 3.1250 02/15/2034 02/15/2035 440M 3.2500 Total Interest Cost: $1,143,579.38 Premium: $160,150.80 Net Interest Cost: $983,428.58 TIC: 2.616928 Time Last Bid Received On:05/05/2015 11:29:48 CDST This proposal is made subject to all of the terms and conditions of the Official Bid Form, the Official Notice of Sale, and the Preliminary Official Statement, all of which are made a part hereof. Bidder: Raymond James & Associates, Inc., Dallas , TX Contact: Randall Hawkins Title: Telephone: 214-365-5546 https://www.newissuehome. i-deal.com/Parity/asp/main. asp?frame=content&page=parityBid... 5/5/2015 PARITY Bid Form Page 2 of 2 Fax: Issuer Name: City of Southlake Accepted By: Date: Company Name: Accepted By: Date: "1981-2002 i-Dea! LLC, All rights reserved, Trademarks https://www.newissuehome. i-deal. com/Parity/asp/main. asp? frame=content&page=parityBid... 5/5/2015 F ml:Southwvest4:0 TABLE OF CONTENTS City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- Report Page Sourcesand Uses of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Bond Summary Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Bond Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Bond Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Proof of Arbitrage Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Form 8038 Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-S35_CO) Iirst1S-outhwest4* SOURCES AND USES OF FUNDS City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- DatedDate 06/02/2015 Delivery Date 06/02/2015 Sources: Bond Proceeds: Par Amount 3,295,000.00 Premium 194,887.70 3,489,887.70 Uses: Project Fund Deposits: Project Fund 3,400,000.00 Delivery Date Expenses: Cost of Issuance 63,065.74 Underwriter's Discount 26,821.96 89,887.70 3,489,887.70 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:G0-S15_C0) Page 1 Rml SouthwestIM BOND SUMMARY STATISTICS City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- DatedDate 06/02/2015 Delivery Date 06/02/2015 First Coupon 02/15/2016 Last Maturity 02/15/2035 Arbitrage Yield 2.431620% True Interest Cost (TIC) 2.601203% Net Interest Cost(NIC) 2.684229% All -In TIC 2.799941% Average Coupon 3.134860% Average Life (years) 11.319 Duration of Issue (years) 9.404 Par Amount 3,295,000.00 Bond Proceeds 3,489,887.70 Totallnterest 1,169,166.35 Net Interest 1,001,100.61 Bond Years from Dated Date 37,295,652.78 Bond Years from Delivery Date 37,295,652.78 Total Debt Service 4,464,166.35 Maximum Annual Debt Service 228,441.25 Average Annual Debt Service 226,575.48 Underwriter's Fees (per $1000) Average Takedown Other Fee 8.140200 Total Underwriter's Discount 8.140200 Bid Price 105.100629 Bond Component Par Value Price Average Coupon Average Life Serial Certificates 610,000.00 108.109 4.000% 2.834 Term Certificate 2022 285,000.00 113.271 3.750% 6.212 Term Certificate 2024 315,000.00 114.638 3.625% 8.211 Term Certificate 2027 510,000.00 104.780 2.750% 10.722 Term Certificate 2029 360,000.00 102.574 2.750% 13.203 Term Certificate 2031 385,000.00 102.974 3.000% 15.209 Term Certificate 2033 405,000.00 102.742 3.125% 17.209 Term Certificate 2035 425,000.00 101.245 3.250% 19.209 3,295,000.00 11.319 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-S15_CO) Page 2 Rmt5outhwest4* BOND SUMMARY STATISTICS City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- All -In Arbitrage TIC TIC Yield Par Value + Accrued Interest + Premium (Discount) Underwriter's Discount Cost of Issuance Expense Other Amounts Target Value Target Date Yield 3,295,000.00 3,295,000.00 3,295,000.00 194,887.70 194,887.70 194,887.70 -26,821.96-26,821.96 -63,065.74 3,463,065.74 06/02/2015 2.601203% 3,400,000.00 3,489,887.70 06/02/2015 06/02/2015 2.799941% 2.431620% May 5, 2015 12:38 pm Prepared by First5outhwest (eaa) (Finance 7.012 Southlake 2015:GO-S15_CO) Page 3 FiMtSouthweStO BOND PRICING City of Southlake, Texas Bond Component Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- MaturityYield to Call Call Date Amount Rate Yield Price Maturity Date Price Premium (-Discount) Serial Certificates: 02/15/2016 100,000 4.000% 0.400% 102.523 2,523.00 02/15/2017 120,000 4.000% 0.550% 105.838 7,005.60 02/15/2018 125,000 4.000% 1.000% 107.978 9,972.50 02/15/2019 130,000 4.000% 1.150% 110.301 13,391.30 02/15/2020 135,000 4.000% 1.300% 112.276 16,572.60 610,000 49,465.00 Term Certificate 2022: 02/15/2021 140,000 3.750% 1.650% 113.271 18,579.40 02/15/2022 145,000 3.750% 1.650% 113.271 19,242.95 285,000 37,822.35 Term Certificate 2024: 02/15/2023 155,000 3.625% 1.800% 114.638 22,688.90 02/15/2024 160,000 3.625% 1.800% 114.638 23,420.80 315,000 46,109.70 Term Certificate 2027: 02/15/2025 165,000 2.750% 2.200% 104.780 C 2.282% 02/15/2025 100.000 7,887.00 02/15/2026 170,000 2.750% 2.200% 104.780 C 2.282% 02/15/2025 100.000 8,126.00 02/15/2027 175,000 2.750% 2.200% 104.780 C 2.282% 02/15/2025 100.000 8,365.00 510,000 24,378.00 Term Certificate 2029: 02/15/2028 180,000 2.750% 2.450% 102.574 C 2.526% 02/15/2025 100.000 4,633.20 02/15/2029 180,000 2.750% 2.450% 102.574 C 2.526% 02/15/2025 100.000 4,633.20 360,000 9,266.40 Term Certificate 2031: 02/15/2030 190,000 3.000% 2.650% 102.974 C 2.765% 02/15/2025 100.000 5,650.60 02/15/2031 195,000 3.000% 2.650% 102.974 C 2.765% 02/15/2025 100.000 5,799.30 385,000 11,449.90 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:G0-S35_C0) Page 4 Bond Component BOND PRICING City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- MaturityYield to Call Call Premium Date Amount Rate Yield Price Maturity Date Price (-Discount) Term Certificate 2033: 02/15/2032 200,000 3.125% 2.800% 102.742 C 2.925% 02/15/2025 100.000 5,484.00 02/15/2033 205,000 3.125% 2.800% 102.742 C 2.925% 02/15/2025 100.000 5,621.10 405,000 11,105.10 Term Certificate 2035: 02/15/2034 210,000 3.250% 3.100% 101.245 C 3.164% 02/15/2025 100.000 2,614.50 02/15/2035 215,000 3.250% 3.100% 101.245 C 3.164% 02/15/2025 100.000 2,676.75 425,000 5,291.25 3,295,000 194,887.70 Dated Date Delivery Date First Coupon Par Amount Premium Production Underwriter's Discount Purchase Price Accrued Interest Net Proceeds 06/02/2015 06/02/2015 02/15/2016 3,295,000.00 194,887.70 3, 489, 88 7.70 105.914649 % -26,821.96-0.814020% 3,463, 065.74 105.100629 % 3,463,065.74 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-515_CO) Page 5 BOND DEBT SERVICE City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- PeriodEnding Principal Coupon Interest Debt Service 09/30/2016 100,000 4.000% 128,441.25 228,441.25 09/30/2017 120,000 4.000% 102,050.00 222,050.00 09/30/2018 125,000 4.000% 97,150.00 222,150.00 09/30/2019 130,000 4.000% 92,050.00 222,050.00 09/30/2020 135,000 4.000% 86,750.00 221,750.00 09/30/2021 140,000 3.750% 81,425.00 221,425.00 09/30/2022 145,000 3.750% 76,081.25 221,081.25 09/30/2023 155,000 3.625% 70,553.13 225,553.13 09/30/2024 160,000 3.625% 64,843.76 224,843.76 09/30/2025 165,000 2.750% 59,675.01 224,675.01 09/30/2026 170,000 2.750% 55,068.76 225,068.76 09/30/2027 175,000 2.750% 50,325.01 225,325.01 09/30/2028 180,000 2.750% 45,443.76 225,443.76 09/30/2029 180,000 2.750% 40,493.76 220,493.76 09/30/2030 190,000 3.000% 35,168.76 225,168.76 09/30/2031 195,000 3.000% 29,393.76 224,393.76 09/30/2032 200,000 3.125% 23,343.76 223,343.76 09/30/2033 205,000 3.125% 17,015.63 222,015.63 09/30/2034 210,000 3.250% 10,400.00 220,400.00 09/30/2035 215,000 3.250% 3,493.75 218,493.75 3,295,000 1,169,166.35 4,464,166.35 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-S35_CO) Page 6 runssmahwest4* BOND DEBT SERVICE City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- PeriodAnnual Ending Principal Coupon Interest Debt Service Debt Service 02/15/2016 100,000 4.000% 76,216.25 176,216.25 08/15/2016 52,225.00 52,225.00 09/30/2016 228,441.25 02/15/2017 120,000 4.000% 52,225.00 172,225.00 08/15/2017 49,825.00 49,825.00 09/30/2017 222,050.00 02/15/2018 125,000 4.000% 49,825.00 174,825.00 08/15/2018 47,325.00 47,325.00 09/30/2018 222,150.00 02/15/2019 130,000 4.000% 47,325.00 177,325.00 08/15/2019 44,725.00 44,725.00 09/30/2019 222,050.00 02/15/2020 135,000 4.000% 44,725.00 179,725.00 08/15/2020 42,025.00 42,025.00 09/30/2020 221,750.00 02/15/2021 140,000 3.750% 42,025.00 182,025.00 08/15/2021 39,400.00 39,400.00 09/30/2021 221,425.00 02/15/2022 145,000 3.750% 39,400.00 184,400.00 08/15/2022 36,681.25 36,681.25 09/30/2022 221,081.25 02/15/2023 155,000 3.625% 36,681.25 191,681.25 08/15/2023 33,871.88 33,871.88 09/30/2023 225,553.13 02/15/2024 160,000 3.625% 33,871.88 193,871.88 08/15/2024 30,972.88 30,971.88 09/30/2024 224,843.76 02/15/2025 165,000 2.750% 30,971.88 195,971.88 08/15/2025 28,703.13 28,703.13 09/30/2025 224,675.01 02/15/2026 170,000 2.750% 28,703.13 198,703.13 08/15/2026 26,365.63 26,365.63 09/30/2026 225,068.76 02/15/2027 175,000 2.750% 26,365.63 201,365.63 08/15/2027 23,959.38 23,959.38 09/30/2027 225,325.01 02/15/2028 180,000 2.750% 23,959.38 203,959.38 08/15/2028 21,484.38 21,484.38 09/30/2028 225,443.76 02/15/2029 180,000 2.750% 21,484.38 201,484.38 08/15/2029 19,009.38 19,009.38 09/30/2029 220,493.76 02/15/2030 190,000 3.000% 19,009.38 209,009.38 08/15/2030 16,159.38 16,159.38 09/30/2030 225,268.76 02/15/2031 195,000 3.000% 16,159.38 211,159.38 08/15/2031 13,234.38 13,234.38 09/30/2031 224,393.76 02/15/2032 200,000 3.125% 13,234.38 213,234.38 08/15/2032 10,109.38 10,109.38 09/30/2032 223,343.76 02/15/2033 205,000 3.125% 10,109.38 215,109.38 08/15/2033 6,906.25 6,906.25 09/30/2033 222,015.63 02/15/2034 210,000 3.250% 6,906.25 216,906.25 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-S35_CO) Page 7 rimtSouthwesi:4* BOND DEBT SERVICE City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- PeriodAnnual Ending Principal Coupon Interest Debt Service Debt Service 08/15/2034 3,493.75 3,493.75 09/30/2034 220,400.00 02/15/2035 215,000 3.250% 3,493.75 218,493.75 09/30/2035 218,493.75 3,295,000 1,169,166.35 4,464,166.35 4,464,166.35 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 South lake 2015:GO-S15_CO) Page 8 F1rstSwthwest4* PROOF OF ARBITRAGE YIELD City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- PresentValue to 06/02/2015 Date Debt Service @ 2.4316200764% 02/ 15/2016 176, 216.25 173, 248.35 08/15/2016 52,225.00 50,728.64 02/ 15 /2017 172, 225.00 165, 280.88 08/15/2017 49,825.00 47,241.69 02/ 15/2018 174, 825.00 163,769.59 08/15/2018 47,325.00 43,799.79 02/15/2019 177,325.00 162,144.78 08/15/2019 44,725.00 40,404.99 02/15/2020 179, 725.00 160,414.93 08/15/2020 42,025.00 37,059.17 02/ 15/2021 182, 025.00 158, 588.11 08/15/2021 39,400.00 33,914.66 02/ 15/2022 184,400.00 15 6,820.85 08/15/2022 36,681.25 30,820.43 02/ 15/2023 191, 681.25 159,120.38 08/15/2023 33,871.88 27,780.31 02/15/2024 193,871.88 157,095.70 08/15/2024 30,971.88 24,795.26 02/15/2025 1,690,971.88 1,337,485.67 08/15/2025 6,906.25 5,396.93 02/15/2026 6,906.25 5,332.10 08/15/2026 6,906.25 5,268.05 02/15/2027 6,906.25 5,204.77 08/15/2027 6,906.25 5,142.25 02/15/2028 6,906.25 5,080.48 08/15/2028 6,906.25 5,019.45 02/15/2029 6,906.25 4,959.16 08/15/2029 6,906.25 4,899.59 02/15/2030 6,906.25 4,840.74 08/15/2030 6,906.25 4,782.59 02/15/2031 6,906.25 4,725.14 08/15/2031 6,906.25 4,668.38 02/15/2032 6,906.25 4,612.31 08/15/2032 6,906.25 4,556.90 02/15/2033 6,906.25 4,502.16 08/15/2033 6,906.25 4,448.08 02/15/2034 216,906.25 138,023.94 08/15/2034 3,493.75 2,196.47 02/15/2035 218,493.75 135,714.01 4,256,616.27 3,489,887.70 Proceeds Summary Delivery date 06/02/2015 Par Value 3,295,000.00 Premium (Discount) 194,887.70 Target for yield calculation 3,489,887.70 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:G0-S35_C0) Page 9 RrsI5acdhwest4* PROOF OF ARBITRAGE YIELD City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- AssumedCall/Computation Dates for Premium Bonds Net Present Value (NPV) Bond Component Maturity Date Rate Yield Call Date Call Price to 06/02/2015 @ 2.4316200764% TERM27 02/15/2026 2.750% 2.200% 02/15/2025 100.000 -3,480.92 TERM27 02/15/2027 2.750% 2.200% 02/15/2025 100.000 -3,583.30 TERM29 02/15/2028 2.750% 2.450% 02/15/2025 100.000 285.12 TERM29 02/15/2029 2.750% 2.450% 02/15/2025 100.000 285.12 TERM33 02/15/2030 3.000% 2.650% 02/15/2025 100.000 3,623.66 TERM31 02/15/2031 3.000% 2.650% 02/15/2025 100.000 3,719.02 TERM33 02/15/2032 3.125% 2.800% 02/15/2025 100.000 6,427.17 TERM33 02/15/2033 3.125% 2.800% 02/15/2025 100.000 6,587.85 Rejected Call/Computation Dates for Premium Bonds Bond Component Maturity Date Rate Call Yield Date Net Present Value (NPV) Call to 06/02/2015 Price @ 2.4316200764% Increase to NPV TERM27 02/15/2026 2.750% 2.200% -3,060.50 420.42 TERM27 02/15/2027 2.750% 2.200% -2,728.07 855.23 TERM29 02/15/2028 2.750% 2.450% 1,588.93 1,303.81 TERM29 02/15/2029 2.750% 2.450% 2,002.94 1,717.82 TERM33 02/15/2030 3.000% 2.650% 7,622.29 3,998.63 TERM31 02/15/2031 3.000% 2.650% 8,585.79 4,866.77 TERM33 02/15/2032 3.125% 2.800% 13,448.26 7,021.09 TERM33 02/15/2033 3.125% 2.800% 14,716.73 8,128.88 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:G0-S15_C0) Page 10 Rrst5outhwest4* FORM 8038 STATISTICS City of Southlake, Texas Tax & Waterworks & Sewer System (Limited Pledge) Revenue Certificates of Obligation, Series 2015 Callable on 2/15/2025 @ par FINAL NUMBERS -----HIGH BID: Raymond James & Associates, Inc., Dallas, TX----- DatedDate 06/02/2015 Delivery Date 06/02/2015 Bond Component Date Serial Certificates: 02/15/2016 02/15/2017 02/15/2018 02/15/2019 02/15/2020 Term Certificate 2022: 02/15/2021 02/15/2022 Term Certificate 2024: 02/15/2023 02/15/2024 Term Certificate 2027: 02/15/2025 02/15/2026 02/15/2027 Term Certificate 2029: 02/15/2028 02/15/2029 Term Certificate 2031: 02/15/2030 02/15/2031 Term Certificate 2033: 02/15/2032 02/15/2033 Term Certificate 2035: 02/15/2034 02/15/2035 Principal Coupon Price 100,000.00 4.000% 102.523 120,000.00 4.000% 105.838 125,000.00 4.000% 107.978 130,000.00 4.000% 110.301 135,000.00 4.000% 112.276 140,000.00 3.750% 113.271 145,000.00 3.750% 113.271 155,000.00 3.625% 114.638 160,000.00 3.625% 114.638 165,000.00 2.750% 104.780 170,000.00 2.750% 104.780 175,000.00 2.750% 104.780 180,000.00 2.750% 102.574 180,000.00 2.750% 102.574 190,000.00 3.000% 102.974 195,000.00 3.000% 102.974 200,000.00 3.125% 102.742 205,000.00 3.125% 102.742 210,000.00 3.250% 101.245 215,000.00 3.250% 101.245 Issue Price 102,523.00 127,005.60 134,972.50 143,391.30 151,572.60 158,579.40 164,242.95 177,688.90 183,420.80 172,887.00 178,126.00 183,365.00 184,633.20 184,633.20 195,650.60 200,799.30 205,484.00 210,621.10 212,614.50 217,676.75 Redemption at Maturity 200,000.00 120,000.00 125,000.00 130,000.00 135,000.00 140,000.00 145,000.00 155,000.00 160,000.00 165,000.00 170,000.00 175,000.00 180,000.00 180,000.00 190,000.00 195,000.00 200,000.00 205,000.00 210,000.00 215,000.00 3,295,000.00 3,489,887.70 3,295,000.00 Stated Weighted Maturity Interest Issue Redemption Average Date Rate Price at Maturity Maturity Yield Final Maturity 02/15/2035 3.250% 217,676.75 215,000.00 Entire Issue 3,489,887.70 3,295,000.00 11.1545 2.4316% Proceeds used for accrued interest 0.00 Proceeds used for bond issuance costs (including underwriters' discount) 89,887.70 Proceeds used for credit enhancement 0.00 Proceeds allocated to reasonably required reserve or replacement fund 0.00 May 5, 2015 12:38 pm Prepared by FirstSouthwest (eaa) (Finance 7.012 Southlake 2015:GO-S35_CO) Page 11