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HomeMy WebLinkAboutR-1999-26 ... RESOLUTION NO. 99-1' A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA PORTE, TEXAS, ADOPTING THE OFFICIAL NOTICE OF SALE AND OFFICIAL STATEMENT FOR THE LA PORTE AREA WATER AUTHORITY CONTRACT REVENUE REFUNDING BONDS, SERIES 1999. WHEREAS, the La Porte Area Water Authority has previously issued debt to construct certain projects, including the purchase of capacity at the Southeast Water Purification Plant and a distribution system to deliver the water; and WHEREAS, changes in market conditions provide the opportunity for the Authority to refund its debt at a rate which will result in financial savings to the Authority and its customers; and WHEREAS, the La Porte Area Water Authority is a component unit of the City of La Porte; and WHEREAS, the City of La Porte is of the opinion that the issuance of refunding debt provides savings to the Authority and its customers; and WHEREAS, the City Council is of the opinion the Official Notice of Sale and the Official Statement of the City should be adopted; BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LA PORTE, : Section 1. THAT, the Official Notice of Sale and Official Statement of the La Porte Area Water Authority Contract Revenue Refunding Bonds, Series 1999, is hereby adopted; Section 2. That the City Council officially finds, determines, recites and declares that a sufficient written notice of the date, hour, place and subject of this meeting of the City Council was posted at a place convenient to the public at the offices of City of La Porte for the time required by law preceding this meeting, as required by the Open Meetings Law, Chapter 551, Texas Government Code; and that this meeting has been open to the public as required by law at all times during which this resolution and the subject matter thereof has been discussed, considered and formally acted upon. The City Council further ratifies, approves and confirms such written notice and the contents and posting thereof. PASSED AND APPROVED this the 9th day of August, 1999. . e La Porte Area Water Authority Interoffice Memorandum To: Robert T. Herrera, General Manager LPAWA Board of Directors Steve Gillett, Director of Public Works From: eft Litchfield, Director of Finance Date: Subject: Refunding Issues At the Authority meeting of August 12th, the Authority will be asked to approve the Official Notice of Sale and Official Statement for the "$8,080,000 La Porte Area Water Authority Contract Refunding Bonds, Series 1999". This is a formality that has been too long in coming. This will start the final ball rolling in the refunding that we have been wanting to do for several years. We are able to do it at this time because the underlying bonds were finally refunded and a window of opportunity was created whereby the Authority could refund its bonds. As a reminder, the Authority's call date on its outstanding bonds is December 1. This means that we can call or redeem the outstanding bonds on December 1, 1999. A Draft Copy of the Official Notice of Sale and Official Statement is attached to this letter, beginning on hand numbered page 11. The Official Notice of Sale and Official Statement also has to be approved by the City of La Porte and it is being presented to them at their August 9th meeting. Also attached to this letter are several financial reports that show the projected impact of the refunding and how it relates to our Capacity Purchase. First is a four page report, beginning on page 3, that is a Projected Analysis of Refunding and Savings Report that was prepared by the Authority's Financial Advisors, Moroney, Beissner & Co. In reviewing it, it shows the impact of the refunding if the bonds can be refunded at the projected interest rates. Page 4 shows a projected savings report. It shows the potential exists for the Authority to realize a budget dollar savings of $1,592,432 and a present value savings of $1,243,654 if the bonds can be refunded at the estimated interest rates. Two important comments about the refunding report are that we are changing our Principal Payment Date to March, instead of December. March is a preferred date for financial planning matters. This creates a situation where we are actually paying more in debt service the first year and then drastically reducing the debt service in the following years. Second, we are moving as much of the savings "up front" as we can so we can use the funds to pay for the additional capacity purchase. e e The next report is found on page 7 and is a report of the Long Range Plan for the Authority Debt Service Fund, which portrays the activity of the fund if the refunding occurs as projected. Please pay particular attention to the expense line item labeled "Reallocate for Capital Purchase" This amount totals $700,000 for the two fiscal years 1999-00 and 2000-01. How this $700,000 is generated is by continuing to charge the participating entities the debt service amounts we are now charging for the next two years. The Authority will take the difference between the current debt service and the new debt service and set that amount aside for the Capital Purchase. On page 8 is a report titled Work Sheet Showing Growth of Funds. This sheet has been provided several times and is now being updated for the projected refunding impact. In reviewing the sheet, we see that the funds set aside totaled $528,690 at September 30, 1998. Those funds have grown to $988,771 as of June 30, 1999 (which is not individually shown on the work sheet) and are projected to be $1,145,857 by September 30, 19~9. Activity in FY 1999-00 is projected as being the continuance of the $176,295 Capital Reserve Billing Fee, a payment from Morgan's Point of $250,000 for additional capacity they want to purchase, Refunding Savings of $100,000, Release of Contingency Amount (caused by the Refunding) of $200,000, and interest income of $81,124. In FY 2000-01, the projection includes Billing for Capital Reserve of $176,295, Refunding Savings of $600,000 and Interest Income of $97,648. Page 10 shows the monthly calculation of deposits into the fund and the interest earned. The bottom line is that the refunding, if successful, will bridge the gap between current funding plans and the amount we have due in August 2001. Last year, we projected that the City might have to transfer $400,000 in FY 1999-2000. Because of the favorable report on refunding, it looks like that transfer will not be needed. If everything on the work sheet were to happen, the Authority would only need about $85,000 to complete the purchase. That exact amount should be known before we prepare the FY 2000-01 budget and an appropriate transfer can be made. On page 9, the changes in capacity ownership are shown. You will note that, percentage wise, Morgan's Point significantly increases the amount of the capacity they own. This is because of the $250,000 contribution they are making next year. In closing, I am very pleased that we are finally at the point where we can refund the debt, however, the window is very short. There is a good chance that the Authority will need to have a joint meeting with the City Council on September 8, 1999 to approve the issuance of the refunding debt. I will have more details at the meeting. 2 FROM: MORONEY BEISSNER FRX NO.: 7139698994 91-19-95 12:38R P.92 e . LA PORTE AREA WATER AUTHORITY (HARRIS COUNTY, TEXAS) ANAL YSIS OF REFUNDING AND SA VINGS REPORTS (July 27, 1999) PREPARED UNDER THE DIRECTION OF: MORONEY, BEISSNER & CO., INC. 1980 POST OAK BLVD., #2100 HOUSTON, TX 77056 FINANCIAL ADVISORS TO THE AUTHORIT'f 3 FROM: MORONEY BEISSNER DATE 3/15/ 0 9/1':./ 0 S/151 1 9/15/ 1 S/15/ a 9/151 ~ S/I$/ 3 9/151 3 3/15/ 4 9/15/ , 3/151 5 9/151 5 3/151 & 9/15/ 8 3/15/ 7 9/151 7 3/151 8 9/15/ 8 3/151 II 9/1$/ 9 S/15/10 9/1S/10 3/15/11 9/15/11 3/15/12 8/15/lZ 3/15/13 9/15/13 3/15/14 9/15/14 3/15/15 9/15/15 3/1S/16 9/15/18 3/15/17 9/1':./17 ACCJWE%) DATED 10/13/99 BOlfD YBARS AVERAGE COUPeI AVERAGE Lln N I C :I: FRX NO.: 7139688984 .a.._ LAlOIl'rE ADA HAm AD11ID1UTY _ ~4 REVIlHUE R!FUIDIIlG JlO1O)S, SERIES 1998 ,., Ul'PRCR'l SAVIlIGS SlRDIO SAvtJIGS IBl'OI.% . . - - PROPOSED DEBT SERVICE . . - - . - - - PRIlfCIPIlL COUJIOI I1ITERESt T02'AL 370.000.00 4.125000 885,000.00 '.230000 405,000.00 4.350000 420,000.00 '.500000 445,000.00 4.600000 480,000.00 4.700000 485,000.00 4.800000 505,000.00 '.900000 5.5.000.00 ~.900000 5~0.000.CO 5.000000 580,000.00 S.050000 815,000.00 5.100000 640.000.00 5.150000 070,000.00 5.aooooo 705,000.00 5.250000 320,000.00 5.250000 166,250.00 196,875.00 1118,875.00 196,875.00 198,875.00 189,243.7~ 189,~43.7S 181,082.50 181.062.50 172,25S.75 172,253.75 1&:1,803.75 1&2,803.75 152,568." 152,588.75 141,758.75 141,758.75 130,118.75 130,118.75 117,768.25 117,74G.2~ 104,883.75 104.883.:7:5 111,133.:7.5 111,133.75 76,488.75 7&,488.15 60,808.25 60.806.25 ",326.25 44,325.lS ZG.1I0G.2~ 26,906.25 8,400.00 8,400.00 863,125.00 3113,750.00 736,118.75 75',306.25 758,318.2S 75.5,057.50 7GO,372.':;0 754,327.50 756,877.50 752,865.00 747,630.00 746,017.50 7",622.50 752.29S.00 745,132.50 761,2:12.50 740,308.25 328,400.00 PRIOR DIS 3'~,1!ilZ.33 826.892.50 828,220.00 lJZ7,832..5D 830,820.00 828,830.00 831.145.00 828,268.75 828,383.75 826,413.75 822.358.75 820,910.00 821.710.00 824,53.5.00 819.218.7S 815.7:10.00 813.931.50 8.080.000.00 -------------- -------------- -------------- 398,571.25 B,080,000.00 ..0- 6,276,752.50 12,354,752.50 13.947,18~.83 4,274."Z.~0 12,354,752.50 15,94',184.83 WITH DELIVERY or 10/13/911 85,326.S$6 5.010 10.580 5.009874 % USING 1DO.OOOOOOO HE! P1mSEIIt VAtUE SAVINGS AT : 5.00001 EQUALS PBEi'ARED :BY taolIEr, BE%SSIlER Q CO., IHC. RUJDAtE: 07-27-1888 , 14:18:14 I'ILBrWV:: Ll'WA 1.243,6.54.00 OR UY: 9SRU' 1 81-18-95 12:38R P.83 SAVIRGS CUHULATIVE SAVINGS .',932.87 -7,932.67 433,142..50 42.5,209.83 72,101.25 497,311.08 72,626.23 569.937.33 72.503.75 642,'41.08 71,872.50 714,313.58 70,772.:10 78:1,086.08 73.941.2.5 859.027.33 71.508.25 930.533.58 73,548.75 1,004,082.3' 7~,728.7.5 l,078,811.D8 74,892.50 1.153,703..58 74,087.50 l,Z27,791.08 72,240.00 1,300,031.08 74,088.25 1,37',117.33 76,517.50 1.448,836.83 73.828.25 1.522,261.08 70,171.25 1,592,632.33 1, 5~.43Z.33 l,592,43Z.33 15.3918: ~ PAR L/- FROM: MORONEY BEISSNER DArE 3/1!J/ 0 8/1S/ 0 3/15/ 1 9/15/ 1 3/15/ :it 9/15/ .% 3/15/ 3 9/15/ 3 3/15/ 6 9/15/ 6 3/15/ 5 9/15/ 5 3/1S/ 6 8/UI 5 3/1S1 7 911S1 7 3/15/ 8 91151 8 allSI 9 8/151 9 3/15/10 9/15110 ;)/1:1/11 9/15/11 3115112 911S112 311.5/13 9/1.5/13 3/15/16 9/15/1' 3115/15 911511' 3/15/16 8115116 3/15/17 ~I1S/17 ACCRVID !)Am 10/13/99 BOIID YEARS Avmwm COUPOH AVERAGE LIFB If X C ~ FAX NO.: 7139698994 .. L.\1lCIR%I AREA WAtER AU'rIDBIrI .. ~ IZVDllI lEFUIIJ)IJIG lORDS, SERIES 1898 . Ul'PlQIT SA'IllGS SDBRIO DEBt SERna SCBItlULB l'1lI1IICIl'AL COU1lOJ 370,0~O.00 6.115000 385,000.00 ..250000 405,000.00 4.350000 420,000.00 4.500000 445,000.00 4.600000 480,000.00 6,700000 485,000.00 4.800000 505,000.00 4.900000 525,000.00 6.900000 "0,000.00 '.000000 580,000.00 5.050000 615.00D.DO 5.100000 8'0,000.00 5.150000 670,000.00 5.200000 705,000.00 5.250000 320,000.00 5.2'0000 8,080.000.00 &..080,000.00 IR'1'ERES'1' 166,250.00 198,875.DO ID8,875.00 196,875.00 1915,875.00 188,243.75 189,243.75 181,062.5D 181,062.50 172,%53.75 17%,253.75 152,803.75 152,803.75 1:;2,:;08.7:; 153.568.75 141.758.75 141.758.75 130,118.75 130, 11S. 75 117,768.25 117,7.8.25 104,883.75 106,883.7' 91,133.75 91,133.75 76,688.75 76.488.75 60.808.25 80,808.25 44,326.25 ",328,25 28,~08.25 26,906.25 B,600.00 8,'00.00 PEIlIOD TOl'AL 166.~.OO 198,875.00 1118,815.00 1;6.875.00 588,875.00 188.243.75 576,243.75 181,082.50 588.082.50 172,253.75 592,2.53.75 182,803.75 607,803.75 1~Z.'GI.7S 612,5&8.75 161,758.75 828,758.75 130.118.75 635,U8.7S 117,768.25 842,766.25 104,883.75 1554,S43.7S 91,133.75 871.133.75 7&,441.75 691.488.75 60,808.25 700,806.2.5 44,328.25 714,328.25 28,908.25 731,908.25 8,600.00 328,400.00 ',276,75a.50 13,35',752.50 4,274,75Z.50 1%,35',752.50 ___0. ~ WITH DELIVERY OP 10/13/99 85,326.556 5.01D 10.560 5.00g87' Z USING 100.0000000 PREPARED BY talOnY, BEXSSNJm . co.. IHe. KUBDAr!: 07-27-1999 I 14:10:04 PILElWSE: t.l%\ 2 DI: 99ItEF 91-19-95 12:38A P.94 FISCAL rotAL 363,lZ5.00 393,750.00 75&,l1B.7~ 755.306.25 758,318.25 755,057.50 7S0.::l7a.SO 754,327.50 756,877.50 752,86S.00 747,630.00 7"6,017.50 747,612.50 752,295.00 745,132.50 761,232..30 760,306.25 328,600.00 5 FROM: MOROHEY BEISSHER DAtE 6/ 11 0 12/ 1/ 0 6/ 1/ 1 121 11 1 6/ 1/ 3 121 11 2 81 11 3 11.1 11 3 61 11 " 121 1f " 81 1/ 5 121 11 , 81 11 6 12/ II 6 61 11 7 121 1/ 7 81 1/ 8 121 11 8 8/ 1/ 9 12.1 1/ 9 1/ 1/10 lZl 1110 SI 1/11 12/ 1/11 6/ 1/lZ 121 l1U 61 1/13 131 1/13 6/ 1/14 121 1/14 6/ 1/15 121 1/1~ 6/ 1118 lZI 1/18 SI 1/17 ACCRUED DATED 10/13/99 llOND YtAlUi AVERAGE COUfOB AVERAGE LIFE II Ie :r FRX HO.: 7139698994 &. LAPORTB AREA WAIER AUtBOll.IrI a ~RTRACT REVUUI BOllJ)S, sum 88 .. 1188 . lW'UlmIRG CMlDIDAtES DB'!' SERVJC! SC8EDULE PlUIICIlAL COUPON Z7~,QOO.OO 6.500000 295,000.00 6.800000 31~,000.OO 6.700000 360,000.00 6.800000 380.000.00 8.850000 380,000.00 6.800000 _lS,OOO.OO 8.8S0000 445.000.00 6.950000 475.000.00 8.950000 505.000.00 6.950000 540,000.00 7.000000 580,000.00 7.000000 625,000.00 7.000000 665,000.00 7.050000 710,000.00 7.050000 780,000.00 7.0'0000 385.000.00 7.050000 8,080,000.00 8.080.000.00 IBt'ERES7 355.182.33 280,41S.00 271,677.50 271,477 .50 261.742.50 361.742.50 251.180.00 251,180.00 238,530.00 239,630.00 227,30D.OO 2a7,3DO.DO 213,845.00 Zl3,845.00 1118,423.75 198,423.75 183,880.00 183,860.00 167,453.75 187,4:53.75 149,90:5.00 149,905.00 131,OOS.00 131,005.00 110.705.00 110,705.00 88,830.00 88,830.00 65,388.75 &5,388.75 "0.3&1.2S 10.361.25 13.571.2.5 13,571.25 91-19-95 12:38R P.95 PERIOD toTAL J'ISCAL torAL 355,192.33 355,192.33 5SS,4U.00 271,677.50 826,SD2.50 566,477..50 261,742.50 828,220.00 578,742.50 251,190.00 827,932.50 5111,1110,00 239.630.00 830.820.00 sgJ,no.oCl 227,300.00 826,930.00 617,300.00 213,845.00 831,145.00 G28,"-'.OO 199,623.75 828,288.75 644,"23.75 183,960.00 828,383.75 858.880.00 167,"53.75 826,413.75 672,453.75 1~',80'.00 8%2,358.75 889,905.00 131,005.00 820,910.DD 711,005.00 110,705.00 821,710.00 73S,705.00 88.830.00 824,535.00 753.830.00 85,a88.75 810,218.75 775,388.75 40,361.25 815,750.00 800,381.25 13,571.25 813.93Z.50 391,571.25 5,867,184.83 13.947.184.83 398.571.25 5,887,184.83 13,047,184.89 WITH DELIVERY or 10/13/99 83,867.333 8.998 10.380 6.085793 z USIJG 100.0000000 PREPARED BY HOJ.ONEY, JlE!SSNDl &0 co., IlIe. RUKDArE: 07-27-1888 , 14:15:44 PIL!BAM!: LI'WA 3 tcEY: 8S-II8S f.o City of La Porte, Texas Long Range Plan for the La Porte Area Water Authority Debt Service Fund Prepared in conjunction with the Water Capacity Purchase Payment Plan July 28, 1999 Projected 2004-05 Projected 2003-04 Projected 2002-03 Projected 2001-02 Projected 2000-01 Projected 1999-00 Estimated 1998-99 Projected 2007-08 Projected 2006-07 Projected 2005-06 e 178,762 176,214 179,810 750,000 6,777 177,952 750,000 6,916 179,424 750,000 6,844 177 ,829 750,000 6,901 127,108 800,000 6,840 290,969 825,000 4,889 461,477 825,000 11,191 446,376 822,000 17,749 Beginning Working Capital Plus Revenues: Billings to Cities Interest Income 750,000 6,875 750,000 6,875 756,875 - 756,877 756,875 - 754,327 756,777 - 760,373 756,916 - 755,058 756,844 - 758,316 756,901 - 755,306 806,840 - 756,119 829,889 - 393,750 600,000 836,191 279,938 263,636 363,125 100,000 839,749 418,783 405,865 Total Revenues Less Expenses: Water Supply Bonds Series Water Supply Bonds Series II 1999 Refunding Bonds Reallocate for Capital Purchase 756,877 754,327 760,373 755,058 758,316 755,306 756,119 993,750 ,006,699 824,648 Total Expenses 178,760 178,762 176,214 179,810 177,952 179,424 177,829 127,108 290,969 461,477 Ending Working Capital .e 86 in late 2000 and early 2001. In an effort to make the Water Purchase Cities at the current Debt Service Rate of $825,000 per year and will We expect to be able to transfer $100,000 in FY 1999-2000 86 85 87 86 87 f successful, they will experience a large savings at we have elected to continue to bill the membe. service and apply it towards the capacity purchase. 86 47 105 In 1999, the LPAWA expects to refund its existing debt. payment in August 2001, without incurring any additional debt take the difference between the old debt service and the new debt and $600,000 in FY 2000-2001 204 Days of Working Capital -:J e . Work Sheet Showing Growth of Funds Available for Purchase of Additional Capacity Calculated as of July 28,1999 Description Entity Attributed To: Total La Porte Morgan's pt Shoreacres 9/30/97 left Over Distribution Funds B 326,801 279,415 23,856 23,530 Capital Recovery Fee A 180,064 163,804 7,725 8,535 Available Working Capital B 331,770 283,664 24,219 23,887 Total 9/30/97 838,635 726,883 55,800 55,952 97-98 Billing for Capital Reserve A 176,295 160,376 7,563 8,356 Interest D 13,760 11,926 916 918 Down Payment: left Over Dist = 338,458; WC = 161,542 A (500,000) (454,850) (21,450) (23,700) Total For Year (309,945) (282,548) (12,971) (14,426) Cumulative Total 528,690 444,335 42,829 41,526 98-99 Billing for Capital Reserve A 176,295 160,376 7,563 8,356 Transfer from City of La Porte 400,000 400,000 Interest Income D 40,872 34,351 3,311 3,210 Total for Year 617,167 594,727 10,874 11,566 Cumulative Total 1,145,857 1,039,062 53,703 53,092 99-00 Billing for Capital Reserve A 176,295 160,376 7,563 8,356 Transfer from Morgan's Point 250,000 250,000 Interest Income D 81,124 73,563 3,802 3,759 Refunidng Savings A 100,000 90,970 4,290 4,740 Refunding - Release of Contingenc~ C 200,000 176,470 11,590 11 ,940 Total for Year 807,419 501,379 277,245 28,795 Cumulative Total 1,953,276 1,540,441 330,948 81,887 00-01 Billing for Capital Reserve A 176,295 160,376 7,563 8,356 Interest Income 0 97,648 77,009 16,545 4,094 Refunding Savings C 600,000 529,410 34,770 35,820 Total for Year 873,943 766,795 58,878 48,270 Cumulative Total 2,827,219 2,307,236 389,826 130,157 Note: Per the Contract, 2,912,700 needs to be available by August, 2001. Because of the various contribution levels, there are three percentages that are being used to show the allocations to the various entities. They are coded by the Alpha Letter in front of the first dollar column: La Porte Morgan's PI. Shoreacres Total A - Percentages for Production 90.97% 4.29% 4.74% 100.00% B - Percentages for Distribution 85.50% 7.30% 7.20% 100.00% C - Average of above Percentages 88.24% 5.79% 5.97% 100.00% D - Based on Cumulative Totals ~ e e City of La Porte, Texas Projection of Funds Available for LPAWA Capacity Purchase July 28,1999 Capital Amts that Interest Recovery Other would have at 5% Fee gone to OS Balance Jun-99 988,771.00 Jul-99 14,691.25 33,333.00 4,119.88 1,040,915.13 Aug-99 14,691.25 33,333.00 4,337.15 1,093,276.53 Sep-99 14,691.25 33,334.00 4,555.32 1,145,857.10 Oct-99 14,691.25 8,333.00 4,774.40 1,173,655.75 Nov-99 14,691.25 8,333.00 4,890.23 1,201,570.23 Dec-99 14,691.25 200,000.00. 8,333.00 5,006.54 1,429,601.02 Jan-OO 14,691.25 250,000.00 8,333.00 5,956.67 1,708,581.94 Feb-OO 14,691.25 8,333.00 7,119.09 1,738,725.28 Mar-OO 14,691.25 8,333.00 7,244.69 1,768,994.22 Apr-OO 14,691.25 8,333.00 7,370.81 1,799,389.28 May-OO 14,691.25 8,333.00 7,497.46 1,829,910.99 Jun-OO 14,691.25 8,333.00 7,624.63 1,860,559.87 Jul-OO 14,691.25 8,333.00 7,752.33 1,891,336.45 Aug-OO 14,691.25 8,333.00 7,880.57 1,922,241.27 Sep-OO 14,691.25 8,334.00 8,009.34 1,953,275.86 Oct-OO 17,629.50 60,000.00 8,138.65 2,039,044.01 Nov-OO 17,629.50 60,000.00 8,496.02 2,125,169.53 Dec-OO 17,629.50 60,000.00 8,854.87 2,211,653.90 Jan-01 17,629.50 60,000.00 9,215.22 2,298,498.62 Feb-01 17,629.50 60,000.00 9,577.08 2,385,705.20 Mar-01 17,629.50 60,000.00 9,940.44 2,473,275.14 Apr-01 17,629.50 60,000.00 10,305.31 2,561,209.95 May-01 17,629.50 60,000.00 10,671.71 2,649,511.16 Jun-01 17,629.50 60,000.00 11,039.63 2,738,180.29 Jul-01 17,629.50 60,000.00 11,409.08 2,827,218.87 Other is comprised of: $400,000 Transfer from City of La Porte in FY 1998-99 $200,000 Release of Contingency Funds in December 1999 $250,000 Payment from Morgan's Point for their increase in Capacity 9 e . Work Sheet Showing Growth of Funds Available for Purchase of Additional Capacity As it translates to Gallons purchased Calculated as of July 28, 1999 Description Calcul~ltion of cost per gallon: Cost of capacity Dividl!d by gallons bought Equals cost per gallon Amounts Contributed by Entity: Entity's part of $500,000 payment Entity's part of remaining balance Totals DividEld by cost per gallon Equal.s gallons purchased Current Allotment (in gallons) Plus Cclpacity Purchased Equals New Allotment Percentage of Current Allotment Percentage of Capacity Purchased Percentage of New Allotment Total Entity Attributed To: La Porte Morgan's Pt Shoreacres 3,412,700 3,000,000 1.1376 500,000 454,850 21 ,450 23,700 2,827,219 2,307,236 389,826 130,157 3,327,219 2,762,086 411,276 153,857 1.1376 1.1376 1.1376 1.1376 3,000,000 2,503,223 361,530 135,247 4,200,000 3,820,740 180,180 199,080 3,000,000 2,481,967 374,265 143,768 7,200,000 6,302, 707 554,445 342,848 90.9700% 4.2900% 4.7400% 82.7300% 12.4800% 4.7900% 87.5400% 7.7000% 4.7600% ID e e OFFICIAL NOTICE OF SALE AND OFFICIAL STATEMENT [ill [fJ~~u $8,080,000 LA PORTE AREA WATER AUTHORITY (HARRIS COUNTY, TEXAS) CONTRACT REVENUE REFUNDING BONDS, SERIES 1999 "QUALIFIED TAX-EXEMPT OBLIGATIONS" SELLING: SEPTEMBER 8, 1999 5:00 P.M., CDST -~ [ill [fJ ~ ~ If (Y\A-~ t-hN ~ W Drl~i /JK I (O<A1Ij - --- -- - -' PREPARED ~Y: MORONEY, BEISSNER & CO., INC. 1980 POST OAK BLVD., SUITE 2100 HOUSTON, TX 77056 FINANCIAL ADVISORS TO THE AUTHORITY I' e . LA PORTE AREA WATER AUTHORITY The Authority is governed by a five member Board of Directors, all of whom are appointed by the City Council of the City of La Porte for four year tenDs. Following are the current members of the Board of Directors. Official Mr. Jeny Bramlett Mr. AI Fields Mr. Rob Roy Mr. Rodney Etchberger Mr. Chester Pool Title President SecretaJyITreasurer Member Member Member Term Expires Mav 2000 2001 2001 2001 2000 Occupation Human Resources Banking Sales Contract Administration Maintenance Supervisor APPOINTED OFFICIALS Name Mr. Robert T. Herrera Mr. Jeff Litchfield Mr. Steve Gillett Position General Manager Director of FinancelInvestment Officer Director of Public Works The following consultants serve the Authority: Moroney, Beissner & Co., Inc. Akin, Gump, Strauss, Hauer & Feld, L.L.,p. Financial Advisors Bond Counsel Note; No Director has any business or family relationship (as defined by the Texas Water Code) with major lando'WD.ers in the Authority or with any of the Authority's consultants. } 2.. e . OFFICIAL NOTICE OF SALE Dated August _' 1999 NEW ISSUE: BOOK ENTRY-ONLY Place and Time of Sale The Board of Directors of the La Porte Area Water Authority, (Harris County, Texas), will receive sealed bids until 5:00 p.m., COST, September 8, 1999, in the City Hall, 604 West Fainnont Parkway, La Porte, Texas 77571, on the following: DESCRIPTION OF BONDS 58,080,000 LA PORTE AREA WATER AUTHORITY (Harris County, Texas) CONTRACT REVENUE REFUNDING BONDS, SERIES 1999 "QUALIFIED TAX-EXEMPT OBUGATIONS" The Bonds will be dated September 15, 1999. Interest on the Bonds will accrue from such date and will be due on March 15, 2000, and each September 15 and March 15 thereafter until maturity. The Bonds will be issued in fully registered fonn in integrai multiples of 55,000, and principal and semiannual interest will be payable at Chase Bank of Texas, National Association, the paying agent/registrar (the "Registrar"), at its principal payment office in Dallas, Texas. The Bonds 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 Bonds may be acquired in denominations of $5,000 or integral multiples thereof No physical delivery of the Bonds will be made to the purchasers thereof. Principal of and interest on the Bonds will be payable by the Registrar to Cede & Co., which will make distribution of the amounts so paid to the beneficial owners of the Bonds. See "Book-Entry-Only System" herein If the date of the payment of the principal or interest on a Bond shall be a Saturday, Sunday,legal holiday, or a day on which banking institutions in the city where the payment office of the Paying AgentlRegistrar 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 a day on which 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. Book-Entrv-Onlv Svstem The Authority intends to utilize the Book-Entry-Only System of The Depository Trust Company ("DTC"). See "BOOK-ENTRY-ONLY SYSTEM" in the Official Statement. March 15 Maturitv Schedule Year 2002 2003 2004 2005 2006 2007 2008 2009 Amount $370,000 385,000 405,000 420,000 445,000 460,000 485,000 505,000 Year 2010 2011 2012 2013 2014 2015 2016 2017 Amount $525,000 550,000 580,000 615,000 640,000 670,000 705,000 320,000 Ontional Provisions All Bonds maturing on or after March 15,2011, are optional forredemption in whole or in part on March 15,2010, or any date thereafter at par and accrued interest to the date fixed for redemption. If less than all of the Bonds are redeemed at any time, the particular Bonds to be redeemed shall be selected by the Authority in integral multiples of $5,000 within anyone maturity. The registered owner of any Bond, all or a portion of which has been called for redemption, shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called for redemption and a new Bond in the principal amount equal to the portion of such Bond not redeemed will be issued to such registered owner. \.3 e . Authorization The Bonds are issued pursuant to the general laws of the State of Texas, particularly Article 717k, Vernon's Texas Civil Statutes, as amended, and a Resolution adopted by the Board of Directors of the Authority authorizing the issuance and sale of the Bonds (the "Bond Resolution"). Use of Proceeds The proceeds from the sale of the Bonds will be used to reflUld on December 1, 1999, all of the Authority's outstanding Bonds, $4,055,000 of the Authority's Contract Revenue Bonds, Series 1988, maturing serially on December 1,2000, through and including 2015, and $4,025,000 of the Authority's Contract Revenue Bonds, Series II 1988, maturing serially on December 1, 2000, through and including 2016. Securitv The Bonds will constitute valid and legally binding special obligations of the La Porte Area Water Authority, payable from and secured by a first lien on and pledge ofllie revenues derived from the operation of the Authority's Water System, after deduction of the necessary and reasonable expenses of maintenance and operation of the system. The owner(s) of the Bonds shall never have the right to demand payment of the principal and interest on the Bonds out of any fimds raised or to be raised by taxation. l.e!!ali tv Attorney General of the State of Texas and Akin, Gump, Strauss, Hauer & Feld, L.L.P., Attorneys, San Antonio, Texas. Pavment Record The Authority has never defaulted. BIDDING CONDITIONS Address of Bids Bids should be in sealed envelopes plainly marked "Bid for Contract Revenue Refunding Bonds" addressed to the President, Board of Directors, La Porte Area Water Authority, 604 West Fairmont Parkway, La Porte, Texas 77571. Deliverv of Bids Bids should be mailed or delivered so that they arrive at the place of sale not later than 5:00 p.m., CDST, September 8, 1999. For convenience of bidders, bids may be delivered to Moroney, Beissner & Co., Inc., 1980 Post Oak Boulevard, Suite 2100, HoustOD, Texas 77056, Agent for the Authority, and, if delivered not later than 3:00 p.m., CST, September 8, 1999, will be deemed to have been delivered to the Authority in accordance with the tenDS of this Official Notice of Sale. Bids so delivered will not be opened except by the Board of Directors of the La Porte Area Water Authority and will not be opened prior to 5:00 p.m., CDST, September 8, 1999. Late bids will not be considered. Bids may be submitted by Telephone or Facsimile if signed blank Bid Fonns are received by Moroney, Beissner & Co, Inc. on or before the day of sale. Telephone bids (713/960-8900) and facsimile bids (713/960-8904) must be received by 3:00 p.m. CDST on the day of the sale to the attention of R. David Fetzer or Moss K Fetzer. No Bid From the Financial Advisor Under the terms of the contract with Moroney, Beissner & Co., Inc., Financial Advisors to the Authority, it is agreed and IUlderstood that Moroney, Beissner & Co., Inc. shall not be permitted to purchase any Bonds from the Authority nor have any interest directly or indirectly, in the original purchase and sale of the Bonds, except as agent for the Authority. As Financial Adviso:rs to the Authority, Moroney, Beissner & Co., Inc. will be paid a fee based upon a percentage of the principal amolUlt of Bonds actually sold and delivered, which fee is contingent upon such sale and delivery. Type of Bids and Interest Rates All bids must be submitted on the Official Bid Form enclosed herewith without change. The Bonds ~ll be sold in one block, all or none, at a price of not less than par value plus accrued interest from date of the Bonds to date of delivery. Bidders are requested to specify the rate or rates of interest that the Bonds will bear. There is no limit on the number of interest rates (hat may be named; however, all Bonds maturing on the same date must bear interest at one and the same rate. Interest rates must be in. multiples of 1/8 or 2 Itt e e 1/20 of 1%. The spread between the highest and lowest interest rates Darned may not exceed 1 % in rate. Bi~ providing for zero or supplemental interest rates will not be considered. Award of Sale For the purpose of awarding the Bonds, the interest cost of each bid will be computed by determining, at the interest rate or rates specified therein, the total dollar amount of all interest and deducting therefrom the premium bid, if any. In the event of an error in interest cost calculations, the interest rates named in the Official Bid Form will govern. The Authority agrees to either award the Bonds on the sale date to the bidder whose bid on the above computation produces the lowest interest cost to the Authority and is in strict accordance with the bidding conditions of this Official Notice of Sale or reject all bids and readvertise the Bonds for competitive bids. No award will be made to any bidder bidding on terms and conditions not in strict conformity with this Official Notice of Sale. Issue Price Certificate To provide the Authority with information to enable it to comply with certain conditions of the Internal Revenue Code of 1986, as amended, relating to the exclusion of interest on the Bonds from gross income for federal income tax purposes, the successful bidder will be required to complete, execute and deliver to the Authority (on the next business day after award of the Bonds is made) a certification regarding "issue price" substantially in the form enclosed herewith as Exhibit A to this Notice of Sale. If the successful bidder will not reoffer the Bonds for sale or has not sold a substantial amoWlt of the bonds of any maturity by the date of delivery, such certificate may be modified in a manner approved by the Authority. In no event will the Authority fail to deliver the Bonds as a result of the successful bidders inability to certify actual sales of Bonds at a particular price prior to delivery. Each bidder, by submitting its bid, agrees to complete, execute, and deliver such a certificate by the date of delivery of the Bonds, if its bid is accepted by the Authority. It will be the responsibility of the successful bidder to institute such syndicate reporting requirements, to make such investigation, or otherwise to ascertain the facts necessary to enable it to make such certification with reasonable certainty. Any questions concerning such certification should be directed to Bond COWlsel. Good Faith Deposit Each bid must be secured by a Good Faith Deposit in the form of a Bank Certified or Bank Cashier's Check in the amoWlt of 5161,600 payable to the La Porte Area Water Authority. The Good Faith Deposit may accompany the Official Bid Fonn or it may be submitted separately, if submitted separately, it must be made available to the payee prior to the opening of the bids and must be accompanied by instructions of the bank on which drawn, which authorizes its use as a Good Faith Deposit by the successful bidder (the "Purchaser") who must be named in such instructions. The check of the Purchaser will be retained by the Authority to assure perfonnance of the contract on the part of the Purchaser. In the event the Purchaser should fail or refuse to take up and pay for the Bonds in accordance with his bid, then said check will be cashed and accepted by the Authority as full and complete liquidated damages. Otherwise, the Good Faith Check will be returned to the Purchaser upon the delivery of and payment for the Bonds. No interest will be paid by the Authority on the Good Faith Deposit. The checks of the Wlsuccessful bidders will be returned after award of the sale is made. DELIVERY OF THE BONDS AND ACCOMPANYING DOCUMENTS CUSIP Numben It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such number on any Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the respective Purchaser to accept delivery of and pay for the Bonds in accordance with the terms of this Official Notice of Sale and the tenns of the Official Bid Fonn. All expenses in relation to the printing ofCUSIP numbers on the Bonds will be paid by the Authority; provided, however, that the CUSIP Service Bureau charge for the assignment of the numbers shall be the responsibility of and shall be paid for by the Purchaser. Delivery of Initial Bond Deliyery of the Bonds will be accomplished by the issuance of one Bond (the "Initial Bond"), either in typed or printed form in the aggregate principal amount of 58,080,000, payable to the Purchaser, signed by the manual or facsimile signatures of the President and Secretary of the Board of Directors, approved by the Attorney General of the State of Texas, and registered by the Comptroller of Public AccoWlts of the State of Texas. Delivery (the "Initial Delivery") will be at the corporate trust office of the Registrar. Payment for the Inltial Bond must be made in immediately available funds for unconditional credit to the Authority, or as otherwise directed by the Authority. The Purchaser will be given five (5) business days notice of the time fIXed for delivery of the Initial Bond. It is anticipated that Initial Delivery can be made on or about October 6, 1999, and it is understood and agreed that the Purchaser will accept delivery and make payment for the Initial Bond on October 6, 1999, or thereafter on the date the Initial Bond is tendered for delivery, up to and including October 13, 1999. If for any reason the Authority is Wlllble to make delivery on or before October 13, 1999.. then the Authority will immediately contact the Purchaser and allow the Purchaser to extend his offer for an additional thirty (30) days. If the Purchaser does not elect to extend his offer within six days thereafter, then the Good Faith Deposit will be returned, and both the Authority and the Purchaser will be relieved of any further obligation. 3 IS e e DTC Definitive Bonds After delivery of the Initial Bond, the Bonds will be issued in book-entry only form. Cede & Co. is the nominee for DTC. All references herein to the bondholders or registered owners of the Bonds mean Cede & Co. and not the beneficial owners of the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry fonn (without bonds) in the denomination of$5,000 principal amount or any integral multiple thereof. Under certain limited circumstances described herein, the Authority may determine to forego immobilization of the Bonds at DTC, or another securities depository, in which case such beneficial interests would become exchangeable for one or more fully registered bonds of like principal amount for the Bonds. Tax Exemntion The delivery of the Bonds are subject to an opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., San Antonio, Texas, Bond Counsel, to the effect that interest thereon is excludable from gross income for federal income tax purposes under existing law and that the obligations are not private activity bonds. See "TAX MATTERS" in the Official Statement for a complete description of Bond Counsel's opinion. Oualified Tax-Exempt Obli2ations The Bonds are "qualified tax-exempt obligations", within the meaning of section 265 of the Internal Revenue Code of 1986 (as amended), for purposes of computing the disallowance of interest expense allocable to interest on the Bonds for fmancial institutions. See "Qualified Tax-Exempt Obligations" in the Official Statement. l.et!al Opinion The Authority will furnish without cost to the respective Purchaser a transcript of certain certified proceedings had incident to the issuance and authorization of the Bonds, including a certified copy of the approving legal opinion of the Attorney General of Texas, as recorded in the Bond Register of the Comptroller of Public Accounts of the State of Texas, to the effect that the Attorney General of Texas has examined a transcript of proceedings authorizing the issuance of the Initial Bond, and that based on such examination the Bonds are valid and legally binding obligations of the Authority, and based upon an examination of such transcript of proceedings, the legal opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Bond Counsel, San Antonio, Texas, to a like effect (subject as to the enforcement to the applicable bankruptcy, moratorium and similar laws applicable to creditors' rights generally from time to time in effect). The. opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. with respect to the tax exemption of the interest on the Bonds is described tmder the caption "TAX MATTERS" in the Official Statement. Such opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. is expected to be reproduced on the back of the Bonds over a certification by the facsimile signature of the Authority Secretary attesting that the opinion was dated as of the date of delivery of and payment therefor, and that the copy is a true and correct copy of the original opinion; however, the failure to print such opinion on any Bond will not constitute cause for failure of or refusal by the Purchaser to accept delivery of and pay for the Bonds. The legal fee' to be paid Akin, Gump, Strauss, Hauer & Feld, L.L.P. for services rendered in connection with the issuance and sale of the Bonds is contingent on the sale and delivery of the Bonds. No Litil!ation Certificate The Authority will furnish the Purchaser a Certificate signed by the President and Secretary of the Board of Directors which will recite, among other things, that no litigation of any nature has been filed or is now pending to restrain or enjoin the issuance or delivery of the Bonds or which would affect the provision made for their payment or security, or in any other manner questioning the proceedings or authority concerning the issuance of the Bonds, and that so far as is known and believed, no such litigation is threatened. Certification as to Official Statement At the time of payment for and delivery of the Bonds, the Authority will furnish the respective Purchaser a Certificate signed by the General Manager of the Authority acting in his official capacity, to the effect that the Official Statement has been authorized and approved by the Board of Directors, and to the best of his knowledge and belief after reasonable investigation: (a) neither the Official Statement nor any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact necesS8Jy to make the statements therein, in light of circumstances in which they were made, not misleading; (b) since the date of the Official Statement no event has occurred which should have been set forth in an amendment or supplement to the Official Statement which has not been set forth in such amendment or supplement; and (c) there has not been any material adverse change in the operation or financial affairs of the Authority since the date of such Official Statement. 4 Ita e e GENERAL Future Re1!istration In the event the Book-Entry-Only System is discontinued with respect to the Bonds, the Bonds, may be transferred, registered and assigned only on the registration books of the Registrar, and such registration and transfer will be without expense or service charge to the owner. except for any tax or other governmental charges required to be paid with respect to such registration and transfer. A Bond may be assigned by the execution of an assigmnent fonn on the Bonds or by other instrument of transfer and assignment acceptable to the Registrar. A new Bond will be delivered by the Registrar for the Bond being transferred or exchanged at the principal office of the Registrar. To the extent possible. Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the owner or his duly authorized agent. in fonn satisfactory to the Registrar. New Bonds registered and delivered in an exchange or transfer will be in denominations of $S.OOO or any integral multiple thereof for anyone maturity and for a like aggregate principal amount as the Bonds surrendered for exchange or transfer. Successor Pavine: Al!entIRee:istrar (the t1Rel!istrartl) Provision is made in the Bond Resolution for replacement of the respective Registrar. Ifa Registrar is replaced by the Authority, the new Registrar shall accept the previous Registrar's records and act in the same capacity as the previous Registrar. Any Registrar selected by the Authority must be either a commercial banlc or trust company organized and doing business under the laws of the United States of America or of any State, authorized under such laws to exercise trust powers, and subject to supervision or examination by Federal or State authority. Record Date The record date ("Record Date") for the interest payable on any interest payment date is defined as the last business day of the month next preceding such interest payment date. Not An Offer To Sell This Official Notice of Sale does not alone constitute an offer to sell the Bonds. This Official Notice of Sale, the Official Bid Forms and the OffJ.cial Statement collectively constitute the offer to seil the Bonds. Prospective purchasers are urged to carefully examine the Official Statement and to make other investigations they deem necessary to detennine the investment quality of the Bonds. Responsibility for Oualification of Bonds for Sale in Respective States The offer and sale of the Bonds have not been registered or qualified under the Securities Act of 1933, as amended. in reliance upon the exemptions provided thereunder. The Bonds have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein, nor have the Bonds been registered or qualified under the securities acts of any other jurisdiction. Neither the Authority nor Moroney. Beissner & Co., Inc. assumes any responsibility for qualification of the Bonds under the securities laws of any jurisdiction in which the Bonds may be sold. assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Bonds shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. Official Statement The accompanying Official Statement is in a fonn deemed final as of its date within the meaning of SEC Rule lSc2-12(bXl). The respective Purchaser is responsible for infonning Moroney, Beissner & Co., Inc., Financial Advisors to the Authority, of the initial offering yields on the Bonds on the next business day after award of the Bonds is made. The Authority will prepare a Supplement to the Official Statement describing these offering yields. the interest rates Gn the Bonds and other tenns relating to the initial reoffering of the Bonds. The Authority will furnish to the Purchaser of the Bonds within seven (7) business days from the sale of the Bonds, up to 100 copies of the Official Statement together with a like number of the Supplement at no cost to the Purchaser. The Purchaser shall be responsible for the printing costs of copies of the Official Statement and Supplement in excess of 100 and the cost of a reprinted Official Statement with the infonnation contained in the above-mentioned Supplement incorporated therein. if requested by the Purchaser. Except as noted above, the Authority assumes no responsibility or obligation for the distribution or delivery of any copies of the Official Statement in connection with the offering or reotTering of the Bonds. S (1 e e ContinuinS! Disclosure The Authority has agreed in the Bond Resolution to provide certain periodic infonnation and notices of material events in accordance with Securities and Exchange Co?JIllission Rule 15c2-12, as described in the Official Statement under "CONTINUING DISCLOSURE REQUIREMENTS". Additional CODies Additional copies of the Official Notice of Sale, Official Statement and Official Bid Fonns may be obtained from Moroney, Beissner & Co., Inc., 1980 Post Oak Boulevard, Suite 2100, Houston, Texas 77056. MR. JERRY BRAMLETT, PRESIDENT LAPORTE AREA WATER AUTHORITY 6 18 e e OFFICIAL BID FORM President and Board of Directors La Porte Area Water Authority clo Moroney, Beissner & Co., Inc. 1980 Post Oak Blvd., Suite 2100 Houston. TX 77056 Gentlemen: This bid is submitted under the bidding conditions of your Official Notice of Sale dated August _' 1999, of $8,080,000 La Porte Area Water Authority, Contract Revenue Refunding Bonds, Series 1998, the terms and conditions of which Official Notice of Sale are made a part hereof. For your legally issued $8,080,000 of Bonds, as described in said Official Notice of Sale, we will pay you par and accrued interest, plus a cash premium of $ for Bonds maturing and bearing interest as follows: Interest Interest Matwitv Rate Maturitv Rate 2002 % 2010 % 2003 % 2011 % 2004 % 2012 % 2005 % 2013 % 2006 % 2014 % 2007 % 2015 % 2008 % 2016 % 2009 % 2017 % GROSS INTEREST COST $ LESS PREMIUM $ NET lNlEREST COST $ EFFECTIVE INTEREST RATE % The Initial Bond shall be registered in the nanle of (syndicate manager). We will advise Chase Bank of Texas, National Association, Houston, Texas, the Paying AgentJRegistrar, our registration instructions at least five business days prior to the date set for Initial Delivery. We will not ask the Paying AgentlRegistrar to accept any registration instructions after the five day period. The undersigned agrees to complete, execute, and deliver to the Authority, on the next business day after award of the Bonds, the Initial Offering Price Certificate, in the fonn enclosed as Exhibit A to the Official Notice of Sale. Attached hereto or submitted separately is a Bank Certified or Bank Cashier's Check of the in the amount of $161,600 which represents our Good Faith ~sit and which is submitted in accordance with the terms as set forth in the Official Notice of Sale. /9 e e We have read in detail the Official Notice of Sale and the Official Statement relating to the Bonds, and we have made such investigations as we deem necessary relating to the Authority and the investment quality of the Bonds. ACCEPTANCE CLAUSE Respectfully submitted, By: Phone: day of The foregoing bid is hereby in all things accepted by the La Porte Area Water Authority, this the September,1999. ATIEST: Secretary President ACCUMULATED BOND YEARS $8,080,000 La Porte Area Water Authority Contract Revenue Refunding Bonds, Series 1999 Dated: September 15, 1999 Year of Maturitv 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Amount of Bonds $370,000 385,000 405,000 420,000 445,000 460,000 485,000 505,000 525,000 550,000 580,000 615,000 640,000 670,000 705,000 320,000 Maturity: March 15 Accumulated Bond Years 925.0000 2,272.5000 4,095.0000 6,405.0000 9,297.5000 12,747.5000 16,870.0000 21,667.5000 27,180.0000 33,505.0000 40,755.0000 49,057.5000 58,337.5000 68,722.5000 80,355.0000 85,955.0000 Average Maturity ...... 10.638 Years 020 e e EXHIBIT A ISSUE PRICE CERTIFICATE The undersigned hereby certifies as follows with respect to the sale of $8,080,000 La Porte Area Water Authority (the "Authority"), Contract Revenue Refunding Bonds, Series 1999 (the "Bonds"): 1. The undersigned is the underwriter or the manager of the syndicate of underwriters which has pW'Chased the Bonds from the Authority at competitive sale. 2. The first price for each maturity of the Bonds at which a substantial amount (at least ten percent) of such maturity is sold to the public (expressed as a percentage of principal amount and exclusive of accrued interest) is set forth below: Principal Principal Amount Year of Offering Amount Maturing Maturitv Price % MaturinE! Year of Maturitv Offering Price % 5370,000 2002 % $525,000 2010 % 385,000 2003 % 550,000 2011 % 405,000 2004 % 580,000 2012 % 420,000 2005 % 615,000 2013 % 445,000 2006 % 640,000 2014 % 460,000 2007 % 670,000 2015 % 485,000 2008 % 705,000 2016 % 505,000 2009 % 320,000 2017 % 3. The Underwriters have made a bona tide offering to the public of all the Bonds of each maturity at the initial offering prices to the public, as set out above. The initial offering price set forth above is the price at which the Underwriters expected, on the date the Bonds were purchased by the Underwriters, to offer such Bonds to the general public and such price has not been adjusted to take into account actual facts after such date. 4. The initial offering prices described above for each maturity of the Bonds reflect current market prices at the time such prices were established. 5. The Underwriters (have) (have not) purchased bond insurance for the Bonds. The bond insurance, if any, has been pW'Chased 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 c:ommitment 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 aCCO\Ult 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 exceeds the present value of the insurance premium discounted at a rate equal to the yield on the bonds which results assuming recovery of the insurance premium. 6. The tenn "public", as used herein, means persons other than bondhouses, -brokers, dealers, and similar persons or organizations acting in the capacity of\Ulderwriters or wholesalers. 7. The undersigned understands that the statements made'herein will be relied upon by the Authority in complying with the conditions imposed by the Internal Revenue Code of 1986, as amended, on the exclusion of interest on the Bonds from the gross income of their owners for federal income tax pwposes. EXEClJIED AND DEllVERED TIllS .1999. (Name of Underwriter or Manager) By Title ;11 . . OFFICIAL STATEMENT NEW ISSUE: BOOK-ENTRY-ONLY Dated August -' 1999 In the opinion of Bond Counsel, the Bonds are excludable from gross income for federal income tax purposes under existing law, and the Bonds are not private activity bonds. See "TAX MATTERS" herein for a discussion of Bond Counsel's opinion, including a description of alternative minimmn tax consequences for corporations. The Authority will designate the Bonds as qualified tax-exempt obligations. See "Qualified Tu-Exempt Obligations". DESCRIPTION OF BONDS 58,080,000 LA PORTE AREA WATER AUTHORITY (Harris County, Texas) CONTRACT REVENUE REFUNDING BONDS, SERlES"1999 "QUALIFIED TAX-EXEMPT OBLIGATIONS" The Bon~ will be dated September 15, 1999. Interest on the Bonds will accrue from such date and will be due on March 15,2000, and each September 15 and March 15 thereafter until maturity. The Bonds will be issued in fully registered form in integral multiples of $5,000, and principal and semiannual interest will be payable at Chase Bank of Texas, National Association, the paying agent/registrar (the "Registrar"), at its principal payment office in Dallas, Texas. The Bonds 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 Bonds may be acquired in denominations of $5,000 or integral multiples thereof. No physical delivery of the Bonds will be made to tbe purchasers thereof. Principal of and interest on the Bonds will be payable by the Registrar to Cede & Co., which will make distribution of the amounts so paid to the beneficial owners of the Bonds. See "Book-Entry-Only System" herein If the date of the payment of the principal or interest on a Bond shall be a Saturday, Sunday, legal holiday, or a day on which banking institutions in the city where the payment office of the Paying AgentlRegistrar is located are authorized by law or executive ordinances to close, then the date for such payment shall be the next succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which 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. Year 2002 2003 2004 2005 2006 2007 2008 2009 Ootional Provisions March IS Maturitv Schedule Amount $370,000 385,000 405,000 420,000 445,000 460,000 485,000 505,000 Year 2010 2011 2012 2013 2014 2015 2016 2017 Amount $525,000 550,000 580,000 615,000 640,000 670,000 705,000 320,000 All Bonds matwing on or after March 15,2011, are optional for redemption in whole or in part on March 15,2010, or any date thereafter at par and accrued interest to the date fixed for redemption. If less than all of the Bonds are redeemed at anytime, the particular Bonds to be redeemed shall be selected by the Authority in integral multiples of $5,000 within anyone maturity. The registered owner of any Bond, all or a portion of which has been called for redemption, shall be required to present same to the Registrar for payment of the redemption price on the portion of the Bond so called for redemption and a new Bond in the principal amount equal to the portion of such Bond not redeemed will be issued to such registered owner. 22 e . Authorization The Bonds are issued pursuant to the general laws of the State of Texas, particularly Article 717, Vernon's Texas Civil Statutes, as amended, and a Resolution adopted by the Board of Directors of the Authority authorizing the issuance and sale of the Bonds (the "Bond Resolution "). Use of Proceeds The proceeds from the sale of the Bonds will be used to refimd on December 1, 1999, all of the Authority's outstanding Bonds, $4,055,000 of the Authority's Contract Revenue Bonds, Series 1988, maturing serially on December I, 2000, through and including 2015, and $4,025,000 of the Authority's Contract Revenue Bonds, Series n 1988, maturing serially on December 1,2000, through and including 2016. Security The Bonds will constitute valid and legally binding special obligations of the La Porte Area Water Authority paYable from and secured by a first lien on and pledge of the revenues derived from the operation of the Authority's Water System, after deduction of the necessary and reasonable expenses of maintenance and operation of said system. The owner(s) of the Bonds shall never have the right to demand payment of the principal and interest on the Bonds out of any fimds raised or to be raised by taxation. Securities DeDositor\' The Authority intends to utilize the Book-Entry-Only System of The Depository Trust Company ("DTC"), but reserves the right on its behalf or on behalf ofDTC to discontinue such system. Such Book-Entry-Only System will affect the method and timing of payment and the method of transfer. See "BOOK-ENTRY-ONLY SYSTEM", herein. Lee:alitv Attorney General of the State of Texas and Akin, Gump, Strauss, Hauer & Feld, L.L.P., Attorneys, San Antonio, Texas. Pavment Record The Authority has never defaulted. TAX MATTERS ODinion On the date of initial delivery of the Bonds, Akin, Gump, Strauss, Hauer & Feld, L.L.P., Bond Counsel, will render their opinion that, under existing law, (1) interest on the Bonds will be excludable from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986, as amended (the "Code") and (2) the Bonds will not be treated as "private activity bonds" within the meaning of section 141 of the Code and that, accordingly, interest on the Bonds will not be included as an alternative minimum tax preference item under section 57(aX5) of the Code. Except as stated above, Bond Counsel will express no opinion as to any other federal, state, or local tax consequences Wlder present law, or proposed legislation, resulting from the receipt or acctual of interest on or the acquisition, ownership, or disposition of the Bonds. In rendering their opinions, Bond Counsel will rely upon representations and certifications of the Authority with respect to matters solely within the knowledge of the Authority and will assume continuing compliance by the Authority with covenants pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income talC purposes. If such representations and certifications are detennined to be inaccurate Of incomplete, or the Authority fails to comply with the foregoing covenants, interest on the Bonds could become includable in gross income retroactively to the date of issuance of the Bonds, regardless of the date on which the event causing such inclusion occurs. The statutes, regulations, published rulings, and court decisions upon which Bond Counsel have based their opinions are subject to change by the Congress and to subsequent judicial and administrative interpretation by the courts and the Department of the Treasury. There can be no assurance that such law or the interpretation thereof will not be changed in a manner which would adversely affect the tax treatment of the receipt or accrual of interest on or the acquisition, ownership, or disposition of the Bonds. Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may hereafter come to Bond Counsel's attention or to reflect any changes in law that may thereafter occur or become effective. 2 ;13 e e Federal Income Tax Accountine: Treatment of Orie:inal Issue Discount The initial public offering price of certain stated maturities of the Bonds may be less than the stated redemption price at maturity (as defined in section 1272 of the Code and Income Tax Regulations thereunder) on the Bonds (the "Original Issue Discount Bonds"). Assuming that all of the Original Issue Discount Bonds have been initially offered and a substantial amount of each maturity thereof has been sold, to the general public in ann's length transactions for a price (with no other consideration being included) for not more than the initial offering prices stated. in this Official Statement, an amount equal to the difference between the initial public offering price of an Original Issue DiscOlmt Bond and the stated. redemption price at maturity constitutes "original issue discount" to the initial purchaser of such Original Issue Discount Bond Such original issue discount may result from the payment of accrued interest by the initial purchaser, Bonds having an interest payment period longer than six months, or the p\U'Chase by the initial purchaser at a discount from the face amount of the Bonds. Under existing law, such initial p\U'Chaser is entitled to exclude from gross income an amount of income with respect to such Original Issue Discount Bond equal to that portion of the amount of such original issue discount allocable to the period that such Original Issue Discount Bond continues to be owned by such purchaser. For a discussion of certain collateral federal ta:r. consequences, see discussion set forth below. In the event of the redemption, sale, or other taxable disposition of such Original Issue Discount Bond prior to stated maturity, the amount realized by such purchaser in excess of the basis of such Original Issue Discount Bond in the hands of such purchaser (adjusted upward by the portion of the original issue discount allocable to the period for which such Original Issue Discount Bond was held by such initial p\U'Chaser) is includable in gross income. Original issue discount is considered to be accrued actuarially in accordance with the constant interest method over the life of the Original Issue Discount Bond, taking into account the semiannual compounding of accrued interest. at the yield to maturity on such Original Issue Discount Bond. The allocation of such original issue discount will generally result in an amount treated as interest that is different than the amount of the payment denominated as interest actually received by the owner thereof during the taxable year. The federal income tax consequences of the acquisition, ownership, redemption, sale, or other disposition of Original Issue Discount Bonds which are not p\U'Chased in the initial offering at the initial offering price may be detennined according to rules which differ from those described above. All purchasers of Original Issue Discount Bonds should consult their own tax advisors with respect to the determination for federal, state, and local income tax purposes of the treatment of interest accrued upon redemption, sale, or other disposition of, such Original Issue Discount Bonds and with respect to the federal, state, local, and foreign tax consequences of the acquisition, ownership, redemption, sale, or other disposition of, such Original Issue Discount Bonds. Collateral Federal Income Tax Conseauences The following discussion is a summary of certain collateral federal income tax consequences resulting from the receipt or accrual of interest on or the acquisition, ownership, or disposition of the Bonds. This discussion is based on existing statutes, regulations, published rulings, and court decisions, all of which are subject to change or modification retroactively. The following discussion is applicable to investors, other than those who are subject to special provisions of the Code, such as fmancial institutions, property and casualty insurance companies, life insurance companies, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualiftying for the earned income tax credit, owners of an interest in a fmancial assest securitization investment trust, certain S corporations with Subchapter C earnings and profits, and taxpayers who may be deemed to have inCWTed or continued indebtedness to p\U'Chase or carry, or who have paid or incurred expenses allocable to, tax-exempt obligations. INVESTORS, INCLUDING rnOSE WHO ARE SUBJECT TO SPECIAL PROVISIONS OF TIiE CODE, SHOULD CONSULT TIIEIR OWN TAX ADVISORS wrrn RESPECT TO THE TAX TREATMENT WHICH MAYBE ANTICIPATED TO RESULT FROM TIiE RECEIPT OR ACCRUAL OF INTEREST ON OR THE ACQmsmoN, OWNERSHIP, AND DISPOSmON OF TAX-EXEMPT OBUGATlONS BEFORE DETERMINING WHETHER TO PURCHASE lHE BONDS. Interest on the Bonds will be included in the "adjusted current earnings" of certain corporations for purposes of computing its alternative minimwn tax imposed by section SS of the Code. Interest on the Bonds may be subject to the "branch profits tax" imposed by section 884 of the Code on the effectively-connected earnings and profits of a foreign corporation doing business in the United States. Under section 6012 of the Code, owners of tax-exempt obligations, such as the Bonds, may be required to disclose interest received or accrued ~uring each taxable year on their returns with respect to federal income taxes. Section 1276 of the Code provides for ordinary income tax treatment of gain recognized upon the disposition of a tax-exempt obligation, such as the Bonds, if such obligation was acquired at a "market discount" and if the fixed maturity of such obligation is equal to, or exceeds, one year from the date of issue. Such treatment applies to "market discount bonds" to the extent such gain does not exceed the 3 dLf e e ac:croed market discount (defined below) of such bonds; although for this purpose, a de minimis amO\Ult of market discount is ignored. A Rmarket discount bondR is one which is acquired by the owner at a purchase price which is less than the stated redemption price at maturity or, in the case of a bond issued at an original issue discount, the "revised issue price" (i.e., the issue price plus accrued original issue discount). The Raccrued market disco\UltR is the amount which bears the same ratio to the market discount as the number of days during which the holder holds the obligation bears to the number of days between the acquisition date and the final maturity date. State. Local. and Foreilrn Taxes Investors should consult their own tax advisors concerning the tax implications resulting from the receipt or accmaI of interest on or the acquisition, ownership, or disposition of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not United States persons. Oualified Tax-Exempt Oblie:ations for Financial Institutions Section 265(a) of the Code provides, in pertinent part, that interest paid or incurred by a taxpayer, including a Rfinancial institutionR, on indebtedness incurred or continued to pW"Chase or cany tax-exempt obligations is not deductible by such taxpayer in detennining taxable income. Section 265(b) of the Code provides an: exception to the disallowance of such deduction for any interest expense paid or incurred on indebtedness of a taxpayer which is a "fmancial institution" allocable to tax-exempt obligations, other than "specified private activity bondsR, which are designated by an issuer as RquaIified tax-exempt obligationsR. Section 265(bX5) of the Code defines the term RfinanciaI institution" as referring to any corporation described in section 585(aX2) of the Code, or any person accepting deposits from the public in the ordinary course of such person's trade or business which is subject to federal or state supervision as a fmancial institution. The Authority expects to designate the Bonds as Rqua1itied tax-exempt obligationsR within the meaning of section 265(b) of the Code. In furtherance of that designation, the Authority will covenant to take such action which would assure or to refrain from such action which would adversely affect the treatment of the Bonds as "qwilitied tax-exempt obligations". Potential purchasers should be aware that if the issue price to the public (or, in the case of discount bonds, the amount payable at maturity) exceeds $10,000,000, then such obligations might fail to satisfy the $10,000,000 limitation and the obligations would not be RquaIified tax-exempt obligations" . LEGAL MATTERS Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approval of the Attorney General of the State of Texas and the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Bond Counsel, whose opinion may be printed on the Bonds. Akin, Gump, Strauss, Hauer & Feld, L.L.P. was not requested to participate, and did not take part in, the preparation of the Official Statement except as hereinafter noted, and such finn has not assumed any responsibility with respect thereto or undertaken independently to verifY any of the infonnation contained herein, except that, in its capacity as Bond Counsel, such fum has reviewed the information under the captions "DESCRIPTION OF BONDS", "TAX MATTERS", and "LEGAL MATTERS" in the Official Statement to detemrine whether such infonnation presents a fair and 8CCWllte summary of the provisions of the law and the instruments described under such captions. The legal fees to be paid to Akin, Gump, Strauss, Hauer & Feld, L.L.P. in connection with the issuance of the Bonds are contingent on the sale and delivery of the Bonds. . The various legal opinions to be delivered concurrently with the delivety of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future perfonnance 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. RATINGS Application for ratings on the Bonds have been made to both Moody's and S&P. The; ratings will be provided by addendum to this Official Statement as soon as possible after their assignment. An explanation of the significance of the ratings may be obtained from Moody's and S&P. The ratings reflect only the respective views of Moody's and S&P and the Authority makes no representation as to the appropriateness of the ratings. There is no assurance that the ratings assigned will continue for any given period of time or that they will not be changed, suspended or withdrawn by either Moody's or S&P. Any change, suspension or withdrawal of the ratings may have an effect on the market price of the Bonds. BOOK-ENTRY-ONLY SYSTEM The Depository Trust Company (RDTCR). New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered security 4 ~s e e will be issued for each maturity of the Bonds, as the case may be, as set forth on page one of this Official Statement, each in the aggregate principal amoWlt of such maturity, and will be deposited with DIC. DIC is a limited-purpose trost company organized Wlder 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 l7A of the Securities Exchange Act of 1934. DIC holds securities that its participants ("Participants") deposit with DIC. DIC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entIy changes in Participants' accoWlts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, tnlst companies, clearing corporations, and certain other organizations. DIC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DIC system is also available to others such as securities brokers and dealers, banks, and trost companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The roles applicable to DIC and its Participants are on file with the Securities and Exchange Commission. Purchases of Bonds Wlder the DIC system must be made by or through Direct Participants, which will receive a credit for the Bonds on the DIC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confl11Il8tions from DIC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statement of their holding, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Iransfers of. ownership interest in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. Io facilitate subsequent transfers, all Bonds deposited by Participants with DIC are registered in the name of DIC's partnership nominee, Cede & Co. The deposit of the Bonds with DIC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DIC has no knowledge of the actual Beneficial Owners of the Bonds; DIC's records reflect only the identity of the Direct Participants to whose 8CCOWlts such Bonds are credited, which mayor may not be the Beneficial Owners. The Participants will remain responsible for keeping 8CCOWlt of their holdings on behalf of their customers. Conveyance of notices and other communications by DIC to direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be g~vemed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither DIC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DIC mails an Onmibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose 8CCOWlts the Bonds are credited on the reco~ date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Bonds will be made to DIC. DIC's practice is to credit Direct Participants' accoWlts on payable date in accordance with their respective holdings shown on DIC's records unless DIC has reason to believe that it will not receive payment on payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and cuStomary practices, as is the case with securities held for the 8CCOWlts of customers in bearer form or registered in "street name", and win be the responsibility of such Participant and not of DIC, the Paying AgentlRegistrar or of the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DIC is the responsibility of the Authority, disbursement of such payments to Direct Participants shall be the responsibility of DIC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DIC may discontinue providing its services as securities depository with respect to the Bonds, at any time by giving reasonable notice to the Authority or the Paying AgentlRegistrar. Under such circumstances, in the event that a successor securities depository is not obtained, printed certificates for the Bonds, are required to be furnished and delivered. The Authority may decide to discontinue use of the system of book-entry transfers through DIC (or a successor depository) for the Bonds. In this event, the printed certificates for the Bonds will be furnished and delivered. The information in this section concerning DIC and DIC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. Use of Certain Ierms in Other Sections of this Official Statement In reading this Official Statement it should be wtderstood that while the Bonds are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Bonds, but (i) all rights of ownership must be exercised through DIC and the Book-Entry-Only System, and (ii) except as described above, payment or notices that are to be given to registered owners Wlder the Resolution will be given only to DIC. 5 d~ e e Information concerning DTC and the Book-Entry-Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not be construed as a representation by the Authority. So long as Cede & Co. is the registered owner of the Bonds, the Authority will have no obligation or responsibility to the DTC Participants or Indirect Participants, or the persons for which they act as nominees, with respect to payment to or providing of notice to such Participants, or the persons for which they act as nominees. REGISTRATION PaviDI! Al!entJResrlstrar (the "Resristrar") The Bonds will be issued in fully registered fonn in integral multiples of $5,000, and principal and semiannual interest will be payable by Chase Bank of Texas, National Association, the Registrar, at its principal payment office in Dallas, Texas. Principal of the Bonds will be payable to the registered owner at maturity or redemption upon presentation to the Registrar. Interest on the Bonds will be payable by check dated as of the interest payment date, and mailed by the Registrar to registered owners as shown on the records of the Registrar as of the last business day of the month next preceding each interest payment date. It is expected that the Bonds will be eligible for delivery to the initial purchaser through DTC. If the date of the payment of the principal or interest on a Bond shall be a Saturday, Sunday, legal holiday, or a day on which banking institutions in the authority where the principal corporate trust office of the Registrar is located are authorized by law or executive ordinances to close, then the date for such payment shall be the neld succeeding day which is not such a Saturday, Sunday, legal holiday, or a day on which 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. Successor Resrlstrar Provision is made in the Bond Resolution for replacement of the Registrar. If the Registrar is replaced by the Authority, the new Registrar must accept the previous Registrar's records and act in the same capacity as the previous Registrar. Any Registrar selected by the Authority must be either a commercial bank or trust company organized under the laws of the United States or of any state and authorized to serve as and perfonn the duties and services of Registrar for the Bonds. Successor Registrars, if any, will be detennined by the Authority. Future ReI!istration In the event the Book-Entry-Only System is discontinued, the Bonds may be transferred, registered and assigned only on the regislIation books of the Registrar, and such registration and transfer will be without expense or service charge to the owner, except for any tax or other governmental charges required to be paid with respect to such regislIation and transfer. A Bond may be assigned by the execution of an assignment fonn on the Bonds or by other instrument of transfer and assignment acceptable to the Registrar. A new Bond or Bonds will be delivered by the Registrar for the Bond being transferred or exchanged at the principal office of the Registrar. To the extent possible, new Bonds issued in an exchange or transfer of Bonds will be delivered to the registered owner or assignee of the owner in not more than three (3) business days after the receipt of the Bonds to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the owner or his duly authorized agent, in fonn satisfactory to the Registrar; New Bonds registered and delivered in an exchange or transfer will be in denominations of $5,000 or any integral multiple thereoffor anyone maturity and for a like aggregate principal amount as the Bond or Bonds surrendered for exchange or transfer. Record Date The record date ("Record Date") for the interest payable on any interest payment date is defined as the last business day of the month next preceding such interest payment date. USE OF INFORMATION IN OFFICIAL STATEMENT This Official Statement has been prepared by Moroney, Beissner & Co., Inc., a f11111 employed by the Authority to perfonn professional services in the capacity of Financial Advisors, inC;luding the preparation of this Official Statement Infonnation with respect to interest rates, discoWlts, and other matters relating to the resale of the Bonds, including changes in the affairs of the Authority subsequent to the date hereof, is the responsibility of the successful bidder and such information is not provided herein. The infonnation set forth herein has been obtained from the Authority and other sources which are believed to be reliable, but no guarantee is made as to the accuracy or completeness of such infonnation, and its inclusion herein is not to be construed as a representation on the part of the Authority nor Moroney, Beissner & Co., Inc. to such effect. No person has been authorized to give any infonnation or to make any representations other than those contained in this Official Statement, and if given or made, such other infonnation or representations must not be relied upon as having been authorized by the Authority or Moroney, Beissner & Co., Inc. This Official Statement does not constitute an offer to sell or solicitation of an offer to buy in any state in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or any person to whom it is unlawful 6 ;J..7t e e to make such offer or solicitation. Any infonnation and expressions of opinions herein are subject to change, without notice, and neither the delivery of this Official Statement, nor any sale made hereunder, shall under any circumstances create any implication that there has been no change in the affairs of the Authority since the date hereof. CONTINUING DISCLOSURE OF INFORMATION In the Bond Resolution, the Authority has made the following agreement for the benefit of the holders and beneficial owners of the Bonds. The Authority is required to observe the agreement for so long as it remains obligated to advance funds to pay the Bonds. Under the agreement, the Authority will be obligated to provide certain updated financial infonnation and operating data annually, and timely notice of specified material events, to certain information vendors. This information will be available to securities brokers and others who subscribe to receive the information from the vendors. Annual ReDorts The Authority will provide certain updated financial infonnation and operating data to certain infonnation vendors annually. The information to be updated includes all quantitative fmancial infonnation and operating data with respect to the Authority of the general type included in this Official Statement under the headings "FINANCIAL INFORMATION", "SPECIAL FUND BALANCES", "COMPUTATION OF NET REVENUES AVAILABLE FOR DEBT SERVICE", "TOP TEN WATER CUSTOMERS", "WATER RATES", "ESTIMATED DEBT SERVICE REQUIREMENT SCHEDULE", "LA PORTE AREA WATER AUTHORITY", and in the Audit Report. The Authority will update and provide this infonnation within six months after the end of each fiscal year. The Authority will provide the updated information to each nationally recognized municipal securities infonnation repository ("NRMSIR") and to any state infonnation depository ("SID") that is designated by the State of Texas and approved by the staff of the United States Securities and Exchange Commission ("SEC"). The Authority may provide updated information in full text or may incorporate by reference certain other publicly available documents, as permitted by SEC Rule 15c2-12. The updated infonnation will include the full audited financial statements of the Authority, if the Authority's audit is completed by the required time. If audited financial statements are not available by the required time, the Authority will provide unaudited financial statements within the required time, and audited financial statements when the audit report becomes available. Any such financial statements will be prepared in accordance with the accounting principles the Authority may be required to employ from time to time pursuant to state law or regulation. The Authority's current fiscal year end is September 30. Accordingly, it must provide updated infonnation by March 31 in each year, unless the Authority changes its fiscal year. If the Authority changes its fiscal year, it will notify each NRMSIR and any SID of the change. Material Event Notices The Authority will also provide timely notices of certain events to certain information vendors. The Authority will provide notice of any of the following events with respect to the Bonds, if such event is material to a decision to purchase or sell Bonds: (1) principal and interest payment delinquencies; (2) nonpayment related defaults; (3) unscheduled draws on debt service reserves reflecting fmancial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the Bonds; (7) modifications to rights of holders of the Bonds; (8) Bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Bonds; and (11) rating changes. In addition, the Authority will provide timely notice of any failure by the Authority to provide information, data, or fmancial statements in accordance with its agreement described above under "Annual Reports". The Authority will provide each notice described in this paragraph to any SID and to either each NRMSIR or the Municipal Securities Rulemaking Board ("MSRB"). Availabilitv of Information From NRMSffis and SID The Authority has agreed to provide the foregoing information only to NRMSIRs and any SID. The infonnation will be available to holders of Bonds only if the holders comply with the procedures and pay the charges established by such information vendors or obtain the information through securities brokers who do so. The Municipal Advisory Council of Texas has been designated by the State of Texas as a SID, and the SEC staff has determined that it is a qualified SID. The address of the Municipal Advisory Council is 600 West 8th Street, P.O. Box 2177, Austin, Texas 78768-2177, and its telephone n\UIlber is 5121476-6947. Limitations and Amendments The Authority has agreed to update infonnation and to provide notices of material events only as described above. The Authority has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operation, 7 dB e . condition, or prospects or agreed to update any infonnation that is provided. except as described above. The Authority makes no representation or wammty concerning such information or concerning its usefulness to a decision to invest in or sell Bonds at any future date. The Authority disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its continuing disclosure agreement or from any statement made pursuant to its agreement, although holders or beneficial owners of Bonds may seek a writ of mandamus to compel the Authority to comply with its agreement. Nothing in this paragraph is intended or shall act to disclaim. waive, or otherwise limit the duties of the Authority under federal and state securities laws. The Authority may amend its continuing disclosure agreement to adapt to changed circwnstances 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 Authority, if, but only if (1) the agreement, as so amended, would have pennitted an underwriter to purchase or sell the Bonds in the original primary offering in compliance with SEC Rule lSc2-12, taking into account any amendments or interpretations of SEC Rule lSc2-12 to the date of such amendment, as well as such changed circumstances, and (2) either (a) the holders of a majority in aggregate amount of the outstanding Bonds consent to such amendment or (b) a person unaffiliated with the Authority (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders and beneficial owners of the Bonds. If the Authority amends the agreement, it has agreed to include with any fmancial information or operating data next provided in accordance with its agreement described above under "Annual Reports" an explanation, in narrative fonn, of the reasons for the amendment and of the impact of any change in the type of financial information and operating data so provided. Cumulianee With Prior Undertakings The Authority has previously made continuing disclosure agreements pursuant to SEC Rule ISc2-12. YEAR 2000 PROBLEM BEING COMPILED BY BOND COUNSEL 8 ;2.'7 . RESERVED FOR YEAR 2000 LANGUAGE 9 e 30 e FINANCIAL INFORMATION (As of June 30, 1999) Contract Revenue Bonds Currently Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Bonds maturing on 12/01199 ................................................. Less: Bonds being reftmded ........................................................ Plus: Contract Revenue Refunding Bonds, Series 1999 ............................ Total Bonds Outstanding after Reftmding ......... . . .. . . . .. . . . . . .. .. . . . . .. .. .. . . . . e $8,335,000 255,000 8,080,000 8.080.000 $8,080,000 SPECIAL FUND BALANCES Debt Service Fund, Reserve Fund & Contingency Fund ..... Capital Recovery Fund ...................................... Total ........................................................ $1,272,673 988.771 $2,261,444 COMPUTATION OF NET REVENUES A V All..ABLE FOR DEBT SERVICE Operating Revenues - User Fees Interest Billings to Participants Earnings on Investments Contribution from Participants (for Bond Principal Retirement and Paying agent Fees) Gross Revenue Less: Operating Expenses Available for Debt Service Principal & Interest Paid During YIE Coverage of Debt Service Fiscal Year Ended September 30 (Taken from Authoritv's Annual Financial Reoort) 1998 1997 1996 1995 1994 1993 $767,016 $741,355 $673,721 $651,658 $614,996 $642,729 594,435 609,976 618,201 631,533 641,699 650,112 116,O15 115,877 108,341 113,067 98,428 126,883 217.530 212.084 205.919 193.468 183.300 174.887 $1,694,996 $1,679,292 $1,606,182 $1,589,726 $1,538,423 $1,594,611 625.501 628.186 594.380 572.396 610.942 552.952 $1,069,495 $1,051,106 $1,0Il,802 $1,017,330 $927,481 $1,041,659 $824,013 $822,123 $824,120 $814,865 $814,408 $813,075 l.30X 1.28X 1.23X 1.25X 1.14X 1.28X TOP TEN WATER CUSTOMERS The Authority has three customers: the Cities of La Porte, Mogan's Point and Shoreacres. The customers listed below are top users of the cities. The Port of Houston is a customer of the City of Morgan's Point. All others are customers of the City of La Porte. Customer Pecan Plantation Port of Houston Harbor Bay Vista Baywood Al1waste Pecan Villa PPG Green Oaks AKZO Nobel La Quinta Type of Business Mobile Home Park Containerized Sea Port Apartments Apamnents Cleaning Service Mobile Home park Petrochemical Plant Apartments Petrochemical Plant Motel WATER RATES 36 1/2 cents per thousand gallons. 10 Consumption in Gallons 23,210,000 18,888,600 13,662,200 10,536,000 7,774,000 7,171,400 6,953,000 6,232,500 5,802,400 5,004,500 01 e e ESTIMATED DEBT SERVICE REOUIREMENT SCHEDULE Fiscal Year Endiruz 9/30 $8.080.000 Bonds. Series 1999 Princioal. Interest.. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $370,000 385,000 405,000 420,000 445,000 460,000 485,000 505,000 525,000 550,000 580,000 615,000 640,000 670,000 705,000 320,000 $393,750 393,750 386,119 370,306 353,316 335,058 315,373 294,328 271,878 247,865 222,630 196,018 167,623 137,295 105,133 71,233 35,306 8,400 Total $393,750 393,750 756,119 755,306 758,316 755,058 760,373 754,328 756,878 752,865 747,630 746,018 747,623 752,295 745,133 741,233 740,306 328,400 Average Maturity on Outstanding Debt ......... 10.638 Years · Excludes Refunding Bonds. .. The average interest rate of 5.00% is used for purpose of illustration. 11 32 . e LA PORTE AREA WATER AUmORITY The Authority was created in 1981 by the 67th Legislature of the State of Texas, Regular Session, as a conservation and reclamation district for the pwpose of acquiring, treating and delivering water to municipalities, water districts and industries within a 30-mile radius in southeast Harris County, including the City of La Porte and its extraterritorial jurisdiction. The creation of the Authority was confirmed at an election held within the City of La Porte on January 16, 1982 by a majority of the votes cast With the proceeds of its $9,800,000 revenue bonds, sold in 1988, the Authority acquired an Wldivided interest in the Southeast Water Purification Plant (the "Plant") constrncted by the City of Houston. The Authority constrncted a major water transmission system to serve its contracting parties, which presently include the Cities of La Porte, Shoreacres and Morgan's Point. The Plant has surface water treatment facilities capable of producing 80 million gallons per day (mgd) and treated water storage facilities and pwnping facilities capable of storing approximately 25 million gallons of potable water and pumping approximately 156,000 gallon per minute (gpm) of treated potable water. The Authority is entitled to an initial demand factor of 5.25% (4.2 mgd) and an initial pwnping allocation factor of 2.33% (3,650 gpm). Each contracting partys share of such capacities are as follows: City of La Porte ................ City of Shoreacres .............. City of Morgan's Point ........... 90.97% 4.74% 4.29% Each contracting party is responsible for its share of the Authority's portion of the cost of constrnction and maintenance and operation of the plant in the percentages shown above. The contracts between the Authority and its contracting parties provide for establishment of rates and charges sufficient to meet the Authority's obligation with respect to operation and maintenance of the project, debt service and reserve fund requirements on its bonds, billing and payment procedures and minimwn monthly charges. The City of La Porte has budgeted $1,390,300 for payment to the Authority for the fiscal year ending September 30, 1998. The payments made to the Authority constitute operating expenses of the contracting parties' water and sewer systems. The term of the contracts is forty years commencing 1988. SELECTED PROVISIONS OF THE CONTRACT REVENUE BOND RESOLUTION PLEDGE. The Bonds and any interest payable thereon, are and shall be secured by and payable from a lien on and pledge of the Pledged Revenues, and the Pledged Revenues are further pledged irrevocably to the establishment and maintenance of the Funds created by this Resolution. The Bonds are not and will not be secured by or payable from a mortgage or deed of trust on any real, personal, or mixed properties constituting the System. The registered owner of the Bonds shall never have the right to demand payment of such obligations out of any funds raised or to be raised by taxation, or from any source whatsoever other than the Pledged Revenues. "This Resolution shall not be construed as requiring the Authority to expend any funds which are derived from sources other than the operation of the System, but nothing herein shall be construed as preventing the Authority from doing so. RAlES. The Authority covenants and agrees with the holders of the Bonds that it will: (a) subject to any restrictions in the Water Sales Contracts, fix and maintain rates and collect charges for the facilities and services afforded by the System which will provide revenues sufficient at all times (i) to pay all Operating Expenses; (ii) to establish and maintain the Bond Fund; and (iii) to pay all indebtedness outstanding against the System, other than the Bonds, as and when the same become due; and (b) deposit as collected all Gross Revenues into the Revenue FWld. Creation of Funds. All Revenues shall be kept separate and apart from all other funds of the Authority, and the following special funds ("Funds") shall be established and maintained in an official depository bank or depository banks of the Authority so long as any of the Bonds, or interest thereon, are outstanding and unpaid: (a) La Porte Area Water Authority Revenue Fund (the "Revenue FWld"); (b) La Porte Area Water Authority Bond Fund (the "Bond Fund"); and (c) La Porte Area Water Authority Reserve FWld (the "Reserve Fund"); 12 33 e Revenue Fund. All Gross Revenues are and shall be credited to e Revenue Fund immediately upon receipt. Payments from the Revenue Fund shall be made with the priorities specified belo Bond Fund. The Bond Fund is created for the sole pwpose of paying e principal of, redemption premiwn, if any, and interest on the Bonds, as the same come due. Payments into the Bond Fund hall be made in substantially equal monthly payments (commencing with respect to the Bonds and any additional Bonds on the date of delivery to the initial purchaser thereof) during each year in which any of the Bonds are outstanding in an aggr ate amount equal to 100% of the amounts required to meet the interest and principal payments falling due on or before the ext maturity date or mandatory redemption date of the Bonds. The Authority shall, at least five days prior to March IS, , and each September 15 and March 15 thereafter, deposit in the Bond Fund any additional Pledged Revenues available in the Revenue Fund which may be necessary to pay in full the interest on an principal, ifany, coming due on such March 15 or September 15. In no event shall any amount in excess of the amounts stated above be retained in the Bond Fund, and any such excess amount may be withdrawn by the Authority and replaced in the Revenue Fund. Reserve Fund. The Reserve Fund shall be used to pay the principal of and interest on the Bonds when and to the extent the amounts in the Bond Fund available for such payment are insufficient for such purpose, and may be used for the purpose of finally retiring the last of the Bonds. The Reserve Fund presently contains $824,253. Notwithstanding any provision hereof to the contrary, no deposits shall be made into the Reserve Fund at a time when there is a deficiency in the amount on deposit in the Bond Fund nor shall any deposits be made into the Reserve Fund at any time it contains an amount equal to or greater than the Reserve Requirement. If and whenever the balance in the Reserve Fund is reduced below the Reserve Requirement, the Authority shall, from the f1I'St available and unallocated Pledged Revenues of the following month or months, cause amounts equal in the aggregate to any such deficiency to be set apart and transferred into the Reserve Fund from the Revenue Fund; provided, however, that in any event the Reserve Requirement shall be restored to the Reserve Requirement within 24 months of such reduction. If at the end of any fiscal year, surplus funds remain in the Reserve Fund resulting from any reduction of the Reserve Requirement or otherwise, they shall be promptly transferred from the Reserve Fund into the Bond Fund and payments into the Bond Fund from the Revenue Fund shall be reduced accordingly. Deficiencies. If in any month the Authority shall fail to deposit into any Fund provided for by this Resolution the full amounts required, amounts equivalent to such deficiencies shall be set apart and paid into said Funds from the first available and unallocated Revenues of the following month or months, and such payment shall be in addition to the amounts otherwise required to be paid into said Funds during such month or months. To the extent necessary, the authority shall increase the rates and charges for its services to make up for any such deficiencies. Surolus Funds. Net Revenues in excess of those necessary to establish and maintain the Funds required in this Resolution may be used for any purpose now or hereafter authorized by law. Prioritv of Deoosits and Payments from Revenue Fund. The Board shall make the deposits and payments from Pledged Revenues in the Revenue Fund when and as required by the Bonds or any Bonds Resolution or any resolution authorizing subordinate lien bonds, and, after payment of Operating Expenses, such deposits shall be made in the following order and with the foll,owing irrevocable priorities, respectively: First to the Bond Fund, when and in the amounts required by any Bonds Resolution: Second: to the Reserve Fund, when and in the amounts required by any Bond Resolution; Third: to the payment of principal, interest and reserve fund requirements for any obligations which hereafter may be issued by the Board that are payable from and secured by a lien on and pledge of the Pledged Revenues which is subordinate to the liens of the Bonds, when and in the amounts required by any resolution authorizing the issuance of such subordinate lien obligations; and Fourth: for any lawful pwpose. ADDmONAL BONDS. In addition to inferior lien bonds permitted to be issued hereunder, the Autho:rity expressly reserves the right hereafter to issue Additional Bonds, and the Additional Bonds, when issued, may be secured by and payable from a lien on and pledge of the Pledged Revenues in the same manner and to the same extent as the outstandblg Bonds but subject to the remaining provisions hereof, and the Bonds and the Additional Bonds may be in all respects of equal dignity. The Additional Bonds may be issued to provide funds for Capital Acquisitions, Capital Additions, and Capital hnprovements, and for any other lawful pwpose. It is provided, however; that no Additional Bonds shall be issued unless such Additional Bonds are made to mature on March 15 in each of the years in which they are scheduled to mature, and the following req"Uirements are met 13 3Lf . e Conditions Precedent for Issuance of Additional Bonds - General. As a condition precedent to the issuance of any additional Bonds, the officer of the Authority then having the primary responsibility for the financial affairs of the Board shall have executed a certificate stating (i) that the Authority is not then in default as to any covenant, obligation, or agreement contained in any proceeding relating to any obligations of the Authority payable from and secured by a lien on and pledge of the Pledged Revenues and (ii) all payments into all funds or accounts created and established for the payment and security of all outstanding obligations payable from and secured by a lien on and pledge of the Pledged Revenues have been made in full and that the amounts on deposit in such funds or accounts are the amounts then required to be deposited therein. Such certificate shall be dated as of the date ofsuch Additional Bonds. Conditions Precedent for Issuance of Additional Bonds - Canital Acouisitions. Canital Imnrovements. and anv other lawful nwoose excent for Canital Additions or for refundine. The Authority covenants and agrees that Additional Bonds will not be issued for the purpose of financing Capital Acquisitions, Capital Improvements, or any other lawful purpose (except for Capital Additions or for refunding, which are to be issued in accordance with the provisions of clauses (c), (d), or (e) of this Section) unless and until the conditions precedent in the paragraph above have been satisfied and, in addition thereto, the Authority has secured a certificate or opinion of the Accountant to the effect that, according to the books and records of the Authority, the Net Earnings for the preceding Year or for 12 consecutive months out of the 15 months immediately preceding the month the order or resolution authorizing the Additional Bonds is adopted are at least equal to the sum of 1.25 times the Average Annual Principal and Interest Requirements for the outstanding Bonds and for the proposed Additional Bonds. In making a detennination of the Net Earnings, the Accountant may (i) take into consideration a change in the rates and charges for services and facilities afforded by the System that became effective at least 60 days prior to the last day of the period for which Net Earnings are determined and (ii) for purposes of satisfying the above Net Earnings test, make a pro forma determination of the Net Earnings for the period of time covered by this certification or opinion based on such change in rates and charges being in effect for the entire period covered by the Accountant's certificate or opinion. In addition, the revenues and expenses of any Capital Acquisition may be added to the net Earnings of the Authority for determinations made under this section. Conditions Precedent for Issuance of Additional Bonds - Canital Additions: Initial Issue. The Authority covenants and agrees that Additional Bonds will not be issued for the purpose of financing Capital additions, unless the same conditions precedent specified in clause (a) above have been satisfied and, in addition thereto, the conditions precedent specified in clause (b) above are satisfied or, in the alternative, the Authority shall have obtained: (a) from the Engineer of Record a comprehensive report for each Capital Addition to be financed, which report shall (A) contain (1) detailed estimates of the cost of acquiring and constructing the Capital Addition, (2) the estimated date the acquisition and construction of the Capital Addition will be completed and commercially operative, and (3) a detailed analysis of the impact of the Capital Addition on the fmancial operations of the System during the construction thereof and for at least five Years after the date the Capital Addition becomes commercially operative, and (B) conclude that (I) the Capital Addition will substantially increase the capacity, or is needed to replace existing facilities, to meet current and projected demands for the service or product to be provided thereby, and (2) the estimated cost of providing the service or product from the Capital Addition will be reasonable in comparison with projected costs for furnishing such service or product from other reasonably available sources; and (b) a certificate of the Engineer of Record to the effect that based on the report prepared for each Capital Addition, the projected Net Earnings for each of the five Years subsequent to the date the Capital Addition becomes commercially operative (as estimated in such report) will be equal to at least 1.25 times the Average Armual Principal and Interest Requirements for Bonds then outstanding or incurred and all Bonds estimated to be issued, if any, for all Capital Acquisitions, Capital Improvements, and Capital Additions then in progress or then being initiated during the period from the date the frrst series of obligations for the Capital Additions is to be delivered through the ftfth Year subsequent to the date the Capital Addition is estimated to become commercially operative. The Board covenants that it will adopt on or before the closing date for the proposed Additional Bonds and enforce any periodic rate increases described in the report of the Engineer of Record; provided, however, if such rate increases are not actually needed for any Year, the Board may be subsequent resolution delay such increase until it becomes actually necessary to comply with its covenants in the paragraph captioned "Additional Bonds" of this Resolution. Conditions Precedent for Issuance of Additional Bonds - Canital Additions: Subseouent Issues. Once the initial Bonds have been delivered for a Capital Addition, the Authority reserves the right to issue Additional Bonds to fInance the remaining costs of such Capital Addition in such amounts as may be necessary to complete the acquisition and construction thereof and make the same commercially operative without satisfaction of any condition precedent under clause (b) or clause (c) of this Section but subject to satisfaction of the following conditions precedent: 14 35 e e (a) the Board makes a forecast (the "Forecast") of the operations of the System demonstrating the System's ability to payoff obligations payable from the Pledged Revenues of the System to be outstanding after the issuance of the Bonds then being issued for the period (the "Forecast Period") of each ensuing Year through the fifth Year subsequent to the latest estimated date such Capital Addition is expected to be commercially operative, and (b) the Engineer of Record reviews the Forecast and executes a certificate to the effect that the Forecast is reasonable, and that based thereon (and such other factors deemed to be relevant), the Pledged Revenues of the System will be adequate to pay all the obligations payable from the Pledged Revenues to be outstanding after the issuance of the Bonds then being issued for the Forecast Period. Refundin~ Bonds. The Authority reserves the right to issue refunding bonds to refund all or any part of the outstanding Bonds (pursuant to any law then available), upon such tenns and conditions as the Board may seem to'be in the best interest of the Authority and its inhabitants, and if less than all such outstanding Bonds are refunded, the conditions precedent (for the issuance of Additional Bonds) set forth in clauses (a) and (b) of this Section shall be satisfied and the Accountant's certificate or opinion required by clause (b) shall give effect to the issuance of the proposed refimding bonds (and sha1l not give effect to the obligations being refunded following their cancellation or provision being made for their payment). No Accountant's certificate otherwise required by clause (b) will be required for refunding bonds, after giving effect to such proposed refunding, if there is no increase in debt service for any Year before or including any Year in which there will be debt service on Bonds outstanding both before and after such refunding and any such refunding bond does not have lien a on Pledged Revenues superior to the obligation which it refunds. Detennination of Averaee Annual PrinciDal and Interest Reauirements. With reference to Additional Bonds anticipated and estimated to be issued or incurred, the Average Annual Principal and Interest Requirements therefor shall be those reasonably estimated and computed by the officer of the Authority then having the primary responsibility for the financial affairs of the Authority. In the preparation of the report required in clause (c Xi) above, the Engineer of Record may rely on other experts or professionals, including those in the employment of the Authority, provided such reports disclose the extent of such reliance and concludes it is reasonable so to rely. In connection with the issuance of Additional Bonds for Capital Additions, the certificate of the authority's officer and the Engineer of Record, together with the appropriate report for the initial issue and the Forecast for a subsequent issue, shall be conclusive evidence and the only evidence required to show compliance with the provisions and requirements of this section. Combined Issues. Bonds for Capital Additions may be combined in a single issue with Bonds, as the case may be, for Capital Acquisitions or Capital hnprovements, or for any lawful purpose, provided the conditions precedent set forth in clauses (b) through (e) are complied with as the same relate to the appropriate purpose. Reserve Fund. The Authority shall increase the Reserve Fund for such Additional Bonds by (i) providing cash from the proceeds of sale of the Additional Bonds or any other lawfully available source, (ii) a surety bond in lieu thereof, (iii) a combination of such cash and surety bond, or (iv) making equal monthly installment payments to the Reserve Fund over the 24 month period following the issuance of such additional Bonds, all as the Authority deems reasonable and appropriate; provided, however, that (A) the amount of any such cash, the coverage of any surety bond in lieu thereof, the amount of such cash and the coverage of such surety bond, and the sum of the monthly payments when added together shall at least equal the Reserve Requirement; (B) any such surety bond provided in lieu of cash shall be issued by an insurance company or association of companies whose insured obligations are rated by a nationally recognized rating agency in its highest rating categories; and (e) any such surety bond may be written (or amended) to provide coverage not only for such Additional Bonds but also pro rata for the Bonds then outstanding, provided, any existing cash or surety fimd in lieu thereof which secures any such outstanding Bonds is extended ratably to secure the Additional Bonds then being issued. It is the Authority's intention hereby to provide maximum flexibility with respect to the Reserve Fund to be provided for any Additional Bonds which may be issued hereafter and the foregoing provisions shall be liberally construed in order to achieve that objective without materially prejudicing the rights and interests of the owners of any Bonds at the time outstanding. Oneration of System: No Free Service. It shall continuously and efficiently operate the System and maintain the System in good condition, repair, and working order, all at reasonable cost. No free service of the System shall be allowed, and should the Authority; or any of its agencies or instrumentalities, lessees, or concessionaires, make use of the services and facilities of the System, payment monthly of the standard retail price of the services provided shall be made by the Authority, or any of its agencies or instrumentalities, lessees, or concessionaires, out of funds from sources other than the revenues of the System, unless made from surplus Net Revenues. Further Encumbrance. The rents, revenues, and income of the System have not in any manner been pledged to the payment of any debt or obligations of the Authority or of the System; and it shall not additionally sell or encumber the Net Revenues in any manner, except as permitted in the Parity Bonds Resolutions in connection with Additional Bonds, unless said encumbrance is made junior and subordinate in all respects to the liens, pledges, covenants, and agreement of "the Prior Lien IS 3lo e e Bonds Resolution and the Parity Bonds Resolutions; but the right of the Authority to issue revenue bonds payable from a subordinate lien on the sUIplus Net Revenues in specifically recognized and retained. Insurance. (1) The Board shall cause to be insured for such parts of the System as would usually be insured by corporations operating like properties, with a responsible insurance company or companies, against risks, accidents, or casualties against which and to the extent insurance is usually carried by corporations operating like properties, including, to the extent reasonably obtainable, fire and extended coverage insurance, insurance against damage by floods, and use and occupancy insw"ance. Public liability and property damage insurance shall also be carried unless legal counsel for the Board gives a written opinion to the effect that the Authority and the Board are not liable for claims which would be protected by such insurance. All insurance premiums shall be paid as an Operating Expense. At any time while any contractor engaged in construction work shall be fully responsible therefor, the Board shall not be required to cany insurance on the work being constructed if the contractor is required to cany appropriate insurance. All such policies shall be open to the inspection of the Bondholders and their representatives at all reasonable times. Upon the happening of any loss or damage covered by insurance from one or more of said causes, the Board shall make due proof of loss and shall do all things necessary or desirable to cause the insuring companies to make payment in full directly to the Board. The proceeds of insurance covering such property, together with any other funds necessary and available for such purpose, shall be used forthwith by the Board for repairing the property damaged or replacing the property destroyed; provided, however, that if said insurance proceeds and other funds are insufficient for such purpose, then said insurance proceeds pertaining to the System shall be deposited in a special and separate trust fund, at an official depository of the Authority, to be designated the Insurance Account The Insurance Account shall be held until such time as other funds become available which, together with the Insurance Account, will be sufficient to make the repairs or replacement originally required. (2) The annual audit hereinafter required may contain a section commenting on whether or not the Board has complied with the requirements of this section with respect to the maintenance of insurance, and shall state whether or not all insurance premiums upon the insurance policies to which reference is made have been paid. Records. The Board shall keep proper books of record and account in which full, true, proper, and correct entries will be made of all dealings, activities, and transactions relating to the System, the Pledged Revenues, and the Funds created pursuant to this Resolution, and all books, documents, and vouchers relating thereto shall at all reasonable times be made available for inSpection' upon request of any Bondholder or customer of the Authority. To the extent consistent with the provisions of this Resolution, the Board shall keep its books and records in a manner confonning to standard accounting practices as usually would be followed by private corporations owning and operating a system similar to the System, with appropriate recognition being given to essential differences between municipal and corporate accounting practices. Audits. After the close of each fiscal year, an audit will be made of the books and accounts relating to the System and the Pledged Revenues by an independent certified public accountant or an independent fmn of certified public accountants. The audit shall include a schedule of the deposits made to the various funds created by this Resolution. The annual audit reports shall be open to the inspection of the Bondholders and their agents and representatives at all reasonable times. Governmental AlZencies. It will comply with all of the terms and conditions of any and all franchises, permits, and authorizations applicable to or necessary with respect to the System, and which have been obtained from any govermnental agency; and the Board has or will obtain and keep in full force and effect all franchises, permits, authorization, and other requirements applicable to or necessary with respect to the acquisition, construction, equipment, operation, and maintenance of the System. No Comnetition. It will not operate, or grant any franchise or pennit for the acquisition, construction, or operation of, any facilities which would be ill competition with the System, and to the extent that it legally may, the Authority will prohibit any such competing facilities. 16 31 e e AUDIT REPORT The infonnation contained on the following pages are excerpts from the financial section of the Authority's Audit Report for the fiscal year ended September 30, 1998, as prepared by: l'Jull"'l.&irssll- Wh ,1'6. pt.:r~" t. M.~'- . \ Certified Public Accounts Houston, Texas This infonnation is not intended to be a complete statement of the Authority's financial condition. A complete Audit Report is available upon request to: Moroney, Beissner & Co., Inc. Financial Advisors to the Authority 17 38 e e GENERAL INFORMATION Lacation The Authority comprises approximately 20,600 acres, located in the southeast quadrant of Harris COWlty approximately 25 miles from downtown Houston. The La Porte Area is bounded on the North by the Houston Ship Channel, and on the east by Galveston Bay. La Porte-Bavshore Area Profile Located some 20 miles southeast of Houston on Galveston Bay in Harris County are the three communities that make up the La Porte-Bayshore Area: La Porte, Morgan's Point and Shoreacres. The area has a combined population of approximately 45,000. Though much of the image of this area is industrial, the La Porte-Bayshore area is still characterized by an expanse of resort homes. Because oflhis, and the metropolitan advantages of Houston, La Porte-Bayshore Area is one of the few communities in the Gulf Coast area that offers this favorable combination. Harris County This 1,728.9 square mile county is a leading oil, gas and petrochemical area, having over $275 million average annual production ofpetrolemn, natural gas and natural gas liquids. It-has more than 3,200 manufacturing plants; the nation's largest concentration of petrochemical plants, the second largest United States seaport, and is a corporate management center. A significant part of the COWlty'S major employers, manufacturers, education and financial institutions are located in Houston, the County seat. The Texas Medical Center, located in Harris County, is one of the nation's largest, providing medical care and educational opportunities. Harris County's 64 hospitals have approximately 16,922 beds, of which 4,589 are in the Texas Medical Center. Harris County's General Obligation Bonds are rated n Aa2" by Moody's and "AA+" by S & P's . 21 3'1 e e Transportation State Highway 225 provides access to the La Porte area on its north side and connects on the west with Interstate 610, a multi-lane limited access freeway which encircles the City of Houston. State Highway 146, which extends into Northeast Texas, allows access from the south through the City of La Porte. Air transportation is accessible through Houston's George Bush Intercontinental and Hobby AiIports. The City of La Porte's Municipal Airport provides private and chartered air transportation through a fully approved FAA facility. Railway transportation is supplied by six railroads, including the Southern Pacific Lines. There are several motor freight lines which adequately fill the need for truck transportation. The Houston Ship Channel, which runs along the northern portion of the La Porte area, provides deep water ocean-going transportation from the Intracoastal Canal to the Port of Houston. The Port of Houston's Barbour's Cut Tenninal, located adjacent to the La Porte area, handles in ex~ of three million tons of cargo annually. Maior Industries The nation's largest concentration of petrochemical plants border the Authority on its north and south sides. Air Liquide (Air Plant) Air Liquide (Alphagaz) Air Products Mfg. Corp. Celanese Compo H2 Purification Facility Hyco I, n. & ill N2 Backup Syngas Trans. & Distribution Akzo Nobel, Inc. (Alkyls) Akzo Nobel, Inc. (La Porte) Amoco Chemical (Albemarle) Arco Chemicals Areo Pipeline Co. Aristech Chemical Corp. BattlegrOlUld Water Co. CBSL Transportation Superior Carriers Chusei (USA), Inc. Ciba Geigy Corp. Dow Chemical U.S.A. Drago Supply Dunn Equipment E.I. DuPont Bayer Corporation Eurecat U.S., Inc. F.MC. Corporation Fairmont Supply Fina Oil & Chemicals Geon Compnay Goodyear Tire & Rubber Co. GTeifBrothers Houston Lighting & Power Laidlaw Environmental Lubrizol Corporation Metton America, Inc. Mil1enium (fonnedy Quantum Chemical (Syngas)) Millenium (fonnerly Quantum Chemical (USI)) NOCS Northwest, Inc. Nippon Pigments U.S. Noltex L.L.C. Occidental Electrochemical Ohmstede Machine Works Petrolite Praxair, Inc. Prime Equipment Co. Ragsdale Development Corp. Revak Rexene Corporation Rohm & Haas Solvay Interox, Inc. Solvay Polymers, Inc. Southern lonies, Inc. (1986) Chern Quest, Inc. Southwest Chem. & Plastic Texas Electric Company Tri-Gas, Inc. (Airco) Tri-Gas, Inc. (Liquid Air) UCISCO Witco Chemical Utilities The residents located in the area of the Authority are provided electricity, gas and telephone service by Houston Lighting and Power Company, Entex, Inc. and Southwestern Bell Telephone, respectively, all as part of the City of Houston system. Water and sewer facilities are provided by the City of La Porte's system. FinanciallDstitutions Banking facilities located within the area of the Authority are provided by Bayshore National Bank, Baytown State Bank, NationsBank and Bank of America. 22 I . lto e . Commercial Develooment The largest city served by the Authority is the City of La Porte. The residential and commercial areas of the City fonn the core of the City, with the Industrial Districts flanking the City on the north and south. The central business district lies east of Highway 146, which crosses the City from north to south, and contains restaurants, shopping facilities and automobile dealerships. In addition, there are several attractive shopping centers within the City. Dun & Bradstreet rates over 310 business establishments in the City. . Residential Develooment Residential subdivisions within the City are well planned, providing complete utility services and hard swface streets with curbs and gutters. Homes are currently priced from $65,000 to $500,000 with construction progressing at a moderate rate. Educational Facilities The La Porte Independent School District provides excellent school facilities within the Authority. The school district operates six elementary schools, three junior high schools, one senior high school and one alternative school. The district is fully accredited by the Texas Education Agency and the Southern Association of Colleges and Schools. All of the school facilities are fully air-conditioned and centrally heated and are furnished with modem educational equipment. As of February 1999 the school district had a student enrollment of 7,385 and a 1998 assessed valuation of $4,423,232,000. The district's bonds are rated "Aa3" by Moody's and "AA" by S& P's . Hieber :Educational Facilities The San Jacinto Junior College District encompasses approximately 289 square miles in southeast Harris County, including the Cities of La Porte, Shoreacres and Morgans Point, providing the residents of the cities with higher educational facilities. The College District has three campuses~ the Main Campus adjacent to the City of La Porte on its west side~ the North Campus north of the Houston Ship Channel, and the South Campus just southwest of Pasadena within the city limits of the City of Houston. San Jacinto college offers two-year educational programs leading to Associate of Arts and Associate of Science Degrees. There are five universities located in nearby Houston: the University of Houston, Rice University, Texas Southern University, St. Thomas University, and Houston Baptist University, all of which offer full four-year as well as postgraduate programs. 23 4-\