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HomeMy WebLinkAboutRES 85-399 R E S O L U T I O N BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BEAUMONT: THAT the preliminary official statement for the issuance of $4.5 Million in Tax Anticipation Notes, Series 1985, attached as Exhibit "A" , be, and the same is hereby, approved. PASSED BY THE CITY COUNCIL of the City of Beaumont this the _ day of �rGt e vZ < e 1985 . - Mayor - M R OFFICIAL STATEMENT DATED NOVEMBER 19 , 1985 NEW ISSUE IN THE OPINION OF BOND COUNSEL, INTEREST ON THE NOTES IS EXEMPT FROM ALL PRESENT FEDERAL INCOME TAXES UNDER EXISTING LAW. I� $4,500,000 CITY OF BEAUMONT 4) (A home rule city of the State of Texas, :P located within Jefferson County) fir, .✓ MAINTENANCE TAX ANTICIPATION NOTES � SERIES 1985 The Notes will be issued in denominations of $10( , 00 or multiples thereof as specified by the Purchaser and agreed upon by the City,,- and will be dated November 25, 1985. Principal of and interest on the Notes will be playable September 25, 1986 at Texas Commerce Bank, National Association, Houston, Texas. ' The Notes wi11 be negotiable and nonregistrable and will not be subject to redemption prior to maturity. Amount Matuuritj Interest Rite $4,500,000 September 25, 1986 % _ b ,,i, -Z--Y The Notes are direct obli ations of the City v g y payable from y available funds of the City. As security for the payment of the Notes,. the City s irrevocably pledged all current and delinquent maintenance taxes as collected and as pledged to deposit such taxes, as collected, into a special account of the City ;e, until there is on deposit in such account amounts sufficient to pay the principal and interest on the notes at maturity. The City Council of the City shall compute and ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the money required to pay all of the City's maintenance expenses including the interest and principal, on the Notes. The Note. are offered when, as and if issued, subject to the opinion of Vinson & Elkins, Houston, Texas, Bond Counsel, as to the validity of the issuance of the Notes under the Constitution and laws of the State of Texas. It is anticipated that the Notes will be delivered to the Purchaser on November 25, 1985. TABLE OF CONTENTS Page USE OF INFORMATION IN OFFICIAL STATEMENT. . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 3 SALE AND DISTRIBUTION OF THE NOTES. . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Saleof the Notes.. . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . .. . . . . . . . . . . . . . .. . . .. . . . . . . . . 3 Marketability. . .. . . .. . .. . . . . . . . . . . . . .. . . .. .. . . . . . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . . 3 SecuritiesLaws. . . . . . . . . . . . .. . .. . .. .. .. . . . . . . . . . . . . . . . . . . . . . . . ..... . . . . . . . . . . . 3 Municipal Note Rating. . . . . . . . .. . . . . . . .. . . . . . . . . . . . 3 THENOTES. . . . .. . . . .. . . . .. . . . . . . . ... . .. .. . . . . . . . . . .. .. . . . . . . .... . . . . .. . . . . . . 4 Description of the Notes. .. . . . . . . . .. . . .. . . . . . . . . . . . . . . . . . . . . .. . . . . .. . . . . . . . . . . . 4 Source of Payment. . .. . . . . . .. ... .. . .. . . . .. . . . . .. . . . . .. . . .. . . . . . . .. . ... . . . . . . . . . . . 4 Authorityfor Issuance. . . . . . . .. .. . .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .. . . . . . . . . . .. . 4 Useof Proceeds. .. . . . . . . . . . .. . .. . . . . .. . . .. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . 4 FutureBorrowing.. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 4 Legal Investment and Eligibility to Secure Public Funds in Texas. . .. . .. .. . . . . . . 4 CASH FLOW STATEMENTS. . .. .. . . . . . .. . . . . . .. ... .. . . . . . . . . . . . . .. . . . . . . .. . . . . .. .. . . . . . . . 5 SPECIAL CONSIDERATIONS. . . . . .. . . . . ., . .. . . ... . . . ... .. . . . . . . . .. . . .. . . 6 Loss of City Funds and Curative Actions by the City.. . . .. . . . .. . . .. .... . . . . . . . . . 6 TAXDATA. . . . . . . . . .. . .. . . . . . . . . . .. . . . . .. .. . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . .. 7 General . . . . .. .. . . . . . . .. . .. . . . . . . . . . 7 Authority for Ad Vaiorem Taxation. . . . . . . . . . . . . . . . . . . .. .. . . . . . . . . . . . .. .. 7 Historical Analysis of Ad Valorem Taxation.. .. . . . . . . . . . . . . . . . . .. ... . . . . . . . . . . .. 9 DEBT STATEMENT. ... . .. .. . . . . . . . . . . . ... . . . . ... .. . . . . . . . . . . . . . . . . . . . . . .. . . . .. . . . . . . . . . . 10 General . . . ... . . . . . . . . . . . . .. . .. . . . . . . .. .. . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . . 10 Bonded Indebtedness. . ., . . . 10 Revenue Support of Ad Valorem Tax Bonds and Certificates of Obligation. . . . . . . . . 10 Estimated Overlapping Debt. . . . . .. . . . . . .. .. . . .. . . . . .. . . . . . . . .. . . . .. . .... . . .. . . .. 10 DebtRatios. ... . . . . . . . . . . ... . . . . .. . . . .. . . .. . . . . . .. . . . . . . .. .. . . . .. . . . . . . . . . 10 Short-Term Debt., . . . . . . . .. . . . . . . . . .. .. . . . . . . . . . . . . . . . . . .. .. . ... ... . . .. .. EstimatedOverlapping Taxes. .. . . . . . . . ... . .. . . . . . . . .. . . . .. .. . . . . . . .. . .. . .. . .. . . . 11 SalesTax. .. .. . .. . .... . . . . . . . . . . . . . . . . . . . . .. . . . . .... . . .. . . .. 11 Industrial District Contracts. . . . . . . . . . . . . ... . . . . . . . . . . . . . . ... . . ... .. . . . . . . . . . 12 Tax Increment Reinvestment Zone.. ... ... .... . . . . .. .. . . .. . . .. . .. . .... . . .. .. . . . . .. 12 SELECTED FINANCIAL DATA. . .. . . . ... .. . . . . . . . . . . . .... .... .... .. ... 13 Historical Operations of the City's General Fund. . . . . . . . . . .. 13 General Fund and Debt Service Fund Balance for the Past Five Fiscal Years.. . . . . 13 Financial Statements. . . . ... . . . . ....... .. . ... . . . . . . . .. .. ... . . . . ... . . . ... . . . . .. 13 ADMINISTRATION OF THE CITY. .. . . . .... . . ... . . . ... .. . . . . . . . . . . . .. . . . .. ........ . . . . . ... . 14 Mayor and City Council . . .. . ... . . . . . . .... .. .. . . . . . .. . .... . . .. . . .... . .. .. .. . . . . . . 14 Administration.... .. . . .. . . .. .. . . . . . . . .... .. . . .. . . . .. .. . .. . . . . . . . ... ... . .. . . . . .. 14 Consultants. . . . . . . . . . . . . .. . . .. . . . ... . . . . ..... . .. . .. . . . ... .. . . . .. ... . .. . . . . . . . .. 15 LITIGATION. .. . . . . . . . ... . . . . . . . . . . . . . . . .. ...... ... . . . .. ..... . . . .. . .. . . ..... . . . . .. .. . . 15 LEGISLATION AND REGULATION. . . . . . .... . ...... ..... . . . . . . ... .. ... . ... . .. .... .. .... .... . 15 Affecting the City's Operations.. . . ..... .... . . . .. . . . .. .. .. . . . ... ... .. . .. .. . . .... 15 Affectingthe Tax Base. . .... ... ... ... .. .... . .. .. . . .. . ........ . . . . . .. . . . ... .. . .. 16 OTHER CONSIDERATIONS.. . . . . . . .. . .... . .. . ........ . .. ... . .. .. ... .. . . . ... ... .. .. . ....> . 16 CapitalImprovements. . . . . . . . .... . . .. .... .. ... .. . .. .. . . . . . .. .... ...... ...... . . .. 16 PensionFund.. . . . . . . .. . .. . . .. .. .. . . ..... .. . . . . . . . .. . . . ... ..... .. .. .. . ... . 16 CollectiveBargaining. . . ... . .. ... . .. . .. . . .. ... ... . . . . .. . . . . . . . ....... . ... .. . . . .. 17 Local Economic Conditions. ... ...... .... .. ... .. ... . . . .. . . . .. .. . ... ...... ... . .. .. 17 LEGAL MATTERS. . . ... . .. . . . . .. . . . ... .. . ... . ... .... . .. . . . . ... . . . .. . ......... ... . . ... 17 LegalOpinion. . . . . .. . .. . . . . . . . ... .. . . ... .. . . . . . . .... . .... ..... . . . . . . . . 17 No-Litigation Certificate. . . ... . .. . .. ..... . .. . . . ... .. .. ... . . . ...... . . . ... . . . ... 17 GENERAL CONSIDERATIONS.. , . .. 17 Sources and Compilation of Information. ... ,.. >. .... .. .. ... . .... . ... ... . .. . . . . .. 17 Certification as to Official Statement........ . . . .. ... . . . . . . . . ........ . . .. . . . . . 18 Updating of Official Statement.. . . . .... .... .. . .. ..... .. .. . .. . ........ .... . . . ... 18 2 o USE OF INFORMATION IN OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized to give any informa- tion or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City. This Official Statement is not to be used in an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information and expressions of opinion herein contained are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall , under any circumstances, create any implication that there has been no change in the affairs of the City or other matters described herein since the date hereof. SALE AND DISTRIBUTION OF THE NOTES Sale of the Notes_: (the "Purchaser") has agreed to purchase the Notes from the City bearing interest at X, at a price of the par value thereof, plus a cash premium of S Marketability: The City has no understanding with the Purchaser regarding the reoffering yields or prices of the Notes and has no control over trading of the Notes after their initial sale by the City. Information concerning reoffering yields or prices is the responsibility of the Purchaser. Securities Laws' No registration statement relating to the Notes has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in reliance upon the exemptions provided thereunder. The Notes have not been registered or qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; nor have the Notes been registered or qualified under the securities acts of any jurisdiction. The City assumes no responsibility for registration or qualification of the Notes under the securities laws of any jurisdiction in which the Notes may be offered, sold or otherwise transferred. This disclaimer of responsibility for registration or qualification for sale or other disposition of the Notes shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration or qualification provisions. Municipal Note Rating: The District made application to Standard & Poor's Corporation ("S&P") 'for a municipal note rating, and a rating of "SPI+", has been assigned to the Notes. An explanation of the significance of such rating may be obtain from S&P. The rating reflects only the views of S&P and the City makes no representation as to the appropriateness of the rating. There is no assurance that such rating will continue for any given period of time or that it will not be revised or withdrawn entirely by such rating company, if in the judgment of S&P, circumstances so warrant. Any such revision or withdrawal may have an effect on the market price of the Notes. 3 THE NOTES Description of the Notes: The Notes are dated November 25, 1985, and bear interest from such date at the interest rates indicated on the cover page hereof, which interest is payable at maturity. The Notes mature September 25, 1986. The Notes are not subject to redemption prior to their scheduled maturities. Principal of and interest on the Notes are payable at Texas Commerce Bank National Association, Houston, Texas. Source of Payment: , The Notes are direct obligations of the City payable from any available funds of the City. As security for the payment of the Notes, the City has irrevocably pledged all current and delinquent maintenance taxes as collected and has pledged to deposit such taxes, as collected, into a special account of the City created for that purpose, until there is on deposit in such account amounts sufficient to pa.y the principal and interest on the notes at maturity. The City Council of the City shall compute and ascertain a rate and amount of ad valorem tax which will be sufficient to raise and produce the money required to pay ail of the City's maintenance expenses including the interest and principal on the Notes. Authority for Issuance: The Notes are issued pursuant to Article VII, Section 9 of the Home Rule Charter of the City as amended and the constitution and laws of the State of Texas. Use of Proceeds: Proceeds of the Notes will be used to fund current maintenance expenses of the City for the fiscal year ending September 30, 1986. Future Borrowing: The City does not intend to issue additional maintenance tax anticipation notes during the current fiscal year. Legal Investment and Eligibility to Secure Public Funds in Texas: The following is quoted from Article 17k-6, Vernon's Texas Civil Statues, and is applicable to the Notes: "All (Notes).. .are legal and authorized investments for banks, savings banks, trust companies, building and loan associations, savings and loan association, insurance companies, fiduciaries, and trustees, and for the sinking fund of cities, towns, villages, school district, and other political subdivisions or public agencies of the State of Texas. Said (Notes) also are e' igibie to secure deposits of any public funds of the state or any political subdivision or public agency of the state, and are lawful and sufficient security for the deposits to the extent of their market value. .." The City makes no representation that the Notes will be acceptable to public entities to secure their deposits, or acceptable to such institutions for investment purposes, and has made no review of laws in other states to determine whether the Notes are legal investments for various institutions in those states. 4 a CASH FLOW STATEMENTS The following unaudited cash flow statements were prepared by City Officials based on records of the City, including the approved 1985-1986 budget. City maintenance and operating expenses tend to occur in somewhat level amounts throughout the year, but the City anticipates that the major portion of ad valorem maintenance taxes levied by the City will not be paid until late December, 1985 and will not be available until early January, 1986. The Notes are being issued to pay maintenance expenses of the City during the period from November 1, 1985 to January 1, 1986. 1985 1985 1986 1986 1986 1986 November 30 December 31 January 31 February 28 March 31 April 30 Projected 1985{86 �a �Q oN7l 3 .l 41,19I i ,�t�,Z�� J'n159z.._ 2 f/,?? 3 a 563s�� Beginning Cash Balance S4,2644- - - 1 Income S, 4/07� A, ?,5116 0 V;4 f;-5, 1?I 46v �h� t Taxes- S-3 S3 8* 4fif,- S 7"-,t25 S 6`691;-t$5 Other (a) 636;& 1 (c) 9 b 5 ? o^w } .' , t .,toc f p5;.33 >�t,�cs�: 3 Total income 58,805,434- 54,526,531 $5,505,902 $4,978,185 $3,747,176 S1;585, 9 3! y?a t{fS0'o: S 9 �Zj"'3g 3^��'3�r4 41 Total Expenditures S2 975,42A- 9 7 7 7 i !b) cc » a1 z Ending Cash Balance 3f 1936 1986 1986 1986 1986 May 31 June 30 July 31 August 31 September 30 Total ' `f Projected 1985/86 Z/� 1�`j g7t da!�•`n17> Beginning Lash Balance $2-9$ 3t3 W,44 $1,A4,184- S3 � A T t7 1'" T `• +lu/ , Income , Sb 9 tt�3:;B !G '-r's y.a z4-, 'BTC, CI,JVG,JV7 $ N-,-70 $ ^6.6,9, J '9.6424-Aga- $ 647- • $421. Other 8 3, 6; {c) 39 4433-3532-9`:;33125= „5 ?� ds?�r� lam; sdLrC� 3i Total Income $2,173,585 $4,120,598 51,576,177 $5,754,848 53,658,124, $46,432,939 3A5? ;14 3dS7� y7�� X537Y-Z Total Expenditures a °ri=,;°'- t" �, r Ending Cash Balance ' bSl7 5 25�avy a Includes $4,500,000 Note proceeds available November 300, 1985. (b) Includes principal and interest set aside for payment of Notes due September 25, 1986. (c) Includes Industrial District contract payments. 5 E :J V SPECIAL CONSIDERATIONS Loss of City Funds and Curative Actions by the City: On March 4, 1985, the City learned that E.S.M. Government Securities, Inc. ("E.S.M.") had been put in receivership by the United States Securities and Exchange Commission in a proceeding in the United States District Court for the Southern District of Florida. The City determined that it had confirmations reflecting the purchase by it from E.S.M. of $20,000,000 worth of government securities which were subject to repurchase agreements with E.S.M. that were outstanding. This represented approximately two thirds of the City's net cash balance as of such date. The City purchased such securities from E.S.M. through E.S.M. 's broker in New York, First Money Managers, Inc. Pursuant to instructions from First Money Managers, Inc., the City had wired its funds to the Bradford Trust Company in New York City. The City received no safekeeping receipts from Bradford or any other party. Neither the funds so lost nor the earnings therefrom are available to the City for application to their various budgeted purposes. The City is pursuing several legal actions to attempt to recover its loss. There can be no assurance that the funds so lost will be recovered. The City was granted leave to intervene in the SEC receivership suit in the United States District Court for the Southern District of Florida. The City has filed a claim for its loss with the receiver for E.S.M. The receiver of E.S.M. was granted permission to place E.S.M. in a bankruptcy liqudation under Chapter 7 of the Bankruptcy Code. The City has filed a motion to have E.S.M. liquidated pursuant to the stockbroker liquidation provisions of Subchapter III of Chapter 7 of the Bankruptcy Code. The City believes that it and most of the other municipal creditors will recover a larger amount of their claims if E.S.M. is liquidated as a stockbroker rather than as an ordinary debtor under Chapter 7 of the Bankruptcy Code. The City's motion was opposed by several of the other claimants, including American Savings and Loan Association of Florida. On June 20, 1985, an order was entered by the District Court granting the City's motion. American Savings and Loan Association of Florida has filed a notice of appeal of this order. The City filed suit in the United States District Court for the Southern District of Florida against E.S.M. 's auditors, Alexander Grant & Co., and against Bradford Trust Co. The City filed a lawsuit against Touche Ross & Co., based upon its audit of the City's September 30, 1984 financial statements. Touche Ross & Co. has resigned as auditor for the City but has not withdrawn the Audit Letter. Legal action by the City against other third parties is also under review. As a result of the E.S.M. investments, losses of $7,344,533, 56,156,732, and $6,498,735 were reallocated by resolution of the City Council to the General Fund, the Water Utility Fund and the Transportation Improvement Fund, producing deficits of approximately $2,300,000 and $1,500,000, respectiveiy, in the General Fund and the Transportation Improvement Fund. The City Council allocated such losses in this manner since these three funds were the only funds which had investments with E.S.M. In making the allocation, the City Council elected to allocate the losses in the Water Find and Transportation Improvement Fund to their cash balances at that time and apply the remaining loss to the General Fund. In response to these losses, the City has imposed a general hiring freeze, cancelled all equipment purchases, deferred all capital improvement programs for which fund balances were not available, applied reserves in certain of the funds to reduce losses, reappropriated revenue sharing and general improvement funds, curtailed or reduced certain services provided by the City, instituted strict budgetary controls to decrease City spending generally, and promulgated procedures and guidelines for investment of City funds. Additionally, in May of 1985 the City sold $6,650,000 of certificates of obligation to the Texas Water Development Board in order to provide funds for on-going water and sewer projects. These certificates are now being refunded by this issue of Bonds. By the end of its current fiscal year in September of 1985, the City estimates that the unreserved General Fund reflects a deficit of approximately $265,000. Moreover, the City expects to continue indefinitely the restrictive fiscal policies, limitations and controls previously implemented. If the City is unable to eliminate the deficits resulting from the E.S.M. losses or to obtain the necessary funds for previously deferred or cancelled improvement programs or purchases or curtailed or reduced services, either through continuation of such policies, limitations and controls or as a result of recoveries in the pending litigation, then further limitations and controls may have to be imposed and the City may have to use ad valorem tax receipts or revenues from other sources for these purposes. Since the City's revenues from other sources (including sales tax receipts) are approximately 3.8% below those budgeted during the fiscal year, L� it is possible that any such ad valorem tax receipts would have to T,P vided through increases in the ad valorem tax rate. yd� . 6 , 2-1,5`3 i TAX DATA General: One of the City's sources of operational revenue and its principal source of funds for ad valorem tax debt service payments is from the receipts from ad valorem taxation. The following is a recapitulation of (1) the authority for taxation, including methodo- logy, limitations, remedies and procedures; (2) historical analysis of collection and trends of tax receipts and provisions for delinquencies; and (3) an analysis of (a) the current tax base, (b) the principal taxpayers and (c) other ad valorem taxation that may compete with the City's tax collections. Additionally, sales tax authority and collec- tions are analyzed as well as payments received in lieu of taxes for Industrial District Contracts and tax receipts received from the City's tax increment reinvestment zone. The inclusion of the following information is not intended to imply that any revenues of the City, other than receipts of an ad valorem tax, are pledged to pay the principal of or interest on the Bonds. Such information, and the other information contained in this Official Statement relating to sources of revenues other than ad valorem taxes, is for the purpose of providing information concerning the general operation of the City. Authority for Ad Valorem Taxation: Following is a discussion of ad valorem taxation under Texas law. Recently effective changes to the law, especially the State Property Tax Code (the "Tax Code"), will have varying but significant effects upon the existing tax methodology and procedures discussed below. The City is presently unable to assess the full impact of such changes upon the City' s ad valorem tax procedures, nor can the City predict the future possibility of further amendments or revisions to the Tax Code. Tax Rate Limitations - Article XI, Section 5 of the Texas Constitution, provides for an overall limitation for Horne Rule Cities of 52.50 per $100 assessed valuation of which not more than $1.50 can be used for general operating purposes under the City Charter. The Attorney General of Texas follows a policy, with respect to Home Rule Cities which have such a $2.50 limitation, of approving ad valorem tax bonds only to the extent that all of such city' s ad valorem tax debt can be serviced by a tax rate of $1.50 at 90% collection. - Property Subject to Taxation - Exr_ept for certain exemptions provided by Texas law, all the property in the City, real or personal, is subject to taxation by the City. Principal categories of exempt property include property owned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain household goods, family supplies. and personal effects; farm products owned by producers; certain property associated with charitable organizations, use and development associations, religious organizations, and qualified schools; designated historic sites; solar and wind powered energy devices; most individually owned automobiles; property of disabled veterans only to the extent of $3,000 of taxable valuation; and residential homesteads of persons over 65 years, to the extent the governing body of the political subdivision granting an exemption deems it advisable to exempt such homestead. The Council presently exempts from taxation up to $17,500 assessed valuation of residential homesteads to persons over 65 years of age. Such homestead and disabled veterans exemptions from the ax roll approximate $ - R,' An eligible owner of agricultural and* timberland may apply to have such properties r which meet certain requirements appraised on the basis of productivity value or market ` value, whichever is less. However, eligible timberland may not be appraised at a value lower than was assigned on the 1978 tax rolls. The total loss in value due to grants of agricultural use and open-space land appraisal from the 1-9.9�-- tax roll approximate S14,51-4,_;Z8. '� __3 7 Voters of the State of Texas cast ballots on November 3, 1981, approving a state constitutional amendment which permits local governments the option of granting homestead exemptions of up to 40% of market value of the 1982-1984 tax years, up to 30% of market value for the 1985-1987 tax years, and up to 20% of market value thereafter. The City currently does not grant an additional homestead exemption. Collections - Since 1982, the City has contracted with the Jefferson County Tax Assessor-Collector to collect ad valorem taxes on behalf of the City at a rate of 50.22 per taxpayer. Collections by the County Tax Assessor-Collector on behalf of the City are approximately 2% below those collections in prior years, resulting in a reduction of approximately $400,000 in current collections. The County Tax Assessor-Collector has undertaken to increase its collection efforts. The City has a lien granted by statute for unpaid taxes on real property which is discharged upon payment. Thereafter, no lien exists in favor of the City until it again levies taxes. A tax lien may not be enforced on personal property transferred to a bona fide purchaser for value who does not have actual notice of the existence of the lien. In the event a taxpayer fails to make timely payment of taxes owing to the City on real property, a penalty of 6% of the unpaip taxes is incurred in February and 1% is added monthly until July 1 when the penalty becomes 12%. In addition, interest on delinquent taxes accrues at the rate of 1% per month until paid. The City may file suit for the collection of delinquent taxes and may foreclose such lien in a foreclosure proceeding. The City may also impose an additional penalty to defray costs of collection by an attorney, not to exceed 15% of the total amount due. The property subject to the City's 1 4 en may be sold, in whole or in part, pursuant to a court order te _col Iect the amounts due. The ability of the City to collect delinquent taxes by foreclosure may be adversely affected by the amount of taxes owed to other taxing units, adverse market conditions, taxpayer redemption rights, or bankruptcy proceedings which restrain the collection: of the taxpayer's, debt. Taxation Procedures - Since January 1, 1982, the appraisal of property within the City is the responsibility of the Jefferson County Appraisal District with county-wide jurisdiction (the "Appraisal District"). Prior to January 1, 1982, appraisal of property within the City was the responsibility of the City's Tax Assessor-Collector. The City operates under rules adopted by the State Property Tax Board (the "Tax Board"). The Tax Board, appointed by the Governor, began operation on January 1, 1980. Appraisal Districts within each county also began operation at that time. The majority of the directors of the Appraisal District may be selected by taxing entities other than the City. The Appraisal District is required to review all property within the City at least every four years. The reappraisal was completed for the 1985 tax roll . The Appraisal City is required to assess all property within the City on the basis of 100% of its appraised value and is prohibited from applying any assessment ratios. By August 1,"or as soon as possible thereafter, the City must adopt a tax rate for the current year. Taxes are due October 1 and become delinquent after January 31 of the following year. No discount for early payment is offered. Partial payments may be accepted if requested by the taxpayer and approved by the City. If the effective tax rate, excluding taxes for bonds and other contracted obligations, for the current year, exceeds the rate for the previous year by more than 8%, the qualified voters of the City may petition for an election to determine whether to limit the increase of the tax rate to no more than 8% for the current year. The City is required to hold public hearings to permit voter discussion should the effective tax rate be increased by more than 3%. _ Under Texas law, the Appraisal District is under an obligation to assess all property for taxation which has not been rendered for taxation by the owner and to present his assessments along with any objections to renditions to a nine-member Appraisal Review Board, each of whom has resided within the Appraisal District for two years, and who have been appointed by the Appraisal District's Board of Directors. The Appraisal Review Board has the ultimate responsibility of equalizing the value of all comparable taxable property within the Appraisal District; however, any owner who has rendered his property may appeal the decision of the Appraisal Review Board by filing suit in district court in Jefferson County, within 45 days from the date the tax roll is approved. In the event of such suit, the value of the property is determined by the court, or by a jury if requested by the owner, which value as so determined is binding on the City for the tax year in question and the succeeding year, except for subsequent improvements. A city, or other taxing unit, may challenge the appraisals assigned categories of property within its jurisdiction under certain limited circumstances. The City may also sue the Appraisal District to compel it to comply with the Tax Code. It is not expected that Appraisal District procedures will affect the ability of the City to adjust its tax rate so that it may levy and collect taxes sufficient to meet its obligations. Historical Analysis of Ad Valorem Taxation: - Collection Ratios - Tax Rate Per % Tax Collections Tax Assessed $100 Assessed Adjusted Current Current & Fiscal Year Year Valuation Valuation Tax Levy Year Prior Years Ending 9�-30 T77.9 $ ,4 4,245 $1.87 5 ,556,563 -9-8-73'1- 99. 1979 1979 728,134,250 1.87 13,616,110 96.23 97.84 1980 1980 799,630,460 1.87 14,956,830 97.04 99.12 1981 1981 1,553,040,314 (a) 1.12 17,266,590 96.43 98.07 1982 1982 2,391,880,308 (b) .75 17,939,102 98.66 98.87 1983 1983 2,529,125,360 .76 19,213,753 95.81 97.73 1984 1984 2,588,372,712 .78 20,182,617 96.67 99.67 1985(c) 1985 2,867,002,595 .69 19,782,347 -x- -x- 1986 (a) increase in assessment ratio from 60% to 100%. (b) Revaluation. (c) Unaudited figures. - Tax Rate Distribution - Tax Year 985 1984 983 982 981 980 19 9 _9 8 General Funa $0.4646 $0.51 $0.51 $0.51 $0.79$1:3351.33 51.33 Interest & Sinking Fund 2254 27 25 24 33 54 54 54 Total .69'0 �� � -O 5 I.B�T.8T 1� 7 - Tax Base Distribution - Type of Property 1985 Tax Roll % 1984 Tax Roll % Residential $1,687,348,260 55.82 $1,515,308,226 55.37 Vacant Platted Lots/Tracts 109,474,830 3.62 104,072,705 3.80 Minerals 17,892,550 0.60 28,126,300 1.03 Commercial & Industrial 636,296,840 21.05 561,960,990 20.53 Utilities 202,802,440 6.71 185,978,655 6.80 Business Personal 342;749,685 11.34 320,092,677 11,70 Vehicles & Other Personal 26,106,380 0.86 21235 480 77 Gross Value 32,670,985 OT 00 T2-,-7T-,'7j 5 OT 0.O U Less: Exemptions 155,668,390 1481402,321 Net Value -f-2,8673002;595 Principal Taxpayers - Assessed Valuation Taxpayer Type of Property 985 Tax Roll 1984 Tax Roll Gulf State Utilities Electric Utility $ 95,528,180 81,459,990 Southwestern Bell Telephone Utility 76,337,600 73,887,970 Dresser Industries, Inc. Manufacturing 19,750,290 21,826,940 Beaumont Medical & Surgical Hospital Hospital 18,272,340 -x_ Betz Laboratories Chemical Properties 14,531,080 10,754,130 Parkdale Mall Shopping Center 14,431,300 14,3398,410 Holidome, John Q. Hammonds Hotel-Motel 14,302,390 15,828,360 InterFirst Bank Bank 13,939,860 _x_ N. L. Shaffer Chemical Properties 13,528,050 15,173,510 E. I . DuPont Chemical Plant 13,157,058 -x- Entex, Inc. Gas Utility -x_ 7,987,870 J. C. Penney Company Department Store -x_ 7,432,240 Joske's Department Store _x- 7,051,120 Total Top Ten Taxpayers Assessed Valuation $293t-788,148 . $255,800,540 % of Assessed Valuation to Respective Tax Roil 10.25% 9.88% 9 I ' a i General : DEBT STATEMENT The following tables and calculations relate to the Notes and to all other tax supported debt of the City. In addition to the Outstanding Bonds and Certificates of Obligation, the City has also issued revenue bonds and has incurred contractual and other indebtedness and liabilities which are not included below but which are significant in amount. Tne City and various otner political subdivisions of government which overlap all or a portion of the City are empowered to incur debt to be paid from revenues raised or be raised by ad valorem taxation against all or a portion of property within the City, Bonded Indebtedness: 1985 Certified Assessed Valuation. . . . . . .. . .. . . . . . . . . . . . .. :.... . . .. . . $2,867,002,595 (100% of Estimated Market Value) 1984 Certified Assessed Valuation, (100% of Estimated Market Value) " " " " " " "" " $2,588,372,712 ✓ Direct Ad Valorem Tax Debt Outstanding Debt (as cf November I 1985).. . .. . .. . . . . . $ 79,455,000 (a) Less: Self Supported Debt � $ 131958 650 b Total Ad Valorem Tax Debt. . . . . . . . . .. . . .. . . . . . . . . . . . ... . . . . . . Ggb,5u ( ) Interest & Sinking Fund Balance (as of November 1, 1985). . . . ... $ 1,014,494 (c) a After giving effect to $6,700,000 Refunding Bonds scheduled for sale December 3, 1985. (b) See "Revenue Support at Ad Valorem Tax Debt."' (c) Unaudited. Revenue Support cf Ad Valorem Tax Bonds and Certificates of Obligation: L r taro tax supported bonds and certificates of obligations are being paid from revenues other than ad valorem taxes. Including the Bonds being sold December 3, 1985, $13,958,650 of such bonds and certificates of obligation are presently outstanding, and the i debt service requirements have traditionally been paid with amounts transferred from he other funds into the Debt Service Fund. The following is a listing of funds so transferred over the last five years, which amounts represent the actual principal and interest requirement; of such bonds and certificates of obligation: Transfer from other funds to 1985 1984 1983 1982 1981 1980 Debt Service Fund, , , , ,• , , , ,, $689,444 $895 $7088 2 $559, 700 $668,027 M-3,031 The City has pursued a policy of making such debt service payments from the other funds and intends to continue to do so in the future. However, nothing herein is to be construed as a guarantee that it will be able to do so. Any change in such policy could have the effect of increasing ad valorem tax requirements with resultant increases 'in the rate of taxation, Estimated Overlapping Debt: The following table indicates the indebtedness, defined as outstanding bonds payable from ad valorem taxes, of governmental entities overlapping the City and the estimated percentagesand amounts of such indebtedness attributable to property within the City. This information is based upon data secured from the individual jurisdictions and or the Texas Municipal Reports. Such figures do not indicate the tax burden levied by the applicable taxing jurisdictions for operation and maintenance or for other purposes. The City has not independently verified the accuracy or completeness of the information shown below except for amounts related to the City. Taxing Jurisdiction Net Overlappinq as of 11-1-85 Percent Amount Beaumont Independent School District. . ... . .. .. 6�0�6 Jefferson County. ... ..... Sa. 66 $ ,69 ,6 7 Jefferson County Drainage District No. 15,500,000 24.60 5,485,800 Port of Beaumont Navington District...,, , ,,, ,, 11,508,750 9,200,000 70.78 — 6,511, 760 TOTAL ESTIMATED OVERLAPPING DEBT„ The City. . ....... . .. . ... ... .. ...... . . . . . .... .. . . . $ 27,198,957 TOTAL DIRECT•AND�ESTIMATED OVERLAPPING DEBT "" ""' ,$—_655,49966,350 Debt Ratios: Direct & Estimated Per 1985 Certified Assessed Valuation Direct ect Debt . Overla pin Debt Per 1984 Certified Assessed Valuation ($2,867,002'595).. .. . , °'v' ---- (52,588 372 712). . ... , 2.28% 3.23% Per Capita (118,111).. .... .. . . . . . 2.53X . 3.58% ✓ $ 555 $785 Short-Term Debt: Under Article VI1 of the City Charter, the City is empowered to issue Tax Anticipation Notes. As of 11-1-85 the City has no other short-term debt besides the Notes. Estimated Overlapping Taxes: Under Texas law, if ad valorem taxes levied by a taxing authority become delinquent, a lien is created upon the property which has been taxed, which lien is on a parity with any tax lien on such property in favor of the City. In addition to ad valorem taxes required to retire the aforementioned direct and estimated overlapping debt, certain taxing jurisdictions including those mentioned above are also authorized by Texas law to assess, levy, and collect ad valorem taxes for operation, maintenance, administrative and/or general revenue purposes. Set forth below is an estimation of ad valorem taxes levied on a $75,000 single- family residence by such jurisdictions, assuming the assessments are made at their claimed basis of assessment (100%). Such residence is further assumed to be located within Jefferson County, wherein substantially all of the residential property within the City is located. No recognition is given to local assessments for civic association dues, fire department contributions, or other charges made by other than political subdivisions. 1985 Tax Estimated Taxing Jurisdiction Rate/S100 1985 Tax Bill The City SO.69000 S 517.50 Beaumont Independent School District .90000 675.00 Jefferson County .22500 168.75 Jefferson County Drainage District No. 6 .19539 146.54 Port of Beaumont Navigation District .05700 42.75 Estimated Total 1985 Tax Hill $1,550.54 Sales Tax: V - Authority The City has adopted the provisions of Article 1066c, Vernon's Texas Civil Statutes, as amended, which grants the City the power to impose and levy a 1% sales tax. The City may not pledge the proceeds from the Sales Tax as security for the Bonds. Collection History - The State Comptroller, after deduction of a 2% service fee, currently remits the City's portion of sales tax collections monthly. By statute the Comptroller is required to remit at least twice annually. The following is an analysis of the collection history of the City's sales tax: Ad Valorem Taxation Comparisons Fiscal Year Sales Tax Equivalent Tax Rate of Actual Ended 9-30 Receipts Tax Year Equivalent Tax Levy 978 5,280,290 19, ) $0.894 1979 6,135,353 (1978) .914 48.86 1980 7,024,856 (1979) .965 51.59 1981 8,147,717 (1980) 1.019 54.47 1982 8,717,207 (1981) .561 50.49 1983 8,627,153 (1982) .361 48.09 1984 9,456,086 (1983) .374 49.22 1985 9,344,283 (a) (1984) .361 46.30 Sales tax revenues were approximately $105,717 below those anticipated through the 1985 fiscal year. a) Unaudited. 11 Industrial District Contracts: The City has created, within its extraterritorial jurisdiction, but outside of the City limits, ten Industrial Districts and has entered into contracts with the industry within such districts. The contracts specify payments to be made in lieu of ad valorem taxes and thereby protect the industries from annexation by the City during the term of the contract, seven years. The annual payments shown below increased 6% annually from 1982 through 1934 and will increase 12% in 1985 and 6% in 1986 and 1987 unless otherwise indicated. Such revenues are not pledged to the payment of the Bonds. The Industrial District, the industry within, their contract dates and current payment are as follows: Contract Annual Payment Industrial District Expires 98 98 Mobil Oil Corporation................................ 12-31-87 $3,013,000 $3,375,000 Texas Gulf Sulphur Co.. .. .. .. 12-31-87 78,322 87,720 P. D. Glycol/Houston Chemical (was PPG Industries)... 12-31-87 258,200 289,200 (a) Bethlehem Steel Corp... ......................... 12-31-87 88,570 99,200 E. I. duPont de Nemours & Co......................... 12-31-87 851,547 953,730 Gulf States Utilities Co............................. 12-31-87 177,493 205,793 (b) Goodyear Tire & Rubber Co............................ 12-31-87 355,515 398,180 Olin Corp.. .................................. 12-31-87 46,239 51,790 Amoco 'exas Refining................................. 12-31-87 123,644 138,480 Pennwalt Corp........................................ 12-31-87 121 515 136 100 TOTAL........................................... x,04 535, 9 is Fixed payments for remaining term of contract. (b) Fixed annually based on the City's annexation policy and Company's plant retirement. Revenue from these contracts is summarized and compared to ad valorem taxation in the table below: Receipts from Industrial Ad Valorem Taxation Comparisons Fiscal Year District Equivalent Tax Rate o Actua Ended 9-30 Contracts Tax Year Equivalent TaxLev X978 — 3,045,025 97? u.45 _ X58% 1979 3,031,231 (1978) .416 24.14 1980 3,059,879 (1979) .383 22.47 1981 4,2;8,225 (1980) .293 28.60 1982 4,591,139 (1981) .192 26.59 1983 4,837,783 (1982) .191 26.97 1984 5,114,045 (1983) .202 26.62 1985 5,735,193 (a) (1984) .222 28.42 a Unaudited. Tax Increment Reinvestment Zone: In 1982, the City established a tax increment reinvestment zone in the downtown area in order to assist in its revitalization. As a result of creation of the zone, ad valorem taxes currently collected in excess of collections during a base year are to be used to finance public improvements to be located within the zone. These excess ad valorem tax collections will not be available for debt service on ad valorem tax debt (including the Bonds). Tax increments set aside for public improvements in the City's zone will be approximately 566,800 during tax year 1985. The zone was set up with a life of 21 years. The taxable assessed valuation of property within the District was approximately $40,390,060 or 1.69% of the taxable assessed valuation of the City at the time of determination. 12 SELECTED FINANCIAL DATA Historical Operations of the City's General Fund: The following is a condensed statement of revenues and expenses of the City's General Fund for the past five fiscal years. The inclusion of the following table is not intended to imply that any revenues of the City, other than receipts from ad valorem taxes as provided in the Ordinance, are pledged to pay principal and interest on the Bonds. Fiscal Year Ended September 30 985 a 1984 1983 1982 198i 1980 REVENUES Property Taxes................. $12,123,436 $12,601,094 511,750,575 $11,774,351 $10,543,631 S 9,320,422 Other Taxes (b)................ 14,387,251 13,340,337 12,534,239 11,628,728 10,104,997 8,568,612 Industrial District Contract Payments..................... 5,787,522 5,114,045 4,837,783 4,591,139 4,278,225 3,059,879 Licenses and Permits........... 467,070 640,219 447,647 340,734 406,102 372,996 Charges for Services........... 884,001 485,421 310,687 250,681 222,959 334,145 Intergovernmental Revenues..... 3,143,760 2,480,653 2,409,810 1,514,305 1,665,513 1,810,663 Fines and Forfeits............. 1,853,932 1,766,324 1,527,058 1,383,333 1,205,711 1,101,357 Cultural and Recreational...... 594,416 642,270 561,670 -0- -0- -0- Interest....................... 694,624 789,526 870,644 1,321,876 905,437 987,017 Miscellaneous.................. 1 921 207 422 760 331,4919 394 273 280,249 99 340 Total Revenues.............. $41,857,219 38,29 ,649 S35,581,612 3 99,42 29,6 ,fi24 25,654,431 'y ly EXPENDITURES General Government............. $ 3,090,785 5.3,361,945 S 1,519,755 $ 1,306,712 $ 1,159,985 S 1,081,028 Finance........................ 1,386,738 1,664,990 768,275 1,048,093 1,295,035 1,088,499 Police......................... 10,009,182 9,217,131 9,041,379 8,212,074 7,264,769 6,253,356 Fire........................... 8,583,452 8,151,746 7,429,268 6,608,043 5,954,185 5,506,029 Pjblic Works................... _ -0- 5,168,419 5,138,992 4,666,45; 4,379,1.53 3,652,971 Traffic and Transportation..... 6,886,549 1,994,752 2,070,704 2,272,732 2,025,882 1,599,651 Code Enforcement............... 2,113,729 1,985,993 1,230,775 1,231,452 1,095,944 900,792 Parks and Recreation........... 2,404,543 2,024,076 1,796,315 1,604,182 1,427,863 1,264,215 Community Services............. 2,756,101 2,521,036 2,090,202 1,712,853 1,421,907 1,159,426 Community Facilities........... 1,090,464 965,982 927,436 (c) (c) (c) General Service................ -0- -O- (d) 1,346,251 1,327,481 1,143,657 1,855,345 Building Maintenance........... -0- -0- (d) 1,525,930 1,325,870 1,280,290 (e) Capital Improvements........... -0- -0- -0- -0- -0- 3,906,000 Non-Departmental............... 219,923 500 000 723,942 1 057 601 347,456 599 968 Total Expenditures.......... T3 8,54.,466 3 , 56,070 $35,609,224 2,373,546 S28,7 288 a Unaudited amounts. (b) Includes Sales and Use Taxes, Street Rentals and penalties and interest on delinquent taxes. (c) Does not include income and expenditures from solid waste disposal and community facilities accounted for in separate funds from 1980 through 1982, inclusive. (d) Included in General Government and Finance in 1984. (e) Building Maintenance included in General Services prior to 1981. General Fund and Debt Service Fund Balance for the Past Five Fiscal Years: Fiscal Year Ended September 30 1985(a) 984 1983 1982 1981 98 General Fund....................... ($ 265,000) 53,538,763 (b) $1,907,798 (S 184,823) $ 759,649 $1,945,797 Debt Service Fund.................. $1,014,494 $2,407,460 $4,063,258 $6,028,639 $5,213,486 $3,776,540 a Unaudited amounts. (b) See - "SPECIAL CONSIDERATIONS - Loss of City Funds and Curative Actions by the City", Financial Statements: A copy of the City's Financial Statements for the fiscal year ended September 30, 1984, is attached hereto in the APPENDIX B. Copies of such statements for preceding years are available, for a fee, upon request. ` 13 ADMINISTRATION OF THE CITY Mayor and City Council : Policy-making and legislative functions are the responsibility of and are vested in the Mayor and Council under provisions of the "Charter of the City of Beaumont" (the "Charter") approved by the electorate December 6, 1947, and amended in 1972 and 1983. In an election held on August 13, 1983, the voters of the City approved amendments to the City Charter effective January 1, 1984, providing for a city council composed of seven members, including the Mayor, three of whom, including the Mayor, are to be elected at- large in even-numbered years. All members will serve two-year terms. The Mayor is entitled to vote on all matters before the Council , but has no power to veto Council action. Members of the Council are described below: Council Members Position Term Expires Occupation William E. Neild Mayor April, 1986 Building Contractor Joseph D. Deshotel Mayor Pro Tem April , 1986 Attorney Nell Pruitt Weisbach Councilman Ward 1 April, 1987 Housewife Mike Brumley Councilman Ward 2 April, 1987 Prehearing Examiner/Texas Industrial Accident Board Audwin Samuel Councilman Ward 3 April , 1987 Salesman/Savin Corp. David W. Moore Councilman Ward 4 April, 1987 Salesman/Xerox Corp. G. Wayne Turner Councilman-At-Large April , 1986 Supervisor/Sunoco Marine Terminal, Inc. _Administration: Under provisions of the Charter, the Council enacts lueal legislation, adopts budgets, determines policies and appoints the City Manager, who is charged with the duties of executing the Iaws and administering the government of the City. As the chief executive officer and head of the administrative branch of the City government, the City Manager is given the power and duties to: (1) Appoint and remove all department heads and all other employees in the administrative service of the City and may authorize the head of a department to appoint and remove subordinates in his respective department; (2) Prepare the budget annually, submit it to Council, and be responsible for its administration; (3) Prepare and submit to Council a complete report on the finances and administrative activities of the City; (4) Keep Council advised of the financial condition and future needs of the City and make appropriate recommendations; and (5) Perform such other necessary duties as prescribed by the Charter or required by Council. Members of the administrative staff are described below: Interim City Manager - C. A. Shelton - Mr. Shelton was appointed Interim City Manager on August, 981 5. He will remain in that position until the City retains a full-time City Manager. Mr. Shelton has been with the City for 35 years and is currently employed as Fire Chief. Assistant City Manager - Hugh H. Earnest - Mr. Earnest is a graduate of Arkansas A & M University (19631- and received a Master's Degree in Public Administration from the University of Arkansas (1971). Mr. Earnest has twelve years' experience in municipal management and became Assistant City Manager of Beaumont in January, 1982. He is a member of the Texas City Management Association and the International City Management Association. Finance Officer - Betty J. Dunkerley - Ms. Dunkerley is a graduate of Southern Methodist University (B.A. 1958). Ms. Ounkerley is a certified public accountant wi h .-���) nine years experience in government accounting and finance. Stle� a member of the1Texas Society of Certified Public Accountants3 ���4. �� v6 f} t, ,;, ,� LA p 14 City Attorney - Lane N4cholS is a graduate of Lamar University (1964) and the University of Texas School of Law (1967), He has been City Attorney of Beaumont since March of 1984. Prior to that ne was First Assistant City Attorney for the City. He is a member of the Texas and American Bar Associations and admitted to practice in the U.S. District Court for the Eastern District of Texas and the United States Supreme Court. He is a member of the National Association of Municipal Law Officers and a member of the Board of Directors of the Texas City Attorneys Association. City Clerk - Myrtle Corgey - Mrs. Corgey has been employed by the City since 1958 and has been City Clerk since 1972. She is a member of the Institute of Municipal Clerks and the Texas Election Officials Association. Consultants: Tne City has retained several consultants to perform professional services in conne:tion with the independent auditing of its books and records and other City activities. The City Council accepted a proposal from Peat, Marwick, Mitch-ell & Co. to audit the City's financial statements for the current fiscal year. Several of these consultants are identified below: Financial Advisor. . ..... . . .. .. . . . . .. . . . . . . . . . . . . . . . . Underwood, Neuhaus & Co. Incorporated Houston, Texas BondCounsel . . . .. . . . ... . . . . . . . . . . . . . . . . . .. .. .. . .. . . ..... . .. . .. . . .. Messrs. Vinson & Elkins Houston, Texas Securities Counsel to the City. . . . . . . . . . .. .. . . ... . . . . . ...... Messrs. Orgain, Bell & Tucker Beaumont, Texas LITIGATION In 1483, the United States Supreme Court held in American Bank & Trust Co. v. Dallas County that Texas taxing entities, including the City, may not include the value of United States obligations in the computation of the value of bank capital stock which is subject to ad valorem taxation under Texas law. The City has recently settled a suit relating to the, valve of bank stock for ad valorem lax purposes. The settlement will allow the City to retain approximately $1,500,000 of the $2,000,000 reserved for the suit. The City is defending a number of lawsuits in which personal injuries, property damages, wrongful deaths, and violations of civil rights law are alleged. The City is also aware of claims based upon alleged personal injuries, property damages, wrongful deaths and violations of civil rights laws which have not been asserted in litigation. The City considers that none of these lawsuits and claims, either individually or in the aggregate, would, if adversely decided, have a material adverse affect on the ability of the City to pay principal of and interest on the Certificates. For a description of the litigation resulting from the E.S.M. losses, See "SPECIAL CONSIDERATIONS - Loss of City funds and Curative Actions by the City". LEGISLATION AND REGULATION Affecting the City's Operations: In July of 1984, the City was notified by the United States Environmental Protection Agency (the "EPA" ) that the City may have to construct additional wastewater treatment facilities to meet final effluent limitations which are presently scheduled to take effect in 1988. The EPA is not requiring that the City furnish additional information concerning its wastewater treatment facilities until the completion of a hearing process which is currently underway. Therefore, it is not known whether any amounts will have to be expended by the City in order to comply with the EPA's final effluent limitations. At the present time, President Reagan has proposed the introduction of legislation which, if enacted, would among other things reduce Federal revenue sharing programs, eliminate grants by the Urban Mass Transit Administration, and reduce the Community Development Block Grant Program, During the fiscal year ended 9-30-84, the City received $1,781,377 in Federal revenue sharing funds which the City used for capital improvements. If legislation in the form proposed is enacted, the City will have to use ad valorem tax revenues for such projects or limit further capital expenditures. During the fiscal year ended 9-30-B4, the City received $508,259 in funds from the Urban Mass Transit Administration which the City used to finance capital improvements and expenses of operation of the City's transit system. If the proposed legislation is passed in the current form, the City may have to abandon or curtail services of the transit system or use ad valorem tax revenues, increase system charges, or use revenue from other sources to offset the loss of federal funding. During the fiscal year ended 9-30-84, the City received $2,564,937 in Community Development Block Grant Program funds which were used for improvements in low and moderate income areas. If such funds are not received in the future, the City will have to restrict or curtail expenditures for these improvements or use ad valorem tax receipts or revenue from other sources in order to provide the necessary funds. 15 The 69th session of the Texas Legislature has just adjourned. The City does not presently know of no legislation which will have a significant impact on the City's operations or its ad valorem taxes. Affecting the Tax Base: Air quality control measures of the EPA and the Texas Air Control Board may curtail new industrial , commercial and residential development in the City and the surrounding areas. Existing ambient ozone concentrations exceed EPA standards, and sulfur dioxide emissions are increasing. Because of these factors, federal regulations are particularly stringent with regard to construction or modification of certain facilities which emit pollutants. The regulations require, among other things, that new or increased hydrocarbon emissions must be offset by reductions of existing sources in the area. New and more stringent limitations on development in the Beaumont area may result if reasonable further progress is not made toward attaining the EPA's ambient air quality standard for ozone. Such limitations could include (1) more stringent offset regulations, (2) outright bans on new large facilities, and (3) increased transportation controls. The City may be required to enforce such limitations which would have an adverse effect on assessed valuations in the City and the surrounding area. Under the provisions of the Flood Disaster Protection Act of 1973 and accompanying regulations, the Federal Insurance Administration identified property lying within the 100-year flood plain (areas with a probability of flooding of 1% or greater each year) and subjected those areas to regulations which constricted construction. These regulations are being implemented in phases, as increasingly detailed data becomes available. The City and Jefferson County have already passed ordinances implementing building restrictions in flood plain areas. Approximately 66% of the surface area in the County and approximately 12% of the surface area of the City are considered flood hazard areas, which may have an adverse effect on the market valuation of the property within the areas and all of which may adversely affect assessed valuations. OTHER CONSIOERATIONS Capital Improvements: The City has 52,000,000 of authorized but unissued Bonds available for street improvements and $11,300,000 of authorized but unissued Bonds for drainage improvements. It is contemplated that the remaining Bonds will be issued in September, 1986. The City anticipates that additional expenditures may have to be made for improvements to its water and sewage system in order to extend facilities into undeveloped areas and to upgrade obsolete facilities and equipment in developed areas. A master plan is now being developed by outside consultants for review by the City during the late summer and fall of 1985. The City may have to make certain improvements to its wastewater treatment facilities to comply with the EPA's final effluent limitations. The timing end cost of these improvements cannot be predicted at this time. See "LEGISLATION AND REGULATIONS -- Affecting the City's Operations". The City also has plans to expand its existing Riverfront Park. It is currently projected that the expansion will begin in 1987 at an estimated cost of $1,000,000, Pension. Fund: All permanent employees of the City other than firemen are covered by a state-wide retirement plan administered by the Board of Trustees of the Texas Municipal Retirement stem. The City's contribution rate to the System, including supplemental disability benefits for calendar year 1984, was set at 5.18% of each participant's salary as determined by the System's actuary in accordance with the Texas Municipal Retirement System Act. The City's total contributions for the fiscal year ended September 30, 1984, in accordance with these requirements, were $1,091,066. The unfunded accrued liability for prior service benefits (both vested and nonvested) at the date of latest actuarial determination on 12-31-83, was $6,680,636. Firemen are covered by a Firemen' Relief and Retirement Fund maintained for members of the City of Beaumont Fire Department under the provisions of applicable laws of the State of Texas. All persons who are not more tha,+ 35 years of age upon entering service as a fireman become members of the pi an. While the City has no direct fiduciary responsibility for the fund, the Director of Finance serves as a member of its Board of Trustees. As determined by the latest actuarial valuation on 2-28-82, required contri- butions made to the fund were 10% of salary by each member and matched by 10% from the City, amounting to a contribution by the City in the aggregate amount of $550,529 for the year ended September 30, 1984. Under Texas Law, expenditure of monies from the Firemens' Relief and Retirement Fund for an actuarial valuation can be made only once every three years. The latest valuation prepared as of October 1, 1982, reflected that there were unfunded liabilities of $5,950,725 which were being amortized over 22 years. 16 e 1 Collective Bargaining: Police officers and firemen employed by the City have collective bargaining rights under the Texas Fire and Police Employees Relations Act. The contract between the City and the union representing the policemen expires September 30, 1986. The contract between the City and the union representing the Firemen expires September 30, 1985, and the parties are in the process of renegotiation. Neither the police officers nor the firemen have the right to strike, but under a local ordinance the firemen may submit any issues not resolved by negotiation to binding arbitration. Local Economic Conditions: The City and the surrounding area are currently experiencing the effects of a economic recession, caused in large part by a decline in the petroleum -and related chemical industries. The recession has, and until abatement will continue to, adversely affect governmental revenues and receipts, income levels, property valuations, entry of new businesses and success of existing enterprises, and other economic conditions generally within the City and the surrounding area. LEGAL MATTERS Legal Opinion: The District will furnish the Purchaser a transcript of certain certified proceedings had incident to the authorization and issuance the Notes, including a certified copy of the approving legal opinion of Vinson & Elkins, Bond Counsel, to the effect that, based upon an examination of such transcript, the Notes are valid and binding obligations of the District under the Constitution and laws of the State of Texas and to the effect that the interest on the Notes is exempt from all present federal income taxation under existing statutes, reg ulations, published rulings and court decisions. The legal opinion of the Bond Counsel will further state that the Notes are payable, both as to principal and interest, from the levy of ad valorem taxes, withou limitation as to rate, against taxable property within the District. The opinion of Bond Counsel is expected to be reproduced on the back panel of the Notes over a certification by the District, attesting that the legal opinion was dated as of the date of delivery of and payment for the Notes and the copy is a true and correct copy of the original opinion. The failure to print such legal opinion on any Note shall not constitute cause for a failure or refusal by the Purchaser to accept delivery of any pay for the Notes. Vinson & Elkins did not take part in the preparation of the Official Statement nor has such firm undertaken to independently verify any of the information contained therein, except that, in their capacity as Bond Counsel, such firm has reviewed the information describing the Notes in the Official Statement to verify that such description conforms to the provisions of the Resolution. No-Lit i gat, Certiicate: The Oistrict wi f 1 furnish the Purchaser a certificate, dated as of the date of deli- very of the Notes, executed by both the Mayor and City Attorney, to the effect that no litigation of any nature is then pending or threatened, either in state or federal courts, contesting or attacking the Notes; restraining or enjoining the issuance, execution, or delivery of the Notes; affecting the provisions made for the payment of or security for the Notes; in any manner questioning the authority or proceedings for the issuance, execu- tion or delivery of the Notes; or affecting the validity of the Notes. GENERAL CONSIDERATIONS t Sources and Compilation of Information: The information contained in this Official Statement has been obtained primarily from the City and from other sources believed to be reliable. No representation is made as to the accuracy or completeness of the information derived from sources other than the City. The summaries of the statutes, resolutions, and other related documents are included herein subject to all of the provisions of such documents. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. e7 Q��s 7 17 a i Certification as to Official Statement: At the time of payment for and delivery of the Notes, the Purchaser will be furnished a certificate executed by an appropriate official of the City, acting in his official capacity, to the effect that to the best of his knowledge and belief: (a) the descriptions and statements pertaining to the City contained in its Official Statement, on the respective date of such statement, on the date of sale of the Notes and the acceptance of the bid therefor, and on the date of delivery of the Notes, did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (b) as of the date of delivery of the Notes, there have been no material adverse changes in the City'.s financial condition and affairs since the date of the Official Statement. Such certificate shall not cover any information contained in APPENDIX A to the Official Statement or relating to taxing jurisdictions other than the City, or stated to have been obtained from sources other than City records or to information supplied to the City by the Purchaser for inclusion into the Official Statement. In rendering such certificate the person executing the certificate may state that he has relied in part on his examination of the records of the City relating to matters within his own area of responsibility, and his discussions with, or certificates or correspondence signed by, certain other officials, employees, consultants and representatives of the City as to matters not within his area of responsibility. Updating of Official Statement: The City will keep the Official Statement current by amendment or sticker to reflect material changes in the affairs of the City and, to the extent that information comes to its attention, to the other matters described in the Official Statement, until the delivery of the Notes to the Purchaser. All changes in the affairs of the City and other matters described in the Official Statement subsequent to the delivery of the Notes to the Purchaser and all informa ion with respeci. to i.he resale of the Notes shall be the responsibility of the Purchaser. This Official Statement was duly authorized and approved by the City Council of the City of Beaumont as of the date specified on the first page hereof. /s/ William E. Neild Mayor City of Beaumont, Texas ATTEST: /s/ Myrtle Coraey City Clerk City of Beaumont, Texas —�S / 18